SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
Commission file number: 1-11234
KINDER MORGAN ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0380342
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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500 Dallas Street, Suite 1000, Houston, Texas 77002
(Address of principal executive offices)(zip code)
Registrant's telephone number, including area code: 713-369-9000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Units of Kinder Morgan New York Stock Exchange Energy Partners, L.P. |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of the Common Units held by non-affiliates of the registrant, based on closing prices in the daily composite list for transactions on the New York Stock Exchange on February 28, 2001 was approximately $3,100,957,450. This figureassumes that only the general partner of the registrant, Kinder Morgan, Inc. and officers and directors of the general partner of the registrant and of Kinder Morgan, Inc. were affiliates. As of February 28, 2001, the registrant had 64,861,509 Common Units outstanding.
KINDER MORGAN ENERGY PARTNERS, L.P.
TABLE OF CONTENTS
Page No.
P A R T I
Items 1 and 2. Business and Properties 3
Item 3. Legal Proceedings 47
Item 4. Submission of Matters to a Vote of Security Holders 47
P A R T II
Item 5. Market for the Registrant's Units and Related
Security Holder Matters 48
Item 6. Selected Financial Data 48
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation 50
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk 62
Item 8. Financial Statements and Supplementary Data 63
Item 9. Changes in and Disagreements on Accounting and
Financial Disclosure 63
P A R T III
Item 10. Directors and Executive Officers of the Registrant 64
Item 11. Executive Compensation 66
Item 12. Security Ownership of Certain Beneficial Owners and
Management 70
Item 13. Certain Relationships and Related Transactions 72
P A R T IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 74
Financial Statements F-1
Signatures S-1
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P A R T I
Items 1. and 2. Business and Properties
General
Kinder Morgan Energy Partners, L.P., a Delaware limited partnership, is a publicly traded master limited partnership formed in August 1992. We are the largest pipeline master limited partnership in terms of market capitalization and the second largest products pipeline system in the United States in terms of volumes delivered. Unless the context requires otherwise, references to "we", "us", "our", "KMP" or the "Partnership" are intended to mean Kinder Morgan Energy Partners, L.P., our operating limited partnerships and their subsidiaries.
We manage a diversified portfolio of midstream energy assets that provide fee-based services to customers. Our assets primarily include:
o more than 10,000 miles of product pipelines and over 20 associated
terminals serving customers across the United States;
o 10,000 miles of natural gas transportation pipelines, plus natural gas
gathering and storage facilities;
o Kinder Morgan CO2 Company, L.P., the largest transporter and marketer
of carbon dioxide in the country; and
o over 25 bulk terminal facilities which transload coal, liquid and
other bulk products.
On October 7, 1999, K N Energy, Inc., a Kansas corporation that provided integrated energy services including the gathering, processing, transportation and storage of natural gas, the marketing of natural gas and natural gas liquidsand the generating of electric power, acquired Kinder Morgan (Delaware), Inc., a Delaware corporation. Kinder Morgan (Delaware), Inc. is the sole stockholder of our general partner, Kinder Morgan G.P., Inc. At the time of the closing of the acquisition, K N Energy, Inc. changed its name to Kinder Morgan, Inc. In connection with the acquisition, Richard Kinder, Chairman and Chief Executive Officer of our general partner, became the Chairman and Chief Executive Officer of KMI. KMI trades on the New York Stock Exchange under the symbol "KMI" and is one of the largest midstream energy companies in America, operating more than 30,000 miles of natural gas and product pipelines. KMI also has significant natural gas retail distribution and electric generation. In addition, KMI, through its general partner interest, operates our portfolio of businesses and holds a significant limited partner interest in us.
The address of our principal executive offices is 500 Dallas Street, Suite 1000, Houston, Texas 77002 and our telephone number at this address is (713) 369-9000. We trade under the New York Stock Exchange symbol "KMP". Our operations are grouped into four reportable business segments. These segments and their major assets are as follows:
o Product Pipelines, consisting of refined petroleum product pipelines
and joint venture projects including:
o our Pacific operations, which are comprised of approximately
3,300 miles of pipeline that transport refined petroleum
products to some of the faster growing population centers in
the United States, including Los Angeles, San Diego, and Orange
County, California; the San Francisco Bay Area; Las Vegas,
Nevada and Tucson and Phoenix, Arizona, and 13 truck-loading
terminals with an aggregate usable tankage capacity of
approximately 8.2 million barrels;
o our North System, a 1,600 mile pipeline that transports natural
gas liquids and refined petroleum products between south central
Kansas and the Chicago area and various intermediate points,
including eight terminals;
o our 51% interest in Plantation Pipe Line Company, which owns and
operates a 3,100 mile refined petroleum products pipeline system
throughout the southeastern United States, serving major
metropolitan areas including Birmingham, Alabama; Atlanta,
Georgia; Charlotte, North Carolina; and the Washington, D.C.
area;
o our 32.5% interest in the Cochin Pipeline System, a 1,900 mile
multiproduct pipeline transversing Canada and the United States
from Fort Saskatchewan, Alberta to Sarnia, Ontario;
o our Cypress Pipeline, which transports natural gas liquids from
Mont Belvieu, Texas to a major petrochemical producer in Lake
Charles, Louisiana;
o our transmix operations, which include the processing and
marketing of petroleum pipeline transmix via transmix processing
plants in Colton, California; Richmond, Virginia; Dorsey
Junction, Maryland; Indianola, Pennsylvania; and Wood River,
Illinois;
o our 50% interest in the Heartland Pipeline Company, which ships
refined petroleum products in the Midwest; and
o our Painter Gas Processing Plant, a natural gas processing plant,
fractionator and natural gas liquids terminal with truck and rail
loading facilities, which is leased to BP Amoco under a long-term
arrangement.
o Natural Gas Pipelines, consisting of assets acquired in late 1999 and
2000 including:
o Kinder Morgan Interstate Gas Transmission LLC, which owns a
6,700 mile natural gas pipeline, including the Pony Express
pipeline facilities, that extends from northwestern Wyoming east
into Nebraska and Missouri and south through Colorado and Kansas;
o Kinder Morgan Texas Pipeline L.P, which owns a 2,700 mile
intrastate pipeline along the Texas Gulf Coast;
o our 66 2/3% interest in the Trailblazer Pipeline Company, which
transmits natural gas from Colorado through southeastern Wyoming
to Beatrice, Nebraska;
o our Casper and Douglas Gathering Systems, which is comprised of
approximately 1,560 miles of natural gas gathering pipelines and
two facilities in Wyoming capable of processing 210 million cubic
feet of natural gas per day;
o our 49% interest in the Red Cedar Gathering Company, which
gathers natural gas in La Plata County, Colorado and owns and
operates a carbon dioxide processing plant;
o our 50% interest in Coyote Gas Treating, LLC, which owns a 250
million cubic feet per day natural gas treating facility in La
Plata County, Colorado; and
o our 25% interest in Thunder Creek Gas Services, LLC, which
gathers, transports and processes coal bed methane gas in the
Powder River Basin of Wyoming.
o CO2 Pipelines, consisting of Kinder Morgan CO2 Company, L.P., which
transports, markets and produces carbon dioxide for use in enhanced
oil recovery operations in the continental United States, through the
following:
o Central Basin Pipeline, a 300 mile carbon dioxide pipeline
located in the Permian Basin between Denver City, Texas and
McCamey, Texas;
o interests in carbon dioxide pipelines, including an approximate
81% interest in the Canyon Reef Carriers Pipeline, a 50% interest
in the Cortez Pipeline and a 13% interest in the Bravo Dome
Pipeline;
o interests in carbon dioxide reserves, including an approximate
45% interest in the McElmo Dome and an approximate 11% interest
in the Bravo Dome; and
o interests in oil-producing fields, including an approximate 71%
interest in the SACROC Unit and minority interests in the Sharon
Ridge Unit, the Reinecke Unit and the Yates Field Unit, all of
which are located in the Permian Basin of West Texas.
o Bulk Terminals, consisting of over 25 owned or operated bulk terminal
facilities including:
o coal terminals located in Cora, Illinois; Paducah, Kentucky;
Newport News, Virginia; Mount Vernon, Indiana; and Los Angeles,
California;
o petroleum coke terminals located on the lower Mississippi River
and along the west coast of the United States;
o liquids chemical terminals located in New
Orleans, Louisiana and Cincinnati, Ohio; and
o other bulk terminals handling alumina, cement, salt, soda ash,
fertilizer and other dry bulk materials.
Business Strategy
Our management's objective is to grow our portfolio of businesses by:
o focusing on stable, fee-based assets which are core to the energy infrastructure of growing markets;
o increasing utilization of assets while containing costs;
o leveraging economies of scale from incremental acquisitions; and
o maximizing the benefits of our financial structure.
Since February 1997, we have announced 20 acquisitions valued at over $4.7 billion. These acquisitions and associated cost reductions have assisted us in growing from $17.7 million of net income in 1997 to $278.3 million of net income in 2000. We regularly consider and enter into discussions regarding potential acquisitions, including those from KMI or its affiliates, and are currently contemplating potential acquisitions. While there are currently no unannounced purchase agreements for the acquisition of any material business or assets, such transactions can be effected quickly, may occur at any time and may be significant in size relative to our existing assets or operations.
We primarily transport and/or handle products for a fee and generally are not engaged in the purchase and sale of commodity products. As a result, we do not face significant risks relating directly to shifts in commodity prices.
Product Pipelines. We plan to continue to expand our presence in the rapidly growing refined petroleum products markets in the western and southeastern United States through incremental expansions of our Pacific and Plantation pipelines and through acquisitions that increase unitholder distributions. Because our North system serves a relatively mature market, we intend to focus on increasing throughput within the system by remaining a reliable, cost-effective provider of transportation services and by continuing to increase the range of products transported and services offered. We recently assumed operation of Plantation Pipe Line Company. Our acquisition of our transmix operations in September 1999, October 2000 and December 2000 strengthened our existing transmix processing business and added fee-based services related to our core refined products pipeline business.
Natural Gas Pipelines. Kinder Morgan Interstate Gas Transmission also serves a stable, mature market, and thus we are focused on reducing costs and securing throughput for this pipeline. New measurement systems and other improvements will aid in managing expenses. We will explore expansion and storage opportunities to increase utilization levels. Kinder Morgan Texas Pipeline L.P. intends to grow its transportation and storage businesses by identifying and serving significant new customers with demand for capacity on its intrastate pipeline system. Trailblazer is currently pursuing an expansion of its system supported by commitments secured in August 2000. Red Cedar Gathering Company, a partnership with the Southern Ute Indian Tribe, is pursuing additional gathering and processing opportunities on tribal lands.
CO2 Pipelines. KMCO2's Permian Basin strategy is to offer customers "one-stop shopping" for carbon dioxide supply, transportation and technical support service. Outside the Permian Basin, we intend to compete aggressively for new supply and transportation projects. Our management believes these projects will arise as other United States oil producing basins mature and make the transition from primary production to enhanced recovery methods.
Bulk Terminals. We are dedicated to growing our bulk terminals business through selective acquisitions, expansions, and development of new terminals. The bulk terminals industry in the United States is highly fragmented, leading to opportunities for us to make selective, accretive acquisitions. We will make investments to expand and improve existing facilities, particularly those facilities that handle low-sulfur western coal. Additionally, we plan to design, construct and operate new facilities for current and prospective customers. Our management believes we can use newly acquired or developed facilities to leverage our operational expertise and customer relationships.
Recent Developments
During 2000, our assets increased 43% and our net income increased 53% from 1999 levels. In addition, distributions per unit increased 31% from $0.725 for the fourth quarter of 1999 to $0.95 for the fourth quarter of 2000.
The following is a brief listing of activity since the end of the third quarter of 2000. Additional information regarding these items is contained in the rest of this report.
o On October 25, 2000, we acquired Kinder Morgan Transmix Company, LLC, formerly known as Buckeye Refining Company, LLC, for approximately $37 million plus net working capital. The acquisition included two transmix processing plants located in Indianola, Pennsylvania and Wood River, Illinois and other transmix assets. The two facilities are projected to process over 4.3 million barrels of transmix in 2001.
o On October 25, 2000, we entered into a new $600 million 364-day bank revolving facility that replaced and expanded our then existing $300 million facility and contains substantially the same covenants. In August 2000, we refinanced a fully drawn $175 million revolving credit facility at our subsidiary, SFPP, L.P., with an intercompany obligation to us.
o On November 8, 2000, we closed on a private placement of $250 million of 10-year notes bearing a coupon of 7.5%. On February 27, 2001, we announced an offer to exchange these notes for substantially identical notes that are registered under the Securities Act of 1933. The exchange offer expires on March 27, 2001, unless extended by us at our sole discretion.
o On November 30, 2000, we announced that we had signed a definitive agreement with GATX Corporation to purchase its United States pipeline and terminal businesses for approximately $1.15 billion, consisting of cash, assumed debt and other obligations. Primary assets included in the transaction are the CALNEV Pipe Line Company and the Central Florida Pipeline Company, along with 12 terminals that store refined petroleum products and chemicals. CALNEV is a 550 mile refined petroleum products pipeline system originating in Colton, California and extending to the Las Vegas, Nevada market. The Central Florida pipeline is a 195 mile refined petroleum products pipeline system consisting of a 16-inch gasoline pipeline and a 10-inch jet fuel and diesel pipeline, transporting product from Tampa to the Orlando, Florida market. The 12 terminals we are acquiring from GATX have a storage capacity of 35.6 million barrels, and the largest of these terminals are located in Houston, New York, Los Angeles and Chicago, with a total capacity of approximately 31.2 million barrels. The other terminals are located in Philadelphia, Portland, Oregon, San Francisco and Seattle. In addition, we are acquiring six other terminals from GATX with a capacity of 3.6 million barrels that are part of the CALNEV and Central Florida pipeline systems. On March 1, 2001, we announced that all of the assets in the transaction have closed, except for CALNEV, which is pending approval from the California Public Utilities Commission. CALNEV is expected to close in March or April of 2001.
o On December 1, 2000, we purchased Delta Terminal Services, Inc. for approximately $114 million in cash. The acquisition included two liquid bulk storage terminals in New Orleans, Louisiana and Cincinnati, Ohio. The facilities provide services to producers of petroleum, chemicals and other products. The New Orleans terminal has a storage capacity of 2.8 million barrels. It is located at the 98.5 mile point on the Mississippi River close to the Harvey Canal and the Greater New Orleans Bridge. The terminal serves the New Orleans/Baton Rouge corridor and is situated on approximately 100 acres of land. The Cincinnati terminal has a storage capacity of 500,000 barrels. It is located at the 465.7 mile point on the Ohio River and is situated on approximately 60 acres of land.
o On December 21, 2000, we reached agreement with the other owner of Plantation Pipe Line Company to become the operator of Plantation, a 3,100-mile refined petroleum products pipeline system throughout the southeastern United States.
o On December 21, 2000, we completed a transaction whereby KMI contributed approximately $300 million of its assets to us. As consideration for these assets, we paid KMI approximately 50% of the fair value of the assets in cash and the remaining 50% of the fair value of the assets in units. The largest asset contributed was Kinder Morgan Texas Pipeline L.P., a 2,700 mile natural gas pipeline system that extends from south Texas to Houston along the Texas gulf coast. Other assets contributed included the Casper and Douglas Natural Gas Gathering and Processing Systems, KMI's 50% interest in Coyote Gas Treating, LLC and KMI's 25% interest in Thunder Creek Gas Services, LLC.
o On December 28, 2000, we completed the purchase of a 32.5% interest in the Cochin Pipeline System from NOVA Chemicals Corporation. The effective date of the acquisition was November 3, 2000. The Cochin pipeline consists of approximately 1,900 miles of 12-inch pipeline transversing Canada and the United States from Fort Saskatchewan, Alberta to Sarnia, Ontario. It transports high vapor pressure ethane, ethylene, propane, butane and natural gas liquids to the midwestern United States and eastern Canadian petrochemical and fuel markets, and is a joint venture of our subsidiary and subsidiaries of BP Amoco, Conoco, Shell and NOVA Chemicals.
o On December 28, 2000, we entered into a definitive agreement to form a joint venture with Marathon Oil Company in the southern Permian Basin of West Texas. The joint venture was formed on January 1, 2001 and is owned 85% by Marathon Oil Company and 15% by KMCO2. The joint venture consists of a nearly 13% interest in the SACROC Unit and a 49.9% interest in the Yates Field Unit, the largest single interest in that Unit. In connection with the formation of the joint venture, we entered into a 10 year contract to supply Marathon with an aggregate of 30 billion cubic feet of carbon dioxide expected to be used to enhance oil recovery in the area.
Kinder Morgan Management, LLC, a wholly-owned subsidiary of our general partner, has filed a registration statement to issue and sell shares. Upon completion of that proposed offering, Kinder Morgan Management, LLC would become a partner in us and manage and control our business and affairs. The net proceeds from that offering would be used to buy i-units from us. The i-units would be a new class of our limited partner interests and would be issued only to Kinder Morgan Management, LLC. We would use the cash received from the sale of i-units to reduce short-term debt incurred to finance the GATX acquisition. No assurance can be given that the proposed issuance of shares and related financing will occur, or that they will not be modified from the foregoing description if ultimately completed.
o On December 31, 2000, we increased our ownership in the Colton, California transmix processing facility by purchasing Duke Energy Merchants' 50% interest in the facility. SFPP, L.P., our subsidiary that owns our Pacific operations, owns the remaining 50% ownership interest. The facility's transmix processing agreements with third parties were transferred to Duke, and in turn, we entered into a ten year fee-based processing agreement to process transmix for Duke at the facility. Duke will market all of the transmix we process for it at the Colton facility.
Product Pipelines
Pacific operations
Our Pacific operations include interstate common carrier pipelines regulated by the Federal Energy Regulatory Commission, intrastate pipelines in California regulated by the California Public Utilities Commission and non rate-regulated terminal operations.
Our Pacific operations are split into a South Region and a North Region. Combined, the two regions consist of five pipeline segments that serve six western states with approximately 3,300 miles of refined petroleum products pipeline and related terminal facilities.
Refined petroleum products and related uses are:
Product Use
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Gasoline Transportation
Diesel fuel Transportation (auto, rail, marine), farm, industrial
and commercial
Jet fuel Commercial and military air transportation
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Our Pacific operations transport over one million barrels per day of refined petroleum products, providing pipeline service to approximately 44 customer-owned terminals, three commercial airports and 12 military bases. For 2000, the three main product types transported were gasoline (61%), diesel fuel (21%) and jet fuel (18%). Our Pacific operations also include 13 truck-loading terminals.
Our Pacific operations provide refined petroleum products to some of the fastest growing populations in the United States, including southern California; Las Vegas, Nevada; and the Tucson-Phoenix, Arizona region. Pipeline transportation of gasoline and jet fuel has a direct correlation with demographic patterns. We believe that the positive demographics associated with the markets served by our Pacific operations will continue in the foreseeable future.
South Region. Our Pacific operations' South Region consists of three pipeline segments: the West Line, East Line and San Diego Line.
The West Line consists of approximately 570 miles of primary pipeline and currently transports products for approximately 50 shippers from seven refineries and three pipeline terminals in the Los Angeles Basin to Phoenix and Tucson, Arizona and various intermediate commercial and military delivery points. Also, a significant portion of West Line volumes are transported to Colton, California for local distribution and for delivery to the CALNEV pipeline, which carries refined petroleum products to Las Vegas, Nevada and intermediate points. The West Line serves our terminals located in Colton and Imperial, California as well as in Tucson and Phoenix. In the fall of 2000, we completed a $9 million expansion of the West Line from Colton to Phoenix.
The East Line is comprised of two parallel lines originating in El Paso, Texas and continuing approximately 300 miles west to our Tucson terminal and one line continuing northwest approximately 130 miles from Tucson to Phoenix. All products received by the East Line at El Paso come from a refinery in El Paso or are delivered through connections with non-affiliated pipelines from refineries in west Texas and Artesia, New Mexico. The East Line serves our terminals located in Tucson and Phoenix.
The San Diego Line is a 135-mile pipeline serving major population areas in Orange County (immediately south of Los Angeles) and San Diego. The same refineries and terminals that supply the West Line also supply the San Diego Line. On June 1, 2000, we completed an expansion of the San Diego Line. The expansion involved
construction of 23 miles of 16-inch diameter pipe, and other appurtenant facilities, across the Camp Pendleton Marine Base just north of Oceanside, California. The expansion project cost approximately $18 million and coupled with the completion of supplementary pumping stations in the summer of 2000, the capacity of the San Diego Line has increased from 116,000 barrels per day to 144,000 barrels per day, an increase of almost 25%. The new facilities will increase the Pacific operations' capability to transport gasoline, diesel and jet fuel to customers in the rapidly growing Orange County and San Diego, California markets.
North Region. Our Pacific operations' North Region consists of two pipeline segments: the North Line and Oregon Line.
The North Line consists of approximately 1,075 miles of pipeline in six segments originating in Richmond, Concord and Bakersfield, California. This line serves our terminals located in Brisbane, Bradshaw, Chico, Fresno and San Jose, California, and Sparks, Nevada. The products delivered through the North Line come from refineries in the San Francisco Bay and Bakersfield areas. The North Line also receives product transported from various pipeline and marine terminals that deliver products from foreign and domestic ports. A refinery located in Bakersfield supplies substantially all of the products shipped through the Bakersfield-Fresno segment of the North Line.
The Oregon Line is a 114-mile pipeline serving approximately ten shippers. Our Oregon Line receives products from marine terminals in Portland, Oregon and from Olympic Pipeline. Olympic Pipeline is a non-affiliated carrier that transports products from the Puget Sound, Washington area to Portland. From its origination point in Portland, the Oregon Line extends south and serves our terminal located in Eugene, Oregon.
Truck Loading Terminals. Our Pacific operations include 13 truck-loading terminals with an aggregate usable tankage capacity of approximately 8.2 million barrels. Terminals are located at destination points on each of our Pacific operations' pipelines as well as at certain intermediate points along each pipeline. The simultaneous truck loading capacity of each terminal ranges from 2 to 12 trucks. We provide the following services at these terminals:
o short-term product storage;
o truck loading;
o vapor recovery;
o deposit control additive injection;
o dye injection;
o oxygenate blending; and
o quality control.
The capacity of terminaling facilities varies throughout our Pacific operations and we do not own terminaling facilities at all pipeline delivery locations. At certain locations, we make product deliveries to facilities owned by shippers or independent terminal operators. At our terminals, we provide truck loading and other terminal services. We charge a separate fee (in addition to pipeline tariffs) for these additional non rate-regulated services.
Markets. Currently our Pacific operations serve in excess of 100 shippers in the refined products market, with the largest customers consisting of:
o major petroleum companies;
o independent refineries;
o the United States military; and
o independent marketers and distributors of products.
A substantial portion of the product volume transported is gasoline. Demand for gasoline depends on such factors as prevailing economic conditions and demographic changes in the markets served. We expect the majority of our Pacific operations' markets to maintain growth rates that exceed the national average for the foreseeable future.
Currently, the California gasoline market is 945,000 barrels per day. The Arizona gasoline market is served primarily by us at a market demand of 135,000 barrels per day. Nevada's gasoline market is approximately 55,000
barrels per day and Oregon's is approximately 95,000 barrels per day. The distillate (diesel and jet fuel) market is approximately 490,000 barrels per day in California, 75,000 barrels per day in Arizona, 50,000 barrels per day in Nevada and 62,000 barrels per day in Oregon. We transport over 1 million barrels of petroleum products per day in these states.
The volume of products transported is directly affected by the level of end-user demand for such products in the geographic regions served. Certain product volumes can experience seasonal variations and, consequently, overall volumes may be lower during the first and fourth quarters of each year.
Supply. The majority of refined products supplied to our Pacific operations come from the major refining centers around Los Angeles, San Francisco and Puget Sound, as well as waterborne terminals located near these refining centers. Transmix is primarily supplied by petroleum pipeline and terminal operations, including our own pipelines in California and other western states.
Competition. The most significant competitors of our Pacific operations' pipeline system are proprietary pipelines owned and operated by major oil companies in the area where our pipeline system delivers products as well as refineries with related trucking arrangements within the our market areas. We believe that high capital costs, tariff regulation and environmental permitting considerations make it unlikely that a competing pipeline system comparable in size and scope will be built in the foreseeable future. However, the possibility of pipelines being constructed to serve specific markets is a continuing competitive factor. Trucks may competitively deliver products in certain markets, particularly to shorter-haul destinations in the Los Angeles and San Francisco Bay areas.
Longhorn Partners Pipeline is a proposed joint venture project that would begin transporting refined products from refineries on the Gulf Coast to El Paso and other destinations in Texas. Increased product supply in the El Paso area could result in some shift of volumes transported into Arizona from our West Line to our East Line. While increased movements into the Arizona market from El Paso would displace higher tariff volumes supplied from Los Angeles on our West Line, such shift of supply sourcing has not had, and is not expected to have, a material effect on operating results.
North System
Our North System is an approximately 1,600-mile interstate common carrier pipeline for natural gas liquids and refined petroleum products.
Natural gas liquids are typically extracted from natural gas in liquid form under low temperature and high pressure conditions. Natural gas liquid products and related uses are as follows:
Product Use
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Propane Residential heating, industrial and agricultural
uses, petrochemical feedstock
Isobutane Further processing
Natural gasoline Further processing or blending into gasoline motor fuel
Ethane Feedstock for petrochemical plants
Normal butane Feedstock for petrochemical plants or blending into
gasoline motor fuel
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Our North System extends from south central Kansas to the Chicago area. South central Kansas is a major hub for producing, gathering, storing, fractionating and transporting natural gas liquids. Our North System's primary pipeline is comprised of approximately 1,400 miles of 8-inch and 10-inch pipelines and includes:
o two parallel pipelines (except for a 50-mile segment in Nebraska and
Iowa), which originate at Bushton, Kansas and continue to a major
storage and terminal area in Des Moines, Iowa;
o a third pipeline, which extends from Bushton to the Kansas City,
Missouri area; and
o a fourth pipeline that transports product to the Chicago area from
Des Moines.
Through interconnections with other major liquids pipelines, our North System's pipeline system connects Mid-Continent producing areas to markets in the Midwest and eastern United States. We also have defined sole carrier rights to use capacity on an extensive pipeline system owned by The Williams Company that interconnects with our North System. This capacity lease agreement requires us to pay $2.0 million per year, is in place until February
2013 and contains a five-year renewal option. In addition to our capacity lease agreement with Williams, we also have a reversal agreement with Williams to help provide for the transport of summer-time surplus butanes from Chicago area refineries to storage facilities at Bushton. We have an annual minimum joint tariff commitment of $0.6 million to Williams for this agreement.
In 1999, we entered into a long-term agreement with Aux Sable Liquid Products to transport a significant volume of natural gas liquids in and around the Chicago area for Aux Sable. We have made modifications to our pipeline system and our Morris and Lemont, Illinois facilities in order to accommodate the transportation of natural gas liquids for Aux Sable. The shipments are expected to begin in late first quarter or early second quarter of 2001. In 2000, we entered into a propane terminaling agreement with Aux Sable and began service in late fourth quarter.
The following table sets forth volumes, in thousands of barrels, of natural gas liquids transported on our North System (excluding Heartland Pipeline Company) for delivery to the various markets for the periods indicated:
Year Ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Petrochemicals 1,276 1,059 1,040 1,200 684
Refineries and line reversal 12,020 10,517 10,489 10,600 9,536
Fuels 7,221 6,172 6,150 7,976 10,500
Other (1) 8,154 8,379 5,532 7,399 8,126
------ ------ ------ ------ ------
Total 28,671 26,127 23,211 27,175 28,846
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(1) Natural gas liquid gathering systems and Chicago originations other than long-haul volumes of refinery butanes.
Our North System has approximately 8.3 million barrels of storage capacity, which includes caverns, steel tanks, pipeline line-fill and leased storage capacity. This storage capacity provides operating efficiencies and flexibility in meeting seasonal demand of shippers as well as propane storage for our truck loading terminals.
Truck Loading Terminals. Our North System has seven propane truck loading terminals and one multi-product complex at Morris, Illinois, in the Chicago area. Propane, normal butane, isobutane and natural gasoline can be loaded at our Morris terminal.
Markets. Our North System currently serves approximately 50 shippers in the upper Midwest market, including both users and wholesale marketers of natural gas liquids. These shippers include all four major refineries in the Chicago area. Wholesale marketers of natural gas liquids primarily make direct large volume sales to major end-users, such as propane marketers, refineries, petrochemical plants and industrial concerns. Market demand for natural gas liquids varies in respect to the different end uses to which natural gas liquid products may be applied. Demand for transportation services is influenced not only by demand for natural gas liquids but also by the available supply of natural gas liquids.
Supply. Natural gas liquids extracted or fractionated at the Bushton gas processing plant have historically accounted for a significant portion (approximately 40-50%) of the natural gas liquids transported through our North System. Other sources of natural gas liquids transported in our North System include large oil companies, marketers, end-users and natural gas processors that use interconnecting pipelines to transport hydrocarbons. KMI has transferred to ONEOK, Inc. the Bushton plant along with other assets previously owned by KMI. ONEOK has assumed contracts with us to continue shipping natural gas liquids through our North System in volumes substantially equal to those shipped through our North System when KMI owned the Bushton plant.
Competition. Our North System competes with other liquids pipelines and to a lesser extent with rail carriers. In most cases, established pipelines are the lowest cost alternative for the transportation of natural gas liquids and refined petroleum products. Consequently, pipelines owned and operated by others represent our primary competition. In the Chicago area, our North System competes with other natural gas liquid pipelines that deliver into the area and with rail car deliveries primarily from Canada. Other Midwest pipelines and area refineries compete with our North System for propane terminal deliveries. Our North System also competes indirectly with pipelines that deliver product to markets that our North System does not serve, such as the Gulf Coast market area.
Plantation Pipe Line Company
We own 51% of Plantation Pipe Line Company, which owns a 3,100 mile pipeline system throughout the southeastern Unites States. On December 21, 2000, we took over the day-to-day operations of Plantation. Plantation serves as a common carrier of refined petroleum products to various metropolitan areas, including Birmingham, Alabama; Atlanta, Georgia; Charlotte, North Carolina; and the Washington, D.C. area. We believe favorable demographics in the southeastern United States will serve as a platform for increased utilization and expansion of Plantation's pipeline system.
Markets. Plantation ships products for approximately 50 companies to terminals throughout the southeastern United States. Plantation's principal customers are Gulf Coast refining and marketing companies, fuel wholesalers and the United States Department of Defense. In addition, Plantation services the Atlanta, Georgia; Charlotte, North Carolina; and Washington, D.C. airports (Ronald Reagan/National and Dulles), at which it delivers jet fuel to major airlines.
Supply. Products shipped on Plantation originate at various Gulf Coast refineries from which major integrated oil companies and independent refineries and wholesalers ship refined petroleum products. Plantation can transport over 600,000 barrels of refined petroleum products per day. In December 1999, Plantation announced an expansion of its mainline system. The $40 million development will increase the system's capacity by 70,000 barrels per day. The first phase of the expansion was completed in the fourth quarter of 2000 and the entire expansion project should be completed in the second quarter of 2001.
Competition. Plantation competes primarily with the Colonial Pipeline, which also runs from Gulf Coast refineries throughout the southeastern United States, extending into the northeastern states.
Cochin Pipeline System
We own 32.5% of the Cochin Pipeline System, a 1,938 mile 12-inch multiproduct pipeline operating between Fort Saskatchewan, Alberta and Sarnia, Ontario.
The Cochin Pipeline System and related storage and processing facilities consist of two components:
o in Canada, all facilities are conducted under the name of Cochin Pipe
Lines, Ltd.; and
o in the United States, all facilities are operated under the name of
Dome Pipeline Corporation.
Markets. Formed in the late 1970's as a joint venture and an integral part of the Alberta petrochemical project, the pipeline transverses three provinces in Canada and seven states in the United States transporting high vapor pressure ethane, ethylene, propane, butane and natural gas liquids to the Midwestern United States and eastern Canadian petrochemical and fuel markets. The system operates as a National Energy Board (Canada) and Federal Energy Regulatory Commission (United States) regulated common carrier; shipping products on behalf of its owners as well as other third parties.
Supply. The pipeline operates on a batched basis and has an estimated system capacity of approximately 112,000 barrels per day. Its peak capacity is approximately 124,000 barrels per day. It includes 31 pump stations spaced at 60 mile intervals and five United States propane terminals.
Associated underground storage is available at Fort Saskatchewan, Alberta and Windsor, Ontario. The system is connected to the Williams Pipeline System in Minnesota and in Iowa, and connects with our North System at Clinton, Iowa. The Cochin Pipeline System has the ability to access the Canadian Eastern Delivery System via the Windsor Storage Facility Joint Venture at Windsor, Ontario. Injection into the system can occur from:
o BP Amoco, Chevron or Dow fractionation facilities at Fort
Saskatchewan, Alberta;
o TransCanada Midstream storage at five points within the provinces of
Canada; or
o the Williams Mapco West Junction, in Minnesota.
Cypress Pipeline
Our Cypress Pipeline is an interstate common carrier pipeline system originating at storage facilities in Mont Belvieu, Texas and extending 104 miles east to the Lake Charles, Louisiana area. Mont Belvieu, located approximately 20 miles east of Houston, is the largest hub for natural gas liquids gathering, transportation, fractionation and storage in the United States.
Markets. The pipeline was built to service a major petrochemical producer in the Lake Charles, Louisiana area under a 20-year ship-or-pay agreement that expires in 2011. The contract requires a minimum volume of 30,000 barrels per day and in 1997, the producer agreed to ship at least an additional 13,700 barrels per day for five years. Also in 1997, we expanded the Cypress Pipeline's capacity by 25,000 barrels per day to 57,000 barrels per day. Our management continues to pursue projects that could increase throughput on our Cypress Pipeline.
Supply. Our Cypress Pipeline originates in Mont Belvieu where it is able to receive ethane and ethane/propane mix from local storage facilities. Mont Belvieu has facilities to fractionate natural gas liquids received from several pipelines into ethane and other components. Additionally, pipeline systems that transport specification natural gas liquids from major producing areas in Texas, New Mexico, Louisiana, Oklahoma and the Mid-Continent Region supply ethane and ethane/propane mix to Mont Belvieu.
Transmix Operations
Our transmix operations consist of:
o transmix processing facilities located in Richmond, Virginia and
Dorsey Junction, Maryland acquired in September 1999 from Primary
Corporation;
o transmix processing facilities located in Indianola, Pennsylvania and
Wood River, Illinois acquired in October 2000 as part of our
acquisition of Kinder Morgan Transmix Company, LLC, formerly known as
Buckeye Refining Company, LLC; and
o the Colton Processing Facility located in Colton, California.
Transmix occurs when dissimilar refined petroleum products are co-mingled in the pipeline transportation process. Different products are pushed through the pipelines abutting each other, and the area where different products mix is called transmix. Employing atmospheric distillation units, we process pipeline transmix generated in the eastern United States to produce pipeline quality gasoline and light distillate products. The processing is provided on a "for fee" basis or on a "purchase, process and sell" basis. The processed material is returned to the generator of the transmix or is sold into the local market depending on the type of agreement in place with the generator.
Our Richmond operating facility resides on an 11-acre site located near Interstate 95 and adjacent to Virginia's James River. The facility is comprised of a dock/pipeline, a 170,000-barrel tank farm, a processing plant, lab and truck rack. The facility is composed of four distillation units that operate 24 hours a day, 7 days a week providing a production capacity of approximately 8,000 barrels per day. The facility is able to segregate feedstock for specialty fuel production. The processing facility employs state-of-the-art computer based process control equipment and is supported by comprehensive in-house quality control laboratory capabilities. The facility is served by both Colonial and Plantation pipelines, by deep-water barge (25 feet draft) and by transport truck and rail. We also own an additional 3.6-acre bulk products terminal with a capacity of 55,000 barrels located nearby in Richmond.
Our Dorsey Junction operating facility is located within the Colonial Pipeline Dorsey Junction terminal facility. The 5,000-plus barrel per day processing unit began operations in February 1998. It operates 24 hours a day, 7 days a week providing dedicated transmix separation service for Colonial on a "for fee" basis.
Our Indianola operating facility is located on a 30-acre site near Pittsburgh and is accessible by truck, barge and pipeline, primarily processing transmix from Buckeye, Colonial, Sun and Teppco pipelines. It has capacity to process 12,000 barrels of transmix per day and operates 24 hours per day, 7 days a week. The facility is comprised of a 500,000-barrel tank farm, a quality control laboratory, a truck loading rack and a processing unit. The facility can ship via the Buckeye pipeline as well as by truck.
Our Wood River operating facility was constructed in 1993 on property owned by Conoco and is accessible by truck, barge and pipeline, primarily processing transmix from Explorer and Conoco pipelines. It has capacity to process 5,000 barrels of transmix per day. Located on approximately three acres leased from Conoco, the facility consists of one processing unit. Supporting terminal capability is provided through leased tanks in adjacent terminals.
Our Colton operating facility, completed in the spring of 1998, and located adjacent to our products terminal in Colton, California, processes proprietary transmix on a fee basis for a subsidiary of Duke Energy. The facility produces refined petroleum products, which are injected into our Pacific operations' pipelines for delivery to markets in Southern California and Arizona. The facility processed approximately 4,100 barrels per day during 2000, which is near the capacity of the facility.
Markets. The Gulf and East Coast petroleum distribution system, particularly the Mid-Atlantic region, provides the target market for our East Coast transmix processing operations. The Mid-Continent area and the New York Harbor are the target markets for our Pennsylvania and Illinois assets. Our West Coast transmix processing operations support the markets serviced by our Pacific operations. We are working to expand our Mid-Continent and West Coast markets.
Supply. Transmix generated by Colonial, Plantation, Sun, Teppco, Explorer, and our Pacific operations provide the vast majority of our supply. These suppliers are committed by long-term contracts. Individual shippers and terminal operators provide additional supply.
Competition. Our transmix operations compete mainly with Placid Refining in the Gulf coast area. Tosco Refining is a major competitor in the New York harbor area. There are various processors in the Mid-Continent area, mainly Phillips and Williams Brothers, who will compete with our expansion efforts into that market. A number of smaller organizations operate in the West and Southwest. These operations compete for supply, which we envision as the basis for growth in the West and Southwest. Our Colton Processing Facility competes with major oil company refineries and other transmix processing facilities in California and Arizona.
Heartland Pipeline Company
The Heartland pipeline was completed in the fall of 1990 and is owned by Heartland Pipeline Company. We and Conoco each own 50% of Heartland. We operate the pipeline and Conoco operates Heartland's Des Moines terminal and serves as the managing partner of Heartland. In 2000, Heartland leased Conoco 100% of the Heartland terminal capacity at Des Moines, Iowa for $1.0 million.
Markets. Heartland provides transportation of refined petroleum products from refineries in the Kansas and Oklahoma area to a BP Amoco terminal in Council Bluffs, Iowa, a Conoco terminal in Lincoln, Nebraska and Heartland's Des Moines terminal. The demand for, and supply of, refined petroleum products in the geographic regions served directly affect the volume of refined petroleum products transported by Heartland.
Supply. Refined petroleum products transported by Heartland on our North System are supplied primarily from the National Cooperative Refinery Association crude oil refinery in McPherson, Kansas and the Conoco crude oil refinery in Ponca City, Oklahoma.
Competition. Heartland competes with other refined product carriers in the geographic market served. Heartland's principal competitor is Williams Pipeline Company.
Painter Gas Processing Plant
Our Painter Plant is located near Evanston, Wyoming and consists of:
o a natural gas processing plant;
o a nitrogen rejection unit;
o a fractionator;
o a natural gas liquids terminal; and
o interconnecting pipelines with truck and rail loading facilities.
The fractionation facility has a capacity of approximately 6,000 barrels per day, depending on the feedstock composition. We lease the Painter Plant to Amoco Oil Company, a unit of BP Amoco, which operates the fractionator and the associated Millis terminal and storage facilities for its own account. BP Amoco also owns and operates the nearby BP Amoco Painter Complex gas plant.
Natural Gas Pipelines
Our Natural Gas Pipelines consist of natural gas gathering, transportation and storage for both interstate and intrastate pipelines. Within this segment, we operate over 10,000 miles of natural gas pipelines and associated storage and supply lines that are strategically located at the center of the North American pipeline grid. Our transportation network provides access to the major gas supply areas in the western United States and the Midwest, as well as major consumer markets.
Kinder Morgan Interstate Gas Transmission LLC.
Through Kinder Morgan Interstate Gas Transmission LLC, we own approximately 6,500 miles of transmission lines in Wyoming, Colorado, Kansas, Missouri and Nebraska. KMIGT provides transportation and storage services to KMI affiliates, third-party natural gas distribution utilities and other shippers. Pursuant to transportation agreements and FERC tariff provisions, KMIGT offers its customers firm and interruptible transportation and storage, including no-notice services. Under KMIGT's tariffs, firm transportation and storage customers pay reservation charges each month plus a commodity charge based on actual volumes transported or stored. Interruptible transportation and storage customers pay a commodity charge based upon actual volumes transported or stored. Reservation and commodity charges are both based upon geographical location (KMIGT does not have seasonal rates) and distance of the transportation service provided. Under no-notice service, customers pay a fee for the right to use a combination of firm storage and firm transportation to make deliveries of natural gas up to a specified volume. No-notice customers are able to meet their peak day requirements without making specific nominations.
The system includes 41 transmission, field and storage compressor stations having an aggregate of approximately 158,981 installed horsepower. The pipeline system provides storage services to its customers from its Huntsman Storage Field in Cheyenne County, Nebraska. The facility has 39.4 billion cubic feet of total storage capacity, 7.9 billion cubic feet of working gas capacity and up to 101 million cubic feet per day of peak withdrawal capacity.
Markets. Markets served by KMIGT consist of a stable customer base with expansion opportunities due to the system's access to the growing Rocky Mountain supply sources. Markets served by KMIGT are comprised mainly of local distribution companies and interconnecting interstate pipelines in the mid-continent area. Markets for the local distribution companies can include residential, commercial, industrial and agricultural customers. KMIGT also delivers into interconnecting interstate pipelines in the mid-continent area, which can in turn deliver gas into multiple markets throughout the United States. Due to the demand for natural gas to run irrigation systems in the summer, summer loads often equal the levels for the winter heating season.
Contracts. On a volumetric basis, approximately 23% of KMIGT's firm contracts expire within one year, 10% expire within one to five years and 67% expire in more than five years. Out of the 23% of the firm volumes that expire within one year, 89% of those volumes are with affiliated entities. Affiliated entities are responsible for approximately 24% of the total firm transportation and storage capacity under contract on KMIGT's system. Over 90% of the system's firm transport capacity is currently subscribed. In February 2000, KMIGT preserved its current cost of service for 5 years as part of the settlement with its customers and the Federal Energy Regulatory Commission on its filed rate case.
Competition. KMIGT competes with other interstate and intrastate gas pipelines transporting gas from the supply sources in the Rocky Mountain and Hugoton Basins to mid-continent pipelines and market centers.
Kinder Morgan Texas Pipeline L.P.
KMTP, acquired in conjunction with the December 31, 2000 transfer of assets from KMI, operates an intrastate
natural gas pipeline system, which is leased from Occidental Petroleum Corporation under a 30 year lease that commenced on December 31, 1996. The pipeline system is principally located in the Texas Gulf Coast area. The system includes approximately 2,700 miles of pipelines, supply and gathering lines, sales laterals and related facilities. KMTP transports natural gas from producing fields in South Texas, the Gulf Coast and the Gulf of Mexico to markets in southeastern Texas. In addition, KMTP has interconnections with Natural Gas Pipeline Company of America, a subsidiary of KMI, and 22 other intrastate and interstate pipelines.
Markets/Contracts. KMTP acts as a seller of natural gas as well as a transporter. Principal customers of KMTP include the electric and natural gas utilities that serve the Houston area, and industrial customers located along the Houston Ship Channel and in the Beaumont/Port Arthur, Texas area.
This market is one of the largest and most competitive natural gas markets in the United States. Large industrial end users of natural gas have, on average, three pipelines connected to their plants. Large local distribution companies and electric utilities have multiple pipeline connections. Multiple pipeline connections provide the consumer of natural gas the opportunity to purchase natural gas directly from a number of pipelines and/or from third parties that may hold capacity on the various pipelines. For this market, the greatest demand for natural gas deliveries for heating load occurs in the winter months, while electric generation peak demand occurs in the summer months. In 2000, KMTP delivered an average of 1.8 billion cubic feet per day of natural gas to this area, of which 62% of the deliveries were for sales contracts and 38% were for transportation contracts.
During 2000, approximately 58% of KMTP's gross margin was attributable to sales and transportation services provided to Reliant Energy and its affiliates. On March 17, 2000, KMTP renewed its natural gas sales and transportation contract with Reliant Energy HL&P through March 1, 2004. Additionally, KMTP has entered into a new transportation services agreement with Reliant Energy HL&P beginning in 2002 and extending through 2012. Reliant HL&P provides electric service to approximately 1.6 million customers in the Houston area. The contract terms for Reliant Energy utilities will expire between 2002 and 2004. Also, on October 21, 2000, KMTP entered into a 10-year firm natural gas transportation and storage agreement with Calpine beginning July 1, 2001. Other industrial end users' contracts vary in length from month-to-month to five or more years.
KMTP has also developed a salt dome storage facility located near Markham, Texas with a subsidiary of NISource Industries, Inc. The facility has two salt dome caverns and approximately 8.3 billion cubic feet of total storage capacity, over 5.7 billion cubic feet of working gas capacity and up to 500 million cubic feet per day of peak deliverability. The storage facility is leased by a partnership in which KMTP and a subsidiary of NISource are partners. KMTP has executed a 20 year sublease with the partnership under which it has rights to 50% of the facility's working gas capacity, 85% of its withdrawal capacity and approximately 70% of its injection capacity. KMTP also leases a salt dome cavern from Dow Hydrocarbon & Resources, Inc. in Brazoria County, Texas, referred to as the Stratton Ridge Facility. The Stratton Ridge Facility has a total capacity of 6.5 billion cubic feet, working gas capacity of 3.6 billion cubic feet and a peak day deliverability of up to 150 million cubic feet per day.
Competition. KMPT competes with marketing companies, interstate and intrastate pipelines for sales and transport customers in the Houston, Beaumont and Port Arthur areas, and for acquiring gas supply in South Texas, the Gulf Coast of Texas and the Gulf of Mexico.
Trailblazer Pipeline Company
We own 66 2/3% of Trailblazer Pipeline Company, an Illinois general partnership. Enron Trailblazer Pipeline Company, a subsidiary of Enron Corporation, owns the remaining 33 1/3%. A committee consisting of management representatives for each of the partners manages Trailblazer. NGPL, a subsidiary of KMI, manages, maintains and operates Trailblazer and provides the personnel to operate Trailblazer for which NGPL is reimbursed at cost. Trailblazer is a "natural gas company" within the meaning of the Natural Gas Act. Trailblazer's principal business is to transport and redeliver natural gas to others in interstate commerce, and it does business in the states of Wyoming, Colorado, Nebraska and Illinois. Trailblazer has been a fully "open access" pipeline under Order Nos. 436/500 since June 1, 1991. Trailblazer owns and operates a 436 mile 36-inch diameter pipeline system which originates at an interconnection with Wyoming Interstate Company Ltd.'s pipeline system near Rockport, Weld County, Colorado and runs through southeastern Wyoming to a terminus near Beatrice, Gage County, Nebraska where Trailblazer's pipeline system interconnects with NGPL's and Northern Natural Gas Company's pipeline systems.
Trailblazer's pipeline is the fourth segment of a 791 mile pipeline system known as the Trailblazer Pipeline System, which originates in Uinta County, Wyoming with Canyon Creek Compression Company, a 22,000 brake horsepower compressor station located at the tailgate of BP Amoco Production Company's processing plant in the Whitney Canyon Area in Wyoming (Canyon Creek's facilities are the first segment). Canyon Creek receives gas from the BP Amoco processing plant and provides transportation and compression of gas for delivery to Overthrust Pipeline Company's 88 mile 36-inch diameter pipeline system at an interconnection in Uinta County, Wyoming (Overthrust's system is the second segment). Overthrust delivers gas to Wyoming Interstate's 269 mile 36-inch diameter pipeline system at an inter-connection (Kanda) in Sweetwater County, Wyoming (Wyoming Interstate's system is the third segment). Wyoming Interstate's pipeline delivers gas to Trailblazer's pipeline at an interconnection near Rockport in Weld County, Colorado.
Markets. Significant growth in Rocky Mountain natural gas supplies has prompted a need for additional pipeline transportation service. In August 2000, Trailblazer announced an approximate $58.7 million expansion to its system, which will provide an additional capacity of 324,000 dekatherms per day. The expansion project would start in Rockport, Colorado, where Trailblazer's pipeline interconnects with pipelines owned by Colorado Interstate Gas Co., Wyoming Interstate Company, West Gas and KMIGT, and terminate in Gage County, Nebraska. With this project, Trailblazer will install two new compressor stations and add additional horsepower at an existing compressor station. Trailblazer filed its expansion plan with the FERC on January 10, 2001, and pending FERC approval, the project is scheduled for completion in the third quarter of 2002.
Competition. While competing pipelines have been announced, which would move gas east out of the Rocky Mountains, the main competition that Trailblazer faces is that the gas supply in the Rocky Mountain area either stays in the area or is moved west and therefore not transported on Trailblazer's pipeline.
Casper and Douglas Natural Gas Gathering and Processing Systems
We own and operate our Casper and Douglas natural gas gathering and processing facilities.
Douglas Gathering is comprised of approximately 1,500 miles of 4-inch to 16-inch diameter pipe that gathers approximately 58 million cubic feet per day of casinghead gas from 650 active receipt points. Douglas Gathering has an aggregate 24,495 horsepower of compression with central dehydration at each field booster compressor station. Gathered volumes are processed at our Douglas plant, located in Douglas, Wyoming. Residue gas is delivered into KMIGT and recovered liquids are injected in Phillips Petroleum's natural gas liquids pipeline for transport to Borger, Texas.
Casper Gathering is comprised of approximately 60 miles of 4-inch to 8-inch diameter pipeline that transports approximately 20 million cubic feet per day of natural gas from eight active receipt points. Gathered volumes are delivered directly into KMIGT. Current gathering capacity is contingent upon available capacity on KMIGT and the Casper Plant's 50 to 80 million cubic feet per day processing capacity.
Our Casper Plant, located in Casper, Wyoming, is a lean oil absorption facility with full fractionation and capacity to process 50 to 80 million cubic feet per day of natural gas depending on raw gas quality. As a result of utilizing a lean oil absorption process the facility does not recover ethane from the raw gas stream. The inlet composition of gas entering our Casper plant averages approximately 1.2 gallons per thousand cubic feet of propane and heavier natural gas liquids, reflecting the relatively lean gas gathered by Casper Gathering. Our Casper Plant recoveries averaged approximately 60% of propane, 89% of isobutene, 90% of normal butane, and 98% of natural gasoline and C6+. The facility is a straddle plant on KMIGT and utilizes 5,000 horsepower of compression.
Casper-Douglas' unique combination of percentage-of-proceeds, sliding scale percent-of-proceeds and keep whole plus fee processing agreements limits our exposure to commodity price volatility.
Competition. There are a number of other natural gas gathering and processing alternatives for producers in the Powder River Basin. However, Casper and Douglas are the only two plants in the region that provide straddle processing of natural gas streams flowing into KMIGT. The other regional facilities include the Hilight (80 million cubic feet per day) and Kitty (17 million cubic feet per day) plants owned and operated by Western Gas Resources; the Sage Creek (50 million cubic feet per day) plant owned and operated by Devon; and Lost Creek Gathering which is a partnership between Burlington Resources and Northern Border Partners.
Red Cedar Gathering Company
We own a 49% equity interest in the Red Cedar Gathering Company, a joint venture organized in August 1994. The Southern Ute Indian Tribe owns the remaining 51%. Red Cedar owns and operates natural gas gathering and treating facilities in La Plata County, Colorado, in the Ignacio Blanco Field of the San Juan Basin. The Ignacio Blanco Field is that portion of the San Juan Basin located in Colorado, most of which is located within the exterior boundaries of the Southern Ute Indian Reservation. Red Cedar gathers coal seam and conventional natural gas at wellheads and at several central delivery points, and treats gas for delivery to three major interstate gas pipeline systems and to an intrastate pipeline.
Red Cedar's gas gathering system currently consists of over 450 miles of gathering pipeline connecting more than 600 producing wells, 17 field compressor stations and a carbon dioxide processing plant. A majority of the gas on the system moves through 8-inch to 20-inch diameter pipe. The capacity and throughput of the Red Cedar system as currently configured is approximately 600 million cubic feet per day of natural gas.
Coyote Gas Treating, LLC
We own a 50% equity interest in Coyote Gas Treating, LLC, a joint venture organized in December 1996. Coyote Gas Treating, LLC, known as Coyote Gulch, is a 250 million cubic feet per day natural gas treating facility located in La Plata County, Colorado. El Paso Field Services Company owns the remaining 50% interest. We took over the operations of Coyote Gulch on February 1, 1999. Prior to that time, El Paso was the operator of the plant.
The inlet gas stream treated by Coyote Gulch contains an average carbon dioxide content of between 12% and 13%. The plant treats the gas down to a carbon dioxide concentration of 2% in order to meet interstate pipeline gas quality specifications. Coyote's residue gas is delivered into the TransColorado Pipeline for transport to the Blanco, New Mexico San Juan Basin Hub.
Thunder Creek Gas Services, LLC
We own a 25% equity interest in Thunder Creek Gas Services, LLC, a joint venture organized in September 1998. Thunder Creek provides gathering, compression and treating services to a number of producers in the Powder River Basin. Throughput volumes include both coalseam and conventional plant residue gas. Devon Energy, an independent energy company, operates the facilities and owns the remaining 75% interest.
Thunder Creek's operations include a 450 million cubic feet per day, 126-mile, 24-inch trunk-line, a 225 million cubic feet per day amine-type carbon dioxide treating plant, 340 miles of gathering lines and one major trunkline compressor station with a total 11,275 horsepower.
Thunder Creek was established to construct, equip, operate and maintain natural gas gathering, compression, and treating facilities within a large area of mutual interest in the Powder River Basin of eastern Wyoming. The Powder River Basin encompasses approximately 26,000 square miles of eastern Wyoming and southeastern Montana and contains an estimated 1 trillion tons of coal. With gas content of the coal in the basin ranging from 30 to 75 standard cubic feet per ton, industry estimates place potential recoverable coalbed methane reserves within the Powder River Basin somewhere between 10 trillion cubic feet and 15 trillion cubic feet.
CO2 Pipelines
On March 5, 1998, we and affiliates of Shell Exploration & Production Company combined our carbon dioxide activities and assets into a partnership (Shell CO2 Company, Ltd.). Shell CO2 Company, Ltd. was established to transport, market and produce carbon dioxide for use in enhanced oil recovery operations in the continental United States. We acquired a 20% interest in Shell CO2 Company, Ltd. in exchange for contributing our Central Basin Pipeline and approximately $25 million in cash. Shell contributed the following assets in exchange for the remaining 80% ownership interest:
o an approximate 45% interest in the McElmo Dome carbon dioxide
reserves;
o an 11% interest in the Bravo Dome carbon dioxide reserves;
o an indirect 50% interest in the Cortez Pipeline;
o a 13% interest in the Bravo Pipeline; and
o certain other related assets.
These assets facilitated our marketing of carbon dioxide by bringing a complete package of carbon dioxide supply, transportation and technical expertise to the customer. Carbon dioxide is used in enhanced oil recovery projects as a flooding medium for recovering crude oil from mature oil fields.
On April 1, 2000, we acquired the remaining 80% interest in Shell CO2 Company, Ltd. from Shell for $212.1 million. After the closing, we renamed Shell CO2 Company, Ltd., Kinder Morgan CO2 Company, L.P. We own a 98.9899% limited partner interest in KMCO2 and our general partner owns a direct 1.0101% general partner interest.
On June 1, 2000, we announced an agreement to acquire carbon dioxide asset interests from Devon Energy Production Company L.P. for approximately $55 million. All of the properties acquired were located in the Permian Basin of west Texas and the principal assets were an 81% interest in the Canyon Reef Carriers carbon dioxide pipeline and a working interest in the SACROC unit (oil field). Additionally, we acquired minority interests in the Sharon Ridge unit, operated by Exxon Mobil, the Reinecke unit, operated by Spirit 76, and gas processing plants used to recover injected carbon dioxide.
On December 28, 2000, we announced that KMCO2 had entered into a definitive agreement to form a joint venture with Marathon Oil Company in the southern Permian Basin of west Texas. The joint venture consists of a nearly 13% interest in the SACROC unit and a 49.9% interest in the Yates Field unit. The joint venture was formed on January 1, 2001, and named MKM Partners, L.P. It is owned 85% by Marathon Oil Company and 15% by KMCO2.
McElmo and Bravo Domes. We operate and own approximately 45% of McElmo Dome, which contains more than 11 trillion cubic feet of nearly pure carbon dioxide. Compression capacity exceeds one billion cubic feet per day. While current wellbore capacity is about 850 million cubic feet per day, additional wells are planned to increase deliverability by approximately 1 billion cubic feet per day. McElmo Dome produces from the Leadville formation at 8,000 feet with 44 wells that produce at individual rates of up to 100 million cubic feet per day.
Bravo Dome, of which we own approximately 11%, holds reserves of approximately two trillion cubic feet of carbon dioxide. Bravo Dome produces approximately 333 million cubic feet per day, with production coming from more than 350 wells in the Tubb Sandstone at 2,300 feet.
Pipelines. Placed in service in 1985, our Central Basin Pipeline consists of approximately 143 miles of 16-inch to 20-inch main pipeline and 157 miles of 4-inch to 12-inch lateral supply lines located in the Permian Basin between Denver City, Texas and McCamey, Texas with a throughput capacity of 600 million cubic feet per day. At its origination point in Denver City, our Central Basin Pipeline interconnects with all three major carbon dioxide supply pipelines from Colorado and New Mexico, namely the Cortez Pipeline (operated by KMCO2) and the Bravo and Sheep Mountain Pipelines (operated by BP Amoco). Central Basin Pipeline's mainline terminates near McCamey where it interconnects with the Canyon Reef Carriers Pipeline.
We operate and own a 50% interest in the 502-mile, 30-inch Cortez Pipeline. Prior to January 1, 2001, Cortez Pipeline was operated by a Shell affiliate. This pipeline carries carbon dioxide from the McElmo Dome source reservoir to the Denver City, Texas hub. The Cortez Pipeline currently transports in excess of 700 million cubic feet per day, including approximately 90% of the carbon dioxide transported on our Central Basin Pipeline.
In addition, we own 13% of the 218 mile 20-inch Bravo Pipeline, which delivers to the Denver City hub and has a capacity of more than 350 million cubic feet per day. Major delivery points along the line include the Slaughter Field in Cochran and Hockley counties, Texas, and the Wasson field in Yoakum County, Texas. Tariffs on the Cortez and Bravo pipelines are not regulated.
In addition, we own 81% of the Canyon Reef Carriers Pipeline. The Canyon Reef Carriers Pipeline, constructed in 1972, is the oldest carbon dioxide pipeline in West Texas. The Canyon Reef Carriers Pipeline extends 140 miles from McCamey, Texas, to our SACROC field. This pipeline is 16 inches in diameter and has a capacity
of approximately 240 million cubic feet per day and makes deliveries to the SACROC, Sharon Ridge and Reinecke units.
SACROC Unit. The SACROC unit, in which we have a 71% working interest, is comprised of approximately 50,000 acres located in the Permian Basin in Scurry County, Texas. SACROC was discovered in 1948 and has produced over 1.2 billion barrels of oil since inception. The current production rate is approximately 9,000 barrels of oil per day from 250 producing wells.
Markets. Our principal market for carbon dioxide is for injection into mature oil fields in the Permian Basin, where industry demand is expected to be comparable to historical demand for the next several years. We have negotiated making deliveries to two new projects, the Cogdell field, operated by Occidental Petroleum and the HT Boyd field, operated by Anadarko Petroleum. Deliveries are expected to begin by mid 2001. We are exploring additional potential markets including southwest and central Kansas, California and the coal bed methane production in the San Juan Basin of New Mexico.
Competition. Our primary competitors for the sale of carbon dioxide include suppliers that have an ownership interest in McElmo Dome, Bravo Dome and Sheep Mountain Dome carbon dioxide reserves. Our ownership interests in the Cortez and Bravo pipelines are in direct competition with Sheep Mountain pipeline and Petrosource Carbon Company's carbon dioxide pipeline. We also compete with other interests in McElmo Dome and Cortez Pipeline, for transportation of carbon dioxide to the Denver City, Texas market area. There is no assurance that new carbon dioxide source fields will not be discovered which could compete with us or that new methodologies for enhanced oil recovery could replace carbon dioxide flooding.
Bulk Terminals
Our Bulk Terminals segment consists of over 25 bulk terminals, which handle approximately 40 million tons of dry and liquid bulk products annually.
Coal Terminals
Our Cora Terminal is a high-speed, rail-to-barge coal transfer and storage facility. Built in 1980, the terminal is located on approximately 480 acres of land along the upper Mississippi River near Cora, Illinois, about 80 miles south of St. Louis, Missouri. The terminal has a throughput capacity of about 15 million tons per year that can be expanded to 20 million tons with certain capital additions. The terminal currently is equipped to store up to one million tons of coal. This storage capacity provides customers the flexibility to coordinate their supplies of coal with the demand at power plants. Storage capacity at the Cora Terminal could be doubled with additional capital investment.
Our Grand Rivers Terminal is operated on land under easements with an initial expiration of July 2014. Grand Rivers is a coal transloading and storage facility located along the Tennessee River just above the Kentucky Dam. The terminal has current annual throughput capacity of approximately 12-15 million tons with a storage capacity of approximately two million tons. With capital improvements, the terminal could handle 25 million tons annually.
Our Pier IX Terminal is located in Newport News, Virginia. The terminal originally opened in 1983 and has the capacity to transload approximately 12 million tons of coal annually. It can store 1.3 million tons of coal on its 30-acre storage site. In addition, the Pier IX Terminal operates a cement facility, which has the capacity to transload over 400,000 tons of cement annually.
In addition, we operate the LAXT Coal Terminal in Los Angeles, California and a smaller coal terminal in Mt. Vernon, Indiana. We are also in the process of developing our Shipyard River Terminal in Charleston, South Carolina, to be able to unload, store, and reload coal imported from various foreign countries. The imported coal is expected to be low sulfur and would be used by local utilities to comply with the Clean Air Act. When modifications are complete, Shipyard River Terminal will have the capacity to handle 2.5 million tons per year.
Markets. Coal continues to dominate as the fuel for electric generation, accounting for more than 55% of United States electric generation feedstock. Forecasts of overall coal usage and power plant usage for the next 20 years show an increase of about 1.5% per year. Current domestic supplies are predicted to last for several hundred
years. Most coal transloaded through our coal terminals is destined for use in coal-fired electric generation.
We believe that obligations to comply with the Clean Air Act Amendments of 1990 will cause shippers to increase the use of low-sulfur coal from the western United States. Approximately 80% of the coal loaded through our Cora Terminal and our Grand Rivers Terminal is low sulfur coal originating from mines located in the western United States, including the Hanna and Powder River basins in Wyoming, western Colorado and Utah. In 2000, four major customers accounted for approximately 90% of all the coal loaded through our Cora Terminal and our Grand Rivers Terminal.
Both Pier IX and LAXT export coal to foreign markets. Substantial portions of the coal transloaded at these facilities are covered by long-term contracts. In addition, Pier IX serves power plants on the eastern seaboard of the United States and imports cement pursuant to a long-term contract.
Supply. Historically, our Cora and Grand Rivers terminals have moved coal that originated in the mines of southern Illinois and western Kentucky. Many shippers, however, particularly in the East, are now using western coal loaded at the terminals or a mixture of western coal and other coals as a means of meeting environmental restrictions. We believe that Illinois and Kentucky coal producers and shippers will continue to be important customers, but anticipate that growth in volume through the terminals will be primarily due to western low sulfur coal originating in Wyoming, Colorado and Utah.
Our Cora Terminal sits on the mainline of the Union Pacific Railroad and is strategically positioned to receive coal shipments from the West. Grand Rivers provides easy access to the Ohio-Mississippi River network and the Tennessee-Tombigbee System. The Paducah & Louisville Railroad, a short line railroad, serves Grand Rivers with connections to seven Class I rail lines including the Union Pacific, CSX, Illinois Central and Burlington Northern Santa Fe. The Pier IX Terminal is served by the CSX Railroad, which transports coal from central Appalachian and other eastern coal basins. Cement imported at the Pier IX Terminal primarily originates in Europe. The Union Pacific Railroad serves LAXT.
Competition. Our Cora Terminal and our Grand Rivers Terminal compete with several coal terminals located in the general geographic area. No significant new coal terminals have been constructed near our Cora Terminal or our Grand Rivers Terminal in the last ten years. We believe our Cora Terminal and our Grand Rivers Terminal can compete successfully with other terminals because of their favorable location, independent ownership, available capacity, modern equipment and large storage areas. Our Pier IX Terminal competes primarily with two modern coal terminals located in the same Virginian port complex as our Pier IX Terminal. There are significant barriers to entry for the construction of new coal terminals, including the requirement for significant capital expenditures and restrictive environmental permitting requirements.
Petroleum Coke and Other Bulk Terminals
We own or operate 8 petroleum coke terminals in the United States. Petroleum coke is a by-product of the refining process and has characteristics similar to coal. Petroleum coke supply in the United States has increased in the last several years due to the increased use of coking units by domestic refineries. Petroleum coke is used in domestic utility and industrial steam generation facilities and is exported to foreign markets. Most of our customers are large integrated oil companies that choose to outsource the storage and loading of petroleum coke for a fee.
We own or operate an additional 12 bulk terminals located primarily on the southern edge of the lower Mississippi River, the Gulf Coast and the West Coast. These other bulk terminals serve customers in the alumina, cement, salt, soda ash, ilminite, fertilizer, ore and other industries seeking specialists who can build, own and operate bulk terminals.
Competition. Our petroleum coke and other bulk terminals compete with numerous independent terminal operators, with other terminals owned by oil companies and other industrials opting not to outsource terminal services. Competition against the petroleum coke terminals that we operate but do not own has increased significantly primarily from companies that also market and sell the product. This increased competition will likely decrease profitability in this segment. Many of our other bulk terminals were constructed pursuant to long-term contracts for specific customers. As a result, we believe other terminal operators would face a significant disadvantage in competing for this business.
Liquid Terminals
On December 1, 2000, we purchased the stock of Delta Terminal Services, Inc. for $114.1 million. Delta operates a large liquids terminal in New Orleans, with 2.8 million barrels of storage, four docks and seven drumming buildings, as well as a smaller liquids terminal in Cincinnati, Ohio. These terminals handle a variety of chemicals, vegetable oils and other liquid petroleum products and compete with several large independent terminal operators.
Major Customers
Our total operating revenues are derived from a wide customer base. During 2000 and 1999, no revenues from transactions with a single external customer amounted to 10% or more of our consolidated revenues. For the year ended December 31, 1998, the following customers accounted for more than 10% of our consolidated revenues:
o Equilon Enterprises(1) 13.2%
o Tosco Group 12.3%
o Chevron 11.0%
o ARCO 10.9%
(1) Equilon is the name of the joint venture, formed in January 1998, that combined major elements of Texaco's and Shell's mid-western and western U.S. refining and marketing businesses and nationwide trading, transportation and lubricants businesses.
Employees
We do not have any employees. Our general partner and/or our subsidiary entities employ all persons necessary for the operation of our business. We reimburse our general partner for the services of its employees. As of February 1, 2001, our general partner and/or our subsidiary entities had approximately 1,600 employees. Approximately 100 hourly personnel at certain terminals are represented by five labor unions. No other employees of our general partner or our subsidiaries are members of a union or have a collective bargaining agreement. Our general partner and our subsidiaries consider their relations with their employees to be good.
Regulation
Interstate Common Carrier Regulation
Some of our pipelines are interstate common carrier pipelines, subject to regulation by the Federal Energy Regulatory Commission under the Interstate Commerce Act. The ICA requires that we maintain our tariffs on file with the FERC, which tariffs set forth the rates we charge for providing transportation services on our interstate common carrier pipelines as well as the rules and regulations governing these services. Petroleum pipelines may change their rates within prescribed ceiling levels that are tied to an inflation index. Shippers may protest rate increases made within the ceiling levels, but such protests must show that the portion of the rate increase resulting from application of the index is substantially in excess of the pipeline's increase in costs. A pipeline must, as a general rule, utilize the indexing methodology to change its rates. The FERC, however, uses cost-of-service ratemaking, market-based rates and settlement as alternatives to the indexing approach in certain specified circumstances. In 2000, 1999 and 1998, application of the indexing methodology did not significantly affect our rates.
The ICA requires, among other things, that such rates be "just and reasonable" and nondiscriminatory. The ICA permits interested persons to challenge newly proposed or changed rates and authorizes the FERC to suspend the effectiveness of such rates for a period of up to seven months and to investigate such rates. If, upon completion of an investigation, the FERC finds that the new or changed rate is unlawful, it is authorized to require the carrier to refund the revenues in excess of the prior tariff collected during the pendency of the investigation. The FERC may also investigate, upon complaint or on its own motion, rates that are already in effect and may order a carrier to change its rates prospectively. Upon an appropriate showing, a shipper may obtain reparations for damages sustained during the two years prior to the filing of a complaint.
On October 24, 1992, Congress passed the Energy Policy Act of 1992. The Energy Policy Act deemed petroleum pipeline rates that were in effect for the 365-day period ending on the date of enactment or that were in effect on the 365th day preceding enactment and had not been subject to complaint, protest or investigation during the 365-day period to be just and reasonable under the ICA (i.e., "grandfathered"). The Energy Policy Act also limited the circumstances under which a complaint can be made against such grandfathered rates. The rates we charge for transportation service on our North System and Cypress Pipeline were not suspended or subject to protest or complaint during the relevant 365-day period established by the Energy Policy Act. For this reason, we believe these rates should be grandfathered under the Energy Policy Act. Certain rates on our Pacific operations' pipeline system were subject to protest during the 365-day period established by the Energy Policy Act. Accordingly, certain of the Pacific pipelines' rates have been, and continue to be, subject to complaints with the FERC, as is more fully described in Item 3. Legal Proceedings.
Both the performance of interstate transportation and storage services by natural gas companies, including interstate pipeline companies, and the rates charged for such services, are regulated by the FERC under the Natural Gas Act and, to a lesser extent, the Natural Gas Policy Act. Legislative and regulatory changes began in 1978 with the passage of the Natural Gas Policy Act, pursuant to which the process of deregulation of natural gas sold at the wellhead was commenced. The restructuring of the natural gas industry continued with the adoption of:
o Order 380 in 1984, which eliminated purchasers' minimum bill
obligations to pipelines, thus making natural gas purchased from third
parties, particularly on the spot market, more economically attractive
relative to natural gas purchased from pipelines; and
o Order 436 in 1985, which provided that interstate transportation of
natural gas under blanket or self-implementing authority must be
provided on an open-access, non-discriminatory basis.
After Order 436 was partially overturned in federal court, the FERC issued Order 500 in August 1987 as an interim rule intended to readopt the basic thrust of the regulations promulgated by Order 436. Order 500 was amended by Orders 500 A through L. The FERC's stated purpose in issuing Orders 436 and 500, as amended, was to create a more competitive environment in the natural gas marketplace. This purpose continued with Order 497, issued in June 1988, which set forth new standards and guidelines imposing certain constraints on the interaction of interstate pipelines and their marketing affiliates and imposing certain disclosure requirements regarding that interaction. Order 636, issued in April 1992, as amended, was a continuation of the FERC's efforts to improve the competitive structure of the pipeline industry and maximize the consumer benefits of a competitive structure of the pipeline industry and a competitive wellhead gas market. In Order 636, the FERC required interstate pipelines that perform open access transportation under blanket certificates to "unbundle" or separate their traditional merchant sales services from their transportation and storage services and to provide comparable transportation and storage services with respect to all natural gas supplies whether purchased from the pipeline or from other merchants such as marketers or producers. Pipelines must now separately state the applicable rates for each unbundled service they provide (i.e., for the natural gas commodity, transportation and storage).
Specifically, Order 636 contains the following procedures to increase competition in the industry:
o requiring the unbundling of sales services from other services,
meaning that only a separately identified merchant affiliate of the
pipeline could sell natural gas at points of entry into the pipeline
system;
o permitting holders of firm capacity to release all or a part of their
capacity for resale by the pipeline either to the highest bidder or,
under short-term or maximum rate releases, to shippers in a
prepackaged release, with revenues in both instances credited to the
releasing shipper;
o allowing shippers to use as secondary points other receipt points and
delivery points on the system, subject to the rights of other shippers
to use those points as their primary receipt and delivery points;
o the issuance of blanket sales certificates to interstate pipelines for
unbundled services;
o the continuation of pre-granted abandonment of previously committed
pipeline sales and transportation services, subject to certain rights
of first refusal, which should make unused pipeline capacity available
to other shippers and clear the way for excess transportation services
to be reallocated to the marketplace;
o requiring that firm and interruptible transportation services be
provided by pipelines to all parties on a comparable basis; and
o generally requiring that pipelines derive transportation rates using a
straight-fixed-variable rate method
which places all fixed costs in a fixed reservation fee that is payable without regard to usage, as opposed to the previously used modified fixed-variable method that allocated a part of the pipelines' fixed costs to the usage fee. The FERC's stated position is that the straight-fixed-variable method promotes the goal of a competitive national gas market by increasing the cost of unnecessarily holding firm capacity rather than releasing it, and is consistent with its directive to unbundle pipelines' traditional merchant sales services.
Order 636 has been affirmed in all material respects upon judicial review and our own FERC orders approving our unbundling plans are final and not subject to any pending judicial review.
Our acquisition of the KMIGT interstate natural gas pipeline system has resulted in a significant increase in the percentage of our assets subject to regulation by the FERC. To the extent any of our interstate pipelines ever have marketing affiliates, we would become subject to the requirements of FERC Order Nos. 497, et. seq., and 566, et. seq., the Marketing Affiliate Rules, which prohibit preferential treatment by an interstate pipeline of its marketing affiliates and govern in particular the provision of information by an interstate pipeline to its marketing affiliates.
The intrastate common carrier operations of our Pacific operations' pipelines in California are subject to regulation by the California Public Utilities Commission under a "depreciated book plant" methodology, which is based on an original cost measure of investment. Intrastate tariffs filed by us with the CPUC have been established on the basis of revenues, expenses and investments allocated as applicable to the intrastate portion of our business. Tariff rates with respect to intrastate pipeline service in California are subject to challenge by complaint by interested parties or by independent action of the CPUC. A variety of factors can affect the rates of return permitted by the CPUC and certain other issues similar to those which have arisen with respect to our FERC regulated rates could also arise with respect to our intrastate rates. Certain of our Pacific operations' pipeline rates have been, and continue to be, subject to complaints with the CPUC, as is more fully described in Item 3. Legal Proceedings.
State and Local Regulation
Our activities are subject to various state and local laws and regulations, as well as orders of regulatory bodies, governing a wide variety of matters, including:
o marketing;
o production;
o pricing;
o pollution;
o protection of the environment; and
o safety.
Safety Regulation
Our pipelines are subject to regulation by the United States Department of Transportation with respect to their design, installation, testing, construction, operation, replacement and management. In addition, we must permit access to and copying of records, and make certain reports and provide information as required by the Secretary of Transportation. Comparable regulation exists in some states in which we conduct pipeline operations. In addition, our truck and bulk terminal loading facilities are subject to U.S. DOT regulations dealing with the transportation of hazardous materials for motor vehicles and rail cars. We believe that we are in substantial compliance with U.S. DOT and comparable state regulations.
We are also subject to the requirements of the Federal Occupational Safety and Health Act and comparable state statutes. We believe that we are in substantial compliance with Federal OSHA requirements, including general industry standards, recordkeeping requirements and monitoring of occupational exposure to hazardous substances.
In general, we expect to increase expenditures in the future to comply with higher industry and regulatory safety standards. Such expenditures cannot be accurately estimated at this time, although we do not expect that such expenditures will have a material adverse impact on us, except to the extent additional hydrostatic testing requirements are imposed.
Environmental Matters
Our operations are subject to federal, state and local laws and regulations relating to protection of the environment. We believe that our operations and facilities are in substantial compliance with applicable environmental regulations. We have an ongoing environmental compliance program. However, risks of accidental leaks or spills are associated with the transportation of natural gas liquids, refined petroleum products, natural gas and carbon dioxide, the handling and storage of bulk materials and the other activities conducted by us. There can be no assurance that we will not incur significant costs and liabilities, including those relating to claims for damages to property and persons resulting from operation of our businesses. Moreover, it is possible that other developments, such as increasingly strict environmental laws and regulations and enforcement policies thereunder, could result in increased costs and liabilities to us.
Environmental laws and regulations have changed substantially and rapidly over the last 25 years, and we anticipate that there will be continuing changes. The clear trend in environmental regulation is to increase reporting obligations and place more restrictions and limitations on activities, such as emissions of pollutants, generation and disposal of wastes and use, storage and handling of chemical substances, that may impact human health, the environment and/or endangered species. Increasingly strict environmental restrictions and limitations have resulted in increased operating costs for us and other similar businesses throughout the United States. It is possible that the costs of compliance with environmental laws and regulations will continue to increase. We will attempt to anticipate future regulatory requirements that might be imposed and to plan accordingly in order to remain in compliance with changing environmental laws and regulations and to minimize the costs of such compliance.
Solid Waste
We own several properties that have been used for many years for the transportation and storage of refined petroleum products and natural gas liquids and the handling and storage of coal and other bulk materials. Solid waste disposal practices within the petroleum industry have changed over the years with the passage and implementation of various environmental laws and regulations. Hydrocarbons and other solid wastes may have been disposed of in, on or under various properties owned by us during the operating history of the facilities located on such properties. In such cases, hydrocarbons and other solid wastes could migrate from their original disposal areas and have an adverse effect on soils and groundwater. We do not believe that there currently exists significant surface or subsurface contamination of our assets by hydrocarbons or other solid wastes not already identified and addressed. We have maintained a reserve to account for the costs of cleanup at these sites.
We generate both hazardous and nonhazardous solid wastes that are subject to the requirements of the Federal Resource Conservation and Recovery Act and comparable state statutes. From time to time, state regulators and the United States Environmental Protection Agency consider the adoption of stricter disposal standards for nonhazardous waste. Furthermore, it is possible that some wastes that are currently classified as nonhazardous, which could include wastes currently generated during pipeline or bulk terminal operations, may in the future be designated as "hazardous wastes." Hazardous wastes are subject to more rigorous and costly disposal requirements. Such changes in the regulations may result in additional capital expenditures or operating expenses for us.
Superfund
The Comprehensive Environmental Response, Compensation and Liability Act, also known as the "Superfund" law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of "potentially responsible persons" for releases of "hazardous substances" into the environment. These persons include the owner or operator of a site and companies that disposed of or arranged for the disposal of the hazardous substances found at the site. CERCLA authorizes the U.S. EPA and, in some cases, third parties to take actions in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. Although "petroleum" is excluded from CERCLA's definition of a "hazardous substance," in the course of our ordinary operations, we will generate wastes that may fall within the definition of "hazardous substance." By operation of law, if we are determined to be a potentially responsible person, we may be responsible under CERCLA for all or part of the costs required to clean up sites at which such wastes have been disposed.
EPA Gasoline Volatility Restrictions
In order to control air pollution in the United States, the U.S. EPA has adopted regulations that require the vapor pressure of motor gasoline sold in the United States to be reduced from May through mid-September of each year. These regulations mandated vapor pressure reductions beginning in 1989, with more stringent restrictions beginning in 1992. States may impose additional volatility restrictions. The regulations have had a substantial effect on the market price and demand for normal butane, and to some extent isobutane, in the United States. Gasoline manufacturers use butanes in the production of motor gasolines. Since normal butane is highly volatile, it is now less desirable for use in blended gasolines sold during the summer months. Although the U.S. EPA regulations have reduced demand and may have resulted in a significant decrease in prices for normal butane, low normal butane prices have not impacted our pipeline business in the same way they would impact a business with commodity price risk. The U.S. EPA regulations have presented the opportunity for additional transportation services on our North System. In the summer of 1991, our North System began long-haul transportation of refinery grade normal butane produced in the Chicago area to the Bushton, Kansas area for storage and subsequent transportation north from Bushton during the winter gasoline blending season.
Clean Air Act
Our operations are subject to the Clean Air Act and comparable state statutes. We believe that the operations of our pipelines, storage facilities and bulk terminals are in substantial compliance with such statutes.
Numerous amendments to the Clean Air Act were adopted in 1990. These amendments contain lengthy, complex provisions that may result in the imposition over the next several years of certain pollution control requirements with respect to air emissions from the operations of the pipelines, storage facilities and bulk terminals. The U.S. EPA is developing, over a period of many years, regulations to implement those requirements. Depending on the nature of those regulations, and upon requirements that may be imposed by state and local regulatory authorities, we may be required to incur certain capital expenditures over the next several years for air pollution control equipment in connection with maintaining or obtaining operating permits and approvals and addressing other air emission-related issues.
Due to the broad scope and complexity of the issues involved and the resultant complexity and controversial nature of the regulations, full development and implementation of many of the regulations have been delayed. Until such time as the new Clean Air Act requirements are implemented, we are unable to estimate the effect on earnings or operations or the amount and timing of such required capital expenditures. At this time, however, we do not believe that we will be materially adversely affected by any such requirements.
Risk Factors
Risks Related to Our Business
Pending Federal Energy Regulatory Commission and California Public Utilities Commission proceedings seek substantial refunds and reductions in tariff rates on some of our Pacific operations' pipelines. Some shippers on our Pacific operations' pipelines have filed complaints with the Federal Energy Regulatory Commission and California Public Utilities Commission that seek substantial refunds and reductions in the tariff rates on such pipelines. Adverse decisions regarding these complaints could negatively impact our cash flow. Additional challenges to tariff rates could be filed with the Federal Energy Regulatory Commission and California Public Utilities Commission in the future.
In the first set of complaints filed between 1992 and 1995 before the Federal Energy Regulatory Commission, some shippers alleged that pipeline tariff rates:
o for the West Line, serving southern California and Arizona, were not
entitled to "grandfathered" status under the Energy Policy Act because
"substantially changed circumstances" had occurred pursuant to the
Energy Policy Act; and
o for the East Line, serving New Mexico and Arizona, were unjust and
unreasonable.
An initial decision by the FERC administrative law judge was issued on September 25, 1997. The initial decision determined that our Pacific operations' West Line rates were grandfathered under the Energy Policy Act. The initial decision also included rulings that were generally adverse to our Pacific operations' East Line regarding certain cost of service issues.
On January 13, 1999, the FERC issued an opinion that affirmed, in major respects, the initial decision, but also modified parts of the decision that were adverse to us. In May 2000, the FERC issued a new opinion affirming in part and modifying and clarifying in part the January 13, 1999 opinion. Some of the complainants have appealed the FERC's decision to the United States Court of Appeals for the District of Columbia Circuit.
During the pendency of the above-referenced complaint proceeding, some shippers filed complaints that predominantly attacked the pipeline tariff rates of our Pacific operations' pipelines, contending that the rates were not just and reasonable under the ICA and should not be entitled to "grandfathered" status under the Energy Policy Act. These complaints covered rates for service on the East Line, the West Line, the North Line serving the area between San Francisco, California and Reno, Nevada, and the Oregon Line serving the area from Portland, Oregon to Eugene, Oregon. The complaints seek substantial reparations for alleged overcharges during the years in question and request prospective rate reduction on each of the challenged facilities. These complaints are expected to proceed to hearing in August 2001, with an initial decision by the administrative law judge expected in the first half of 2002. In January 2000, several of the shippers amended and restated their complaints challenging the tariff rates of our Pacific operations' pipelines and filed additional complaints in July and August 2000. We are vigorously defending against all of these complaints.
The complaints filed before the CPUC challenge the rates charged for intrastate transportation of refined petroleum products through our Pacific operations' pipeline system in California. On August 6, 1998, the CPUC issued its decision dismissing the complainants' challenge to SFPP, L.P.'s intrastate rates. On June 24, 1999, the CPUC granted limited rehearing of its August 1998 decision for the purpose of:
o addressing the proper ratemaking treatment for partnership tax
expenses;
o the calculation of environmental costs; and
o the public utility status of SFPP, L.P.'s Sepulveda Line and its
Watson Station gathering enhancement facilities.
In pursuing these rehearing issues, the complainants seek prospective rate reductions aggregating approximately $10 million per year.
On April 10, 2000, the complainants filed a new complaint with the CPUC asserting SFPP, L.P.'s intrastate rates were not just and reasonable. See Note 16 of the Notes to our Consolidated Financial Statements for additional information.
Our acquisition strategy may require access to new capital, and tightened credit markets or more expensive capital will impair our ability to execute our strategy. Part of our business strategy includes acquiring additional businesses that will allow us to increase distributions to unitholders. During the period from December 31, 1996 to December 31, 2000, we made several acquisitions that increased our asset base over 14 times and increased our net income over 23 times. We regularly consider and enter into discussions regarding potential acquisitions and are currently contemplating potential acquisitions. While there are currently no unannounced purchase agreements pending for the acquisition of any business or assets, such transactions can be effected quickly, may occur at any time and may be significant in size relative to our existing assets. We may need new capital to finance these acquisitions. Limitations on our access to capital will impair our ability to execute our strategy. Expensive capital will limit our ability to make acquisitions accretive. Our ability to maintain our capital structure may impact the market value of our common units and our debt securities.
Environmental regulation significantly affects our business. Our business operations are subject to federal, state and local laws and regulations relating to environmental protection. If an accidental leak or spill of liquid petroleum products occurs from our pipelines or at our storage facilities, we may have to pay a significant amount to clean up the leak or spill. The resulting costs and liabilities could negatively affect our level of cash flow. In addition, emission controls required under the Federal Clean Air Act and other similar federal and state laws could
require significant capital expenditures at our facilities. Although we cannot predict the impact of EPA standards or future environmental measures, our costs could increase significantly if environmental laws and regulations become stricter. Since the costs of environmental regulation are already significant, additional regulation could negatively affect our business.
Competition could ultimately lead to lower levels of profits and lower our cash flow. Propane competes with electricity, fuel, oil and natural gas in the residential and commercial heating market. In the engine fuel market, propane competes with gasoline and diesel fuel. Butanes and natural gasoline used in motor gasoline blending and isobutane used in premium fuel production compete with alternative products. Natural gas liquids used as feed stocks for refineries and petrochemical plants compete with alternative feed stocks. The availability and prices of alternative energy sources and feed stocks significantly affect demand for natural gas liquids.
Refined product pipelines are generally the lowest cost method for intermediate and long-haul overland refined product movement. Accordingly, the most significant competitors to our product pipelines are:
o proprietary pipelines owned and operated by major oil companies in the
areas where our pipelines deliver products;
o refineries within the market areas served by our product pipelines;
and
o trucks.
Additional product pipelines may be constructed in the future to serve specific markets now served by our pipelines. Trucks competitively deliver products in certain markets. Recently, major oil companies have increased the usage of trucks, resulting in minor but notable reductions in product volumes delivered to certain shorter-haul destinations, primarily Orange County and Colton, California served by the South and West lines of our Pacific operations.
We cannot predict with certainty whether this trend towards increased short-haul trucking will continue in the future. Demand for terminaling services varies widely throughout the product pipeline system. Certain major petroleum companies and independent terminal operators directly compete with us at several terminal locations. At those locations, pricing, service capabilities and available tank capacity control market share.
Our natural gas and carbon dioxide pipelines compete against other existing natural gas and carbon dioxide pipelines originating from the same sources or serving the same markets as our natural gas and carbon dioxide pipelines. In addition, we also may face competition from natural gas pipelines that may be built in the future.
Our coal terminals compete with other coal terminals located in the same general geographic areas. Our petroleum coke and other bulk terminals compete with numerous independent terminal operators, with other terminals owned by oil companies and other industrials opting not to outsource terminal services. Competition against the petroleum coke terminals that we operate but do not own has increased significantly primarily from companies that also market and sell the product.
Our ability to compete also depends upon general market conditions, which may change. We conduct our operations without the benefit of exclusive franchises from government entities. We provide common carrier transportation services through our pipelines at posted tariffs and, with respect to our Pacific operations, almost always without long-term contracts for transportation service with customers. Demand for transportation services on our pipelines is primarily a function of:
o total and per capita consumption;
o prevailing economic and demographic conditions;
o alternate modes of transportation;
o alternate sources; and
o price.
We generally do not own the land on which our pipelines are constructed and we are subject to the possibility of increased costs for the loss of land use. We generally do not own the land on which our pipelines are constructed. Instead, we obtain the right to construct and operate the pipelines on other people's land for a period of
time. If we were to lose these rights, our business could be affected negatively.
Southern Pacific Transportation Company has allowed us to construct and operate a significant portion of our Pacific operations' pipeline under their railroad tracks. Southern Pacific Transportation Company and its predecessors were given the right to construct their railroad tracks under federal statutes enacted in 1871 and 1875. The 1871 statute was thought to be an outright grant of ownership that would continue until the land ceased to be used for railroad purposes. Two United States Circuit Courts, however, ruled in 1979 and 1980 that railroad rights-of-way granted under laws similar to the 1871 statute provide only the right to use the surface of the land for railroad purposes without any right to the underground portion. If a court were to rule that the 1871 statute does not permit the use of the underground portion for the operation of a pipeline, we may be required to obtain permission from the land owners in order to continue to maintain the pipelines. No assurance can be given that we could obtain that permission over time at a cost that would not negatively affect us.
Whether we have the power of eminent domain for our pipelines varies from state to state depending upon the type of pipeline -- petroleum liquids, natural gas or carbon dioxide -- and the laws of the particular state. Our inability to exercise the power of eminent domain could negatively affect our business if we were to lose the right to use or occupy the property on which our pipelines are located.
Our rapid growth may cause difficulties integrating new operations. Part of our business strategy includes acquiring additional businesses that will allow us to increase distributions to unitholders. During the period from December 31, 1996 to December 31, 2000, we made several acquisitions that increased our asset base over 14 times and increased our net income over 23 times. We believe that we can profitably combine the operations of acquired businesses with our existing operations. However, unexpected costs or challenges may arise whenever businesses with different operations and management are combined. Successful business combinations require management and other personnel to devote significant amounts of time to integrating the acquired business with existing operations. These efforts may temporarily distract their attention from day-to-day business, the development or acquisition of new properties and other business opportunities. In addition, the management of the acquired business often will not join our management team. The change in management may make it more difficult to integrate an acquired business with our existing operations.
Our debt instruments may limit our financial flexibility. The instruments governing our debt contain restrictive covenants that may prevent us from engaging in certain transactions we deem beneficial. The agreements governing our debt generally require us to comply with various affirmative and negative covenants, including the maintenance of certain financial ratios and restrictions on:
o incurring additional debt;
o entering into mergers, consolidations and sales of assets; and
o granting liens.
The instruments governing any future debt may contain similar restrictions.
Restrictions on our ability to prepay the debt of SFPP, L.P. may limit our financial flexibility. SFPP, L.P. is subject to restrictions with respect to its debt that may limit our flexibility in structuring or refinancing existing or future debt. These restrictions include the following:
o before December 15, 2002, we may prepay SFPP, L.P.'s first mortgage
notes with a make-whole prepayment premium; and
o we agreed as part of the acquisition of our Pacific operations not to
take actions with respect to $190 million of SFPP, L.P.'s debt that
would cause adverse tax consequences for the prior general partner of
SFPP, L.P.
Risk Related to Ownership of Our Debt Securities if We Default
Debt securities are structurally subordinated to debt of our operating partnerships and subsidiaries. Since we do not anticipate that any of our operating partnerships or subsidiaries will guarantee our debt securities, our existing and future debt securities will be effectively subordinated to all debt of our operating partnerships and subsidiaries. As of December 31, 2000, our operating partnerships and subsidiaries had $165.4 million of debt (excluding
intercompany debt). If any of our operating partnerships or subsidiaries defaults on its debt, the holders of our debt securities would not receive any money from the defaulting operating partnership or subsidiary until it had repaid all of its debts in full.
Risks Related to Ownership of Our Units if We Default
Unitholders may have negative tax consequences if we default on our debt or sell assets. If we default on any of our debt, the lenders will have the right to sue us for non-payment. Such an action could cause an investment loss and cause negative tax consequences for unitholders through the realization of taxable income by unitholders without a corresponding cash distribution. Likewise, if we were to dispose of assets and realize a taxable gain while there is substantial debt outstanding and proceeds of the sale were applied to the debt, unitholders could have increased taxable income without a corresponding cash distribution.
There is the potential for a change of control if Kinder Morgan, Inc. defaults on debt. Kinder Morgan, Inc. indirectly owns all of the outstanding capital stock of the general partner. KMI has significant operations which provide cash independent of dividends that KMI receives from the general partner. Nevertheless, if KMI defaults on its debt, its lenders could acquire control of our general partner.
Limitations in Our Partnership Agreement and State Partnership Law
Our unitholders have limited voting rights and control of management. Our unitholders have only limited voting rights on matters affecting the Partnership. Our general partner, through a wholly owned subsidiary, manages our activities. Our unitholders have no right to elect our general partner on an annual or other ongoing basis. If our general partner withdraws, however, the holders of a majority of the outstanding units, excluding units owned by our departing general partner and its affiliates, may elect its successor.
Our limited partners may remove our general partner only if:
o the holders of at least 66 2/3% of our outstanding units, excluding
units owned by our departing general partner and its affiliates, vote
to remove our general partner;
o a successor general partner is approved by at least 66 2/3% of our
outstanding units, excluding units owned by our departing general
partner and its affiliates; and
o we receive an opinion of counsel opining that the removal would not
result in the loss of the limited liability to any of our limited
partners or the limited partners of any of our operating partnerships
or cause us or our operating partnerships to be taxed other than as a
partnership for federal income tax purposes.
A person or group owning 20% or more of our units cannot vote. Any units held by a person or group that owns 20% or more of the common units cannot be voted. This limitation does not apply to our general partner and its affiliates. This provision may:
o discourage a person or group from attempting to remove our general
partner or otherwise change management; and
o reduce the price at which the common units will trade under certain
circumstances. For example, a third party will probably not attempt to
remove our general partner and take over our management by making a
tender offer for our outstanding units at a price above their trading
market price without removing our general partner and substituting an
affiliate.
Our general partner's liability to us and our unitholders may be limited. Our partnership agreement contains language limiting the liability of our general partner to us or our unitholders. For example, our partnership agreement provides that:
o our general partner does not breach any duty to us or our unitholders
by borrowing funds or approving any borrowing. Our general partner is
protected even if the purpose or effect of the borrowing is to
increase incentive distributions to our general partner;
o our general partner does not breach any duty to us or our unitholders
by taking any actions consistent with the standards of reasonable
discretion outlined in the definitions of "available cash" and "cash
from operations" contained in our partnership agreement; and
o our general partner does not breach any standard of care or duty by resolving conflicts of interest unless our general partner acts in bad faith.
Our partnership agreement modifies the fiduciary duties of our general partner under Delaware law. Such modifications of state law standards of fiduciary duty may significantly limit the ability of unitholders to successfully challenge the actions of our general partner as being a breach of what would otherwise have been a fiduciary duty. These standards include the highest duties of good faith, fairness and loyalty to our limited partners. Such a duty of loyalty would generally prohibit a general partner of a Delaware limited partnership from taking any action or engaging in any transaction for which it has a conflict of interest. Under our partnership agreement, our general partner may exercise its broad discretion and authority in the management of us and the conduct of our operations as long as our general partner's actions are in our best interest.
Unitholders may have liability to repay distributions. Unitholders will not be liable for assessments in addition to their initial capital investment in our units. Under certain circumstances, however, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Delaware law, we may not make a distribution to you if the distribution causes our liabilities to exceed the fair value of our assets. Liabilities to partners on account of their partnership interests and non-recourse liabilities are not counted for purposes of determining whether a distribution is permitted. Delaware law provides that for a period of three years from the date of such a distribution, a limited partner who receives the distribution and knew at the time of the distribution that the distribution violated Delaware law will be liable to the limited partnership for the distribution amount. Under Delaware law, an assignee who becomes a substituted limited partner of a limited partnership is liable for the obligations of the assignor to make contributions to the partnership. However, such an assignee is not obligated for liabilities unknown to the assignee at the time the assignee became a limited partner if the liabilities could not be determined from the partnership agreement.
Unitholders may be liable if we have not complied with state partnership law. We conduct our business in a number of states. In some of those states the limitations on the liability of limited partners for the obligations of a limited partnership have not been clearly established. Our unitholders might be held liable for our obligations as if they were a general partner if:
o a court or government agency determined that we were conducting
business in the state but had not complied with the state's
partnership statute; or
o our unitholders' rights to act together to remove or replace the
general partner or take other actions under our partnership agreement
constitute "control" of our business.
Our general partner may buy out minority unitholders if it owns 80% of the units. If at any time our general partner and its affiliates own 80% or more of our issued and outstanding units, our general partner will have the right to purchase all of the remaining units. Because of this right, a unitholder may have to sell his units against his will or for a less than desirable price. Our general partner may only purchase all of the units. The purchase price for such a purchase will be the greater of:
o the most recent 20-day average trading price ending on the date five days prior to the date the notice of purchase is mailed; or
o the highest purchase price paid by our general partner or its affiliates to acquire units during the prior 90 days.
Our general partner can assign this right to its affiliates or to us.
We may sell additional limited partner interests, diluting existing interests of unitholders. Our partnership agreement allows our general partner to cause us to issue additional common units and other equity securities. When we issue additional equity securities, your proportionate partnership interest will decrease. Such an issuance could negatively affect the amount of cash distributed to unitholders and the market price of our units. Issuance of additional units will also diminish the relative voting strength of the previously outstanding units. There is no limit on the total number of units we may issue.
Our general partner can protect itself against dilution. Whenever we issue equity securities to any person other than our general partner and its affiliates, our general partner has the right to purchase additional limited
partnership interests on the same terms. This allows our general partner to maintain its partnership interest in the Partnership. No other unitholder has a similar right. Therefore, only our general partner may protect itself against dilution caused by issuance of additional equity securities.
There are potential conflicts of interest related to the operation of the Partnership. Certain conflicts of interest could arise among our general partner, its ultimate corporate parent, Kinder Morgan, Inc., and us. Such conflicts may include, among others, the following situations:
Some of our general partner's officers and directors may have conflicting fiduciary duties to KMI. Some of KMI's directors and officers are also directors and officers of our general partner. Conflicts of interest may result due to the fiduciary duties such directors and officers may have to manage KMI's business in a manner beneficial to KMI and its shareholders. The resolution of these conflicts may not always be resolved in the best interests of our unitholders.
Our general partner may not be fully reimbursed for KMI's use of its officers and employees and/or it may over-compensate KMI for our use of KMI's officers and employees. KMI shares administrative personnel with our general partner to operate both KMI's business and our business. As a result, our general partner's officers, who in some cases may also be KMI officers, must allocate, in their reasonable and sole discretion, the time our general partner's employees and KMI's employees spend on behalf of us and on behalf of KMI. These allocations are not the result of arms-length negotiations between our general partner and KMI. Although our general partner intends for the net payments to reflect the relative value received by us and KMI for the use of each others employees, due to the nature of the allocations, this reimbursement may not exactly match the actual time and overhead spent. Since we reimburse our general partner for its general and administrative expenses, the under allocation of the time and overhead spent by our general partners' employees on KMI's activities or the over allocation of the time and overhead spent by KMI's employees on our behalf could negatively affect the amount of cash available for distribution to our unitholders. See Item 13. "Certain Relationships and Related Transactions -- General and Administrative Expenses" in this Report.
Our general partner's decisions may affect cash distributions to unitholders. Our general partner determines the amount and timing of asset purchases and sales, capital expenditures, borrowings and reserves. All of these decisions can impact the amount of cash distributed by us to our unitholders, which, in turn, affects the amount of the cash incentive distribution to our general partner.
Our general partner generally tries to avoid being personally liable for our obligations. Our general partner is permitted to protect its assets in this manner pursuant to our partnership agreement. Under our partnership agreement, our general partner does not breach its fiduciary duty even if we could have obtained more favorable terms without limitations on our general partner's liability.
Our general partner's decision to exercise or assign its call right to purchase all of the limited partnership interests may conflict with our unitholder's interests. If our general partner exercises this right, a unitholder may have to sell its interest against its will or for a less than desirable price.
Tax Treatment of Publicly Traded Partnerships Under the Internal Revenue Code
The Internal Revenue Code of 1986, as amended, imposes certain limitations on the current deductibility of losses attributable to investments in publicly traded partnerships and treats certain publicly traded partnerships as corporations for federal income tax purposes. The following discussion briefly describes certain aspects of the Code that apply to individuals who are citizens or residents of the United States without commenting on all of the federal income tax matters affecting us or our unitholders, and is qualified in its entirety by reference to the Code. Our unitholders are urged to consult their own tax advisor about the federal, state, local and foreign tax consequences to them of an investment in us.
Tax Characterization of the Partnership
The availability of the federal income tax benefits of a unitholder's investment in us depends, in large part, on our classification as a partnership for federal income tax purposes. The Code generally treats a publicly traded partnership formed after 1987 as a corporation unless, for each taxable year of its existence, 90% or more of its gross income consists of qualifying income.
If we were to fail to meet the 90% qualified income test for any year, we would be treated as a corporation unless we met the inadvertent failure exception. Qualifying income includes interest, dividends, real property rents, gains from the sale or disposition of real property, income and gains derived from the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas, oil or products thereof), or the marketing of any mineral or natural resource (including fertilizer, geothermal energy and timber), and gain from the sale or disposition of capital assets that produced such income. Our general partner believes that more than 90% of our gross income is, and has been, qualifying income, because we are engaged primarily in the transportation of natural gas liquids, refined petroleum products, natural gas and carbon dioxide through pipelines and the handling and storage of coal.
If we were classified as an association taxable as a corporation for federal income tax purposes, we would be required to pay tax on our income at corporate rates, distributions to our unitholders would generally be taxed as corporate distributions, and no income, gain, loss, deduction or credit would flow through to our unitholders. Because tax would be imposed upon us as an entity, the cash available for distribution to our unitholders would be substantially reduced. Our being treated as an association taxable as a corporation or otherwise as a taxable entity would result in a material reduction in the anticipated cash flow and after-tax return to our unitholders.
There can be no assurance that the law will not be changed so as to cause us to be treated as an association taxable as a corporation for federal income tax purposes or otherwise to be subject to entity-level taxation. Our partnership agreement provides that, if a law is enacted that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal income tax purposes, certain provisions of our partnership agreement relating to our general partner's incentive distributions will be subject to change, including a decrease in the amount of the target distribution levels to reflect the impact of entity level taxation on us. See "Description of the Partnership Agreement -- Cash Distribution Policy -- Adjustment of Target Distribution Levels" in this Report.
Passive Activity Loss Limitations
Under the passive loss limitations, losses generated by us, if any, will only be available to offset future income generated by us and cannot be used to offset income which an individual, estate, trust or personal service corporation realizes from other activities, including passive activities or investments. Income which may not be offset by passive activity losses, includes not only salary and active business income, but also portfolio income such as interest, dividends or royalties or gain from the sale of property that produces portfolio income. Credits from passive activities are also limited to the tax attributable to any income from passive activities. The passive activity loss rules are applied after other applicable limitations on deductions, such as the at-risk rules and the basis limitation. Certain closely held corporations are subject to slightly different rules, which can also limit their ability to offset passive losses against certain types of income. A unitholder's proportionate share of unused losses may be
deducted when the unitholder disposes of all of such holder's units in a fully taxable transaction with an unrelated party. Net passive income from us may be offset by a unitholder's unused losses from us carried over from prior years, but not by losses from other passive activities, including losses from other publicly traded partnerships. In addition, a unitholder's proportionate share of our portfolio income, including portfolio income arising from the investment of our working capital, is not treated as income from a passive activity and may not be offset by such unitholder's share of net losses from us.
Section 754 Election
We and our operating partnerships have made, will make for each taxable year, as necessary, and will maintain the election provided for by Section 754 of the Code, which will generally permit a unitholder to calculate cost recovery and depreciation deductions by reference to the portion of the unitholder's purchase price attributable to each of our assets. For tax purposes, transfers of more than 50% of unitholders' interests in capital and profits during any 12-month period will result in a constructive termination of us. A constructive termination of the partnership could result in penalties and a loss of basis adjustments under Section 754, if we were unable to determine that a termination had occurred during any year and, therefore, did not make a Section 754 election for the new partnership's initial tax year.
No Amortization of Book-Up Attributable to Intangibles
Our acquisition of our Pacific operations resulted in a restatement of the capital accounts of both the former Santa Fe common unitholders and our pre-acquisition unitholders to fair market value. An allocation of such increased capital account value among our assets was based on values indicated by an independent appraisal obtained by our general partner. The independent appraisal indicated that all of such value was attributable to tangible assets. However, if such allocations are challenged by the Internal Revenue Service and such challenge is successful, a portion of such allocations could be re-allocated to intangible assets that would not be amortizable either for tax or capital account purposes, and therefore, would not support a curative allocation of income. This could result in a disproportionate allocation of taxable income to either a pre-acquisition unitholder or a former Santa Fe common unitholder.
Deductibility of Interest Expense
The Code generally provides that investment interest expense is deductible only to the extent of a non-corporate taxpayer's net investment income. In general, net investment income for purposes of this limitation includes gross income from property held for investment (except for net capital gains taxed at the long-term capital gains rate) and portfolio income (determined pursuant to the passive loss rules) reduced by certain expenses (other than interest) which are directly connected with the production of such income. Property subject to the passive loss rules is not treated as property held for investment. However, the IRS has issued a notice which provides that net income from a publicly traded partnership (not otherwise treated as a corporation) may be included in net investment income for the purposes of the limitation on the deductibility of investment interest. A unitholder's investment income attributable to its interest in us will include both its allocable share of our portfolio income and trade or business income. A unitholder's investment interest expense will include its allocable share of our interest expense attributable to portfolio investments.
Tax Liability Exceeding Cash Distributions or Proceeds from Dispositions of Units
A unitholder will be required to pay federal income tax and, in certain cases, state and local income taxes on such unitholder's allocable share of our income, whether or not such unitholder receives cash distributions from us. No assurance is given that unitholders will receive cash distributions equal to their allocable share of taxable income from the Partnership. Further, a unitholder may incur tax liability in excess of the amount of cash received.
Tax Shelter Registration; Potential IRS Audit
We are registered with the IRS as a tax shelter. No assurance can be given that the IRS will not audit us or that tax adjustments will not be made. The rights of a unitholder owning less than a 1% profits interest in us to participate in the income tax audit process have been substantially reduced by our partnership agreement. Further, any adjustments in our returns will lead to adjustments in a unitholder's returns and may lead to audits of such
unitholder's returns and adjustments of items unrelated to us. Each unitholder would bear the cost of any expenses incurred in connection with an examination of the personal tax return of such unitholder.
Unrelated Business Taxable Income
Certain entities otherwise exempt from federal income taxes (such as individual retirement accounts, pension plans and charitable organizations) are nevertheless subject to federal income tax on net unrelated business taxable income and each such entity must file a tax return for each year in which it has more than $1,000 of gross income from unrelated business activities. Our general partner believes that substantially all of our gross income will be treated as derived from an unrelated trade or business and taxable to such entities. The tax-exempt entity's share of our deductions directly connected with carrying on such unrelated trade or business is allowed in computing the entity's taxable unrelated business income. Accordingly, investment in us by tax-exempt entities such as individual retirement accounts, pension plans and charitable trusts may not be advisable.
State and Local Tax Treatment
Each unitholder may be subject to income, estate or inheritance taxes in states and localities in which we own property or do business, as well as in such unitholder's own state or locality. For purposes of state and local tax reporting, as of December 31, 2000, partners may have to report income in 25 states: Arizona, California, Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Texas, Virginia and Wyoming. A unitholder will likely be required to file state income tax returns and to pay applicable state income taxes in many of these states and may be subject to penalties for failure to comply with such requirements. Some of the states have proposed that we withhold a percentage of income attributable to our operations within the state for unitholders who are non-residents of the state. In the event that such states require that we withhold amounts (which may be greater or less than a particular unitholder's income tax liability to the state), such withholding would generally not relieve the non-resident unitholder from the obligation to file a state income tax return.
Description of the Partnership Agreement
The following paragraphs summarize provisions of our partnership agreement. A copy of our partnership agreement is filed as an exhibit to this report. Unless otherwise specifically described, references herein to our partnership agreement constitute references herein to our partnership agreement and those of our operating partnerships, collectively. The following discussion is qualified in its entirety by reference to our partnership agreement. With regard to allocations of taxable income and taxable loss, See "Tax Treatment of Publicly Traded Partnerships Under the Internal Revenue Code."
Organization and Duration
Except for Kinder Morgan CO2 Company, L.P., which is a Texas limited partnership, we and each of our operating partnerships are Delaware limited partnerships. Unless liquidated or dissolved at an earlier time, under the terms of our partnership agreement, we and each of our operating partnerships will dissolve on December 31, 2082.
Purpose
Our purpose under our partnership agreement is to serve as the limited partner in our operating partnerships and to conduct any other business that may be lawfully conducted by a Delaware limited partnership.
Limited Partner Units
We currently have two classes of limited partner interests: common units and class B units. Our common units are publicly traded on the New York Stock Exchange. Our class B units are similar to our common units except that our class B units are not eligible for trading on the New York Stock Exchange. The holders of our class B units have the same rights as our common unitholders with respect to, without limitation, distributions from us, voting rights and allocations of income, gain, loss or deductions. All of the outstanding class B units were issued to KMI in connection with KMI's transfer to us of certain Natural Gas Pipelines assets effective December 31, 2000.
The class B units are convertible into common units after such time as the New York Stock Exchange has advised us that the common units issuable upon such conversion are eligible for listing on the NYSE. At any time after December 21, 2001, the holders of a majority of our class B units may notify us of their desire to convert their class B units into our common units. If at such time the common units issuable upon conversion of the class B units would not be eligible for listing on the NYSE, we must use our reasonable efforts to meet any unfulfilled requirements for such listing within 120 days after receipt of such notice. If we are unable to satisfy all of the requirements of the NYSE for listing of such common units within the 120 days, then our class B unitholders may at any time thereafter require that we redeem their class B units for cash by delivering a notice of redemption to us. KMI has represented that it will not demand cash redemption for the class B units. On the 60th day after our receipt of the redemption notice, we must redeem the class B units subject to the redemption notice, unless before the redemption date the NYSE has approved for listing the common units issuable in exchange for the class B units.
Power of Attorney
Each limited partner, and each person who acquires a unit from a prior unitholder and executes and delivers a transfer application with respect to such unit, grants to our general partner and, if a liquidator has been appointed, the liquidator, a power of attorney to, among other things:
o execute and file certain documents required in connection with our
qualification, continuance or dissolution or the amendment of our
partnership agreement in accordance with its terms; and
o make consents and waivers contained in our partnership agreement.
Restrictions on Authority of our General Partner
Our general partner's authority is limited in certain respects under our partnership agreement. Our general partner is prohibited, without the prior approval of holders of record of a majority of the outstanding units from, among other things, selling or exchanging all or substantially all of our assets in a single transaction or a series of related transactions (including by way of merger, consolidation or other combination) or approving on our behalf the sale, exchange or other disposition of all or substantially all of our assets. However, our general partner may mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets without such approval. Our general partner may also sell all or substantially all of our assets pursuant to a foreclosure or other realization upon the foregoing encumbrances without such approval. Except as provided in our partnership agreement and generally described under "--Amendment of Partnership Agreement and Other Agreements," any amendment to a provision of our partnership agreement generally will require the approval of the holders of at least 66 2/3% of our outstanding units. Our general partner's ability to sell or otherwise dispose of a significant portion of our assets is restricted by the terms of our credit facilities.
In general, our general partner may not take any action, or refuse to take any reasonable action, the effect of which would be to cause us to be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes, unless it has obtained the consent of holders of record of a majority of our outstanding units (other than units owned by our general partner and its affiliates).
Withdrawal or Removal of our General Partner
Our general partner has agreed not to voluntarily withdraw as our general partner prior to January 1, 2003 (with limited exceptions described below) without obtaining the approval of at least a majority of our outstanding units (excluding for purposes of such determination units held by the general partner and its affiliates) and furnishing an opinion of counsel that such withdrawal will not cause us to be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes or result in the loss of the limited liability of any limited partner. On or after January 1, 2003, our general partner may withdraw as our general partner by giving 90 days' written notice (without first obtaining approval from the unitholders), and such withdrawal will not constitute a breach of our partnership agreement. If an opinion of counsel cannot be obtained to the effect that (following the selection of a successor) our general partner's withdrawal would not result in the loss of limited liability of the holders of units or cause us to be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes, we will be dissolved after such withdrawal. Notwithstanding the foregoing, our general partner may withdraw prior to January 1, 2003 without approval of the unitholders upon 90 days' notice to our limited partners if more than 50% of our outstanding units (other than those held by the withdrawing general partner and its affiliates)
are held or controlled by one person and its affiliates. In addition, our partnership agreement does not restrict KMI's ability to sell directly or indirectly, all or any portion of the capital stock of our general partner to a third party without the approval of the holders of units.
Our general partner may not be removed unless such removal is approved by the vote of the holders of not less than 66 2/3% of our outstanding units (excluding units held by our general partner and its affiliates) provided that certain other conditions are satisfied. Any such removal is subject to the approval of our successor general partner by the same vote and receipt of an opinion of counsel that such removal and the approval of a successor will not result in the loss of limited liability of any limited partner or cause us to be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes.
In the event our general partner withdraws and such withdrawal violates our partnership agreement or our limited partners remove the general partner for cause, a successor general partner will have the option to acquire the general partner interest of the departing general partner for a cash payment equal to the fair market value of such interest. Under all other circumstances where our general partner withdraws or is removed by our limited partners, the departing general partner will have the option to require the successor general partner to acquire such departing general partner's interest for such amount. In each case such fair market value will be determined by agreement between the departing general partner and the successor general partner, or if no agreement is reached, by an independent investment banking firm or other independent expert selected by the departing general partner and the successor general partner (or if no expert can be agreed upon, by the expert chosen by agreement of the expert selected by each of them). In addition, we would also be required to reimburse the departing general partner for all amounts due to the departing general partner, including without limitation all employee related liabilities, including severance liabilities, incurred in connection with the termination of the employees employed by the departing general partner for our benefit.
If the above-described option is not exercised by either the departing general partner or the successor general partner, as applicable, the departing general partner's interest in us will be converted into common units equal to the fair market value of such departing general partner's interest as determined by an investment banking firm or other independent expert selected in the manner described in the preceding paragraph.
Our general partner may transfer all, but not less than all, of its general partner interest in us, without the approval of our limited partners, to one of its affiliates, or upon its merger or consolidation into another entity or the transfer of all or substantially all of its assets to another entity, provided in either case that such entity assumes the rights and duties of our general partner, agrees to be bound by the provisions of our partnership agreement and furnishes an opinion of counsel that such transfer would not result in the loss of the limited liability of any limited partner or cause us to be treated as an association taxable as a corporation or otherwise cause us to be subject to entity level taxation for federal income tax purposes. In the case of any other transfer of our general partner's interest in us, in addition to the foregoing requirements, the approval of at least a majority of the units is required, excluding for such purposes those units held by our general partner and its affiliates.
Upon the withdrawal or removal of our general partner, we will be dissolved, wound up and liquidated, unless such withdrawal or removal takes place following the approval of a successor general partner or unless within 180 days after such withdrawal or removal a majority of the holders of units agrees in writing to continue our business and appoint a successor general partner. See "-Termination and Dissolution."
Anti-takeover and Restricted Voting Right Provisions
Our partnership agreement contains certain provisions that are intended to discourage a person or group from attempting to remove our general partner or otherwise change our management. If any person or group other than our general partner and its affiliates acquires beneficial ownership of 20% or more of the units, such person or group loses any and all voting rights with respect to all of the units beneficially owned or held by such person.
Transfer of Units; Status as Limited Partner or Assignee
Until a unit has been transferred on our books, we and our transfer agent, notwithstanding any notice to the contrary, may treat the record holder thereof as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulation. Any transfers of a unit will not be recorded by our transfer agent or recognized by
us unless the transferee executes and delivers a transfer application (set forth on the reverse side of the certificate representing units). By executing and delivering the transfer application, the transferee of units:
o becomes the record holder of such units and shall constitute an
assignee until admitted to us as a substituted limited partner;
o automatically requests admission as a substituted limited partner;
o agrees to be bound by the terms and conditions of and is deemed to
have executed our partnership agreement;
o represents that such transferee has the capacity, power and authority
to enter into our partnership agreement;
o grants powers of attorney to our general partner and any liquidator of
ours as specified in our partnership agreement; and
o makes the consents and waivers contained in our partnership agreement.
An assignee, pending its admission as a substituted limited partner, is entitled to an interest in us equivalent to that of a limited partner with respect to the right to share in allocations and distributions from us, including liquidating distributions. Our general partner will vote, and exercise other powers attributable to, units owned by an assignee that has not become a substituted limited partner at the written direction of such assignee. See "-Meetings; Voting."
An assignee will become a substituted limited partner in respect of the transferred units upon our general partner's consent and the recordation of the name of the assignee in our books and records. Our general partner's consent may be withheld in its sole discretion. Units are securities and are transferable according to the laws governing transfers of securities. In addition to other rights acquired upon transfer, a transferor gives a transferee the right to request admission as a substituted limited partner in respect of the transferred units. A purchaser or transferee of a unit who does not execute and deliver a transfer application obtains only:
o the right to transfer the units to a purchaser or other transferee;
and
o the right to transfer the right to seek admission as a substituted
limited partner with respect to the transferred units.
Thus, a purchaser or transferee of units who does not execute and deliver a transfer application will not receive cash distributions unless the units are held in a nominee or street name account and the nominee or broker has executed and delivered a transfer application with respect to such units and may not receive certain federal income tax information or reports furnished to record holders of units. The transferor of units will have a duty to provide such transferee with all information that may be necessary to obtain registration of the transfer of the units, but the transferee agrees, by acceptance of the certificate representing units, that the transferor will not have a duty to see to the execution of the transfer application by the transferee and will have no liability or responsibility if such transferee neglects or chooses not to execute and forward the transfer application.
Unitholders may hold their units in nominee accounts, provided that the broker (or other nominee) executes and delivers a transfer application. We will be entitled to treat the nominee holder of a unit as the absolute owner thereof, and the beneficial owner's rights will be limited solely to those that it has against the nominee holder as a result of or by reason of any understanding or agreement between such beneficial owner and nominee holder.
Non-citizen Assignees; Redemption
If we are or become subject to federal, state or local laws or regulations that, in the reasonable determination of our general partner, provide for the cancellation or forfeiture of any property in which we have an interest because of the nationality, citizenship or other related status of any limited partner or assignee, we may redeem the units held by such limited partner or assignee at their average fair market price. In order to avoid any such cancellation or forfeiture, our general partner may require each record holder or assignee to furnish information about such unitholder's nationality, citizenship, residency or related status. If the record holder fails to furnish such information within 30 days after a request for such information, or if our general partner determines on the basis of the information furnished by such holder in response to the request that the cancellation or forfeiture of any property in which we have an interest may occur, our general partner may be substituted as the limited partner for such record
holder, who will then be treated as a non-citizen assignee, and our general partner will have the right to redeem the units held by such record holder as described above. Our partnership agreement sets forth the rights of such record holder or assignee upon redemption. Pending such redemption or in lieu thereof, our general partner may change the status of any such limited partner or assignee to that of a non-citizen assignee. Further, a non-citizen assignee (unlike an assignee who is not a substituted limited partner) does not have the right to direct the vote regarding such non-citizen assignee's units and may not receive distributions in kind upon our liquidation. See "-Transfer of Units; Status as Limited Partner or Assignee."
As used in this Report:
o "average fair market price" means, with respect to a limited partner
interest as of any date, the average of the daily end of day price (as
hereinafter defined) for the 20 consecutive unit transaction days (as
hereinafter defined) immediately prior to such date;
o "end of day price" means for any day the last sale price on such day,
regular way, or in case no such sale takes place on such day, the
average of the closing bid and asked prices on such day, regular way,
in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which our
limited partner interests of such class are listed or admitted to
trading or, if our limited partner interests of such class are not
listed or admitted to trading on any national securities exchange, the
last quoted sale price on such day, or, if not so quoted, the average
of the high bid and low asked prices on such day in the
over-the-counter market, as reported by the NASDAQ or such other
system then in use, or if on any such day our limited partner
interests of such class are not quoted by any such organization, the
average of the closing bid and asked prices on such day as furnished
by a professional market maker making a market in our limited partner
interests of such class selected by the board of directors of our
general partner, or if on any such day no market maker is making a
market in such limited partner interests, the fair value of such
limited partner interests on such day as determined reasonably and in
good faith by the board of directors of our general partner; and
o "unit transaction day" means a day on which the principal national
securities exchange on which such limited partner interests are listed
or admitted to trading is open for the transaction of business or, if
our limited partner interests of such class are not listed or admitted
to trading on any national securities exchange, a day on which banking
institutions in New York City generally are open.
Issuance of Additional Securities
The Partnership's Issuance of Securities. Our partnership agreement does not restrict the ability of our general partner to issue additional limited or general partner interests and authorizes our general partner to cause us to issue additional securities for such consideration and on such terms and conditions as shall be established by our general partner in its sole discretion without the approval of any limited partners. In accordance with Delaware law and the provisions of our partnership agreement, our general partner may issue additional partnership interests, which, in its sole discretion, may have special voting rights to which the units are not entitled.
Limited Pre-emptive Right of Our General Partner. Our general partner has the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase from us units or other of our equity securities whenever, and on the same terms that, we issue such securities to persons other than our general partner and its affiliates, to the extent necessary to maintain the percentage interest of our general partner and its affiliates in the Partnership to that which existed immediately prior to each such issuance.
Limited Call Right
If at any time our general partner and its affiliates hold 80% or more of any class of our units, our general partner will have the right, which it may assign and transfer to any of its affiliates or to us, to purchase all of our remaining units of that class as of a record date to be selected by the general partner, on at least 10 but not more than 60 days' notice. The purchase price in the event of such purchase shall be the greater of:
o the average fair market price of limited partner interests of such class as of the date five days prior to the mailing of written notice of our general partner's election to purchase limited partner interests of such class; and
o the highest cash price paid by our general partner or any of its affiliates for any units of that class purchased within the 90 days preceding the date our general partner mails notice of its election to purchase such units.
Amendment of Our Partnership Agreement and Other Agreements
Amendments to our partnership agreement may be proposed only by or with the consent of our general partner. In order to adopt a proposed amendment, our general partner is required to seek written approval of the holders of the number of units required to approve such amendment or call a meeting of our limited partners to consider and vote upon the proposed amendment, except as described below. Proposed amendments (other than those described below) must be approved by holders of at least 66 2/3% of the outstanding units, except that no amendment may be made which would:
o enlarge the obligations of any limited partner, without its consent;
o enlarge the obligations of our general partner, without its consent,
which may be given or withheld in its sole discretion;
o restrict in any way any action by or rights of our general partner as
set forth in our partnership agreement;
o modify the amounts distributable, reimbursable or otherwise payable by
us to our general partner;
o change the term of the Partnership; or
o give any person the right to dissolve us other than our general
partner's right to dissolve us with the approval of a majority of the
outstanding units or change such right of our general partner in any
way.
Our general partner may make amendments to our partnership agreement without the approval of any limited partner or assignee to reflect:
o a change in our name, the location of our principal place of business,
our registered agent or our registered office;
o admission, substitution, withdrawal or removal of partners in
accordance with our partnership agreement;
o a change that, in our general partner's sole discretion, is reasonable
and necessary or appropriate to qualify or continue our qualification
as a partnership in which our limited partners have limited liability
or that is necessary or advisable in our general partner's opinion to
ensure that we will not be treated as an association taxable as a
corporation or otherwise subject to taxation as an entity for federal
income tax purposes;
o an amendment that is necessary, in the opinion of counsel, to prevent
us or our general partner or our or their respective directors or
officers from in any manner being subjected to the provisions of the
Investment Company Act of 1940, the Investment Advisors Act of 1940,
or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, whether or not substantially similar to
plan asset regulations currently applied or proposed by the United
States Department of Labor;
o an amendment that in our general partner's sole discretion is
necessary or desirable in connection with the authorization of
additional limited or general partner interests;
o any amendment expressly permitted in our partnership agreement to be
made by our general partner acting alone;
o an amendment effected, necessitated or contemplated by a merger
agreement that has been approved pursuant to the terms of our
partnership agreement; and o any other amendments substantially
similar to the foregoing.
In addition, our general partner may make amendments to our partnership agreement without such consent if the amendments:
o do not adversely affect our limited partners in any material respect;
o are necessary or desirable to satisfy any requirements, conditions or
guidelines contained in any opinion, directive, ruling or regulation
of any federal or state agency or judicial authority or contained in
any federal or state statute;
o are necessary or desirable to facilitate the trading of our units or
to comply with any rule, regulation, guideline or requirement of any
securities exchange on which our units are or will be listed for
trading, compliance with any of which our general partner deems to be
in our best interests and the holders of our units; or
o are required to effect the intent of, or as contemplated by, our partnership agreement.
Our general partner will not be required to obtain an opinion of counsel as to the tax consequences or the possible effect on limited liability of amendments described in the two immediately preceding paragraphs. No other amendments to our partnership agreement will become effective without the approval of at least 95% of the units unless we obtain an opinion of counsel to the effect that such amendment:
o will not cause us to be treated as an association taxable as a
corporation or otherwise cause us to be subject to entity level
taxation for federal income tax purposes; and
o will not affect the limited liability of any of our limited partners
or the limited partner of our operating partnerships.
Any amendment that materially and adversely affects the rights or preferences of any type or class of limited partner interests in relation to other types or classes of limited partner interests or our general partner's interests will require the approval of at least 66 2/3% of the type or class of limited partner interests so affected.
Management
Our general partner will manage and operate our activities, and our general partner's activities will be limited to such management and operation. Holders of units will not direct or participate in our or any of our operating partnerships, management or operations. See "--Limited Liability." Our general partner owes a fiduciary duty to our unitholders. Notwithstanding any limitation on obligations or duties, our general partner will be liable, as our general partner, for all of our debts (to the extent we do not pay them), except to the extent that indebtedness we incur is made specifically non-recourse to our general partner.
We do not currently have any directors, officers or employees. As is commonly the case with publicly traded limited partnerships, we do not currently contemplate that we will directly employ any of the persons responsible for managing or operating our business or for providing it with services, but will instead reimburse our general partner or its affiliates for the services of such persons. See "-Reimbursement of Expenses."
Reimbursement of Expenses. Our general partner will receive no management fee or similar compensation in conjunction with its management of us (other than cash distributions). See "--Cash Distribution Policy." However, our general partner is entitled pursuant to our partnership agreement to reimbursement on a monthly basis, or such other basis as our general partner may determine in its sole discretion, for all direct and indirect expenses it incurs or payments it makes on our behalf and all other necessary or appropriate expenses allocable to us or otherwise reasonably incurred by our general partner in connection with operating our business. Our partnership agreement provides that our general partner shall determine the fees and expenses that are allocable to us in any reasonable manner determined by our general partner in its sole discretion. The reimbursement for such costs and expenses will be in addition to any reimbursement to our general partner and its affiliates as a result of the indemnification provisions of our partnership agreement. See "-Indemnification."
Indemnification. Our partnership agreement provides that we will indemnify our general partner, any departing general partner and any person who is or was an officer or director of our general partner or any departing general partner, to the fullest extent permitted by law, and may indemnify, to the extent deemed advisable by our general partner, to the fullest extent permitted by law, any person who is or was an affiliate of our general partner or any departing general partner, any person who is or was an officer, director, employee, partner, agent or trustee of our general partner, any departing general partner or any such affiliate, or any person who is or was serving at the request of our general partner or any affiliate of our general partner or any departing general partner as an officer, director, employee, partner, agent, or trustee of another person from and against any and all losses, claims, damages, liabilities (joint or several), expenses (including, without limitation, legal fees and expenses), judgments, fines, penalties, interest, settlement and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any indemnified person may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as:
o our general partner, a departing general partner or affiliate of
either;
o an officer, director, employee, partner, agent or trustee of the
general partner, any departing general partner or affiliate of either;
or
o a person serving at our request in another entity in a similar capacity.
In each case the indemnified persons must have acted in good faith and in a manner which such indemnified persons believed to be in or not opposed to our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful. Any indemnification under our partnership agreement will only be paid out of our assets, and our general partner will not be personally liable for, or have any obligation to contribute or loan funds or assets to us to enable us to effectuate, such indemnification. We are authorized to purchase (or to reimburse our general partner or its affiliates for the cost of) insurance, purchased on behalf of our general partner and such other persons as our general partner determines, against liabilities asserted against and expenses incurred by such persons in connection with our activities, whether or not we would have the power to indemnify such person against such liabilities under the provisions described above.
Conflicts and Audit Committee. One or more of our general partner's directors who are neither officers nor employees of our general partner or any of its affiliates will serve as a committee of our general partner's board of directors and will, at the request of our general partner, review specific matters as to which our general partner believes there may be a conflict of interest in order to determine if the resolution of such conflict proposed by our general partner is fair and reasonable to us. This conflicts and audit committee will only review matters at the request of our general partner, which has sole discretion to determine which matters to submit to such committee. Any matters approved by this conflicts and audit committee will be conclusively deemed to be fair and reasonable to us, approved by all of our partners and not a breach by our general partner of our partnership agreement or any duties it may owe to us. Additionally, it is possible that such procedure in itself may constitute a conflict of interest.
Meetings; Voting
Holders of units or assignees who are record holders of units on the record date set pursuant to our partnership agreement will be entitled to notice of, and to vote at, meetings of our limited partners and to act with respect to matters as to which approvals may be solicited. With respect to voting rights attributable to units that are owned by assignees who have not yet been admitted as limited partners, our general partner will be deemed to be the limited partner with respect thereto and will, in exercising the voting rights in respect of such units on any matter, vote such units at the written direction of the record holders thereof. If a proxy is not returned on behalf of the unit record holder, such record holder's units will not be voted (except that, in the case of units held by our general partner on behalf of non-citizen assignees, our general partner will vote the votes in respect of such units in the same ratios as the votes of limited partners in respect of other units are cast). When a proxy is returned properly executed, the units represented thereby will be voted in accordance with the indicated instructions. If no instructions have been specified on the properly executed and returned proxy, the units represented thereby will be voted "FOR" the approval of the matters to be presented. Units held by our general partner on behalf of non-citizen assignees shall be voted by our general partner in the same ratios as the votes of our limited partners with respect to the matter presented to the holders of units.
Any action that our limited partners are required or permitted to be taken may be taken either at a meeting of our limited partners or without a meeting if consents in writing setting forth the action so taken are signed by holders of such number of limited partner interests as would be necessary to authorize or take such action at a meeting of our limited partners. Meetings of our limited partners may be called by our general partner or by limited partners owning at least 20% of the outstanding units of the class for which a meeting is proposed. Our limited partners may vote either in person or by proxy at meetings. Two-thirds (or a majority, if that is the vote required to take action at the meeting in question) of the outstanding limited partner interests of the class for which a meeting is to be held (excluding, if such are excluded from such vote, limited partner interests held by the general partner and its affiliates) represented in person or by proxy will constitute a quorum at a meeting of our limited partners. Except for any proposal for removal of our general partner or certain amendments to our partnership agreement described above, substantially all matters submitted for a vote are determined by the affirmative vote, in person or by proxy, of holders of a majority of our outstanding limited partner interests.
Each record holder of a unit has a vote according to such record holder's percentage interest in us, although our general partner could issue additional limited partner interests having special voting rights. See "--Issuance of Additional Securities." However, units owned beneficially by any person or group (other than our general partner and its affiliates) that own beneficially 20% or more of all units may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of limited partners, calculating required votes,
determining the presence of a quorum or for other similar partnership purposes. Our partnership agreement provides that the broker (or other nominee) will vote units held in nominee or street name accounts pursuant to the instruction of the beneficial owner thereof, unless the arrangement between the beneficial owner and such holder's nominee provides otherwise.
Any notice, demand, request, report or proxy materials required or permitted to be given or made to record holders of units (whether or not such record holder has been admitted as a limited partner) under the terms of our partnership agreement will be delivered to the record holder by us or, at our request, by the transfer agent.
Limited Liability
Except as described below, units are fully paid, and holders of units will not be required to make additional contributions to us.
Assuming that a limited partner does not participate in the control of our business, within the meaning of the Delaware limited partnership act, and that such partner otherwise acts in conformity with the provisions of our partnership agreement, such partner's liability under Delaware law will be limited, subject to certain possible exceptions, generally to the amount of capital such partner is obligated to contribute to us in respect of such holder's units plus such holder's share of any of our undistributed profits and assets. However, if it were determined that the right or exercise of the right by our limited partners as a group to remove or replace our general partner, to approve certain amendments to our partnership agreement or to take other action pursuant to our partnership agreement constituted "participation in the control" of our business for the purposes of the Delaware limited partnership act, then our limited partners could be held personally liable for our obligations under the laws of the State of Delaware to the same extent as our general partner.
Under Delaware law, a limited partnership may not make a distribution to a partner to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the partnership, other than liabilities to partners on account of their partnership interests and nonrecourse liabilities, exceed the fair value of the assets of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, Delaware law provides that the fair value of property subject to nonrecourse liability shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds that nonrecourse liability. Delaware law provides that a limited partner who receives such a distribution and knew at the time of the distribution that the distribution was in violation of Delaware law shall be liable to the limited partnership for the amount of the distribution for three years from the date of the distribution.
Under Delaware law, an assignee who becomes a substituted limited partner of a limited partnership is liable for the obligations of the assignor to make contributions to us, except the assignee is not obligated for liabilities unknown to such assignee at the time the assignee became a limited partner and which could not be ascertained from our partnership agreement.
We are organized under the laws of Delaware and currently conduct business in a number of states. Maintaining limited liability will require that we comply with legal requirements in all of the jurisdictions in which we conduct business, including qualifying the operating partnerships to do business therein. Limitations on the liability of limited partners for the obligations of a limited partnership have not been clearly established in many jurisdictions. If it were determined that we were, by virtue of our limited partner interest in our operating partnerships or otherwise, conducting business in any state without complying with the applicable limited partnership statute, or that the right or exercise of the right by our limited partners as a group to remove or replace our general partner, to approve certain amendments to our partnership agreement, or to take other action pursuant to our partnership agreement constituted "participation in the control" of our business for the purposes of the statues of any relevant jurisdiction, then our limited partners could be held personally liable for our obligations under the law of such jurisdiction to the same extent as our general partner. We will operate in such manner as our general partner deems reasonable and necessary or appropriate to preserve the limited liability of holders of units.
Books and Reports
Our general partner is required to keep appropriate books of the business at our principal offices. Our books will be maintained for both tax and financial reporting purposes on an accrual basis. Our fiscal is the calendar year.
As soon as practicable, but in no event later than 120 days after the close of each fiscal year, our general partner will furnish each record holder of a unit (as of a record date selected by our general partner) with an annual report containing audited financial statements for the past fiscal year, prepared in accordance with generally accepted accounting principles. As soon as practicable, but in no event later than 90 days after the close of each calendar quarter (except the fourth quarter), our general partner will furnish each record holder of a unit upon request a report containing our unaudited financial statements and such other information as may be required by law.
Our general partner will use all reasonable efforts to furnish each record holder of a unit information reasonably required for tax reporting purposes within 90 days after the close of each taxable year. Such information is expected to be furnished in a summary form so that certain complex calculations normally required of partners can be avoided. Our general partner's ability to furnish such summary information to holders of units will depend on the cooperation of such holders of units in supplying certain information to our general partner. Every holder of a unit (without regard to whether such holder supplies such information to our general partner) will receive information to assist in determining such holder's federal and state tax liability and filing such holder's federal and state income tax returns.
Right to Inspect Partnership Books and Records
Our partnership agreement provides that a limited partner can, for a purpose reasonably related to such limited partner's interest as a limited partner, upon reasonable demand and at such partner's own expense, have furnished to him:
o a current list of the name and last known address of each partner;
o a copy of our tax returns;
o information as to the amount of cash, and a description and statement
of the agreed value of any other property or services contributed or
to be contributed by each partner and the date on which each became a
partner;
o copies of our partnership agreement, our certificate of limited
partnership, amendments thereto and powers of attorney pursuant to
which the same have been executed;
o information regarding the status of our business and financial
condition; and
o such other information regarding our affairs as is just and
reasonable.
Our general partner may, and intends to, keep confidential from our limited partners trade secrets or other information the disclosure of which our general partner believes in good faith is not in our best interests or which we are required by law or by agreements with third parties to keep confidential.
Termination and Dissolution
We will continue until December 31, 2082, unless sooner terminated pursuant to our partnership agreement. We will be dissolved upon:
1. our general partner's election to dissolve us, if approved by a
majority of the units;
2. our sale of all or substantially all of our assets and properties and
our operating partnerships;
3. the bankruptcy or dissolution of our general partner; or
4. the withdrawal or removal of our general partner or any other event
that results in its ceasing to be our general partner (other than by
reason of a transfer in accordance with the partnership agreement or
withdrawal or removal following approval of a successor).
However, we will not be dissolved upon an event described in clause 4 if within 90 days after such event our partners agree in writing to continue our business and to the appointment, effective as of the date of such event, of a successor general partner. Upon a dissolution pursuant to clause 3 or 4, at least a majority of the units may also elect, within certain time limitations, to reconstitute us and continue our business on the same terms and conditions set forth in our partnership agreement by forming a new limited partnership on terms identical to those set forth in our partnership agreement and having as a general partner an entity approved by at least a majority of the units, subject to our receipt of an opinion of counsel that the exercise of such right will not result in our unitholders' loss
of limited liability or cause us or the reconstituted limited partnership to be treated as an association taxable as a corporation or otherwise subject to taxation as an entity for federal income tax purposes.
Registration Rights
Pursuant to the terms of our partnership agreement and subject to certain limitations described therein, we have agreed to register for resale under the Securities Act of 1933 and applicable state securities laws any units (or other securities of the Partnership) proposed to be sold by our general partner (or its affiliates) if an exemption from such registration requirements is not otherwise available for such proposed transaction. We are obligated to pay all expenses incidental to such registration, excluding underwriting discounts and commissions.
Cash Distribution Policy
One of our principal objectives is to generate cash from our operations and to distribute available cash to our partners in the manner described herein. "Available cash" generally means, with respect to any calendar quarter, all cash received by us from all sources, less all of our cash disbursements and net additions to reserves. For purposes of cash distributions to our unitholders, the term available cash excludes the amount paid in respect of the 0.5% special limited partner interest in SFPP, L.P. owned by the former general partner of SFPP, which amount will equal 0.5% of the total cash distributions made each quarter by SFPP to its partners.
Our general partner's decisions regarding amounts to be placed in or released from reserves may have a direct impact on the amount of available cash. This is because increases and decreases in reserves are taken into account in computing available cash. Our general partner may, in its reasonable discretion (subject to certain limits), determine the amounts to be placed in or released from reserves each quarter.
Cash distributions will be characterized as either distributions of cash from operations or cash from interim capital transactions. This distinction affects the amounts distributed to unitholders relative to our 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."
"Cash from operations" generally refers to our cash balance on the date we commenced operations, plus all cash generated by the operations of our business, after deducting related cash expenditures, reserves, debt service and certain other items.
"Cash from interim capital transactions" will generally be generated only by borrowings, sales of debt and equity securities and sales or other dispositions of assets for cash (other than inventory, accounts receivable and other current assets and assets disposed of in the ordinary course of business).
To avoid the difficulty of trying to determine whether available cash distributed by us is cash from operations or cash from interim capital transactions, all available cash distributed by us from any source will be treated as cash from operations until the sum of all available cash distributed as cash from operations equals the cumulative amount of cash from operations actually generated from the date we commenced operations through the end of the calendar quarter prior to such distribution. Any excess available cash (irrespective of its source) will be deemed to be cash from interim capital transactions and distributed accordingly.
If cash from interim capital transactions is distributed in respect of each unit in an aggregate amount per unit equal to $11.00 per unit (the initial public offering price of the units adjusted to give effect to the 2-for-1 split of units effective October 1, 1997) the distinction between cash from operations and cash from interim capital transactions will cease, and both types of available cash will be treated as cash from operations. Our general partner does not anticipate that we will distribute significant amounts of cash from interim capital transactions.
The discussion below indicates the percentages of cash distributions required to be made to our general partner and our unitholders. In the following general discussion of how available cash is distributed, references to available cash, unless otherwise stated, mean available cash that constitutes cash from operations.
Quarterly Distributions of Available Cash. We will make distributions to our partners with respect to each calendar quarter prior to liquidation in an amount equal to 100% of our available cash for such quarter.
Distributions of Cash from Operations. Our distributions of available cash constituting cash from operations with respect to any quarter will be made in the following manner:
first, 98% to the unitholders pro rata and 2% to our general partner until our unitholders have received a total of $0.3025 per unit for such quarter in respect of each unit; and
second, 85% of any such available cash then remaining to unitholders pro rata and 15% to our general partner until our unitholders have received a total of $0.3575 per unit for such quarter in respect of each unit (the "Second Target Distribution");
third, 75% of any such available cash then remaining to unitholders pro rata and 25% to our general partner until our unitholders have received a total of $0.4675 per unit for such quarter in respect of each unit; and
fourth, 50% of any such available cash then remaining to our unitholders pro rata and 50% to our general partner.
In addition, if the first, second and third target distribution levels are reduced to zero, as described below under "--Quarterly Distributions of Available Cash-Adjustment of Target Distribution Levels," all remaining available cash will be distributed as cash from operations, 50% our unitholders pro rata and 50% to our general partner. These provisions are inapplicable upon our dissolution and liquidation.
Distributions of Cash from Interim Capital Transactions. Distributions on any date by us of available cash that constitutes cash from interim capital transactions will be distributed 98% to our unitholders pro rata and 2% to our general partner until we shall have distributed in respect of each unit available cash constituting cash from interim capital transactions in an aggregate amount per unit equal to the adjusted initial unit price of $11.00.
As cash from interim capital transaction is distributed, it is treated as if it were a repayment of the initial public offering price. To reflect such repayment, the first, second and third target distribution levels will be adjusted downward by multiplying each amount by a fraction, the numerator of which is the unrecovered initial unit price immediately after giving effect to such repayment and the denominator of which is the unrecovered initial unit price, immediately prior to giving effect to such repayment. "Unrecovered initial unit price" includes the amount by which the initial unit price exceeds the aggregate distribution of cash from interim capital transactions per unit.
When "payback of initial unit price" is achieved, i.e., when the unrecovered initial unit price is zero, then in effect the first, second and third target distribution levels each will have been reduced to zero. Thereafter all distributions of available cash from all sources will be treated as if they were cash from operations and available cash will be distributed 50% to our unitholders pro rata and 50% to our general partner.
Adjustment of Target Distribution Levels. The first, second and third target distribution levels will be proportionately adjusted upward or downward, as appropriate, in the event of any combination or subdivision of units (whether effected by a distribution payable in units or otherwise) but not by reason of the issuance of additional units for cash or property. For example, in connection with our two-for-one split of the units on October 1, 1997, the first, second and third target distribution levels were each reduced to 50% of their initial levels. See "--Quarterly Distributions of Available Cash-Distributions of Cash from Operations."
In addition, if a distribution is made of available cash constituting cash from interim capital transactions, the first, second and third target distribution levels will be adjusted downward proportionately, by multiplying each such amount, as the same may have been previously adjusted, by a fraction, the numerator of which is the unrecovered initial unit price immediately after giving effect to such distribution and the denominator of which is the unrecovered initial unit price immediately prior to such distribution. For example, assuming the unrecovered initial unit price is $11.00 per unit and if cash from interim capital transactions of $5.50 per unit is distributed to our unitholders (assuming no prior adjustments), then the amount of the first, second and third target distribution levels would each be reduced to 50% of their initial levels. If and when the unrecovered initial unit price is zero, the first, second and third target distribution levels each will have been reduced to zero, and our general partner's share of distributions of available cash will increase, in general, to 50% of all distributions of available cash.
The first, second and third target distribution levels may also be adjusted if legislation is enacted which causes us to become taxable as a corporation or otherwise subjects us to taxation as an entity for federal income tax purposes. In such event, the first, second, and third target distribution levels for each quarter thereafter would be reduced to an amount equal to the product of:
o each of the first, second and third target distribution levels
multiplied by;
o one minus the sum of:
o the maximum marginal federal income tax rate to which we are
subject as an entity; plus
o any increase that results from such legislation in the effective
overall state and local income tax rate to which we are subject
as an entity 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).
For example, assuming we are not previously subject to state and local income tax, if we were to become taxable as an entity for federal income tax purposes and we became subject to a maximum marginal federal, and effective state and local, income tax rate of 38%, then each of the target distribution levels, would be reduced to 62% of the amount thereof immediately prior to such adjustment.
Liquidation and Distribution of Proceeds
Upon our dissolution, unless we are reconstituted and continued as a new limited partnership, the liquidator authorized to wind up our affairs will, acting with all of the powers of our general partner that such liquidator deems necessary or desirable in its good faith judgment in connection therewith, liquidate our assets and apply the proceeds of the liquidation as follows:
o first towards the payment of all our creditors and the creation of a
reserve for contingent liabilities; and
o then to all partners in accordance with the positive balances in their
respective capital accounts.
Under certain circumstances and subject to certain limitations, the liquidator may defer liquidation or distribution of our assets for a reasonable period of time and/or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to our partners.
Generally, any gain will be allocated between our unitholders and our general partner in a manner that approximates their sharing ratios in the various target distribution levels. Our unitholders and our general partner will share in the remainder of our assets in proportion to their respective partnership capital account balances.
Any loss or unrealized loss will be allocated to our general partner and our unitholders: first, in proportion to the positive balances in such partners' capital accounts until all such balances are reduced to zero; and thereafter, to our general partner.
Transfer Agent and Registrar
Duties
First Chicago Trust Company of New York is the registrar and transfer agent for our units and receives a fee from us for serving in such capacities. We will pay fees charged by our transfer agent for transfers of units except:
o fees similar to those customarily paid by holders of securities for
surety bond premiums to replace lost or stolen certificates;
o taxes or other governmental charges;
o special charges for services requested by a holder of a unit; and
o other similar fees or charges.
We will not charge unitholders for disbursements of cash distributions. We will indemnify our transfer agent, its agents and each of their respective shareholders, directors, officers and employees against all claims and losses that
may arise out of acts performed or omitted in respect of its activities as such, except for any liability due to any negligence, gross negligence, bad faith or intentional misconduct of the indemnified person or entity.
Resignation or Removal
Our transfer agent may at any time resign, by notice to us, or be removed by us, such resignation or removal to become effective upon our general partner's appointment of a successor transfer agent and registrar and such successor's acceptance of such appointment. If no successor has been appointed and accepted such appointment within 30 days after notice of such resignation or removal, our general partner is authorized to act as the transfer agent and registrar until a successor is appointed.
Item 3. Legal Proceedings
See Note 16 of the Notes to the Consolidated Financial Statements included elsewhere in this report.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of our unitholders during the fourth quarter of 2000.
P A R T II
Item 5. Market for the Registrant's Units and Related Security Holder Matters
The following table sets forth, for the periods indicated, the high and low sale prices per common unit, as reported on the New York Stock Exchange, the principal market in which our common units are traded, and the amount of cash distributions declared per common unit.
Price Range
----------- Cash
High Low Distributions
---- --- -------------
2000
----
First Quarter $44.5625 $38.5000 $0.7750
Second Quarter 39.9375 37.1250 0.8500
Third Quarter 47.3750 39.6250 0.8500
Fourth Quarter 56.3125 46.0000 0.9500
1999
----
First Quarter $37.9375 $33.1250 $0.7000
Second Quarter 39.0000 33.9375 0.7000
Third Quarter 45.3750 37.5000 0.7250
Fourth Quarter 43.9375 39.6250 0.7250
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The quarterly distribution for the fourth quarter of 2000 was $.95 per unit. We currently expect that we will continue to pay comparable cash distributions in the future assuming no adverse change in our operations, economic conditions and other factors. However, we can give no assurance that future distributions will continue at such levels.
As of February 14, 2001, there were approximately 36,000 beneficial owners of our common units and one holder of our class B units.
Recent Sales of Unregistered Securities. During the quarter ended December 31, 2000, we issued the following equity securities, which were not registered under the Securities Act of 1933, as amended. Effective December 31, 2000, we acquired over $300 million of assets from KMI. As consideration for these assets, we paid to KMI $192.7 million, 640,000 common units and 2,656,700 class B units. The units were issued to KMI pursuant to Section 4(2) of the Securities Act of 1933.
Item 6. Selected Financial Data (unaudited)
The following table sets forth, for the periods and at the dates indicated, selected historical financial and operating data for us.
Year Ended December 31,
2000(7) 1999(8) 1998(9) 1997 1996
----------- -------------- --------------- -------------- ------------
(In thousands, except per unit and operating data)
Income and Cash Flow Data:
Revenues $ 816,442 $ 428,749 $ 322,617 $ 73,932 $ 71,250
Cost of product sold 124,641 16,241 5,860 7,154 7,874
Operating expense 190,329 111,275 77,162 17,982 22,347
Fuel and power 43,216 31,745 22,385 5,636 4,916
Depreciation and amortization 82,630 46,469 36,557 10,067 9,908
General and administrative 60,065 35,612 39,984 8,862 9,132
----------- -------------- --------------- -------------- ------------
Operating income 315,561 187,407 140,669 24,231 17,073
Earnings from equity investments 71,603 42,918 25,732 5,724 5,675
Amortization of excess cost of equity investments (8,195) (4,254) (764) - -
Interest (expense) (97,102) (54,336) (40,856) (12,605) (12,634)
Interest income and other, net 10,415 22,988 (5,992) (353) 3,129
Income tax (provision) benefit (13,934) (9,826) (1,572) 740 (1,343)
----------- -------------- --------------- -------------- ------------
Income before extraordinary charge 278,348 184,897 117,217 17,737 11,900
Extraordinary charge - (2,595) (13,611) - -
----------- -------------- --------------- -------------- ------------
Net income $ 278,348 $ 182,302 $ 103,606 $ 17,737 $ 11,900
=========== ============== =============== ============== ============
Basic Limited Partners' income per unit
before extraordinary charge(1) $ 2.68 $ 2.63 $ 2.09 $ 1.02 $ 0.90
=========== ============== =============== ============== ============
Basic Limited Partners' net income per unit $ 2.68 $ 2.57 $ 1.75 $ 1.02 $ 0.90
=========== ============== =============== ============== ============
Diluted Limited Partners' net income per unit($) 2.67 $ 2.57 $ 1.75 $ 1.02 $ 0.90
=========== ============== =============== ============== ============
Per unit cash distribution paid $ 3.20 $ 2.78 $ 2.39 $ 1.63 $ 1.26
=========== ============== =============== ============== ============
Additions to property, plant and equipment $ 125,523 $ 82,725 $ 38,407 $ 6,884 $ 8,575
Balance Sheet Data (at end of period):
Net property, plant and equipment $ 3,306,305 $ 2,578,313 $ 1,763,386 $ 244,967 $ 235,994
Total assets $ 4,625,210 $ 3,228,738 $ 2,152,272 $ 312,906 $ 303,603
Long-term debt $ 1,255,453 $ 989,101 $ 611,571 $ 146,824 $ 160,211
Partners' capital $ 2,117,067 $ 1,774,798 $ 1,360,663 $ 150,224 $ 118,344
Operating Data:
Product Pipelines -
Pacific - Mainline delivery volumes (MBbls)(3) 386,611 375,663 307,997 - -
Pacific - Other delivery volumes (MBbls)(3) 14,243 10,025 17,957 - -
Plantation - Delivery volumes (MBbls) 226,795 214,900 - - -
North System/Cypress - Delivery volumes (MBbls) 51,111 50,124 44,783 46,309 46,601
Natural Gas Pipelines -
Transport volumes (Bcf)(4) 449.2 424.3 - - -
Carbon Dioxide Pipelines -
Delivery volumes (Bcf)(5) 386.5 379.3 - - -
Bulk Terminals -
Transload tonnage (Mtons)(6) 41,529 39,190 24,016 9,087 6,090
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(1) Represents income before extraordinary charge per unit adjusted for the
two-for-one split of units on October 1, 1997. Basic Limited Partners'
income per unit before extraordinary charge was computed by dividing the
interest of our unitholders in income before extraordinary charge by the
weighted average number of units outstanding during the period.
(2) Diluted Limited Partners' net income per unit reflects the potential
dilution, by application of the treasury stock method, that could occur if
options to issue units were exercised, which would result in the issuance
of additional units that would then share in our net income.
(3) We acquired our Pacific operations on March 6, 1998.
(4) KMIGT and Trailblazer assets were acquired on December 31, 1999. 1999
volumes are shown for comparative purposes only.
(5) Acquired remaining 80% interest in Kinder Morgan CO2 Company, L.P.,
effective April 1, 2000. 2000 and 1999 volume information is adjusted to
include properties acquired from Devon Energy effective June 1, 2000, and
to correct volumes previously reported. 2000 and 1999 volume information is
shown for comparative purposes only.
(6) Represents the volumes of the Cora Terminal, excluding ship or pay volumes
of 252 Mtons for 1996, the Grand Rivers Terminal from September 1997,
Kinder Morgan Bulk Terminals from July 1, 1998 and the Pier IX and Shipyard
Terminals from December 18, 1998.
(7) Includes results of operations for KMIGT, 66 2/3% interest in Trailblazer
Pipeline Company, 49% interest in Red Cedar, Milwaukee Bulk Terminals,
Dakota Bulk Terminal, remaining 80% interest in KMCO2, Devon Energy carbon
dioxide properties, Buckeye Refining Company, LLC, 32.5% interest in Cochin
Pipeline System and Delta Terminal Services since dates of acquisition.
(8) Includes results of operations for 51% interest in Plantation Pipe Line
Company, Product Pipelines' transmix operations and 33 1/3% interest in
Trailblazer Pipeline Company since dates of acquisition.
(9) Includes results of operations for Pacific operations, Kinder Morgan Bulk
Terminals and 24% interest in Plantation Pipe Line Company since dates of
acquisition.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis in conjunction with our Consolidated Financial Statements included elsewhere in this report.
Results of Operations
Our financial results over the past two years reflect significant growth in revenues, operating income and net income. During this timeframe, we have consistently made strategic business acquisitions and experienced ongoing strength in all of our pipeline and terminal operations. The combination of targeted business acquisitions, higher capital spending, favorable economic conditions and management's continuing focus on controlling general and operating expenses across our entire business portfolio led the way to strong growth in all four of our business segments. In 2000, we reported record levels of revenue, operating income, net income and earnings per unit.
Our net income was $278.3 million ($2.67 per diluted unit) on revenues of $816.4 million in 2000, compared to net income of $182.3 million ($2.57 per diluted unit) on revenues of $428.7 million in 1999, and net income of $103.6 million ($1.75 per diluted unit) on revenues of $322.6 million in 1998. Included in our net income for 1999 and 1998 were extraordinary charges associated with debt refinancing transactions in the amount of $2.6 million in 1999 and $13.6 million in 1998. In addition, our 1999 net income included a benefit of $10.1 million related to the sale of our 25% interest in the Mont Belvieu fractionation facility, partially offset by special non-recurring charges. Our total consolidated operating income was $315.6 million in 2000, $187.4 million in 1999 and $140.7 million in 1998. Our total consolidated net income before extraordinary charges was $278.3 million in 2000, $184.9 million in 1999 and $117.2 million in 1998.
Our increase in overall net income and revenues in 2000 compared to 1999 primarily resulted from the inclusion of our Natural Gas Pipelines segment, acquired from Kinder Morgan, Inc. on December 31, 1999, and our acquisition of the remaining 80% ownership interest in Kinder Morgan CO2 Company, L.P. (formerly Shell CO2 Company, Ltd.) effective April 1, 2000. Prior to that date, we owned a 20% equity interest in Kinder Morgan CO2 Company, L.P. and reported its results under the equity method of accounting. The results of Kinder Morgan CO2 Company, L.P. are included in our CO2 Pipelines segment. Our acquisition of substantially all of our Product Pipelines' transmix operations in September 1999, and Milwaukee Bulk Terminals, Inc. and Dakota Bulk Terminal, Inc. in January 2000, also contributed to our overall increase in period-to-period revenues and net income.
The inclusion of a full year of activity for our Pacific operations and Bulk Terminals segment was the largest contributing factor for the increase in total revenues and earnings in 1999 compared with 1998. We acquired our Pacific operations in March 1998, Kinder Morgan Bulk Terminals, Inc. in July 1998 and the Pier IX and Shipyard River terminals in December 1998.
Product Pipelines
Our Product Pipelines' segment revenues increased 34%, from $314.1 million in 1999 to $421.4 million in 2000, and net income increased 6%, from $209.0 million in 1999 to $221.2 million in 2000. The year-to-year increase in revenues resulted primarily from the inclusion of a full year of our transmix operations, which were mainly acquired in September 1999, and additional transmix assets acquired in October 2000. Furthermore, higher throughput volumes on both our Pacific operations and North System pipelines contributed to the increase in segment revenues. On our Pacific operations, average tariff rates remained relatively flat between 2000 and 1999, with an almost 3% increase in mainline delivery volumes resulting in a 3% increase in revenues. On our North System, revenues grew 14% in 2000 compared to 1999. The increase was due to an almost 10% increase in throughput revenue volumes, primarily due to strong refinery demand in the Midwest, as well as a 5% increase in average tariff rates.
In 1998, the Product Pipelines segment earned $156.9 million on revenues of $258.7 million. The increase in revenues in 1999 over 1998 relates to the inclusion in 1999 of a full year of results from our Pacific operations, acquired in March 1998, and the inclusion of almost four months of transmix operations, which were acquired in early September 1999. With a full twelve months of activity reported in 1999, total mainline throughput volumes on our Pacific operations pipelines increased 22% in 1999 compared to 1998. The higher 1999 segment revenues were partly offset by an almost 4% decrease in average tariff rates on our Pacific pipelines. The decrease in average tariff
rates was mainly due to the reduction in transportation rates, effective April 1, 1999, on our Pacific operation's East Line.
Combined operating expenses for the Product Pipelines segment, which include the segment's cost of sales, fuel, power and operating and maintenance expenses, were $172.5 million in 2000, $76.5 million in 1999 and $56.3 million in 1998. The increase in expenses in each year resulted mainly from the inclusion of our transmix operations and the higher delivery volumes on our Pacific operations pipelines. Depreciation and amortization expense was $41.7 million in 2000, $38.9 million in 1999 and $32.7 million in 1998, reflecting our acquisitions, continued investments in capital additions and pipeline expansions. Segment operating income was $193.5 million in 2000, $186.1 million in 1999 and $159.2 million in 1998. Earnings from our equity investments, net of amortization of excess costs, were $29.1 million in 2000, $21.4 million in 1999 and $5.9 million in 1998. The increases in our equity earnings each year were chiefly due to our investments in Plantation Pipe Line Company. We acquired a 24% ownership interest in September 1998 and an additional 27% ownership interest in June 1999. Additionally, the Product Pipelines segment benefited from favorable changes in non-operating income/expense in 1999 compared to 1998, primarily the result of lower 1999 expense accruals made for our FERC rate case reserve (as a result of the FERC's opinion relating to an outstanding rate case dispute), 1999 insurance recoveries and favorable adjustments to employee post-retirement benefit liabilities.
Natural Gas Pipelines
Our Natural Gas Pipelines segment reported earnings of $112.9 million on revenues of $173.0 million in 2000. These results were produced from assets that we acquired from Kinder Morgan, Inc. on December 31, 1999. For comparative purposes, transported gas volumes on our natural gas assets increased almost 6% in 2000 compared with 1999 when Kinder Morgan, Inc owned these assets. The overall increase includes an almost 9% increase in volumes shipped on the Trailblazer Pipeline. Higher receipt-side pressure on the Trailblazer Pipeline during 2000 resulted in an increase in the available quantity of gas delivered to the Trailblazer Pipeline. Segment operating expenses totaled $51.2 million in 2000 and segment operating income was $97.2 million. Earnings for 2000 from the segment's 49% equity investment in Red Cedar Gathering Company, net of amortization of excess costs, were $15.0 million.
Segment results for 1999 and 1998 primarily represent activity from our since divested partnership interest in the Mont Belvieu fractionation facility. Segment earnings of $16.8 million in 1999 includes $2.5 million in equity earnings from our interest in the fractionation facility and $14.1 million from our third quarter gain on the sale of that interest to Enterprise Products Partners, L.P. In 1998, the segment reported earnings of $4.9 million, including equity income of $4.6 million. This amount represents earnings from our interest in the Mont Belvieu facility for a full twelve-month period.
CO2 Pipelines
Our CO2 Pipelines segment consists of Kinder Morgan CO2 Company, L.P. After our acquisition of the remaining 80% interest in Kinder Morgan CO2 Company, L.P., on April 1, 2000, we no longer accounted for our investment on an equity basis. Our 2000 results also include the segment's acquisition of significant carbon dioxide pipeline assets and oil-producing property interests on June 1, 2000. For the year 2000, the segment reported earnings of $68.0 million on revenues of $89.2 million. CO2 Pipelines reported operating expenses of $26.8 million and operating income of $47.9 million. Equity earnings from the segment's 50% interest in the Cortez Pipeline Company, net of amortization of excess costs, were $19.3 million.
Segment results from 1999 and 1998 primarily represent equity earnings from our original 20% interest in Kinder Morgan CO2 Company, L.P. Segment earnings of $15.2 million in 1999 include $14.5 million in equity earnings from our interest in Kinder Morgan CO2 Company, L.P. In 1998, our CO2 Pipelines segment reported earnings of $15.5 million, including $14.5 million in equity earnings from our Kinder Morgan CO2 Company, L.P. investment. Under the terms of the prior Kinder Morgan CO2 Company, L.P. partnership agreement, we received a priority distribution of $14.5 million per year during 1998, 1999 and the first quarter of 2000. After our acquisition of the remaining 80% ownership interest, we amended this partnership agreement, among other things, to eliminate the priority distribution and other provisions rendered irrelevant by our sole ownership.
Bulk Terminals
Our Bulk Terminals segment reported its highest amount of revenues, operating income and earnings in 2000. Following our acquisition of Kinder Morgan Bulk Terminals, Inc. effective July 1, 1998, we continued to make selective acquisitions and increase capital spending in order to grow and expand our bulk terminal businesses. Our 2000 results include the operations of Milwaukee Bulk Terminals, Inc. and Dakota Bulk Terminal, Inc., effective January 1, 2000, and Delta Terminal Services, Inc., acquired on December 1, 2000. The 1999 results include the full-year of operations for Kinder Morgan Bulk Terminals, Inc. and the Pier IX and Shipyard River terminals, acquired on December 18, 1998.
The Bulk Terminals segment reported earnings of $37.6 million in 2000, $35.0 million in 1999 and $19.2 million in 1998. Segment revenues were $132.8 million in 2000, $114.6 million in 1999 and $62.9 million in 1998. In addition to our acquisitions, our Bulk Terminals segment's overall increases in year-to-year revenues were due to a 10% increase in revenues earned by the segment's Cora and Grand Rivers coal terminals in 1999 and 2000. The 16% increase in segment revenues in 2000 over 1999 reflects a 6% increase in transloaded coal volumes accompanied by a 4% increase in average coal transfer rates. The increase in 1999 was impacted by an 18% increase in transloaded coal volumes, partially offset by a 7% decrease in average transfer rates. The growth in the Bulk Terminals segment revenues over the two-year period was partially offset by lower revenue from coal marketing activities.
Bulk Terminals combined operating expenses totaled $81.7 million in 2000 compared to $66.6 million in 1999 and $36.9 million in 1998. The increase in 2000 versus 1999 was the result of acquisitions made in 2000, higher operating expenses associated with the transfer of higher coal volumes and an increase in fuel costs. The increase in 1999 compared to 1998 was the result of including a full year of operations for Kinder Morgan Bulk Terminals, Inc., partially offset by higher 1998 cost of sales expenses related to purchase/sale marketing contracts. Depreciation and amortization expense was $9.6 million in 2000, $7.5 million in 1999 and $3.9 million in 1998. The increases in depreciation were primarily due to the addition of Kinder Morgan Bulk Terminals, Inc. and the Pier IX and Shipyard River terminals in 1998, Milwaukee Bulk Terminals, Inc. and Dakota Bulk Terminal Inc. in 2000, and higher property balances as a result of increased capital spending.
Other
Items not attributable to any segment include general and administrative expenses, interest income and expense and minority interest. General and administrative expenses totaled $60.1 million in 2000 compared with $35.6 million in 1999 and $40.0 million in 1998. The increase in our 2000 general and administrative expenses over the prior year was mainly due to our larger and more diverse operations. During 2000, we assimilated the operations of our Natural Gas Pipelines and CO2 Pipelines business segments. We continue to manage aggressively our infrastructure expense and to focus on our productivity and expense controls. Our total interest expense, net of interest income, was $93.3 million in 2000, $52.6 million in 1999 and $38.6 million in 1998. The increases were primarily due to debt we assumed as part of the acquisition of our Pacific operations as well as additional debt related to the financing of our 2000 and 1999 investments. Minority interest increased to $8.0 million in 2000 compared with $2.9 million in 1999 and $1.0 million in 1998. The $5.1 million increase in 2000 over 1999 primarily resulted from the inclusion of earnings attributable to the Trailblazer Pipeline Company. The $1.9 million increase in 1999 over 1998 resulted from higher earnings attributable to our Pacific operations as well as to our higher overall income.
Outlook
We actively pursue a strategy to increase our operating income. We will use a three-pronged strategy to accomplish this goal.
o Cost Reductions. We have substantially reduced the operating expenses of those operations that we owned at the time Kinder Morgan (Delaware), Inc. acquired our general partner in February 1997. In addition, we have made substantial reductions in the operating expenses of the businesses and assets that we acquired since February 1997. We intend to continue to seek further reductions where appropriate.
o Internal Growth. We intend to expand the operations of our current facilities. We have taken a number of steps that management believes will increase revenues from existing operations, including the following:
o completing the expansion of our San Diego Line in June 2000. The
expansion project cost approximately $18 million and consisted of
the construction of 23 miles of 16-inch diameter pipe and other
appurtenant facilities. The new facilities will increase capacity
on our San Diego Line by approximately 25%;
o entering into an agreement to provide pipeline transportation
services on the North System for Aux Sable Liquid Products, L.P.
in the Chicago area beginning in first quarter of 2001;
o constructing a multi-million dollar cement import and
distribution facility at the Shipyard River terminal, which was
completed in the fourth quarter of 2000, as part of a 30 year
cement contract with Blue Circle Cement;
o announcing an expansion project on the Trailblazer Pipeline in
August 2000. The project will involve the installation of two new
compressor stations and the addition of horsepower at an existing
compressor station;
o continuing a $13 million upgrade to the coal loading facilities
at the Cora and Grand Rivers coal terminals. The two terminals
handled an aggregate of 17.0 million tons of coal during 2000
compared with 16.0 million tons in 1999; and
o increasing earnings and cash flow, as a result of our
investments, acquisitions and operating performance.
o Strategic Acquisitions. Since January 1, 2000, we have made the following acquisitions:
o Milwaukee Bulk Terminals, Inc. January 1, 2000
o Dakota Bulk Terminal, Inc. January 1, 2000
o Kinder Morgan CO2 Company, L.P. (80%) April 1, 2000
o Carbon Dioxide Assets June 1, 2000
o Transmix Assets (Buckeye Refining Company,
LLC) October 25, 2000
o Cochin Pipeline System November 3, 2000
o Delta Terminal Services, Inc. December 1, 2000
o Kinder Morgan Texas Pipeline L.P. December 21, 2000
o Casper-Douglas Gas Gathering
and Processing Assets December 21, 2000
o Coyote Gas Treating, LLC (50%) December 21, 2000
o Thunder Creek Gas Services, LLC (25%) December 21, 2000
o Carbon Dioxide Investment to be contributed
to joint venture with Marathon December 28, 2000
o Colton Transmix Processing Facility (50%) December 31, 2000
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We regularly seek opportunities to make additional strategic acquisitions, to expand existing businesses and to enter into related businesses. We periodically consider potential acquisition opportunities as such opportunities are identified. No assurance can be given that we will be able to consummate any such acquisition. Our management anticipates that we will finance acquisitions temporarily by borrowings under our bank credit facilities or by issuing commercial paper, and permanently by issuing new debt securities and/or units.
On January 17, 2001, we announced a quarterly distribution of $0.95 per unit for the fourth quarter of 2000. The distribution for the fourth quarter of 1999 was $0.725 per unit.
Liquidity and Capital Resources
Our primary cash requirements, in addition to normal operating expenses, are debt service, sustaining capital expenditures, expansion capital expenditures and quarterly distributions to our common unitholders. In addition to utilizing cash generated from operations, we could meet our cash requirements through borrowings under our credit facilities or issuing short-term commercial paper, long-term notes or additional units. We expect to fund:
o future cash distributions and sustaining capital expenditures with existing cash and cash flows from operating activities;
o expansion capital expenditures through additional borrowings or
issuance of additional units;
o interest payments from cash flows from operating activities; and
o debt principal payments with additional borrowings as they become
due or by issuance of additional units.
Operating Activities
Net cash provided by operating activities was $301.6 million in 2000 compared to $182.9 million in 1999. Increases in our period-to-period cash flows from operations resulted from:
o a $93.4 million increase in net earnings;
o a $36.2 million increase in non-cash depreciation and amortization
charges;
o a $28.4 million increase in cash inflows relative to net changes in
working capital items;
o a $14.0 million increase in cash inflows relative to other non-cash
operating activities;
o a $13.8 million increase in distributions from equity investments; and
o a $10.1 million gain on the sale of our equity interest in the Mont
Belvieu fractionation facility, net of special charges, in the third
quarter of 1999.
Higher earnings and higher non-cash depreciation charges in 2000 compared to 1999 were primarily due to the business acquisitions and capital investments we made during 2000. Higher cash inflows from working capital items were mainly due to favorable changes in our accounts receivable-trade balances, particularly from our Pacific operations and our newly acquired carbon dioxide businesses, and from higher collections on our Pacific operations' insurance receivables. The $14.0 million increase in other non-cash operating activities was primarily due to favorable changes in accrued gas transportation imbalances recorded by our Natural Gas Pipelines. The increase in distributions from equity investments was mainly due to distributions we received in 2000 from our 50% ownership interest in Cortez Pipeline Company and our 49% ownership interest in Red Cedar Gathering Company. Following our acquisition of the remaining ownership interest in Kinder Morgan CO2 Company, L.P. on April 1, 2000, we accounted for our investment in Cortez Pipeline Company under the equity method of accounting. We acquired our interest in Red Cedar Gathering Company from Kinder Morgan, Inc. on December 31, 1999. The overall increase in distributions from equity investments was partially offset by the absence of distributions from our original 20% interest in Kinder Morgan CO2 Company, L.P. from April 1, 2000 through December 31, 2000 due to the fact we no longer accounted for this investment on an equity basis.
Our overall increase in cash provided by operating activities was offset by:
o a $52.5 million payment of accrued rate refund liabilities; and
o a $24.7 million increase in undistributed earnings from equity
investments, net of amortization of excess costs.
The payment of the rate refunds was made under settlement agreements with shippers on our Natural Gas Pipelines. The increase in undistributed earnings from equity investments, net of amortization of excess costs, resulted primarily from earnings generated from our investments in Cortez Pipeline Company and Red Cedar Gathering Company. Higher overall equity earnings were partly offset by the absence of earnings in 2000 from our investment in the Mont Belvieu fractionation facility, and, as was the case in distributions, the absence of earnings from our original 20% interest in Kinder Morgan CO2 Company, L.P. from April 1, 2000 through December 31, 2000 due to the fact we no longer accounted for this investment on an equity basis.
Investing Activities
Net cash used in investing activities was $1,197.6 million in 2000 compared to $196.5 million in 1999, an increase of $1,001.1 million chiefly attributable to the $1,008.6 million of asset acquisitions we made in 2000. Our 2000 acquisition outlays included:
o a $478.3 million payment to Kinder Morgan, Inc. for the Natural Gas
Pipelines assets;
o a $188.9 million net payment for the remaining 80% interest in Kinder
Morgan CO2 Company, L.P.;
o a $120.5 million payment for our 32.5% ownership interest in the
Cochin Pipeline System;
o a $114.3 million payment for Bulk Terminal acquisitions, including
Milwaukee Bulk Terminals, Inc.,
Dakota Bulk Terminal, Inc. and Delta Terminal Services, Inc.;
o a $53.4 million payment for our interests in the Canyon Reef Carriers
CO2 Pipeline and SACROC Unit; and
o a $45.7 million payment for the acquisition of Buckeye Refining
Company, LLC.
We expended an additional $42.8 million for capital expenditures in 2000 compared to 1999. Including expansion and maintenance projects, our capital expenditures were $125.5 million in 2000 and $82.7 million in 1999. The increase was driven primarily by continued investment in our Pacific operations and in our Bulk Terminals business segment. Proceeds from the sale of investments, property, plant and equipment, net of removal costs, were lower by $29.7 million in 2000 versus 1999. Proceeds received from sales and retirements of investments, property, plant and equipment were $13.4 million in 2000 and $43.1 million in 1999. The decrease was due to the $41.8 million we received for the sale of our interest in the Mont Belvieu fractionation facility in September 1999.
The overall increase in funds used in investing activities was offset by a $82.4 million decrease in cash used for acquisitions of investments. We used $79.4 million for acquisitions of investments in 2000 compared with $161.8 million in 1999.
Our 2000 investment outlays included:
o $34.2 million for our 7.5% interest in the Yates field unit
subsequently contributed to the carbon dioxide joint venture with
Marathon Oil Company; and
o $44.6 million for our 25% interest in Thunder Creek Gas Services, LLC
and our 50% interest in Coyote Gas Treating, LLC.
Our 1999 investment outlays consisted of:
o $124.2 million for our second investment in Plantation Pipe Line
Company; and
o $37.6 million for our first one-third interest in Trailblazer Pipeline
Company.
Financing Activities
Net cash provided by financing activities amounted to $915.3 million in 2000. The increase of $893.3 million from the prior year was mainly the result of an additional $817.1 million we received from overall debt financing activities. The increase in borrowings was mainly due to 2000 acquisitions. We completed a private placement of $400 million in debt securities during the first quarter of 2000, resulting in a cash inflow of $397.9 million, net of discounts and issuing costs. We completed a second private placement of $250 million in debt securities during the fourth quarter of 2000, resulting in a cash inflow of $246.8 million, net of discounts and issuing costs. In addition, we received $171.4 million as proceeds from our issuance of units during 2000, most significantly realized from our 4,500,000-unit public offering on April 4, 2000. The overall increase in funds provided by our financing activities was partially offset by a $102.8 million increase in our distributions to partners. Distributions to all partners increased to $293.6 million in 2000 compared to $190.8 million in 1999. The increase in distributions was due to:
o an increase in our per unit distributions paid;
o an increase in our number of units outstanding;
o our general partner incentive distributions, which resulted from
increased distributions to our unitholders; and
o distributions paid by Trailblazer Pipeline Company, which were
included in our consolidated results following the acquisition of our
controlling 66 2/3% interest on December 31, 1999.
We paid distributions of $3.20 per unit in 2000 compared to $2.775 per unit in 1999. The 15% increase in paid distributions per unit resulted from favorable operating results in 2000. We believe that future operating results will continue to support similar or higher levels of quarterly cash distributions, however, no assurance can be given that future distributions will continue at such levels.
Partnership Distributions
Our partnership agreement requires that we distribute 100% of our Available Cash to our partners within 45 days following the end of each calendar quarter in accordance with their respective percentage interests. Our available cash consists generally of all of our cash receipts, including cash received by our operating partnerships, less cash disbursements and net additions to reserves (including any reserves required under debt instruments for future principal and interest payments) and amounts payable to the former Santa Fe general partner in respect of its remaining 0.5% interest in SFPP, L.P.
Our available cash is initially distributed 98% to our limited partners and 2% to our general partner, Kinder Morgan G.P., Inc. These distribution percentages are modified to provide for incentive distributions to be paid to our general partner in the event that quarterly distributions to unitholders exceed certain specified targets.
Our available cash for each quarter is distributed:
o first, 98% to our limited partners and 2% to our general partner until
our limited partners have received a total of $0.3025 per unit for
such quarter;
o second, 85% to our limited partners and 15% to our general partner
until our limited partners have received a total of $0.3575 per unit
for such quarter;
o third, 75% to our limited partners and 25% to our general partner
until our limited partners have received a total of $0.4675 per unit
for such quarter; and
o fourth, thereafter 50% to our limited partners and 50% to our general
partner.
Incentive distributions are generally defined as all cash distributions paid to our general partner that are in excess of 2% of the aggregate amount of cash being distributed. The general partner's incentive distributions declared by us for 2000 were $107,764,885, while the incentive distributions paid during 2000 were $89,399,771.
Debt and Credit Facilities
Our debt and credit facilities as of December 31, 2000, consist primarily of:
o a $600 million unsecured 364-day credit facility due October 25, 2001;
o a $300 million unsecured five-year credit facility due September 29,
2004;
o $250 million of 6.30% Senior Notes due February 1, 2009;
o $200 million of 8.00% Senior Notes due March 15, 2005;
o $250 million of 7.50% Senior Notes due November 1, 2010;
o $200 million of Floating Rate Senior Notes due March 22, 2002;
o $119 million of Series F First Mortgage Notes (our subsidiary, SFPP
L.P., is the obligor on the notes);
o $20.2 million of Senior Secured Notes (Trailblazer Pipeline Company,
of which we own 66 2/3%, is the obligor on the notes);
o $23.7 million of tax-exempt bonds due 2024 (our subsidiary, Kinder
Morgan Operating L.P. "B" is the obligor on these bonds); and
o a $600 million short-term commercial paper program.
We have a $300 million unsecured five-year credit facility and a $600 million unsecured 364-day credit facility with a syndicate of financial institutions. First Union National Bank is the administrative agent under the agreements.
Interest on borrowings is payable quarterly. Interest on the credit facilities accrues at our option at a floating rate equal to either:
o First Union National Bank's base rate (but not less than the Federal Funds Rate, plus .5%); or
o LIBOR, plus a margin, which varies depending upon the credit rating of our long-term senior unsecured debt.
The LIBOR margins under the 364-day credit facility are lower than the margins under the five-year credit facility. The five-year credit facility also permits us to obtain bids for fixed rate loans from members of the lending syndicate.
The credit facilities include restrictive covenants that are customary for these types of facilities, including without limitation:
o requirements to maintain certain financial ratios;
o restrictions on the incurrence of additional indebtedness;
o restrictions on entering into mergers, consolidations and sales of
assets;
o restrictions on granting liens;
o prohibitions on making cash distributions to holders of units more
frequently than quarterly;
o prohibitions on making cash distributions in excess of 100% of
Available Cash for the immediately preceding calendar quarter; and
o prohibitions on making any distribution to holders of units if an
event of default exists or would exist upon making such distribution.
As of December 31, 2000, we had outstanding borrowings under our credit facilities of $789.6 million. At December 31, 2000, the interest rate on our credit facilities was 7.115% per annum. Our borrowings at December 31, 2000 included the following:
o $193 million borrowed to fund the purchase price of Natural Gas
Pipelines assets acquired in December 2000;
o $175 million used to pay the outstanding balance on SFPP, L.P.'s
credit facility;
o $118 million borrowed to fund the purchase price of our 32.5% interest
in the Cochin Pipeline system in December 2000;
o $114 million borrowed to fund the purchase price of Delta Terminal
Services, Inc. in December 2000;
o $72 million borrowed to fund principal and interest payments on SFPP,
L.P.'s Series F First Mortgage Notes in December 2000;
o $34 million borrowed to fund the purchase price of our 7.5% interest
in the Yates field unit in December 2000; and
o $83.6 million borrowed to fund expansion capital projects.
Our short-term debt at December 31, 2000, consisted of:
o $582 million of borrowings under our unsecured 364-day credit facility
due October 25, 2001;
o $52 million of commercial paper borrowings;
o $35 million under the SFPP L.P.'s 10.70% Series F First Mortgage
Notes; and
o $14.6 million in other borrowings.
During 2000, cash used for acquisitions and expansions exceeded $600 million. Historically, we have utilized our short-term credit facilities to fund acquisitions and expansions and then refinanced our short-term borrowings utilizing long-term credit facilities and by issuing equity or long-term debt securities. We intend to refinance our short-term debt during 2001 through a combination of long-term debt and equity. Based on prior successful short-term debt refinancings and current market conditions, we do not anticipate any liquidity problems.
We have an outstanding letter of credit issued under our five-year credit facility in the amount of $23.7 million that backs-up our tax-exempt bonds due 2024. The letter of credit reduces the amount available for borrowing under that credit facility. The $23.7 million principal amount of tax-exempt bonds due 2024 were issued by the Jackson-Union Counties Regional Port District. These bonds bear interest at a weekly floating market rate. At December 31, 2000, the interest rate was 5.00%.
In addition, as of December 31, 1999, we financed $330 million through Kinder Morgan, Inc. to fund part of the acquisition of assets acquired from Kinder Morgan, Inc. on December 31, 1999. In accordance with the Closing Agreement entered into as of January 20, 2000, we paid Kinder Morgan, Inc. a per diem fee of $180.56 for each $1,000,000 financed. We paid Kinder Morgan, Inc. $200 million on January 21, 2000, and the remaining $130
million on March 23, 2000 with a portion of the proceeds from our issuance of notes on March 22, 2000.
In December 1999, we established a commercial paper program providing for the issuance of up to $200 million of commercial paper, subsequently increased to $300 million in January, 2000 and then on October 25, 2000, in conjunction with our new 364-day credit facility, we increased the commercial paper program to provide for the issuance of up to $600 million of commercial paper. Borrowings under our commercial paper program reduce the borrowings allowed under our 364-day and five-year credit facilities combined. As of December 31, 2000, we had $52 million of commercial paper outstanding with an interest rate of 7.02%.
At December 31, 2000, the outstanding balance under SFPP, L.P.'s Series F notes was $119.0 million. The annual interest rate on the Series F notes is 10.70%, the maturity is December 2004, and interest is payable semiannually in June and December. The Series F notes are payable in annual installments of $39.5 million in 2001, $42.5 million in 2002 and $37.0 million in 2003. The Series F notes may also be prepaid in full or in part at a price equal to par plus, in certain circumstances, a premium. The Series F notes are secured by mortgages on substantially all of the properties of SFPP, L.P. The Series F notes contain certain covenants limiting the amount of additional debt or equity that may be issued and limiting the amount of cash distributions, investments, and property dispositions.
At December 31, 1999, the outstanding balance under SFPP, L.P.'s bank credit facility was $174.0 million. On August 11, 2000, we replaced the outstanding balance under SFPP, L.P.'s secured credit facility with a $175.0 million unsecured borrowing under our five-year credit facility. SFPP, L.P. executed a $175 million intercompany note in our favor to evidence this obligation.
In December 1999, Trailblazer Pipeline Company entered into a 364-day revolving credit agreement with Toronto Dominion, Inc. providing for loans up to $10 million. At December 26, 2000, the outstanding balance due under Trailblazer Pipeline Company's bank credit facility was $10 million. On December 27, 2000, Trailblazer Pipeline Company paid the outstanding balance under its credit facility with a $10 million borrowing under an intercompany account payable in favor of Kinder Morgan, Inc. In January 2001, Trailblazer Pipeline Company entered into a 364-day revolving credit agreement with Credit Lyonnais New York Branch, providing for loans up to $10 million. The agreement expires December 27, 2001. The borrowings were used to pay the account payable to Kinder Morgan, Inc. At January 31, 2001, the outstanding balance under Trailblazer Pipeline Company's revolving credit agreement was $10 million. The agreement provides for an interest rate of LIBOR plus 0.875%. At January 31, 2001 the interest rate on the credit facility debt was 6.625%. Pursuant to the terms of the revolving credit agreement with Credit Lyonnais New York Branch, Trailblazer Pipeline Company partnership distributions are restricted by certain financial covenants.
From time to time we issue long-term debt securities. All of our long-term debt securities issued to date, other than those issued under our revolving credit facilities, generally have the same terms except for interest rates, maturity dates and prepayment restrictions. All of our outstanding debt securities are unsecured obligations that rank equally with all of our other senior debt obligations. Our outstanding debt securities consist of the following:
o $250 million in principal amount of 6.3% senior notes due February 1,
2009. These notes were issued on January 29, 1999 at a price to the
public of 99.67% per note. In the offering, we received proceeds, net
of underwriting discounts and commissions, of approximately $248
million. We used the proceeds to pay the outstanding balance on our
credit facility and for working capital and other partnership
purposes. At December 31, 2000, the unamortized liability balance on
the 6.30% senior notes was $249.3 million;
o $200 million of floating rate notes due March 22, 2002 and $200
million of 8.0% notes due March 15, 2005. These notes were issued on
March 22, 2000. We used the proceeds to reduce outstanding commercial
paper. At December 31, 2000, the interest rate on our floating rate
notes was 7.0%; and
o $250 million of 7.5% notes due November 1, 2010. These notes were
issued on November 8, 2000. The proceeds from this offering, net of
underwriting discounts, were $246.8 million. These proceeds were used
to reduce our outstanding commercial paper. At December 31, 2000, the
unamortized liability balance on the 7.5% notes was $248.4 million.
The fixed rate notes provide that we may redeem the notes at any time at a price equal to 100% of the principal amount of the notes plus accrued interest to the redemption date plus a make-whole premium. We may not prepay the floating rate notes prior to their maturity.
On September 23, 1992, pursuant to the terms of a Note Purchase Agreement, Trailblazer Pipeline Company issued and sold an aggregate principal amount of $101 million of Senior Secured Notes to a syndicate of fifteen insurance companies. Trailblazer Pipeline Company provided security for the notes principally by an assignment of certain Trailblazer Pipeline Company transportation contracts. Effective April 29, 1997, Trailblazer Pipeline Company amended the Note Purchase Agreement. This amendment allowed Trailblazer Pipeline Company to include several additional transportation contracts as security for the notes, added a limitation on the amount of additional money that Trailblazer Pipeline Company could borrow and relieved Trailblazer Pipeline Company from its security deposit obligation. At December 31, 2000, Trailblazer Pipeline Company's outstanding balance under the Senior Secured Notes was $20.2 million. The Senior Secured Notes have a fixed annual interest rate of 8.03% and will be repaid in semiannual installments of $5.05 million from March 1, 2001 through September 1, 2002, the final maturity date. Interest is payable semiannually in March and September. Pursuant to the terms of this Note Purchase Agreement, Trailblazer Pipeline Company partnership distributions are restricted by certain financial covenants. Currently, Trailblazer Pipeline Company's proposed expansion project is pending before the FERC. If the expansion is approved, which is expected in the first quarter of 2001, we plan to refinance these notes.
Capital Requirements for Recent Transactions
Milwaukee Bulk Terminals, Inc. Effective January 1, 2000, we acquired Milwaukee Bulk Terminals, Inc. for approximately $14.6 million in aggregate consideration consisting of $0.6 million and 0.3 million common units.
Dakota Bulk Terminal, Inc. Effective January 1, 2000, we acquired Dakota Bulk Terminal, Inc. for approximately $9.5 million in aggregate consideration consisting of $0.2 million and 0.2 million common units.
Kinder Morgan CO2 Company, L.P. On April 1, 2000, we acquired the remaining 80% ownership interest in Shell CO2 Company, Ltd. that we did not own for approximately $212.1 million before purchase price adjustments. We paid this amount with approximately $171.4 million received from our public offering of 4.5 million units on April 4, 2000 and approximately $40.7 million received from the issuance of commercial paper.
Carbon Dioxide Assets. On June 1, 2000, we acquired certain carbon dioxide assets from Devon Energy Production Company, L.P. for approximately $55 million before purchase price adjustments. We borrowed the necessary funds under our commercial paper program.
Transmix Operations. On October 25, 2000, we acquired Kinder Morgan Transmix Company, LLC, formerly known as Buckeye Refining Company, LLC, for $45.6 million after purchase price adjustments. We borrowed the necessary funds under our commercial paper program.
Cochin Pipeline. On November 3, 2000, we acquired a 32.5% ownership interest in the Cochin Pipeline system for $120.5 million from NOVA Chemicals Corporation. We borrowed $118 million under our credit facilities.
Delta Terminal Services, Inc. On December 1, 2000, we acquired Delta Terminal Services, Inc. for $114.1 million. We borrowed $114 million under our credit facilities and our commercial paper program.
Carbon Dioxide Joint Venture With Marathon Oil Company. On December 28, 2000, we paid $34.2 million for a 7.5% interest in the Yates field unit, which was subsequently contributed to a carbon dioxide joint venture with Marathon Oil Company. The joint venture was formed on January 1, 2001. We borrowed $34 million under our credit facilities.
Colton Transmix Processing Facility. On December 31, 2000 we acquired an additional 50% ownership interest in the Colton Transmix Processing Facility from Duke Energy Merchants for $11.2 million. We borrowed the necessary funds under our commercial paper program.
Natural Gas Pipelines. Effective December 31, 2000, we acquired certain assets of Kinder Morgan Inc. for approximately $349.0 million in aggregate consideration consisting of $192.7 million, 0.64 million common units and 2.7 million class B units. We borrowed $193 million under our credit facilities.
Risk Management
The following discussion should be read in conjunction with note 14 to the Consolidated Financial Statements included elsewhere in this report.
To minimize the risk of price changes in the crude oil, natural gas liquids and natural gas and associated transportation markets, we use certain financial instruments for hedging purposes. These instruments include energy products traded on the New York Mercantile Exchange and over-the-counter markets including, but not limited to, futures and options contracts, fixed-price swaps and basis swaps. We are exposed to credit-related losses in the event of nonperformance by counterparties to these financial instruments but, given their existing credit ratings, we do not expect any counterparties to fail to meet their obligations.
Pursuant to our management's approved policy, we are to engage in these activities only as a hedging mechanism against price volatility associated with:
o pre-existing or anticipated physical natural gas, natural gas liquids,
crude oil and carbon dioxide sales;
o gas purchases; and
o system use and storage.
Our risk management activities are only used in order to protect our profit
margins and we are prohibited from engaging in speculative trading.
Commodity-related activities of our risk management group are monitored by KMI's
Risk Management Committee, which is charged with the review and enforcement of
our management's risk management policy. Gains and losses on hedging positions
are deferred and recognized as natural gas purchases expense in the periods in
which the underlying physical transactions occur.
Through December 31, 2000, gains and losses on hedging positions have been deferred and recognized as cost of sales in the periods in which the underlying physical transactions occur. On January 1, 2001, we began accounting for derivative instruments under Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" (after amendment by SFAS 137 and SFAS 138). As discussed above, our principal use of derivative financial instruments is to mitigate the market price risk associated with anticipated transactions for the purchase and sale of natural gas, natural gas liquids and crude oil. SFAS No. 133 allows these transactions to continue to be treated as hedges for accounting purposes, although the changes in the market value of these instruments will affect comprehensive income in the period in which they occur and any ineffectiveness in the risk mitigation performance of the hedge will affect net income currently. The change in the market value of these instruments representing effective hedge operation will continue to affect net income in the period in which the associated physical transactions are consummated. Adoption of SFAS No. 133 has resulted in $1.7 million of deferred net gain as of January 1, 2001, being reported as part of other comprehensive income in 2001, as well as subsequent changes in the market value of these derivatives prior to consummation of the transaction being hedged.
We measure the risk of price changes in the natural gas, natural gas liquids and crude oil markets utilizing a Value-at-Risk model. Value-at-Risk is a statistical measure of how much the marked-to-market value of a portfolio could change during a period of time, within a certain level of statistical confidence. We utilize a closed form model to evaluate risk on a daily basis. The Value-at-Risk computations utilize a confidence level of 97.7% for the resultant price movement and a holding period of one day chosen for the calculation. The confidence level used means that there is a 97.7% probability that the mark-to-market losses for a single day will not exceed the Value-at-Risk number presented. Financial instruments evaluated by the model include commodity futures and options contracts, fixed price swaps, basis swaps and over-the-counter options. During 2000, Value-at-Risk reached a high of $6.2 million and a low of $0.0 million. Value-at-Risk at December 31, 2000, was $6.2 million and averaged $0.3 million for 2000.
Our calculated Value-at-Risk exposure represents an estimate of the reasonably possible net losses that would be recognized on our portfolio or derivatives assuming hypothetical movements in future market rates, and is not necessarily indicative of actual results that may occur. It does not represent the maximum possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated. Actual gains and losses may differ from estimates due to actual fluctuations in market rates, operating exposures and the timing thereof, as well as changes in our portfolio of derivatives during the year.
Year 2000
There was no interruption to any business operation because of any Year 2000 glitch in programming. All operations were running smoothly on January 1, 2000. All business operations ran smoothly on January 3, 2000, when a full staff returned to work, and have continued running without incident throughout the year. There have been no incidents of consequence reported by material suppliers, customers or service providers, and no disruption to business through any electronic interface with third party companies.
Expenditures to handle the Year 2000 issue were less than the moneys allocated and were not material. No further Year 2000 expenditures are planned. We have contingency plans and emergency response plans to address any unexpected incidents.
Information Regarding Forward-Looking Statements
This filing includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are identified as any
statement that does not relate strictly to historical or current facts. They use
words such as "anticipate," "believe," "intend," "plan," "projection,"
"forecast," "strategy," "position," "continue," "estimate," "expect," "may,"
"will," or the negative of those terms or other variations of them or by
comparable terminology. In particular, statements, express or implied,
concerning future operating results or the ability to generate sales, income or
cash flow are forward-looking statements. Forward-looking statements are not
guarantees of performance. They involve risks, uncertainties and assumptions.
The future results of our operations may differ materially from those expressed
in these forward-looking statements. Many of the factors that will determine
these results are beyond our ability to control or predict. Specific factors
which could cause actual results to differ from those in the forward-looking
statements, include:
o price trends and overall demand for natural gas liquids, refined
petroleum products, carbon dioxide, natural gas, coal and other bulk
materials in the United States. Economic activity, weather,
alternative energy sources, conservation and technological advances
may affect price trends and demand;
o changes in our tariff rates implemented by the Federal Energy
Regulatory Commission or the California Public Utilities Commission;
o our ability to integrate any acquired operations into our existing
operations;
o any difficulties or delays experienced by railroads in delivering
products to the bulk terminals;
o our ability to successfully identify and close strategic acquisitions
and make cost saving changes in operations;
o shut-downs or cutbacks at major refineries, petrochemical plants,
utilities, military bases or other businesses that use our services;
o interruptions of electric power supply to our facilities due to
natural disasters, power shortages, strikes, riots or other causes;
o the condition of the capital markets and equity markets in the United
States; and
o the political and economic stability of the oil producing nations of
the world.
You should not put undue reliance on any forward-looking statements.
See Items 1 and 2 "Business and Properties - Risk Factors" for a more detailed description of these and other factors that may affect the forward looking statements. When considering forward looking statements, one should keep in mind the risk factors described in "Risk Factors" above. The risk factors could cause our actual results to differ materially from those contained in any forward looking statement. We disclaim any obligation to update the above list or to announce publicly the result of any revisions to any of the forward looking statements to reflect future events or developments.
In addition, our classification as a partnership for federal income tax purposes means that we do not generally pay federal income taxes on our net income. We do, however, pay taxes on the net income of subsidiaries that are corporations. We are relying on a legal opinion from our counsel, and not a ruling from the Internal Revenue
Service, as to our proper classification for federal income tax purposes. See Items 1 and 2 "Business and Properties - Tax Treatment of Publicly Traded Partnerships Under the Internal Revenue Code."
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Energy Financial Instruments
We use energy financial instruments to reduce our risk of price changes in the spot and fixed price natural gas, natural gas liquids and crude oil markets. For a complete discussion of our risk management activities, see note 14 to the Consolidated Financial Statements included elsewhere in this report.
Interest Rate Risk
The market risk inherent in our market risk sensitive instruments and positions is the potential change arising from increases or decreases in interest rates as discussed below. Generally, our market risk sensitive instruments and positions are characterized as "other than trading." Our exposure to market risk as discussed below includes "forward-looking statements" and represents an estimate of possible changes in fair value or future earnings that would occur assuming hypothetical future movements in interest rates. Our views on market risk are not necessarily indicative of actual results that may occur and do not represent the maximum possible gains and losses that may occur, since actual gains and losses will differ from those estimated, based on actual fluctuations in interest rates and the timing of transactions.
We utilize both variable rate and fixed rate debt in our financing strategy. See note 9 to the Consolidated Financial Statements included elsewhere in this report for additional information related to our debt instruments. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but may affect our future earnings and cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity and, as a result, interest rate risk and changes in fair value should not have a significant impact on our fixed rate debt until we would be required to refinance such debt.
As of December 31, 2000 and 1999, the carrying values of our long-term fixed rate debt were approximately $836.7 million and $460.6 million, respectively, compared to fair values of $944.1 million and $471.9 million, respectively. Fair values were determined using quoted market prices, where applicable, or future cash flow discounted at market rates for similar types of borrowing arrangements. A hypothetical 10% change in the average interest rates applicable to such debt for 2000 and 1999, respectively, would result in changes of approximately $23.6 million and $12.8 million, respectively, in the fair values of these instruments.
The carrying value and fair value of our variable rate debt, including accrued interest, was $1,070.5 million as of December 31, 2000 and $740.0 million as of December 31, 1999. Fair value was determined using future cash flows discounted based on market rates for similar types of borrowing arrangements. A hypothetical 10% change in the average interest rate applicable to this debt would result in a change of approximately $7.4 million in our annualized pre-tax earnings.
As of December 31, 2000, we were party to interest rate swap agreements with a notional principal amount of $200 million for the purpose of hedging the interest rate risk associated with our variable rate debt obligations. A hypothetical 10% change in the average interest rates related to these swaps would not have a material effect on our annual pre-tax earnings.
We monitor our mix of fixed rate and variable rate debt obligations in light of changing market conditions and from time to time may alter that mix by, for example, refinancing balances outstanding under our variable rate debt with fixed rate debt (or vice versa) or by entering into interest rate swaps or other interest rate hedging agreements.
As of December 31, 2000, our cash and investment portfolio did not include fixed-income securities. Due to the short-term nature of our investment portfolio, a hypothetical 10% increase in interest rates would not have a material effect on the fair market value of our portfolio. Since we have the ability to liquidate this portfolio, we do not expect our operating results or cash flows to be materially affected to any significant degree by the effect of a sudden change in market interest rates on our investment portfolio.
Item 8. Financial Statements and Supplementary Data
The information required in this Item 8 is included in this report as set forth in the "Index to Financial Statements" on page F-1.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors and Executive Officers of our General Partner
As is commonly the case with publicly traded limited partnerships, we do not employ any of the persons responsible for managing or operating our business, but instead reimburse our general partner for its services. Set forth below is certain information concerning the directors and executive officers of our general partner. All directors of our general partner are elected annually by, and may be removed by, Kinder Morgan (Delaware), Inc. as its sole shareholder. All officers serve at the discretion of the board of directors of our general partner.
Name Age Position with our General Partner
---- --- ---------------------------------
Richard D. Kinder 56 Director, Chairman and CEO
William V. Morgan 57 Director, Vice Chairman and President
Edward O. Gaylord 69 Director
Gary L. Hultquist 57 Director
Perry M. Waughtal 65 Director
William V. Allison 53 President, Natural Gas Pipelines
Thomas A. Bannigan 47 President, Products Pipelines
David G. Dehaemers, Jr. 40 Vice President, Corporate Development
Joseph Listengart 32 Vice President, General Counsel and
Secretary
Michael C. Morgan 32 Vice President, Strategy and Investor
Relations
C. Park Shaper 32 Vice President, Treasurer and Chief
Financial Officer
Thomas B. Stanley 50 President, Bulk Terminals
James E. Street 44 Vice President, Human Resources and
Administration
|
Richard D. Kinder was elected Director, Chairman and Chief Executive Officer of our general partner in February 1997. From 1992 to 1994, Mr. Kinder served as Chairman of our general partner. From October 1990 until December 1996, Mr. Kinder was President of Enron Corp. Enron and its affiliates and predecessors employed Mr. Kinder for over 16 years.
William V. Morgan was elected Director of our general partner in June 1994, Vice Chairman of our general partner in February 1997 and President of our general partner in November 1998. He has held legal and management positions in the energy industry since 1975, including the presidencies of three major interstate natural gas companies which are now a part of Enron: Florida Gas Transmission Company, Transwestern Pipeline Company and Northern Natural Gas Company. In addition, Mr. Morgan served as President of Cortez Holdings Corporation, a pipeline investment company, from October 1992.through March 2000. Prior to joining Florida Gas in 1975, Mr. Morgan was engaged in the private practice of law in Washington, D.C.
Edward O. Gaylord was elected Director of our general partner in February 1997. Mr. Gaylord is the Chairman of the Board of Directors of Jacintoport Terminal Company, a liquid bulk storage terminal on the Houston, Texas ship channel. Mr. Gaylord also serves on the Board of Directors for EOTT Energy Corporation, an oil trading and transportation company located in Houston, Texas, Seneca Foods Corporation and Imperial Sugar Company.
Gary L. Hultquist was elected Director of our general partner in October 1999. Mr. Hultquist is the Managing Director of Hultquist Capital, LLC, a San Francisco-based strategic and merger advisory firm. He also serves as Chairman and Chief Executive Officer of TitaniumX Corporation, a supplier of high-performance storage disk substrates and magnetic media to the disk drive industry. He is also a member of the Board of Directors of Rodel, Inc. Previously, Mr. Hultquist practiced law in two San Francisco area firms for over 15 years, specializing in business, intellectual property, securities and venture capital litigation.
Perry M. Waughtal was elected Director of our general partner in April 2000. Mr. Waughtal is a Limited Partner and 40% owner of Songy Partners Limited, an Atlanta, Georgia based real estate investment company. Mr. Waughtal advises Songy's management on real estate investments and has overall responsibility for strategic planning, management and operations. Previously, Mr. Waughtal served for over 30 years as Vice Chairman of Development
and Operations and as Chief Financial Officer for Hines Interests Limited Partnership, a real estate and development entity based in Houston, Texas.
William V. Allison was elected President, Natural Gas Pipelines of our general partner in September 1999. He served as President, Pipeline Operations of our general partner from February 1999 to September 1999. From April 1998 to February 1999, he served as Vice President and General Counsel of our general partner. From 1977 to April 1998, Mr. Allison was employed at Enron Corp. where he held various executive positions, including President of Enron Liquid Services Corporation, Florida Gas Transmission Company and Houston Pipeline Company and Vice President and Associate General Counsel of Enron Corp. Prior to joining Enron Corp., he was an attorney at the FERC.
Thomas A. Bannigan was elected President, Products Pipelines of our general partner in October 1999. Since 1980, Mr. Bannigan has held various legal and management positions in the energy industry, including General Counsel and Secretary of Plantation Pipe Line Company, and from May 1998 until October 1999, President and Chief Executive Officer of Plantation Pipe Line Company.
David G. Dehaemers, Jr. was elected Vice President, Corporate Development of our general partner in January 2000. He was Treasurer of our general partner from February 1997 to January 2000 and Vice President and Chief Financial Officer of our general partner from July 1997 to January 2000. He served as Secretary of our general partner from February 1997 to August 1997. From October 1992 to January 1997, he was Chief Financial Officer of Morgan Associates, Inc., an energy investment and pipeline management company. Mr. Dehaemers was previously employed by the national CPA firms of Ernst & Whinney and Arthur Young. He is a CPA, and received his undergraduate Accounting degree from Creighton University in Omaha, Nebraska. Mr. Dehaemers received his law degree from the University of Missouri-Kansas City and is a member of the Missouri Bar.
Joseph Listengart was elected Vice President and General Counsel of our general partner in October 1999. Mr. Listengart became an employee of our general partner in March 1998 and was elected its Secretary in November 1998. From March 1995 through February 1998, Mr. Listengart worked as an attorney for Hutchins, Wheeler & Dittmar, a Professional Corporation. Mr. Listengart received his Juris Doctor, magna cum laude, from Boston University in May 1994, his Masters in Business Administration from Boston University in January 1995 and his Bachelors of Arts degree in Economics from Stanford University in June 1990.
Michael C. Morgan was elected Vice President, Strategy and Investor Relations of our general partner in January 2000. He was Vice President, Corporate Development of our general partner from February 1997 to January 2000. From August 1995 until February 1997, Mr. Morgan was an associate with McKinsey & Company, an international management consulting firm. In 1995, Mr. Morgan received a Masters in Business Administration from the Harvard Business School. From March 1991 to June 1993, Mr. Morgan held various positions at PSI Energy, Inc., an electric utility, including Assistant to the Chairman. Mr. Morgan received a Bachelor of Arts in Economics and a Masters of Arts in Sociology from Stanford University in 1990. Mr. Morgan is the son of William V. Morgan.
C. Park Shaper was elected Vice President, Treasurer and Chief Financial Officer of our general partner in January 2000. Previously, Mr. Shaper was President and Director of Altair Corporation, an enterprise focused on the distribution of web-based investment research for the financial services industry. He also served as Vice President and Chief Financial Officer of First Data Analytics, a wholly-owned subsidiary of First Data Corporation, from 1997 until June 1999. From 1995 to 1997, he was a consultant with The Boston Consulting Group. Mr. Shaper has prior experience with TeleCheck Services, Inc. and as a management consultant with the Strategic Services Division of Andersen Consulting. Mr. Shaper has a Bachelor of Science degree in Industrial Engineering and a Bachelor of Arts degree in Quantitative Economics from Stanford University. He also received a Master of Management degree from the J.L. Kellogg Graduate School of Management at Northwestern University.
Thomas B. Stanley was elected President, Bulk Terminals of our general partner in August 1998. From 1993 to July 1998, he was President of Hall-Buck Marine, Inc. (now known as Kinder Morgan Bulk Terminals, Inc.), for which he has worked since 1980. Mr. Stanley is a CPA with ten years' experience in public accounting, banking, and insurance accounting prior to joining Hall-Buck. He received his bachelor's degree from Louisiana State University in 1972.
James E. Street was elected Vice President, Human Resources and Administration of our general partner in August 1999. From October 1996 to August 1999, Mr. Street was Senior Vice President, Human Resources and Administration for Coral Energy. Prior to joining Coral Energy, he was Vice President, Human Resources of Enron Corp. from July 1989 to August 1992. Mr. Street received a Bachelor of Science degree from the University of Nebraska at Kearney in 1979 and a Masters of Business Administration degree from the University of Nebraska at Omaha in 1984.
Item 11. Executive Compensation
We have no executive officers, but we are obligated to reimburse our general partner for compensation paid to our general partner's executive officers in connection with their operation of our business. The following table summarizes all compensation paid to our general partner's chief executive officer and to each of our general partner's four other most highly compensated executive officers for services rendered to us during 2000, 1999 and 1998.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Awards
------------------------------------------------------------------------------------------
Units /
Restricted KMI Shares
Stock Underlying All Other
Name and Principal Position Year Salary Bonus(2) Awards(3) Options Compensation(6)
------------------------------------------------------------------------------------------------------------------------------------
Richard D. Kinder(1) 2000 $ 1 $ - $ - - $ -
Director, Chairman and CEO 1999 150,003 - - - 7,554
1998 200,004 - - - 13,584
David G. Dehaemers, Jr. 2000 200,000 300,000(4) 498,750 0 / 150,000(5) 10,920
Vice President, 1999 161,249 250,000(4) - 0 / 250,000 7,408
Corporate Development 1998 141,247 200,000 - - 34,393
Michael C. Morgan 2000 200,000 300,000(4) 498,750 0 / 150,000(5) 10,836
Vice President, 1999 161,249 250,000(4) - 0 / 250,000 7,408
Strategy and Investor Relations 1998 141,247 200,000 - - 50,421
William V. Allison 2000 200,000 300,000 498,750 - 11,466
President, 1999 192,497 250,000 - 0 / 250,000 9,335
Natural Gas Pipelines 1998 99,998 200,000 - 10,000 / 0 11,366
Joseph Listengart(7) 2000 181,250 225,000 498,750 0 / 6,300 10,798
Vice President, 1999 124,336 175,000 - 0 / 175,000 5,890
General Counsel and Secretary 1998 124,007 140,436 - 5,000 / 0 78,620
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(1) Effective October 1, 1999, Mr. Kinder's annual salary was reduced to $1.00.
Mr. Kinder is not eligible for annual bonuses or option grants.
(2) Amounts earned in year shown and paid the following year.
(3) Represent shares of KMI stock awarded in 2001 that relate to performance in
2000. Value computed as the number of shares awarded (10,000) times the
closing price on date of grant ($49.875 at 01/17/01). Twenty five percent
of the shares vest on each of the first four anniversaries after the date
of grant. The holders of the restricted stock awards are eligible to vote
and to receive dividends declared on such shares.
(4) Does not include for 1999, $3,753,868, or for 2000, $7,010,000 paid to
Messrs. Dehaemers and Morgan under our Executive Compensation Plan. The
payments made in 2000 were the last payments Messrs. Dehaemers and Morgan
are to receive under our Executive Compensation Plan. We do not intend to
compensate any of our general partner's employees under the Executive
Compensation Plan on a going forward basis. See "-Executive Compensation
Plan."
(5) The 150,000 options in KMI shares were granted and became fully vested on
April 20, 2000. The options were granted to Messrs. Dehaemers and Morgan in
connection with the execution of their employment agreements. See
"-Employment agreements."
(6) Represents our general partner's contributions to the Retirement Savings
Plan (a 401(k) plan), the imputed value of general partner-paid group term
life insurance exceeding $50,000, and compensation attributable to taxable
moving and parking expenses allowed. For 2000, contributions to Retirement
Savings Plan, value of group-term life insurance exceeding $50,000 and
parking compensation respectively were Messrs. Dehaemers ($10,200 / $420 /
$300), Morgan ($10,200 / $336 / $300), Allison ($10,200 / $966 / $300) and
Listengart ($10,200 / $298 / $300).
(7) The 2000 options were granted in 2001, but relate to performance in 2000.
The options were granted and became fully exercisable on 01/17/01 at a
grant price of $49.875 per share.
Retirement Savings Plan. Effective July 1, 1997, our general partner established the Kinder Morgan Retirement Savings Plan, a defined contribution 401(k) plan, that permits all full-time employees of our general partner to contribute 1% to 15% of base compensation, on a pre-tax basis, into participant accounts. This plan was subsequently amended and merged to form the Kinder Morgan Savings Plan. In addition to a mandatory contribution equal to 4% of base compensation per year for each plan participant, our general partner may make
discretionary contributions in years when specific performance objectives are met. Our mandatory contributions are made each pay period on behalf of each eligible employee. Any discretionary contributions are made during the first quarter following the performance year. All contributions, including discretionary contributions, are in the form of KMI stock that is immediately convertible into other available investment options at the employee's discretion. In the first quarter of 2001, an additional 2% discretionary contribution was made to individual accounts based on 2000 financial targets to unitholders. All contributions, together with earnings thereon, are immediately vested and not subject to forfeiture. Participants may direct the investment of their contributions into a variety of investments. Plan assets are held and distributed pursuant to a trust agreement. Because levels of future compensation, participant contributions and investment yields cannot be reliably predicted over the span of time contemplated by a plan of this nature, it is impractical to estimate the annual benefits payable at retirement to the individuals listed in the Summary Compensation Table above.
Executive Compensation Plan. Pursuant to our Executive Compensation Plan, executive officers of our general partner are eligible for awards equal to a percentage of the "incentive compensation value", which is defined as cash distributions to our general partner during the four calendar quarters preceding the date of redemption multiplied times eight (less a participant adjustment factor, if any). Under the plan, no eligible employee may receive a grant in excess of 2% and total awards under the plan may not exceed 10%. In general, participants may redeem vested awards in whole or in part from time to time by written notice. We may, at our option, pay the participant in units (provided, however, the unitholders approve the plan prior to issuing such units) or in cash. We may not issue more than 200,000 units in the aggregate under the plan. Units will not be issued to a participant unless such units have been listed for trading on the principal securities exchange on which the units are then listed. The plan terminates January 1, 2007 and any unredeemed awards will be automatically redeemed. The board of directors of our general partner may, however, terminate the plan before such date, and upon such early termination, we will redeem all unpaid grants of compensation at an amount equal to the highest incentive compensation value, using as the determination date any day within the previous twelve months, multiplied by 1.5. The plan was established in July 1997 and on July 1, 1997, the board of directors of our general partner granted awards totaling 2% of the incentive compensation value to each of David Dehaemers and Michael Morgan. Originally, 50% of such awards were to vest on each of January 1, 2000 and January 1, 2002. No awards were granted during 1998 and 1999.
On January 4, 1999, the awards granted to Mr. Dehaemers and Mr. Morgan were amended to provide for the immediate vesting and pay-out of 50% of their awards, or 1% of the incentive compensation value. On April 28, 2000, the awards granted to Mr. Dehaemers and Mr. Morgan were amended to provide for the immediate vesting and pay-out of the remaining 50% of their awards, or 1% of the incentive compensation value. The board of directors of our general partner believes that accelerating the vesting and pay-out of the awards was in our best interest because it capped the total payment the participants were entitled to receive with respect to their awards.
Unit Option Plan. Pursuant to our Common Unit Option Plan our and our affiliates' key personnel are eligible to receive grants of options to acquire units. The total number of units available under the option plan is 250,000. None of the options granted under the option plan may be "incentive stock options" under Section 422 of the Internal Revenue Code. If an option expires without being exercised, the number of units covered by such option will be available for a future award. The exercise price for an option may not be less than the fair market value of a unit on the date of grant. Either the board of directors of our general partner or a committee of the board of directors will administer the option plan. The option plan terminates on March 5, 2008.
No individual employee may be granted options for more than 10,000 units in any year. Our board of directors or the committee will determine the duration and vesting of the options to employees at the time of grant. As of December 31, 2000, options for 206,800 units were granted to 99 employees of our general partner and our subsidiaries. Forty percent of such options will vest on the first anniversary of the date of grant and twenty percent on each anniversary, thereafter. The options expire seven years from the date of grant.
The option plan also granted to each of our non-employee directors as of April 1, 1998, an option to acquire 5,000 units at an exercise price equal to the fair market value of the units on such date. In addition, each new non-employee director will receive options to acquire 5,000 units on the first day of the month following his or her election. Under this provision, as of December 31, 2000, options for 15,000 units were granted to our three non-employee directors. Forty percent of such options will vest on the first anniversary of the date of grant and twenty percent on each anniversary, thereafter. The non-employee director options will expire seven years from the date of grant.
The following table sets forth certain information at December 31, 2000 and for the fiscal year then ended with respect to unit options granted to the individuals named in the Summary Compensation Table above. Mr. Allison and Mr. Listengart were the only persons named in the Summary Compensation Table that have been granted unit options. No unit options were granted at an option price below fair market value on the date of grant.
Aggregated Unit Option Exercises in 2000,
and 2000 Year-End Unit Option Values
Number of Units
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Units Acquired Value 2000 Year-End at 2000 Year-End(1)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------------------------------------------------------------------------------------------
William V. Allison - - 6,000 4,000 $ 139,125 $ 92,750
Joseph Listengart - - 3,000 2,000 $ 65,250 $ 43,500
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(1) Calculated on the basis of the fair market value of the underlying units at year-end, minus the exercise price.
KMI Option Plan. Under Kinder Morgan, Inc.'s stock option plans, key personnel of KMI and its affiliates, including employees of our general partner and its subsidiaries, are eligible to receive grants of options to acquire shares of common stock of KMI. KMI's board of directors administers this option plan. The primary purpose for granting stock options under this plan to employees of our general partner and our subsidiaries is to provide them with an incentive to increase the value of common stock of KMI. A secondary purpose of the grants is to provide compensation to those employees for services rendered to our subsidiaries and us.
The following tables set forth certain information at December 31, 2000 and for the fiscal year then ended with respect to KMI stock options granted to the individuals named in the Summary Compensation Table above. Mr. Dehaemers and Mr. Morgan are the only persons named in the Summary Compensation Table that have been granted KMI stock options during 2000. None of these KMI stock options were granted with an exercise price below the fair market value of the common stock on the date of grant. The options expire 10 years after the date of grant.
KMI Stock Option Grants in 2000
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates
Underlying Granted to Exercise of Stock Price Appreciation
Options Employees Price Expiration for Option Term(1)
Name Granted in 2000 Per Share Date 5% 10%
-------------------------------------------------------------------------------------------------------------------------
David G. Dehaemers, Jr. 150,000 12.8% $ 33.125 04/20/2010 $ 3,124,820 $ 7,918,908
Michael C. Morgan 150,000 12.8% $ 33.125 04/20/2010 $ 3,124,820 $ 7,918,908
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(1) The dollar amounts under these columns use the 5% and 10% rates of appreciation prescribed by the Securities and Exchange Commission. The 5% and 10% rates of appreciation would result in per share prices of $53.96 and $85.92, respectively. We express no opinion regarding whether this level of appreciation will be realized and expressly disclaim any representation to that effect.
Aggregated KMI Stock Option Exercises in 2000,
and 2000 Year-End KMI Stock Option Values
Number of Shares
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Shares Acquired Value 2000 Year-End at 2000 Year-End(1)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------------------------------------------------------------------------------------------
David G. Dehaemers, Jr. - - 212,500 187,500 $ 4,632,813 $ 5,320,313
Michael C. Morgan - - 212,500 187,500 $ 4,632,813 $ 5,320,313
William V. Allison - - 62,500 187,500 $ 1,773,438 $ 5,320,313
Joseph Listengart - - 43,750 131,250 $ 1,241,406 $ 3,724,219
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(1) Calculated on the basis of the fair market value of the underlying shares at year-end, minus the exercise price.
Cash Balance Retirement Plan. Effective January 1, 2001, employees of our general partner became eligible to participate in a new Cash Balance Retirement Plan. Certain employees continue to accrue benefits through a career-pay formula, "grandfathered" according to age and years of service on December 31, 2000, or collective bargaining arrangements. All other employees accrue benefits through a personal retirement account in the new Cash Balance Retirement Plan. Employees with prior service and not grandfathered convert to the Cash Balance Retirement Plan and are credited with the current fair value of any benefits they have previously accrued through the defined benefit plan. On January 1, 2001, we commenced contributions on behalf of these employees equal to 3% of eligible compensation every pay period. In addition, we may make discretionary contributions to the plan based on our performance. Interest is credited to the employee's personal retirement account at the 30-year U.S.Treasury bond rate in effect each year. Employees will be fully vested in the plan after five years, and they may take a lump sum distribution upon termination of employment or retirement.
Compensation Committee Interlocks and Insider Participation. We do not have a separate compensation committee. Our general partner's compensation committee, comprised of Mr. Edward O. Gaylord, Mr. Gary L. Hultquist and Mr. Perry M. Waughtal, makes compensation decisions regarding our executive officers. Mr. Richard D. Kinder and Mr. William V. Morgan, who are executive officers of our general partner, participate in the deliberations of the board of directors of our general partner concerning executive officer compensation. Messrs. Kinder and Morgan each receive $1.00 annually in total compensation for services to KMI and us.
Directors fees. During 2000, each of the three non-employee members of the board of directors of our general partner was paid an annual retainer of $25,000 in lieu of all attendance fees. Non-employee directors will each receive $10,000 for each quarter in 2001 in which they serve on the board of directors.
Employment agreements. In April 2000, Mr. David G. Dehaemers, Jr. and Mr. Michael C. Morgan entered into four-year employment agreements with Kinder Morgan, Inc. and our general partner. Under the employment agreements, each of Mr. Dehaemers, Jr. and Mr. Michael C. Morgan receives an annual base salary of $200,000 and bonuses at the discretion of the compensation committee of our general partner. In connection with the execution of the employment agreements, Messrs. Dehaemers and Morgan no longer participate under our Executive Compensation Plan. In addition, each are prevented from competing with KMI and us for a period of four years from the date of the agreements, provided Mr. Richard D. Kinder or Mr. William V. Morgan continues to serve as chief executive officer of KMI or its successor. A copy of each employment agreement has been filed as an exhibit to this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of February 15, 2001, regarding (a) the beneficial ownership of (i) our units and (ii) the common stock of Kinder Morgan, Inc., the parent company of our general partner, by all
directors of our general partner, each of the named executive officers and all directors and executive officers as a group and (b) all persons known by our general partner to own beneficially more than 5% of our units.
Amount and Nature of Beneficial Ownership(1)
Common Units Class B Units KMI Voting Stock
-------------------------- ------------------------- --------------------------
Number Percent Number Percent Number Percent
of Units (2) of Class of Units (3) of Class of Shares (4) of Class
-------------------------- ------------------------- --------------------------
Richard D. Kinder(5) 145,000 * - - 23,989,992 20.87%
William V. Morgan(6) 2,000 * - - 4,500,000 3.92%
Edward O. Gaylord (7) 19,000 * - - - -
Gary L. Hultquist(8) 2,500 * - - - -
Perry M. Waughtal 10,000 * - - 10,000 *
William V. Allison (9) 6,000 * - - 85,000 *
David G. Dehaemers, Jr.(10) 4,000 * - - 197,500 *
Joseph Listengart(11) 4,699 * - - 49,050 *
Michael C. Morgan(12) 2,500 * - - 223,500 *
Directors and Executive 261,765 * - - 29,227,690 25.29%
Officers as a group (13 persons)(13)
Goldman, Sachs & Co.(14) 4,894,303 7.55% - - - -
Kinder Morgan, Inc.(15) 11,312,000 17.44% 2,656,700 100.00% - -
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*Less than 1%
(1) Except as noted otherwise, all units and KMI shares involve sole voting
power and sole investment power.
(2) As of February 15, 2001, we had 64,861,509 common units issued and
outstanding.
(3) As of February 15, 2001, we had 2,656,700 class B units issued and
outstanding.
(4) As of February 15, 2001, Kinder Morgan, Inc. ("KMI") had a total of
114,931,387 shares of outstanding voting common stock.
(5) Does not include (a) 2,987 common units owned by Mr. Kinder's spouse,
Nancy G. Kinder (b) 463,683 KMI shares held by a Kinder family charitable
foundation, a charitable not-for-profit corporation and (c) 2,500 KMI
shares held by Mrs. Kinder. Mr. Kinder disclaims any and all beneficial
or pecuniary interest in these units and shares.
(6) Morgan Associates, Inc., a Kansas corporation, wholly owned by Mr. Morgan,
holds the KMI shares. Mr. Morgan may be deemed to own the 4,500,000 KMI
shares and thereby shares in the voting and disposition power with Morgan
Associates, Inc.
(7) Includes options to purchase 4,000 common units exercisable within 60 days
of February 15, 2001.
(8) Includes options to purchase 2,000 common units exercisable within 60 days
of February 15, 2001.
(9) Includes options to purchase 6,000 common units and 75,000 KMI shares
exercisable within 60 days of February 15, 2001, and includes 10,000
shares of restricted KMI stock, 25% of which vests on each of the first
four anniversaries after the date of grant.
(10) Includes options to purchase 187,500 KMI shares exercisable within 60 days
of February 15, 2001, and includes 10,000 shares of restricted KMI stock,
25% of which vests on each of the first four anniversaries after the date
of grant.
(11) Includes options to purchase 4,000 common units and 39,050 KMI shares
exercisable within 60 days of February 15, 2001, and includes 10,000 shares
of restricted KMI stock, 25% of which vests on each of the first four
anniversaries after the date of grant.
(12) Includes options to purchase 212,500 KMI shares exercisable within 60 days
of February 15, 2001, and includes 10,000 shares of restricted KMI stock,
25% of which vests on each of the first four anniversaries after the date
of grant.
(13) Includes options to purchase 22,000 common units and 656,200 KMI shares
exercisable within 60 days of February 15, 2001, and includes 65,000 shares
of restricted KMI stock, 25% of which vests on each of the first four
anniversaries after the date of grant.
(14) As reported on the Schedule 13G/A filed February 13, 2001 by The Goldman
Sachs Group, Inc. and Goldman, Sachs & Co. The Goldman Sachs companies
report that they have sole voting power over 0 common units, shared voting
power over 4,894,303 common units, sole disposition power over 0 common
units and shared disposition power over 4,894,303 common units. The Goldman
Sachs companies' address is 10 Hanover Square, New York, New York 10005.
(15) Kinder Morgan, Inc.'s address is 500 Dallas St., Ste. 1000, Houston, Texas
77002. Common units owned include units owned by KMI and its subsidiaries,
including 862,000 common units held by Kinder Morgan G.P., Inc.
Item 13. Certain Relationships and Related Transactions
General and Administrative Expenses
Our general partner provides us with general and administrative services and is entitled to reimbursement of all direct and indirect costs related to our business activities. Our general partner incurred general and administrative expenses of $54.4 million in 2000, $30.7 million in 1999 and $38.0 million in 1998.
Since K N Energy, Inc. acquired Kinder Morgan (Delaware), Inc. in October 1999, our general partner has shared administrative personnel with KMI to operate both KMI's business and our business. As a result, our general partner's officers, who in some cases may also be officers of KMI, must allocate, in their reasonable and sole discretion, the time our general partner's employees and KMI's employees spend on behalf of KMI and on behalf of us. For 2000, KMI paid our general partner a net payment of $1.0 million in January 2001 as reimbursement for the services of our general partner's employees. Although we believe this amount received from KMI for the services it provided in 2000 fairly reflects the net value of the services performed, the determination of this amount was not the result of arms length negotiations. However, due to the nature of the allocations, this reimbursement may not have exactly matched the actual time and overhead spent. We believe the agreed-upon amount was a reasonable allocation of the expenses for the services rendered. Our general partner and KMI will continue to evaluate the net amount to be charged for the services provided to KMI and us by the employees of our general partner and KMI.
Partnership Distributions
See Item 7. for information regarding Partnership Distributions.
Asset Acquisitions
Effective December 31, 2000, we acquired over $300 million of assets from KMI. As consideration for these assets, we paid to KMI $192.7 million, 640,000 common units and 2,656,700 class B units. The common units and class B units were valued at $156.3 million. We acquired Kinder Morgan Texas Pipeline, L.P. and MidCon NGL Corp., the Casper and Douglas natural gas gathering and processing systems, a 50% interest in Coyote Gas Treating, LLC and a 25% interest in Thunder Creek Gas Services, LLC. The purchase price for the transaction was not the result of arms length negotiation, but was determined by the boards of directors of KMI and our general partner based on pricing principles used in the acquisition of similar assets as well as a fairness opinion from the investment banking firm A.G. Edwards & Sons, Inc.
Operations
KMI or its subsidiaries operate and maintain for us the assets comprising our Natural Gas Pipelines business segment. Natural Gas Pipeline Company of America, a subsidiary of KMI, operates Trailblazer Pipeline Company's assets under a long-term contract pursuant to which Trailblazer Pipeline Company incurs the costs and expenses related to NGPL's operating and maintaining the assets. Trailblazer Pipeline Company provides the funds for capital expenditures. NGPL does not profit from or suffer loss related to its operation of Trailblazer Pipeline Company's assets.
The remaining assets comprising our Natural Gas Pipelines business segment are operated under two separate agreements, one entered into December 31, 1999, between KMI and KMIGT, and one entered into December 31, 2000, between KMI and Kinder Morgan Operating L.P. "A". Both agreements have five-year terms and contain automatic five-year extensions. Under these agreements, KMIGT and Kinder Morgan Operating L.P. "A" pay KMI a fixed amount as reimbursement for the corporate general and administrative costs incurred in connection with the operation of these assets. For 2000, this amount was $6.1 million. For 2001, the amount will increase to $9.6 million due to the addition of the natural gas assets acquired from KMI in December 2000. See "Asset Acquisitions" discussed above. Although we believe the amount paid to KMI for the services provided by them in 2000 fairly reflects the value of the services performed, the determination of this amount was not the result of arms length negotiation. However, due to the nature of the allocations, this reimbursement may not have exactly matched the actual time and overhead spent. We believe the agreed-upon amount was, at the time the contracts were entered into, a reasonable estimate of the corporate general and administrative expenses to be incurred by KMI and its subsidiaries in performing such services. We also reimburse KMI and its subsidiaries for operating and maintenance
costs and capital expenditures incurred with respect to these assets.
Other
Our general partner makes all decisions relating to the management of our business, and KMI owns all the common stock of our general partner. Certain conflicts of interest could arise as a result of the relationships among our general partner, KMI and us. The directors and officers of KMI have fiduciary duties to manage KMI, including selection and management of its investments in its subsidiaries and affiliates, in a manner beneficial to the shareholders of KMI. In general, our general partner has a fiduciary duty to manage us in a manner beneficial to our unitholders. The partnership agreements contain provisions that allow our general partner to take into account the interests of parties in addition to us in resolving conflicts of interest, thereby limiting its fiduciary duty to our unitholders, as well as provisions that may restrict the remedies available to unitholders for actions taken that might, without such limitations, constitute breaches of fiduciary duty. The duty of the directors and officers of KMI to the shareholders of KMI may, therefore, come into conflict with the duties of our general partner to our unitholders. Our general partner's Conflicts and Audit Committee of the board of directors will, at the request of our general partner, review (and is one of the means for resolving) conflicts of interest that may arise between KMI or its subsidiaries, on the one hand, and us, on the other hand.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) and (2) Financial Statements and Financial Statement Schedules
See "Index to Financial Statements" set forth on page F-1.
(a)(3) Exhibits
*2.1 Stock Purchase Agreement dated November 30, 2000 between
GATX Rail Corporation, GATX Terminals Holding Corporation
and Kinder Morgan Energy Partners, L.P. (filed as Exhibit
99(b) to the Partnership's Current Report on Form 8-K filed
December 1, 2000)
*3.1 - Second Amended and Restated Agreement of Limited Partnership
of Kinder Morgan Energy Partners, L.P. effective as of
February 14, 1997 (filed as Exhibit 3.1 to Amendment No. 1
to Kinder Morgan Energy Partners, L.P. Registration
Statement on Form S-4, file No. 333-46709, filed on April
14, 1998)
*3.2 - Amendment No. 1 to Second Amended and Restated Agreement of
Limited Partnership of Kinder Morgan Energy Partners, L.P.
dated as of January 20, 2000 (filed as Exhibit 4.1 to the
Partnership's Current Report on Form 8-K filed January 20,
2000)
3.3 - Amendment No. 2 to Second Amended and Restated Agreement of
Limited Partnership of Kinder Morgan Energy Partners, L.P.
dated as of December 21, 2000
*4.1 - Specimen Certificate evidencing Common Units representing
Limited Partner Interests (filed as Exhibit 4.1 to Amendment
No. 1 to Kinder Morgan Energy Partners, L.P. Registration
Statement on Form S-4, file No. 333-44519, filed on February
4, 1998)
*4.2 - Indenture dated as of January 29, 1999 among Kinder Morgan
Energy Partners, L.P., the guarantors listed on the
signature page thereto and U.S. Trust Company of Texas,
N.A., as trustee, relating to Senior Debt Securities (filed
as Exhibit 4.1 to the Partnership's Current Report on Form
8-K filed February 16, 1999 (the "February 16, 1999 Form
8-K"))
*4.3 - First Supplemental Indenture dated as of January 29, 1999
among Kinder Morgan Energy Partners, L.P., the subsidiary
guarantors listed on the signature page thereto and U.S.
Trust Company of Texas, N.A., as trustee, relating to
$250,000,000 of 6.30% Senior Notes due February 1, 2009
(filed as Exhibit 4.2 to the February 16, 1999 Form 8-K)
*4.4 - Second Supplemental Indenture dated as of September 30, 1999
among Kinder Morgan Energy Partners, L.P. and U.S. Trust
Company of Texas, N.A., as trustee, relating to release of
subsidiary guarantors under the $250,000,000 of 6.30% Senior
Notes due February 1, 2009 (filed as Exhibit 4.4 to the
Partnership's Form 10-Q for the quarter ended September 30,
1999 (the "1999 Third Quarter Form 10-Q"))
*4.5 - Indenture dated March 22, 2000 between Kinder Morgan Energy
Partners and First Union National Bank, as Trustee (filed as
Exhibit 4.1 to Kinder Morgan Energy Partners, L.P.
Registration Statement on Form S-4 (file no. 333-35112)
filed on April 19, 2000 (the "April 2000 Form S-4")).
*4.6 - Form of Floating Rate Note and Form of 8% Note (contained
in the Indenture filed as Exhibit 4.1 to the April 2000
Form S-4).
*4.7 - Registration Rights Agreement dated March 22, 2000 among
Kinder Morgan Energy Partners, Goldman, Sachs & Co., Merrill
Lynch & Co., Banc of America Securities LLC and First Union
Securities, Inc. (filed as Exhibit 4.3 to the April 2000
Form S-4).
4.8 - Indenture dated November 8, 2000 between Kinder Morgan
Energy Partners and First Union National Bank, as Trustee.
4.9 - Form of 7.50% Note (contained in the Indenture filed as
Exhibit 4.8).
4.10 - Registration Rights Agreement dated November 8, 2000 between
Kinder Morgan Energy Partners and Banc of America Securities
LLC.
4.11 - Indenture dated January 2, 2001 between Kinder Morgan Energy
Partners and First Union National Bank, as trustee,
relating to Senior Debt Securities (including form of
Senior Debt Securities).
4.12 - Indenture dated January 2, 2001 between Kinder Morgan Energy
Partners and First Union National Bank, as trustee,
relating to Subordinate Debt Securities (including form of
Subordinate Debt Securities).
4.13 - Certain instruments with respect to long-term debt of the
Partnership and its consolidated subsidiaries which relate
to debt that does not exceed 10% of the total assets of the
Partnership and its consolidated subsidiaries are omitted
pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, 17
C.F.R. ss.229.601. The Partnership hereby agrees to furnish
supplementally to the Securities and Exchange Commission a
copy of each such instrument upon request.
74
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*10.1 - Kinder Morgan Energy Partners, L.P. Common Unit Option Plan
(filed as Exhibit 10.6 to the Partnership's 1997 Form 10-K)
*10.2 - Employment Agreement with William V. Morgan (filed as Exhibit
10.1 to the Partnership's Form 10-Q for the quarter
ended March 31, 1997)
*10.3 - Kinder Morgan Energy Partners L.P. Executive Compensation Plan
(filed as Exhibit 10 to the Partnership's Form 10-Q for the
quarter ended June 30, 1997)
*10.4 - Employment Agreement dated April 20, 2000, by and among Kinder
Morgan, Inc., Kinder Morgan G.P., Inc. and David G
Dehaemers, Jr. (filed as Exhibit 10(a) to Kinder Morgan,
Inc.'s Form 10-Q for the quarter ended March 31, 2000)
*10.5 - Employment Agreement dated April 20, 2000, by and among Kinder
Morgan, Inc., Kinder Morgan G.P., Inc. and Michael
C. Morgan (filed as Exhibit 10(b) to Kinder Morgan, Inc.'s
Form 10-Q for the quarter ended March 31, 2000)
* 10.6 - Intrastate Pipeline system Lease, dated December 31, 1996,
between MidCon Texas Pipeline, L.P. and MidCon Texas
Pipeline Operator, Inc. (filed as Exhibit 10(y) to Kinder
Morgan, Inc.'s 1997 Form 10-K).
* 10.7 - Amendment Number One to Intrastate Pipeline system Lease,
dated December 31, 1996, between MidCon Texas Pipeline,
L.P. and MidCon Texas Pipeline Operator, Inc. (filed as
Exhibit 10(z) to Kinder Morgan, Inc.'s 1997 Form 10-K).
21.1 - List of Subsidiaries
23.1 - Consent of PricewaterhouseCoopers LLP
---------------------
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* Asterisk indicates exhibits incorporated by reference as indicated; all other exhibits are filed herewith.
(b) Reports on Form 8-K
Report dated November 6, 2000, on Form 8-K was filed on November 6, 2000, pursuant to Item 9 of that form. Notice that on November 6, 2000, Kinder Morgan, Inc., a subsidiary of which serves as general partner of Kinder Morgan Energy Partners, L. P., and the Partnership intend to make a presentation to a group of analysts and others to address various strategic and financial issues relating to the business plans and objectives of Kinder Morgan, Inc. and the Partnership was disclosed pursuant to Item 9. Furthermore, notice was given that Kinder Morgan, Inc. and the Partnership maintain a web site at www.kindermorgan.com, on which Kinder Morgan, Inc. and the Partnership have posted the materials furnished pursuant to this Item 9. A copy of the visual portion of the materials to be presented and discussed at the meeting was furnished as an exhibit and was incorporated by reference into this Item 9.
Report dated November 30, 2000, on Form 8-K was filed on December 1, 2000, pursuant to Items 5, 7 and 9 of that form. Notice of a press release announcing a definitive agreement with GATX to acquire its U.S. pipeline and terminal businesses was disclosed pursuant to Item 5. The press release and Stock Purchase Agreement between GATX Rail Corporation, GATX Terminals Holding Corporation and Kinder Morgan Energy Partners, L.P. were filed as exhibits pursuant to Item 7. Notice of a live web cast conference call on December 1, 2000, with a group of analysts and others to discuss the proposed purchase by the Partnership of GATX Corporation's U.S. pipeline and terminal businesses, and various strategic and financial issues relating to the business plans and objectives of Kinder Morgan, Inc. and the Partnership was disclosed pursuant to Item 9.
Report dated December 7, 2000, on Form 8-K was filed on December 7, 2000, pursuant to Items 5 and 7 of that form. Notice that on December 4, 2000, the Partnership issued a press release announcing that it has purchased Delta Terminal Services, Inc. for approximately $114 million in cash was disclosed pursuant to Item 5. A copy of the press release was disclosed as an exhibit pursuant to Item 7.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants F-2 Consolidated Statements of Income for the years ended December 31, 2000, 1999, and 1998 F-3 |
Consolidated Balance Sheets for the years ended December 31, 2000 and 1999 F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999, and 1998 F-5
Consolidated Statements of Partners' Capital for the years ended December 31, 2000, 1999, and 1998 F-6
Notes to Consolidated Financial Statements F-7
Certain supplementary financial statement schedules have been omitted because the information required to be set forth therein is either not applicable or is shown in the financial statements or notes thereto.
Report of Independent Accountants
To the Partners of
Kinder Morgan Energy Partners, L.P.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of partners' capital present fairly, in all material respects, the financial position of Kinder Morgan Energy Partners, L.P. and its subsidiaries (the Partnership) at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Houston, Texas February 14, 2001 |
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Unit Amounts)
Year Ended December 31,
-------------------------------------
2000 1999 1998
----------- ----------- -----------
Revenues $ 816,442 $ 428,749 $ 322,617
Costs and Expenses
Cost of products sold 124,641 16,241 5,860
Operations and maintenance 164,379 95,121 65,022
Fuel and power 43,216 31,745 22,385
Depreciation and amortization 82,630 46,469 36,557
General and administrative 60,065 35,612 39,984
Taxes, other than income taxes 25,950 16,154 12,140
----------- ----------- -----------
500,881 241,342 181,948
----------- ----------- -----------
Operating Income 315,561 187,407 140,669
Other Income (Expense)
Earnings from equity investments 71,603 42,918 25,732
Amortization of excess cost of equity investments (8,195) (4,254) (764)
Interest, net (93,284) (52,605) (38,600)
Other, net 14,584 14,085 (7,263)
Gain on sale of equity interest, net of special charges - 10,063 -
Minority Interest (7,987) (2,891) (985)
----------- ----------- -----------
Income Before Income Taxes and Extraordinary Charge 292,282 194,723 118,789
Income Taxes (13,934) (9,826) (1,572)
Income Before Extraordinary Charge 278,348 184,897 117,217
Extraordinary Charge on Early Extinguishment of Debt - (2,595) (13,611)
----------- ----------- -----------
Net Income $ 278,348 $ 182,302 $ 103,606
=========== =========== ===========
Calculation of Limited Partners' Interest in Net Income:
Income Before Extraordinary Charge $ 278,348 $ 184,897 $ 117,217
Less: General Partner's interest in Net Income (109,470) (56,273) (33,447)
----------- ----------- -----------
Limited Partners' Net Income before Extraordinary Charge 168,878 128,624 83,770
Less: Extraordinary Charge on Early Extinguishment of Debt - (2,595) (13,611)
----------- ----------- -----------
Limited Partners' Net Income $ 168,878 $ 126,029 $ 70,159
=========== =========== ===========
Basic Limited Partners' Net Income per Unit:
Income before Extraordinary Charge $ 2.68 $ 2.63 $ 2.09
Extraordinary Charge - (.06) (.34)
----------- ----------- -----------
Net Income $ 2.68 $ 2.57 $ 1.75
=========== =========== ===========
Weighted Average Units Outstanding 63,106 48,974 40,120
=========== =========== ===========
Diluted Limited Partners' Net Income per Unit:
Income before Extraordinary Charge $ 2.67 $ 2.63 $ 2.09
Extraordinary Charge - (.06) (.34)
----------- ----------- -----------
Net Income $ 2.67 $ 2.57 $ 1.75
=========== =========== ===========
Weighted Average Units Outstanding 63,150 48,993 40,121
=========== =========== ===========
|
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
---------------------------------------
2000 1999
------------------- ------------------
ASSETS
Current Assets
Cash and cash equivalents $ 59,319 $ 40,052
Accounts and notes receivable
Trade 345,065 71,738
Related parties 3,384 45
Inventories
Products 24,137 8,380
Materials and supplies 4,972 4,703
Gas imbalances 26,878 7,014
Gas in underground storage 27,481 -
Other current assets 20,025 -
------------------- ------------------
511,261 131,932
------------------- ------------------
Property, Plant and Equipment, net 3,306,305 2,578,313
Investments 417,045 418,651
Notes receivable 9,101 10,041
Intangibles, net 345,305 56,630
Deferred charges and other assets 36,193 33,171
------------------- ------------------
TOTAL ASSETS $ 4,625,210 $ 3,228,738
=================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable
Trade $ 293,268 $ 15,692
Related parties 8,255 3,569
Current portion of long-term debt 648,949 209,200
Accrued rate refunds 1,100 36,607
Deferred Revenues 43,978 -
Gas imbalances 48,834 6,189
Accrued other liabilities 54,572 47,904
------------------- ------------------
1,098,956 319,161
------------------- ------------------
Long-Term Liabilities and Deferred Credits
Long-term debt 1,255,453 989,101
Other 95,565 97,379
------------------- ------------------
1,351,018 1,086,480
------------------- ------------------
Commitments and Contingencies (Notes 13 and 16)
Minority Interest 58,169 48,299
------------------- ------------------
Partners' Capital
Common Units (64,858,109 and 59,137,137 units issued
and outstanding at December 31, 2000 and 1999, respectively) 1,957,357 1,759,142
Class B Units (2,656,700 and 0 units issued
and oustanding at December 31, 2000 and 1999, respectively) 125,961 -
General Partner 33,749 15,656
------------------- ------------------
2,117,067 1,774,798
------------------- ------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 4,625,210 $ 3,228,738
=================== ==================
|
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Year Ended December 31,
-----------------------------------------------------------
2000 1999 1998
------------------ ------------------- ------------------
Cash Flows From Operating Activities
Reconciliation of net income to net cash provided by operating activities
Net income $ 278,348 $ 182,302 $ 103,606
Extraordinary charge on early extinguishment of debt - 2,595 13,611
Depreciation and amortization 82,630 46,469 36,557
Amortization of excess cost of equity investments 8,195 4,254 764
Earnings from equity investments (71,603) (42,918) (25,732)
Distributions from equity investments 47,512 33,686 19,670
Gain on sale of equity interest, net of special charges - (10,063) -
Changes in components of working capital
Accounts receivable 6,791 (12,358) 1,203
Other current assets (6,872) - -
Inventories (1,376) (2,817) (734)
Accounts payable (8,374) (9,515) 197
Accrued liabilities 26,479 11,106 (14,115)
Accrued taxes (1,302) 497 (1,266)
Rate refunds settlement (52,467) - -
El Paso settlement - - (8,000)
Other, net (6,394) (20,382) 8,220
------------------ ------------------- ------------------
Net Cash Provided by Operating Activities 301,567 182,856 133,981
------------------ ------------------- ------------------
Cash Flows From Investing Activities
Acquisitions of assets (1,008,648) 5,678 (107,144)
Additions to property, plant and equipment for
expansion and maintenance projects (125,523) (82,725) (38,407)
Sale of investments, property, plant and equipment,
net of removal costs 13,412 43,084 64
Acquisitions of investments (79,388) (161,763) (135,000)
Other 2,581 (800) (1,234)
------------------ ------------------- ------------------
Net Cash Used in Investing Activities (1,197,566) (196,526) (281,721)
------------------ ------------------- ------------------
Cash Flows From Financing Activities
Issuance of debt 2,928,304 550,287 492,612
Payment of debt (1,894,904) (333,971) (407,797)
Debt issue costs (4,298) (3,569) (16,768)
Proceeds from issuance of common units 171,433 68 212,303
Contributions from General Partner's minority interest 7,434 146 12,349
Distributions to partners
Common units (194,691) (135,835) (93,352)
General Partner (91,366) (52,674) (27,450)
Minority interest (7,533) (2,316) (1,614)
Other, net 887 (149) (420)
------------------ ------------------- ------------------
Net Cash Provided by Financing Activities 915,266 21,987 169,863
------------------ ------------------- ------------------
Increase in Cash and Cash Equivalents 19,267 8,317 22,123
Cash and Cash Equivalents, beginning of period 40,052 31,735 9,612
------------------ ------------------- ------------------
Cash and Cash Equivalents, end of period $ 59,319 $ 40,052 $ 31,735
================== =================== ==================
Noncash Investing and Financing Activities:
Contribution of net assets to partnership investments $ - $ 20 $ 60,387
Assets acquired by the issuance of units 179,623 420,850 1,003,202
Assets acquired by the assumption of liabilities 333,301 111,509 569,822
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest (net of capitalized interest) 88,821 48,222 47,616
Income taxes 1,806 529 1,354
|
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(In Thousands)
Total
Common Class B General Partners'
Units Units Partner Capital
-------------- --------------- --------------- --------------
Partners' capital at December 31, 1997 $ 146,840 $ - $ 3,384 $ 150,224
Net income 70,159 - 33,447 103,606
Net proceeds from issuance
of common units 1,212,421 - - 1,212,421
Capital contributions 10,234 - 2,678 12,912
Distributions (91,063) - (27,437) (118,500)
-------------- --------------- --------------- --------------
Partners' capital at December 31, 1998 1,348,591 - 12,072 1,360,663
Net income 126,029 - 56,273 182,302
Net proceeds from issuance
of common units 420,357 - (15) 420,342
Distributions (135,835) - (52,674) (188,509)
-------------- --------------- --------------- --------------
Partners' capital at December 31, 1999 1,759,142 - 15,656 1,774,798
Net income 168,878 - 109,470 278,348
Net proceeds from issuance
of units 224,028 125,961 (11) 349,978
Distributions (194,691) - (91,366) (286,057)
-------------- --------------- --------------- --------------
Partners' capital at December 31, 2000 $ 1,957,357 $ 125,961 $ 33,749 $ 2,117,067
============== =============== =============== ==============
|
The accompanying notes are an integral part of these consolidated financial statements.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
General
Kinder Morgan Energy Partners, L.P., the "Partnership", is a Delaware limited partnership formed in August 1992. We are a publicly traded Master Limited Partnership managing a diversified portfolio of midstream energy assets that provide fee-based services to customers. We trade under the New York Stock Exchange symbol "KMP" and presently conduct our business through four reportable business segments:
o Product Pipelines;
o Natural Gas Pipelines;
o CO2 Pipelines; and
o Bulk Terminals.
Acquisitions in 2000 required a reevaluation of our previously reported Pacific Operations, Mid-Continent Operations, Natural Gas Operations and Bulk Terminals business segments. Our previous Pacific Operations segment, previous Mid-Continent Operations segment, with the exception of our Mid-Continent's Gas Processing and Fractionation activities and carbon dioxide activities, and our 32.5% interest in the Cochin Pipeline System, acquired in the fourth quarter of 2000, have been combined to present our current Product Pipelines segment. Our prior interest in the Mont Belvieu fractionation facility has been combined with our acquisition of certain assets from Kinder Morgan, Inc., effective December 31, 1999 and December 31, 2000, to present our current Natural Gas Pipelines segment. Finally, due to our acquisition of the remaining 80% of Kinder Morgan CO2 Company, L.P., effective April 1, 2000, we began reporting the CO2 Pipelines segment. Prior to April 1, 2000, we only owned a 20% equity interest in Shell CO2 Company, Ltd. and reported its results under the equity method of accounting in the Mid-Continent Operations. Other than acquisitions made during 2000, there was no change in our Bulk Terminals business segment. See note 3 for more information on these acquisitions and note 15 for financial information on these segments.
Merger of KMI
On October 7, 1999, K N Energy, Inc., a Kansas corporation that provided integrated energy services including the gathering, processing, transportation and storage of natural gas, the marketing of natural gas and natural gas liquids and the generating of electric power, acquired Kinder Morgan (Delaware), Inc., a Delaware corporation. Kinder Morgan (Delaware), Inc. is the sole stockholder of our general partner, Kinder Morgan G.P., Inc. At the time of the closing of the acquisition, K N Energy, Inc. changed its name to Kinder Morgan, Inc. It is referred to as "KMI" in this report. KMI trades on the New York Stock Exchange under the symbol "KMI" and is one of the largest midstream energy companies in America, operating more than 30,000 miles of natural gas and product pipelines. KMI also has significant retail distribution, electric generation and terminal assets. KMI, through its subsidiary Kinder Morgan (Delaware), Inc., remains the sole stockholder of our general partner. KMI also owns approximately 20.7% of our outstanding units.
2. Summary of Significant Accounting Policies
Basis of Presentation
Our consolidated financial statements include our accounts and those of our majority-owned and controlled subsidiaries and our operating partnerships. All significant intercompany items have been eliminated in consolidation. Certain amounts from prior years have been reclassified to conform to the current presentation.
Use of Estimates
The preparation of our financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect:
o the amounts we report for assets and liabilities;
o our disclosure of contingent assets and liabilities at the
date of the financial statements; and
o the amounts we report for revenues and expenses during the
reporting period.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Actual results could differ from those estimates.
Cash Equivalents
We define cash equivalents as all highly liquid short-term investments with original maturities of three months or less.
Inventories
Our inventories of products consist of natural gas liquids, refined petroleum products, natural gas, carbon dioxide and coal. We report these assets at the lower of weighted-average cost or market. We report materials and supplies at the lower of cost or market.
Property, Plant and Equipment
We state property, plant and equipment at its acquisition cost. We expense costs for maintenance and repairs in the period incurred. The cost of property, plant and equipment sold or retired and the related depreciation are removed from our balance sheet in the period of sale or disposition. We compute depreciation using the straight-line method based on estimated economic lives. Generally, we apply composite depreciation rates to functional groups of property having similar economic characteristics. The rates range from 2.0% to 12.5%, excluding certain short-lived assets such as vehicles. Depreciation, depletion and amortization of the capitalized costs of producing carbon dioxide properties, both tangible and intangible, are provided for on a units-of-production basis. Proved developed reserves are used in computing units-of-production rates for drilling and development costs, and total proved reserves are used for depletion of leasehold costs. The basis for units-of-production rate determination is by field. We charge the original cost of property sold or retired to accumulated depreciation and amortization, net of salvage and cost of removal. We do not include retirement gain or loss in income except in the case of significant retirements or sales.
We evaluate impairment of our long-lived assets in accordance with Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." We review for the impairment of long-lived assets whenever events or changes in circumstances indicate that our carrying amount of an asset may not be recoverable. We would recognize an impairment loss when estimated future cash flows expected to result from our use of the asset and its eventual disposition is less than its carrying amount.
Equity Method of Accounting
We account for investments in greater than 20% owned affiliates, which we do not control, by the equity method of accounting. Under this method, an investment is carried at our acquisition cost, plus our equity in undistributed earnings or losses since acquisition.
Excess of Cost Over Fair Value
We amortize our excess cost over our underlying net asset book value in equity investments using the straight-line method over the estimated remaining useful lives of the assets. We amortize this excess for undervalued depreciable assets over a period not to exceed 50 years and for intangible assets over a period not to exceed 40 years. For our investments in consolidated affiliates, we report amortization of excess cost over fair value of net assets (goodwill) as amortization expense in our accompanying consolidated statement of income. For our investments accounted for under the equity method, we report amortization of excess cost on investments as amortization of excess cost of equity investments in our accompanying consolidated statement of income. Our total unamortized excess cost over fair value of net assets on investments in consolidated affiliates was approximately $158.1 million as of December 31, 2000 and $48.6 million as of December 31, 1999. These amounts are included within intangibles on our accompanying consolidated balance sheet. Our total unamortized excess cost over underlying book value of net assets on investments accounted for under the equity method was approximately $350.2 million as of December 31, 2000 and $273.5 million as of December 31, 1999. These amounts are included within equity investments on our accompanying balance sheet.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We periodically reevaluate the amount at which we carry the excess of cost over fair value of net assets of businesses we acquired, as well as the amortization period for such assets, to determine whether current events or circumstances warrant adjustments to our carrying value and/or revised estimates of useful lives. At this time, we believe no such impairment has occurred and no reduction in estimated useful lives is warranted.
Revenue Recognition
We recognize revenues for our pipeline operations based on delivery of actual volume transported or minimum obligations under take-or-pay contracts. We recognize bulk terminal transfer service revenues based on volumes loaded. We recognize transmix processing revenues based on volumes processed or sold, and if applicable, title has passed. We recognize energy-related product sales revenues based on delivered quantities of product.
Environmental Matters
We expense or capitalize, as appropriate, environmental expenditures that relate to current operations. We expense expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation. We do not discount liabilities to net present value and we record environmental liabilities when environmental assessments and/or remedial efforts are probable and we can reasonably estimate the costs. Generally, our making of these accruals coincides with our completion of a feasibility study or our commitment to a formal plan of action.
Minority Interest
Minority interest consists of the following:
o the 1.0101% general partner interest in our operating partnerships;
o the 0.5% special limited partner interest in SFPP, L.P.;
o the 33 1/3% interest in Trailblazer Pipeline Company;
o the 50% interest in Globalplex Partners, a Louisiana joint venture
owned 50% and controlled by Kinder Morgan Bulk Terminals,
Inc.; and
o the approximate 32% interest in MidTex Gas Storage Company, L.L.P.,
a Texas limited liability partnership owned approximately 68% and
controlled by Kinder Morgan Texas Pipeline L.P. and its
consolidated subsidiaries.
Income Taxes
We are not a taxable entity for Federal income tax purposes. As such, we do not directly pay Federal income tax. Our taxable income or loss, which may vary substantially from the net income or net loss we report in our consolidated statement of income, is includable in the Federal income tax returns of each partner. The aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined as we do not have access to information about each partner's tax attributes in the Partnership.
Some of our corporate subsidiaries and corporations in which we have an equity investment do pay Federal or state income taxes. Deferred income tax assets and liabilities for certain of our operations conducted through corporations are recognized for temporary differences between the assets and liabilities for financial reporting and tax purposes. Changes in tax legislation are included in the relevant computations in the period in which such changes are effective. Deferred tax assets are reduced by a valuation allowance for the amount of any tax benefit not expected to be realized.
Comprehensive Income
Due to the absence of items of other comprehensive income, our comprehensive income equaled our net income in each of the periods presented.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Income Per Unit
We compute Basic Limited Partners' Net Income per Unit by dividing limited partner's interest in net income by the weighted average number of units outstanding during the period. Diluted Limited Partners' Net Income per Unit reflects the potential dilution, by application of the treasury stock method, that could occur if options to issue units were exercised, which would result in the issuance of additional units that would then share in our net income.
Risk Management Activities
We utilize energy derivatives for the purpose of mitigating our risk resulting from fluctuations in the market price of natural gas, natural gas liquids, crude oil and carbon dioxide. Prior to December 31, 2000, our accounting policy for these activities was based on a number of authoritative pronouncements including SFAS No. 80 "Accounting for Futures Contracts". Our new policy, which is based on SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", became effective for us on January 1, 2001. See note 14 for more information on our risk management activities.
3. Acquisitions and Joint Ventures
During 1998, 1999 and 2000, we completed the following significant acquisitions. Each of the acquisitions was accounted for under the purchase method and the assets acquired and liabilities assumed were recorded at their estimated fair market values as of the acquisition date. The preliminary amounts assigned to assets and liabilities may be adjusted during a short period following the acquisition. The results of operations from these acquisitions are included in the consolidated financial statements from the date of acquisition.
Product Pipelines
Santa Fe
On March 6, 1998, we acquired 99.5% of SFPP, L.P., the operating partnership of Santa Fe Pacific Pipeline Partners, L.P. SFPP owns our Pacific operations. The transaction was valued at more than $1.4 billion inclusive of liabilities assumed. We acquired the interest of Santa Fe Pacific Pipeline's common unitholders in SFPP in exchange for approximately 26.6 million units (1.39 of our units for each Santa Fe Pacific Pipeline common unit). In addition, we paid $84.4 million to Santa Fe Pacific Pipelines, Inc. in exchange for the general partner interest in Santa Fe Pacific Pipeline Partners, L.P. Also on March 6, 1998, SFPP redeemed from Santa Fe Pacific Pipelines, Inc. a 0.5% interest in SFPP for $5.8 million. The redemption was paid from SFPP's cash reserves. After the redemption, Santa Fe Pacific Pipelines, Inc. continues to own a 0.5% special limited partner interest in SFPP. Assets acquired in this transaction comprise our Pacific operations, which include over 3,300 miles of pipeline and thirteen owned and operated terminals.
Plantation Pipe Line Company
On September 15, 1998, we acquired an approximate 24% interest in Plantation Pipe Line Company for $110 million. On June 16, 1999, we acquired an additional approximate 27% interest in Plantation Pipe Line Company for $124.2 million. Collectively, we now own approximately 51% of Plantation Pipe Line Company, and ExxonMobil Pipeline Company, an affiliate of ExxonMobil Corporation, owns approximately 49%. Plantation Pipe Line Company owns and operates a 3,100-mile pipeline system throughout the southeastern United States. The pipeline is a common carrier of refined petroleum products to various metropolitan areas, including Atlanta, Georgia; Charlotte, North Carolina; and the Washington, D.C. area. We do not control Plantation Pipe Line Company, and therefore, we account for our investment in Plantation under the equity method of accounting.
Transmix Operations
On September 10, 1999, we acquired transmix processing plants in Richmond, Virginia and Dorsey Junction, Maryland and other related assets from Primary Corporation. As consideration for the purchase, we paid Primary approximately $18.3 million (before purchase price adjustments) and 510,147 units valued at approximately $14.3 million.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On October 25, 2000, we acquired Buckeye Refining Company, LLC, which owns and operates transmix processing plants in Indianola, Pennsylvania and Wood River, Illinois and other related transmix assets. As consideration for the purchase, we paid Buckeye approximately $37.3 million for property, plant and equipment plus approximately $8.3 million for net working capital and other items.
Effective December 31, 2000, we acquired the remaining 50% interest in the Colton Transmix Processing Facility from Duke Energy Merchants for approximately $11.2 million, including working capital purchase price adjustments. We now own 100% of the Colton facility. Prior to our acquisition of the controlling interest in the Colton facility, we accounted for our ownership interest in the Colton facility under the equity method of accounting.
Cochin Pipeline
Effective November 3, 2000, we acquired from NOVA Chemicals Corporation an undivided 32.5% interest in the Cochin Pipeline System for approximately $120.5 million. We record our proportional share of joint venture revenues and expenses and cost of joint venture assets as part of our Product Pipelines business segment.
Natural Gas Pipelines
Trailblazer Pipeline Company
Effective November 30, 1999, we acquired a 33 1/3% interest in Trailblazer Pipeline Company for $37.6 million from Columbia Gulf Transmission Company, an affiliate of Columbia Energy Group. Trailblazer is an Illinois partnership that owns and operates a 436-mile natural gas pipeline system that traverses from Colorado through southeastern Wyoming to Beatrice, Nebraska. Trailblazer has a certificated capacity of 492 million cubic feet per day of natural gas. For the month of December 1999, we accounted for our 33 1/3% interest in Trailblazer under the equity method of accounting. Effective December 31, 1999, following our acquisition of an additional 33 1/3% interest in Trailblazer, which is discussed below, we included Trailblazer's activities as part of our consolidated financial statements.
Kinder Morgan, Inc. Asset Contributions
Effective December 31, 1999, we acquired over $700 million of assets from KMI. We paid to KMI $330 million and 9.81 million units, valued at approximately $406.5 million as consideration for the assets. We acquired Kinder Morgan Interstate Gas Transmission LLC (formerly K N Interstate Gas Transmission Co.), a 33 1/3% interest in Trailblazer and a 49% equity interest in Red Cedar Gathering Company. The acquired interest in Trailblazer, when combined with the interest purchased on November 30, 1999, gave us a 66 2/3% ownership interest.
Effective December 31, 2000, we acquired over $300 million of assets from KMI. As consideration for these assets, we paid to KMI $192.7 million, 640,000 common units and 2,656,700 class B units. The units were valued at $156.3 million. We acquired Kinder Morgan Texas Pipeline, Inc. and MidCon NGL Corp. (both of which were converted to single-member limited liability companies), the Casper and Douglas natural gas gathering and processing systems, a 50% interest in Coyote Gas Treating, LLC and a 25% interest in Thunder Creek Gas Services, LLC.
CO2 Pipelines
Kinder Morgan CO2 Company, L.P.
On March 5, 1998, we and affiliates of Shell Oil Company agreed to combine our carbon dioxide activities and assets into a partnership, Shell CO2 Company, Ltd., to be operated by a Shell affiliate. We acquired a 20% interest in Shell CO2 Company, Ltd. in exchange for contributing our Central Basin Pipeline and approximately $25 million in cash.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective April 1, 2000, we acquired the remaining 78% limited partner interest and the 2% general partner interest in Shell CO2 Company, Ltd. from Shell for $212.1 million. We renamed the limited partnership Kinder Morgan CO2 Company, L.P., and going forward from April 1, 2000, we have included its results as part of our consolidated financial statements under our CO2 Pipelines business segment. As is the case with all of our operating partnerships, we own a 98.9899% limited partner ownership interest in KMCO2 and our general partner owns a direct 1.0101% general partner ownership interest.
Other Acquisitions and Joint Ventures
Effective June 1, 2000, we acquired significant interests in carbon dioxide pipeline assets and oil-producing properties from Devon Energy Production Company L.P. for $55 million, before purchase price adjustments. Included in the acquisition was an approximate 81% equity interest in the Canyon Reef Carriers CO2 Pipeline, an approximate 71% working interest in the SACROC field unit, and minority interests in the Sharon Ridge unit and the Reinecke unit. All of the assets and properties are located in the Permian Basin of west Texas.
On December 28, 2000, we announced that KMCO2 had entered into a definitive agreement to form a joint venture with Marathon Oil Company in the southern Permian Basin of west Texas. The joint venture consists of a nearly 13% interest in the SACROC unit and a 49.9% interest in the Yates Field unit. The joint venture was formed on January 1, 2001 and named MKM Partners, L.P. As of December 31, 2000, we paid $34.2 million plus committed 30 billion cubic feet of carbon dioxide for our 7.5 % interest in the Yates field unit. In January 2001, we contributed our interest in the Yates field unit together with an approximate 2% interest in the SACROC unit in return for a 15% interest in the joint venture. In January 2001, Marathon Oil Company purchased an approximate 11% interest in the SACROC unit from KMCO2 for $6.2 million. Marathon Oil Company then contributed this interest in the SACROC unit and its 42.4% interest in the Yates field unit for an 85% interest in the joint venture. Going forward from January 1, 2001 we will account for this investment under the equity method.
Bulk Terminals
Hall-Buck Marine, Inc.
Effective July 1, 1998, we acquired Hall-Buck Marine, Inc. for approximately $100 million. Hall-Buck, headquartered in Sorrento, Louisiana, is one of the nation's largest independent operators of dry bulk terminals. In addition, Hall-Buck owns all of the common stock of River Consulting Incorporated, a nationally recognized leader in the design and construction of bulk material facilities and port related structures. The $100 million of consideration consisted of approximately 2.1 million units and assumed indebtedness of $23 million. After the acquisition, we changed the name of Hall-Buck Marine, Inc. to Kinder Morgan Bulk Terminals, Inc.
Milwaukee Bulk Terminals, Inc. and Dakota Bulk Terminal, Inc.
Effective January 1, 2000, we acquired all of the shares of the capital stock of Milwaukee Bulk Terminals, Inc. and Dakota Bulk Terminal, Inc. We paid an aggregate consideration of approximately $24.1 million, including 574,172 units and approximately $0.8 million in cash. The Milwaukee terminal, located on nine acres of property leased from the Port of Milwaukee. Its major cargoes are coal and bulk de-icing salt. The Dakota terminal, located in St. Paul, Minnesota, primarily handles salt and grain products.
Delta Terminal Services, Inc.
Effective December 1, 2000, we acquired all of the shares of the capital stock of Delta Terminal Services, Inc. for approximately $114.1 million. The acquisition includes two liquid bulk storage terminals in New Orleans, Louisiana and Cincinnati, Ohio.
Pro Forma Information
The following summarized unaudited Pro Forma Consolidated Income Statement information for the twelve months ended December 31, 2000 and 1999, assumes the 2000 and 1999 acquisitions and joint ventures had occurred as of January 1, 1999. We have prepared these unaudited Pro Forma financial results for comparative purposes only. These unaudited Pro Forma financial results may not be indicative of the results that would have
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
occurred if we had completed the 2000 and 1999 acquisitions and joint ventures as of January 1, 1999 or the results which will be attained in the future. Amounts presented below are in thousands, except for the per unit amounts:
Pro Forma
Twelve Months Ended
December 31,
2000 1999
-------------- --------------
Income Statement (Unaudited)
Revenues $ 2,954,180 $ 1,806,453
Operating Income 393,982 350,075
Net Income before extraordinary charge 334,817 290,134
Net Income 334,817 287,539
Basic Limited Partners' Net Income per unit before extraordinary charge $ 2.82 $ 2.63
Basic Limited Partners' Net Income per unit $ 2.82 $ 2.59
Diluted Limited Partners' Net Income per unit before extraordinary charge $ 2.81 $ 2.63
Diluted Limited Partners' Net Income per unit $ 2.81 $ 2.59
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Acquisitions Subsequent to December 31, 2000
On November 30, 2000, we announced that we had signed a definitive agreement with GATX Corporation to purchase its United States' pipeline and terminal businesses for approximately $1.15 billion, consisting of cash, assumed debt and other obligations. Primary assets included in the transaction are the CALNEV Pipe Line Company, the Central Florida Pipeline Company and twelve terminals that store refined petroleum products and chemicals. The transaction is expected to close in the first quarter of 2001.
4. Gain on Sale of Equity Interest, Net of Special Charges
During the third quarter of 1999, we completed the sale of our partnership interest in the Mont Belvieu fractionation facility for approximately $41.8 million. We recognized a gain of $14.1 million on the sale and included that gain as part of our Natural Gas Pipelines business segment. Offsetting the gain were charges of approximately $3.6 million relating to our write-off of abandoned project costs, primarily within our Product Pipelines business segment, and a charge of $0.4 million relating to prior years' over-billed storage tank lease fees, also within our Product Pipelines business segment.
5. Income Taxes
Components of the income tax provision applicable to continuing operations for federal and state taxes are as follows (in thousands):
Year Ended December 31,
2000 1999 1998
-------- --------- ---------
Taxes currently payable:
Federal $10,612 $ 8,169 $ 1,432
State 1,416 1,002 168
-------- --------- ---------
Total 12,028 9,171 1,600
Taxes deferred:
Federal 1,627 583 (25)
State 279 72 (3)
-------- --------- ---------
Total 1,906 655 (28)
-------- --------- ---------
Total tax provision $13,934 $ 9,826 $ 1,572
======== ========= =========
Effective tax rate 4.8% 5.0% 1.3%
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The difference between the statutory federal income tax rate and our effective income tax rate is summarized as follows:
Year Ended December 31,
2000 1999 1998
------------- -------------- -------------
Federal Income Tax Rate 35.0% 35.0% 35.0%
Increase (Decrease) as a Result of:
Partnership earnings not subject to tax (35.0%) (35.3%) (35.4%)
Corporate subsidiary earnings subject to tax 0.6% 1.0% 0.8%
Income tax expense attributable to corporate equity earnings 4.1% 4.4% 1.6%
Gain on distribution of appreciated property from
corporate subsidiary - - 3.7%
Utilization of net operating loss - - (1.0%)
Utilization of alternative minimum tax credits - - (1.5%)
Prior year adjustments - - (2.0%)
State taxes 0.1% 0.1% 0.5%
Other - (0.2%) (0.4%)
------------- -------------- -------------
Effective Tax Rate 4.8% 5.0% 1.3%
============= ============== =============
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Deferred tax assets and liabilities result from the following (in thousands):
December 31,
2000 1999
----------- ----------
Deferred tax assets:
State taxes $ 184 $ -
Book accruals 176 1,110
Alternative minimum tax credits 1,376 1,376
----------- ----------
Total deferred tax assets 1,736 2,486
Deferred tax liabilities:
Property, plant and equipment 4,223 3,323
Book accruals - 661
Other - 2
----------- ----------
Total deferred tax liabilities 4,223 3,986
----------- ----------
Net deferred tax liabilities $ 2,487 $ 1,500
=========== ==========
We had available, at December 31, 2000, approximately $1.4 million of
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alternative minimum tax credit carryforwards, which are available indefinitely.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Property, Plant and Equipment
Property, plant and equipment consists of the following (in thousands):
December 31,
------------
2000 1999
------------ -----------
Natural Gas, liquids and carbon dioxide pipelines $ 1,732,607 $ 1,729,034
Natural Gas, liquids and carbon dioxide pipeline station equip. 1,072,185 550,044
Coal and bulk tonnage transfer, storage and services 191,313 107,052
Natural Gas and transmix processing 95,624 45,232
Land 79,653 72,259
Land right-of-way 116,456 93,909
Construction work in process 90,067 38,653
Other 117,981 59,939
------------ -----------
Total cost 3,495,886 2,696,122
Accumulated depreciation and depletion ( 189,581) (117,809)
------------ -----------
$ 3,306,305 $ 2,578,313
------------ -----------
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Depreciation and depletion expense charged against property, plant and equipment consists of the following (in thousands):
2000 1999 1998
-------- -------- --------
Depreciation and depletion expense $ 79,740 $ 44,553 $ 35,288
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7. Investments
Our significant equity investments at December 31, 2000 consisted of:
o Plantation Pipe Line Company (51%);
o Red Cedar Gathering Company (49%);
o Thunder Creek Gas Services, LLC (25%);
o Coyote Gas Treating, LLC (Coyote Gulch) (50%);
o Cortez Pipeline Company (50%); and
o Heartland Pipeline Company (50%).
On April 1, 2000, we acquired the remaining 80% ownership interest in Shell CO2 Company, Ltd. and renamed the entity Kinder Morgan CO2 Company, L.P. (KMCO2). On December 31, 2000, we acquired the remaining 50% ownership interest in the Colton Transmix Processing Facility. Due to these acquisitions, we no longer report these two investments under the equity method of accounting. In addition, we had an equity investment in Trailblazer Pipeline Company (33 1/3%) for one month of 1999 and had an equity interest in Mont Belvieu Associates through two quarters of 1999. We sold our equity interest in Mont Belvieu Associates in the third quarter of 1999 and acquired an additional 33 1/3% interest in Trailblazer effective December 31, 1999.
We acquired our investment in Cortez as part of our KMCO2 acquisition and we acquired our investments in Coyote Gas Treating and Thunder Creek from KMI on December 31, 2000.
Please refer to notes 3 and 4 for more information.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our total equity investments consisted of the following (in thousands):
December 31,
2000 1999
----------- ----------
Plantation Pipe Line Company $223,627 $229,349
Red Cedar Gathering Company 96,388 88,249
Thunder Creek Gas Services, LLC 27,625 -
Coyote Gas Treating, LLC 17,000 -
Cortez Pipeline Company 9,559 -
Heartland Pipeline Company 6,025 4,818
Shell CO2 Company, Ltd. - 86,675
Colton Transmix Processing Facility - 5,263
All Others 2,658 4,297
----------- ----------
Total $382,882 $418,651
=========== ==========
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Our earnings from equity investments were as follows (in thousands):
Year ended December 31,
2000 1999 1998
----------- ---------- -----------
Plantation Pipe Line Company $31,509 $22,510 $ 4,421
Cortez Pipeline Company 17,219 - -
Red Cedar Gathering Company 16,110 - -
Shell CO2 Company, Ltd. 3,625 14,500 14,500
Colton Transmix Processing Facility 1,815 1,531 803
Heartland Pipeline Company 1,581 1,571 1,394
Coyote Gas Treating, LLC - - -
Thunder Creek Gas Services, LLC - - -
Mont Belvieu Associates - 2,500 4,577
Trailblazer Pipeline Company (24) 284 -
All Others (232) 22 37
----------- ---------- -----------
Total $71,603 $42,918 $25,732
=========== ========== ===========
Amortization of excess costs $ (8,195) $ (4,254) $ (764)
=========== ========== ===========
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized combined unaudited financial information for our significant equity investments is reported below (in thousands):
Year ended December 31,
Income Statement 2000 1999 1998
----------- ---------- -----------
Revenues $399,335 $344,017 $236,534
Costs and expenses 276,000 244,515 148,616
Earnings before extraordinary items 123,335 99,502 87,918
Net income 123,335 99,502 87,918
December 31,
Balance Sheet 2000 1999
----------- ----------
Current assets $117,050 $137,828
Non-current assets 665,435 450,791
Current liabilities 92,027 64,333
Non-current liabilities 576,278 289,671
Partners'/Owners' equity 114,180 234,615
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On December 28, 2000, we announced that KMCO2 had entered into a definitive agreement to form a joint venture with Marathon Oil Company in the southern Permian Basin of west Texas. The joint venture consists of a nearly 13% interest in the SACROC unit and a 49.9% interest in the Yates Field unit. The joint venture was formed on January 1, 2001 and named MKM Partners, L.P. As of December 31, 2000, we paid $34.2 million plus committed 30 billion cubic feet of carbon dioxide for our 7.5 % interest in the Yates field unit. In January 2001, we contributed our interest in the Yates field unit together with an approximate 2% interest in the SACROC unit in return for a 15% interest in the joint venture. In January 2001, Marathon Oil Company purchased an approximate 11% interest in the SACROC unit from KMCO2 for $6.2 million. Marathon Oil Company then contributed this interest in the SACROC unit and its 42.4% interest in the Yates field unit for an 85% interest in the joint venture. Going forward from January 1, 2001 we will account for this investment under the equity method.
8. Intangibles
Our intangible assets include value associated with acquired:
o goodwill;
o contracts and agreements; and
o intangible lease value associated with our acquisition of Kinder
Morgan Texas Pipeline, L.P. on December 31, 2000.
All of our intangible assets are amortized on a straight-line basis over their estimated useful lives. Goodwill is being amortized over a period of 40 years. Beginning in 2001, the intangible lease value will be amortized over 26 years, the remaining life of an operating lease covering the use of KMTP's natural gas pipeline.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets consisted of the following (in thousands):
December 31,
2000 1999
------------ -----------
Goodwill $162,271 $50,546
Accumulated amortization (4,201) (1,941)
------------ -----------
Goodwill, net $158,070 $48,605
Lease value $185,982 $ 6,592
Contracts and agreements 1,768 1,768
Other 93 93
------------ -----------
Accumulated amortization (608) (428)
------------ -----------
Other intangibles, net $187,235 $ 8,025
------------ -----------
Total intangibles, net $345,305 $56,630
============ ===========
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9. Debt
Our debt facilities as of December 31, 2000, consist primarily of:
o a $600 million unsecured 364-day credit facility due October 25, 2001;
o a $300 million unsecured five-year credit facility due September 29,
2004;
o $250 million of 6.30% Senior Notes due February 1, 2009;
o $200 million of 8.00% Senior Notes due March 15, 2005;
o $250 million of 7.50% Senior Notes due November 1, 2010;
o $200 million of Floating Rate Senior Notes due March 22, 2002;
o $119 million of Series F First Mortgage Notes (our subsidiary, SFPP,
is the obligor on the notes);
o $20.2 million of Senior Secured Notes (our subsidiary, Trailblazer, is
the obligor on the notes);
o $23.7 million of tax-exempt bonds due 2024 (our subsidiary, Kinder
Morgan Operating L.P. "B" is the obligor on these bonds); and
o a $600 million short-term commercial paper program.
Our short-term debt at December 31, 2000, consisted of:
o $582 million of borrowings under our unsecured 364-day credit facility
due October 25, 2001;
o $52 million of commercial paper borrowings;
o $35 million under the SFPP 10.7% First Mortgage Notes; and
o $14.6 million in other borrowings.
During 2000, our cash acquisitions and expansions exceeded $600 million. Historically, we have utilized our short-term credit facilities to fund acquisitions and expansions and then refinanced our short-term borrowings utilizing long-term credit facilities and by issuing equity or long-term debt securities. We intend to refinance our short-term debt during 2001 through a combination of long-term debt and equity. Based on prior successful short-term debt refinancings and current market conditions, we do not anticipate any liquidity problems.
Credit Facilities
In February 1998, we refinanced our first mortgage notes and existing bank credit facilities with a $325 million secured revolving credit facility expiring in February 2005. On December 1, 1998, the credit facility was amended to release the collateral and the credit facility became unsecured. Borrowings under the credit facility were primarily used to fund our investment in Plantation Pipe Line Company in June 1999. On September 29, 1999, the $325 million credit facility was replaced with a $300 million unsecured five-year credit facility expiring in September 2004 and a $300 million unsecured 364-day credit facility. We recorded an extraordinary charge of $2.6
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
million related to the retirement of the $325 million credit facility. Our 364-day credit facility expired on September 29, 2000 and was extended until October 25, 2000. On October 25, 2000, the facility was replaced with a new $600 million unsecured 364-day credit facility. The terms of the new credit facility are substantially similar to the terms of the previous facility. The two credit facilities are with a syndicate of financial institutions. First Union National Bank is the administrative agent under the agreements.
The outstanding balance under our five-year credit facility was $197.6 million at December 31, 1999. On August 11, 2000, we refinanced the outstanding balance under SFPP's secured credit facility with a $175.0 million borrowing under our five-year credit facility. The outstanding balance under our five-year credit facility was $207.6 million at December 31, 2000.
No borrowings were outstanding under our 364-day credit facility at December 31, 1999. The outstanding balance under our 364-day credit facility was $582 million at December 31, 2000.
Interest on our credit facilities accrues at our option at a floating rate equal to either:
o First Union National Bank's base rate (but not less than the Federal
Funds Rate, plus 0.5%); or
o LIBOR, plus a margin, which varies depending upon the credit rating of
our long-term senior unsecured debt.
The five-year credit facility also permits us to obtain bids for fixed rate loans from members of the lending syndicate. At December 31, 2000, the interest rate on our credit facilities was 7.115% per annum. The weighted average interest rate on our borrowings under our credit facilities was 6.8987% during 2000 and 6.1313% during 1999.
Senior Notes
On January 29, 1999, we closed a public offering of $250 million in principal amount of 6.30% senior notes due February 1, 2009 at a price to the public of 99.67% per note. In the offering, we received proceeds, net of underwriting discounts and commissions, of approximately $248 million. We used the proceeds to pay the outstanding balance on our credit facility and for working capital and other partnership purposes. In connection with the refinancing of our credit facility on September 29, 1999, our subsidiaries were released from their guarantees of the credit facility. As a result, the subsidiary guarantees under these senior notes were also automatically released in accordance with the terms of the notes. At December 31, 2000, the unamortized liability balance on the 6.30% senior notes was $249.3 million.
Under an indenture dated March 22, 2000, we completed a private placement of $200 million of floating rate notes due March 22, 2002 and $200 million of 8.0% notes due March 15, 2005. On May 31, 2000, we exchanged these notes with substantially identical notes that were registered under the Securities Act of 1933. The proceeds from the issuance of these notes were used to reduce our outstanding commercial paper. At December 31, 2000, the unamortized liability balance on the 8.0% notes was $199.7 million and the unamortized liability balance on the floating rate notes was $200 million. At December 31, 2000, the interest rate on our floating rate notes was 7.0%.
On November 8, 2000, we closed a private placement of $250 million of 7.5% notes due November 1, 2010. We agreed to offer to exchange these notes with substantially identical notes that are registered under the Securities Act of 1933 within 210 days of the close of this transaction. The proceeds from this offering, net of underwriting discounts, were $246.8 million. These proceeds were used to reduce our outstanding commercial paper. At December 31, 2000, the unamortized liability balance on the 7.5% notes was $248.4 million.
In addition, as of December 31, 1999, we financed $330 million through KMI to fund part of the acquisition of assets acquired from KMI on December 31, 1999. In accordance with the Closing Agreement entered into as of January 20, 2000, we paid KMI a per diem fee of $180.56 for each $1,000,000 financed. We paid KMI $200 million on January 21, 2000, and the remaining $130 million on March 23, 2000 with a portion of the proceeds from our issuance of notes on March 22, 2000.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commercial Paper Program
In December 1999, we established a commercial paper program providing for the issuance of up to $200 million of commercial paper, subsequently increased to $300 million in January 2000. As of December 31, 1999, we had not issued any commercial paper. On October 25, 2000, in conjunction with our new 364-day credit facility, we also increased our commercial paper program to provide for the issuance of up to $600 million of commercial paper. Borrowings under our commercial paper program reduce the borrowings allowed under our 364-day and five-year credit facilities combined. As of December 31, 2000, we had $52 million of commercial paper outstanding with an interest rate of 7.02%.
SFPP Debt
At December 31, 2000, the outstanding balance under SFPP's Series F notes was $119.0 million. The annual interest rate on the Series F notes is 10.70%, the maturity is December 2004, and interest is payable semiannually in June and December. The Series F notes are payable in annual installments of $39.5 million in 2001, $42.5 million in 2002 and $37.0 million in 2003. The Series F notes may also be prepaid in full or in part at a price equal to par plus, in certain circumstances, a premium. The Series F notes are secured by mortgages on substantially all of the properties of SFPP (the "Mortgaged Property"). The Series F notes contain certain covenants limiting the amount of additional debt or equity that may be issued and limiting the amount of cash distributions, investments, and property dispositions.
At December 31, 1999, the outstanding balance under SFPP's bank facility was $174.0 million. On August 11, 2000, we refinanced the outstanding balance under SFPP's secured credit facility with a $175.0 million borrowing under our five-year credit facility. Upon refinancing, SFPP executed a $175 million intercompany note in favor of Kinder Morgan Energy Partners, L.P. The weighted average interest rate on the SFPP bank facility was 5.477% for 1999 and 6.4797% in 2000.
Trailblazer Debt
On September 23, 1992, pursuant to the terms of a Note Purchase Agreement, Trailblazer Pipeline Company issued and sold an aggregate principal amount of $101 million of Senior Secured Notes to a syndicate of fifteen insurance companies. Trailblazer provided security for the notes principally by an assignment of certain Trailblazer transportation contracts. Effective April 29, 1997, Trailblazer amended the Note Purchase Agreement. This amendment allowed Trailblazer to include several additional transportation contracts as security for the notes, added a limitation on the amount of additional money that Trailblazer could borrow and relieved Trailblazer from its security deposit obligation. At December 31, 2000, Trailblazer's outstanding balance under the Senior Secured Notes was $20.2 million. The Senior Secured Notes have a fixed annual interest rate of 8.03% and will be repaid in semiannual installments of $5.05 million from March 1, 2001 through September 1, 2002, the final maturity date. Interest is payable semiannually in March and September. Pursuant to the terms of this Note Purchase Agreement, Trailblazer partnership distributions are restricted by certain financial covenants. Currently, Trailblazer's proposed expansion project is pending before the FERC. If the expansion is approved, which is expected in the first quarter of 2001, we plan to refinance these notes.
In December 1999, Trailblazer entered into a 364-day revolving credit agreement with Toronto Dominion, Inc. providing for loans up to $10 million. At December 26, 2000, the outstanding balance due under Trailblazer's bank facility was $10 million. Trailblazer paid the outstanding balance under its credit facility with a $10 million borrowing under an intercompany account payable in favor of KMI on December 27, 2000.
In January 2001, Trailblazer entered into a 364-day revolving credit agreement with Credit Lyonnais New York Branch, providing for loans up to $10 million. The agreement expires December 27, 2001. At January 31, 2001, the outstanding balance under Trailblazer's revolving credit agreement was $10 million. The borrowings were used to pay the account payable to KMI. The agreement provides for an interest rate of LIBOR plus 0.875%. At January 31, 2001, the interest rate on the credit facility debt was 6.625%. Pursuant to the terms of the revolving credit agreement, Trailblazer partnership distributions are restricted by certain financial covenants.
Kinder Morgan Operating L.P. "B" Debt
The $23.7 million principal amount of tax-exempt bonds due 2024 were issued by the Jackson-Union Counties Regional Port District. These bonds bear interest at a weekly floating market rate. During 2000, the weighted-
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
average interest rate on these bonds was 4.47% per annum, and at December 31, 2000 the interest rate was 5.00%. We have an outstanding letter of credit issued under our credit facilities that backs-up our tax-exempt bonds. The letter of credit reduces the amount available for borrowing under our credit facilities.
Cortez Pipeline
Pursuant to a certain Throughput and Deficiency Agreement, the owners of Cortez Pipeline Company are required to contribute capital to Cortez in the event of a cash deficiency. The agreement contractually supports the financings of Cortez Capital Corporation, a wholly-owned subsidiary of Cortez Pipeline Company, by obligating the owners of Cortez Pipeline to fund cash deficiencies at Cortez Pipeline, including cash deficiencies relating to the repayment of principal and interest. Their respective parent or other companies further severally guarantee the obligations of the Cortez Pipeline owners under this agreement.
Due to our indirect ownership of Cortez through KMCO2, we severally guarantee 50% of the debt of Cortez Capital Corporation. Shell Oil Company shares our guaranty obligations jointly and severally through December 31, 2006 for Cortez's debt programs in place as of April 1, 2000.
At December 31, 2000, the debt facilities of Cortez Capital Corporation consisted of:
o a $127 million uncommitted 364-day revolving credit facility;
o a $48 million committed 364-day revolving credit facility;
o a $175 million in short term commercial paper program; and
o $151.7 million of Series D notes.
Maturities of Debt
The scheduled maturities of our outstanding debt at December 31, 2000, are summarized as follows (in thousands):
2001 $ 683,649
2002 253,116
2003 37,016
2004 207,617
2005 199,670
Thereafter 523,334
----------
Total $1,904,402
==========
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Of the $683.6 million scheduled to mature in 2001, we intend and have the ability to refinance $34.7 million on a long-term basis under our existing credit facilities.
Fair Value of Financial Instruments
The estimated fair value of our long-term debt based upon prevailing interest rates available to us at December 31, 2000 and December 31, 1999 is disclosed below.
Fair value as used in SFAS No. 107 "Disclosures About Fair Value of Financial Instruments" represents the amount at which an instrument could be exchanged in a current transaction between willing parties.
December 31, 2000 December 31, 1999
--------------------------------- ----------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
-------------- -------------- --------------- --------------
(in thousands)
Total Debt $ 1,904,402 $ 2,011,818 $ 1,198,301 $ 1,209,625
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10. Pensions and Other Postretirement Benefits
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the acquisition of SFPP and Kinder Morgan Bulk Terminals in 1998, we acquired certain liabilities for pension and postretirement benefits. We have a noncontributory defined benefit pension plan covering the former employees of Kinder Morgan Bulk Terminals. The benefits under this plan were based primarily upon years of service and final average pensionable earnings. We provide medical and life insurance benefits to current employees, their covered dependents and beneficiaries of SFPP and Kinder Morgan Bulk Terminals. We also provide the same benefits to former salaried employees of SFPP. Additionally, we will continue to fund these costs for those employees currently in the plan during their retirement years.
SFPP's postretirement benefit plan is frozen and no additional participants may join the plan. Similarly, benefit accruals were frozen as of December 31, 1998 for the Hall-Buck plan. As a result of these events, we recognized a curtailment gain related to the SFPP's plan of $3.9 million in 1999 and a gain related to Hall-Buck's plan of $0.4 million in 1998.
Net periodic benefit costs and weighted-average assumptions for these plans include the following components (in thousands):
2000 1999 1998
--------------------------- --------------------------- ----------------------------
Other Other Other
Pension Postretirement Pension Postretirement Pension Postretirement
Benefits Benefits Benefits Benefits Benefits Benefits
---------- -------------- ----------- -------------- ------------ --------------
Net periodic benefit cost
Service cost $ - $ 46 $ - $ 80 $ 98 $ 636
Interest cost 145 755 141 696 76 983
Expected return on plan assets (171) - (150) - (70) -
Amortization of transition obligation 1 - - - - -
Amortization of prior service cost - (493) - (493) - (493)
Actuarial loss (gain) - (290) - (340) - (208)
---------- -------------- ----------- -------------- ------------ --------------
Net periodic benefit cost $ (25) $ 18 $ (9) $ (57) $ 104 $ 918
========== ============== =========== ============== ============ ==============
Additional amounts recognized
Curtailment (gain) loss $ - $ - $ - $ (3,859) $ (425) $ -
Weighted-average assumptions as of December 31:
Discount rate 7.5% 7.75% 7.0% 7.0% 7.0% 7.5%
Expected return on plan assets 8.5% - 8.5% - 8.5% -
Rate of compensation increase - - - - 4.0% 4.0%
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information concerning benefit obligations, plan assets, funded status and recorded values for these plans follows (in thousands):
2000 1999
------------------------- ---------------------------
Other Other
Pension Postretirement Pension Postretirement
Benefits Benefits Benefits Benefits
---------- ------------- ----------- --------------
Change in benefit obligation
Benefit obligation at Jan. 1 $ 1,737 $ 9,564 $ 1,862 $ 14,734
Service cost - 46 - 80
Interest cost 145 755 141 696
Amendments - (371) - -
Administrative expenses (9) - (12) -
Actuarial (gain) loss 299 1,339 86 (1,521)
Curtailment (gain) - - - (3,859)
Benefits paid from plan assets (189) (435) (340) (566)
--------- ------------- ----------- ------------
Benefit obligation at Dec. 31 $ 1,983 $ 10,898 $ 1,737 $ 9,564
========= ============= =========== ============
Change in plan assets
Fair value of plan assets at Jan. 1 $ 2,060 $ - $ 1,833 $ -
Actual return on plan assets (138) - 300 -
Employer contributions 92 435 279 566
Administrative expenses (9) - (12) -
Benefits paid from plan assets (189) (435) (340) (566)
--------- ------------- ----------- ------------
Fair value of plan assets at
Dec. 31 $ 1,816 $ - $ 2,060 $ -
========= ============= =========== ============
Funded status $ (167) $ (10,898) $ 323 $ (9,564)
Unrecognized net transition
obligation 1 - 2 -
Unrecognized net actuarial
(gain) loss 359 (1,383) (250) (3,012)
Unrecognized prior service (benefit) - (1,656) - (1,777)
--------- ------------- ----------- ------------
Prepaid (accrued) benefit cost $ 193 $ (13,937) $ 75 $ (14,353)
========= ============= =========== ============
|
In 2001, SFPP modified benefits associated with its postretirement benefit plan. This plan amendment resulted in a $0.4 million decrease in its benefit obligation for 2000. The unrecognized prior service credit is amortized on a straight-line basis over the remaining expected service to retirement (3.5 years). For measurement purposes, an 8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2000. The rate was assumed to decrease gradually to 5% by 2005 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% change in assumed health care cost trend rates would have the following effects:
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1-Percentage Point 1-Percentage Point
Increase Decrease
------------------ ------------------
Effect on total of service and
interest cost components $ 61 $ (52)
Effect on postretirement benefit
obligation $ 773 $ (665)
|
Multiemployer Plans and Other Benefits. With our acquisition of Kinder Morgan Bulk Terminals, effective July 1, 1998, we participate in multi-employer pension plans for the benefit of its employees who are union members. We contributed $0.6 million during each of the years 2000 and 1999. We do not administer these plans and contribute to them in accordance with the provisions of negotiated labor contracts. Other benefits include a self-insured health and welfare insurance plan and an employee health plan where employees may contribute for their dependents' health care costs. Amounts charged to expense for these plans were $0.5 million for each of the years 2000 and 1999. The amount charged from the period of acquisition through December 31, 1998 was $0.5 million.
We terminated the Employee Stock Ownership Plan held by Kinder Morgan Bulk Terminals for the benefit of its employees on August 13, 1998. All ESOP participants became fully vested retroactive to July 1, 1998, the effective date of our acquisition of Kinder Morgan Bulk Terminals. We distributed the assets remaining in the plan during 1999.
We assumed River Consulting, Inc.'s (a consolidated affiliate of Kinder Morgan Bulk Terminals) savings plan under Section 401(k) of the Internal Revenue Code. This savings plan allowed eligible employees to contribute up to 10% of their compensation on a pre-tax basis, with us matching 2.5% of the first 5% of the employees' wage. Matching contributions are vested at the time of eligibility, which is one year after employment. Effective January 1, 1999, we merged this savings plan into the retirement savings plan of our general partner (see next paragraph).
Effective July 1, 1997, our general partner established the Kinder Morgan Retirement Savings Plan, a defined contribution 401(k) plan, that permits all full-time employees of our general partner to contribute 1% to 15% of base compensation, on a pre-tax basis, into participant accounts. This plan was subsequently amended and merged to form the Kinder Morgan Savings Plan. In addition to a mandatory contribution equal to 4% of base compensation per year for each plan participant, our general partner may make discretionary contributions in years when specific performance objectives are met. Our mandatory contributions are made each pay period on behalf of each eligible employee. Any discretionary contributions are made during the first quarter following the performance year. All contributions, including discretionary contributions, are in the form of KMI stock that is immediately convertible into other available investment vehicles at the employee's discretion. In the first quarter of 2001, an additional 2% discretionary contribution was made to individual accounts based on 2000 financial targets to unitholders. The total amount charged to expense for our Retirement Savings Plan was $1.8 million during 2000. All contributions, together with earnings thereon, are immediately vested and not subject to forfeiture. Participants may direct the investment of their contributions into a variety of investments. Plan assets are held and distributed pursuant to a trust agreement.
Effective January 1, 2001, employees of our general partner became eligible to participate in a new Cash Balance Retirement Plan. Certain employees continue to accrue benefits through a career-pay formula, "grandfathered" according to age and years of service on December 31, 2000, or collective bargaining arrangements. All other employees will accrue benefits through a personal retirement account in the new Cash Balance Retirement Plan. Employees with prior service and not grandfathered convert to the Cash Balance Retirement Plan and will be credited with the current fair value of any benefits they have previously accrued through the defined benefit plan. We will then begin contributions on behalf of these employees equal to 3% of eligible compensation every pay period. In addition, we may make discretionary contributions to the plan based on our performance. Interest will be credited to the personal retirement accounts at the 30-year U.S. Treasury bond rate in effect each year. Employees will be fully vested in the plan after five years, and they may take a lump sum distribution upon termination of employment or retirement.
11. Partners' Capital
In connection with KMI's transfer to us of Natural Gas Pipelines assets effective December 31, 2000, we paid to KMI cash consideration and issued to KMI 640,000 common units and 2,656,700 class B units representing
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
limited partnership interests in us. These units will not participate in our distribution declared for the fourth quarter of 2000. Our class B units are similar to our common units except our class B units are not eligible for trading on the New York Stock Exchange. Our class B unitholders (KMI) have the same rights as our common unitholders with respect to, without limitation, distributions from us, voting rights and allocations of income, gain, loss or deductions. The class B units are convertible into common units after such time as the New York Stock Exchange has advised us that common units issuable upon such conversion are eligible for listing on the NYSE. At any time after December 21, 2001, the holders of a majority of our class B units may notify us of their desire to convert their class B units into our common units. If at such time the common units issuable upon conversion of the class B units would not be eligible for listing on the NYSE, we must use our reasonable efforts to meet any unfulfilled requirements for such listing within 120 days after receipt of such notice. If we are unable to satisfy all of the requirements of the NYSE for listing of such common units within the 120 days, then our class B unitholders may at any time thereafter require that we redeem their class B units for cash by delivering a notice of redemption to us. KMI has represented that it will not demand cash redemption for the class B units. On the 60th day after our receipt of the redemption notice, we must redeem the class B units subject to the redemption notice, unless before the redemption date the NYSE has approved for listing the common units issuable in exchange for the class B units.
At December 31, 2000, Partners' capital consisted of 64,858,109 common units and 2,656,700 class B units. Together, these 67,514,809 units represent the limited partners' interest and an effective 98% economic interest in the Partnership, exclusive of our general partner's incentive distribution. The common unit total consisted of 53,546,109 units held by third parties, 10,450,000 units held by KMI and 862,000 units held by our general partner. The class B units were held entirely by KMI. At December 31, 1999 and 1998 there were 59,137,137 and 48,821,690 common units outstanding, respectively. The general partner has an effective 2% interest in the Partnership, excluding the general partner's incentive distribution.
During 1998, we issued 26,548,879 on March 6, 1998 for the acquisition of SFPP and 2,121,033 units on August 13, 1998 for the acquisition of Hall-Buck. Additionally, we issued 6,070,578 units in a primary public offering on June 12, 1998 and we repurchased 30,000 units in December 1998.
During 1999, we issued 510,147 units on September 10, 1999 for the acquisition of assets from Primary Corporation and 9,810,000 units on December 31, 1999 related to the acquisition of assets from KMI. Additionally, in 1999, we issued 2,000 units in accordance with unit option exercises, and we repurchased 6,000 units in January 1999 and 700 units in December 1999.
During 2000, we issued 574,172 units on February 2, 2000 for the acquisition of Milwaukee Bulk Terminals, Inc. and Dakota Bulk Terminal, Inc. On April 4, 2000, we issued 4,500,000 units in a public offering at an issuance price of $39.75 per unit, less commissions and underwriting expenses. We used the proceeds from the April 2000 unit issuance to acquire the remaining ownership interest in Kinder Morgan CO2 Company, L.P. On December 21, 2000, we issued 3,296,700 units to KMI as partial consideration for acquired assets (see note 3). Additionally, in 2000, we issued 6,800 common units in accordance with common unit option exercises.
For purposes of maintaining partner capital accounts, our partnership agreement specifies that items of income and loss shall be allocated among the partners in accordance with their percentage interests. Normal allocations according to percentage interests are made, however, only after giving effect to any priority income allocations in an amount equal to the incentive distributions that are allocated 100% to our general partner.
Incentive distributions allocated to our general partner are determined by the amount quarterly distributions to unitholders exceed certain specified target levels. For the years ended December 31, 2000, 1999 and 1998, we distributed $3.425, $2.85 and $2.4725, respectively, per unit. Our distributions to unitholders for 2000, 1999 and 1998 required incentive distributions to our general partner in the amount of $107.8 million, $55.0 million and $32.7 million, respectively. The increased incentive distributions paid for 2000 over 1999 and 1999 over 1998 reflect the increase in amounts distributed per unit as well as the issuance of additional units.
On January 17, 2001, we declared a cash distribution for the quarterly period ended December 31, 2000, of $0.95 per unit. This distribution was paid on February 14, 2001, to unitholders of record as of January 31, 2001, except for the 640,000 common units and 2,656,700 class B units issued to KMI on December 21, 2000. This distribution required an incentive distribution to our general partner in the amount of $32.8 million. Since this distribution was declared after the end of the quarter, no amount is shown in the December 31, 2000 balance sheet as
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
a Distribution Payable.
12. Related Party Transactions
General and Administrative Expenses
Our general partner provides us with general and administrative services and is entitled to reimbursement of all direct and indirect costs related to our business activities. Our general partner incurred on behalf of us general and administrative expenses of $54.4 million in 2000, $30.7 million in 1999 and $38.0 million in 1998. We believe that these amounts were a reasonable allocation of the expenses incurred on our behalf.
Since K N Energy, Inc. acquired Kinder Morgan (Delaware), Inc. in October 1999, our general partner has shared administrative personnel with KMI to operate both KMI's business and our business. As a result, our general partner's officers, who in some cases may also be officers of KMI, must allocate, in their reasonable and sole discretion, the time our general partner's employees and KMI's employees spend on behalf of KMI and on behalf of us. For 2000, KMI paid our general partner a net payment of $1.0 million in January 2001 as reimbursement for the services of our general partner's employees. Although we believe this amount received from KMI for the services it provided in 2000 fairly reflects the net value of the services performed, the determination of this amount was not the result of arms length negotiations. However, due to the nature of the allocations, this reimbursement may not have exactly matched the actual time and overhead spent. We believe the agreed-upon amount was a reasonable allocation of the expenses for the services rendered. Our general partner and KMI will continue to evaluate the net amount to be charged for the services provided to KMI and us by the employees of our general partner and KMI.
Partnership Distributions
Kinder Morgan G.P., Inc.
Kinder Morgan G.P., Inc. serves as our sole general partner. Pursuant to our partnership agreements, our general partner's interests represent a 1% ownership interest in the Partnership, and a direct 1.0101% ownership interest in each of our five operating partnerships. Collectively, our general partner owns an effective 2% interest in the operating partnerships, excluding incentive distributions: its 1.0101% direct general partner ownership interest (accounted for as minority interest in the consolidated financial statements of the Partnership) and its 0.9899% ownership interest indirectly owned via its 1% ownership interest in the Partnership.
At December 31, 2000, our general partner owned 862,000 common units, representing approximately 1.3% of the outstanding units. Our partnership agreement requires that we distribute 100% of "Available Cash" (as defined in the partnership agreement) to our partners within 45 days following the end of each calendar quarter in accordance with their respective percentage interests. Available Cash consists generally of all of our cash receipts less cash disbursements and net additions to reserves (including any reserves required under debt instruments for future principal and interest payments) and amounts payable to the former general partner of SFPP in respect of its remaining 0.5% special limited partner interest in SFPP.
Available Cash is initially distributed 98% to our limited partners (including the approximate 1.3% limited partner interest owned by our general partner) and 2% to our general partner. These distribution percentages are modified to provide for incentive distributions to be paid to our general partner in the event that quarterly distributions to unitholders exceed certain specified targets.
Available Cash for each quarter is distributed;
o first, 98% to our limited partners and 2% to our general partner until
our limited partners have received a total of $0.3025 per unit for
such quarter;
o second, 85% to our limited partners and 15% to our general partner
until our limited partners have received a total of $0.3575 per unit
for such quarter;
o third, 75% to our limited partners and 25% to our general partner
until our limited partners have received a total of $0.4675 per unit
for such quarter; and
o fourth, thereafter 50% to our limited partners and 50% to our general
partner.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Incentive distributions are generally defined as all cash distributions paid to our general partner that are in excess of 2% of the aggregate amount of cash being distributed. Our general partner's declared incentive distributions for the years ended December 31, 2000, 1999 and 1998 were $107.8 million, $55.0 million and $32.7 million, respectively.
Kinder Morgan, Inc.
KMI, through its subsidiary Kinder Morgan (Delaware), Inc., remains the sole stockholder of our general partner. At December 31, 2000, KMI directly owned 10,450,000 common units and 2,656,700 class B units. These units, excluding the common units indirectly owned by our general partner, represent approximately 19.4% of the outstanding units.
13. Leases and Commitments
We have entered into certain operating leases. Including probable elections to exercise renewal options, the remaining terms on our leases range from one to 43 years. Future commitments related to these leases at December 31, 2000 are as follows (in thousands):
2001 $ 30,622
2002 50,021
2003 48,497
2004 46,480
2005 45,591
Thereafter 670,711
--------------
Total minimum payments $ 891,922
==============
|
We have not reduced our total minimum payments for future minimum sublease rentals aggregating approximately $2.4 million. Total lease and rental expenses, including related variable charges were $7.5 million for 2000, $8.8 million for 1999 and $7.3 million for 1998.
During 1998, we established a unit option plan, which provides that key personnel are eligible to receive grants of options to acquire units. The number of units available under the option plan is 250,000. The option plan terminates in March 2008. As of December 31, 2000, options for 206,800 units were granted to certain personnel with a term of seven years at exercise prices equal to the market price of the units at the grant date. In addition, as of December 31, 2000, options for 15,000 units were granted to our three non-employee directors. The options granted generally vest 40% in the first year and 20% each year thereafter.
We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for unit options granted under our option plan. Pro forma information regarding changes in net income and per unit data, if the accounting prescribed by Statement of Financial Accounting Standards No.123 "Accounting for Stock Based Compensation," had been applied, is not material. No compensation expense has been recorded since the options were granted at exercise prices equal to the market prices at the date of grant.
We have an Executive Compensation Plan for certain executive officers of our general partner. We may, at our option and with the approval of our unitholders, pay the participants in units instead of cash. Eligible awards are equal to a percentage of an incentive compensation value, which is equal to a formula based upon the cash distributions paid to our general partner during the four calendar quarters preceding the date of redemption multiplied by eight. The amount of these awards are accrued as compensation expense and adjusted quarterly. Under the plan, no eligible employee may receive a grant in excess of 2% of the incentive compensation value and total awards under the plan may not exceed 10% of the incentive compensation value. The plan terminates January 1, 2007, and any unredeemed awards will be automatically redeemed.
At December 31, 1998, two executive officers of our general partner each had outstanding awards totaling 2% of the incentive compensation value eligible to be granted under the Executive Compensation Plan. On January 4, 1999, 50% of the awards granted to these executive officers were vested and paid out. On April 28, 2000, the remaining 50% of the awards granted to these executive officers were vested and paid out.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Risk Management
We use energy financial instruments to reduce our risk of price changes in the spot and fixed price natural gas, natural gas liquids and crude oil markets as discussed below. We are exposed to credit-related losses in the event of nonperformance by counterparties to these financial instruments but, given their existing credit ratings, we do not expect any counterparties to fail to meet their obligations. The fair value of these risk management instruments reflects the estimated amounts that we would receive or pay to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses on open contracts. We have available market quotes for substantially all of the financial instruments that we use.
The energy risk management products that we use include:
o commodity futures and options contracts;
o fixed-price swaps; and
o basis swaps.
Pursuant to our management's approved policy, we are to engage in these activities only as a hedging mechanism against price volatility associated with:
o pre-existing or anticipated physical natural gas, natural gas liquids,
crude oil and carbon dioxide sales;
o gas purchases; and
o system use and storage.
Our risk management activities are only used in order to protect our profit
margins and we are prohibited from engaging in speculative trading.
Commodity-related activities of our risk management group are monitored by KMI's
Risk Management Committee, which is charged with the review and enforcement of
our management's risk management policy. Gains and losses on hedging positions
are deferred and recognized as natural gas purchases expense in the periods in
which the underlying physical transactions occur.
Purchases or sales of commodity contracts require a dollar amount to be placed in margin accounts. In addition, we are required to post margins with certain over-the-counter swap partners. These margin requirements are determined based upon credit limits and mark-to-market positions. At December 31, 2000, we had $7.0 million in margin deposits associated with commodity contract positions and $0.0 million in margin deposits associated with over-the-counter swap partners.
The differences between the current market value and the original physical contracts value associated with hedging activities are reflected, depending on maturity, as deferred charges or credits and other current assets or liabilities in the accompanying consolidated balance sheet at December 31, 2000. These deferrals are offset by the corresponding value of the underlying physical transactions. In the event energy financial instruments are terminated prior to the period of physical delivery of the items being hedged, the gains and losses on the energy financial instruments at the time of termination remain deferred until the period of physical delivery.
Given our portfolio of businesses as of December 31, 2000, our principal uses of derivative financial instruments will be to mitigate the risk associated with market movements in the price of energy commodities. Our short natural gas derivatives position primarily represents our hedging of anticipated future natural gas sales. Our short crude oil derivatives position represents our crude oil derivative sales made to hedge anticipated oil sales. In addition, crude oil contracts have been sold to hedge anticipated carbon dioxide sales that have pricing tied to crude oil prices. Finally, our short natural gas liquids derivatives position reflects the hedging of our forecasted natural gas liquids sales.
The short and long positions shown in the table that follows are principally associated with the activities described above. Current deferred net gains (losses) are reported as Deferred Revenues in the current liability section on the accompanying consolidated balance sheet at December 31, 2000. Long-term deferred net gains (losses) are included with Other Long-Term Liabilities and Deferred Credits on the accompanying consolidated balance sheet at December 31, 2000. In 2001, these amounts will be included with other comprehensive income as
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
discussed below.
As of December 31, 2000, our commodity contracts and over-the-counter swaps and options (in thousands) consisted of the following:
Commodity Over the Counter
Contracts Swaps and Options Total
-----------------------------------------
Deferred Net (Loss) Gain $ 6,977 $ (36,229) $ (29,252)
Contract Amounts - Gross $816,216 $1,537,671 $2,353,887
Contract Amounts - Net $(58,679) $ (156,966) $ (215,645)
Credit Exposure of Loss $ - $ 23,570 $ 23,570
Natural Gas
Notional Volumetric Positions: Long 5,206 11,837
Notional Volumetric Positions: Short (5,475) (14,298)
Net Notional Totals to Occur in 2001 186 (2,014)
Net Notional Totals to Occur in 2002
and Beyond (455) (447)
Crude Oil
Notional Volumetric Positions: Long 34 102
Notional Volumetric Positions: Short (1,585) (5,108)
Net Notional Totals to Occur in 2001 (1,107) (2,147)
Net Notional Totals to Occur in 2002
and Beyond (444) (2,589)
Natural Gas Liquids
Notional Volumetric Positions: Long - 120
Notional Volumetric Positions: Short - (951)
Net Notional Totals to Occur in 2001 - (510)
Net Notional Totals to Occur in 2002
and Beyond - (321)
|
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". The statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset of liability measured at its fair value. The statement requires that changes in the derivatives fair value be recognized currently in earnings unless specific hedge accounting criteria are met. If the derivatives meet these criteria, the statement allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company formally designate a derivative as a hedge and document and assess the effectiveness of derivatives associated with transactions that receive hedge accounting.
SFAS No. 133, after amendment by SFAS No. 137 and SFAS No. 138, is effective for all quarters of all fiscal years beginning after June 15, 2000. The statement cannot be applied retroactively. As discussed above, our principal use of derivative financial instruments is to mitigate the market price risk associated with anticipated transactions for the purchase and sale of natural gas, natural gas liquids, crude oil and carbon dioxide. The statement allows these transactions to continue to be treated as hedges for accounting purposes, although the changes in the market value of these instruments will affect comprehensive income in the period in which they occur and any ineffectiveness in the risk mitigation performance of the hedge will affect net income currently. The change in the market value of these instruments representing effective hedge operation will continue to affect net income in the period in which the associated physical transactions are consummated. Adoption of the statement will result in the deferred net loss shown in the preceding table being reported as part of other comprehensive income, as well as subsequent changes in the market value of these derivatives.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Reportable Segments
We compete in four reportable business segments (see note 1):
o Product Pipelines;
o Natural Gas Pipelines;
o CO2 Pipelines; and
o Bulk Terminals.
Each segment uses the same accounting policies as those described in the summary of significant accounting policies (see note 2). We evaluate performance based on each segments' earnings, which excludes general and administrative expenses, third-party debt costs, interest income and expense and minority interest. Our reportable segments are strategic business units that offer different products and services. Each segment is managed separately because each segment involves different products and marketing strategies.
Financial information by segment follows (in thousands):
2000 1999 1998
--------------- -------------- --------------
Revenues
Product Pipelines $ 421,423 $ 314,113 $ 258,722
Natural Gas Pipelines 173,036 - -
CO2 Pipelines 89,214 23 979
Bulk Terminals 132,769 114,613 62,916
--------------- -------------- --------------
Total Segments $ 816,442 $ 428,749 $ 322,617
=============== ============== ==============
Operating Income
Product Pipelines $ 193,531 $ 186,086 $ 159,227
Natural Gas Pipelines 97,198 - (103)
CO2 Pipelines 47,901 18 957
Bulk Terminals 36,996 36,917 20,572
--------------- -------------- --------------
Total Segments $ 375,626 $ 223,021 $ 180,653
=============== ============== ==============
Earnings from equity investments, net of amortization of excess costs
Product Pipelines $ 29,105 $ 21,395 $ 5,854
Natural Gas Pipelines 14,975 2,759 4,577
CO2 Pipelines 19,328 14,487 14,500
Bulk Terminals - 23 37
--------------- -------------- --------------
Total Segments $ 63,408 $ 38,664 $ 24,968
=============== ============== ==============
Interest revenue
Product Pipelines $ - $ - $ 22
Natural Gas Pipelines - - -
CO2 Pipelines - - -
Bulk Terminals - - -
--------------- -------------- --------------
Total Segments $ - $ - $ 22
=============== ============== ==============
|
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2000 1999 1998
--------------- -------------- --------------
Interest (expense)
Product Pipelines $ - $ - $ -
Natural Gas Pipelines - - (338)
CO2 Pipelines - - -
Bulk Terminals - - -
--------------- -------------- --------------
Total Segments $ - $ - $ (338)
=============== ============== ==============
Other, net
Product Pipelines $ 10,492 $ 10,008 $ (6,492)
Natural Gas Pipelines 744 14,099 (6)
CO2 Pipelines 741 710 -
Bulk Terminals 2,607 (669) (765)
--------------- -------------- --------------
Total Segments $ 14,584 $ 24,148 $ (7,263)
=============== ============== ==============
Income tax benefit (expense)
Product Pipelines $ (11,960)$ (8,493) $ (1,698)
Natural Gas Pipelines - (45) 726
CO2 Pipelines - - -
Bulk Terminals (1,974) (1,288) (600)
--------------- -------------- --------------
Total Segments $ (13,934)$ (9,826) $ (1,572)
=============== ============== ==============
Segment earnings
Product Pipelines $ 221,168 $ 208,996 $ 156,913
Natural Gas Pipelines 112,917 16,813 4,856
CO2 Pipelines 67,970 15,215 15,457
Bulk Terminals 37,629 34,983 19,244
--------------- -------------- --------------
Total Segments (1) $ 439,684 $ 276,007 $ 196,470
=============== ============== ==============
|
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2000 1999 1998
--------------- -------------- -------------
Assets at December 31
Product Pipelines $ 2,230,287 $ 2,015,995 $ 1,817,126
Natural Gas Pipelines 1,544,489 879,076 27,518
CO2 Pipelines 417,278 86,684 86,760
Bulk Terminals 357,689 203,601 186,298
--------------- -------------- -------------
Total Segments (2) $ 4,549,743 $ 3,185,356 $ 2,117,702
=============== ============== =============
Depreciation and amortization
Product Pipelines $ 41,659 $ 38,928 $ 32,687
Natural Gas Pipelines 20,780 - -
CO2 Pipelines 10,559 - -
Bulk Terminals 9,632 7,541 3,870
--------------- -------------- -------------
Total Segments $ 82,630 $ 46,469 $ 36,557
=============== ============== =============
Equity Investments at December 31
Product Pipelines $ 231,651 $ 243,668 $ 124,283
Natural Gas Pipelines 141,613 88,249 27,568
CO2 Pipelines 9,559 86,675 86,688
Bulk Terminals 59 59 69
--------------- -------------- -------------
Total Segments $ 382,882 $ 418,651 $ 238,608
=============== ============== =============
Capital expenditures
Product Pipelines $ 69,243 $ 68,674 $ 28,393
Natural Gas Pipelines 14,496 - -
CO2 Pipelines 16,115 - 69
Bulk Terminals 25,669 14,051 9,945
--------------- -------------- -------------
Total Segments $ 125,523 $ 82,725 $ 38,407
=============== ============== =============
(1) The following reconciles segment earnings to net income.
2000 1999 1998
--------------- -------------- -------------
Segment earnings $ 439,684 $ 276,007 $ 196,470
Interest and corporate
administrative expenses (a) (161,336) (93,705) (92,864)
--------------- -------------- -------------
Net Income $ 278,348 $ 182,302 $ 103,606
=============== ============== =============
|
(a) Includes interest and debt expense, general and administrative expenses, minority interest expense, extraordinary charges and other insignificant items.
(2) The following reconciles segment assets to consolidated assets.
2000 1999 1998
--------------- -------------- -------------
Segment assets $ 4,549,743 $ 3,185,356 $ 2,117,702
Corporate assets (a) 75,467 43,382 34,570
--------------- -------------- -------------
Total assets $ 4,625,210 $ 3,228,738 $ 2,152,272
=============== ============== =============
|
(a) Includes cash, cash equivalents and certain unallocable deferred charges.
Our total operating revenues are derived from a wide customer base. During each of the years ended December 31, 2000 and December 31, 1999, no revenues from transactions with a single external customer amounted to 10% or more of our consolidated revenues. In 1998, revenues from one customer of our Products Pipelines and Bulk Terminals segments represented approximately $42.5 million (13.2%) of our consolidated revenues. Additionally, in 1998, three other customers of our Product Pipelines segment accounted for more than 10% of our consolidated revenues. Revenues from these customers were approximately $39.7 million (12.3%), $35.29 million (11.0%) and $35.28 million (10.9%), respectively, of consolidated revenues. Our management believes that we are exposed to minimal credit risk, and we generally do not require collateral for our receivables.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Litigation and Other Contingencies
The tariffs charged for interstate common carrier pipeline transportation for our pipelines are subject to rate regulation by the Federal Energy Regulatory Commission ("FERC") under the Interstate Commerce Act. The Interstate Commerce Act requires, among other things, that petroleum products pipeline rates be just and reasonable and non-discriminatory. Pursuant to FERC Order No. 561, effective January 1, 1995, petroleum products pipelines are able to change their rates within prescribed ceiling levels that are tied to an inflation index. FERC Order No. 561-A, affirming and clarifying Order No. 561, expands the circumstances under which petroleum products pipelines may employ cost-of-service ratemaking in lieu of the indexing methodology, effective January 1, 1995. For each of the years ended December 31, 2000, 1999 and 1998, the application of the indexing methodology did not significantly affect our tariff rates.
Federal Energy Regulatory Commission Proceedings
SFPP, L.P.
SFPP, L.P. is the partnership that owns our Pacific operations. Tariffs charged by SFPP are subject to certain proceedings involving shippers' protests regarding the interstate rates, as well as practices and the jurisdictional nature of certain facilities and services, on our Pacific operations' pipeline systems. In September 1992, El Paso Refinery, L.P. filed a protest/complaint with the FERC:
o challenging SFPP's East Line rates from El Paso, Texas to Tucson and
Phoenix, Arizona;
o challenging SFPP's proration policy; and
o seeking to block the reversal of the direction of flow of SFPP's
six-inch pipeline between Phoenix and Tucson.
At various dates following El Paso Refinery's September 1992 filing, other shippers on SFPP's South System filed separate complaints, and/or motions to intervene in the FERC proceeding, challenging SFPP's rates on its East and West Lines. These shippers include:
o Chevron U.S.A. Products Company;
o Navajo Refining Company;
o ARCO Products Company;
o Texaco Refining and Marketing Inc.;
o Refinery Holding Company, L.P. (a partnership formed by El Paso
Refinery's long-term secured creditors that purchased its refinery in
May 1993);
o Mobil Oil Corporation; and
o Tosco Corporation.
Certain of these parties also claimed that a gathering enhancement charge at SFPP's Watson origin pump station in Carson, California was charged in violation of the Interstate Commerce Act. In subsequent procedural rulings, the FERC consolidated these challenges (Docket Nos. OR92-8-000, et al.) and ruled that they must proceed as a complaint proceeding, with the burden of proof being placed on the complaining parties. These parties must show that SFPP's rates and practices at issue violate the requirements of the Interstate Commerce Act.
Hearings in the FERC proceeding were held in 1996 and an initial decision by the FERC administrative law judge was issued on September 25, 1997. The initial decision upheld SFPP's position that "changed circumstances" were not shown to exist on the West Line, thereby retaining the just and reasonable status of all West Line rates that were "grandfathered" under the Energy Policy Act of 1992. Accordingly, the administrative law judge ruled that these rates are not subject to challenge, either for the past or prospectively, in that proceeding. The administrative law judge's decision specifically excepted from that ruling SFPP's Tariff No. 18 for movement of jet fuel from Los Angeles to Tucson, which was initiated subsequent to the enactment of the Energy Policy Act.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The initial decision also included rulings that were generally adverse to SFPP on such cost of service issues as:
o the capital structure to be used in computing SFPP's 1985 starting
rate base under FERC Opinion 154-B;
o the level of income tax allowance; and
o the recoverability of civil and regulatory litigation expense and
certain pipeline reconditioning costs.
The administrative law judge also ruled that the gathering enhancement service at SFPP's Watson origin pump station was subject to FERC jurisdiction and ordered that a tariff for that service and supporting cost of service documentation be filed no later than 60 days after a final FERC order on this matter.
On January 13, 1999, the FERC issued its Opinion No. 435, which affirmed in part and modified in part the initial decision. In Opinion No. 435, the FERC ruled that all but one of the West Line rates are "grandfathered" as just and reasonable and that "changed circumstances" had not been shown to satisfy the complainants' threshold burden necessary to challenge those rates. The FERC further held that the one "non-grandfathered" West Line tariff did not require rate reduction. Accordingly, the FERC dismissed all complaints against the West Line rates without any requirement that SFPP reduce, or pay any reparations for, any West Line rate.
With respect to the East Line rates, Opinion No. 435 reversed in part and affirmed in part the initial decision's ruling regarding the methodology for calculating the rate base for the East Line. Opinion No. 435 modified the initial decision concerning the date on which the starting rate base should be calculated and the accumulated deferred income tax and allowable cost of equity used to calculate the rate base. In addition, Opinion No. 435 ruled that SFPP would not owe reparations to any complainant for any period prior to the date on which that complainant's complaint was filed, thus reducing by two years the potential reparations period claimed by most complainants. On January 19, 1999, ARCO filed a petition with the United States Court of Appeals for the District of Columbia Circuit for review of Opinion No. 435. SFPP and a number of the complainants each sought rehearing by FERC of elements of Opinion No. 435. In compliance with Opinion No. 435, on March 15, 1999, SFPP submitted a compliance filing implementing the rulings made by FERC, establishing the level of rates to be charged by SFPP in the future, and setting forth the amount of reparations owed by SFPP to the complainants under the order. The complainants contested SFPP's compliance filing.
SFPP and certain complainants sought rehearing of Opinion No. 435 by the FERC, asking that a number of rulings be modified. On May 17, 2000, the FERC issued its Opinion No. 435-A, which ruled on the requests for rehearing and modified Opinion No. 435 in certain respects. It denied requests to reverse its prior rulings that SFPP's West Line rates and Watson Station gathering enhancement facilities charge are entitled to be treated as just and reasonable "grandfathered" rates under the Energy Policy Act. It suggested, however, that if SFPP had fully recovered the capital costs of the Watson Station facilities, that might form the basis of an amended "changed circumstances" complaint.
Opinion No. 435-A granted a request by Chevron and Navajo to require that SFPP's December 1988 partnership capital structure be used to compute the starting rate base from December 1983 forward, as well as a request by SFPP to vacate a ruling that would have required the elimination of approximately $125 million from the rate base used to determine capital structure. It also granted two clarifications sought by Navajo, to the effect that SFPP's return on its starting rate base should be based on SFPP's capital structure in each given year (rather than a single capital structure from the outset) and that the return on deferred equity should also vary with the capital structure for each year. Opinion No. 435-A denied the request of Chevron and Navajo that no income tax allowance be recognized for the limited partnership interests held by SFPP's corporate parent, as well as SFPP's request that the tax allowance should include interests owned by certain non-corporate entities. However, it granted Navajo's request to make the computation of interest expense for tax allowance purposes the same as the computation for debt return.
Opinion No. 435-A reaffirmed that SFPP may recover certain litigation costs incurred in defense of its rates (amortized over five years), but reversed a ruling that those expenses may include the costs of certain civil litigation between SFPP and Navajo and El Paso. It also reversed a prior decision that litigation costs should be allocated between the East and West Lines based on throughput, and instead adopted SFPP's position that such expenses should be split equally between the two systems.
As to reparations, Opinion No. 435-A held that no reparations would be awarded to West Line shippers and that only Navajo was eligible to recover reparations on the East Line. It reaffirmed that a 1989 settlement with SFPP barred Navajo from obtaining reparations prior to November 23, 1993, but allowed Navajo reparations for a one-month period prior to the filing of its December 23, 1993 complaint. Opinion No. 435-A also confirmed that FERC's indexing
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
methodology should be used in determining rates for reparations purposes and made certain clarifications sought by Navajo.
Opinion No. 435-A denied Chevron's request for modification of SFPP's prorationing policy. This policy requires customers to demonstrate a need for additional capacity if a shortage of available pipeline space exits.
Finally, Opinion No. 435-A directed SFPP to revise its initial compliance filings to reflect the modified rulings. It eliminated the refund obligation for the compliance tariff containing the Watson Station gathering enhancement charge, but required SFPP to pay refunds to the extent that the compliance tariff East Line rates are higher than the rates produced under Opinion No. 435-A.
In June 2000, several parties filed requests for rehearing of certain rulings made in Opinion No. 435-A. Chevron and RHC both sought reconsideration of the FERC's ruling that only Navajo is entitled to reparations for East Line shipments. SFPP sought rehearing of the FERC's:
o decision to require use of the December 1988 partnership capital
structure for the period 1994-98 in computing the starting rate base;
o elimination of civil litigation costs;
o refusal to allow any recovery of civil litigation settlement payments;
and
o failure to provide any allowance for regulatory expenses in
prospective rates.
ARCO, Chevron, Navajo, RHC, Texaco and SFPP sought judicial review of Opinion No. 435-A in the United States Court of Appeals for the District of Columbia Circuit. The FERC moved to:
o consolidate those petitions with prior ARCO and RHC petitions to
review Opinion No. 435;
o dismiss the Chevron, RHC and SFPP petitions; and
o hold the other petitions in abeyance pending ruling on the requests
for rehearing of Opinion No. 435-A.
On July 17, 2000, SFPP submitted a compliance filing implementing the rulings made in Opinion No. 435-A, together with a calculation of reparations due to Navajo and refunds due to other East Line shippers. SFPP also filed a tariff containing East Line rates based on those rulings. On August 16, 2000, the FERC directed SFPP to supplement its compliance filing by providing certain underlying workpapers and information; SFPP responded to that order on August 31, 2000.
On September 19, 2000, the Court of Appeals dismissed Chevron's petition for lack of prosecution, and the court in an order issued January 19, 2001 denied a November 2, 2000 motion by Chevron for reconsideration of that dismissal. On October 20, 2000, the court dismissed the petitions for review filed by SFPP and RHC as premature in light of their pending requests for FERC rehearing, consolidated the ARCO, Navajo and Texaco petitions for review with the petitions for review of Opinion No. 435, and ordered that proceedings be held in abeyance until after FERC action on the rehearing requests.
In December 1995, Texaco filed an additional FERC complaint, which involves the question of whether a tariff filing was required for movements on SFPP's Sepulveda Lines, which are upstream of its Watson, California station origin point, and, if so, whether those rates may be set in that proceeding and what those rates should be. Several other West Line shippers have filed similar complaints and/or motions to intervene in this proceeding, all of which have been consolidated into Docket Nos. OR96-2-000, et al. Hearings before an administrative law judge were held in December 1996 and the parties completed the filing of final post-hearing briefs in January 1997.
On March 28, 1997, the administrative law judge issued an initial decision holding that the movements on the Sepulveda Lines are not subject to FERC jurisdiction. On August 5, 1997, the FERC reversed that decision and found the Sepulveda Lines to be subject to the jurisdiction of the FERC. The FERC ordered SFPP to make a tariff filing within 60 days to establish an initial rate for these facilities. The FERC reserved decision on reparations until it ruled on the newly-filed rates. On October 6, 1997, SFPP filed a tariff establishing the initial interstate rate for movements on the Sepulveda Lines from Sepulveda Junction to Watson Station at the preexisting rate of five cents per barrel, along with supporting cost of service documentation. Subsequently, several shippers filed protests and motions to intervene at the FERC challenging that rate. On December 24, 1997, FERC denied SFPP's request for rehearing of the August 5, 1997 decision. On December 31, 1997, SFPP filed an application for market power determination, which, if granted, will
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
enable it to charge market-based rates for this service. Several parties protested SFPP's application. On September 30, 1998, the FERC issued an order finding that, based on SFPP's application, SFPP lacks market power in the Watson Station destination market served by the Sepulveda Lines. The FERC found that SFPP appeared to lack market power in the origin market served by the Sepulveda Lines as well, but established a hearing to permit the protesting parties to substantiate allegations that SFPP possesses market power in the origin market. Hearings before a FERC administrative law judge on this limited issue were held in February 2000.
On December 21, 2000, the FERC administrative law judge issued his initial decision finding that SFPP possesses market power over the Sepulveda Lines origin market. Upon the filing by SFPP and other parties of briefs opposing and supporting the initial decision with the FERC, the ultimate disposition of SFPP's market rate application will be before the FERC.
Since the issuance of the initial decision in the Sepulveda case, the FERC judge has indicated an intention to proceed to consideration of the justness and reasonableness of the existing rate for service on the Sepulveda Lines. SFPP has sought clarification from FERC on the proper disposition of that issue in light of the pendency of its market rate application and prior deferral of consideration of SFPP's tariff filing. Further proceedings on this matter have been suspended pending resolution of SFPP's motion for clarification to the FERC.
On October 22, 1997, ARCO, Mobil and Texaco filed another complaint at the FERC (Docket No. OR98-1-000) challenging the justness and reasonableness of all of SFPP's interstate rates. The complaint again challenges SFPP's East and West Line rates and raises many of the same issues, including a renewed challenge to the grandfathered status of West Line rates, that have been at issue in Docket Nos. OR92-8-000, et al. The complaint includes an assertion that the acquisition of SFPP and the cost savings anticipated to result from the acquisition constitute "substantially changed circumstances" that provide a basis for terminating the "grandfathered" status of SFPP's otherwise protected rates. The complaint also seeks to establish that SFPP's grandfathered interstate rates from the San Francisco Bay area to Reno, Nevada and from Portland to Eugene, Oregon are also subject to "substantially changed circumstances" and, therefore, are subject to challenge. In November 1997, Ultramar Diamond Shamrock Corporation filed a similar complaint at the FERC (Docket No. OR98-2-000, et al.). The shippers are seeking both reparations and prospective rate reductions for movements on all of the lines.
SFPP filed answers to both complaints, and on January 20, 1998, the FERC issued an order accepting the complaints and consolidating both complaints into one proceeding, but holding them in abeyance pending a FERC decision on review of the initial decision in Docket Nos. OR92-8-000, et al. In July 1998, some complainants amended their complaints to incorporate updated financial and operational data on SFPP. SFPP answered the amended complaints. In a companion order to Opinion No. 435, the FERC directed the complainants to amend their complaints, as may be appropriate, consistent with the terms and conditions of its orders, including Opinion No. 435. On January 10 and 11, 2000, the complainants again amended their complaints to incorporate further updated financial and operational data on SFPP. SFPP filed an answer to these amended complaints on February 15, 2000. On May 17, 2000, the FERC issued an order finding that the various complaining parties had alleged sufficient grounds for their complaints against SFPP's interstate rates to go forward to a hearing. At such hearing, the administrative law judge will assess whether any of the challenged rates that are grandfathered under the Energy Policy Act will continue to have such status and, if the grandfathered status of any rate is not upheld, whether the existing rate is just and reasonable.
Discovery in this new proceeding is currently being conducted, with a hearing scheduled for August 2001 and an initial decision by the administrative law judge due in January 2002.
In August 2000, Navajo and RHC filed new complaints against SFPP's East Line rates and Ultramar filed an additional complaint updating its pre-existing challenges to SFPP's interstate pipeline rates. SFPP answered the complaints, and on September 22, 2000, the FERC issued an order accepting these new complaints and consolidating them with the ongoing proceeding in Docket No. OR96-2-000, et al.
Applicable rules and regulations in this field are vague, relevant factual issues are complex and there is little precedent available regarding the factors to be considered or the method of analysis to be employed in making a determination of "substantially changed circumstances," which is the showing necessary to make "grandfathered" rates subject to challenge. The complainants have alleged a variety of grounds for finding "substantially changed circumstances," including the acquisition of SFPP and cost savings achieved subsequent to the acquisition. Given the newness of the grandfathering standard under the Energy Policy Act and limited precedent, we cannot predict how these
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allegations will be viewed by the FERC.
If "substantially changed circumstances" are found, SFPP rates previously "grandfathered" under the Energy Policy Act may lose their "grandfathered" status. If these rates are found to be unjust and unreasonable, shippers may be entitled to a prospective rate reduction together with reparations for periods from the date of the complaint to the date of the implementation of the new rates.
We are not able to predict with certainty the final outcome of the FERC proceedings, should they be carried through to their conclusion, or whether we can reach a settlement with some or all of the complainants. Although it is possible that current or future proceedings could be resolved in a manner adverse to us, we believe that the resolution of such matters will not have a material adverse effect on our business, financial position or results of operations.
KMIGT
On January 23, 1998, KMIGT filed a general rate case with the FERC requesting a $30.2 million increase in annual revenues. As a result of the FERC's action, KMIGT was allowed to place its rates into effect on August 1, 1998, subject to refund. On November 3, 1999, KMIGT filed a comprehensive Stipulation and Agreement to resolve all issues in this proceeding. The FERC approved the Stipulation and Agreement on December 22, 1999. The settlement rates have been placed in effect, and KMIGT paid refunds of $34.7 million during 2000. The refunds did not exceed amounts previously accrued.
Trailblazer
On July 1, 1997, Trailblazer filed a rate case with the FERC (Docket No. RP97-408) which reflected a proposed annual revenue increase of $3.3 million. The timing of the rate case filing was in accordance with the requirements of Trailblazer's previous rate case settlement in Docket No. RP93-55. The FERC issued an order on July 31, 1997, which suspended the rates to be effective January 1, 1998. Major issues in the rate case included:
o throughput levels used in the design of rates;
o levels of depreciation rates;
o return on investment; and
o the cost of service treatment of the Columbia settlement revenues.
Trailblazer filed a proposed settlement agreement with the administrative law judge on May 8, 1998. The presiding administrative law judge certified the settlement to the FERC in an order dated June 25, 1998. The FERC issued an order on October 19, 1998 remanding the settlement, which was contested by two parties, to the presiding administrative law judge for further action. A revised settlement was filed on November 20, 1998. The presiding administrative law judge certified the revised settlement to the FERC on January 25, 1999.
The FERC issued orders on April 28, 1999 and August 3, 1999, approving the revised settlement as to all parties except the two parties who contested the settlement. As to the two contesting parties, the FERC established hearing procedures. On March 3, 2000, Trailblazer and the two parties filed a joint motion indicating that a settlement in principle had been reached. On March 6, 2000, the presiding administrative law judge issued an order suspending the procedural schedule and hearing pending the filing of the appropriate documents necessary to terminate the proceeding. On March 16, 2000, the two contesting parties filed a motion to withdraw their requests for rehearing of the FERC orders approving the settlement and concurrently those parties and Trailblazer jointly moved to terminate the proceeding. On March 30, 2000, the administrative law judge issued an order granting motion to terminate further proceedings, followed by an initial decision on April 7, 2000, terminating the proceedings. On May 18, 2000, the FERC issued a notice of the finality of the initial decision. Refunds related to the rate case were made in April 28, 2000 and totaled approximately $17.8 million. Adequate reserves had previously been established.
California Public Utilities Commission Proceeding
ARCO, Mobil and Texaco filed a complaint against SFPP with the California Public Utilities Commission on April 7, 1997. The complaint challenges rates charged by SFPP for intrastate transportation of refined petroleum products through its pipeline system in the State of California and requests prospective rate adjustments. On October 1, 1997, the
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
complainants filed testimony seeking prospective rate reductions aggregating approximately $15 million per year.
On August 6, 1998, the CPUC issued its decision dismissing the complainants' challenge to SFPP's intrastate rates. On June 24, 1999, the CPUC granted limited rehearing of its August 1998 decision for the purpose of addressing the proper ratemaking treatment for partnership tax expenses, the calculation of environmental costs and the public utility status of SFPP's Sepulveda Line and its Watson Station gathering enhancement facilities. In pursuing these rehearing issues, complainants seek prospective rate reductions aggregating approximately $10 million per year.
On March 16, 2000, SFPP filed an application with the CPUC seeking authority to justify its rates for intrastate transportation of refined petroleum products on competitive, market-based conditions rather than on traditional, cost-of-service analysis.
On April 10, 2000, ARCO and Mobil filed a new complaint with the CPUC asserting that SFPP's California intrastate rates are not just and reasonable based on a 1998 test year and requesting the CPUC to reduce SFPP's rates prospectively. The amount of the reduction in SFPP rates sought by the complainants is not discernible from the complaint.
Procedurally, the rehearing complaint will be heard first, followed by consideration of the April 2000 complaint and SFPP's market-based application, which have been consolidated for hearing by the CPUC. The rehearing complaint was the subject of evidentiary hearings in October 2000, and a decision is expected within two to six months. The April 2000 complaint and SFPP's market-based application will be the subject of evidentiary hearings in February 2001, with a decision expected within six months of the hearings.
We believe that the resolution of such matters will not have a material adverse effect on our business, financial position or results of operations.
Southern Pacific Transportation Company Easements
SFPP and Southern Pacific Transportation Company are engaged in a judicial reference proceeding to determine the extent, if any, to which the rent payable by SFPP for the use of pipeline easements on rights-of-way held by SPTC should be adjusted pursuant to existing contractual arrangements (Southern Pacific Transportation Company vs. Santa Fe Pacific Corporation, SFP Properties, Inc., Santa Fe Pacific Pipelines, Inc., SFPP, L.P., et al., Superior Court of the State of California for the County of San Francisco, filed August 31, 1994). Although SFPP received a favorable ruling from the trial court in May 1997, in September 1999, the California Court of Appeals remanded the case back to the trial court for further proceeding. SFPP is accruing amounts for payment of the rental for the subject rights-of-way consistent with our expectations of the ultimate outcome of the proceeding.
FERC Order 637
On June 15, 2000, KMIGT made its filing to comply with the FERC's Orders 637 and 637-A. That filing contained KMIGT's compliance plan to implement the changes required by the FERC dealing with the way business is conducted on interstate pipelines. All interstate pipelines are required to make such compliance filings, according to a schedule established by the FERC. KMIGT's filing is currently pending FERC action, and any changes to its tariff provisions are not expected to take effect until after the entire Order 637 process is finished for all pipelines. Separately, numerous petitioners, including KMIGT, have filed appeals of Order No. 637 in the D.C. Circuit, potentially raising a wide array of issues.
Carbon Dioxide Litigation
Kinder Morgan CO2Company, L.P., as the successor to Shell CO2 Company, Ltd. and directly and indirectly through its ownership interest in the Cortez Pipeline Company, along with other entities, is a defendant in several actions in which the plaintiffs allege that the defendants undervalued carbon dioxide produced from the McElmo Dome field and overcharged for transportation costs, thereby allegedly underpaying royalties and severance tax payments. The plaintiffs are comprised of royalty, overriding royalty and small share working interest owners who claim that they were underpaid by the defendants. These cases are: CO2 Claims Coalition, LLC v. Shell Oil Co., et al., No. 96-Z-2451 (U.S.D.C. Colo.); Rutter & Wilbanks et al. v. Shell Oil Co., et al., No. 00-Z-1854 (U.S.D.C. Colo.); Watson v. Shell Oil Co., et al., No. 00-Z-1855 (U.S.D.C. Colo.); Ainsworth et al. v. Shell Oil Co., et al., No.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
00-Z-1856 (U.S.D.C. Colo.); United States ex rel. Crowley v. Shell Oil Company, et al., No. 00-Z-1220 (U.S.D.C. Colo.); Ptasynski et al. v. Shell Western E&P Inc., et al., No. 3:97-CV-1208-R (U.S.D.C. Tex. N. Dist. Dallas Div.); Feerer et al. v. Amoco Production Co., et al., No. 99-2231 (U.S. Ct. App. 10th Cir.); Shell Western E&P Inc. v. Bailey, et al., No 98-28630 (215th Dist. Ct. Harris County, Tex.); Shores, et al. v. Mobil Oil Corporation, et al., No. GC-99-01184 (Texas Probate Court, Denton County); and Celeste C. Grynberg v. Shell Oil Company, et al., No. 98-CV-43 (Colo. Dist. Ct. Montezuma County).
Although no assurances can be given, we believe that we have meritorious defenses to these actions, that we have established an adequate reserve to cover potential liability, and that these matters will not have a material adverse effect on our business, financial position or results of operations.
Environmental Matters
We are subject to environmental cleanup and enforcement actions from time to time. In particular, the federal Comprehensive Environmental Response, Compensation and Liability Act generally imposes joint and several liability for cleanup and enforcement costs on current or predecessor owners and operators of a site, without regard to fault or the legality of the original conduct. Our operations are also subject to federal, state and local laws and regulations relating to protection of the environment. Although we believe our operations are in substantial compliance with applicable environmental regulations, risks of additional costs and liabilities are inherent in pipeline and terminal operations, and there can be no assurance that we will not incur significant costs and liabilities. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from our operations, could result in substantial costs and liabilities to us.
We are currently involved in the following governmental proceedings related to compliance with environmental regulations:
o one cleanup ordered by the United States Environmental Protection
Agency related to ground water contamination in the vicinity of SFPP's
storage facilities and truck loading terminal at Sparks, Nevada; and
o several ground water hydrocarbon remediation efforts under
administrative orders issued by the California Regional Water Quality
Control Board and two other state agencies.
In addition, we are from time to time involved in civil proceedings relating to damages alleged to have occurred as a result of accidental leaks or spills of refined petroleum products, natural gas liquids, natural gas and carbon dioxide.
Review of assets related to Kinder Morgan Interstate Gas Transmission LLC includes the environmental impacts from petroleum and used oil releases to the soil and groundwater at five sites. Further delineation and remediation of these impacts will be conducted. A reserve was established to address the closure of these issues.
Although no assurance can be given, we believe that the ultimate resolution of all these environmental matters set forth in this note will not have a material adverse effect on our business, financial position or results of operations. We have recorded a reserve for environmental claims in the amount of $21.1 million at December 31, 2000.
Other
We are a defendant in various lawsuits arising from the day-to-day operations of our businesses. Although no assurance can be given, we believe, based on our experiences to date, that the ultimate resolution of such items will not have a material adverse impact on our business, financial position or results of operations.
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Quarterly Financial Data (unaudited)
Basic Diluted
Operating Operating Net Income Net Income
Revenues Income Net Income per Unit per Unit
(In thousands, except per unit amounts)
--------------------------------------------------------------------------------
2000
First Quarter $157,358 $63,061 $59,559 $0.63 $0.63
Second Quarter 193,758 79,976 71,810 0.70 0.70
Third Quarter 202,575 79,826 69,860 0.67 0.67
Fourth Quarter 262,751 92,698 77,119 0.68 0.68
--------------------------------------------------------------------------------
1999
First Quarter $100,049 $47,645 $41,069 $0.57 $0.57
Second Quarter 102,933 47,340 43,113 0.61 0.61
Third Quarter (1) 104,388 48,830 52,553 0.77 0.77
Fourth Quarter 121,379 43,592 45,567 0.62 0.62
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(1) 1999 third quarter includes an extraordinary charge of $2.6 million due to an early extinguishment of debt. Net income before extraordinary charge was $55.1 million and basic net income per unit before extraordinary charge was $0.82.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 12th day of March 2001.
KINDER MORGAN ENERGY PARTNERS, L.P.
(A Delaware Limited Partnership)
By: KINDER MORGAN G.P., INC.
as General Partner
By: /s/ William V. Morgan
____________________________________
William V. Morgan,
Vice Chairman and President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Richard D. Kinder Chairman of the Board and Chief March 12, 2001
________________________ Executive Officer of Kinder
Richard D. Kinder Morgan G.P., Inc.
/s/ William V. Morgan Director, Vice Chairman and March 12, 2001
________________________ President of Kinder Morgan
William V. Morgan G.P., Inc.
/s/ Edward O. Gaylord Director of Kinder Morgan March 12, 2001
________________________ G.P., Inc.
Edward O. Gaylord
/s/ Gary L. Hultquist Director of Kinder Morgan March 12, 2001
________________________ G.P., Inc.
Gary L. Hultquist
/s/ Perry M. Waughtal Director of Kinder Morgan March 12, 2001
________________________ G.P., Inc.
Perry M. Waughtal
/s/ C. Park Shaper Vice President, Treasurer and March 12, 2001
________________________ Chief Financial Officer of Kinder
C. Park Shaper Morgan G.P., Inc. (principal
financial officer and principal
accounting officer)
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AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
KINDER MORGAN ENERGY PARTNERS, L.P.
This Amendment No. 2 to the Second Amended and Restated Agreement of Limited Partnership of Kinder Morgan Energy Partners, L.P. (this "Amendment") is made as of the 21st day of December, 2000, by Kinder Morgan G.P., Inc., a Delaware corporation (the "General Partner"), in its individual capacity and as attorney-in-fact for the Limited Partners of Kinder Morgan Energy Partners, L.P., in accordance with Article XV of the Partnership Agreement (as such capitalized terms are defined below).
RECITALS
A. The General Partner is the sole general partner of Kinder Morgan Energy Partners, L.P., a Delaware limited partnership (the "Partnership") organized under a Second Amended and Restated Agreement of Limited Partnership effective as of February 14, 1997 (the "Partnership Agreement").
B. The General Partner and the Partnership entered into a Contribution Agreement dated October 19, 2000 (the "Contribution Agreement") among Kinder Morgan, Inc., a Kansas corporation ("KMI"), MidCon Gas Services Corp., a Delaware corporation ("MGSC"), KN Gas Gathering, Inc., a Colorado corporation ("KN Gas"), the General Partner and the Partnership.
C. The Contribution Agreement contemplates, among other things, the contribution of (i) all of KN Gas' interests in Coyote Gas Treating Limited Liability Company, a Colorado limited liability company, Thunder Creek Gas Services, L.L.C., a Wyoming limited liability company, and the Douglas Natural Gas Gathering and Processing System and the Casper Natural Gas Gathering and Processing System, (ii) all of MGSC's equity interest in Kinder Morgan Texas Pipeline, Inc., a Delaware corporation to be converted into a single-member Delaware limited liability company prior to the contribution, and (iii) all of MGSC's equity interest in MidCon NGL Corp., a Delaware corporation to be converted into a single-member Delaware limited liability company prior to the contribution, in exchange for the issuance by the Partnership to KN Gas and MGSC of an aggregate of 640,000 common units representing limited partnership units of the Partnership and 2,656,700 class B units representing limited partnership units of the Partnership.
D. Pursuant to the Contribution Agreement, the Partnership has agreed to incur debt in such amount and on such terms as may be acceptable to the Partnership (the "KMEP Debt") sufficient in amount to allow the Partnership to use the proceeds of the KMEP Debt to fund a distribution to MGSC in the amount of $150,000,000 plus $42,676,903 attributable to a working capital adjustment for a total of $192,676,903 (the "Special Distribution") which shall be declared and paid to MGSC upon its contribution pursuant to the Contribution Agreement.
E. To effect the Special Distribution and the creation of the class of units to be designated "Class B Units" as contemplated by the Contribution Agreement, it is necessary to amend the Partnership Agreement as provided herein.
F. Section 15.1(d) of the Partnership Agreement provides that the
General Partner may amend the Partnership Agreement without the consent of any
limited partner of the Partnership to reflect a change that, in the sole
discretion of the General Partner, does not adversely affect such limited
partners in any material respect. In addition, Section 15.1(f) of the
Partnership Agreement provides that the General Partner may amend the
Partnership Agreement without the consent of any limited partner of the
Partnership to reflect, subject to the terms of Section 4.4 of the Partnership
Agreement, an amendment that the General Partner determines in its sole
discretion to be necessary or appropriate in connection with the authorization
for issuance of any class or series of partnership securities pursuant to
Section 4.4 of the Partnership Agreement.
G. The General Partner is authorized to execute and deliver this Amendment on behalf of the limited partners pursuant to Sections 15.1 and 1.4 of the Partnership Agreement.
AGREEMENT
NOW, THEREFORE, the Partnership Agreement is hereby amended as follows:
1. Article II. The following definitions shall be added in Article II of the Partnership Agreement:
"Class B Unit" means a Unit representing a fractional part of the Partnership Interests of all Limited Partners and Assignees and having the rights and obligations specified with respect to Class B Units in this Agreement.
"Mandatory Redemption Notice" has the meaning assigned to such term in
Section 4.12(b).
"Notice of Intent to Convert" has the meaning assigned to such term in
Section 4.12(b).
2. Article II. The following definition in Article II of the Partner- ship Agreement shall be deleted in its entirety and replaced with the following:
"Unit" means a Partnership Interest of a Limited Partner or Assignee in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and Assignees and shall include, without limitation, Common Units and Class B Units (but shall exclude APIs); provided that each Unit at any time Outstanding shall represent the same fractional part of the Partnership Interests of all Limited Partners and Assignees holding Units as each other Unit.
3. Article II. The following sentence shall be added to the end of the definition of "Record Holder" in Article II of the Partnership Agreement:
Solely for purposes of the distribution of Available Cash pursuant to
Section 5.4 of this Agreement for the calendar quarter ended December
31, 2000, the holders of Common Units and Class B Units issued pursuant
to the Contribution Agreement (as defined herein) shall not be treated
as Record Holders and shall not be entitled to participate in such
distribution.
4. Article II. The reference to "Common Units" in the definition of "Outstanding," "Partnership Interest," and "Percentage Interest" in Article II of the Partnership Agreement shall be eliminated and replaced with "Units."
5. Section 4.6(e). A new Section 4.6(e) is hereby added to the Part- nership Agreement, to follow Section 4.6(d) and to read in full as follows:
(e) Upon the conversion of a Class B Unit into one Common Unit, the difference (whether positive or negative) between the Per Unit Capital Amount of such Class B Unit and the Per Unit Capital Amount of the then Outstanding Common Units shall be allocated proportionately among all Class B Units Outstanding immediately after such conversion. After giving effect to such reallocation, (i) the Per Unit Capital Amount of the Common Unit issued upon such conversion shall equal the Per Unit Capital Amount of each Common Unit then Outstanding, and (ii) such conversion shall not increase or decrease the aggregate Per Unit Capital Amounts attributable to all Outstanding Common Units.
6. Section 4.12. A new Section 4.12 is hereby added to the Partner- ship Agreement, to follow Section 4.11 and to read in full as follows:
4.12 Class B Units. (a) Pursuant to Section 4.4, the General Partner hereby designates and creates a special class of Units designated "Class B Units" and fixes the designations, preferences and relative, participating, optional or other special rights, powers and duties of the holders of the Class B Units as follows:
(b) Each Class B Unit shall be convertible from time to time, in whole or in part, into one Common Unit from and after such date as the Partnership has been advised by the New York Stock Exchange that the Common Units issuable upon any such conversion are eligible for listing on the New York Stock Exchange. The General Partner will promptly notify the holders of Class B Units upon receipt of such advice. Upon written notice to the General Partner from the holders of at least a majority of the Outstanding Class B Units (a "Notice of Intent to Convert") given not earlier than one year after the issuance of the Class B Units, the General Partner will use its reasonable best efforts to cause the Partnership to meet any unfulfilled requirements of the New York Stock Exchange for such listing, including obtaining such approval of the holders of Common Units as may be required by the New York Stock Exchange for the issuance of additional Common Units to be listed thereon. If, 120 days after the date of the Notice of Intent to Convert, the Common Units issuable upon such conversion have not been approved for listing on the New York Stock Exchange, then the Partnership shall give written notice thereof to the holders of the Outstanding Class B Units, whereupon each holder of
Outstanding Class B Units may, at such holder's election at any time thereafter, notify the General Partner in writing (a "Mandatory Redemption Notice") of such holder's election to cause the Partnership to redeem such holder's Outstanding Class B Units for cash. All such Outstanding Class B Units shall be redeemed as of the 60th day following the date of such Mandatory Redemption Notice unless, prior to such 60th day, the General Partner gives written notice to the holders of all Outstanding Class B Units that it has been advised by the New York Stock Exchange that the Common Units issuable upon a conversion of Class B Units have been approved for listing on the New York Stock Exchange, in which case the Mandatory Redemption Notice shall be deemed to have been withdrawn.
(c) Before any holder of Class B Units shall be entitled to receive any redemption payment or to convert such holder's Class B Units into Common Units, as the case may be, it shall surrender the Class B Unit Certificates therefor, duly endorsed, at the office of the General Partner or of any transfer agent for the Class B Units. In the case of any such conversion, the Partnership shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Class B Units one or more Certificates, registered in the name of such holder, for the number of Common Units to which he shall be entitled as aforesaid. Such conversion shall be deemed to have been made as of the date of such surrender of the Class B Units to be converted, and the person entitled to receive the Common Units issuable upon such conversion shall be treated for all purposes as the record holder of such Common Units on said date.
(d) Upon the request of KMI or any of its Affiliates to register all or any part of the Class B Units pursuant to Section 6.13, the Class B Units for which registration is so requested may be redeemed by the Partnership at its election. The Partnership shall exercise its option under this Section 4.12(d) by mailing written notice thereof to the holders of Class B Units for which registration is so requested. Such notice shall be given not later than 15 days after the receipt by the General Partner of such registration request and shall fix a date for redemption of such Class B Units not less than 30 nor more than 60 days after the date of such notice.
(e) Any redemption under Section 4.12(b) or Section 4.12(d) shall be for a cash redemption price equal to the Current Market Price per Common Unit as of the date fixed for redemption multiplied by 0.955.
(f) From and after a redemption date (unless default shall be made by the Partnership in providing money for the payment of the redemption price), the Class B Units redeemed shall no longer be deemed to be Outstanding, and all rights of the holders thereof as Partners in the Partnership (except the right to receive from the Partnership the redemption price) shall cease. Class B Units redeemed pursuant to Section 4.12(b) or Section 4.12(d) shall be restored to the status of authorized but unissued Units, without designation as to class.
(g) Except as otherwise provided in this Agreement, each Class B Unit shall be identical to a Common Unit, and the holder of a Class B Unit shall have the rights of a holder of a Common Unit with respect to, without limitation, Partnership distributions, voting and allocations of income, gain, loss or deductions; but the Certificates evidencing Class B Units shall be separately identified and shall not bear the same CUSIP number as the Certificates
evidencing Common Units. Except as otherwise provided herein, all Units shall vote or consent together as a single class on all matters submitted for a vote or consent of the Outstanding Units. Class B Units shall be represented by Certificates in such form as the General Partner may approve.
7. Article IV. The reference to "Common Units" in Section 5.1(c),
Section 5.1(d)(iii) and Section 5.4 of the Partnership Agreement shall be
eliminated and replaced with "Units."
8. Section 5.10. A new Section 5.10 is hereby added to the Partnership Agreement, to follow Section 5.9 and to read in full as follows:
5.10 Special Distribution. Notwithstanding anything to the contrary set forth in this Agreement, following the contribution by MidCon Gas Services Corp., a Delaware corporation ("MGSC"), of (i) all of its equity interest in Kinder Morgan Texas Pipeline, Inc., a Delaware corporation to be converted into a single-member Delaware limited liability company prior to the contribution, and (ii) all of its equity interest in MidCon NGL Corp., a Delaware corporation to be converted into a single-member Delaware limited liability company prior to the contribution, as contemplated by the Contribution Agreement dated October 19, 2000 (the "Contribution Agreement"), among Kinder Morgan, Inc., a Kansas corporation, MGSC, KN Gas Gathering, Inc., a Colorado corporation, the General Partner and the Partnership, the Partnership shall distribute $150,000,000 plus $42,676,903 attributable to a working capital adjustment for a total of $192,676,903 in cash to MGSC, without a corresponding distribution to the General Partner or the Limited Partners, as provided for in the Contribution Agreement. Notwithstanding anything to the contrary set forth in this Agreement, MGSC shall not receive an allocation of income (including gross income) or gain as a result of the distribution provided for in the preceding sentence.
9. Section 15.2. The fifth sentence in Section 15.2 of the Partnership Agreement shall be deleted in its entirety and replaced with the following:
A proposed amendment shall be effective upon its approval by at least two-thirds of the Outstanding Units unless a greater or different percentage is required under this Agreement; provided that if the effect of any amendment shall be to affect materially and adversely any holders of Units of a particular class in relation to any other class of Units, the affirmative vote of the holders of at least a majority in interest of the Outstanding Units of the class so affected shall be required to adopt such amendment.
10. Article II. The following sentence shall be added to the end of
Section 17.1(a) of the Partnership Agreement:
Notwithstanding anything herein to the contrary, the Current Market Price of each Class B Unit shall be deemed to be the same as the Current Market Price of one Common Unit.
11. Ratification. Except as expressly amended hereby, the Partnership Agreement is hereby ratified and confirmed, and shall continue in full force and effect.
*****
IN WITNESS WHEREOF, the General Partner has executed and delivered this Amendment, in its individual capacity and as attorney-in-fact for the limited partners of the Partnership, in accordance with Section 15.1 of the Partnership Agreement, as of the date first above written.
KINDER MORGAN G.P., INC.,
as General Partner
By: /s/ Michael C. Morgan
-----------------------------------------
Name: Michael C. Morgan
---------------------------------------
Title: Vice President
--------------------------------------
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KINDER MORGAN G.P., INC.,
as Attorney-in-Fact for the limited partners
By: /s/ Michael C. Morgan
----------------------------------------
Name: Michael C. Morgan
---------------------------------------
Title: Vice President
--------------------------------------
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[Amendment No. 2]
EXHIBIT 4.8
KINDER MORGAN
ENERGY PARTNERS, L.P.
ISSUER
AND
FIRST UNION NATIONAL BANK
TRUSTEE
INDENTURE
DATED AS OF NOVEMBER 8, 2000
$250,000,000 7.50% SENIOR NOTES DUE 2010
KINDER MORGAN ENERGY PARTNERS, L.P.
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318, INCLUSIVE, OF THE
TRUST INDENTURE ACT OF 1939:
Trust Indenture
Act Section Indenture Section
--------------- -----------------
Section 310(a)(1)............................................................................ 609
(a)(2)............................................................................ 609
(a)(3)............................................................................ Not Applicable
(a)(4)............................................................................ Not Applicable
(b)............................................................................... 608; 610
Section 311(a)............................................................................... 613
(b)............................................................................... 613
Section 312(a)............................................................................... 701; 702
(b)............................................................................... 702
(c)............................................................................... 702
Section 313(a)............................................................................... 703
(b)............................................................................... 703
(c)............................................................................... 703
(d)............................................................................... 703
Section 314(a)............................................................................... 704
(a)(4)............................................................................ 1004
(b)............................................................................... Not Applicable
(c)(1)............................................................................ 102
(c)(2)............................................................................ 102
(c)(3)............................................................................ Not Applicable
(d)............................................................................... Not Applicable
(e)............................................................................... 102
Section 315(a)............................................................................... 601, 603
(b)............................................................................... 602
(c)............................................................................... 601
(d)............................................................................... 601
(e)............................................................................... 514
Section 316(a)............................................................................... 101
(a)(1)(A)......................................................................... 502; 512
(a)(1)(B)......................................................................... 513
(a)(2)............................................................................ Not Applicable
(b)............................................................................... 508
(c)............................................................................... 104
Section 317(a)(1)............................................................................ 503
(a)(2)............................................................................ 504
(b)............................................................................... 1003
Section 318(a)............................................................................... 107
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NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions..................................................................................1
SECTION 102. Compliance Certificates and Opinions........................................................14
SECTION 103. Form of Documents Delivered to Trustee......................................................14
SECTION 104. Acts of Holders; Record Dates...............................................................15
SECTION 105. Notices, Etc., to Trustee and Partnership...................................................16
SECTION 106. Notice to Holders; Waiver...................................................................17
SECTION 107. Conflict with Trust Indenture Act...........................................................17
SECTION 108. Effect of Headings and Table of Contents....................................................17
SECTION 109. Successors and Assigns......................................................................17
SECTION 110. Separability Clause.........................................................................18
SECTION 111. Benefits of Indenture.......................................................................18
SECTION 112. Governing Law...............................................................................18
SECTION 113. Legal Holidays..............................................................................18
SECTION 114. Language of Notices, Etc....................................................................18
ARTICLE II
SECURITY FORMS
SECTION 201. Forms Generally.............................................................................18
SECTION 202. Forms of Face of Securities.................................................................19
SECTION 203. Forms of Reverse of Securities..............................................................21
SECTION 204. Form of Legend for Global Securities........................................................26
SECTION 205. Form of Trustee's Certificate and Authorization.............................................27
ARTICLE III
THE SECURITIES
SECTION 301. Title and Terms.............................................................................27
SECTION 302. Denominations...............................................................................28
SECTION 303. Execution, Authentication, Delivery and Dating..............................................28
SECTION 304. Temporary Securities........................................................................29
SECTION 305. Registration, Registration of Transfer and Exchange.........................................29
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities............................................34
SECTION 307. Payment of Interest; Interest Rights Preserved..............................................35
SECTION 308. Persons Deemed Owners.......................................................................36
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SECTION 309. Cancellation................................................................................37
SECTION 310. Computation of Interest.....................................................................37
SECTION 311. CUSIP Numbers...............................................................................37
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.....................................................38
SECTION 402. Application of Trust Money..................................................................39
ARTICLE V
REMEDIES
SECTION 501. Events of Default...........................................................................39
SECTION 502. Acceleration of Maturity; Rescission and Annulment..........................................40
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.............................41
SECTION 504. Trustee May File Proofs of Claim............................................................42
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.................................42
SECTION 506. Application of Money Collected..............................................................42
SECTION 507. Limitation on Suits.........................................................................43
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest....................................................................................43
SECTION 509. Restoration of Rights and Remedies..........................................................44
SECTION 510. Rights and Remedies Cumulative..............................................................44
SECTION 511. Delay or Omission Not Waiver................................................................44
SECTION 512. Control by Holders..........................................................................44
SECTION 513. Waiver of Past Defaults.....................................................................45
SECTION 514. Undertaking for Costs.......................................................................45
SECTION 515. Waiver of Usury, Stay or Extension Laws.....................................................45
ARTICLE VI
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.........................................................46
SECTION 602 Notice of Defaults..........................................................................47
SECTION 603. Certain Rights of Trustee...................................................................47
SECTION 604. Not Responsible for Recitals or Issuance of Securities......................................48
SECTION 605. May Hold Securities.........................................................................49
SECTION 606. Money Held in Trust.........................................................................49
SECTION 607. Compensation and Reimbursement..............................................................49
SECTION 608. Disqualification; Conflicting Interests.....................................................50
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SECTION 609. Corporate Trustee Required; Eligibility.....................................................50
SECTION 610. Resignation and Removal; Appointment of Successor...........................................50
SECTION 611. Acceptance of Appointment by Successor......................................................51
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.................................52
SECTION 613. Preferential Collection of Claims Against Partnership.......................................52
SECTION 614. Appointment of Authenticating Agent.........................................................52
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND PARTNERSHIP
SECTION 701. Partnership to Furnish Trustee Names and Addresses of Holders...............................54
SECTION 702. Preservation of Information; Communications to Holders......................................54
SECTION 703. Reports by Trustee..........................................................................55
SECTION 704. Reports by Partnership......................................................................55
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Partnership and Guarantors May Consolidate, Etc., Only on Certain Terms.....................56
SECTION 802. Successor Substituted.......................................................................56
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders..........................................57
SECTION 902. Supplemental Indentures with Consent of Holders.............................................58
SECTION 903. Execution of Supplemental Indentures........................................................59
SECTION 904. Effect of Supplemental Indentures...........................................................59
SECTION 905. Conformity with Trust Indenture Act.........................................................59
SECTION 906. Reference in Securities to Supplemental Indentures..........................................59
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ARTICLE X
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest..................................................59
SECTION 1002. Maintenance of Office or Agency.............................................................60
SECTION 1003. Money for Securities Payments to Be Held in Trust...........................................60
SECTION 1004. Statement by Officers as to Default.........................................................61
SECTION 1005. Existence...................................................................................62
SECTION 1006. Limitations on Liens........................................................................62
SECTION 1007. Restriction of Sale-Leaseback Transaction...................................................63
SECTION 1008. Waiver of Certain Covenants.................................................................64
SECTION 1009. Officers' Certificate as to Additional Interest.............................................64
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 1101. Optional Redemption.........................................................................65
SECTION 1102. Election to Redeem; Notice to Trustee.......................................................65
SECTION 1103. Selection by Trustee of Securities to be Redeemed...........................................65
SECTION 1104. Notice of Redemption........................................................................66
SECTION 1105. Deposit of Redemption Price.................................................................66
SECTION 1106. Securities Payable on Redemption Date.......................................................67
SECTION 1107. Securities Redeemed in Part.................................................................67
ARTICLE XII
NON-RECOURSE
SECTION 1201. Non-Recourse to the General Partner; No Personal Liability of
Officers, Directors, Employees or Partners..................................................67
ARTICLE XIII
DEFEASANCE OF SECURITIES
SECTION 1301. Legal Defeasance............................................................................68
SECTION 1302. Covenant Defeasance.........................................................................69
SECTION 1303. Application by Trustee of Funds Deposited for Payment of Securities.........................71
SECTION 1304. Repayment to Partnership....................................................................71
SECTION 1305. Reinstatement...............................................................................72
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ARTICLE XIV
GUARANTY OF SECURITIES
SECTION 1401. Requirement for Guaranty....................................................................72
SECTION 1402. Release of Guaranty.........................................................................72
ANNEX A Guaranty Provisions
ANNEX B Form of Regulation S Certificate
ANNEX C Form of Restricted Securities Certificate
ANNEX D Form of Unrestricted Securities Certificate
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INDENTURE dated as of November 8, 2000 between KINDER MORGAN ENERGY PARTNERS, L.P., a Delaware limited partnership (the "Partnership"), having its principal office at 1301 McKinney Street, Suite 3400, Houston Texas, 77010, the and FIRST UNION NATIONAL BANK, a national banking association, as Trustee (the "Trustee").
RECITALS OF THE PARTNERSHIP
The Partnership has duly authorized the creation of the Securities (as hereinafter defined), substantially of the tenor and amount hereinafter set forth, and to provide therefor the Partnership has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by the Partnership and authenticated and delivered hereunder and duly issued by the Partnership, the valid obligations of the Partnership, and to make this Indenture a valid agreement of the Partnership, in accordance with the terms of this Securities and this Indenture, respectively, have been done.
Upon the issuance of the Exchange Securities or the effectiveness of a registration statement filed in connection with the Exchange Offer, this Indenture will be subject to the provisions of the Trust Indenture Act (as hereinafter defined) that are required to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. Prior thereto, the provisions of said Trust Indenture Act will apply to this Indenture only to the extent expressly provided herein.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date of such computation;
(4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and
(5) the words "Article" and "Section" refer to an Article and Section, respectively, of this Indenture, and the word "Annex" refers to an Annex to this Indenture.
"Act", when used with respect to any Holder, has the meaning specified in Section 104.
"Additional Interest", which does not apply to the Exchange Securities, has the meaning specified in the Forms of Reverse of Security in Section 203.
"Additional Interest Event", which does not apply to the Exchange
Securities, has the meaning specified in the Forms of Reverse of Security in
Section 203.
"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.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, or Euroclear and Clearstream, in each case to the extent applicable to such transaction and as in effect from time to time.
"Attributable Indebtedness", when used with respect to any Sale-Leaseback Transaction, means, as of the time of determination, the present value (discounted at the rate set forth or implicit in the terms of the lease included in such transaction) of the total obligations of the lessee for rental payments (other than amounts required to be paid on account of property taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items that do not constitute payments for property rights) during the remaining term of the lease included in such Sale-Leaseback Transaction (including any period for which such lease has been extended). In the case of any lease that is terminable by the lessee upon the payment of a penalty or other termination payment, such
amount shall be the lesser of the amount determined assuming termination upon the first date such lease may be terminated (in which case the amount shall also include the amount of the penalty or termination payment, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the amount determined assuming no such termination.
"Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate the Securities.
"Authorized Agent" has the meaning specified in Section 105 of Annex A.
"Authorized Newspaper" means a newspaper, in the English language, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in the Borough of Manhattan, The City of New York.
"Bankruptcy Law" means Title 11, U.S. Code, as amended, or any similar federal or state law for the relief of debtors or the protection of creditors.
"Board of Directors" means the board of directors of the General Partner, or the executive or any other committee of that board duly authorized to act in respect thereof. If the Partnership shall change its form of entity to other than a limited partnership, the references to officers or the Board of Directors of the General Partner shall mean the officers or the Board of Directors (or other comparable governing body) of the Partnership.
"Board Resolution" means a copy of a resolution certified by the Corporate Secretary of the General Partner, the principal financial officer of the General Partner or any other authorized officer of the General Partner or a Person duly authorized by any of them, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"Business Day", means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York are authorized or obligated by law, executive order or regulation to close.
"Capital Interests" means, with respect to any Person, any and all
shares, interests, participations, rights or other equivalents (however
designated) of such Person's equity, including, without limitation (i) with
respect to partnerships, partnership interests (whether general or limited),
(ii) with respect to limited liability companies, member interests, and (iii)
any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
such Person.
"Clearstream" means Clearstream Banking (or any successor securities clearing agency).
"Closing Date" has the meaning specified in the Registration Rights Agreement.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Consolidated Net Tangible Assets" means, at any date of determination, the total amount of assets after deducting therefrom (i) all current liabilities (excluding (A) any current liabilities that by their terms are extendable or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed, and (B) current maturities of long-term debt), and (ii) the value (net of any applicable reserves) of all goodwill, trade names, trademarks, patents and other like intangible assets, all as set forth on the consolidated balance sheet of the Partnership and its consolidated subsidiaries for the Partnership's most recently completed fiscal quarter, prepared in accordance with generally accepted accounting principles.
"Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which at the date hereof is 40 Broad Street, Suite 550, New York, New York 10004.
"corporation" includes corporations, associations, partnerships (general or limited), limited liability companies, joint-stock companies and business trusts.
"covenant defeasance" has the meaning specified in Section 1302.
"Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
"Debt" means any obligation created or assumed by any Person for the repayment of money borrowed, any purchase money obligation created or assumed by such Person and any guarantee of the foregoing.
"Default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to the Securities.
"Defaulted Interest" has the meaning specified in Section 307.
"defeasance" has the meaning specified in Section 1301.
"Definitive Security" means a Security other than a Global Security or a temporary Security.
"Depositary" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the Securities, until a successor Depositary shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter shall mean or include each Person which is then a Depositary hereunder, and if at any time there is more than one such Person, shall be a collective reference to such Persons.
"Dollar" or "$" means the coin or currency of the United States as at the time of payment is legal tender for the payment of public and private debts.
"DTC" means the Depository Trust Company.
"Euroclear" means the Euroclear Clearance System (or any successor securities clearing agency).
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 or any statute successor thereto, in each case as amended from time to time.
"Exchange Offer" has the meaning specified in the Registration Rights Agreement.
"Exchange Security" means any Security issued in exchange for an Original Security or Original Securities pursuant to the Exchange Offer or otherwise registered under the Securities Act (which shall be substantially identical to the Original Securities except that the Exchange Securities will have been registered pursuant to an effective registration statement under the Securities Act, will not be subject to transfer restrictions or registration rights and will not be entitled to the benefit of provisions for Additional Interest) and any Security with respect to which the next preceding Predecessor Security of such Security was an Exchange Security.
"Funded Debt" means all Debt maturing one year or more from the date of the creation thereof, all Debt directly or indirectly renewable or extendable, at the option of the debtor, by its terms or by the terms of any instrument or agreement relating thereto, to a date one year or more from the date of the creation thereof, and all Debt under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more.
"Funding Guarantor" has the meaning specified in Section 103 of Annex
A.
"General Partner" means Kinder Morgan G.P., Inc., a Delaware corporation.
"Global Securities" means the Restricted Global Securities and the Regulation S Global Securities.
"Global Security Legend" means a legend substantially in the form specified in Section 204(c).
"Guarantor" means (i) each Subsidiary of the Partnership that becomes a guarantor of the Securities pursuant to Section 1401, and (ii) any Subsidiary of the Partnership that is a successor of any Subsidiary of the Partnership referred to in clause (i). The term "Guarantor" shall not include any Subsidiary of the Partnership referred to in clause (i) or (ii) that shall have been (or whose predecessor shall have been) released from its obligations under a Guaranty pursuant to Section 1402.
"Guaranty" means a guaranty of the Securities containing provisions substantially in the form specified in Annex A, and such other provisions, not inconsistent herewith, as are customary in guaranties, executed and delivered by one or more Subsidiaries of the Partnership as required by Section 1401.
"Holder" means a Person in whose name a Security is registered in the Security Register.
"Independent Investment Banker" has the meaning specified in Section 1101.
"Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument, and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively.
"interest" includes Additional Interest, if any.
"Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities.
"Judgment Currency" has the meaning specified in Section 107 of Annex
A.
"Lien" means, as to any entity, any mortgage, lien, pledge, security interest or other encumbrance in or on, or adverse interest or title of any vendor, lessor, lender or other secured party to or of the entity under conditional sale or other title retention agreement or capital lease with respect to, any property or asset of the entity, but excluding agreements to refrain from granting Liens.
"Make-Whole Premium" with respect to any Security (or portion thereof) to be redeemed will be equal to the excess, if any, of (i) the sum of the present values, calculated as of the Redemption Date, of (a) each interest payment that, but for such redemption, would have been payable on any such Security (or portion thereof) being redeemed on each Interest Payment Date occurring after the Redemption Date (excluding any accrued interest for the period prior to the Redemption Date) and (b) the principal amount that, but for such redemption, would have been payable at the Stated Maturity of the principal of such Security (or portion thereof) being redeemed, over (ii) the principal amount of such Security (or portion thereof) being redeemed. The present value of interest and
principal payments referred to in clause (i) will be determined in accordance with generally accepted principles of financial analysis. Such present values will be calculated by discounting the amount of each payment of interest or principal from the date that each such payment would have been payable, but for the redemption, to the Redemption Date at a discount rate equal to the Treasury Yield plus 25 basis points (0.25%).
"Maturity," when used with respect to a Security, means the date on which the principal of the Securities becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
"Non-U.S. Guarantor" has the meaning specified in Section 105 of Annex
A.
"Notice of Default" means a written notice of the kind specified in
Section 501(3).
"Officers' Certificate" of a Person means a certificate signed by the Chairman of the Board, the Vice Chairman, the President or a Vice President, and by the Treasurer or the Secretary, of the Person, or if such Person is a partnership, of its general partner, and delivered to the Trustee. One of the officers or such other Persons (as applicable) signing an Officers' Certificate given pursuant to Section 1004 or 1009 shall be the principal executive, financial or accounting officer of the Person, or if such Person is a partnership, of its general partner.
"Opinion of Counsel" means a written opinion of legal counsel, who may be an employee of or counsel for the Partnership or a Guarantor, which opinion shall comply with the provisions of Sections 102 and 103. Such counsel shall be acceptable to the Trustee, whose acceptance shall not be unreasonably withheld.
"Original Securities" means all Securities other than Exchange Securities.
"Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities 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 Holders of such Securities; provided, however, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor has been made;
(iii) Securities which have been paid pursuant to
Section 306 or in exchange for or in lieu of which other Securities
have been authenticated and delivered
pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Partnership; and
(iv) Securities, except to the extent provided in Sections 1301 and 1302, with respect to which the Partnership has effected defeasance or covenant defeasance as provided in Article XIII;
provided, however, that in determining whether Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Partnership or any other obligor upon the 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 Securities which the Trustee knows to be so owned shall be so disregarded. 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 Securities and that the pledgee is not the Partnership or any other obligor upon the Securities or any Affiliate of the Partnership or of such other obligor.
"Pari Passu Debt" means any Debt of the Partnership, whether outstanding on the Closing Date or thereafter created, incurred or assumed, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinated in right of payment to the Securities.
"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" or "Partnership Order" means a written request or order signed in the name of the Partnership by the Chairman of the Board, the Vice Chairman, the President or a Vice President of the General Partner, and by the Treasurer or 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 the like positions comparable to those of the foregoing nature, as applicable.
"Paying Agent" means any Person authorized by the Partnership to pay the principal of or any premium or interest on any Securities on behalf of the Partnership.
"Permitted Liens" means (i) Liens upon rights-of-way for pipeline purposes; (ii) any statutory or governmental Lien or Lien arising by operation of law, or any mechanics', repairmen's, materialmen's, supplier's, carrier's, landlord's, warehousemen's or similar Lien incurred in the ordinary course of business which is not yet due or which is being contested in good faith by
appropriate proceedings and any undetermined Lien which is incidental to construction, development, improvement or repair; (iii) the right reserved to, or vested in, any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or by any provision of law, to purchase or recapture or to designate a purchaser of, any property; (iv) Liens of taxes and assessments which are (A) for the then current year, (B) not at the time delinquent, or (C) delinquent but the validity of which is being contested at the time by the Partnership or any Subsidiary in good faith; (v) Liens of, or to secure performance of, leases, other than capital leases; (vi) any Lien upon, or deposits of, any assets in favor of any surety company or clerk of court for the purpose of obtaining indemnity or stay of judicial proceedings; (vii) any Lien upon property or assets acquired or sold by the Partnership or any Subsidiary resulting from the exercise of any rights arising out of defaults on receivables; (viii) any Lien incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance, temporary disability, social security, retiree health or similar laws or regulations or to secure obligations imposed by statute or governmental regulations; (ix) any Lien in favor of the Partnership or any Subsidiary; (x) any Lien in favor of the United States or any state thereof, or any department, agency or instrumentality or political subdivision of the United States or any state thereof, to secure partial, progress, advance, or other payments pursuant to any contract or statute, or any Debt incurred by the Partnership or any Subsidiary for the purpose of financing all or any part of the purchase price of, or the cost of constructing, developing, repairing or improving, the property or assets subject to such Lien; or (xi) any Lien securing industrial development, pollution control or similar revenue bonds; (xii) any Lien securing Debt of the Partnership or any Subsidiary, all or a portion of the net proceeds of which are used, substantially concurrent with the funding thereof (and for purposes of determining such "substantial concurrence", taking into consideration, among other things, required notices to be given to Holders of Outstanding securities under this Indenture (including the Securities) in connection with such refunding, refinancing or repurchase, and the required corresponding durations thereof), to refinance, refund or repurchase all Outstanding Securities, including the amount of all accrued interest thereon and reasonable fees and expenses and premium, if any, incurred by the Partnership or any Subsidiary in connection therewith; (xiii) Liens in favor of any Person to secure obligations under the provisions of any letters of credit, bank guarantees, bonds or surety obligations required or requested by any governmental authority in connection with any contract or statute; or (xiv) any Lien upon or deposits of any assets to secure performance of bids, trade contracts, leases or statutory obligations.
"Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, other entity, unincorporated organization or government, or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities, means the office or agency of the Partnership in The City of New York.
"Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same Debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same Debt as the mutilated, destroyed, lost or stolen Security.
"Principal Property" means, whether owned or leased on the date of this Indenture or thereafter acquired, (i) any pipeline assets of the Partnership or any Subsidiary, including any related facilities employed in the transportation, distribution, storage or marketing of refined petroleum products, natural gas liquids and carbon dioxide, that are located in the United States or any territory or political subdivision thereof, and (ii) any processing or manufacturing plant or terminal owned or leased by the Partnership or any Subsidiary that is located in the United States or any territory or political subdivision thereof, except, in the case of either of the foregoing clauses (i) or (ii), (A) any such assets consisting of inventories, furniture, office fixtures and equipment (including data processing equipment), vehicles and equipment used on, or useful with, vehicles, and (B) any such assets, plant or terminal which, in the opinion of the Board of Directors, is not material in relation to the activities of the Partnership or of the Partnership and its Subsidiaries, taken as a whole.
"Purchase Agreement" means the Purchase Agreement, dated as of November 1, 2000, between the Partnership and Banc of America Securities LLC, as the same shall be amended from time to time.
"Purchaser" means Banc of America Securities LLC.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
"Registered Securities" means the Exchange Securities and all other Securities sold or otherwise disposed of pursuant to an effective registration statement under the Securities Act, together with their respective Successor Securities.
"Registrable Securities" has the meaning specified in the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement, dated as of November 8, 2000 between the Partnership and Banc of America Securities LLC, as the same shall be amended from time to time.
"Regular Record Date" for the interest payable on any Interest Payment Date means April 15th or October 15th of each year (whether or not a Business Day) as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (or any successor provision), as it may be amended from time to time.
"Regulation S Certificate" means a certificate substantially in the form specified in Annex B.
"Regulation S Global Securities" has the meaning specified in Section 201.
"Regulation S Legend" means a legend substantially in the form of the legend specified in Section 204(b).
"Regulation S Securities" means any Securities sold by the Purchaser in reliance on Regulation S and any Successor Securities thereto as long as such Securities are required pursuant to Section 305(c) to bear any Regulation S Legend.
"Restricted Global Securities" has the meaning specified in Section 201.
"Restricted Period" means the period of 41 consecutive days beginning on and including the later of (i) the day on which Securities are first offered to Persons other than distributors (as defined in Regulation S) in reliance on Regulation S and (ii) the original issuance date of the Securities.
"Restricted Securities" means any Securities sold by the Purchaser in reliance on Rule 144A and any Successor Securities thereto as long as such Securities are required pursuant to Section 305(c) to bear any Restricted Securities Legend.
"Restricted Securities Certificate" means a certificate substantially in the form specified in Annex C.
"Restricted Securities Legend" means a legend substantially in the form of the legend specified in Section 204(a).
"Rule 144" means Rule 144 under the Securities Act (or any successor provision), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time.
"Rule 144(k) Holding Period" has the meaning specified in the Forms of Reverse of Security in Section 203.
"Sale-Leaseback Transaction" means the sale or transfer by the Partnership or any Subsidiary of any Principal Property to a Person (other than the Partnership or a Subsidiary) and the taking back by the Partnership or any Subsidiary, as the case may be, of a lease of such Principal Property.
"Securities" means the 7.50% Senior Notes due 2010 of the Partnership, including the Original Securities and the Exchange Securities. For all purposes of this Indenture, the term "Securities" shall include any Exchange Securities issued in exchange for Original Securities pursuant to this Indenture and, for purposes of this Indenture, all Outstanding Original Securities and Exchange Securities shall vote together as one series of Securities under this Indenture.
"Securities Act" means the Securities Act of 1933 or any statute successor thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a Regulation S Legend.
"Security Register" and "Security Registrar" have the respective meanings specified in Section 305(a).
"Shelf Registration Statement" has the meaning specified in the Registration Rights Agreement.
"Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307.
"spot rate of exchange" has the meaning specified in Section 107 of Annex A.
"Stated Maturity", when used with respect to the principal of any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of the Capital Interests of such Person entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof or, in the case of a partnership, more than 50% of the partners' Capital Interests (considering all partners' Capital 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 a combination thereof.
"Successor Security" of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Treasury Yield" means a rate of interest per annum equal to the weekly average yield to maturity of United States Treasury Notes that have a constant maturity that corresponds to the remaining term to maturity of the Securities, calculated to the nearest 1/12 of a year (the "Remaining
Term"). The Treasury Yield will be determined as of the third Business Day immediately preceding the applicable Redemption Date. The weekly average yields of United States Treasury Notes will be determined by reference to the most recent statistical release published by the Federal Reserve Bank of New York and designated "H.15(519) Selected Interest Rates" or any successor release (the "H.15 Statistical Release"). If the H.15 Statistical Release sets forth a weekly average yield for United States Treasury Notes having a constant maturity that is the same as the Remaining Term, then the Treasury Yield will be equal to such weekly average yield. In all other cases, the Treasury Yield will be calculated by interpolation, on a straight-line basis, between the weekly average yields on the United States Treasury Notes that have a constant maturity closest to and greater than the Remaining Term and the United States Treasury Notes that have a constant maturity closest to and less than the Remaining Term (in each case as set forth in the H.15 Statistical Release). Any weekly average yields so calculated by interpolation will be rounded to the nearest 1/100th of 1% with any figure of 1/200% or above being rounded upward. If weekly average yields for United States Treasury Notes are not available in the H.15 Statistical Release or otherwise, then the Treasury Yield will be calculated by interpolation of comparable rates selected by the Independent Investment Banker.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as otherwise provided in Section 905; provided, however, that if the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee.
"Unrestricted Securities Certificate" means a certificate substantially in the form specified in Annex D.
"U.S." and "United States" each means the United States of America.
"U.S. Government Obligations" means securities which are (i) direct obligations of the United States for the payment of which its full faith and credit is pledged, or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, each of which are not callable or redeemable at the option of the issuer thereof.
"Vice President", when used with respect to the Partnership, means any vice president of the General Partner, or when used with respect to the Trustee, means any vice president of the Trustee.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Partnership or any Guarantor to the Trustee to take or refrain from taking any action under any provision of this Indenture, the Partnership shall furnish to the Trustee an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with, and an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by officers of the General Partner or any Guarantor, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture.
Every Officers' Certificate or Opinion of Counsel (except for certificates provided for in Sections 1004 and 1009) shall include:
(1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(2) 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;
(3) a statement that, in the opinion of each such individual, 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
(4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Partnership, the General Partner or a Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Partnership, the General Partner or such Guarantor stating that the information with respect to such factual matters is in the possession of the Partnership, the General Partner or such Guarantor, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed (either physically or by means of a facsimile or an electronic transmission, provided that such electronic transmission is transmitted through the facilities of a Depositary) by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered (either physically or by means of a facsimile or an electronic transmission, provided that such electronic transmission is transmitted through the facilities of a Depositary) to the Trustee and, where it is hereby expressly required, to the Partnership. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 315 of the Trust Indenture Act) conclusive in favor of the Trustee and the Partnership, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including a Depositary that is a Holder of a Global Security, may make, give or take, by a proxy or proxies, duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and a Depositary that is a Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interests in any such Global Security.
The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
The ownership, principal amount and serial numbers of Securities held by any Person, and the date of commencement of such Person's holding the same, shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver or other action of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Partnership in reliance thereon, whether or not notation of such action is made upon such Security.
The Partnership may set any day as the record date for the purpose of determining Holders of Outstanding Securities entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders of Securities (other than any such action provided or permitted to be taken under Section 501, 502 or 512), but the Partnership shall have no obligation to do so. Such record date shall be not earlier than the 30th day prior to the first solicitation of any Holder to give or take any such action and not later than the date of such first solicitation. With regard to any record date set pursuant to this paragraph, Holders of Outstanding Securities on such record date (or their duly appointed agents), and only such Persons, shall be entitled to give or take the relevant action, whether or not such Holders remain Holders after such record date. The Partnership shall notify the Trustee in writing of any such record date not later than the date of the first solicitation of any Holder to give or take any action.
SECTION 105. Notices, Etc., to Trustee and Partnership.
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Partnership or any
Guarantor shall be sufficient for every purpose hereunder if made in writing and
actually received by the Trustee at its Corporate Trust Office, Attention:
Corporate Trustee Administration, or at any other address previously furnished
in writing by the Trustee, or
(2) the Partnership or any Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Partnership addressed to it at 1301 McKinney Street, Suite 3400, Houston Texas, 77010, to the attention of the Corporate Secretary, or at any other address previously furnished in writing to the Trustee by the Partnership. Notice to the Partnership shall constitute notice to each Guarantor, if any.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid (if international mail, by air mail), to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Partnership shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the 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 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in accordance with the law of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, 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 Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 114. Language of Notices, Etc.
Any request, demand, authorization, direction, notice, consent, waiver or Act required or permitted under this Indenture shall be in the English language.
ARTICLE II
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, 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 may
be required to comply with applicable securities laws, tax laws or the rules of any securities exchange or automated quotation system on which the Securities may be listed or traded or of the Depositary therefor.
The Definitive Securities 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 Securities, as evidenced by their execution of such Securities.
Upon their original issuance, the Restricted Securities shall be issued in the form of one or more Global Securities registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Such Global Securities, together with their Successor Securities which are Global Securities other than the Regulation S Global Securities, are collectively herein called the "Restricted Global Securities".
Upon their original issuance, initial Regulation S Securities shall be issued in the form of one or more Global Securities registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct), provided that upon such deposit all such Securities shall be credited to or through accounts maintained at DTC by or on behalf of Euroclear or Clearstream and in accordance with Section 305(b)(iv). Such Global Securities, together with their Successor Securities which are Global Securities other than the Restricted Global Securities, are collectively herein called the "Regulation S Global Securities".
SECTION 202. Forms of Face of Securities.
KINDER MORGAN ENERGY PARTNERS, L.P.
7.50% SENIOR NOTE DUE 2010
No. ___________ U.S. $______________
[CUSIP No. [________]
Kinder Morgan Energy Partners, L.P., a Delaware limited partnership (herein called the "Partnership", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to _____________________, or registered assigns, the principal sum of ______________________ Dollars on November 1, 2010, and to pay interest thereon from November 8, 2000 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on May 1 and November 1 in each year (or if any such date is not a Business Day, the next succeeding Business Day), commencing May 1, 2001, at the rate of 7.50% per annum, until the principal hereof is paid or made available for payment.
The interest so payable [(including Additional Interest, if any, provided for on the reverse hereof)],(1) and punctually paid or duly provided for, on any Interest Payment Date will, as provided in said Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be April 15 or October 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of and interest on this Security will be made at the office or agency of the Partnership maintained for that purpose in The City of New York, New York, in such coin or currency of the United States as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Partnership payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register; and provided, further, however, that in case this Security is held by a Depositary or its nominee, payments of principal, interest and premium, if any, shall be made by wire transfer of immediately available funds to an account designated by such Depositary.
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Partnership has caused this instrument to be duly executed.
KINDER MORGAN ENERGY
PARTNERS, L.P.
By: Kinder Morgan G.P., Inc.,
Its General Partner
Title:
SECTION 203. Forms of Reverse of Securities.
This Security is one of a duly authorized issue of securities of the Partnership, limited in initial aggregate principal amount to $250,000,000, issued and to be issued under an Indenture, dated as of November 8, 2000 (herein called the "Indenture"), between the Partnership and First Union National Bank, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which the Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Partnership, the Trustee and Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. The Securities issued and to be issued under the Indenture consist of $250,000,000 initial aggregate original principal amount of 7.50% Senior Notes due 2010 and are hereinafter called the "Securities"; provided, however, that the Partnership may, so long as no Event of Default has occurred and is continuing, reopen the series of Securities to issue additional Securities of such series, which shall form a single series with the Securities and shall have the same terms, without the consent of the Holders.
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement. The Partnership agrees to pay additional interest
(the "Additional Interest"), as specified below, upon the occurrence of any of
the following events (each such event an "Additional Interest Event"): (i) if
the Exchange Registration Statement or Shelf Registration Statement is not filed
within 120 days following the Closing Date, then commencing on the 121st day
after the Closing Date, Additional Interest shall accrue on the Securities over
and above the otherwise applicable interest rate at a rate of 0.25% per annum,
(ii) if the Exchange Registration Statement or the Shelf Registration Statement
is filed and is not declared effective within 210 days following the Closing
Date, then commencing on the 211th day after the Closing Date, Additional
Interest shall accrue on the Securities over and above the otherwise applicable
interest rate at a rate of 0.25% per annum, or (iii) if either (A) the
Partnership has not exchanged Exchange Securities for all Securities validly
tendered in accordance with the terms of the Exchange Offer on or prior to 45
Business Days after the date on which the Exchange Registration Statement was
declared effective, or (B) the Shelf Registration Statement has been declared
effective but such Shelf Registration Statement ceases to be effective at any
time (I)
prior to the second anniversary of the Closing Date or, if Rule 144(k) is
amended to provide a shorter restrictive period, such shorter period (the "Rule
144(k) Holding Period") and (II) while Registrable Securities are Outstanding,
then Additional Interest shall accrue on the Securities over and above the
otherwise applicable interest rate at a rate of 0.25% per annum commencing on
the (x) 46th Business Day after such effective date, in the case of (A) above,
or (y) the day the Shelf Registration Statement ceases to be effective, in the
case of (B) above; provided, however, that the rate at which Additional Interest
accrues on the Securities shall never exceed 0.25% per annum; and provided
further that Additional Interest shall cease to accrue upon the earlier of (X)
when all Additional Interest Events have been cured or (Y) upon the expiration
of the Rule 144(k) Holding Period. For purposes of clarifying the foregoing
provisions (i) the circumstances under which Additional Interest is owed are not
cumulative, (ii) in no event will the rate of Additional Interest exceed 0.25%
per annum, and (iii) Additional Interest shall not accrue at any time when there
are no Registrable Securities Outstanding.](2)
If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture.
The Securities are redeemable, at the option of the Partnership, at any time in whole or from time to time in part, upon not less than 30 and not more than 60 days' notice mailed to each Holder of the Securities to be redeemed at the Holder's address appearing in the Security Register, on any date prior to Maturity at a price equal to (a) 100% of the principal amount thereof plus accrued interest to the Redemption Date (subject to the right of holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date) and (b) a Make-Whole Premium, if any (the "Redemption Price"). In no event will the Redemption Price ever be less than 100% of the principal amount of the Notes plus accrued interest to the Redemption Date. The Make-Whole Premium will be calculated by an independent investment banking institution of national standing appointed by the Partnership; provided, that if the Partnership fails to make such appointment at least 30 Business Days prior to the Redemption Date, or if the institution so appointed is unwilling or unable to make such calculation, such calculation will be made by Banc of America Securities LLC or, if such firm is unwilling or unable to make such calculation, by an independent investment banking institution of national standing appointed by the Trustee (in any such case, an "Independent Investment Banker").
The Partnership has no obligation to redeem or purchase any Securities pursuant to any sinking fund or analogous requirement, or (except as provided in the Indenture) upon the happening of a specified event, or at the option of a Holder thereof.
The Indenture contains provision for defeasance at any time of (1) the entire indebtedness of this Security or (2) certain covenants contained therein, in each case upon compliance with certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Partnership and the rights of Holders of the Securities under the Indenture at any time by the Partnership and the Trustee with the consent of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of Holders of all the Securities, to waive compliance by the Partnership with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Securities, Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from Holders of a majority in principal amount of the Outstanding Securities a direction inconsistent with such request and shall have failed to institute such proceedings within 60 days; provided, however, that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of or any interest on this Security on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall, without the consent of the Holder hereof, alter or impair the obligation of the Partnership, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Partnership in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Partnership and the Security Registrar duly executed by, the Holder hereof or its attorney duly authorized in writing, and thereupon one or more new Securities of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof, unless otherwise required by law. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Partnership may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Partnership, the Trustee and any agent of the Partnership or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Partnership, the Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers this Security to
and irrevocably appoints __________________________ agent to transfer this Security on the books of the Partnership. The agent may substitute another to act for the agent.
Signature Guaranteed by:
In connection with any transfer of this Security, the undersigned confirms that such Security is being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Partnership; or
(2) [ ] pursuant to an effective registration statement under
the Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act
of 1933) that purchases for its own account or for the
account of a qualified institutional buyer to whom
notice is given that such transfer is being made in
reliance on Rule 144A, in each case pursuant to and in
compliance with Rule 144A under the Securities Act of
1933; or
(4) [ ] outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities
Act in compliance with Rule 903 or Rule 904 under the
Securities Act of 1933; or
(5) [ ] pursuant to another available exemption from
registration provided by Rule 144 under the Securities
Act of 1933.
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Unless one of the boxes is checked, the Trustee will refuse to register this Security in the name of any Person other than the registered Holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of this Security, such legal opinions, certifications and other information as the Partnership has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Security as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.
Dated:
----------------- ----------------------------------------------
NOTICE: To be executed by an executive officer
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SECTION 204. Form of Legend for Global Securities.
(a) Each Restricted Security shall bear the following legend:
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
THE STATES OF THE UNITED STATES.
(b) Each Regulation S Security shall bear the following legend: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY UNITED STATES PERSON, UNLESS THIS NOTE IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.
(c) Each Global Security shall bear the following legend: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN 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.
SECTION 205. Form of Trustee's Certificate and Authorization.
The Trustee's certificates of authentication shall be in substantially the following form:
This is one of the Securities designated therein referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
ARTICLE III
THE SECURITIES
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is initially limited to $250,000,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306 or 906; provided, however, that the Partnership may, so long as no Event of Default has occurred and is continuing, reopen the series of Securities represented by the 7.50% Senior Notes due 2010 to issue additional Securities of such series, which shall form a single series with the Securities and shall have the same terms, without the consent of the Holders.
The Securities shall be known and designated as the "7.50% Senior Notes due 2010" of the Partnership. Their Stated Maturity in respect of principal shall be November 1, 2010, and they shall bear interest at the rate of 7.50% per annum, from November 8, 2000 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable semi-annually on each November 1 and May 1, commencing May 1, 2001, until the principal thereof is paid or made available for payment.
The principal of and interest on the Securities shall be payable at the office or agency of the Partnership in The City of New York maintained for such purpose and any other office or agency maintained by the Partnership for such purpose; provided, however, that at the option of the Partnership payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without coupons and only denominations of $1,000 and any integral multiple thereof, unless otherwise required by law.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Partnership by the Chairman of the Board, Vice Chairman, Chief Executive Officer, Chief Financial Officer, President or any Vice President of the General Partner and need not be attested. The signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the General Partner shall bind the Partnership, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this Indenture, the Partnership may deliver Securities executed by the Partnership to the Trustee or an Authenticating Agent for authentication, together with a Partnership Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Partnership Order shall authenticate and deliver such Securities; provided, however, that Exchange Securities shall be issuable only upon the valid surrender for cancellation of Original Securities of a like aggregate principal amount, in accordance with the Exchange Offer.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or any Guaranty or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature of an
authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Partnership, and the Partnership shall deliver such Security to the Trustee for cancellation as provided in Section 309 for all purposes of this Indenture, such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of Definitive Securities, the Partnership may execute, and upon receipt of the documents required by Section 303, together with a Partnership Order, the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the Definitive Securities in lieu of which they are issued.
If temporary Securities are issued, the Partnership will cause
Definitive Securities to be prepared without unreasonable delay. After the
preparation of Definitive Securities, the temporary Securities shall be
exchangeable for Definitive Securities upon surrender of the temporary
Securities at the office or agency of the Partnership maintained pursuant to
Section 1002 for the purpose of exchanges of Securities, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities
the Partnership shall execute and the Trustee shall authenticate and deliver in
exchange therefor one or more Definitive Securities, of any authorized
denominations and of a like aggregate principal amount and tenor. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as Definitive Securities of such tenor.
SECTION 305. Registration, Registration of Transfer and Exchange.
(a) Registration, Registration of Transfer and Exchange, Generally.
The Partnership shall cause to be kept at an office or agency of the Security Registrar in The City of New York a register (the register maintained in such office or in any other office or agency of the Partnership in a Place of Payment being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Partnership shall provide for the registration of Securities and of transfers of Securities. The Partnership shall, prior to the issuance of any Securities hereunder, appoint the Trustee as the initial "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided and its corporate trust office which, at the date hereof, is located at 40 Broad Street, Suite 550, New York, New York 10004, as the initial office or agency in The City of New York where the Security Register will be maintained. The Partnership may at any time replace such Security Registrar, change such office or agency or act as its own Security Registrar. The Partnership will give prompt written notice to the Trustee of any change of the Security Registrar or of the location of such office
or agency. At all reasonable times the Security Register shall be available for inspection by the Trustee.
Upon surrender for registration of transfer of any Security at the office or agency of the Partnership maintained pursuant to Section 1002 for such purpose, the Partnership shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities, of any authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Securities (except a Global Security) may be exchanged for other Securities, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Partnership shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive; provided that no exchange of Original Securities for Exchange Securities shall occur until a registration statement for the issuance of the Exchange Securities shall have been declared effective by the Commission and the Original Securities to be exchanged for such Exchange Securities shall be cancelled by the Trustee.
All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Partnership, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Partnership or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Partnership and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Securities, but the Partnership may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304 or 1107 not involving any transfer.
Neither the Trustee nor the Partnership shall be required (1) to issue, register the transfer of or exchange Securities during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of Securities selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (2) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only to Global Securities:
(1) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (A) such Depositary (i) has notified the Partnership that
it is unwilling or unable to continue as Depositary for such Global Security or
(ii) has ceased to be a clearing agency registered under the Exchange Act, and
in either (i) or (ii) of this clause (2) a successor Depositary is not appointed
by the Partnership within 90 days after the date of such notice from the
Depositary, (B) there shall have occurred and be continuing a Default or an
Event of Default, or (C) the Partnership by Partnership Order, elects to have
the Global Security registered in the name of a Person other than the Depositary
or its nominee.
(3) Subject to Clause (2) above, any exchange of a Global Security for other Securities may be made in whole or in part, and all Securities issued in exchange for a Global Security or any portion thereof shall be registered in such names as the Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Section, Section 304, 306 or 906 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof.
(b) Certain Transfers and Exchanges. Notwithstanding any other provision of this Indenture or the Securities, transfers and exchanges of Securities and beneficial interests in a Global Security of the kinds specified in this Section 305(b) shall be made only in accordance with this Section 305(b).
(i) Restricted Global Security to Regulation S Global Security. If the owner of a beneficial interest in a Restricted Global Security wishes at any time to transfer such interest to a Person who wishes to acquire the same in the form of a beneficial interest in the Regulation S Global Security, such transfer may be effected only in accordance with the provisions of this Clause (b)(i) and Clause (b)(iv) below and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Regulation S Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Restricted Global Security and in an equal principal amount be debited from another specified Agent Member's account and (B) a Regulation S Certificate, satisfactory to the Trustee and duly executed by the owner of such
beneficial interest in the Restricted Global Security or his attorney duly authorized in writing, then the Trustee, as Security Registrar but subject to Clause (b)(iv) below, shall reduce the principal amount of the Restricted Global Security and increase the principal amount of the Regulation S Global Security by such specified principal amount.
(ii) Regulation S Global Security to Restricted Global Security. If the owner of a beneficial interest in a Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to acquire the same in the form of a beneficial interest in the Restricted Global Security, such transfer may be effected only in accordance with this Clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Restricted Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Regulation S Global Security and in an equal principal amount be debited from another specified Agent Member's account and (B) if such transfer is to occur during the Restricted Period, a Restricted Securities Certificate, satisfactory to the Trustee and duly executed by the owner of such beneficial interest in the Regulation S Global Security or his attorney duly authorized in writing, then the Trustee, as Security Registrar, shall reduce the principal amount of the Restricted Global Security by such specified principal amount. If transfers under this Clause (b)(ii) occur after the Restricted Period, no Restricted Securities Certificates will be required.
(iii) Non-Global Security to Non-Global Security. A Security that is not a Global Security may be transferred, in whole or in part to a Person who takes delivery in the form of another Security that is not a Global Security as provided in Section 305(a), provided, that, if the Security to be transferred in whole or in part is a Restricted Security, then the Trustee shall have received a Restricted Securities Certificate, satisfactory to the Trustee and duly executed by the transferor Holder or his attorney duly authorized in writing, in which case the Transferee Holder shall take delivery in the form of a Restricted Security (subject in every case to Section 305(c)).
(iv) Regulation S Global Security to be Held Through Euroclear or Clearstream During Restricted Period. The Partnership shall use its reasonable efforts to cause the Depositary to ensure that during the Restricted Period beneficial interests in a Regulation S Global Security may be held only in or through accounts maintained at the Depositary by Euroclear or Clearstream (or by Agent Members acting for the account thereof), and no Person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account; provided, that this Clause (b)(iv) shall not prohibit any transfer or exchange of such an interest in accordance with Clause (b)(ii) above.
(v) Restricted Non-Global Security to Restricted Global Security or Regulation S Global Security. If the Holder of a Restricted Security (other than a Global
Security) wishes at any time to transfer all or any portion of such
Security to a Person who wishes to take delivery thereof in the form of
a beneficial interest in the Restricted Global Security or the
Regulation S Global Security, such transfer may be effected only in
accordance with the provisions of this Clause (b)(v) and Clause (b)(iv)
above and subject to the Applicable Procedures. Upon receipt by the
Trustee, as Security Registrar, of (A) such Security as provided in
Section 305(a) and instructions satisfactory to the Trustee directing
that a beneficial interest in such Restricted Global Security or such
Regulation S Global Security in a specified principal amount not
greater than the principal amount of such Security be credited to a
specified Agent Member's account and (B) a Restricted Securities
Certificate, if the specified account is to be credited with a
beneficial interest in such Restricted Global Security, or a Regulation
S Certificate, if the specified account is to be credited with a
beneficial interest in such Regulation S Global Security, in either
case satisfactory to the Trustee and duly executed by such Holder or
his attorney duly authorized in writing, then the Trustee, as Security
Registrar, shall cancel such Security (and issue a new Security in
respect of any untransferred portion thereof) and increase the
principal amount of the Restricted Global Security or the Regulation S
Global Security, as the case may be, by the specified principal amount,
both as provided in Section 305(a).
(c) Securities Act Legends. Restricted Securities and their Successor Securities shall bear a Restricted Securities Legend, and the Regulation S Securities and their Successor Securities shall bear a Regulation S Legend, subject to the following:
(i) subject to the following Clauses of this Section
305(c), a Security or any portion thereof which is exchanged, upon
transfer or otherwise, for a Global Security or any portion thereof
shall bear the Securities Act Legend borne by such Global Security
while represented thereby;
(ii) subject to the following Clauses of this Section
305(c), a new Security which is not a Global Security and is issued in
exchange for another Security (including a Global Security or any
portion thereof, upon transfer or otherwise, shall bear the Securities
Act Legend borne by such other Security, provided that, if such new
Security is required pursuant to Section 305(b)(v) to be issued in the
form of a Restricted Security, it shall bear a Restricted Securities
Legend and, if such new Security is so required to be issued in the
form of a Regulation S Security, it shall bear a Regulation S Legend;
(iii) Registered Securities shall not bear a Securities Act Legend;
(iv) at any time after the Securities may be freely transferred without registration under the Securities Act or without being subject to transfer restrictions pursuant to the Securities Act, a new Security which does not bear a Securities Act legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if the Trustee has received an Unrestricted Securities Certificate, satisfactory to the Trustee and duly executed by the Holder of such legended
Security or his attorney duly authorized in writing, and after such date and receipt of such certificate, the Trustee shall authenticate and deliver such a new Security in exchange for or in lieu of such other Security as provided in this Article III.
(v) a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if, in the Partnership's judgment, placing such a legend upon such new Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the written direction of the Partnership, shall authenticate and deliver such a new Security as provided in this Article III; and
(vi) notwithstanding the foregoing provisions of this
Section 305(c), a Successor Security of a Security that does not bear a
particular form of Securities Act Legend shall not bear such form of
legend unless the Partnership has reasonable cause to believe that such
Successor Security is a "restricted security" within the meaning of
Rule 144, in which case the Trustee, at the written direction of the
Partnership, shall authenticate and deliver a new Security bearing a
Restricted Securities Legend in exchange for such Successor Security as
provided in this Article III.
Furthermore, any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by the Holder of such Global Security (or its agent), and that ownership of a beneficial interest in such Global Security shall be required to be reflected in a book entry.
The Trustee shall retain copies of all letters, notices and other written communications (if any) received concerning transfer or exchange, and the Partnership shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of a reasonable written notice to the Trustee.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, together with such security or indemnity as may be required by the Partnership or the Trustee to save each of them and any agent of either of them harmless, the Partnership shall execute and upon its request the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously Outstanding.
If there shall be delivered to the Partnership and the Trustee (1) evidence to their satisfaction of the destruction, loss or theft of any Security and (2) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Partnership or the Trustee that such Security has been acquired by a bona fide purchaser, the
Partnership shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously Outstanding. If, after the delivery of such new Security, a bona fide purchaser of the original Security in lieu of which such new Security was issued presents for payment or registration such original Security, the Trustee shall be entitled to recover such new Security from the party to whom it was delivered or any party taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Partnership and the Trustee in connection therewith.
In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Partnership in its discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Partnership may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in exchange for any mutilated Security or in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Partnership, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Partnership, at its election in each case, as provided in Clause (1) or (2) below:
(1) The Partnership may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) 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 Security 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 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 prepaid, to each Holder of Securities at his 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 Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Partnership may make payment of any Defaulted Interest on the Securities in any other lawful manner not inconsistent with the requirements of either securities exchange or automated quotation system on which such Securities may be listed or traded, 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.
Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security, shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.
The Partnership shall, prior to 10:30 a.m. (New York City time) on each payment date for principal and premium, if any, and interest, if any, deposit with the Trustee money in immediately available funds sufficient to make cash payments due on the applicable payment date.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the Partnership, the Trustee and any agent of the Partnership or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Sections 305 and 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Partnership, the Trustee nor any agent of the Partnership or the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Partnership, the Trustee and any agent of the Partnership or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Partnership, the Trustee nor 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 beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Partnership may at any time deliver to the Trustee for cancellation any Security previously authenticated and delivered hereunder which the Partnership may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Security previously authenticated hereunder which the Partnership has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Security held by the Trustee shall be disposed of in accordance with its customary procedures, and the Trustee shall thereafter deliver to the Partnership a certificate with respect to such disposition.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months and interest on the Securities for any partial period shall be computed on the basis of a 360- day year of twelve 30-day months and the number of days elapsed in any partial month.
SECTION 311. CUSIP Numbers.
The Partnership in issuing the Securities may use "CUSIP" numbers (in addition to the other identification numbers printed on the Securities), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such "CUSIP" 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 "CUSIP" numbers. The Partnership will promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Partnership Request cease to be of further effect with respect to Securities (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Partnership, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to such Securities, when
(1) either
(A) all such Securities theretofore authenticated and
delivered (other than (i) such Securities which have been destroyed,
lost or stolen and which have been replaced or paid as provided in
Section 306, and (ii) such Securities for whose payment money has
theretofore been deposited in trust or segregated and held in trust by
the Partnership and thereafter repaid to the Partnership or discharged
from such trust, as provided in Section 1003) have been delivered to
the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at their Stated Maturity in respect of principal within one year, or
(iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Partnership,
and the Partnership in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for this purpose an amount in Dollars sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity of the principal thereof, or the Redemption Date, as the case may be;
(2) the Partnership has paid or caused to be paid all other sums payable hereunder by the Partnership with respect to such Securities; and
(3) the Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to such Securities have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to the Securities (x) the obligations of the Partnership to the Trustee
under Section 607, the obligations of each Guarantor under Section 101 of its
Guaranty, the obligations of the Trustee to any Authenticating Agent under
Section 614 and the right of the Trustee to resign under Section 610 shall
survive, and (y) if money shall have been deposited with the Trustee pursuant to
subclause (B) of Clause (1) of this Section, the obligations of the Partnership
and/or the Trustee under Sections 402, 606, 701 and 1002 and the last paragraph
of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Partnership acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee.
ARTICLE V
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or
(3) default in the performance, or breach, of any term, covenant or warranty of the Partnership or any Guarantor in this Indenture or the applicable Guaranty, and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Partnership or such Guarantor by the Trustee or to the Partnership or such Guarantor and the Trustee by Holders of at least 25% in principal amount of the Outstanding Securities a written
notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or
(4) the Partnership pursuant to or within the meaning of any Bankruptcy Law (A) commences a voluntary case, (B) consents to the entry of any order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors; or
(5) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Partnership in an involuntary case, (B) appoints a Custodian of the Partnership or for all or substantially all of its property, or (C) orders the liquidation of the Partnership; and the order or decree remains unstayed and in effect for 90 days.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities at the time Outstanding occurs and is continuing, then in every such case the Trustee or Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal amount of and accrued but unpaid interest, if any, on all of the Securities to be due and payable immediately, by a notice in writing to the Partnership (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to the Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Partnership and the Trustee, may rescind and annul such declaration and its consequences if
(1) the Partnership has paid or deposited with the Trustee a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities, other
than the non-payment of the principal of Securities which have become due solely
by such declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent Default or impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Partnership covenants that if
(1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof,
the Partnership will, upon demand of the Trustee, pay to it, for the benefit of Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Partnership fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Partnership, any Guarantor, or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Partnership, any Guarantor, or any other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of Holders of the Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Partnership, any Guarantor, or any other obligor upon the Securities, their property or their creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of Holders of the Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money or property collected or to be applied by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively; and
THIRD: The balance, if any, to the Partnership.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities;
(2) Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer and, if requested, provision of security or indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by Holders of a majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Sections 305 and 307) interest on such Security on the Stated Maturity expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute
suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Guaranty and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then in every such case, subject to any determination in such proceeding, the Partnership, the relevant Guarantor, the Trustee and Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by Holders, as the case may be.
SECTION 512. Control by Holders.
Subject to the provisions of Section 603, Holders of a majority in aggregate principal amount of the Outstanding Securities 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 Securities; provided, however, that
(1) such direction shall not be in conflict with any rule of law or with this Indenture;
(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and
(3) subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such directions if the Trustee in good faith shall determine that the proceeding so directed would involve the Trustee in personal liability or would otherwise be contrary to applicable law.
SECTION 513. Waiver of Past Defaults.
Holders of a majority in aggregate principal amount of the Outstanding Securities may on behalf of Holders of all the Securities waive any past default hereunder and its consequences, except
(1) a continuing default in the payment of the principal of or any premium or interest on any Security, or
(2) a default in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
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, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Trustee, in any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities to which the suit relates, or in any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the Stated Maturity expressed by such Security (or, in the case of redemption or repayment, on or after the Redemption Date).
SECTION 515. Waiver of Usury, Stay or Extension Laws.
The Partnership covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Partnership (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default with respect to the Securities,
(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture with respect to the Securities, and no implied covenants or obligations shall read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may, with respect to the Securities, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee 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.
(b) In case an Event of Default with respect to the Securities has occurred and is continuing, the Trustee shall exercise with respect to the Securities such rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs.
(c) No provisions 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
(1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any 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;
(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders or a majority in principal amount of the Outstanding Securities 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 the Securities; and
(4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have 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 602. Notice of Defaults.
If a Default occurs and is continuing with respect to the Securities, the Trustee shall, within 90 days after it occurs, transmit, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, notice of all uncured or unwaived Defaults known to it; provided, however, that, except in the case of a Default in payment on the Securities, the Trustee shall be protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors or responsible officers of the Trustee determine in good faith that withholding such notice is in the interests of Holders of Securities; provided, further, however, that, in the case of any Default of the character specified in Section 501(3) with respect to the Securities, no such notice to Holders shall be given until at least 30 days after the occurrence of such Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely on 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, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(2) any request, direction, order or demand of the Partnership mentioned herein shall be sufficiently evidenced by a Partnership Request or Partnership Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(6) 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, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Partnership, personally or by agent or attorney;
(7) 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 with due care by it hereunder;
(8) the Trustee is not a party to the Registration Rights Agreement and shall be entitled to rely on an Officers' Certificate as to whether Additional Interest is owed on the Securities; and
(9) the Trustee may request that the Partnership deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any Person authorized to sign an Officers' Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Partnership, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. Neither the Trustee nor any Authenticating Agent makes any representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Partnership of the Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Partnership, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Partnership with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder 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 money received by it hereunder except as otherwise agreed with the Partnership.
SECTION 607. Compensation and Reimbursement.
The Partnership agrees:
(1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith;
(3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder; and
(4) The Trustee shall have a claim prior to the Securities as to all property and funds held by it hereunder for any amounts owing it or any predecessor Trustee pursuant to this Section 607, except to funds held in trust for the benefit of Holders of any Securities.
The obligations of the Partnership under this Section to compensate the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder.
Without limiting any rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(4) or Section 501(5), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any applicable Bankruptcy Law.
The provisions of this Section 607 and the obligations of the Partnership thereunder, shall survive payment in full of the Securities, the satisfaction and discharge of this Indenture and any defeasance of the Securities.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a single Trustee hereunder that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus required by the Trust Indenture Act. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of a supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611.
The Trustee may resign at any time by giving written notice thereof to the Partnership. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.
The Trustee may be removed at any time by Act of Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Partnership. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the removed Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written request therefor by the Partnership, or by any Holder who has been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Partnership, or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case (A) the Partnership, by a Board Resolution, may remove the Trustee, or (B) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Partnership, by a Board Resolution, shall promptly appoint a successor Trustee and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of Holders of a majority in principal amount of the Outstanding Securities delivered to the Partnership and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee and shall supersede the successor Trustee appointed by the Partnership. If no successor Trustee shall have been so appointed by the Partnership or Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.
The Partnership shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders of Securities in the manner provided in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(1) Every such successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Partnership and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Partnership or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(2) Upon request of any such successor Trustee, the Partnership shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (1) of this Section.
(3) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Partnership.
If and when the Trustee shall be or become a creditor of the Partnership, any Guarantor, or any other obligor upon the Securities, the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Partnership, any such Guarantor, or any such other obligor.
SECTION 614. Appointment of Authenticating Agent.
The Trustee (upon notice to the Partnership) may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Partnership and shall at all times be a corporation organized and doing business under the laws of the United States, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate agency or corporate trust business of such Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Partnership. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Partnership. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Partnership and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
Except with respect to an Authenticating Agent appointed at the request of the Partnership, the Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
Date: By:
--------------- ------------------------------
As Authenticating Agent
By:
------------------------------
Authorized Signatory
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND
PARTNERSHIP
SECTION 701. Partnership to Furnish Trustee Names and Addresses of Holders.
The Partnership will furnish or cause to be furnished to the Trustee
(1) not later than each Interest Payment Date in each year in respect of the Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of Holders of Securities as of the preceding Regular Record Date in respect of the Securities, and
(2) 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 content as of a date not more than 15 days prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees with the Partnership and the Trustee that neither the Partnership nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to the names and addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
As promptly as practicable after each May 15 beginning with the May 15
following the date of this Indenture, and in any event prior to July 15 in each
year, the Trustee shall mail to each Holder a brief report dated as of May 15
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b). Prior to delivery to Holders, the Trustee shall deliver to the
Partnership a copy of any report it delivers to Holders pursuant to this Section
703.
A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Partnership. The Partnership will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Partnership.
The Partnership shall:
(1) file with the Trustee, within 15 days after the Partnership is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Partnership may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Partnership is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission (unless the Commission will not accept such a filing), in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Partnership with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and
(3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Partnership pursuant to paragraphs
(1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR
LEASE
SECTION 801. Partnership and Guarantors May Consolidate, Etc., Only on Certain Terms.
The Partnership shall not, and shall not permit any Guarantor to, consolidate with or merge into any other Person or sell, lease or transfer its properties and assets as, or substantially as, an entirety to, any Person, unless:
(1) (A) in the case of a merger, the Partnership or such Guarantor, as the case may be, is the surviving entity, or (B) the Person formed by such consolidation or into which the Partnership or such Guarantor is merged or the Person which acquires by sale or transfer, or which leases, the properties and assets of the Partnership or such Guarantor as, or substantially as, an entirety must expressly assume, by an indenture supplemental hereto, or a supplement to the applicable Guaranty, as the case may be, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the obligations of the Partnership or such Guarantor, as the case may be, under this Indenture and the Securities, or the applicable Guaranty, as the case may be;
(2) the surviving entity or successor Person is a Person organized and existing under the laws of the United States, any State thereof or the District of Columbia;
(3) immediately after giving effect to such transaction, no Default or Event of Default exists; and
(4) the Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, transfer or lease and the supplemental indenture required in connection with such transaction comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Partnership or any Guarantor with, or merger of the Partnership or any Guarantor into, any other Person or any sale, transfer or lease of the properties and assets of the Partnership or any Guarantor as, or substantially as, an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Partnership or such Guarantor is merged or to which such sale, transfer or lease is made shall (and, in the case of
a Guarantor, its Guaranty will provide that it shall) succeed to, and be substituted for, and may exercise every right and power of, the Partnership or such Guarantor under this Indenture and the Securities, or the Guaranty of such Guarantor, as the case may be, with the same effect as if such successor Person had been named originally as the Partnership or such Guarantor herein or therein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities, or such Guaranty, as the case may be.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Securities, the Partnership and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to secure the Securities;
(2) to evidence the succession of another Person to the Partnership under this Indenture and the Securities and the assumption by such successor Person of the obligations of the Partnership hereunder;
(3) to reflect the addition of any Subsidiary of the Partnership as a Guarantor, or to reflect the release of any Guarantor from its Guaranty, in either case in the manner provided by Article XIV of this Indenture;
(4) to add covenants and Events of Default for the benefit of Holders of the Securities or to surrender any right or power conferred by this Indenture upon the Partnership;
(5) to add to, change or eliminate any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities in uncertificated form;
(6) to cure any ambiguity or correct any inconsistency in this Indenture;
(7) to amend this Indenture to reopen the series represented by the Securities and issue additional Securities of that series in compliance with Section 301;
(8) to evidence the acceptance of appointment by a successor Trustee;
(9) to qualify this Indenture under the Trust Indenture Act;
(10) to supplement any provisions of this Indenture necessary to permit or facilitate the defeasance and discharge of the Securities, provided that such action does not adversely affect the interests of Holders of Securities; and
(11) to comply with the rules or regulations of any securities exchange or automated quotation system on which any of the Securities may be listed or traded.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of Holders of not less than a majority in aggregate principal amount of the Outstanding Securities affected by such supplemental indenture, the Partnership and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture, or modifying in any manner the rights of Holders of Securities under this Indenture; provided that the Partnership and the Trustee may not, without the consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or of any installment of interest on, any Security, or reduce the principal amount thereof or premium, if any, or the rate of interest thereon, or alter the method of computation of interest;
(2) reduce the percentage in principal amount of the Securities required for any such supplemental indenture or for any waiver provided for in this Indenture;
(3) change the Partnership's obligation to maintain an office or agency for payment of Securities and the other matters specified herein;
(4) impair the right to institute suit for the enforcement of any payment of principal of, premium, if any, or interest on, any Security; or
(5) modify any of the provisions of this Indenture relating to the execution of supplemental indentures with the consent of Holders of Securities which are discussed in this Section or modify any provisions relating to the waiver by Holders of Securities of past defaults and covenants, except to increase any required percentage or to provide that other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but 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.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 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. If the Partnership shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Partnership, to any such supplemental indenture may be prepared and executed by the Partnership and authenticated and delivered by the Trustee in exchange for Outstanding Securities.
ARTICLE X
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Partnership covenants and agrees for the benefit of Holders of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities in accordance with the terms of such Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Partnership will maintain in the Place of Payment an office or agency where the Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Partnership in respect of the Securities 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 Corporate Trust Office of the Trustee, and the Partnership hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.
The Partnership may also from time to time designate one or more other offices or agencies in the City of New York where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Partnership of its obligation to maintain an office or agency in the Place of Payment for such purposes. The Partnership will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
The Partnership hereby permanently designates as the Place of Payment of Securities The City of New York, and initially appoints the Trustee as Paying Agent at its office located at 40 Broad Street, Suite 550, New York, New York 10004, as the Partnership's office or agency for such purpose in such city.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Partnership or any of its Subsidiaries shall at any time act as Paying Agent with respect to the Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.
Whenever the Partnership shall have one or more Paying Agents for the Securities, it will, on or prior to each due date of the principal of or any premium or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Partnership will promptly notify the Trustee of its action or failure so to act.
The Partnership will cause the Paying Agent for the Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (1) hold all sums held
by it for the payment of the principal of (and premium, if any) or interest, if any, on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Partnership or any Guarantor (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest, if any, on the Securities; and (3) during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities.
The Partnership may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Partnership Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Partnership, any Guarantor or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Partnership, such Guarantor or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent in trust for the payment of the principal of or any premium or interest on any Security and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the state whose escheat laws control, and the Trustee or such Paying Agent shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the state whose escheat laws control, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Partnership as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment, may at the expense of the Partnership cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be paid to the state whose escheat laws control.
SECTION 1004. Statement by Officers as to Default.
The Partnership will deliver to the Trustee, within 150 days after the end of each fiscal year of the Partnership ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Partnership or any Guarantor is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Partnership or any Guarantor shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.
SECTION 1005. Existence.
Subject to Article VIII, the Partnership will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises and those of each Guarantor; provided, however, that neither the Partnership nor any Guarantor shall be required to preserve any such right or franchise if the Partnership shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Partnership or such Guarantor.
SECTION 1006. Limitations on Liens.
The Partnership will not, nor will it permit any Subsidiary to, create, assume, incur or suffer to exist any Lien upon any Principal Property, or upon any shares of capital stock of any Subsidiary owning or leasing any Principal Property, whether owned or leased on the date of this Indenture or thereafter acquired, to secure any Debt of the Partnership or any other Person (other than the Securities issued hereunder), without in any such case making effective provision whereby all of the Securities Outstanding hereunder shall be secured equally and ratably with, or prior to, such Debt so long as such Debt shall be so secured. This restriction shall not apply to:
(1) Permitted Liens;
(2) any Lien upon any property or assets created at the time of acquisition of such property or assets by the Partnership or any Subsidiary or within one year after such time to secure all or a portion of the purchase price for such property or assets or Debt incurred to finance such purchase price, whether such Debt was incurred prior to, at the time of or within one year after the date of such acquisition;
(3) any Lien upon any property or assets to secure all or part of the cost of construction, development, repair or improvements thereon or to secure Debt incurred prior to, at the time of, or within one year after completion of such construction, development, repair or improvements or the commencement of full operations thereof (whichever is later), to provide funds for any such purpose;
(4) any Lien upon any property or assets existing thereon at the time of the acquisition thereof by the Partnership or any Subsidiary (whether or not the obligations secured thereby are assumed by the Partnership or any Subsidiary); provided, however, that such Lien only encumbers the property or assets so acquired;
(5) any Lien upon any property or assets of a Person existing thereon at the time such Person becomes a Subsidiary by acquisition, merger or otherwise; provided, however, that such Lien only encumbers the property or assets of such Person at the time such Person becomes a Subsidiary;
(6) any Lien upon any property or assets of the Partnership or any Subsidiary in existence on the Closing Date or provided for pursuant to agreements existing on the Closing Date;
(7) Liens imposed by law or order as a result of any proceeding before any court or regulatory body that is being contested in good faith, and Liens which secure a judgment or other court-ordered award or settlement as to which the Partnership or the applicable Subsidiary, as the case may be, has not exhausted its appellate rights;
(8) any extension, renewal, refinancing, refunding or
replacement (or successive extensions, renewals, refinancing, refunding or
replacements) of Liens, in whole or in part, referred to in Clauses (1) through
(7), inclusive, of this Section; provided, however, that any such extension,
renewal, refinancing, refunding or replacement Lien shall be limited to the
property or assets covered by the Lien extended, renewed, refinanced, refunded
or replaced and that the obligations secured by any such extension, renewal,
refinancing, refunding or replacement Lien shall be in an amount not greater
than the amount of the obligations secured by the Lien extended, renewed,
refinanced, refunded or replaced and any expenses of the Partnership and its
Subsidiaries (including any premium) incurred in connection with such extension,
renewal, refinancing, refunding or replacement; or
(9) any Lien resulting from the deposit of moneys or evidence of indebtedness in trust for the purpose of defeasing Debt of the Partnership or any Subsidiary.
Notwithstanding the foregoing provisions of this Section, the
Partnership may, and may permit any Subsidiary to, create, assume, incur or
suffer to exist any Lien upon any Principal Property to secure Debt of the
Partnership or any Person (other than the Securities) that is not excepted by
Clauses (1) through (9), inclusive, of this Section without securing the
Securities issued hereunder, provided that the aggregate principal amount of all
Debt then outstanding secured by such Lien and all similar Liens, together with
all Attributable Indebtedness from Sale-Leaseback Transactions (excluding
Sale-Leaseback Transactions permitted by Clauses (1) through (4), inclusive, of
Section 1007), does not exceed 10% of Consolidated Net Tangible Assets.
SECTION 1007. Restriction of Sale-Leaseback Transaction.
The Partnership will not, and will not permit any Subsidiary to, engage in a Sale-Leaseback Transaction, unless:
(1) such Sale-Leaseback Transaction occurs within one year from the date of completion of the acquisition of the Principal Property subject thereto or the date of the completion of construction, development or substantial repair or improvement, or commencement of full operations on such Principal Property, whichever is later;
(2) the Sale-Leaseback Transaction involves a lease for a period, including renewals, of not more than three years;
(3) the Partnership or such Subsidiary would be entitled to incur Debt secured by a Lien on the Principal Property subject thereto in a principal amount equal to or exceeding the Attributable Indebtedness from such Sale-Leaseback Transaction without equally and ratably securing the Securities; or
(4) the Partnership or such Subsidiary, within a one-year period after such Sale-Leaseback Transaction, applies or causes to be applied an amount not less than the Attributable Indebtedness from such Sale-Leaseback Transaction to (A) the prepayment, repayment, redemption, reduction or retirement of Pari Passu Debt of the Partnership or any Subsidiary, or (B) the expenditure or expenditures for Principal Property used or to be used in the ordinary course of business of the Partnership or its Subsidiaries.
Notwithstanding the foregoing provisions of this Section, the Partnership may, and may permit any Subsidiary to, effect any Sale-Leaseback Transaction that is not excepted by Clauses (1) through (4), inclusive, of this Section, provided that the Attributable Indebtedness from such Sale-Leaseback Transaction, together with the aggregate principal amount of then outstanding Debt (other than the Securities) secured by Liens upon Principal Properties not excepted by Clauses (1) through (9), inclusive, of Section 1006, do not exceed 10% of the Consolidated Net Tangible Assets.
SECTION 1008. Waiver of Certain Covenants.
The Partnership may omit in any particular instance to comply with any term, provision or condition set forth in Section 1005, 1006 or 1007 with respect to the Securities if before the time for such compliance Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance 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 Guarantors and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.
SECTION 1009. Officers' Certificate as to Additional Interest.
The Partnership shall deliver an Officers' Certificate to the Trustee
within five Business Days after an Additional Interest Event occurs which
identifies such Additional Interest Event and states the date as of which
Additional Interest began accruing or will begin to accrue. Promptly upon (i) an
Additional Interest Event having been cured or (ii) the expiration of the Rule
144(k) Holding Period, the Partnership shall deliver to the Trustee an Officers'
Certificate which identifies such Additional Interest Event, states that it has
been cured or that the Rule 144(k) Holding Period has expired, as the case may
be, and states the date as of which Additional Interest ceased accruing or will
cease to accrue.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 1101. Optional Redemption.
The Securities will be redeemable, at the option of the Partnership, at any time in whole or from time to time in part, upon not less than 30 and not more than 60 days' notice mailed to each Holder of the Securities to be redeemed at the Holder's address appearing in the Security Register, on any date prior to Maturity at a price equal to (a) 100% of the principal amount thereof plus accrued interest to the Redemption Date (subject to the right of holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date) and (b) a Make-Whole Premium, if any (the "Redemption Price"). In no event will the Redemption Price ever be less than 100% of the principal amount of the Notes plus accrued interest to the Redemption Date. The Make-Whole Premium will be calculated by an independent investment banking institution of national standing appointed by the Partnership; provided, that if the Partnership fails to make such appointment at least 30 business days prior to the Redemption Date, or if the institution so appointed is unwilling or unable to make such calculation, such calculation will be made by Banc of America Securities LLC or, if such firm is unwilling or unable to make such calculation, by an independent investment banking institution of national standing appointed by the Trustee (in any such case, an "Independent Investment Banker").
The Partnership has no obligation to redeem or purchase any Securities pursuant to any sinking fund or analogous requirement, or (except as provided in Article V) upon the happening of a specified event, or at the option of a Holder thereof.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Partnership to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Partnership of less than all the Securities, the Partnership shall, not less than 35 nor more than 60 days prior to the Redemption Date fixed by the Partnership (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities to be redeemed.
SECTION 1103. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, on a pro rata basis or by any other method which the Trustee deems fair and appropriate and which complies with any securities exchange or other applicable requirements for redemption of portions (equal to the minimum authorized denomination for Securities or any integral multiple thereof) of the principal amount of Securities of a denomination larger than the minimum authorized denomination for Securities.
The Trustee shall promptly notify the Partnership in writing of the Securities selected for redemption and, in the case of any such Securities selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of the Securities shall relate, in the case of any such Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail (if international mail, by air mail), postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of the Securities to be redeemed, at his address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption of any such Securities, the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed shall be given by the Partnership or, at the Partnership's request, by the Trustee in the name and at the expense of the Partnership.
SECTION 1105. Deposit of Redemption Price.
On or prior to 10:30 a.m. New York City Time on any Redemption Date, 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 as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Partnership shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Partnership at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in such Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Partnership or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Partnership 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 Security without service charge, a new Security or Securities, 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 Security so surrendered.
ARTICLE XII
NON-RECOURSE
SECTION 1201. Non-Recourse to the General Partner; No Personal Liability of Officers, Directors, Employees or Partners.
Obligations of the Partnership or any Guarantor, as such, under this Indenture, the Securities and any Guaranty are non-recourse to the General Partner, and its respective Affiliates (other than the Partnership and the Guarantors), and payable only out of cash flow and assets of the Partnership and the Guarantors. The Trustee, and each Holder of a Security by its acceptance thereof, will be deemed to have agreed in this Indenture that (1) neither the General Partner nor its assets (nor any of its respective Affiliates other than the Partnership or the Guarantors, nor their respective assets) shall be liable for any of the obligations of the Partnership or the Guarantors under this Indenture, such Securities or any Guaranty, and (2) no director, officer, employee, stockholder or unitholder,
as such, of the Partnership, the Guarantors, the Trustee, the General Partner or any Affiliate of any of the foregoing entities shall have any personal liability in respect of the obligations of the Partnership or the Guarantors under this Indenture, such Securities or any Guaranty by reason of his, her or its status. The agreements set forth in this Section 1201 are part of the consideration for the issuance of the Securities and any Guaranty.
ARTICLE XIII
DEFEASANCE OF SECURITIES
SECTION 1301. Legal Defeasance.
In addition to discharge of the Indenture pursuant to Section 401, the Partnership shall be deemed to have paid and discharged the entire indebtedness on all Securities on the 91st day after the date of the deposit referred to in Clause (1) below, and the provisions of this Indenture with respect to such Securities shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of such Securities and the Partnership's right of optional redemption, (ii) substitution of mutilated, destroyed, lost or stolen Securities, (iii) rights of Holders of such Securities to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor or on the specified redemption dates therefor (but not upon acceleration), (iv) the rights, obligations, duties and immunities of the Trustee hereunder, and the Partnership's and Guarantors' obligations in connection therewith (including, but not limited to, Section 607), (v) the rights, if any, to convert or exchange such Securities, (vi) the rights of Holders of such Securities as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, and (vii) the obligations of the Partnership under Section 1002), and the Trustee, at the expense of the Partnership, shall, upon a Partnership Request, execute proper instruments acknowledging the same, if the conditions set forth below are satisfied (hereinafter, "defeasance"):
(1) The Partnership has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust, for the purposes of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of Holders of such Securities (A) cash in an amount, or (B) U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure the availability of cash, or (C) a combination thereof, certified to be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay the principal and interest and premium, if any, on all such Securities on each date that such principal, interest or premium, if any, is due and payable or on any Redemption Date established pursuant to Clause (3) below;
(2) The Partnership has delivered to the Trustee an Opinion of Counsel based on the fact that (A) the Partnership has received from, or there has been published by, the Internal Revenue Service a ruling, or (B) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and such opinion shall confirm that, Holders
of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge 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, defeasance and discharge had not occurred;
(3) If such Securities are to be redeemed prior to Stated Maturity, notice of such redemption shall have been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee shall have been made;
(4) No Event of Default or Default shall have occurred and be continuing on the date of such deposit;
(5) Such defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all such Securities are in default within the meaning of such Act);
(6) Such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Partnership is a party or by which it is bound;
(7) Such defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; and
(8) The Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the defeasance contemplated by this provision have been complied with.
For this purpose, such defeasance means that the Partnership, the Guarantors, and any other obligor upon the Securities shall be deemed to have paid and discharged the entire debt represented by such Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1303 and the rights and obligations referred to in Clauses (i) through (vii), inclusive, of the first paragraph of this Section, and to have satisfied all its other obligations under such Securities, this Indenture and the Guaranties insofar as such Securities are concerned.
SECTION 1302. Covenant Defeasance.
The Partnership and any other obligor, including the Guarantors, shall
be released on the 91st day after the date of the deposit referred to in Clause
(1) below from its obligations under Sections 704, 801, 1005, 1006 and 1007 with
respect to the Securities on and after the date the conditions set forth below
are satisfied (hereinafter, "covenant defeasance"), and such Securities shall
thereafter be deemed to be not "Outstanding" for the purposes of any request,
demand, authorization, direction,
notice, waiver, consent or declaration or other action or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed Outstanding for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Securities, the Partnership and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, whether directly or indirectly by reason of any reference elsewhere herein to such Section or by reason of any reference in such Section to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501, but, except as specified above, the remainder of this Indenture and the Securities shall be unaffected thereby. The following shall be the conditions to application of this Section 1302:
(1) The Partnership has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of Holders of the Securities (A) cash in an amount, or (B) U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure the availability of cash, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay the principal and interest and premium, if any, on all Securities on each date that such principal, interest or premium, if any, is due and payable or on any Redemption Date established pursuant to Clause (2) below;
(2) If such Securities are to be redeemed prior to Stated Maturity, notice of such redemption shall have been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee shall have been made;
(3) No Event of Default or Default shall have occurred and be continuing on the date of such deposit;
(4) The Partnership has delivered to the Trustee an Opinion of Counsel which shall confirm that Holders of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same time as would have been the case if such deposit and covenant defeasance had not occurred;
(5) Such covenant defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all such Securities are in default within the meaning of such Act);
(6) Such covenant defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Partnership is a party or by which it is bound;
(7) Such covenant defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; and
(8) The Partnership has delivered to the Trustee an Officers' Certificate and Opinion of Counsel stating that all conditions precedent provided for relating to the covenant defeasance contemplated by this provision have been complied with.
SECTION 1303. Application by Trustee of Funds Deposited for Payment of Securities.
Subject to the provisions of the last paragraph of Section 1003, all
moneys or U.S. Government Obligations deposited with the Trustee pursuant to
Section 1301 or 1302 (and all funds earned on such moneys or U.S. Government
Obligations) shall be held in trust and applied by it to the payment, either
directly or through any Paying Agent (including the Partnership acting as its
own Paying Agent), to Holders of such Securities for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such money need not be
segregated from other funds except to the extent required by law. Subject to
Sections 1301 and 1302, the Trustee shall promptly pay to the Partnership upon
Partnership Order any moneys held by it at any time, which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification delivered to the Trustee, are in excess of the amounts
required to effect the defeasance with respect to the Outstanding Securities in
question.
SECTION 1304. Repayment to Partnership.
The Trustee and any Paying Agent promptly shall pay or return to the Partnership upon Partnership Request any money and U.S. Government Obligations held by them at any time that are not required for the payment of the principal of and any interest on such Securities for which money or U.S. Government Obligations have been deposited pursuant to Section 1301 or 1302, which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification delivered to the Trustee, are in excess of the amounts required to effect the defeasance with respect to the Outstanding Securities in question.
The provisions of the last paragraph of Section 1003 shall apply to any money held by the Trustee or any Paying Agent under this Article that remains unclaimed for two years after the Maturity of the Securities for which money or U.S. Government Obligations have been deposited pursuant to Section 1301 or 1302.
SECTION 1305. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Partnership and any Guarantor under this Indenture, the applicable Guaranty and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Indenture until such time as the Trustee or the Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article; provided, however, that if the Partnership or any Guarantor has made any payment of principal of or interest on any Securities because of the reinstatement of its obligations, the Partnership or such Guarantor shall be subrogated to the rights of Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or the Paying Agent.
ARTICLE XIV
GUARANTY OF SECURITIES
SECTION 1401. Requirement for Guaranty.
(1) If any Subsidiary of the Partnership guarantees or becomes a co-obligor in respect of any Funded Debt of the Partnership other than the Securities at any time subsequent to the Closing Date (including, without limitation, following any release of such Subsidiary pursuant to Section 1402 from any Guaranty previously provided by it under this Article XIV), then the Partnership shall (A) cause the Securities to be equally and ratably guaranteed by such Subsidiary, but only to the extent that the Securities are not already guaranteed by such Subsidiary on reasonably comparable terms and (B) cause such Subsidiary to execute and deliver a Guaranty in accordance with clause (2) below.
(2) Any Person may become a Guarantor by executing and delivering to the Trustee (A) a Guaranty in form and substance satisfactory to the Trustee, which subjects such Person to the provisions (including the representations and warranties) of this Indenture as a Guarantor and (B) an Opinion of Counsel and Officers' Certificate to the effect that such Guaranty has been duly authorized and executed by such Person and constitutes the legal, valid, binding and enforceable obligation of such Person (subject to such customary exceptions concerning creditors' rights and equitable principles as may be acceptable to the Trustee in its discretion).
SECTION 1402. Release of Guaranty.
Notwithstanding anything to the contrary in this Article XIV, in the event that any Guarantor shall no longer be a guarantor of any Funded Debt of the Partnership other than the Securities, and so long as no Default or Event of Default shall have occurred or be continuing, such Guarantor, upon
giving written notice to the Trustee to the foregoing effect, shall be deemed to be released from all of its obligations in respect of the Securities and this Indenture without further act or deed and the Guaranty of such Guarantor shall be of no further force or effect. Following the receipt by the Trustee of any such notice, the Partnership shall cause this Indenture to be amended as provided in Section 901; provided, however, that the failure to so amend this Indenture shall not affect the validity of the termination of the Guaranty of such Guarantor.
* * *
This instrument may be executed with counterpart signature pages or in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written.
KINDER MORGAN ENERGY
PARTNERS, L. P.
By: Kinder Morgan G.P., Inc.,
Its General Partner
By: /s/ Joseph Listengart --------------------------- Name: Joseph Listengart Title: Vice President |
FIRST UNION NATIONAL BANK
By: /s/ R. Douglas Milner --------------------------- R. Douglas Milner Vice President |
ANNEX A
"GUARANTY PROVISIONS"
SECTION 101. Unconditional Guaranties.
(1) For value received, the undersigned Guarantors, jointly and severally, hereby fully, unconditionally and absolutely guarantee to Holders and to the Trustee the due and punctual payment of the principal of, and premium, if any, and interest on the Securities and all other amounts due and payable under the Indenture and the 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 Securities and the Indenture.
(2) Failing payment when due of any amount guaranteed pursuant to the Guaranties, for whatever reason, each Guarantor will be obligated to pay the same immediately. Each guaranty hereunder is intended to be a general, unsecured, senior obligation of each undersigned Guarantor and will rank pari passu in right of payment with all Debt of each such Guarantor that is not, by its terms, expressly subordinated in right of payment to such guaranty of such Guarantor. Each of the undersigned Guarantors hereby agrees that its obligations hereunder shall be full, unconditional and absolute, irrespective of the validity, regularity or enforceability of the Securities, this Guaranty or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Partnership, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each of the undersigned Guarantors hereby agrees that in the event of a default in payment of the principal of, or premium, if any, or interest on the 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 Holders or, subject to Section 507 of the Indenture, by Holders, on the terms and conditions set forth in the Indenture, directly against each of the Guarantors to enforce this Guaranty without first proceeding against the Partnership.
(3) The obligations of each undersigned Guarantor under this Guaranty 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 Guarantor contained in the Securities, the Indenture or any other Guaranty, (B) any impairment, modification, release or limitation of the liability of the Partnership, any Guarantor or any 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 Guarantor or the Trustee of any rights or remedies under the Securities, the Indenture or any other Guaranty 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 Securities, including all or any part of the rights of the Partnership or any Guarantor under the Indenture or any other Guaranty, (E) the extension of the time for payment by the Partnership or any Guarantor of any payments or other sums or any part thereof owing or payable under any of the terms and provisions of the Securities, the Indenture or any other Guaranty or of the time for performance by the Partnership or any Guarantor 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 Guarantor set forth in the Indenture or any other Guaranty, (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 Guarantors or any of their respective assets, or the disaffirmance of the Securities, this Guaranty or the Indenture or any other Guaranty in any such proceeding, (H) the release or discharge of the Partnership or any Guarantor 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 Securities, this Guaranty, any other Guaranty or the Indenture or (J) any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or guarantor.
(4) Each of the undersigned 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 a Guarantor, and all demands whatsoever, (B) acknowledges that this Guaranty may be transferred and that the benefit of its obligations hereunder shall extend to each holder of any Securities without notice to them and (C) covenants that its guaranty hereunder will not be discharged except by complete performance. Each undersigned Guarantor further agrees that if at any time all or any part of any payment hereunder theretofore applied by any Person is, or must be, rescinded or returned for any reason whatsoever, including without limitation, the insolvency, bankruptcy or reorganization of the Partnership or such Guarantor, this Guaranty 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 this Guaranty shall continue to be effective or be reinstated, as the case may be, as though such application had not been made.
(5) Each undersigned Guarantor shall be subrogated to all rights of Holders and the Trustee against the Partnership in respect of any amounts paid by such Guarantor pursuant to the provisions of the Indenture or this Guaranty, provided, however, that no Guarantor shall be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until all of the Securities and this Guaranty shall have been paid in full or discharged.
(6) A director, officer, employee or stockholder, as such, of any Guarantor shall not have any liability for any obligations of such Guarantor under the Indenture or this Guaranty, or for any claim based on, in respect of or by reason of such obligations or their creation.
SECTION 102. Limitation of Guarantor's Liability.
Each undersigned Guarantor and by its acceptance hereof each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to this Guaranty not constitute a fraudulent transfer or conveyance for purposes of any federal, state or foreign law. To effectuate the foregoing intention, Holders and each Guarantor hereby irrevocably agree that the obligations of each Guarantor under this Guaranty shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Guaranty or pursuant to Section 103, result in the obligations of such Guarantor under this Guaranty not constituting a fraudulent conveyance or fraudulent transfer under federal, state or foreign law.
SECTION 103. Contribution.
In order to provide for just and equitable contribution among all Guarantors, the undersigned Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Guaranty, such Funding Guarantor shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by the Funding Guarantor in discharging the Partnership's obligations with respect to the Securities or any other Guarantor's obligations with respect to its Guaranty.
SECTION 104. Execution and Delivery of Guaranties.
To further evidence the guaranty set forth in Section 101, each undersigned Guarantor hereby agrees that a notation relating to such guaranty (in substantially the form hereinbelow set forth) shall be endorsed on each Security authenticated and delivered by the Trustee and executed by either manual or facsimile signature of two officers of the Guarantor.
Each of the undersigned Guarantors hereby agrees that its guaranty set forth in Section 101 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation relating to such guaranty.
If an officer of a Guarantor whose signature is on this Guaranty or a Security no longer holds that office at the time the Trustee authenticates such Security or at any time thereafter, such Guarantor's Guaranty of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Guaranty on behalf of the Guarantor.
SECTION 105. Consent to Jurisdiction and Service of Process.
Each undersigned Guarantor that is not organized under the laws of the United States (including the States and the District of Columbia) (each a "Non-U.S. Guarantor") hereby appoints the principal office of CT Corporation System in The City of New York which, on the date hereof, is located at 1633 Broadway, New York, New York 10019, as the authorized agent thereof (the "Authorized Agent") upon whom process may be served in any action, suit or proceeding arising out of or based on the Indenture or this Guaranty or the Securities which may be instituted in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York, in either case in The Borough of Manhattan, The City of New York, by the Holder of any Security, and each Non-United States Guarantor hereby waives any objection which it may now or hereafter have to the laying of venue of any such proceeding and expressly and irrevocably accepts and submits, for the benefit of Holders from time to time of the Securities, to the nonexclusive jurisdiction of any such court in respect of any such action, suit or proceeding, for itself and with respect to its properties, revenues and assets. Such appointment shall be irrevocable unless and until the appointment of a successor authorized agent for such purpose, and such successor's acceptance of such appointment, shall have occurred. Each Non-U.S. Guarantor agrees to take any and all actions, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent with respect to any such action shall be deemed, in every respect, effective service of process upon any such Non-U.S. Guarantor. Notwithstanding the foregoing, any action against any Non-U.S. Guarantor arising out of or based on any Security may also be instituted by the Holder of such Security in any court in the jurisdiction of organization of such Non-U.S. Guarantor, and such Non-U.S. Guarantor expressly accepts the jurisdiction of any such court in any such action. The Partnership shall require the Authorized Agent to agree in writing to accept the foregoing appointment as agent for service of process.
SECTION 106. Waiver of Immunity.
To the extent that any Non-U.S. Guarantor or any of its properties, assets or revenues may have or may hereafter become entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any thereof, from set-off or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution of judgment, or from execution of judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with the Indenture or this Guaranty or the Securities, such Non-U.S. Guarantor, to the maximum extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any such immunity and consents to such relief and enforcement.
SECTION 107. Judgment Currency.
Each Non-U.S. Guarantor agrees to indemnify the Trustee and each Holder against any loss incurred by it as a result of any judgment or order being given or made and expressed and paid in a currency (the "Judgment Currency") other than Dollars and as a result of any variation as between (A) the rate of exchange at which the Dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (B) the spot rate of exchange in The City of New York at which the Trustee or such Holder on the date of payment of such judgment or order is able to purchase Dollars with the amount of the Judgment Currency actually received by the Trustee or such Holder. The foregoing indemnity shall constitute a separate and independent obligation of each Non-U.S. Guarantor and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, Dollars.
SECTION 108. Definitions.
All capitalized terms used herein and not defined herein that are defined in the Indenture are used herein as so defined.
"Adjusted Net Assets" of a Guarantor at any date means the amount by which the fair value of the property of such Guarantor at such date exceeds the total amount of liabilities, including, without limitation, the probable amount of contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date) of such Guarantor at such date, but excluding liabilities under the Guaranty of such Guarantor.
FORM OF GUARANTY ENDORSEMENT
Each Guarantor (which term includes any successor Person under the Guaranty, defined below), has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and in a certain Guaranty dated [ ] (the "Guaranty"), and subject to the provisions in the Indenture and the Guaranty, the due and punctual payment of the principal of, and premium, if any, and interest on the Securities and all other amounts due and payable under the Indenture and the Securities by the Partnership.
The obligations of the Guarantors to Holders of Securities and to the Trustee pursuant to the Guaranty and the Indenture are expressly set forth in Article XIV of the Indenture and in the Guaranty, and reference is hereby made to the Indenture and the Guaranty for the precise terms of such obligations.
[SIGNATURES]
ANNEX B
FORM OF REGULATION S CERTIFICATE
REGULATION S CERTIFICATE
(For transfers pursuant to Sections 305(b)(i) and
(v) of the below-referenced Indenture)
First Union National Bank,
as Trustee
40 Broad Street, Suite 550
New York, NY 10004
Attention: Corporate Trust Administration
Re: 7.50% Senior Notes due 2010 of Kinder Morgan Energy Partners, L.P. (the "Securities")
Reference is made to the Indenture, dated as of November 8, 2000 (the "Indenture"), between Kinder Morgan Energy Partners, L.P. (the "Partnership"), and First Union National Bank, as Trustee. Terms used herein and defined in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act"), are used herein as therein so defined.
This certificate relates to U.S. $____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"):
The Person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner." If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to a Person (the "Transferee") who will take delivery in the form of a Regulation S Security.
In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected
in accordance with Rule 904 or Rule 144 under the Securities Act and with all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an Affiliate of the Partnership or any such distributor or a Person acting on behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a Person in the United States;
(C) either:
(i) at the time the buy order was originated, the Transferee was outside the United States or the Owner and any Person acting on its behalf reasonably believed that the Transferee was outside the United States, or
(ii) the transaction is being executed in, on or through the facilities of the Eurobond market, as regulated by the Association of International Bond Dealers, or another designated offshore securities market and neither the Owner nor any Person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United States by or on behalf of the Owner or any Affiliate thereof;
(E) if the Owner is a dealer in securities or has received a selling concession, fee or other remuneration in respect of the Specified Securities, and the transfer is to occur during the Restricted Period, then the requirements of Rule 904(c)(1) have been satisfied; and
(F) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144:
(A) the transfer is occurring after a holding period
of at least one year (computed in accordance with paragraph
(d) of Rule 144) has elapsed since the Specified Securities
were last acquired from the Partnership or from an Affiliate
of
the Partnership, whichever is later, and is being effected in accordance with the applicable volume, manner of sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period
of at least two years (computed in accordance with paragraph
(d) of Rule 144) has elapsed since the Specified Securities
were last acquired from the Partnership or from an Affiliate
of the Partnership, whichever is later, and the Owner is not,
and during the preceding three months has not been, an
Affiliate of the Partnership.
This certificate and the statements contained herein are made for your benefit and the benefit of the Partnership, the Guarantors (if any) and the Purchaser.
Dated:
Title:
(If the Undersigned is a corporation,
partnership, limited liability
company or fiduciary, the title of
the Person signing on behalf of the
Undersigned must be stated.)
ANNEX C
FORM OF RESTRICTED SECURITIES CERTIFICATE
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Sections 305(b)(ii), (iii) and
(v) of the below-referenced Indenture)
First Union National Bank,
as Trustee
40 Broad Street, Suite 550
New York, NY 10004
Attention: Corporate Trust Administration
Re: 7.50% Senior Notes due 2010 of Kinder Morgan Energy Partners, L.P. (the "Securities")
Reference is made to the Indenture, dated as of November 8, 2000 (the "Indenture"), between Kinder Morgan Energy Partners, L.P. (the "Partnership"), and First Union National Bank, as Trustee. Terms used herein and defined in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act"), are used herein as therein so defined.
This certificate relates to U.S. $____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"):
The Person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner." If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to a Person (the "Transferee") who will take delivery in the form of a Restricted Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance with Rule
144A or Rule 144 under the Securities Act and all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 144A Transfers. If the transfer is being effected in accordance with Rule 144A:
(A) the Specified Securities are being transferred to a Person that the Owner and any Person acting on its behalf reasonably believe is a "qualified institutional buyer" within the meaning of Rule 144A, acquiring for its own account or for the account of a qualified institutional buyer; and
(B) the Owner and any Person acting on its behalf have taken reasonable steps to ensure that the Transferee is aware that the Owner may be relying on Rule 144A in connection with the transfer; and
(2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144:
(A) the transfer is occurring after a holding period
of at least one year (computed in accordance with paragraph
(d) of Rule 144) has elapsed since the Specified Securities
were last acquired from the Partnership or from an Affiliate
of the Partnership, whichever is later, and is being effected
in accordance with the applicable volume, manner of sale and
notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period
of at least two years (computed in accordance with paragraph
(d) of Rule 144) has elapsed since the Specified Securities
were last acquired from the Partnership or from an Affiliate
of the Partnership, whichever is later, and the Owner is not,
and during the preceding three months has not been, an
Affiliate of the Partnership.
This certificate and the statements contained herein are made for your benefit and the benefit of the Partnership, the Guarantors (if any) and the Purchaser.
Dated:
Title:
(If the Undersigned is a corporation,
partnership, limited liability
company or fiduciary, the title of
the Person signing on behalf of the
Undersigned must be stated.)
ANNEX D
FORM OF UNRESTRICTED SECURITIES CERTIFICATE
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Sections 305(c) of the below-referenced Indenture)
First Union National Bank,
as Trustee
40 Broad Street, Suite 550
New York, NY 10004
Attention: Corporate Trust Administration
Re: 7.50% Senior Notes due 2010 of Kinder Morgan Energy Partners, L.P. (the "Securities")
Reference is made to the Indenture, dated as of November 8, 2000 (the "Indenture"), between Kinder Morgan Energy Partners, L.P. (the "Partnership"), and First Union National Bank, as Trustee. Terms used herein and defined in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act"), are used herein as therein so defined.
This certificate relates to U.S. $____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"):
The Person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner." If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged for Securities bearing no Securities Act Legend pursuant to Section 305(c) of the Indenture. In connection with such exchange, the Owner hereby certifies that the exchange is occurring after a holding period of at least two years (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified
Securities were last acquired from the Partnership or from an Affiliate of the Partnership, whichever is later, and the Owner is not, and during the preceding three months has not been, an Affiliate of the Partnership.
This certificate and the statements contained herein are made for your benefit and the benefit of the Partnership, the Guarantors (if any) and the Purchaser.
Dated:
Title:
EXHIBIT 4.10
KINDER MORGAN ENERGY PARTNERS, L.P.
$250,000,000 7.50% SENIOR NOTES DUE 2010
REGISTRATION RIGHTS AGREEMENT
November 8, 2000
Banc of America Securities LLC
Bank of America Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
Kinder Morgan Energy Partners, L.P., a Delaware limited partnership (the "Partnership"), proposes to issue and sell to you (the "Purchaser") upon the terms and subject to the conditions set forth in the Purchase Agreement (as defined herein) an aggregate of $250,000,000 principal amount of its 7.50% Senior Notes due 2010. As an inducement to the Purchaser to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Purchaser thereunder, the Partnership agrees with the Purchaser for the benefit of holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows:
SECTION 1. Certain Definitions.
For purposes of this Registration Rights Agreement, the following terms shall have the following respective meanings:
"Additional Interest" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Additional Interest Event" shall have the meaning assigned thereto in
Section 2(c) hereof.
"broker-dealer" shall mean any broker or dealer registered with the Commission under the Exchange Act.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law, executive order or regulation to close.
"Closing Date" shall mean the date on which the Securities (as defined herein) are initially issued.
"Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose.
"Effective Time", in the case of (i) an Exchange Registration, shall mean the time and date as of which the Commission declares the Exchange Registration Statement effective or as of which the Exchange Registration Statement otherwise becomes effective and (ii) a Shelf Registration, shall mean the time and date as of which the Commission declares the Shelf Registration Statement effective or as of which the Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Partnership in accordance with Section 3(c)(ii) or 3(c)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any successor statute thereto, in each case as amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section 2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(b) hereof.
"Exchange Registration Statement" shall have the meaning assigned thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
"holder" shall mean the Purchaser and each other person who acquires Registrable Securities from time to time (including any successors or assigns), in each case for so long as such person owns any Registrable Securities.
"Indenture" shall mean the Indenture, dated as of November 8, 2000, between the Partnership and First Union National Bank, as Trustee, as the same shall be amended from time to time.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto.
"Partnership" shall mean Kinder Morgan Energy Partners, L.P., a Delaware limited partnership.
"person" shall mean any individual, corporation, partnership (whether general or limited), joint venture, limited liability company, association, joint stock company, trust, other entity, unincorporated organization or government or any agency or political subdivision thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of November 1, 2000, between the Partnership and the Purchaser, as the same shall be amended from time to time.
"Purchaser" shall mean Banc of America Securities LLC.
"Registrable Securities" shall mean the Securities; provided, however,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) hereof (provided, that any Exchange Security that, pursuant to the
last two sentences of Section 2(a) hereof, is included in a prospectus for use
in connection with resales by broker-dealers shall be deemed to be a Registrable
Security until resale of such Registrable Security has been effected within the
120-day period referred to in Section 2(a) hereof); (ii) in the circumstances
contemplated by Section 2(b) hereof, a Shelf Registration Statement registering
such Security under the Securities Act has been declared or becomes effective
and such Security has been sold or otherwise transferred by the holder thereof
pursuant to and in a manner contemplated by such effective Shelf Registration
Statement; (iii) such Security is sold pursuant to Rule 144 under circumstances
in which any legend borne by such Security relating to restrictions on
transferability thereof, under the Securities Act or otherwise, is removed by
the Partnership or pursuant to the Indenture; (iv) such Security is eligible to
be sold pursuant to paragraph (k) of Rule 144 (or any similar provision then in
effect); or (v) such Security shall cease to be outstanding.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section 2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of the Partnership within the meaning of Rule 405 (as defined herein), (ii) a holder who acquires Exchange Securities outside the ordinary course of such holder's business, (iii) a holder who has arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing Exchange Securities and (iv) a holder that is a broker-dealer, but only with respect to Exchange Securities received by such broker-dealer pursuant to the Exchange Offer in exchange for Registrable Securities acquired by the broker-dealer directly from the Partnership.
"Rule 144", "Rule 405" and "Rule 415" shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time.
"Rule 144(k) Holding Period" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Securities" shall mean the 7.50% Senior Notes due 2010 of the Partnership to be issued and sold to the Purchaser.
"Securities Act" shall mean the Securities Act of 1933, or any successor statute thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto in Section 2(b) hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or any successor statute thereto, and the rules, regulations and forms promulgated thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section" or "clause" refers to a Section or clause, as the case may be, of this Registration Rights Agreement, and the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Registration Rights Agreement as a whole and not to any particular Section or other subdivision.
SECTION 2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Partnership agrees to use its reasonable efforts to file under the Securities Act, as soon as practicable, but no later than 120 days after the Closing Date, a single registration statement relating to an offer to exchange (such registration statement, the "Exchange Registration Statement" and, such offer, the "Exchange Offer") any and all of the Securities for a like aggregate principal amount of debt securities issued by the Partnership, which debt securities will be substantially identical to such Securities (and will be entitled to the benefits of a trust indenture that will be substantially identical to the Indenture or is the Indenture and that will be qualified under the Trust Indenture Act), except that such new debt securities will have been registered pursuant to an effective registration statement under the Securities Act, will not be subject to transfer restrictions or registration rights and will not be entitled to the benefit of provisions for the Additional Interest contemplated in Section 2(c) below (such new debt securities hereinafter called "Exchange Securities"). The Partnership agrees to use its reasonable efforts to cause the Exchange Registration Statement to become effective under the Securities Act as soon as practicable, but no later than 210 days after the Closing Date. The Exchange Offer will be registered under the Securities Act on the appropriate form and will comply with all applicable tender offer rules and regulations under the Exchange Act. The Partnership further agrees to use its reasonable efforts to commence and complete the Exchange Offer promptly, but no later than 45 Business Days after the date on which such Exchange
Registration Statement has become effective, to hold the Exchange Offer open for at least 30 days and to exchange the Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn on or prior to the expiration of the Exchange Offer. The Exchange Offer shall be deemed to have been completed upon the earlier to occur of (i) the Partnership having exchanged Exchange Securities for all outstanding Registrable Securities that are properly tendered and not withdrawn pursuant to the Exchange Offer and (ii) the Partnership having exchanged, pursuant to the Exchange Offer, Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn before the expiration of the Exchange Offer, which shall be on a date that is at least 30 days following the commencement of the Exchange Offer. The Partnership agrees (x) to include in the Exchange Registration Statement a prospectus for use in any resales by any holder of Exchange Securities that is a broker-dealer and (y) to keep such Exchange Registration Statement effective for a period (the "Resale Period") beginning when Exchange Securities are first issued in the Exchange Offer and ending upon the earlier of the expiration of the 120th day after the Exchange Offer has been completed or such time as such broker-dealers no longer own any Registrable Securities. With respect to such Exchange Registration Statement, such holders shall have the benefit of the rights of indemnification and contribution set forth in Sections 5(a), (c), (d) and (e) hereof.
(b) If (i) the Partnership determines that the Exchange Registration Statement is not available or the Exchange Offer may not be consummated because it would violate applicable law or the applicable interpretations of the staff of the Commission, (ii) the Exchange Offer has not been completed within 210 days plus 45 Business Days following the Closing Date or (iii) in the opinion of counsel for the Purchaser, under applicable law or the applicable interpretations of the staff of the Commission, the Purchaser is not entitled to tender Securities in the Exchange Offer or must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any offering or sale of Registrable Securities, the Partnership shall, in lieu of conducting the Exchange Offer contemplated by Section 2(a) hereof, use its reasonable efforts to file under the Securities Act, as soon as practicable after the time such obligation to file arises, a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (such filing, the "Shelf Registration" and, such registration statement, the "Shelf Registration Statement"). The Partnership agrees to use its reasonable efforts to cause the Shelf Registration Statement to become or be declared effective and to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the second anniversary of the Closing Date or, if Rule 144(k) is amended to provide a shorter restrictive period, such shorter period (the "Rule 144(k) Holding Period") or such time as there are no longer any Registrable Securities outstanding; provided, however, that no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or to use the prospectus forming a part thereof for resales of Registrable Securities unless such holder is an Electing Holder, and furnishes to the Partnership in writing, within 20 days after receipt of a request therefor, such information with respect to such Electing Holder required under Regulation S-K under the Act as the Partnership may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary prospectus
included therein. No Electing Holder shall be entitled to Additional Interest pursuant to Section 2(c) hereof unless and until such Electing Holder shall have used its reasonable efforts to provide all such reasonably requested information. Each Electing Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Partnership all information required to be disclosed in order to make the information previously furnished to the Partnership by such Electing Holder not materially misleading. The Partnership further agrees to supplement or make amendments to the Shelf Registration Statement, as and when required by the rules, regulations or instructions applicable to the registration form used by the Partnership for such Shelf Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, and the Partnership agrees to furnish to each Electing Holder copies of any such supplement or amendment promptly after its being used following its filing with the Commission.
(c) The Partnership agrees to pay additional interest (the "Additional Interest") upon the occurrence of any of the following events (each such event, an "Additional Interest Event"):
(i) if the Exchange Registration Statement or Shelf Registration Statement is not filed within 120 days following the Closing Date, then commencing on the 121st day after the Closing Date, Additional Interest shall accrue on the Securities over and above the otherwise applicable interest rate at a rate of 0.25% per year; or
(ii) if an Exchange Registration Statement or Shelf Registration Statement is filed and is not declared effective within 210 days following the Closing Date, then commencing on the 210th day after the Closing Date, Additional Interest shall accrue on the Securities over and above the otherwise applicable interest rate at a rate of 0.25% per year; or
(iii) if either (A) the Partnership has not exchanged Exchange Securities for all Securities validly tendered in accordance with the terms of the Exchange Offer on or prior to 45 Business Days after the date on which the Exchange Registration Statement was declared effective, or (B) the Shelf Registration Statement has been declared effective, but such Shelf Registration Statement ceases to be effective at any time (I) prior to the expiration of the Rule 144(k) Holding Period and (II) while Registrable Securities are outstanding,
then Additional Interest shall accrue on the Securities over and above the otherwise applicable interest rate at a rate of 0.25% per year commencing on the (x) 46th Business Day after such effective date, in the case of (A) above, or (y) the day the Shelf Registration Statement ceases to be effective, in the case of (B) above;
provided, however, that the circumstances under which the Partnership may be required to pay Additional Interest are not cumulative and the rate at which Additional Interest accrues on the Securities shall never exceed 0.25% per year; and, provided further, that Additional Interest on the
Securities shall cease to accrue upon the earlier of (i) when all Additional Interest Events have been cured or (ii) upon the expiration of the Rule 144(k) Holding Period. For purposes of clarifying the foregoing provisions, Additional Interest shall not accrue at any time that there are no Registrable Securities outstanding.
All accrued Additional Interest shall be payable, in the manner provided for the payment of interest in the Indenture and the Securities, on each applicable Interest Payment Date (as defined in the Indenture).
(d) The Partnership shall take all actions reasonably necessary to be taken by it to ensure that the transactions contemplated herein are effected as so contemplated.
(e) Any reference herein to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time and any reference herein to any post-effective amendment to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time.
SECTION 3. Registration Procedures.
If the Partnership files a registration statement pursuant to Section 2(a) or Section 2(b) hereof, the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Registration or the Shelf Registration, as the case may be, the Partnership shall qualify the Indenture under the Trust Indenture Act.
(b) In connection with the Partnership's obligations with respect to the registration of Exchange Securities as contemplated by Section 2(a) hereof (the "Exchange Registration"), if applicable, the Partnership shall, as soon as practicable (or as otherwise specified):
(i) use its reasonable efforts to prepare and file with the Commission, as soon as practicable, but no later than 120 days after the Closing Date, an Exchange Registration Statement on any form that may be utilized by the Partnership and that shall permit the Exchange Offer and resales of Exchange Securities by broker-dealers during the Resale Period to be effected as contemplated by Section 2(a) hereof, and use its reasonable efforts to cause such Exchange Registration Statement to become effective as soon as practicable thereafter, but no later than 210 days following the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such amendments and supplements to such Exchange Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such
Exchange Registration Statement for the periods and purposes contemplated in Section 2(a) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Exchange Registration Statement, and promptly provide each broker-dealer holding Exchange Securities with such number of copies of the prospectus included therein (as then amended or supplemented), in conformity in all material respects with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, as such broker-dealer reasonably may request prior to the expiration of the Resale Period, for use in connection with resales of Exchange Securities;
(iii) promptly notify each broker-dealer that has requested or received copies of the prospectus included in such registration statement and, if requested by such broker-dealer, confirm such advice in writing, (A) when such Exchange Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Exchange Registration Statement or any post-effective amendment, when the same has become effective, (B) of any request by the Commission for amendments or supplements to such Exchange Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Exchange Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) of the receipt by the Partnership of any notification with respect to the suspension of the qualification of the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (E) if at any time during the Resale Period when a prospectus is required to be delivered under the Securities Act, that such Exchange Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;
(iv) in the event that the Partnership would be required, pursuant to Section 3(b)(iii)(E) above, to notify any broker-dealers holding Exchange Securities, it will use its reasonable efforts to prepare and furnish to each such holder a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of such Exchange Securities during the Resale Period, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each broker-dealer agrees that upon receipt of any notice from the Partnership pursuant to Section 3(b)(iii)(E) hereof, such broker-dealer shall forthwith discontinue the disposition of Exchange Securities pursuant to the Exchange
Registration Statement applicable to such Exchange Securities until such broker-dealer shall have received copies of such amended or supplemented prospectus and, if so directed by the Partnership, such broker-dealer shall deliver to the Partnership (at the Partnership's expense) all copies of the prospectus covering such Exchange Securities then in such broker-dealers' possession for the purpose of making offers of Exchange Securities;
(v) use its reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such Exchange Registration Statement or any post-effective amendment thereto at the earliest practicable date;
(vi) use its reasonable efforts to (A) register or qualify the Exchange Securities under the securities laws or blue sky laws of such jurisdictions as any holder of Exchange Securities shall reasonably request in writing no later than the commencement of the Exchange Offer, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions until the expiration of the Resale Period and (C) take any and all other actions as may be reasonably necessary to enable each broker-dealer holding Exchange Securities to consummate the disposition thereof in such jurisdictions under the securities laws or blue sky laws of such jurisdictions; provided, however, that the Partnership shall not be required for any such purpose to (1) qualify as a foreign partnership or as a dealer in securities in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Agreement, (2) consent to general service of process in any such jurisdiction or subject itself to taxation in any such jurisdiction if it is not already so subject or (3) make any changes to its certificate of limited partnership or its agreement of limited partnership or any agreement between it and its unitholders;
(vii) use its reasonable efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, that may be required to effect the Exchange Registration, the Exchange Offer and the offering and sale of Exchange Securities by broker-dealers during the Resale Period;
(viii) provide a CUSIP number for the Exchange Securities, not later than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable, but no later than 18 months after the effective date of such Exchange Registration Statement, an earnings statement of the Partnership and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Partnership, Rule 158 thereunder).
As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Electing Holder shall furnish, upon the request of the Partnership, prior to the consummation thereof, a written representation to the Partnership (which may be contained in the
letter of transmittal contemplated by the Exchange Registration) to the effect that (A) it is not an affiliate of the Partnership, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Securities to be issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in its ordinary course of business. In addition, although Electing Holders shall otherwise cooperate in the Partnership's preparation for the Exchange Offer, each Electing Holder hereby acknowledges and agrees that any broker-dealer who purchases the Securities from the Partnership to resell pursuant to Rule 144A or any other available exemption under the Securities Act or any Electing Holder who is an affiliate of the Partnership or who intends to use the Exchange Offer to participate in a distribution of the Exchange Securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters, (2) will not be entitled to tender Securities in the Exchange Offer, and (3) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Securities unless such sale or transfer is made pursuant to any exemption from such requirements.
(c) In connection with the Partnership's obligations with respect to the Shelf Registration, if applicable, the Partnership shall, as soon as practicable (or as otherwise specified):
(i) use its reasonable efforts to prepare and file with the Commission a Shelf Registration Statement on any form that may be utilized by the Partnership and that shall register all of the Registrable Securities for resale by the holders thereof in accordance with such method or methods of disposition as may be specified by such of the holders as, from time to time, may be Electing Holders and use its reasonable efforts to cause such Shelf Registration Statement to become effective;
(ii) not less than 30 days prior to the Effective Time of the Shelf Registration Statement, mail the Notice and Questionnaire to the holders of Registrable Securities; no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement as of the Effective Time, and no holder shall be entitled to use the prospectus forming a part thereof for resales of Registrable Securities at any time, unless such holder has returned a completed and signed Notice and Questionnaire to the Partnership by the deadline for response set forth therein; provided, however, holders of Registrable Securities shall have at least 20 days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Partnership;
(iii) after the Effective Time of the Shelf Registration Statement, upon the request of any holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder; provided, that the Partnership
shall not be required to take any action to name such holder as a selling securityholder in the Shelf Registration Statement or to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities until such holder has returned a completed and signed Notice and Questionnaire to the Partnership; and, provided further, that the Partnership shall not be required to file an amendment to such Shelf Registration Statement for the sole reason of naming such holder as a selling securityholder in the Shelf Registration Statement;
(iv) as soon as practicable prepare and file with the Commission such amendments and supplements to such Shelf Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Shelf Registration Statement for the period specified in Section 2(b) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Shelf Registration Statement, and furnish to the Electing Holders copies of any such supplement or amendment simultaneously with or prior to its being used or filed with the Commission;
(v) comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities covered by such Shelf Registration Statement in accordance with the intended methods of disposition by the Electing Holders provided for in such Shelf Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters (which term, for purposes of this Registration Rights Agreement, shall include a person deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act), if any, thereof, (C) any sales or placement agent therefor, (D) counsel for any such underwriter or agent and (E) not more than one counsel for all the Electing Holders the opportunity to participate in the preparation of such Shelf Registration Statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto;
(vii) for a reasonable period prior to the filing of such Shelf Registration Statement, and throughout the period specified in Section 2(b) hereof, make available at reasonable times at the Partnership's principal place of business or such other reasonable place for inspection by the persons referred to in Section 3(c)(vi) hereof who shall certify to the Partnership that they have a current intention to sell the Registrable Securities pursuant to the Shelf Registration such financial and other information and books and records of the Partnership, and reasonably cause the officers, employees, counsel and independent certified public accountants of the Partnership to respond to such inquiries, as shall be reasonably necessary to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that each such party shall be required to maintain in confidence and not to disclose to any other person any information or records considered by the Partnership in good faith as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its
inclusion in such Shelf Registration Statement or otherwise), or (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such person shall have given the Partnership prompt prior written notice of such requirement), or (C) such information is required, as determined by the Partnership in good faith and its counsel, to be set forth in such Shelf Registration Statement or the prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such prospectus in order that such Shelf Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the Commission thereunder and does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;
(viii) promptly notify each of the Electing Holders, any sales or placement agent therefor and any underwriter thereof (which notification may be made through any managing underwriter that is a representative of such underwriter for such purpose) and, if requested by such Holders, agents or underwriters, confirm such advice in writing, (A) when such Shelf Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Shelf Registration Statement or any post-effective amendment, when the same has become effective, (B) of any request by the Commission for amendments or supplements to such Shelf Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) of the receipt by the Partnership of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (E) if at any time when a prospectus is required to be delivered under the Securities Act, that such Shelf Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;
(ix) use its reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such Shelf Registration Statement or any post-effective amendment thereto at the earliest practicable date;
(x) if requested by any managing underwriter or underwriters, any placement or sales agent or any Electing Holder, promptly incorporate in a prospectus
supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission and as such managing underwriter or underwriters, such agent or such Electing Holder may reasonably propose should be included therein relating to the terms of the sale of such Registrable Securities, including information with respect to the principal amount of Registrable Securities being sold by such Electing Holder or agent or to any underwriters, the name and description of such Electing Holder, agent or underwriter, the offering price of such Registrable Securities and any discount, commission or other compensation payable in respect thereof, the purchase price being paid therefor by such underwriters and with respect to any other terms of the offering of the Registrable Securities to be sold by such Electing Holder or agent or to such underwriters; and make all required filings of such prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales agent, if any, therefor, each underwriter, if any, thereof and the respective counsel referred to in Section 3(c)(vi), a copy of such Shelf Registration Statement, each such amendment and supplement thereto (in each case including all exhibits thereto (in the case of an Electing Holder of Registrable Securities, upon request) and documents incorporated by reference therein) and such number of copies of such Shelf Registration Statement (excluding exhibits thereto and documents incorporated by reference therein unless specifically so requested by such Electing Holder, agent or underwriter, as the case may be) and of the prospectus included in such Shelf Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, and such other documents as such Electing Holder, agent, if any, and underwriter, if any, may reasonably request in order to facilitate the offering and disposition of the Registrable Securities owned by such Electing Holder, offered or sold by such agent or underwritten by such underwriter and to permit such Electing Holder, agent and underwriter to satisfy the prospectus delivery requirements of the Securities Act; and the Partnership hereby consents to the use of such prospectus (including such preliminary and summary prospectus) and any amendment or supplement thereto by each such Electing Holder and by any such agent and underwriter, in each case in the form most recently provided to such person by the Partnership, in connection with the offering and sale of the Registrable Securities covered by the prospectus (including such preliminary and summary prospectus) or any supplement or amendment thereto;
(xii) use reasonable efforts to (A) register or qualify the Registrable Securities to be included in such Shelf Registration Statement under such securities laws or blue sky laws of such jurisdictions as any Electing Holder and each placement or sales agent, if any, therefor and underwriter, if any, thereof shall reasonably request in writing, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above, and (C) take any and all other actions as may be
reasonably necessary to enable each such Electing Holder, agent, if
any, and underwriter, if any, to consummate the disposition in such
jurisdictions under the securities laws or blue sky laws of such
jurisdictions; provided, however, that the Partnership shall not be
required for any such purpose to (1) qualify as a foreign partnership
or as a dealer in securities in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of this
Agreement, (2) consent to general service of process in any such
jurisdiction or subject itself to taxation in any such jurisdiction if
it is not already so subject, or (3) make any changes to its
certificate of limited partnership or its agreement of limited
partnership or any agreement between it and its unitholders;
(xiii) use its reasonable efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, that may be required to effect the Shelf Registration or the offering or sale in connection therewith or to enable the selling holder or holders to offer, or to consummate the disposition of, their Registrable Securities;
(xiv) unless any Registrable Securities shall be in book-entry only form, cooperate with the Electing Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates, if so required by any securities exchange upon which any Registrable Securities are listed, shall be penned, lithographed or engraved, or produced by any combination of such methods, on steel engraved borders, and which certificates shall not bear any restrictive legends; and, in the case of an underwritten offering, enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may reasonably request at least two Business Days prior to any sale of the Registrable Securities;
(xv) provide a CUSIP number for the Registrable Securities, not later than the applicable Effective Time;
(xvi) in connection with an underwritten offering of Registrable Securities, enter into one or more customary underwriting agreements, engagement letters, agency agreements, "best efforts" underwriting agreements or similar agreements, as appropriate, including customary provisions relating to indemnification and contribution, and take such other actions in connection therewith as any Electing Holders aggregating at least a majority in aggregate principal amount of the Registrable Securities at the time outstanding (it being understood for purposes of this Agreement that all holders of the Registrable Securities shall vote on this and any other matter as a single class) shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities;
(xvii) in connection with any underwritten offering
of Registrable Securities pursuant to a Shelf Registration, to the
extent requested by the underwriters thereof, (A) make such
representations and warranties to the Electing Holders and the
underwriters thereof in form, substance and scope as are customarily
made in primary underwritten offerings of debt securities and covering
matters including, but not limited to, those set forth in the Purchase
Agreement; (B) obtain an opinion of counsel to the Partnership in
customary form and covering such matters of the type customarily
covered by such an opinion in primary offerings of debt securities as
the underwriters thereof may reasonably request, addressed to such
underwriters thereof and dated the effective date of such Shelf
Registration Statement and the date of the closing under the
underwriting agreement relating thereto) covering the matters
customarily covered in opinions requested in primary underwritten
offerings of debt securities (it being agreed that the matters to be
covered by such opinion may be subject to customary qualifications and
exceptions and it being understood that opinions that are substantially
the same as those called for by the Purchase Agreement will be
satisfactory for these purposes); (C) obtain a "cold comfort" letter or
"cold comfort" letters from the independent certified public
accountants of the Partnership addressed to the underwriters thereof,
dated (i) the effective date of such Shelf Registration Statement and
(ii) the effective date of any prospectus supplement to the prospectus
included in such Shelf Registration Statement or post-effective
amendment to such Shelf Registration Statement that includes unaudited
or audited financial statements as of a date or for a period subsequent
to that of the latest such statements included in such prospectus (and,
if such Shelf Registration Statement contemplates an underwritten
offering pursuant to any prospectus supplement to the prospectus
included in such Shelf Registration Statement or post-effective
amendment to such Shelf Registration Statement that includes unaudited
or audited financial statements as of a date or for a period subsequent
to that of the latest such statements included in such prospectus,
dated the date of the closing under the underwriting agreement relating
thereto), such letter or letters to be in customary form and covering
such matters of the type customarily covered by letters of such type;
(D) deliver such customary documents and certificates, including
officers' certificates, as may be reasonably requested by the
underwriters thereof to evidence the accuracy of the representations
and warranties made pursuant to clause (A) above and the compliance
with or satisfaction of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by the
Partnership; and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in
Section 5 hereof;
(xviii) notify in writing each holder of Registrable Securities of any proposal of any amendment or waiver effected pursuant to Section 8(h) hereof, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be;
(xix) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable, but in any event
not later than 18 months after the effective date of such Shelf Registration Statement, an earnings statement of the Partnership and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Partnership, Rule 158 thereunder).
(d) In the event that the Partnership would be required, pursuant to Section 3(c)(viii)(E) above, to notify the Electing Holders, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, the Partnership shall without any unreasonable delay prepare and furnish to each of the Electing Holders, to each placement or sales agent, if any, and to each such underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each Electing Holder agrees that upon receipt of any notice from the Partnership pursuant to Section 3(c)(viii)(E) hereof, such Electing Holder shall forthwith discontinue the disposition of Registrable Securities pursuant to the Shelf Registration Statement applicable to such Registrable Securities until such Electing Holder shall have received copies of such amended or supplemented prospectus, and if so directed by the Partnership, such Electing Holder shall deliver to the Partnership (at the Partnership's expense) all copies of the prospectus covering such Registrable Securities then in such Electing Holder's possession for the purpose of making offers of the Registrable Securities.
(e) In the event of a Shelf Registration, in addition to the information required to be provided by each Electing Holder in its Notice and Questionnaire, the Partnership may require such Electing Holder to furnish to the Partnership such additional information regarding such Electing Holder and such Electing Holder's intended method of distribution of Registrable Securities as may be required in order to comply with the Securities Act. Each such Electing Holder agrees to notify the Partnership as promptly as practicable of any inaccuracy or change in information previously furnished by such Electing Holder to the Partnership or of the occurrence of any event in either case as a result of which any prospectus relating to such Shelf Registration contains or would contain an untrue statement of a material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities or omits to state any material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Partnership any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Electing Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.
(f) Until the expiration of the Rule 144(k) Holding Period, the Partnership will not, and will use its reasonable efforts to cause its "affiliates" (as defined in Rule 144) not to, resell any of the Securities that have been reacquired by any of them except pursuant to an effective registration statement under the Securities Act.
SECTION 4. Registration Expenses.
The Partnership agrees to bear and to pay or cause to be paid promptly
all reasonable expenses incident to the Partnership's performance of or
compliance with this Registration Rights Agreement, including (a) all Commission
and any applicable National Association of Securities Dealers, Inc. ("NASD")
registration, filing and review fees and expenses, including fees and
disbursements of one counsel for the placement or sales agent or underwriters as
a group in connection with such NASD registration, filing and review, (b) all
fees and expenses in connection with the qualification of the Securities for
offering and sale under the state securities and blue sky laws referred to in
Section 3(c)(xii) hereof and determination of their eligibility for investment
under the laws of such jurisdictions as any managing underwriters or the
Electing Holders may reasonably designate, but not the fees and disbursements of
counsel for the Electing Holders or underwriters as a group in connection with
such qualification and determination, (c) all expenses relating to the
preparation, printing, production, distribution and reproduction of each
registration statement required to be filed hereunder, each prospectus included
therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Securities for
delivery and the expenses of printing or producing any required underwriting
agreements, agreements among underwriters, selling agreements and blue sky or
legal investment memoranda and all other documents in connection with the
offering, sale or delivery of Securities to be disposed of (including
certificates representing the Securities), (d) messenger, telephone and delivery
expenses incurred by the Partnership, its counsel and auditors relating to the
offering, sale or delivery of Securities and the preparation of documents
referred in clause (c) above, (e) fees and expenses of the Trustee under the
Indenture, any agent of the Trustee and any counsel for the Trustee and of any
collateral agent or custodian, (f) internal expenses (including all salaries and
expenses of the Partnership's officers and employees performing legal or
accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Partnership (including the
expenses of any opinions or "cold comfort" letters required by or incident to
such performance and compliance), (h) fees, disbursements and expenses of one
counsel for the Electing Holders retained in connection with a Shelf
Registration, as selected by the Electing Holders of at least a majority in
aggregate principal amount of the Registrable Securities held by Electing
Holders (which counsel shall be reasonably satisfactory to the Partnership), (i)
any fees charged by securities rating services for rating the Securities, and
(j) fees, expenses and disbursements of any other persons, including special
experts, retained by the Partnership in connection with such registration
(collectively, the "Registration Expenses"). To the extent that any Registration
Expenses are reasonably incurred, assumed or paid by any holder of Registrable
Securities or any placement or sales agent therefor or underwriter thereof, the
Partnership shall reimburse such person for the full amount of the Registration
Expenses so incurred, assumed or paid promptly after receipt of a request
therefor. Notwithstanding the
foregoing, the holders of the Registrable Securities being registered shall pay all agency fees and commissions, transfer taxes, if any, and underwriting discounts and commissions attributable to the sale of such Registrable Securities and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel and experts specifically referred to above.
SECTION 5. Indemnification.
(a) Indemnification by the Partnership. The Partnership will indemnify and hold harmless each of the holders of Registrable Securities included in an Exchange Registration Statement, each of the Electing Holders of Registrable Securities included in a Shelf Registration Statement and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Securities against any losses, claims, damages or liabilities, joint or several, to which such holder, agent or underwriter may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Exchange Registration Statement or Shelf Registration Statement, as the case may be, under which such Registrable Securities were registered under the Securities Act, or any preliminary, final or summary prospectus contained therein or furnished by the Partnership to any such holder, Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such holder, such Electing Holder, such agent and such underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Partnership shall not be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Partnership by such person expressly for use therein; and, provided further, that the Partnership shall not be liable to any such person, to the extent that any such losses, claims, damages or liabilities arise out of or are based upon an untrue statement or alleged untrue statement of a material fact or omission or alleged omission if either (A)(i) such person was required by law to send or deliver, and failed to send or deliver, a copy of the prospectus with or prior to delivery of written confirmation of the sale by such person to the person asserting the claims from which such losses, claims, damages or liabilities arise and (ii) the prospectus previously delivered by the Partnership to such person would have corrected such untrue statement or alleged untrue statement or omission or alleged omission, (B)(i) such untrue statement or alleged untrue statement or omission or alleged omission is corrected in an amendment to the prospectus and (ii) having been previously furnished by or on behalf of the Partnership with copies of the prospectus as so amended or supplemented, such person failed to send or deliver a copy of such amendment to the prospectus with or prior to the delivery of written confirmation of the sale of a Registrable Security to the person asserting the claim from which such losses, claims, damages or liabilities arise or
(C)(i) such person disposed of Registrable Securities to the person asserting the claim from which such losses, claims, damages or liabilities arise pursuant to an Exchange Registration Statement or Shelf Registration Statement and sent or delivered, or was required by law to send or deliver, a prospectus to such person in connection with such disposition, (ii) such person received a suspension notice as provided in Sections 3(b)(iii)(C) through (E) and 3(c)(vii)(C) through (E) hereof in writing at least one Business Day prior to the date of such disposition and (iii) such untrue statement or alleged untrue statement or omission or alleged omission was the reason for such suspension notice.
(b) Indemnification by the Holders and any Agents and Underwriters. In the case of a Shelf Registration pursuant to Section 2(b) hereof, each Electing Holder and each underwriter who participates as an underwriter in any offering or sale of Registrable Securities to the Registrable Securities, severally and not jointly, will (i) indemnify and hold harmless the Partnership, and all other holders of Registrable Securities, against any losses, claims, damages or liabilities to which the Partnership or such other holders of Registrable Securities may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary, final or summary prospectus contained therein or furnished by the Partnership to any such Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Partnership by such Electing Holder or underwriter expressly for use therein, and (ii) reimburse the Partnership for any legal or other expenses reasonably incurred by the Partnership in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that no such Electing Holder shall be required to undertake liability to any person under this Section 5(b) for any amounts in excess of the dollar amount of the proceeds to be received by such Electing Holder from the sale of such Electing Holder's Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) above of written notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party pursuant to the indemnification provisions of or contemplated by this Section 5, notify such indemnifying party in writing of the commencement of such action; but the omission so to notify the indemnifying party shall not relieve it from any liability that it may have to any indemnified party otherwise than under the indemnification provisions of or contemplated by Section 5(a) or 5(b) hereof. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification
provisions contemplated by Section 5(a) or Section 5(b) are unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and the indemnified
party in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 5(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in this Section 5(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 5(d), no holder shall
be required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds received by such holder from the sale of any Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) exceeds the amount of any damages that such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such underwriter has otherwise
been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The holders' and any underwriters' obligations in this Section 5(d) to contribute shall be several in proportion to the principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint.
(e) The obligations of the Partnership under this Section 5 shall be in addition to any liability that the Partnership may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Electing Holder, sales agent or underwriter participating in the sale of Registered Securities within the meaning of the Securities Act; and the obligations of the holders and any agents or underwriters contemplated by this Section 5 shall be in addition to any liability that the respective holder, agent or underwriter may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Partnership (including any person who, with his consent, is named in any registration statement as about to become a director of the Partnership) and to each person, if any, who controls the Partnership within the meaning of the Securities Act.
SECTION 6. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities covered by the Shelf Registration are to be sold pursuant to an underwritten offering, the managing underwriter or underwriters thereof shall be designated by Electing Holders holding at least a majority in aggregate principal amount of the Registrable Securities to be included in such offering, provided, that such designated managing underwriter or underwriters is or are reasonably acceptable to the Partnership.
(b) Participation by Holders. Each holder of Registrable Securities hereby agrees with each other such holder that no such holder may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.
SECTION 7. Rule 144.
The Partnership covenants to the holders of Registrable Securities that to the extent it shall be required to do so under the Exchange Act, the Partnership shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act), all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the
limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities in connection with that holder's sale pursuant to Rule 144, the Partnership shall advise such holder in writing as to whether the Partnership has complied with such requirements.
SECTION 8. Miscellaneous.
(a) No Inconsistent Agreements. The Partnership represents, warrants, covenants and agrees that, except pursuant to the Partnership Agreement relating to the Partnership and granted in connection with the acquisition of certain assets, it has not granted, and shall not grant, registration rights with respect to Registrable Securities or any other securities that would be inconsistent with the terms contained in this Registration Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Partnership fails to perform any of its obligations hereunder and that the Purchaser and the holders from time to time of the Registrable Securities may be irreparably harmed by any such failure, and accordingly agree that the Purchaser and such holders, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of the Partnership under this Registration Rights Agreement in accordance with the terms and conditions of this Registration Rights Agreement, in any court of the United States or any state thereof having jurisdiction; provided, that, in the case of any terms of this Registration Rights Agreement for which Additional Interest pursuant to Section 2(c) hereof is expressly provided as a remedy of a violation of such terms, such Additional Interest shall be the sole monetary damages for such violation.
(c) Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, if delivered personally or by courier, or three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested), or telecopied (when receipt is acknowledged) as follows: if to the Partnership, 1301 McKinney Street, Suite 3450, Houston, Texas 77010, Attention: Park Shaper, telecopier number (713) 844-3781 (with a copy to the General Counsel), and, if to a holder, to the address of such holder set forth in the security register or other records of the Partnership, or to such other address as the Partnership or any such holder may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Registration Rights Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and the holders from time to time of the Registrable Securities and the respective successors and assigns of the parties hereto and such holders; provided, however, that nothing herein shall be deemed to permit any transfer of Registrable Securities in violation of this Agreement, the Indenture or applicable law. In the event that any transferee of any holder of
Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Securities shall be held subject to all of the terms of this Registration Rights Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by all of the applicable terms and provisions of this Registration Rights Agreement. If the Partnership shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Securities subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Registration Rights Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any holder of Registrable Securities, any director, officer or partner of such holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Registrable Securities pursuant to the Purchase Agreement and the transfer and registration of Registrable Securities by such holder and the consummation of an Exchange Offer.
(f) Governing Law. This Registration Rights Agreement shall be governed by and construed in accordance with the laws of the State of New York.
(g) Headings. The descriptive headings of the several Sections and paragraphs of this Registration Rights Agreement are inserted for convenience only, do not constitute a part of this Registration Rights Agreement and shall not affect in any way the meaning or interpretation of this Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Registration Rights Agreement and the other writings referred to herein (including the Indenture and the form of Securities) or delivered pursuant hereto that form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Registration Rights Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Registration Rights Agreement may be amended and the observance of any term of this Registration Rights Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Partnership and the holders of at least a majority in aggregate principal amount of the Registrable Securities at the time outstanding (except with respect to Section 2(c) hereof, which may be amended only with the consent of each holder of Registrable Securities at the time outstanding). Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 8(h), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities or is delivered to such holder.
(i) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provisions in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
(j) Counterparts. This agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and return to us four counterparts hereof, being one for the Partnership, one for the Purchaser and one for each counsel, and upon the acceptance hereof by you, this letter and such acceptance hereof shall constitute a binding agreement between the Purchaser and the Partnership.
Very truly yours,
KINDER MORGAN ENERGY
PARTNERS, L.P.
By: Kinder Morgan G.P., Inc.,
its general partner
By: /s/ Joseph Listengart ---------------------- Name: Joseph Listengart Title: Vice President |
Accepted as of the date hereof:
BANC OF AMERICA SECURITIES LLC
By: /s/ Lily Chang ---------------------------- Name: Lily Chang Title: Principal |
EXHIBIT A
KINDER MORGAN ENERGY PARTNERS, L.P.
INSTRUCTION TO DTC PARTICIPANTS
[DATE OF MAILING]
URGENT -- IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]*
The Depository Trust Company ("DTC") has identified you as a DTC Participant through which beneficial interests in the 7.50% Senior Notes due 2010 (the "Securities") of Kinder Morgan Energy Partners, L.P. (the "Partnership") are held.
The Partnership is in the process of registering the Securities under the Securities Act of 1933 for resale by the beneficial owners thereof. In order to have their Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a copy of the enclosed materials as soon as possible as their rights to have the Securities included in the registration statement depend upon their returning the Notice and Questionnaire by [Deadline For Response]. Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact Kinder Morgan Energy Partners, L.P., 1301 McKinney Street, Suite 3450, Houston, Texas 77010, Attention: General Counsel.
KINDER MORGAN ENERGY PARTNERS, L.P.
NOTICE OF REGISTRATION STATEMENT
AND
SELLING SECURITYHOLDER QUESTIONNAIRE
[DATE]
Reference is hereby made to the Registration Rights Agreement (the "Registration Rights Agreement") between Kinder Morgan Energy Partners, L.P. (the "Partnership"), and the Purchaser named therein. Pursuant to the Registration Rights Agreement, the Partnership has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Partnership's 7.50% Senior Notes due 2010 (the "Securities"). A copy of the Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire (the "Notice and Questionnaire") must be completed, executed and delivered to the Partnership's counsel at the address set forth herein for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Shelf Registration Statement and (ii) may not use the prospectus forming a part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and related prospectus.
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement, including, without limitation, Section 6 of the Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement, the Selling Securityholder will be required to deliver to the Partnership and Trustee the Notice of Transfer set forth in Appendix A to the prospectus and as Exhibit B to the Registration Rights Agreement. The Selling Securityholder hereby provides the following information to the Partnership and represents and warrants that such information is accurate and complete:
QUESTIONNAIRE
(b) Full Legal Name of Registered Holder (if not the same as in
(a) above) of Registrable Securities Listed in Item (3) below:
(c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in Item (3) below are Held:
(2) Address for Notices to Selling Securityholder:
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Telephone:
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Fax:
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Contact Person:
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(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned
does not beneficially own any Securities.
(a) Principal amount of Registrable Securities beneficially owned:
Title and CUSIP No(s). of such Registrable Securities:
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(b) Principal amount of Securities other than Registrable
Securities beneficially owned: Title and CUSIP No(s). of such
other Securities:
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(c) Principal amount of Registrable Securities that the
undersigned wishes to be included in the Shelf Registration
Statement:
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|
(4) Beneficial ownership of Other Securities of the Partnership:
Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any other securities of the Partnership, other than the Securities listed above in Item (3).
State any exceptions here:
(5) Relationships with the Partnership:
Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Partnership (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item
(3) only as follows (if at all): Such Registrable Securities may be
sold from time to time directly by the undersigned Selling
Securityholder or, alternatively, through underwriters, broker-dealers
or agents. Such Registrable Securities may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time
of sale, at varying prices determined at the time of sale, or at
negotiated prices. Such sales may be effected in transactions (which
may involve crosses or block transactions) (i) on any national
securities exchange or quotation service on which the Registered
Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv)
through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may
enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the Registrable Securities in the course of
hedging the positions they assume. The Selling Securityholder may also
sell Registrable Securities short and deliver Registrable Securities to
close out such short positions, or loan or pledge Registrable
Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M.
In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Partnership, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure
of the information contained herein in its answers to Items (1) through
(6) above and the inclusion of such information in the Shelf
Registration Statement and related prospectus. The Selling
Securityholder understands that such information will be relied upon by
the Partnership in connection with the preparation of the Shelf
Registration Statement and related prospectus.
In accordance with the Selling Securityholder's obligation under
Section 3(e) of the Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Shelf
Registration Statement, the Selling Securityholder agrees to promptly
notify the Partnership of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date
hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Registration Rights
Agreement shall be made in writing, by hand-delivery, first-class mail
or air courier guaranteeing overnight delivery as follows:
(i) To the Partnership: Park Shaper, Chief Financial Officer Kinder Morgan Energy Partners, L.P.
One Allen Center
500 Dallas Street, Suite 1000
Houston, Texas 77002
(ii) With a copy to: Gary Orloff Bracewell & Patterson L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2718
Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Partnership's counsel, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall be
binding on, shall inure to the benefit of and shall be enforceable by the
respective successors, heirs, personal representatives and assigns of the
Partnership and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above). This Agreement shall be governed in all respects by the laws of the
State of New York.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE PARTNERSHIP'S COUNSEL AT:
EXHIBIT B
NOTICE OF TRANSFER PURSUANT TO
REGISTRATION STATEMENT
Kinder Morgan Energy Partners, L.P.
c/o First Union National Bank
5847 San Felipe, Suite 1050
Houston, Texas 77057
Re: Kinder Morgan Energy Partners, L.P. (the "Partnership") 7.50% Senior Notes due 2010
Dear Sirs:
Please be advised that ________________ has transferred $250,000,000 aggregate principal amount of the above-referenced 7.50% Senior Notes due 2010 pursuant to an effective Registration Statement on Form S-3 (File No. 333-________) filed by the Partnership.
We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the Securities is named as a "Selling Holder" in the prospectus dated [date] or in supplements thereto, and that the aggregate principal amount of the Securities transferred are the Securities listed in such prospectus opposite such owner's name.
Very truly yours,
By:
Conformed Copy
KINDER MORGAN
ENERGY PARTNERS, L.P.
Issuer
and
FIRST UNION NATIONAL BANK
Trustee
INDENTURE
Dated as of January 2, 2001
SENIOR DEBT SECURITIES
KINDER MORGAN ENERGY PARTNERS, L.P.
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318, INCLUSIVE, OF THE
TRUST INDENTURE ACT OF 1939:
Trust Indenture
Act Section Indenture Section
------------------- ---------------------
ss.310(a)(1)................................. 609
(a)(2)................................. 609
(a)(3)................................. Not Applicable
(a)(4)................................. Not Applicable
(b).................................... 608; 610
ss.311(a).................................... 613
(b).................................... 613
ss.312(a).................................... 701; 702
(b).................................... 702
(c).................................... 702
ss.313(a).................................... 703
(b).................................... 703
(c).................................... 703
(d).................................... 703
ss.314(a).................................... 704
(a)(4)................................. 1004
(b).................................... Not Applicable
(c)(1)................................. 102
(c)(2)................................. 102
(c)(3)................................. Not Applicable
(d).................................... Not Applicable
(e).................................... 102
ss.315(a).................................... 601, 603
(b).................................... 602
(c).................................... 601
(d).................................... 601
(e).................................... 514
ss.316(a).................................... 101
(a)(1)(A).............................. 502; 512
(a)(1)(B).............................. 513
(a)(2)................................. Not Applicable
(b).................................... 508
(c).................................... 104
ss.317(a)(1)................................. 503
(a)(2)................................. 504
(b).................................... 1003
ss.318(a).................................... 107
---------------
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NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS......................................................1
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS............................10
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE..........................11
SECTION 104. ACTS OF HOLDERS; RECORD DATES...................................12
SECTION 105. NOTICES, ETC., TO TRUSTEE AND PARTNERSHIP.......................13
SECTION 106 NOTICE TO HOLDERS; WAIVER.......................................13
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT...............................14
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS........................14
SECTION 109. SUCCESSORS AND ASSIGNS..........................................14
SECTION 110. SEPARABILITY CLAUSE.............................................14
SECTION 111. BENEFITS OF INDENTURE...........................................14
SECTION 112. GOVERNING LAW...................................................14
SECTION 113. LEGAL HOLIDAYS..................................................15
SECTION 114. LANGUAGE OF NOTICES, ETC........................................15
SECTION 115. INTEREST LIMITATION.............................................15
SECTION 116. NON-RECOURSE TO THE GENERAL PARTNER; NO PERSONAL LIABILITY
OF OFFICERS, DIRECTORS, EMPLOYEES OR PARTNERS...................16
ARTICLE II
SECURITY FORMS
SECTION 201. FORMS GENERALLY.................................................16
SECTION 202. FORM OF FACE OF SECURITY........................................17
SECTION 203. FORM OF REVERSE OF SECURITY.....................................19
SECTION 204. GLOBAL SECURITIES...............................................24
SECTION 205. FORM OF TRUSTEE'S CERTIFICATE AND AUTHORIZATION.................25
ARTICLE III
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES............................26
SECTION 302. DENOMINATIONS...................................................29
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING..................29
SECTION 304. TEMPORARY SECURITIES............................................31
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.............32
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES................33
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED................ .34
SECTION 308. PERSONS DEEMED OWNERS...........................................36
SECTION 309. CANCELLATION....................................................36
SECTION 310. COMPUTATION OF INTEREST.........................................36
SECTION 311. CUSIP NUMBERS...................................................36
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.........................37
SECTION 402. APPLICATION OF TRUST MONEY......................................38
ARTICLE V
REMEDIES
SECTION 501. EVENTS OF DEFAULT...............................................38
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT..............39
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.........................................................40
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM................................41
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.....41
SECTION 506. APPLICATION OF MONEY COLLECTED..................................41
SECTION 507. LIMITATION ON SUITS.............................................42
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST............................................43
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES..............................43
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE..................................43
SECTION 511. DELAY OR OMISSION NOT WAIVER....................................43
SECTION 512. CONTROL BY HOLDERS..............................................43
SECTION 513. WAIVER OF PAST DEFAULTS.........................................44
SECTION 514. UNDERTAKING FOR COSTS...........................................44
ARTICLE VI
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.............................45
SECTION 602. NOTICE OF DEFAULTS..............................................46
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.......................................46
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES..........47
SECTION 605. MAY HOLD SECURITIES.............................................47
SECTION 606. MONEY HELD IN TRUST.............................................48
SECTION 607. COMPENSATION AND REIMBURSEMENT..................................48
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.........................48
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.........................49
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR...............49
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR..........................50
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.....51
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST PARTNERSHIP...........52
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.............................52
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND PARTNERSHIP
SECTION 701. PARTNERSHIP TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS...53
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS..........54
SECTION 703. REPORTS BY TRUSTEE..............................................54
SECTION 704. REPORTS BY PARTNERSHIP..........................................54
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. PARTNERSHIP AND GUARANTORS MAY CONSOLIDATE, ETC., ONLY ON
CERTAIN TERMS...................................................55
SECTION 802. SUCCESSOR SUBSTITUTED...........................................56
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS..............56
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.................57
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES............................58
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES...............................58
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.............................58
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES..............58
ARTICLE X
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST......................59
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.................................59
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST...............59
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.............................60
SECTION 1005. EXISTENCE.......................................................61
SECTION 1006. LIMITATIONS ON LIENS............................................61
SECTION 1007. RESTRICTION OF SALE-LEASEBACK TRANSACTION.......................62
SECTION 1008. WAIVER OF CERTAIN COVENANTS.....................................63
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE........................................64
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE...........................64
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED...............64
SECTION 1104. NOTICE OF REDEMPTION............................................65
SECTION 1105. DEPOSIT OF REDEMPTION PRICE.....................................65
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE...........................65
SECTION 1107. SECURITIES REDEEMED IN PART.....................................66
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ARTICLE XII
SINKING FUNDS
SECTION 1201. APPLICABILITY OF ARTICLE........................................66
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES...........66
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.......................67
ARTICLE XIII
DEFEASANCE
SECTION 1301. APPLICABILITY OF ARTICLE........................................67
SECTION 1302. LEGAL DEFEASANCE................................................67
SECTION 1303. COVENANT DEFEASANCE.............................................69
SECTION 1304. APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT
OF SECURITIES...................................................70
SECTION 1305. REPAYMENT TO PARTNERSHIP........................................71
SECTION 1306. REINSTATEMENT...................................................71
ARTICLE XIV
GUARANTY OF SECURITIES
SECTION 1401. RETIREMENT FOR GUARANTY.........................................71
SECTION 1402. RELEASE OF GUARANTY.............................................72
Annex A
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INDENTURE dated as of January 2, 2001, between KINDER MORGAN ENERGY PARTNERS, L.P., a Delaware limited partnership (the "Partnership"), having its principal office at One Allen Center, Suite 1000, 500 Dallas Street, Houston Texas, 77002, and FIRST UNION NATIONAL BANK, a national banking association, as Trustee (the "Trustee").
RECITALS OF THE PARTNERSHIP
The Partnership has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (the "Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the Partnership, in accordance with its terms, have been done.
This Indenture is subject to the provisions of the Trust Indenture Act that are required to be a part of this Indenture and, to the extent applicable, shall be governed by such provisions.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture Act, either directly, or by reference therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date of such computation;
(4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and
(5) the words "Article" and "Section" refer to an Article and Section, respectively, of this Indenture, and the word "Annex" refers to an Annex to this Indenture.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Adjusted Net Assets" has the meaning specified in Section 108 of Annex A.
"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.
"Attributable Indebtedness", when used with respect to any Sale-Leaseback Transaction, means, as at the time of determination, the present value (discounted at the rate set forth or implicit in the terms of the lease included in such transaction) of the total obligations of the lessee for rental payments (other than amounts required to be paid on account of property taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items that do not constitute payments for property rights) during the remaining term of the lease included in such Sale-Leaseback Transaction (including any period for which such lease has been extended). In the case of any lease that is terminable by the lessee upon the payment of a penalty or other termination payment, such amount shall be the lesser of the amount determined assuming termination upon the first date such lease may be terminated (in which case the amount shall also include the amount of the penalty or termination payment, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the amount determined assuming no such termination.
"Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series.
"Authorized Agent" has the meaning specified in Section 105 of Annex A.
"Authorized Newspaper" means a newspaper, in the English language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in the place in connection with which the term is used or in the financial community of such place.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors or the protection of creditors.
"Board of Directors" means the board of directors of the General Partner, or the executive or any other committee of that board duly authorized to act in respect thereof. If the Partnership shall change its form of entity to other than a limited partnership, the references to officers or the Board of Directors of the General Partner shall mean the officers or the Board of Directors (or other comparable governing body) of the Partnership.
"Board Resolution" means a copy of a resolution certified by the Corporate Secretary of the General Partner, the principal financial officer of the General Partner or any other authorized officer of the General Partner or a Person duly authorized by any of them, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment or other location, means, except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment or other location are authorized or obligated by law, executive order or regulation to close.
"Capital Interests" means any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Consolidated Net Tangible Assets" means, at any date of determination, the total amount of assets after deducting therefrom (i) all current liabilities (excluding (A) any current liabilities that by their terms are extendable or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed, and (B) current maturities of long-term debt), and (ii) the value (net of any applicable reserves) of all goodwill, trade names, trademarks, patents and other like intangible assets, all as set forth, or on a pro forma basis would be set forth, on the consolidated balance sheet of the Partnership and its consolidated subsidiaries for the Partnership's most recently completed fiscal quarter, prepared in accordance with generally accepted accounting principles.
"Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which at the date hereof is 40 Broad Street, Suite 550, New York, New York 10004.
"Corporation" includes corporations, associations, partnerships (general or limited), limited liability companies, joint-stock companies and business trusts.
"Covenant defeasance" has the meaning specified in Section 1303.
"Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
"Debt" means any obligation created or assumed by any Person for the repayment of money borrowed, any purchase money obligation created or assumed by such Person and any guarantee of the foregoing.
"Default" means, with respect to a series of Securities, any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Definitive Security" means a Security other than a Global Security or a temporary Security.
"Depositary" means, with respect to Securities of any series issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities as contemplated by Section 301, until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter shall mean or include each Person which is then a Depositary hereunder, and if at any time there is more than one such Person, shall be a collective reference to such Persons.
"Dollar" or "$" means the coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any statute successor thereto.
"Funded Debt" means all Debt maturing one year or more from the date of the creation thereof, all Debt directly or indirectly renewable or extendable, at the option of the debtor, by its terms or by the terms of any instrument or agreement relating thereto, to a date one year or more from the date of the creation thereof, and all Debt under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more.
"Funding Guarantor" has the meaning specified in Section 103 of Annex A.
"General Partner" means Kinder Morgan G.P., Inc., a Delaware corporation.
"Global Security" means a Security in global form that evidences all or part of the Securities of any series and is registered in the name of, the Depositary for such Securities or a nominee thereof.
"Guarantor" means (i) each Subsidiary of the Partnership that becomes a
guarantor of the Securities of any series pursuant to Section 1401 and (ii) any
Subsidiary of the Partnership that is a successor corporation of any Subsidiary
of the Partnership referred to in clause (i). The term "Guarantor" shall not
include any Subsidiary of the Partnership referred to in clause (i) or (ii) that
shall have been released from its obligations under a Guaranty pursuant to
Section 1402.
"Guaranty" means a guaranty of the Securities of any series containing
provisions substantially in the form specified in Annex A, and such other
provisions, not inconsistent herewith, as are customary in guaranties, executed
and delivered by one or more Subsidiaries of the Partnership as required by
Section 1401.
"Holder" means a Person in whose name a Security is registered in the Security Register.
"Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument, and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" also shall include the terms of particular series of Securities established as contemplated by Section 301.
"Interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.
"Issue Date"means with respect to any series of Debt Securities issued under either Indenture the date on which Debt Securities of that series are initially issued under that Indenture.
"Judgment Currency" has the meaning specified in Section 107 of Annex A.
"Lien" means, as to any entity, any mortgage, lien, pledge, security interest or other encumbrance in or on, or adverse interest or title of any vendor, lessor, lender or other secured party to or of the entity under conditional sale or other title retention agreement or capital lease with respect to, any property or asset of the entity, but excluding agreements to refrain from granting Liens.
"Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
"Non-U.S. Guarantor" has the meaning specified in Section 105 of Annex A.
"Notice of Default" means a written notice of the kind specified in
Section 501(3).
"Officers' Certificate" of a Person means a certificate signed by the Chairman of the Board, the Vice Chairman, the President or a Vice President, and by the Treasurer or the Secretary, of the Person, or if such Person is a partnership, of its general partner, and delivered to the Trustee. One of the officers or such other Persons (as applicable) signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Person, or if such Person is a partnership, of its general partner.
"Opinion of Counsel" means a written opinion of legal counsel, who may be an employee of or counsel for the Partnership or a Guarantor, which opinion shall comply with the provisions of Sections 102 and 103. Such counsel shall be acceptable to the Trustee, whose acceptance shall not be unreasonably withheld.
"Original Issue Discount Security" means any Security which provides for an amount less than the stated principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities 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 Securities; provided, however, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor has been made;
(iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Partnership; and
(iv) Securities, except to the extent provided in Sections 1302 and 1303, with respect to which the Partnership has effected defeasance or covenant defeasance as provided in Article XIII;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (A) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding shall be the amount of the principal thereof that would be due and
payable as of the date of such determination upon acceleration of the Maturity
thereof on such date pursuant to Section 502, (B) the principal amount of a
Security denominated in one or more currencies or currency units other than U.S.
dollars shall be the U.S. dollar equivalent of such currencies or currency
units, determined in the manner provided as contemplated by Section 301 on the
date of original issuance of such Security, of the principal amount (or, in the
case of an Original Issue Discount Security, the U.S. dollar equivalent (as so
determined) on the date of original issuance of such Security, of the amount
determined as provided in Clause (A) above) of such Security, and (C) Securities
owned by the Partnership or any other obligor upon the 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 Securities which the Trustee knows to
be so owned shall be so disregarded. Securities so owned as described in Clause
(C) above 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 Securities and that the pledgee is not the
Partnership or any other obligor upon the Securities or any Affiliate of the
Partnership or of such other obligor.
"Pari Passu Debt" means any Debt of the Partnership, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinated in right of payment to the Securities.
"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" or "Partnership Order" means a written request or order signed in the name of the Partnership by the Chairman of the Board, the Vice Chairman, the President or a Vice President of the General Partner, and by the Treasurer or 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 the like positions comparable to those of the foregoing nature, as applicable.
"Paying Agent" means any Person authorized by the Partnership to pay the principal of or any premium or interest on any Securities on behalf of the Partnership.
"Periodic Offering" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest or formula for determining the rate or rates of interest thereon, if any, the Stated Maturity or Stated Maturities thereof, the original issue date or dates thereof, the redemption provisions, if any, with respect thereto, and any other terms specified as contemplated by Section 301 with respect thereto, are to be determined by the Partnership upon the issuance of such Securities.
"Permitted Liens" means (i) Liens upon rights-of-way for pipeline purposes; (ii) any statutory or governmental Lien or Lien arising by operation of law, or any mechanics', repairmen's, materialmen's, suppliers', carriers', landlords', warehousemen's or similar Lien incurred in the ordinary course of business which is not yet due or which is being contested in good faith by appropriate proceedings and any undetermined Lien which is incidental to construction, development, improvement or repair; (iii) the right reserved to, or vested in, any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or by any provision of law, to purchase or recapture or to designate a purchaser of, any property; (iv) Liens of taxes and assessments which are (A) for the then current year, (B) not at the time delinquent, or (C) delinquent but the validity of which is being contested at the time by the Partnership or any Subsidiary in good faith; (v) Liens of, or to secure performance of, leases, other than capital leases; (vi) any Lien upon, or deposits of, any assets in favor of any surety company or clerk of court for the purpose of obtaining indemnity or stay of judicial proceedings; (vii) any Lien upon property or assets acquired or sold by the Partnership or any Subsidiary resulting from the exercise of any rights arising out of defaults on receivables; (viii) any Lien incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance, temporary disability, social security, retiree health or similar laws or regulations or to secure obligations imposed by statute or governmental regulations; (ix) any Lien in favor of the Partnership or any Subsidiary; (x) any Lien in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any state thereof, to secure partial, progress, advance, or other payments pursuant to any contract or statute, or any Debt incurred by the Partnership or any Subsidiary for the purpose of financing all or any part of the purchase price of, or the cost of constructing, developing, repairing or improving, the property or assets subject to such Lien; or (xi) any Lien securing industrial development, pollution control or similar revenue bonds; (xii) any Lien securing Debt of the Partnership or any Subsidiary, all or a portion of the net proceeds of which are used, substantially concurrent with the funding thereof (and for purposes of determining such "substantial concurrence," taking into consideration, among other things, required notices to be given to Holders of outstanding securities under this Indenture (including the Securities) in connection with such refunding, refinancing or repurchase, and the required corresponding durations thereof), to refinance, refund or repurchase all outstanding securities under this Indenture (including the Securities), including the amount of all accrued interest thereon and reasonable fees and expenses and premium, if any, incurred by the Partnership or any Subsidiary in connection therewith; (xiii) Liens in favor of any Person to secure obligations under the provisions of any letters of credit, bank guarantees, bonds or surety obligations required or requested by any governmental authority in connection with any contract or statute; or (xiv) any Lien upon or deposits of any assets to secure performance of bids, trade contracts, leases or statutory obligations.
"Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, other entity, unincorporated organization or government, or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series, means, unless otherwise specifically provided for with respect to such series as contemplated by Section 301,
the office or agency of the Partnership in The City of New York and such other place or places where, subject to the provisions of Section 1002, the principal of and any premium and interest on the Securities of that series are payable as specified as contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same Debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same Debt as the mutilated, destroyed, lost or stolen Security.
"Principal Property" means, whether owned or leased on the date of this Indenture or thereafter acquired, (i) any pipeline assets of the Partnership or any Subsidiary, including any related facilities employed in the transportation, distribution, storage or marketing of refined petroleum products, natural gas liquids and carbon dioxide, that are located in the United States of America or any territory or political subdivision thereof, and (ii) any processing or manufacturing plant or terminal owned or leased by the Partnership or any Subsidiary that is located in the United States or any territory or political subdivision thereof, except, in the case of either of the foregoing clauses (i) or (ii), (A) any such assets consisting of inventories, furniture, office fixtures and equipment (including data processing equipment), vehicles and equipment used on, or useful with, vehicles, and (B) any such assets, plant or terminal which, in the opinion of the Board of Directors, is not material in relation to the activities of the Partnership or of the Partnership and its Subsidiaries, taken as a whole.
"Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301.
"Sale-Leaseback Transaction" means the sale or transfer by the Partnership or any Subsidiary of any Principal Property to a Person (other than the Partnership or a Subsidiary) and the taking back by the Partnership or any Subsidiary, as the case may be, of a lease of such Principal Property.
"Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to the principal of any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of the Capital Interests of such Person entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof or, in the case of a partnership, more than 50% of the partners' Capital Interests (considering all partners' Capital 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 a combination thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as otherwise provided in Section 905; provided, however, that if the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean each Trustee with respect to Securities of that series.
"U.S. Government Obligations" means securities which are (i) direct obligations of the United States for the payment of which its full faith and credit is pledged, or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, each of which are not callable or redeemable at the option of the issuer thereof.
"Vice President", when used with respect to the Partnership, means any vice president of the General Partner, or when used with respect to the Trustee, means any vice president of the Trustee.
SECTION 102. Compliance Certificates and Opinions .
Upon any application or request by the Partnership or any Guarantor to the Trustee to take or refrain from taking any action under any provision of this Indenture, the Partnership shall furnish to the Trustee an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with, and an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Each
such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by officers of the General Partner or any Guarantor, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture.
Every Officers' Certificate or Opinion of Counsel (except for certificates provided for in Section 1004) shall include:
(1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(2) 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;
(3) a statement that, in the opinion of each such individual, 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
(4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee .
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Partnership, the General Partner or a Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Partnership, the General Partner or such Guarantor stating that the information with respect to such factual matters is in the possession of the Partnership, the General Partner or such Guarantor, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed (either physically or by means of a facsimile or an electronic transmission, provided that such electronic transmission is transmitted through the facilities of a Depositary) by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered (either physically or by means of a facsimile or an electronic transmission, provided that such electronic transmission is transmitted through the facilities of a Depositary) to the Trustee and, where it is hereby expressly required, to the Partnership. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 315 of the Trust Indenture Act) conclusive in favor of the Trustee and the Partnership, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including a Depositary that is a Holder of a Global Security, may make, give or take, by a proxy or proxies, duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and a Depositary that is a Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interests in any such Global Security.
The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
The ownership, principal amount and serial numbers of Securities held by any Person, and the date of commencement of such Person's holding the same, shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver or other action of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Partnership in reliance thereon, whether or not notation of such action is made upon such Security.
Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount.
The Partnership may set any day as the record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders of Securities of such series, but the Partnership shall have no obligation to do so. With regard to any record date set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to give or take the relevant action, whether or not such Holders remain Holders after such record date.
SECTION 105. Notices, Etc., to Trustee and Partnership.
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Partnership or any Guarantor shall be sufficient for every purpose hereunder if made in writing and actually received by the Trustee at its office at 5847 San Felipe, Suite 1050, Houston, Texas 77057, or at any other address previously furnished in writing by the Trustee, or
(2) the Partnership or any Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Partnership or a Guarantor, if any, addressed to it at One Allen Center, Suite 1000, 500 Dallas, Houston Texas, 77002, to the attention of the Corporate Secretary, or at any other address previously furnished in writing to the Trustee by the Partnership.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid (if international mail, by air mail), to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Partnership shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the 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 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in accordance with the law of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of the Securities of any series which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, 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 Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 114. Language of Notices, Etc .
Any request, demand, authorization, direction, notice, consent, waiver or Act required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication.
SECTION 115. Interest Limitation.
It is the intention of the Partnership to conform strictly to all applicable usury laws and any subsequent revisions, repeals or judicial interpretations thereof. Accordingly, if the transactions contemplated hereby would be usurious under any applicable law then, in that event, notwithstanding anything to the contrary in the Securities or this Indenture, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under applicable law with respect to a Security shall under no circumstances exceed the maximum amount allowed by applicable law, and any excess shall be credited to the principal amount of such Security (or, if the principal amount of such Security shall have been paid in full, refunded to the Partnership), to the extent permitted by applicable law; and (ii) in the event that the maturity of any Security is accelerated or in the event of any redemption of such Security, then such consideration that constitutes interest under applicable law may never include more than the maximum amount allowed by applicable law, and any excess shall be credited to the principal amount of such Security (or, if the principal amount of such Security shall be paid in full, refunded to the Partnership), to the extent permitted by applicable law. All calculations made to compute the rate of interest with respect to a Security for the purpose of determining whether such rate exceeds the maximum amount allowed by applicable law shall be made, to the extent permitted by such applicable law, by allocating and spreading during the period of the full stated term of such Security all interest any time contracted for, taken, reserved, charged or received by such Holder or by the Trustee on behalf of any such Holder in connection therewith so that the amount or rate of interest charged for any and all periods of time during the term of the Security does not exceed the maximum amount or rate of interest allowed to be charged by law during the relevant period of time. Notwithstanding any of the foregoing, if at any time applicable laws shall be changed so as to permit a higher rate or amount of interest to be charged than that permitted prior to such change, then unless prohibited by law, references in this Indenture or any Security to "applicable law" when used in the context of determining the maximum interest or
rate of interest that can be charged shall be deemed to refer to such applicable law as so amended to allow the greater amount or rate of interest.
The right to accelerate maturity of any Security does not include the right to accelerate any interest which has not otherwise accrued to the date of such acceleration, provided, however, that the foregoing shall not prohibit the continuing accrual after acceleration of interest in accordance with the terms of the Indenture and such Security.
SECTION 116. Non-Recourse to the General Partner; No Personal Liability of Officers, Directors, Employees or Partners.
Obligations of the Partnership, or any Guarantor, as such, under this Indenture and the Securities hereunder are non-recourse to the General Partner, and its respective Affiliates (other than the Partnership and the Guarantors), and payable only out of cash flow and assets of the Partnership and the Guarantors. The Trustee, and each Holder of a Security by its acceptance thereof, will be deemed to have agreed in this Indenture that (1) neither the General Partner nor its assets (nor any of its respective Affiliates other than the Partnership or the Guarantors, nor their respective assets) shall be liable for any of the obligations of the Partnership or the Guarantors under this Indenture or such Securities, and (2) no director, officer, employee, stockholder or unitholder, as such, of the Partnership, the Guarantors, the Trustee, the General Partner or any Affiliate of any of the foregoing entities shall have any personal liability in respect of the obligations of the Partnership or the Guarantors under this Indenture or such Securities by reason of his, her or its status.
ARTICLE II
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution 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 may be required to comply with applicable tax laws or the rules of any securities exchange or automated quotation system on which the Securities of such series may be listed or traded or Depositary therefor or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by an authorized officer or other authorized Person on behalf of the Partnership and delivered to the Trustee at or prior to the delivery of the Partnership Order contemplated by Section 303 for the authentication and delivery of such Securities. Any form of Security approved by or pursuant to a Board Resolution
must be acceptable as to form by the Trustee, such acceptance to be evidenced by the Trustee's authentication of Securities in that form. The Definitive Securities 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 Securities, as evidenced by their execution of such Securities.
SECTION 202. Form of Face of Security.
[Insert any legend required by the United States Internal Revenue Code and the regulations thereunder.]
[If a Global Security,--insert legend required by Section 204 of the Indenture] [If applicable, insert--UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE PARTNERSHIP OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
KINDER MORGAN ENERGY PARTNERS, L. P.
[TITLE OF SECURITY]
NO. U.S.$
[CUSIP No. ]
KINDER MORGAN ENERGY PARTNERS, L. P., a Delaware limited partnership (herein called the "Partnership", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to , or registered assigns, the
principal sum of United States Dollars on
[if the Security is to bear interest prior to Maturity,
|
insert--, and to pay interest thereon from , or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, semi-annually on and in each year, commencing , at the
rate of % per annum, until the principal hereof is paid or made available for payment [if applicable, insert--, and at the rate of % per annum on any overdue principal and premium and on any overdue installment of interest]. [If applicable, insert -- The amount of interest payable for any period shall be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any partial period shall be computed on the
basis of a 360-day year of twelve 30-day months and the days elapsed in any partial month. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. A "Business Day" shall mean, when used with respect to any Place of Payment, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law, executive order or regulation to close.] The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the or (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice of which shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities of this series may be listed or traded, and upon such notice as may be required by such exchange or automated quotation system, all as more fully provided in such Indenture].
[If the Security is not to bear interest prior to Maturity, insert--The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of % per annum, which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of % per annum, which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.]
[If a Global Security, insert--Payment of the principal of [(and premium, if any)] and [if applicable, insert--any such] interest on this Security will be made by transfer of immediately available funds to a bank account in designated by the Holder in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts [state other currency].]
[If a Definitive Security, insert--Payment of the principal of [(and premium, if any)] and [if applicable, insert--any such] interest on this Security will be made at the office or agency of the Partnership maintained for that purpose in , [in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts] [state other currency] [or subject to any laws or regulations applicable thereto and to the right of the Partnership (as provided in the Indenture) to rescind the designation of any
such Paying Agent, at the [main] offices of in and in , or at such other offices or agencies as the Partnership may designate, by [United States Dollar] [state other currency] check drawn on, or transfer to a [United States Dollar] account maintained by the payee with, a bank in The City of New York [ ] (so long as the applicable Paying Agent has received proper transfer instructions in writing at least [ ] days prior to the payment date)] [if applicable, insert--; provided, however, that payment of interest may be made at the option of the Partnership by [United States Dollar] [state other currency] check mailed to the addresses of the Persons entitled thereto as such addresses shall appear in the Security Register] [or by transfer to a [United States Dollar] [state other currency] account maintained by the payee with a bank in The City of New York [state other Place of Payment] (so long as the applicable Paying Agent has received proper transfer instructions in writing by the Record Date prior to the applicable Interest Payment Date)].]
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Partnership has caused this instrument to be duly executed.
Dated:
KINDER MORGAN ENERGY PARTNERS, L. P.,
By: Kinder Morgan G.P., Inc.,
Its General Partner
Title:
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the Partnership (the "Securities"), issued and to be issued in one or more series under an Indenture dated as of January 2, 2001 (the "Indenture"), between the Partnership and First Union National Bank, as Trustee (the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, obligations, duties and immunities thereunder of the Partnership, the Guarantors, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. As provided in the Indenture, the Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest, if any, at different rates, may be subject to different redemption provisions, if any, may be subject to different sinking, purchase or analogous funds, if any, may be subject to different covenants and Events of Default and may otherwise vary as in the Indenture provided or permitted. This Security is one of the series designated on the face hereof [if applicable, insert--, limited in aggregate principal amount to U.S. $ ].
[If applicable, insert--The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by mail, [if applicable, insert--(1) on in any year commencing with the year and ending with the year through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [if applicable, insert--on or after , ], as a whole or in part, at the election of the Partnership, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [if applicable, insert--on or before , %, and if redeemed] during the 12-month period beginning of the years indicated,
Year Redemption Price Year Redemption Price
and thereafter at a Redemption Price equal to % of the principal amount, together in the case of any such redemption [if applicable, insert--(whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert--The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by mail, (1) on in any year commencing with the year and ending with the year through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [if applicable, insert--on or after ], as a whole or in part, at the election of the Partnership, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning of the years indicated,
Redemption Price for Redemption Price for
Redemption Through Redemption Otherwise
Operation of the Than Through
Sinking Operation
Year Fund of the Sinking Fund
|
and thereafter at a Redemption Price equal to % of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert--The sinking fund for this series provides for the redemption on in each year beginning with the year and ending with the year of [if applicable,--not less than $ ("mandatory sinking fund") and not more than] $ aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Partnership otherwise than through [if applicable,--mandatory] sinking fund payments may be credited against subsequent [if applicable,--mandatory] sinking fund payments otherwise required to be made [if applicable,--in the inverse order in which they become due].]
[If the Security is subject to redemption in part of any kind, insert--In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert--The Securities of this series are not redeemable prior to Stated Maturity.]
[If the Security is not an Original Issue Discount Security, insert--If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert--If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to--insert formula for determining the amount. Upon payment (1) of the amount of principal so declared due and payable, and (2) of interest on any overdue principal and overdue interest, all of the Partnership's and the Guarantors' obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Partnership or the Guarantors and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Partnership, the Guarantors and the Trustee with the consent of not less than the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series to
be affected (voting as one class). The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Outstanding Securities of all affected series (voting as one class), on behalf of the Holders of all Securities of such series, to waive compliance by the Partnership and the Guarantors with certain provisions of the Indenture. The Indenture permits, with certain exceptions as therein provided, the Holders of a majority in principal amount of Securities of any series then Outstanding to waive past defaults under the Indenture with respect to such series and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or [any premium or] interest hereon on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall, without the consent of the Holder, alter or impair the
obligation of the Partnership, which is absolute and unconditional, to pay the
principal of and [any premium and] interest on this Security at the times,
place(s) and rate, and in the coin or currency, herein prescribed, except for
Section 115 of the Indenture (which limits interest to the maximum amount
permissible by law), the provisions of which are incorporated herein by
reference.
[If a Global Security, insert--This Global Security or portion hereof may not be exchanged for Definitive Securities of this series except in the limited circumstances provided in the Indenture.
The holders of beneficial interests in this Global Security will not be entitled to receive physical delivery of Definitive Securities except as described in the Indenture and will not be considered the Holders thereof for any purpose under the Indenture.]
[If a Definitive Security, insert--As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registerable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Partnership in [if applicable, insert -- any place where the principal of and any premium and interest on this Security are payable] [if applicable, insert-- The City of New York [, or, subject
to any laws or regulations applicable thereto and to the right of the Partnership (limited as provided in the Indenture) to rescind the designation of any such transfer agent, at the [main] offices of in and in or at such other offices or agencies as the Partnership may designate]], duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Partnership and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.]
The Securities of this series are issuable only in registered form without coupons in denominations of U.S.$ [state other currency] and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Partnership may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Partnership, the Trustee and any agent of the Partnership or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security is overdue, and neither the Partnership, the Trustee nor any such agent shall be affected by notice to the contrary.
Obligations of the Partnership and the Guarantors under the Indenture and
the Securities thereunder, including this Security, are non-recourse to Kinder
Morgan G.P., Inc. (the "General Partner") and its Affiliates (other than the
Partnership and the Guarantors), and payable only out of cash flow and assets of
the Partnership and the Guarantors. The Trustee, and each Holder of a Security
by its acceptance hereof, will be deemed to have agreed in the Indenture that
(1) neither the General Partner nor its assets (nor any of its Affiliates other
than the Partnership or the Guarantors, nor their respective assets) shall be
liable for any of the obligations of the Partnership or the Guarantors under the
Indenture or such Securities, including this Security, and (2) no director,
officer, employee, stockholder or unitholder, as such, of the Partnership, the
Guarantors, the Trustee, the General Partner or any Affiliate of any of the
foregoing entities shall have any personal liability in respect of the
obligations of the Partnership or the Guarantors under the Indenture or such
Securities by reason of his, her or its status.
The Indenture contains provisions that relieve the Partnership and the Guarantors from the obligation to comply with certain restrictive covenants in the Indenture and for satisfaction and discharge at any time of the entire indebtedness upon compliance by the Partnership and the Guarantors with certain conditions set forth in the Indenture.
[The obligations of the Partnership pursuant to the Indenture and the Securities, including the repurchase obligations under the Indenture, will be unconditionally guaranteed, on a senior unsecured basis, by each Guarantor.]
This Security shall be governed by and construed in accordance with the laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
[If a Definitive Security, insert as a separate page--
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _____________________________________ (Please Print or Typewrite Name and Address of Assignee) the within instrument of KINDER MORGAN ENERGY PARTNERS, L. P. and does hereby irrevocably constitute and appoint ________________________ Attorney to transfer said instrument on the books of the within-named Partnership, with full power of substitution in the premises.
Please Insert Social Security or
Other Identifying Number of Assignee:
Dated:___________________________ _____________________________(Signature)
Signature Guarantee:____________________________________________________________ (Participant in a Recognized Signature Guaranty Medallion Program)
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever.]
SECTION 204. Global Securities.
Every Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE TRANSFERRED TO, OR REGISTERED OR EXCHANGED FOR SECURITIES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN THE DEPOSITARY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY
BE REGISTERED, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. EVERY SECURITY AUTHENTICATED AND DELIVERED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR OR IN LIEU OF, THIS SECURITY SHALL BE A GLOBAL SECURITY SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES.
If Securities of a series are issuable in whole or in part in the form of one or more Global Securities, as contemplated by Section 301, then, notwithstanding Clause (9) of Section 301 and the provisions of Section 302, any Global Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced or increased, as the case may be, to reflect exchanges. Any endorsement of a Global Security to reflect the amount, or any reduction or increase in the amount, of Outstanding Securities represented thereby shall be made in such manner and upon instructions given by such Person or Persons as shall be specified therein or in a Partnership Order. Subject to the provisions of Sections 303, 304 and 305, the Trustee shall deliver and redeliver any Global Security in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Partnership Order. Any instructions by the Partnership with respect to endorsement or delivery or redelivery of a Global Security shall be in a Partnership Order (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel).
The provisions of the last sentence of Section 303 shall apply to any Security represented by a Global Security if such Security was never issued and sold by the Partnership and the Partnership delivers to the Trustee the Global Security together with a Partnership Order (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction or increase, as the case may be, in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303.
SECTION 205. Form of Trustee's Certificate and Authorization.
The Trustee's certificates of authentication shall be in substantially the following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
ARTICLE III
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution (and, subject to Section 303, to the extent established pursuant to rather than set forth in a Board Resolution, in an Officers' Certificate or Partnership Order setting forth, or determining the manner of, such establishment) or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series,
(1) the form and title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series);
(2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest;
(4) the date or dates on which the Securities will be issued and on which the principal of, and premium, if any, on the Securities of the series is payable or the method of determination thereof;
(5) the rate or rates (which may be fixed or variable) at which the Securities of the series shall bear interest, if any, or the method of determination thereof, the date or dates from which such interest shall accrue, or the method of determination thereof, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Interest Payment Date;
(6) the place or places where, subject to the provisions of Section 1002, the principal of and any premium and interest on Securities of the series shall be payable, Securities of the series may be surrendered for registration of transfer, Securities of the series may be surrendered for exchange and notices, and demands to or upon the Partnership in respect of the Securities of the series and this Indenture may be served;
(7) the period or periods, if any, within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Partnership or otherwise, if the Partnership is to have that option;
(8) the obligation, if any, and the option, if any, of the Partnership to redeem, purchase or repay Securities of the series pursuant to any sinking fund or analogous provisions or upon the happening of a specified event or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable;
(10) whether payment of principal of and premium, if any, and interest, if any, on the Securities of the series shall be without deduction for taxes, assessments or governmental charges paid by Holders of the series;
(11) the currency, currencies or currency units in which payment of the principal of and any premium and interest on any Securities of the series shall be denominated, payable, redeemable or purchasable if other than the currency of the United States of America and the manner of determining the equivalent thereof in the currency of the United States of America for purposes of the definition of "Outstanding" in Section 101;
(12) if the amount of payments of principal of or any premium or interest on any Securities of the series may be determined with reference to an index, the manner in which such amounts shall be determined;
(13) if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Partnership or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made;
(14) the right, if any, of the Partnership to defer payments of interest by extending the interest payment periods and specify the duration of such extension, the Interest Payment Dates on which such interest shall be payable and whether and under what circumstances additional interest on amounts deferred shall be payable;
(15) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502 or provable in bankruptcy pursuant to Section 504 or the method of determination thereof;
(16) if and as applicable, that the Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities (and whether in temporary or permanent global form) and, in such case, the Depositary or Depositaries for such Global Security or Global Securities and any circumstances other than those set forth in Section 305 in which any such Global Security may be transferred to, and registered and exchanged for Securities registered in the name of, a Person other than the Depositary for such Global Security or a nominee thereof and in which any such transfer may be registered;
(17) any deletions from, modifications of or additions to the Events of Default set forth in Section 501 or the covenants of the Partnership set forth in Article X pertaining to the Securities of the series;
(18) if and the terms and conditions upon which any Securities of the series may be converted into or exchanged for securities, which may include, without limitation, capital stock, of any class or series of the Partnership or any other issuer;
(19) If the amount of payments of principal of or any premium or interest on any Securities of the series may be determined with reference to an index, including, but not limited to an index based on a currency or currencies other than that in which the Securities of that series are payable, or any other type of index, the manner in which such amounts shall be determined;
(20) if other than as provided in Sections 1302 and 1303, the terms and conditions upon which and the manner in which such series of Securities may be defeased or discharged;
(21) if other than the Trustee, the identity of any other trustee, the Security Registrar and any Paying Agent;
(22) any restrictions or other provisions with respect to the transfer or exchange of the Securities; and
(23) any other terms of the Securities of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)).
All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution or Officers' Certificate referred to above or in any such indenture supplemental hereto.
Any such Board Resolution or Officers' Certificate referred to above with respect to Securities of any series filed with the Trustee on or before the initial issuance of the Securities of such series shall be incorporated herein by reference with respect to Securities of such series and shall thereafter be deemed to be a part of the Indenture for all purposes relating to Securities of such series as fully as if such Board Resolution or Officers' Certificate were set forth herein in full.
All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the Holders, for increases in the aggregate principal amount of such series of Securities and issuances of additional Securities of such series or for the establishment of additional terms with respect to the Securities of such series.
If any of the terms of the series are established by action taken by or pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by an authorized officer or other authorized person of the General Partner on behalf of the Partnership and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth, or providing the manner for determining, the terms of the series.
With respect to Securities of a series subject to a Periodic Offering, such Board Resolution or Officers' Certificate may provide general terms for Securities of such series and provide either that the specific terms of particular Securities of such series shall be specified in a Partnership Order, or that such terms shall be determined by the Partnership, or one or more of the Partnership's agents designated in an Officers' Certificate, in accordance with a Partnership Order.
SECTION 302. Denominations.
The Securities of each series shall be issuable only in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 301. In the absence of any such specified denomination with respect to
the Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Partnership by the Chairman of the Board, Vice Chairman, Chief Executive Officer, Chief Financial Officer, President or any Vice President of the General Partner and need not be attested. The signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the General Partner shall bind the Partnership, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this Indenture, the Partnership may deliver Securities of any series executed by the Partnership to the Trustee for authentication, together with a Partnership Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Partnership Order shall authenticate and deliver such Securities; provided, however, that in the case of Securities offered in a Periodic Offering, the Trustee shall authenticate and deliver such Securities from time to time in accordance with such other procedures (including, without limitation, the receipt by the Trustee
of oral or electronic instructions from the Partnership or its duly authorized agents, thereafter promptly confirmed in writing) acceptable to the Trustee as may be specified by or pursuant to a Partnership Order delivered to the Trustee prior to the time of the first authentication of Securities of such series. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, in addition to any Officers' Certificate and Opinion of Counsel required to be furnished to the Trustee pursuant to Section 102, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating,
(1) The form and terms (or the manner of determining the terms) of such Securities have been established by or pursuant to Board Resolution as permitted by Section 201, that such form or forms have been established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been, or in the case of Securities of a series offered in a Periodic Offering, will be, established by or pursuant to a Board Resolution as permitted by Section 301, that such terms have been, or in the case of Securities of a series offered in a Periodic Offering, will be, established in conformity with the provisions of this Indenture, subject, in the case of Securities of a series offered in a Periodic Offering, to any conditions specified in such Opinion of Counsel (which conditions are reasonably acceptable to the Trustee); and
(3) that such 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, which conditions are reasonably acceptable to the Trustee, will constitute valid and legally binding obligations of the Partnership enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and entitled to the benefits of this Indenture, equally and ratably with all other Securities, if any, of such Series Outstanding; and
(4) such other matters as the Trustee may reasonably request;
and, if the authentication and delivery relates to a new series of Securities created by an indenture supplemental hereto, also stating that all conditions precedent to the execution of the supplemental indenture with respect to that series of Securities have been complied with, the Partnership has the power to execute and deliver any such supplemental indenture and has taken all necessary action for those purposes and any such supplemental indenture has been executed and delivered and constitutes the legal, valid and binding obligation of the Partnership enforceable in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other laws and legal principles affecting creditors' rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity).
If such form or forms or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 301 or the Partnership Order and Opinion of Counsel or Board Resolution or supplemental indenture otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued.
With respect to Securities of a series not to be originally issued at one time, the Trustee may rely upon the Opinion of Counsel and the other documents delivered pursuant to Sections 201 and 301 and this Section, as applicable, in connection with the first authentication of Securities of such series and any subsequent request by the Partnership to the Trustee to authenticate 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 shall be true and correct as if made on such date.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or any Guaranty or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Partnership, and the Partnership shall deliver such Security to the Trustee for cancellation as provided in Section 309 for all purposes of this Indenture, such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of Definitive Securities of any series, the Partnership may execute, and upon receipt of the documents required by Section 303, together with a Partnership Order, the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the Definitive Securities of like series in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Partnership will cause Definitive Securities of that series to be prepared without unreasonable delay. After the preparation of Definitive Securities of such series, the temporary Securities of such series shall be exchangeable for Definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Partnership maintained pursuant to Section 1002 for the purpose of exchanges of Securities of such series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Partnership shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more Definitive Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as Definitive Securities of such series and tenor.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Partnership shall cause to be kept at an office or agency of the Security Registrar in The City of New York a register (the register maintained in such office or in any other office or agency of the Partnership in a Place of Payment being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Partnership shall provide for the registration of Securities and of transfers of Securities. The Partnership shall, prior to the issuance of any Securities hereunder, appoint the Trustee as the initial "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided and its Corporate Trust Office which, at the date hereof, is located at 40 Broad Street, Suite 550, New York, New York, 10004, as the initial office or agency in The City of New York where the Security Register will be maintained. The Partnership may at any time replace such Security Registrar, change such office or agency or act as its own Security Registrar. The Partnership will give prompt written notice to the Trustee of any change of the Security Registrar or of the location of such office or agency. At all reasonable times the Security Register shall be available for inspection by the Trustee.
Upon surrender for registration of transfer of any Security of any series at the office or agency of the Partnership maintained pursuant to Section 1002 for such purpose, the Partnership shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Securities of any series (except a Global Security) may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Partnership shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Partnership, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Partnership or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Partnership and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Securities, but the Partnership may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304 or 1107 not involving any transfer.
Neither the Trustee nor the Partnership shall be required (1) to issue, register the transfer of or exchange Securities of any series (or of any series and specified tenor, as the case may be) during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (2) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
Notwithstanding any other provision in this Indenture and except as otherwise specified as contemplated by Section 301, no Global Security may be transferred to, or registered or exchanged for Securities registered in the name of, any Person other than the Depositary for such Global Security or any nominee thereof, and no such transfer may be registered, except as provided in this paragraph. Every Security authenticated and delivered upon registration or transfer of, or in exchange for or in lieu of, a Global Security shall be a Global Security, except as provided in this paragraph. If (1) (A) the Depositary for a Global Security notifies the Partnership that it is unwilling or unable to continue as Depositary for such Global Security or ceases to be a clearing agency registered under the Exchange Act, and (B) a successor Depositary is not appointed by the Partnership within 90 days, (2) an Event of Default has occurred and is continuing with respect to the Securities of such series and the Security Registrar has received a request from the Depositary to issue certificated securities in lieu of all or a portion of the Global Securities of such series (in which case the Partnership shall deliver certificated securities within 30 days of such request) or (3) the Partnership determines in its sole discretion that Securities of a series issued in global form shall no longer be represented by a Global Security, then such Global Security may be exchanged by such Depositary for Definitive Securities of the same series, of any authorized denomination and of a like aggregate principal amount and tenor, registered in the names of, and the transfer of such Global Security or portion thereof may be registered to, such Persons as such Depositary shall direct.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, together with such security or indemnity as may be required by the Partnership or the Trustee to save each of them and any
agent of either of them harmless, the Partnership shall execute and upon its request the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously Outstanding.
If there shall be delivered to the Partnership and the Trustee (1) evidence to their satisfaction of the destruction, loss or theft of any Security and (2) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Partnership or the Trustee that such Security has been acquired by a bona fide purchaser, the Partnership shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously Outstanding. If, after the delivery of such new Security, a bona fide purchaser of the original Security in lieu of which such new Security was issued presents for payment or registration such original Security, the Trustee shall be entitled to recover such new Security from the party to whom it was delivered or any party taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Partnership and the Trustee in connection therewith.
In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Partnership in its discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Partnership may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in exchange for any mutilated Security or in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Partnership, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Partnership, at its election in each case, as provided in Clause (1) or (2) below:
(1) The Partnership may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) 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 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 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 prepaid, to each Holder of Securities of such series at his 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 Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Partnership may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which such Securities may be listed or traded, 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.
Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security, shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.
For each series of Securities, the Partnership shall, prior to 10:30 a.m. (New York City time) on each payment date for principal and premium, if any, and interest, if any, deposit with the Trustee money in immediately available funds sufficient to make cash payments due on the applicable payment date.
SECTION 308. Persons Deemed Owners.
Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, prior to due presentment of a Security for registration of transfer, the Partnership, the Trustee and any agent of the Partnership or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Sections 305 and 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Partnership, the Trustee nor any agent of the Partnership or the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Partnership, the Trustee and any agent of the Partnership or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Partnership, the Trustee nor 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 beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Partnership may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Partnership may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Partnership has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of in accordance with its customary procedures, and the Trustee shall thereafter deliver to the Partnership a certificate with respect to such disposition.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months and interest on the Securities of each series for any partial period shall be computed on the basis of a 360-day year of twelve 30-day months and the number of days elapsed in any partial month.
SECTION 311. CUSIP Numbers.
The Partnership in issuing the Securities may use "CUSIP" numbers (in addition to the other identification numbers printed on the Securities), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such "CUSIP" 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 "CUSIP" numbers. The Partnership will promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Partnership Request cease to be of further effect with respect to Securities of any series (except as to any surviving rights of registration of transfer or exchange of such Securities herein expressly provided for), and the Trustee, at the expense of the Partnership, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to such Securities, when
(1) either
(A) all such Securities theretofore authenticated and delivered (other than (i) such Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, and (ii) such Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Partnership and thereafter repaid to the Partnership or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Partnership,
and the Partnership in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for this purpose an amount of money in the currency or currency units in which such Securities are payable sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Partnership has paid or caused to be paid all other sums payable hereunder by the Partnership with respect to such Securities; and
(3) the Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to such Securities have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture with respect to Securities of any series, (i) the obligations of the Partnership and any Guarantor to the Trustee under Section 607, the obligations of any Guarantor under Section 101 of its Guaranty, the obligations of the Trustee to any Authenticating Agent under Section 614 and the right of the Trustee to resign under Section 610 shall survive, and (ii) if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Partnership and/or the Trustee under Sections 402, 606, 701 and 1002 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Partnership acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee.
ARTICLE V
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or
(3) default in the performance, or breach, of any term, covenant or warranty of the Partnership or any Guarantor in this Indenture or the applicable Guaranty (other than a term, covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Partnership or such Guarantor by the Trustee or to the Partnership or such Guarantor and the Trustee by Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or
(4) the Partnership pursuant to or within the meaning of any Bankruptcy Law (A) commences a voluntary case, (B) consents to the entry of any order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors; or
(5) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against the Partnership in an
involuntary case, (B) appoints a Custodian of the Partnership or for all or
substantially all of its property, or (C) orders the liquidation of the
Partnership; and the order or decree remains unstayed and in effect for 90 days;
or
(6) any other Event of Default provided as contemplated by Section
301 with respect to Securities of that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount of (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof), and accrued but unpaid interest, if any, on all of the Securities of that series to be due and payable immediately, by a notice in writing to the Partnership (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Partnership and the Trustee, may rescind and annul such declaration and its consequences if
(1) the Partnership has paid or deposited with the Trustee a sum sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent Default or impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Partnership covenants that if
(1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof,
the Partnership will, upon demand of the Trustee, pay to it, for the benefit of Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Partnership fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Partnership, any Guarantor, or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Partnership, any Guarantor, or any other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Partnership, any Guarantor, or any other obligor upon the Securities, their property or their creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of Holders of the Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money or property collected or to be applied by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively; and
THIRD: The balance, if any, to the Partnership.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;
(2) Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer and, if requested, provision of security or indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by Holders of a majority in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders.
SECTION 508. Unconditional Rightof Holders toReceive Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Sections 305 and 307) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Guaranty and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then in every such case, subject to any determination in such proceeding, the Partnership, the relevant Guarantor, the Trustee and Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
Subject to the provisions of Section 603, Holders of a majority in aggregate principal amount of the Outstanding Securities of any series 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 Securities of such series; provided, however, that
(1) such direction shall not be in conflict with any rule of law or with this Indenture;
(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and
(3) subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall determine that the proceeding so directed would involve the Trustee in personal liability or would otherwise be contrary to applicable law.
SECTION 513. Waiver of Past Defaults.
Holders of a majority in aggregate principal amount of the Outstanding Securities of any series may on behalf of Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except
(1) a continuing default in the payment of the principal of or any premium or interest on any Security of such series, or
(2) a default in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
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, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Trustee, in any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series to which the suit relates, or in any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed by such Security (or, in the case of redemption or repayment, on or after the Redemption Date).
ARTICLE VI
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default with respect to any series of Securities,
(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture with respect to the Securities of such series, and no implied covenants or obligations shall read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may, with respect to Securities of such series, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee 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.
(b) In case an Event of Default with respect to any series of Securities has occurred and is continuing, the Trustee shall exercise with respect to the Securities of such series such rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such person's own affairs.
(c) No provisions 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
(1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any 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;
(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders or a majority in principal amount of the Outstanding Securities of any 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 the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) 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 602. Notice of Defaults.
If a Default occurs and is continuing with respect to the Securities of any series, the Trustee shall, within 90 days after it occurs, transmit, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, notice of all uncured or unwaived Defaults known to it; provided, however, that, except in the case of a Default in payment on the Securities of any series, the Trustee shall be protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors or responsible officers of the Trustee determine in good faith that withholding such notice is in the interests of Holders of Securities of such series; provided, further, however, that, in the case of any default or breach of the character specified in Section 501(3) with respect to the Securities of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely on 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, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(2) any request, direction, order or demand of the Partnership mentioned herein shall be sufficiently evidenced by a Partnership Request or Partnership Order (or in the case of a Periodic Offering, as agreed in procedures set forth in a Partnership Order pursuant to Section 303) and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(6) 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, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may, without obligation to do so, make such further inquiry or investigation into such facts or matters as it may see fit; and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Partnership, personally or by agent or attorney;
(7) 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 with due care by it hereunder; and
(8) the Trustee may request that the Partnership deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any Person authorized to sign an Officers' Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Partnership, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. Neither the Trustee nor any Authenticating Agent makes any representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Partnership of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Partnership, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Partnership with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder 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 money received by it hereunder except as otherwise agreed with the Partnership.
SECTION 607. Compensation and Reimbursement.
The Partnership agrees:
(1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
The obligations of the Partnership and the Guarantors under this Section to compensate the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder.
Without limiting any rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(4) or Section 501(5), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any applicable Bankruptcy Law.
The provisions of this Section shall survive the satisfaction and discharge of this Indenture and the defeasance of the Securities.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be one or more Trustees hereunder with respect to the Securities of each series, at least one of which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus required by the Trust Indenture Act. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of a supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of one
or more series by giving written notice thereof to the Partnership and the
Guarantors. If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Partnership. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the removed Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written request therefor by the Partnership or by any Holder who has been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Partnership or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Partnership, acting pursuant to the authority of a Board Resolution, may remove the Trustee with respect to
all Securities, or (B) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Partnership, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Partnership, the Guarantors, and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Partnership. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Partnership or Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
The Partnership shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(1) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Partnership and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Partnership or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(2) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Partnership, the retiring Trustee and each
successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (A) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (B) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (C) 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 as co-trustees of the same trust and that each such 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; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, but, on request of the Partnership, or any successor Trustee, such retiring Trustee shall, upon payment of its charges, duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.
(3) Upon request of any such successor Trustee, the Partnership and the Guarantors shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (1) or (2) of this Section, as the case may be.
(4) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Partnership.
If and when the Trustee shall be or become a creditor of the Partnership, any Guarantor, or any other obligor upon the Securities, the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Partnership, any such Guarantor, or any such other obligor.
SECTION 614. Appointment of Authenticating Agent.
The Trustee (upon notice to the Partnership) may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue (in accordance with procedures acceptable to the Trustee) and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Partnership and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate agency or corporate trust business of such Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee, to the Partnership, and to the Guarantors. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent, to the Partnership. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Partnership. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
Except with respect to an Authenticating Agent appointed at the request of the Partnership, the Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND PARTNERSHIP
SECTION 701. Partnership to Furnish Trustee Names and Addresses of Holders.
The Partnership will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than each Interest Payment Date in each year, a list for each series of Securities, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities of such series as of the preceding Regular Record Date, and
(2) 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 content as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Security Registrar for Securities of a series, no such list need be furnished with respect to such series of Securities.
SECTION 702. Preservation of Information; Communications to Holders.
The Trustee shall comply with the obligations imposed upon it pursuant to
Section 312 of the Trust Indenture Act.
The rights of the Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees with the Partnership and the Trustee that neither the Partnership nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to the names and addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
As promptly as practicable after each May 15 beginning with the May 15
following the date of this Indenture, and in any event prior to July 15 in each
year, the Trustee shall mail to each Holder a brief report dated as of May 15
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b). Prior to delivery to the Holders, the Trustee shall deliver to
the Partnership a copy of any report it delivers to Holders pursuant to this
Section 703.
A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Partnership. The Partnership will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Partnership.
The Partnership shall:
(1) file with the Trustee, within 15 days after the Partnership is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Partnership may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Partnership is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission (unless the Commission will not accept such a filing), in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed
and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Partnership with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and
(3) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof with
the Trustee, such summaries of any information, documents and reports required
to be filed by the Partnership pursuant to paragraphs (1) and (2) of this
Section as may be required by rules and regulations prescribed from time to time
by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Partnership and Guarantors May Consolidate, Etc., Only on Certain Terms.
The Partnership shall not, and shall not permit any Guarantor to, consolidate with or merge into any other Person or sell, lease or transfer its properties and assets as, or substantially as, an entirety to, any Person, unless:
(1) (A) in the case of a merger, the Partnership or such Guarantor, as the case may be, is the surviving entity, or (B) the Person formed by such consolidation or into which the Partnership or such Guarantor is merged or the Person which acquires by sale or transfer, or which leases, the properties and assets of the Partnership or such Guarantor as, or substantially as, an entirety must expressly assume, by an indenture supplemental hereto, or a supplement to the applicable Guaranty, as the case may be, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the obligations of the Partnership or such Guarantor, as the case may be, under this Indenture and the Securities or the applicable Guaranty, as the case may be;
(2) the surviving entity or successor Person is a Person organized and existing under the laws of the United States, any State thereof or the District of Columbia;
(3) immediately after giving effect to such transaction, no Default or Event of Default exists; and
(4) the Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, transfer or lease and the supplemental indenture required in connection with such transaction comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Partnership or any Guarantor with, or merger of the Partnership or any Guarantor into, any other Person or any sale, transfer or lease of the properties and assets of the Partnership or any Guarantor as, or substantially as, an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Partnership or such Guarantor is merged or to which such sale, transfer or lease is made shall (and, in the case of a Guarantor, its Guaranty will provide that it shall) succeed to, and be substituted for, and may exercise every right and power of, the Partnership or such Guarantor under this Indenture with the same effect as if such successor Person had been named originally as the Partnership or such Guarantor herein or therein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities, or such Guaranty, as the case may be.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Securities, the Partnership and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to secure any of such Securities;
(2) to evidence the succession of another Person to the Partnership under this Indenture and the Securities and the assumption by such successor Person of the obligations of the Partnership hereunder;
(3) to reflect the addition of any Subsidiary of the Partnership as a Guarantor, or to reflect the release of any Guarantor from its Guaranty, in either case in the manner provided by Article XIV of this Indenture;
(4) to add covenants and Events of Default for the benefit of the Holders of all or any series of such Securities or to surrender any right or power conferred by this Indenture upon the Partnership;
(5) to add to, change or eliminate any of the provisions of this Indenture, provided that any such addition, change or elimination shall become effective only after there are no such Securities of any series entitled to the benefit of such provision outstanding;
(6)to establish the forms or terms of the Securities of any series issued hereunder;
(7) to cure any ambiguity or correct any inconsistency in this Indenture;
(8) to evidence the acceptance of appointment by a successor Trustee with respect to one or more series of Securities or otherwise;
(9) to qualify this Indenture under the Trust Indenture Act;
(10) to provide for uncertificated securities in addition to certificated securities;
(11) to supplement any provisions of this Indenture necessary to permit or facilitate the defeasance and discharge of any series of Securities, provided that such action does not adversely affect the interests of the Holders of Securities of such series or any other series; and
(12) to comply with the rules or regulations of any securities exchange or automated quotation system on which any of the Securities may be listed or traded.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate principal amount of all Outstanding Securities affected by such supplemental indenture (voting as one class), the Partnership and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture, or modifying in any manner the rights of Holders of Securities of such series under this Indenture; provided that the Partnership and the Trustee may not, without the consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of principal of or interest, if any, on, any Security, or reduce the principal amount thereof or premium, if any, on or the rate of interest thereon or alter the method of computation of interest;
(2) reduce the percentage in principal amount of Securities required for any such supplemental indenture or for any waiver provided for in this Indenture;
(3) change the Partnership's obligation to maintain an office or agency for payment of Securities and the other matters specified herein;
(4) impair the right to institute suit for the enforcement of any payment of principal of, premium, if any, or interest on, any Security; or
(5) modify any of the provisions of this Indenture relating to the execution of supplemental indentures with the consent of Holders of Securities which are discussed in this Section or modify any provisions relating to the waiver by Holders of Securities of past defaults and covenants, except to increase any required percentage or to provide that other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby.
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of 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 Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but 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.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 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. If the Partnership shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee, the Guarantors and the Partnership, to any such supplemental indenture may be prepared and executed by the Partnership and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Partnership covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Partnership will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Partnership in respect of the Securities of that 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 Corporate Trust Office of the Trustee, and the Partnership hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.
The Partnership may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Partnership of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Partnership will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
Except as otherwise specified with respect to a series of Securities as contemplated by Section 301, the Partnership hereby initially designates as the Place of Payment for each series of Securities The City of New York, and initially appoints the Trustee as Paying Agent at its Corporate Trust Office as the Partnership's office or agency for each such purpose in such city.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Partnership or any of its Subsidiaries shall at any time act as Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.
Whenever the Partnership shall have one or more Paying Agents for any series of Securities, it will, on or prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Partnership will promptly notify the Trustee of its action or failure so to act.
The Partnership will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest, if any, on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Partnership or any Guarantor (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest, if any, on the Securities of that series; and (3) during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series.
The Partnership may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Partnership Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Partnership, any Guarantor or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Partnership, such Guarantor or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent in trust for the payment of the principal of or any premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the state which escheat laws control and the Trustee or any Paying Agent shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the state which escheat laws control for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Partnership as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment, may at the expense of the Partnership cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be paid to the state whose escheat laws control.
SECTION 1004. Statement by Officers as to Default.
The Partnership will deliver to the Trustee, within 150 days after the end of each fiscal year of the Partnership ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signer or signers thereof the Partnership is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice provided hereunder) and, if the Partnership shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.
SECTION 1005. Existence.
Subject to Article VIII, the Partnership will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Partnership shall not be required to preserve any such right or franchise if it shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Partnership.
SECTION 1006. Limitations on Liens.
The Partnership will not, nor will it permit any Subsidiary to, create, assume, incur or suffer to exist any Lien upon any Principal Property, or upon any shares of capital stock of any Subsidiary owning or leasing any Principal Property, whether owned or leased on the date of this Indenture or thereafter acquired, to secure any Debt of the Partnership or any other Person (other than the Securities issued hereunder), without in any such case making effective provision whereby all of the Securities Outstanding hereunder shall be secured equally and ratably with, or prior to, such Debt so long as such Debt shall be so secured. This restriction shall not apply to:
(1) Permitted Liens;
(2) any Lien upon any property or assets created at the time of acquisition of such property or assets by the Partnership or any Subsidiary or within one year after such time to secure all or a portion of the purchase price for such property or assets or Debt incurred to finance such purchase price, whether such Debt was incurred prior to, at the time of or within one year after the date of such acquisition;
(3) any Lien upon any property or assets to secure all or part of the cost of construction, development, repair or improvements thereon or to secure Debt incurred prior to, at the time of, or within one year after completion of such construction, development, repair or improvements or the commencement of full operations thereof (whichever is later), to provide funds for any such purpose;
(4) any Lien upon any property or assets existing thereon at the time of the acquisition thereof by the Partnership or any Subsidiary (whether or not the obligations secured thereby are assumed by the Partnership or any Subsidiary); provided, however, that such Lien only encumbers the property or assets so acquired;
(5) any Lien upon any property or assets of a Person existing thereon at the time such Person becomes a Subsidiary by acquisition, merger or otherwise; provided, however, that such Lien only encumbers the property or assets of such Person at the time such Person becomes a Subsidiary;
(6) any Lien upon any property or assets of the Partnership or any Subsidiary in existence on the Issue Date or provided for pursuant to agreements existing on the Issue Date;
(7) Liens imposed by law or order as a result of any proceeding before any court or regulatory body that is being contested in good faith, and Liens which secure a judgment or other court-ordered award or settlement as to which the Partnership or the applicable Subsidiary, as the case may be, has not exhausted its appellate rights;
(8) any extension, renewal, refinancing, refunding or replacement (or successive extensions, renewals, refinancing, refunding or replacements) of Liens, in whole or in part, referred to in Clauses (1) through (7), inclusive, of this Section; provided, however, that any such extension, renewal, refinancing, refunding or replacement Lien shall be limited to the property or assets covered by the Lien extended, renewed, refinanced, refunded or replaced and that the obligations secured by any such extension, renewal, refinancing, refunding or replacement Lien shall be in an amount not greater than the amount of the obligations secured by the Lien extended, renewed, refinanced, refunded or replaced and any expenses of the Partnership and its Subsidiaries (including any premium) incurred in connection with such extension, renewal, refinancing, refunding or replacement; or
(9) any Lien resulting from the deposit of moneys or evidence of indebtedness in trust for the purpose of defeasing Debt of the Partnership or any Subsidiary.
Notwithstanding the foregoing provisions of this Section, the Partnership
may, and may permit any Subsidiary to, create, assume, incur or suffer to exist
any Lien upon any Principal Property to secure Debt of the Partnership or any
Person (other than the Securities) that is not excepted by Clauses (1) through
(9), inclusive, of this Section without securing the Securities issued
hereunder, provided that the aggregate principal amount of all Debt then
outstanding secured by such Lien and all similar Liens, together with all
Attributable Indebtedness from Sale-Leaseback Transactions (excluding
Sale-Leaseback Transactions permitted by Clauses (1) through (4), inclusive, of
Section 1007), does not exceed 10% of Consolidated Net Tangible Assets.
SECTION 1007. Restriction of Sale-Leaseback Transaction.
The Partnership will not, and will not permit any Subsidiary to, engage in a Sale-Leaseback Transaction, unless:
(1) such Sale-Leaseback Transaction occurs within one year from the date of completion of the acquisition of the Principal Property subject thereto or the date of the completion of construction, development or substantial repair or improvement, or commencement of full operations on such Principal Property, whichever is later;
(2) the Sale-Leaseback Transaction involves a lease for a period, including renewals, of not more than three years;
(3) the Partnership or such Subsidiary would be entitled to incur Debt secured by a Lien on the Principal Property subject thereto in a principal amount equal to or exceeding the Attributable Indebtedness from such Sale-Leaseback Transaction without equally and ratably securing the Securities; or
(4) the Partnership or such Subsidiary, within a one-year period after such Sale-Leaseback Transaction, applies or causes to be applied an amount not less than the Attributable Indebtedness from such Sale-Leaseback Transaction to (A) the prepayment, repayment, redemption, reduction or retirement of Pari Passu Debt of the Partnership or any Subsidiary, or (B) the expenditure or expenditures for Principal Property used or to be used in the ordinary course of business of the Partnership or its Subsidiaries.
Notwithstanding the foregoing provisions of this Section, the Partnership may, and may permit any Subsidiary to, effect any Sale-Leaseback Transaction that is not excepted by Clauses (1) through (4), inclusive, of this Section, provided that the Attributable Indebtedness from such Sale-Leaseback Transaction, together with the aggregate principal amount of then outstanding Debt (other than the Securities) secured by Liens upon Principal Properties not excepted by Clauses (1) through (9), inclusive, of Section 1006, do not exceed 10% of Consolidated Net Tangible Assets.
SECTION 1008. Waiver of Certain Covenants.
The Partnership may omit in any particular instance to comply with any term, provision or condition set forth in Section 1005, 1006 or 1007 with respect to the Securities of any series if before the time for such compliance Holders of at least a majority in aggregate principal amount of the Outstanding Securities of all affected series (voting as one class) shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance 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 any Guarantors and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.
A waiver which changes or eliminates any term, provision or condition of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such term, provision or condition, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Partnership to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Partnership of less than all the Securities of any series, the Partnership shall, not less than 35 nor more than 60 days prior to the Redemption Date fixed by the Partnership (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities (1) prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, or (2) pursuant to an election of the Partnership which is subject to a condition specified in the terms of such Securities, the Partnership shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction or condition.
SECTION 1103. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed (unless all the Securities of such series and of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, on a pro rata basis or by any other method which the Trustee deems fair and appropriate and which complies with any securities exchange or other applicable requirements for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series.
The Trustee shall promptly notify the Partnership in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail (if international mail, by air mail), postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series and of a specified tenor are to be redeemed, the identification (and, in the case of partial redemption of any Securities, the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed shall be given by the Partnership or, at the Partnership's request, by the Trustee in the name and at the expense of the Partnership.
SECTION 1105. Deposit of Redemption Price.
On or prior to 10:30 a.m. New York City Time on any Redemption Date, 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 as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Partnership shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Partnership at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by
Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Partnership or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Partnership 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 Security without service charge, a new Security or Securities of the same series and of like tenor, 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 Security so surrendered.
ARTICLE XII
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of Securities of any series 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 Securities of any series is herein referred to as an "optional sinking fund payment." If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Partnership (1) may deliver Outstanding Securities of a series (other than any previously called for redemption), and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Partnership pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such
Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment date for any
series of Securities (unless a shorter period shall be satisfactory to the
Trustee), 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, 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 Securities of that series pursuant to
Section 1202 and stating the basis for such credit and that such Securities have
not been previously so credited, and will also deliver to the Trustee any
Securities to be so delivered. Not less than 30 days before each such sinking
fund payment date the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Partnership in the manner provided in Section 1104. Such notice having
been duly given, the redemption of such Securities shall be made upon the terms
and in the manner stated in Sections 1106 and 1107.
ARTICLE XIII
DEFEASANCE
SECTION 1301. Applicability of Article.
The provisions of this Article shall be applicable to each series of Securities except as otherwise specified as contemplated by Section 301 for Securities of such series.
SECTION 1302. Legal Defeasance.
In addition to discharge of the Indenture pursuant to Section 401, the Partnership shall be deemed to have paid and discharged the entire indebtedness on all the Securities of such a series on the 91st day after the date of the deposit referred to in Clause (1) below, and the provisions of this Indenture with respect to the Securities of such series shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of Securities of such series and the Partnership's right of optional redemption, if any, (ii) substitution of mutilated, destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor or on the specified redemption dates therefor (but not upon acceleration), and remaining rights of the holders to receive mandatory sinking fund payments, if any, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, and the Partnership's and any Guarantors' obligations in connection therewith (including, but not limited to, Section 607), (v) the rights, if any, to convert or exchange the Securities of such series, (vi) the rights of Holders of Securities of such series as beneficiaries
hereof with respect to the property so deposited with the Trustee payable to all or any of them, and (vii) the obligations of the Partnership under Section 1002), and the Trustee, at the expense of the Partnership, shall, upon a Partnership Request, execute proper instruments acknowledging the same, if the conditions set forth below are satisfied (hereinafter, "defeasance"):
(1) The Partnership has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust, for the purposes of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of Holders of the Securities of such series (A) cash in an amount, or (B) in the case of any series of Securities the payments on which may only be made in legal coin or currency of the United States, U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure the availability of cash, or (C) a combination thereof, certified to be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (i) the principal and interest and premium, if any, on all Securities of such series on each date that such principal, interest or premium, if any, is due and payable or on any Redemption Date established pursuant to Clause (3) below, and (ii) any mandatory sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series;
(2) The Partnership has delivered to the Trustee an Opinion of Counsel based on the fact that (A) the Partnership has received from, or there has been published by, the Internal Revenue Service a ruling, or (B) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and such opinion shall confirm that, Holders of the Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge 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, defeasance and discharge had not occurred;
(3) If the Securities are to be redeemed prior to Stated Maturity (other than from mandatory sinking fund payments or analogous payments), notice of such redemption shall have been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee shall have been made;
(4) No Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit;
(5) Such defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act);
(6) Such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Partnership is a party or by which it is bound;
(7) Such defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; and
(8) The Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the defeasance contemplated by this provision have been complied with.
For this purpose, such defeasance means that the Partnership, any Guarantors, and any other obligor upon the Securities of such series shall be deemed to have paid and discharged the entire debt represented by the Securities of such series, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1304 and the rights and obligations referred to in Clauses (i) through (vii), inclusive, of the first paragraph of this Section, and to have satisfied all its other obligations under the Securities of such series and this Indenture insofar as the Securities of such series are concerned.
SECTION 1303. Covenant Defeasance.
The Partnership and any other obligor, including any Guarantors, shall be released on the 91st day after the date of the deposit referred to in Clause (1) below from its obligations under Sections 704, 801, 1005, 1006 and 1007 with respect to the Securities of any series on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities of such series shall thereafter be deemed to be not "Outstanding" for the purposes of any request, demand, authorization, direction, notice, waiver, consent or declaration or other action or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed Outstanding for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the Securities of such series, the Partnership and any Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, whether directly or indirectly by reason of any reference elsewhere herein to such Section or by reason of any reference in such Section to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501, but, except as specified above, the remainder of this Indenture and the Securities of such series shall be unaffected thereby. The following shall be the conditions to application of this Section 1303:
(1) The Partnership has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of Holders of the Securities of such series, (A) cash in an amount, or (B) in the case of any series of Securities the payments on which may only be made in legal coin or currency of the United States, U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure the availability of cash, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (i) the principal and interest and premium, if any, on all Securities of such series on each date that such principal, interest or premium, if any, is due and
payable or on any Redemption Date established pursuant to Clause (2) below, and
(ii) any mandatory sinking fund payments on the day on which such payments are
due and payable in accordance with the terms of the Indenture and the Securities
of such series;
(2) If the Securities are to be redeemed prior to Stated Maturity (other than from mandatory sinking fund payments or analogous payments), notice of such redemption shall have been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee shall have been made;
(3) No Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit;
(4) The Partnership has delivered to the Trustee an Opinion of Counsel which shall confirm that Holders of the Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same time as would have been the case if such deposit and covenant defeasance had not occurred;
(5) Such covenant defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act);
(6) Such covenant defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Partnership is a party or by which it is bound;
(7) Such covenant defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; and
(8) The Partnership has delivered to the Trustee an Officers' Certificate and Opinion of Counsel stating that all conditions precedent provided for relating to the covenant defeasance contemplated by this provision have been complied with.
SECTION 1304. Application by Trustee of Funds Deposited for Payment of Securities.
Subject to the provisions of the last paragraph of Section 1003, all
moneys or U.S. Government Obligations deposited with the Trustee pursuant to
Section 1302 or 1303 (and all funds earned on such moneys or U.S. Government
Obligations) shall be held in trust and applied by it to the payment, either
directly or through any Paying Agent (including the Partnership acting as its
own Paying Agent), to Holders of the particular Securities of such series for
the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal and interest;
but such money need not be segregated from other funds except to the extent
required by law. Subject to Sections 1302 and 1303, the
Trustee shall promptly pay to the Partnership upon Partnership Order any moneys held by it at any time, which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification delivered to the Trustee, are in excess of the amounts required to effect the defeasance with respect to the Outstanding Securities in question.
SECTION 1305. Repayment to Partnership.
The Trustee and any Paying Agent promptly shall pay or return to the Partnership upon Partnership Request any money and U.S. Government Obligations held by them at any time that are not required for the payment of the principal of and any interest on the Securities of any series for which money or U.S. Government Obligations have been deposited pursuant to Section 1302 or 1303, which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification delivered to the Trustee, are in excess of the amounts required to effect the defeasance with respect to the Outstanding Securities in question.
The provisions of the last paragraph of Section 1003 shall apply to any money held by the Trustee or any Paying Agent under this Article that remains unclaimed for two years after the Maturity of any series of Securities for which money or U.S. Government Obligations have been deposited pursuant to Section 1302 or 1303.
SECTION 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money or U. S. Government Obligations in accordance with this Article by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Partnership and any Guarantor under this Indenture, the applicable Guaranty and the Securities of the applicable series shall be revived and reinstated as though no deposit had occurred pursuant to this Indenture until such time as the Trustee or the Paying Agent is permitted to apply all such money or U. S. Government Obligations in accordance with this Article; provided, however, that if the Partnership or any Guarantor has made any payment of principal of or interest on any Securities of such series because of the reinstatement of its obligations, the Partnership or such Guarantor shall be subrogated to the rights of Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or the Paying Agent.
ARTICLE XIV
GUARANTY OF SECURITIES
SECTION 1401. Retirement for Guaranty.
(1) If any Subsidiary of the Partnership guarantees or becomes a co-obligor in respect of any Funded Debt of the Partnership other than the Securities at any time subsequent to the Closing Date (including, without limitation, following any release of such Subsidiary pursuant to Section 1402 from any Guaranty previously provided by it under this Article XIV), then the Partnership shall (A) cause the Securities to be equally and ratably guaranteed by such
Subsidiary, but only to the extent that the Securities are not already guaranteed by such Subsidiary on reasonably comparable terms and (B) cause such Subsidiary to execute and deliver a Guaranty in accordance with clause (2) below.
(2) Any Person may become a Guarantor by executing and delivering to the Trustee (A) a Guaranty in form and substance satisfactory to the Trustee, which subjects such Person to the provisions (including the representations and warranties) of this Indenture as a Guarantor and (B) an Opinion of Counsel and Officers' Certificate to the effect that such Guaranty has been duly authorized and executed by such Person and constitutes the legal, valid, binding and enforceable obligation of such Person (subject to such customary exceptions concerning creditors' rights and equitable principles as may be acceptable to the Trustee in its discretion).
SECTION 1402. Release of Guaranty.
Notwithstanding anything to the contrary in this Article XIV, in the event that any Guarantor shall no longer be a guarantor of any Funded Debt of the Partnership other than the Securities, and so long as no Default or Event of Default shall have occurred or be continuing, such Guarantor, upon giving written notice to the Trustee to the foregoing effect, shall be deemed to be released from all of its obligations in respect of the Securities and this Indenture without further act or deed and the Guaranty of such Guarantor shall be of no further force or effect. Following the receipt by the Trustee of any such notice, the Partnership shall cause this Indenture to be amended as provided in Section 901; provided, however, that the failure to so amend this Indenture shall not affect the validity of the termination of the Guaranty of such Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed in multiple counterparts, each of which so executed shall be deemed to be an original, but all of which shall together constitute but one and the same instrument, all as of the day and year first above written.
KINDER MORGAN ENERGY PARTNERS, L. P.
By: Kinder Morgan G.P., Inc.,
Its General Partner
By: /s/ C. PARK SHAPER
-------------------------------
Name: C. Park Shaper
Title: Vice President and Chief Financial Officer
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FIRST UNION NATIONAL BANK
By: /s/ KEVIN M. DOBRAVA
-------------------------------
Name: Kevin M. Dobrava
Title: Vice President
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ANNEX A
"Guaranty Provisions"
SECTION 101. Unconditional Guaranties.
(1) For value received, the undersigned Guarantors, jointly and severally, hereby fully, unconditionally and absolutely guarantee to Holders and to the Trustee the due and punctual payment of the principal of, and premium, if any, and interest on the Securities and all other amounts due and payable under the Indenture and the 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 Securities and the Indenture.
(2) Failing payment when due of any amount guaranteed pursuant to the Guaranties, for whatever reason, each Guarantor will be obligated to pay the same immediately. Each guaranty hereunder is intended to be a general, unsecured, senior obligation of each undersigned Guarantor and will rank pari passu in right of payment with all Debt of each such Guarantor that is not, by its terms, expressly subordinated in right of payment to such guaranty of such Guarantor. Each of the undersigned Guarantors hereby agrees that its obligations hereunder shall be full, unconditional and absolute, irrespective of the validity, regularity or enforceability of the Securities, this Guaranty or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Partnership, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each of the undersigned Guarantors hereby agrees that in the event of a default in payment of the principal of, or premium, if any, or interest on the 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 Holders or, subject to Section 507 of the Indenture, by Holders, on the terms and conditions set forth in the Indenture, directly against each of the Guarantors to enforce this Guaranty without first proceeding against the Partnership.
(3) The obligations of each undersigned Guarantor under this Guaranty 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 Guarantor contained in the Securities, the Indenture or any other Guaranty, (B) any impairment, modification, release or limitation of the liability of the Partnership, any Guarantor or any 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 Guarantor or the Trustee of any rights or remedies under the Securities, the Indenture or any other Guaranty 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 Securities, including all or any part of the rights of the Partnership or any Guarantor under the Indenture or any other Guaranty, (E)
the extension of the time for payment by the Partnership or any Guarantor of any payments or other sums or any part thereof owing or payable under any of the terms and provisions of the Securities, the Indenture or any other Guaranty or of the time for performance by the Partnership or any Guarantor 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 Guarantor set forth in the Indenture or any other Guaranty, (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 Guarantors or any of their respective assets, or the disaffirmance of the Securities, this Guaranty or the Indenture or any other Guaranty in any such proceeding, (H) the release or discharge of the Partnership or any Guarantor 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 Securities, this Guaranty, any other Guaranty or the Indenture or (J) any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or guarantor.
(4) Each of the undersigned 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 a Guarantor, and all demands whatsoever, (B) acknowledges that this Guaranty may be transferred and that the benefit of its obligations hereunder shall extend to each holder of any Securities without notice to them and (C) covenants that its guaranty hereunder will not be discharged except by complete performance. Each undersigned Guarantor further agrees that if at any time all or any part of any payment hereunder theretofore applied by any Person is, or must be, rescinded or returned for any reason whatsoever, including without limitation, the insolvency, bankruptcy or reorganization of the Partnership or such Guarantor, this Guaranty 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 this Guaranty shall continue to be effective or be reinstated, as the case may be, as though such application had not been made.
(5) Each undersigned Guarantor shall be subrogated to all rights of Holders and the Trustee against the Partnership in respect of any amounts paid by such Guarantor pursuant to the provisions of the Indenture or this Guaranty, provided, however, that no Guarantor shall be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until all of the Securities and this Guaranty shall have been paid in full or discharged.
(6) A director, officer, employee or stockholder, as such, of any Guarantor shall not have any liability for any obligations of such Guarantor under the Indenture or this Guaranty, or for any claim based on, in respect of or by reason of such obligations or their creation.
SECTION 102. Limitation of Guarantor's Liability.
Each undersigned Guarantor and by its acceptance hereof each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to this Guaranty not constitute a fraudulent transfer or conveyance for purposes of any federal, state or foreign law. To effectuate the foregoing intention, Holders and each Guarantor hereby irrevocably agree that the obligations of each Guarantor under this Guaranty shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Guaranty or pursuant to Section 103, result in the obligations of such Guarantor under this Guaranty not constituting a fraudulent conveyance or fraudulent transfer under federal, state or foreign law.
SECTION 103. Contribution.
In order to provide for just and equitable contribution among all Guarantors, the undersigned Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Guaranty, such Funding Guarantor shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by the Funding Guarantor in discharging the Partnership's obligations with respect to the Securities or any other Guarantor's obligations with respect to its Guaranty.
SECTION 104. Execution and Delivery of Guaranties.
To further evidence the guaranty set forth in Section 101, each undersigned Guarantor hereby agrees that a notation relating to such guaranty (in substantially the form hereinbelow set forth) shall be endorsed on each Security authenticated and delivered by the Trustee and executed by either manual or facsimile signature of two officers of the Guarantor.
Each of the undersigned Guarantors hereby agrees that its guaranty set forth in Section 101 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation relating to such guaranty.
If an officer of a Guarantor whose signature is on this Guaranty or a Security no longer holds that office at the time the Trustee authenticates such Security or at any time thereafter, such Guarantor's Guaranty of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Guaranty on behalf of the Guarantor.
SECTION 105. Consent to Jurisdiction and Service of Process.
Each undersigned Guarantor that is not organized under the laws of the United States (including the States and the District of Columbia) (each a "Non-U.S. Guarantor") hereby appoints the principal office of CT Corporation System in The City of New York which, on the date hereof, is located at 1633 Broadway, New York, New York 10019, as the authorized agent thereof (the "Authorized Agent") upon whom process may be served in any action, suit or proceeding arising out of or based on the Indenture or this Guaranty or the Securities which may be instituted in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York, in either case in The Borough of Manhattan, The City of New York, by the Holder of any Security, and each Non-United States Guarantor hereby waives any objection which it may now or hereafter have to the laying of venue of any such proceeding and expressly and irrevocably accepts and submits, for the benefit of Holders from time to time of the Securities, to the nonexclusive jurisdiction of any such court in respect of any such action, suit or proceeding, for itself and with respect to its properties, revenues and assets. Such appointment shall be irrevocable unless and until the appointment of a successor authorized agent for such purpose, and such successor's acceptance of such appointment, shall have occurred. Each Non-U.S. Guarantor agrees to take any and all actions, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent with respect to any such action shall be deemed, in every respect, effective service of process upon any such Non-U.S. Guarantor. Notwithstanding the foregoing, any action against any Non-U.S. Guarantor arising out of or based on any Security may also be instituted by the Holder of such Security in any court in the jurisdiction of organization of such Non-U.S. Guarantor, and such Non-U.S. Guarantor expressly accepts the jurisdiction of any such court in any such action. The Partnership shall require the Authorized Agent to agree in writing to accept the foregoing appointment as agent for service of process.
SECTION 106. Waiver of Immunity.
To the extent that any Non-U.S. Guarantor or any of its properties, assets or revenues may have or may hereafter become entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any thereof, from set-off or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution of judgment, or from execution of judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with the Indenture or this Guaranty or the Securities, such Non-U.S. Guarantor, to the maximum extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any such immunity and consents to such relief and enforcement.
SECTION 107. Judgment Currency.
Each Non-U.S. Guarantor agrees to indemnify the Trustee and each Holder against any loss incurred by it as a result of any judgment or order being given or made and expressed and paid in a currency (the "Judgment Currency") other than Dollars and as a result of any variation as between (A) the rate of exchange at which the Dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (B) the spot rate of exchange in The City of New York at which the Trustee or such Holder on the date of payment of such judgment or order is able to purchase Dollars with the amount of the Judgment Currency actually received by the Trustee or such Holder. The foregoing indemnity shall constitute a separate and independent obligation of each Non-U.S. Guarantor and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, Dollars.
SECTION 108. Definitions.
All capitalized terms used herein and not defined herein that are defined in the Indenture are used herein as so defined.
"Adjusted Net Assets" of a Guarantor at any date means the amount by which the fair value of the property of such Guarantor at such date exceeds the total amount of liabilities, including, without limitation, the probable amount of contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date) of such Guarantor at such date, but excluding liabilities under the Guaranty of such Guarantor.
FORM OF GUARANTY ENDORSEMENT
Each Guarantor (which term includes any successor Person under the Guaranty, defined below), has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and in a certain Guaranty dated [ ] (the "Guaranty"), and subject to the provisions in the Indenture and the Guaranty, the due and punctual payment of the principal of, and premium, if any, and interest on the Securities and all other amounts due and payable under the Indenture and the Securities by the Partnership.
The obligations of the Guarantors to Holders of Securities and to the Trustee pursuant to the Guaranty and the Indenture are expressly set forth in Article XIV of the Indenture and in the Guaranty, and reference is hereby made to the Indenture and the Guaranty for the precise terms of such obligations.
[SIGNATURES]
KINDER MORGAN
ENERGY PARTNERS, L.P.
Issuer
and
FIRST UNION NATIONAL BANK
Trustee
INDENTURE
Dated as of January 2, 2001
SUBORDINATED DEBT SECURITIES
KINDER MORGAN ENERGY PARTNERS, L.P.
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318, INCLUSIVE, OF THE
TRUST INDENTURE ACT OF 1939:
Trust Indenture
Act Section Indenture Section
----------- -----------------
ss.310(a)(1)........................................... 609
(a)(2)........................................... 609
(a)(3)........................................... Not Applicable
(a)(4)........................................... Not Applicable
(b).............................................. 608; 610
ss.311(a).............................................. 613
(b).............................................. 613
ss.312(a).............................................. 701; 702
(b).............................................. 702
(c).............................................. 702
ss.313(a).............................................. 703
(b).............................................. 703
(c).............................................. 703
(d).............................................. 703
ss.314(a).............................................. 704
(a)(4)........................................... 104; 1004
(b).............................................. Not Applicable
(c)(1)........................................... 101
(c)(2)........................................... 101; 102
(c)(3)........................................... Not Applicable
(d).............................................. Not Applicable
(e).............................................. 102
ss.315(a).............................................. 601
(b).............................................. 602
(c).............................................. 601
(d).............................................. 601
(e).............................................. 514
ss.316(a).............................................. 101
(a)(1)(A)........................................ 502; 512
(a)(1)(B)........................................ 513
(a)(2)........................................... Not Applicable
(b).............................................. 508
(c).............................................. 104
ss.317(a)(1)........................................... 503
(a)(2)........................................... 504
(b).............................................. 1003
ss.318(a).............................................. 107
--------------------------
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NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS...................................... 1
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS............. 8
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE........... 8
SECTION 104. ACTS OF HOLDERS; RECORD DATES.................... 9
SECTION 105. NOTICES, ETC., TO TRUSTEE AND PARTNERSHIP........ 10
SECTION 106. NOTICE TO HOLDERS; WAIVER........................ 11
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT................ 11
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS......... 11
SECTION 109. SUCCESSORS AND ASSIGNS........................... 11
SECTION 110. SEPARABILITY CLAUSE.............................. 12
SECTION 111. BENEFITS OF INDENTURE............................ 12
SECTION 112. GOVERNING LAW.................................... 12
SECTION 113. LEGAL HOLIDAYS................................... 12
SECTION 114. LANGUAGE OF NOTICES, ETC......................... 12
SECTION 115. INTEREST LIMITATION.............................. 12
SECTION 116. NON-RECOURSE TO THE GENERAL PARTNER;
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS,
EMPLOYEES OR PARTNERS............................ 13
ARTICLE II
SECURITY FORMS
SECTION 201. FORMS GENERALLY.................................. 14
SECTION 202. FORM OF FACE OF SECURITY......................... 14
SECTION 203. FORM OF REVERSE OF SECURITY...................... 17
SECTION 204. GLOBAL SECURITIES................................ 22
SECTION 205. FORM OF TRUSTEE'S CERTIFICATE AND AUTHORIZATION.. 23
ARTICLE III
SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES............. 23
SECTION 302. DENOMINATIONS.................................... 27
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING... 27
SECTION 304. TEMPORARY SECURITIES............................. 29
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE 29
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. 31
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED... 32
SECTION 308. PERSONS DEEMED OWNERS............................ 33
SECTION 309. CANCELLATION..................................... 34
SECTION 310. COMPUTATION OF INTEREST.......................... 34
SECTION 311. CUSIP NUMBERS.................................... 34
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.......... 34
SECTION 402. APPLICATION OF TRUST MONEY...................... 36
ARTICLE V
REMEDIES
SECTION 501. EVENTS OF DEFAULT............................... 36
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT 37
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE...................................... 38
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM................ 38
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES...................................... 39
SECTION 506. APPLICATION OF MONEY COLLECTED.................. 39
SECTION 507. LIMITATION ON SUITS............................. 40
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST............................ 40
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.............. 40
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.................. 41
SECTION 511. DELAY OR OMISSION NOT WAIVER.................... 41
SECTION 512. CONTROL BY HOLDERS.............................. 41
SECTION 513. WAIVER OF PAST DEFAULTS......................... 42
SECTION 514. UNDERTAKING FOR COSTS........................... 42
ARTICLE VI
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES............. 42
SECTION 602. NOTICE OF DEFAULTS.............................. 44
SECTION 603. CERTAIN RIGHTS OF TRUSTEE....................... 44
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES 45
SECTION 605. MAY HOLD SECURITIES............................. 45
SECTION 606. MONEY HELD IN TRUST............................. 45
SECTION 607. COMPENSATION AND REIMBURSEMENT.................. 46
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS......... 46
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY......... 46
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR 47
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.......... 48
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS..................................... 49
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST PARTNERSHIP 49
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT............. 50
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND PARTNERSHIP
SECTION 701. PARTNERSHIP TO FURNISH TRUSTEE NAMES AND ADDRESSES
OF HOLDERS...................................... 52
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
HOLDERS......................................... 52
SECTION 703. REPORTS BY TRUSTEE.............................. 52
SECTION 704. REPORTS BY PARTNERSHIP.......................... 53
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ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. PARTNERSHIP MAY CONSOLIDATE, ETC., ONLY ON
CERTAIN TERMS................................... 54
SECTION 802. SUCCESSOR SUBSTITUTED........................... 54
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS 55
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS 56
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES............ 57
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES............... 57
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT............. 57
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES 57
ARTICLE X
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST...... 57
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY................. 58
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST 58
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT............. 59
SECTION 1005. EXISTENCE....................................... 59
SECTION 1006. WAIVER OF CERTAIN COVENANTS..................... 60
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE....................... 60
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.......... 60
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED 61
SECTION 1104. NOTICE OF REDEMPTION........................... 61
SECTION 1105. DEPOSIT OF REDEMPTION PRICE.................... 62
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE.......... 62
SECTION 1107. SECURITIES REDEEMED IN PART.................... 62
ARTICLE XII
SINKING FUND
SECTION 1201. APPLICABILITY OF ARTICLE........................ 63
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES 63
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND....... 63
ARTICLE XIII
DEFEASANCE
SECTION 1301. APPLICABILITY OF ARTICLE....................... 64
SECTION 1302. LEGAL DEFEASANCE............................... 64
SECTION 1303. COVENANT DEFEASANCE............................ 66
SECTION 1304. APPLICATION BY TRUSTEE OF FUNDS DEPOSITED
FOR PAYMENT OF SECURITIES...................... 67
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SECTION 1305. REPAYMENT TO PARTNERSHIP....................... 67
SECTION 1306. REINSTATEMENT.................................. 68
ARTICLE XIV
SUBORDINATION OF SECURITIES
SECTION 1401. SECURITIES SUBORDINATED TO SENIOR DEBT.......... 68
SECTION 1402. DISTRIBUTION ON DISSOLUTION, LIQUIDATION AND
REORGANIZATION; SUBROGATION OF SECURITIES....... 69
SECTION 1403. PAYMENTS ON SECURITIES PERMITTED................ 71
SECTION 1404. AUTHORIZATION OF HOLDERS OF SECURITIES TO
TRUSTEE TO EFFECT SUBORDINATION................. 71
SECTION 1405. NOTICES TO TRUSTEE.............................. 71
SECTION 1406. TRUSTEE AS HOLDER OF SENIOR DEBT................ 72
SECTION 1407. MODIFICATION OF TERMS OF SENIOR DEBT............ 73
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INDENTURE dated as of January 2, 2001, between KINDER MORGAN ENERGY PARTNERS, L.P., a Delaware limited partnership (the "Partnership"), having its principal office at One Allen Center, Suite 1000, 500 Dallas Street, Houston Texas, 77002, and FIRST UNION NATIONAL BANK, a national banking association, as Trustee (the "Trustee").
RECITALS OF THE PARTNERSHIP
The Partnership has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured subordinated debentures, notes or other evidences of indebtedness (the "Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the Partnership, in accordance with its terms, have been done.
This Indenture is subject to the provisions of the Trust Indenture Act that are required to be a part of this Indenture and, to the extent applicable, shall be governed by such provisions.
NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture Act, either directly, or by reference therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date of such computation;
(4) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(5) the words "Article" and "Section" refer to an Article and Section, respectively, of this Indenture.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"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.
"Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series.
"Authorized Newspaper" means a newspaper, in the English language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in the place in connection with which the term is used or in the financial community of such place.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors or the protection of creditors. "Board of Directors" means the board of directors of the General Partner, or the executive or any other committee of that board duly authorized to act in respect thereof. If the Partnership shall change its form of entity to other than a limited partnership, the references to officers or the Board of Directors of the General Partner shall mean the officers or the Board of Directors (or other comparable governing body) of the Partnership.
"Board Resolution" means a copy of a resolution certified by the Corporate Secretary of the General Partner, the principal financial officer of the General Partner or any other authorized officer of the General Partner or a Person duly authorized by any of them, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment or other location, means, except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment or other location are authorized or obligated by law, executive order or regulation to close.
"Capital Interests" means any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or
participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which at the date hereof is 40 Broad Street, Suite 550, New York, New York 10004.
"corporation" includes corporations, associations, partnerships (general or limited), limited liability companies, joint-stock companies and business trusts.
"covenant defeasance" has the meaning specified in Section 1303.
"Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
"Debt" means any obligation created or assumed by any Person for the repayment of money borrowed, any purchase money obligation created or assumed by such Person and any guarantee of the foregoing.
"Default" means, with respect to a series of Securities, any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. "Defaulted Interest" has the meaning specified in Section 307.
"defeasance" has the meaning specified in Section 1302.
"Definitive Security" means a Security other than a Global Security or a temporary Security.
"Depositary" means, with respect to Securities of any series issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities as contemplated by Section 301, until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter shall mean or include each Person which is then a Depositary hereunder, and if at any time there is more than one such Person, shall be a collective reference to such Persons.
"Dollar" or "$" means the coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any statute successor thereto.
"General Partner" means Kinder Morgan G.P., Inc., a Delaware corporation.
"Global Security" means a Security in global form that evidences all or part of the Securities of any series and is registered in the name of, the Depositary for such Securities or a nominee thereof.
"Holder" means a Person in whose name a Security is registered in the Security Register.
"Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument, and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" also shall include the terms of particular series of Securities established as contemplated by Section 301.
"interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in Section 501(3).
"Officers' Certificate" of a Person means a certificate signed by the Chairman of the Board, the Vice Chairman, the President or a Vice President, and by the Treasurer or the Secretary, of the Person, or if such Person is a partnership, of its general partner, and delivered to the Trustee. One of the officers or such other Persons (as applicable) signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Person, or if such Person is a partnership, of its general partner.
"Opinion of Counsel" means a written opinion of legal counsel, who may be an employee of or counsel for the Partnership, which opinion shall comply with the provisions of Sections 102 and 103. Such counsel shall be acceptable to the Trustee, whose acceptance shall not be unreasonably withheld.
"Original Issue Discount Security" means any Security which provides for an amount less than the stated principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities 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 Securities; provided, however, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor has been made;
(iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Partnership; and
(iv) Securities, except to the extent provided in Sections 1302 and 1303, with respect to which the Partnership has effected defeasance or covenant defeasance as provided in Article XIII;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (A) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding shall be the amount of the principal thereof that would be due and
payable as of the date of such determination upon acceleration of the Maturity
thereof on such date pursuant to Section 502, (B) the principal amount of a
Security denominated in one or more currencies or currency units other than U.S.
dollars shall be the U.S. dollar equivalent of such currencies or currency
units, determined in the manner provided as contemplated by Section 301 on the
date of original issuance of such Security, of the principal amount (or, in the
case of an Original Issue Discount Security, the U.S. dollar equivalent (as so
determined) on the date of original issuance of such Security, of the amount
determined as provided in Clause (A) above) of such Security, and (C) Securities
owned by the Partnership or any other obligor upon the 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 Securities which the Trustee knows to
be so owned shall be so disregarded. Securities so owned as described in Clause
(C) above 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 Securities and that the pledgee is not the
Partnership or any other obligor upon the Securities or any Affiliate of the
Partnership or of such other obligor.
"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" or "Partnership Order" means a written request or order signed in the name of the Partnership by the Chairman of the Board, the Vice Chairman, the President or a Vice President of the General Partner, and by the Treasurer or 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 the like positions comparable to those of the foregoing nature, as applicable.
"Paying Agent" means any Person authorized by the Partnership to pay the principal of or any premium or interest on any Securities on behalf of the Partnership.
"Periodic Offering" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest or formula for determining the rate or rates of interest thereon, if any, the Stated Maturity or Stated Maturities thereof, the original issue date or dates thereof, the redemption provisions, if any, with respect thereto, and any other terms specified as contemplated by Section 301 with respect thereto, are to be determined by the Partnership upon the issuance of such Securities.
"Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, other entity, unincorporated organization or government, or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series,
means, unless otherwise specifically provided for with respect to such series as
contemplated by Section 301, the office or agency of the Partnership in The City
of New York and such other place or places where, subject to the provisions of
Section 1002, the principal of and any premium and interest on the Securities of
that series are payable as specified as contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same Debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same Debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301.
"Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective meanings specified in Section 305.
"Senior Debt" of the Partnership, unless otherwise provided with respect to
the Securities of a series as contemplated by Section 301, means (1) all Debt of
the 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 Securities or to other
Debt which is pari passu with or subordinated to the Securities, 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 Debt" include (a) Debt of the
Partnership owed or owing to any Subsidiary of the Partnership or any officer,
director or employee of the Partnership or any Subsidiary of the Partnership,
(b) Debt to trade creditors or (c) any liability for taxes owed or owing by the
Partnership.
"Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to the principal of any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of the Capital Interests of such Person entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof or, in the case of a partnership, more than 50% of the partners' Capital Interests (considering all partners' Capital 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 a combination thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as otherwise provided in Section 905; provided, however, that if the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean each Trustee with respect to Securities of that series.
"U.S. Government Obligations" means securities which are (i) direct obligations of the United States for the payment of which its full faith and credit is pledged, or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, each of which are not callable or redeemable at the option of the issuer thereof.
"Vice President", when used with respect to the Partnership, means any vice president of the General Partner, or when used with respect to the Trustee, means any vice president of the Trustee.
SECTION 102. Compliance Certificates and Opinions
Upon any application or request by the Partnership to the Trustee to take or refrain from taking any action under any provision of this Indenture, the Partnership shall furnish to the Trustee an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with, and an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by officers of the General Partner, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture.
Every Officers' Certificate or Opinion of Counsel (except for certificates provided for in Section 1004) shall include:
(1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(2) 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;
(3) a statement that, in the opinion of each such individual, 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
(4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Partnership or the General Partner may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Partnership or the General Partner stating that the information with respect to such factual matters is in the possession of the Partnership or the General Partner, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 104. Acts of Holders; Record Dates
Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed (either physically or by means of a facsimile or an electronic transmission, provided that such electronic transmission is transmitted through the facilities of a Depositary) by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered (either physically or by means of a facsimile or an electronic transmission, provided that such electronic transmission is transmitted through the facilities of a Depositary) to the Trustee and, where it is hereby expressly required, to the Partnership. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 315 of the Trust Indenture Act) conclusive in favor of the Trustee and the Partnership, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including a Depositary that is a Holder of a Global Security, may make, give or take, by a proxy or proxies, duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and a Depositary that is a Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interests in any such Global Security.
The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
The ownership, principal amount and serial numbers of Securities held by any Person, and the date of commencement of such Person's holding the same, shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver or other action of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Partnership in reliance thereon, whether or not notation of such action is made upon such Security.
Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount.
The Partnership may set any day as the record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders of Securities of such series, but the Partnership shall have no obligation to do so. With regard to any record date set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to give or take the relevant action, whether or not such Holders remain Holders after such record date.
SECTION 105. Notices, Etc., to Trustee and Partnership
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Partnership shall be sufficient for every purpose hereunder if made in writing and actually received by the Trustee at its office at 5847 San Felipe, Suite 1050, Houston, Texas 77057, or at any other address previously furnished in writing by the Trustee, or
(2) the Partnership by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Partnership addressed to it at One Allen Center, Suite 1000, 500 Dallas, Houston Texas, 77002, to the attention of the Corporate Secretary, or at any other address previously furnished in writing to the Trustee by the Partnership.
SECTION 106. Notice to Holders; Waiver
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-
class postage prepaid (if international mail, by air mail), to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act
If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns
All covenants and agreements in this Indenture by the Partnership shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause
In case any provision in this Indenture or in the 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 111. Benefits of Indenture
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Debt
and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law
This Indenture and the Securities shall be governed by and construed in accordance with the law of the State of New York.
SECTION 113. Legal Holidays
In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of the Securities of any series which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, 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 Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 114. Language of Notices, Etc.
Any request, demand, authorization, direction, notice, consent, waiver or Act required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication.
SECTION 115. Interest Limitation
It is the intention of the Partnership to conform strictly to all applicable usury laws and any subsequent revisions, repeals or judicial interpretations thereof. Accordingly, if the transactions contemplated hereby would be usurious under any applicable law then, in that event, notwithstanding anything to the contrary in the Securities or this Indenture, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under applicable law with respect to a Security shall under no circumstances exceed the maximum amount allowed by applicable law, and any excess shall be credited to the principal amount of such Security (or, if the principal amount of such Security shall have been paid in full, refunded to the Partnership), to the extent permitted by applicable law; and (ii) in the event that the maturity of any Security is accelerated or in the event of any redemption of such Security, then such consideration that constitutes interest under applicable law may never include more than the maximum amount allowed by applicable law, and any excess shall be credited to the principal amount of such Security (or, if the principal amount of such Security shall be paid in full, refunded to the Partnership), to the extent permitted by applicable law. All calculations made to compute the rate of interest with respect to a Security for the purpose of determining whether such rate exceeds the maximum amount allowed by applicable law shall be made, to the extent permitted by such applicable law, by allocating and spreading during the period of the full stated term of such Security all interest any time contracted for, taken, reserved, charged or received by such Holder or by the Trustee on behalf of any such Holder in connection therewith so that the amount or rate of interest charged for any and all periods of time during the term of the Security
does not exceed the maximum amount or rate of interest allowed to be charged by law during the relevant period of time. Notwithstanding any of the foregoing, if at any time applicable laws shall be changed so as to permit a higher rate or amount of interest to be charged than that permitted prior to such change, then unless prohibited by law, references in this Indenture or any Security to "applicable law" when used in the context of determining the maximum interest or rate of interest that can be charged shall be deemed to refer to such applicable law as so amended to allow the greater amount or rate of interest.
The right to accelerate maturity of any Security does not include the right to accelerate any interest which has not otherwise accrued to the date of such acceleration, provided, however, that the foregoing shall not prohibit the continuing accrual after acceleration of interest in accordance with the terms of the Indenture and such Security.
SECTION 116. Non-Recourse to the General Partner; No Personal Liability of Officers, Directors, Employees or Partners
Obligations of the Partnership under this Indenture and the Securities hereunder are non-recourse to the General Partner, and its respective Affiliates (other than the Partnership), and payable only out of cash flow and assets of the Partnership. The Trustee, and each Holder of a Security by its acceptance thereof, will be deemed to have agreed in this Indenture that (1) neither the General Partner nor its assets (nor any of its respective Affiliates other than the Partnership, nor their respective assets) shall be liable for any of the obligations of the Partnership under this Indenture or such Securities, and (2) no director, officer, employee, stockholder or unitholder, as such, of the Partnership, the Trustee, the General Partner or any Affiliate of any of the foregoing entities shall have any personal liability in respect of the obligations of the Partnership under this Indenture or such Securities by reason of his, her or its status.
ARTICLE II
SECURITY FORMS
SECTION 201. Forms Generally
The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution 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 may be required to comply with applicable tax laws or the rules of any securities exchange or automated quotation system on which the Securities of such series may be listed or traded or Depositary therefor or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by an authorized officer or other authorized Person on behalf of the Partnership and delivered to the Trustee at or prior to the
delivery of the Partnership Order contemplated by Section 303 for the authentication and delivery of such Securities.
Any form of Security approved by or pursuant to a Board Resolution must be acceptable as to form by the Trustee, such acceptance to be evidenced by the Trustee's authentication of Securities in that form.
The definitive Securities 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 Securities, as evidenced by their execution of such Securities.
SECTION 202. Form of Face of Security
[ Insert any legend required by the United States Internal Revenue Code and the regulations thereunder.]
[If a Global Security,-insert legend required by Section 204 of the Indenture] [If applicable, insert-UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE PARTNERSHIP OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
KINDER MORGAN ENERGY PARTNERS, L. P.
[TITLE OF SECURITY]
No._______________ U.S. $_________
[CUSIP No. _____________]
KINDER MORGAN ENERGY PARTNERS, L. P., a Delaware limited partnership (herein called the "Partnership", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of United States Dollars on [if the Security is to bear interest prior to Maturity, insert--, and to pay interest thereon from , or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on and in each year, commencing , at the rate of % per annum, until the principal hereof is paid or made available for payment [if applicable, insert--, and at the rate of % per annum on any overdue principal and
premium and on any overdue installment of interest]. [If applicable, insert-- The amount of interest payable for any period shall be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any partial period shall be computed on the basis of a 360-day year of twelve 30-day months and the days elapsed in any partial month. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. A "Business Day" shall mean, when used with respect to any Place of Payment, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law, executive order or regulation to close.] The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the or (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice of which shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities of this series may be listed or traded, and upon such notice as may be required by such exchange or automated quotation system, all as more fully provided in such Indenture].
[If the Security is not to bear interest prior to Maturity, insert-The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of % per annum, which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of % per annum, which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.]
[If a Global Security, insert-Payment of the principal of [(and premium, if any)] and [if applicable, insert-any such] interest on this Security will be made by transfer of immediately available funds to a bank account in designated by the Holder in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts [state other currency].]
[If a Definitive Security, insert-Payment of the principal of [(and premium, if any)] and [if applicable, insert-any such] interest on this Security will be made at the office or agency of the Partnership maintained for that purpose in , [in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public
and private debts] [state other currency] [or subject to any laws or regulations applicable thereto and to the right of the Partnership (as provided in the Indenture) to rescind the designation of any such Paying Agent, at the [main] offices of in and in , or
at such other offices or agencies as the Partnership may designate, by [United States Dollar] [state other currency] check drawn on, or transfer to a [United States Dollar] account maintained by the payee with, a bank in The City of New York [ ] (so long as the applicable Paying Agent has received proper transfer instructions in writing at least [ ] days prior to the payment date)] [if applicable, insert-; provided, however, that payment of interest may be made at the option of the Partnership by [United States Dollar] [state other currency] check mailed to the addresses of the Persons entitled thereto as such addresses shall appear in the Security Register] [or by transfer to a [United States Dollar] [state other currency] account maintained by the payee with a bank in The City of New York [state other Place of Payment] (so long as the applicable Paying Agent has received proper transfer instructions in writing by the Record Date prior to the applicable Interest Payment Date)].]
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Partnership has caused this instrument to be duly executed.
Dated: KINDER MORGAN ENERGY PARTNERS, L. P.,
By: Kinder Morgan G.P., Inc.,
Its General Partner
By: _______________________________
Name:
Title:
SECTION 203. Form of Reverse of Security
This Security is one of a duly authorized issue of securities of the Partnership (the "Securities"), issued and to be issued in one or more series under an Indenture dated as of January 2, 2001 (the "Indenture"), between the Partnership and First Union National Bank, as Trustee (the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, obligations, duties and immunities thereunder of the
Partnership, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. As provided in the Indenture, the Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest, if any, at different rates, may be subject to different redemption provisions, if any, may be subject to different sinking, purchase or analogous funds, if any, may be subject to different covenants and Events of Default and may otherwise vary as in the Indenture provided or permitted. This Security is one of the series designated on the face hereof [if applicable, insert--, limited in aggregate principal amount to U.S.$ ].
[If applicable, insert--The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by mail, [if applicable, insert--(1) on in any year commencing with the year and ending with the year through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [if applicable, insert--on or after , ], as a whole or in part, at the election of the Partnership, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [if applicable, insert--on or before , %, and if redeemed] during the 12-month period beginning of the years indicated,
and thereafter at a Redemption Price equal to % of the principal amount, together in the case of any such redemption [if applicable, insert--(whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert--The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by mail, (1) on in any year commencing with the year and ending with the year through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [if applicable, insert--on or after ], as a whole or in part, at the election of the Partnership, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning of the years indicated,
Redemption Price for Redemption Price for
Redemption Through Redemption Otherwise
Operation of the Sinking Than Through Operation
Year Fund of the Sinking Fund
---- ---- -------------------
|
and thereafter at a Redemption Price equal to % of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert--The sinking fund for this series provides for the redemption on in each year beginning with the year and ending with the year of [if applicable,--not less than $ ("mandatory sinking fund") and not more than] $ aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Partnership otherwise than through [if applicable,--mandatory] sinking fund payments may be credited against subsequent [if applicable,--mandatory] sinking fund payments otherwise required to be made [if applicable,--in the inverse order in which they become due].]
[If the Security is subject to redemption in part of any kind, insert-In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert--The Securities of this series are not redeemable prior to Stated Maturity.]
[If the Security is not an Original Issue Discount Security, insert-If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert-If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to-insert formula for determining the amount. Upon payment (1) of the amount of principal so declared due and payable, and (2) of interest on any overdue principal and overdue interest, all of the Partnership's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Partnership and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Partnership and the Trustee with the consent of not less than the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series to be affected (voting as one class). The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Outstanding Securities of all affected series (voting as one class), on behalf of the Holders of all Securities of such series, to waive compliance by the Partnership with certain provisions of the Indenture. The Indenture permits, with certain exceptions as therein provided, the Holders of a majority in principal amount of Securities of any series then Outstanding to waive past defaults under the Indenture with respect to such series and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or [any premium or] interest hereon on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall, without the consent of the Holder, alter or impair the
obligation of the Partnership, which is absolute and unconditional, to pay the
principal of and [any premium and] interest on this Security at the times,
place(s) and rate, and in the coin or currency, herein prescribed, except for
Section 115 of the Indenture (which limits interest to the maximum amount
permissible by law), the provisions of which are incorporated herein by
reference.
[If a Global Security, insert--This Global Security or portion hereof may not be exchanged for Definitive Securities of this series except in the limited circumstances provided in the Indenture. The holders of beneficial interests in this Global Security will not be entitled to receive physical delivery of Definitive Securities except as described in the Indenture and will not be considered the Holders thereof for any purpose under the Indenture.]
[If a Definitive Security, insert--As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registerable in the Security Register,
upon surrender of this Security for registration of transfer at the office or agency of the Partnership in [if applicable, insert--any place where the principal of and any premium and interest on this Security are payable] [if applicable, insert--The City of New York [, or, subject to any laws or regulations applicable thereto and to the right of the Partnership (limited as provided in the Indenture) to rescind the designation of any such transfer agent, at the [main] offices of in and in or at such other offices or agencies as the Partnership may designate]], duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Partnership and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.]
The Securities of this series are issuable only in registered form without coupons in denominations of U.S.$ [state other currency] and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Partnership may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Partnership, the Trustee and any agent of the Partnership or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security is overdue, and neither the Partnership, the Trustee nor any such agent shall be affected by notice to the contrary.
This Security is subordinated in right of payment to Senior Debt, to the extent provided in the Indenture.
Obligations of the Partnership under the Indenture and the Securities thereunder, including this Security, are non-recourse to Kinder Morgan, G.P., Inc. (the "General Partner") and its Affiliates (other than the Partnership), and payable only out of cash flow and assets of the Partnership. The Trustee, and each Holder of a Security by its acceptance hereof, will be deemed to have agreed in the Indenture that (1) neither the General Partner nor its assets (nor any of its Affiliates other than the Partnership, nor their respective assets) shall be liable for any of the obligations of the Partnership under the Indenture or such Securities, including this Security, and (2) no director, officer, employee, stockholder or unitholder, as such, of the Partnership, the Trustee, the General Partner or any Affiliate of any of the foregoing entities shall have any personal liability in respect of the obligations of the Partnership under the Indenture or such Securities by reason of his, her or its status.
The Indenture contains provisions that relieve the Partnership from the obligation to comply with certain restrictive covenants in the Indenture and for satisfaction and discharge at
any time of the entire indebtedness upon compliance by the Partnership with certain conditions set forth in the Indenture.
This Security shall be governed by and construed in accordance with the laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
[If a Definitive Security, insert as a separate page-
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto _____________________________________ (Please Print or Typewrite Name and Address of Assignee) the within instrument of KINDER MORGAN ENERGY PARTNERS, L. P. and does hereby irrevocably constitute and appoint ________________________ Attorney to transfer said instrument on the books of the within-named Partnership, with full power of substitution in the premises.
Please Insert Social Security or
Other Identifying Number of Assignee:
Dated:____________________________ ________________________________(Signature)
Signature Guarantee: _______________________________________________ (Participant in a Recognized Signature Guaranty Medallion Program)
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever.]
SECTION 204. Global Securities
Every Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE TRANSFERRED TO, OR REGISTERED OR EXCHANGED FOR SECURITIES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN THE DEPOSITARY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. EVERY SECURITY
AUTHENTICATED AND DELIVERED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR OR IN LIEU OF, THIS SECURITY SHALL BE A GLOBAL SECURITY SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES.
If Securities of a series are issuable in whole or in part in the form of one or more Global Securities, as contemplated by Section 301, then, notwithstanding Clause (9) of Section 301 and the provisions of Section 302, any Global Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced or increased, as the case may be, to reflect exchanges. Any endorsement of a Global Security to reflect the amount, or any reduction or increase in the amount, of Outstanding Securities represented thereby shall be made in such manner and upon instructions given by such Person or Persons as shall be specified therein or in a Partnership Order. Subject to the provisions of Sections 303, 304 and 305, the Trustee shall deliver and redeliver any Global Security in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Partnership Order. Any instructions by the Partnership with respect to endorsement or delivery or redelivery of a Global Security shall be in a Partnership Order (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel).
The provisions of the last sentence of Section 303 shall apply to any Security represented by a Global Security if such Security was never issued and sold by the Partnership and the Partnership delivers to the Trustee the Global Security together with a Partnership Order (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction or increase, as the case may be, in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303.
SECTION 205. Form of Trustee's Certificate and Authorization
The Trustee's certificates of authentication shall be in substantially the following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
By: ________________________________
Authorized Signatory
ARTICLE III
SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series
The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution (and, subject to Section 303, to the extent established pursuant to rather than set forth in a Board Resolution, in an Officers' Certificate or Partnership Order setting forth, or determining the manner of, such establishment) or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series,
(1) the form and title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture (except
for Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities of the series pursuant to
Section 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant
to Section 303, are deemed never to have been authenticated and delivered
hereunder);
(3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest;
(4) the date or dates on which the Securities will be issued and on which the principal of, and premium, if any, on the Securities of the series is payable or the method of determination thereof;
(5) the rate or rates (which may be fixed or variable) at which the Securities of the series shall bear interest, if any, or the method of determination thereof, the date or dates from which such interest shall accrue, or the method of determination thereof, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Interest Payment Date;
(6) the place or places where, subject to the provisions of Section 1002, the principal of and any premium and interest on Securities of the series shall be payable, Securities of the series may be surrendered for registration of transfer, Securities of the series may be surrendered for exchange and notices, and demands to or upon the Partnership in respect of the Securities of the series and this Indenture may be served;
(7) the period or periods, if any, within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Partnership or otherwise if the Partnership is to have that option;
(8) the obligation, if any, and the option, if any, of the Partnership to redeem, purchase or repay Securities of the series pursuant to any sinking fund or analogous provisions or upon the happening of a specified event or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable;
(10) whether payment of principal of and premium, if any, and interest, if any, on the Securities of the series shall be without deduction for taxes, assessments or governmental charges paid by Holders of the series;
(11) the currency, currencies or currency units in which payment of the principal of and any premium and interest on any Securities of the series shall be denominated, payable, redeemable or purchasable if other than the currency of the United States of America and the manner of determining the equivalent thereof in the currency of the United States of America for purposes of the definition of "Outstanding" in Section 101;
(12) if the amount of payments of principal of or any premium or interest on any Securities of the series may be determined with reference to an index, the manner in which such amounts shall be determined;
(13) if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Partnership or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made;
(14) the right, if any, of the Partnership to defer payments of interest by extending the interest payment periods and specify the duration of such extension, the Interest Payment Dates on which such interest shall be payable and whether and under what circumstances additional interest on amounts deferred shall be payable;
(15) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502 or provable in bankruptcy pursuant to Section 504 the method of determination thereof;
(16) if and as applicable, that the Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities (and whether in temporary or permanent global form) and, in such case, the Depositary or Depositaries for such Global Security or Global Securities and any circumstances other than those set forth in Section 305 in which any such Global Security may be transferred to, and registered and exchanged for Securities registered in the name of, a Person other than the Depositary for such Global Security or a nominee thereof and in which any such transfer may be registered;
(17) any deletions from, modifications of or additions to the Events of Default set forth in Section 501 or the covenants of the Partnership set forth in Article X pertaining to the Securities of the series;
(18) if and the terms and conditions upon which any Securities of the series may be converted into or exchanged for securities, which may include, without limitation, capital stock, of any class or series of the Partnership or any other issuer;
(19) if the amount of payments of principal of or any premium or interest on any Securities of the series may be determined with reference to an index, including, but not limited to an index based on a currency or currencies other than that in which the Securities of that series are payable, or any other type of index, the manner in which such amounts shall be determined;
(20) if other than as provided in Sections 1302 and 1303, the terms and conditions upon which and the manner in which such series of Securities may be defeased or discharged;
(21) if other than the Trustee, the identity of the Security Registrar and any Paying Agent;
(22) any restrictions or other provisions with respect to the transfer or exchange of the Securities; and
(23) any other terms of the Securities of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)).
All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution or Officers' Certificate referred to above or in any such indenture supplemental hereto.
Any such Board Resolution or Officers' Certificate referred to above with respect to Securities of any series filed with the Trustee on or before the initial issuance of the Securities of such series shall be incorporated herein by reference with respect to Securities of such series and shall thereafter be deemed to be a part of the Indenture for all purposes relating to Securities of such series as fully as if such Board Resolution or Officers' Certificate were set forth herein in full.
All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the Holders, for increases in the aggregate principal amount of such series of Securities and issuances of additional Securities of such series or for the establishment of additional terms with respect to the Securities of such series.
If any of the terms of the series are established by action taken by or pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by an authorized officer or other authorized person of the General Partner on behalf of the Partnership and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth, or providing the manner for determining, the terms of the series.
With respect to Securities of a series subject to a Periodic Offering, such Board Resolution or Officers' Certificate may provide general terms for Securities of such series and provide either that the specific terms of particular Securities of such series shall be specified in a Partnership Order, or that such terms shall be determined by the Partnership, or one or more of the Partnership's agents designated in an Officers' Certificate, in accordance with a Partnership Order.
SECTION 302. Denominations
The Securities of each series shall be issuable only in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 301. In the absence of any such specified denomination with respect to
the Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating
The Securities shall be executed on behalf of the Partnership by the Chairman of the Board, Vice Chairman, Chief Executive Officer, Chief Financial Officer, President or any Vice President of the General Partner and need not be attested. The signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the General Partner shall bind the Partnership, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this Indenture, the Partnership may deliver Securities of any series executed by the Partnership to the Trustee for authentication, together with a Partnership Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Partnership Order shall authenticate and deliver such Securities; provided, however, that in the case of Securities offered in a Periodic Offering, the Trustee shall authenticate and deliver such Securities from time to time in accordance with such other procedures (including, without limitation, the receipt by the Trustee of oral or electronic instructions from the Partnership or its duly authorized agents, thereafter promptly confirmed in writing) acceptable to the Trustee as may be specified by or pursuant to a Partnership Order delivered to the Trustee prior to the time of the first authentication of
Securities of such series. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, in addition to any Officers' Certificate and Opinion of Counsel required to be furnished to the Trustee pursuant to Section 102, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating,
(1) the form and terms (or the manner of determining the terms) of such Securities have been established by or pursuant to Board Resolution as permitted by Section 201, that such form or forms have been established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been, or in the case of Securities of a series offered in a Periodic Offering, will be, established by or pursuant to a Board Resolution as permitted by Section 301, that such terms have been, or in the case of Securities of a series offered in a Periodic Offering, will be, established in conformity with the provisions of this Indenture, subject, in the case of Securities of a series offered in a Periodic Offering, to any conditions specified in such Opinion of Counsel (which conditions are reasonably acceptable to the Trustee); and
(3) that such 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, which conditions are reasonably acceptable to the Trustee, will constitute valid and legally binding obligations of the Partnership enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and entitled to the benefits of this Indenture, equally and ratably with all other Securities, if any, of such series outstanding; and
(4) such other matters as the Trustee may reasonably request;
and, if the authentication and delivery relates to a new series of Securities created by an indenture supplemental hereto, also stating that all conditions precedent to the execution of the supplemental indenture with respect to that series of Securities have been complied with, the Partnership has the power to execute and deliver any such supplemental indenture and has taken all necessary action for those purposes and any such supplemental indenture has been executed and delivered and constitutes the legal, valid and binding obligation of the Partnership enforceable in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other laws and legal principles affecting creditors' rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity).
If such form or forms or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 301 or the Partnership Order and Opinion of Counsel or Board Resolution or supplemental indenture otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued.
With respect to Securities of a series not to be originally issued at one time, the Trustee may rely upon the Opinion of Counsel and the other documents delivered pursuant to Sections 201 and 301 and this Section, as applicable, in connection with the first authentication of Securities of such series and any subsequent request by the Partnership to the Trustee to authenticate 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 shall be true and correct as if made on such date.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Partnership, and the Partnership shall deliver such Security to the Trustee for cancellation as provided in Section 309 for all purposes of this Indenture, such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities
Pending the preparation of Definitive Securities of any series, the Partnership may execute, and upon receipt of the documents required by Section 303, together with a Partnership Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the Definitive Securities of like series in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Partnership will cause Definitive Securities of that series to be prepared without unreasonable delay. After the preparation of Definitive Securities of such series, the temporary Securities of such series shall be exchangeable for Definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Partnership maintained pursuant to Section 1002 for the purpose of exchanges of Securities of such series, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities of any series the Partnership shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more Definitive Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as Definitive Securities of such series and tenor.
SECTION 305. Registration, Registration of Transfer and Exchange
The Partnership shall cause to be kept at an office or agency of the Security Registrar in The City of New York a register (the register maintained in such office or in any other office or agency of the Partnership in a Place of Payment being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Partnership shall provide for the registration of Securities and of transfers of Securities. The Partnership shall, prior to the issuance of any Securities hereunder, appoint the Trustee as the initial "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided and its Corporate Trust Office which, at the date hereof, is located at 40 Broad Street, Suite 550, New York, New York 10004, as the initial office or agency in The City of New York where the Security Register will be maintained. The Partnership may at any time replace such Security Registrar, change such office or agency or act as its own Security Registrar. The Partnership will give prompt written notice to the Trustee of any change of the Security Registrar or of the location of such office or agency. At all reasonable times the Security Register shall be available for inspection by the Trustee.
Upon surrender for registration of transfer of any Security of any series at the office or agency of the Partnership maintained pursuant to Section 1002 for such purpose, the Partnership shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Securities of any series (except a Global Security) may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Partnership shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Partnership, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Partnership or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Partnership and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Securities, but the Partnership may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304 or 1107 not involving any transfer.
Neither the Trustee nor the Partnership shall be required (1) to issue, register the transfer of or exchange Securities of any series (or of any series and specified tenor, as the case may be) during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (2) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
Notwithstanding any other provision in this Indenture and except as otherwise specified as contemplated by Section 301, no Global Security may be transferred to, or registered or exchanged for Securities registered in the name of, any Person other than the Depositary for such Global Security or any nominee thereof, and no such transfer may be registered, except as provided in this paragraph. Every Security authenticated and delivered upon registration or transfer of, or in exchange for or in lieu of, a Global Security shall be a Global Security, except as provided in this paragraph. If (1) (A) the Depositary for a Global Security notifies the Partnership that it is unwilling or unable to continue as Depositary for such Global Security or ceases to be a clearing agency registered under the Exchange Act, and (B) a successor Depositary is not appointed by the Partnership within 90 days, (2) an Event of Default has occurred and is continuing with respect to the Securities of such series and the Security Registrar has received a request from the Depositary to issue certificated securities in lieu of all or a portion of the Global Securities of such series (in which case the Partnership shall deliver certificated securities within 30 days of such request) or (3) the Partnership determines in its sole discretion that Securities of a series issued in global form shall no longer be represented by a Global Security, then such Global Security may be exchanged by such Depositary for Definitive Securities of the same series, of any authorized denomination and of a like aggregate principal amount and tenor, registered in the names of, and the transfer of such Global Security or portion thereof may be registered to, such Persons as such Depositary shall direct.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities
If any mutilated Security is surrendered to the Trustee, together with such security or indemnity as may be required by the Partnership or the Trustee to save each of them and any agent of either of them harmless, the Partnership shall execute and upon its request the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously Outstanding.
If there shall be delivered to the Partnership and the Trustee (1) evidence to their satisfaction of the destruction, loss or theft of any Security and (2) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Partnership or the Trustee that such Security has been acquired by a bona fide purchaser, the Partnership shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously Outstanding. If, after the delivery of such new Security, a bona fide purchaser of the original Security in lieu of which such new Security was issued presents for payment or registration such original Security, the Trustee shall be entitled to recover such new Security from the party to whom it was delivered or any party taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Partnership and the Trustee in connection therewith.
In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Partnership in its discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Partnership may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in exchange for any mutilated Security or in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Partnership, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved
Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Partnership, at its election in each case, as provided in Clause (1) or (2) below:
(1) The Partnership may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) 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 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 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 prepaid, to each Holder of Securities of such series at his 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 Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Partnership may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which such Securities may be listed or traded, 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.
Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security, shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.
For each series of Securities, the Partnership shall, prior to 10:30 a.m. (New York City time) on each payment date for principal and premium, if any, and interest, if any, deposit with the Trustee money in immediately available funds sufficient to make cash payments due on the applicable payment date.
SECTION 308. Persons Deemed Owners
Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, prior to due presentment of a Security for registration of transfer, the Partnership, the Trustee and any agent of the Partnership or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Sections 305 and 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Partnership, the Trustee nor any agent of the Partnership or the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Partnership, the Trustee and any agent of the Partnership or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Partnership, the Trustee nor 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 beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
SECTION 309. Cancellation
All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Partnership may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Partnership may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Partnership has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of in accordance with its customary procedures, and the Trustee shall thereafter deliver to the Partnership a certificate with respect to such disposition.
SECTION 310. Computation of Interest
Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months and interest on the Securities of each series for any partial period shall be computed on the basis of a 360-day year of twelve 30-day months and the number of days elapsed in any partial month.
SECTION 311. CUSIP Numbers.
The Partnership in issuing the Securities may use "CUSIP" numbers (in addition to the other identification numbers printed on the Securities), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such "CUSIP" 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 "CUSIP" numbers. The Partnership will promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture
This Indenture shall upon Partnership Request cease to be of further effect with respect to Securities of any series (except as to any surviving rights of registration of transfer or exchange of such Securities herein expressly provided for), and the Trustee, at the expense of the Partnership, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to such Securities, when
(1) either
(A) all such Securities theretofore authenticated and delivered (other than (i) such Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, and (ii) such Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Partnership and thereafter repaid to the Partnership or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Partnership,
and the Partnership in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for this purpose an amount of money in the currency or currency units in which such Securities are payable sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Partnership has paid or caused to be paid all other sums payable hereunder by the Partnership with respect to such Securities; and
(3) the Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture with respect to such Securities have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture with respect to Securities of any series, (x) the obligations of the Partnership to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and the right of the Trustee to resign under Section 610 shall survive, and (y) if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Partnership and/or the Trustee under Sections 402, 606, 701 and 1002 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money
Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Partnership acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee.
ARTICLE V
REMEDIES
SECTION 501. Events of Default
"Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days (whether or not such payment is prohibited by the provisions of Article XIV hereof); or
(2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity (whether or not such payment is prohibited by the provisions of Article XIV hereof); or
(3) default in the performance, or breach, of any term, covenant or
warranty of the Partnership in this Indenture (other than a term, covenant or
warranty a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of series of Securities other than that
series), and continuance of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the Partnership by the
Trustee or to the Partnership and the Trustee by Holders of at least 25% in
principal amount of the Outstanding Securities of that
series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or
(4) the Partnership pursuant to or within the meaning of any Bankruptcy Law (A) commences a voluntary case, (B) consents to the entry of any order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors; or
(5) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Partnership in an involuntary case, (B) appoints a Custodian of the Partnership or for all or substantially all of its property, or (C) orders the liquidation of the Partnership; and the order or decree remains unstayed and in effect for 90 days; or
(6) any other Event of Default provided as contemplated by Section 301 with respect to Securities of that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment
If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount of (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof), and accrued but unpaid interest, if any, on all of the Securities of that series to be due and payable immediately, by a notice in writing to the Partnership (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Partnership and the Trustee, may rescind and annul such declaration and its consequences if
(1) the Partnership has paid or deposited with the Trustee a sum sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent Default or impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee
The Partnership covenants that if
(1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days (whether or not such payment is prohibited by the provisions of Article XIV hereof), or
(2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof (whether or not such payment is prohibited by the provisions of Article XIV hereof),
the Partnership will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Partnership fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Partnership or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Partnership or any other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim
In case of any judicial proceeding relative to the Partnership or any other
obligor upon the Securities, their property or their creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected
Any money or property collected or to be applied by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: Subject to Article XIV, to the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively; and
THIRD: The balance, if any, to the Partnership.
SECTION 507. Limitation on Suits
No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer and, if requested, provision of security or indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Sections 305 and 307) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then in every such case, subject
to any determination in such proceeding, the Partnership, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver
No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders
Subject to the provisions of Section 603, the Holders of a majority in aggregate principal amount of the Outstanding Securities of any series 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 Securities of such series; provided, however, that
(1) such direction shall not be in conflict with any rule of law or with this Indenture;
(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and
(3) subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall determine that the proceeding so directed would involve the Trustee in personal liability or would otherwise be contrary to applicable law.
SECTION 513. Waiver of Past Defaults
The Holders of a majority in aggregate principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except
(1) a continuing default in the payment of the principal of or any premium or interest on any Security of such series, or
(2) a default in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs
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, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Trustee, in any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series to which the suit relates, or in any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed by such Security (or, in the case of redemption or repayment, on or after the Redemption Date).
ARTICLE VI
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities
(a) Except during the continuance of an Event of Default with respect to any series of Securities,
(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture with respect to the Securities of such series, and no implied covenants or obligations shall read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may, with respect to Securities of such series, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee 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.
(b) In case an Event of Default with respect to any series of Securities has occurred and is continuing, the Trustee shall exercise with respect to the Securities of such series such rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such person's own affairs.
(c) No provisions 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
(1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any 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;
(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders or a majority in principal amount of the Outstanding Securities of any 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 the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) 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 602. Notice of Defaults
If a Default occurs and is continuing with respect to the Securities of any series, the Trustee shall, within 90 days after it occurs, transmit, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, notice of all uncured or unwaived Defaults known to
it; provided, however, that, except in the case of a Default in payment on the Securities of any series, the Trustee shall be protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors or responsible officers of the Trustee determine in good faith that withholding such notice is in the interests of Holders of Securities of such series; provided, further, however, that, in the case of any default or breach of the character specified in Section 501(3) with respect to the Securities of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof.
SECTION 603. Certain Rights of Trustee
Subject to the provisions of Section 601:
(1) the Trustee may rely on 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, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(2) any request, direction, order or demand of the Partnership mentioned herein shall be sufficiently evidenced by a Partnership Request or Partnership Order (or in the case of a Periodic Offering, as agreed in procedures set forth in a Partnership Order pursuant to Section 303) and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(6) 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, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may, without obligation to do so, make such further inquiry or investigation into such facts or matters as it may see fit; and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Partnership, personally or by agent or attorney;
(7) 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 with due care by it hereunder; and
(8) the Trustee may request that the Partnership deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any Person authorized to sign an Officers' Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.
SECTION 604. Not Responsible for Recitals or Issuance of Securities
The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Partnership, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. Neither the Trustee nor any Authenticating Agent makes any representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Partnership of Securities or the proceeds thereof.
SECTION 605. May Hold Securities
The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Partnership, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Partnership with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust
Money held by the Trustee in trust hereunder 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 money received by it hereunder except as otherwise agreed with the Partnership.
SECTION 607. Compensation and Reimbursement
The Partnership agrees:
(1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
The obligations of the Partnership under this Section to compensate the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder.
Without limiting any rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(4) or Section 501(5), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any applicable Bankruptcy Law.
The provisions of this Section shall survive the satisfaction and discharge of this Indenture and the defeasance of the Securities.
SECTION 608. Disqualification; Conflicting Interests
If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility
There shall at all times be one or more Trustees hereunder with respect to the Securities of each series, at least one of which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus required by the Trust Indenture Act. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of a supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor
No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Partnership. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Partnership. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the removed Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written request therefor by the Partnership or by any Holder who has been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Partnership or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Partnership, acting pursuant to the authority of a Board Resolution, may remove the Trustee with respect to all Securities, or (B) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Partnership, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Partnership and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Partnership. If no successor Trustee with
respect to the Securities of any series shall have been so appointed by the
Partnership or the Holders and accepted appointment in the manner required by
Section 611, any Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
The Partnership shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor
(1) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Partnership and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Partnership or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(2) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Partnership,
the retiring Trustee and each successor Trustee with respect to the Securities
of one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (A) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (B)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(C) 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 as co-trustees of
the same trust and that each such 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; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates, but, on request of the Partnership or any successor Trustee,
such retiring Trustee shall, upon payment of its charges, duly assign, transfer
and deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(3) Upon request of any such successor Trustee, the Partnership shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (1) or (2) of this Section, as the case may be.
(4) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Partnership
If and when the Trustee shall be or become a creditor of the Partnership or any other obligor upon the Securities, the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Partnership or any such other obligor.
SECTION 614. Appointment of Authenticating Agent
The Trustee (upon notice to the Partnership) may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue (in accordance with procedures acceptable to the Trustee) and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Partnership and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate agency or corporate trust business of such Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Partnership. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Partnership. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Partnership. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
Except with respect to an Authenticating Agent appointed at the request of the Partnership, the Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
By: ________________________________
As Authenticating Agent
By: ________________________________
Authorized Signatory
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND
PARTNERSHIP
SECTION 701. Partnership to Furnish Trustee Names and Addresses of Holders
The Partnership will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than each Interest Payment Date in each year, a list for each series of Securities, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities of such series as of the preceding Regular Record Date, and
(2) 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 content as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Security Registrar for Securities of a series, no such list need be furnished with respect to such series of Securities.
SECTION 702. Preservation of Information; Communications to Holders
The Trustee shall comply with the obligations imposed upon it pursuant to
Section 312 of the Trust Indenture Act.
The rights of the Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees with the Partnership and the Trustee that neither the Partnership nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to the names and addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee
As promptly as practicable after each May 15 beginning with the May 15
following the date of this Indenture, and in any event prior to July 15 in each
year, the Trustee shall mail to each Holder a brief report dated as of May 15
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b). Prior to delivery to the Holders, the Trustee shall deliver to
the Partnership a copy of any report it delivers to Holders pursuant to this
Section 703.
A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Partnership. The Partnership will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Partnership
The Partnership shall:
(1) file with the Trustee, within 15 days after the Partnership is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Partnership may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Partnership is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission (unless the Commission will not accept such a filing), in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Partnership with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and
(3) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof with
the Trustee, such summaries of any information, documents and reports required
to be filed by the Partnership pursuant to paragraphs (1) and (2) of this
Section as may be required by rules and regulations prescribed from time to time
by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Partnership May Consolidate, Etc., Only on Certain Terms
The Partnership shall not consolidate with or merge into any other Person or sell, lease or transfer its properties and assets as, or substantially as, an entirety to, any Person, unless:
(1) (A) in the case of a merger, the Partnership is the surviving entity, or (B) the Person formed by such consolidation or into which the Partnership is merged or the Person which acquires by sale or transfer, or which leases, the properties and assets of the Partnership as, or substantially as, an entirety must expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the obligations of the Partnership under this Indenture and the Securities;
(2) the surviving entity or successor Person is a Person organized and existing under the laws of the United States, any State thereof or the District of Columbia;
(3) immediately after giving effect to such transaction, no Default or Event of Default exists; and
(4) the Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, transfer or lease and the supplemental indenture required in connection with such transaction comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
SECTION 802. Successor Substituted
Upon any consolidation of the Partnership with, or merger of the Partnership into, any other Person or any sale, transfer or lease of the properties and assets of the Partnership as, or substantially as, an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Partnership is merged or to which such sale, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Partnership under this Indenture with the same effect as if such successor Person had been named originally as the Partnership herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders
Without the consent of any Holders of Securities, the Partnership and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Partnership under this Indenture and the Securities and the assumption by such successor Person of the obligations of the Partnership hereunder;
(2) to add covenants and Events of Default for the benefit of the Holders of all or any series of such Securities or to surrender any right or power conferred by this Indenture upon the Partnership;
(3) to add to, change or eliminate any of the provisions of this Indenture, provided that any such addition, change or elimination shall become effective only after there are no such Securities of any series entitled to the benefit of such provision outstanding;
(4) to establish the forms or terms of the Securities of any series issued hereunder;
(5) to cure any ambiguity or correct any inconsistency in this Indenture;
(6) to evidence the acceptance of appointment by a successor Trustee with respect to one or more series of Securities or otherwise;
(7) to qualify this Indenture under the Trust Indenture Act;
(8) to provide for uncertificated securities in addition to certificated securities;
(9) to supplement any provisions of this Indenture necessary to permit or facilitate the defeasance and discharge of any series of Securities, provided that such action does not adversely affect the interests of the Holders of Securities of such series or any other series; and
(10) to comply with the rules or regulations of any securities exchange or automated quotation system on which any of the Securities may be listed or traded.
SECTION 902. Supplemental Indentures with Consent of Holders
With the consent of the Holders of not less than a majority in aggregate principal amount of all Outstanding Securities affected by such supplemental indenture (voting as one class), the Partnership and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture, or modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided that the Partnership and the Trustee may not, without the consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of principal of or interest, if any, on, any Security, or reduce the principal amount thereof or premium, if any, on or the rate of interest thereon or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders or adversely affect any right to convert or exchange any Security into any other security, or alter the method of computation of interest;
(2) reduce the percentage in principal amount of Securities required for any such supplemental indenture or for any waiver provided for in this Indenture;
(3) change the Partnership's obligation to maintain an office or agency for payment of Securities and the other matters specified herein;
(4) impair the right to institute suit for the enforcement of any payment of principal of, premium, if any, or interest on, any Security;
(5) modify the provisions of this Indenture with respect to the subordination of any Security in a manner adverse to the Holder thereof; or
(6) modify any of the provisions of this Indenture relating to the execution of supplemental indentures with the consent of Holders of Securities which are discussed in this Section or modify any provisions relating to the waiver by Holders of Securities of past defaults and covenants, except to increase any required percentage or to provide that other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby.
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of 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 Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but 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.
SECTION 904. Effect of Supplemental Indentures
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures
Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 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. If the Partnership shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Partnership, to any such supplemental indenture may be prepared and executed by the Partnership and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest
The Partnership covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency
The Partnership will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Partnership in respect of the Securities of that 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 Corporate Trust Office of the Trustee, and the Partnership hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.
The Partnership may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Partnership of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Partnership will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
Except as otherwise specified with respect to a series of Securities as contemplated by Section 301, the Partnership hereby initially designates as the Place of Payment for each series of Securities The City of New York, and initially appoints the Trustee as Paying Agent at its Corporate Trust Office as the Partnership's office or agency for each such purpose in such city.
SECTION 1003. Money for Securities Payments to Be Held in Trust
If the Partnership or any of its Subsidiaries shall at any time act as Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.
Whenever the Partnership shall have one or more Paying Agents for any series of Securities, it will, on or prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Partnership will promptly notify the Trustee of its action or failure so to act.
The Partnership will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest, if any, on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Partnership (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest, if any, on the Securities of that series; and (3) during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series.
The Partnership may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Partnership Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Partnership or such Paying Agent, 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; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent in trust for the payment of the principal of or any premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the state which escheat laws control and the Trustee or any Paying Agent shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the state which escheat laws control for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Partnership as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment, may at the expense of the Partnership cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be paid to the state whose escheat laws control.
SECTION 1004. Statement by Officers as to Default
The Partnership will deliver to the Trustee, within 150 days after the end of each fiscal year of the Partnership ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signer or signers thereof the Partnership is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Partnership shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.
SECTION 1005. Existence
Subject to Article VIII, the Partnership will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Partnership shall not be required to preserve any such right or franchise if it shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Partnership.
SECTION 1006. Waiver of Certain Covenants
The Partnership may omit in any particular instance to comply with any term, provision or condition set forth in Section 1005, with respect to the Securities of any series if before the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities of all affected series (voting as one class) shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance 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 duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.
A waiver which changes or eliminates any term, provision or condition of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such term, provision or condition, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article
Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee
The election of the Partnership to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Partnership of less than all the Securities of any series, the Partnership shall, not less than 35 nor more than 60 days prior to the Redemption Date fixed by the Partnership (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities (1) prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, or (2) pursuant to an election of the Partnership which is subject to a condition specified in the terms of
such Securities, the Partnership shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction or condition.
SECTION 1103. Selection by Trustee of Securities to be Redeemed
If less than all the Securities of any series are to be redeemed (unless all the Securities of such series and of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, on a pro rata basis or by any other method which the Trustee deems fair and appropriate and which complies with any securities exchange or other applicable requirements for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series.
The Trustee shall promptly notify the Partnership in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption
Notice of redemption shall be given by first-class mail (if international mail, by air mail), postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series and of a specified tenor are to be redeemed, the identification (and, in the case of partial redemption of any Securities, the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed shall be given by the Partnership or, at the Partnership's request, by the Trustee in the name and at the expense of the Partnership.
SECTION 1105. Deposit of Redemption Price
On or prior to 10:30 a.m. New York City Time on any Redemption Date, 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 as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date
Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Partnership shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Partnership at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.
SECTION 1107. Securities Redeemed in Part
Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Partnership or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Partnership 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 Security without service charge, a new Security or Securities of the same series and of like tenor, 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 Security so surrendered.
ARTICLE XII
SINKING FUND
SECTION 1201. Applicability of Article
The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of Securities of any series 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 Securities of any series is herein referred to as an "optional sinking fund payment." If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities
The Partnership (1) may deliver Outstanding Securities of a series (other than any previously called for redemption), and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Partnership pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund
Not less than 45 days prior to each sinking fund payment date for any
series of Securities (unless a shorter period shall be satisfactory to the
Trustee), 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, 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 Securities of that series pursuant to
Section 1202 and stating the basis for such credit and that such Securities have
not been previously so credited, and will also deliver to the Trustee any
Securities to be so delivered. Not less than 30 days before each such sinking
fund payment date the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Partnership in the manner provided in Section 1104. Such notice having
been duly given, the redemption of such Securities shall be made upon the terms
and in the manner stated in Sections 1106 and 1107.
ARTICLE XIII
DEFEASANCE
SECTION 1301. Applicability of Article
The provisions of this Article shall be applicable to each series of Securities except as otherwise specified as contemplated by Section 301 for Securities of such series.
SECTION 1302. Legal Defeasance
In addition to discharge of the Indenture pursuant to Section 401, the Partnership shall be deemed to have paid and discharged the entire indebtedness on all the Securities of such a series on the 91st day after the date of the deposit referred to in Clause (1) below, and the provisions of this Indenture with respect to the Securities of such series shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of Securities of such series and the Partnership's right of optional redemption, if any, (ii) substitution of mutilated, destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor or on the specified redemption dates therefor (but not upon acceleration), and remaining rights of the holders to receive mandatory sinking fund payments, if any, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, and the Partnership's obligations in connection therewith (including, but not limited to, Section 607), (v) the rights, if any, to convert or exchange the Securities of such series, (vi) the rights of the Holders of Securities of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, and (vii) the obligations of the Partnership under Section 1002), and the Trustee, at the expense of the Partnership, shall, upon a Partnership Request, execute proper instruments acknowledging the same, if the conditions set forth below are satisfied (hereinafter, "defeasance"):
(1) The Partnership has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust, for the purposes of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of such series (A) cash in an amount, or (B) in the case of any series of Securities the payments on which may only be made in legal coin or currency of the United States, U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure the availability of cash, or (C) a combination thereof, certified to be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (i) the principal and interest and premium, if any, on all Securities of such series on each date that such principal, interest or premium, if any, is due and payable or on any Redemption Date established pursuant to Clause (3) below, and (ii) any mandatory sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series;
(2) The Partnership has delivered to the Trustee an Opinion of Counsel based on the fact that (A) the Partnership has received from, or there has been published by, the Internal Revenue Service a ruling, or (B) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and such opinion shall confirm that, the Holders of the Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge 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, defeasance and discharge had not occurred;
(3) If the Securities are to be redeemed prior to Stated Maturity (other than from mandatory sinking fund payments or analogous payments), notice of such redemption shall have been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee shall have been made;
(4) No Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit;
(5) Such defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act);
(6) Such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Partnership is a party or by which it is bound;
(7) Such defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; and
(8) The Partnership has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the defeasance contemplated by this provision have been complied with.
For this purpose, such defeasance means that the Partnership and any other obligor upon the Securities of such series shall be deemed to have paid and discharged the entire debt represented by the Securities of such series, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1304 and the rights and obligations referred to in Clauses (i) through (vii), inclusive, of the first paragraph of this Section, and to have satisfied all its other obligations under the Securities of such series and this Indenture insofar as the Securities of such series are concerned.
SECTION 1303. Covenant Defeasance
The Partnership and any other obligor, if any, shall be released on the 91st day after the date of the deposit referred to in Clause (1) below from its obligations under Sections 704, 801 and 1005 with respect to the Securities of any series on and after the date the conditions set forth
below are satisfied (hereinafter, "covenant defeasance"), and the Securities of
such series shall thereafter be deemed to be not "Outstanding" for the purposes
of any request, demand, authorization, direction, notice, waiver, consent or
declaration or other action or Act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
Outstanding for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Securities of such series, the
Partnership may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such Section, whether
directly or indirectly by reason of any reference elsewhere herein to such
Section or by reason of any reference in such Section to any other provision
herein or in any other document and such omission to comply shall not constitute
a Default or an Event of Default under Section 501, but, except as specified
above, the remainder of this Indenture and the Securities of such series shall
be unaffected thereby. The following shall be the conditions to application of
this Section 1303:
(1) The Partnership has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of such series, (A) cash in an amount, or (B) in the case of any series of Securities the payments on which may only be made in legal coin or currency of the United States, U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure the availability of cash, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (i) the principal and interest and premium, if any, on all Securities of such series on each date that such principal, interest or premium, if any, is due and payable or on any Redemption Date established pursuant to Clause (2) below, and (ii) any mandatory sinking fund payments on the day on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series;
(2) If the Securities are to be redeemed prior to Stated Maturity (other than from mandatory sinking fund payments or analogous payments), notice of such redemption shall have been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee shall have been made;
(3) No Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit;
(4) The Partnership has delivered to the Trustee an Opinion of Counsel which shall confirm that the Holders of the Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same time as would have been the case if such deposit and covenant defeasance had not occurred;
(5) Such covenant defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act);
(6) Such covenant defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Partnership is a party or by which it is bound;
(7) Such covenant defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; and
(8) The Partnership has delivered to the Trustee an Officers' Certificate and Opinion of Counsel stating that all conditions precedent provided for relating to the covenant defeasance contemplated by this provision have been complied with.
SECTION 1304. Application by Trustee of Funds Deposited for Payment of Securities
Subject to the provisions of the last paragraph of Section 1003, all moneys or U.S. Government Obligations deposited with the Trustee pursuant to Section 1302 or 1303 (and all funds earned on such moneys or U.S. Government Obligations) shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Partnership acting as its own Paying Agent), to the Holders of the particular Securities of such series for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such money need not be segregated from other funds except to the extent required by law. Subject to Sections 1302 and 1303, the Trustee shall promptly pay to the Partnership upon Partnership Order any moneys held by it at any time, which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification delivered to the Trustee, are in excess of the amounts required to effect the defeasance with respect to the Outstanding Securities in question.
SECTION 1305. Repayment to Partnership
The Trustee and any Paying Agent promptly shall pay or return to the Partnership upon Partnership Request any money and U.S. Government Obligations held by them at any time that are not required for the payment of the principal of and any interest on the Securities of any series for which money or U.S. Government Obligations have been deposited pursuant to Section 1302 or 1303, which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification delivered to the Trustee, are in excess of the amounts required to effect the defeasance with respect to the Outstanding Securities in question.
The provisions of the last paragraph of Section 1003 shall apply to any money held by the Trustee or any Paying Agent under this Article that remains unclaimed for two years after the Maturity of any series of Securities for which money or U.S. Government Obligations have been deposited pursuant to Section 1302 or 1303.
SECTION 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money or U. S. Government Obligations in accordance with this Article by reason of any legal proceeding or by reason of any
order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Partnership under this Indenture, and the Securities of the applicable series shall be revived and reinstated as though no deposit had occurred pursuant to this Indenture until such time as the Trustee or the Paying Agent is permitted to apply all such money or U. S. Government Obligations in accordance with this Article; provided, however, that if the Partnership has made any payment of principal of or interest on any Securities of such series because of the reinstatement of its obligations, the Partnership shall be subrogated to the rights of Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or the Paying Agent.
ARTICLE XIV
SUBORDINATION OF SECURITIES
SECTION 1401. Securities Subordinated to Senior Debt
(1) The Partnership, for itself, its successors and assigns, covenants and agrees, and each Holder of Securities, by his acceptance thereof, likewise covenants and agrees, that the payment of the principal of (and premium, if any), and interest on each and all of the Securities is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all Senior Debt of the Partnership.
(2) If (A) the Partnership shall default in the payment of any principal of, premium, if any, or interest, if any, on any Senior Debt of the Partnership when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, or (B) any other default shall occur with respect to Senior Debt of the Partnership and the maturity of such Senior Debt has been accelerated in accordance with its terms, then, upon written notice of such default to the Partnership and the Trustee by the holders of Senior Debt of the Partnership or any trustee therefor, unless and until, in either case, the default has been cured or waived or has ceased to exist, or, any such acceleration has been rescinded or such Senior Debt has been paid in full, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of, premium, if any, or interest, if any, on any of the Securities, or in respect of any redemption, retirement, purchase or other acquisition of any of the Securities other than those made in capital stock of the Partnership (or cash in lieu of fractional shares thereof).
(3) If any default occurs (other than a default described in paragraph
(2) of this Section 1401) under the Senior Debt of the Partnership, 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 at the
expiration of any applicable grace periods (a "Senior Nonmonetary Default"),
then, upon the receipt by the Partnership and the Trustee of written notice
thereof (a "Payment Blockage Notice") from or on behalf of holders of such
Senior Debt of the Partnership specifying an election to prohibit such payment
and other action by the Partnership in accordance with the following provisions
of this paragraph (3), the Partnership may not make any payment or take any
other action that would be prohibited by paragraph (2) of this Section 1401
during the period (the "Payment Blockage Period")
commencing on the date of receipt of such Payment Blockage Notice and ending on the earlier of (A) the date, if any, on which the holders of such Senior Debt or their representative notifies the Trustee that such Senior Nonmonetary Default is cured or waived or ceases to exist or the Senior Debt to which such Senior Nonmonetary Default relates is discharged or (B) the 179th day after the date of receipt of such Payment Blockage Notice. Notwithstanding the provisions described in the immediately preceding sentence, the Partnership may resume payments on the Securities following such Payment Blockage Period.
SECTION 1402. Distribution on Dissolution, Liquidation and Reorganization; Subrogation of Securities
Upon any distribution of assets of the Partnership upon any dissolution, winding up, liquidation or reorganization of the Partnership, whether in bankruptcy, insolvency, reorganization or receivership proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Partnership or otherwise (subject to the power of a court of competent jurisdiction to make other equitable provision reflecting the rights conferred in this Indenture upon the Senior Debt of the Partnership and the holders thereof with respect to the Securities and the Holders thereof by a lawful plan or reorganization under applicable bankruptcy law),
(1) the holders of all Senior Debt of the Partnership shall be entitled to receive payment in full of the principal thereof, premium, if any, interest, and any interest thereon, due thereon before the Holders of the Securities are entitled to receive any payment upon the principal, premium, interest of or on the Securities or interest on overdue amounts thereof; and
(2) any payment or distribution of assets of the Partnership of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee (on behalf of the Holders) would be entitled except for the provisions of this Article XIV shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Debt of the Partnership or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Debt may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, premium, if any, interest, and any interest thereon, on the Senior Debt of the Partnership held or represented by each, to the extent necessary to make payment in full of all Senior Debt of the Partnership remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Debt; and
(3) in the event that, notwithstanding the foregoing, any payment or distribution of assets of the Partnership of any kind or character, whether in cash, property or securities, shall be received by the Trustee (on behalf of the Holders) or the Holders of the Securities before all Senior Debt of the Partnership is paid in full, such payment or distribution shall be paid over to the holders of such Senior Debt or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Debt may have been issued, ratably as aforesaid, for application to the payment of all Senior Debt remaining unpaid until all such Senior Debt shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of such Senior Debt.
Subject to the payment in full of all Senior Debt of the Partnership, the Holders of the Securities shall be subrogated to the rights of the holders of such Senior Debt to receive payments or distributions of cash, property or securities of the Partnership applicable to Senior Debt of the Partnership until the principal, premium, interest, and any interest thereon, of or on the Securities shall be paid in full and no such payments or distributions to the Holders of the Securities of cash, property or securities otherwise distributable to the Senior Debt of the Partnership shall, as between the Partnership, its creditors other than the holders of Senior Debt of the Partnership, and the Holders of the Securities, be deemed to be a payment by the Partnership to or on account of the Securities. It is understood that the provisions of this Article XIV are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Senior Debt of the Partnership, on the other hand. Nothing contained in this Article XIV or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Partnership, its creditors other than the holders of Senior Debt of the Partnership, and the Holders of the Securities, the obligation of the Partnership, which is unconditional and absolute, to pay to the Holders of the Securities the principal, premium, interest, and any interest thereon, of or on the Securities as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the Holders of the Securities and creditors of the Partnership other than the holders of Senior Debt of the Partnership, nor shall anything herein or in the Securities prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XIV of the holders of such Senior Debt in respect of cash, property or securities of the Partnership received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Partnership referred to in this Article XIV, the Trustee shall be entitled to conclusively rely upon a certificate of the liquidating trustee or agent or other person making any distribution to the Trustee for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Senior Debt of the Partnership and other indebtedness of the Partnership, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon, and all other facts pertinent thereto or to this Article XIV.
The Trustee, however, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of the Partnership. The Trustee shall not be liable to any such holder if it shall pay over or distribute to or on behalf of Holders of Securities or the Partnership moneys or assets to which any holder of Senior Debt of the Partnership shall be entitled by virtue of this Article XIV. The rights and claims of the Trustee under Section 607 shall not be subject to the provisions of this Article XIV.
If the Trustee or any Holder of Securities does not file a proper claim or proof of debt in the form required in any proceeding referred to above prior to 30 days before the expiration of the time to file such claim in such proceeding, then the holder of any Senior Debt of the Partnership is hereby authorized, and has the right, to file an appropriate claim or claims for or on behalf of such Holder of Securities.
SECTION 1403. Payments on Securities Permitted
Except for Section 115 of the Indenture (which limits interest to the maximum amount permissible by law), the provisions of which are incorporated herein by reference, nothing contained in this Indenture or in any of the Securities shall (1) affect the obligation of the Partnership to make, or prevent the Partnership from making, at any time except as provided in Sections 1401 and 1402, payments of principal, premium, interest, and any interest thereon, of or on the Securities or (2) prevent the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal, premium, interest or other amounts, and any interest thereon, of or on the Securities unless the Trustee shall have received at its Corporate Trust Office written notice of any event prohibiting the making of such payment two Business Days (A) prior to the date fixed for such payment, (B) prior to the execution of an instrument to satisfy and discharge this Indenture based upon the deposit of funds under Section 401(1)(b), (C) prior to the execution of an instrument acknowledging the defeasance of such Securities pursuant to Section 1302 or (D) prior to any deposit pursuant to clause (1) of Section 1303 with respect to such Securities.
SECTION 1404. Authorization of Holders of Securities to Trustee to Effect Subordination
Each Holder of Securities by his acceptance thereof, whether upon original issue or upon transfer or assignment, authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article XIV and appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1405. Notices to Trustee
The Partnership shall give prompt written notice to a Responsible Officer of the Trustee located at the Corporate Trust Office of the Trustee of any fact known to the Partnership which would prevent the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article XIV or any other provisions of this Indenture, neither the Trustee nor any Paying Agent (other than the Partnership) shall be charged with knowledge of the existence of any Senior Debt of the Partnership or of any event which would prohibit the making of any payment of moneys to or by the Trustee or such Paying Agent, unless and until the Trustee or such Paying Agent shall have received (in the case of the Trustee, at its Corporate Trust Office) written notice thereof from the Partnership or from the holder of any Senior Debt of the Partnership or from the trustee for or representative of any Senior Debt of the Partnership together with proof satisfactory to the Trustee of such holding of such Senior Debt or of the authority of such trustee or representative; provided, however, that if at least two Business Days prior to the date upon which by the terms hereof any such moneys may become payable for any purpose (including, without limitation, the payment of the principal, premium, interest, of or on any Security, or any interest thereon) or the date on which the Trustee shall execute an instrument acknowledging satisfaction and discharge of this Indenture or the defeasance of Securities pursuant to Section 1302 or the date on which a deposit pursuant to clause (1) of Section 1303 is made, the Trustee shall not have received with respect to such moneys or the moneys deposited with it as a condition to such satisfaction and discharge or defeasance the notice provided for in this Section 1405, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such moneys and to
apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary, which may be received by it on or after such two Business Days prior to such date. The Trustee shall be entitled to conclusively rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Debt of the Partnership (or a trustee or representative on behalf of such holder) to establish that such a notice has been given by a holder of Senior Debt of the Partnership or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt of the Partnership to participate in any payment or distribution pursuant to this Article XIV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt of the Partnership held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XIV 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.
SECTION 1406. Trustee as Holder of Senior Debt
The Trustee shall be entitled to all the rights set forth in this Article XIV in respect of any Senior Debt of the Partnership at any time held by it to the same extent as any other holder of Senior Debt of the Partnership and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder.
SECTION 1407. Modification of Terms of Senior Debt
Any renewal or extension of the time of payment of any Senior Debt of the Partnership or the exercise by the holders of Senior Debt of the Partnership of any of their rights under any instrument creating or evidencing such Senior Debt, including without limitation the waiver of default thereunder, may be made or done all without notice to or assent from Holders of the Securities or the Trustee.
No compromise, alteration, amendment, modification, extension, renewal or other change of, or waiver, consent or other action in respect of, any liability or obligation under or in respect of, or of any of the terms, covenants or conditions of any indenture or other instrument under which any Senior Debt of the Partnership is outstanding or of such Senior Debt, whether or not such release is in accordance with the provisions of any applicable document, shall in any way alter or affect any of the provisions of this Article XIV or of the Securities relating to the subordination thereof.
This instrument may be executed with counterpart signature pages or in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written.
KINDER MORGAN ENERGY
PARTNERS, L. P.
By: Kinder Morgan G.P., Inc.,
Its General Partner
By: /s/ C. PARK SHAPER
----------------------------
Name: C. Park Shaper
Title: Vice President and
Chief Financial Officer
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FIRST UNION NATIONAL BANK
By: /s/ KEVIN M. DOBRAVA ---------------------------- Name: Kevin M. Dobrava Title: Vice President |
KINDER MORGAN ENERGY PARTNERS, L.P.
SUBSIDIARIES OF THE REGISTRANT
NAME OF COMPANY STATE OF INCORPORATION --------------- ---------------------- CGT Trailblazer, L.L.C...........................................Delaware Colton Processing Facility.......................................California Dakota Bulk Terminal, Inc........................................Wisconsin Delta Terminal Services, Inc.....................................Delaware HBM Environmental, Inc...........................................Louisiana HBM Environmental Holding Co., Inc...............................Louisiana HBM River Plant, Inc.............................................Louisiana Kinder Morgan Bulk Terminals, Inc................................Louisiana Kinder Morgan Canada Company.....................................Nova Scotia Kinder Morgan CO2, LLC...........................................Delaware Kinder Morgan CO2 Company, L.P...................................Texas Kinder Morgan Energy Partners, L.P...............................Delaware Kinder Morgan Interstate Gas Transmission LLC....................Colorado Kinder Morgan NGL L.P............................................Delaware Kinder Morgan Operating L.P. "A".................................Delaware Kinder Morgan Operating L.P. "B".................................Delaware Kinder Morgan Operating L.P. "C".................................Delaware Kinder Morgan Operating L.P. "D".................................Delaware Kinder Morgan Texas Gas Services LLC.............................Delaware Kinder Morgan Texas Pipeline, L.P................................Delaware Kinder Morgan Texas Pipeline GP LLC..............................Delaware Kinder Morgan Trailblazer, LLC...................................Delaware Kinder Morgan Transmix Company, LLC..............................Delaware KMTP LLC.........................................................Delaware Milwaukee Bulk Terminals, Inc....................................Wisconsin Queen City Terminals, Inc........................................Delaware RCI Contractors, Inc.............................................Delaware River Consulting, Inc............................................Louisiana River Consulting International, Inc..............................Delaware River Engineered Systems, Inc....................................Louisiana River Environmental Consulting, Inc..............................Louisiana SFPP, L.P........................................................Delaware Trailblazer Pipeline Company.....................................Illinois Trimark Engineers/Constructors, Inc..............................Pennsylvania Western Plant Services, Inc......................................California Woodland Marine, Inc.............................................Louisiana |
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on (i) Form S-3 (Nos. 333-25995, 333-62155, 333-33726, 333-54616 and 333-55866); (ii) Form S-4, (No. 333-50898); (iii) Form S-8, (No. 333-56343) of Kinder Morgan Energy Partners, L.P. of our report dated February 14, 2001 relating to the financial statements, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP Houston, Texas March 13, 2001 |