-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AwKlqERTKeN1kEgZdBifttiu4+SBs+wqKI5BP0lq8x0a7H93Jec4wYRChw1uxy1u RnYdfzHGqN2ZGRIa+2hsHw== 0001022321-97-000006.txt : 19970409 0001022321-97-000006.hdr.sgml : 19970409 ACCESSION NUMBER: 0001022321-97-000006 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970407 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENESIS ENERGY LP CENTRAL INDEX KEY: 0001022321 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM BULK STATIONS & TERMINALS [5171] IRS NUMBER: 760513049 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-12295 FILM NUMBER: 97575900 BUSINESS ADDRESS: STREET 1: 500 DALLAS SUITE 3200 STREET 2: ONE ALLEN CENTER CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136465466 MAIL ADDRESS: STREET 1: 500 DALLAS SUITE 3200 CITY: HOUSTON STATE: TX ZIP: 77002 10-K405/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K/A AMENDMENT NO. 1 X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-12295 GENESIS ENERGY, L.P. (Exact name of registrant as specified in its charter) Delaware 76-0513049 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 500 Dallas, Suite 3200, Houston, Texas 77002 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 646-1200 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- -------------------- Common Units New York Stock Exchange 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. ---------- 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 March 14, 1997, was approximately $184.4 million. GENESIS ENERGY, L.P. 1996 FORM 10-K ANNUAL REPORT Table of Contents Page ---- Part I Item 1. Business 3 Item 2. Properties 11 Item 3. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Part II Item 5. Market for Registrant's Common Units and Related Security Holder Matters 11 Item 6. Selected Financial Data 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 8. Financial Statements and Supplementary Data 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 18 Part III Item 10. Directors and Executive Officers of the Registrant 18 Item 11. Executive Compensation 20 Item 12. Security Ownership of Certain Beneficial Owners and Management 22 Item 13. Certain Relationships and Related Transactions 23 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 24 PART I Item 1. Business General Genesis Energy, L.P., a Delaware limited partnership, was formed in December 1996. With the proceeds of an offering of common limited partnership units ("Common Units") to the public, Genesis Energy, L.P., through its affiliated limited partnership, Genesis Crude Oil, L.P., (collectively the "Partnership" or "Genesis") acquired the crude oil gathering and marketing operations of Basis Petroleum, Inc. ("Basis") and the crude oil gathering, marketing and pipeline operations of Howell Corporation and its subsidiaries ("Howell"). The Partnership is one of the largest independent gatherers and marketers of crude oil in North America. Genesis' operations are concentrated in Texas, Louisiana, Alabama, Florida, Mississippi, New Mexico, Kansas and Oklahoma. In its gathering and marketing business, Genesis is principally engaged in the purchase and aggregation of crude oil at the wellhead and the bulk purchase of crude oil at pipeline and terminal facilities for resale at various points along the crude oil distribution chain, which extends from the wellhead to aggregation and terminal stations, refineries and other end markets (the "Distribution Chain"). The Partnership's gathering and marketing margins are generated by buying crude oil at competitive prices, efficiently transporting or exchanging the crude oil along the Distribution Chain and marketing the crude oil to refineries or other customers at favorable prices. In addition to its gathering and marketing business, Genesis' operations include transportation of crude oil at regulated published tariffs on its four common carrier pipeline systems. On a pro forma basis, in 1996 the gathering and marketing operations contributed approximately 67% of the Partnership's total gross margin and the pipeline operations contributed the remaining 33%. Genesis currently purchases approximately 120,000 bpd of crude oil at the wellhead from approximately 7,100 leases. Genesis utilizes its trucking fleet of approximately 100 tractor-trailers and its gathering lines to transport crude oil purchased at the wellhead to pipeline injection points, terminals and refineries for sale to its customers. It also transports purchased crude oil on trucks, barges and pipelines owned and operated by third parties. In addition, as part of its gathering and marketing business, Genesis makes purchases of crude oil in bulk at pipeline and terminal facilities for resale to refineries or other customers. When opportunities arise to increase margin or to acquire a grade of crude oil that more nearly matches the specifications for crude oil the Partnership is obligated to deliver, Genesis exchanges crude oil with third parties through exchange or buy/sell agreements. Genesis currently transports a total of approximately 86,000 barrels per day on its three principal common carrier crude oil pipeline systems and related gathering lines. These systems are the Texas System, the Jay System extending between Florida and Alabama and the Mississippi System extending between Mississippi and Louisiana. Additionally, Genesis owns an interstate pipeline in the Gulf of Mexico serving Main Pass Block 64. Approximately 2.2 million barrels of associated storage capacity is owned by Genesis, of which approximately 1.0 million barrels are available for use. Genesis Energy, L.L.C. (the "General Partner"), a Delaware limited liability company, serves as the sole general partner of Genesis Energy, L.P., and as the operating general partner of its affiliated limited partnership, Genesis Crude Oil, L.P. (GCOLP). The General Partner is owned 54% by Basis, a wholly-owned subsidiary of Salomon Inc and 46% by Howell Crude Oil Company, a wholly-owned subsidiary of Howell Corporation. Basis also owns 1,163,700 subordinated limited partner units in GCOLP, representing 10.58% of GCOLP. Howell owns 991,300 subordinated limited partner units in GCOLP, representing 9.01% of GCOLP. These subordinated limited partner interests are hereinafter referred to as Subordinated OLP Units. Announced Sale of Basis On March 17, 1997, Salomon Inc announced that it had entered into a letter of intent to sell 100% of the stock of Basis to Valero Energy Corporation. The parties expect the transaction to close in May 1997. Prior to the transaction, Basis will convey its interests in the Partnership and in the General Partner to Salomon Inc. Management is currently evaluating the impact that such a sale may have on the Partnership. Salomon Inc, who controls the General Partner through their indirect 54% ownership, does not anticipate that the transaction with Valero will have a material impact on the Partnership. Business Overview In its gathering and marketing business, the Partnership seeks to purchase and sell crude oil at points along the Distribution Chain where gross margins can be achieved. Genesis generally purchases crude oil at prevailing prices from producers at the wellhead under short-term contracts or in bulk from major oil companies, intermediaries and other third parties. Genesis then transports the crude oil along the Distribution Chain for sale to or exchange with customers. The Partnership's margins from its gathering and marketing operations are generated by the difference between the price of crude oil at the point of purchase and the price of crude oil at the point of sale, minus the associated costs of aggregation and transportation. The Partnership utilizes computerized management information systems to identify the optimal combination of transportation and exchange transactions expected to result in the greatest margin for each barrel of crude oil purchased. Genesis generally enters into an exchange transaction only when the cost of the exchange is less than the alternative costs that it would otherwise incur in transporting or storing the crude oil. In addition, Genesis often exchanges one grade of crude oil for another to maximize margins or meet contract delivery requirements. Generally, as Genesis purchases crude oil, it simultaneously establishes a margin by selling crude oil for physical delivery to third party users, such as independent refiners or major oil companies, or by entering into a future delivery obligation with respect to futures contracts on the New York Mercantile Exchange ("NYMEX"). Through these transactions, the Partnership seeks to maintain a position that is substantially balanced between crude oil purchases, on the one hand, and sales or future delivery obligations, on the other hand. It is the Partnership's policy not to acquire and hold crude oil, futures contracts or other derivative products for the purpose of speculating on crude oil price changes. Gross margin from gathering, marketing and pipeline operations varies from period to period, depending to a significant extent upon changes in the supply and demand of crude oil and the resulting changes in U.S. crude oil inventory levels. In general, gathering and marketing gross margin increases when crude oil inventories decline, resulting in crude oil for prompt (generally the next month) delivery being priced at an increased premium over crude oil for future delivery. During periods of low crude oil inventories, however, pipeline margins in the Partnership's operating areas generally decrease because there is less crude oil available for shipment and storage in Genesis' pipeline systems as large supplies of crude oil are directed to markets located away from the U.S. Gulf Coast. Conversely, when crude oil inventories are high, gathering and marketing margins narrow, but crude oil shipment and storage opportunities result in increased pipeline margins as crude oil is not directed away from the U.S. Gulf Coast. Accordingly, the aggregate gross margins from pipeline operations generally tend to be countercyclical to those from gathering and marketing. The General Partner believes that the countercyclical nature of the two businesses will tend to have a stabilizing effect on Genesis' cash flows from operations. Through the pipeline systems it owns and operates, the Partnership transports crude oil for itself and others pursuant to tariff rates regulated by the Federal Energy Regulatory Commission ("FERC") or the Texas Railroad Commission. Accordingly, the Partnership offers transportation services to any shipper of crude oil, provided that the products tendered for transportation satisfy the conditions and specifications contained in the applicable tariff. Pipeline revenues and gross margins are primarily a function of the level of throughput and storage activity. The margins from the Partnership's pipeline operations are generated by the difference between the regulated published tariff and the fixed and variable costs of operating the pipeline. The pipeline transportation business has considerable flexibility with respect to sources of crude oil and does not depend on any specific wellhead source. Genesis believes that the areas served by its pipeline systems will continue to produce crude oil in volumes that are sufficient to maintain or increase its pipeline throughput for the foreseeable future. Management Information and Risk Management Systems Genesis' computerized management information and risk management systems are integral to each stage of the gathering, transportation and marketing operations. Hand-held computer terminals combined with modems and satellite equipment are used by field personnel to provide data to Genesis' marketing personnel about crude oil purchases on a daily basis. Using this information from the field, management is able to monitor crude oil volumes, grades, locations and timing of delivery on a daily basis and to transmit instructions to field personnel regarding crude oil pick-up schedules and truck routing to crude oil injection stations and end markets. Using information transmitted from field personnel and representatives to its computers, Genesis has developed a database that includes volumes of crude oil purchases, volumes and prices under contracts with producers and customers, accounting balances, transportation costs and alternatives, and marketing and exchange opportunities. Genesis uses this database to support its management information and risk management systems. Risk management strategies, including those involving price hedges using NYMEX futures contracts, have become increasingly important in creating and maintaining margins, although the costs of such strategies are not billed to the Partnership's customers. Such hedging techniques require significant resources dedicated to managing futures positions. By analyzing information in its database through internally developed software programs, Genesis is able to monitor crude oil volumes, grades, locations and delivery schedules and to coordinate marketing and exchange opportunities, as well as NYMEX hedging positions. This coordination enables the Partnership to net positions internally, thereby reducing NYMEX commissions, and further ensures that Genesis' NYMEX hedging activities are consistent with its business objectives. Producer Services Crude oil purchasers who buy from producers compete on the basis of competitive prices and highly responsive services. Through its team of crude oil purchasing representatives, Genesis maintains ongoing relationships with more than 700 producers. The Partnership believes that its ability to offer high-quality field and administrative services to producers will be a key factor in its ability to maintain volumes of purchased crude oil and to obtain new volumes. High-quality field services include efficient gathering capabilities, availability of trucks, willingness to construct gathering pipelines where economically justified, timely pickup of crude oil from tank batteries at the lease or production point, accurate measurement of crude oil volumes received, avoidance of spills and effective management of pipeline deliveries. Accounting and other administrative services include securing division orders (statements from interest owners affirming the division of ownership in crude oil purchased by the Partnership), providing statements of the crude oil purchased each month, disbursing production proceeds to interest owners and calculation and payment of ad valorem and production taxes on behalf of interest owners. In order to compete effectively, the Partnership must maintain records of title and division order interests in an accurate and timely manner for purposes of making prompt and correct payment of crude oil production proceeds, together with the correct payment of all severance and production taxes associated with such proceeds. In 1996, with its staff of division order specialists, Genesis distributed monthly payments to approximately 29,000 interest owners. Credit Genesis' credit standing is a major consideration for parties with whom Genesis does business. At times, in connection with its crude oil purchases or exchanges, Genesis is required to furnish guarantees or letters of credit. In most purchases from producers and most exchanges, an open line of credit is provided by the seller up to a dollar limit, with credit support required for amounts in excess of the limit. In connection with the purchase, sale or exchange of crude oil, subject to Genesis' compliance with specified terms and conditions, Salomon Inc has agreed in a Master Credit Support Agreement to provide certain amounts of credit support until December 31, 1999, in the form of guarantees from time to time at the Partnership's request. See Note 8 of Notes to Consolidated Financial Statements. When Genesis markets crude oil, it must determine the amount, if any, of the line of credit to be extended to any given customer. If Genesis determines that a customer should receive a credit line, it must then decide on the amount of credit that should be extended. Since typical Genesis sales transactions can involve tens of thousands of barrels of crude oil, the risk of nonpayment and nonperformance by customers is a major consideration in Genesis' business. Management believes that most of Genesis' sales are made to creditworthy entities or entities with adequate credit support. Credit review and analysis are also integral to Genesis' leasehold purchases. Payment for all or substantially all of the monthly leasehold production is sometimes made to the operator of the lease. The operator, in turn, is responsible for the correct payment and distribution of such production proceeds to the proper parties. In these situations, Genesis must determine whether the operator has sufficient financial resources to make such payments and distributions and to indemnify and defend Genesis in the event any third party should bring a protest, action or complaint in connection with the ultimate distribution of production proceeds by the operator. Competition In the various business activities described above, the Partnership is in competition with a number of major oil companies and smaller entities. There is intense competition among all participants in the business for leasehold purchases of crude oil. The number and location of the Partnership's pipeline systems and trucking facilities give the Partnership access to a substantial volume of domestic crude oil production throughout its area of operations. The Partnership also has considerable flexibility in marketing the volumes of crude oil which it purchases, without dependence on any single customer or transportation or storage facility. The Partnership's principal competitors in the purchase of leasehold crude oil production are Koch Oil Company, Scurlock Permian Oil Company, Texaco Trading & Transportation Co., Inc., and EOTT Energy Partners, L.P. Competitive factors include price, range and quality of services, knowledge of products and markets and capabilities of risk management systems. Genesis' most significant competitors in its pipeline operations are primarily common carrier and proprietary pipelines owned and operated by major oil companies, large independent pipeline companies and other companies in the areas where the Mississippi and Texas Systems deliver crude oil. The Jay System and the Main Pass System operate in areas not currently served by pipeline competitors. Competition among common carrier pipelines is based primarily on posted tariffs, quality of customer service and proximity to refineries and connecting pipelines. The Partnership believes that high capital costs, tariff regulation and problems in acquiring rights-of-way make it unlikely that other competing crude oil pipeline systems comparable in size and scope to Genesis' pipelines will be built in the same geographic areas in the near future, provided that Genesis' pipelines continue to have available capacity to satisfy demands of shippers and that its tariffs remain at reasonable levels. Employees To carry out various purchasing, gathering, transporting and marketing activities, the General Partner employs approximately 260 employees, including management, truck drivers and other operating personnel, division order analysts, accountants, tax specialists, contract administrators, schedulers, marketing and credit specialists and employees involved in Genesis' pipeline operations. None of such employees is represented by labor unions, and the General Partner believes that the relationships with such employees are good. Additional services will be performed on behalf of the Partnership pursuant to a Corporate Services Agreement with Basis. Environmental Matters The Partnership is subject to federal and state laws and regulations relating to the protection of the environment. At the federal level such laws include, among others, the Clean Air Act, 42 U.S.C. Section 7401 et seq., as amended; the Clean Water Act, 33 U.S.C. Section 1251 et seq., as amended; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., as amended; the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended; and the National Environmental Policy Act, 42 U.S.C. Section 4321 et seq., as amended. Although compliance with such laws has not had a significant effect on Genesis' business, such compliance in the future could prove to be costly, and there can be no assurance that the Partnership will not incur such costs in material amounts. The Clean Air Act regulates, among other things, the emission of volatile organic compounds in order to minimize the creation of ozone. Such emissions may occur from the handling or storage of crude oil. The required levels of emission control are established in state air quality control implementation plans. Both federal and state law impose substantial penalties for violation of these applicable requirements. The Clean Water Act controls, among other things, the discharge of oil and derivatives into certain surface waters. The Clean Water Act provides penalties for any discharges of crude oil in harmful quantities and imposes liability for the costs of removing an oil spill. State laws for the control of water pollution also provide varying civil and criminal penalties and liabilities in the case of a release of crude oil in surface waters or into the ground. Federal and state permits for water discharges may be required. The Oil Pollution Act of 1990 ("OPA"), as amended by the Coast Guard Authorization Act of 1996, requires operators of offshore facilities to provide financial assurance in the amount of $35 million to cover potential environmental cleanup and restoration costs. This amount is subject to upward regulatory adjustment. The Resource Conservation and Recovery Act regulates, among other things, the generation, transportation, treatment, storage and disposal of hazardous wastes. Transportation of petroleum, petroleum derivatives or other commodities and maintenance activities may invoke the requirements of the federal statute, or state counterparts, which impose substantial penalties for violation of applicable standards. The Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), also known as the "Superfund" law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons that are considered to have contributed to the release of a "hazardous substance" into the environment. These persons include the owner or operator of the disposal site or sites where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources, and it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. In the ordinary course of the Partnership's operations, substances may be generated or handled which fall within the definition of "hazardous substances." Under the National Environmental Policy Act ("NEPA"), a federal agency, in conjunction with a permittee, may be required to prepare an environmental assessment or a detailed environmental impact study before issuing a permit for a pipeline extension or addition that would significantly affect the quality of the environment. Should an environmental impact study or assessment be required for any proposed pipeline extensions or additions, the effect of NEPA may be to delay or prevent construction or to alter the proposed location, design or method of construction. The Partnership is subject to similar state and local environmental laws and regulations that may also address additional environmental considerations of particular concern to a state. As part of the partnership formation, Basis and Howell are responsible for certain environmental conditions related to their ownership and operation of their respective assets transferred to the Partnership and for any environmental liabilities which Basis or Howell may have assumed from prior owners of these assets. Neither Basis nor Howell, however, will be required to indemnify the Partnership for any liabilities resulting from an invasive environmental site investigation unless such investigation was undertaken as a result of (i) certain requirements imposed by a lending institution, (ii) any governmental or judicial proceeding, (iii) any disposition of assets, (iv) a discovery in the ordinary course of business of materials, or a discovery in prudent and customary business practice of the possible presence of such materials, that require regulatory disclosure or (v) any complaints by property owners or public groups. In addition, the Partnership has assumed responsibility for the first $25,000 per occurrence as to any environmental liability, up to an annual aggregate of $200,000 and a total maximum liability of $600,000. The Partnership has no knowledge of any outstanding liabilities or claims relating to safety and environmental matters, individually or in the aggregate, which would have a material adverse effect on the Partnership's financial position or results of operations and that Partnership assets are in compliance in all material respects with all applicable environmental laws and regulations. No assurance can be given, however, as to the amount or timing of future expenditures for environmental remediation or compliance, and actual future expenditures may be different from the amounts currently anticipated. Regulation Pipeline regulation Interstate Regulation Generally. The interstate common carrier pipeline operations of the Jay, Mississippi and Main Pass Systems are subject to rate regulation by FERC under the Interstate Commerce Act ("ICA"). The ICA requires, among other things, that to be lawful, petroleum pipeline rates be just and reasonable and not unduly discriminatory. The ICA permits challenges to proposed new or changed rates by protest and to rates that are already final and in effect by complaint, and provides that upon an appropriate showing a complainant may obtain reparations for damages sustained for a period of up to two years prior to the filing of a complaint. Howell is responsible for any ICA liabilities with respect to activities or conduct during periods prior to the closing of the Partnership's initial public offering of Common Units, and the Partnership is responsible for ICA liabilities with respect to activities or conduct thereafter. The Partnership adopted all of Howell's tariffs in effect on the date of the transfer of the assets to Genesis. None of the tariffs have been subjected to a protest or complaint by any shipper or other interested party. In general, the ICA requires that petroleum pipeline rates be cost based and permits them to generate operating revenues on the basis of projected volumes sufficient to cover, among other things, the following: (i) operating expenses, (ii) depreciation and amortization, (iii) federal and state income taxes determined on a separate company basis and adjusted or "normalized" to reflect the impact of timing differences between book and tax accounting for certain expenses, primarily depreciation and (iv) an overall allowed rate of return on the pipeline's "rate base." Generally, rate base is a measure of investment in or value of the common carrier assets which are used and useful in providing the regulated services. Energy Policy Act of 1992 and Subsequent Developments. In October of 1992 Congress passed the Energy Policy Act of 1992 ("Energy Policy Act"). The Energy Policy Act is significant in that it requires FERC to promulgate regulations establishing a simplified and generally applicable ratemaking methodology under the ICA which will streamline FERC procedures to avoid unnecessary costs and delays. As a fundamental part of this simplification and streamlining of procedures, the Energy Policy Act deemed pipeline rates in effect for the 365- day period ending on the date of enactment of the Energy Policy Act 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. In regard to these so-called "grandfathered" rates, the Energy Policy Act provides that such grandfathered rates may only be challenged under the following limited circumstances: (i) a substantial change has occurred since enactment in either the economic circumstances of the oil pipeline or the nature of the services which were a basis for the rate; (ii) the complainant was contractually barred from challenging the rate prior to enactment (in which event, following the expiration of the contractual bar, the complainant has a very limited time period to lodge a complaint); or (iii) the rate is unduly discriminatory or preferential. FERC responded to the requirement that it promulgate rules simplifying and streamlining the ratemaking process in a series of three related rulemaking proceedings, the principal provisions of which took effect on January 1, 1995. On October 22, 1993, FERC first responded to this mandate by issuing Order No. 561, which adopts a new indexing rate methodology for petroleum pipelines. Under the new regulations, which were effective January 1, 1995, petroleum pipelines are able to change their rates within prescribed ceiling levels that are tied to the Producer Price Index for Finished Goods, minus one percent. Rate increases made pursuant to the index will be subject to protest, 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. FERC's regulations provide, and a recent FERC order in a contested pipeline rate proceeding affirms, that shippers may not challenge that portion of the pipeline's rates which was grandfathered under the Energy Policy Act whenever the pipeline files for its annual indexed rate increase; such challenges are limited to the amount of the increase only unless, in a separate showing, the complainant satisfies the Energy Policy Act's threshold requirement to show that a "substantial change" has occurred in the economic circumstances or the nature of the pipeline's services. Rate decreases are mandated under the new regulations if the index decreases and the carrier has been collecting rates equal to the rate ceiling. The new indexing methodology can be applied to any existing rate, including in particular all "grandfathered" rates, but also applies to rates under investigation. If such rate is subsequently adjusted, the ceiling level established under the index must be likewise adjusted. In Order No. 561, FERC emphasized that the combination of grandfathered rates plus use of the new indexation methodology is expected to be the generally prevailing methodology. The new indexation methodology is expected to cover all normal cost increases. Cost-of-service ratemaking, while still available to the pipeline for certain rate increases and to establish initial rates for new service, is generally disfavored except in specified circumstances. In this regard, the carrier may not use the cost-of-service methodology to change an existing rate unless the pipeline can demonstrate that there is a substantial divergence between the actual cost experienced by the carrier and the rate resulting from the index such that the rate at the ceiling level would preclude the carrier from being able to charge a just and reasonable rate. Similarly, any party complaining of any existing indexed rate or challenging any indexed rate change (other than a grandfathered rate) must provide a reasonable basis for FERC to conclude that there may be a substantial divergence between actual costs experienced and the rate resulting from the index such that the carrier's rates are excessive and, therefore, unjust and unreasonable, and should be investigated in a cost-of-service proceeding. FERC regulations also allow rate changes to occur through market- based rates (for pipeline services which have been found to be eligible for such rates) and through settlement rates, which are rates unanimously agreed by the carrier and all shippers as appropriate. In respect of new facilities and new services requiring the establishment of new, initial rates, the carrier may rely on either cost-of-service ratemaking or may initiate service under rates which have been contractually agreed with at least one nonaffiliated shipper; however, other shippers may protest any new rates established in this manner, in which event a cost-of-service showing is required. These alternative ratemaking methodologies to FERC's indexing methodology were finalized on October 28, 1994, when FERC issued Order Nos. 571 and 572. In Order No. 571, FERC articulated cost-of-service filing and reporting requirements to be applicable to a pipeline's initial rates and to situations where indexing is determined to be inappropriate. Order No. 571 also adopted rules for the establishment of revised depreciation rates, and revised the information required to be reported by pipelines in their FERC Form No. 6, "Annual Report for Oil Pipelines." Order No. 572 establishes the filing requirements and procedures that must be followed when a pipeline seeks to charge market-based rates. On May 10, 1996, the Court of Appeals for the District of Columbia Circuit affirmed Order Nos. 561, 571 and 572. The Court held that by establishing a general indexing methodology along with limited exceptions to indexed rates, FERC had fulfilled its responsibilities under the Energy Policy Act and reasonably balanced its dual responsibilities of ensuring just and reasonable rates and streamlining ratemaking through generally applicable procedures. Among other things, the Court affirmed FERC's interpretation of the Energy Policy Act respecting challenges to grandfathered rates in the context of rate increase filings using the indexation methodology. Because of the novelty and uncertainty surrounding the indexing methodology as well as the numerous untested issues associated with the trended original cost methodology and light-handed regulation, the General Partner is unable to predict with certainty whether, how or the extent to which FERC may apply these methodologies to the Jay, Mississippi and Main Pass Systems, which FERC regulates. The General Partner adopted Howell's preexisting tariffs and rates pertaining to the Jay, Mississippi and Main Pass Systems and intends to rely on the indexation procedures available under FERC regulations. Nevertheless, by protest, complaint or shipper challenge under the Energy Policy Act to the Partnership's grandfathered or indexed rates, the Partnership could become involved in a cost-of-service proceeding before FERC and be required to defend and support its rates based on costs. In any such cost-of-service rate proceeding involving rates of the FERC-regulated Jay, Mississippi and Main Pass Systems, FERC would be permitted to inquire into and determine all relevant matters including such issues as (i) the appropriate capital structure to be utilized in calculating rates, (ii) the appropriate rate of return, (iii) the rate base, including the proper starting rate base, (iv) the rate design and (v) the proper allowance for federal and state income taxes. In addition to the regulatory considerations noted above, it is expected that the interstate common carrier pipeline tariff rates will continue to be constrained by competitive and other market factors. Texas intrastate regulation The intrastate common carrier pipeline operations of the Partnership in Texas are subject to regulation by the Texas Railroad Commission. The applicable Texas statutes require that pipeline rates be non-discriminatory and provide a fair return on the aggregate value of the property of a common carrier used and useful in the services performed after providing reasonable allowance for depreciation and other factors and for reasonable operating expenses. There is no case law interpreting these standards as used in the applicable Texas statutes. This is because historically, as well as currently, the Texas Railroad Commission has not been aggressive in regulating common carrier pipelines such as those of the Partnership and has not investigated the rates or practices of such carriers in the absence of shipper complaints, which have been few and almost invariably settled informally. Given this history, although no assurance can be given that the tariffs to be charged by the Partnership would ultimately be upheld if challenged, the General Partner believes that the tariffs now in effect can be sustained. Howell is responsible for any liabilities under the applicable Texas statutes with respect to activities or conduct during periods prior to the closing, and the Partnership is responsible for such liabilities with respect to activities or conduct thereafter. The Partnership adopted the tariffs in effect on the date of the closing of the Partnership's initial public offering of Common Units. Pipeline Safety Regulation The Partnership's crude oil pipelines are subject to construction, installation, operating and safety regulation by the Department of Transportation ("DOT") and various other federal, state and local agencies. The Pipeline Safety Act of 1992, among other things, amends the Hazardous Liquid Pipeline Safety Act of 1979 ("HLPSA") in several important respects. It requires the Research and Special Programs Administration ("RSPA") of DOT to consider environmental impacts, as well as its traditional public safety mandate, when developing pipeline safety regulations. In addition, the Pipeline Safety Act mandates the establishment by DOT of pipeline operator qualification rules requiring minimum training requirements for operators, and requires that pipeline operators provide maps and records to RSPA. It also authorizes RSPA to require that pipelines be modified to accommodate internal inspection devices, to mandate the installation of emergency flow restricting devices for pipelines in populated or sensitive areas, and to order other changes to the operation and maintenance of petroleum pipelines. The Partnership has conducted hydrostatic testing of most segments. Significant expenses could be incurred in the future if additional safety measures are required or if safety standards are raised and exceed the current pipeline control system capabilities. States are largely preempted from regulating pipeline safety by federal law but may assume responsibility for enforcing federal intrastate pipeline regulations and inspection of intrastate pipelines. In practice, states vary considerably in their authority and capacity to address pipeline safety. The Partnership does not anticipate any significant problems in complying with applicable state laws and regulations in those states in which it operates. The Partnership's crude oil pipelines are also subject to the requirements of the Federal Occupational Safety and Health Act ("OSHA") and comparable state statutes. The General Partner believes that the Partnership's crude oil pipelines have been operated in substantial compliance with OSHA requirements, including general industry standards, record keeping requirements and monitoring of occupational exposure to regulated substances. In general, the General Partner expects to increase the Partnership's expenditures in the future to comply with higher industry and regulatory safety standards such as those described above. Such expenditures cannot be accurately estimated at this time, although the General Partner does not expect that such expenditures will have a material adverse impact on the Partnership, except to the extent additional testing requirements or safety measures are imposed. Trucking regulation The Partnership will operate its fleet of trucks as a private carrier. Although a private carrier that transports property in interstate commerce is not required to obtain operating authority from the ICC, the carrier is subject to certain motor carrier safety regulations issued by the DOT. The trucking regulations cover, among other things, driver operations, keeping of log books, truck manifest preparations, the placement of safety placards on the trucks and trailer vehicles, drug testing, safety of operation and equipment, and many other aspects of truck operations. The Partnership is also subject to OSHA with respect to its trucking operations. Commodities regulation The Partnership's price risk management operations are subject to constraints imposed under the Commodity Exchange Act and the rules of the NYMEX. The futures and options contracts that are traded on the NYMEX are subject to strict regulation by the Commodity Futures Trading Commission. Information Regarding Forward-Looking Information The statements in this Annual Report on Form 10-K that are not historical information are 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. Although the Partnership believes that its expectations regarding future events are based on reasonable assumptions, it can give no assurance that its goals will be achieved or that its expectations regarding future developments will prove to be correct. Important factors that could cause actual results to differ materially from those in the forward looking statements herein include changes in regulations, the Partnership's success in obtaining additional lease barrels, developments relating to possible acquisitions or business combination opportunities, the success of the Partnership's risk management activities and conditions of the capital markets and equity markets during the periods covered by the forward looking statements. Item 2. Properties The Partnership owns and operates three common carrier crude oil pipeline systems onshore and one offshore common carrier crude oil pipeline. The onshore pipelines and related gathering systems consist of the 553-mile Texas system, the 117-mile Jay System extending between Florida and Alabama and the 281-mile Mississippi System extending between Mississippi and Louisiana. The offshore pipeline is located in the Gulf of Mexico. It is 5.5 miles long and extends from Main Pass Block 64 to a connection with another pipeline. The Partnership also owns approximately 2.2 million barrels of storage capacity associated with the onshore pipelines. These storage capacities include approximately 200,000 barrels each on the Mississippi and Jay Systems and 1.6 million barrels on the Texas System, primarily at the Satsuma terminal in Houston, Texas. In addition to transporting crude oil by pipeline, the Partnership transports crude oil through a fleet of owned and leased tractors and trailers. At December 31, 1996, the trucking fleet consisted of approximately 100 tractor- trailers. The trucking fleet generally hauls the crude oil to one of the 110 pipeline injection stations owned or leased by the Partnership. Item 3. Legal Proceedings There is presently no pending or threatened litigation to which the Partnership is a party. During 1996 and 1995, various suits were filed in different jurisdictions against numerous purchasers of crude oil production alleging price-fixing and other discriminatory practices in connection with the purchase of crude oil production at posted prices. The premise of these suits generally is that the use of posted prices in purchasing crude oil has resulted in the underpayment of the plaintiffs, and other interest owners, for the crude oil purchased and that purchasers of crude oil have conspired to accomplish this result. Basis or Howell, as well as major competitors of Genesis, were named in several of these suits. Class certification either has been denied or not yet granted in the cases filed against Basis or Howell. No assurance can be given that Genesis will not be named as a defendant in these cases or that the prosecution of these claims will not have an impact on industry practices and profitability in the crude oil gathering and marketing business. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the one month ended December 31, 1996. PART II Item 5. Market for Registrant's Common 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 Composite Tape, and the amount of cash distributions paid per Common Unit. Price Range -------------------- Cash High Low Distributions -------- -------- ------------- One Month Ended December 31, 1996 $21.125 $20.250 $ - As of January 31, 1997, there were approximately 12,000 record holders and beneficial owners (held in street name) of the Partnership's Common Units. There is no established public trading market for the Partnership's Subordinated OLP Units. The Partnership will distribute 100% of its Available Cash as defined in the Partnership Agreement within 45 days after the end of each quarter to Unitholders of record and to the General Partner. Available Cash consists generally of all of the cash receipts less cash disbursements of the Partnership adjusted for net changes to reserves. The full definition of Available Cash is set forth in the Partnership Agreement and amendments thereto, a form of which is filed as an exhibit hereto. Distributions of Available Cash to the Subordinated Unitholders will be subject to the prior rights of the Common Unitholders to receive the Minimum Quarterly Distribution ("MQD") for each quarter during the subordination period, which will not end earlier than December 31, 2001, and to receive any arrearages in the distribution of the MQD on the Common Units for prior quarters during the subordination period. In connection with the Partnership's initial public offering of Common Units in December 1996, Salomon Inc and the Partnership entered into a Distribution Support Agreement pursuant to which, among other things, Salomon Inc agreed that it would contribute up to $17.6 million to the Partnership in exchange for Additional Partnership Interests ("APIs"), if necessary, to support the Partnership's ability to pay the MQD on Common Units. Salomon Inc's obligation to purchase APIs will end no earlier than December 31, 1999 and end no later than December 31, 2001, with the actual termination subject to the levels of distributions that have been made prior to the termination date. The Partnership expects to declare a cash distribution to the Common Unitholders and the General Partner that will be paid on or about May 15, 1997. Item 6. Selected Financial Data (Unaudited) (in thousands, except per unit and operating data) The table below includes selected financial data for the Partnership for the one month ended December 31, 1996 and includes the results of operations acquired from Basis and Howell. Since Basis has the largest ownership interest in the Partnership, the net assets acquired from Basis have been recorded at their historical carrying amounts and the crude oil gathering and marketing division of Basis has been treated as the Predecessor and the acquirer of Howell's operations. The acquisition of Howell has been treated as a purchase for accounting purposes.
Eleven Year One Month Months Ended Ended Ended Year Ended December 31,December 31,November 30, December 31, ------------------------------------------- 1996 1996 1996 1995 1994 1993 1992 ---------- -------- ---------- ---------- ---------- --------- ---------- (Pro forma) (Predecessor) (Predecessor) (Unaudited) Income Statement Data: Revenues: Gathering and marketing revenues $4,565,834 $370,559 $3,598,107 $3,440,065 $1,830,721 $2,171,056 $2,705,077 Pipeline revenues 16,780 1,426 - - - - - ---------- -------- ---------- ---------- ---------- ---------- ---------- Total revenues 4,582,614 371,985 3,598,107 3,440,065 1,830,721 2,171,056 2,705,077 Cost of sales: Crude cost 4,526,363 366,723 3,573,086 3,409,759 1,806,241 2,153,901 2,687,226 Field operating costs 15,092 1,290 6,744 7,152 7,778 8,046 9,783 Pipeline operating costs 4,978 463 - - - - - ---------- ------- ---------- --------- ---------- ---------- ---------- Total cost of sales 4,546,433 368,476 3,579,830 3,416,911 1,814,019 2,161,947 2,697,009 ---------- -------- ---------- --------- ---------- ---------- ---------- Gross margin 36,181 3,509 18,277 23,154 16,702 9,109 8,068 General and administrative expenses 9,470 1,363 3,316 3,658 3,858 4,111 4,960 Depreciation and amortization 6,834 518 1,396 4,815 7,530 7,947 8,611 ---------- -------- ---------- --------- --------- ---------- ---------- Operating income 19,877 1,628 13,565 14,681 5,314 (2,949) (5,503) Interest income (expense) 56 56 294 173 (685) (1,215) (1,691) Other income (expense) (74) - (83) (197) 82 122 93 ---------- -------- ---------- --------- --------- ---------- ---------- Net income (loss) before minority interests 19,859 1,684 13,776 14,657 4,711 (4,042) (7,101) Minority interests 3,970 337 - - - - - ---------- -------- ---------- --------- --------- ---------- ---------- Net income (loss) $ 15,889 $ 1,347 $ 13,776 $ 14,657 $ 4,711 $ (4,042)$ (7,101) ========== ======== ========== ========== ========= ========== ========== Net income per common unit $ 1.81 $ 0.15 N/A N/A N/A N/A N/A ========== ======== Balance Sheet Data (at end of period): Current assets $ 410,371 $410,371 N/A $ 279,285 $ 184,253 $ 132,95 $ 324,111 Total assets 509,900 509,900 N/A 283,036 193,367 149,430 349,957 Long-term liabilities - - N/A - - - - Equity of parent - - N/A (8,437) 4,393 15,578 24,824 Minority interest 26,257 26,257 N/A - - - - Partners' capital 85,080 85,080 N/A - - - - Other Data: Maintenance capital expenditures $ 2,535 $ 106 $ 1,100 $ 17 $ 56 $ 122 $ 2,849 EBITDA $ 26,637 $ 2,146 $ 14,878 $ 19,299 $ 12,926 $ 5,120 $ 3,201 Volumes (bpd): Gathering and marketing: Wellhead 116,263 120,553 83,239 83,551 89,788 90,974 93,141 Bulk 174,174 163,645 170,003 190,279 33,595 - - Exchange 288,880 216,709 247,936 248,781 180,924 236,555 270,946 ---------- -------- ---------- --------- --------- ---------- ---------- Total 579,317 500,907 501,178 522,611 304,307 327,529 364,087 Pipeline 86,557 85,874 - - - - - The unaudited pro forma selected financial data of the Partnership includes (a) the historical operating results of the crude oil gathering and marketing operations of Basis, (b) the historical crude gathering, marketing and pipeline transportation operations of Howell and (c) certain pro forma adjustments to the historical results of operations of Basis and Howell as if the Partnership had been formed on January 1, 1996. See Note 2 of Notes to the Consolidated Financial Statements for a description of the pro forma adjustments. Net income (loss) excludes the effect of income taxes and accounting changes for the Predecessor. The General Partner estimates that capital expenditures necessary to maintain the existing asset base at current operating levels will be $3 million each year. EBITDA (earnings before interest expense, income taxes, depreciation and amortization and minority interests) should not be considered as an alternative to net income (loss) (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity of ability to service debt obligations).
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following review of the results of operations and financial condition should be read in conjunction with the Consolidated Financial Statements and Notes thereto. The pro forma results of operations for the years ended December 31, 1996 and 1995 reflect the activities of Genesis Energy, L.P., and its subsidiary (the "Partnership"). The results of operations for the years ended December 31, 1995 and 1994 reflect the activities of the Predecessor. In order to make the comparisons more meaningful, the pro forma results of operations of the Partnership for the year ended December 31, 1996 are compared to the pro forma results of operations for the year ended December 31, 1995 and the historical results of operations of the Predecessor for the year ended December 31, 1995 are compared to the historical results of operations for the year ended December 31, 1994. Results of Operations Selected financial data for this discussion of the results of operations follows, in thousands. Years Ended Years Ended December 31, December 31, ------------------ ----------------- 1996 1995 1995 1994 ------- ------- ------- ------- (Pro forma) (Predecessor) Gross margin Gathering & marketing $24,379 $26,571 $23,154 $16,702 Pipeline $11,802 $14,055 $ - $ - General and administrative expenses $ 9,470 $ 9,148 $ 3,658 $ 3,858 Depreciation and amortization $ 6,834 $10,146 $ 4,815 $ 7,530 Operating income $19,877 $21,332 $14,681 $ 5,314 Interest income (expense) net $ 56 $ - $ 173 $ (685) The profitability of Genesis and the entities from which Genesis was formed depends to a significant extent upon their ability to maximize gross margin. The gross margin from gathering and marketing operations is generated by the difference between the price of crude oil at the point of purchase and the price of crude oil at the point of sale, minus the associated costs of aggregation and transportation. In addition to purchasing crude oil at the wellhead, Genesis purchases crude oil in bulk at major pipeline terminal points and enters into exchange transactions with third parties. These bulk and exchange transactions are characterized by large volumes and narrow profit margins on purchase and sales transactions, and the absolute price levels for crude oil do not necessarily bear a relationship to gross margin, although such price levels significantly impact revenues and cost of sales. Because period-to-period variations in revenues and cost of sales are not generally meaningful in analyzing the variation in gross margin for gathering and marketing operations, such changes are not addressed in the following discussion. Pipeline revenues and gross margins are primarily a function of the level of throughput and storage activity and are generated by the difference between the regulated published tariff and the fixed and variable costs of operating the pipeline. Changes in revenues, volumes and pipeline operating costs, therefore, are relevant to the analysis of financial results of Genesis' pipeline operations and are addressed in the following discussion of pipeline operations of Genesis. Gross margin from gathering, marketing and pipeline operations varies from period to period, depending to a significant extent upon changes in the supply and demand of crude oil and the resulting changes in U.S. crude oil inventory levels. In general, gathering and marketing gross margin increases when crude oil inventories decline, resulting in crude oil for prompt (generally the next month) delivery being priced at an increased premium over crude oil for future delivery. During periods of low crude oil inventories, however, pipeline margins in the Partnership's operating areas generally decrease because there is less crude oil available for shipment and storage in Genesis' pipeline systems as large supplies of crude oil are directed to markets located away from the U.S. Gulf Coast. Conversely, when crude oil inventories are high, gathering and marketing margins narrow, but crude oil shipments and storage opportunities result in increased pipeline margins as crude oil is not directed away from the U.S. Gulf Coast. Accordingly, the aggregate gross margins from pipeline operations generally tend to be countercyclical to those from gathering and marketing. The General Partner believes that the countercyclical nature of the two businesses will tend to have a stabilizing effect on Genesis' cash flows from operations. Pro Forma Year Ended December 31, 1996 Compared with Pro Forma Year Ended December 31, 1995 The following analyses compare the pro forma results of the Partnership for the year ended December 31, 1996 and the year ended December 31, 1995. The pro forma consolidated financial statements of the Partnership reflect the historical operating results of the crude oil gathering and marketing operations of Basis and the crude oil gathering, marketing and pipeline transportation operations of Howell including operations of certain of the crude oil pipelines while they were owned by Exxon Pipeline Company from January 1 to March 31, 1995. Because the Partnership has no long-term debt, the pro forma consolidated results reflect the elimination of interest expense. Income taxes were also eliminated from the pro forma consolidated results as the Partnership will not be subject to federal income taxes. The pro forma consolidated results of operations assume no significant period-to-period changes in Genesis' general and administrative expenses for 1996. Gross Margin. Gathering and marketing gross margin decreased $2.2 million or 8% to $24.4 million for the year ended December 31, 1996, as compared to $26.6 million for the year ended December 31, 1995. Field operating expenses increased by $0.4 million, primarily due to higher fuel costs to operate Genesis' fleet of tractors-trailers. In the first half of 1996, U.S. crude oil inventories were at their historically low levels and refiner demand for prompt delivery of crude oil was strong, leading to substantial backwardation in crude oil prices. This backwardated market caused the sales prices received by the Partnership to increase faster than prices paid to producers at the wellhead, which resulted in increasing gross margins for the six months ended June 30, 1996 as compared to the six months ended June 30, 1995. In the second half of 1996, due to increasing crude oil inventories and reduced refiner demand for prompt delivery of crude oil, the sales prices received by the Partnership decreased faster than the prices paid to producers, particularly as other gathering companies continued to pay higher producer bonuses in an effort to increase market share. As a result of the expiration of a favorable provision in a large crude oil purchase contract with one of the Partnership's principal customers that reduced gross margins by approximately $1.0 million and the third and fourth quarters' unfavorable pricing situation, pro forma gathering and marketing gross margin declined from the first half of 1996 to the second half of 1996. Pipeline gross margin decreased $2.3 million or 16% to $11.8 million for the year ended December 31, 1996, as compared to $14.1 million for the year ended December 31, 1995. Although increased demand for crude oil resulted in increased gross margin in the gathering and marketing operations during the first half of 1996, pipeline operations experienced a countercyclical decline in gross margin during the same period. Pipeline volumes per day increased slightly in the second half of 1996. Low U.S. crude oil inventories resulted in reduced pipeline utilization, which resulted in a decline of 9% in pipeline throughput during 1996 compared to 1995. Pipeline revenues for 1995 include nine months of tank rental fees totaling $0.9 million charged to a third party for usage of storage tanks that the Partnership owns in northwest Houston whereas the 1996 period includes three months of tank rental fees totaling $0.3 million. The Partnership has not received any payments under such lease since March 31, 1996. Depreciation and Amortization. Depreciation and amortization expense decreased $3.3 million or 33% to $6.8 million for the year ended December 31, 1996, as compared to $10.1 million for the year ended December 31, 1995. Of the reduction, $2.4 million resulted from the full amortization in 1995 of costs capitalized from the JM Petroleum Corporation acquisition by Basis in 1991. Year Ended December 31, 1995 (Predecessor) Compared to Year Ended December 31, 1994 (Predecessor) Gross Margin. Gathering and marketing gross margin increased $6.5 million or 39% to $23.2 million for the year ended December 31, 1995, as compared to $16.7 million for the prior year. The increase in gross margin is attributable in part to decreased U.S. crude oil inventories and higher levels of bulk purchases as compared with the prior period. Field operating costs decreased from year to year, primarily due to the full realization in 1995 of the discontinuation of unprofitable operations in nonstrategic areas during 1994. Also, during June 1995 all of the Predecessor's Oklahoma trucking operation assets were sold, which further decreased field operating costs in 1995. General and Administrative Expenses. General and administrative expenses decreased $0.2 million or 5% to $3.7 million for the year ended December 31, 1995, as compared to $3.9 million for the prior year, primarily reflecting ongoing efforts to reduce expenses and to consolidate functions. Depreciation and Amortization. Depreciation and amortization expense decreased $2.7 million or 36% to $4.8 million for the year ended December 31, 1995, as compared to $7.5 million for the prior year. Of this reduction, $2.4 million resulted from the full amortization in 1995 of costs capitalized from the JM Petroleum acquisition in 1991. The remainder of the reduction in 1995 is due to the full amortization of some operating assets. Interest Expense. Net interest expense decreased $0.9 million to net interest income of $0.2 million for the year ended December 31, 1995, as compared to net interest expense of $0.7 million for the prior year. This reduction in interest expense was due primarily to repayment to Basis of cash advances outstanding. Liquidity and Capital Resources Cash Flows Net cash used in operating activities was $0.8 million for the one-month ended December 31, 1996. The decrease in cash flow from the formation of the Partnership is due primarily to increases in inventories. Net cash used in operating activities of the Predecessor was $2.6 million for the eleven months ended November 30, 1996 and net cash provided by operating activities was $21.5 million and $13.8 million for the years ended December 31, 1995 and 1994, respectively. The decrease during 1996 was primarily the result of an increase in accounts receivable of $133.7 million, only partially offset by an increase of $118.9 million in accounts payable. The increases in 1995 and 1994 were primarily due to increases in operating income. Net cash used in investing activities was $74.1 million for the one month ended December 31, 1996. This amount primarily relates to the cash expended to acquire the Howell operations. For the eleven months ended November 30, 1996, net cash used in investing activities for the Predecessor was $2.0 primarily from the purchase of 26 new tractors and NYMEX seats contributed to Genesis. For the years ended December 31, 1995 and 1994, net cash provided by investing activities was $0.5 million and $0.1 million, respectively, primarily as a result of the sale of nonstrategic assets. Net cash provided by financing activities for the one month ended December 31, 1996, was $79.5 million, consisting of the net public offering proceeds and general partner contribution at formation of the Partnership totaling $165.9 million, offset by the distribution to Basis at formation of $87.0 million. Net cash provided by financing activities for the eleven months ended November 30, 1996 and net cash used by financing activities for the years ended December 31, 1995 and 1994 resulted from advances between Basis and the Predecessor. Capital Expenditures Capital expenditures for the one month ended December 31, 1996 and eleven months ended November 30, 1996 were $0.1 million and $1.1 million, respectively. In each period, these expenditures were maintenance capital expenditures. In the years ended December 31, 1995 and 1994, capital expenditures by the Predecessor were less than $0.1 million. Maintenance capital expenditures on a pro forma basis for the years ended December 31, 1996 and 1995 were $2.5 million and $0.7 million, respectively. The Partnership estimates future maintenance capital expenditures to be approximately $3.0 million per year. These expenditures are expected to be primarily for improvements related to the three principal pipeline systems and for the periodic replacement of tractors and trailers in the Partnership's fleet. The Partnership expects to fund its maintenance capital expenditure requirements from internally generated cash. Working Capital and Credit Resources Pursuant to the Master Credit Support Agreement, Salomon Inc will provide transitional credit support in the form of a Guaranty Facility over a period of approximately three years in connection with the purchase, sale or exchange of crude oil in the ordinary course of the Partnership's business with third parties. The aggregate amount of the Guaranty Facility will be limited to $550 million through June 30, 1997, $500 million for the period from July 1, 1997 to December 31, 1997, $400 million for the year ending December 31, 1998 and $300 million for the year ending December 31, 1999 (to be reduced in each case by the amount utilized at any one time pursuant to the Working Capital Facility and by the amount of any obligation to a third party to the extent that such party has a prior security interest in the collateral under the Master Credit Support Agreement). The Partnership will be required to pay a guaranty fee to Salomon Inc which will increase over the three-year period, thereby increasing the cost of the credit support provided to the Partnership under the Guaranty Facility, from a below-market rate to a rate that may be higher than rates paid to independent financial institutions for similar credit. Basis has agreed to use its reasonable best efforts, to the extent it has availability under its uncommitted credit lines, to provide to the Partnership, for a six-month period ending May 31, 1997, a Working Capital Facility of up to $50 million, which amount includes direct cash advances not to exceed $35 million outstanding at any one time and letters of credit that may be required in the ordinary course of the Partnership's business. The total amounts outstanding at any one time under this Working Capital Facility will correspondingly reduce the amounts available under the Guaranty Facility. The interest rate for the Working Capital Facility will equal the cost to Basis of its borrowings as reasonably determined by Basis. Prior to the expiration of the six-month period of availability, it is expected that the Partnership will have arranged for a working capital facility through one or more third party lenders. At December 31, 1996, the aggregate amount of obligations covered by guarantees was $459.6 million, including $260.6 million in payable obligations and $199.0 million in estimated crude oil purchase obligations for January 1997. In addition, the Partnership had letters of credit in the amount of $2.2 million outstanding at December 31, 1996. No direct cash advances were outstanding at year end. Salomon Inc and Basis received a security interest in all the Partnership's receivables, inventories, general intangibles and cash to secure obligations under the Master Credit Support Agreement. There can be no assurance of the availability or the terms of credit for the Partnership. Salomon Inc does not currently foresee any circumstances under which it would provide guarantees or other credit support after the three-year credit support period. In addition, if the General Partner is removed without its consent, Salomon Inc's and Basis' credit support obligations will terminate. In addition, Salomon Inc's and Basis' obligations under the Master Credit Support Agreement may be transferred or terminated early subject to certain conditions. Prior to December 1999, management of the Partnership intends to replace the Guaranty Facility with a letter of credit facility with one or more third party lenders. The Partnership will make its first distribution of Available Cash within 45 days after the end of the first quarter of 1997 to Unitholders of record and to the General Partner. Announced Sale of Basis On March 17, 1997, Salomon Inc announced that it had entered into a letter of intent to sell 100% of the stock of Basis to Valero Energy Corporation. The parties expect the transaction to close in May 1997. Prior to the transaction, Basis will convey its interests in the Partnership and in the General Partner to Salomon Inc. Management is currently evaluating the impact that such a sale may have on the Partnership. Salomon Inc, who controls the General Partner through their indirect 54% ownership, does not anticipate that the transaction with Valero will have a material impact on the Partnership. Item 8. Financial Statements and Supplementary Data The information required hereunder is included in this report as set forth in the "Index to Consolidated Financial Statements" on page 26. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. Part III Item 10. Directors and Executive Officers of the Registrant The Partnership does not directly employ any persons responsible for managing or operating the Partnership or for providing services relating to day-to-day business affairs. The General Partner provides such services and is reimbursed for its direct and indirect costs and expenses, including all compensation and benefit costs. The Board of Directors of the General Partner has established a committee (the "Audit Committee") consisting of individuals who are neither officers nor employees of the General Partner or any affiliate of the General Partner. The committee has the authority to review, at the request of the General Partner, specific matters as to which the General Partner believes there may be a conflict of interest in order to determine if the resolution of such conflict is fair and reasonable to the Partnership. In addition, the committee will review the external financial reporting of the Partnership, will recommend engagement of the Partnership's independent accountants, and will review the Partnership's procedures for internal auditing and the adequacy of the Partnership's internal accounting controls. Directors and Executive Officers of the General Partner Set forth below is certain information concerning the directors and executive officers of the General Partner. All directors of the General Partner are elected annually by the General Partner. All executive officers serve at the discretion of the General Partner. Name Age Position - ----------------- ---- ------------------------------------ Jeffrey R. Serra 40 Director and Chairman of the Board John P. vonBerg 43 Director, Chief Executive Officer and President Mark J. Gorman 42 Director and Executive Vice President Thomas W. Jasper 51 Director Paul N. Howell 78 Director Ronald E. Hall 65 Director Donald H. Anderson 48 Director Herbert I. Goodman 74 Director J. Conley Stone 65 Director John M. Fetzer 43 Senior Vice President, Crude Oil Allyn R. Skelton, II 45 Chief Financial Officer Paul A. Scoff 38 General Counsel and Secretary Allen R. Stanley 53 Vice President, Pipeline Operations Ben F. Runnels 56 Vice President, Trucking Operations Jeffrey R. Serra has served as a Director and Chairman of the Board of the General Partner since December 1996. He is currently Chairman, President and Chief Executive Officer of Basis Petroleum, Inc., formerly Phibro Energy USA, Inc. ("Phibro USA"), and has held this post since January 1, 1992. From 1991 to 1992, Mr. Serra was Vice-Chairman and a Director of Phibro Energy, Inc., a wholly owned subsidiary of Salomon Inc, responsible for all refining and marketing activities. From 1987 to 1991, Mr. Serra was Vice President of Supply and Trading for Hill Petroleum Company, at the time an 80% owned subsidiary of Phibro Energy Inc. Prior to 1987, Mr. Serra held the position of Crude Oil Trader at Phibro Energy Inc. for one year as well as for The Standard Oil Company of Ohio for the three preceding years. Prior to that, he served four years in the United States Army Corps of Engineers with the final rank of Captain. John P. vonBerg has served as Director, Chief Executive Officer and President of the General Partner since December 1996. He was Vice President of Crude Oil Gathering, Domestic Supply and Trading, for Basis and its predecessor, Phibro USA, from January 1994 to December 1996. He managed the Gathering and Domestic Trading and Commercial Support functions for Phibro USA during 1993. Prior to 1993, Mr. vonBerg worked for Marathon Oil Company ("Marathon") for 13 years in various capacities, including Product Trading, Risk Management, Crude Oil Purchases and Sales, Finance, Auditing and Operations. Mark J. Gorman has served as Director and Executive Vice President of the General Partner since December 1996. He was President of Howell Crude Oil Company, a wholly-owned subsidiary of Howell Corporation, from September 1992 to December 1996. Prior to joining Howell, Mr. Gorman worked for Marathon for fifteen years in various capacities in Crude Oil Acquisition and Finance and Administration, including Manager of Crude Oil Purchases and Sales and Manager of Crude Oil Trading and Risk Management. Thomas W. Jasper has served as a director of the General Partner since December 1996. He was appointed to the position of Treasurer of Salomon Inc and Salomon Brothers in April 1996. Mr. Jasper is also a Managing Director of Salomon Brothers. Prior to this appointment, he was responsible for investment banking client relationships with European and Japanese multinational subsidiaries in the United States. In February 1994, Mr. Jasper was named Chairman of Salomon Brothers Hong Kong Limited and Chief Operating Officer for the Asia-Pacific region. Mr. Jasper was originally made Regional Head of Salomon Brothers Hong Kong Limited in July 1992. His previous responsibilities with Salomon Brothers included managing the firm's Capital Markets Services Group and its Interest Rate Swap Group. He joined Salomon Brothers in 1982. Mr. Jasper was with Bankers Trust Company prior to 1982. Paul N. Howell has served as a Director of the General Partner since December 1996. He is currently President and Chief Executive Officer of Howell. He has held the position of President since 1995 and the post of Chief Executive Officer since 1955. Mr. Howell served as Chairman of the Board of Howell from 1978 to 1995. Ronald E. Hall has served as a Director of the General Partner since December 1996. He has been Chairman of the Board of Howell since 1995. From 1985 to 1995, Mr. Hall held the position of President and Chief Executive Officer of CITGO Petroleum Corporation ("CITGO"), a refining, marketing and distribution company. Mr. Hall served as a director of CITGO from 1990 to 1995. Donald H. Anderson was elected to the Board of Directors of the General Partner in March 1997. He was Chairman, President and Chief Executive Officer of PanEnergy Services, Inc., from December 1994 to March 1, 1997. PanEnergy Services, Inc., a subsidiary of PanEnergy Corp., is engaged in nonjurisdictional natural gas and electric marketing, natural gas gathering and processing and crude oil and natural gas liquids trading and pipeline transportation. From 1989 to 1994, Mr. Anderson was President and Chief Operating Officer and Director of Associated Natural Gas Corporation, which merged with PanEnergy Corp. in 1994. Prior to 1989, Mr. Anderson was Vice President of Lantern Petroleum Corporation. Herbert I. Goodman was elected to the Board of Directors of the General Partner in January 1997. He is the Chairman of IQ Holdings, Inc., a manufacturer and marketer of petrochemical-based consumer products. From 1988 until 1996 he was Chairman and Chief Executive Officer of Applied Trading Systems, Inc., a trading and consulting business. Prior to 1988, Mr. Goodman was with Gulf Trading and Transportation Company and Gulf Oil Corporation. Mr. J. Conley Stone was elected to the Board of Directors of the General Partner in January 1997. From 1987 to his retirement in 1995, he served as President, Chief Executive Officer, Chief Operating Officer and Director of Plantation Pipe Line Company, a common carrier liquid petroleum products pipeline transporter. From 1976 to 1987, Mr. Stone served in a variety of positions with Exxon Pipeline Company. John M. Fetzer has served as Senior Vice President, Crude Oil, for the General Partner since December 1996. He served in the same capacity for Howell Crude Oil Company from September 1994 to December 1996. From 1993 to September 1994, Mr. Fetzer was a private investor and a consultant and expert witness in oil- and gas-related matters. He held the positions of Senior Vice President, Marketing, from 1991 to 1993 and Vice President of Crude Oil Trading from 1986 to 1991 at Enron Oil Trading and Transportation. From 1981 to 1986, Mr. Fetzer served as Manager, Crude Oil Trading for UPG Falco and P&O Falco, which later became Enron Oil Trading and Transportation. Prior to joining P&O Falco he held various financial and commercial positions with Marathon, which he joined in 1976. Allyn R. Skelton, II, has served as Chief Financial Officer of the General Partner since December 1996. He served as Chief Financial Officer of Howell from 1989 until October 1996, and served as Senior Vice President of Howell from 1993 to December 1996. Previously, he held the position of Controller of Howell from 1985 to 1989. Mr. Skelton joined Howell in 1983 as Tax Manager. Prior to joining Howell, he held various tax and financial positions with other oil companies. Paul A. Scoff has served as General Counsel and Secretary of the General Partner since December 1996. He served as Senior Counsel for Basis Petroleum, Inc. and its predecessor Phibro USA from June 1994 to December 1996. Prior to joining Phibro USA, he was a Senior Attorney for The Coastal Corporation ("Coastal") from 1989 until June of 1994 where he advised the marine, refining and marketing and crude gathering subsidiaries of Coastal. Mr. Scoff was in private practice from 1984 until he joined Coastal in 1989. Allen R. Stanley has served as Vice President, Pipeline Operations, of the General Partner since December 1996. He joined Howell Crude Oil Company as Senior Vice President of Operations in February 1995 following one year of consulting work for Howell. From 1986 to his retirement from Marathon in 1992, he was Manager, Business Development and Joint Interest for the downstream component. From 1976 to 1986, he served as Manager/Gulf Coast Division in Houston, Texas for Marathon Pipe Line Company, Manager/Non-operated Joint Interests in London for Marathon, Manager/Engineering for Oasis Oil Company and Manager, Engineering for Marathon Pipe Line Company in Findlay, Ohio. Mr. Stanley began his career with Marathon in 1965. Ben F. Runnels has served as Vice President, Trucking Operations of the General Partner since December 1996. He held the position of General Manager, Operations with Basis and its predecessor, Phibro USA, for the past four years. Prior to that, he was Manager, Operations for JM Petroleum Corporation for four years. From 1974 until 1988, he was employed by Tesoro Petroleum Corp. and held the positions of Terminal Manager, Regional Manager, Pipeline Manager, and Division Manager, respectively. From 1962 until 1974, Mr. Runnels held various managerial positions at Ryder Tank Lines, Coastal Tank Lines, Robertson Tank Lines and Gulf Oil Corporation. Section 16(a) of the Securities Exchange Act of 1934 requires the officers and directors of the General Partner and persons who own more than ten percent of a registered class of the equity securities of the Partnership to file reports of ownership and changes in ownership with the SEC and the New York Stock Exchange. Based solely on its review of the copies of such reports received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the General Partner believes that during 1996 its officers and directors complied with all applicable filing requirements in a timely manner. Officers of Salomon Inc, Basis, Howell and the General Partner will not receive any additional compensation for serving Genesis Energy, L.L.C., as members of the Board of Directors or any of its committees. Each of the independent directors will receive an annual fee of $20,000. Item 11. Executive Compensation The Partnership and the General Partner were formed in September 1996 but transacted no business until December 1996. Accordingly, the General Partner paid no compensation to its directors and officers with respect to the first eleven months of 1996 or the 1995 fiscal year. Under the terms of the Partnership Agreement, the Partnership is required to reimburse the General Partner for expenses relating to the operation of the Partnership, including salaries and bonuses of employees employed on behalf of the Partnership, as well as the costs of providing benefits to such persons under employee benefit plans and for the costs of health and life insurance. See "Certain Relationships and Related Transactions." The following table summarizes certain information regarding the compensation paid or accrued by Genesis during the one month ended December 31, 1996 to the Chief Executive Officer.
Summary Compensation Table Annual Compensation Salary Name and Principal Position Year ($) --------------------------- ---- ------ John P. vonBerg 1996 29,167 Chief Executive Officer and President No executive officer received compensation from the General Partner in amounts greater than $100,000 for the one month ended December 31, 1996. Therefore, the only executive officer listed is the Chief Executive Officer. Amounts listed for Mr. vonBerg represent amounts paid to him for services to the General Partner for the one month ended December 31, 1996. Mr. vonBerg did not have "Perquisites and Other Benefits" with a value greater than the lesser of $50,000 or 10% of his reported salary.
Employment Agreements The General Partner entered into employment agreements with the following executive officers: Mr. vonBerg, Mr. Gorman, Mr. Fetzer, Mr. Skelton, Mr. Stanley, Mr. Runnels and Mr. Scoff. The agreements have an initial term expiring December 31, 1999 ("Initial Term") with one optional extension term of two years and five additional optional extension terms of one year each ("Extension Terms"), and include the following additional provisions: (i) an annual base salary, (ii) eligibility to participate in the Restricted Unit Plan (including the allocation of Initial Restricted Units) and Incentive Compensation Plan described below, (iii) confidential information and noncompetition provisions and (iv) an involuntary termination provision pursuant to which the executive officer will receive severance compensation under certain circumstances. Severance compensation applicable under the employment agreements for an involuntary termination during the Initial Term and Extension Terms (other than a termination for cause, as defined in the agreements) will include payment of the greater of (i) the base salary for the balance of the applicable term, or (ii) one year's base salary then in effect and, in addition, the executive will be entitled to retain the Initial Restricted Units allocated to such employee under the Restricted Unit Plan for a period of six months after termination or expiration and incentive compensation payable to the executive in accordance with the Incentive Plan. Upon expiration or termination of the agreement, the confidential information and noncompetition provisions will continue until the earlier of one year after the date of termination or the remainder of the unexpired term, but in no event for less than six months following the expiration or termination. Restricted Unit Plan In January 1997, the General Partner adopted a restricted unit plan (the "Restricted Unit Plan") for key employees of the General Partner. Initially, rights to receive 291,000 Common Units are available under the Restricted Unit Plan. From these Units, rights to receive 194,000 Common Units (the "Initial Restricted Units") have been allocated to approximately 30 individuals, subject to the vesting conditions described below and subject to other customary terms and conditions. The Initial Restricted Units will vest upon the conversion of Subordinated OLP Units to Common OLP Units. In the event of early conversion of a portion of the Subordinated OLP Units into Common OLP Units, the Initial Restricted Units will vest in the same proportion as the percentage of Subordinated OLP Units that convert into Common OLP Units. The remaining rights to receive 97,000 Common Units initially available under the Restricted Unit Plan may be allocated or issued in the future to key employees on such terms and conditions (including vesting conditions) as the Compensation Committee of the General Partner ("Compensation Committee") shall determine. Upon "vesting" in accordance with the terms and conditions of the Restricted Unit Plan, Common Units allocated to a plan participant will be issued to such participant. Units issued to participants may be newly issued Units acquired by the General Partner from the Partnership at then prevailing market prices or may be acquired by the General Partner in the open market. In either case, the associated expense will be borne by the Partnership. Until Common Units have vested and have been issued to a participant, such participant shall not be entitled to any distributions or allocations of income or loss and shall not have any voting or other rights in respect of such Common Units. The issuance of the Common Units pursuant to the Restricted Unit Plan is intended to serve as a means of incentive compensation for performance. Accordingly, no consideration will be payable by the plan participants upon vesting and issuance of the Common Units. Incentive Plan In January 1997, the General Partner adopted the Genesis Incentive Compensation Plan (the "Incentive Plan"). The Incentive Plan is designed to enhance the financial performance of the Partnership by rewarding the executive officers and other specific key employees for achieving annual financial performance objectives. The Incentive Plan will be administered by the Compensation Committee. Individual participants and payments, if any, for each calendar year will be determined by and in the discretion of the Compensation Committee. In no event will incentive payments be made with respect to any year unless (i) the aggregate Minimum Quarterly Distribution in the Incentive Plan year has been distributed to each holder of Common Units, plus any arrearage thereon, and to each holder of Subordinated OLP Units, (ii) the Adjusted Operating Surplus generated during such year has equaled or exceeded the sum of the Minimum Quarterly Distribution on all of the outstanding Common Units and Subordinated OLP Units and the related distribution on the General Partner's 2% general partner interest during such year and (iii) no APIs are outstanding. Any incentive payments will be at the discretion of the Compensation Committee, and the General Partner will be able to amend or change the Incentive Plan at any time. Item 12. Security Ownership of Certain Beneficial Owners and Management The Partnership knows of no one who beneficially owns in excess of five percent of the Common Units of the Partnership. As set forth below, certain beneficial owners own interests in the General Partner of the Partnership.
Amount and Nature Name and Address of Beneficial Ownership Percent Title of Class of Beneficial Owner as of January 1, 1997 of Class --------------------- --------------------- ----------------------- --------- General Partner Interest Genesis Energy, L.L.C. 1 100.00 500 Dallas, Suite 3200 Houston, TX 77002 General Partner Interest Basis Petroleum, Inc. 1 100.00 500 Dallas, Suite 3200 Houston, TX 77002 General Partner Interest Howell Corporation 1 100.00 1111 Fannin, Suite 1500 Houston, TX 77002 Basis owns 54% of Genesis Energy, L.L.C., and a wholly-owned subsidiary of Howell owns 46% of Genesis Energy, L.L.C. The reporting of the General Partner interest shall not be deemed to be a concession that such interest represents a security. Held by wholly-owned subsidiary of Howell.
The following table sets forth certain information as of January 31, 1997, regarding the beneficial ownership of the Common Units by all directors of the General Partner, each of the named executive officers and all directors and executive officers as a group.
Amount and Nature of Beneficial Ownership -------------------------------------------------- Sole Voting and Shared Voting and Percent Title of Class Name Investment Power Investment Power of Class - ------------------- ----------------- ----------------- ---------------- ----------- Genesis Energy, L.P. Jeffrey R. Serr - 10,000 * Common Unit John P. vonBerg 1,000 - * Mark J. Gorman 1,000 - * Thomas W. Jasper - - - Paul N. Howell 1,200 - * Ronald E. Hall 3,000 - * Donald H. Anderson - - - Herbert I. Goodman - - - J. Conley Stone - - - All directors and executive officers as a group (14 in number) 7,700 12,200 * - -------------------------- * Less than 1%
The above table includes shares owned by certain members of the families of the directors or executive officers, including shares in which pecuniary interest may be disclaimed. Item 13. Certain Relationships and Related Transactions See Note 10 to the Consolidated Financial Statements for information regarding certain transactions between Genesis and the General Partner, Salomon Inc, Basis, and Howell and their subsidiaries and affiliates. Basis and Howell own 1,163,700 and 991,300 Subordinated OLP Units, respectively, representing a 10.58% and 9.01% limited partner interest in GCOLP. Basis and Howell own 54% and 46%, respectively, of the General Partner. Through its control of the General Partner, Basis has the ability to control the management of the Partnership and GCOLP. For administrative reasons, each of Basis and Howell employed through December 31, 1996, the persons responsible for managing or operating the Partnership. All employment costs and expenses related to such employees for the one month ended December 31, 1996 were charged to the General Partner and were reimbursed by the Partnership to the General Partner. Redemption and Registration Rights Agreement. Pursuant to the Redemption and Registration Rights Agreement, the Partnership has agreed, at the end of the Subordination Period or upon earlier conversion of Subordinated OLP Units into Common OLP Units, to use reasonable efforts to sell that number of Common Units equal to the number of Common OLP Units that Basis or Howell is requesting be redeemed. The proceeds, net of underwriting discount or placement fees, if any, from such sale will be used by the Operating Partnership to redeem such Common OLP Units. The Partnership is obligated to pay the expenses incidental to redemption requests, other than the underwriting discount or placement fees, if any. The General Partner will have a proportionate percentage of its general partner interest in the Operating Partnership redeemed when Common OLP Units are redeemed in connection with the exercise of the redemption right. Distribution Support Agreement. To further enhance the Partnership's ability to distribute the Minimum Quarterly Distribution on the Common Units with respect to each quarter through the quarter ending December 31, 2001 (subject to earlier termination commencing December 31, 1999), Salomon Inc has agreed in the Distribution Support Agreement, subject to certain limitations, to contribute or cause to be contributed cash, if necessary, to the Partnership in return for APIs. Salomon Inc's obligation to purchase APIs is limited to a maximum amount outstanding at any one time equal to $17.6 million. The Unitholders have no independent right separate and apart from the Partnership to enforce obligations of Salomon Inc under the Distribution Support Agreement. See "Cash Distribution Policy--Distribution Support." Corporate Services Agreement. The Partnership entered into a Corporate Services Agreement with Basis pursuant to which Basis, directly or through its affiliates, provides certain administrative and support services for the benefit of the Partnership. Such services may include human resources, tax, accounting, data processing, NYMEX transaction clearing and other similar administrative services. Under such agreement, Basis does not receive a fee for such services but the Partnership reimburses Basis or its affiliates for (i) allocated personnel costs (such as salaries and employee benefits) of the personnel actually providing such services, (ii) rent on office space allocated to the General Partner in Basis' offices in Houston, Texas and (iii) all reasonable out-of-pocket expenses related to the provision of such services. Either the Partnership or Basis may terminate or reduce the level of services or office space on 90 days' or 180 days' notice, respectively, to the other party. The Corporate Services Agreement may be terminated at the Partnership's or Basis' option on 180 days' notice to the other party. In the event the Corporate Services Agreement is terminated, the cost to the Partnership of obtaining the services covered thereby from third parties would likely be higher than the cost of such services under the Corporate Services Agreement. In addition, the Partnership has agreed to indemnify and hold harmless Basis and its affiliates from all claims and damages arising from the provision of services under the Corporate Services Agreement, unless due to the gross negligence or willful misconduct of Basis or its affiliates. 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 Consolidated Financial Statements" set forth on page 26. (a)(3) Exhibits 3.1 Certificate of Limited Partnership of Genesis Energy, L.P. ("Genesis") (incorporated by reference to Exhibit 3.1 to Registration Statement, File No. 333-11545) * 3.2 Agreement of Limited Partnership of Genesis 3.3 Certificate of Limited Partnership of Genesis Crude Oil, L.P. (the "Operating Partnership") * 3.4 Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to Exhibit 3.4 to Registration Statement, File No. 333-11545) * 10.1 Purchase & Sale and Contribution & Conveyance Agreement dated as of December 3, 1996 among Basis Petroleum, Inc., Howell Corporation ("Howell"), certain subsidiaries of Howell, Genesis, the Operating Partnership and Genesis Energy, L.L.C. * 10.2 First Amendment to Purchase & Sale and Contribution & Conveyance Agreement * 10.3 Distribution Support Agreement among the Operating Partnership and Salomon Inc * 10.4 Master Credit Support Agreement among the Operating Partnership, Salomon Inc and Basis Petroleum, Inc. ("Basis") * 10.5 Redemption and Registration Rights Agreement among Basis, Howell Corporation ("Howell"), certain Howell subsidiaries, Genesis and the Operating Partnership * 10.6 Corporate Services Agreement between Basis, Genesis and the Operating Partnership 10.7 Non-competition Agreement among Genesis, the Operating Partnership, Salomon Inc, Basis and Howell (incorporated by reference to Exhibit 10.6 to Registration Statement, File No. 333-11545) * 10.8 Employment Agreement between Genesis Energy, L.L.C. and John P. vonBerg * 10.9 Employment Agreement between Genesis Energy, L.L.C. and Mark J. Gorman * 10.10 Employment Agreement between Genesis Energy, L.L.C. and John M. Fetzer * 10.11 Employment Agreement between Genesis Energy, L.L.C. and Allyn R. Skelton, II * 10.12 Employment Agreement between Genesis Energy, L.L.C. and Paul A. Scoff * 10.13 Employment Agreement between Genesis Energy, L.L.C. and Allen R. Stanley * 10.14 Employment Agreement between Genesis Energy, L.L.C. and Ben F. Runnels 11.1 Statement Regarding Computation of Per Share Earnings (See Note 3 to the Consolidated Financial Statements - "Net Income Per Unit") * 21.1 Subsidiaries of the Registrant ------------------------ * Filed herewith (b) Reports on Form 8-K None. 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 7th day of April, 1997. GENESIS ENERGY, L.P. (A Delaware Limited Partnership) By: GENESIS ENERGY, L.L.C., as General Partner By: /s/ John P. vonBerg * --------------------------- John P. vonBerg Chief Executive Officer 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. /s/ John P. vonBerg * Director, Chief Executive Officer April 7, 1997 - --------------------------- John P. vonBerg and President (Principal Executive Officer) /s/ Allyn R. Skelton, II Chief Financial Officer April 7, 1997 - --------------------------- Allyn R. Skelton, II (Principal Financial and Accounting Officer) /s/ Jeffrey R. Serra * Chairman of the Board and April 7, 1997 - --------------------------- Jeffrey R. Serra Director /s/ Thomas W. Jasper * Director April 7, 1997 - --------------------------- Thomas W. Jasper /s/ Paul N. Howell * Director April 7, 1997 - --------------------------- Paul N. Howell /s/ Ronald E. Hall * Director April 7, 1997 - --------------------------- Ronald E. Hall /s/ Mark J. Gorman * Director and April 7, 1997 - --------------------------- Mark J. Gorman Executive Vice President * By /s/ Allyn R. Skelton, II - --------------------------- Allyn R. Skelton, II (Attorney-in-fact for persons indicated) GENESIS ENERGY, L.P. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page ---- Report of Independent Public Accountants 28 Consolidated Balance Sheet, December 31, 1996, Balance Sheet, December 31, 1995 (Predecessor) 29 Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 1996, Consolidated Statement of Operations for the One Month Ended December 31, 1996, Statement of Operations for the Eleven Months Ended November 30, 1996 (Predecessor), Statement of Operations for the Year Ended December 31, 1995 (Predecessor), and Statement of Operations for the Year Ended December 31, 1994 (Predecessor) 30 Consolidated Statement of Cash Flows for the One Month Ended December 31, 1996, Statement of Cash Flows for the Eleven Months Ended November 30, 1996 (Predecessor), Statement of Cash Flows for the Year Ended December 31, 1995 (Predecessor), and Statement of Cash Flows for the Year Ended December 31, 1994 (Predecessor) 31 Consolidated Statement of Partners' Capital for the One Month Ended December 31, 1996, Statement of Divisional Equity for the Eleven Months Ended November 30, 1996 (Predecessor), Statement of Divisional Equity for the Year Ended December 31, 1995 (Predecessor), and Statement of Divisional Equity for the Year Ended December 31, 1994 (Predecessor) 32 Notes to Consolidated Financial Statements 33 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Genesis Energy, L.P.: We have audited the accompanying consolidated balance sheet of Genesis Energy, L.P., (a Delaware limited partnership) as of December 31, 1996 and the related consolidated statements of operations, cash flows and partners' capital for the one month ended December 31, 1996. We have also audited the balance sheet of the Predecessor (as defined in Note 1 to the consolidated financial statements) as of December 31, 1995 and the related statements of operations, cash flows and divisional equity for the eleven months ended November 30, 1996 and the years ended December 31, 1995 and 1994. These financial statements are the responsibility of the Partnership's management and the Predecessor's management, respectively. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Genesis Energy, L.P. as of December 31, 1996, and the results of its operations and its cash flows for the one month ended December 31, 1996 and the financial position of the Predecessor as of December 31, 1995 and the results of its operations and its cash flows for the eleven months ended November 30, 1996 and the years ended December 31, 1995 and 1994, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP - ------------------------------------- ARTHUR ANDERSEN LLP Houston, Texas March 17, 1997 GENESIS ENERGY, L.P. CONSOLIDATED BALANCE SHEET (In thousands) December 31, December 31, 1996 1995 ----------- ----------- Assets (Predecessor) Current Assets Cash and cash equivalents $ 11,878 $ - Accounts receivable - Trade 336,358 117,361 Related party 52,449 155,427 Inventories 8,290 6,041 Deferred income tax assets - 456 Other 1,396 - -------- -------- Total current assets 410,371 279,285 Property and Equipment, at cost 100,097 13,517 Less: Accumulated depreciation (11,160) (9,766) -------- -------- Net property and equipment 88,937 3,751 Other Assets, net of amortization 10,592 - -------- -------- Total Assets $509,900 $283,036 ======== ======== Liabilities and Partners' Capital/Divisional Equity Current Liabilities Accounts payable - Trade $387,322 $212,035 Related party 3,430 70,316 Accrued liabilities 7,811 3,078 Accrued income taxes - 6,030 -------- -------- Total current liabilities 398,563 291,459 Deferred Income Tax Liabilities - 14 Commitments and Contingencies (Notes 15 and 16) Minority Interests 26,257 - Divisional Equity - (8,437) Partners' Capital Common unitholders, 8,625 units issued and outstanding 83,378 - General partner 1,702 - -------- -------- Total partners' capital 85,080 - -------- -------- Total Liabilities and Partners' Capital/Divisional Equity $509,900 $283,036 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. GENESIS ENERGY, L.P. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per unit amounts)
One Month Eleven Months Year Ended Ended Ended December 31, December 31, November 30,Year Ended December 31, ---------------------- 1996 1996 1996 1995 1994 -------- -------- -------- -------- -------- (Pro forma) ( P r e d e c e s s o r ) (Unaudited) REVENUES: Gathering and marketing revenues Unrelated parties $3,101,632 $318,110 $2,194,156 $1,916,231 $1,160,151 Related parties 1,464,202 52,449 1,403,951 1,523,834 670,570 Pipeline revenues 16,780 1,426 - - - ---------- -------- ---------- ---------- ---------- Total revenues 4,582,614 371,985 3,598,107 3,440,065 1,830,721 COST OF SALES: Crude costs, unrelated parties 4,179,974 363,735 3,245,123 2,729,145 1,455,275 Crude costs, related parties 346,389 2,988 327,963 680,614 350,966 Field operating costs 15,092 1,290 6,744 7,152 7,778 Pipeline operating costs 4,978 463 - - - ---------- -------- ---------- ---------- ---------- Total cost of sales 4,546,433 368,476 3,579,830 3,416,911 1,814,019 ---------- -------- ---------- ---------- ---------- GROSS MARGIN 36,181 3,509 18,277 23,154 16,702 EXPENSES: General and administrative 9,470 1,363 3,316 3,658 3,858 Depreciation and amortization 6,834 518 1,396 4,815 7,530 ---------- -------- ---------- ---------- ---------- OPERATING INCOME 19,877 1,628 13,565 14,681 5,314 OTHER INCOME (EXPENSE): Interest, net 56 56 294 173 (685) Other, net (74) - (83) (197) 82 ---------- -------- ---------- ---------- ---------- Income before income taxes, cumulative effect of change in accounting principle and minority interests 19,859 1,684 13,776 14,657 4,711 Income tax provision - - 5,167 5,530 1,792 ---------- -------- ---------- ---------- ---------- Income before cumulative effect of change in accounting principle and minority interests 19,859 1,684 8,609 9,127 2,919 Cumulative effect of change in accounting principle - - - - (136) Net income before minority interests 19,859 1,684 8,609 9,127 2,783 ---------- -------- ---------- ---------- ---------- Minority interests 3,970 337 - - - ---------- -------- ---------- ---------- ---------- NET INCOME $ 15,889 $ 1,347 $ 8,609 $ 9,127 $ 2,783 ========== ======== ========== ========== ========== NET INCOME PER COMMON UNIT $ 1.81 $ 0.15 ========== ======== NUMBER OF COMMON UNITS OUTSTANDING 8,625 8,625 ========== ========
The accompanying notes are an integral part of these consolidated financial statements. GENESIS ENERGY, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
One Month Eleven Months Ended Ended Year Ended December 31, November 30, December 31, 1996 1996 1995 1994 --------- -------- -------- -------- (Predecessor) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,347 $ 8,609 $ 9,127 $ 2,783 Adjustments to reconcile net income to net cash provided by (used in)operating activities - Depreciation 479 1,396 2,178 2,472 Amortization of intangible assets 39 - 2,637 5,058 Deferred income taxes - (12) (500) (452) Loss (gain) on disposal of assets - 82 (33) (85) Minority interests equity in earnings 337 - - - Other noncash charges 200 - 124 (196) Changes in components of working capital - Accounts receivable (384,681) (133,676) 98,158) (51,951) Inventories (4,944) 2,763 3,249 (426) Other current assets (1,260) (17) - - Accounts payable 381,418 118,948 98,916 52,459 Accrued liabilities 6,218 157 83 760 Accrued income taxes - (851) 3,858 3,413 --------- --------- -------- -------- Net cash (used in) provided by operating activities (847) (2,601) 21,481 13,835 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (106) (1,100) (17) (56) Increase in other assets - (1,203) - - Purchase of operations of Howell (74,021) - - - Proceeds from sale of assets - 270 493 173 --------- --------- -------- -------- Net cash (used in) provided by investing activities (74,127) (2,033) 476 117 CASH FLOWS FROM FINANCING ACTIVITIES: General partner contribution at formation 2,941 - - - Net proceeds of public offering of Common Units 162,975 - - - Distribution to Basis at formation (86,985) - - - Net advances from (to) Basis - 4,634 (21,957) (13,968) Other 543 - - - --------- --------- -------- -------- Net cash provided by (used in) financing activities 79,474 4,634 (21,957) (13,968) --------- --------- -------- -------- Net increase (decrease) in cash and cash equivalents 4,500 - - (16) Cash and cash equivalents at beginning of period 7,378 - - 16 --------- --------- -------- -------- Cash and cash equivalents at end of period $ 11,878 $ - $ - $ - ========= ========= ======== ========
The accompanying notes are an integral part of these consolidated financial statements. GENESIS ENERGY, L.P. CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL/DIVISIONAL EQUITY (In thousands) Partners' Capital ----------------------- Common General Divisional Unitholders Partner Equity ----------- ------- ---------- (Predecessor) Divisional equity at December 31, 1993 $15,578 Net income 2,783 Net advances to Basis (13,968) ------- Divisional equity at December 31, 1994 4,393 Net income 9,127 Net advances to Basis (21,957) ------- Divisional equity at December 31, 1995 (8,437) Net income for eleven months ended November 30, 1996 8,609 Net advances from Basis 4,634 ------- Divisional equity at November 30, 1996 $ 4,806 ======= Initial capital based on issuance of partnership interests (see Note 1) $82,058 $1,675 Net income for the one month ended December 31, 1996 1,320 27 ------- ------ Partners' capital at December 31, 1996 $83,378 $1,702 ======= ====== The accompanying notes are an integral part of these consolidated financial statements. GENESIS ENERGY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Formation and Offering In December 1996, Genesis Energy, L.P. ("GELP") completed an initial public offering of 8.6 million Common Units at $20.625 per unit, representing limited partner interests in GELP of 98%. The offering consisted of 7.5 million Common Units, with an option to the underwriters of the offering to purchase 1.1 million additional overallotment Common Units. The underwriters exercised their overallotment option in December 1996. Genesis Energy, L.L.C. (the "General Partner") serves as general partner of GELP and its operating limited partnership, Genesis Crude Oil, L.P. ("GCOLP)". At December 31, 1996, the General Partner owned a 2% general partner interest in GELP. Transactions at Formation At the closing of the offering, GELP contributed the net proceeds of the offering ($163.0 million) to GCOLP in exchange for a 80.01% general partner interest in GCOLP. With the net proceeds of the offering, GCOLP purchased for $74.0 million a portion of the crude oil gathering, marketing and pipeline operations of Howell Corporation ("Howell") and made a distribution of $86.9 million to Basis in exchange for its conveyance of a portion of its crude oil gathering and marketing operations. GCOLP issued an aggregate of 2.2 million subordinated limited partner units ("Subordinated OLP Units") to Basis and Howell to obtain the remaining operations. Such operations acquired from Basis are hereafter referred to as the "Predecessor". The General Partner received an effective 2% general partner interest in GELP in exchange for a contribution of $2.9 million. The effects of these transactions, and the dilutive effect of differences in the consideration paid by the respective parties for their interests, have been reflected in the initial capital recorded by the Partnership. Unless the context otherwise requires, the term "the Partnership" hereafter refers to GELP, its operating limited partnership and the Predecessor. Basis has the largest ownership interest in the Partnership, with an effective 10.58% limited partner interest in GCOLP and ownership of 54% of the General Partner; therefore, the net assets acquired from Basis have been recorded at their historical carrying amounts and the crude oil gathering and marketing division of Basis has been treated as the Predecessor and the acquirer of Howell's operations. The acquisition of Howell's operations was treated as a purchase for accounting purposes. See Note 4. 2. Basis of Presentation The accompanying financial statements and related notes present the consolidated financial position as of December 31, 1996 for GELP and its results of operations, cash flows and changes in partners' capital for the one month ended December 31, 1996, the financial position as of December 31, 1995 for the Predecessor and its results of operations, cash flows and changes in divisional equity for the eleven months ended November 30, 1996, and the years ended December 31, 1995 and 1994. The accompanying financial statements of the Predecessor were prepared in connection with the public offering of limited partner interests in the Partnership. These financial statements include the accounts of the Predecessor, a division of Basis, a wholly-owned subsidiary of Salomon Inc. Cash flows of the Predecessor not funded from operating activities were funded by Basis prior to the formation of the Partnership. Changes in divisional equity during the eleven months ended November 30, 1996 and the years ended December 31, 1995 and 1994 which are not attributable to net income of the Predecessor represent net advances to or from Basis. No provision for income taxes related to the operation of GELP is included in the accompanying consolidated financial statements, as such income will be taxable directly to the partners holding partnership interests in the Partnership. Federal income tax liabilities resulting from activities of the Predecessor and Howell prior to the closing of the offering were retained by Basis and Howell. The unaudited pro forma Consolidated Statement of Operations for the year ended December 31, 1996 reflects certain pro forma adjustments to the historical results of operations of the Predecessor and Howell as if the Partnership had been formed on January 1, 1996. These pro forma adjustments reflect the inclusion of fees associated with the Master Credit Support Agreement, incremental fees related to execution of futures contracts on the New York Mercantile Exchange ("NYMEX") as a separate entity, and incremental general and administrative expenses and compensation costs for the operation of the Partnership as a separate public entity. The pro forma adjustments also include additional depreciation and amortization expense due to the increase in property and intangibles that resulted from applying the purchase method of accounting to the assets acquired from Howell. The pro forma adjustments eliminate net interest expense recorded by the Predecessor and Howell as the Partnership had no long-term debt as of the closing of the public offering. Income tax provisions have also been eliminated as the Partnership is not a taxable entity. The pro forma adjustments were made based upon available information and certain estimates and assumptions which management believes provide a reasonable basis for presentation. 3. Summary of Significant Accounting Policies Principles of Consolidation The Partnership owns and operates its assets through GCOLP, an operating limited partnership. The accompanying consolidated financial statements reflect the combined accounts of the Partnership and the operating partnership after elimination of intercompany transactions. All material intercompany accounts and transactions have been eliminated. Nature of Operations The principal business activities of the Partnership are the purchasing, gathering, transporting and marketing of crude oil in the United States. The Partnership gathers approximately 120,000 barrels per day at the wellhead principally in the southern and southwestern states and offshore in the Gulf of Mexico. The Partnership also owns and operates three crude oil pipelines onshore as well as one offshore pipeline. The onshore pipelines are in Texas, Mississippi/Louisiana and Florida/Alabama. The offshore pipeline is a 5.5-mile pipeline in the Gulf of Mexico that transports oil from Main Pass Block 64 to a connection with another party's pipeline. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Partnership considers investments purchased with a maturity of three months or less to be cash equivalents. Funds deposited with Basis, as discussed in Note 10, are also considered cash equivalents. The Partnership has no requirement for compensating balances or restrictions on cash. Inventories Crude oil inventories held for sale are valued at market. Due to the nature of the Partnership's marketing activities, a minimum level of physical inventories is required, as determined by management, to ensure efficient and uninterrupted operation of the gathering business. These minimum inventories are not marked- to-market as inventories held for sale but are carried at the lower of cost or market, using the weighted-average cost method. Store warehouse inventories, including parts and fuel, are carried at the lower of cost or market. Property and Equipment Property and equipment are carried at cost. Depreciation of property and equipment is provided using the straight-line method over the respective estimated useful lives of the assets. Asset lives are 20 years for pipelines and related assets, 3 to 7 years for vehicles and transportation equipment, and 3 to 10 years for buildings, office equipment, furniture and fixtures and other equipment. Maintenance and repair costs are charged against current operations. Expenditures which materially increase value, change capacities or extend useful lives are capitalized. Other Assets Goodwill of the Partnership is amortized over a period of 20 years and is recorded net of accumulated amortization. Minority Interests Minority interests represent the Subordinated OLP Units held by Basis and Howell totaling 19.59% in GCOLP and the 0.4% interest the General Partner owns directly in GCOLP. Also included in minority interests are Howell's and Basis' interests in $5 million to be retained by GCOLP for at least one year to provide additional support for the Partnership's ability to distribute the minimum quarterly distribution on the Common Units and the Subordinated OLP Units. Environmental Liabilities The Partnership provides for the estimated costs of environmental contingencies when liabilities are likely to occur and reasonable estimates can be made. Ongoing environmental compliance costs, including maintenance and monitoring costs, are charged to expense as incurred. Income Taxes The Predecessor was included, through Basis, in the consolidated federal and state income tax returns of Salomon Inc. The Predecessor's federal and state income taxes were provided as if the Predecessor filed its income tax return separately from Basis. If there was taxable income, taxes were provided at the statutory rate reduced by allowable tax credits. If there was a taxable loss, a tax benefit was provided at the statutory rate without limitation of any loss deduction. The tax benefit was increased by tax credits to the extent the credits were utilized by Basis. Income taxes have been eliminated as the Partnership is not a taxable entity. No provision for income taxes related to the operation of GELP is included in the accompanying consolidated financial statements, as such income will be taxable directly to the partners holding partnership interests in the Partnership. Financial Instruments The Partnership routinely utilizes forward contracts, swaps, options and futures contracts in an effort to minimize the impact of market fluctuations on inventories and contractual commitments. Gains and losses on forward contracts, swaps, options and futures contracts used to hedge future contract purchases of unpriced domestic crude oil, where firm commitments to sell are required prior to establishment of the purchase price, are deferred until the margin from the underlying risk element of the hedged item is recognized in accordance with Statement of Financial Accounting Standards (SFAS) No. 80, "Accounting for Futures Contracts." Unrecognized income of $355,000 and $1,614,000 was deferred on these contracts at December 31, 1996 and 1995, respectively. Based on the historical correlations between the NYMEX price for West Texas intermediate crude at Cushing, Oklahoma, and the various trading hubs at which the Partnership trades, the Partnership's management believes the hedging program has been effective in minimizing the overall price risk. The Partnership continuously monitors the basis differentials between its various trading hubs and Cushing, Oklahoma, to further manage its basis exposure. The Partnership accounts for all other transactions which are not designated as hedges under the marked-to-market method of accounting. Under this methodology, forward contracts, swaps, options and futures contracts are reflected at market value and the resulting unrealized gains and losses are recognized currently in the statement of operations. The net gains and losses are determined on a counterparty-by-counterparty basis, netted when a contractual right of offset exists and reflected as either an asset or liability on the balance sheet. Activities for trading purposes were not material to the Partnership's consolidated financial position or results of operations for all periods presented. See Note 14 for further discussion of the Partnership's financial instruments. Revenue Recognition Gathering and marketing revenues are recognized when title to the crude oil is transferred to the customer. Pipeline revenues are recognized upon delivery of the barrels to the location designated by the shipper. Cost of Sales Cost of sales consists of the cost of crude oil and field and pipeline operating expenses. Field and pipeline operating expenses consist primarily of labor costs for drivers and pipeline field personnel, truck rental costs and maintenance, utilities, insurance and property taxes. Adoption of Accounting Standards Effective January 1, 1994, Basis adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires employers to accrue the cost of postemployment benefits during the service periods of eligible employees. The Predecessor was allocated, as the cumulative effect of a change in accounting principle, a charge to income of $136,000 (net of income tax benefit of $73,000) in 1994 to reflect the present value at January 1, 1994, of expected future benefits to be provided for by Basis to former or inactive employees of the Predecessor after employment but before retirement attributed to employees' services prior to the January 1, 1994, adoption date. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position No. 96-1, "Environmental Remediation Liabilities," which establishes new accounting and reporting for the recognition and disclosure of environmental remediation liabilities. The provisions of the statement are effective for fiscal years beginning after December 15, 1996. The impact of this new standard is not expected to have a significant effect on the Partnership's consolidated financial position or results of operations. In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which establishes new accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities. The statement is effective for transactions occurring after December 31, 1996. The impact of the adoption of the new standard is not expected to have a significant effect on the Partnership's consolidated financial position or results of operations. Significant Customers A significant portion of the Partnership's revenues resulted from transactions with Basis and other Salomon Inc affiliates. No other customer accounted for more than 10% of the Partnership's revenues in any period. Net Income Per Common Unit Net income per Common Unit is calculated on the number of outstanding Common Units of 8,625,000. For this purpose, the 2% General Partner interest is excluded from net income. 4. Acquisition of Howell As discussed in Notes 1 and 2, GCOLP acquired the crude oil gathering, marketing and pipeline operations of Howell in December 1996. This acquisition has been treated as a purchase for accounting purposes. The purchase price consisted of cash and Subordinated OLP Units in GCOLP. The total purchase price was determined as follows (in thousands). Cash $74,021 Subordinated OLP Units in GCOLP 21,174 Howell's share of cash proceeds from the public offering of units that was retained in GCOLP 2,300 ------- Total purchase price of Howell $97,495 ======= The purchase price was allocated to the assets acquired from Howell based on their relative fair values. The allocation was as follows (in thousands). Property and inventory $88,094 Goodwill 9,401 ------- Total allocated $97,495 ======= The results of operations of the assets acquired from Howell are included in the consolidated statement of operations of the Partnership for the one month ended December 31, 1996. The following unaudited pro forma information represents the consolidated pro forma amounts assuming the acquisition of Howell had occurred at the beginning of each period presented, including the operations of certain of the crude oil pipelines while they were owned by Exxon Pipeline Company from January 1 to March 31, 1995 (in thousands, except per unit amounts). Year Ended December 31, -------------------------- 1996 1995 ---------- ----------- Revenues $4,582,614 $4,045,450 Net income $15,889 $16,918 Net income per Common Unit $1.81 $1.92 The above amounts are based upon certain assumptions and estimates which the Partnership believes are reasonable. The pro forma results do not necessarily represent results which would have occurred if the acquisition had taken place on the basis assumed above, nor are they necessarily indicative of the results of future combined operations. 5. Inventories Inventories consisted of the following (in thousands). December 31, --------------- 1996 1995 ------ ------ (Predecessor) Crude inventories, at market $3,548 $3,134 Minimum crude inventories, at lower of cost or market 4,435 2,551 Store warehouse inventories, at lower of cost or market 307 356 ------ ------ Total inventories $8,290 $6,041 ====== ====== As of December 31, 1996 and 1995, the number of barrels included in minimum crude inventories was 285,000 and 185,000, respectively, with approximate market values of $7,259,000 and $3,573,000, respectively. 6. Property and Equipment Property and equipment consisted of the following (in thousands). December 31, -------------------- 1996 1995 -------- ------- (Predecessor) Land and buildings $ 3,553 $ 1,032 Pipelines and related assets 80,567 - Vehicles and transportation equipment 8,065 3,377 Office equipment, furniture and fixtures 3,375 3,410 Other equipment 4,537 5,698 -------- ------- 100,097 13,517 Less - Accumulated depreciation (11,160) (9,766) -------- ------- Net property and equipment $ 88,937 $ 3,751 ======== ======= Depreciation expense was $479,000 for the one month ended December 31, 1996, $1,396,000 for the eleven months ended November 30, 1996 and $2,178,000 and $2,472,000 for the years ended December 31, 1995 and 1994, respectively. 7. Other Assets Other assets consisted of the following (in thousands). December 31, -------------------- 1996 1995 ------- -------- (Predecessor) Goodwill $ 9,401 $ - Producer contracts - 15,150 Noncompete agreements - 4,910 NYMEX seats 1,203 - Other 27 604 ------- -------- 10,631 20,664 Less - Accumulated amortization (39) (20,664) ------- -------- Unamortized other assets $10,592 $ - ======= ======== Amortization expense was $39,000 for the one month ended December 31, 1996 and $2,637,000 and $5,058,000 for the years ended December 31, 1995 and 1994, respectively. There was no amortization expense for the eleven months ended November 30, 1996. 8. Credit Resources and Liquidity GCOLP entered into credit facilities with Salomon Inc and Basis (collectively, the "Credit Facilities") pursuant to a Master Credit Support Agreement. GCOLP's obligations under the Credit Facilities are secured by its receivables, inventories, general intangibles and cash. Guaranty Facility Salomon Inc is providing a Guaranty Facility through December 31, 1999 in connection with the purchase, sale and exchange of crude oil by GCOLP. The aggregate amount of the Guaranty Facility is limited to $550 million through June 30, 1997, $500 million for the period July 1, 1997 to December 31, 1997, $400 million for the year ending December 31, 1998 and $300 million for the year ending December 31, 1999 (to be reduced in each case by the amount utilized at any one time pursuant to the Working Capital Facility, as described below, and by the amount of any obligation to a third party to the extent that such third party has a prior security interest in the collateral under the Master Credit Support Agreement as described below). GCOLP pays a guarantee fee to Salomon Inc which will increase over the three-year period, thereby increasing the cost of the credit support provided to GCOLP under the Guaranty Facility from a below-market rate to a rate that may be higher than rates paid to independent financial institutions for similar credit. At December 31, 1996, the aggregate amount of obligations covered by guarantees was $459.6 million, including $260.6 million in payable obligations and $199.0 million of estimated crude oil purchase obligations for January 1997. Working Capital Facility Basis has agreed to use its reasonable best efforts, to the extent it has availability under its uncommitted credit lines, to provide GCOLP, through May 31, 1997, with a Working Capital Facility of up to $50 million, which amount includes direct cash advances not to exceed $35 million outstanding at any one time and letters of credit that may be required in the ordinary course of GCOLP's business. The total amounts outstanding at any one time under the Working Capital Facility will correspondingly reduce the amounts available under the Guaranty Facility. The interest rate for the Working Capital Facility is equal to Basis' cost of borrowings as reasonably determined by Basis. The Partnership had letters of credit in the amount of $2.2 million outstanding at December 31, 1996. No direct cash advances were outstanding at December 31, 1996. Prior to the expiration of the six-month period of availability, it is expected that the Partnership will have arranged for a working capital facility through one or more third party lenders. Summary of Credit Facilities Terms The Master Credit Support Agreement contains various restrictive and affirmative covenants including (i) restrictions on indebtedness other than (a) pre-existing indebtedness, (b) indebtedness pursuant to Hedging Agreements (as defined in the Master Credit Support Agreement) entered into in the ordinary course of business and (c) indebtedness incurred in the ordinary course of business by acquiring and holding receivables to be collected in accordance with customary trade terms, (ii) restrictions on certain liens, investments, guarantees, loans, advances, lines of business, acquisitions, mergers, consolidations and sales of assets and (iii) compliance with certain risk management policies, audit and receivable risk exposure practices and cash management practices as in effect for Basis and as may from time to time be revised or altered by Salomon Inc in its sole discretion. Pursuant to the Master Credit Support Agreement, GCOLP is required to maintain (a) Consolidated Tangible Net Worth of not less than $50 million, (b) Consolidated Working Capital of not less than $1 million, (c) a ratio of its Consolidated Current Liabilities to Consolidated Working Capital plus net property, plant and equipment of not more than 7.5 to 1, (d) a ratio of Consolidated Earnings before Interest, Taxes, Depreciation and Amortization to Consolidated Fixed Charges of at least 1.75 to 1 as of the last day of each fiscal quarter prior to December 31, 1999 and (e) a ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth of not more than 10.0 to 1 (as such terms are defined in the Master Credit Support Agreement). An Event of Default could result in the termination of the Credit Facilities at the discretion of Salomon Inc and Basis. Significant Events of Default include (a) a default in the payment of (i) any principal on any payment obligation under the Credit Facilities when due or (ii) interest or fees or other amounts within two business days of the due date, (b) the guaranty exposure amount exceeding the maximum credit support amount for two consecutive calendar months, (c) failure to perform or otherwise comply with any covenants contained in the Master Credit Support Agreement if such failure continues unremedied for a period of 30 days after written notice thereof and (d) a material misrepresentation in connection with any loan, letter of credit or guarantee issued under the Credit Facilities. Removal of the General Partner will result in the termination of the Credit Facilities and the release of all of Salomon Inc's and Basis' obligations thereunder. Salomon Inc does not currently foresee any circumstances under which it would provide guarantees or other credit support after the three-year credit support period. In addition, Salomon Inc's and Basis' obligations under the Master Credit Support Agreement may be transferred or terminated early subject to certain conditions. Prior to December 1999, management of the Partnership intends to replace the Guaranty Facility with a letter of credit facility with one or more third party lenders. There can be no assurance of the availability or the terms of credit for the Partnership. The General Partner believes that the Credit Facilities will be sufficient to support the Partnership's crude oil purchasing activities and working capital requirements. No assurance, however, can be given that the General Partner will not be required to reduce or restrict the Partnership's gathering and marketing activities because of limitations on its ability to obtain credit support and financing for its working capital needs. Distributions GCOLP will distribute 100% of its Available Cash within 45 days after the end of each quarter to Unitholders of record and to the General Partner. Available Cash consists generally of all of the cash receipts less cash disbursements of GCOLP adjusted for net changes to reserves. (A full definition of Available Cash is set forth in the Partnership Agreement.) Distributions of Available Cash to the holders of Subordinated OLP Units are subject to the prior rights of holders of Common Units to receive the minimum quarterly distribution ("MQD") for each quarter during the subordination period (which will not end earlier than December 31, 2001) and to receive any arrearages in the distribution of the MQD on the Common Units for prior quarters during the subordination period. MQD is $0.50 per unit. Salomon Inc has committed, subject to certain limitations, to provide total cash distribution support, with respect to quarters ending on or before December 31, 2001, in an amount up to an aggregate of $17.6 million in exchange for Additional Partnership Interests ("APIs"). Salomon Inc's obligation to purchase APIs will end no earlier than December 31, 1999 and end no later than December 31, 2001, with the actual termination subject to the levels of distributions that have been made prior to the termination date. Any APIs purchased by Salomon Inc are not entitled to cash distributions or voting rights. The APIs will be redeemed if and to the extent that Available Cash for any future quarter exceeds an amount necessary to distribute the MQD on all Common Units and Subordinated OLP Units and to eliminate any arrearages in the MQD on Common Units for prior periods. In addition, the Partnership Agreement authorizes the General Partner to cause GCOLP to issue additional limited partner interests and other equity securities, the proceeds from which could be used to provide additional funds for acquisitions or other GCOLP needs. 9. Partnership Equity Partnership equity in GELP consists of the general partner interest of 2% and 8.6 million Common Units representing limited partner interests of 98%. The Common Units were sold to the public in an initial public offering in December 1996. The general partner interest is held by the General Partner. GELP has an approximate 80.01% general partner interest in GCOLP. The remainder of GCOLP is held by Basis, Howell and the General Partner. These interests, reflected in the consolidated financial statements as minority interests, are as follows. Interest in GCOLP --------- Subordinated limited partner interest held by: Basis 10.58% Howell 9.01 General partner interest in GCOLP held by the General Partner 0.40 ------ Total minority interests 19.99% ====== The Partnership will be managed by the General Partner. Common Units will receive distributions in liquidation in preference to Subordinated OLP Units. See Note 8 for a discussion regarding distributions. Conversion of Subordinated OLP Units There is no established public market for the Subordinated OLP Units. The Subordinated OLP Units will convert into common units of GCOLP ("Common OLP Units") upon the expiration of the subordination period. The subordination period will not end prior to December 31, 2001 and will only end thereafter if GCOLP satisfies certain cash distribution and earnings tests. In addition, up to one half of the Subordinated OLP Units may convert into Common OLP Units prior to the end of the subordination period if GCOLP satisfies certain cash distribution and earnings tests. Subordinated OLP Units that have converted into Common OLP Units will share equally in distributions of Available Cash with the Common Units. Once the Subordinated OLP Units have converted into Common OLP Units, Basis or Howell may request that these units be redeemed. At such time, pursuant to a Redemption and Registration Rights Agreement, GELP will use its reasonable best efforts to sell the number of Common Units equal to the number of Common OLP Units in GCOLP that are to be redeemed. The proceeds, net of underwriting discount or placement fees from such sale, will be contributed to GCOLP and used to redeem such Common OLP Units. GELP is obligated to pay the expenses incidental to redemption requests, other than underwriting discount or placement fees. The General Partner will have a proportionate percentage of its general partner interest in GCOLP redeemed when Common OLP Units are redeemed in connection with the exercise of the redemption right. 10. Transactions with Related Parties Sales, purchases and other transactions with affiliated companies, in the opinion of management, are conducted under terms no more or less favorable than those conducted with unaffiliated parties. Sales and Purchases of Crude Oil A summary of sales to and purchases from related parties of crude oil is as follows (in thousands). One Month Eleven Ended Months Ended Year Ended December 31, November 30, December 31, ----------------- 1996 1996 1995 1994 --------- ---------- -------- -------- ( P r e d e c e s s o r ) Sales to affiliates $52,449 $1,403,951 $1,523,834 $670,570 Purchases from affiliates $2,988 $327,963 $680,614 $350,966 Clearing of Commodities Futures Transactions The Predecessor cleared its commodity futures transactions on the NYMEX through Basis Clearing, Inc., a wholly-owned subsidiary of Basis, and Phibro Energy Clearing, Inc., a wholly-owned subsidiary of Phibro Inc., a wholly-owned subsidiary of Salomon Inc. The Predecessor paid commissions to these entities, of $645,000 for the eleven months ended November 30, 1996 and $376,000 and $263,000 in 1995 and 1994, respectively. The Partnership cleared its NYMEX transactions through a third party during the month ended December 31, 1996. In 1997, the Partnership plans to use third parties as well as Basis Clearing, Inc., for clearing of NYMEX transactions. General and Administrative Services The Partnership does not directly employ any persons to manage or operate its business. Those functions are provided by the General Partner. The Partnership reimburses the General Partner for all direct and indirect costs of these services. Total costs reimbursed to the General Partner by the Partnership were $703,000 for the one month ended December 31, 1996. The Partnership entered into a Corporate Services Agreement with Basis pursuant to which Basis, directly or through its affiliates, provides certain administrative and support services for the benefit of the Partnership. Such services may include human resources, tax, accounting, data processing, NYMEX transaction clearing and other similar administrative services. Under such agreement, Basis does not receive a fee for such services but the Partnership reimburses Basis or its affiliates for (i) allocated personnel costs (such as salaries and employee benefits) of the personnel actually providing such services, (ii) rent on office space allocated to the General Partner in Basis' offices in Houston, Texas and (iii) all reasonable out-of-pocket expenses related to the provision of such services. Either the Partnership or Basis may terminate or reduce the level of services under certain circumstances as described in the Corporate Services Agreement. In the event the Corporate Services Agreement is terminated, the cost to the Partnership of obtaining the services covered thereby from third parties would likely be higher than the cost of such services under the Corporate Services Agreement. In addition, the Partnership has agreed to indemnify and hold harmless Basis and its affiliates from all claims and damages arising from the provision of services under the Corporate Services Agreement, unless due to the gross negligence or willful misconduct of Basis or its affiliates. Charges by Basis under the Corporate Services Agreement were $120,000 for the one month ended December 31, 1996. For the one month ended December 31, 1996, those persons who managed and operated the Partnership were employees of Basis or Howell, providing services to the General Partner under a transition services agreement. The total amount paid for the services and the related benefit costs were $344,000 to Basis and $359,000 to Howell. Basis allocated certain general and administrative costs to the Predecessor for ancillary services, insurance and office space. These costs amounted to approximately $1,100,000 for the eleven months ended November 30, 1996 and approximately $1,200,000 for each of the years ended December 31, 1995 and 1994. Treasury Services The Partnership entered into a Treasury Management Agreement with Basis. Under the Treasury Management Agreement, the Partnership loans excess cash to Basis at an interest rate that is the mid-point between a market rate from third parties on invested funds and the cost to Basis of borrowing funds from Salomon Inc. At December 31, 1996, Basis owed the Partnership $6,053,000 under the Treasury Management Agreement. Such amount has been classified in the consolidated balance sheet as cash and cash equivalents. For the one month ended December 31, 1996, the Partnership earned interest of $52,000 on these loans by the Partnership to Basis. Credit Facilities As discussed in Note 8, Salomon Inc and Basis provide Credit Facilities to the Partnership. For the one month ended December 31, 1996, the Partnership paid Salomon Inc $102,000 for guarantee fees under the Credit Facilities. 11. Supplemental Cash Flow Information Cash received for imputed interest was $299,000 for the eleven months ended November 30, 1996. Payments of imputed interest were $169,000 and $685,000 for the years ended December 31, 1995 and 1994, respectively. Cash paid for state income taxes and the imputed cash payments made by the Predecessor for federal income taxes totaled $6,030,000 during the eleven months ended November 30, 1996 related to 1995 and $1,959,000 during the year ended December 31, 1995 related to 1994. Basis received payments on behalf of the Predecessor of $1,109,000 in 1994 for the utilization of federal income tax net operating losses in prior periods. 12. Employee Benefit Plans The Partnership does not directly employ any of the persons responsible for managing or operating the Partnership. Beginning January 1, 1997, employees of the General Partner provide those services and are covered by various retirement and other benefit plans. The General Partner's employees will participate in the plans of Basis beginning in 1997. The plans described below represent the plans of the Predecessor. The General Partner has adopted these plans in 1997. In order to encourage long-term savings and to provide additional funds for retirement to its employees, the Predecessor sponsored a profit-sharing and retirement savings plan. Under this plan, the Predecessor's matching contribution was calculated as the lesser of 50% of each employee's annual pretax contribution or 3% of each employee's total compensation. The Predecessor also made a profit-sharing contribution of at least 3% of each eligible employee's total compensation. The Predecessor's costs relating to this plan were $267,000 for the eleven months ended November 30, 1996 and $292,000 and $289,000 in 1995 and 1994, respectively. The Predecessor also provided certain health care and survivor benefits for its active and retired employees. Basis self-insured these benefit programs. Both active and retired employees contributed to such programs with retired employees assuming a larger portion of the cost attributable to their benefits. Expenses allocated to the Predecessor for these benefits were $369,000 for the eleven months ended November 30, 1996, and $391,000 and $625,000 in 1995 and 1994, respectively. The Partnership has accrued approximately $200,000 at December 31, 1996 for these benefits. The General Partner also adopted two new plans in January 1997. These plans are a restricted unit plan ("Restricted Unit Plan") for key employees of the General Partner and the Genesis Incentive Compensation Plan ("Incentive Plan"). Restricted Unit Plan Initially, rights to receive 291,000 Common Units are available under the Restricted Unit Plan. From these Units, rights to receive 194,000 Common Units (the "Initial Restricted Units") have been allocated to approximately 30 individuals, subject to the vesting conditions described below and subject to other customary terms and conditions. The Initial Restricted Units will vest upon the conversion of Subordinated OLP Units to Common OLP Units. In the event of early conversion of a portion of the Subordinated OLP Units into Common OLP Units, the Initial Restricted Units will vest in the same proportion as the percentage of Subordinated OLP Units that convert into Common OLP Units. The remaining rights to receive 97,000 Common Units initially available under the Restricted Unit Plan may be allocated or issued in the future to key employees on such terms and conditions (including vesting conditions) as the Compensation Committee of the General Partner ("Compensation Committee") shall determine. Upon "vesting" in accordance with the terms and conditions of the Restricted Unit Plan, Common Units allocated to a plan participant will be issued to such participant. Units issued to participants may be newly issued Units acquired by the General Partner from the Partnership at then prevailing market prices or may be acquired by the General Partner in the open market. In either case, the associated expense will be borne by the Partnership. Until Common Units have vested and have been issued to a participant, such participant shall not be entitled to any distributions or allocations of income or loss and shall not have any voting or other rights in respect of such Common Units. The issuance of the Common Units pursuant to the Restricted Unit Plan is intended to serve as a means of incentive compensation for performance. Accordingly, no consideration will be payable by the plan participants upon vesting and issuance of the Common Units. Incentive Plan The Incentive Plan is designed to enhance the financial performance of the Partnership by rewarding the executive officers and other specific key employees for achieving annual financial performance objectives. The Incentive Plan will be administered by the Compensation Committee. Individual participants and payments, if any, for each calendar year will be determined by and in the discretion of the Compensation Committee. In no event will incentive payments be made with respect to any year unless (i) the aggregate MQD in the Incentive Plan year has been distributed to each holder of Common Units, plus any arrearage thereon, and to each holder of Subordinated OLP Units, (ii) the Adjusted Operating Surplus generated during such year has equaled or exceeded the sum of the MQD on all of the outstanding Common Units and Subordinated OLP Units and the related distribution on the General Partner's 2% general partner interest during such year and (iii) no APIs are outstanding. Any incentive payments will be at the discretion of the Compensation Committee, and the General Partner will be able to amend or change the Incentive Plan at any time. 13. Income Taxes The components of the provision for income taxes for the Predecessor are as follows (in thousands). November 30, December 31, ---------- -------------- 1996 1995 1994 ------ ------ ------ Current - Federal $4,656 $5,416 $1,959 State 523 614 212 ------ ------ ------ Total current 5,179 6,030 2,171 ------ ------ ------ Deferred - Federal (12) (500) (452) ------ ------ ------ Total deferred (12) (500) (452) ------ ------ ------ Total provision $5,167 $5,530 $1,719 ====== ====== ====== The components of deferred tax assets and liabilities of the Predecessor are as follows (in thousands). December 31, 1995 ----------- Current deferred tax assets - Inventories $249 Accrued liabilities 207 Net current deferred tax assets 456 Noncurrent deferred tax liabilities - Property and equipment (14) ---- Net deferred tax assets $442 ==== A reconciliation of income taxes computed at the federal statutory rate to income taxes computed at the Predecessor's effective tax rate is as follows (in thousands). November 30, December 31, --------- ---------------- 1996 1995 1994 ------ ------ ------ Provision for income taxes at the statutory rate $4,822 $5,130 $1,649 State taxes, net of federal tax benefit 340 399 138 Other 5 1 5 Provision for income taxes 5,167 5,530 1,792 Tax effect of accounting changes - - (73) ------ ------ ------ Provision for income taxes after tax effect of accounting changes $5,167 $5,530 $1,719 ====== ====== ====== Net operating loss carryforwards have not been utilized as a reduction against the Predecessor's future tax liability. Rather, as the losses were utilized on the consolidated tax return, the benefit has been reflected as a contribution from Basis in the Predecessor's equity in the year of benefit. 14. Financial Instruments Market Risk Market risk represents the potential loss than can be caused by a change in the market value of a commitment. In order to hedge its exposure to market fluctuations, the Partnership enters into various financial instruments with off-balance-sheet risk, including option contracts and swap agreements. The Partnership does not consider its commodity futures and forward contracts to be financial instruments since these contracts either require or permit settlement by the delivery of the underlying commodities. Normally, any contracts used to hedge market risk are generally less than one year in duration. Changes in the market value of these transactions are deferred until the gain or loss is recognized on the hedged transaction, at which time such gains and losses are recognized through cost of sales Credit Risk Credit risk represents the accounting loss that the Partnership would record if counterparties failed to perform pursuant to contractual terms. Management of credit risk involves a number of considerations, such as the financial profile of the counterparty, the value of collateral held, if any, specific terms and duration of the contractual agreement, and the counterparty's sensitivity to political and macroeconomic developments. The Partnership's exposure to credit risk is limited to the book value of trade receivables included in the accompanying financial statements. The Partnership has established various procedures to manage credit exposure, including initial credit approvals, credit limits, collateral requirements and rights of offset. Letters of credit, prepayments and guarantees are also utilized to limit credit risk to ensure that management's established credit criteria are met. Fair Value and Net Gains and Losses Estimated fair values of financial instruments and the net gains and losses, both recognized and deferred, arising from hedging activities at December 31, 1996, 1995 and 1994, are as follows (in thousands).
1996 1995 1994 ---------------------- ------------------------- ------------------------ Net Net Net Carrying Fair Gains Carrying Fair Gains Carrying Fair Gains Amount Value (Losses) Amount Value (Losses) Amount Value (Losses) ------ ----- ------- ------- ----- -------- ------ ------ ------- Option contracts written $- $- $- $557 $324 $213 $1,880 $2,339 $(459)
Quoted market prices are used in determining the fair value of financial instruments. If quoted prices are not available, fair values are estimated on the basis of pricing models or quoted prices for financial instruments with similar characteristics. Judgment is required in interpreting market data and the use of different market assumptions or estimation methodologies may affect the estimated fair value amounts. 15. Commitments and Contingencies The Partnership uses surface, vehicle and office leases in the course of its business operations. The Partnership also leases three tanks for use in its pipeline operations. The future minimum rental payments under all noncancelable operating leases as of December 31, 1996, were as follows (in thousands). 1997 $ 779 1998 611 1999 502 2000 - 2001 - Thereafter - ------ Total minimum lease obligations $1,892 ====== Total operating lease expense was as follows (in thousands). One month ended December 31, 1996 $133 Eleven months ended November 30, 1996 $522 Year ended December 31, 1995 $538 Year ended December 31, 1994 $472 The Partnership has contractual commitments (primarily forward contracts) arising in the ordinary course of business. At December 31, 1996, the Partnership had commitments to purchase 13,967,000 barrels of crude oil at fixed prices ranging from $20.30 to $26.85 per barrel extending to January 1998, and commitments to sell 11,541,000 barrels of crude oil at fixed prices ranging from $22.00 to $28.00 per barrel extending to June 1997. Additionally, the Partnership had commitments to purchase 32,742,000 barrels of crude oil extending to December 1998, and commitments to sell 7,696,000 barrels of crude oil extending to June 1997, associated with market-price related contracts. The Partnership is subject to various environmental laws and regulations. Policies and procedures are in place to monitor compliance. The Partnership's management has made an assessment of its potential environmental exposure and determined that such exposure is not material to its consolidated financial position, results of operations or cash flows. As part of the formation of the Partnership, Basis and Howell agreed to be responsible for certain environmental conditions related to their ownership and operation of their respective assets contributed to the Partnership and for any environmental liabilities which Basis or Howell may have assumed from prior owners of these assets. The Partnership is subject to lawsuits in the normal course of business and examination by tax and other regulatory authorities. No such matters are presently pending. As part of the formation of the Partnership, Basis and Howell agreed to each retain liability and responsibility for the defense of any future lawsuits arising out of activities conducted by Basis and Howell prior to the formation of the Partnership and have also agreed to cooperate in the defense of such lawsuits. 16. Subsequent Event On March 17, 1997, Salomon Inc announced that it had entered into a letter of intent to sell 100% of the stock of Basis to Valero Energy Corporation. The parties expect the transaction to close in May 1997. Prior to the transaction, Basis will convey its interests in the Partnership and in the General Partner to Salomon Inc. Management is currently evaluating the impact that such a sale may have on the Partnership. Salomon Inc, who controls the General Partner through their indirect 54% ownership, does not anticipate that the transaction with Valero will have a material impact on the Partnership. EX-3 2 EXHIBIT 3.2 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GENESIS ENERGY, L.P. TABLE OF CONTENTS ARTICLE I Definitions 1.1 Definitions 1.2 Construction ARTICLE II Organization 2.1 Formation 2.2 Name 2.3 Registered Office; Registered Agent; Principal Office; Other Offices 2.4 Purpose and Business 2.5 Powers 2.6 Power of Attorney 2.7 Term 2.8 Title to Partnership Assets ARTICLE III Rights of Limited Partners 3.1 Limitation of Liability 3.2 Management of Business 3.3 Outside Activities of the Limited Partners 3.4 Rights of Limited Partners ARTICLE IV Certificates; Record Holders; Transfer of Partnership Interests; Redemption of Partnership Interests 4.1 Certificates 4.2 Mutilated, Destroyed, Lost or Stolen Certificates 4.3 Record Holders 4.4 Transfer Generally 4.5 Registration and Transfer of Limited Partner Interests 4.6 Transfer of a General Partner's General Partner Interest 4.7 Restrictions on Transfers 4.8 Citizenship Certificates; Non-citizen Assignees 4.9 Redemption of Partnership Interests of Non-citizen Assignees ARTICLE V Capital Contributions and Issuance of Partnership Interests 5.1 Organizational Contributions 5.2 Contributions by General Partner 5.3 Contributions by Initial Limited Partners 5.4 Interest and Withdrawal 5.5 Capital Accounts 5.6 Issuances of Additional Partnership Securities 5.7 Limitations on Issuance of Additional Partnership Securities 5.8 Limited Preemptive Right 5.9 Splits and Combination 5.10 Fully Paid and Non-Assessable Nature of Limited Partner Interests0 ARTICLE VI Allocations and Distributions 6.1 Allocations for Capital Account Purposes 6.2 Allocations for Tax Purposes 6.3 Distributions to Record Holders ARTICLE VII Management and Operation of Business 7.1 Management 7.2 Certificate of Limited Partnership 7.3 Restrictions on General Partner's Authority 7.4 Reimbursement of the General Partner 7.5 Outside Activities 7.6 Loans from the General Partner; Loans or Contributions from the Partnership; Contracts with Affiliates; Certain Restrictions on the General Partner 7.7 Indemnification 7.8 Liability of Indemnitees 7.9 Resolution of Conflicts of Interest 7.10 Other Matters Concerning the General Partner 7.11 Purchase or Sale of Partnership Securities 7.12 Registration Rights of the General Partner and its Affiliates 7.13 Reliance by Third Parties ARTICLE VIII Books, Records, Accounting and Reports 8.1 Records and Accounting 8.2 Fiscal Year 8.3 Reports ARTICLE IX Tax Matters 9.1 Tax Returns and Information 9.2 Tax Elections 9.3 Tax Controversies 9.4 Withholding ARTICLE X Admission of Partners 10.1 Admission of Initial Limited Partners 10.2 Admission of Substituted Limited Partner 10.3 Admission of Successor General Partner 10.4 Admission of Additional Limited Partners 10.5 Amendment of Agreement and Certificate of Limited Partnership ARTICLE XI Withdrawal or Removal of Partners 11.1 Withdrawal of the General Partner 11.2 Removal of the General Partner 11.3 Interest of Departing Partner and Successor General Partner 11.4 Withdrawal of Limited Partners ARTICLE XII Dissolution and Liquidation 12.1 Dissolution 12.2 Continuation of the Business of the Partnership After Dissolution0 12.3 Liquidator 12.4 Liquidation 12.5 Cancellation of Certificate of Limited Partnership 12.6 Return of Contributions 12.7 Waiver of Partition 12.8 Capital Account Restoration ARTICLE XIII Amendment of Partnership Agreement; Meetings; Record Date 13.1 Amendment to be Adopted Solely by the General Partner 13.2 Amendment Procedures 13.3 Amendment Requirements 13.4 Special Meetings 13.5 Notice of a Meeting 13.6 Record Date 13.7 Adjournment 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes 13.9 Quorum 13.10 Conduct of a Meeting 13.11 Action Without a Meeting 13.12 Voting and Other Rights 14.1 Authority 14.2 Procedure for Merger or Consolidation 14.3 Approval by Limited Partners of Merger or Consolidation 14.4 Certificate of Merger ARTICLE XIV Merger 14.5 Effect of Merger ARTICLE XV Right to Acquire Limited Partner Interests 15.1 Right to Acquire Limited Partner Interests ARTICLE XVI General Provisions 16.1 Addresses and Notices 16.2 Further Action 16.3 Binding Effect 16.4 Integration 16.5 Creditors 16.6 Waiver 16.7 Counterparts 16.8 Applicable Law 16.9 Invalidity of Provisions 16.10 Consent of Partners AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GENESIS ENERGY, L.P. THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Genesis Energy, L.P. dated as of December 3, 1996, is entered into by and among Genesis Energy, L.L.C., a Delaware limited liability company, as the General Partner, and Wayne Kubicek, as the Organizational Limited Partner, together with any other Persons who become Partners in the Partnership or parties hereto as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I Definitions 1.1 Definitions The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. ''Acquisition'' means any transaction in which any Group Member acquires (through an asset acquisition, merger, stock acquisition or other form of investment) control over all or a portion of the assets, properties or business of another Person for the purpose of increasing the operating capacity or revenues of the Partnership Group from the operating capacity or revenues of the Partnership Group existing immediately prior to such transaction. ''Additional Limited Partner'' means a Person admitted to the Partnership as a Limited Partner pursuant to Section 10.4 and who is shown as such on the books and records of the Partnership. ''Adjusted Capital Account'' means the Capital Account maintained for each Partner as of the end of each fiscal year of the Partnership, (a) increased by any amounts that such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such fiscal year, are reasonably expected to be allocated to such Partner in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end of such fiscal year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases as a result of a minimum gain chargeback pursuant to Section 6.1(c)(i) or 6.1(c)(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently therewith. ''Adjusted Operating Surplus'' has the meaning assigned to such term in the Genesis OLP Partnership Agreement. ''Adjusted Property'' means any property the Carrying Value of which has been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted Property is deemed distributed by, and recontributed to, the Partnership for federal income tax purposes upon a termination of the Partnership pursuant to Treasury Regulation Section 1.708-1(b)(1)(iv), such property shall thereafter constitute a Contributed Property until the Carrying Value of such property is subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Upon a termination of the Partnership following the publication of Proposed Treasury Regulation 1.708-1(b)(1)(iv) as a final regulation, an Adjusted Property deemed contributed to a new partnership in exchange for an interest in the new partnership, followed by the deemed liquidation of the Partnership, shall thereafter constitute a Contributed Property until the Carrying Value of such property is subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). ''Affiliate'' means, with respect to any Person, any other Person that (i) directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question or (ii) owns, beneficially, directly or indirectly, 20% or more of the outstanding capital stock, shares or other equity interests of the Person in question. As used herein, the term ''control'' means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. ''Agreed Allocation'' means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section 6.1, including, without limitation, a Curative Allocation (if appropriate to the context in which the term ''Agreed Allocation'' is used). ''Agreed Value'' of any Contributed Property means the fair market value of such property or other consideration at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, that the Agreed Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code (whether before or after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv)) shall be determined in accordance with Section 5.5(c)(i). Subject to Section 5.5(c)(i), the General Partner shall, in its discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties contributed to the Partnership in a single or integrated transaction among each separate property on a basis proportional to the fair market value of each Contributed Property. ''Agreement'' means this Amended and Restated Agreement of Limited Partnership of Genesis Energy, L.P., as it may be amended, supplemented or restated from time to time. ''API'' has the meaning assigned to such term in the Genesis OLP Partnership Agreement. ''Assignee'' means a Non-citizen Assignee or a Person to whom one or more Limited Partner Interests have been transferred in a manner permitted under this Agreement and who has executed and delivered a Transfer Application as required by this Agreement, but who has not been admitted as a Substituted Limited Partner. ''Associate'' means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest; (b) any trust or other estate in which such Person has at least a 20% beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person. ''Audit Committee'' means a committee of the Board of Directors of the General Partner composed entirely of two or more directors who are neither officers nor employees of the General Partner or officers, directors or employees of any Affiliate of the General Partner. ''Available Cash'' means, with respect to any Quarter ending prior to the Liquidation Date, (a) the sum of (i) all cash and cash equivalents of the Partnership on hand at the end of such Quarter and (ii) all additional cash and cash equivalents of the Partnership on hand on the date of determination of Available Cash with respect to such Quarter resulting from borrowings for working capital purposes and purchases of APIs made subsequent to the end of such Quarter, less (b) the amount of any cash reserves that is necessary or appropriate in the reasonable discretion of the General Partner to (i) provide for the proper conduct of the business of the Partnership Group (including reserves for future capital expenditures and for anticipated future credit needs of the business of the Partnership Group) subsequent to such Quarter or (ii) comply with applicable law or any loan agreement (including the Master Credit Support Agreement), security agreement (including the Security Agreement), mortgage, debt instrument or other agreement or obligation to which any Group Member is a party or by which it is bound or its assets are subject; provided, however, that disbursements made by the Partnership or cash reserves established, increased or reduced after the end of such Quarter but on or before the date of determination of Available Cash with respect to such Quarter shall be deemed to have been made, established, increased or reduced, for purposes of determining Available Cash, within such Quarter if the General Partner so determines, less (c) any Redemption Proceeds on hand that have not yet been contributed to Genesis OLP. Notwithstanding the foregoing, ''Available Cash'' with respect to the Quarter in which the Liquidation Date occurs and any subsequent Quarter shall equal zero. ''Basis'' means Basis Petroleum, Inc., a Texas corporation. ''Book-Tax Disparity'' means with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Section 5.5 and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. ''Business Day'' means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the states of New York or Texas shall not be regarded as a Business Day. ''Capital Account'' means the capital account maintained for a Partner pursuant to Section 5.5. ''Capital Contribution'' means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership pursuant to this Agreement. ''Capital Improvement'' means any (a) addition or improvement to the capital assets owned by any Group Member or (b) acquisition of existing or the construction of new capital assets (including pipeline systems, storage facilities and related assets), made to increase the operating capacity or revenues of the Partnership Group from the operating capacity or revenues of the Partnership Group existing immediately prior to such addition, improvement, acquisition or construction. ''Carrying Value'' means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, amortization and cost recovery deductions charged to the Partners' and Assignees' Capital Accounts in respect of such Contributed Property, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner. ''Cause'' means a court of competent jurisdiction has entered a final, non- appealable judgment finding the General Partner liable for actual fraud, gross negligence or willful or wanton misconduct in its capacity as general partner of the Partnership. ''Certificate'' means a certificate, substantially in the form of Exhibit A to this Agreement or in such other form as may be adopted by the General Partner in its discretion, issued by the Partnership evidencing ownership of one or more Common Units or a certificate, in such form as may be adopted by the General Partner in its discretion, issued by the Partnership evidencing ownership of one or more other Partnership Securities. ''Certificate of Limited Partnership'' means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 7.2, as such Certificate of Limited Partnership may be amended, supplemented or restated from time to time. ''Citizenship Certification'' means a properly completed certificate in such form as may be specified by the General Partner by which an Assignee or a Limited Partner certifies that he (and if he is a nominee holding for the account of another Person, that to the best of his knowledge such other Person) is an Eligible Citizen. ''claim'' has the meaning assigned to such term in Section 7.12(c). ''Closing Date'' means the first date on which Common Units are sold by the Partnership to the Underwriters pursuant to the provisions of the Underwriting Agreement. ''Closing Price'' has the meaning assigned to such term in Section 15.1(a). ''Code'' means the Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. ''Combined Interest'' has the meaning assigned to such term in Section 11.3(a). ''Commission'' means the United States Securities and Exchange Commission. ''Common Unit'' means a Partnership Security representing a fractional part of the Partnership Interests of all Limited Partners and Assignees and having the rights and obligations specified with respect to a Common Unit in this Agreement. ''Contributed Property'' means each property or other asset, in such form as may be permitted by the Delaware Act, but excluding cash, contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code, whether before or after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv)). Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 5.5(d), such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property. ''Conversion Election'' has the meaning assigned to such term in the Genesis OLP Partnership Agreement. ''Conveyance Agreement'' means that certain Purchase & Sale and Contribution & Conveyance Agreement, dated as of November 26, 1996, among the Partnership, Genesis OLP, Genesis Energy, L.L.C., Basis, Howell and the Howell Subsidiaries, together with the additional conveyance documents and instruments contemplated or referenced thereunder. ''Curative Allocation'' means any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 6.1(c)(ix). ''Current Market Price'' has the meaning assigned to such term in Section 15.1(a). ''Delaware Act'' means the Delaware Revised Uniform Limited Partnership Act, 6 Del C. 17-101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute. ''Departing Partner'' means a former General Partner from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Section 11.1 or 11.2. ''Distribution Support Agreement'' means the Distribution Support Agreement, dated as of the Closing Date, among Salomon and Genesis OLP, which sets forth the agreement of Salomon and Genesis OLP relating to the purchase of APIs. ''Economic Risk of Loss'' has the meaning set forth in Treasury Regulation Section 1.752-2(a). ''Eligible Citizen'' means a Person qualified to own interests in real property in jurisdictions in which any Group Member does business or proposes to do business from time to time, and whose status as a Limited Partner or Assignee does not or would not subject such Group Member to a significant risk of cancellation or forfeiture of any of its properties or any interest therein. ''Event of Withdrawal'' has the meaning assigned to such term in Section 11.1(a). ''GP Unit'' means a Partnership Security representing a fractional part of the Partnership Interest of the General Partner and having the rights and obligations specified with respect to GP Units in this Agreement. ''General Partner'' means Genesis Energy, L.L.C. and its successors and permitted assigns as general partner of the Partnership. ''General Partner Interest'' means the ownership interest of a General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interest held by it), which may be evidenced by GP Units or other Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which the General Partner is entitled as provided in this Agreement, together with all obligations of the General Partner to comply with the terms and provisions of this Agreement. ''Genesis Energy, L.L.C.'' means Genesis Energy, L.L.C., a Delaware limited liability company, which is currently the General Partner of the Partnership, and its successors. ''Genesis OLP'' means Genesis Crude Oil, L.P., a Delaware limited partnership, and its successors. ''Genesis OLP Partnership Agreement'' means the Amended and Restated Agreement of Limited Partnership of Genesis Crude Oil, L.P., as it may be amended, supplemented or restated from time to time. ''Group'' means a Person that with or through any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent given to such Person in response to a proxy or consent solicitation made to 10 or more Persons) or disposing of any Partnership Securities with any other Person that beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, Partnership Securities. ''Group Member'' means a member of the Partnership Group. ''Holder'' as used in Section 7.12, has the meaning assigned to such term in Section 7.12(a). ''Howell'' means Howell Corporation, a Delaware corporation. ''Howell Subsidiaries'' means Howell Crude Oil Company, a Delaware corporation, Howell Pipeline Texas, Inc., a Delaware corporation, Howell Pipeline USA, Inc., a Delaware corporation, Howell Power Systems, Inc., a Delaware corporation, and Howell Transportation Services, Inc., a Delaware corporation. ''Incentive Compensation Payment'' has the meaning assigned to such term in the Genesis OLP Partnership Agreement. ''Indemnified Persons'' has the meaning assigned to such term in Section 7.12(c). ''Indemnitee'' means (a) the General Partner, any Departing Partner and any Person who is or was an Affiliate of the General Partner or any Departing Partner, (b) any Person who is or was a director, officer, employee, agent or trustee of a Group Member, (c) any Person who is or was a member, officer, director, employee, agent or trustee of the General Partner or any Departing Partner or any Affiliate of the General Partner or any Departing Partner, or any Affiliate of any such Person, and (d) any Person who is or was serving at the request of the General Partner or any Departing Partner or any such Affiliate as a director, officer, employee, member, partner, agent, fiduciary or trustee of another Person; provided, that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services. ''Initial Common Unit'' means a Common Unit sold in the Initial Offering. ''Initial Limited Partners'' means the Underwriters upon being admitted to the Partnership in accordance with Section 10.1. ''Initial Offering'' means the initial offering and sale of Common Units to the public, as described in the Registration Statement. ''Issue Price'' means the price at which a Unit is purchased from the Partnership, after taking into account any sales commission or underwriting discount charged to the Partnership. ''LLC Contribution Amount'' has the meaning assigned to such term in the Conveyance Agreement. ''LLC Overallotment Contribution'' has the meaning assigned to such term in the Conveyance Agreement. ''Limited Partner'' means, unless the context otherwise requires, (a) the Organizational Limited Partner, each Initial Limited Partner, each Substituted Limited Partner, each Additional Limited Partner, and any Partner upon the change of its status from General Partner to Limited Partner pursuant to Section 11.3 and (b) solely for purposes of Articles V, VI, VII and IX and Section 12.4, each Assignee. ''Limited Partner Interest'' means the ownership interest of a Limited Partner or Assignee in the Partnership, which may be evidenced by Common Units or other Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which such Limited Partner or Assignee is entitled as provided in this Agreement, together with all obligations of such Limited Partner or Assignee to comply with the terms and provisions of this Agreement. ''Liquidation Date'' means (a) in the case of an event giving rise to the dissolution of the Partnership of the type described in clauses (a) and (b) of the first sentence of Section 12.2, the date on which the applicable time period during which the Partners have the right to elect to reconstitute the Partnership and continue its business has expired without such an election being made, and (b) in the case of any other event giving rise to the dissolution of the Partnership, the date on which such event occurs. ''Liquidator'' means one or more Persons selected by the General Partner to perform the functions described in Section 12.3 as liquidating trustee of the Partnership within the meaning of the Delaware Act. ''Master Credit Support Agreement'' means the Master Credit Support Agreement, dated as of the Closing Date, among Genesis OLP, Salomon and Basis which sets forth the agreement of Genesis OLP and Salomon relating to the credit support to be provided by Salomon to Genesis OLP and the agreement of Genesis OLP and Basis regarding working capital to be provided by Basis to Genesis OLP. ''Majority Interest'' means at least a majority in Voting Power of the Outstanding Limited Partner Interests. ''Merger Agreement'' has the meaning assigned to such term in Section 14.1. ''National Securities Exchange'' means an exchange registered with the Commission under Section 6(a) of the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time, and any successor to such statute, or the Nasdaq Stock Market or any successor thereto. ''Net Agreed Value'' means, (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, and (b) in the case of any property distributed to a Partner or Assignee by the Partnership, the Partnership's Carrying Value of such property (as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is distributed, reduced by any indebtedness either assumed by such Partner or Assignee upon such distribution or to which such property is subject at the time of distribution, in either case, as determined under Section 752 of the Code. ''Net Income'' means, for any taxable year, the excess, if any, of the Partnership's items of income and gain for such taxable year over the Partnership's items of loss and deduction for such taxable year. The items included in the calculation of Net Income shall be determined in accordance with Section 5.5(b) and shall not include any items specially allocated under Section 6.1(c). ''Net Loss'' means, for any taxable year, the excess, if any, of the Partnership's items of loss and deduction for such taxable year over the Partnership's items of income and gain for such taxable year. The items included in the calculation of Net Loss shall be determined in accordance with Section 5.5(b) and shall not include any items specially allocated under Section 6.1(c). ''Ninety Percent Interest'' means at least 90% in Voting Power of the Outstanding Limited Partner Interests. ''Non-Competition Agreement'' means the Non-Competition Agreement, dated as of the Closing Date, among the Partnership, Genesis OLP, Salomon, Basis and Howell. ''Non-citizen Assignee'' means a Person whom the General Partner has determined in its discretion does not constitute an Eligible Citizen and as to whose Limited Partner Interest the General Partner has become the Substituted Limited Partner, pursuant to Section 4.8. ''Nonrecourse Built-in Gain'' means with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and 6.2(b)(iii) if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration. ''Nonrecourse Deductions'' means any and all items of loss, deduction or expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-2(b), are attributable to a Nonrecourse Liability. ''Nonrecourse Liability'' has the meaning set forth in Treasury Regulation Section 1.752-1(a)(2). ''Notice of Election to Purchase'' has the meaning assigned to such term in Section 15.1(b) hereof. ''OLP Common Unit'' has the meaning assigned to the term ''Common Unit'' in the Genesis OLP Partnership Agreement. ''OLP Parity Unit'' has the meaning assigned to the term ''Parity Unit'' in the Genesis OLP Partnership Agreement. ''OLP Subordinated Unit'' has the meaning assigned to the term ''Subordinated Unit'' in the Genesis OLP Partnership Agreement. ''OLP Unit'' has the meaning assigned to the term ''Unit'' in the Genesis OLP Partnership Agreement. ''OLP Unitholders'' has the meaning assigned to the term ''Unitholders'' in the Genesis OLP Partnership Agreement. ''Operating General Partner'' has the meaning assigned to such term in the Genesis OLP Partnership Agreement. ''Opinion of Counsel'' means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner or any of their Affiliates) acceptable to the General Partner in its reasonable discretion. ''Option Closing Date'' has the meaning assigned to such term in the Underwriting Agreement. ''Organizational Limited Partner'' means Wayne Kubicek in his capacity as the organizational limited partner of the Partnership pursuant to this Agreement. ''Outstanding'' means, with respect to Partnership Securities, all Partnership Securities that are issued by the Partnership and reflected as outstanding on the Partnership's books and records as of the date of determination; provided, however, that if at any time any Person or Group (other than the General Partner or its Affiliates) beneficially owns 20% or more of any Outstanding Partnership Securities of any class then Outstanding, all Partnership Securities owned by such Person or Group shall not be voted on any matter and shall not be considered to be Outstanding when sending notices of a meeting of Limited Partners to vote on any matter (unless otherwise required by law), calculating required votes, determining the presence of a quorum or for other similar purposes under this Agreement, except that such Partnership Securities shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such Partnership Securities shall not, however, be treated as a separate class of Partnership Securities for purposes of this Agreement). ''Over-allotment Option'' means the over-allotment option granted to the Underwriters by the Partnership pursuant to the Underwriting Agreement. ''Parity Units'' means Common Units and all other Limited Partner Interests having rights to distributions or in liquidation ranking on a parity with the Common Units. ''Partner Nonrecourse Debt'' has the meaning set forth in Treasury Regulation Section 1.704-2(b)(4). ''Partner Nonrecourse Debt Minimum Gain'' has the meaning set forth in Treasury Regulation Section 1.704-2(i)(2). ''Partner Nonrecourse Deductions'' means any and all items of loss, deduction or expenditure (including, without limitation, any expenditure described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-2(i), are attributable to a Partner Nonrecourse Debt. ''Partner'' means the General Partner and each Limited Partner. ''Partnership'' means Genesis Energy, L.P., a Delaware limited partnership, and any successors thereto. ''Partnership Group'' means the Partnership, Genesis OLP and any other Subsidiary of the Partnership, treated as a single consolidated entity. ''Partnership Interest'' means an ownership interest in the Partnership, which shall include General Partner Interests and Limited Partner Interests. ''Partnership Minimum Gain'' means that amount determined in accordance with the principles of Treasury Regulation Section 1.704-2(d). ''Partnership Security'' means any class or series of equity interest in the Partnership and shall include, without limitation, Common Units and GP Units. ''Percentage Interest'' means as of the date of such determination (a) as to any Partner or Assignee holding Units, the product obtained by multiplying (i) 100% less the percentage applicable to paragraph (b) by (ii) the quotient obtained by dividing (A) the number of Units held by such Partner or Assignee by (B) the total number of all Outstanding Units, and (b) as to the holders of additional Partnership Securities issued by the Partnership in accordance with Section 5.6, the percentage established as a part of such issuance. ''Person'' means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity. ''Pro Rata'' means (a) when modifying Units or any class thereof, apportioned among all designated Units in accordance with their relative Percentage Interests and (b) when modifying Partners and Assignees, apportioned among all Partners and Assignees in accordance with their respective Percentage Interests. ''Purchase Date'' means the date determined by the General Partner as the date for purchase of all Outstanding Units (other than Units owned by the General Partner and its Affiliates) pursuant to Article XV. ''Quarter'' means, unless the context requires otherwise, a calendar quarter. ''Recapture Income'' means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. ''Record Date'' means the date established by the General Partner for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Limited Partners or entitled to vote by ballot or give approval of Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Limited Partners or (b) the identity of Record Holders entitled to receive any report or distribution or participate in any offer. ''Record Holder'' means the Person in whose name a Common Unit is registered on the books of the Transfer Agent as of the opening of business on a particular Business Day, or with respect to other Partnership Securities, the Person in whose name any such other Partnership Security is registered on the books which the General Partner has caused to be kept as of the opening of business on such Business Day. ''Redeemable Interests'' means any Limited Partner Interests for which a redemption notice has been given, and has not been withdrawn, pursuant to Section 4.9. ''Redemption and Registration Rights Agreement'' means the Redemption and Registration Rights Agreement, dated as of the Closing Date, among Basis, Howell, the Howell Subsidiaries, the Partnership and Genesis OLP which sets forth the agreement regarding the redemption of OLP Common Units by Genesis OLP. ''Redemption Proceeds'' means any cash received by the Partnership from the issuance of Partnership Securities which cash is to be contributed to Genesis OLP and used by Genesis OLP to redeem OLP Common Units pursuant to the Redemption and Registration Rights Agreement. ''Registration Statement'' means the Registration Statement on Form S-1 (Registration No. 333-11545) as it has been or as it may be amended or supplemented from time to time, filed by the Partnership with the Commission under the Securities Act to register the offering and sale of the Common Units in the Initial Offering. ''Required Allocations'' means (a) any limitation imposed on any allocation of Net Losses under Section 6.1(b) and (b) any allocation of an item of income, gain, loss or deduction pursuant to Section 6.1(c)(i), 6.1(c)(ii), 6.1(c)(iii), 6.1(c)(vi) or 6.1(c)(viii). ''Residual Gain'' or ''Residual Loss'' means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of a Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities. ''Salomon'' means Salomon Inc, a Delaware corporation. ''Securities Act'' means the Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute. ''Security Agreement'' means the Security Agreement, dated as of the Closing Date, among Genesis OLP, Salomon and the Secured Parties (as defined in the Security Agreement) securing the obligations of Genesis OLP under the Master Credit Support Agreement and creating a security interest in the Collateral (as defined in the Security Agreement) in favor of the Collateral Agent (as defined in the Security Agreement). ''Special Approval'' means approval by a majority of the members of the Audit Committee. ''Subordination Period'' has the meaning assigned to such term in the Genesis OLP Partnership Agreement. ''Subsidiary'' means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of such partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person. ''Substituted Limited Partner'' means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 10.2 in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership. ''Surviving Business Entity'' has the meaning assigned to such term in Section 14.2(b). ''Trading Day'' has the meaning assigned to such term in Section 15.1(a). ''transfer'' has the meaning assigned to such term in Section 4.4(a). ''Transfer Agent'' means such bank, trust company or other Person (including the General Partner or one of its Affiliates) as shall be appointed from time to time by the Partnership to act as registrar and transfer agent for the Common Units. ''Transfer Application'' means an application and agreement for transfer of Partnership Securities in the form set forth on the back of a Certificate or in a form substantially to the same effect in a separate instrument. ''Two-Thirds Interest'' means at least 662/3% in Voting Power of the Outstanding Limited Partner Interests. ''Underwriter'' means each Person named as an underwriter in Schedule I to the Underwriting Agreement who purchases Common Units pursuant thereto. ''Underwriting Agreement'' means the Underwriting Agreement dated November 26, 1996, among the Underwriters, the Partnership, Genesis OLP, the General Partner and certain other parties, providing for the purchase of Common Units by such Underwriters. ''Unit'' means a Common Unit or a GP Unit or any other Partnership Security that is designated as a ''Unit.'' ''Unrealized Gain'' attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section 5.5(d)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 5.5(d) as of such date). ''Unrealized Loss'' attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 5.5(d) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 5.5(d)). ''U.S. GAAP'' means United States Generally Accepted Accounting Principles consistently applied. ''Voting Power'' means the right, if any, of the holder of a Partnership Security to vote on Partnership matters. Each Common Unit shall entitle the holder thereof to one vote. Each additional Partnership Security shall entitle the holder thereof to such vote, if any, as shall be established at the time of issuance of such Partnership Security. ''Withdrawal Opinion of Counsel'' has the meaning assigned to such term in Section 11.1(b). 1.2 Construction Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; and (c) ''include'' or ''includes'' means includes, without limitation, and ''including'' means including, without limitation. ARTICLE II Organization 2.1 Formation The General Partner and the Organizational Limited Partner have previously formed the Partnership as a limited partnership pursuant to the provisions of the Delaware Act and hereby amend and restate the original Agreement of Limited Partnership of Genesis Energy, L.P. in its entirety. This amendment and restatement shall become effective on the date of this Agreement. Except as expressly provided to the contrary in this Agreement, the rights, duties (including fiduciary duties), liabilities and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes and a Partner has no interest in specific Partnership property. 2.2 Name The name of the Partnership shall be ''Genesis Energy, L.P.'' The Partnership's business may be conducted under any other name or names deemed necessary or appropriate by the General Partner in its sole discretion, including the name of the General Partner. The words ''Limited Partnership,'' ''L.P.,'' ''Ltd.'' or similar words or letters shall be included in the Partnership's name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The General Partner in its discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners. 2.3 Registered Office; Registered Agent; Principal Office; Other Offices Unless and until changed by the General Partner, the registered office of the Partnership in the State of Delaware shall be located at 1209 Orange Street, New Castle County, Wilmington, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be CT Corporation System. The principal office of the Partnership shall be located at 500 Dallas, Suite 3100, Houston, Texas 77002 or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems necessary or appropriate. The address of the General Partner shall be 500 Dallas, Suite 3100, Houston, Texas 77002 or such other place as the General Partner may from time to time designate by notice to the Limited Partners. 2.4 Purpose and Business The purpose and nature of the business to be conducted by the Partnership shall be to (a) serve as a general partner in Genesis OLP and, in connection therewith, to exercise all the rights and powers conferred upon the Partnership as a general partner in Genesis OLP pursuant to the Genesis OLP Partnership Agreement or otherwise, (b) engage directly in, or enter into or form any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any business activity that Genesis OLP is permitted to engage in by the Genesis OLP Partnership Agreement and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, (c) engage directly in, or to enter into or form any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any business activity that is approved by the General Partner and which lawfully may be conducted by a limited partnership organized pursuant to the Delaware Act and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, and (d) do anything necessary or appropriate to the foregoing, including the making of capital contributions or loans to a Group Member; provided, however, that, notwithstanding the foregoing, the Partnership shall not engage in the activities described in (b) and (c) above if (x) there are any outstanding OLP Units that are not held by the Partnership, which OLP Units give the holders thereof the right to cause Genesis OLP to redeem such OLP Units based on a value that is related to the value of Partnership Securities and, as a result of engaging in such activities, the relative values of such OLP Units and Partnership Securities will be materially affected or (y) there are any outstanding OLP Subordinated Units. The General Partner has no obligation or duty to the Partnership, the Limited Partners, or the Assignees to propose or approve, and in its discretion may decline to propose or approve, the conduct by the Partnership of any business. 2.5 Powers The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described in Section 2.4 and for the protection and benefit of the Partnership. 2.6 Power of Attorney (a) Each Limited Partner and each Assignee hereby constitutes and appoints the General Partner and, if a Liquidator shall have been selected pursuant to Section 12.3, the Liquidator, severally (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, as the case may be, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to: (i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including this Agreement and the Certificate of Limited Partnership and all amendments or restatements hereof or thereof) that the General Partner or the Liquidator deems necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator deems necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the General Partner or the Liquidator deems necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article IV, X, XI or XII; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Partnership Securities issued pursuant to Section 5.6; and (F) all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger or consolidation of the Partnership pursuant to Article XIV; and (ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments necessary or appropriate, in the discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or is necessary or appropriate, in the discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided, that when required by Section 13.3 or any other provision of this Agreement that establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the General Partner and the Liquidator may exercise the power of attorney made in this Section 2.6(a)(ii) only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series, as applicable. Nothing contained in this Section 2.6(a) shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIII or as may be otherwise expressly provided for in this Agreement. (b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner's or Assignee's Partnership Interest and shall extend to such Limited Partner's or Assignee's heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership. 2.7 Term The term of the Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue until the close of Partnership business on December 31, 2086 or until the earlier dissolution of the Partnership in accordance with the provisions of Article XII. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate of Limited Partnership as provided in the Delaware Act. 2.8 Title to Partnership Assets Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner or Assignee, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner, one or more of its Affiliates or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Partnership assets for which record title is held in the name of the General Partner or one or more of its Affiliates or one or more nominees shall be held by the General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable) to be vested in the Partnership as soon as reasonably practicable; provided, further, that, prior to the withdrawal or removal of the General Partner or as soon thereafter as practicable, the General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the General Partner. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership assets is held. ARTICLE III Rights of Limited Partners 3.1 Limitation of Liability The Limited Partners and the Assignees shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act. 3.2 Management of Business No Limited Partner or Assignee, in its capacity as such, shall participate in the operation, management or control (within the meaning of the Delaware Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. Any action taken by any Affiliate of the General Partner or any officer, director, employee, member, general partner, agent or trustee of the General Partner or any of its Affiliates, or any officer, director, employee, member, general partner, agent or trustee of a Group Member, in its capacity as such, shall not be deemed to be participation in the control of the business of the Partnership by a limited partner of the Partnership (within the meaning of Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement. 3.3 Outside Activities of the Limited Partners Subject to the provisions of Section 7.5, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners or Assignees, any Limited Partner or Assignee shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership Group. Neither the Partnership nor any of the other Partners or Assignees shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. 3.4 Rights of Limited Partners (a) In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 3.4(b), each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon reasonable written demand and at such Limited Partner's own expense: (i) to obtain true and full information regarding the status of the business and financial condition of the Partnership; (ii) promptly after becoming available, to obtain a copy of the Partnership's federal, state and local tax returns for each year; (iii) to have furnished to him a current list of the name and last known business, residence or mailing address of each Partner; (iv) to have furnished to him a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with a copy of the executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed; (v) to obtain true and full information regarding the amount of cash and a description and statement of the Net Agreed Value of any other Capital Contribution by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner; and (vi) to obtain such other information regarding the affairs of the Partnership as is just and reasonable. (b) The General Partner may keep confidential from the Limited Partners and Assignees, for such period of time as the General Partner deems reasonable, (i) any information that the General Partner reasonably believes to be in the nature of trade secrets or (ii) other information the disclosure of which the General Partner in good faith believes (A) is not in the best interests of the Partnership Group, (B) could damage the Partnership Group or (C) that any Group Member is required by law or by agreement with any third party to keep confidential (other than agreements with Affiliates of the Partnership the primary purpose of which is to circumvent the obligations set forth in this Section 3.4). ARTICLE IV Certificates; Record Holders; Transfer of Partnership Interests; Redemption of Partnership Interests 4.1 Certificates Upon the Partnership's issuance of Common Units to any Person, the Partnership shall issue one or more Certificates in the name of such Person evidencing the number of such Common Units being so issued. In addition, the General Partner may cause the Partnership to issue Certificates evidencing ownership of one or more other classes or series of Partnership Securities. Certificates shall be executed on behalf of the Partnership by the Chairman of the Board, President or any Vice President and the Secretary or any Assistant Secretary of the General Partner. No Common Unit Certificate shall be valid for any purpose until it has been countersigned by the Transfer Agent. 4.2 Mutilated, Destroyed, Lost or Stolen Certificates (a) If any mutilated Certificate is surrendered to the Transfer Agent, the appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver and, in the case of a Common Unit Certificate, the Transfer Agent shall countersign, in exchange therefor, a new Certificate evidencing the same number and type of Partnership Securities as the Certificate so surrendered. (b) The appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver and, in the case of a Common Unit Certificate, the Transfer Agent shall countersign, a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate: (i) makes proof by affidavit, in form and substance satisfactory to the Partnership, that a previously issued Certificate has been lost, destroyed or stolen; (ii) requests the issuance of a new Certificate before the Partnership has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim; (iii) if requested by the Partnership, delivers to the Partnership a bond, in form and substance satisfactory to the Partnership, with surety or sureties and with fixed or open penalty as the Partnership may reasonably direct, in its sole discretion, to indemnify the Partnership, the General Partner and the Transfer Agent against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and (iv) satisfies any other reasonable requirements imposed by the Partnership. If a Limited Partner or Assignee fails to notify the Partnership within a reasonable time after he has notice of the loss, destruction or theft of a Certificate, and a transfer of the Limited Partner Interests represented by the Certificate is registered before the Partnership, the General Partner or the Transfer Agent receives such notification, the Limited Partner or Assignee shall be precluded from making any claim against the Partnership, the General Partner or the Transfer Agent for such transfer or for a new Certificate. (c) As a condition to the issuance of any new Certificate under this Section 4.2, 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 Transfer Agent) reasonably connected therewith. 4.3 Record Holders The Partnership shall be entitled to recognize the Record Holder as the Partner or Assignee with respect to any Partnership Interest and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Partnership Interest on the part of any other Person, regardless of whether the Partnership shall have actual or other notice thereof, except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which Limited Partner Interests are listed for trading. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Limited Partner Interests, as between the Partnership on the one hand, and such other Persons on the other, such representative Person (a) shall be the Partner or Assignee (as the case may be) of record and beneficially, (b) must execute and deliver a Transfer Application and (c) shall be bound by this Agreement and shall have the rights and obligations of a Partner or Assignee (as the case may be) hereunder and as, and to the extent, provided for herein. 4.4 Transfer Generally (a) The term ''transfer,'' when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction by which the General Partner assigns its General Partner Interest to another Person who becomes the General Partner, or by which the holder of a Limited Partner Interest assigns such Limited Partner Interest to another Person who is or becomes a Limited Partner or an Assignee, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. (b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article IV. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article IV shall be null and void. (c) Nothing contained in this Agreement shall be construed to prevent a disposition by any interest holder in the General Partner of any or all of the issued and outstanding interests in the General Partner. 4.5 Registration and Transfer of Limited Partner Interests (a) The Partnership shall keep or cause to be kept on behalf of the Partnership a register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 4.5(b), the Partnership will provide for the registration and transfer of Limited Partner Interests. The Transfer Agent is hereby appointed registrar and transfer agent for the purpose of registering Common Units and transfers of such Common Units as herein provided. The Partnership shall not recognize transfers of Certificates evidencing Limited Partner Interests unless such transfers are effected in the manner described in this Section 4.5. Upon surrender of a Certificate for registration of transfer of any Limited Partner Interest, and subject to the provisions of Section 4.5(b), the appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver and, in the case of Common Units, the Transfer Agent shall countersign, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder's instructions, one or more new Certificates evidencing the same aggregate number and type of Limited Partner Interests as was evidenced by the Certificate so surrendered. (b) Except as otherwise provided in Section 4.8, the Partnership shall not recognize any transfer of Limited Partner Interests until the Certificates evidencing such Limited Partner Interests are surrendered for registration of transfer and are accompanied by a Transfer Application duly executed by the transferee (or the transferee's attorney-in-fact duly authorized in writing). No charge shall be imposed by the Partnership for such transfer; provided, that as a condition to the issuance of any new Certificate under this Section 4.5, the Partnership may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto. (c) Limited Partner Interests may be transferred only in the manner described in this Section 4.5. The transfer of any Limited Partner Interests and the admission of any new Limited Partner shall not constitute an amendment to this Agreement. (d) Until admitted as a Substituted Limited Partner pursuant to Section 10.2, the Record Holder of a Limited Partner Interest shall be an Assignee in respect of such Limited Partner Interest. Limited Partners may include custodians, nominees or any other individual or entity in its own or any representative capacity. (e) A transferee of a Limited Partner Interest who has completed and delivered a Transfer Application shall be deemed to have (i) requested admission as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and to have executed this Agreement, (iii) represented and warranted that such transferee has the right, power and authority and, if an individual, the capacity to enter into this Agreement, (iv) granted the powers of attorney set forth in this Agreement and (v) given the consents and approvals and made the waivers contained in this Agreement. 4.6 Transfer of a General Partner's General Partner Interest Prior to December 31, 2006, the General Partner shall not transfer all or any part of its General Partner Interest to a Person unless such transfer (a) has been approved by the prior written consent or vote of the holders of a Majority Interest or (b) is of all, but not less than all, of its General Partner Interest to (i) an Affiliate of the General Partner or (ii) another Person in connection with the merger or consolidation of the General Partner with or into another Person or the transfer by the General Partner of all or substantially all of its assets to another Person. Notwithstanding anything herein to the contrary, no transfer by the General Partner of all or any part of its General Partner Interest to another Person shall be permitted unless (x) the transferee agrees to assume the rights and duties of the General Partner under this Agreement and the Genesis OLP Partnership Agreement and to be bound by the provisions of this Agreement and the Genesis OLP Partnership Agreement, (y) the Partnership receives an Opinion of Counsel that such transfer would not result in the loss of limited liability of any Limited Partner or of any limited partner of Genesis OLP or cause the Partnership or Genesis OLP to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already so treated or taxed) and (z) such transferee also agrees to purchase all (or the appropriate portion thereof, if applicable) of the partnership interest of the General Partner as the general partner of each other Group Member. In the case of a transfer pursuant to and in compliance with this Section 4.6, the transferee or successor (as the case may be) shall, subject to compliance with the terms of Section 10.3, be admitted to the Partnership as a General Partner immediately prior to the transfer of the General Partner Interest, and the business of the Partnership shall continue without dissolution. 4.7 Restrictions on Transfers (a) Notwithstanding the other provisions of this Article IV, no transfer of any Partnership Interest shall be made if such transfer would (i) violate the then applicable federal or state securities laws or rules and regulations of the Commission, any state securities commission or any other governmental authority with jurisdiction over such transfer, (ii) terminate the existence or qualification of the Partnership or Genesis OLP under the laws of the jurisdiction of its formation or (iii) cause the Partnership or Genesis OLP to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already so treated or taxed). (b) The General Partner may impose restrictions on the transfer of Partnership Interests if a subsequent Opinion of Counsel determines that such restrictions are necessary to avoid a significant risk of the Partnership or Genesis OLP becoming taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes. The restrictions may be imposed by making such amendments to this Agreement as the General Partner may determine to be necessary or appropriate to impose such restrictions; provided, however, that any amendment that the General Partner believes, in the exercise of its reasonable discretion, could result in the delisting or suspension of trading of any class of Limited Partner Interests on the principal National Securities Exchange on which such class of Limited Partner Interests is then traded must be approved, prior to such amendment being effected, by the holders of at least a majority of the Outstanding Limited Partner Interests of such class. (c) Nothing contained in this Article IV, or elsewhere in this Agreement, shall preclude the settlement of any transactions involving Partnership Interests entered into through the facilities of any National Securities Exchange on which such Partnership Interests are listed for trading. 4.8 Citizenship Certificates; Non-citizen Assignees (a) If any Group Member is or becomes subject to any federal, state or local law or regulation that, in the reasonable determination of the General Partner, creates a substantial risk of cancellation or forfeiture of any property in which the Group Member has an interest based on the nationality, citizenship or other related status of a Limited Partner or Assignee, the General Partner may request any Limited Partner or Assignee to furnish to the General Partner, within 30 days after receipt of such request, an executed Citizenship Certification or such other information concerning his nationality, citizenship or other related status (or, if the Limited Partner or Assignee is a nominee holding for the account of another Person, the nationality, citizenship or other related status of such Person) as the General Partner may request. If a Limited Partner or Assignee fails to furnish to the General Partner within the aforementioned 30-day period such Citizenship Certification or other requested information or if upon receipt of such Citizenship Certification or other requested information the General Partner determines, with the advice of counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the Limited Partner Interests owned by such Limited Partner or Assignee shall be subject to redemption in accordance with the provisions of Section 4.9. In addition, the General Partner may require that the status of any such Limited Partner or Assignee be changed to that of a Non-citizen Assignee and, thereupon, the General Partner shall be substituted for such Non-citizen Assignee as the Limited Partner in respect of his Limited Partner Interests. (b) The General Partner shall, in exercising voting rights in respect of Limited Partner Interests held by it on behalf of Non-citizen Assignees, distribute the votes in the same ratios as the votes of Limited Partners (including without limitation the General Partner) in respect of Limited Partner Interests other than those of Non-citizen Assignees are cast, either for, against or abstaining as to the matter. (c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have no right to receive a distribution in kind pursuant to Section 12.4 but shall be entitled to the cash equivalent thereof, and the Partnership shall provide cash in exchange for an assignment of the Non-citizen Assignee's share of the distribution in kind. Such payment and assignment shall be treated for Partnership purposes as a purchase by the Partnership from the Non-citizen Assignee of his Limited Partner Interest (representing his right to receive his share of such distribution in kind). (d) At any time after he can and does certify that he has become an Eligible Citizen, a Non-citizen Assignee may, upon application to the General Partner, request admission as a Substituted Limited Partner with respect to any Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to Section 4.9, and upon his admission pursuant to Section 10.2, the General Partner shall cease to be deemed to be the Limited Partner in respect of the Non-citizen Assignee's Limited Partner Interests. 4.9 Redemption of Partnership Interests of Non-citizen Assignees (a) If at any time a Limited Partner or Assignee fails to furnish a Citizenship Certification or other information requested within the 30-day period specified in Section 4.8(a), or if upon receipt of such Citizenship Certification or other information the General Partner determines, with the advice of counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the Partnership may, unless the Limited Partner or Assignee establishes to the satisfaction of the General Partner that such Limited Partner or Assignee is an Eligible Citizen or has transferred his Limited Partner Interests to a Person who is an Eligible Citizen and who furnishes a Citizenship Certification to the General Partner prior to the date fixed for redemption as provided below, redeem the Limited Partner Interest of such Limited Partner or Assignee as follows: (i) The General Partner shall, not later than the 30th day before the date fixed for redemption, give notice of redemption to the Limited Partner or Assignee, at his last address designated on the records of the Partnership or the Transfer Agent, by registered or certified mail, postage prepaid. The notice shall be deemed to have been given when so mailed. The notice shall specify the Redeemable Interests, the date fixed for redemption, the place of payment, that payment of the redemption price will be made upon surrender of the Certificate evidencing the Redeemable Interests and that on and after the date fixed for redemption no further allocations or distributions to which the Limited Partner or Assignee would otherwise be entitled in respect of the Redeemable Interests will accrue or be made. (ii) The aggregate redemption price for Redeemable Interests shall be an amount equal to the Current Market Price (the date of determination of which shall be the date fixed for redemption) of Limited Partner Interests of the class to be so redeemed multiplied by the number of Limited Partner Interests of each such class included among the Redeemable Interests. The redemption price shall be paid, in the discretion of the General Partner, in cash or by delivery of a promissory note of the Partnership in the principal amount of the redemption price, bearing interest at the rate of 10% annually and payable in three equal annual installments of principal together with accrued interest, commencing one year after the redemption date. (iii) Upon surrender by or on behalf of the Limited Partner or Assignee, at the place specified in the notice of redemption, of the Certificate evidencing the Redeemable Interests, duly endorsed in blank or accompanied by an assignment duly executed in blank, the Limited Partner or Assignee or his duly authorized representative shall be entitled to receive the payment therefor. (iv) After the redemption date, Redeemable Interests shall no longer constitute issued and Outstanding Limited Partner Interests. (b) The provisions of this Section 4.9 shall also be applicable to Limited Partner Interests held by a Limited Partner or Assignee as nominee of a Person determined to be other than an Eligible Citizen. (c) Nothing in this Section 4.9 shall prevent the recipient of a notice of redemption from transferring his Limited Partner Interests before the redemption date if such transfer is otherwise permitted under this Agreement. Upon receipt of notice of such a transfer, the General Partner shall withdraw the notice of redemption, provided the transferee of such Limited Partner Interests certifies to the satisfaction of the General Partner in a Citizenship Certification delivered in connection with the Transfer Application that he is an Eligible Citizen. If the transferee fails to make such certification, such redemption shall be effected from the transferee on the original redemption date. ARTICLE V Capital Contributions and Issuance of Partnership Interests 5.1 Organizational Contributions In connection with the formation of the Partnership under the Delaware Act, the General Partner made an initial Capital Contribution to the Partnership in the amount of $10.00 for an interest in the Partnership and has been admitted as the General Partner of the Partnership, and the Organizational Limited Partner made an initial Capital Contribution to the Partnership in the amount of $990.00 for an interest in the Partnership and has been admitted as a Limited Partner of the Partnership. As of the Closing Date, the interest of the Organizational Limited Partner shall be redeemed as provided in the Conveyance Agreement; the initial Capital Contributions of each Partner shall thereupon be refunded; and the Organizational Limited Partner shall cease to be a Limited Partner of the Partnership. Ninety-nine percent of any interest or other profit that may have resulted from the investment or other use of such initial Capital Contributions shall be allocated and distributed to the Organizational Limited Partner, and the balance thereof shall be allocated and distributed to the General Partner. 5.2 Contributions by General Partner (a) On the Closing Date and pursuant to the Conveyance Agreement, the General Partner shall contribute to the Partnership, as a Capital Contribution, cash in an amount equal to the LLC Contribution Amount in exchange for the number of GP Units specified in Section 2.2(a) of the Conveyance Agreement and the continuation of its General Partner Interest in the Partnership, subject to all of the rights, privileges and duties of the General Partner under this Agreement. (b) Upon the issuance of any Common Units pursuant to the exercise of the Over-allotment Option, the General Partner shall be required to make an additional Capital Contribution equal to the LLC Overallotment Contribution in exchange for a number of additional GP Units equal to 2/98ths of the number of Common Units issued to the Underwriters pursuant to Section 5.3(b). All cash contributed to the Partnership in exchange for the GP Units issued to the General Partner pursuant to this Section 5.2(b) shall be contributed to Genesis OLP. (c) If the Partnership issues Partnership Securities, other than Common Units issued pursuant to Sections 5.3(a) and 5.3(b), then: (i) if the proceeds of such issuance of Partnership Securities will be used to redeem OLP Units pursuant to the terms of the Redemption and Registration Rights Agreement, the General Partner shall not make an additional Capital Contribution to the Partnership in conjunction with the issuance of such Partnership Securities and (ii) if the proceeds of such issuance of Partnership Securities will be used for purposes other than to redeem OLP Units pursuant to the terms of the Redemption and Registration Rights Agreement, the General Partner shall make an additional Capital Contribution to the Partnership in conjunction with the issuance of such Partnership Securities in exchange for a number of GP Units sufficient to maintain the Percentage Interest of the General Partner's General Partner Interest existing prior to the issuance of such Partnership Securities. (d) Except as set forth in Sections 5.2(a), 5.2(b) and 5.2(c) and Article XII, the General Partner shall not be obligated to make any Capital Contributions to the Partnership. 5.3 Contributions by Initial Limited Partners (a) On the Closing Date, simultaneous with the Capital Contribution referred to in Section 5.2(a), each Underwriter shall contribute to the Partnership cash in an amount equal to the Issue Price per Initial Common Unit, multiplied by the number of Common Units specified in the Underwriting Agreement to be purchased by such Underwriter at the Closing Date. In exchange for such Capital Contributions by the Underwriters, the Partnership shall issue Common Units to each Underwriter on whose behalf such Capital Contribution is made in an amount equal to the quotient obtained by dividing (i) the cash contribution to the Partnership by or on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit. All cash contributed to the Partnership in exchange for the Common Units issued to the Underwriters on the Closing Date pursuant to this Section 5.3(a) remaining after the payment or reservation of amounts for payment of all expenses associated with the Initial Offering shall be contributed to Genesis OLP. (b) Upon the exercise of the Over-allotment Option, each Underwriter shall contribute to the Partnership cash in an amount equal to the Issue Price per Initial Common Unit, multiplied by the number of Common Units specified in the Underwriting Agreement to be purchased by such Underwriter at the Option Closing Date. In exchange for such Capital Contributions by the Underwriters, the Partnership shall issue Common Units to each Underwriter on whose behalf such Capital Contribution is made in an amount equal to the quotient obtained by dividing (i) the cash contributions to the Partnership by or on behalf of such Underwriter by (ii) the Issue Price per Common Unit. All cash contributed to the Partnership in exchange for the Common Units issued to the Underwriters pursuant to this Section 5.3(b) shall be contributed to Genesis OLP. (c) No Limited Partner Interests will be issued or issuable as of or at the Closing Date other than (i) the Common Units issuable pursuant to Section 5.3(a) in aggregate number equal to 7,500,000 and (ii) the ''Option Units'' as such term is defined in the Underwriting Agreement in aggregate number up to 1,125,000 issuable upon exercise of the Over-allotment Option pursuant to Section 5.3(b). 5.4 Interest and Withdrawal No interest shall be paid by the Partnership on Capital Contributions. No Partner or Assignee shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner or Assignee shall have priority over any other Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. Any such return shall be a compromise to which all Partners and Assignees agree within the meaning of Section 17-502(b) of the Delaware Act. 5.5 Capital Accounts (a) The Partnership shall maintain for each Partner (or a beneficial owner of Partnership Interests held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the General Partner in its sole discretion) owning a Partnership Interest a separate Capital Account with respect to such Partnership Interest in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership with respect to such Partnership Interest pursuant to this Agreement and (ii) all items of Partnership income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 5.5(b) and allocated with respect to such Partnership Interest pursuant to Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made with respect to such Partnership Interest pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 5.5(b) and allocated with respect to such Partnership Interest pursuant to Section 6.1. (b) For purposes of computing the amount of any item of income, gain, loss or deduction which is to be allocated pursuant to Article VI and is to be reflected in the Partners' Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including, without limitation, any method of depreciation, cost recovery or amortization used for that purpose), provided, that: (i) Solely for purposes of this Section 5.5, the Partnership shall be treated as owning directly its proportionate share (as determined by the General Partner based upon the provisions of the Genesis OLP Partnership Agreement) of all property owned by Genesis OLP. (ii) All underwriting discounts and commissions incurred by the Partnership in connection with the issuance of Partnership Securities that can neither be deducted nor amortized under Section 709 of the Code shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such costs are incurred and shall be allocated 100% to the holders of such Partnership Securities in accordance with their relative Percentage Interests. All other fees and other expenses incurred by the Partnership to promote the sale of (or to sell) Partnership Securities that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Partners pursuant to Section 6.1. (iii) Except as otherwise provided in Treasury Regulation Section 1.704- 1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704- 1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts, the amount of such adjustment in the Capital Accounts shall be treated as an item of gain or loss. (iv) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date. (v) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 5.5(d) to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, however, that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the General Partner may adopt. (vi) If the Partnership's adjusted basis in a depreciable or cost recovery property is reduced for federal income tax purposes pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction shall, solely for purposes hereof, be deemed to be an additional depreciation or cost recovery deduction in the year such property is placed in service and shall be allocated among the Partners pursuant to Section 6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code shall, to the extent possible, be allocated in the same manner to the Partners to whom such deemed deduction was allocated. (c) A transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred; provided, however, that, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties and liabilities shall be deemed (i) to have been distributed in liquidation of the Partnership to the Partners (including any transferee of a Partnership Interest that is a party to the transfer causing such termination) pursuant to Section 12.4 (after adjusting the balance of the Capital Accounts of the Partners as provided in Section 5.5(d)(ii)) and recontributed by such Partners in reconstitution of the Partnership or (ii) in the event of a termination of the Partnership that occurs after the finalization of Proposed Treasury Regulation Section 1.704-1(b)(1)(iv), to have been contributed to a new partnership which will be deemed to be a continuation of, and successor to, the Partnership and the Partnership will be deemed to make liquidating distributions of the interests in this new partnership to the Partners (including any transferee of a Partnership Interest that is a party to the transfer causing such termination) pursuant to Section 12.4 (after adjusting the balance of the Capital Accounts of the Partners as provided in Section 5.5(d)(ii)). Any such deemed distribution and contribution, in the case of a characterization under clause (i) of the preceding sentence, or any such deemed contribution and distribution, in the case of a characterization under clause (ii) of the preceding sentence, shall be treated as an actual contribution and distribution for purposes of this Section 5.5. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution and contribution, or deemed contribution and distribution, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv) and this Section 5.5 and such Carrying Values shall then constitute the Agreed Values of such properties upon such deemed contribution to the new partnership. In either case, the Capital Accounts of the new partnership that results under the applicable characterization shall be maintained in accordance with the principles of this Section 5.5. (d) (i) In accordance with Treasury Regulation Section 1.704- 1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or Contributed Property or the conversion of the General Partner's Combined Interest to Common Units pursuant to Section 11.3(b), the Capital Account of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to the Partners at such time pursuant to Section 6.1 in the same manner as any item of gain or loss actually recognized during such period would have been allocated. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to the issuance of additional Partnership Securities shall be determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, that the General Partner, in arriving at such valuation, must take fully into account the fair market value of the Partnership Interests of all Partners at such time. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its discretion to be reasonable) to arrive at a fair market value for individual properties. (ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), the Capital Accounts of all Partners and the Carrying Value of all Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 6.1 in the same manner as any item of gain or loss actually recognized during such period would have been allocated. In determining such Unrealized Gain or Unrealized Loss the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to a distribution shall (A) in the case of an actual distribution which is not made pursuant to Section 12.4 or in the case of a deemed contribution and/or distribution occurring as a result of a termination of the Partnership pursuant to Section 708 of the Code, be determined and allocated in the same manner as that provided in Section 5.5(d)(i) or (B) in the case of a liquidating distribution pursuant to Section 12.4, be determined and allocated by the Liquidator using such reasonable method of valuation as it may adopt. 5.6 Issuances of Additional Partnership Securities (a) Subject to Section 5.7, the Partnership may issue additional Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities for any Partnership purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole discretion, all without the approval of any Limited Partners. (b) Each additional Partnership Security authorized to be issued by the Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Securities), as shall be fixed by the General Partner in the exercise of its sole discretion, including (i) the right to share Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may redeem such Partnership Security; (v) whether such Partnership Security is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which such Partnership Security will be issued, evidenced by certificates and assigned or transferred; and (vii) the right, if any, of such Partnership Security to vote on Partnership matters, including matters relating to the relative rights, preferences and privileges of such Partnership Security. (c) The General Partner is hereby authorized and directed to take all actions that it deems necessary or appropriate in connection with (i) each issuance of Partnership Securities pursuant to this Section 5.6, (ii) the conversion of a General Partner Interest into Common Units pursuant to the terms of this Agreement, (iii) the admission of Additional Limited Partners and (iv) all additional issuances of Partnership Securities. The General Partner is further authorized and directed to specify the relative rights, powers and duties of the holders of Partnership Securities being so issued. The General Partner shall do all things necessary to comply with the Delaware Act and is authorized and directed to do all things it deems to be necessary or advisable in connection with any future issuance of Partnership Securities or in connection with the conversion of a General Partner Interest into Common Units pursuant to the terms of this Agreement, including compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency or any National Securities Exchange on which the Common Units or other Partnership Securities are listed for trading. (d) If the Partnership shall issue any Partnership Securities at a time when there are any outstanding OLP Units that are not held by the Partnership, which OLP Units give the holders thereof the right to cause Genesis OLP to redeem such OLP Units based on a value that is related to the value of Partnership Securities, the Partnership shall contribute the net proceeds raised in connection with all such issuances of Partnership Securities (including Partnership Securities issued to the General Partner) as a Capital Contribution to Genesis OLP if the contribution of such net proceeds to Genesis OLP is required to maintain the relative values of the OLP Units and the Partnership Securities. 5.7 Limitations on Issuance of Additional Partnership Securities The issuance of Partnership Securities pursuant to Section 5.6 shall be subject to the following restrictions and limitations: (a) During the Subordination Period, the Partnership shall not issue an aggregate of more than 3,750,000 additional Parity Units without the prior approval of the holders of a majority of the Outstanding Common Units; provided, however that the number of additional Parity Units that may be issued without the prior approval of the holders of a majority of the Outstanding Common Units shall be reduced by the number of OLP Parity Units issued by Genesis OLP to any Person other than the Partnership. In applying this limitation, there shall be excluded Common Units issued (i) in connection with the exercise of the Over- allotment Option, (ii) in accordance with Section 5.7(b), (iii) in connection with the redemption of OLP Common Units pursuant to the Redemption and Registration Rights Agreement, (iv) pursuant to the employee benefit plans of the General Partner, the Partnership or any other Group Member and (v) in the event of a combination or subdivision of Common Units. (b) The Partnership may also issue an unlimited number of Parity Units, prior to the end of the Subordination Period and without the prior approval of the Limited Partners if such issuance occurs (i) in connection with an Acquisition or a Capital Improvement or (ii) within 365 days of, and the net proceeds from such issuance are used to repay debt incurred in connection with, an Acquisition or a Capital Improvement, in each case where such Acquisition or Capital Improvement involves assets that, if acquired by the Partnership as of the date that is one year prior to the first day of the Quarter in which such Acquisition is to be consummated or such Capital Improvement is to be completed, would have resulted, on a pro forma basis, in an increase in: (A) the amount of Adjusted Operating Surplus generated by Genesis OLP on a per-unit basis (for all Outstanding OLP Units) with respect to each of the four most recently completed Quarters (on a pro forma basis as described below) as compared to (B) the actual amount of Adjusted Operating Surplus generated by Genesis OLP on a per-unit basis (for all Outstanding OLP Units) (excluding Adjusted Operating Surplus attributable to the Acquisition or Capital Improvement) with respect to each of such four most recently completed Quarters. If the issuance of Partnership Securities with respect to an Acquisition or a Capital Improvement occurs within the first four full Quarters after the Closing Date, then Adjusted Operating Surplus as used in clauses (A) (subject to the succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if any, that commenced after the Closing Date for which actual results of operations are available, based on the actual Adjusted Operating Surplus of Genesis OLP generated with respect to such Quarter, and (ii) for each other Quarter, on a pro forma basis not inconsistent with the procedure, as applicable, set forth in Appendix E to the Registration Statement. Furthermore, the amount in clause (A) shall be determined on a pro forma basis assuming that (1) all of the Parity Units or Partnership Securities to be issued in connection with or within 365 days of such Acquisition or Capital Improvement had been issued and outstanding, (2) all indebtedness for borrowed money to be incurred or assumed in connection with such Acquisition or Capital Improvement (other than any such indebtedness that is to be repaid with the proceeds of such issuance) had been incurred or assumed, in each case as of the commencement of such four-Quarter period, (3) the personnel expenses that would have been incurred by the Partnership in the operation of the acquired assets are the personnel expenses for employees to be retained by the Partnership in the operation of the acquired assets, and (4) the non-personnel costs and expenses are computed on the same basis as those incurred by the Partnership in the operation of the Partnership's business at similarly situated Partnership facilities. (c) During the Subordination Period, the Partnership shall not issue additional Partnership Securities having rights to distributions or in liquidation ranking prior or senior to the Common Units, without the prior approval of the holders of a majority of the Outstanding Common Units. (d) No fractional Common Units shall be issued by the Partnership. 5.8 Limited Preemptive Right Except as provided in this Section 5.8 and in Section 5.2, no Person shall have any preemptive, preferential or other similar right with respect to the issuance of any Partnership Security, whether unissued, held in the treasury or hereafter created. The General Partner shall have the right, which it may from time to time assign in whole or in part to any of its Affiliates, to purchase Partnership Securities from the Partnership whenever, and on the same terms that, the Partnership issues Partnership Securities to Persons other than the General Partner and its Affiliates, to the extent necessary to maintain the Percentage Interests of the General Partner and its Affiliates equal to that which existed immediately prior to the issuance of such Partnership Securities. 5.9 Splits and Combination (a) Subject to Section 5.9(d), the Partnership may make a Pro Rata distribution of Partnership Securities to all Record Holders or may effect a subdivision or combination of Partnership Securities so long as, after any such event, each Partner shall have the same Percentage Interest in the Partnership as before such event, and any amounts calculated on a per Unit basis or stated as a number of Units (including the number of additional Parity Units that may be issued pursuant to Section 5.7 without a vote of the Limited Partners) are proportionately adjusted retroactive to the beginning of the Partnership. (b) Whenever such a distribution, subdivision or combination of Partnership Securities is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Partnership Securities to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation. (c) Promptly following any such distribution, subdivision or combination, the Partnership may issue Certificates to the Record Holders of Partnership Securities as of the applicable Record Date representing the new number of Partnership Securities held by such Record Holders, or the General Partner may adopt such other procedures as it may deem appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Securities Outstanding, the Partnership shall require, as a condition to the delivery to a Record Holder of such new Certificate, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date. (d) The Partnership shall not issue fractional Common Units upon any distribution, subdivision or combination of Common Units. If a distribution, subdivision or combination of Common Units would result in the issuance of fractional Common Units but for the provisions of Section 5.7(d) and this Section 5.9(d), each fractional Common Unit shall be rounded to the nearest whole Common Unit (and a 0.5 Common Unit shall be rounded to the next higher Common Unit). 5.10 Fully Paid and Non-Assessable Nature of Limited Partner Interests All Limited Partner Interests issued pursuant to, and in accordance with the requirements of, this Article V shall be fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Section 17-607 of the Delaware Act. ARTICLE VI Allocations and Distributions 6.1 Allocations for Capital Account Purposes For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be allocated among the Partners in each taxable year (or portion thereof) as provided hereinbelow. (a) Net Income. After giving effect to the special allocations set forth in Section 6.1(c), Net Income for each taxable year and all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable year shall be allocated as follows: (i) First, 100% to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 6.1(a)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the General Partner pursuant to Section 6.1(b)(ii) for all previous taxable years; and (ii) Second, the balance, if any, 100% to the Partners in accordance with their respective Percentage Interests. (b) Net Losses. After giving effect to the special allocations set forth in Section 6.1(c), Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated as follows: (i) First, 100% to the Partners in accordance with their respective Percentage Interests; provided, that Net Losses shall not be allocated pursuant to this Section 6.1(b)(i) to the extent that such allocation would cause any Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); and (ii) Second, the balance, if any, 100% to the General Partner. (c) Special Allocations. Notwithstanding any other provision of this Section 6.1, the following special allocations shall be made for such taxable period: (i) Partnership Minimum Gain Chargeback. Notwithstanding any other provision of this Section 6.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes of this Section 6.1(c), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.1(c) with respect to such taxable period (other than an allocation pursuant to Sections 6.1(c)(v) and 6.1(c)(vi)). This Section 6.1(c)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith. (ii) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding the other provisions of this Section 6.1 (other than Section 6.1(c)(i)), except as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704- 2(j)(2)(ii), or any successor provisions. For purposes of this Section 6.1(c), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.1(c), other than Section 6.1(c)(i) and other than an allocation pursuant to Sections 6.1(c)(v) and 6.1(c)(vi), with respect to such taxable period. This Section 6.1(c)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith. (iii) Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704- 1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations promulgated under Section 704(b) of the Code, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible unless such deficit balance is otherwise eliminated pursuant to Section 6.1(c)(i) or 6.1(c)(ii). (iv) Gross Income Allocations. In the event any Partner has a deficit balance in its Capital Account at the end of any Partnership taxable period in excess of the sum of (A) the amount such Partner is required to restore pursuant to the provisions of this Agreement and (B) the amount such Partner is deemed obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 6.1(c)(iv) shall be made only if and to the extent that such Partner would have a deficit balance in its Capital Account as adjusted after all other allocations provided for in this Section 6.1 have been tentatively made as if this Section 6.1(c)(iv) were not in this Agreement. (v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Partners in accordance with their respective Percentage Interests. If the General Partner determines in its good faith discretion that the Partnership's Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the other Partners, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements. (vi) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss. (vii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests. (viii) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(c) of the Code is required, pursuant to Treasury Regulation Section 1.704- 1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations. (ix) Curative Allocation. (A) Notwithstanding any other provision of this Section 6.1, other than the Required Allocations, the Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss and deduction allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and the related Curative Allocation not otherwise been provided in this Section 6.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partner Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section 6.1(c)(ix)(A) shall only be made with respect to Required Allocations to the extent the General Partner reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Partners. Further, allocations pursuant to this Section 6.1(c)(ix)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof to the extent the General Partner reasonably determines that such allocations are likely to be offset by subsequent Required Allocations. (B) The General Partner shall have reasonable discretion, with respect to each taxable period, to (1) apply the provisions of Section 6.1(c)(ix)(A) in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all allocations pursuant to Section 6.1(c)(ix)(A) among the Partners in a manner that is likely to minimize such economic distortions. 6.2 Allocations for Tax Purposes (a) Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of ''book'' income, gain, loss or deduction is allocated pursuant to Section 6.1. (b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, depreciation, amortization and cost recovery deductions shall be allocated for federal income tax purposes among the Partners as follows: (i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted basis at the time of contribution; and (B) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of ''book'' gain or loss is allocated pursuant to Section 6.1. (ii) (A) In the case of an Adjusted Property, such items shall (1) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of ''book'' gain or loss is allocated pursuant to Section 6.1. (iii) The General Partner shall apply the principles of Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities. (c) For the proper administration of the Partnership and for the preservation of uniformity of the Limited Partner Interests (or any class or classes thereof), the General Partner shall have sole discretion to (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including, without limitation, gross income) or deductions; and (iii) amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury Regulations under Section 704(b) or 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of the Limited Partner Interests (or any class or classes thereof). The General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section 6.2(c) only if such conventions, allocations or amendments would not have a material adverse effect on the Partners, the holders of any class or classes of Limited Partner Interests issued and Outstanding or the Partnership, and if such allocations are consistent with the principles of Section 704 of the Code. (d) The General Partner in its discretion may determine to depreciate or amortize the portion of an adjustment under Section 743(b) of the Code attributable to unrealized appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a predetermined rate derived from the depreciation or amortization method and useful life applied to the Partnership's common basis of such property, despite any inconsistency of such approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of the Code. If the General Partner determines that such reporting position cannot reasonably be taken, the General Partner may adopt depreciation and amortization conventions under which all purchasers acquiring Limited Partner Interests in the same month would receive depreciation and amortization deductions, based upon the same applicable rate as if they had purchased a direct interest in the Partnership's property. If the General Partner chooses not to utilize such aggregate method, the General Partner may use any other reasonable depreciation and amortization conventions to preserve the uniformity of the intrinsic tax characteristics of any Limited Partner Interests that would not have a material adverse effect on the Limited Partners or the Record Holders of any class or classes of Limited Partner Interests. (e) Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 6.2, be characterized as Recapture Income in the same proportions and to the same extent as such Partners (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. (f) All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, however, that such allocations, once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted or required by Sections 734 and 743 of the Code. (g) Each item of Partnership income, gain, loss and deduction attributable to a transferred Partnership Interest, shall for federal income tax purposes, be determined on an annual basis and prorated on a monthly basis and shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of each month; provided, however, that (i) if the Over- allotment Option is not exercised, such items for the period beginning on the Closing Date and ending on the last day of the month in which the Closing Date occurs shall be allocated to Partners as of the opening of the New York Stock Exchange on the first Business Day of the next succeeding month or (ii) if the Over-allotment Option is exercised, such items for the period beginning on the Closing Date and ending on the last day of the month in which the Option Closing Date occurs shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the next succeeding month; and provided, further, that gain or loss on a sale or other disposition of any assets of the Partnership other than in the ordinary course of business shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the month in which such gain or loss is recognized for federal income tax purposes. The General Partner may revise, alter or otherwise modify such methods of allocation as it determines necessary, to the extent permitted or required by Section 706 of the Code and the regulations or rulings promulgated thereunder. (h) Allocations that would otherwise be made to a Limited Partner under the provisions of this Article VI shall instead be made to the beneficial owner of Limited Partner Interests held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the General Partner in its sole discretion. 6.3 Distributions to Record Holders (a) Within 45 days following the end of each Quarter commencing with the Quarter ending on March 31, 1997, an amount equal to 100% of Available Cash with respect to such Quarter shall, subject to Section 17-607 of the Delaware Act, be distributed in accordance with this Article VI by the Partnership to the Partners as of the Record Date selected by the General Partner in its reasonable discretion in accordance with their respective Percentage Interests. The immediately preceding sentence shall not require any distribution of cash if and to the extent such distribution would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership is a party or by which it is bound or its assets are subject. All distributions required to be made under this Agreement shall be made subject to Section 17-607 of the Delaware Act. (b) In the event of the dissolution and liquidation of the Partnership, all receipts received during or after the Quarter in which the Liquidation Date occurs, other than from borrowings described in (a)(ii) of the definition of Available Cash, shall be applied and distributed solely in accordance with, and subject to the terms and conditions of, Section 12.4. (c) The General Partner shall have the discretion to treat taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners, as a distribution of Available Cash to such Partners. (d) Each distribution in respect of a Partnership Interest shall be paid by the Partnership, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holder of such Partnership Interest as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Partnership's liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise. ARTICLE VII Management and Operation of Business 7.1 Management (a) The General Partner shall conduct, direct and manage all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner shall have any management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.3, shall have full power and authority to do all things and on such terms as it, in its sole discretion, may deem necessary or appropriate to conduct the business of the Partnership, to exercise all powers set forth in Section 2.5 and to effectuate the purposes set forth in Section 2.4, including the following: (i) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into Partnership Securities, and the incurring of any other obligations; (ii) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership; (iii) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership or the merger or other combination of the Partnership with or into another Person (the matters described in this clause (iii) being subject, however, to any prior approval that may be required by Section 7.3); (iv) the use of the assets of the Partnership (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the Partnership Group, the lending of funds to other Persons, the repayment of obligations of the Partnership Group and the making of capital contributions to any member of the Partnership Group; (v) the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Partnership under contractual arrangements to all or particular assets of the Partnership, with the other party to the contract to have no recourse against the General Partner or its assets other than its interest in the Partnership, even if same results in the terms of the transaction being less favorable to the Partnership than would otherwise be the case); (vi) the distribution of Partnership cash; (vii) the selection and dismissal of employees (including employees having titles such as ''president,'' ''vice president,'' ''secretary'' and ''treasurer'') and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; (viii) the maintenance of such insurance for the benefit of the Partnership Group and the Partners as it deems necessary or appropriate; (ix) the formation of, or acquisition of an interest in, and the contribution of property and the making of loans to, any further limited or general partnerships, joint ventures, corporations or other relationships (including the acquisition of interests in, and the contributions of property to, Genesis OLP from time to time), subject, however, to the restrictions set forth in Section 2.4; (x) the control of any matters affecting the rights and obligations of the Partnership, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation and the incurring of legal expense and the settlement of claims and litigation; (xi) the indemnification of any Person against liabilities and contingencies to the extent permitted by law; (xii) the entering into of listing agreements with any National Securities Exchange and the delisting of some or all of the Limited Partner Interests from, or requesting that trading be suspended on, any such exchange (subject to any prior approval that may be required under Section 4.7); (xiii) the purchase, sale or other acquisition or disposition of Partnership Securities, and, unless restricted or prohibited by Section 5.7, the issuance of additional Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities; and (xiv) the undertaking of any action in connection with the Partnership's participation as a general partner of Genesis OLP including, without limitation, exercising the authority granted to the Partnership in Section 7.3(d) of the Genesis OLP Partnership Agreement to make certain decisions relating to the operation and conduct of the business of Genesis OLP. (b) Notwithstanding any other provision of this Agreement, the Genesis OLP Partnership Agreement, the Delaware Act or any applicable law, rule or regulation, each of the Partners and each other Person who may acquire an interest in Partnership Securities hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of this Agreement, the other agreements and documents filed as exhibits to the Registration Statement, and the other agreements described in the Registration Statement; (ii) agrees that the General Partner (on its own or through any officer of the Partnership) is authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners or the other Persons who may acquire an interest in Partnership Securities; and (iii) agrees that the execution, delivery or performance by the General Partner, any Group Member or any Affiliate of any of them, of this Agreement or any agreement authorized or permitted under this Agreement (including the exercise by the General Partner or any Affiliate of the General Partner of the rights accorded pursuant to Article XV), shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement (or any other agreements) or of any duty stated or implied by law or equity. 7.2 Certificate of Limited Partnership The General Partner has caused the Certificate of Limited Partnership to be filed with the Secretary of State of the State of Delaware as required by the Delaware Act and shall use all reasonable efforts to cause to be filed such other certificates or documents as may be determined by the General Partner in its sole discretion to be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent that such action is determined by the General Partner in its sole discretion to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership or other entity in which the limited partners have limited liability) under the laws of the State of Delaware or of any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 3.4(a), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any qualification document or any amendment thereto to any Limited Partner. 7.3 Restrictions on General Partner's Authority (a) The General Partner may not, without written approval of the specific act by holders of all of the Outstanding Limited Partner Interests or by other written instrument executed and delivered by holders of all of the Outstanding Limited Partner Interests subsequent to the date of this Agreement, take any action in contravention of this Agreement, including, except as otherwise provided in this Agreement, (i) possessing Partnership property, or assigning any rights in specific Partnership property, for other than a Partnership purpose; (ii) admitting a Person as a Partner; (iii) amending this Agreement in any manner; or (iv) transferring its General Partner Interest. (b) Except as provided in Articles XII and XIV, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the assets of the Partnership Group in a single transaction or a series of related transactions, without the approval of holders of a Majority Interest; provided, however, that this provision shall not preclude or limit the General Partner's ability to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the Partnership Group and shall not apply to any forced sale of any or all of the assets of the Partnership Group pursuant to the foreclosure of, or other realization upon, any such encumbrance; and provided, futher, that this provision shall not preclude or limit the ability of Genesis OLP to sell, exchange or otherwise dispose of all of the assets of Genesis OLP in a single transaction or a series of related transactions that is approved by the OLP Unitholders as provided in Section 7.3(b) of the Genesis OLP Partnership Agreement. (c) Without the approval of holders of a Majority Interest, the General Partner shall not, on behalf of the Partnership, (i) consent to any amendment to the Genesis OLP Partnership Agreement or, except as expressly permitted by Section 7.9(d), take any action permitted to be taken by a partner of Genesis OLP, in either case, that would have a material adverse effect on the Partnership as a partner of Genesis OLP or (ii) except as permitted under Sections 4.6, 11.1 and 11.2, elect or cause the Partnership to elect a successor general partner of Genesis OLP; provided, however, that if a vote of the holders of OLP Units is to be taken or the approval of such holders is otherwise sought (A) as required by Section 3.6 of the Distribution Support Agreement to approve an amendment to the Distribution Support Agreement, (B) to approve the sale, exchange or other disposition of all or substantially all of the assets of Genesis OLP, (C) to approve the merger or consolidation of Genesis OLP, or (D) to approve the dissolution of Genesis OLP, the General Partner will call a special meeting of the Limited Partners at which special meeting the Limited Partners will be asked to vote on the proposal for which a vote of the holders of OLP Units is to be taken, and following the vote of the Limited Partners the General Partner will vote the Partnership's OLP Units on such proposal in the same ratios as the votes of the Limited Partner Interests were cast on such proposal, either for, against or abstaining. (d) At all times while serving as the general partner of the Partnership, the General Partner shall not make any dividend or distribution on, or repurchase any shares of, its stock or take any other action within its control if the effect of such action would cause its net worth, independent of its interest in the Partnership Group, to be less than $7.5 million or such lower amount, which based on an Opinion of Counsel that states, (i) based on a change in the position of the Internal Revenue Service with respect to partnership status pursuant to Code Section 7701, such lower amount would not cause the Partnership or Genesis OLP to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes and (ii) would not result in the loss of the limited liability of any Limited Partner or of any limited partner of Genesis OLP. 7.4 Reimbursement of the General Partner (a) Except as provided in this Section 7.4 and elsewhere in this Agreement or in the Genesis OLP Partnership Agreement, the General Partner shall not be compensated for its services as general partner of any Group Member. (b) The General Partner shall be reimbursed on a monthly basis, or such other reasonable basis as the General Partner may determine in its sole discretion, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership (including salary, bonus, incentive compensation and other amounts paid to any Person, including Affiliates of the General Partner, to perform services for the Partnership or for the General Partner in the discharge of its duties to the Partnership), and (ii) all other necessary or appropriate expenses allocable to the Partnership or otherwise reasonably incurred by the General Partner in connection with operating the Partnership's business (including expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Reimbursements pursuant to this Section 7.4 shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 7.7. (c) Subject to Section 5.7, the General Partner, in its sole discretion and without the approval of the Limited Partners (who shall have no right to vote in respect thereof), may propose and adopt on behalf of the Partnership employee benefit plans, employee programs and employee practices (including plans, programs and practices involving the issuance of Partnership Securities or options to purchase Partnership Securities), or cause the Partnership to issue Partnership Securities pursuant to any employee benefit plan, employee program or employee practice maintained or sponsored by the General Partner or any of its Affiliates, in each case for the benefit of employees of the General Partner, any Group Member or any Affiliate, or any of them, in respect of services performed, directly or indirectly, for the benefit of the Partnership Group. The Partnership agrees to issue and sell to the General Partner or any of its Affiliates any Partnership Securities that the General Partner or such Affiliate is obligated to provide to any employees pursuant to any such employee benefit plans, employee programs or employee practices. Expenses incurred by the General Partner in connection with any such plans, programs and practices (including the net cost to the General Partner or such Affiliate of Partnership Securities purchased by the General Partner or such Affiliate from the Partnership to fulfill options or awards under such plans, programs and practices) shall be reimbursed in accordance with Section 7.4(b). Any and all obligations of the General Partner under any employee benefit plans, employee programs or employee practices adopted by the General Partner as permitted by this Section 7.4(c) shall constitute obligations of the General Partner hereunder and shall be assumed by any successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the General Partner's General Partner Interest pursuant to Section 4.6. 7.5 Outside Activities (a) After the Closing Date, the General Partner, for so long as it is the general partner of the Partnership (i) agrees that its sole business will be to act as a general partner of the Partnership, Genesis OLP and any other partnership of which the Partnership or Genesis OLP is, directly or indirectly, a partner and to undertake activities that are ancillary or related thereto (including being a limited partner in the Partnership or any such other partnership) and (ii) shall not, directly or indirectly, engage in any business or activity or incur any debts or liabilities except in connection with or incidental to (A) its performance as general partner of one or more Group Members or as described in or contemplated by the Registration Statement or (B) the acquiring, owning or disposing of debt or equity securities of any Group Member. (b) Salomon, Basis and Howell have entered into the Non-Competition Agreement with the Partnership and Genesis OLP, which agreement sets forth certain restrictions on their ability to engage in the business of (i) crude oil gathering at the wellhead in the states of Alabama, Florida, Kansas, Louisiana, Mississippi, New Mexico, Oklahoma or Texas, or any states contiguous to such states, and (ii) transporting for third parties crude oil by pipeline along the routes of the Partnership's crude oil pipelines owned as of the Closing Date. (c) Except as specifically restricted by Section 7.5(a) and the Non- Competition Agreement, each Indemnitee shall have the right to engage in businesses of every type and description and other activities for profit and to engage in and possess an interest in other business ventures of any and every type or description, whether in businesses engaged in or anticipated to be engaged in by any Group Member, independently or with others, including business interests and activities in direct competition with the business and activities of any Group Member, and none of the same shall constitute a breach of this Agreement or any duty express or implied by law to any Group Member or any Partner. Neither any Group Member, any Limited Partner nor any other Person shall have any rights by virtue of this Agreement, the Genesis OLP Partnership Agreement or the partnership relationship established hereby or thereby in any business ventures of any Indemnitee. (d) Subject to the terms of Sections 7.5(a), 7.5(b) and 7.5(c) and the Non- Competition Agreement, but otherwise notwithstanding anything to the contrary in this Agreement, (i) the engaging in competitive activities by any Indemnitees (other than the General Partner) in accordance with the provisions of this Section 7.5 is hereby approved by the Partnership and all Partners and (ii) it shall be deemed not to be a breach of the General Partner's fiduciary duty or any other obligation of any type whatsoever of the General Partner for the Indemnitees (other than the General Partner) to engage in such business interests and activities in preference to or to the exclusion of the Partnership, and the General Partner and the Indemnitees shall have no obligation to present business opportunities to the Partnership. (e) The General Partner and any of its Affiliates may acquire Partnership Securities in addition to those acquired on the Closing Date and, except as otherwise provided in this Agreement, shall be entitled to exercise all rights of a General Partner or Limited Partner, as applicable, relating to such Partnership Securities. (f) The term ''Affiliates'' when used in Section 7.5 with respect to the General Partner shall not include any Group Member or any Subsidiary of the Group Member. 7.6 Loans from the General Partner; Loans or Contributions from the Partnership; Contracts with Affiliates; Certain Restrictions on the General Partner (a) The General Partner or any Affiliate thereof may lend to any Group Member, and any Group Member may borrow from the General Partner or any of its Affiliates, funds needed or desired by the Group Member for such periods of time and in such amounts as the General Partner may determine; provided, however, that in any such case the lending party may not charge the borrowing party interest at a rate greater than the rate that would be charged the borrowing party or impose terms less favorable to the borrowing party than would be charged or imposed on the borrowing party by unrelated lenders on comparable loans made on an arm's-length basis (without reference to the lending party's financial abilities or guarantees). The borrowing party shall reimburse the lending party for any costs (other than any additional interest costs) incurred by the lending party in connection with the borrowing of such funds. For purposes of this Section 7.6(a) and Section 7.6(b), the term ''Group Member'' shall include any Affiliate of a Group Member that is controlled by the Group Member. No Group Member may lend funds to the General Partner or any of its Affiliates (other than another Group Member). (b) The Partnership may lend or contribute to any Group Member, and any Group Member may borrow from the Partnership, funds on terms and conditions established in the sole discretion of the General Partner; provided, however, that the Partnership may not charge the Group Member interest at a rate less than the rate that would be charged to the Group Member (without reference to the General Partner's financial abilities or guarantees) by unrelated lenders on comparable loans. The foregoing authority shall be exercised by the General Partner in its sole discretion and shall not create any right or benefit in favor of any Group Member or any other Person. (c) The General Partner may itself, or may enter into an agreement with any of its Affiliates to, render services to a Group Member or to the General Partner in the discharge of its duties as general partner of the Partnership. Any services rendered to a Group Member by the General Partner or any of its Affiliates shall be on terms that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 7.6(c) shall be deemed satisfied as to (i) any transaction approved by Special Approval, (ii) any transaction, the terms of which are no less favorable to the Partnership Group than those generally being provided to or available from unrelated third parties or (iii) any transaction that, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership Group), is equitable to the Partnership Group. The provisions of Section 7.4 shall apply to the rendering of services described in this Section 7.6(c). (d) The Partnership Group may transfer assets to joint ventures, other partnerships, corporations, limited liability companies or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as are consistent with this Agreement and applicable law. (e) Neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from the Partnership, directly or indirectly, except pursuant to transactions that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 7.6(e) shall be deemed to be satisfied as to (i) the transactions effected pursuant to Sections 5.2 and 5.3, the Conveyance Agreement and any other transactions described in or contemplated by the Registration Statement, (ii) any transaction approved by Special Approval, (iii) any transaction, the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties, or (iv) any transaction that, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership), is equitable to the Partnership. With respect to any contribution of assets to the Partnership in exchange for Partnership Securities, the Audit Committee, in determining whether the appropriate number of Partnership Securities are being issued, may take into account, among other things, the fair market value of the assets, the liquidated and contingent liabilities assumed, the tax basis in the assets, the extent to which tax-only allocations to the transferor will protect the existing partners of the Partnership against a low tax basis, and such other factors as the Audit Committee deems relevant under the circumstances. (f) The General Partner and its Affiliates will have no obligation to permit any Group Member to use any facilities or assets of the General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use, nor shall there be any obligation on the part of the General Partner or its Affiliates to enter into such contracts. (g) Without limitation of Sections 7.6(a) through 7.6(f), and notwithstanding anything to the contrary in this Agreement, the existence of the conflicts of interest described in the Registration Statement are hereby approved by all Partners. 7.7 Indemnification (a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee; provided, that in each case the Indemnitee acted in good faith and in a manner that such Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Partnership and, with respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that the Indemnitee acted in a manner contrary to that specified above. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, it being agreed that the General Partner shall not be personally liable for such indemnification and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate such indemnification. (b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of any undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 7.7. (c) The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the holders of Outstanding Limited Partner Interests, as a matter of law or otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and as to actions in any other capacity (including any capacity under the Underwriting Agreement), and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee. (d) The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of the General Partner, its Affiliates and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expense that may be incurred by such Person in connection with the Partnership's activities or such Person's activities on behalf of the Partnership, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. (e) For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute ''fines'' within the meaning of Section 7.7(a); and action taken or omitted by it with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is in, or not opposed to, the best interests of the Partnership. (f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement. (g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. (h) The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. (i) No amendment, modification or repeal of this Section 7.7 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligations of the Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. 7.8 Liability of Indemnitees (a) Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, the Limited Partners or any other Persons who have acquired interests in Partnership Securities, for losses sustained or liabilities incurred as a result of any act or omission if such Indemnitee acted in good faith. (b) Subject to its obligations and duties as General Partner set forth in Section 7.1(a), the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith. (c) To the extent that, at law or in equity, an Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, the General Partner and any other Indemnitee acting in connection with the Partnership's business or affairs shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict or otherwise modify the duties and liabilities of an Indemnitee otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of such Indemnitee. (d) Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnitees under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. 7.9 Resolution of Conflicts of Interest (a) Unless otherwise expressly provided in this Agreement or the Genesis OLP Partnership Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, Genesis OLP or any Partner, on the other, any resolution or course of action by the General Partner or its Affiliates in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of the Genesis OLP Partnership Agreement, of any agreement contemplated herein, or of any duty stated or implied by law or equity, if the resolution or course of action is, or by operation of this Agreement is deemed to be, fair and reasonable to the Partnership. The General Partner shall be authorized but not required in connection with its resolution of such conflict of interest to seek Special Approval of such resolution. Any conflict of interest and any resolution of such conflict of interest shall be conclusively deemed fair and reasonable to the Partnership if such conflict of interest or resolution is (i) approved by Special Approval (as long as the material facts known to the General Partner or any of its Affiliates regarding any proposed transaction were disclosed to the Audit Committee at the time it gave its approval), (ii) on terms no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (iii) fair to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership). The General Partner may also adopt a resolution or course of action that has not received Special Approval. The General Partner (including the Audit Committee in connection with Special Approval) shall be authorized in connection with its determination of what is ''fair and reasonable'' to the Partnership and in connection with its resolution of any conflict of interest to consider (A) the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; (B) any customary or accepted industry practices and any customary or historical dealings with a particular Person; (C) any applicable generally accepted accounting practices or principles; and (D) such additional factors as the General Partner (including the Audit Committee) determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. Nothing contained in this Agreement, however, is intended to nor shall it be construed to require the General Partner (including the Audit Committee) to consider the interests of any Person other than the Partnership. In the absence of bad faith by the General Partner, the resolution, action or terms so made, taken or provided by the General Partner with respect to such matter shall not constitute a breach of this Agreement or any other agreement contemplated herein or a breach of any standard of care or duty imposed herein or therein or, to the extent permitted by law, under the Delaware Act or any other law, rule or regulation. (b) Whenever this Agreement or any other agreement contemplated hereby provides that the General Partner or any of its Affiliates is permitted or required to make a decision (i) in its ''sole discretion'' or ''discretion,'' that it deems ''necessary or appropriate'' or ''necessary or advisable'' or under a grant of similar authority or latitude, except as otherwise provided herein, the General Partner or such Affiliate shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Partnership, Genesis OLP or any Limited Partner, (ii) it may make such decision in its sole discretion (regardless of whether there is a reference to ''sole discretion'' or ''discretion'') unless another express standard is provided for, or (iii) in ''good faith'' or under another express standard, the General Partner or such Affiliate shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement, the Genesis OLP Partnership Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation. In addition, any actions taken by the General Partner or such Affiliate consistent with the standards of ''reasonable discretion'' set forth in the definition of Available Cash shall not constitute a breach of any duty of the General Partner to the Partnership or the Limited Partners. The General Partner shall have no duty, express or implied, to sell or otherwise dispose of any asset of the Partnership Group other than in the ordinary course of business. No borrowing by any Group Member or the approval thereof by the General Partner shall be deemed to constitute a breach of any duty of the General Partner to the Partnership or the Limited Partners by reason of the fact that the purpose or effect of such borrowing is directly or indirectly to (A) enable Genesis OLP to make Incentive Compensation Payments or (B) hasten the expiration of the Subordination Period or the conversion of any OLP Subordinated Units into OLP Common Units. (c) Whenever a particular transaction, arrangement or resolution of a conflict of interest is required under this Agreement to be ''fair and reasonable'' to any Person, the fair and reasonable nature of such transaction, arrangement or resolution shall be considered in the context of all similar or related transactions. (d) The Limited Partners hereby authorize the General Partner, on behalf of the Partnership as a partner of a Group Member, to approve of actions by the general partner of such Group Member similar to those actions permitted to be taken by the General Partner pursuant to this Section 7.9. 7.10 Other Matters Concerning the General Partner (a) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion (including an Opinion of Counsel) of such Persons as to matters that the General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. (c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers, a duly appointed attorney or attorneys-in-fact or the duly authorized officers of the Partnership. (d) Any standard of care and duty imposed by this Agreement or under the Delaware Act or any applicable law, rule or regulation shall be modified, waived or limited, to the extent permitted by law, as required to permit the General Partner to act under this Agreement or any other agreement contemplated by this Agreement and to make any decision pursuant to the authority prescribed in this Agreement, so long as such action is reasonably believed by the General Partner to be in, or not inconsistent with, the best interests of the Partnership. 7.11 Purchase or Sale of Partnership Securities The General Partner may cause the Partnership to purchase or otherwise acquire Partnership Securities; provided that the General Partner may not cause the Partnership or any other Group Member to purchase OLP Subordinated Units during the Subordination Period. As long as Partnership Securities are held by any Group Member, such Partnership Securities shall not be considered Outstanding for any purpose, except as otherwise provided herein. The General Partner and any Affiliate of the General Partner may also purchase or otherwise acquire and sell or otherwise dispose of Partnership Securities for its own account, subject to the provisions of Articles IV and X. 7.12 Registration Rights of the General Partner and its Affiliates (a) If (i) the General Partner or any Affiliate of the General Partner (including for purposes of this Section 7.12, any Person that is an Affiliate of the General Partner at the date hereof notwithstanding that it may later cease to be an Affiliate of the General Partner) holds Partnership Securities that it desires to sell and (ii) Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144) or another exemption from registration is not available to enable such holder of Partnership Securities (the ''Holder'') to dispose of the number of Partnership Securities it desires to sell at the time it desires to do so without registration under the Securities Act, then upon the request of the General Partner or any of its Affiliates, the Partnership shall file with the Commission as promptly as practicable after receiving such request, and use all reasonable efforts to cause to become effective and remain effective for a period of not less than six months following its effective date or such shorter period as shall terminate when all Partnership Securities covered by such registration statement have been sold, a registration statement under the Securities Act registering the offering and sale of the number of Partnership Securities specified by the Holder; provided, however, that the Partnership shall not be required to effect more than three registrations pursuant to this Section 7.12(a); and provided further, however, that if the Audit Committee determines in its good faith judgment that a postponement of the requested registration for up to six months would be in the best interests of the Partnership and its Partners due to a pending transaction, investigation or other event, the filing of such registration statement or the effectiveness thereof may be deferred for up to six months, but not thereafter. In connection with any registration pursuant to the immediately preceding sentence, the Partnership shall promptly prepare and file (x) such documents as may be necessary to register or qualify the Partnership Securities subject to such registration under the securities laws of such states as the Holder shall reasonably request; provided, however, that no such qualification shall be required in any jurisdiction where, as a result thereof, the Partnership would become subject to general service of process or to taxation or qualification to do business as a foreign corporation or partnership doing business in such jurisdiction solely as a result of such registration and (y) such documents as may be necessary to apply for listing or to list the Partnership Securities subject to such registration on such National Securities Exchange as the Holder shall reasonably request, and do any and all other acts and things that may reasonably be necessary or advisable to enable the Holder to consummate a public sale of such Partnership Securities in such states. Except as set forth in Section 7.12(c), all costs and expenses of any such registration and offering (other than the underwriting discounts and commissions) shall be paid by the Partnership, without reimbursement by the Holder. (b) If the Partnership shall at any time propose to file a registration statement under the Securities Act for an offering of Partnership Securities for cash (other than an offering relating solely to an employee benefit plan), the Partnership shall use all reasonable efforts to include such number or amount of Partnership Securities held by the Holder in such registration statement as the Holder shall request. If the proposed offering pursuant to this Section 7.12(b) shall be an underwritten offering, then, in the event that the managing underwriter or managing underwriters of such offering advise the Partnership and the Holder in writing that in their opinion the inclusion of all or some of the Holder's Partnership Securities would adversely and materially affect the success of the offering, the Partnership shall include in such offering only that number or amount, if any, of Partnership Securities held by the Holder which, in the opinion of the managing underwriter or managing underwriters, will not so adversely and materially affect the offering. Except as set forth in Section 7.12(c), all costs and expenses of any such registration and offering (other than the underwriting discounts and commissions) shall be paid by the Partnership, without reimbursement by the Holder. (c) If underwriters are engaged in connection with any registration referred to in this Section 7.12, the Partnership shall provide indemnification, representations, covenants, opinions and other assurance to the underwriters in form and substance reasonably satisfactory to such underwriters. Further, in addition to and not in limitation of the Partnership's obligation under Section 7.7, the Partnership shall, to the fullest extent permitted by law, indemnify and hold harmless the Holder, its officers, directors and each Person who controls the Holder (within the meaning of the Securities Act) and any agent thereof (collectively, ''Indemnified Persons'') against any losses, claims, demands, actions, causes of action, assessments, damages, liabilities (joint or several), costs and expenses (including interest, penalties and reasonable attorneys' fees and disbursements), resulting to, imposed upon, or incurred by the Indemnified Persons, directly or indirectly, under the Securities Act or otherwise (hereinafter referred to in this Section 7.12(c) as a ''claim'' and in the plural as ''claims'') based upon, arising out of or resulting from any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which any Partnership Securities were registered under the Securities Act or any state securities or Blue Sky laws, in any preliminary prospectus (if used prior to the effective date of such registration statement), or in any summary or final prospectus or in any amendment or supplement thereto (if used during the period the Partnership is required to keep the registration statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein not misleading; provided, however, that the Partnership shall not be liable to any Indemnified Person to the extent that any such claim arises out of, is based upon or results from an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, such preliminary, summary or final prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Partnership by or on behalf of such Indemnified Person specifically for use in the preparation thereof. (d) The provisions of Section 7.12(a) and 7.12(b) shall continue to be applicable with respect to the General Partner (and any of the General Partner's Affiliates) after it ceases to be a General Partner of the Partnership, during a period of two years subsequent to the effective date of such cessation and for so long thereafter as is required for the Holder to sell all of the Partnership Securities with respect to which it has requested during such two-year period inclusion in a registration statement otherwise filed or that a registration statement be filed; provided, however, that the Partnership shall not be required to file successive registration statements covering the same Partnership Securities for which registration was demanded during such two-year period. The provisions of Section 7.12(c) shall continue in effect thereafter. (e) Any request to register Partnership Securities pursuant to this Section 7.12 shall (i) specify the Partnership Securities intended to be offered and sold by the Person making the request, (ii) express such Person's present intent to offer such shares for distribution, (iii) describe the nature or method of the proposed offer and sale of Partnership Securities, and (iv) contain the undertaking of such Person to provide all such information and materials and take all action as may be required in order to permit the Partnership to comply with all applicable requirements in connection with the registration of such Partnership Securities. 7.13 Reliance by Third Parties Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner and any officer of the General Partner authorized by the General Partner to act on behalf of and in the name of the Partnership has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any authorized contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner or any such officer as if it were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner or any such officer in connection with any such dealing. In no event shall any Person dealing with the General Partner or any such officer or its representatives be obligated to ascertain that the terms of the Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or any such officer or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. ARTICLE VIII Books, Records, Accounting and Reports 8.1 Records and Accounting The General Partner shall keep or cause to be kept at the principal office of the Partnership, appropriate books and records with respect to the Partnership's business, including all books and records necessary to provide to the Limited Partners any information required to be provided pursuant to Section 3.4(a). Any books and records maintained by or on behalf of the Partnership in the regular course of its business, including the record of the Record Holders and Assignees of Units or other Partnership Securities, books of account and records of Partnership proceedings, may be kept on, or be in the form of, computer disks, hard drives, punch cards, magnetic tape, photographs, micrographics or any other information storage device; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with U.S. GAAP. 8.2 Fiscal Year The fiscal year of the Partnership shall be the calendar year. 8.3 Reports (a) As soon as practicable, but in no event later than 120 days after the close of each fiscal year of the Partnership, the General Partner shall cause to be mailed or furnished to each Record Holder of a Limited Partner Interest as of a date selected by the General Partner in its discretion, an annual report containing financial statements of the Partnership for such fiscal year of the Partnership, presented in accordance with U.S. GAAP, including a balance sheet and statements of operations, Partnership equity and cash flows, such statements to be audited by a firm of independent public accountants selected by the General Partner. (b) As soon as practicable, but in no event later than 90 days after the close of each Quarter except the last Quarter of each year, the General Partner shall cause to be mailed or furnished to each Record Holder of a Limited Partner Interest, as of a date selected by the General Partner in its discretion, a report containing unaudited financial statements of the Partnership and such other information as may be required by applicable law, regulation or rule of any National Securities Exchange on which Limited Partner Interests are listed for trading, or as the General Partner determines to be necessary or appropriate. ARTICLE IX Tax Matters 9.1 Tax Returns and Information The General Partner shall arrange for the preparation and timely filing of all returns of the Partnership that are required for federal, state and local income tax purposes on the basis of the accrual method and a taxable year ending on December 31. The tax information reasonably required by Record Holders for federal and state income tax reporting purposes with respect to a taxable year shall be furnished to them within 90 days of the close of the calendar year in which the Partnership's taxable year ends. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for federal income tax purposes. 9.2 Tax Elections (a) The Partnership shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder, subject to the reservation of the right to seek to revoke any such election upon the General Partner's determination that such revocation is in the best interests of the Limited Partners. Notwithstanding any other provision herein contained, for the purposes of computing the adjustments under Section 743(b) of the Code, the General Partner shall be authorized (but not required) to adopt a convention whereby the price paid by a transferee of a Limited Partner Interest will be deemed to be the lowest quoted closing price of such Limited Partner Interests on any National Securities Exchange on which such Limited Partner Interests are traded during the calendar month in which such transfer is deemed to occur pursuant to Section 6.2(g) without regard to the actual price paid by such transferee. (b) The Partnership shall elect to deduct expenses incurred in organizing the Partnership ratably over a sixty-month period as provided in Section 709 of the Code. (c) Except as otherwise provided herein, the General Partner shall determine whether the Partnership should make any other elections permitted by the Code. 9.3 Tax Controversies Subject to the provisions hereof, the General Partner is designated as the Tax Matters Partner (as defined in the Code) and is authorized and required to represent the Partnership (at the Partnership's expense) in connection with all examinations of the Partnership's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings. 9.4 Withholding Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines in its discretion to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required or elects to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or Assignee (including, without limitation, by reason of Section 1446 of the Code), the amount withheld may be treated as a distribution of cash pursuant to Section 6.3 in the amount of such withholding from such Partner. ARTICLE X Admission of Partners 10.1 Admission of Initial Limited Partners Upon the issuance by the Partnership of Common Units to the Underwriters as described in Section 5.3 in connection with the Initial Offering and the execution by each Underwriter of a Transfer Application, the General Partner shall admit the Underwriters to the Partnership as Initial Limited Partners in respect of the Common Units purchased by them. 10.2 Admission of Substituted Limited Partner By transfer of a Limited Partner Interest in accordance with Article IV, the transferor shall be deemed to have given the transferee the right to seek admission as a Substituted Limited Partner subject to the conditions of, and in the manner permitted under, this Agreement. A transferor of a Certificate representing a Limited Partner Interest shall, however, only have the authority to convey to a purchaser or other transferee who does not execute and deliver a Transfer Application (a) the right to negotiate such Certificate to a purchaser or other transferee and (b) the right to transfer the right to request admission as a Substituted Limited Partner to such purchaser or other transferee in respect of the transferred Limited Partner Interests. Each transferee of a Limited Partner Interest (including any nominee holder or an agent acquiring such Limited Partner Interest for the account of another Person) who executes and delivers a Transfer Application shall, by virtue of such execution and delivery, be an Assignee and be deemed to have applied to become a Substituted Limited Partner with respect to the Limited Partner Interest so transferred to such Person. Such Assignee shall become a Substituted Limited Partner (x) at such time as the General Partner consents thereto, which consent may be given or withheld in the General Partner's discretion, and (y) when any such admission is shown on the books and records of the Partnership. If such consent is withheld, such transferee shall be an Assignee. An Assignee shall have an interest in the Partnership equivalent to that of a Limited Partner with respect to allocations and distributions, including liquidating distributions, of the Partnership. With respect to voting rights attributable to Limited Partner Interests that are held by Assignees, the General Partner shall be deemed to be the Limited Partner with respect thereto and shall, in exercising the voting rights in respect of such Limited Partner Interests on any matter, vote such Limited Partner Interests at the written direction of the Assignee who is the Record Holder of such Limited Partner Interests. If no such written direction is received, such Limited Partner Interests will not be voted. An Assignee shall have no other rights of a Limited Partner. 10.3 Admission of Successor General Partner A successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the General Partner's General Partner Interest pursuant to Section 4.6 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to the withdrawal or removal of the General Partner pursuant to Section 11.1 or 11.2 or the transfer of the General Partner's General Partner Interest pursuant to Section 4.6; provided, however, that no such successor shall be admitted to the Partnership until compliance with the terms of Section 4.6 has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission. Any such successor shall, subject to the terms hereof, carry on the business of the Partnership and Genesis OLP without dissolution. 10.4 Admission of Additional Limited Partners (a) A Person (other than the General Partner, an Initial Limited Partner or a Substituted Limited Partner) who makes a Capital Contribution to the Partnership in accordance with this Agreement in exchange for Limited Partner Interests shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including the power of attorney granted in Section 2.6, and (ii) such other documents or instruments as may be required in the discretion of the General Partner to effect such Person's admission as an Additional Limited Partner. (b) Notwithstanding anything to the contrary in this Section 10.4, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner's discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded as such in the books and records of the Partnership, following the consent of the General Partner to such admission. 10.5 Amendment of Agreement and Certificate of Limited Partnership To effect the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Delaware Act to amend the records of the Partnership to reflect such admission and, if necessary, to prepare as soon as practicable an amendment to this Agreement and, if required by law, the General Partner shall prepare and file an amendment to the Certificate of Limited Partnership, and the General Partner may for this purpose, among others, exercise the power of attorney granted pursuant to Section 2.6. ARTICLE XI Withdrawal or Removal of Partners 11.1 Withdrawal of the General Partner (a) The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an ''Event of Withdrawal''); (i) the General Partner voluntarily withdraws from the Partnership by giving written notice to the Limited Partners (and it shall be deemed that the General Partner has withdrawn pursuant to this Section 11.1(a)(i) if the General Partner voluntarily withdraws as a general partner of Genesis OLP); (ii) the General Partner transfers all of its General Partner Interest pursuant to Section 4.6; (iii) the General Partner is removed pursuant to Section 11.2; (iv) the General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary bankruptcy petition for relief under Chapter 7 of the United States Bankruptcy Code; (C) files a petition or answer seeking for itself a liquidation, dissolution or similar relief (but not a reorganization) under any law; (D) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in clauses (A)-(C) of this Section 11.1(a)(iv); or (E) seeks, consents to or acquiesces in the appointment of a trustee (but not a debtor in possession), receiver or liquidator of the General Partner or of all or any substantial part of its properties; (v) a final and non-appealable order of relief under Chapter 7 of the United States Bankruptcy Code is entered by a court with appropriate jurisdiction pursuant to a voluntary or involuntary petition by or against the General Partner; or (vi) (A) in the event the General Partner is a corporation, a certificate of dissolution or its equivalent is filed for the General Partner, or 90 days expire after the date of notice to the General Partner of revocation of its charter without a reinstatement of its charter, under the laws of its state of incorporation; (B) in the event the General Partner is a partnership, the dissolution and commencement of winding up of the General Partner; (C) in the event the General Partner is acting in such capacity by virtue of being a trustee of a trust, the termination of the trust; (D) in the event the General Partner is a natural person, his death or adjudication of incompetency; and (E) otherwise in the event of the termination of the General Partner. If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A), (B), (C) or (E) occurs, the withdrawing General Partner shall give notice to the Limited Partners within 30 days after such occurrence. The Partners hereby agree that only the Events of Withdrawal described in this Section 11.1 shall result in the withdrawal of the General Partner from the Partnership. (b) Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances: (i) at any time during the period beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard Time, on December 31, 2006, the General Partner voluntarily withdraws by giving at least 90 days' advance notice of its intention to withdraw to the Limited Partners; provided that prior to the effective date of such withdrawal, the withdrawal is approved by the holders of a Majority Interest and the General Partner delivers to the Partnership an Opinion of Counsel (''Withdrawal Opinion of Counsel'') that such withdrawal (following the selection of the successor General Partner) would not result in the loss of the limited liability of any Limited Partner or any limited partner of Genesis OLP or cause the Partnership or Genesis OLP to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not previously treated as such); (ii) at any time after 12:00 midnight, Eastern Standard Time, on December 31, 2006, the General Partner voluntarily withdraws by giving at least 90 days' advance notice to the Limited Partners, such withdrawal to take effect on the date specified in such notice; (iii) at any time that the General Partner ceases to be the General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any time that the General Partner voluntarily withdraws by giving at least 90 days' advance notice of its intention to withdraw to the Limited Partners, such withdrawal to take effect on the date specified in the notice, if at the time such notice is given one Person and its Affiliates (other than the General Partner and its Affiliates) own beneficially or of record or control at least 50% of the Outstanding Limited Partner Interests. The withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall also constitute the withdrawal of the General Partner as general partner of the other Group Members. If the General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the holders of a Majority Interest, may, prior to the effective date of such withdrawal, elect a successor General Partner. The Person so elected as successor General Partner shall automatically become a successor general partner of the other Group Members of which the General Partner is a general partner. If, prior to the effective date of the General Partner's withdrawal, a successor is not selected by the Limited Partners as provided herein or the Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any successor General Partner elected in accordance with the terms of this Section 11.1 shall be subject to the provisions of Section 10.3. 11.2 Removal of the General Partner The General Partner may not be removed without Cause. If Cause exists the General Partner may be removed if such removal is approved by the holders of a Two-Thirds Interest (including Limited Partner Interests held by the General Partner and its Affiliates). Any such action by such holders for removal of the General Partner must also provide for the election of a successor General Partner by the holders of a Two-Thirds Interest (including Limited Partner Interests held by the General Partner and its Affiliates). Such removal shall be effective immediately following the admission of a successor General Partner pursuant to Section 10.3. The removal of the General Partner shall also automatically constitute the removal of the General Partner as general partner of the other Group Members of which the General Partner is a general partner. If a Person is elected as a successor General Partner in accordance with the terms of this Section 11.2, such Person shall, upon admission pursuant to Section 10.3, automatically become a successor general partner of the other Group Members of which the General Partner is a general partner. The right of the Limited Partners to remove the General Partner pursuant to this Section 11.2 shall not exist or be exercised unless the Partnership has received an opinion opining as to the matters covered by a Withdrawal Opinion of Counsel. Any successor General Partner elected in accordance with the terms of this Section 11.2 shall be subject to the provisions of Section 10.3. 11.3 Interest of Departing Partner and Successor General Partner (a) In the event of the withdrawal of the General Partner under circumstances where such withdrawal does not violate this Agreement, if a successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2, the Departing Partner shall have the option exercisable prior to the effective date of the departure of such Departing Partner to require its successor to purchase its General Partner Interest and its partnership interest as a general partner in the other Group Members and if the General Partner has delivered a Conversion Election as provided in Section 7.13 of the Genesis OLP Partnership Agreement, its right to participate in distributions as provided in Section 7.13 of the Genesis OLP Partnership Agreement (collectively, the ''Combined Interest'') in exchange for an amount in cash equal to the fair market value of such Combined Interest, such amount to be determined and payable as of the effective date of its departure. If the General Partner is removed by the Partners under circumstances where Cause exists or if the General Partner withdraws under circumstances where such withdrawal violates this Agreement or the Genesis OLP Partnership Agreement, and if a successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2, such successor shall have the option, exercisable prior to the effective date of the departure of such Departing Partner, to purchase the Combined Interest of the Departing Partner for such fair market value of such Combined Interest. In either event, the Departing Partner shall be entitled to receive all reimbursements due such Departing Partner pursuant to Section 7.4, including any employee-related liabilities (including severance liabilities), incurred in connection with the termination of any employees employed by the General Partner for the benefit of the Partnership or the other Group Members. For purposes of this Section 11.3(a), the fair market value of the Departing Partner's Combined Interest shall be determined by agreement between the Departing Partner and its successor or, failing agreement within 30 days after the effective date of such Departing Partner's departure, by an independent investment banking firm or other independent expert selected by the Departing Partner and its successor, which, in turn, may rely on other experts, and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such departure, then the Departing Partner shall designate an independent investment banking firm or other independent expert, the Departing Partner's successor shall designate an independent investment banking firm or other independent expert, and such firms or experts shall mutually select a third independent investment banking firm or independent expert, which third independent investment banking firm or other independent expert shall determine the fair market value of the Combined Interest. In making its determination, such third independent investment banking firm or other independent expert may consider the then current trading price of Common Units on any National Securities Exchange on which Common Units are then listed, the value of the Partnership's assets, the rights and obligations of the General Partner and other factors it may deem relevant. (b) If the Combined Interest is not purchased in the manner set forth in Section 11.3(a), the Departing Partner will have the right to convert the Combined Interest into Common Units or to receive cash from the Partnership in exchange for such Combined Interest. The Departing Partner's Combined Interest shall be converted into Common Units pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to Section 11.3(a), without reduction in such Combined Interest (but subject to proportionate dilution by reason of the admission of its successor). Any successor General Partner shall indemnify the Departing Partner as to all debts and liabilities of the Partnership arising on or after the date on which the Departing Partner becomes a Limited Partner. For purposes of this Agreement, conversion of the General Partner's Combined Interest to Common Units will be characterized as if the General Partner contributed its Combined Interest to the Partnership in exchange for the newly issued Common Units. (c) If a successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2 and the option described in Section 11.3(a) is not exercised by the party entitled to do so, the successor General Partner shall, at the effective date of its admission to the Partnership, contribute to the Partnership cash in the amount necessary to acquire a General Partner Interest equal to the General Partner Interest of the Departing Partner. In such event, such successor General Partner shall be entitled to such Percentage Interest of all Partnership allocations and distributions and any other allocations and distributions to which the Departing Partner was entitled. 11.4 Withdrawal of Limited Partners No Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner's Limited Partner Interest becomes a Record Holder of the Limited Partner Interest so transferred, such transferring Limited Partner shall cease to be a Limited Partner with respect to the Limited Partner Interest so transferred. ARTICLE XII Dissolution and Liquidation 12.1 Dissolution The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner, if a successor General Partner is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be dissolved and such successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its affairs shall be wound up, upon: (a) the expiration of its term as provided in Section 2.7; (b) an Event of Withdrawal of the General Partner as provided in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected and an Opinion of Counsel is received as provided in Section 11.1(b) or 11.2 and such successor is admitted to the Partnership pursuant to Section 10.3; (c) an election to dissolve the Partnership by the General Partner that is approved by the holders of a Majority Interest; (d) the entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Delaware Act; (e) the dissolution of Genesis OLP; or (f) the sale of all or substantially all of the assets and properties of the Partnership Group. 12.2 Continuation of the Business of the Partnership After Dissolution Upon (a) dissolution of the Partnership following an Event of Withdrawal caused by the withdrawal or removal of the General Partner as provided in Section 11.1(a)(i) or (iii) and the failure of the Partners to select a successor to such Departing Partner pursuant to Section 11.1 or 11.2, then within 90 days thereafter, or (b) dissolution of the Partnership upon an event constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or (vi), then, to the maximum extent permitted by law, within 180 days thereafter, the holders of a Majority Interest may elect to reconstitute the Partnership and continue its business on the same terms and conditions set forth in this Agreement by forming a new limited partnership on terms identical to those set forth in this Agreement and having as the successor general partner a Person approved by the holders of a Majority Interest. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made, then: (i) the reconstituted Partnership shall continue until the end of the term set forth in Section 2.7 unless earlier dissolved in accordance with this Article XII; (ii) if the successor General Partner is not the former General Partner, then the interest of the former General Partner shall be treated in the manner provided in Section 11.3; and (iii) all necessary steps shall be taken to cancel this Agreement and the Certificate of Limited Partnership and to enter into and, as necessary, to file a new partnership agreement and certificate of limited partnership, and the successor general partner may for this purpose exercise the powers of attorney granted the General Partner pursuant to Section 2.6; provided, that the right of the holders of a Majority Interest to approve a successor General Partner and to reconstitute and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that (x) the exercise of the right would not result in the loss of limited liability of any Limited Partner and (y) neither the Partnership, the reconstituted limited partnership, nor Genesis OLP would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of such right to continue. 12.3 Liquidator Upon dissolution of the Partnership, unless the Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 12.2, the General Partner shall select one or more Persons to act as Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by the holders of a Majority Interest. The Liquidator (if other than the General Partner) shall agree not to resign at any time without 15 days' prior notice and may be removed at any time, with or without cause, by notice of removal approved by the holders of a Majority Interest. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by the holders of a Majority Interest. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 7.3(b)) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding up and liquidation of the Partnership as provided for herein. 12.4 Liquidation The Liquidator shall proceed to dispose of the assets of the Partnership, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as the Liquidator determines to be in the best interest of the Partners, subject to Section 17-804 of the Delaware Act and the following: (a) Disposition of Assets. The assets may be disposed of by public or private sale or by distribution in kind to one or more Partners on such terms as the Liquidator and such Partner or Partners may agree. If any property is distributed in kind, the Partner receiving the property shall be deemed for purposes of Section 12.4(c) to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Partners. The Liquidator may, in its absolute discretion, defer liquidation or distribution of the Partnership's assets for a reasonable time if it determines that an immediate sale of all or some of the Partnership's assets would be impractical or would cause undue loss to the partners. The Liquidator may, in its absolute discretion, distribute the Partnership's assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the partners. (b) Discharge of Liabilities. Liabilities of the Partnership include amounts owed to Partners otherwise than in respect of their distribution rights under Article VI. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reasonable reserve of cash or other assets to provide for its payment. When paid, any unused portion of the reserve shall be distributed as additional liquidation proceeds. (c) Liquidation Distributions. All property and all cash in excess of that required to discharge liabilities as provided in Section 12.4(b) shall be distributed to the Partners in accordance with, and to the extent of, the positive balances in their respective Capital Accounts, as determined after taking into account all Capital Account adjustments (other than those made by reason of distributions pursuant to this Section 12.4(c)) for the taxable year of the Partnership during which the liquidation of the Partnership occurs (with such date of occurrence being determined pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such taxable year (or, if later, within 90 days after said date of such occurrence). 12.5 Cancellation of Certificate of Limited Partnership Upon the completion of the distribution of Partnership cash and property as provided in Section 12.4 in connection with the liquidation of the Partnership, the Partnership shall be terminated and the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken. 12.6 Return of Contributions The General Partner shall not be personally liable for, and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets. 12.7 Waiver of Partition To the maximum extent permitted by law, each Partner hereby waives any right to partition of the Partnership property. 12.8 Capital Account Restoration No Limited Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership. The General Partner shall be obligated to restore any negative balance in its Capital Account upon liquidation of its interest in the Partnership by the end of the taxable year of the Partnership during which such liquidation occurs, or, if later, within 90 days after the date of such liquidation. ARTICLE XIII Amendment of Partnership Agreement; Meetings; Record Date 13.1 Amendment to be Adopted Solely by the General Partner Each Partner agrees that the General Partner, without the approval of any Partner or Assignee, may amend any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (a) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership; (b) admission, substitution, withdrawal or removal of Partners in accordance with this Agreement; (c) a change that, in the sole discretion of the General Partner, is necessary or advisable to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the Limited Partners have limited liability under the laws of any state or to ensure that the Partnership and Genesis OLP will not be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes; (d) a change that, in the discretion of the General Partner, (i) does not adversely affect the Limited Partners in any material respect, (ii) is necessary or advisable (A) to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including the Delaware Act), (B) to facilitate the trading of Limited Partner Interests (including the division of any class or classes of Outstanding Limited Partner Interests into different classes to facilitate uniformity of tax consequences within such classes of Limited Partner Interests) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which Limited Partner Interests are or will be listed for trading, compliance with any of which the General Partner determines in its discretion to be in the best interests of the Partnership and the Limited Partners (C) in connection with action taken by the General Partner pursuant to Section 5.9, or (iii) is required to effect the intent expressed in the Registration Statement or the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement; (e) a change in the fiscal year or taxable year of the Partnership and any changes that, in the discretion of the General Partner, are necessary or advisable as a result of a change in the fiscal year or taxable year of the Partnership including, if the General Partner shall so determine, a change in the definition of ''Quarter'' and the dates on which distributions are to be made by the Partnership; (f) an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership or the General Partner or its directors, officers, trustees or agents from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or ''plan asset'' regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor; (g) subject to the terms of Section 5.7, an amendment that, in the discretion of the General Partner, is necessary or advisable in connection with the authorization of issuance of any class or series of Partnership Securities pursuant to Section 5.6; (h) any amendment expressly permitted in this Agreement to be made by the General Partner acting alone; (i) an amendment effected, necessitated or contemplated by a Merger Agreement approved in accordance with Section 14.3; (j) an amendment that, in the discretion of the General Partner, is necessary or advisable to reflect, account for and deal with appropriately the formation by the Partnership of, or investment by the Partnership in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by the Partnership of activities permitted by the terms of Section 2.4; (k) a merger or conveyance pursuant to Section 14.3(d); or (l) any other amendments substantially similar to the foregoing. 13.2 Amendment Procedures Except as provided in Sections 13.1 and 13.3, all amendments to this Agreement shall be made in accordance with the following requirements. Amendments to this Agreement may be proposed only by or with the consent of the General Partner, which consent may be given or withheld in its sole discretion. A proposed amendment shall be effective upon its approval by the holders of a Majority Interest, unless a greater or different percentage is required under this Agreement or by Delaware law. Each proposed amendment that requires the approval of the holders of a specified percentage of Outstanding Limited Partner Interests shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the General Partner shall seek the written approval of the requisite percentage of Outstanding Limited Partner Interests or call a meeting of the Limited Partners to consider and vote on such proposed amendment. The General Partner shall notify all Record Holders upon final adoption of any such proposed amendments. 13.3 Amendment Requirements (a) Notwithstanding the provisions of Sections 13.1 and 13.2, no provision of this Agreement that establishes a percentage of Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting percentage unless such amendment is approved by the written consent or the affirmative vote of holders of Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) whose aggregate Outstanding Limited Partner Interests constitute not less than the voting requirement sought to be reduced. (b) Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent, unless such shall be deemed to have occurred as a result of an amendment approved pursuant to Section 13.3(c), (ii) enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to, the General Partner or any of its Affiliates without its consent, which may be given or withheld in its sole discretion, (iii) change Section 12.1(a) or 12.1(c), or (iv) change the term of the Partnership or, except as set forth in Section 12.1(c) or 12.1(e), give any Person the right to dissolve the Partnership. (c) Except as provided in Section 14.3, and except as otherwise provided, and without limitation of the General Partner's authority to adopt amendments to this Agreement as contemplated in Section 13.1, any amendment that would have a material adverse effect on the rights or preferences of any class of Partnership Interests in relation to other classes of Partnership Interests must be approved by the holders of not less than a majority of the Outstanding Partnership Interests of the class affected. (d) Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 7.3 or 13.1 and except as otherwise provided by Section 14.3(b), no amendments shall become effective without the approval of the holders of a Ninety Percent Interest unless the Partnership obtains an Opinion of Counsel to the effect that such amendment will not affect the limited liability of any Limited Partner under applicable law. (e) Except as provided in Section 13.1, this Section 13.3 shall only be amended with the approval of the holders of a Ninety Percent Interest. 13.4 Special Meetings All acts of Limited Partners to be taken pursuant to this Agreement shall be taken in the manner provided in this Article XIII. Special meetings of the Limited Partners may be called by the General Partner or by Limited Partners owning 20% or more of the Outstanding Limited Partner Interests of the class or classes for which a meeting is proposed and which are entitled to vote thereat. Limited Partners shall call a special meeting by delivering to the General Partner one or more requests in writing stating that the signing Limited Partners wish to call a special meeting and indicating the general or specific purposes for which the special meeting is to be called. Within 60 days after receipt of such a call from Limited Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any statutes, rules, regulations, listing agreements or similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the General Partner shall send a notice of the meeting to the Limited Partners either directly or indirectly through the Transfer Agent. A meeting shall be held at a time and place determined by the General Partner on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability under the Delaware Act or the law of any other state in which the Partnership is qualified to do business. 13.5 Notice of a Meeting Notice of a meeting called pursuant to Section 13.4 shall be given to the Record Holders of the class or classes of Limited Partner Interests for which a meeting is proposed in writing by mail or other means of written communication in accordance with Section 16.1. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication. 13.6 Record Date For purposes of determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners or to give approvals without a meeting as provided in Section 13.11, the General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which Limited Partner Interests are listed for trading, in which case the rule, regulation, guideline or requirement of such exchange shall govern) or (b) in the event that approvals are sought without a meeting, the date by which Limited Partners are requested in writing by the General Partner to give such approvals. 13.7 Adjournment When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XIII. 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes The transactions of any meeting of Limited Partners, however called and noticed, and whenever held, shall be as valid as if occurred at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, Limited Partners representing such quorum who were present in person or by proxy and entitled to vote, sign a written waiver of notice or an approval of the holding of the meeting or an approval of the minutes thereof. All waivers and approvals shall be filed with the Partnership records or made a part of the minutes of the meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver of notice of the meeting, except when the Limited Partner does not approve, at the beginning of the meeting, of the transaction of any business because the meeting is not lawfully called or convened; and except that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, if the disapproval is expressly made at the meeting. 13.9 Quorum The holders of a majority of the Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) of the class or classes for which a meeting has been called and which are entitled to vote represented in person or by proxy shall constitute a quorum at a meeting of Limited Partners of such class or classes unless any such action by the Limited Partners requires approval by holders of a greater percentage of such Limited Partner Interests, in which case the quorum shall be such greater percentage. At any meeting of the Limited Partners duly called and held in accordance with this Agreement at which a quorum is present, the act of Limited Partners holding Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) that in the aggregate represent a majority of the Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Limited Partners holding Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) that in the aggregate represent at least such greater or different percentage shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) specified in this Agreement. In the absence of a quorum any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of holders of at least a majority of the Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) entitled to vote at such meeting represented either in person or by proxy, but no other business may be transacted, except as provided in Section 13.7. 13.10 Conduct of a Meeting The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Partners or solicitation of approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 13.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals in writing. 13.11 Action Without a Meeting If authorized by the General Partner, any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if an approval in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum percentage of the Outstanding Limited Partner Interests (including Limited Partner Interests deemed owned by the General Partner) that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted (unless such provision conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which Limited Partner Interests are listed for trading, in which case the rule, regulation, guideline or requirement of such exchange shall govern). Prompt notice of the taking of action without a meeting shall be given to the Limited Partners who have not approved in writing. The General Partner may specify that any written ballot submitted to Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the General Partner. If a ballot returned to the Partnership does not vote all of the Limited Partner Interests held by a Limited Partner the Partnership shall be deemed to have failed to receive a ballot for the Limited Partner Interests that were not voted. If approval of the taking of any action by the Limited Partners is solicited by any Person other than by or on behalf of the General Partner, the written approvals shall have no force and effect unless and until (a) they are deposited with the Partnership in care of the General Partner, (b) approvals sufficient to take the action proposed are dated as of a date not more than 90 days prior to the date sufficient approvals are deposited with the Partnership and (c) an Opinion of Counsel is delivered to the General Partner to the effect that the exercise of such right and the action proposed to be taken with respect to any particular matter (i) will not cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability, and (ii) is otherwise permissible under the state statutes then governing the rights, duties and liabilities of the Partnership and the Partners. 13.12 Voting and Other Rights (a) Only those Record Holders of the Limited Partner Interests on the Record Date set pursuant to Section 13.6 (and also subject to the limitations contained in the definition of ''Outstanding'') shall be entitled to notice of, and to vote at, a meeting of Limited Partners or to act with respect to matters as to which the holders of the Outstanding Limited Partner Interests have the right to vote or to act. All references in this Agreement to votes of, or other acts that may be taken by, the Outstanding Limited Partner Interests shall be deemed to be references to the votes or acts of the Record Holders of such Outstanding Limited Partner Interests. (b) With respect to Limited Partner Interests that are held for a Person's account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Limited Partner Interests are registered, such other Person shall, in exercising the voting rights in respect of such Limited Partner Interests on any matter, and unless the arrangement between such Persons provides otherwise, vote such Limited Partner Interests in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 13.12(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 4.3. ARTICLE XIV Merger 14.1 Authority The Partnership may merge or consolidate with one or more corporations, limited liability companies, business trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including a general partnership or limited partnership, formed under the laws of the State of Delaware or any other state of the United States of America, pursuant to a written agreement of merger or consolidation (''Merger Agreement'') in accordance with this Article XIV. 14.2 Procedure for Merger or Consolidation Merger or consolidation of the Partnership pursuant to this Article XIV requires the prior approval of the General Partner. If the General Partner shall determine, in the exercise of its discretion, to consent to the merger or consolidation, the General Partner shall approve the Merger Agreement, which shall set forth: (a) The names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate; (b) The name and jurisdiction of formation or organization of the business entity that is to survive the proposed merger or consolidation (the ''Surviving Business Entity''); (c) The terms and conditions of the proposed merger or consolidation; (d) The manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity; and (i) if any general or limited partner interests, securities or rights of any constituent business entity are not to be exchanged or converted solely for, or into, cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or general or limited partner interests, rights, securities or obligations of any limited partnership, corporation, trust or other entity (other than the Surviving Business Entity) which the holders of such general or limited partner interests, securities or rights are to receive in exchange for, or upon conversion of their general or limited partner interests, securities or rights, and (ii) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity or any general or limited partnership, corporation, trust or other entity (other than the Surviving Business Entity), or evidences thereof, are to be delivered; (e) A statement of any changes in the constituent documents or the adoption of new constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation; (f) The effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 14.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided, that if the effective time of the merger is to be later than the date of the filing of the certificate of merger, the effective time shall be fixed no later than the time of the filing of the certificate of merger and stated therein); and (g) Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or appropriate by the General Partner. 14.3 Approval by Limited Partners of Merger or Consolidation (a) Except as provided in Section 14.3(d), the General Partner, upon its approval of the Merger Agreement, shall direct that the Merger Agreement be submitted to a vote of the Limited Partners, whether at a special meeting or by written consent, in either case in accordance with the requirements of Article XIII. A copy or a summary of the Merger Agreement shall be included in or enclosed with the notice of a special meeting or the written consent. (b) Except as provided in Section 14.3(d), the Merger Agreement shall be approved upon receiving the affirmative vote or consent of the holders of a Majority Interest unless the Merger Agreement contains any provision that, if contained in an amendment to this Agreement, the provisions of this Agreement or the Delaware Act would require the vote or consent of a greater percentage of the Outstanding Limited Partner Interests or of any class of Limited Partners, in which case such greater percentage vote or consent shall be required for approval of the Merger Agreement. (c) Except as provided in Section 14.3(d), after such approval by vote or consent of the Limited Partners, and at any time prior to the filing of the certificate of merger pursuant to Section 14.4, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement. (d) Notwithstanding anything else contained in this Article XIV or in this Agreement, the General Partner is permitted, in its discretion, without Limited Partner approval, to merge the Partnership or any Group Member into, or convey all of the Partnership's assets to, another limited liability entity which shall be newly formed and shall have no assets, liabilities or operations at the time of such Merger other than those it receives from the Partnership or other Group Member if (i) the General Partner has received an Opinion of Counsel that the merger or conveyance, as the case may be, would not result in the loss of the limited liability of any Limited Partner or any limited partner in Genesis OLP or cause the Partnership or Genesis OLP to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not previously treated as such), (ii) the sole purpose of such merger or conveyance is to effect a mere change in the legal form of the Partnership into another limited liability entity and (iii) the governing instruments of the new entity provide the Limited Partners and the General Partner with the same rights and obligations as are herein contained. 14.4 Certificate of Merger Upon the required approval by the General Partner and the Limited Partners of a Merger Agreement, a certificate of merger shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Act. 14.5 Effect of Merger (a) At the effective time of the certificate of merger: (i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity; (ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation; (iii) all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and (iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity, and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it. (b) A merger or consolidation effected pursuant to this Article XIV shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another. ARTICLE XV Right to Acquire Limited Partner Interests 15.1 Right to Acquire Limited Partner Interests (a) Notwithstanding any other provision of this Agreement, if at any time not more than 20% of the total Limited Partner Interests of any class then Outstanding are held by Persons other than the General Partner and its Affiliates, the General Partner shall then have the right, which right it may assign and transfer in whole or in part to the Partnership or any Affiliate of the General Partner, exercisable in its sole discretion, to purchase all, but not less than all, of such Limited Partner Interests of such class then Outstanding held by Persons other than the General Partner and its Affiliates, at the greater of (x) the Current Market Price as of the date three days prior to the date that the notice described in Section 15.1(b) is mailed and (y) the highest price paid by the General Partner or any of its Affiliates for any such Limited Partner Interest of such class purchased during the 90-day period preceding the date that the notice described in Section 15.1(b) is mailed. As used in this Agreement, (i) ''Current Market Price'' as of any date of any class of Limited Partner Interests listed or admitted to trading on any National Securities Exchange means the average of the daily Closing Prices (as hereinafter defined) per Limited Partner Interest of such class for the 20 consecutive Trading Days (as hereinafter defined) immediately prior to such date; (ii) ''Closing Price'' for any day means 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 for trading on the principal National Securities Exchange (other than the Nasdaq Stock Market) on which such Limited Partner Interests of such class are listed or admitted to trading or, if such Limited Partner Interests of such class are not listed or admitted to trading on any National Securities Exchange (other than the Nasdaq Stock Market), the last quoted 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 Stock Market or such other system then in use, or, if on any such day such 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 such Limited Partner Interests of such class selected by the General Partner, or if on any such day no market maker is making a market in such Limited Partner Interests of such class, the fair value of such Limited Partner Interests on such day as determined reasonably and in good faith by the General Partner; and (iii) ''Trading Day'' means a day on which the principal National Securities Exchange on which such Limited Partner Interests of any class are listed or admitted to trading is open for the transaction of business or, if Limited Partner Interests of a 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. (b) If the General Partner, any Affiliate of the General Partner or the Partnership elects to exercise the right to purchase Limited Partner Interests granted pursuant to Section 15.1(a), the General Partner shall deliver to the Transfer Agent notice of such election to purchase (the ''Notice of Election to Purchase'') and shall cause the Transfer Agent to mail a copy of such Notice of Election to Purchase to the Record Holders of Limited Partner Interests of such class (as of a Record Date selected by the General Partner) at least 10, but not more than 60, days prior to the Purchase Date. Such Notice of Election to Purchase shall also be published for a period of at least three consecutive days in at least two daily newspapers of general circulation printed in the English language and published in the Borough of Manhattan, New York. The Notice of Election to Purchase shall specify the Purchase Date and the price (determined in accordance with Section 15.1(a)) at which Limited Partner Interests will be purchased and state that the General Partner, its Affiliate or the Partnership, as the case may be, elects to purchase such Limited Partner Interests, upon surrender of Certificates representing such Limited Partner Interests in exchange for payment, at such office or offices of the Transfer Agent as the Transfer Agent may specify, or as may be required by any National Securities Exchange on which such Limited Partner Interests are listed or admitted to trading. Any such Notice of Election to Purchase mailed to a Record Holder of Limited Partner Interests at his address as reflected in the records of the Transfer Agent shall be conclusively presumed to have been given regardless of whether the owner receives such notice. On or prior to the Purchase Date, the General Partner, its Affiliate or the Partnership, as the case may be, shall deposit with the Transfer Agent cash in an amount sufficient to pay the aggregate purchase price of all of such Limited Partner Interests to be purchased in accordance with this Section 15.1. If the Notice of Election to Purchase shall have been duly given as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to the Purchase Date the deposit described in the preceding sentence has been made for the benefit of the holders of Limited Partner Interests subject to purchase as provided herein, then from and after the Purchase Date, notwithstanding that any Certificate shall not have been surrendered for purchase, all rights of the holders of such Limited Partner Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall thereupon cease, except the right to receive the purchase price (determined in accordance with Section 15.1(a)) for Limited Partner Interests therefor, without interest, upon surrender to the Transfer Agent of the Certificates representing such Limited Partner Interests, and such Limited Partner Interests shall thereupon be deemed to be transferred to the General Partner, its Affiliate or the Partnership, as the case may be, on the record books of the Transfer Agent and the Partnership, and the General Partner or any Affiliate of the General Partner, or the Partnership, as the case may be, shall be deemed to be the owner of all such Limited Partner Interests from and after the Purchase Date and shall have all rights as the owner of such Limited Partner Interests (including all rights as owner of such Limited Partner Interests pursuant to Articles IV, V, VI and XII). (c) At any time from and after the Purchase Date, a holder of an Outstanding Limited Partner Interest subject to purchase as provided in this Section 15.1 may surrender his Certificate evidencing such Limited Partner Interest to the Transfer Agent in exchange for payment of the amount described in Section 15.1(a), therefor, without interest thereon. ARTICLE XVI General Provisions 16.1 Addresses and Notices Any notice, demand, request, report or proxy materials required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner or Assignee at the address described below. Any notice, payment or report to be given or made to a Partner or Assignee hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Partnership Security at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Partnership Security by reason of any assignment or otherwise. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 16.1 executed by the General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Transfer Agent or the Partnership is returned by the United States Post Office marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) if they are available for the Partner or Assignee at the principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners and Assignees. Any notice to the Partnership shall be deemed given if received by the General Partner at the principal office of the Partnership designated pursuant to Section 2.3. The General Partner may rely and shall be protected in relying on any notice or other document from a Partner, Assignee or other Person if believed by it to be genuine. 16.2 Further Action The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. 16.3 Binding Effect This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. 16.4 Integration This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto. 16.5 Creditors None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership. 16.6 Waiver No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition. 16.7 Counterparts This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Limited Partner Interest, upon accepting the certificate evidencing such Limited Partner Interest or executing and delivering a Transfer Application as herein described, independently of the signature of any other party. 16.8 Applicable Law This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. 16.9 Invalidity of Provisions If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. 16.10 Consent of Partners Each Partner hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Partners, such action may be so taken upon the concurrence of less than all of the Partners and each Partner shall be bound by the results of such action. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. GENESIS ENERGY, L.L.C., As General Partner By: /s/ John P. VonBerg ---------------------------------------------- Name: John P. vonBerg Title: President and Chief Executive Officer /s/ Wayne Kubicek - ---------------------------------------------------- Wayne Kubicek, As Organizational Limited Partner LIMITED PARTNERS All Limited Partners now and hereafter admitted as Limited Partners of the Partnership, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to the General Partner. By: Genesis Energy, L.L.C. General Partner, as attorney-in-fact for all Limited Partners pursuant to the Powers of Attorney granted pursuant to Section 2.6. By: /s/ John P. vonBerg --------------------- EX-3 3 EXHIBIT 3.4 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GENESIS CRUDE OIL, L.P. TABLE OF CONTENTS ARTICLE I DEFINITIONS 1.1 Definitions 1.2 Construction ARTICLE II ORGANIZATION 2.1 Formation 2.2 Name 2.3 Registered Office; Registered Agent; Principal Office; Other Offices 2.4 Purpose and Business 2.5 Powers 2.6 Power of Attorney 2.7 Term 2.8 Title to Partnership Assets ARTICLE III RIGHTS OF LIMITED PARTNERS 3.1 Limitation of Liability 3.2 Management of Business 3.3 Outside Activities of Limited Partners 3.4 Rights of Limited Partners ARTICLE IV CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF PARTNERSHIP INTERESTS 4.1 Certificates 4.2 Mutilated, Destroyed, Lost or Stolen Certificates 4.3 Record Holders 4.4 Transfer Generally 4.5 Registration and Transfer of Limited Partner Interests 4.6 Transfer of a General Partner's General Partner Interest 4.7 Transfer of APIs 4.8 Restrictions on Transfers ARTICLE V CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS 5.1 Organizational Contributions 5.2 Contributions by General Partners 5.3 Contributions by Initial Limited Partners 5.4 Interest and Withdrawal 5.5 Capital Accounts 5.6 Issuances of Additional Partnership Securities 5.7 Limitations on Issuance of Additional Partnership Securities 5.8 Conversion of Subordinated Units 5.9 Limited Preemptive Right 5.10 Splits and Combination 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS 6.1 Allocations for Capital Account Purposes 6.2 Allocations for Tax Purposes 6.3 Requirement and Characterization of Distributions; Distributions to Record Holders 6.4 Distributions of Available Cash from Operating Surplus 6.5 Distributions of Available Cash from Capital Surplus 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels 6.7 Special Provisions Relating to the Holders of APIs 6.8 Entity-Level Taxation 6.9 Special Distribution to the Initial Limited Partners and the Operating General Partner 6.10 Characterization of Distributions as Advances or Drawings ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS 7.1 Management 7.2 Certificate of Limited Partnership 7.3 Restrictions on the General Partners' Authority 7.4 Reimbursement of the General Partners 7.5 Outside Activities 7.6 Loans from the General Partners; Loans or Contributions from the Partnership; Contracts with Affiliates; Certain Restrictions on the Operating General Partner 7.7 Indemnification 7.8 Liability of Indemnitees 7.9 Resolution of Conflicts of Interest 7.10 Other Matters Concerning the General Partners 7.11 Reliance by Third Parties 7.12 Incentive Compensation Payments to the Operating General Partner 7.13 Conversion of Operating General Partner's Incentive Compensation Payment Rights ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS 8.1 Records and Accounting 8.2 Fiscal Year ARTICLE IX TAX MATTERS 9.1 Tax Returns and Information 9.2 Tax Elections 9.3 Tax Controversies 9.4 Withholding ARTICLE X ADMISSION OF PARTNERS 10.1 Admission of General Partners 10.2 Admission of Successor or Transferee General Partner 10.3 Admission of Initial Limited Partners 10.4 Admission of Substituted Limited Partner 10.5 Admission of Additional Limited Partners 10.6 Amendment of Agreement and Certificate of Limited Partnership ARTICLE XI WITHDRAWAL OR REMOVAL OF PARTNERS 11.1 Withdrawal of Operating General Partner 11.2 Removal of Operating General Partner 11.3 Interest of Departing Partner and Successor Operating General Partner 11.4 Withdrawal or Removal of Managing General Partner 11.5 Withdrawal of Limited Partners ARTICLE XII DISSOLUTION AND LIQUIDATION 12.1 Dissolution 12.2 Continuation of the Business of the Partnership After Dissolution 12.3 Liquidator 12.4 Liquidation 12.5 Cancellation of Certificate of Limited Partnership 12.6 Return of Contributions 12.7 Waiver of Partition 12.8 Capital Account Restoration ARTICLE XIII AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE 13.1 Amendment to be Adopted Solely by Operating General Partner 13.2 Amendment Procedures 13.3 Amendment Requirements 13.4 Special Meetings 13.5 Notice of a Meeting 13.6 Record Date 13.7 Adjournment 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes 13.9 Quorum 13.10 Conduct of a Meeting 13.11 Action Without a Meeting 13.12 Voting and Other Rights ARTICLE XIV MERGER 14.1 Authority 14.2 Procedure for Merger or Consolidation 14.3 Approval by Partners of Merger or Consolidation 14.4 Certificate of Merger 14.5 Effect of Merger ARTICLE XV GENERAL PROVISIONS 15.1 Addresses and Notices 15.2 Further Action 15.3 Binding Effect 15.4 Integration 15.5 Creditors 15.6 Waiver 15.7 Counterparts 15.8 Applicable Law 15.9 Invalidity of Provisions 15.10 Consent of Partners AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GENESIS CRUDE OIL, L.P. THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF Genesis Crude Oil, L.P., dated as of December 3, 1996, is entered into by and among Genesis Energy, L.L.C., a Delaware limited liability company, as the Operating General Partner, Genesis Energy, L.P., a Delaware limited partnership, as the Managing General Partner and the Organizational Limited Partner, together with any other Persons who become Partners in the Partnership or parties hereto as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. ''Acquisition'' means any transaction in which any Group Member acquires (through an asset acquisition, merger, stock acquisition or other form of investment) control over all or a portion of the assets, properties or business of another Person for the purpose of increasing the operating capacity or revenues of the Partnership Group from the operating capacity or revenues of the Partnership Group existing immediately prior to such transaction. ''Additional Limited Partner'' means a Person admitted to the Partnership as a Limited Partner pursuant to Section 10.5 and who is shown as such on the books and records of the Partnership. ''Adjusted Capital Account'' means the Capital Account maintained for each Partner as of the end of each fiscal year of the Partnership, (a) increased by any amounts that such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such fiscal year, are reasonably expected to be allocated to such Partner in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end of such fiscal year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently therewith. ''Adjusted Operating Surplus'' means, with respect to any period, Operating Surplus generated during such period (a) less (i) any net increase in working capital borrowings during such period, (ii) any net reduction in cash reserves for Operating Expenditures during such period not relating to an Operating Expenditure made during such period and (iii) any Capital Contributions made during such period in exchange for APIs, and (b) plus (i) any net decrease in working capital borrowings during such period, (ii) any net increase in cash reserves for Operating Expenditures during such period required by any debt instrument for the repayment of principal, interest or premium and (iii) the amount of any Incentive Compensation Payments that reduced Operating Surplus for such period. Adjusted Operating Surplus does not include that portion of Operating Surplus included in clause (a)(i) of the definition of Operating Surplus. ''Adjusted Property'' means any property the Carrying Value of which has been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted Property is deemed distributed by, and recontributed to, the Partnership for federal income tax purposes upon a termination of the Partnership pursuant to Treasury Regulation Section 1.708-1(b)(1)(iv), such property shall thereafter constitute a Contributed Property until the Carrying Value of such property is subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Upon a termination of the Partnership following the publication of Proposed Treasury Regulation 1.708-1(b)(1)(iv) as a final regulation, an Adjusted Property deemed contributed to a new partnership in exchange for an interest in the new partnership, followed by the deemed liquidation of the Partnership shall thereafter constitute a Contributed Property until the Carrying Value of such property is subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). ''Affiliate'' means, with respect to any Person, any other Person that (i) directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question or (ii) owns, beneficially, directly or indirectly, 20% or more of the outstanding capital stock, shares or other equity interests of the Person in question. As used herein, the term ''control'' means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. ''Agreed Allocation'' means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section 6.1, including, without limitation, a Curative Allocation (if appropriate to the context in which the term ''Agreed Allocation'' is used). ''Agreed Value'' of any Contributed Property means the fair market value of such property or other consideration at the time of contribution as determined by the Operating General Partner using such reasonable method of valuation as it may adopt; provided, however, that the Agreed Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code (whether before or after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv)) shall be determined in accordance with Section 5.5(c)(i). Subject to Section 5.5(c)(i), the Operating General Partner shall, in its discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties contributed to the Partnership in a single or integrated transaction among each separate property on a basis proportional to the fair market value of each Contributed Property. ''Agreement'' means this Amended and Restated Agreement of Limited Partnership of Genesis Crude Oil, L.P., as it may be amended, supplemented or restated from time to time. ''API'' means a non-voting, Limited Partner Interest issued (at a rate of $100 per API) pursuant to Section 5.6 and in accordance with the Distribution Support Agreement, which non-voting, Limited Partner Interest shall confer upon the holder thereof only the rights and obligations specifically provided in this Agreement with respect to APIs (and no other rights otherwise available to holders of a Limited Partner Interest). ''Assets'' has the meaning assigned to such term in the Conveyance Agreement. ''Assignee'' means a Person to whom one or more Limited Partner Interests have been transferred in a manner permitted under this Agreement and who has executed and delivered a Transfer Application as required by this Agreement, but who has not been admitted as a Substituted Limited Partner. ''Audit Committee'' means a committee of the Board of Directors of the Operating General Partner composed entirely of two or more directors who are neither officers nor employees of the Operating General Partner or officers, directors or employees of any Affiliate of the Operating General Partner. ''Available Cash,'' means, with respect to any Quarter ending prior to the Liquidation Date, (a) the sum of (i) all cash and cash equivalents of the Partnership Group on hand at the end of such Quarter and (ii) all additional cash and cash equivalents of the Partnership Group on hand on the date of determination of Available Cash with respect to such Quarter resulting from borrowings for working capital purposes and purchases of APIs made subsequent to the end of such Quarter, less (b) the amount of any cash reserves that is necessary or appropriate in the reasonable discretion of the Operating General Partner to (i) provide for the proper conduct of the business of the Partnership Group (including reserves for future capital expenditures and for anticipated future credit needs of the business of the Partnership Group) subsequent to such Quarter, (ii) comply with applicable law or any loan agreement (including the Master Credit Support Agreement), security agreement (including the Security Agreement), mortgage, debt instrument or other agreement or obligation to which any Group Member is a party or by which it is bound or its assets are subject or (iii) provide funds for distributions under Section 6.4, 6.5 or 6.9 or to make Incentive Compensation Payments to the Operating General Partner in respect of any one or more of the next four Quarters; provided, however, that the Operating General Partner may not establish cash reserves pursuant to (iii) above if the effect of such reserves would be that the Partnership is unable to distribute the Minimum Quarterly Distribution on all Common Units with respect to such Quarter; and, provided further, that disbursements made by a Group Member or cash reserves established, increased or reduced after the end of such Quarter but on or before the date of determination of Available Cash with respect to such Quarter shall be deemed to have been made, established, increased or reduced, for purposes of determining Available Cash, within such Quarter if the Operating General Partner so determines, less (c) the amount necessary to make Incentive Compensation Payments to the Operating General Partner pursuant to Section 7.12 with respect to such Quarter, less (d) any Redemption Proceeds on hand that have not yet been used by the Partnership to redeem Common Units pursuant to the Redemption and Registration Rights Agreement. Notwithstanding the foregoing, ''Available Cash'' with respect to the Quarter in which the Liquidation Date occurs and any subsequent Quarter shall equal zero. ''Basis'' means Basis Petroleum, Inc., a Texas corporation. ''Book-Tax Disparity'' means with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Section 5.5 and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. ''Business Day'' means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the states of New York or Texas shall not be regarded as a Business Day. ''Capital Account'' means the capital account maintained for a Partner pursuant to Section 5.5. ''Capital Contribution'' means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership pursuant to this Agreement or the Conveyance Agreement. ''Capital Improvement'' means any (a) addition or improvement to the capital assets owned by any Group Member or (b) acquisition of existing or the construction of new capital assets (including pipeline systems, storage facilities and related assets), made to increase the operating capacity or revenues of the Partnership Group from the operating capacity or revenues of the Partnership Group existing immediately prior to such addition, improvement, acquisition or construction. ''Capital Surplus'' has the meaning assigned to such term in Section 6.3(a). ''Carrying Value'' means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, amortization and cost recovery deductions charged to the Partners' and Assignees' Capital Accounts in respect of such Contributed Property, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the Operating General Partner. ''Certificate'' means a certificate, substantially in the form of Exhibit A to this Agreement or in such other form as may be adopted by the Operating General Partner in its discretion, issued by the Partnership evidencing ownership of one or more Common LP Units or Subordinated LP Units or a certificate, in such form as may be adopted by the Operating General Partner in its discretion, issued by the Partnership evidencing ownership of one or more other Partnership Securities. ''Certificate of Limited Partnership'' means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 7.2, as such Certificate of Limited Partnership may be amended, supplemented or restated from time to time. ''Closing Date'' means the first date on which MLP Common Units are sold by Genesis MLP to the Underwriters pursuant to the provisions of the Underwriting Agreement. ''Code'' means the Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. ''Commission'' means the United States Securities and Exchange Commission. ''Common GP Unit'' means a Partnership Security representing a fractional part of the Partnership Interests of all General Partners and having the rights and obligations specified with respect to a Common GP Unit in this Agreement. The term ''Common GP Unit'' does not refer to a Subordinated GP Unit prior to its conversion into a Common GP Unit pursuant to the terms of this Agreement. ''Common LP Unit'' means a Partnership Security representing a fractional part of the Partnership Interests of all Limited Partners and Assignees (other than of holders of the APIs) and having the rights and obligations specified with respect to a Common LP Unit in this Agreement. The term ''Common LP Unit'' does not refer to a Subordinated LP Unit prior to its conversion into a Common LP Unit pursuant to the terms of this Agreement. ''Common Unit'' means a Common GP Unit or a Common LP Unit. ''Common Unit Arrearage'' means as to any Quarter within the Subordination Period commencing prior to the Liquidation Date, the excess, if any, of (a) the Minimum Quarterly Distribution in respect of such Quarter over (b) the sum of all Available Cash distributed with respect to a Common Unit in respect of such Quarter pursuant to Section 6.4(a)(i). ''Contributed Property'' means each property or other asset, in such form as may be permitted by the Delaware Act, but excluding cash, contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code, whether before or after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv)). Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 5.5(d), such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property. ''Conversion Election'' has the meaning assigned to such term in Section 7.13. ''Conveyance Agreement'' means that certain Purchase & Sale and Contribution & Conveyance Agreement, dated as of November 26, 1996, among the Partnership, Genesis MLP, Genesis Energy, L.L.C., Basis, Howell and the Howell Subsidiaries, together with the additional conveyance documents and instruments contemplated or referenced thereunder. ''Cumulative Common Unit Arrearage'' means, with respect to any Common Unit, whenever issued, and as of the end of any Quarter, the excess, if any, of (a) the sum resulting from adding together the Common Unit Arrearage as to an Initial Common Unit for each of the Quarters within the Subordination Period ending on or before the last day of such Quarter over (b) the sum of any distributions theretofore made pursuant to Section 6.4(a)(ii) and Section 6.5(ii) with respect to such Initial Common Unit (including any distributions to be made in respect of the last of such Quarters). ''Curative Allocation'' means any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi). ''Delaware Act'' means the Delaware Revised Uniform Limited Partnership Act, 6 Del C. 17-101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute. ''Departing Partner'' means a former Operating General Partner from and after the effective date of any withdrawal or removal of such former Operating General Partner pursuant to Section 11.1 or 11.2. ''Distribution Support Agreement'' means the Distribution Support Agreement, dated as of the Closing Date, between the Partnership and Salomon, which sets forth the agreement of the Partnership and Salomon relating to the purchase of APIs. ''Economic Risk of Loss'' has the meaning set forth in Treasury Regulation Section 1.752-2(a). ''Event of Withdrawal'' has the meaning assigned to such term in Section 11.1(a). ''Excess Basis Cash'' has the meaning assigned to such term in the Conveyance Agreement. ''Excess Howell Cash'' has the meaning assigned to such term in the Conveyance Agreement. ''Excess Howell Subordinated LP Units'' has the meaning assigned to such term in the Conveyance Agreement. ''Final Subordinated Units'' has the meaning assigned to such term in Section 6.1(d)(x). ''First Target Distribution'' means $0.550 per Unit per Quarter (or, with respect to the Quarter ending on March 31, 1997, it means the product of $0.550 multiplied by the sum of (x) 1.00 and (y) a fraction of which the numerator is the number of days in the period commencing on the Closing Date and ending on December 31, 1996, and of which the denominator is 92), subject to adjustment in accordance with Sections 6.6 and 6.8. ''GP Unit'' means a Common GP Unit or a Subordinated GP Unit. ''General Partner'' means each of the Managing General Partner and the Operating General Partner, and their successors and permitted assigns as general partners of the Partnership. ''General Partner Interest'' means the ownership interest of a General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interest held by it), which may be evidenced by GP Units or other Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which such General Partner is entitled as provided in this Agreement (other than the right of the Operating General Partner to receive Incentive Compensation Payments pursuant to Section 7.12), together with all obligations of such General Partner to comply with the terms and provisions of this Agreement. ''Genesis Energy, L.L.C.'' means Genesis Energy, L.L.C., a Delaware limited liability company, which is currently the Operating General Partner, and its successors. ''Genesis MLP'' means Genesis Energy, L.P., a Delaware limited partnership, and its successors. ''Genesis MLP Partnership Agreement'' means the Amended and Restated Agreement of Limited Partnership of Genesis Energy, L.P., as it may be amended, supplemented or restated from time to time. ''Group Member'' means a member of the Partnership Group. ''Howell'' means Howell Corporation, a Delaware corporation. ''Howell Affiliate Cash'' has the meaning assigned to such term in the Conveyance Agreement. ''Howell Purchase Cash'' has the meaning assigned to such term in the Conveyance Agreement. ''Howell Subsidiaries'' means Howell Crude Oil Company, a Delaware corporation, Howell Pipeline Texas, Inc., a Delaware corporation, Howell Pipeline USA, Inc., a Delaware corporation, Howell Power Systems, Inc., a Delaware corporation, and Howell Transportation Services, Inc., a Delaware corporation. ''Incentive Compensation Payment'' means a payment made to the Operating General Partner pursuant to Section 7.12. ''Indemnitee'' means (a) a General Partner, any Departing Partner and any Person who is or was an Affiliate of a General Partner or any Departing Partner, (b) any Person who is or was a director, officer, employee, agent or trustee of a Group Member, (c) any Person who is or was a member, officer, director, employee, agent, or trustee of a General Partner or any Departing Partner or any Affiliate of the General Partner or any Departing Partner, or any Affiliate of any such Person, and (d) any Person who is or was serving at the request of a General Partner or any Departing Partner or any such Affiliate as a director, officer, employee, member, partner, agent, fiduciary or trustee of another Person; provided, however, that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services. ''Initial Common Unit'' means a Common Unit issued on the Closing Date. ''Initial Limited Partners'' means Basis and the Howell Subsidiaries upon being admitted to the Partnership in accordance with Section 10.3. ''Initial Unit Price'' means the initial public offering price per MLP Common Unit at which the Underwriters offered the MLP Common Units to the public for sale as set forth on the cover page of the prospectus included as part of the Registration Statement and first issued at or after the time the Registration Statement first became effective, adjusted as appropriate to give effect to any distribution, subdivision or combination of MLP Common Units. ''Interim Capital Transactions'' means the following transactions if they occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings of indebtedness and sales of debt securities (other than for working capital purposes and other than for items purchased on open account in the ordinary course of business) by any Group Member; (b) sales of equity interests by any Group Member (other than sales of APIs); and (c) sales or other voluntary or involuntary dispositions of any assets of any Group Member other than (x) sales or other dispositions of inventory in the ordinary course of business, (y) sales or other dispositions of other current assets, including receivables and accounts in the ordinary course of business, and (z) sales or other dispositions of assets as part of normal retirements or replacements. ''Limited Partner'' means, unless the context otherwise requires, (a) the Organizational Limited Partner, each Initial Limited Partner, each Substituted Limited Partner, each Additional Limited Partner, (b) each holder of an API and (c) solely for purposes of Articles V, VI, VII and IX and Section 12.4, each Assignee. ''Limited Partner Interest'' means the ownership interest of a Limited Partner or Assignee in the Partnership, which may be evidenced by LP Units, APIs or other Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which such Limited Partner or Assignee is entitled as provided in this Agreement, together with all obligations of such Limited Partner or Assignee to comply with the terms and provisions of this Agreement. ''Liquidation Date'' means (a) in the case of an event giving rise to the dissolution of the Partnership of the type described in clauses (a) and (b) of the first sentence of Section 12.2, the date on which the applicable time period during which the holders of Outstanding Units have the right to elect to reconstitute the Partnership and continue its business has expired without such an election being made, and (b) in the case of any other event giving rise to the dissolution of the Partnership, the date on which such event occurs. ''Liquidator'' means one or more Persons selected by the Operating General Partner to perform the functions described in Section 12.3 as liquidating trustee of the Partnership within the meaning of the Delaware Act. ''LLC Overallotment Contribution'' has the meaning assigned to such term in the Conveyance Agreement. ''LP Unit'' means a Common LP Unit or a Subordinated LP Unit. ''Managing General Partner'' means Genesis MLP and its successors and permitted assigns as managing general partner of the Partnership. ''Majority Interest'' means, during the Subordination Period, at least a majority in Voting Power of the Outstanding Common Units, voting as a separate class, and at least a majority in Voting Power of the Outstanding Subordinated Units, voting as a separate class and, thereafter, at least a majority of the Outstanding Units, voting as a class, excluding in each case GP Units held by the Operating General Partner. ''Master Credit Support Agreement'' means the Master Credit Support Agreement, dated as of the Closing Date, among the Partnership, Salomon and Basis which sets forth the agreement of the Partnership and Salomon relating to the credit support to be provided by Salomon to the Partnership and the agreement of the Partnership and Basis regarding working capital to be provided by Basis to the Partnership. ''Merger Agreement'' has the meaning assigned to such term in Section 14.1. ''Minimum Quarterly Distribution'' means $0.50 per Unit per Quarter (or with respect to the Quarter ending on March 31, 1997, it means the product of $0.50 multiplied by the sum of (x) 1.00 and (y) a fraction of which the numerator is equal to the number of days in the period commencing on the Closing Date and ending on December 31, 1996, and of which the denominator is 92), subject to adjustment in accordance with Sections 6.6 and 6.8. ''MLP Common Unit'' has the meaning assigned to the term ''Common Unit'' in the Genesis MLP Partnership Agreement. ''MLP General Partner Interest'' has the meaning assigned to the term ''General Partner Interest'' in the Genesis MLP Partnership Agreement. ''MLP Parity Unit'' has the meaning assigned to the term ''Parity Unit'' in the Genesis MLP Partnership Agreement. ''MLP Partnership Security'' has the meaning assigned to the term ''Partnership Security'' in the Genesis MLP Partnership Agreement. ''MLP Unit'' has the meaning assigned to the term ''Unit'' in the Genesis MLP Partnership Agreement. ''Net Agreed Value'' means, (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, and (b) in the case of any property distributed to a Partner or Assignee by the Partnership, the Partnership's Carrying Value of such property (as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is distributed, reduced by any indebtedness either assumed by such Partner or Assignee upon such distribution or to which such property is subject at the time of distribution, in either case, as determined under Section 752 of the Code. ''Net Income'' means, for any taxable year, the excess, if any, of the Partnership's items of income and gain (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable year over the Partnership's items of loss and deduction (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable year. The items included in the calculation of Net Income shall be determined in accordance with Section 5.5(b) and shall not include any items specially allocated under Section 6.1(d). ''Net Loss'' means, for any taxable year, the excess, if any, of the Partnership's items of loss and deduction (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable year over the Partnership's items of income and gain (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable year. The items included in the calculation of Net Loss shall be determined in accordance with Section 5.5(b) and shall not include any items specially allocated under Section 6.1(d). ''Net MLP Proceeds'' has the meaning assigned to such term in the Conveyance Agreement. ''Net Overallotment Proceeds'' has the meaning assigned to such term in the Conveyance Agreement. ''Net Termination Gain'' means, for any taxable year, the sum, if positive, of all items of income, gain, loss or deduction recognized by the Partnership after the Liquidation Date. The items included in the determination of Net Termination Gain shall be determined in accordance with Section 5.5(b) and shall not include any items of income, gain or loss specially allocated under Section 6.1(d). ''Net Termination Loss'' means, for any taxable period, the sum, if negative, of all items of income, gain, loss or deduction recognized by the Partnership after the Liquidation Date. The items included in the determination of Net Termination Loss shall be determined in accordance with Section 5.5(b) and shall not include any items of income, gain or loss specially allocated under Section 6.1(d). ''Ninety Percent Interest'' means at least 90% in Voting Power of the Outstanding Units, excluding GP Units held by the Operating General Partner. ''Non-Competition Agreement'' means the Non-Competition Agreement, dated as of the Closing Date, among the Partnership, Genesis MLP, Salomon, Basis and Howell. ''Nonrecourse Built-in Gain'' means with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and 6.2(b)(iii) if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration. ''Nonrecourse Deductions'' means any and all items of loss, deduction or expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-2(b), are attributable to a Nonrecourse Liability. ''Nonrecourse Liability'' has the meaning set forth in Treasury Regulation Section 1.752-1(a)(2). ''Operating Expenditures'' means all Partnership Group expenditures, including, but not limited to, taxes, reimbursements of the General Partners, Incentive Compensation Payments to the Operating General Partner, debt service payments, guarantee fees and capital expenditures, subject to the following: (a) Payments (including prepayments) of principal of and premium on indebtedness shall not be an Operating Expenditure if the payment is (i) required in connection with the sale or other disposition of assets or (ii) made in connection with the refinancing or refunding of indebtedness with the proceeds from new indebtedness or from the sale of equity interests. For purposes of the foregoing, at the election and in the reasonable discretion of the Operating General Partner, any payment of principal or premium shall be deemed to be refunded or refinanced by any indebtedness incurred or to be incurred by the Partnership Group within 180 days before or after such payment to the extent of the principal amount of such indebtedness. (b) Operating Expenditures shall not include (i) capital expenditures made for Acquisitions or for Capital Improvements, (ii) payment of transaction expenses relating to Interim Capital Transactions or (iii) distributions to Partners. Where capital expenditures are made in part for Acquisitions or for Capital Improvements and in part for other purposes, the Operating General Partner's good faith allocation between the amounts paid for each shall be conclusive. ''Operating General Partner'' means Genesis Energy, L.L.C., and its successors and permitted assigns as operating general partner of the Partnership. ''Operating Surplus'' means, with respect to any period ending prior to the Liquidation Date, on a cumulative basis and without duplication, (a) the sum of (i) $20 million plus all cash and cash equivalents of the Partnership Group on hand as of the close of business on the Closing Date, (ii) all cash receipts of the Partnership Group for the period beginning on the Closing Date and ending with the last day of such period, other than cash receipts from Interim Capital Transactions (except to the extent specified in Section 6.5) and (iii) all cash receipts of the Partnership Group after the end of such period but on or before the date of determination of Operating Surplus with respect to such period resulting from borrowings for working capital purposes and purchases of APIs, less (b) the sum of (i) Operating Expenditures for the period beginning on the Closing Date and ending with the last day of such period and (ii) the amount of cash reserves that is necessary or advisable in the reasonable discretion of the Operating General Partner to provide funds for future Operating Expenditures, provided, however, that disbursements made (including contributions to a Group Member or disbursements on behalf of a Group Member) or cash reserves established, increased or reduced after the end of such period but on or before the date of determination of Available Cash with respect to such period shall be deemed to have been made, established, increased or reduced for purposes of determining Operating Surplus, within such period if the Operating General Partner so determines. Notwithstanding the foregoing, ''Operating Surplus'' with respect to the Quarter in which the Liquidation Date occurs and any subsequent Quarter shall equal zero. ''Opinion of Counsel'' means a written opinion of counsel (who may be regular counsel to the Partnership or a General Partner or any of their Affiliates) acceptable to the Operating General Partner in its reasonable discretion. ''Option Closing Date'' has the meaning assigned to such term in the Underwriting Agreement. ''Organizational Limited Partner'' means Genesis MLP in its capacity as the organizational limited partner of the Partnership pursuant to this Agreement. ''Outstanding'' means, with respect to Partnership Securities, all Partnership Securities that are issued by the Partnership and reflected as Outstanding on the Partnership's books and records as of the date of determination. ''Over-allotment Option'' means the over-allotment option granted to the Underwriters by Genesis MLP pursuant to the Underwriting Agreement. ''Parity Units'' means Common Units and all other Partnership Securities having rights to distributions or in liquidation on a parity with the Common Units. ''Partner'' means each General Partner and each Limited Partner. ''Partner Nonrecourse Debt'' has the meaning set forth in Treasury Regulation Section 1.704-2(b)(4). ''Partner Nonrecourse Debt Minimum Gain'' has the meaning set forth in Treasury Regulation Section 1.704-2(i)(2). ''Partner Nonrecourse Deductions'' means any and all items of loss, deduction or expenditure (including, without limitation, any expenditure described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-2(i), are attributable to a Partner Nonrecourse Debt. ''Partnership'' means Genesis Crude Oil, L.P., a Delaware limited partnership, and any successors thereto. ''Partnership Group'' means the Partnership and any Subsidiary of the Partnership, treated as a single consolidated entity. ''Partnership Interest'' means an ownership interest in the Partnership which shall include General Partner Interests and Limited Partner Interests. ''Partnership Minimum Gain'' means that amount determined in accordance with the principles of Treasury Regulation Section 1.704-2(d). ''Partnership Security'' means any class or series of equity interest in the Partnership and shall include, without limitation, Common Units, Subordinated Units and APIs. ''Per Unit Capital Amount'' means, as of any date of determination, the Capital Account, stated on a per Unit basis, underlying any Common Unit held by the Managing General Partner. ''Percentage Interest'' means as of the date of such determination (a) as to any Partner or an Assignee holding Units, the product obtained by multiplying (i) 100% less the percentage applicable to paragraph (b) by (ii) the quotient obtained by dividing (A) the number of Units held by such Partner or Assignee by (B) the total number of all Outstanding Units and (b) as to the holders of additional Partnership Securities issued by the Partnership in accordance with Section 5.6, the percentage established as a part of such issuance. The Percentage Interest with respect to an API shall at all times be zero. ''Person'' means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity. ''Pro Rata'' means (a) when modifying Units or any class thereof, apportioned among all designated Units in accordance with their relative Percentage Interests, (b) when modifying Partners and Assignees, apportioned among all Partners and Assignees in accordance with their respective Percentage Interests and (c) when modifying holders of APIs, apportioned among all holders of APIs in accordance with the relative number of APIs held by each such holder. ''Quarter'' means, unless the context requires otherwise, a calendar quarter. ''Recapture Income'' means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. ''Record Date'' means the date established by the Operating General Partner for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Partners or entitled to vote by ballot or give approval of Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Partners or (b) the identity of Record Holders entitled to receive any report or distribution or participate in any offer. ''Record Holder'' means, as of a particular Business Day, with respect to a holder of a Common Unit, a Subordinated Unit, an API or other Partnership Security, the Person in whose name such Common Unit, Subordinated Unit, API or other Partnership Security is registered on the books which the Operating General Partner has caused to be kept as of the opening of business on such Business Day. ''Redemption and Registration Rights Agreement'' means the Redemption and Registration Rights Agreement, dated as of the Closing Date, among Basis, Howell, the Howell Subsidiaries, the Partnership and Genesis MLP which sets forth the agreement regarding the redemption of Common LP Units by the Partnership. ''Redemption Proceeds'' means any cash contributed by Genesis MLP to the Partnership which is to be used by the Partnership to redeem Common LP Units pursuant to the Redemption and Registration Rights Agreement. ''Registration Statement'' means the Registration Statement on Form S-1 (Registration No. 333-11545) as it has been or as it may be amended or supplemented from time to time, filed by Genesis MLP with the Commission under the Securities Act to register the initial offering and sale of MLP Common Units to the public. ''Required Allocations'' means (a) any limitation imposed on any allocation of Net Losses or Net Termination Losses under Section 6.1(b) or Section 6.1(c) and (b) any allocation of an item of income, gain, loss or deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix). ''Residual Gain'' or ''Residual Loss'' means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of a Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities. ''Salomon'' means Salomon Inc, a Delaware corporation. ''Second Target Distribution'' means $0.635 per Unit per Quarter (or, with respect to the Quarter ending on March 31, 1997, it means the product of $0.635 multiplied by the sum of (x) 1.00 and (y) a fraction of which the numerator is equal to the number of days in the period commencing on the Closing Date and ending on December 31, 1996, and of which the denominator is 92), subject to adjustment in accordance with Sections 6.6 and 6.8. ''Securities Act'' means the Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute. ''Security Agreement'' means the Security Agreement, dated as of the Closing Date, among the Partnership, Salomon and the Secured Parties (as defined in the Security Agreement) securing the obligations of the Partnership under the Master Credit Support Agreement and creating a security interest in the Collateral (as defined in the Security Agreement) in favor of the Collateral Agent (as defined in the Security Agreement). ''Special Approval'' means approval by a majority of the members of the Audit Committee. ''Subordinated GP Unit'' means a Partnership Security representing a fractional part of the Partnership Interests of all General Partners and having the rights and obligations specified with respect to a Subordinated GP Unit in this Agreement. ''Subordinated LP Unit'' means a Partnership Security representing a fractional part of the Partnership Interests of all Limited Partners and Assignees (other than of holders of the APIs) and having the rights and obligations specified with respect to a Subordinated LP Unit in this Agreement. ''Subordinated Unit'' means a Subordinated GP Unit or a Subordinated LP Unit. ''Subordination Period'' means the period commencing on the Closing Date and ending on the first day of any Quarter beginning after December 31, 2001 in respect of which (i) distributions of Available Cash from Operating Surplus on each of the Outstanding Common Units and Subordinated Units with respect to each of the three consecutive, non-overlapping four-Quarter periods immediately preceding such date equaled or exceeded the sum of the Minimum Quarterly Distribution on all Outstanding Common Units and Subordinated Units during such periods, (ii) the Adjusted Operating Surplus generated during each of the three consecutive, non-overlapping four-Quarter periods immediately preceding such date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of the Outstanding Common Units and Subordinated Units during such periods and (iii) there are no outstanding Cumulative Common Unit Arrearages. ''Subsidiary'' means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of such partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person. ''Substituted Limited Partner'' means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 10.4 in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership. ''Surviving Business Entity'' has the meaning assigned to such term in Section 14.2(b). ''Third Target Distribution'' means $0.825 per Unit per Quarter (or, with respect to the Quarter ending on March 31, 1997, it means the product of $0.825 multiplied by the sum of (x) 1.00 and (y) a fraction of which the numerator is equal to the number of days in the period commencing on the Closing Date and ending on December 31, 1996, and of which the denominator is 92), subject to adjustment in accordance with Sections 6.6 and 6.8. ''transfer'' has the meaning assigned to such term in Section 4.4(a). ''Transfer Application'' means an application and agreement for transfer of Partnership Securities in the form set forth on the back of a Certificate or in a form substantially to the same effect in a separate instrument. ''Underwriter'' means each Person named as an underwriter in Schedule I to the Underwriting Agreement who purchases MLP Common Units pursuant thereto. ''Underwriting Agreement'' means the Underwriting Agreement dated November 26, 1996, among the Underwriters, the Partnership, Genesis MLP, the Operating General Partner and certain other parties, providing for the purchase of MLP Common Units by such Underwriters. ''Unit'' means a Common Unit or Subordinated Unit or any other Partnership Security that is designated as a ''Unit.'' ''Unitholder'' means a holder of a Unit. ''Unpaid MQD'' has the meaning assigned to such term in Section 6.1(c)(i)(B). ''Unrealized Gain'' attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section 5.5(d)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 5.5(d) as of such date). ''Unrealized Loss'' attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 5.5(d) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 5.5(d)). ''Unrecovered Capital'' means at any time, with respect to (a) a Unit, the Initial Unit Price less the sum of all distributions constituting Capital Surplus theretofore made in respect of an Initial Common Unit and any distributions of cash (or the Net Agreed Value of any distributions in kind) in connection with the dissolution and liquidation of the Partnership theretofore made in respect of an Initial Common Unit, adjusted as the Operating General Partner determines to be appropriate to give effect to any distribution, subdivision or combination of such Units, and (b) an API, the excess of (i) the cash amount contributed to the Partnership in exchange for such API over (ii) any amounts previously distributed toward the redemption of such API pursuant to Section 6.4 or 12.4. ''U.S. GAAP'' means United States Generally Accepted Accounting Principles consistently applied. ''Voting Power'' means the right, if any, of the holder of a Partnership Security to vote on Partnership matters. Each Common Unit and Subordinated Unit shall entitle the holder thereof to one vote. Each additional Partnership Security shall entitle the holder thereof to such vote, if any, as shall be established at the time of issuance of such Partnership Security. 1.2 Construction Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; and (c) ''include'' or ''includes'' means includes, without limitation, and ''including'' means including, without limitation. ARTICLE II ORGANIZATION 2.1 Formation The Operating General Partner and the Organizational Limited Partner have previously formed the Partnership as a limited partnership pursuant to the provisions of the Delaware Act and hereby amend and restate the original Agreement of Limited Partnership of Genesis Crude Oil, L.P. in its entirety. This amendment and restatement shall become effective on the date of this Agreement. Except as expressly provided to the contrary in this Agreement, the rights, duties (including fiduciary duties), liabilities and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes and a Partner has no interest in specific Partnership property. 2.2 Name The name of the Partnership shall be ''Genesis Crude Oil, L.P.'' The Partnership's business may be conducted under any other name or names deemed necessary or appropriate by the Operating General Partner in its sole discretion, including the name of a General Partner. The words ''Limited Partnership,'' ''L.P.,'' ''Ltd.'' or similar words or letters shall be included in the Partnership's name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The Operating General Partner in its discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners. 2.3 Registered Office; Registered Agent; Principal Office; Other Offices Unless and until changed by the Operating General Partner, the registered office of the Partnership in the State of Delaware shall be located at 1209 Orange Street, New Castle County, Wilmington, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be CT Corporation System. The principal office of the Partnership shall be located at 500 Dallas, Suite 3100, Houston, Texas 77002 or such other place as the Operating General Partner may from time to time designate by notice to the other Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the Operating General Partner deems necessary or appropriate. The address of the Managing General Partner and the Operating General Partner shall be 500 Dallas, Suite 3100, Houston, Texas 77002 or such other place as the Managing General Partner or the Operating General Partner, as the case may be, may from time to time designate by notice to the Limited Partners. 2.4 Purpose and Business The purpose and nature of the business to be conducted by the Partnership shall be to (a) acquire, manage and operate the Assets and any similar assets or properties, and to engage directly in, or to enter into or form any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any type of business or activity engaged in by Basis or Howell immediately prior to the Closing Date associated with the Assets and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, (b) engage directly in, or to enter into or form any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any business activity that is approved by the Operating General Partner and which lawfully may be conducted by a limited partnership organized pursuant to the Delaware Act and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, and (c) do anything necessary or appropriate to the foregoing, including the making of capital contributions or loans to a Group Member. The General Partners have no obligation or duty to the Partnership, the Partners, or the Assignees to propose or approve, and in their discretion may decline to propose or approve, the conduct by the Partnership of any business. 2.5 Powers The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described in Section 2.4 and for the protection and benefit of the Partnership. 2.6 Power of Attorney (a) Each Limited Partner and each Assignee hereby constitutes and appoints the Operating General Partner and, if a Liquidator shall have been selected pursuant to Section 12.3, the Liquidator, severally (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, as the case may be, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to: (i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including this Agreement and the Certificate of Limited Partnership and all amendments or restatements hereof or thereof) that the Operating General Partner or the Liquidator deems necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all certificates, documents and other instruments that the Operating General Partner or the Liquidator deems necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the Operating General Partner or the Liquidator deems necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article IV, X, XI or XII; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Partnership Securities issued pursuant to Section 5.6; and (F) all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger or consolidation of the Partnership pursuant to Article XIV; and (ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments necessary or appropriate, in the discretion of the Operating General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or is necessary or appropriate, in the discretion of the Operating General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided, that when required by Section 13.3 or any other provision of this Agreement that establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the Operating General Partner and the Liquidator may exercise the power of attorney made in this Section 2.6(a)(ii) only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series, as applicable. Nothing contained in this Section 2.6(a) shall be construed as authorizing the Operating General Partner to amend this Agreement except in accordance with Article XIII or as may be otherwise expressly provided for in this Agreement. (b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner's or Assignee's Partnership Interest and shall extend to such Limited Partner's or Assignee's heirs, successors, assigns and personal representatives. Each such Limited Partner and Assignee hereby agrees to be bound by any representation made by the Operating General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each such Limited Partner and Assignee, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the Operating General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner and Assignee shall execute and deliver to the Operating General Partner or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the Operating General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership. 2.7 Term The term of the Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue until the close of Partnership business on December 31, 2086 or until the earlier dissolution of the Partnership in accordance with the provisions of Article XII. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate of Limited Partnership as provided in the Delaware Act. 2.8 Title to Partnership Assets Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner or Assignee, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, a General Partner, one or more of a General Partner's Affiliates or one or more nominees, as the Operating General Partner may determine. The General Partners hereby declare and warrant that any Partnership assets for which record title is held in the name of such General Partner or one or more of its Affiliates or one or more nominees shall be held by such General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that such General Partner shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the Operating General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable) to be vested in the Partnership as soon as reasonably practicable; provided, further, that, prior to the withdrawal or removal of such General Partner or as soon thereafter as practicable, such General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the Operating General Partner. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership assets is held. ARTICLE III RIGHTS OF LIMITED PARTNERS 3.1 Limitation of Liability The Limited Partners and the Assignees shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act. 3.2 Management of Business No Limited Partner or Assignee, in its capacity as such, shall participate in the operation, management or control (within the meaning of the Delaware Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. Any action taken by any Affiliate of a General Partner or any officer, director, employee, member, general partner, agent or trustee of a General Partner or any of its Affiliates, or any officer, director, employee, member, general partner, agent or trustee of a Group Member, in its capacity as such, shall not be deemed to be participation in the control of the business of the Partnership by a limited partner of the Partnership (within the meaning of Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement. 3.3 Outside Activities of Limited Partners Subject to the provisions of Section 7.5, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners or Assignees, any Limited Partner or Assignee shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership Group. Neither the Partnership nor any of the other Partners or Assignees shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. 3.4 Rights of Limited Partners (a) In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 3.4(b), each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon reasonable written demand and at such Limited Partner's own expense: (i) to obtain true and full information regarding the status of the business and financial condition of the Partnership; (ii) promptly after becoming available, to obtain a copy of the Partnership's federal, state and local tax returns for each year; (iii) to have furnished to him a current list of the name and last known business, residence or mailing address of each Partner; (iv) to have furnished to him a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with a copy of the executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed; (v) to obtain true and full information regarding the amount of cash and a description and statement of the Net Agreed Value of any other Capital Contribution by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner; and (vi) to obtain such other information regarding the affairs of the Partnership as is just and reasonable. (b) The General Partners may keep confidential from the Limited Partners and Assignees, for such period of time as the General Partners deem reasonable, (i) any information that the General Partners reasonably believe to be in the nature of trade secrets or (ii) other information the disclosure of which the General Partners in good faith believe (A) is not in the best interests of the Partnership Group, (B) could damage the Partnership Group or (C) that any Group Member is required by law or by agreement with any third party to keep confidential (other than agreements with Affiliates of the Partnership the primary purpose of which is to circumvent the obligations set forth in this Section 3.4). ARTICLE IV CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF PARTNERSHIP INTERESTS 4.1 Certificates Upon the request of any Person owning Units, APIs or other Partnership Securities, the Partnership shall issue to such Person one or more Certificates evidencing such Units, APIs or other Partnership Securities, as applicable. Certificates shall be executed on behalf of the Partnership by the Operating General Partner. Partners holding Certificates evidencing Subordinated GP Units may exchange such Certificates for Certificates evidencing Common GP Units and Partners holding Certificates evidencing Subordinated LP Units may exchange such Certificates for Certificates evidencing Common LP Units, in each case on or after the date on which such Subordinated Units are converted into Common Units pursuant to Section 5.8. 4.2 Mutilated, Destroyed, Lost or Stolen Certificates (a) If any mutilated Certificate is surrendered to the Operating General Partner, the Operating General Partner on behalf of the Partnership shall execute and deliver in exchange therefor, a new Certificate evidencing the same number and type of Partnership Securities as the Certificate so surrendered. (b) The Operating General Partner on behalf of the Partnership shall execute and deliver a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate: (i) makes proof by affidavit, in form and substance satisfactory to the Partnership, that a previously issued Certificate has been lost, destroyed or stolen; (ii) requests the issuance of a new Certificate before the Partnership has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim; (iii) if requested by the Partnership, delivers to the Partnership a bond, in form and substance satisfactory to the Partnership, with surety or sureties and with fixed or open penalty as the Partnership may reasonably direct, in its sole discretion, to indemnify the Partnership and the Partners against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and (iv) satisfies any other reasonable requirements imposed by the Partnership. If a Limited Partner or Assignee fails to notify the Partnership within a reasonable time after he has notice of the loss, destruction or theft of a Certificate, and a transfer of the Partnership Securities represented by the Certificate is registered before the Partnership or the General Partners receive such notification, the Limited Partner or Assignee shall be precluded from making any claim against the Partnership or the General Partners for such transfer or for a new Certificate. (c) As a condition to the issuance of any new Certificate under this Section 4.2, 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 reasonably connected therewith. 4.3 Record Holders The Partnership shall be entitled to recognize the Record Holder as the Partner or Assignee with respect to any Partnership Interest and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Partnership Interest on the part of any other Person, regardless of whether the Partnership shall have actual or other notice thereof, except as otherwise provided by law. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Partnership Securities, as between the Partnership on the one hand, and such other Persons on the other, such representative Person (a) shall be the Partner or Assignee (as the case may be) of record and beneficially, (b) must execute and deliver a Transfer Application and (c) shall be bound by this Agreement and shall have the rights and obligations of a Partner or Assignee (as the case may be) hereunder and as, and to the extent, provided for herein. 4.4 Transfer Generally (a) The term ''transfer,'' when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction by which a General Partner assigns its General Partner Interest to another Person or by which a holder of a Limited Partner Interest assigns such Limited Partner Interest to another Person who is or becomes a Limited Partner or an Assignee, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. (b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article IV. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article IV shall be null and void. (c) Nothing contained in this Agreement shall be construed to prevent a disposition by any interest holder of a General Partner of any or all of the issued and outstanding interests of such General Partner. 4.5 Registration and Transfer of Limited Partner Interests (a) The Partnership shall keep or cause to be kept on behalf of the Partnership a register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 4.5(b), the Partnership will provide for the registration and transfer of Limited Partner Interests. The Partnership shall not recognize transfers of Certificates evidencing Limited Partner Interests unless such transfers are effected in the manner described in this Section 4.5. Upon surrender of a Certificate for registration of transfer of any Limited Partner Interest evidenced by a Certificate, and subject to the provisions of Section 4.5(b), the appropriate officers of the Operating General Partner on behalf of the Partnership shall execute, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder's instructions, one or more new Certificates evidencing the same aggregate number and type of Limited Partner Interests as was evidenced by the Certificate so surrendered. (b) The Partnership shall not recognize any transfer of Limited Partner Interests until the Certificates evidencing such Limited Partner Interests are surrendered for registration of transfer and are accompanied by a Transfer Application duly executed by the transferee (or the transferee's attorney-in- fact duly authorized in writing). No charge shall be imposed by the Partnership for such transfer; provided, however, that as a condition to the issuance of any new Certificate under this Section 4.5, the Partnership may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto. (c) Limited Partner Interests may be transferred only in the manner described in this Section 4.5. The transfer of any Limited Partner Interests and the admission of any new Limited Partner shall not constitute an amendment to this Agreement. (d) Until admitted as a Substituted Limited Partner pursuant to Section 10.4, the Record Holder of a Limited Partner Interest shall be an Assignee in respect of such Limited Partner Interest. Limited Partners may include custodians, nominees or any other individual or entity in its own or any representative capacity. (e) A transferee of a Limited Partner Interest who has completed and delivered a Transfer Application shall be deemed to have (i) requested admission as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and to have executed this Agreement, (iii) represented and warranted that such transferee has the right, power and authority and, if an individual, the capacity to enter into this Agreement, (iv) granted the powers of attorney set forth in this Agreement and (v) given the consents and approvals and made the waivers contained in this Agreement. 4.6 Transfer of a General Partner's General Partner Interest (a) If the Operating General Partner transfers its MLP General Partner Interest to any Person in accordance with the provisions of the Genesis MLP Partnership Agreement, the Operating General Partner shall contemporaneously therewith transfer all, but not less than all, of its General Partner Interest to such Person, and the Partners hereby expressly consent to such transfer, and following any such transfer such Person may become a successor Operating General Partner pursuant to Section 10.4(a). Except as set forth in the immediately preceding sentence, the Operating General Partner may not transfer all or any part of its General Partner Interest. (b) The Managing General Partner may transfer all, but not less than all, of its Partnership Interest in connection with the merger, consolidation or other combination of the Managing General Partner with or into any other Person or the transfer by the Managing General Partner of all or substantially all of its assets to another Person, and following any such transfer such Person may become a successor Managing General Partner pursuant to Section 10.4(b). Except as set forth in the immediately preceding sentence, or in connection with any pledge of (or any related foreclosure on) the Managing General Partner's Partnership Interest solely for the purpose of securing, directly or indirectly, indebtedness of Genesis MLP, a Group Member or the Managing General Partner, the Managing General Partner may not transfer all or any part of its Partnership Interest. 4.7 Transfer of APIs A holder of APIs may transfer any or all of the APIs held by such holder. The Operating General Partner shall have the authority (but shall not be required) to adopt such reasonable restrictions on the transfer of APIs and requirements for registering the transfer of APIs as the Operating General Partner, in its sole discretion, shall determine are necessary or appropriate. 4.8 Restrictions on Transfers (a) Notwithstanding the other provisions of this Article IV, no transfer of any Partnership Interest shall be made if such transfer would (i) violate the then applicable federal or state securities laws or rules and regulations of the Commission, any state securities commission or any other governmental authorities with jurisdiction over such transfer, (ii) terminate the existence or qualification of the Partnership under the laws of the jurisdiction of its formation, or (iii) cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already so treated or taxed). (b) The Operating General Partner may impose restrictions on the transfer of Partnership Interests if a subsequent Opinion of Counsel determines that such restrictions are necessary to avoid a significant risk of the Partnership becoming taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes. The restrictions may be imposed by making such amendments to this Agreement as the Operating General Partner may determine to be necessary or appropriate to impose such restrictions. ARTICLE V CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS 5.1 Organizational Contributions In connection with the formation of the Partnership under the Delaware Act, the Operating General Partner made an initial Capital Contribution to the Partnership in the amount of $10.00, for an interest in the Partnership and has been admitted as the Operating General Partner of the Partnership, and the Organizational Limited Partner made an initial Capital Contribution to the Partnership in the amount of $990.00 for an interest in the Partnership and has been admitted as a Limited Partner of the Partnership. As of the Closing Date, the interest of the Organizational Limited Partner shall be redeemed as provided in the Conveyance Agreement; the initial Capital Contributions of each Partner shall thereupon be refunded; and the Organizational Limited Partner shall cease to be a Limited Partner of the Partnership. Ninety-nine percent of any interest or other profit that may have resulted from the investment or other use of such initial Capital Contributions shall be allocated and distributed to the Organizational Limited Partner, and the balance thereof shall be allocated and distributed to the Operating General Partner. 5.2 Contributions by General Partners (a) Contributions by the Managing General Partner. (i) On the Closing Date, the Managing General Partner shall, as set forth in the Conveyance Agreement, contribute cash to the Partnership in an amount equal to the Net MLP Proceeds in exchange for 7,653,061 Common GP Units. (ii) As further set forth in the Conveyance Agreement, if the Underwriters exercise the Over-Allotment Option, in whole or in part, the Managing General Partner shall contribute cash to the Partnership in an amount equal to the sum of (A) the Net Overallotment Proceeds plus (B) the LLC Overallotment Contribution in exchange for an additional number of Common GP Units equal to the number of MLP Units issued pursuant to Sections 5.2(b) and 5.3(b) of the Genesis MLP Partnership Agreement. The Partnership shall use the cash contributed by the Managing General Partner pursuant to this Section 5.2(a)(ii) to redeem from all of the holders of Subordinated Units, in accordance with their relative Percentage Interests, a number of Subordinated Units equal to the number of additional Common GP Units issued pursuant to this Section 5.2(a)(ii). (b) Contributions by the Operating General Partner. In the event that any Capital Contribution is made to the Partnership subsequent to the Closing Date (other than Capital Contributions made pursuant to Section 5.2(a)): (i) if such Capital Contribution will be used by the Partnership solely to redeem Partnership Securities pursuant to the terms of the Redemption and Registration Rights Agreement, the Operating General Partner shall not be required to make an additional Capital Contribution to the Partnership in conjunction therewith, or (ii) if such Capital Contribution will be used, in whole or in part, by the Partnership for any purpose other than the redemption of Partnership Securities pursuant to the terms of the Redemption and Registration Rights Agreement, the Operating General Partner shall make an additional Capital Contribution to the Partnership in the amount necessary to maintain an overall two percent interest in all Partnership distributions, taking into account for this purpose the Operating General Partner's General Partner Interest and any indirect interest in Partnership distributions held by the Operating General Partner as a consequence of its MLP General Partner Interest. (c) Except as set forth in Sections 5.2(a) and (b) and Article XII, the General Partners shall not be obligated to make any Capital Contribution to the Partnership. 5.3 Contributions by Initial Limited Partners (a) On the Closing Date, as set forth in the Conveyance Agreement, (i) the Howell Subsidiaries (other than Howell Crude Oil Company), shall, in the event the Howell Purchase Cash is less than the Howell Affiliate Cash, contribute to the Partnership an undivided interest in the assets described in Sections 2.4(a)(ii)-(v) of the Conveyance Agreement in exchange for the number of Subordinated LP Units specified in Section 2.4(b)(ii) of the Conveyance Agreement, (ii) Howell Crude Oil Company shall contribute to the Partnership the assets described in Section 2.5(a)(ii) of the Conveyance Agreement in exchange for (x) the Excess Howell Cash, (y) the Excess Howell Subordinated LP Units, and (z) 30,792 Subordinated GP Units, and (iii) Basis shall contribute to the Partnership the assets described in Section 2.5(a)(i) of the Conveyance Agreement in exchange for (x) the Excess Basis Cash, (y) 1,771,200 Subordinated LP Units, and (z) 36,147 Subordinated GP Units. (b) No Limited Partner Interests will be issuable as of or at the Closing Date other than the Subordinated LP Units issued pursuant to Section 5.3(a). 5.4 Interest and Withdrawal No interest shall be paid by the Partnership on Capital Contributions. No Partner or Assignee shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner or Assignee shall have priority over any other Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. Any such return shall be a compromise to which all Partners and Assignees agree within the meaning of Section 17-502(b) of the Delaware Act. 5.5 Capital Accounts (a) The Partnership shall maintain for each Partner (or a beneficial owner of Partnership Interests held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the Operating General Partner in its sole discretion) owning a Partnership Interest a separate Capital Account with respect to such Partnership Interest in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership with respect to such Partnership Interest pursuant to this Agreement and (ii) all items of Partnership income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 5.5(b) and allocated with respect to such Partnership Interest pursuant to Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made with respect to such Partnership Interest pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 5.5(b) and allocated with respect to such Partnership Interest pursuant to Section 6.1. (b) For purposes of computing the amount of any item of income, gain, loss or deduction which is to be allocated pursuant to Article VI and is to be reflected in the Partners' Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including, without limitation, any method of depreciation, cost recovery or amortization used for that purpose), provided, that: (i) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Partners pursuant to Section 6.1. (ii) Except as otherwise provided in Treasury Regulation Section 1.704- 1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704- 1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts, the amount of such adjustment in the Capital Accounts shall be treated as an item of gain or loss. (iii) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date. (iv) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 5.5(d) to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, however, that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the Operating General Partner may adopt. (v) If the Partnership's adjusted basis in a depreciable or cost recovery property is reduced for federal income tax purposes pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction shall, solely for purposes hereof, be deemed to be an additional depreciation or cost recovery deduction in the year such property is placed in service and shall be allocated among the Partners pursuant to Section 6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code shall, to the extent possible, be allocated in the same manner to the Partners to whom such deemed deduction was allocated. (c) A transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred; provided, however, that, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties and liabilities shall be deemed (i) to have been distributed in liquidation of the Partnership to the Partners (including any transferee of a Partnership Interest that is a party to the transfer causing such termination) pursuant to Section 12.4 (after adjusting the balance of the Capital Accounts of the Partners as provided in Section 5.5(d)(ii)) and recontributed by such Partners in reconstitution of the Partnership or (ii) in the event of a termination of the Partnership that occurs after the finalization of Proposed Treasury Regulation Section 1.704-1(b)(1)(iv), to have been contributed to a new partnership which will be deemed to be a continuation of, and successor to, the Partnership and the Partnership will be deemed to make liquidating distributions of the interests in this new partnership to the Partners (including any transferee of a Partnership Interest that is a party to the transfer causing such termination) pursuant to Section 12.4 (after adjusting the balance of the Capital Accounts of the Partners as provided in Section 5.5(d)(ii)). Any such deemed distribution and contribution, in the case of a characterization under clause (i) of the preceding sentence, or any such deemed contribution and distribution, in the case of a characterization under clause (ii) of the preceding sentence, shall be treated as an actual contribution and distribution for purposes of this Section 5.5. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution and contribution, or deemed contribution and distribution, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv) and this Section 5.5 and such Carrying Values shall then constitute the Agreed Values of such properties upon such deemed contribution to the new Partnership. In either case, the Capital Accounts of the new Partnership that results under the applicable characterization shall be maintained in accordance with the principles of this Section 5.5. (d) (i) In accordance with Treasury Regulation Section 1.704- 1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or Contributed Property, the conversion of the Operating General Partner's Combined Interest to MLP Common Units pursuant to Section 11.3(b) of the Genesis MLP Partnership Agreement, or the conversion of the Operating General Partner's right to Incentive Compensation Payments pursuant to Section 7.13, the Capital Account of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance or conversion shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to the Partners at such time pursuant to Section 6.1(c). In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to the issuance of additional Units shall be determined by the Operating General Partner using such reasonable method of valuation as it may adopt; provided, however, that the Operating General Partner, in arriving at such valuation, must take fully into account the fair market value of the Partnership Interests of all Partners at such time. The Operating General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its discretion to be reasonable) to arrive at a fair market value for individual properties. (ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), the Capital Accounts of all Partners and the Carrying Value of all Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 6.1(c). In determining such Unrealized Gain or Unrealized Loss the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to a distribution shall (A) in the case of an actual distribution which is not made pursuant to Section 12.4 or in the case of a deemed distribution occurring as a result of a termination of the Partnership pursuant to Section 708 of the Code, whether before or after the finalization of Proposed Treasury Regulation Section 1.704-1(b)(l)(iv), be determined and allocated in the same manner as that provided in Section 5.5(d)(i) or (B) in the case of a liquidating distribution pursuant to Section 12.4, be determined and allocated by the Liquidator using such reasonable method of valuation as it may adopt. 5.6 Issuances of Additional Partnership Securities (a) Subject to Sections 5.7 and 7.3(d), the Partnership may issue additional Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities for any Partnership purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as shall be established by the Operating General Partner in its sole discretion, all without the approval of any Limited Partners. (b) Each additional Partnership Security authorized to be issued by the Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Securities), as shall be fixed by the Operating General Partner in the exercise of its sole discretion, including (i) the right to share Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may redeem such Partnership Security; (v) whether such Partnership Security is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which such Partnership Security will be issued, evidenced by Certificates and assigned or transferred; and (vii) the right, if any, of such Partnership Security to vote on Partnership matters, including matters relating to the relative rights, preferences and privileges of such Partnership Security. (c) The Operating General Partner is hereby authorized and directed to take all actions that it deems necessary or appropriate in connection with (i) each issuance of Partnership Securities pursuant to this Section 5.6, (ii) the admission of Additional Limited Partners and (iii) all additional issuances of Partnership Securities. The Operating General Partner is further authorized and directed to specify the relative rights, powers and duties of the holders of Partnership Securities being so issued. The Operating General Partner shall do all things necessary to comply with the Delaware Act and is authorized and directed to do all things it deems to be necessary or advisable in connection with any future issuance of Partnership Securities pursuant to the terms of this Agreement, including compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency. 5.7 Limitations on Issuance of Additional Partnership Securities The issuance of Partnership Securities pursuant to Section 5.6 shall be subject to the following restrictions and limitations: (a) During the Subordination Period, the Partnership shall not issue an aggregate of more than 3,750,000 additional Parity Units without the prior approval of the holders of a Majority Interest; provided, however, that the number of additional Parity Units that may be issued without the prior approval of the holders of a Majority Interest shall be reduced by the number of MLP Parity Units issued by Genesis MLP that count against the limitation on issuance of MLP Parity Units in Section 5.7(a) of the Genesis MLP Partnership Agreement. In applying this limitation, there shall be excluded Common GP Units issued (i) to Genesis MLP, (ii) in accordance with Section 5.7(b), (iii) pursuant to the employee benefit plans of a General Partner, the Partnership or any other Group Member and (iv) in the event of a combination or subdivision of Common Units. (b) The Partnership may also issue an unlimited number of Parity Units, prior to the end of the Subordination Period and without the prior approval of the Partners if such issuance occurs (i) in connection with an Acquisition or a Capital Improvement or (ii) within 365 days of, and the net proceeds from such issuance are used to repay debt incurred in connection with, an Acquisition or a Capital Improvement, in each case where such Acquisition or Capital Improvement involves assets that, if acquired by the Partnership as of the date that is one year prior to the first day of the Quarter in which such Acquisition is to be consummated or such Capital Improvement is to be completed, would have resulted, on a pro forma basis, in an increase in: (A) the amount of Adjusted Operating Surplus generated by the Partnership on a per-Unit basis (for all Outstanding OLP Units) with respect to each of the four most recently completed Quarters (on a pro forma basis as described below) as compared to (B) the actual amount of Adjusted Operating Surplus generated by the Partnership on a per-Unit basis (for all Outstanding OLP Units) (excluding Adjusted Operating Surplus attributable to the Acquisition or Capital Improvement) with respect to each of such four most recently completed Quarters. If the issuance of Partnership Securities with respect to an Acquisition or Capital Improvement occurs within the first four full Quarters after the Closing Date, then Adjusted Operating Surplus as used in clauses (A) (subject to the succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if any, that commenced after the Closing Date for which actual results of operations are available, based on the actual Adjusted Operating Surplus of Genesis OLP generated with respect to such Quarter, and (ii) for each other Quarter, on a pro forma basis not inconsistent with the procedure, as applicable, set forth in Appendix E to the Registration Statement. Furthermore, the amount in clause (A) shall be determined on a pro forma basis assuming that (1) all of the Parity Units or Partnership Securities to be issued in connection with or within 365 days of such Acquisition or Capital Improvement had been issued and outstanding, (2) all indebtedness for borrowed money to be incurred or assumed in connection with such Acquisition or Capital Improvement (other than any such indebtedness that is to be repaid with the proceeds of such issuance) had been incurred or assumed, in each case as of the commencement of such four-Quarter period, (3) the personnel expenses that would have been incurred by the Partnership in the operation of the acquired assets are the personnel expenses for employees to be retained by the Partnership in the operation of the acquired assets, and (4) the non-personnel costs and expenses are computed on the same basis as those incurred by the Partnership in the operation of the Partnership's business at similarly situated Partnership facilities. (c) During the Subordination Period, the Partnership shall not issue additional Partnership Securities having rights to distributions or in liquidation ranking prior or senior to the Common Units, without the prior approval of the holders of a Majority Interest. 5.8 Conversion of Subordinated Units (a) A total of 16,735 of the Outstanding Subordinated GP Units will convert into Common GP Units on a one-for-one basis and a total of 820,000 of the Outstanding Subordinated LP Units will convert into Common LP Units on a one-for-one basis on the first day after the Record Date for distributions in respect of any Quarter ending on or after December 31, 1999, in respect of which: (i) distributions under Section 6.4 in respect of all Outstanding Common Units and Subordinated Units with respect to each of the three consecutive, non- overlapping four-Quarter periods immediately preceding such date equals or exceeds the sum of the Minimum Quarterly Distribution on all of the Outstanding Common Units and Subordinated Units during such periods; and (ii) the Adjusted Operating Surplus generated during each of the two consecutive, non-overlapping four-Quarter periods immediately preceding such date equals or exceeds the sum of the Minimum Quarterly Distribution on all of the Outstanding Common Units and Subordinated Units, plus the related distribution on the General Partner Interest in the Partnership, during such periods; and (iii) the Cumulative Common Unit Arrearage on all of the Common Units is zero; provided, however, that notwithstanding anything else herein contained the total number of Outstanding Subordinated GP Units that may be converted pursuant to this Section 5.8(a) shall be reduced by a number equal to one quarter of the Subordinated GP Units, if any, redeemed by the Partnership pursuant to Section 5.2(a)(ii); and provided, further, that notwithstanding anything else herein contained the total number of Outstanding Subordinated LP Units that may be converted pursuant to this Section 5.8(a) shall be reduced by a number equal to one quarter of the Subordinated LP Units, if any, redeemed by the Partnership pursuant to Section 5.2(a)(ii). (b) An additional 16,735 of the Outstanding Subordinated GP Units will convert into Common GP Units on a one-for-one basis and an additional 820,000 of the Outstanding Subordinated LP Units will convert into Common LP Units on a one-for-one basis on the first day after the Record Date for distributions in respect of any Quarter ending on or after December 31, 2000, in respect of which: (i) distributions under Section 6.4 in respect of all Outstanding Common Units and Subordinated Units with respect to each of the three consecutive, non- overlapping four-Quarter periods immediately preceding such date equals or exceeds the sum of the Minimum Quarterly Distribution on all of the Outstanding Common Units and Subordinated Units during such periods; and (ii) the Adjusted Operating Surplus generated during each of the two consecutive, non-overlapping four-Quarter periods immediately preceding such date equals or exceeds the sum of the Minimum Quarterly Distribution on all of the Outstanding Common Units and Subordinated Units, during such periods; and (iii) the Cumulative Common Unit Arrearage on all of the Common Units is zero; provided, however, that the conversion of Subordinated Units pursuant to this Section 5.8(b) may not occur until at least one year following the conversion of Subordinated Units pursuant to Section 5.8(a); and provided, further, that notwithstanding anything else herein contained the total number of Outstanding Subordinated GP Units that may be converted pursuant to this Section 5.8(b) shall be reduced by a number equal to one quarter of the Subordinated Units, if any, redeemed by the Partnership pursuant to Section 5.2(a)(ii); and provided further that notwithstanding anything else herein contained the total number of Outstanding Subordinated LP Units that may be converted pursuant to this Section 5.8(b) shall be reduced by a number equal to one quarter of the Subordinated Units, if any, redeemed by the Partnership pursuant to Section 5.2(a)(ii). (c) (i) In the event that Outstanding Subordinated GP Units shall convert into Common Units pursuant to Section 5.8(a) or 5.8(b) at a time when there shall be more than one holder of Subordinated GP Units, then, unless all of the holders of Subordinated GP Units shall agree to a different allocation, the Subordinated GP Units that are to be converted into Common GP Units shall be allocated among all of the holders of Subordinated GP Units in accordance with their relative Percentage Interests. (ii) In the event that Outstanding Subordinated LP Units shall convert into Common Units pursuant to Section 5.8(a) or 5.8(b) at a time when there shall be more than one holder of Subordinated LP Units, then, unless all of the holders of Subordinated LP Units shall agree to a different allocation, the Subordinated LP Units that are to be converted into Common LP Units shall be allocated among all of the holders of Subordinated LP Units in accordance with their relative Percentage Interests. (d) Any Subordinated Units that are not converted into Common Units pursuant to Sections 5.8(a) and 5.8(b) shall convert into Common Units on a one- for-one basis on the first day following the Record Date for distributions in respect of the final Quarter of the Subordination Period. 5.9 Limited Preemptive Right Except as provided in this Section 5.9 and in Section 5.2, no Person shall have any preemptive, preferential or other similar right with respect to the issuance of any Partnership Security, whether unissued, held in the treasury or hereafter created. The Operating General Partner shall have the right, which it may from time to time assign in whole or in part to any of its Affiliates, to purchase Partnership Securities from the Partnership whenever, and on the same terms that, the Partnership issues Partnership Securities to Persons other than the Operating General Partner and its Affiliates, to the extent necessary to maintain the Percentage Interests of the Operating General Partner and its Affiliates equal to that which existed immediately prior to the issuance of such Partnership Securities. 5.10 Splits and Combination (a) The Partnership may make a Pro Rata distribution of Partnership Securities to all Record Holders or may effect a subdivision or combination of Partnership Securities so long as, after any such event, each Partner shall have the same Percentage Interest in the Partnership as before such event, and any amounts calculated on a per Unit basis (including any Common Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of Units (including the number of Subordinated Units that may convert prior to the end of the Subordination Period and the number of additional Parity Units that may be issued pursuant to Section 5.7 without a Unitholder vote) are proportionately adjusted retroactive to the beginning of the Partnership. (b) The Partnership may make distributions of Partnership Securities and effect subdivisions and combinations of Partnership Securities to reflect any such distribution, subdivision or combination of MLP Partnership Securities. (c) Whenever such a distribution, subdivision or combination of Partnership Securities is declared, the Operating General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The Operating General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Partnership Securities to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The Operating General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation. (d) Promptly following any such distribution, subdivision or combination, the Partnership may issue Certificates to the Record Holders of Partnership Securities as of the applicable Record Date representing the new number of Partnership Securities held by such Record Holders, or the Operating General Partner may adopt such other procedures as it may deem appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Securities Outstanding, the Partnership shall require, as a condition to the delivery to a Record Holder of such new Certificate, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date. 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests All Limited Partner Interests issued pursuant to, and in accordance with the requirements of, this Article V shall be fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Section 17-607 of the Delaware Act. ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS 6.1 Allocations for Capital Account Purposes For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be allocated among the Partners in each taxable year (or portion thereof) as provided hereinbelow. (a) Net Income. After giving effect to the special allocations set forth in Section 6.1(d), Net Income for each taxable year and all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable year shall be allocated as follows: (i) First, 100% to the Operating General Partner until the aggregate Net Income allocated to the Operating General Partner pursuant to this Section 6.1(a)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the Operating General Partner pursuant to Section 6.1(b)(iv) for all previous taxable years; (ii) Second, 100% to the holders of APIs, in the proportion that the Capital Account maintained for each holder with respect to such APIs bears to the aggregate Capital Accounts attributable to all APIs then Outstanding, until the aggregate Net Income allocated to such holders pursuant to this Section 6.1(a)(ii) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to such holders pursuant to Section 6.1(b)(iii) for all previous taxable years; (iii) Third, 100% to the Partners in accordance with their respective Percentage Interests, until the aggregate Net Income allocated to the Partners pursuant to this Section 6.1(a)(iii) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the Partners pursuant to Section 6.1(b)(ii) for all previous taxable years; and (iv) Fourth, the balance, if any, 100% to the Partners in accordance with their respective Percentage Interests. (b) Net Losses. After giving effect to the special allocations set forth in Section 6.1(d), Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated as follows: (i) First, 100% to the Partners, in accordance with their respective Percentage Interests, until the aggregate Net Losses allocated pursuant to this Section 6.1(b)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Income allocated to the Partners pursuant to Section 6.1(a)(iv) for all previous taxable years; provided that Net Losses shall not be allocated pursuant to this Section 6.1(b)(i) to the extent that such allocation would cause any Partner other than the Operating General Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); (ii) Second, 100% to the Partners in accordance with their respective Percentage Interests; provided that Net Losses shall not be allocated pursuant to this Section 6.1(b)(ii) to the extent that such allocation would cause any Partner other than the Operating General Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); (iii) Third, 100% to holders of APIs, in the proportion that the Capital Account maintained for each holder with respect to such APIs bears to the aggregate Capital Accounts attributable to all APIs then Outstanding; provided that Net Losses shall not be allocated pursuant to this Section 6.1(b)(iii) to the extent that such allocation would cause any holder of APIs to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); and (iv) Fourth, the balance, if any, 100% to the Operating General Partner. (c) Net Termination Gains and Losses. After giving effect to the special allocations set forth in Section 6.1(d), all items of income, gain, loss and deduction taken into account in computing Net Termination Gain or Net Termination Loss for such taxable period shall be allocated in the same manner as such Net Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this Section 6.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 6.1 and after all distributions of Available Cash provided under Sections 6.4 and 6.5 have been made; provided, however, that solely for purposes of this Section 6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant to Section 12.4. (i) If a Net Termination Gain is recognized (or deemed recognized pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated among the General Partner and the Limited Partners in the following manner (and the Capital Accounts of the Partners shall be increased by the amount so allocated in each of the following subclauses, in the order listed, before an allocation is made pursuant to the next succeeding subclause): (A) First, to each Partner having a deficit balance in its Capital Account, in the proportion that such deficit bears to the total deficit balances in the Capital Accounts of all Partners, until each Partner has been allocated Net Termination Gain equal to any such deficit balance in its Capital Account; (B) Second, 100% to all Partners holding Common Units, in accordance with their relative Percentage Interests, until the Capital Account in respect of each Common Unit held by the Managing General Partner is equal to the sum of (1) its Unrecovered Capital, plus (2) the Minimum Quarterly Distribution for the Quarter during which the Liquidation Date occurs (the ''Unpaid MQD''), plus (3) any then existing Cumulative Common Unit Arrearages; (C) Third, 100% to the holders of APIs, in the proportion that the Capital Account maintained for each holder with respect to such APIs bears to the aggregate Capital Accounts attributable to all APIs then Outstanding, until the Capital Account in respect of each API then Outstanding is equal to its Unrecovered Capital; (D) Fourth, 100% to all Partners holding Subordinated Units, in accordance with their relative Percentage Interests, until the Capital Account in respect of each Subordinated LP Unit then Outstanding is equal to the sum of (1) its Unrecovered Capital, plus (2) the Unpaid MQD; and (E) Fifth, the balance, if any, 100% to the Partners in accordance with their respective Percentage Interests. (ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated to the Partners in the following manner: (A) First, 100% to the Partners holding Subordinated Units in accordance with their relative Percentage Interests until the Capital Account in respect of each Subordinated LP Unit then Outstanding has been reduced to zero; (B) Second, 100% to the holders of APIs, in the proportion that the Capital Account maintained for each holder with respect to such APIs bears to the aggregate Capital Accounts attributable to all APIs then Outstanding, to the extent of the positive balances in the Capital Accounts maintained with respect to such APIs; (C) Third, 100% to the Partners holding Common Units in accordance with their relative Percentage Interests until the Capital Account in respect of each Common Unit held by the Managing General Partner has been reduced to zero; and (D) Fourth, the balance, if any, 100% to the Operating General Partner. (d) Special Allocations. Notwithstanding any other provision of this Section 6.1, the following special allocations shall be made for such taxable period: (i) Partnership Minimum Gain Chargeback. Notwithstanding any other provision of this Section 6.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes of this Section 6.1(d), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.1(d) with respect to such taxable period (other than an allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This Section 6.1(d)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith. (ii) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding the other provisions of this Section 6.1 (other than Section 6.1(d)(i)), except as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704- 2(j)(2)(ii), or any successor provisions. For purposes of this Section 6.1(d), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.1(d), other than Section 6.1(d)(i) and other than an allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii), with respect to such taxable period. This Section 6.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith. (iii) Priority Allocations. If the amount of cash or the Net Agreed Value of any property distributed (except cash or property distributed pursuant to Section 12.4) to any Partner with respect to its Common Units for a taxable year is greater (on a per Unit basis) than the amount of cash or the Net Agreed Value of property distributed to the Partners holding Subordinated Units with respect to their Units (on a per Unit basis), then each Partner receiving such greater cash or property distribution shall be allocated gross income in an amount equal to the product of (aa) the amount by which the distribution (on a per Unit basis) to such Partner exceeds the distribution (on a per Unit basis) to the Partners receiving the smallest distribution and (bb) the number of Units owned by the Partner receiving the greater distribution. (iv) Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704- 1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations promulgated under Section 704(b) of the Code, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible unless such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i) or 6.1(d)(ii). (v) Gross Income Allocations. In the event any Partner has a deficit balance in its Capital Account at the end of any Partnership taxable period in excess of the sum of (A) the amount such Partner is required to restore pursuant to the provisions of this Agreement and (B) the amount such Partner is deemed obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 6.1(d)(v) shall be made only if and to the extent that such Partner would have a deficit balance in its Capital Account as adjusted after all other allocations provided for in this Section 6.1 have been tentatively made as if this Section 6.1(d)(v) were not in this Agreement. (vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Partners in accordance with their respective Percentage Interests. If the Operating General Partner determines in its good faith discretion that the Partnership's Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the Operating General Partner is authorized, upon notice to the other Partners, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements. (vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss. (viii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests. (ix) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(c) of the Code is required, pursuant to Treasury Regulation Section 1.704- 1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations. (x) Economic Uniformity. At the election of the Operating General Partner with respect to any taxable period ending upon, or after, the termination of the Subordination Period, all or a portion of the remaining items of Partnership gross income or gain for such taxable period, after taking into account allocations pursuant to Section 6.1(d)(iii), shall be allocated 100% to each Partner holding Subordinated Units that are Outstanding as of the termination of the Subordination Period (''Final Subordinated Units'') in the proportion of the number of Final Subordinated Units held by such Partner to the total number of Final Subordinated Units then Outstanding, until each such Partner has been allocated an amount of gross income or gain which increases the Capital Account maintained with respect to such Final Subordinated Units to an amount equal to the product of (A) the number of Final Subordinated Units held by such Partner and (B) the Per Unit Capital Amount. The purpose of this allocation is to establish uniformity between the Capital Accounts underlying Final Subordinated Units and the Capital Accounts underlying Common Units immediately prior to the conversion of such Final Subordinated Units into Common Units. (xi) Curative Allocation. (A) Notwithstanding any other provision of this Section 6.1, other than the Required Allocations, the Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss and deduction allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and the related Curative Allocation not otherwise been provided in this Section 6.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partner Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section 6.1(d)(xi)(A) shall only be made with respect to Required Allocations to the extent the Operating General Partner reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Partners. Further, allocations pursuant to this Section 6.1(d)(xi)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof to the extent the Operating General Partner reasonably determines that such allocations are likely to be offset by subsequent Required Allocations. (B) The Operating General Partner shall have reasonable discretion, with respect to each taxable period, to (1) apply the provisions of Section 6.1(d)(xi)(A) in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all allocations pursuant to Section 6.1(d)(xi)(A) among the Partners in a manner that is likely to minimize such economic distortions. 6.2 Allocations for Tax Purposes (a) Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of ''book'' income, gain, loss or deduction is allocated pursuant to Section 6.1. (b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, depreciation, amortization and cost recovery deductions shall be allocated for federal income tax purposes among the Partners as follows: (i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted basis at the time of contribution; and (B) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of ''book'' gain or loss is allocated pursuant to Section 6.1. (ii) (A) In the case of an Adjusted Property, such items shall (1) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of ''book'' gain or loss is allocated pursuant to Section 6.1. (iii) The Operating General Partner shall apply the principles of Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities. (c) For the proper administration of the Partnership and for the preservation of uniformity of Partnership Securities (or any class or classes thereof), the Operating General Partner shall have sole discretion to (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including, without limitation, gross income) or deductions; and (iii) amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury regulations under Section 704(b) or 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of Partnership Securities (or any class or classes thereof). The Operating General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section 6.2(c) only if such conventions, allocations or amendments would not have a material adverse effect on the Partners, the holders of any class or classes of Partnership Securities issued and Outstanding or the Partnership, and if such allocations are consistent with the principles of Section 704 of the Code. (d) The Operating General Partner in its discretion may determine to depreciate or amortize the portion of an adjustment under Section 743(b) of the Code attributable to unrealized appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a predetermined rate derived from the depreciation or amortization method and useful life applied to the Partnership's common basis of such property, despite any inconsistency of such approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of the Code. If the Operating General Partner determines that such reporting position cannot reasonably be taken, the Operating General Partner may adopt depreciation and amortization conventions under which all purchasers acquiring Partnership Securities in the same month would receive depreciation and amortization deductions, based upon the same applicable rate as if they had purchased a direct interest in the Partnership's property. If the Operating General Partner chooses not to utilize such aggregate method, the Operating General Partner may use any other reasonable depreciation and amortization conventions to preserve the uniformity of the intrinsic tax characteristics of any Partnership Securities that would not have a material adverse effect on the Limited Partners, the Managing General Partner or the Record Holders of any class or classes of Partnership Securities. (e) Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 6.2, be characterized as Recapture Income in the same proportions and to the same extent as such Partners (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. (f) All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, however, that such allocations, once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted or required by Sections 734 and 743 of the Code. (g) Each item of Partnership income, gain, loss and deduction attributable to a transferred Partnership Interest, shall for federal income tax purposes, be determined on an annual basis and prorated on a monthly basis and shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of each month; provided, however, that (i) if the Over- allotment Option is not exercised, such items for the period beginning on the Closing Date and ending on the last day of the month in which the Closing Date occurs shall be allocated to Partners as of the opening of the New York Stock Exchange on the first Business Day of the next succeeding month or (ii) if the Over-allotment Option is exercised, such items for the period beginning on the Closing Date and ending on the last day of the month in which the Option Closing Date occurs shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the next succeeding month; and provided, further, that gain or loss on a sale or other disposition of any assets of the Partnership other than in the ordinary course of business shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the month in which such gain or loss is recognized for federal income tax purposes. The Operating General Partner may revise, alter or otherwise modify such methods of allocation as it determines necessary, to the extent permitted or required by Section 706 of the Code and the regulations or rulings promulgated thereunder. (h) Allocations that would otherwise be made to a Partner under the provisions of this Article VI shall instead be made to the beneficial owner of Partnership Securities held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the Operating General Partner in its sole discretion. 6.3 Requirement and Characterization of Distributions; Distributions to Record Holders (a) Within 45 days following the end of each Quarter commencing with the Quarter ending on March 31, 1997, an amount equal to 100% of Available Cash with respect to such Quarter shall, subject to Section 17-607 of the Delaware Act, be distributed in accordance with this Article VI by the Partnership to the Partners as of the Record Date selected by the Operating General Partner in its reasonable discretion. All amounts of Available Cash distributed by the Partnership on any date from any source shall be deemed to be Operating Surplus until the sum of all amounts of Available Cash theretofore distributed by the Partnership to the Partners pursuant to Section 6.4 equals the Operating Surplus from the Closing Date through the close of the immediately preceding Quarter. Any remaining amounts of Available Cash distributed by the Partnership on such date shall, except as otherwise provided in Section 6.5, be deemed to be ''Capital Surplus.'' All distributions required to be made under this Agreement shall be made subject to Section 17-607 of the Delaware Act. (b) In the event of the dissolution and liquidation of the Partnership, all receipts received during or after the Quarter in which the Liquidation Date occurs, other than from borrowings described in (a)(ii) of the definition of Available Cash, shall be applied and distributed solely in accordance with, and subject to the terms and conditions of, Section 12.4. (c) The Operating General Partner shall have the discretion to treat taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners, as a distribution of Available Cash to such Partners. (d) Each distribution in respect of a Partnership Interest shall be paid by the Partnership, directly or through any agent, only to the Record Holder of such Partnership Interest as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Partnership's liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise. 6.4 Distributions of Available Cash from Operating Surplus (a) During Subordination Period. Available Cash with respect to any Quarter within the Subordination Period that is deemed to be Operating Surplus pursuant to the provisions of Section 6.3 or 6.5 shall, subject to Section 17-607 of the Delaware Act, be distributed as follows, except as otherwise required by Section 5.6(b) (in respect of additional Partnership Securities issued pursuant thereto) or permitted by Section 6.9: (i) First, 100% to the Partners holding Common Units, in proportion to their relative Percentage Interests, until there has been distributed in respect of each Common Unit then Outstanding an amount equal to the Minimum Quarterly Distribution for such Quarter; (ii) Second, 100% to the Partners holding Common Units, in proportion to their relative Percentage Interests, until there has been distributed in respect of each Common Unit then Outstanding an amount equal to the Cumulative Common Unit Arrearage existing with respect to such Quarter; (iii) Third, 100% to the Partners holding Subordinated Units, in proportion to their relative Percentage Interests, until there has been distributed in respect of each Subordinated Unit then Outstanding an amount equal to the Minimum Quarterly Distribution for such Quarter; (iv) Fourth, 100% to Salomon and its Affiliates, Pro Rata, to redeem Outstanding APIs held by them at a price of $100 per API, until Salomon and its Affiliates hold 54% of the total number of Outstanding APIs; (v) Fifth, 100% to the holders of APIs, Pro Rata, to redeem Outstanding APIs at a price of $100 per API, until all Outstanding APIs have been redeemed; and (vi) Thereafter, 100% to all Partners in accordance with their respective Percentage Interests; provided, however, if the Minimum Quarterly Distribution, the First Target Distribution, the Second Target Distribution and the Third Target Distribution have been reduced to zero pursuant to the second sentence of Section 6.6(a), the distribution of Available Cash that is deemed to be Operating Surplus with respect to any Quarter will be made solely in accordance with Sections 6.4(a)(ii), (iv), (v) and (vi). (b) After Subordination Period. Available Cash with respect to any Quarter after the Subordination Period that is deemed to be Operating Surplus pursuant to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of the Delaware Act, shall be distributed as follows, except as otherwise required by Section 5.6(b) (in respect of additional Partnership Securities issued pursuant thereto) or permitted by Section 6.9: (i) First, 100% to all Partners, in accordance with their relative Percentage Interests, until there has been distributed in respect of each Unit then Outstanding an amount equal to the Minimum Quarterly Distribution for such Quarter; (ii) Second, 100% to Salomon and its Affiliates, Pro Rata, to redeem Outstanding APIs held by them at a price of $100 per API, until Salomon and its Affiliates hold 54% of the total number of Outstanding APIs; (iii) Third, 100% to the holders of APIs, Pro Rata, to redeem Outstanding APIs at a price of $100 per API, until all Outstanding APIs have been redeemed; and (iv) Thereafter, 100% to all Partners, in accordance with their respective Percentage Interests; provided, however, if the Minimum Quarterly Distribution, the First Target Distribution, the Second Target Distribution and the Third Target Distribution have been reduced to zero pursuant to the second sentence of Section 6.6(a), the distribution of Available Cash that is deemed to be Operating Surplus with respect to any Quarter will be made solely in accordance with Sections 6.4(b)(ii), (iii) and (iv). 6.5 Distributions of Available Cash from Capital Surplus Available Cash with respect to any Quarter that is deemed to be Capital Surplus pursuant to the provisions of Section 6.3 shall, subject to Section 17- 607 of the Delaware Act, be distributed as follows, unless the provisions of Section 6.3 require otherwise: (i) First, 100% to all Partners, in accordance with their respective Percentage Interests, until a hypothetical holder of a Common Unit acquired on the Closing Date has received with respect to such Common Unit, during the period since the Closing Date through such date, distributions of Available Cash that are deemed to be Capital Surplus in an aggregate amount equal to the Initial Unit Price; (ii) Second, 100% to all Partners holding Common Units, in proportion to their relative Percentage Interests, until there has been distributed in respect of each Common Unit then Outstanding an amount equal to the Cumulative Common Unit Arrearage existing with respect to such Quarter; and (iii) Thereafter, all Available Cash that is deemed to be Capital Surplus pursuant to the provisions of Section 6.3 shall be distributed as if it were Operating Surplus and shall be distributed in accordance with Section 6.4. 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels (a) The Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution, Third Target Distribution, Common Unit Arrearages and Cumulative Common Unit Arrearages shall be proportionately adjusted in the event of any distribution, combination or subdivision (whether effected by a distribution payable in Units or otherwise) of Units or other Partnership Securities in accordance with Section 5.10. In the event of a distribution of Available Cash that is deemed to be from Capital Surplus, the then applicable Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution and Third Target Distribution shall be adjusted proportionately downward to equal the product obtained by multiplying the otherwise applicable Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution and Third Target Distribution, as the case may be, by a fraction of which the numerator is the Unrecovered Capital of the Common Units immediately after giving effect to such distribution and of which the denominator is the Unrecovered Capital of the Common Units immediately prior to giving effect to such distribution. (b) The Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution and Third Target Distribution shall also be subject to adjustment pursuant to Section 6.8. 6.7 Special Provisions Relating to the Holders of APIs Notwithstanding anything to the contrary set forth in this Agreement, the holders of APIs (a) shall (i) possess the rights and obligations provided in this Agreement with respect to a Limited Partner pursuant to Articles III and VII and (ii) have a Capital Account as a Partner pursuant to Section 5.5 and all other provisions related thereto and (b) shall not (i) be entitled to vote on any matters requiring the approval or vote of the holders of Outstanding Units, (ii) be entitled to any distributions other than to such holders as provided by Section 6.4 and 12.4 or (iii) be allocated items of income, gain, loss or deduction other than as specified in this Article VI. 6.8 Entity-Level Taxation If legislation is enacted or the interpretation of existing language is modified by the relevant governmental authority which causes the Partnership to be treated as an association taxable as a corporation or otherwise subjects the Partnership to entity-level taxation for federal income tax purposes, the then applicable Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution and Third Target Distribution shall be adjusted to equal the product obtained by multiplying (a) the amount thereof by (b) one minus the sum of (i) the highest marginal federal corporate (or other entity, as applicable) income tax rate of the Partnership for the taxable year of the Partnership in which such Quarter occurs (expressed as a percentage) plus (ii) the effective overall state and local income tax rate (expressed as a percentage) applicable to the Partnership for the calendar year next preceding the calendar 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), but only to the extent of the increase in such rates resulting from such legislation or interpretation. Such effective overall state and local income tax rate shall be determined for the taxable year next preceding the first taxable year during which the Partnership is taxable for federal income tax purposes as an association taxable as a corporation or is otherwise subject to entity-level taxation by determining such rate as if the Partnership had been subject to such state and local taxes during such preceding taxable year. 6.9 Special Distribution to the Initial Limited Partners and the Operating General Partner At any time following the first anniversary of the Closing Date, the Operating General Partner may, but shall not be required, to cause the Partnership to distribute up to $5 million to the Initial Limited Partners and the Operating General Partner in the ratio of their respective Percentage Interests; provided, however, that no distribution shall be made by the Partnership pursuant to this Section 6.9 prior to the second anniversary of the Closing Date unless the Operating General Partner reasonably believes that the Partnership will distribute the Minimum Quarterly Distribution on all Common Units in each of the next four Quarters. 6.10 Characterization of Distributions as Advances or Drawings Any distribution made to a Partner pursuant to Section 6.4, Section 6.5 or Section 12.4 of this Agreement shall be treated as an advance or drawing against such Partner's share of Partnership income under Treasury Regulation Section 1.731-1(a)(1)(ii). Any other distribution made to a Partner pursuant to the terms of this Agreement shall not be treated as an advance or drawing against such Partner's share of Partnership income under Treasury Regulation Section 1.731-1(a)(1)(ii). ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS 7.1 Management (a) The General Partners shall conduct, direct and manage all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partners, and no Limited Partner shall have any management power over the business and affairs of the Partnership. Subject to the provisions of Section 7.3(d), the day-to-day activities of the Partnership shall be conducted, directed and managed on the Partnership's behalf by the Operating General Partner. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partners under any other provision of this Agreement, the General Partners, subject to Section 7.3, shall have full power and authority to do all things and on such terms as they, in their sole discretion, may deem necessary or appropriate to conduct the business of the Partnership, to exercise all powers set forth in Section 2.5 and to effectuate the purposes set forth in Section 2.4, including the following: (i) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, including entering into the Master Credit Support Agreement, the issuance of evidences of indebtedness, including indebtedness that is convertible into Partnership Securities, and the incurring of any other obligations; (ii) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership; (iii) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership or the merger or other combination of the Partnership with or into another Person (the matters described in this clause (iii) being subject, however, to any prior approval that may be required by Section 7.3); (iv) the use of the assets of the Partnership (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the Partnership Group, the lending of funds to other Persons, the repayment of obligations of the Partnership and the making of capital contributions to any member of the Partnership Group; (v) the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Partnership under contractual arrangements to all or particular assets of the Partnership, with the other party to the contract to have no recourse against a General Partner or its assets other than its interest in the Partnership, even if same results in the terms of the transaction being less favorable to the Partnership than would otherwise be the case); (vi) the distribution of Partnership cash; (vii) the selection and dismissal of employees (including employees having titles such as ''president,'' ''vice president,'' ''secretary'' and ''treasurer'') and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; (viii) the maintenance of such insurance for the benefit of the Partnership Group and the Partners as it deems necessary or appropriate; (ix) the formation of, or acquisition of an interest in, and the contribution of property and the making of loans to, any further limited or general partnerships, joint ventures, corporations or other relationships; (x) the control of any matters affecting the rights and obligations of the Partnership, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation and the incurring of legal expense and the settlement of claims and litigation; (xi) the indemnification of any Person against liabilities and contingencies to the extent permitted by law; and (xii) the purchase, sale or other acquisition or disposition of Partnership Securities, or, unless restricted or prohibited by Section 5.7, the issuance of additional Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities. (b) Notwithstanding any other provision of this Agreement, the Delaware Act or any applicable law, rule or regulation, each of the Partners and each other Person who may acquire an interest in Partnership Securities hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of this Agreement, the other agreements and documents filed as exhibits to the Registration Statement and the other agreements described in the Registration Statement; (ii) agrees that the General Partners (on their own or through any officer of the Partnership) are authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners or the other Persons who may acquire an interest in Partnership Securities; and (iii) agrees that the execution, delivery or performance by the General Partners, any Group Member or any Affiliate of any of them, of this Agreement or any agreement authorized or permitted under this Agreement, shall not constitute a breach by the General Partners of any duty that the General Partners may owe the Partnership or the Limited Partners or any other Persons under this Agreement (or any other agreements) or of any duty stated or implied by law or equity. 7.2 Certificate of Limited Partnership The Operating General Partner has caused the Certificate of Limited Partnership to be filed with the Secretary of State of the State of Delaware as required by the Delaware Act and shall use all reasonable efforts to cause to be filed such other certificates or documents as may be determined by the Operating General Partner in its sole discretion to be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent that such action is determined by the Operating General Partner in its sole discretion to be reasonable and necessary or appropriate, the Operating General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership or other entity in which the limited partners have limited liability) under the laws of the State of Delaware or of any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 3.4(a), the Operating General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any qualification document or any amendment thereto to any Limited Partner. 7.3 Restrictions on the General Partners' Authority (a) The General Partners may not, without written approval of the specific act by holders of all of the Outstanding Partnership Securities or by other written instrument executed and delivered by all of the Outstanding Partnership Securities subsequent to the date of this Agreement, take any action in contravention of this Agreement, including, except as otherwise provided in this Agreement, (i) possessing Partnership property, or assigning any rights in specific Partnership property, for other than a Partnership purpose; (ii) admitting a Person as a Partner; (iii) amending this Agreement in any manner; or (iv) transferring its General Partner Interest. (b) Except as provided in Articles XII and XIV, the General Partners may not sell, exchange or otherwise dispose of all or substantially all of the assets of the Partnership Group in a single transaction or a series of related transactions, without the approval of holders of a Majority Interest; provided, however, that this provision shall not preclude or limit the General Partners' ability to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the Partnership Group and shall not apply to any forced sale of any or all of the assets of the Partnership Group pursuant to the foreclosure of, or other realization upon, any such encumbrance. (c) At all times while serving as the general partner of the Partnership, the Operating General Partner shall not make any dividend or distribution on, or repurchase any shares of, its stock or take any other action within its control if the effect of such action would cause its net worth, independent of its interest in the Partnership Group, to be less than $7.5 million or such lower amount, which based on an Opinion of Counsel that states, (i) based on a change in the position of the Internal Revenue Service with respect to partnership status pursuant to Code Section 7701, such lower amount would not cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes and (ii) would not result in the loss of the limited liability of any Limited Partner. (d) Notwithstanding anything else herein contained, the Operating General Partner shall not hire or terminate Partnership officers or cause the Partnership to take any of the following actions, in each case without the prior approval of the Managing General Partner: (i) sell, exchange or otherwise dispose of Partnership assets outside the ordinary course of business if the consideration (including Partnership liabilities assumed) received from such sale, exchange or other disposition exceeds $100,000; (ii) purchase or otherwise acquire assets outside the ordinary course of business if the acquisition price (including liabilities assumed by the Partnership) exceeds $100,000; (iii) undertake a capital project that is budgeted to exceed $100,000; (iv) reorganize, merge, consolidate or dissolve; (v) issue any additional Partnership Securities; (vi) incur any debt or the guarantee of or contingent liability for any debt outside the ordinary course of business if the debt proceeds exceed $100,000; (vii) file any Federal or state income tax returns for the Partnership; (viii) make any distributions to the Partners; (ix) adopt any employee benefit plans, employee programs or practices; (x) lend money; or (xi) any other action that is either (A) outside the ordinary course of the business of the Partnership or (B) similar in scope or magnitude to the foregoing items listed in this Section 7.3(d). 7.4 Reimbursement of the General Partners (a) Except as provided in this Section 7.4 and elsewhere in this Agreement or the Genesis MLP Partnership Agreement, the General Partners shall not be compensated for their services as general partner of Genesis MLP or any Group Member. (b) The General Partners shall be reimbursed on a monthly basis, or such other reasonable basis as the General Partners may determine in their sole discretion, for (i) all direct and indirect expenses they incur or payments they make on behalf of Genesis MLP and the Partnership Group (including salary, bonus, incentive compensation and other amounts paid to any Person, including Affiliates of the General Partners, to perform services for Genesis MLP and the Partnership Group or for the General Partners in the discharge of their duties to Genesis MLP or the Partnership Group), and (ii) all other necessary or appropriate expenses allocable to Genesis MLP and the Partnership Group or otherwise reasonably incurred by the General Partners in connection with operating the business of Genesis MLP and the Partnership Group (including expenses allocated to the General Partners by their Affiliates). The General Partners shall determine the expenses that are allocable to Genesis MLP and the Partnership in any reasonable manner determined by the General Partners in their sole discretion. Reimbursements pursuant to this Section 7.4 shall be in addition to any reimbursement to the General Partners as a result of indemnification pursuant to Section 7.7. (c) Expenses incurred by a General Partner in connection with any employee benefit plans, employee programs and employee practices (including the net cost to such General Partner or such Affiliate of MLP Units or other MLP Partnership Securities purchased by such General Partner or such Affiliate from the Partnership to fulfill options or awards under such plans, programs and practices) shall be reimbursed in accordance with Section 7.4(b). Any and all obligations of a General Partner under any employee benefit plans, employee programs or employee practices adopted by such General Partner as permitted by this Section 7.4(c) shall constitute obligations of such General Partner hereunder and shall be assumed by any successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of such General Partner's General Partner Interest pursuant to Section 4.6. 7.5 Outside Activities (a) After the Closing Date, the Operating General Partner, for so long as it is a general partner of the Partnership, (i) agrees that its sole business will be to act as a general partner of the Partnership, Genesis MLP and any other partnership of which the Partnership or Genesis MLP is, directly or indirectly, a partner and to undertake activities that are ancillary or related thereto (including being a limited partner in the Partnership or any such other partnership) and (ii) shall not, directly or indirectly, engage in any business or activity or incur any debts or liabilities except in connection with or incidental to (A) its performance as general partner of one or more Group Members or as described in or contemplated by the Registration Statement or (B) the acquiring, owning or disposing of debt or equity securities of Genesis MLP or any Group Member. (b) Salomon, Basis and Howell have entered into the Non-Competition Agreement with the Partnership and Genesis MLP which agreement sets forth certain restrictions on their ability to engage in the business of (i) crude oil gathering at the wellhead in the states of Alabama, Florida, Kansas, Louisiana, Mississippi, New Mexico, Oklahoma or Texas, or any states contiguous to such states, and (ii) transporting for third parties crude oil by pipeline along the routes of the Partnership's crude oil pipelines owned as of the Closing Date. (c) Except as specifically restricted by Section 7.5(a) and the Non- Competition Agreement, each Indemnitee shall have the right to engage in businesses of every type and description and other activities for profit and to engage in and possess an interest in other business ventures of any and every type or description, whether in businesses engaged in or anticipated to be engaged in by any Group Member, independently or with others, including business interests and activities in direct competition with the business and activities of any Group Member, and none of the same shall constitute a breach of this Agreement or any duty express or implied by law to any Group Member or any Partner. Neither any Group Member, any Limited Partner nor any other Person shall have any rights by virtue of this Agreement, the Genesis MLP Partnership Agreement or the partnership relationship established hereby in any business ventures of any Indemnitee. (d) Subject to the terms of Sections 7.5(a), 7.5(b) and 7.5(c) and the Non- Competition Agreement, but otherwise notwithstanding anything to the contrary in this Agreement, (i) the engaging in competitive activities by any Indemnitees (other than the Operating General Partner) in accordance with the provisions of this Section 7.5 is hereby approved by the Partnership and all Partners and (ii) it shall be deemed not to be a breach of the Operating General Partner's fiduciary duty or any other obligation of any type whatsoever of the Operating General Partner for the Indemnitees (other than the Operating General Partner) to engage in such business interests and activities in preference to or to the exclusion of the Partnership, and the Operating General Partner and the Indemnitees shall have no obligation to present business opportunities to the Partnership. (e) The Operating General Partner and any of its Affiliates may acquire Partnership Securities in addition to those acquired on the Closing Date and, except as otherwise provided in this Agreement, shall be entitled to exercise all rights of a General Partner or Limited Partner, as applicable, relating to such Partnership Securities. (e) The term ''Affiliates'' when used in this Section 7.5 with respect to the Operating General Partner shall not include Genesis MLP, any Group Member or any Subsidiary of a Group Member. 7.6 Loans from the General Partners; Loans or Contributions from the Partnership; Contracts with Affiliates; Certain Restrictions on the Operating General Partner (a) Subject to Section 7.3(d), the General Partners and any of their Affiliates may lend to any Group Member, and any Group Member may borrow from the General Partners or any of their Affiliates, funds needed or desired by the Group Member for such periods of time and in such amounts as the Operating General Partner may determine; provided, however, that in any such case the lending party may not charge the borrowing party interest at a rate greater than the rate that would be charged the borrowing party or impose terms less favorable to the borrowing party than would be charged or imposed on the borrowing party by unrelated lenders on comparable loans made on an arm's-length basis (without reference to the lending party's financial abilities or guarantees). The borrowing party shall reimburse the lending party for any costs (other than any additional interest costs) incurred by the lending party in connection with the borrowing of such funds. For purposes of this Section 7.6(a) and Section 7.6(b), the term ''Group Member'' shall include any Affiliate of a Group Member that is controlled by the Group Member. No Group Member may lend funds to the Operating General Partner or any of its Affiliates (other than Genesis MLP or another Group Member). (b) Subject to Section 7.3(d), the Partnership may lend or contribute to Genesis MLP or any Group Member, and Genesis MLP and any Group Member may borrow from the Partnership, funds on terms and conditions established in the sole discretion of the Operating General Partner; provided, however, that the Partnership may not charge Genesis MLP or the Group Member interest at a rate less than the rate that would be charged to the Group Member (without reference to the General Partners' financial abilities or guarantees) by unrelated lenders on comparable loans. Subject to Section 7.3(d), the foregoing authority shall be exercised by the Operating General Partner in its sole discretion and shall not create any right or benefit in favor of Genesis MLP or any Group Member or any other Person. (c) The General Partners may themselves, or may enter into an agreement with any of their Affiliates to, render services to a Group Member or to the General Partners in the discharge of their duties as general partners of the Partnership. Any services rendered to a Group Member by a General Partner or any of its Affiliates shall be on terms that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 7.6(c) shall be deemed satisfied as to (i) any transaction approved by Special Approval, (ii) any transaction, the terms of which are no less favorable to the Partnership Group than those generally being provided to or available from unrelated third parties or (iii) any transaction that, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership Group), is equitable to the Partnership Group. The provisions of Section 7.4 shall apply to the rendering of services described in this Section 7.6(c). (d) The Partnership Group may transfer assets to joint ventures, other partnerships, corporations, limited liability companies or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as are consistent with this Agreement and applicable law. (e) Neither the Operating General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from the Partnership, directly or indirectly, except pursuant to transactions that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 7.6(e) shall be deemed to be satisfied as to (i) the transactions effected pursuant to Sections 5.1, 5.2 and 5.3, the Conveyance Agreement and any other transactions described in or contemplated by the Registration Statement, (ii) any transaction approved by Special Approval, (iii) any transaction, the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties, or (iv) any transaction that, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership), is equitable to the Partnership. With respect to any contribution of assets to the Partnership in exchange for Partnership Securities, the Audit Committee, in determining whether the appropriate number of Partnership Securities are being issued, may take into account, among other things, the fair market value of the assets, the liquidated and contingent liabilities assumed, the tax basis in the assets, the extent to which tax-only allocations to the transferor will protect the existing partners of the Partnership against a low tax basis, and such other factors as the Audit Committee deems relevant under the circumstances. (f) The Operating General Partner and its Affiliates will have no obligation to permit any Group Member to use any facilities or assets of the Operating General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use, nor shall there be any obligation on the part of the Operating General Partner or its Affiliates to enter into such contracts. (g) Without limitation of Sections 7.6(a) through 7.6(f), and notwithstanding anything to the contrary in this Agreement, the existence of the conflicts of interest described in the Registration Statement are hereby approved by all Partners. 7.7 Indemnification (a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee; provided, that in each case the Indemnitee acted in good faith and in a manner that such Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Partnership and, with respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that the Indemnitee acted in a manner contrary to that specified above. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, it being agreed that the General Partners shall not be personally liable for such indemnification and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate such indemnification. (b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of any undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 7.7. (c) The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the holders of Outstanding Partnership Securities, as a matter of law or otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and as to actions in any other capacity (including any capacity under the Underwriting Agreement), and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee. (d) The Partnership may purchase and maintain (or reimburse a General Partner or its Affiliates for the cost of) insurance, on behalf of a General Partner, its Affiliates and such other Persons as the Operating General Partner shall determine, against any liability that may be asserted against or expense that may be incurred by such Person in connection with the Partnership's activities or such Person's activities on behalf of the Partnership, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. (e) For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute ''fines'' within the meaning of Section 7.7(a); and action taken or omitted by it with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is in, or not opposed to, the best interests of the Partnership. (f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement. (g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. (h) The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. (i) No amendment, modification or repeal of this Section 7.7 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligations of the Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. 7.8 Liability of Indemnitees (a) Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, the Limited Partners or any other Persons who have acquired interests in Partnership Securities, for losses sustained or liabilities incurred as a result of any act or omission if such Indemnitee acted in good faith. (b) Subject to their obligations and duties as a general partner of the Partnership set forth in Section 7.1(a), the General Partners may exercise any of the powers granted to them by this Agreement and perform any of the duties imposed upon them hereunder either directly or by or through their agents, and a General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by a General Partner in good faith. (c) To the extent that, at law or in equity, an Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, the General Partners and any other Indemnitee acting in connection with the Partnership's business or affairs shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict or otherwise modify the duties and liabilities of an Indemnitee otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of such Indemnitee. (d) Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnitees under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. 7.9 Resolution of Conflicts of Interest (a) Unless otherwise expressly provided in this Agreement, whenever a potential conflict of interest exists or arises between a General Partner or any of its Affiliates, on the one hand, and the Partnership or any Partner, on the other, any resolution or course of action by the General Partner or its Affiliates in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of any agreement contemplated herein, or of any duty stated or implied by law or equity, if the resolution or course of action is, or by operation of this Agreement is deemed to be, fair and reasonable to the Partnership. The Operating General Partner shall be authorized but not required in connection with its resolution of such conflict of interest to seek Special Approval of such resolution. Any conflict of interest and any resolution of such conflict of interest shall be conclusively deemed fair and reasonable to the Partnership if such conflict of interest or resolution is (i) approved by Special Approval (as long as the material facts known to the Operating General Partner or any of its Affiliates regarding any proposed transaction were disclosed to the Audit Committee at the time it gave its approval), (ii) on terms no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (iii) fair to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership). The Operating General Partner may also adopt a resolution or course of action that has not received Special Approval. The Operating General Partner (including the Audit Committee in connection with Special Approval) shall be authorized in connection with its determination of what is ''fair and reasonable'' to the Partnership and in connection with its resolution of any conflict of interest to consider (A) the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; (B) any customary or accepted industry practices and any customary or historical dealings with a particular Person; (C) any applicable generally accepted accounting practices or principles; and (D) such additional factors as the Operating General Partner (including the Audit Committee) determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. Nothing contained in this Agreement, however, is intended to nor shall it be construed to require the Operating General Partner (including the Audit Committee) to consider the interests of any Person other than the Partnership. In the absence of bad faith by the Operating General Partner, the resolution, action or terms so made, taken or provided by the Operating General Partner with respect to such matter shall not constitute a breach of this Agreement or any other agreement contemplated herein or a breach of any standard of care or duty imposed herein or therein or, to the extent permitted by law, under the Delaware Act or any other law, rule or regulation. (b) Whenever this Agreement or any other agreement contemplated hereby provides that a General Partner or any of its Affiliates is permitted or required to make a decision (i) in its ''sole discretion'' or ''discretion,'' that it deems ''necessary or appropriate'' or ''necessary or advisable'' or under a grant of similar authority or latitude, except as otherwise provided herein, a General Partner or such Affiliate shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, Genesis MLP, the Partnership, any other General Partner or any Limited Partner, (ii) it may make such decision in its sole discretion (regardless of whether there is a reference to ''sole discretion'' or ''discretion'') unless another express standard is provided for, or (iii) in ''good faith'' or under another express standard, a General Partner or such Affiliate shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation. In addition, any actions taken by a General Partner or such Affiliate consistent with the standards of ''reasonable discretion'' set forth in the definitions of Available Cash or Operating Surplus shall not constitute a breach of any duty of a General Partner to the Partnership or the Limited Partners. The General Partners shall have no duty, express or implied, to sell or otherwise dispose of any asset of the Partnership Group other than in the ordinary course of business. No borrowing by any Group Member or the approval thereof by a General Partner shall be deemed to constitute a breach of any duty of the General Partner to the Partnership, any other General Partner, any Limited Partner or any Assignee by reason of the fact that the purpose or effect of such borrowing is directly or indirectly to (A) enable the Operating General Partner to receive Incentive Compensation Payments or (B) hasten the expiration of the Subordination Period or the conversion of any Subordinated Units into Common Units. (c) Whenever a particular transaction, arrangement or resolution of a conflict of interest is required under this Agreement to be ''fair and reasonable'' to any Person, the fair and reasonable nature of such transaction, arrangement or resolution shall be considered in the context of all similar or related transactions. (d) The Unitholders hereby authorize the Operating General Partner, on behalf of the Partnership as a partner of a Group Member, to approve of actions by the general partner of such Group Member similar to those actions permitted to be taken by a General Partner pursuant to this Section 7.9. 7.10 Other Matters Concerning the General Partners (a) The General Partners may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) The General Partners may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion (including an Opinion of Counsel) of such Persons as to matters that such General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. (c) The General Partners shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers, a duly appointed attorney or attorneys-in-fact or the duly authorized officers of the Partnership. (d) Any standard of care and duty imposed by this Agreement or under the Delaware Act or any applicable law, rule or regulation shall be modified, waived or limited, to the extent permitted by law, as required to permit the General Partners to act under this Agreement or any other agreement contemplated by this Agreement and to make any decision pursuant to the authority prescribed in this Agreement, so long as such action is reasonably believed by such General Partner to be in, or not inconsistent with, the best interests of the Partnership. 7.11 Reliance by Third Parties Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that any General Partner and any officer of a General Partner authorized by such General Partner to act on behalf of and in the name of the Partnership has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any authorized contracts on behalf of the Partnership, and such Person shall be entitled to deal with a General Partner or any such officer as if it were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of a General Partner or any such officer in connection with any such dealing. In no event shall any Person dealing with a General Partner or any such officer or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of a General Partner or any such officer or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by a General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. 7.12 Incentive Compensation Payments to the Operating General Partner (a) Within 45 days following the end of each Quarter commencing with the Quarter ending on March 31, 1997 and ending with the Quarter immediately preceding the Quarter in which a Conversion Election is made, the Partnership shall make the following payments to the Operating General Partner as compensation for management and other services provided to the Partnership (such payments will be characterized for federal income tax purposes as guaranteed payments within the meaning of Section 707(c) of the Code): (i) An amount equal to 13/85ths of all amounts distributed to the Partners with respect to such Quarter pursuant to Section 6.4(a)(vi) or Section 6.4(b)(iv) on a per Unit basis that are in excess of the First Target Distribution up to and including the Second Target Distribution; (ii) An amount equal to 23/75ths of all amounts distributed to the Partners with respect to such Quarter pursuant to Section 6.4(a)(vi) or Section 6.4(b)(iv) on a per Unit basis that are in excess of the Second Target Distribution up to and including the Third Target Distribution; and (iii) An amount equal to 48/50ths of all amounts distributed to the Partners with respect to such Quarter pursuant to Section 6.4(a)(vi) or Section 6.4(b)(iv) on a per Unit basis that are in excess of the Third Target Distribution. (b) The Operating General Partner shall not be entitled to transfer the right to receive Incentive Compensation Payments to any Person; provided, however, that upon the admission of a successor Operating General Partner pursuant to Section 10.4(a), such successor Operating General Partner shall, unless a Conversion Election has been previously made, be entitled to receive Incentive Compensation Payments and shall have the right to elect to convert its right to receive Incentive Compensation Payments into a right to participate with all other Partners in distributions made in excess of the First Target Distribution as provided in Section 7.13. 7.13 Conversion of Operating General Partner's Incentive Compensation Payment Rights At any time following the second anniversary of the Closing Date, the Operating General Partner may elect to convert (a ''Conversion Election'') its right to receive Incentive Compensation Payments pursuant to Section 7.12 into a right to participate with all other Partners in distributions made in excess of the First Target Distribution in a ratio which would result in the Operating General Partner receiving additional cash distributions with respect to the Quarter in which the Conversion Election is made and for any subsequent Quarter in an amount equal to the amount of Incentive Compensation Payments which would have otherwise been made to the Operating General Partner pursuant to Section 7.12 for such Quarters. If the Operating General Partner makes a Conversion Election, the Partnership Agreement shall be amended to reflect the following: (a) the Operating General Partner's right to Incentive Compensation Payments has been extinguished; (b) the Operating General Partner's right to participate in distributions in excess of the First Target Distribution in a ratio which would result in the Operating General Partner receiving additional cash distributions with respect to the Quarter in which the Conversion Election is made and for any subsequent Quarter pursuant to such provisions in an amount equal to the amount of Incentive Compensation Payments which would have otherwise been made to the Operating General Partner pursuant to Section 7.12 for such Quarters; (c) the special allocation of additional Net Income to the Operating General Partner in a manner which matches the Operating General Partner's increased share of subsequent distributions, but only to the extent that the Partnership has sufficient net income to achieve such matching in that year or later years; (d) the Operating General Partner's right to participate in an increased share of any gains realized (or deemed realized) by the Partnership following the Conversion Election in connection with (i) an issuance of additional Partnership Interests, (ii) distributions of Partnership property, or (iii) the liquidation of the Partnership; and (e) any special allocations or other matters associated with and reasonably necessary to the implementation of the foregoing to the extent such special allocations or other matters do not adversely impact the interests of the other Partners. ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS 8.1 Records and Accounting The Operating General Partner shall keep or cause to be kept at the principal office of the Partnership, appropriate books and records with respect to the Partnership's business, including all books and records necessary to provide to the Unitholders any information required to be provided pursuant to Section 3.4(a). Any books and records maintained by or on behalf of the Partnership in the regular course of its business, including the record of the Record Holders and Assignees of Units or other Partnership Securities, books of account and records of Partnership proceedings, may be kept on, or be in the form of, computer disks, hard drives, punch cards, magnetic tape, photographs, micrographics or any other information storage device; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with U.S. GAAP. 8.2 Fiscal Year The fiscal year of the Partnership shall be the calendar year. ARTICLE IX TAX MATTERS 9.1 Tax Returns and Information The Operating General Partner shall arrange for the preparation and timely filing of all returns of the Partnership that are required for federal, state and local income tax purposes on the basis of the accrual method and a taxable year ending on December 31. The tax information reasonably required by Record Holders for federal and state income tax reporting purposes with respect to a taxable year shall be furnished to them within 90 days of the close of the calendar year in which the Partnership's taxable year ends. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for federal income tax purposes. 9.2 Tax Elections (a) The Partnership shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder, subject to the reservation of the right to seek to revoke any such election upon the Operating General Partner's determination that such revocation is in the best interests of the Unitholders. (b) The Partnership shall elect to deduct expenses incurred in organizing the Partnership ratably over a sixty-month period as provided in Section 709 of the Code. (c) Except as otherwise provided herein, the Operating General Partner shall determine whether the Partnership should make any other elections permitted by the Code. 9.3 Tax Controversies Subject to the provisions hereof, the Operating General Partner is designated as the Tax Matters Partner (as defined in the Code) and is authorized and required to represent the Partnership (at the Partnership's expense) in connection with all examinations of the Partnership's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the Operating General Partner and to do or refrain from doing any or all things reasonably required by the Operating General Partner to conduct such proceedings. 9.4 Withholding Notwithstanding any other provision of this Agreement, the Operating General Partner is authorized to take any action that it determines in its discretion to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required or elects to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or Assignee (including, without limitation, by reason of Section 1446 of the Code), the amount withheld may be treated as a distribution of cash pursuant to Section 6.3 in the amount of such withholding from such Partner. ARTICLE X ADMISSION OF PARTNERS 10.1 Admission of General Partners (a) In connection with the formation of the Partnership under the Delaware Act, the Operating General Partner made an initial Capital Contribution to the Partnership in the amount of $10.00 for an interest in the Partnership and has been admitted as the Operating General Partner of the Partnership. (b) Upon the issuance of Common GP Units pursuant to Section 5.2(a), Genesis MLP will be admitted to the Partnership as the Managing General Partner. 10.2 Admission of Successor or Transferee General Partner (a) A successor Operating General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the Operating General Partner's General Partner Interest pursuant to Section 4.6(a) who is proposed to be admitted as a successor Operating General Partner shall, subject to compliance with the terms of Section 11.3, if applicable, be admitted to the Partnership as a successor Operating General Partner, effective immediately prior to the withdrawal or removal of the Operating General Partner pursuant to Section 11.1 or 11.2 or the transfer of the Operating General Partner's General Partner Interest pursuant to Section 4.6(a); provided, however, that no such successor shall be admitted to the Partnership until compliance with the terms of Section 4.6(a) has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission. Any such successor shall, subject to the terms hereof, carry on the business of the Partnership without dissolution. (b) A successor Managing General Partner approved pursuant to Section 11.4 or the transferee of or successor to all of the Managing General Partner's General Partner Interest pursuant to Section 4.6(b) who is proposed to be admitted as a successor Managing General Partner shall be admitted to the Partnership as a successor Managing General Partner, effective immediately prior to the withdrawal or removal of the Managing General Partner pursuant to Section 11.4 or the transfer of the Managing General Partner's General Partner Interest pursuant to Section 4.6(b); provided, however, that no such successor shall be admitted to the Partnership until compliance with the terms of Section 4.6(b) has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission. Any such successor shall, subject to the terms hereof, carry on the business of the Partnership without dissolution. 10.3 Admission of Initial Limited Partners Upon the issuance of Subordinated LP Units pursuant to Section 5.3(a), Basis and the Howell Subsidiaries will be admitted to the Partnership as Initial Limited Partners. 10.4 Admission of Substituted Limited Partner By transfer of a Limited Partner Interest in accordance with Article IV, the transferor shall be deemed to have given the transferee the right to seek admission as a Substituted Limited Partner subject to the conditions of, and in the manner permitted under, this Agreement. A transferor of a Certificate representing a Limited Partner Interest shall, however, only have the authority to convey to a purchaser or other transferee who does not execute and deliver a Transfer Application (a) the right to negotiate such Certificate to a purchaser or other transferee and (b) the right to transfer the right to request admission as a Substituted Limited Partner to such purchaser or other transferee in respect of the transferred Limited Partner Interests. Each transferee of a Limited Partner Interest (including any nominee holder or an agent acquiring such Limited Partner Interest for the account of another Person) who executes and delivers a Transfer Application shall, by virtue of such execution and delivery, be an Assignee and be deemed to have applied to become a Substituted Limited Partner with respect to the Limited Partner Interest so transferred to such Person. Such Assignee shall become a Substituted Limited Partner (x) at such time as the Operating General Partner consents thereto, which consent may be given or withheld in the Operating General Partner's discretion and (y) when any such admission is shown on the books and records of the Partnership. If such consent is withheld, such transferee shall be an Assignee. An Assignee shall have an interest in the Partnership equivalent to that of a Limited Partner with respect to allocations and distributions, including liquidating distributions, of the Partnership. With respect to voting rights attributable to Limited Partner Interests that are held by Assignees, the Operating General Partner shall be deemed to be the Limited Partner with respect thereto and shall, in exercising the voting rights in respect of such Limited Partner Interests on any matter, vote such Limited Partner Interests at the written direction of the Assignee who is the Record Holder of such Limited Partner Interests. If no such written direction is received, such Limited Partner Interests will not be voted. An Assignee shall have no other rights of a Limited Partner. 10.5 Admission of Additional Limited Partners (a) A Person (other than a General Partner, an Initial Limited Partner or a Substituted Limited Partner) who makes a Capital Contribution to the Partnership in accordance with this Agreement in exchange for Limited Partner Interests (other than by virtue of the purchase of APIs) shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the Operating General Partner (i) evidence of acceptance in form satisfactory to the Operating General Partner of all of the terms and conditions of this Agreement, including the power of attorney granted in Section 2.6, and (ii) such other documents or instruments as may be required in the discretion of the Operating General Partner to effect such Person's admission as an Additional Limited Partner. (b) Notwithstanding anything to the contrary in this Section 10.5, no Person shall be admitted as an Additional Limited Partner without the consent of the Operating General Partner, which consent may be given or withheld in the Operating General Partner's discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded as such in the books and records of the Partnership, following the consent of the Operating General Partner to such admission. 10.6 Amendment of Agreement and Certificate of Limited Partnership To effect the admission to the Partnership of any Partner, the Operating General Partner shall take all steps necessary and appropriate under the Delaware Act to amend the records of the Partnership to reflect such admission and, if necessary, to prepare as soon as practicable an amendment to this Agreement and, if required by law, the Operating General Partner shall prepare and file an amendment to the Certificate of Limited Partnership, and the Operating General Partner may for this purpose, among others, exercise the power of attorney granted pursuant to Section 2.6. ARTICLE XI WITHDRAWAL OR REMOVAL OF PARTNERS 11.1 Withdrawal of Operating General Partner (a) The Operating General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an ''Event of Withdrawal''); (i) the Operating General Partner voluntarily withdraws from the Partnership by giving written notice to the other Partners (and it shall be deemed that the Operating General Partner has withdrawn pursuant to this Section 11.1(a)(i) if the Operating General Partner voluntarily withdraws as a general partner of Genesis MLP); (ii) the Operating General Partner transfers all of its General Partner Interest pursuant to Section 4.6; (iii) the Operating General Partner is removed pursuant to Section 11.2; (iv) the Operating General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary bankruptcy petition for relief under Chapter 7 of the United States Bankruptcy Code; (C) files a petition or answer seeking for itself a liquidation, dissolution or similar relief (but not a reorganization) under any law; (D) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Operating General Partner in a proceeding of the type described in clauses (A)- (C) of this Section 11.1(a)(iv); or (E) seeks, consents to or acquiesces in the appointment of a trustee (but not a debtor in possession), receiver or liquidator of the Operating General Partner or of all or any substantial part of its properties; (v) a final and non-appealable order of relief under Chapter 7 of the United States Bankruptcy Code is entered by a court with appropriate jurisdiction pursuant to a voluntary or involuntary petition by or against the Operating General Partner; or (vi) (A) in the event the Operating General Partner is a corporation, a certificate of dissolution or its equivalent is filed for the Operating General Partner, or 90 days expire after the date of notice to the Operating General Partner of revocation of its charter without a reinstatement of its charter, under the laws of its state of incorporation; (B) in the event the Operating General Partner is a partnership, the dissolution and commencement of winding up of the Operating General Partner; (C) in the event the Operating General Partner is acting in such capacity by virtue of being a trustee of a trust, the termination of the trust; (D) in the event the Operating General Partner is a natural person, his death or adjudication of incompetency; and (E) otherwise in the event of the termination of the Operating General Partner. If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A), (B), (C) or (E) occurs, the withdrawing Operating General Partner shall give notice to the Partners within 30 days after such occurrence. The Partners hereby agree that only the Events of Withdrawal described in this Section 11.1 shall result in the withdrawal of the Operating General Partner from the Partnership. (b) Withdrawal of the Operating General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances: (i) if the Operating General Partner has voluntarily withdrawn as a general partner of Genesis MLP and such withdrawal was not in breach of the Genesis MLP Partnership Agreement or (ii) at any time that the Operating General Partner ceases to be the Operating General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to Section 11.2. The withdrawal of the Operating General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall also constitute the withdrawal of the Operating General Partner as general partner of the other Group Members. If the Operating General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the Person elected as successor general partner of Genesis MLP shall, upon admission as a successor general partner of Genesis MLP, automatically become the successor Operating General Partner and a successor general partner of the other Group Members of which the Operating General Partner is a general partner. If, prior to the effective date of the Operating General Partner's withdrawal, a successor Operating General is not selected as provided herein, the Partnership shall be dissolved in accordance with Section 12.1. Any successor Operating General Partner selected in accordance with the terms of this Section 11.1 shall be subject to the provisions of Section 10.3. 11.2 Removal of Operating General Partner The Operating General Partner may not be removed as a general partner of the Partnership unless the Operating General Partner is removed as a general partner of Genesis MLP pursuant to Section 11.2 of the Genesis MLP Partnership Agreement. If the Operating General Partner is removed as a general partner of Genesis MLP pursuant to Section 11.2 of the Genesis MLP Partnership Agreement, the Operating General Partner shall be removed as a general partner of the Partnership. Such removal shall be effective concurrently with the effectiveness of the removal of the Operating General Partner as a general partner of Genesis MLP pursuant to the terms of the Genesis MLP Partnership Agreement. If a Person is elected as a successor general partner of Genesis MLP in connection with the removal of the Operating General Partner as a general partner of Genesis MLP, such Person shall, upon admission as a successor general partner of Genesis MLP, automatically become the successor Operating General Partner of the Partnership and a successor general partner of the other Group Members of which the Operating General Partner is a general partner. 11.3 Interest of Departing Partner and Successor Operating General Partner (a) The General Partner Interest of a Departing Partner departing as a result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall (unless it is otherwise required to be converted into MLP Common Units pursuant to Section 11.3(b) of the Genesis MLP Partnership Agreement) be purchased by the successor to the Departing Partner for cash in the manner specified in the Genesis MLP Partnership Agreement. Such purchase (or conversion into MLP Common Units, as applicable) shall be a condition to the admission to the Partnership of the successor as the Operating General Partner. Any successor Operating General Partner shall indemnify the Departing General Partner as to all debts and liabilities of the Partnership arising on or after the effective date of the withdrawal or removal of the Departing Partner. (b) The Departing Partner shall be entitled to receive all reimbursements due such Departing Partner pursuant to Section 7.4, including any employee- related liabilities (including severance liabilities), incurred in connection with the termination of any employees employed by the General Partner for the benefit of the Partnership or the other Group Members. 11.4 Withdrawal or Removal of Managing General Partner (a) Without the prior written consent of the Operating General Partner, which may be granted or withheld in its sole discretion, the Managing General Partner shall not have the right to withdraw from the Partnership. (b) The Partners shall not have the right to remove the Managing General Partner. 11.5 Withdrawal of Limited Partners No Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner's LP Units or APIs becomes a Record Holder of the LP Units or APIs so transferred, such transferring Limited Partner shall cease to be a Limited Partner with respect to the LP Units or APIs so transferred. ARTICLE XII DISSOLUTION AND LIQUIDATION 12.1 Dissolution The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the Operating General Partner, if a successor Operating General Partner is selected as provided in Section 11.1 or 11.2, the Partnership shall not be dissolved and such successor Operating General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its affairs shall be wound up, upon: (a) the expiration of its term as provided in Section 2.7; (b) an Event of Withdrawal of the Operating General Partner as provided in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is selected as provided in Section 11.1(b) or 11.2 and such successor is admitted to the Partnership pursuant to Section 10.3; (c) an election to dissolve the Partnership by the Operating General Partner that is approved by the holders of a Majority Interest; (d) the entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Delaware Act; or (e) the sale of all or substantially all of the assets and properties of the Partnership Group. 12.2 Continuation of the Business of the Partnership After Dissolution Upon (a) dissolution of the Partnership following an Event of Withdrawal caused by the withdrawal or removal of the Operating General Partner as provided in Section 11.1(a)(i) or (iii) and the failure of the Partners to select a successor to such Departing Partner pursuant to Section 11.1 or 11.2, then within 90 days thereafter, or (b) dissolution of the Partnership upon an event constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or (vi), then, to the maximum extent permitted by law, within 180 days thereafter, the holders of a Majority Interest may elect to reconstitute the Partnership and continue its business on the same terms and conditions set forth in this Agreement by forming a new limited partnership on terms identical to those set forth in this Agreement and having as the successor Operating General Partner a Person approved by the holders of a Majority Interest. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made, then: (i) the reconstituted Partnership shall continue until the end of the term set forth in Section 2.7 unless earlier dissolved in accordance with this Article XII; (ii) if the successor Operating General Partner is not the former Operating General Partner, then the interest of the former Operating General Partner shall be treated in the manner provided in Section 11.3; and (iii) all necessary steps shall be taken to cancel this Agreement and the Certificate of Limited Partnership and to enter into and, as necessary, to file a new partnership agreement and certificate of limited partnership, and the successor general partner may for this purpose exercise the powers of attorney granted the Operating General Partner pursuant to Section 2.6; provided, that the right of the holders of a Majority Interest to approve a successor Operating General Partner and to reconstitute and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that (x) the exercise of the right would not result in the loss of limited liability of any Limited Partner and (y) neither the Partnership nor the reconstituted limited partnership would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of such right to continue. 12.3 Liquidator Upon dissolution of the Partnership, unless the Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 12.2, the Operating General Partner shall select one or more Persons to act as Liquidator. The Liquidator (if other than the Operating General Partner) shall be entitled to receive such compensation for its services as may be approved by the holders of a Majority Interest. The Liquidator (if other than the Operating General Partner) shall agree not to resign at any time without 15 days' prior notice and may be removed at any time, with or without cause, by notice of removal approved by the holders of at least a majority of the Outstanding Units voting as a single class. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by the holders of at least a majority of the Outstanding Units voting as a single class. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the Operating General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 7.3(b)) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding up and liquidation of the Partnership as provided for herein. 12.4. Liquidation The Liquidator shall proceed to dispose of the assets of the Partnership, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as the Liquidator determines to be in the best interest of the Partners, subject to Section 17-804 of the Delaware Act and the following: (a) Disposition of Assets. The assets may be disposed of by public or private sale or by distribution in kind to one or more Partners on such terms as the Liquidator and such Partner or Partners may agree. If any property is distributed in kind, the Partner receiving the property shall be deemed for purposes of Section 12.4(c) to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Partners. The Liquidator may, in its absolute discretion, defer liquidation or distribution of the Partnership's assets for a reasonable time if it determines that an immediate sale of all or some of the Partnership's assets would be impractical or would cause undue loss to the partners. The Liquidator may, in its absolute discretion, distribute the Partnership's assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the partners. (b) Discharge of Liabilities. Liabilities of the Partnership include amounts owed to Partners otherwise than in respect of their distribution rights under Article VI. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reasonable reserve of cash or other assets to provide for its payment. When paid, any unused portion of the reserve shall be distributed as additional liquidation proceeds. (c) Liquidation Distributions. All property and all cash in excess of that required to discharge liabilities as provided in Section 12.4(b) shall be distributed to the Partners in accordance with, and to the extent of, the positive balances in their respective Capital Accounts, as determined after taking into account all Capital Account adjustments (other than those made by reason of distributions pursuant to this Section 12.4(c)) for the taxable year of the Partnership during which the liquidation of the Partnership occurs (with such date of occurrence being determined pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such taxable year (or, if later, within 90 days after said date of such occurrence). 12.5 Cancellation of Certificate of Limited Partnership Upon the completion of the distribution of Partnership cash and property as provided in Section 12.4 in connection with the liquidation of the Partnership, the Partnership shall be terminated and the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken. 12.6 Return of Contributions The General Partners shall not be personally liable for, and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners or Unitholders, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets. 12.7 Waiver of Partition To the maximum extent permitted by law, each Partner hereby waives any right to partition of the Partnership property. 12.8 Capital Account Restoration Neither the Managing General Partner nor any Limited Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership. The Operating General Partner shall be obligated to restore any negative balance in its Capital Account upon liquidation of its interest in the Partnership by the end of the taxable year of the Partnership during which such liquidation occurs, or, if later, within 90 days after the date of such liquidation. ARTICLE XIII AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE 13.1 Amendment to be Adopted Solely by Operating General Partner Each Partner agrees that the Operating General Partner, without the approval of any Partner or Assignee, may amend any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (a) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership; (b) the admission, substitution, withdrawal or removal of Partners in accordance with this Agreement; (c) a change that, in the sole discretion of the Operating General Partner, is necessary or advisable to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the Limited Partners have limited liability under the laws of any state or to ensure that the Partnership will not be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes; (d) a change that, in the discretion of the Operating General Partner, (i) does not adversely affect the Partners in any material respect, (ii) is necessary or advisable (A) to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including the Delaware Act), (B) to facilitate the trading of the Partnership Securities (including the division of any class or classes of Outstanding Partnership Securities into different classes to facilitate uniformity of tax consequences within such classes of Partnership Securities), compliance with any of which the Operating General Partner determines in its discretion to be in the best interests of the Partnership and the Partners, (C) in connection with action taken by the Operating General Partner pursuant to Section 5.10, or (D) to effect the conversion of the Operating General Partner's Incentive Compensation Payments as provided in Section 7.13, or (iii) is required to effect the intent expressed in the Registration Statement or the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement; (e) a change in the fiscal year or taxable year of the Partnership and any changes that, in the discretion of the Operating General Partner, are necessary or advisable as a result of a change in the fiscal year or taxable year of the Partnership including, if the Operating General Partner shall so determine, a change in the definition of ''Quarter'' and the dates on which distributions are to be made by the Partnership; (f) an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership, or the General Partners or their directors, officers, trustees or agents from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or ''plan asset'' regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor; (g) subject to the terms of Section 5.7, an amendment that, in the discretion of the Operating General Partner, is necessary or advisable in connection with the authorization of issuance of any class or series of Partnership Securities pursuant to Section 5.6; (h) any amendment expressly permitted in this Agreement to be made by the Operating General Partner acting alone; (i) an amendment effected, necessitated or contemplated by a Merger Agreement approved in accordance with Section 14.3; (j) an amendment that, in the discretion of the Operating General Partner, is necessary or advisable to reflect, account for and deal with appropriately the formation by the Partnership of, or investment by the Partnership in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by the Partnership of activities permitted by the terms of Section 2.4; (k) a merger or conveyance pursuant to Section 14.3(d); or (l) any other amendments substantially similar to the foregoing. 13.2 Amendment Procedures Except as provided in Sections 13.1 and 13.3, all amendments to this Agreement shall be made in accordance with the following requirements. Amendments to this Agreement may be proposed only by or with the consent of both of the General Partners which consent may be given or withheld in their sole discretion. A proposed amendment shall be effective upon its approval by the holders of a Majority Interest, unless a greater or different percentage is required under this Agreement or by Delaware law. Each proposed amendment that requires the approval of the holders of a specified percentage of Outstanding Partnership Securities shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the Operating General Partner shall seek the written approval of the requisite percentage of Outstanding Partnership Securities or call a meeting of the Partners to consider and vote on such proposed amendment. The Operating General Partner shall notify all Record Holders upon final adoption of any such proposed amendments. 13.3 Amendment Requirements (a) Notwithstanding the provisions of Sections 13.1 and 13.2, no provision of this Agreement that establishes a percentage of Outstanding Partnership Securities required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting percentage unless such amendment is approved by the written consent or the affirmative vote of holders of Outstanding Partnership Securities whose aggregate Outstanding Partnership Securities constitute not less than the voting requirement sought to be reduced. (b) Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent, unless such shall be deemed to have occurred as a result of an amendment approved pursuant to Section 13.3(c), (ii) enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to, the General Partners or any of their Affiliates without its consent, which may be given or withheld in its sole discretion, (iii) change Section 12.1(a) or (c), or (iv) change the term of the Partnership or, except as set forth in Section 12.1(c), give any Person the right to dissolve the Partnership. (c) Except as provided in Section 14.3, and except as otherwise provided, and without limitation of the Operating General Partner's authority to adopt amendments to this Agreement as contemplated in Section 13.1, any amendment that would have a material adverse effect on the rights or preferences of any class of Partnership Interests in relation to other classes of Partnership Interests must be approved by the holders of not less than a majority of the Outstanding Partnership Interests of the class affected. (d) Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 7.3 or 13.1 and except as otherwise provided by Section 14.3(b), no amendments shall become effective without the approval of the holders of a Ninety Percent Interest unless the Partnership obtains an Opinion of Counsel to the effect that such amendment will not affect the limited liability of any Limited Partner under applicable law. (e) Except as provided in Section 13.1, this Section 13.3 shall only be amended with the approval of the holders of a Ninety Percent Interest. 13.4 Special Meetings All acts of Partners to be taken pursuant to this Agreement shall be taken in the manner provided in this Article XIII. Special meetings of the Partners may be called by a General Partner or by Partners owning 20% or more of the Outstanding Partnership Securities of the class or classes for which a meeting is proposed and which are entitled to vote thereat. Partners shall call a special meeting by delivering to the Operating General Partner one or more requests in writing stating that the signing Partners wish to call a special meeting and indicating the general or specific purposes for which the special meeting is to be called. Within 60 days after receipt of such a call from Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any statutes, rules, regulations, listing agreements or similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the Operating General Partner shall send a notice of the meeting to the Partners. A meeting shall be held at a time and place determined by the Operating General Partner on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability under the Delaware Act or the law of any other state in which the Partnership is qualified to do business. 13.5 Notice of a Meeting Notice of a meeting called pursuant to Section 13.4 shall be given to the Record Holders in writing by mail or other means of written communication in accordance with Section 15.1. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication. 13.6 Record Date For purposes of determining the Partners entitled to notice of or to vote at a meeting of Partners or to give approvals without a meeting as provided in Section 13.11, the Operating General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting or (b) in the event that approvals are sought without a meeting, the date by which Partners are requested in writing by the Operating General Partner to give such approvals. 13.7 Adjournment When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XIII. 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes The transactions of any meeting of Partners, however called and noticed, and whenever held, shall be as valid as if occurred at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, Partners representing such quorum who were present in person or by proxy and entitled to vote, sign a written waiver of notice or an approval of the holding of the meeting or an approval of the minutes thereof. All waivers and approvals shall be filed with the Partnership records or made a part of the minutes of the meeting. Attendance of a Partner at a meeting shall constitute a waiver of notice of the meeting, except when the Partner does not approve, at the beginning of the meeting, of the transaction of any business because the meeting is not lawfully called or convened; and except that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, if the disapproval is expressly made at the meeting. 13.9 Quorum The holders of a majority of the Outstanding Partnership Securities of the class or classes for which a meeting has been called represented in person or by proxy shall constitute a quorum at a meeting of Partners of such class or classes unless any such action by the Partners requires approval by holders of a greater percentage of such Partnership Securities, in which case the quorum shall be such greater percentage. At any meeting of the Partners duly called and held in accordance with this Agreement at which a quorum is present, the act of Partners holding Outstanding Partnership Securities that in the aggregate represent a majority of the Outstanding Partnership Securities entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Partners holding Outstanding Partnership Securities that in the aggregate represent at least such greater or different percentage shall be required. The Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of Outstanding Partnership Securities specified in this Agreement. In the absence of a quorum any meeting of Partners may be adjourned from time to time by the affirmative vote of holders of at least a majority of the Outstanding Partnership Securities represented either in person or by proxy, but no other business may be transacted, except as provided in Section 13.7. 13.10 Conduct of a Meeting The Operating General Partner shall have full power and authority concerning the manner of conducting any meeting of the Partners or solicitation of approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 13.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The Operating General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting. All minutes shall be kept with the records of the Partnership maintained by the Operating General Partner. The Operating General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals in writing. 13.11 Action Without a Meeting If authorized by the Operating General Partner, any action that may be taken at a meeting of the Partners may be taken without a meeting if an approval in writing setting forth the action so taken is signed by Partners owning not less than the minimum percentage of the Outstanding Partnership Securities that would be necessary to authorize or take such action at a meeting at which all the Partners were present and voted. Prompt notice of the taking of action without a meeting shall be given to the Partners who have not approved in writing. The Operating General Partner may specify that any written ballot submitted to Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the Operating General Partner. If a ballot returned to the Partnership does not vote all of the Partnership Securities held by a Person the Partnership shall be deemed to have failed to receive a ballot for the Partnership Securities that were not voted. If approval of the taking of any action by the Partners is solicited by any Person other than by or on behalf of the Operating General Partner, the written approvals shall have no force and effect unless and until (a) they are deposited with the Partnership in care of the Operating General Partner, (b) approvals sufficient to take the action proposed are dated as of a date not more than 90 days prior to the date sufficient approvals are deposited with the Partnership and (c) an Opinion of Counsel is delivered to the Operating General Partner to the effect that the exercise of such right and the action proposed to be taken with respect to any particular matter (i) will not cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability, and (ii) is otherwise permissible under the state statutes then governing the rights, duties and liabilities of the Partnership and the Partners. 13.12 Voting and Other Rights (a) Only those Record Holders of Partnership Securities on the Record Date set pursuant to Section 13.6 shall be entitled to notice of, and to vote at, a meeting of Partners or to act with respect to matters as to which the holders of the Outstanding Partnership Securities have the right to vote or to act. All references in this Agreement to votes of, or other acts that may be taken by, the Outstanding Partnership Securities shall be deemed to be references to the votes or acts of the Record Holders of such Outstanding Partnership Securities. (b) With respect to Partnership Securities that are held for a Person's account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Partnership Securities are registered, such other Person shall, in exercising the voting rights in respect of such Partnership Securities on any matter, and unless the arrangement between such Persons provides otherwise, vote such Partnership Securities in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 13.12(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 4.3. ARTICLE XIV MERGER 14.1 Authority The Partnership may merge or consolidate with one or more corporations, limited liability companies, business trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including a general partnership or limited partnership, formed under the laws of the State of Delaware or any other state of the United States of America, pursuant to a written agreement of merger or consolidation (''Merger Agreement'') in accordance with this Article XIV. 14.2 Procedure for Merger or Consolidation Merger or consolidation of the Partnership pursuant to this Article XIV requires the prior approval of the General Partners. If the General Partners shall determine, in the exercise of their discretion, to consent to the merger or consolidation, the General Partners shall approve the Merger Agreement, which shall set forth: (a) The names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate; (b) The name and jurisdiction of formation or organization of the business entity that is to survive the proposed merger or consolidation (the ''Surviving Business Entity''); (c) The terms and conditions of the proposed merger or consolidation; (d) The manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity; and (i) if any general or limited partner interests, securities or rights of any constituent business entity are not to be exchanged or converted solely for, or into, cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or general or limited partner interests, rights, securities or obligations of any limited partnership, corporation, trust or other entity (other than the Surviving Business Entity) which the holders of such general or limited partner interests, securities or rights are to receive in exchange for, or upon conversion of their general or limited partner interests, securities or rights, and (ii) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity or any general or limited partnership, corporation, trust or other entity (other than the Surviving Business Entity), or evidences thereof, are to be delivered; (e) A statement of any changes in the constituent documents or the adoption of new constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation; (f) The effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 14.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided, that if the effective time of the merger is to be later than the date of the filing of the certificate of merger, the effective time shall be fixed no later than the time of the filing of the certificate of merger and stated therein); and (g) Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or appropriate by the General Partners. 14.3 Approval by Partners of Merger or Consolidation (a) Except as provided in Section 14.3(d), the General Partners, upon their approval of the Merger Agreement, shall direct that the Merger Agreement be submitted to a vote of Partners, whether at a special meeting or by written consent, in either case in accordance with the requirements of Article XIII. A copy or a summary of the Merger Agreement shall be included in or enclosed with the notice of a special meeting or the written consent. (b) Except as provided in Section 14.3(d), the Merger Agreement shall be approved upon receiving the affirmative vote or consent of the holders of a Majority Interest unless the Merger Agreement contains any provision that, if contained in an amendment to this Agreement, the provisions of this Agreement or the Delaware Act would require the vote or consent of a greater percentage of the Outstanding Partnership Securities or of any class of Partners, in which case such greater percentage vote or consent shall be required for approval of the Merger Agreement. (c) Except as provided in Section 14.3(d), after such approval by vote or consent of the Partners, and at any time prior to the filing of the certificate of merger pursuant to Section 14.4, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement. (d) Notwithstanding anything else contained in this Article XIV or in this Agreement, the Operating General Partner is permitted, in its discretion, without Partner approval, to merge the Partnership or any Group Member into, or convey all of the Partnership's assets to, another limited liability entity which shall be newly formed and shall have no assets, liabilities or operations at the time of such Merger other than those it receives from the Partnership or other Group Member if (i) the Operating General Partner has received an Opinion of Counsel that the merger or conveyance, as the case may be, would not result in the loss of the limited liability of any Limited Partner or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not previously treated as such), (ii) the sole purpose of such merger or conveyance is to effect a mere change in the legal form of the Partnership into another limited liability entity and (iii) the governing instruments of the new entity provide the Limited Partners and the General Partners with the same rights and obligations as are herein contained. 14.4 Certificate of Merger Upon the required approval by the Partners of a Merger Agreement, a certificate of merger shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Act. 14.5 Effect of Merger (a) At the effective time of the certificate of merger: (i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity; (ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation; (iii) all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and (iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity, and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it. (b) A merger or consolidation effected pursuant to this Article shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another. ARTICLE XV GENERAL PROVISIONS 15.1 Addresses and Notices Any notice, demand, request, report or proxy materials required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner or Assignee at the address described below. Any notice, payment or report to be given or made to a Partner or Assignee hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Partnership Security at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Partnership Security by reason of any assignment or otherwise. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 15.1 executed by the Operating General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Transfer Agent or the Partnership is returned by the United States Post Office marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) if they are available for the Partner or Assignee at the principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners and Assignees. Any notice to the Partnership shall be deemed given if received by the Operating General Partner at the principal office of the Partnership designated pursuant to Section 2.3. The General Partners may rely and shall be protected in relying on any notice or other document from a Partner, Assignee or other Person if believed by it to be genuine. 15.2 Further Action The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. 15.3 Binding Effect This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. 15.4 Integration This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto. 15.5 Creditors None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership. 15.6 Waiver No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition. 15.7 Counterparts This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Limited Partner Interest, upon accepting the certificate evidencing such Limited Partner Interest or executing and delivering a Transfer Application as herein described, independently of the signature of any other party. 15.8 Applicable Law This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. 15.9 Invalidity of Provisions If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. 15.10 Consent of Partners Each Partner hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Partners, such action may be so taken upon the concurrence of less than all of the Partners and each Partner shall be bound by the results of such action. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. OPERATING GENERAL PARTNER GENESIS ENERGY, L.L.C. By: /s/ John P. vonBerg - --------------------------------------------------- Name: John P. vonBerg Title: President and Chief Executive Officer MANAGING GENERAL PARTNER GENESIS ENERGY, L.P. By: GENESIS ENERGY, L.L.C., As General Partner By: /s/ John P. vonBerg - --------------------------------------------------- Name: John P. vonBerg Title: President and Chief Executive Officer ORGANIZATIONAL LIMITED PARTNER GENESIS ENERGY, L.P. By: GENESIS ENERGY, L.L.C., As General Partner By: /s/ John P. vonBerg - --------------------------------------------------- Name: John P. vonBerg Title: President and Chief Executive Officer LIMITED PARTNERS All Limited Partners now and hereafter admitted as Limited Partners of the Partnership, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to the Operating General Partner. By: Genesis Energy, L.L.C. General Partner, as attorney-in-fact for all Limited Partners pursuant to the Powers of Attorney granted pursuant to Section 2.6. By: /s/ John P. vonBerg --------------------------------------------------- EX-10 4 EXHIBIT 10.1 PURCHASE & SALE AND CONTRIBUTION & CONVEYANCE AGREEMENT Dated as of November 26, 1996 TABLE OF CONTENTS 1. Definitions 2 2. Capitalization and Conveyance Transactions 15 2.1 LLC Funding 15 2.2 MLP Funding 15 2.3 Genesis MLP's Contribution to Genesis OLP 16 2.4 Asset Purchase and Sale 16 2.5 Basis' and Howell Crude's Contributions to Genesis OLP 17 2.6 Additional LLC Contributions 18 2.7 Clean Up Distributions 18 2.8 Over-Allotment Contributions 18 3. Representations and Warranties 19 3.1 Basis 19 3.2 Howell 29 3.3 Genesis OLP 40 3.4 Genesis MLP 41 4. Miscellaneous Provisions Relating to Transfer of Assets and Business 42 4.1 Nonassignability of Assets 42 4.2 Direct Transfer to a Genesis OLP Affiliate 44 4.3 Assumption of Assumed Liabilities by Genesis OLP 44 4.4 Post Signing Covenants and Agreements 44 4.5 Satsuma Crude Oil Tanks 46 4.6 Nontransferability of Subordinated LP Units 47 4.7 Environmental Make-Whole Provision 47 5. Conditions to Closing 48 6. Closing 49 6.1 Date of Closing 49 6.2 Deliveries 49 7. Post-Closing Matters 50 7.1 Post-Closing Accounting Adjustment 50 7.2. Survival 50 7.3. Further Assurances 50 8. Indemnification 50 8.1 Indemnification by the Transferors 50 8.2 Indemnification by Genesis OLP and Genesis MLP 52 8.3 Specific Indemnification Issues 52 8.4 Notice and Payment of Claims 54 8.5 Defense of Third Party Claims 55 8.6 Cooperation and Preservation of Records 56 9. Disclaimers and Waiver 57 9.1 Disclaimer of Warranties 57 9.2 Waiver of Bulk Sales Laws 57 10. Trademarks and Tradenames 57 10.1 Written Materials and Logos 57 10.2 Signs 57 11. Employee Matters 58 11.1 Employment 58 11.2 LLC Plans 58 11.3 No Third Party Beneficiaries 59 12. Termination of Agreement 59 12.1 Termination 59 12.2 Effect of Termination 59 13. Tax Matters 59 13.1 Refunds of Taxes 59 13.2 Notice of Tax Audits 60 14. Miscellaneous 60 14.1 Costs 60 14.2 Notices 61 14.3 Files and Records 62 14.4 Headings; References; Interpretation 62 14.5 Successors and Assigns 62 14.6 No Third Party Rights 63 14.7 Counterparts 63 14.8 Governing Law 63 14.9 Waiver of Jury Trial 63 14.10 Severability 63 14.11 Deed; Bill of Sale; Assignment 63 14.12 Amendment or Modification 63 14.13 Integration 63 Exhibits A Form of Agency Agreement B Form of Ancillary Agreement C Form of Assignment and Assumption Agreement (Tractors and other Assets) D Form of Assignment Agreement (Pipelines) E Form of Assignment and Assumption Agreement (Station Sites) F Form of Corporate Services Agreement G Form of Credit Support Agreement H Form of Distribution Support Agreement I Form of Employment Agreement J Form of Members Agreement Addendum K Form of Non-Competition Agreement L Form of Pledge Agreement M Form of Refinery Supply Agreement N Form of Redemption and Registration Rights Agreement O Form of Supply, Transportation and Purchase Agreement P Form of Transition Services Agreement Schedules 1.1 Assets A. Basis Assets B-1. Howell Crude Assets B-2. Howell Pipeline Assets B-3. Howell Texas Assets B-4. Howell Transportation Assets B-5. Howell Power Assets B-6. Howell Corporation Assets 1.2 Assumed Liabilities 1.3 Excluded Assets 1.4 Excluded Liabilities 3.1(c) Basis exceptions to representations regarding noncontravention of obligations associated with Basis Assets due to execution of Agreement and consummation of transaction 3.1(g) Basis exceptions to representations regarding balance sheet 3.1(h) Basis exceptions to representations regarding timely filing of tax returns 3.1(j) Basis exceptions to representation regarding leases to third parties of Basis Assets to remain in effect after closing date 3.1(k) Basis exceptions to representation regarding marketing, distribution, etc. of technology used with respect to Basis Assets 3.1(l) Basis Litigation 3.1(m) Basis Employment Plans; Basis exceptions to representation regarding payments to Basis Employees, or increases in benefits payable under Basis Employee Plan; Basis exceptions to representations regarding employment matters contained in Section 3.1(m)(iv) 3.1(n) Basis consents required in connection with execution, delivery or performance of agreements (excepting such consents which the failure to obtain would not have a MAE with respect to the Business) 3.1(o) Basis exceptions to representations regarding Basis Assets and Business contained in Section 3.1(o)(i)-(vii); Amendments to contracts assigned to OLP listed in Schedule 3.1(o) other than in ordinary course; Contracts listed in Schedule 3.1.(o) requiring consent for assignment; Cancellations or threats to cancel contracts listed in Schedule 3.1(o) 3.1(q) Basis exceptions to representations regarding Environmental Matters contained in Section 3.1(q)(i)-(iii) 3.1(s) Basis exceptions to representations regarding compliance with law and permits contained in Section 3.1(s)(ii) 3.1(u) Basis exceptions to representations regarding third party rights to Basis Assets 3.2(c) Howell exceptions to representations regarding noncontravention of obligations associated with Howell Assets due to execution of Agreement and consummation of transaction 3.2(g) Howell exceptions to representations regarding balance sheet 3.2(h) Howell exceptions to representations regarding timely filing of tax returns 3.2(j) Howell exceptions to representation regarding leases to third parties of Howell Assets to remain in effect after closing date 3.2(k) Howell exceptions to representation regarding marketing, distribution, etc. of technology used with respect to Howell Assets 3.2(l) Howell Litigation 3.2(m) Howell Employee Plans; Howell exceptions to representation regarding payments to Howell Employees or directors, or increases in benefits payable under Howell Employee Plan or acceleration of time of payment or vesting of benefits due to execution and consummation of Agreement; Howell exceptions to representations regarding employment matters contained in Section 3.2(m)(iv) 3.2(n) Howell consents required in connection with execution, delivery or performance of agreements (excepting such consents which the failure to obtain would not have a MAE with respect to the Business) 3.2(o) Howell exceptions to representations regarding Howell Assets and Business contained in Section 3.2(o)(i)-(vii); Amendments to contracts assigned to OLP listed in Schedule 3.2(o) other than in ordinary course; Contracts listed in Schedule 3.2(o) requiring consent for assignment; Cancellations or threats to cancel contracts listed in Schedule 3.2(o) 3.2(q) Howell exceptions to representations regarding Environmental Matters contained in Section 3.2(q)(i)-(iii) 3.2(s) Howell exceptions to representations regarding compliance with law and permits contained in Section 3.2(s)(ii) 3.2(u) Howell exceptions to representations regarding third party rights to Howell Assets 7.1 Post-Closing Accounting Adjustment 11.1 List of Business Employees; Severance Payment Terms PURCHASE & SALE AND CONTRIBUTION & CONVEYANCE AGREEMENT This PURCHASE & SALE AND CONTRIBUTION & CONVEYANCE AGREEMENT, dated as of November 26, 1996, is entered into by and among GENESIS ENERGY, L.P., a Delaware limited partnership ("Genesis MLP"), GENESIS CRUDE OIL, L.P., a Delaware limited partnership ("Genesis OLP"), BASIS PETROLEUM, INC., a Texas corporation ("Basis"), HOWELL CORPORATION, a Delaware corporation ("Howell"), HOWELL CRUDE OIL COMPANY, a Delaware corporation ("Howell Crude"), HOWELL PIPELINE TEXAS, INC., a Delaware corporation ("Howell Texas"), HOWELL PIPELINE USA, INC., a Delaware corporation ("Howell Pipeline"), HOWELL TRANSPORTATION SERVICES, INC., a Delaware corporation ("Howell Transportation"), HOWELL POWER SYSTEMS, INC., a Delaware corporation ("Howell Power" and, collectively with Howell Crude, Howell Texas, Howell Pipeline and Howell Transportation, the "Howell Subsidiaries") and GENESIS ENERGY, L.L.C., a Delaware limited liability company ("Genesis LLC"). RECITALS WHEREAS, each of Basis and Howell (individually a Sponsor and together the "Sponsors") has heretofore caused the formation of Genesis LLC pursuant to the Delaware Limited Liability Company Act (the "DLLCA") for the purposes of serving as the general partner of Genesis MLP and a general partner of Genesis OLP; WHEREAS, Basis owns 540 LLC Shares (as defined herein) and Howell owns 460 LLC Shares; WHEREAS, Genesis LLC, as the general partner, and Wayne Kubicek ("Kubicek"), as the organizational limited partner, have heretofore formed Genesis MLP pursuant to the Delaware Revised Uniform Limited Partnership Act (the "Delaware Act") for the purpose, in part, of serving as the organizational limited partner of Genesis OLP; WHEREAS, Genesis LLC contributed $10.00 to the capital of Genesis MLP and received a 1% General Partner Interest (as defined herein) therein; and Kubicek contributed $990.00 to the capital of Genesis MLP and received a 99% Limited Partner Interest (as defined herein) therein; WHEREAS, Genesis LLC, as the general partner, and Genesis MLP, as the organizational limited partner, have heretofore caused the formation of Genesis OLP pursuant to the Delaware Act for the purpose of acquiring, owning and operating the Assets and Business (as hereinafter defined); WHEREAS, Genesis LLC contributed $10.00 to the capital of Genesis OLP and received a 1% General Partner Interest therein; and Genesis MLP contributed $990.00 to the capital of Genesis OLP and received a 99% Limited Partner Interest therein; WHEREAS, Genesis LLC, as the general partner, and Kubicek, as the organizational limited partner, have entered into that certain Agreement of Limited Partnership of Genesis MLP (as it may be amended, supplemented or restated from time to time, the "MLP Agreement"); WHEREAS, Genesis LLC, as the general partner, and Genesis MLP, as the organizational limited partner, have entered into that certain Agreement of Limited Partnership of Genesis OLP (as it may be amended, supplemented or restated from time to time, the "OLP Agreement"); and WHEREAS, Howell Crude has contributed all of its tangible assets to Howell Power; NOW, THEREFORE, in consideration of their mutual undertakings and agreements hereunder, and subject to the terms and conditions set forth in this Agreement, the Parties (as defined herein) hereto undertake and agree as follows: ARTICLE 1 DEFINITIONS. The following capitalized terms shall have the meanings given below. "Accounting Firm" has the meaning assigned to such term in Schedule 7.1. "Additional LLC Contributions" has the meaning assigned to such term in Section 2.6(b). "Affiliate" means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person in question. As used herein, the term "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. Notwithstanding anything contained in this definition to the contrary, the term Affiliate, (i) with respect to Genesis MLP and Genesis OLP, shall not include the Sponsors, the Transferors, Genesis LLC or SI (or their respective Affiliates determined without regard to Genesis MLP or Genesis OLP), and (ii) with respect to the Sponsors, the Transferors, Genesis LLC or SI, shall not include Genesis MLP or Genesis OLP (or their respective Affiliates determined without regard to the Sponsors, the Transferors, Genesis LLC or SI). "Agency Agreement" means the Agency Agreement between Genesis OLP and each Transferor or its Affiliate, dated as of the Closing Date, relating to the servicing by Genesis OLP as an agent of such Transferor of certain contracts that would (but for limitations on assignability or transfer as referred to in Section 4.1 therein) be part of the Assets, substantially in the form attached hereto as Exhibit A. "Aggregate Obligation" has the meaning assigned to such term in Section 8.3(c). "Agreement" means this Purchase & Sale and Contribution & Conveyance Agreement, as it may be amended, supplemented or restated from time to time. "Ancillary Agreement" means the Ancillary Agreement between Basis, SI, Howell, Howell Crude and Howell Pipeline Texas, dated as of the Closing Date, substantially in the form attached hereto as Exhibit B. "Andersen" has the meaning assigned to such term in Section 3.1(d). "Annual Obligation" has the meaning assigned to such term in Section 8.3(c). "Asset Purchase and Sale" has the meaning assigned to such term in Section 2.4(c). "Assets" means the Basis Assets and the Howell Assets, collectively, including, however, any accounting adjustments for operating income in the ordinary course of business as of the Effective Date. "Assignment and Assumption Agreement (Tractors and Other Assets)" means a Bill of Sale, Assignment and Assumption Agreement, dated as of the Closing Date, between each of the Transferors and Genesis OLP, in substantially the form attached hereto as Exhibit C. "Assignment Agreement (Pipelines)" means a Conveyance, Assignment and Bill of Sale between certain Howell Subsidiaries and Genesis OLP, substantially in the form attached hereto as Exhibit D. "Assignment and Assumption Agreement (Station Sites)" means a Conveyance, General Assignment and Bill of Sale, dated as of the Closing Date, between a Transferor and Genesis OLP, substantially in the form attached hereto as Exhibit E. "Assumed Liabilities" means (a) all liabilities and obligations reflected on Schedule 1.2, (b) all liabilities or obligations arising from or relating to the ownership or operation of the Assets or the Business on or after the Closing Date, but excluding all liabilities (including those created under CERCLA) arising from ownership or operation of the Assets or the Business prior to the Closing Date, (c) all liabilities and obligations with respect to the contracts, including without limitation, those listed on Schedules 1.1A-1.1B-6, to be paid or performed by Genesis OLP on or after the Closing Date, or which relate to periods on or after the Closing Date, and (d) all liabilities and obligations in connection with all funds transferred to Genesis OLP for the account of any other Person in Suspense Accounts as reflected on Schedule 1.2; excluding, however, in each case, any Excluded Liabilities; provided, however, that any accounting adjustment to operating expenses in the ordinary course of business shall be as of the Effective Date. "Base Inventory" means (i) with respect to Basis 184,671 barrels of crude oil and (ii) with respect to Howell 100,000 barrels of crude oil. "Basis" has the meaning assigned to such term in the opening paragraph of this Agreement. "Basis and Howell Crude Contributions" has the meaning assigned to such term in Section 2.5(b). "Basis Adjusted Working Capital" has the meaning assigned to such term in Schedule 7.1. "Basis Assets" means the assets referred to in Schedule 1.1A. "Basis Employee Plans" has the meaning assigned to such term in Section 3.1(m)(ii). "Basis Employees" has the meaning assigned to such term in Section 3.1(m)(iii). "Basis Final Balance Sheet" has the meaning assigned to such term in Schedule 7.1. "Basis Financial Statements" has the meaning assigned to such term in Section 3.1(d). "Basis Purchase Cash" means 54% of the Purchase Cash. "Basis Returns" has the meaning assigned to such term in Section 3.1(h). "Basis Taxes" has the meaning assigned to such term in Section 3.1(h). "Benefit Plan" has the meaning assigned to such term in Section 11.2. "Business" means (i) with respect to Basis, the crude oil gathering and marketing operations conducted by Basis immediately prior to the Closing Date; (ii) with respect to the Howell Entities, the crude oil gathering and marketing operations and pipeline-related operations conducted by the Howell Entities immediately prior to the Closing Date; and (iii) with respect to Genesis OLP, the crude oil gathering and marketing operations and pipeline-related operations to be conducted by Genesis OLP immediately after the Closing Date. "Business Employees" has the meaning assigned to such term in Section 11.1. "Case Handler" has the meaning assigned to such term in Section 8.5(a). "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986. "Clean Up Distributions" has the meaning assigned to such term in Section 2.7(d). "Closing" has the meaning assigned to such term in Section 6.1. "Closing Date" means the Closing Date as defined in the Underwriting Agreement or such other date as the Parties may mutually agree. "Collateral Agent" has the meaning assigned to such term in the Pledge Agreement. "Commitment" has the meaning assigned to such term in Section 4.1(a). "Common GP Units" means units representing common general partner interests in Genesis OLP. "Common LP Units" means units representing common limited partner interests in Genesis OLP. "Common MLP Units" means units representing limited partner interests in Genesis MLP. "Common Units" means Common GP Units or Common LP Units. "Corporate Services Agreement" means the Corporate Services Agreement dated as of the Closing Date, among Genesis MLP, Genesis OLP and Basis, substantially in the form attached hereto as Exhibit F. "Credit Support Agreement" means the Master Credit Support Agreement dated as of the Closing Date, by and among Genesis OLP, Basis and SI, substantially in the form attached hereto as Exhibit G. "Delaware Act" has the meaning assigned to such term in the Recitals to this Agreement. "DGCL" means the Delaware General Corporation Law. "Disputed Items" has the meaning assigned to such term in Schedule 7.1. "Distribution Support Agreement" means the Distribution Support Agreement, dated as of the Closing Date, among Genesis OLP and SI, substantially in the form attached hereto as Exhibit H. "DLLCA" has the meaning assigned to such term in the Recitals to this Agreement. "Effective Time" has the meaning assigned to such term in Schedule 7.1. "Employment Agreement" means the employment agreements entered into by certain officers of Genesis LLC substantially in the form attached hereto as Exhibit I. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Estimated Basis Adjustment" means $4,298,539, a good faith estimate as of the date hereof by Basis, in consultation with Genesis OLP, of the amount necessary to be paid by Basis to Genesis OLP so that no post-closing adjustment is required pursuant to section 1(b)(i) of Schedule 7.1. "Excess Basis Cash" means an amount equal to the excess of (x) the Basis Purchase Cash over (y) $8,700,000. "Estimated Howell Adjustment" means $2,828,373, a good faith estimate as of the date hereof by Howell, in consultation with Genesis OLP, of the amount necessary to be paid by Howell to Genesis OLP so that no post-closing adjustment is required pursuant to section 1(b)(ii) of Schedule 7.1. "Excess Howell Cash" means an amount equal to the excess, if any, of (x) the Howell Purchase Cash over (y) the Howell Affiliate Cash. "Excess Howell Subordinated LP Units" means a number of Subordinated LP Units equal to the excess of (x) 1,508,800 Subordinated LP Units over (y) the Howell Affiliate Subordinated LP Units. "Excluded Assets" means the assets referred to in Schedule 1.3. "Excluded Liabilities" means the respective liabilities and obligations of each Transferor and each of their respective Affiliates: (a) reflected on Schedule 1.4; (b) for income and franchise taxes; (c) accruing or arising from or relating to the ownership or operation of the Assets or the Business prior to the Closing Date by each Transferor and its Affiliates, including, without limitation, all environmental matters (including those created under CERCLA) and all ad valorem taxes, real property taxes, federal, state or other income taxes, sales taxes, personal property taxes, excise, production, severance, gross receipts and other similar taxes relating to the Assets and the operation of the Business prior to the Closing Date, including any such income tax liabilities of the Transferors and their Affiliates that may result from consummation of the transactions contemplated by this Agreement; (d) for salary, wages, bonus payments and fringe benefits for employees of each Transferor or its Affiliates with respect to all periods ending prior to the Closing Date except as otherwise provided in Section 11 hereto; (e) to third parties for personal injury and/or property damage occurring prior to the Closing Date or arising out of operation of the Assets or the Business prior to the Closing Date; (f) to third parties arising from or attributable to any civil, criminal, administrative, arbitrative or other such proceedings or government investigations pending against such Transferor or Affiliate or its Assets prior to the Closing Date or that may be filed against such Transferor or Affiliate or its Assets on or after the Closing Date that are attributable to a claim or claims arising prior to the Closing Date or to the ownership or operation of the Assets or the Business prior to the Closing Date; (g) any indebtedness of Basis or any of the Howell Entities for borrowed money; (h) any obligation or liability relating primarily to the Excluded Assets; and (i) with respect to the Howell Entities the indemnification obligations of Howell and its Affiliates to Exxon relating to the purchase of Exxon's pipeline operations pursuant to the Purchase and Sale Agreement dated February 22, 1995, as amended March 31, 1995; provided, however, that any accounting adjustment for operating expenses in the ordinary course of business shall be as of the Effective Date. "Expertise" means all processes, trade secrets, confidential or proprietary know-how (to the fullest extent that such know-how can be conveyed), design, manufacturing, engineering and other drawings, technology, intellectual property rights, agent agreements, technical information, software, engineering data, design and engineering specifications relating to the Business, including Transferor's internally developed computer technology related to the Assets and the Business. "Exxon" means Exxon Pipeline Company. "Exxon Pipeline Statement" has the meaning assigned to such term in Section 3.2(d). "Exxon Satsuma Facilities Lease Agreement" has the meaning assigned to such term in Section 4.5(c). "Final Balance Sheets" means the Basis Final Balance Sheet and the Howell Final Balance Sheet. "Final Prospectus" means the prospectus relating to the Common MLP Units offered in the Public Offering that is first filed pursuant to Rule 424(b) of the Securities Act or, if no filing pursuant to Rule 424(b) is required, the final prospectus included in the Registration Statement. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, in statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be accepted by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination. "General Partner Interest" shall mean, with respect to Genesis MLP and Genesis OLP, an interest in the profits, losses and capital of Genesis MLP and Genesis OLP, respectively, that provides the holder thereof with the rights and obligations of a general partner in accordance with MLP Agreement and the OLP Agreement, respectively. "Genesis LLC" has the meaning assigned to such term in the opening paragraph of this Agreement. "Genesis MLP" has the meaning assigned to such term in the opening paragraph of this Agreement. "Genesis OLP" has the meaning assigned to such term in the opening paragraph of this Agreement. "Howell" has the meaning assigned to such term in the opening paragraph of this Agreement. "Howell Adjusted Working Capital" has the meaning assigned to such term in Schedule 7.1. "Howell Affiliate Cash" means the aggregate amount of cash to be paid by Genesis OLP to Howell Pipeline, Howell Texas, Howell Transportation and Howell Power pursuant to Sections 2.4(a)(ii) through (a)(v). "Howell Affiliate Subordinated LP Units" means the aggregate number of Subordinated LP Units, if any, issued to Howell Pipeline, Howell Texas, Howell Transportation and Howell Power pursuant to Section 2.4(b). "Howell Assets" means the Howell Corporation Assets, the Howell Crude Assets, the Howell Pipeline Assets, the Howell Texas Assets, the Howell Transportation Assets and the Howell Power Assets. "Howell Corporation Assets" means the Assets referred to in Schedule 1.1B- 6. "Howell Crude" has the meaning assigned to such term in the opening paragraph of this Agreement. "Howell Crude Assets" means the assets referred to in Schedule 1.1B-1. "Howell Crude Operations" has the meaning assigned to such term in Section 3.2(d). "Howell Employee Plans" has the meaning assigned to such term in Section 3.2(m)(ii). "Howell Employees" has the meaning assigned to such term in Section 3.2(m)(iii). "Howell Entities" means Howell and the Howell Subsidiaries. "Howell Final Balance Sheet" has the meaning assigned to such term in Schedule 7.1. "Howell Financial Statements" has the meaning assigned to such term in Section 3.2(d). "Howell Pipeline" has the meaning assigned to such term in the opening paragraph of this Agreement. "Howell Pipeline Assets" means the assets referred to in Schedule 1.1B-2. "Howell Power" has the meaning assigned to such term in the opening paragraph of this Agreement. "Howell Power Assets" means the assets referred to in Schedule 1.1B-5. "Howell Purchase Cash" means 46% of the Purchase Cash. "Howell Returns" has the meaning assigned to such term in Section 3.2(h). "Howell Subsidiaries" means Howell Crude, Howell Texas, Howell Pipeline, Howell Transportation and Howell Power. "Howell Taxes" has the meaning assigned to such term in Section 3.2(h). "Howell Texas" has the meaning assigned to such term in the opening paragraph of this Agreement. "Howell Texas Assets" means the assets referred to in Schedule 1.1B-3. "Howell Transportation" has the meaning assigned to such term in the opening paragraph of this Agreement. "Howell Transportation Assets" means the assets referred to in Schedule 1.1B-4. "Indemnified Losses" has the meaning assigned to such term in Section 8.1. "Indemnified Party" has the meaning assigned to such term in Section 8.4. "Indemnifying Party" has the meaning assigned to such term in Section 8.4. "Information" has the meaning assigned to such term in Section 14.3. "Interest" has the meaning assigned to such term in Section 4.1. "JMP" means JM Petroleum Corporation. "Laws" means any and all laws, statutes, common law, ordinances, rules or regulations promulgated by a governmental authority, orders or decrees of a court or other governmental authority, judicial decisions, decisions of arbitrators or determinations of any governmental authority or court. "Liens" means liens, claims, pledges, security interests, charges, restrictive covenants, easements or encumbrances or title defects of any nature. "Limited Partner Interest" shall mean, with respect to Genesis MLP and Genesis OLP, an interest in the profits, losses and capital of Genesis MLP and Genesis OLP, respectively, that provides the holder thereof with the rights and obligations of a limited partner in accordance with the MLP Agreement and the OLP Agreement, respectively. "Litigation Records" has the meaning assigned to such term in Section 8.6(b). "LLC Agreement" the Limited Liability Company Agreement of Genesis LLC entered into by Basis and Howell, as members, dated as of November 14, 1996. "LLC Contribution Amount" means an amount equal to 2/98ths of the Net Offering Proceeds. "LLC Funding" has the meaning assigned to such term in Section 2.1(c). "LLC Interest" shall mean, with respect to Genesis LLC, an interest in the profits, losses and capital of Genesis LLC that provides the holder thereof with the rights and obligations of a member in accordance with the Members Agreement. "LLC Over-Allotment Contribution" has the meaning assigned to such term in Section 2.8(b). "LLC Plans" has the meaning assigned to such term in Section 11.2. "LLC Shares" means shares issued pursuant to the LLC Agreement representing LLC Interests. "MAE" means a material adverse effect on the business, results of operations, assets, liabilities or financial condition of the applicable Person or the Business. "Make-Whole Payment Request" has the meaning assigned to such term in Section 4.7. "Managing General Partner Interest" shall mean, with respect to Genesis OLP, an interest in the profits, losses and capital of Genesis OLP that provides the holder thereof with the rights and obligations of the managing general partner in accordance with the OLP Agreement. "Members Agreement Addendum" means the addendum dated as of the Closing Date of the LLC Agreement between Howell and Howell Crude regarding the transfer of interests in Genesis LLC, in the form of Exhibit J hereto. "MLP Agreement" has the meaning assigned to such term in the Recitals to this Agreement. "MLP Contribution" has the meaning assigned to such term in Section 2.3(b). "MLP Funding" has the meaning assigned to such term in Section 2.2(c). "MLP GP Units" means units representing a general partner interest in Genesis MLP. "Net MLP Proceeds" means an amount equal to (x) the sum of (i) the Net Offering Proceeds, plus (ii) the LLC Contribution Amount, minus (y) the Nonunderwriting Offering Expenses. "Net Offering Proceeds" means the Public Offering Proceeds less the Underwriting Discount. "Net Over-Allotment Proceeds" means the gross proceeds received by Genesis MLP in connection with the exercise by the Underwriters of the Over-Allotment Option, less the Over-Allotment UW Discount. "Non-Competition Agreement" means the agreement, dated as of the Closing Date, among SI, Basis, Howell, Genesis MLP and Genesis OLP, in substantially the form attached hereto as Exhibit K. "Nonunderwriting Offering Expenses" means, any and all fees and other out- of-pocket expenses (including, without limitation, all Transfer Expenses, fees and expenses of accountants, attorneys, printers, consultants or other agents) incurred, paid, payable or provided by Genesis MLP in connection with the Public Offering; provided, however, Nonunderwriting Offering Expenses shall not include the Underwriting Discount or the Over-Allotment UW Discount. "OLP Agreement" has the meaning assigned to such term in the Recitals to this Agreement. "OLP Covered Liabilities" has the meaning assigned to such term in Section 4.7. "OLP Damages" has the meaning assigned to such term in Section 8.1 of this Agreement. "OLP Parties" means Genesis OLP and any direct or indirect subsidiary or Affiliate of Genesis OLP, and any of their respective directors, shareholders, officers, employees, agents, consultants, customers and representatives. "Operating General Partner Interest" shall mean, with respect to Genesis OLP, an interest in the profits, losses and capital of Genesis OLP that provides the holder thereof with the rights and obligations of an operating general partner in accordance with the OLP Agreement. "Organizational Limited Partner" means, with respect to Genesis MLP, Wayne Kubicek, and with respect to Genesis OLP, Genesis MLP. "Over-Allotment Common MLP Units" means the Common MLP Units purchased by the Underwriters upon exercise of the Over-Allotment Option. "Over-Allotment Contributions" has the meaning assigned to such term in Section 2.8(e). "Over-Allotment Option" means the over-allotment option granted to the Underwriters in the Underwriting Agreement to purchase up to 1,125,000 additional Common MLP Units. "Over-Allotment UW Discount" means the amount of underwriting discounts and commissions provided to the Underwriters in connection with the exercise by the Underwriters of the Over-Allotment Option. "Party" means each of the Persons who are signatories to this Agreement. "Per Unit Capital Amount" has the meaning set forth in the OLP Agreement. "Percentage Interests" has, with respect to Genesis MLP and Genesis OLP, the meaning assigned to such terms in the MLP Agreement and the OLP Agreement, respectively. "Permitted Encumbrances" means any claims or Liens which would not result in a loss, liability, cost or expense in excess of $5 million each or which do not secure monetary obligations. "Person" means an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity. "Phibro" means Phibro Energy USA, Inc. and any other entity containing the name "Phibro". "Pipeline Assets" means all pipelines for the transmission of crude oil and fixtures related thereto included in the Assets, including interests in real property relating thereto, but expressly excluding all storage terminals, station sites and improvements located thereon. "Pledge Agreement" means the Pledge Agreement dated as of the Closing Date among Basis, the Howell Entities and Genesis OLP, substantially in the form attached as Exhibit L. "Post-Signing Period" means the period beginning on the date hereof and until the Closing Date. "Prime Rate" means the U.S. annual interest rate published as the "Prime Rate" in the Wall Street Journal under the column headed "Money Rates" or such other title as may succeed such heading for the applicable period in effect from time to time. "Proportional Share" means with regard to Basis 54% and to Howell 46%. "Public Offering" means the initial public offering of Common MLP Units (including the Over-Allotment Option) pursuant to the terms of the Underwriting Agreement. "Public Offering Expenses" means the Nonunderwriting Offering Expenses plus the Underwriting Discount. "Public Offering Proceeds" means the gross proceeds received by Genesis MLP in connection with the Public Offering (excluding gross proceeds received by Genesis MLP in connection with the exercise by the Underwriters of the Over- Allotment Option). "Purchase Cash" means the Net MLP Proceeds minus $5 million. "Recent Audited Balance Sheet" means (i) with respect to Basis, the balance sheet as of December 31, 1995 of Basis Petroleum, Inc. Crude Gathering Division that is included in the Final Prospectus and (ii) with respect to Howell, the balance sheet as of December 31, 1995 of Howell Crude Operations that is included in the Final Prospectus. "Redemption and Registration Rights Agreement" means the Redemption and Registration Rights Agreement, dated as of the Closing Date, among Genesis MLP, Genesis OLP, Basis and the Howell Entities, substantially in the form attached hereto as Exhibit M. "Refinery Supply Agreement" means the Purchase and Sale Agreement for Crude Oil dated as of the Closing Date, by and among Basis and Genesis OLP, substantially in the form attached hereto as Exhibit N. "Registration Statement" means the Registration Statement on Form S-1 (Registration No. 333-11545) filed with the Securities and Exchange Commission on behalf of Genesis MLP, as amended or supplemented. "Representatives" means Salomon Brothers Inc, Smith Barney Inc., Dean Witter Reynolds Inc., PaineWebber Incorporated and Prudential Securities Incorporated, as the representatives of the several Underwriters. "Retained Accounts" has the meaning assigned to such term in Schedule 7.1. "Securities Act" means the Securities Act of 1933, as amended. "September Balance Sheet" means (i) with respect to Basis, a balance sheet of Basis Petroleum, Inc. Crude Gathering Division as of September 30, 1996 prepared in accordance with GAAP and (ii) with respect to Howell, a balance sheet of Howell Crude Operations as of September 30, 1996 prepared in accordance with GAAP. "SI" means Salomon Inc, a Delaware corporation. "Sponsor" means each of Basis and Howell, but does not include any of the Howell Subsidiaries. "Subordinated GP Units" means units representing subordinated general partner interests in Genesis OLP. "Subordinated LP Units" means units representing subordinated limited partner interests in Genesis OLP. "Subordinated Unit" means a Subordinated LP Unit or a Subordinated GP Unit. "Supply, Transportation and Purchase Agreement" means the Supply, Transportation and Purchase Agreement dated as of the Closing Date, by and among Howell and Genesis OLP, substantially in the form attached hereto as Exhibit O. "Suspense Account" means an account established by a Transferor to hold hydrocarbon production revenues where a dispute or question exists as to the ownership of such revenues. "Tank Cleaning" means the complete removal and disposal in Howell's name, to a location away from the Assets, of all water, tank bottoms, sediments, sludges and residual materials in any of the following Satsuma Station bulk crude oil storage tanks and associated piping, in each case in compliance with all applicable Laws: Tanks 1786, 1788, 1789, 1790, 1912, 1913, 1915, and 1916. "Transaction Documents" means this Agreement, the Agency Agreement, if applicable, the Ancillary Agreement, each Assignment Agreement (Pipelines), each Assignment and Assumption Agreement (Station Sites), each Assignment and Assumption Agreement (Tractors and Other Assets), the Corporate Services Agreement, the Credit Support Agreement, the Distribution Support Agreement, Employment Agreements, the Members Agreement Addendum, the restatements of each of the MLP Agreement and the OLP Agreement in substantially the forms included in the Final Prospectus, the Non-Competition Agreement, the Pledge Agreement, the Redemption and Registration Rights Agreement, the Refinery Supply Agreement, the Supply, Transportation and Purchase Agreement, the Transition Services Agreement and the Underwriting Agreement. "Transfer Expenses" means all reasonable out-of-pocket expenses, fees and costs, including, without limitation all sales, use and similar taxes and documentary, filing, recording, transfer, deed or conveyance fees or taxes, in each case, that are reasonably incurred or proposed to be reasonably incurred in connection with the contributions, conveyances and deliveries to be made hereunder. "Transferor" means each of Basis, Howell and the Howell Subsidiaries. "Transferor Damages" has the meaning assigned to such term in Section 8.2. "Transferor Parties" means any Transferor and any Affiliate of such Transferor (including, without limitation, Genesis LLC and, with respect to Basis, SI), and (unless such Persons are OLP Parties) any of their respective directors, shareholders, partners, members, officers, employees, agents, consultants, customers, representatives, successors, transferees or assignees. "Transition Services Agreement" means the Transition Services Agreement dated as of the Closing Date, among Genesis LLC, Basis and Howell, substantially in the form attached hereto as Exhibit P. "Underallocated Sponsor" has the meaning assigned to such term in Section 4.7. "Underground Storage Tanks" has the meaning assigned to such term in the Resource, Conservation and Recovery Act, 42 U.S.C. 6991, as amended, or any applicable state law. "Underwriters" means the several Underwriters to be listed in Schedule I to the Underwriting Agreement. "Underwriting Agreement" means the Underwriting Agreement of even date herewith relating to the Public Offering by and among Genesis MLP, Genesis OLP, Genesis LLC, the Sponsors, SI and the Representatives. "Underwriting Discount" means the underwriting discounts and commissions provided to the Underwriters in connection with the Public Offering (excluding the Over-Allotment UW Discount). "Usable Tanks" means the following tanks located at the Satsuma Station: Tanks 1788, 1912, 1913, 1915, and 1916. ARTICLE 2 CAPITALIZATION AND CONVEYANCE TRANSACTIONS. On the Closing Date, the transactions described in this Section 2 will occur in the exact order set forth in this Section 2. SECTION 2.1 LLC Funding. (a) Simultaneously, (i) with respect to its 540 LLC Shares, Basis shall contribute to Genesis LLC (A) a $ 4.05 million demand, interest-bearing promissory note and (B) cash in an amount equal to 54% of the LLC Contribution Amount and (ii) with respect to its 460 LLC Shares, Howell shall contribute to Genesis LLC (A) a $ 3.45 million demand, interest- bearing promissory note and (B) cash in an amount equal to 46% of the LLC Contribution Amount. (b) Howell shall then contribute its 460 LLC Shares to Howell Crude. (c) The transactions contemplated by this Section 2.1 shall be collectively referred to as the "LLC Funding." SECTION 2.2 MLP Funding. (a) Upon the prior consummation of the LLC Funding, and simultaneously, (i) Genesis LLC shall contribute to Genesis MLP cash in an amount equal to the LLC Contribution Amount in exchange for 153,061 MLP GP Units representing a 2% general partner interest in Genesis MLP and (ii) the Underwriters shall contribute to Genesis MLP cash in an amount equal to the Net Offering Proceeds in exchange for 7,500,000 Common MLP Units representing a 98% limited partner interest in Genesis MLP. (b) Genesis MLP shall accept the amounts contributed pursuant to clauses (a)(i) and (a)(ii) hereof as a contribution to capital. (c) The transactions contemplated by this Section 2.2 shall be collectively referred to as the "MLP Funding." SECTION 2.3 Genesis MLP's Contribution to Genesis OLP. (a) Upon the prior consummation of the MLP Funding, Genesis MLP shall transfer cash in an amount equal to the Net MLP Proceeds to Genesis OLP in exchange for 7,653,061 Common GP Units representing a 69.57% Managing General Partner Interest in Genesis OLP, and Genesis OLP shall accept such cash as a contribution to capital. (b) The transactions contemplated by this Section 2.3 shall be collectively referred to as the "MLP Contribution." SECTION 2.4 Asset Purchase and Sale. (a) Upon the prior consummation of the MLP Contribution, and simultaneously, (i) Basis shall sell, grant, convey, assign, transfer, set over and deliver to Genesis OLP, its successors and assigns, for its and their own use forever, all right, title and interest of Basis in and to the tangible Basis Assets in exchange for cash in the amount of $8,700,000, the sufficiency of such consideration which is hereby acknowledged, (ii) Howell Pipeline shall sell, grant, convey, assign, transfer, set over and deliver to Genesis OLP, its successors and assigns, for its and their own use forever, all right, title and interest of Howell Pipeline in and to the Howell Pipeline Assets in exchange for cash in the amount of $38,818,514, the sufficiency of such consideration which is hereby acknowledged, (iii) Howell Texas shall sell, grant, convey, assign, transfer, set over and deliver to Genesis OLP, its successors and assigns, for its and their own use forever, all right, title and interest of Howell Texas in and to the Howell Texas Assets in exchange for cash in the amount of $44,116,066, the sufficiency of such consideration which is hereby acknowledged, (iv) Howell Transportation shall sell, grant, convey, assign, transfer, set over and deliver to Genesis OLP, its successors and assigns, for its and their own use forever, all right, title and interest of Howell Transportation in and to the Howell Transportation Assets in exchange for cash in the amount of $1,573,000, the sufficiency of such consideration which is hereby acknowledged, and (v) Howell Power shall sell, grant, convey, assign, transfer, set over and deliver to Genesis OLP, its successors and assigns, for its and their own use forever, all right, title and interest of Howell Power in and to the Howell Power Assets in exchange for cash in the amount of $3,586,000, the sufficiency of such consideration which is hereby acknowledged. (b) In the event that the Howell Purchase Cash is less than the Howell Affiliate Cash, (i) the Howell Purchase Cash shall be paid first to Howell Pipeline, Howell Transportation and Howell Power with the remainder, if any, to Howell Texas, and (ii)Genesis OLP shall issue to each of Howell Pipeline, Howell Texas, Howell Transportation and Howell Power Subordinated LP Units with an aggregate Per Unit Capital Amount equal to the difference, in each case, between the amount to be paid by Genesis OLP to each Howell Subsidiary for its assets under clause (a) hereof and the amount of Howell Purchase Cash received by each Howell Subsidiary pursuant to this clause (b). (c) The transactions contemplated by this Section 2.4 shall be collectively referred to as the "Asset Purchase and Sale." SECTION 2.5 Basis' and Howell Crude's Contributions to Genesis OLP. (a) Upon the prior consummation of the Asset Purchase and Sale, and simultaneously, (i) Basis shall grant, convey, assign, transfer, set over and deliver to Genesis OLP, its successors and assigns, for its and their own use forever, all right, title and interest of Basis in and to all of the intangible assets associated with its crude oil gathering and marketing business, including all associated goodwill, going concern value and know- how, in exchange for (A) the distribution of the Excess Basis Cash, (B) the issuance of 1,771,200 Subordinated LP Units and (C) the issuance of 36,147 Subordinated GP Units representing a .3286% General Partner Interest in Genesis OLP, the sufficiency of such consideration which is hereby acknowledged, and Genesis OLP shall accept such assets as a contribution to the capital of Genesis OLP, and (ii) Howell Crude shall grant, convey, assign, transfer, set over and deliver to Genesis OLP, its successors and assigns, for its and their own use forever, all right, title and interest of Howell Crude in and to all of the intangible assets associated with its crude oil gathering and marketing business, including all associated goodwill, going concern value, and know-how, in exchange for (A) the distribution of the Excess Howell Cash, (B) the issuance of the Excess Howell Subordinated LP Units and (C) the issuance of 30,792 Subordinated GP Units representing a .2799% General Partner Interest in Genesis OLP, the sufficiency of such consideration which is hereby acknowledged, and Genesis OLP shall accept such assets as a contribution to the capital of Genesis OLP. (b) The transactions contemplated by this Section 2.5 shall be collectively referred to as the "Basis and Howell Crude Contributions." SECTION 2.6 Additional LLC Contributions. (a) Upon the prior consummation of the Basis and Howell Crude Contributions, and simultaneously, (i) with respect to its 540 LLC Shares, Basis shall transfer to Genesis LLC its 36,147 Subordinated GP Units and (ii) with respect to its 460 LLC Shares, Howell Crude shall transfer to Genesis LLC its 30,792 Subordinated GP Units. Genesis LLC shall accept the contributions made pursuant to clauses (a)(i) and (a)(ii) of this Section 2.6 as additional contributions to its capital. (b) The transactions contemplated by this Section 2.6 shall be collectively referred to as the "Additional LLC Contributions." SECTION 2.7 Clean Up Distributions. (a) Upon the prior consummation of the Additional LLC Contributions, and simultaneously, Genesis OLP shall distribute (i) cash in the amount of $10.00 to Genesis LLC with respect to its General Partner Interest in Genesis OLP and (ii) cash in the amount of $990.00 to Genesis MLP with respect to its organizational Limited Partner Interest in Genesis OLP. Thereafter, Genesis MLP shall cease to be a limited partner of Genesis OLP. (b) Genesis MLP shall distribute (i) cash in the amount of $10.00 to Genesis LLC with respect to its General Partner Interest in Genesis MLP and (ii) cash in the amount of $990.00 to Kubicek with respect to his Organizational Limited Partner Interest in Genesis MLP. Thereafter, Kubicek shall cease to be a limited partner of Genesis MLP. (c) Genesis LLC shall distribute (i) cash in the amount of $540.00 to Basis with respect to its 540 LLC Shares and (ii) cash in the amount of $460.00 to Howell Crude with respect to its 460 LLC Shares. (d) The transactions contemplated by this Section 2.7 shall be collectively referred to as the "Clean Up Distributions." SECTION 2.8 Over-Allotment Contributions. (a) In the event the Underwriters exercise the Over-Allotment Option, in whole or in part, (i) with respect to its 540 LLC Shares, Basis shall contribute to Genesis LLC cash in an amount equal to 54% of the LLC Over-Allotment Contribution and (ii) with respect to its 460 LLC Shares, Howell shall contribute or cause an Affiliate to contribute to Genesis LLC cash in an amount equal to 46% of the LLC Over- Allotment Contribution. (b) Genesis LLC shall then contribute cash to Genesis MLP in an amount equal to 2/98ths of the Net Over-Allotment Proceeds (the "LLC Over-Allotment Contribution") in exchange for an additional number of MLP GP Units equal to 2/98ths of the total number of Over-Allotment Common MLP Units. (c) Genesis MLP shall then contribute to Genesis OLP cash in an amount equal to the sum of (i) the Net Over-Allotment Proceeds plus (ii) the LLC Over- Allotment Contribution in exchange for a number of additional Common GP Units equal to the sum of (x) the total number of Over-Allotment Common MLP Units plus (y) the number of additional MLP GP Units issued pursuant to the MLP Agreement as described therein. (d) Genesis OLP shall use the cash received pursuant to clause (c) of this Section 2.8 to redeem from all the holders of Subordinated Units, based on the relative number of Subordinated Units owned by each such holder, a number of such Subordinated Units equal to the number of additional Common GP Units issued to Genesis MLP pursuant to the OLP Agreement as described therein. (e) The transactions contemplated by this Section 2.8 shall be collectively referred to as the "Over-Allotment Contributions." If and to the extent any of the Parties hereto receive funds in connection with the transactions contemplated by this Section 2 at a time not contemplated by this Section 2, then such funds shall be deemed held in escrow to be applied in accordance with this Section 2. ARTICLE 3 REPRESENTATIONS AND WARRANTIES. SECTION 3.1 Basis hereby represents and warrants to Genesis OLP as follows: (a) Corporate Organization and Subsidiaries. (i) Basis is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and is duly qualified or licensed as a foreign corporation authorized to do business in each jurisdiction in which the character of the properties and assets now owned or held by it, including the Basis Assets, or the nature of the business now conducted by it requires it to be so licensed or qualified, except in those jurisdictions where the failure to be so qualified or licensed would not have a MAE on Basis or the Business. Basis is a wholly owned subsidiary of SI. Basis has full corporate power and authority to own its properties and carry on its business, including the Business, as now being conducted. Basis has delivered to Genesis OLP true, complete and correct copies of the articles of incorporation and all amendments thereto to the date hereof and the by-laws as presently in effect for Basis. (ii)Basis does not own, directly or indirectly, interests in any partnership that is related to the Basis Assets or the Business. Other than as set forth on Schedule 1.1A and other than the stock of Basis Clearing, Inc., Basis does not own, directly or indirectly, any stock or other equity or profit interest, or have any other investment of any kind, in any other entity or business, that is necessary to or employed in the operation of the Basis Assets or the Business. (b) Authorization. Basis has full corporate power and authority to execute and deliver each Transaction Document to which it is a party and to consummate the transactions contemplated thereby. The execution and delivery by Basis of each Transaction Document to which it is a party and the consummation by Basis of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of Basis and its stockholder, and no other corporate action or proceeding on the part of Basis or its stockholder is necessary to authorize the execution and delivery by Basis of any Transaction Document to which it is a party or the consummation by Basis of the transactions contemplated thereby. This Agreement has, and on the Closing Date each other Transaction Document to which it is a party will have, been duly executed and delivered by Basis and, assuming each has been duly authorized, executed and delivered by the other parties thereto, is a legal, valid and binding obligation of Basis, enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally or as may be limited by the availability of equitable remedies, including specific performance, subject to the discretion of the court before which any proceeding therefor may be brought. (c) Noncontravention. The execution and delivery of each Transaction Document, and the consummation of the transactions contemplated hereby and thereby, will not: (i) violate any provision of the Articles of Incorporation or By-laws of Basis; (ii) except as set forth on Schedule 3.1(c), violate, or result with the giving of notice or the passage of time in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or entitle any party to terminate any or all of the provisions of, or result in the creation or imposition of any Lien upon any of the Basis Assets pursuant to any provision of, or require the consent or approval of any other party to, any mortgage, lease, license, loan agreement, indenture or other agreement, instrument or document to which Basis is a party or to or by which any of the Basis Assets is subject or bound; or (iii) violate or conflict with any law, order, rule, regulation, arbitration award, judgment or decree to or by which Basis or any of the Basis Assets is subject or bound; except, in the case of (ii) and (iii) above, for such violations, conflicts, breaches, defaults, Liens or encumbrances the existence of which would not have a MAE with respect to Basis or the Business. (d) Financial Statements. Basis has previously delivered to Genesis OLP balance sheets of Basis Petroleum, Inc. Crude Gathering Division as of December 31, 1994, December 31, 1995 and September 30, 1996 and the related statements of income and cash flows for Basis Petroleum, Inc. Crude Gathering Division for the years ended 1993, 1994 and 1995 and the nine-month period ended September 30, 1996. All of the financial statements referred to above in this Section 3.1(d) are included in the Prospectus and are herein collectively referred to as the "Basis Financial Statements." Arthur Andersen LLP ("Andersen") has audited the Basis Financial Statements other than the September Balance Sheet and the income and cash flow statements for the nine month period ended September 30, 1996 and furnished an opinion with respect thereto. The balance sheets included in the Basis Financial Statements fairly present in all material respects the financial position of Basis and its subsidiaries as of the respective dates set forth therein and the income statements and statements of cash flows included in the Basis Financial Statements fairly present in all material respects the results of operations and the cash flows of Basis and its subsidiaries for the respective periods set forth therein, in each case in conformity with GAAP applied on a consistent basis, except as otherwise noted therein and, in the case of unaudited statements for the period ended September 30, 1996, for normally recurring year-end adjustments which are not material. (e) Condition of Assets. The Basis Assets (other than the real property) are in good condition, except for ordinary wear and tear and except for such defects as would not in the aggregate have a MAE with respect to the Business. Basis has not received any appraisals or engineering reports nor has Basis conducted any appraisals or engineering reports relating to the condition of any of the Basis Assets, other than data or reports the contents of which have been specifically disclosed to Genesis OLP and to Howell. (f) Information Included in Registration Statement. The information supplied or to be supplied by Basis for inclusion in the Registration Statement, as of the time the Registration Statement becomes effective, does not contain any untrue statement of a material fact or omit a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. (g) Absence of Certain Changes or Events. Except as reflected in Schedule 3.1(g)) as specifically set forth herein, or, as expressly permitted or described elsewhere in the Transaction Documents or as disclosed in the Prospectus since the September Balance Sheet, Basis has not: (i) incurred any material liability whether absolute or contingent, with respect to the Basis Assets or the Business taken as whole except (a) trade or business obligations or liabilities incurred in the ordinary course of business, (b) obligations under any contracts or commitments made in the ordinary course of business and (c) sales, income, franchise, ad valorem, severance and windfall profit taxes and assessments accruing or becoming payable in the ordinary course of business; (ii)purchased or redeemed any shares from, or declared or made any payment or distribution to, any stockholders of Basis, except such payments or distributions consisting of Excluded Assets or as reflected on Schedule 7.1; (iii) issued or authorized the issuance of any securities or any options, warrants or rights to purchase any securities that relate to the Basis Assets or the Business; (iv)disposed of or acquired any material assets or business to be included in the Basis Assets or Business (other than the Excluded Assets) or canceled any debts or claims except in the ordinary course of business; (v) suffered any extraordinary losses or any damage, destruction or other casualty losses with respect to the Basis Assets, or waived any rights of substantial value, except as would not have, individually or in the aggregate, a MAE with respect to the Business; (vi)entered into any material transaction with respect to the Basis Assets or the Business other than in the ordinary course of business; (vii) had, individually or in the aggregate, any material adverse change in its business, assets, liabilities, financial condition or results of operations with respect to the Basis Assets or the Business or such that would have a MAE on the Basis Assets or the Business, except for any change resulting from general economic, market or financial conditions and for any change resulting from conditions or circumstances generally affecting the industry in which the Business operates or which have been specifically disclosed to Genesis OLP and to Howell; (viii) given any promise, assurance or guaranty of the payment, discharge or fulfillment of any obligation of any other Person with respect to the Assumed Liabilities or the Basis Assets or the Business after the Closing Date except in the ordinary course of business; (ix)had any actual or, to the knowledge of Basis, threatened cancellation or nonrenewal of customer agreements or adverse change in the relationship with any of the significant customers of the Business; (x) sold or disposed of or otherwise divested itself of the ownership, possession, custody and control of any corporate books and records of any nature which, in accordance with past business practices, are retained for a period of time after their use, creation or receipt with respect to the Basis Assets or the Business; (xi)transferred to any stockholder or any Affiliate of any stockholder any right, property or interest which is necessary in the operation of the Business other than in the ordinary course of business, except Excluded Assets and regular cash compensation in accordance with past practice or pursuant to existing severance agreements with employees of Basis; or (xii) engaged in any transaction which gives rise to an intercompany receivable, payable or loan between Basis and any Affiliate thereof except in the ordinary course of business. (h) Taxes. For purposes of this Agreement, "Basis Taxes" shall mean all federal, state, local and foreign taxes for which Basis is or may be liable. Basis has taken the position on all tax returns, reports and forms (collectively, the "Basis Returns") since July 1, 1985 that it is a corporation. Except as set forth on Schedule 3.1(h), Basis has filed or caused to be filed in a timely manner (within any applicable extension periods) all Basis Returns required to be filed. All such Basis Returns when filed were true, complete and accurate in all material respects except to the extent the same would not have a MAE on the Basis Assets or the Business. The amounts withheld and paid to governmental authorities for production, windfall profit and other taxes during the immediately preceding year are correct in all material respects. To the best of Basis' knowledge, there are no filed or threatened state or federal tax Liens relating to the Basis Assets that would have a MAE on the Basis Assets or the Business. (i) Title to Properties. Basis has, and will at the Closing have and shall convey by a recordable instrument, (i) good and indefeasible title to all owned real property related to the Business, excluding Pipeline Assets, to be transferred to Genesis OLP by Basis or any of its Affiliates pursuant hereto, (ii) sufficient title to the portion of the Basis Assets constituting the Pipeline Assets, if any, to enable Genesis OLP to use the Pipeline Assets as they have been used in the past and as they are proposed to be used in the Business and any lack of title to the Pipeline Assets has not had and will not have a MAE on the Business and will not materially increase the cost of such use, (iii) valid leasehold interests in Basis' leased real property and leased personal property and vehicles that are the subject of assigned leases included in the Basis Assets, and (iv) good title to all other assets and properties, whether real, personal, mixed or fixtures, included in the Basis Assets, in each case, with respect to clauses (i) + (iv) hereof, free and clear of all Liens, except for (a) Liens that are specified as a part of the Assumed Liabilities and (b) Permitted Encumbrances. Basis enjoys peaceful possession of all its owned or leased real property, personal property and vehicles relating to the Business, except as would not have a MAE on the Business, all of which assets are included on Schedule 1.1A and are reflected on the September Balance Sheet. No covenants, easements, restrictions, servitudes or rights of way applicable to the Basis Assets have or can be reasonably expected to have a MAE with respect to the Business. (j) Leased Property. To the best knowledge of Basis, Basis is not in default, and no notice of alleged default has been received by Basis, under any leases under which Basis is lessee of any of the Basis Assets, no lessor is in default or alleged to be in default thereunder, and there exists no condition or event which, after notice or lapse of time or both, would constitute a default by any party thereto, except as would not have a MAE on the Business. Except as set forth on Schedule 3.1(j), there are no leases or tenancies of third parties for any part of the real property, personal property or vehicles included in the Basis Assets that shall remain in effect at or after the Closing Date, except as would not have a MAE on the Business. (k) Patents, Trademarks, Expertise, Etc. There are no patents, trade names, copyrights or trademarks relating to the Basis Assets or the Business that are material to the Business. The consummation of the transactions contemplated by the Transaction Documents will not result in the loss or material impairment of any of Basis' Expertise; and no proceedings have been instituted, are pending or, to the best knowledge of Basis, are threatened which challenge the rights of Basis in respect to Basis' Expertise. To the best knowledge of Basis, Basis has adequate patent and trademark rights to the technology used or useful with respect to the Basis Assets or the Business, and the use thereof is not infringing any patent, copyright, trademark or similar right of any person. Except as set forth in Schedule 3.1(k), there are no agreements or arrangements in effect with respect to the marketing, distribution, licensing or promotion of such technology by any independent salesperson, distributor, sublicensor, or other remarketer or sales organization. (l) Litigation. Except as set forth on Schedule 3.1(l) hereto, there is not pending or, to the knowledge of Basis, threatened any judicial, administrative or arbitration action, suit or proceeding against Basis, which might result in any significant adverse change in the Assumed Liabilities or have a MAE on the Business, or which questions the validity of any Transaction Document or any action taken or to be taken in connection therewith. (m) Employees, Employee Benefit Plans, Labor Matters and Compensation. (i) Genesis LLC intends to offer employment effective as of January 1, 1997 to all of the employees of Basis actively employed in the Business under such terms and conditions (including compensation and benefits) as Genesis LLC may deem appropriate. Basis shall use its reasonable best efforts to persuade such employees as Genesis LLC may designate to become employees of Genesis LLC. Basis will not solicit, or in any other manner attempt to induce, any employee of Genesis LLC to leave the employ of Genesis LLC. Any severance pay or other severance-related obligations arising with respect to any employees of Basis, as of the Closing Date or thereafter, shall be the obligation of Basis except as otherwise provided in Section 11. Basis will timely pay all its employees who will become employees of Genesis LLC, their pro rata portion of any bonus otherwise payable under any bonus payment plan or arrangement of Basis through the Closing Date. (ii)Basis has provided Genesis LLC with summaries of all employee benefit plans, programs and arrangements of Basis (the "Basis Employee Plans") and each of the documents relating thereto as Genesis LLC shall reasonably request, as well as a list of employees of Basis who are actively employed in the Business with a listing of each such employee's "service" with Basis and such other information as Genesis LLC may reasonably request. (iii) Except as described on Schedule 3.1(m), there are no agreements with, or pending petitions for recognition of, a labor union or association as the exclusive bargaining agent for any or all employees currently or formerly employed in the Business, or their respective dependents (collectively, the "Basis Employees"); no such petitions have been pending at any time within two years prior to the date of this Agreement and, to the best knowledge of Basis, there has not been any organizing effort by any union or other group seeking to represent any Basis Employees as their exclusive bargaining agent at any time within two years prior to the date of this Agreement; and there are no labor strikes, work stoppages or other labor troubles, other than routine grievance matters, now pending, or, to the best of Basis's knowledge, threatened, against Basis, nor have there been any such labor strikes, work stoppages or other labor troubles, other than routine grievance matters, with respect to the Business at any time within two years prior to the date of this Agreement. (iv)Except as set forth on Schedule 3.1(m) or pursuant to the Transition Services Agreement, since January 1, 1996, Basis (a) has not entered into any employment or similar contract with, or made any increase in the compensation payable or to become payable by it to, any Basis Employee other than in the ordinary course of business, in accordance with past practice or in accordance with the requirements of applicable Laws, which will become the obligation of Genesis OLP or Genesis LLC, and (b) has not contributed or made any commitment to, or representation that it will, contribute any amounts to any bonus or other Basis Employee Plan, severance plan or collective bargaining agreement in respect of Basis Employees in the case of (a) and (b), other than as required by applicable Laws or by the terms of any such Basis Employee Plan as in effect on the date of the September Balance Sheet, which will become the obligation of Genesis OLP or Genesis LLC. (n) Consents. Except as set forth in Schedule 3.1(n), no consent, approval, authorization or order of (or registration or filing with) any court or governmental agency or body is required in connection with the execution, delivery or performance by Basis of any Transaction Document or in connection with the transactions contemplated thereby, except for such consents which the failure to obtain would not have, individually or in the aggregate, a MAE with respect to the Business. (o) Contracts. Except as set forth in Schedule 3.1(o) and except for lessee leases, to the knowledge of Basis with respect to Basis Assets or the Business, Basis is not a party to, nor bound by, nor are any of the Basis Assets or the Business subject to: (i) any contract which (A) has not been entered into or received in the ordinary course of Basis' business and is not consistent with prior practice of Basis, or (B) involves the bulk or wellhead purchase, sale or exchange of in the aggregate more than 5,000 barrels of oil per day; (ii)any mortgage, pledge or other form of secured indebtedness for borrowed money; (iii) any debentures, notes or installment obligations, other than accounts payable arising in the ordinary course of Basis' business, or other instruments for or relating to any borrowing of money by Basis; (iv)any guaranty of any obligation for borrowings or otherwise, excluding endorsements made for collection, and any other guaranty, which has not been entered into in the ordinary course of Basis' business; (v) any agreement or arrangement for the sale or lease of any of the Basis Assets (other than inventory and other than in the ordinary course of business) or for the sale of inventory other than in the ordinary course of business; (vi)any contract pursuant to which Basis is obligated to make payments, contingent or otherwise, on account of or arising out of the prior acquisition of the business, or all or substantially all of the assets or stock, of other companies or any division thereof; or (vii) any other contract, agreement or other instrument not entered into in the ordinary course of business which is material to the Business and not excluded by reason of the provisions of clauses (i) through (vi), inclusive, of this subsection. Except as would not have a MAE with respect to the Business, all contracts referred to in Schedule 3.1(o) which are contracts assigned to Genesis OLP are legal, valid and binding obligations of Basis enforceable against it in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally or as may be limited by the availability of equitable remedies, including specific performance, subject to the discretion of the court before which any proceeding therefor may be brought. Except as set forth on Schedule 3.1(o), such assigned contracts have not been amended except in the ordinary course of business and additions or deletions of leases pursuant to such assigned contracts in the ordinary course of business. To the best knowledge of Basis, (i) Basis is not in default, and no notice of alleged default has been received by Basis, under any of such contracts which are assigned contracts and (ii) no other party thereto is in default or alleged to be in default thereunder. Except as separately identified in Schedule 3.1(o), each of the assigned contracts of Basis set forth on Schedule 3.1(o) may be assigned by Basis to Genesis OLP without the consent of any Person, except such as would not have a MAE with respect to the Business or for which consent has been obtained. To the best knowledge of Basis, the rights of Basis under all assigned contracts that are set forth in Schedule 3.1(o) are owned or possessed by Basis free and clear of all Liens, except such as would not have a MAE with respect to the Business. Except as set forth on Schedule 3.1(o), Basis does not know of any cancellation, and Basis has not received any written threat to cancel or not to renew or extend, any such contract which is an assigned contract by or from any other party thereto. To the extent that there are any exchange imbalances relating to assigned contracts that are contracts for the exchange of liquid hydrocarbons, such imbalances are to be settled in the ordinary course of business and consistent with past practice and would not have a MAE on the Business. (p) Broker's and Finder's Fees. Basis is not obligated to pay, nor has Basis retained any broker or finder or any other Person who is entitled to, any broker's or finder's fee or any other commission or financial advisory fee based on any agreement or undertaking made by or on behalf of Basis in connection with the transactions contemplated hereby or in the Transaction Documents, except pursuant to the Underwriting Agreement. (q) Environmental Matters. (i) Except as set forth in Schedule 3.1(q), Basis has not and does not handle, treat, store or dispose of, on Basis' owned or leased real property or easements included in the Basis Assets, any wastes (including, without limitation, hazardous or toxic wastes but excluding ordinary garbage and trash and further excluding the handling and storage of crude oil, condensate, motor fuels, lubricants and solvents for use in the Business) or hazardous or toxic substances. Except as set forth in Schedule 3.1(q), any such handling, treatment, storage or disposal has been conducted in compliance with all applicable Laws, except where the failure to so comply would not, individually or in the aggregate, have a MAE on the Business. (ii) Except as set forth on Schedule 3.1(q), the Business relating to Basis as currently being operated meets and as operated at all times during the three-year period prior to the date hereof met, all applicable federal, state and local requirements with respect to air and water quality, pipeline safety, and the handling, treatment, storage and disposal of wastes or by-products (including hazardous or toxic wastes, if any) and hazardous or toxic substances generated by Basis, where any failure to meet, or during the three-year period prior to the date hereof any failure to have met, such requirements would have a MAE on the Business. Basis has given to pertinent government authorities all notices required pursuant to the Clean Air Act, 42 U.S.C. 7401 et seq., the Clean Water Act, 42 U.S.C. 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., the Solid Waste Disposal Act, as amended by the Resource, Conservation and Recovery Act, 42 U.S.C. 6901 et seq., CERCLA, and all other federal, state and local environmental Laws, where any failure to give such notices would have a MAE on the Business, or would materially and adversely affect Basis' ability to consummate the transactions contemplated by the Transaction Documents. Except as listed on Schedule 3.1(q), Basis has not since the date five years prior to the date hereof received any order or notice of violation or noncompliance from, or been the subject of any regulatory audit or investigation (other than any periodic investigation or inspection of a routine nature) by, any governmental authority in connection with the ownership or operation of the Basis Assets or the Business or as a potentially responsible party in connection with any waste disposal facility, except where such violations or noncompliance would not have a MAE with respect to the Business. (iii) With respect to the operation of the Basis Assets, Basis has not handled, treated, stored, recycled, reclaimed or disposed of, or arranged for the handling, treatment, storage, recycling or reclamation or disposal of, any wastes or by-products (including hazardous or toxic wastes) or hazardous or toxic substances on any property other than the sites disclosed on Schedule 3.1(q). (iv)To the best knowledge of Basis, there are no Underground Storage Tanks on the owned or leased real property or easements included in the Basis Assets, and any Underground Storage Tanks that may have been on Basis' owned or leased real property were removed, and any soil contaminated as a result of such Underground Storage Tanks was remediated in accordance with all applicable Laws. Except as set forth on Schedule 3.1(q), none of the improvements owned or used by Basis on such owned or leased real property or easements contain, to the knowledge of Basis, any friable asbestos, nor does any equipment owned or used, except for electrical transformers owned and in service by third parties, by Basis on such owned or leased real property or easements contain, to the knowledge of Basis, any polychlorinated biphenyls at least greater than 50 parts per million. (v) With respect to environmental matters, all financial assurances required by governmental authorities for the lawful operation of the Basis Assets are in place and fully funded as described on Schedule 3.1(q). (r) Public Utility Status. Basis is not (i) a "public utility company", a "holding company" or an "affiliate" of a "holding company" as those terms are defined in the Public Utility Holding Company Act of 1935, (ii) a "gas utility", "public utility" or "utility" as those terms are defined in Article 6050 of the Revised Civil Statutes of Texas or (iii) a "public utility" or "utility" as those terms are defined in the Public Utility Regulatory Act of Texas or under the applicable laws of any state in which Basis does business. (s) Authorities, Permits, Tariffs and Regulatory Authorizations. (i) Basis has no common carrier pipelines relating to the Business or the Basis Assets and is licensed and qualified to own and operate any and all trucks, tractors and trailers leased, owned or operated by, for or on behalf of Basis in connection with the Basis Assets or the Business and holds all necessary certificates, permits or other regulatory authorizations to own and operate the Basis Assets as utilized in the Business presently and during the past twelve months, except where the failure to be so qualified or licensed would not have a MAE on the Business. (ii)Except as set forth on Schedule 3.1(s), (a) Basis has complied with all federal, state and local Laws, including, without limitation, the rules and regulations of all governmental agencies having authority over it and any such Laws, concerned with export and import licenses, occupational safety, environmental protection and employment practices, relating to the Business, (b) Basis has complied with each and all permits and tariffs, including any required filings and renewals, and no default exists with respect thereto, and (c) Basis has not received written notice of violation of any such rules or regulations, corrected or not, since January 1, 1996, except, in the cases of (a) and (b) where such violations or noncompliance would not have a MAE with respect to the Business. Basis has not received from any governmental authority any written notice since January 1, 1996, of any currently proposed public improvement which would impose a Lien upon any of the Basis Assets, except as would not have a MAE with respect to the Business. (t) Suspense Accounts. Basis has maintained each of its Suspense Accounts for third party sellers of crude oil in accordance with all applicable Laws, including, without limitation, applicable escheat laws, except as would not have a MAE with respect to the Business. (u) Third Party Rights. Except as set forth in Schedule 3.1(u), no party has any right, whether or not exercisable after notice or lapse of time or any triggering event, to purchase any material part of the Basis Assets (other than crude oil transactions in the ordinary course of business). Except as set forth in Schedule 3.1(u), no agreement binding on Basis or the Business contains any provision which would impose material limitations on Genesis OLP or any of its Affiliates or their respective business practices through a noncompetition, an area of interest or similar type of provision. (v) Prepayment. Basis is not obligated by virtue of any express or implied contract or agreement to deliver at some future time oil, gas or products thereof, without receiving at such time a commitment for full payment in accordance with usual business practice. Except as provided for in Schedule 7.1, Basis has not received any prepayment for any oil or gas to be sold, or for services, including transportation, treating or storage, to be rendered with respect to which Genesis OLP could have any liability. (w) Investment Representation. Basis is acquiring the Subordinated LP Units for its own account and not with a view to or for sale in connection with any distribution thereof, and will not sell or transfer the Subordinated LP Units except pursuant to an effective registration statement under the Securities Act, and the rules and regulations promulgated thereunder or an exemption therefrom and in compliance with all state securities and blue sky laws; provided, however, it is understood that Basis may transfer the Subordinated LP Units to Affiliates of Basis and to John vonBerg under the circumstances described in the Final Prospectus, and that the Subordinated LP Units will bear an appropriate legend relating to such restriction on transfer and to restrictions on transfer under the Securities Act and the regulations thereunder. Basis is an "accredited investor" as defined in Rule 501(a) under the Securities Act. SECTION 3.2 Each of the Howell Entities hereby represents and warrants to Genesis OLP as follows: (a) Corporate Organization and Subsidiaries. (i) Each of the Howell Entities is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified or licensed as a foreign corporation authorized to do business in each jurisdiction in which the character of the properties and assets now owned or held by it, including the Howell Assets, or the nature of the business now conducted by it requires it to be so licensed or qualified, except in those jurisdictions where the failure to be so qualified or licensed would not have a MAE on such entities as a whole or the Business. Each of the Howell Entities has full corporate power and authority to own its properties and carry on its business, including the Business, as now being conducted. Each of the Howell Subsidiaries is a direct or indirect wholly owned subsidiary of Howell. Howell has delivered to Genesis OLP true, complete and correct copies of the certificate of incorporation and all amendments thereto to the date hereof and the by-laws as presently in effect for each of the Howell Entities. (ii)None of the Howell Entities owns, directly or indirectly, interests in any partnership that is related to the Howell Assets or the Business. Other than as set forth on Schedule 1.1B and other than stock of the Howell Subsidiaries, none of the Howell Entities owns, directly or indirectly, any stock or other equity or profit interest, or have any other investment of any kind, in any other entity or business, that is necessary to or employed in the operation of the Howell Assets or the Business. (b) Authorization. Each of the Howell Entities has full corporate power and authority to execute and deliver each Transaction Document to which it is a party and to consummate the transactions contemplated thereby. The execution and delivery of each Transaction Document by each of the Howell Entities to which it is a party, and the consummation by each Howell Entity of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of each of the Howell Entities and their stockholders, and no other corporate action or proceeding on the part of any Howell Entity or its stockholders is necessary to authorize the execution and delivery by the Howell Entities of any Transaction Document to which it is a party or the consummation by each Howell Entity of the transactions contemplated thereby. This Agreement has, and on the Closing Date each other Transaction Document will have, been duly executed and delivered by each Howell Entity which is a party and, assuming each has been duly authorized, executed and delivered by the other parties thereto, is a legal, valid and binding obligation of each Howell Entity party thereto, enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally or as may be limited by the availability of equitable remedies, including specific performance, subject to the discretion of the court before which any proceeding therefor may be brought. (c) Noncontravention. The execution and delivery of each Transaction Document, and the consummation of the transactions contemplated thereby, will not: (i) violate any provision of the Certificate of Incorporation or By-laws of any Howell Entity; (ii) except as set forth on Schedule 3.2(c), violate, or result with the giving of notice or the passage of time in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or entitle any party to terminate any or all of the provisions of, or result in the creation or imposition of any Lien upon any of the Howell Assets pursuant to any provision of, or require the consent or approval of any other party to, any mortgage, lease, license, loan agreement, indenture or other agreement, instrument or document to which any Howell Entity is a party or to or by which any of the Howell Assets is subject or bound; or (iii) violate or conflict with any Law, order, arbitration award, judgment or decree to or by which any Howell Entity or any of the Howell Assets is subject or bound; except, in the case of (ii) and (iii) above, for such violations, conflicts, breaches, defaults, Liens or encumbrances the existence of which would not, individually or in the aggregate, have a MAE with respect to the Howell Entities taken as a whole or the Business. (d) Financial Statements. Howell has previously delivered to Genesis OLP balance sheets of the combination of Howell Crude and its wholly-owned subsidiaries and the crude oil transportation operations of Howell Transportation (collectively referred to as "Howell Crude Operations") as of the end of each of the fiscal periods ended December 31, 1994, December 31, 1995 and September 30, 1996 and the related statements of income and statement of cash flow for the annual fiscal periods of 1993, 1994 and 1995 and nine month period ended September 30, 1996. All of the financial statements referred to above in this Section 3.2(d) are included in the Prospectus and are herein collectively referred to as the "Howell Financial Statements." Deloitte & Touche LLP has audited the Howell Financial Statements other than the September Balance Sheet and the income and cash flow statements for the nine month period ended September 30, 1996 and furnished an opinion with respect thereto. The balance sheets included in the Howell Financial Statements fairly present in all material respects the financial position of Howell Crude Operations as of the respective dates set forth therein, and the income statements and statements of cash flows included in the Howell Financial Statements fairly present in all material respects the results of operations and the cash flows of Howell and its subsidiaries for the respective periods set forth therein, in each case in conformity with GAAP applied on a consistent basis, except as otherwise noted therein and, in the case of unaudited statements for the period ended September 30, 1996, for normally recurring year-end adjustments which are not material. Howell has also previously delivered to Genesis OLP a statement of revenue and direct operating expenses relating to the Howell Assets acquired from Exxon (the "Exxon Pipeline Statement") as of the end of each of the fiscal periods ended December 31, 1992, December 31, 1993, December 31, 1994 and March 31, 1995. Price Waterhouse LLP audited the Exxon Pipeline Statement, except for the fiscal period ending March 31, 1995 and furnished an opinion with respect thereto. (e) Condition of Assets. The Howell Assets (other than the real property) are in good condition, except for ordinary wear and tear and except for such defects as would not in the aggregate have a MAE with respect to the Business. Howell has not received any appraisals or engineering reports nor has Howell conducted any appraisals or engineering reports relating to the condition of any of the Howell Assets, other than data or reports the contents of which have been specifically disclosed to Genesis OLP and to Basis. (f) Information Included in Registration Statement. The information supplied or to be supplied by the Howell Entities for inclusion in the Registration Statement, as of the time the Registration Statement becomes effective, does not contain any untrue statement of a material fact or omit a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. (g) Absence of Certain Changes or Events. Except as reflected in Schedule 3.2(g) or as specifically set forth herein, or, as expressly permitted or described elsewhere in the Transaction Documents or as disclosed in the Prospectus since the September Balance Sheet, no Howell Entity has: (i) incurred any material liability whether absolute or contingent, with respect to the Howell Assets or the Business taken as a whole, except (A) trade or business obligations or liabilities incurred in the ordinary course of business, (B) obligations under any contracts or commitments made in the ordinary course of business, (C) sales, income, franchise, ad valorem, severance and windfall profit taxes and assessments accruing or becoming payable in the ordinary course of business and (D) as expressly permitted elsewhere in the Transaction Documents; (ii)purchased or redeemed any shares from, or declared or made any payment or distribution to, any stockholders of Howell or the Howell Subsidiaries, except such payments or distributions consisting of Excluded Assets or as reflected on Schedule 7.1; (iii) issued or authorized the issuance of any securities or any options, warrants or rights to purchase any securities that relate to the Howell Assets or the Business; (iv)disposed of or acquired any material assets or business to be included in the Howell Assets or Business (other than the Excluded Assets) or canceled any debts or claims except in the ordinary course of business; (v) suffered any extraordinary losses or any damage, destruction or other casualty losses with respect to the Howell Assets, or waived any rights of substantial value, except as would not, individually or in the aggregate, have a MAE with respect to the Business; (vi)entered into any material transaction with respect to the Howell Assets or the Business other than in the ordinary course of business; (vii) had, individually or in the aggregate, any material adverse change in its business, assets, liabilities, financial condition or results of operations, with respect to the Howell Assets or the Business or such that would have a MAE on the Howell Assets or the Business, except for any change resulting from general economic, market or financial conditions and for any change resulting from conditions or circumstances generally affecting the industry in which the Business operates or which have been specifically disclosed to Genesis OLP and to Basis; (viii) given any promise, assurance or guaranty of the payment, discharge or fulfillment of any obligation of any other person or entity with respect to the Assumed Liabilities or the Howell Assets or the Business after the Closing Date except in the ordinary course of business; (ix)had any actual or, to the knowledge of Howell, threatened cancellation or nonrenewal of customer agreements or adverse change in the relationship with any of the significant customers of the Business; (x) sold or disposed of or otherwise divested itself of the ownership, possession, custody and control of any corporate books and records of any nature which, in accordance with past business practices, are retained for a period of time after their use, creation or receipt with respect to the Howell Assets or the Business; (xi)transferred to any stockholder or any Affiliate of any stockholder any right, property or interest which is necessary in the operation of the Business other than in the ordinary course of business, except Excluded Assets and regular cash compensation in accordance with past practice or pursuant to existing severance agreements with employees of any Howell Entity; or (xii) engaged in any transaction which gives rise to an intercompany receivable, payable or loan between any Howell Entity and any Affiliate thereof except in the ordinary course of business. (h) Taxes. For purposes of this Agreement, "Howell Taxes" shall mean all federal, state, local and foreign taxes for which any Howell Entity is or may be liable. Howell has taken the position on all tax returns, reports and forms (collectively, "Howell Returns") since its incorporation that it is a corporation. Except as set forth on Schedule 3.2(h), Howell has filed or caused to be filed in a timely manner (within any applicable extension periods) all Howell Returns required to be filed. All such Howell Returns when filed were true, complete and accurate in all material respects except to the extent the same would not have a MAE on the Howell Assets or the Business. The amounts withheld and paid to governmental authorities for production, windfall profit and other taxes during the immediately preceding year are correct in all material respects. To the best of Howell's knowledge, there are no filed or threatened state or federal tax Liens relating to the Howell Assets that would have a MAE on the Howell Assets or the Business. (i) Title to Properties. Each of the Howell Entities has, and will at the Closing have and shall convey by a recordable instrument, (i) good and indefeasible title to all owned real property related to the Business, excluding Pipeline Assets, to be transferred to Genesis OLP by Howell or any of its Affiliates pursuant hereto, (ii) sufficient title to the portion of the Howell Assets constituting the Pipeline Assets to enable Genesis OLP to use the Pipeline Assets as they have been used in the past and as they are proposed to be used in the Business and any lack of title to the Pipeline Assets has not had and will not have a MAE on the Business and will not materially increase the cost of such use, (iii) valid leasehold interests in each of the Howell Entities' leased real property and leased personal property and vehicles that are the subject of assigned leases included in the Howell Assets, and (iv) good title to all other assets and properties, whether real, personal, mixed or fixtures, included in the Howell Assets, in each case, with respect to clauses (i) + (iv) hereof, free and clear of all Liens, except for (a) Liens that are specified as a part of the Assumed Liabilities and (b) Permitted Encumbrances. Each of the Howell Entities enjoys peaceful possession of all its owned or leased real property, personal property and vehicles relating to the Business, except as would not have a MAE on the Business, all of which assets are included on Schedule 1.1B and are reflected on the September Balance Sheet. No covenants, easements, restrictions, servitudes or rights of way applicable to the Howell Assets have or can be reasonably expected to have a MAE with respect to the Business. (j) Leased Property. To the best knowledge of Howell, none of the Howell Entities is in default, and no notice of alleged default has been received by the Howell Entities, under any leases under which a Howell Entity is lessee of any of the Howell Assets, no lessor is in default or alleged to be in default thereunder, and there exists no condition or event which, after notice or lapse of time or both, would constitute a default by any party thereto, except as would not have a MAE on the Business. Except as set forth on Schedule 3.2(j), there are no leases or tenancies of third parties for any part of the real property, personal property or vehicles included in the Howell Assets that shall remain in effect at or after the Closing Date, except as would not have a MAE on the Business. (k) Patents, Trademarks, Expertise, Etc. There are no patents, trade names, copyrights or trademarks relating to the Howell Assets or the Business that are material to the Business. The consummation of the transactions contemplated by the Transaction Documents will not result in the loss or material impairment of any of the Howell Entities' Expertise; and no proceedings have been instituted, are pending or, to the best knowledge of Howell, are threatened which challenge the rights of any Howell Entity in respect to its Expertise. To the best knowledge of Howell, each Howell Entity has adequate patent and trademark rights to the technology used or useful with respect to the Howell Assets or the Business, and the use thereof is not infringing any patent, copyright, trademark or similar right of any person. Except as set forth in Schedule 3.2(k), there are no agreements or arrangements in effect with respect to the marketing, distribution, licensing or promotion of such technology by any independent salesperson, distributor, sublicensor, or other remarketer or sales organization. (l) Litigation. Except as set forth on Schedule 3.2(l) hereto, there is not pending or, to the knowledge of Howell, threatened any judicial, administrative or arbitration action, suit or proceeding against Howell or any of the Howell Subsidiaries, which might result in any significant adverse change in the Assumed Liabilities or have, individually or in the aggregate, a MAE on the Business, or which questions the validity of any Transaction Document or any action taken or to be taken in connection therewith. (m) Employees and Employee Benefit Plans, Labor Matters and Compensation. (i) Genesis LLC intends to offer employment effective as of January 1, 1997 to all of the employees of the Howell Entities actively employed in the Business under such terms and conditions (including compensation and benefits) as Genesis LLC may deem appropriate. Howell shall use its reasonable best efforts to persuade such employees as Genesis LLC may designate to become employees of Genesis LLC. Howell will not solicit, or in any other manner attempt to induce, any employee of Genesis LLC to leave the employ of Genesis LLC. Any severance pay or other severance-related obligations arising with respect to any employees of Howell or its Affiliates, as of the Closing Date or thereafter, shall be the obligation of Howell except as otherwise provided in Section 11 hereto. Howell will timely pay all its employees and its Affiliates' employees, including those who will become employees of Genesis LLC, their pro rata portion of any bonus otherwise payable under any bonus payment plan or arrangement of Howell or its Affiliates through the Closing Date. (ii)Howell has provided Genesis LLC with summaries of all employee benefit plans, programs and arrangements of Howell ("Howell Employee Plans") and each of the documents relating thereto as Genesis LLC shall reasonably request, as well as a list of employees of Howell who are actively employed in the Business with a listing of each such employee's "service" with Howell and such other information as Genesis LLC may reasonably request. (iii) Except as described on Schedule 3.2(m), there are no agreements with, or pending petitions for recognition of, a labor union or association as the exclusive bargaining agent for any employees currently or formerly employed in the Business, or their respective dependents (collectively, the "Howell Employees"); no such petitions have been pending at any time within two years prior to the date of this Agreement or in the case of the Exxon Pipeline Acquisition since April 1, 1995 and, to the best knowledge of Howell, there has not been any organizing effort by any union or other group seeking to represent any Howell Employees as their exclusive bargaining agent at any time within two years prior to the date of this Agreement; and there are no labor strikes, work stoppages or other labor troubles, other than routine grievance matters, now pending, or, to the best of Howell's knowledge, threatened, against Howell, nor have there been any such labor strikes, work stoppages or other labor troubles, other than routine grievance matters, with respect to the Business at any time within two years prior to the date of this Agreement. (iv)Except as set forth on Schedule 3.2(m) or pursuant to the Transition Services Agreement, since January 1, 1996, no Howell Entity (a) has entered into any employment or similar contract with, or made any increase in the compensation payable or to become payable by it to, any Howell Employee other than in the ordinary course of business, in accordance with past practice or in accordance with the requirements of applicable Law, which will become the obligation of Genesis OLP or Genesis LLC, (b) has contributed or made any commitment to, or representation that it will, contribute any amounts to any bonus or other Howell Employee Plan, severance plan or collective bargaining agreement in respect of Howell Employees in the case of (a) and (b), other than as required by applicable Law or by the terms of any such Howell Employee Plan as in effect on the September Balance Sheet, which will become the obligation of Genesis OLP or Genesis LLC. (n) Consents. Except as set forth in Schedule 3.2(n), no consent, approval, authorization or order of (or registration or filing with) any court or governmental agency or body is required in connection with the execution, delivery or performance by any Howell Entity of any Transaction Document or in connection with the transactions contemplated thereby, except for such consents the failure to obtain which would not have, individually or in the aggregate, a MAE with respect to the Business. (o) Contracts. Except as set forth in Schedule 3.2(o) and except for lessee leases, to the knowledge of Howell with respect to the Howell Assets or the Business, no Howell Entity is a party to, nor bound by, nor are any of the Howell Assets or the Business subject to: (i) any contract which (A) has not been entered into or received in the ordinary course of business of the Howell Entities and which is not consistent with prior practice of the Howell Entities, or (B) involves the bulk or wellhead purchase, sale or transfer of in the aggregate more than 5,000 barrels of oil per day; (ii)any mortgage, pledge or other form of secured indebtedness for borrowed money; (iii) any debentures, notes or installment obligations, other than accounts payable arising in the ordinary course of business of the Howell Entities, or other instruments for or relating to any borrowing of money by any Howell Entity; (iv)any guaranty of any obligation for borrowings or otherwise, excluding endorsements made for collection, and any other guaranty, which has not been entered into in the ordinary course of business of the Howell Entity; (v) any agreement or arrangement for the sale or lease of any of the Howell Assets (other than inventory and other than in the ordinary course of business) or for the sale of inventory other than in the ordinary course of business; (vi)any contract pursuant to which a Howell Entity is obligated to make payments, contingent or otherwise, on account of or arising out of the prior acquisition of the business, or all or substantially all of the assets or stock, of other companies or any division thereof; or (vii) any other contract, agreement or other instrument not entered into in the ordinary course of business which is material to the Business and not excluded by reason of the provisions of clauses (i) through (vi), inclusive, of this subsection. Except as would not have a MAE with respect to the Business, all contracts referred to in Schedule 3.2(o) which are contracts assigned to Genesis OLP are legal, valid and binding obligations of the Howell Entities enforceable against them in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally or as may be limited by the availability of equitable remedies, including specific performance, subject to the discretion of the court before which any proceeding therefor may be brought. Except as set forth on Schedule 3.2(o), such assigned contracts have not been amended except in the ordinary course of business and additions or deletions of leases pursuant to such assigned contracts in the ordinary course of business. To the best knowledge of Howell, (i) none of the Howell Entities is in default, and no notice of alleged default has been received by any Howell Entity, under any of such contracts which are assigned contracts and (ii) no other party thereto is in default or alleged to be in default thereunder. Except as separately identified in Schedule 3.2(o), each of the assigned contracts of the Howell Entities set forth on Schedule 3.2(o) may be assigned by the Howell Entities to Genesis OLP without the consent of any Person except such, individually or in the aggregate, as would not have a MAE on the Business or for which consent has been obtained. To the best knowledge of Howell, the rights of the Howell Entities under all assigned contracts that are set forth in Schedule 3.2(o) are owned or possessed by the Howell Entities free and clear of all Liens, except such as would not have a MAE with respect to the Business. Except as set forth on Schedule 3.2(o), Howell does not know of any cancellation, and no Howell Entities has received any written threat to cancel or not to renew or extend, any such contract which is an assigned contract by or from any other party thereto. To the extent that there are any exchange imbalances relating to assigned contracts that are contracts for the exchange of liquid hydrocarbons, such imbalances are to be settled in the ordinary course of business and consistent with past practice and would not have a MAE on the Business. (p) Broker's and Finder's Fees. Neither Howell nor any of its Affiliates is obligated to pay, nor has any of them retained any broker or finder or any other Person who is entitled to, any broker's or finder's fee or any other commission or financial advisory fee based on any agreement or undertaking made by or on behalf of Howell nor any of its Affiliates in connection with the transactions contemplated in the Transaction Documents, except pursuant to the Underwriting Agreement. (q) Environmental Matters. (i) Except as set forth in Schedule 3.2(q), none of the Howell Entities have and none handle, treat, store or dispose of, on the Howell Entities' owned or leased real property or easements included in the Howell Assets, any wastes (including, without limitation, hazardous or toxic wastes but excluding ordinary garbage and trash and further excluding the handling and storage of crude oil, condensate, motor fuels, lubricants and solvents for use in the Business) or hazardous or toxic substances. Except as set forth in Schedule 3.2(q), any such handling, treatment, storage or disposal has been conducted in compliance with all applicable Laws, except where the failure to so comply would not, individually or in the aggregate, have a MAE on the Business. (ii) Except as set forth on Schedule 3.2(q), the Business relating to the Howell Entities as currently being operated meets, and as operated at all times during the three-year period prior to the date hereof met (except that Howell makes no representations about the Pipeline Assets prior to their acquisition by Howell in April 1995), all applicable federal, state and local requirements with respect to air and water quality, pipeline safety, and the handling, treatment, storage and disposal of wastes or by- products (including hazardous or toxic wastes, if any) and hazardous or toxic substances generated by any Howell Entity, where any failure to meet, or during the three-year period prior to the date hereof any failure to have met, such requirements would have a MAE on the Business. Howell has given to pertinent government authorities all notices required pursuant to the Clean Air Act, 42 U.S.C. 7401 et seq., the Clean Water Act, 42 U.S.C. 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., the Solid Waste Disposal Act, as amended by the Resource, Conservation and Recovery Act, 42 U.S.C. 6901 et seq., CERCLA, and all other federal, state and local environmental Laws, where any failure to give such notices would have a MAE on the Business, or would materially and adversely affect the Howell Entities' ability to consummate the transactions contemplated by the Transaction Documents. Except as listed on Schedule 3.2(q), no Howell Entity, and to the knowledge of Howell with respect to the assets acquired from Exxon in April 1995, has since the date five years prior to the date hereof received any order or notice of violation or noncompliance from, or been the subject of any regulatory audit or investigation (other than any periodic investigation or inspection of a routine nature) by, any governmental authority in connection with ownership or operation of the Howell Assets or the Business or as a potentially responsible party in connection with any waste disposal facility, except where such violations or noncompliance would not have, individually or in the aggregate, a MAE with respect to the Business. (iii) With respect to the operation of the Howell Assets, no Howell Entity and, to the knowledge of Howell with respect to the assets acquired from Exxon in April 1995, has handled, treated, stored, recycled, reclaimed or disposed of, or arranged for the handling, treatment, storage, recycling or reclamation or disposal of, any wastes or by-products (including hazardous or toxic wastes) or hazardous or toxic substances on any property other than the sites disclosed on Schedule 3.2(q). (iv)To the best knowledge of Howell, there are no Underground Storage Tanks on the owned or leased real property or easements included in the Howell Assets, and any Underground Storage Tanks that may have been on any Howell Entity's owned or leased real property were removed, and any soil contaminated as a result of such Underground Storage Tanks was remediated in accordance with all applicable Laws. Except as set forth on Schedule 3.2(q), none of the improvements owned or used by a Howell Entity on such owned or leased real property or easements contain, to the knowledge of Howell, any friable asbestos, nor does any equipment owned or used, except for electrical transformers owned and in service by third parties by a Howell Entity on such owned or leased real property or easements contain, to the knowledge of Howell, any polychlorinated biphenyls at levels greater than 50 parts per million. (v) With respect to environmental matters, all financial assurances required by governmental authorities for the lawful operation of the Howell Assets are in place and fully funded as described on Schedule 3.2(q). (r) Public Utility Status. No Howell Entity is (i) a "public utility company", a "holding company" or an "affiliate" of a "holding company" as those terms are defined in the Public Utility Holding Company Act of 1935, (ii) a "gas utility", "public utility" or "utility" as those terms are defined in Article 6050 of the Revised Civil Statutes of Texas or (iii) a "public utility" or "utility" as those terms are defined in the Public Utility Regulatory Act of Texas or under the applicable laws of any state in which Howell or the Howell Subsidiaries does business. (s) Authorities, Permits, Tariffs and Regulatory Authorizations. (i) Each Howell Entity is qualified and licensed to own and operate each pipeline system owned or operated by such Howell Entity relating to the Business or the Howell Assets and any and all trucks, tractors and trailers leased, owned or operated by, for or on behalf of Howell in connection with the Howell Assets or the Business, and holds all necessary certificates, permits or other regulatory authorizations to own and operate the Howell Assets as utilized in the Business presently and during the past twelve months, except where the failure to be so qualified or licensed would not have, individually or in the aggregate, a MAE on the Business. (ii)Except as set forth on Schedule 3.2(s), (a) each Howell Entity has complied with all federal, state and local Laws, including, without limitation, the rules and regulations of all governmental agencies having authority over it and any such Laws, concerned with export and import licenses, occupational safety, environmental protection and employment practices, relating to the Business, (b) each Howell Entity has complied with each and all permits and tariffs, including any required filings and renewals and no default exists with respect thereto, and (c) no Howell Entity has received written notice of violation of any such rules or regulations, corrected or not, since January 1, 1996, except, in the cases of (a) and (b), where such violations or noncompliance, individually or in the aggregate, would not have a MAE with respect to the Business. No Howell Entity has received from any governmental authority any written notice since January 1, 1996, of any currently proposed public improvement which would impose a Lien upon any of the Howell Assets, except as would not have a MAE with respect to the Business. (t) Suspense Accounts. Each Howell Entity has maintained its Suspense Accounts for third party sellers of crude oil in accordance with all applicable Laws, including, without limitation, applicable escheat laws, except as would not have a MAE with respect to the Business. (u) Third Party Rights. Except as set forth in Schedule 3.2(u), no party has any right, whether or not exercisable after notice or lapse of time or any triggering event, to purchase any material part of the Howell Assets (other than crude oil sold in the ordinary course of business). Except as set forth in Schedule 3.2(u), no agreement binding on any Howell Entity or the Business contains any provision which would impose material limitations on Genesis OLP or any of its Affiliates or their respective business practices through a noncompetition, an area of interest or similar type of provision. (v) Prepayment. No Howell Entity is obligated by virtue of any express or implied contract or agreement to deliver at some future time oil, gas or products thereof, without receiving at such time a commitment for full payment in accordance with usual business practice. Except as provided for in Schedule 7.1, no Howell Entity has received any prepayment for any oil or gas to be sold, or for services, including transportation, treating or storage, to be rendered. (w) Investment Representation. The Howell Entities are acquiring the Subordinated LP Units for their own account and not with a view to or for sale in connection with any distribution thereof, and will not sell or transfer the Subordinated LP Units except pursuant to an effective registration statement under the Securities Act, and the rules and regulations promulgated thereunder, or an exemption therefrom and in compliance with all state securities and blue sky laws; provided, however, it is understood that, subject to the provisions of Section 4.6, a Howell Entity may transfer its Subordinated LP Units to its Affiliates, and that the Subordinated LP Units will bear an appropriate legend relating to such restriction on transfer and to restrictions on transfer under the Securities Act and the regulations thereunder. Each Howell Entity is an "accredited investor" as defined in Rule 501(a) under the Securities Act. SECTION 3.3 Genesis OLP hereby represents and warrants to each Transferor as follows: (a) Organization, Standing and Authority. Genesis OLP is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. Genesis OLP has full power and authority to enter into each Transaction Document to which it is a party, to perform its obligations thereunder and to consummate the transactions contemplated thereby which are to be consummated by it. The execution and delivery of the Transaction Documents to which it is a party by Genesis OLP and the consummation by Genesis OLP of the transactions contemplated thereby have been duly authorized by all necessary partnership action on the part of Genesis OLP, and no other partnership action or proceeding on the part of Genesis OLP is necessary to authorize the execution and delivery by Genesis OLP of the Transaction Documents to which it is a party or the consummation by Genesis OLP of the transactions contemplated thereby. This Agreement has, and on the Closing Date each other Transaction Document to which it is a party will have, been duly executed and delivered by Genesis OLP and, assuming each has been duly authorized, executed and delivered by the other parties thereto, is a legal, valid and binding obligation of Genesis OLP enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally or as may be limited by the availability of equitable remedies, including specific performance, subject to the discretion of the court before which any proceeding therefor may be brought. (b) Noncontravention. The execution and delivery of the Transaction Documents do not, and the consummation of the transactions contemplated thereby will not: (i) violate any provision of the OLP Agreement; (ii) violate, or result with the giving of notice or the passage of time in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or entitle any party to terminate any or all of the provisions of, or result in the creation or imposition of any Lien upon any of the assets of Genesis OLP pursuant to any provision of, or require the consent or approval of any other party to, any mortgage, lien, lease, license, loan agreement, indenture or other agreement, instrument or document to which Genesis OLP is a party or to or by which Genesis OLP or any of the assets of Genesis OLP are subject or bound; or (iii) violate or conflict with any Law, order, arbitration award, judgment or decree to or by which Genesis OLP or any of the assets of Genesis OLP are subject or bound; except, in the case of (ii) and (iii) above, for such violations, conflicts, breaches, defaults or encumbrances the existence of which would not have a MAE with respect to Genesis OLP. (c) Brokers and Finders. Neither Genesis OLP nor any of the officers, directors or employees of Genesis LLC is obligated to pay, nor has any of them retained, any broker or finder or any other person who is entitled to any broker's or finder's fees or any other commission or financial advisory fee based on any agreement or undertaking made by or on behalf of Genesis OLP or Genesis LLC in connection with the transactions contemplated hereby or in the Transaction Documents, except pursuant to the Underwriting Agreement. SECTION 3.4 Genesis MLP hereby represents and warrants to each Transferor as follows: (a) Organization, Standing and Authority. Genesis MLP is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. Genesis MLP has full power and authority to enter into each Transaction Document to which it is a party, to perform its obligations thereunder and to consummate the transactions contemplated thereby which are to be consummated by it. The execution and delivery of the Transaction Documents to which it is a party by Genesis MLP and the consummation by Genesis MLP of the transactions contemplated thereby have been duly authorized by all necessary partnership action on the part of Genesis MLP and no other partnership action or proceeding on the part of Genesis MLP is necessary to authorize the execution and delivery by Genesis MLP of the Transaction Documents to which it is a party or the consummation by Genesis MLP of the transactions contemplated thereby. This Agreement has, and on the Closing Date each other Transaction Document to which it is a party will have, been duly executed and delivered by Genesis MLP and, assuming each has been duly authorized, executed and delivered by the other parties thereto, is a legal, valid and binding obligation of Genesis MLP enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency and similar laws affecting the rights of creditors generally or as may be limited by the availability of equitable remedies, including specific performance, subject to the discretion of the court before which any proceeding therefor may be brought. (b) Noncontravention. The execution and delivery of the Transaction Documents do not, and the consummation of the transactions contemplated thereby will not: (i) violate any provision of the MLP Agreement; (ii) violate, or result with the giving of notice or the passage of time in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or entitle any party to terminate any or all of the provisions of, or result in the creation or imposition of any Lien upon any of the assets of Genesis MLP pursuant to any provision of, or require the consent or approval of any other party to, any mortgage, lien, lease, license, loan agreement, indenture or other agreement, instrument or document to which Genesis MLP is a party or to or by which Genesis MLP or any of the assets of Genesis MLP are subject or bound; or (iii) violate or conflict with any Law, order, rule, award, judgment or decree to or by which Genesis MLP or any of the assets of Genesis MLP are subject or bound; except, in the case of (ii) and (iii) above, for such violations, conflicts, breaches, defaults or encumbrances the existence of which would not have a MAE with respect to Genesis MLP. (c) Brokers and Finders. Neither Genesis MLP nor any of the officers, directors or employees of Genesis LLC is obligated to pay, nor has any of them retained, any broker or finder or any other person who is entitled to any broker's or finder's fees or any other commission or financial advisory fee based on any agreement or undertaking made by or on behalf of Genesis MLP or Genesis LLC in connection with the transactions contemplated in the Transaction Documents, except pursuant to the Underwriting Agreement. ARTICLE 4 MISCELLANEOUS PROVISIONS RELATING TO TRANSFER OF ASSETS AND BUSINESS. SECTION 4.1 Nonassignability of Assets. (a) To the extent that any lease, contract, license, permit, agreement, sales or purchase order, commitment, property interest, qualification or other assets described in this Agreement as being sold, assigned, transferred, set over or delivered to Genesis OLP (each, a "Commitment") or any claim, right or benefit arising thereunder or resulting therefrom (collectively with the Commitment it arises or results from, an "Interest"), is not capable of being sold, granted, conveyed, assigned, transferred, set over or delivered without the approval, consent or waiver of the issuer thereof or the other party thereto, or any third person (including a government or governmental authority), or if such sale, assignment, grant, conveyance, transfer, set over or delivery or attempted sale, grant, conveyance, assignment, transfer set over or delivery would be invalid, would destroy or eliminate such Interest, or would constitute a breach of such Commitment or a violation of any Law, this Agreement shall not constitute a sale, grant, conveyance, assignment, transfer, set over or delivery thereof, or an attempted sale, grant, conveyance, assignment, transfer, set over or delivery thereof in the absence of such approval, consent or waiver. The obligations of Genesis OLP and the Transferor with respect to such Interests will be governed by clause (b) hereof. (b) The Parties hereto undertake to co-operate in good faith to ensure that they do such acts and things as may be reasonably necessary to complete the transfer of the Business. At all times after the date of this Agreement, the Parties shall do such acts and things as may be reasonably required for the purpose of giving to the OLP Parties hereto the full benefit of all the provisions of this Agreement in respect of the Interests, including using their reasonable best efforts in order that any necessary third party shall execute such documents and do such acts and things as may be reasonably required for such purpose. Each of the Transferors and Genesis OLP will use its reasonable best efforts to obtain any consent, substitution, approval or amendment required to novate, reissue or assign all Commitments; provided, however, that no Transferor shall be obligated to pay more than a reasonable amount as consideration therefor (except for filing fees and other similar charges) to, and no Transferor nor Genesis OLP shall be obligated to commence litigation against, the third party from whom such consents, approvals, substitutions or amendments are requested. If the Transferors and Genesis OLP are unable to obtain any such required consent, approval, substitution or amendment, the Transferor (or its Affiliates) that is the holder of or party to a commitment for which such required consent, approval, substitution or amendment cannot be obtained shall continue to be bound by such Commitments and, unless not permitted by Law or the terms thereof, Genesis OLP (or its Affiliates) shall, as agent for such Transferor (or its Affiliates) or as subcontractor, pay, perform and discharge fully all the obligations of such Transferor (or its Affiliates) thereunder from and after the Closing Date and indemnify and hold harmless such Transferor and its Affiliates from and against all losses, claims, damages, taxes, liabilities and expenses whatsoever arising out of or in connection with Genesis OLP's (or its Affiliates') performance of or omission to perform its obligations thereunder and hereunder. Such Transferor (or its Affiliates) shall, without further consideration, pay and remit to Genesis OLP (or its designee) promptly all money, rights and other consideration received in respect of such performance after payment of any taxes, costs or expenses due from such Transferor (or its Affiliates) with respect to such receipt. Such Transferor (or its Affiliates) shall exercise its rights and options under all such Commitments only as reasonably directed by Genesis OLP and at Genesis OLP's expense. If and when any such approval, consent or waiver shall be obtained or such Commitment shall otherwise become assignable or able to be novated, the assignment of the Assets and the assumption of the Assumed Liabilities related to such approval, consent or waiver or restriction on assignment and/or assumption shall become effective automatically as of the Closing Date, without further action on the part of such Transferor, Genesis OLP or any of their respective Affiliates, and without payment of further consideration. To the extent that the assignment of any Commitment or the proceeds thereof pursuant to this Section 4.1 is prohibited by Law, the assignment provisions of this paragraph shall operate to create a subcontract or agency with Genesis OLP to perform each relevant, unassignable Commitment, and the subcontract price shall be equal to the money, rights and other consideration received by a Transferor (net of any taxes imposed on such Transferor or any of its Affiliates with respect to such money, rights or other consideration) in respect of the performance by Genesis OLP under such subcontract. If any such restriction on the assignability of the Interests is not satisfied or waived within 21 years after the death of the last to die of all descendants of Joseph P. Kennedy, father of the late President of the United States of America, who are living on the date the assignments executed pursuant to this Agreement are executed, the transfer to Genesis OLP of the Interests affected by such restriction shall be null and void. (c) Genesis OLP and each Transferor shall enter into the Agency Agreement as of the Closing Date. To the extent that a conflict exists between the Agency Agreement and this Agreement, the Agency Agreement shall control with respect to the subject matter thereof. SECTION 4.2 Direct Transfer to a Genesis OLP Affiliate. Genesis OLP may, in its sole discretion, direct a Transferor to transfer any of the Assets directly to an Affiliate of Genesis OLP; provided, however, that any such transfer shall not relieve Genesis OLP of any of its obligations under this Agreement (including, without limitation, the obligation to assume the Assumed Liabilities and to indemnify the Transferor Parties). SECTION 4.3 Assumption of Assumed Liabilities by Genesis OLP. In connection with the Asset Purchase and Sale and the Basis and Howell Crude Contributions, Genesis OLP shall absolutely and irrevocably assume and agree to be solely liable and responsible for, and to duly and timely pay, perform and discharge, all of the Assumed Liabilities; provided, however, that said assumption and agreement shall not (a) waive any valid defense that was available to a Transferor with respect to the Assumed Liabilities or (b) enlarge any rights or remedies of any third party under any of the Assumed Liabilities. The only liabilities to be assumed by Genesis OLP in connection with the transfer of Assets from any of the Transferors or their Affiliates are the Assumed Liabilities. Genesis OLP will not assume or become obligated, and nothing in this Agreement shall be deemed to constitute an assumption by Genesis OLP of liability, to pay, perform or discharge, and will not be responsible for, any other liabilities or obligations of any Transferor or its Affiliates, whether accrued, absolute, contingent or otherwise, including, without limitation, liabilities or obligations based on, arising out of or in connection with the Excluded Liabilities, except to the extent set forth in Section 8 of this Agreement. SECTION 4.4 Post Signing Covenants and Agreements. Each of the Transferors and Genesis OLP covenants and agrees with each other as follows: (a) During the Post-Signing Period, each Transferor agrees, and will cause its Affiliates, (i) to maintain and operate their respective Assets and the Business only in, and not to take any action except in, the ordinary course of business and consistent with past practice; (ii)to maintain books of account and records with regard to the Assets in accordance with past practice of such Transferor or its Affiliate; (iii) not to enter into any material agreements with respect to any of its respective Assets or the Business which is not in the ordinary course of business and consistent with past practice; (iv)not to encumber (other than by Permitted Encumbrances), sell, or otherwise dispose of any of its respective Assets other than the disposition of inventory in the ordinary course of business and consistent with Schedule 7.1; (v) to maintain its properties, machinery and equipment in good operating condition and repair subject to wear and tear consistent with past practice; (vi)not to take any action that is reasonably expected to result in any termination of a material lease related to the Assets; (vii) not to fail to take any action that is reasonably expected to maintain a material lease related to the Assets; (viii) to use its reasonable best efforts to preserve its business relationships with suppliers, licensors, licensees, distributors, customers and others having material business dealings with it such that the Business will not be materially impaired; (ix)not to cancel, release or waive any debt, claim, or right of value relating to the Interests or the Business, which, in the aggregate, exceeds $10,000; and (x) not to agree in writing, or otherwise, to take any of the foregoing actions or any other action which would make any representation or warranty contained in Section 3 untrue or incorrect in any material respect as of the Closing Date. (b) Each Party will cooperate with the other Parties and use its best reasonable efforts to: (i) procure upon reasonable terms and conditions all necessary consents and approvals to (A) the Transaction Documents and (B) all agreements, instruments or documents referred to on Schedules 3.1(c) and 3.2(c); (ii)complete all necessary filings, registrations, and certificates; and (iii) satisfy all requirements prescribed by applicable Laws for, and all conditions to, the consummation of the transactions contemplated in the Transaction Documents. (c) Notwithstanding any other provision of this Agreement, if any tangible Asset currently used in the Business sustains damage greater than $50,000, per occurrence, from and after the date hereof and prior to the Closing Date which in the reasonable opinion of Genesis OLP either materially impairs its usefulness or materially reduces its remaining useful life, other than wear and tear sustained in the ordinary course of the Business, the Transferor thereof, at its sole discretion, shall immediately either (i) replace, repair or cause to be repaired the damage to such Asset at such Transferor's own expense, prior to the Closing Date or (ii) pay to Genesis OLP at Closing an amount reasonably necessary to allow Genesis OLP to replace such Asset or restore such Asset to its condition immediately prior to such damage. SECTION 4.5 Satsuma Crude Oil Tanks. (a) Covenants Made by Howell - Howell makes the following covenants to Genesis OLP with regard to the Tank Cleaning: (i) Howell agrees to perform and shall retain liability for all Tank Cleaning, provided that Howell reserves any rights it may have against Exxon relating to the Tank Cleaning and rental obligations. Genesis OLP shall be entitled to have a representative present to observe the Tank Cleaning. (ii)As between Howell and Genesis OLP, Howell shall retain full liability and financial responsibility for all Tank Cleaning regardless of whether such Tank Cleaning may be performed by Howell, Genesis OLP, or some other party. (b) Genesis OLP Performance Privilege - If Tank Cleaning has not been completed by June 30, 1997, Genesis OLP, at its sole discretion, may elect by written notice to Howell, at Howell's risk and expense, to commence judicial proceedings with Howell's assistance and to perform any or all of the Tank Cleaning itself or by contracting with any other party for the performance thereof. Alternatively, Genesis OLP, at its sole discretion, may accept any request from Howell, at Howell's risk and expense, to perform any or all of the Tank Cleaning itself or by contracting with any other party for the performance thereof. Should Genesis OLP exercise its right or so elect to perform any of the Tank Cleaning in accordance with this Section 4.5(b), Genesis OLP shall provide Howell copies of any resulting invoice for such amounts. Howell shall reimburse Genesis OLP for all Tank Cleaning expenses within 15 days of receipt of an invoice from Genesis OLP for any such expenses. (c) Rental Payment for the Satsuma Station Tanks -All rental payments attributable to the Exxon Satsuma facilities lease agreement, dated March 31, 1995 (the "Exxon Satsuma Facilities Lease Agreement"), for periods (i) prior to June 30, 1997 shall be retained by Howell and (ii) on or after June 30, 1997, if any, shall be delivered to Genesis OLP. Should the Tank Cleaning not be completed by June 30, 1997, Howell agrees to pay monthly rent on any Usable Tank that is not cleaned on or after that date until such time as such Usable Tank has been cleaned and becomes available for service by Genesis OLP. These monthly rental payments shall (x) be due on the first day of each month, (y) paid by Howell to the extent such rental payments are not made by Exxon to Genesis OLP and (z) be calculated at a rate of 10 cents per barrel of shell capacity without regard to proration for any term less than a calendar month. Genesis OLP shall reimburse Howell for any payments made by Howell for which Genesis OLP also received payment from Exxon for such obligation. (d) Indemnification - Howell shall indemnify, defend, save and hold harmless each of the OLP Parties from and against all claims, liabilities, obligations, losses, costs, cost of defense (as and when incurred), including expenses, fines, charges, penalties, allegations, demands, damages (including but not limited to actual, punitive or consequential, foreseen or unforeseen, known or unknown), settlements, awards or judgments of any kind or nature whatsoever and reasonable outside attorney's and consultant's fees, to the extent arising out of (a) the Tank Cleaning Operations, whether performed by Howell or any of the OLP parties or any third party, or the presence of waste in any of the tanks, regardless or whether this liability results from the negligent acts of Howell, any OLP Party or Exxon or any of their respective contractors, invitees or licensees or (b) any and all claims made by Exxon under the Exxon Satsuma Facilities Lease Agreement relating to matters occurring prior to the Closing Date. SECTION 4.6 Nontransferability of Subordinated LP Units. Except pursuant to the terms of the Pledge Agreement, the Subordinated LP Units received by Howell Crude pursuant to Section 2 of this Agreement shall not be transferred to any Person nor shall any Subordinated LP Units be transferred to Howell Crude until the special distribution pursuant to Section 6.9 of the OLP Agreement has been made. SECTION 4.7 Environmental Make-Whole Provisions. In the event that pursuant to Section 8.1 Genesis OLP is entitled to a defense and/or indemnification for environmental liabilities which constitute Excluded Liabilities with respect to the Assets ("OLP Covered Liabilities"), the allocated pro rata share of each of the Sponsors with respect to the Annual Obligation and the Aggregate Obligation referenced in Section 8.3(c) shall be 66 2/3 % to Howell, including any matters related to the Howell Subsidiaries, and 33 1/3 % to Basis. Each Sponsor will initially be allocated its pro rata share of Genesis OLP's Annual Obligation and Aggregate Obligation. However, if a Sponsor has not used any, or all, of its allocated pro rata share of the Annual Obligation or the Aggregate Obligation (the "Underallocated Sponsor"), the other Sponsor shall be entitled to use such allocated pro rata share until the Annual Obligation and the Aggregate Obligation are met. Once the Annual Obligation and Aggregate Obligation have been met, the Underallocated Sponsor shall be entitled to receive a cash payment for each occurrence from the other Sponsor, which payment shall be in the amount of the claim up to $25,000 per occurrence. These payments shall occur until the full unused amount of the Underallocated Sponsor's allocated pro rata share has been utilized. Each payment shall be made within five business days of the Underallocated Sponsor having submitted to the other Sponsor a request for a make-whole reimbursement payment for such environmental liability or liabilities (the "Make-Whole Payment Request"). Any Sponsor who does not deliver a Make-Whole Payment Request for any or all of its unused allocated pro rata share of the Annual Obligation or Aggregate Obligation to the other Sponsor within seven years of the Closing Date forfeits any claim hereunder for restitution for such unused allocated pro rata share from such other Sponsor for any subsequent indemnification claims made by Genesis OLP for OLP Covered Liabilities. ARTICLE 5 CONDITIONS TO CLOSING. In addition to the conditions set forth in Section 2 of this Agreement, the obligations of each Party under this Agreement shall be subject to the prior satisfaction of each of the following conditions: (a) There shall not be in effect any injunction or restraining order issued by a court of competent jurisdiction barring the consummation of any of the transactions contemplated by this Agreement; (b) There shall not have occurred any MAE with respect to the Basis Assets, the Howell Assets or the Business of Basis and the Howell Entities since December 31, 1995; (c) The representations and warranties of each Party shall have been true and correct on the date when made and such representations and warranties shall be true and correct on and as of the Closing Date (except those, if any, expressly stated to be true and correct at an earlier date), with the same force and effect as though such representations and warranties had been made on and as of the Closing Date; (d) All consents, permits, approvals and other actions of any Person required for the lawful transfer, conveyance and assignment to Genesis OLP of the Assets (except (i) consents for the assignment of government leases that are customarily obtained after the Closing of a sale of these type of assets and (ii) consents the failure to obtain that will not individually or in the aggregate have a MAE on Genesis OLP, Genesis MLP or the Business); (e) Genesis OLP shall have received a full release of all Liens encumbering the Howell Assets in favor of Banc One, Texas, N.A.; such release to be in a form reasonable acceptable to Genesis OLP; (f) Each Party shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed and satisfied by the applicable Party at or prior to the Closing Date; (g) All of the conditions under the Underwriting Agreement (other than those conditions relating to the consummation of the transactions contemplated by this Agreement) shall have been satisfied or waived and the Underwriting Agreement shall be in full force and effect, enforceable against the Underwriters in accordance with its terms (subject to the consummation of the transactions contemplated by this Agreement); (h) Opinions dated as of the Closing Date, in form and substance reasonably acceptable to the Parties from (i) Wayne Kubicek, General Counsel of Basis, on behalf of Basis, (ii) Robert T. Moffett, General Counsel of Howell, on behalf of the Howell Entities and (iii) Andrews & Kurth L.L.P., counsel for Genesis MLP and Genesis OLP, shall have been delivered; and (i) The appropriate parties shall have executed and acknowledged each of the Transaction Documents. ARTICLE 6 CLOSING. SECTION 6.1 Date of Closing. Subject to the satisfaction of the conditions in Section 5 of this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place on the Closing Date at the offices of Andrews & Kurth L.L.P., 4200 Texas Commerce Tower, Houston, Texas 77002 (or at such other place as the Parties may agree). SECTION 6.2 Deliveries. In order to more fully implement the transactions contemplated by Sections 2 and 4 of this Agreement, the Parties covenant and agree as follows: (a) On the Closing Date, Genesis OLP and the Transferors shall, and shall cause their Affiliates to each execute and deliver, to the other (or in the case of Genesis OLP, to Genesis LLC), an Assignment and Assumption Agreement (Other Assets), an Assignment Agreement (Pipelines) and an Assignment and Assumption Agreement (Station Sites) and any instruments necessary to record such deeds and other instruments, as may be necessary or appropriate to vest effectively in Genesis OLP or its Affiliate or Genesis LLC title to the Assets and to comply with the purpose and intent of this Agreement; (b) The appropriate parties shall have executed and delivered each of the Transaction Documents; (c) On the Closing Date, Genesis OLP shall deliver to (i) each Transferor or a Person designated by such Transferor, net proceeds pursuant to the terms of Section 2 hereof and (ii) to the Collateral Agent pursuant to the Pledge Agreement certificates representing the Subordinated LP Units, which certificates with appropriate restrictive legends imposed thereon shall be issued in the name and denominations as requested by the Transferors on or prior to the Closing Date; (d) Each Transferor shall, and shall cause its Affiliates to, deliver to Genesis OLP or its designee at its principal place of business the original or copies of records related to the Assets; and (e) Each of the Parties hereto shall, and shall cause its Affiliates to, execute and deliver such other documents as may be reasonably necessary to effectuate the transactions contemplated hereby. ARTICLE 7 POST-CLOSING MATTERS. SECTION 7.1 Post-Closing Accounting Adjustment. The Parties hereto agree to the post closing adjustment referred to in Schedule 7.1. SECTION 7.2 Survival. The representations and warranties of the parties hereto contained herein and in any certificates, exhibits, schedules or other documents furnished in connection with this Agreement shall survive the Closing for a period of five (5) years thereafter, except for the representations and warranties of Basis set forth in Sections 3.1(f) and (h), and the representations and warranties of Howell set forth in Sections 3.2(f) and (h), which representations and warranties shall survive until the expiration of any applicable statutes of limitations, including, without limitation, as a result of any claims for violations of state or federal securities or tax laws; provided, that all such representations and warranties shall survive with respect to any claim, notice of which shall have been duly given under this Agreement prior to the time of expiration set forth above. All covenants and agreements of the parties contained herein (other than representations and warranties) shall except as expressly provided herein survive the Closing, for the time periods set forth therein. SECTION 7.3 Further Assurances. After the Closing Date, each Transferor shall, and shall cause its Affiliates to, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments, agreements, and other documents and shall take such other action, including providing transition services at reasonable charges to Genesis LLC, Genesis MLP and Genesis OLP (such as use of Howell's computer hardware), as may reasonably be necessary or advisable to effectuate the intent of this Agreement or to carry out the obligations of the Parties under this Agreement or under any other instrument, agreement, certificate or other document delivered pursuant hereto. Each of Genesis MLP and Genesis OLP shall, and shall cause their Affiliates to, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments, agreements, and other documents and shall take such other action, including providing services to the Transferors and their Affiliates (such as in connection with the accounting adjustment described in Schedule 7.1), as may reasonably be necessary or advisable to effectuate the intent of this Agreement or to carry out the obligations of the Parties under this Agreement or under any other instrument, agreement, certificate or other document delivered pursuant hereto; provided, however, that any third-party out-of-pocket expenses incurred by Genesis LLC, Genesis MLP or Genesis OLP on behalf of any Transferor or Affiliate shall be reimbursed by such Transferor or Affiliate. ARTICLE 8 INDEMNIFICATION. SECTION 8.1 Indemnification by the Transferors. (a) Subject to Section 8.3, each Transferor shall, without any further responsibility or liability of, or recourse to, any of the OLP Parties, absolutely and irrevocably be solely liable and responsible for its respective Excluded Liabilities; provided, however, the Howell Entities shall be jointly and severally liable and responsible for the Excluded Liabilities of the Howell Entities. Basis and its Affiliates shall not be liable for the Excluded Liabilities of the Howell Entities and their Affiliates and none of the Howell Entities or their Affiliates shall be liable for the Excluded Liabilities of Basis and its Affiliates. None of the OLP Parties shall be liable to any of the Transferor Parties or any third parties for any reason whatsoever on account of any of the Excluded Liabilities and none of the Transferor Parties shall be liable to any of the OLP Parties or any third party for any reason whatsoever on account of any of the Assumed Liabilities. (b) Each Transferor shall indemnify, defend, save and hold harmless each of the OLP Parties from and against all claims, liabilities, obligations, losses, costs, costs of defense (as and when incurred), including expenses, fines, charges, penalties, allegations, demands, damages (including but not limited to actual, punitive or consequential, foreseen or unforeseen, known or unknown), settlements, awards or judgments of any kind or nature whatsoever and reasonable outside attorneys' and consultants' fees, to the extent arising out of (a) Excluded Liabilities of such Transferor, including liability arising under CERCLA or relating to the Assets or the operation of the Business prior to the Closing Date, (b) any failure of a Transferor or its Affiliate to comply with any applicable bulk sales law of any jurisdiction in connection with the transactions contemplated by this Agreement, (c) any breach of the representations and warranties of such Transferor in this Agreement for which Genesis OLP must assert a claim for indemnification during the applicable survival period referred to in Section 7.2, including, without limitation, any loss suffered by Genesis OLP or Genesis MLP to the Underwriters or any third party that is attributable solely to a breach by any Transferor of its representations in Section 3.1(f) or Section 3.2(f), as the case may be, or (d) the breach by such Transferor or its Affiliate of any of its obligations under this Agreement, including, without limitation, with respect to Howell, Howell's obligations pursuant to Section 4.5, all of which are hereinafter collectively referred to as the "OLP Damages." The Transferors' obligations pursuant to this Section 8.1 shall terminate in the event Genesis LLC is removed as a General Partner of Genesis OLP without the General Partner's consent. Notwithstanding anything in this Agreement to the contrary, each of Basis' and the Howell Entities' liability under this Agreement shall be several and not joint; provided, however, the Howell Entities shall be jointly and severally liable among themselves for the liabilities of the Howell Entities. Notwithstanding anything in this Agreement to the contrary, neither Basis' nor the Howell Entities' indemnification obligations pursuant to this Section 8.1 shall include any liability or responsibility attributable to the ownership or operation of certain of the Assets by either JMP or Exxon, which liabilities or responsibilities were not assumed by either Basis or the Howell Entities in connection with their respective acquisitions of such Assets. (c) The indemnification obligations of Basis and the Howell Entities pursuant to this Section 8.1 shall not apply to any claims, liabilities, obligations, losses, costs, costs of defense (as and when incurred), including expenses, fines, charges, penalties, allegations, demands, damages (including but not limited to actual, punitive or consequential, foreseen or unforeseen, known or unknown), settlements, awards or judgments of any kind or nature whatsoever and reasonable outside attorneys' and consultants' fees (hereafter referred to as "Indemnified Losses"), to the extent such Indemnified Losses, including liabilities arising under CERCLA, were suffered or incurred as a result of an invasive environmental site investigation of the Basis Assets or Howell Assets undertaken after the Closing Date other than such an investigation which is undertaken (i) under the direction of any financial institution in connection with any application or request for a loan or other financial transaction by Genesis LLC, Genesis MLP or Genesis OLP, (ii) as a result of, or in defense of, or pursuant to any administrative, arbitral, civil or criminal judicial proceeding by reason of a notice of deficiency, notice of violation, judgment, order, consent decree, settlement or otherwise, (iii) as a condition to, or in connection with, any merger, sale, assignment or other disposition of the business or assets of Genesis LLC, Genesis MLP or Genesis OLP or with respect to any part thereof, (iv) as a result of the discovery in the ordinary course of business of (or, a discovery in prudent and customary business practice, as a result of any condition, leaks or other occurrences which reasonably suggests the possible presence of) a quantity of crude oil, petroleum products or other hydrocarbons, wastes (whether hazardous or nonhazardous) or materials that are required to be reported or otherwise disclosed to any regulatory agency, body or authority or (v) in response to any complaints of, or notices from, any property owner, community or civic group. SECTION 8.2 Indemnification by Genesis OLP and Genesis MLP. Subject to Section 8.3, upon, from and after the Closing Date, Genesis OLP and Genesis MLP shall, without any further responsibility or liability of, or recourse to, any of the Transferor Parties, absolutely and irrevocably assume and be solely liable and responsible for the Assumed Liabilities. None of the Transferor Parties shall be liable to any of the OLP Parties or any third parties for any reason whatsoever on account of any of the Assumed Liabilities. Genesis OLP and Genesis MLP shall indemnify, defend, save and hold harmless each of the Transferor Parties from and against all claims, liabilities, obligations, losses, costs, costs of defense (as and when incurred), including expenses, fines, charges, penalties, allegations, demands, damages (including but not limited to actual, punitive or consequential, foreseen or unforeseen, known or unknown), settlements, awards or judgments of any kind or nature whatsoever and reasonable outside attorneys' and consultants' fees, to the extent arising out of (a) the Assumed Liabilities, (b) any breach of the representations or warranties of Genesis OLP and Genesis MLP in this Agreement for which a Transferor Party must assert a claim for indemnification during the applicable survival period referred to in Section 7.2 or (c) the breach by any of the OLP Parties of any of their obligations under this Agreement, all of which are hereinafter collectively referred to as the "Transferor Damages." SECTION 8.3 Specific Indemnification Issues. (a) In the event a claim, demand, action or proceeding is brought by a third party in which the liability as between any Transferor, on the one hand, and Genesis MLP or Genesis OLP, on the other hand, is determined after trial in any judgment, award or decree to be joint or concurrent or in which the entitlement to indemnification hereunder is not readily determinable, the parties shall negotiate in good faith in an effort to agree, as between such Transferor, on the one hand, and Genesis MLP or Genesis OLP, on the other hand, on the proper allocation of liability or entitlement to indemnification, as well as the proper allocation of the costs of any joint defense or settlement pursuant to Section 8.5(d), all in accordance with the provisions of, and the principles set forth in, this Agreement. (b) It is acknowledged that after the Closing Date, the Parties may have business relationships with one another, which relationships will be described in contracts, agreements and other documents entered into in the normal course of business, including the Transaction Documents. Such documents may include agreements by the Parties and their Affiliates to supply, after the Closing Date, materials, products, services and leases to another Party or its Affiliate. Such business relationships shall not be subject to the indemnity provisions hereof, unless the parties expressly agree to the contrary in the agreements governing such relationships. (c) Notwithstanding anything in this Agreement to the contrary, Genesis OLP shall assume the responsibility for the payment of the first $25,000 per occurrence as to any environmental liability included in Excluded Liabilities up to an amount that shall not exceed in the aggregate $200,000 for the twelve- month period beginning on the Closing Date and ending on the anniversary thereof and for each twelve-month period thereafter (the "Annual Obligation"); provided that Genesis OLP's aggregate liability pursuant to this Section 8.3(c) shall not exceed $600,000 (the "Aggregate Obligation"). As security to cover any and all costs, including any reserves required in accordance with GAAP, arising out of each of the Transferor's indemnification obligation for environmental liabilities included in the Excluded Liabilities, pursuant to the Pledge Agreement, each Transferor shall pledge to Genesis OLP one half of its initial Subordinated LP Units subject to release of such Subordinated LP Units from this pledge upon conversion of such Subordinated LP Units into Common LP Units pursuant to the terms of OLP Agreement. (d) EACH OF THE AGREEMENTS TO INDEMNIFY, DEFEND OR HOLD HARMLESS CONTAINED IN THIS AGREEMENT SHALL APPLY, IN ACCORDANCE WITH ITS TERMS, IRRESPECTIVE OF WHETHER THE SUBJECT CLAIM IS BASED IN WHOLE OR IN PART UPON THE CONTRIBUTING NEGLIGENCE (WHETHER ACTIVE OR PASSIVE), BREACH OF WARRANTY, STRICT LIABILITY, OR BREACH OR VIOLATION OF ANY DUTY IMPOSED BY ANY LAW OR REGULATION, ON THE PART OF THE BENEFICIARY OF THE AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT. (e) The Indemnified Party shall not be entitled to recover from the Indemnifying Party for any losses, costs, expenses, or damages arising under this Agreement or in connection with or with respect to the transactions contemplated in this Agreement any amount in excess of the actual compensatory damages, court costs and reasonable attorney fees, suffered by the Indemnified Party. Each OLP Party and each Transferor Party waives any right to recover punitive, special, exemplary and consequential damages arising in connection with or with respect to the transactions contemplated in this Agreement unless recovered by a third party against the OLP Party or the Transferor Party. (f) The Indemnified Party shall take reasonable steps to mitigate losses, costs, expenses and damages after becoming aware of any event or circumstance that could reasonably be expected to give rise to any losses, costs, expenses and damages that are indemnifiable or recoverable hereunder or in connection herewith; provided, however, that (i) such mitigation shall be necessary only for a reasonable time after notice is given to the Indemnifying Party, and (ii) all costs of such mitigation shall be an indemnifiable expense, including indirect and administrative costs. SECTION 8.4 Notice and Payment of Claims. (a) If any Person entitled to a defense and/or indemnification under this Agreement (the "Indemnified Party") determines that it is or may be entitled to a defense or indemnification by Genesis OLP, Genesis MLP or any Transfer or, as the case may be (the "Indemnifying Party"), under this Agreement: (i) The Indemnified Party shall deliver promptly to the Indemnifying Party a written notice and demand for a defense or indemnification, specifying the basis for the claim for defense and/or indemnification, the nature of the claim, and if known, the amount for which the Indemnified Party reasonably believes it is entitled to be indemnified. Nothing in this subparagraph shall be interpreted to invalidate any claim by the Indemnified Party to be entitled to indemnification, except to the extent, if any, that the failure of the Indemnified Party to deliver such notice resulted in actual prejudice to the Indemnifying Party. (ii)The Indemnifying Party shall promptly, but in any event within 30 days from receipt of the notice requesting indemnification, either: (A) assume the defense of such litigation or claim; (B) pay the claim in immediately available funds; (C) reserve its rights pending resolution under Section 8.5(d); or (D) object in accordance with clause (b) of this Section 8.4. This 30-day period may be extended by agreement of the parties. Nothing in this subparagraph shall be interpreted to abrogate or delay a party's obligation to provide the other with a defense under this Agreement. (b) The Indemnifying Party may object to the claim for defense and/or indemnification set forth in any notice; provided, however, that if the Indemnifying Party does not give the Indemnified Party written notice setting forth its objection to such claim (or the amount thereof) and the grounds therefor within the same 30-day period (or any extended period), the Indemnifying Party shall be deemed to have acknowledged its liability to provide a defense or to pay the amount of such claim and the Indemnified Party may exercise any and all of its rights under applicable Law to collect such amount or obtain such defense. (c) Payments due to be made to any Indemnified Party under this Section 8 shall bear interest from the date on which the Indemnified Party paid any amount or actually suffered a loss in respect of OLP Damages or Transferor Damages, as the case may be, to but excluding the date of actual payment (whether before or after judgment) at the Prime Rate. (d) Payments due to be made under this Agreement shall be free and clear of all deductions, withholdings, set-offs or counterclaims whatsoever, except as may be required by law. If any deductions or withholdings are required by law, the Indemnifying Party shall be obliged to pay such sum as will, after such deduction, withholding, set-off or counter-claim has been made, leave the Indemnified Party with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction, withholding, set-off or counterclaim. The parties to this Agreement may enter into agreements or other arrangements providing for the set-off of payments due to be made by way of indemnification to both the Transferors and Genesis OLP. (e) Payments due to be made under this Agreement shall be reduced by the amount by which any taxes for which the Indemnified Party would have been accountable or liable to be assessed are either (i) actually reduced prior to payment falling due hereunder or (ii) likely to be reduced subsequent to payment falling due hereunder in the reasonable opinion of the Indemnified Party acting in good faith in the light of the circumstances prevailing at the time of delivery of written notice in accordance with clause (a) of this Section 8.4. The determination of the amount by which taxes are actually or likely to be reduced shall take into account the time value of money. SECTION 8.5 Defense of Third Party Claims. (a) If the Indemnified Party's claim for indemnification is based, under this Agreement, on a claim, demand, investigation, action or proceeding, judicial or otherwise, brought by a third party, and the Indemnifying Party does not object under Section 8.4(b), the Indemnifying Party shall, within the 30+day period (or any extended period) referred to in Section 8.4(a), assume the defense of such third-party claim at its sole cost and expense and shall thereafter be designated as the "Case Handler." Any such defense shall be conducted by attorneys employed by the Indemnifying Party. The Indemnified Party may retain attorneys of its own choosing to participate in such defense at the Indemnified Party's sole cost and expense. (b) If the Indemnifying Party assumes the defense of any such third-party claim, the Indemnifying Party may settle or compromise the claim without the prior consent of the Indemnified Party so long as all existing and future claims relating to the compromised claim against the Indemnified Party are irrevocably and unconditionally released in full. (c) The Indemnifying Party shall pay to the Indemnified Party in immediately available funds the amount for which the Indemnified Party is entitled to be indemnified within 30 days after the settlement or compromise of such third-party claim or the judgment of a court of competent jurisdiction (or within such longer period as agreed to by the parties in a final nonappealable decision). If the Indemnifying Party does not assume the defense of any such third-party claim, the Indemnifying Party shall be bound by the result obtained with respect thereto by the Indemnified Party, except that the Indemnifying Party has the right to contest that it is obligated to the Indemnified Party under the terms of this Agreement, provided the Indemnifying Party shall have raised its objection in a timely manner under Section 8.4. (d) In the event a claim, demand, action or proceeding is brought by a third party in which the liability as between Genesis OLP and any Transferor is alleged to be joint or in which the entitlement to indemnification hereunder is not readily determinable, the parties shall cooperate in a joint defense. Such joint defense shall be under the general management and supervision of the party which is expected to bear the greater share of the liability, and which will be considered the Case Handler, unless otherwise agreed; provided, however, that neither party shall settle or compromise any such joint defense matter without the consent of the other, which consent shall not be unreasonably withheld. The costs of such joint defense, any settlement and any award or judgment (unless the award or judgment specifies otherwise) shall be borne as the parties may agree; or in the absence of such agreement, such costs shall be borne by the party incurring such costs. SECTION 8.6 Cooperation and Preservation of Records. (a) The OLP Parties and the Transferor Parties shall cooperate with one another fully and in a timely manner in connection with the defense of any litigation or any other actual or threatened claim. (b) Such cooperation shall include, without limitation, making available to the other party, during normal business hours and upon reasonable notice, all books, records and information ("Litigation Records"), officers and employees (without substantial interruption of employment) necessary or useful in connection with any actual or threatened claim, investigation, audit, action or proceeding. (c) Each party shall continue in force, or at the request of the other party, shall issue, notices exempting from destruction any Litigation Records which the requesting party represents may be necessary to the defense of, or required to be produced in discovery in connection with, any such claim, investigation, audit, action or proceeding and shall either refrain from destroying any such Litigation Records until authorized by the requesting party or provide copies at the requesting party's expense thereof. The requesting party shall notify the other party promptly when the Litigation Records are no longer required to be maintained. (d) The party requesting access to Litigation Records or officers and employees pursuant to clause (b) of this Section 8.6 or preservation of Litigation Records pursuant to clause (c) of this Section 8.6 shall bear all reasonable out-of-pocket expenses (except reimbursement of salaries, employee benefits and general overhead) incurred by the other party in connection with providing such Litigation Records or officers and employees. (e) The party providing Litigation Records hereunder may elect, upon a reasonable basis and within a reasonable time, to designate all or a portion of the Litigation Records as confidential or proprietary. If Litigation Records are so designated, the party receiving them will treat them as it would its own confidential or proprietary information and will take all reasonable steps to protect and safeguard the Litigation Records while in its own custody and will attempt to shield such information from disclosure by motions to quash, motions for a protective order, redaction or other appropriate actions. ARTICLE 9 DISCLAIMERS AND WAIVER. SECTION 9.1 Disclaimer of Warranties. (a) EACH TRANSFEROR IS CONVEYING AND TRANSFERRING THE ASSETS "AS IS" AND, EXCEPT AS EXPRESSLY SET FORTH HEREIN, WITHOUT REPRESENTATION OR WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY (ALL OF WHICH THE TRANSFEROR HEREBY DISCLAIMS), AS TO (i) TITLE, (ii) FITNESS FOR ANY PARTICULAR PURPOSE OR MERCHANTABILITY OR DESIGN OR QUALITY, OR (iii) ANY OTHER MATTER WHATSOEVER. THE PROVISIONS OF THIS SECTION 9.1 HAVE BEEN NEGOTIATED BY THE TRANSFERORS AND GENESIS OLP AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES OF THE TRANSFERORS, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS EXPRESSLY SET FORTH HEREIN. (b) The Transferors, Genesis MLP and Genesis OLP agree that the disclaimers contained in this Section 9.1 are "conspicuous" disclaimers. Any covenants implied by statute or by the use of the words "grant," "convey," "bargain," "sell," "assign," "transfer," "deliver," or "set over" or any of them or any other words used in this Agreement are hereby expressly disclaimed, waived and negated. SECTION 9.2 Waiver of Bulk Sales Laws. Each of the parties hereto hereby waives compliance with any applicable bulk sales law or any similar law in any applicable jurisdiction in respect of the transactions contemplated by this Agreement. ARTICLE 10 TRADEMARKS AND TRADENAMES. SECTION 10.1 Written Materials and Logos. Genesis OLP shall as soon as reasonably practicable cease to use written materials, including without limitation, packaging, labels, package inserts, invoices, catalogs, brochures, handbooks, and similar materials, which contain the name Salomon, Phibro, Basis Petroleum, Inc., Howell Corporation, any names of the Howell Subsidiaries or variations thereof (including logos), or other trade names currently in use by the Business and not included in the Assets, as necessary; provided, however, that Genesis OLP shall use all reasonable efforts in its procurement of such materials after the Closing Date to procure materials which do include any such names, and to overprint, sticker, or otherwise identify on such materials in such a way as to either obliterate such names or clearly indicate that the Transferor is no longer affiliated with the Business or the Assets. SECTION 10.2 Signs. Each Transferor hereby agrees that Genesis OLP and its Affiliates may, until April 1, 1997, use signs which contain the name Basis Petroleum, Inc., any names of the Howell Entities or variations thereof (including logos), or other trade names currently in use by the Business and not included in the Assets, as necessary after the Closing Date; provided, however, Genesis OLP shall remove such signs as soon as reasonably possible; provided further, all pipeline signs in the name of Basis or any of the Howell Entities may be used but must be removed by December 31, 1997. ARTICLE 11 EMPLOYEE MATTERS. SECTION 11.1 Employment. Genesis LLC on behalf of Genesis MLP and Genesis OLP shall offer employment as of January 1, 1997 to all persons who are employees of the Business actively employed immediately prior to the date hereof, each of which is listed on Schedule 11.1, including, without limitation, the officers referred to therein (collectively, the "Business Employees"). The Business Employees shall be employed by Genesis LLC on substantially the same terms and conditions as those in effect in respect of their employment by the Transferors or their Affiliates immediately prior to the Closing Date. The officers identified in the Final Prospectus shall be offered employment pursuant to the form of Employment Agreement. Either Sponsor shall have the right to designate any employee who becomes actively employed in the Business between date hereof and December 31, 1996 as a Business Employee to be added to Schedule 11.1. Notwithstanding the foregoing, this Agreement shall not create any obligation on the part of Genesis LLC or any of its Affiliates to continue the employment of the Business Employees, nor create any other right of any such employee, or his or her beneficiaries, in either case, following the Closing Date. If Genesis LLC shall not hire or terminate without cause any Business Employee within the first six months of employment, then Genesis LLC shall be obligated to pay severance pursuant to the terms described in Schedule 11.1 or the Employment Agreement, as the case may be. From the Closing Date through December 31, 1996, each Transferor and its Affiliates shall provide the services of the Business Employees to Genesis MLP and Genesis OLP and be promptly reimbursed by Genesis MLP and Genesis OLP for such services pursuant to the term of the Transition Services Agreement. SECTION 11.2 LLC Plans. To the extent required, as of January 1, 1997, Genesis LLC shall, directly, or indirectly through the Corporate Services Agreement become the sponsor of and/or shall duly adopt each plan, program, policy, payroll practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, fringe benefits, medical benefits, performance awards (other than stock or stock related awards), or other employee benefits of any kind, including, without limitation, each "employee benefit plan" (within the meaning of Section 3(3) of ERISA) (each, a "Benefit Plan"), sponsored by, maintained, contributed to, or required to be sponsored, maintained or contributed to, by the Transferor or any of its Affiliates immediately prior to January 1, 1997 for the benefit of any Business Employee or former employee or agent of the Business (such Benefit Plans, the "LLC Plans"). The foregoing does not and shall not be construed to provide the Business Employees or former employees or agents of the Business any rights, or impose upon Genesis OLP or its Affiliates, any obligations, in either case, in addition to those which such employees or agents or a Transferor or its Affiliates may have in respect of the LLC Plans immediately prior to January 1, 1997. Notwithstanding anything to the contrary in this Agreement, Genesis OLP and its Affiliates shall not assume any of the Excluded Liabilities related to the LLC Plans. SECTION 11.3 No Third Party Beneficiaries. This Section 11 is solely for the benefit of the Parties and their respective Affiliates and nothing contained herein should be deemed to confer upon any other person any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. ARTICLE 12 TERMINATION OF AGREEMENT. SECTION 12.1 Termination. This Agreement and transactions contemplated hereby may be terminated and abandoned at any time prior to the Closing Date: (a) by the mutual consent of the Transferors, Genesis MLP and Genesis OLP; or (b) by either Basis or Howell (provided that the Party seeking termination has diligently and in good faith performed and complied in all material respects with the agreements and covenants required to be performed by it hereunder), by action of its Board of Directors, in the event the transactions contemplated hereby are not consummated pursuant to this Agreement by December 31, 1996, unless Basis and Howell shall have agreed upon an extension of time in which to consummate the transactions contemplated hereby. SECTION 12.2 Effect of Termination. In the event of the termination of this Agreement and the transactions contemplated hereby pursuant to Section 12.1, this Agreement shall become wholly void and of no force or effect, without any liability or further obligation on the part of the Transferors, Genesis MLP or Genesis OLP (or any of their respective Affiliates, directors, officers, employees, agents, representatives, partners or members); provided, however, that the provisions of Section 14.1(e) hereof shall survive such termination; and provided further, that such termination shall not relieve either Basis or Howell from any liability for any breach of this Agreement attributable to bad faith or willful misconduct. ARTICLE 13 TAX MATTERS. SECTION 13.1 Refunds of Taxes. Upon the reasonable request of either Sponsor, Genesis OLP shall assist such Sponsor in connection with (or to the extent necessary shall file, or cause to be filed in such form as such Sponsor may reasonably request), claims for refunds of federal, state, local or foreign income taxes attributable to the operation of the Business prior to the Closing Date. The Sponsor shall have the sole right to prosecute any claims for such refunds (by suit or otherwise) at the Sponsor's expense and with counsel of the Sponsor's choice, and Genesis OLP and its Affiliates shall cooperate fully with the Sponsor in connection therewith. SECTION 13.2 Notice of Tax Audits. Genesis LLC or Genesis OLP shall promptly notify the appropriate Sponsor in writing upon the receipt by Genesis LLC, Genesis OLP or any of their Affiliates of a notice of any pending or threatened audits or assessments against Genesis OLP or any of its Affiliates with respect to any taxes for which Genesis OLP or any of its Affiliates is or may be entitled to indemnification under this Agreement. The Sponsor shall have the sole right, at its election, (a) to represent Genesis OLP's (and its Affiliates') interest with respect to any such audits or assessments, including in any administrative or court proceeding relating thereto, and (b) employ counsel of its choice at its expense and to control the conduct of such audit, assessment, or proceeding, including the settlement or disposition thereof. Genesis LLC, Genesis OLP and their Affiliates shall cooperate fully with the Sponsor and its counsel in the defense against or compromise of any claim in any such audit, assessment, or proceeding. ARTICLE 14 MISCELLANEOUS. SECTION 14.1 Costs. (a) Genesis OLP shall be responsible for and, within a reasonable time after any request by a Transferor, shall pay directly to any designated third party, all Transfer Expenses; provided, that in lieu of such direct payment, the Transferor shall be entitled to pay such Transfer Expenses directly to third parties and shall be entitled to be reimbursed by Genesis OLP within a reasonable time after any request therefor. (b) Genesis MLP shall be responsible for and shall pay all Public Offering Expenses incurred prior to, as of or after the Closing Date. Such payment shall be made by Genesis MLP or its subsidiaries directly to any obligee in respect of such expenses. If, on or before April 30, 1997, Genesis MLP has reasonably incurred or paid Public Offering Expenses in excess of the actual and estimated amounts of such expenses used in the calculation as of the Closing Date of the Net MLP Proceeds, each Sponsor shall, promptly after each request by Genesis MLP, pay to Genesis MLP its Proportional Share of the amount of such excess. If, on or before April 30, 1997, Genesis MLP has reasonably incurred or paid Public Offering Expenses that are less than the actual and estimated amounts of such expenses used in the calculation as of the Closing Date of the Net MLP Proceeds, Genesis MLP shall promptly pay to each Sponsor, an amount equal to its Proportional Share of such deficiency. (c) If any Transferor or any of its Affiliates have paid any expenses, fees, costs or taxes that are the responsibility of Genesis MLP or Genesis OLP pursuant to clauses (a) or (b) of this Section 14.1, then Genesis MLP or Genesis OLP, as appropriate, shall reimburse the appropriate Transferor or such Affiliate promptly upon request therefor. (d) Each Transferor shall be responsible for and shall pay directly to any designated third party its own fees and expenses of attorneys incurred in connection with this Agreement. (e) In the event that this Agreement is terminated pursuant to Section 12.1, Basis and Howell shall bear their Proportional Share of all expenses, fees, costs or taxes referred to in clauses (a) or (b) of this Section 14.1 that were the responsibility of Genesis MLP and Genesis OLP. SECTION 14.2 Notices. All notices and other communications under this Agreement will be in writing and will be duly given (i) upon delivery if delivered personally with signed receipt acknowledging delivery; or (ii) upon dispatch if telexed (with answerback confirmation) or telegraphed (and if telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if mailed, by certified mail, postage prepaid, ten business days after date of mailing, addressed as follows: (a) If to the Basis Basis Petroleum, Inc. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Attention: President with copy to: General Counsel Fax No.: (713) 646+5278 (b) If to any of the Howell Entities Howell Corporation 1111 Fannin, Suite 1500 Houston, Texas 77002 Attention: Robert T. Moffett Fax No.: (713) 658+4007 (c) If to Genesis MLP, Genesis OLP or Genesis LLC c/o Genesis Energy, L.P. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Fax No.: (713) 646+5278 Attention: President with a copy to: General Counsel or to such other address as a party may from time to time designate in the manner heretofore provided. SECTION 14.3 Files and Records. As soon as reasonably practicable following the Closing Date, each Transferor shall, and shall cause its Affiliates to, deliver copies or originals of all books, files, records and other data relating to the Assets and the Business (the "Information") to be delivered to Genesis LLC's offices at One Allen Center, 500 Dallas, Suite 3200, Houston, Texas. After the Closing Date, Genesis OLP and its Affiliates shall permit each Transferor and its Affiliates and agents to have full access, at any reasonable time and from time to time, to such Assets and former Information of such Transferor as such Transferor and its Affiliates may reasonably request in connection with the preparation of financial statements, tax returns, or other similar reports regarding the Assets and former Business for periods of such Transferor. If Genesis OLP intends at any time to discard any Information relating to the Assets and operation of the Business prior to the Closing Date, Genesis OLP shall (a) give the appropriate Transferor written notice of such intention at least thirty days prior to discarding such Information, and (b) offer to allow such Transferor to take possession of such Information. SECTION 14.4 Headings; References; Interpretation. The definitions in this Agreement shall apply equally to both the singular and plural forms of the terms defined. All Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. All references herein to Articles, Sections, Schedules and Exhibits shall, unless the context requires a different construction, be deemed to be references to the Articles and Sections of this Agreement and the Schedules and Exhibits attached hereto, and all such Schedules and Exhibits attached hereto are hereby incorporated herein and made a part hereof for all purposes. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word "including" following any general statement. term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation," "but not limited to," or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Transaction Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP. SECTION 14.5 Successors and Assigns. This Agreement shall not be assignable by any party hereto by operation of law or otherwise without the applicable consent of the Parties to this Agreement. The Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. SECTION 14.6 No Third Party Rights. Except as expressly provided in Article 8, the provisions of this Agreement are not intended to and do not create rights in any Person not a party to this Agreement or confer upon any other Person any benefits, rights or remedies, and except as expressly provided for in Article 8, no Person is or is intended to be a third party beneficiary of any of the provisions of this Agreement. SECTION 14.7 Counterparts. This Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the parties hereto. SECTION 14.8 Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Texas, to the extent permitted by law, without regard to the conflicts of law principles thereof. SECTION 14.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY EXHIBIT OR SCHEDULE HERETO. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AS APPLICABLE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 14.9. SECTION 14.10 Severability. If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any political body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or provisions held to be invalid, and an equitable adjustment shall be made and necessary provision added so as to give effect to the intention of the parties as expressed in this Agreement at the time of execution of this Agreement. SECTION 14.11 Deed; Bill of Sale; Assignment. To the extent required by applicable law, this Agreement shall also constitute a "deed," "bill of sale" or "assignment" of the Assets. SECTION 14.12 Amendment or Modification. This Agreement may be amended or modified, or any provision waived or rescinded, from time to time only by the written agreement of the Parties directly bound by, or benefited from, the provisions in respect of which such amendment, modification, waiver or rescission is sought. SECTION 14.13 Integration. This Agreement supersedes all previous understandings or agreements between the parties, whether oral or written, with respect to its subject matter. This Agreement and the Transaction Documents constitute an integrated agreement which contain the entire understanding of the parties. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or form part of this Agreement or the Transaction Documents unless it is contained in a written amendment hereto executed by the Parties hereto after the date of this Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written. BASIS PETROLEUM, INC. By: /s/ Jeffrey R. Serra --------------------- Jeffrey R. Serra Chairman of the Board, President and Chief Executive Officer HOWELL CORPORATION By: /s/ Paul N. Howell -------------------- Paul N. Howell President and Chief Executive Officer HOWELL CRUDE OIL COMPANY By: /s/ Mark J. Gorman -------------------- Mark J. Gorman President HOWELL PIPELINE TEXAS, INC. By: /s/ Allen R. Stanley ----------------------- Allen R. Stanley President HOWELL PIPELINE USA, INC. By: /s/ Allen R. Stanley ----------------------- Allen R. Stanley President HOWELL TRANSPORTATION SERVICES, INC. By: /s/ Bradley N. Howell -------------------------- Bradley N. Howell President HOWELL POWER SYSTEMS, INC. By: /s/ Allyn R. Skelton, II -------------------------- Allyn R. Skelton, II President GENESIS ENERGY, L.L.C. By: /s/ Allyn R. Skelton, II ------------------------- Allyn R. Skelton, II Chief Financial Officer GENESIS ENERGY, L.P. By: Genesis Energy, L.L.C. As General Partner By: /s/ Allyn R. Skelton, II -------------------------- Allyn R. Skelton, II Chief Financial Officer GENESIS CRUDE OIL, L.P. By: Genesis Energy, L.L.C. As General Partner By: /s/ Allyn R. Skelton, II ------------------------- Allyn R. Skelton, II Chief Financial Officer EX-10 5 EXHIBIT 10.2 FIRST AMENDMENT TO PURCHASE & SALE AND CONTRIBUTION & CONVEYANCE AGREEMENT This First Amendment to the Purchase & Sale and Contribution and Conveyance Agreement (the "First Amendment") is effective as of December 2, 1996 among GENESIS ENERGY, L.P., a Delaware limited partnership ("Genesis MLP"), GENESIS CRUDE OIL, L.P., a Delaware limited partnership ("Genesis OLP"), BASIS PETROLEUM, INC., a Texas corporation ("Basis"), HOWELL CORPORATION, a Delaware corporation ("Howell"), HOWELL CRUDE OIL COMPANY, a Delaware corporation ("Howell Crude"), HOWELL PIPELINE TEXAS, INC., a Delaware corporation ("Howell Texas"), HOWELL PIPELINE USA, INC., a Delaware corporation ("Howell Pipeline"), HOWELL TRANSPORTATION SERVICES, INC., a Delaware corporation ("Howell Transportation"), HOWELL POWER SYSTEMS, INC., a Delaware corporation ("Howell Power" and, collectively with Howell Crude, Howell Texas, Howell Pipeline and Howell Transportation, the "Howell Subsidiaries") and GENESIS ENERGY, L.L.C., a Delaware limited liability company ("Genesis LLC"). W I T N E S S E T H: WHEREAS, on November 26, 1996 the parties entered into a Purchase & Sale and Contribution & Conveyance Agreement (the "Agreement") relating to the contribution, conveyance and sale of certain crude oil gathering, marketing and pipeline assets and operations to Genesis OLP; and WHEREAS, pursuant to Section 14.2 of the Agreement, the parties now mutually desire to amend the Agreement as described hereinbelow. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: 1. The following definitions in Article I shall be amended as follows: A. The defined term "Basis Final Balance Sheet" is replaced with "Basis Final Adjustment Statement." B. The definition of "Basis Purchase Cash" is hereby amended to read as follows: " `Basis Purchase Cash' means 54% of the Purchase Cash minus the Estimated Basis Adjustment." C. The definition of "Effective Time" is hereby amended to mean "12:01 a.m. on December 1, 1996, the Effective Date." D. The amount included in the definition of the "Estimated Basis Adjustment" is hereby amended by changing it from "$4,298,538" to "$4,429,563." E. The amount included in the definition of "Estimated Howell Adjustment" is hereby amended by changing it from "$2,828,373" to $2,858,691.84." F. The defined term "Howell Final Balance Sheet" is replaced with "Howell Financial Adjustment Statement." 2. Section 2.4(a)(i) is hereby amended to delete the word "tangible." 3. Section 2.4(a)(iii) is hereby amended to add the following phrase at the end of the last line of such section "subject to reduction pursuant to Section 2.4(b)(i)." 4. Section 2.5(a)(i) is hereby amended to add the phrase "not included in the Basis Assets" on the fourth line after business and before the comma. 5. Schedule 1.1A to the Agreement is hereby amended to delete the "and" after (n) and insert "and" after (o) and to add the following: "(p) 26 new 1997 Mack trucks on order. For purposes hereof, the words "primarily in the operation of the Business" or words of similar import shall mean used in the operation of the Business and not otherwise used primarily in the operation of any other business of Basis." 6. Schedule 1.3(d) is hereby amended to add the word "and" after refining in the last line of 1.3(d). 7. Schedule 7.1 to the Agreement is hereby deleted in its entirety and replaced with Annex A, attached hereto. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed this 3rd day of December, 1996. BASIS PETROLEUM, INC. By: /s/ Jeffrey R. Serra ------------------------ Jeffrey R. Serra Chairman of the Board, President and Chief Executive Officer HOWELL CORPORATION By: /s/ Paul N. Howell ------------------------ Paul N. Howell President and Chief Executive Officer HOWELL CRUDE OIL COMPANY By: /s/ Mark J. Gorman ----------------------- Mark J. Gorman President HOWELL PIPELINE TEXAS, INC. By: /s/ Allen R. Stanley ------------------------- Allen R. Stanley President HOWELL PIPELINE USA, INC. By: /s/ Allen R. Stanley ----------------------- Allen R. Stanley President HOWELL TRANSPORTATION SERVICES, INC. By: /s/ Bradley N. Howell ------------------------- Bradley N. Howell President HOWELL POWER SYSTEMS, INC. By: /s/ Allyn R. Skelton, II ------------------------ Allyn R. Skelton, II President GENESIS ENERGY, L.L.C. By: /s/ John P. vonBerg ------------------------- John P. vonBerg President and Chief Executive Officer GENESIS ENERGY, L.P. By: Genesis Energy, L.L.C. As General Partner By: /s/ John P. vonBerg ------------------------- John P. vonBerg President and Chief Executive Officer GENESIS CRUDE OIL, L.P. By: Genesis Energy, L.L.C. As General Partner By: /s/ John P. vonBerg ------------------------ John P. vonBerg President and Chief Executive Officer EX-10 6 EXHIBIT 10.3 DISTRIBUTION SUPPORT AGREEMENT This DISTRIBUTION SUPPORT AGREEMENT, dated as of December 3, 1996 (this "Agreement"), is entered into by and between GENESIS CRUDE OIL, L.P., a Delaware limited partnership ("Genesis OLP"), and SALOMON INC, a Delaware corporation ("Salomon"). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and as an inducement to consummate the transactions contemplated by the Genesis OLP Partnership Agreement (as hereinafter defined), the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.1. Terms Defined by Reference to the Genesis OLP Partnership Agreement. All capitalized terms used herein and not defined herein shall have the meanings provided therefor in the Amended and Restated Agreement of Limited Partnership of Genesis Crude Oil, L.P., dated as of December 3, 1996 (the "Genesis OLP Partnership Agreement"), without giving effect to any amendments or modifications to the Genesis OLP Partnership Agreement subsequent to the Closing Date that would modify or amend in any respect any of such terms not defined herein unless such amendment or modification is consented to in accordance with the provisions of Section 3.6. SECTION 1.2. Terms Defined Herein. The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. "Agreement" means this Distribution Support Agreement, as it may be amended, supplemented or restated from time to time. "Aggregate Ceiling" means, with respect to any Quarter, an amount equal to the product obtained by multiplying (a) four, times (b) the Minimum Quarterly Distribution as in effect for such Quarter, times (c) the sum of (i) the number of OLP Common Units Outstanding as of the Closing Date, plus (ii) the number of OLP Common Units, if any, issued after the Closing Date to Genesis MLP pursuant to Section 5.2(a)(ii) of the Genesis OLP Partnership Agreement; provided, however, that the number of OLP Common Units, if any, calculated as provided in clause (c) of this definition shall be proportionately adjusted in the event of any combination or subdivision of OLP Common Units, however effected, with the result that, after taking into account an adjustment to the Minimum Quarterly Distribution resulting pursuant to the Genesis OLP Partnership Agreement due to such combination or subdivision, there shall not be any change in the Aggregate Ceiling as a result of such combination or subdivision. "API Contributor" means Salomon unless and until Salomon has transferred its obligations under this Agreement to a transferee pursuant to and in compliance with Section 2.6, and thereafter shall mean the transferee of such obligations. "Cumulative OLP Common Unit Arrearage" has the meaning assigned to the term "Cumulative Common Unit Arrearage" in the Genesis OLP Partnership Agreement. "General Partner" means Genesis Energy, LLC unless and until Genesis Energy, LLC has transferred its General Partner Interest in Genesis OLP in compliance with the requirements of Section 4.6 of the Genesis OLP Partnership Agreement, and thereafter shall mean the transferee of such General Partner Interest. "Genesis Energy, LLC" means Genesis Energy, L.L.C., a Delaware limited liability company, and its successors. "Genesis MLP" means Genesis Energy, L.P., a Delaware limited partnership, and its successors. "Genesis MLP Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of Genesis Energy, L.P., dated as of December 3, 1996, as it may be amended, supplemented or restated from time to time. "Genesis OLP" means Genesis Crude Oil, L.P., a Delaware limited partnership, and its successors. "Genesis OLP Partnership Agreement" has the meaning assigned to such term in Section 1.1. "Investment Grade Entity" means (a) a Person that has any long-term unsecured debt obligations that are rated Qualified Investment Grade or (b) in the case of a Person (i) who does not have long-term unsecured debt obligations, (ii) whose long-term unsecured debt obligations are not rated by S&P, Moody's or an NRSRO or (iii) who is not a U.S. Person, a Person having, in the reasonable judgment of the API Contributor, credit quality comparable to that of a Person described in clause (a) of this definition. "Letter of Credit" means a letter of credit issued by a Qualified Bank, which letter of credit meets the requirements set forth in Section 2.7. "MLP Unit" has the meaning assigned to the term "Unit" in the Genesis MLP Partnership Agreement. "MLP Unitholder" has the meaning assigned to the term "Unitholder" in the Genesis MLP Partnership Agreement. "Moody's" means Moody's Investors Service, Inc., or any successor thereto. "NRSRO" means a rating agency that is designated by the Securities and Exchange Commission as a nationally recognized statistical rating organization. "OLP Common Unit" has the meaning assigned to the term "Common Unit" in the Genesis OLP Partnership Agreement. "OLP Subordinated Unit" has the meaning assigned to the term "Subordinated Unit" in the Genesis OLP Partnership Agreement. "OLP Unit" has the meaning assigned to the term "Unit" in the Genesis OLP Partnership Agreement. "OLP Unitholders" has the meaning assigned to the term "Unitholders" in the Genesis OLP Partnership Agreement. "Qualified Bank" means a commercial bank whose long-term unsecured debt obligations are rated Qualified Investment Grade at the time of issuance of a Letter of Credit by such commercial bank. "Qualified Investment Grade" means (a) a rating of at least BBB- by S&P, (b) a rating of at least Baa3 by Moody's or (c) a rating by any other NRSRO that is comparable to the ratings of S&P and Moody's described in clauses (a) and (b) of this definition. "Quarterly Ceiling" means, with respect to any Quarter and any contribution contemplated hereby, an amount equal to the product of (i) the Minimum Quarterly Distribution as in effect for such Quarter, times (ii) the number of OLP Common Units Outstanding on the Record Date with respect to such Quarter. "Required Contribution" has the meaning assigned to such term in Section 2.7. "S&P" means Standard & Poor's Ratings Group, or any successor thereto. "Salomon" means Salomon Inc, a Delaware corporation, and its successors. "Support Period" means the period commencing on the Closing Date and ending on the earlier to occur of (a) the first day after the day on which Available Cash is distributed with respect to the Quarter ending December 31, 2001, (b) the first day of any Quarter beginning after December 31, 1999 in respect of which (i) distributions of Available Cash from Operating Surplus on each of the Outstanding OLP Common Units and OLP Subordinated Units with respect to the four-Quarter period immediately preceding such date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of the Outstanding OLP Common Units and OLP Subordinated Units during such period, (ii) the Adjusted Operating Surplus generated during the four-Quarter period immediately preceding such date equaled or exceeded 133% of the sum of the Minimum Quarterly Distribution on all of the Outstanding OLP Common Units and OLP Subordinated Units during such period and (iii) there are no outstanding Cumulative OLP Common Unit Arrearages, and (c) the date this Agreement terminates in accordance with its terms and as contemplated by Section 2.3. "Trustee" has the meaning assigned to such term in Section 2.7. "U.S. Person" means a Person who is organized and existing under the laws of the United States of America or any state thereof. ARTICLE 2 DISTRIBUTION SUPPORT SECTION 2.1. Distribution Support. The API Contributor agrees that, if the amount of Available Cash from Operating Surplus (before giving effect to the purchase of APIs as described below) with respect to any Quarter ending during the Support Period is less at the relevant time than the amount necessary to distribute the Minimum Quarterly Distribution as in effect for such Quarter on all OLP Common Units Outstanding on the Record Date with respect to such Quarter, then, on the date of determination of Available Cash with respect to such Quarter, the API Contributor, subject to the limitations of this Agreement, will contribute (or cause to be contributed) to Genesis OLP, in exchange for APIs, cash in an amount equal to the lesser of (a) the amount that would enable Genesis OLP to distribute the Minimum Quarterly Distribution as in effect for such Quarter on all OLP Common Units Outstanding on the Record Date with respect to such Quarter, (b) an amount equal to the Quarterly Ceiling with respect to such Quarter and (c) the amount, if any, by which the Aggregate Ceiling with respect to such Quarter exceeds at the relevant time the Unrecovered Capital of the APIs Outstanding on the Record Date with respect to such Quarter. SECTION 2.2. Issuance of APIs to the API Contributor. Genesis OLP shall issue one API (having an initial Unrecovered Capital of $100) in exchange for each $100 contributed (or caused to be contributed) by the API Contributor to Genesis OLP pursuant to Section 2.1. SECTION 2.3. Termination of Distribution Support Obligation Upon the Dissolution and Liquidation of Genesis OLP. Upon the occurrence of the Liquidation Date, the obligations of the API Contributor under this Agreement shall terminate and the Support Period shall end immediately, retroactive to the end of the last Quarter preceding the Liquidation Date with respect to which distributions of Available Cash have been paid or are payable to holders of the OLP Common Units. After such termination, the API Contributor shall not be required to contribute (or cause to be contributed) any cash in exchange for additional APIs from Genesis OLP. SECTION 2.4. Rights of API Holders. As a result of the contribution of cash in exchange for APIs, the holder of such APIs will become a non-voting limited partner of Genesis OLP with a capital account in Genesis OLP and the right to require Genesis OLP to redeem such APIs as provided in the Genesis OLP Partnership Agreement and as provided in Section 2.5. APIs will not be allocated any items of Genesis OLP income, gain, loss, deduction or credit, except as otherwise expressly provided in the Genesis OLP Partnership Agreement. SECTION 2.5. Redemption of APIs in Excess of Required Amount. In the event that cash is contributed to Genesis OLP in exchange for APIs pursuant to this Agreement and subsequent thereto it is determined that any portion of such cash was not required to be so contributed by reason of the limitations contained in this Article 2, then Genesis OLP shall redeem the APIs issued in exchange for the portion of such cash not required to be so contributed as promptly as practicable prior to any distributions of Available Cash with respect to the OLP Common Units. SECTION 2.6. Permitted Assignment by the API Contributor. The API Contributor may transfer its obligations under this Agreement and be relieved of its obligations hereunder at any time, provided that the transferee of such obligations (a) unconditionally assumes all of the API Contributor's obligations under this Agreement, (b) is an Affiliate of the General Partner, (c) is a Person (i) who is a U.S. Person or (ii) who agrees to abide by and submit to the jurisdiction of the United Kingdom or the United States of America with respect to matters arising out of this Agreement and at the time of transfer is not organized or based in any jurisdiction that is subject to any general provision under the laws or regulations of the United States of America prohibiting U.S. Persons from making investments in or conducting business with such jurisdictions and (d) at the time of such transfer and after giving effect to the assumption either (i) is an Investment Grade Entity or (ii) has arranged for a Letter of Credit that satisfies the requirements of Section 2.7 to be issued by a Qualified Bank for the account of Genesis OLP which Letter of Credit secures the transferee's obligations under this Agreement to contribute cash to Genesis OLP in exchange for APIs pursuant to Section 2.1. SECTION 2.7. Letter of Credit. To constitute a Letter of Credit, a letter of credit must (a) be a letter of credit providing for draws thereunder to be made directly by a trustee ("Trustee") that is acceptable to Genesis OLP and the API Contributor, (b) be issued by a Qualified Bank for the account of Genesis OLP, (c) secure the API Contributor's obligations under this Agreement to contribute cash to Genesis OLP in exchange for APIs pursuant to Section 2.1, and (d) at all times be in an amount at least equal to the Aggregate Ceiling less the Unrecovered Capital of any Outstanding APIs, unless more than one Letter of Credit is issued and outstanding in which case the aggregate amount of such Letters of Credit shall at all times be in an amount at least equal to the Aggregate Ceiling less the Unrecovered Capital of any Outstanding APIs. Each Letter of Credit must provide that (x) in the event that the API Contributor is required to contribute cash to Genesis OLP in exchange for APIs pursuant to Section 2.1 (a "Required Contribution") and such Required Contribution is not made as required the Trustee will make a draw thereunder in an amount equal to the amount of the Required Contribution and (y) the Trustee will make a draw thereunder, in an amount equal to the full amount of such Letter of Credit, 30 days prior to the expiration of any such Letter of Credit, unless on such date the API Contributor has in place a substitute Letter of Credit or Letters of Credit. In the event of any draw under a Letter of Credit the amount of such draw will be paid directly to Genesis OLP in cash. ARTICLE 3 MISCELLANEOUS SECTION 3.1. Headings; References; Interpretation. All Article or Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of the provisions hereof. The definitions in this Agreement shall apply equally to both the singular and plural forms of the terms defined. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word "including" following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation," "but not limited to," or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. SECTION 3.2. Benefit of Agreement. This Agreement is not a direct or indirect guaranty of payment of all or any portion of the Minimum Quarterly Distribution on any of the OLP Units or of any distribution on any of the MLP Units. The covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto and shall not be construed as conferring, and are not intended to confer, any direct, indirect or third-party beneficiary rights on any other persons, including without limitation, the OLP Unitholders and the MLP Unitholders. This Agreement shall be binding upon Genesis OLP and the API Contributor. SECTION 3.3. Integration. This Agreement supersedes all previous understandings or agreements between the parties, whether oral or written, with respect to its subject matter. This document is an integrated agreement which contains the entire understanding of the parties. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or form part of this Agreement unless it is contained in a written amendment hereto executed by the parties hereto after the date of this Agreement. SECTION 3.4 Counterparts. This Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the parties hereto. SECTION 3.5 Applicable Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, to the extent permitted by law, without regard to the principles of conflicts of law. SECTION 3.6 Amendments and Waivers. The parties hereto, by mutual agreement in writing, may amend, modify or supplement this Agreement; provided, however, that if any such amendment, modification or supplement adversely affects the holders of the OLP Common Units in any material respect then such amendment, modification or supplement shall require the approval of holders of more than 50% of the outstanding OLP Common Units (excluding OLP Common Units held by the API Contributor and any of its Affiliates (other than Genesis MLP)). IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written. GENESIS CRUDE OIL, L. P. By: GENESIS ENERGY, L.L.C., general partner By: /s/ John P. vonBerg ----------------------------------------------------- Name: John P. vonBerg Title: President and Chief Executive Officer SALOMON INC By: /s/ Thomas W. Jasper -------------------------------------- Name: Thomas W. Jasper Title: Treasurer /s/ Michelle Turner - ------------------------------ Michelle Turner Authorized Signatory EX-10 7 EXHIBIT 10.4 ================================================================ MASTER CREDIT SUPPORT AGREEMENT dated as of December 3, 1996 among GENESIS CRUDE OIL, L.P., SALOMON INC and BASIS PETROLEUM, INC. ================================================================== TABLE OF CONTENTS Page ARTICLE I Definitions SECTION 1.1. Definitions 1 SECTION 1.2. Terms Generally 14 ARTICLE II Guaranty Facility SECTION 2.1. Guaranties 14 SECTION 2.2. Notice of Issuance, Amendment, Renewal or Extension 15 SECTION 2.3. Guaranty Fees 15 SECTION 2.4. Agent 16 SECTION 2.5. Repayment Obligation 16 ARTICLE III Working Capital Facility SECTION 3.1. Loans 17 SECTION 3.2. Letters of Credit 17 SECTION 3.3. Term 18 SECTION 3.4. Pricing Terms 18 SECTION 3.5. Notes 19 SECTION 3.6. Default Interest 19 SECTION 3.7. Payments Generally 19 ARTICLE IV Conditions of Lending SECTION 4.1. Conditions to All Credit Events 20 SECTION 4.2. Conditions to First Credit Event 20 ARTICLE V Representations and Warranties SECTION 5.1. Organization; Powers 22 SECTION 5.2. Authorization; Enforceability 22 SECTION 5.3. Governmental Approvals; No Conflicts 22 SECTION 5.4. No Material Adverse Change 23 SECTION 5.5. Title to Properties 23 SECTION 5.6. Litigation and Environmental Matters 23 SECTION 5.7. Compliance with Laws and Agreements 23 SECTION 5.8. Investment and Holding Company Status 24 SECTION 5.9. Taxes 24 SECTION 5.10. ERISA 24 SECTION 5.11. Disclosure 24 SECTION 5.12. Subsidiaries 24 SECTION 5.13. Federal Reserve Regulations 24 SECTION 5.14. Security Agreement 25 SECTION 5.15. Solvency 25 ARTICLE VI Covenants SECTION 6.1. Liens 25 SECTION 6.2. Management Practices 27 SECTION 6.3. Limitation on Transactions 27 SECTION 6.4. Cash Management 27 SECTION 6.5. Information Covenants 28 SECTION 6.6. Consolidation, Merger, Sale of Assets, etc. 29 SECTION 6.7. Indebtedness 29 SECTION 6.8. Minimum Tangible Net Worth 30 SECTION 6.9. Minimum Working Capital 30 SECTION 6.10. Working Capital Leverage Ratio 30 SECTION 6.11. Fixed Charge Coverage 30 SECTION 6.12. Leverage Ratio 30 SECTION 6.13. Advances, Investments and Loans 30 SECTION 6.14. Restricted Payments 31 SECTION 6.15. Existence; Conduct of Businesses 31 SECTION 6.16. Payment of Obligations 31 SECTION 6.17. Maintenance of Properties; Insurance 31 SECTION 6.18. Books and Records; Inspection Rights 31 SECTION 6.19. Compliance with Laws 32 SECTION 6.20. Further Assurances 32 ARTICLE VII Events of Default ARTICLE VIII Miscellaneous SECTION 8.1. Choice of Law; Submission to Jurisdiction; Waiver of Jury Trial 35 SECTION 8.2. Notices 36 SECTION 8.3. Entire Agreement 36 SECTION 8.4. Effect of Waiver or Consent 36 SECTION 8.5. Amendment, Modification or Waiver 36 SECTION 8.6. Termination 37 SECTION 8.7. Assignment 37 SECTION 8.8. Counterparts 37 SECTION 8.9. Demands and Claims 38 SECTION 8.10. U.S. Currency 38 SECTION 8.11. Laws and Regulations 38 SECTION 8.12. Negation of Rights of Assignees and Third Parties 38 SECTION 8.13. Maximum Interest Rate 38 SECTION 8.14. Expenses; Indemnification 38 SECTION 8.15. Cash Collateralization 39 SECTION 8.16. Survival 40 SECTION 8.17. Obligations Absolute 40 Schedule I Guaranty Facility Fees Schedule II Working Capital Facility Fees Exhibit A Form of Promissory Note Exhibit B Security Agreement Exhibit C Form of Subsidiary Guarantee Agreement Exhibit D Form of Pledge Agreement Exhibit E Form of Indemnity, Subrogation and Contribution Agreement Exhibit F Form of Borrowing Base Certificate Exhibit G Form of Borrowing Request Exhibit H Form of Opinion of Andrews & Kurth L.L.P. EXECUTION COPY MASTER CREDIT SUPPORT AGREEMENT, dated as of December 3, 1996 (this "Agreement"), entered into among GENESIS CRUDE OIL, L.P., a Delaware limited partnership ("Genesis OLP"), SALOMON INC, a Delaware corporation ("Salomon Inc"), and BASIS PETROLEUM, INC., a Texas corporation ("Basis"). WHEREAS Genesis OLP has been formed to conduct the crude oil gathering and marketing and pipeline business previously conducted by Howell Corporation ("Howell") and the crude oil gathering and marketing business previously conducted by Basis; WHEREAS the crude oil gathering and marketing business to be conducted by Genesis OLP is expected to require significant transitional credit support in connection with crude oil purchase, sale, transfer and other related transactions entered into by Genesis OLP in the ordinary course of business; and WHEREAS Salomon Inc and Basis desire to provide transitional credit support to Genesis OLP on the terms and subject to the limitations specified herein; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Definitions. The following terms shall for purposes of this Agreement have the meanings assigned below. "Account" shall mean any right to payment for goods sold, exchanged or leased or for services rendered, whether or not earned by performance. "Account Debtor" shall mean, with respect to any Account, the obligor with respect to such Account. "Affiliate" shall have the meaning assigned to such term in the Conveyance Agreement. "Agent" shall have the meaning assigned to such term in Section 2.4 of this Agreement. "Availability Period" shall mean (a) with respect to the Working Capital Facility Commitment, the period from and including the Closing Date to but excluding the earlier of (i) the Working Capital Facility Maturity Date and (ii) the date of termination of the Working Capital Facility Commitment pursuant to Section 3.2(d), Section 3.3, Article VII or Section 8.6 and (b) with respect to the Guaranty Facility Commitment, the period from and including the Closing Date to but excluding the earlier of (i) the Guaranty Facility Maturity Date and (ii) the date of termination of the Guaranty Facility Commitment pursuant to Section 2.1(b), Article VII or Section 8.6. "Bankruptcy Code" shall mean Title 11 of the United States Code. "Borrowing Base" shall mean an amount equal to the sum, without duplication, of (a) 90% of Pre-Approved Eligible Receivables, (b) 85% of Eligible Receivables other than Pre-Approved Eligible Receivables and (c) 80% of the crude oil inventories of Genesis OLP calculated on a mark-to-market basis on the relevant date and in accordance with industry practice, which inventories shall be taken into account if and only to the extent that the mark-to-market value of such inventories is in excess of $5,000,000; provided that at no time shall the amount resulting from clause (c) above with respect to crude oil inventories exceed 20% of the total Borrowing Base; and, provided further, that for the period from and including the Closing Date until December 31, 1996, the Borrowing Base shall be deemed to be $50,000,000. The Borrowing Base at any time in effect shall be determined by reference to the Borrowing Base Certificate most recently delivered hereunder. "Borrowing Base Certificate" shall have the meaning assigned to such term in Section 4.2(i) of this Agreement. "Borrowing Request" shall mean a request by Genesis OLP in accordance with the terms of Section 3.1(b) and substantially in the form of Exhibit G hereto. "Business Day" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close. "Capitalized Lease Obligations" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" shall mean, with respect to any Person, any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest. "Closing Date" shall mean the date of the first Credit Event. "Code" shall mean the Internal Revenue Code of 1986. "Collateral" shall mean all the "Collateral" as defined in the Security Agreement. "Collateral Agent" shall mean Salomon Inc, in its capacity as Collateral Agent for the Secured Parties under the Security Agreement. "Commitments" shall mean the Guaranty Facility Commitment and the Working Capital Facility Commitment. "Compromise of Claims Agreement" shall mean an agreement evidenced in writing whereby Genesis OLP and another Person have agreed to compromise their claims and cancel in all respects without further liability specified contracts to purchase and sell quantities of crude oil and both parties have agreed to enter into a new contract to purchase and sell the net quantity of crude oil related to such purchase and sale contracts and such agreement is in compliance with the terms of Section 6.2 hereof. "Consolidated Current Assets" shall mean the current assets of Genesis OLP and the Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Current Liabilities" shall mean the current liabilities of Genesis OLP and the Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated EBITDA" shall mean, for any period, the Consolidated Net Income for such period, plus, to the extent deducted in computing Consolidated Net Income, the sum (without duplication) of (a) income tax expense, (b) interest expense, (c) depreciation and amortization expense, (d) Guaranty fees and Letter of Credit fees payable hereunder and (e) any extraordinary losses, minus, to the extent added in computing such Consolidated Net Income, (i) any interest income and (ii) any extraordinary gains, all as determined on a consolidated basis with respect to Genesis OLP and the Subsidiaries in accordance with GAAP. "Consolidated Fixed Charges" shall mean, for any period, the sum (without duplication) of (i) Maintenance Capital Expenditures during such period, (ii) interest expense for such period, (iii) Guaranty fees and Letter of Credit fees payable hereunder for such period and (iv) the aggregate amount of payments of principal on Indebtedness (excluding any payments of principal on Loans hereunder) of Genesis OLP and the Subsidiaries scheduled to be made during such period (including, without limitation, scheduled Capitalized Lease Obligations). "Consolidated Net Income" shall mean, for any period, the net income or loss of Genesis OLP and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any Person in which any other Person (other than Genesis OLP or any of the Subsidiaries or any director holding qualifying shares in compliance with applicable law) has an interest, except to the extent of the amount of dividends or other distributions actually paid to Genesis OLP or any of the Subsidiaries (subject to the limitation contained in clause (c)) by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with Genesis OLP or any of the Subsidiaries or the date that Person's assets are acquired by Genesis OLP or any of the Subsidiaries, (c) the income of any Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to Genesis OLP, except to the extent of the amount of dividends or other distributions actually paid to Genesis OLP or any of the Subsidiaries as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Subsidiary, to the limitations contained in this clause), (d) any after-tax gains or losses attributable to sales of assets out of the ordinary course of business and (e) to the extent not excluded by clauses (a) through (d) above, any non-cash extraordinary gains or non-cash extraordinary losses. "Consolidated Net Worth" shall mean the total partners' capital of Genesis OLP determined on a consolidated basis in accordance with GAAP after appropriate deduction for any less-than-wholly owned interests in Subsidiaries. "Consolidated Tangible Net Worth" shall mean the total amount of assets (less accumulated depreciation and amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) which would appear on a consolidated balance sheet of Genesis OLP and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, and after giving effect to purchase accounting and after deducting therefrom Consolidated Current Liabilities and, to the extent otherwise included, the amounts of (i) minority interests in the Subsidiaries held by Persons other than Genesis OLP or a Subsidiary; (ii) excess of cost over fair value of assets of businesses acquired, as determined in good faith by the General Partner; (iii) any revaluation or other write-up in book value of assets subsequent to the Closing Date as a result of a change in the method of valuation in accordance with GAAP consistently applied; (iv) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items; (v) treasury stock; and (vi) cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities. "Consolidated Total Liabilities" shall mean the total liabilities (including, without limitation, all Indebtedness) of Genesis OLP and the Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Working Capital" shall mean the Consolidated Current Assets less the Consolidated Current Liabilities. "Contingent Obligation" shall mean any obligation of a Person guaranteeing or having the effect of guaranteeing any Indebtedness, leases, distributions, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purpose of payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the holder of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by Genesis OLP in good faith. "Contract Cancelation Agreement" shall mean an agreement evidenced in writing whereby Genesis OLP and another Person have agreed to cancel in all respects and without further liability specified contracts to purchase and sell equal quantities of crude oil resulting in no deliveries of crude oil and both parties have agreed to pay cancelation fees as set forth in such agreement and such agreement is in compliance with the terms of Section 6.2 hereof. "Conveyance Agreement" shall mean that certain Purchase & Sale and Contribution & Conveyance Agreement dated as of November 26, 1996 by and between Genesis MLP, Genesis OLP, Basis, Howell, certain subsidiaries of Howell and Genesis LLC. "Credit Event" shall have the meaning assigned to such term in Section 4.1. "Crude Oil Contracts" shall mean contracts entered into by Genesis OLP with third parties for the sale, purchase, exchange, marketing or transportation of crude oil in form and substance customary in Genesis OLP's crude oil gathering, marketing and transportation business and in compliance with Section 6.2 hereof. "Default" shall mean any event or condition that upon notice, lapse of time or both would constitute an Event of Default. "Disbursement" shall mean a Guaranty Disbursement or an L/C Disbursement. "Domestic Subsidiary" shall mean each Subsidiary that is organized under the laws of the United States or any state thereof. "Eligible Receivable" shall mean, on any date, all Accounts of Genesis OLP and the Subsidiaries on such date that (a) have been invoiced and represent the bona fide sale and delivery or rendering of goods or services, in each case in the ordinary course of business of such Person in connection with its trade operations, and (b) are not ineligible for inclusion in the calculation of the Borrowing Base pursuant to any of clauses (i) through (ix) below or otherwise deemed by the Collateral Agent in good faith to be ineligible for inclusion in the calculation of the Borrowing Base as described below. Without limiting the foregoing, to qualify as an Eligible Receivable, an Account shall indicate Genesis OLP or any Subsidiary as sole payee and as sole remittance party. In determining the amount to be so included, the face amount of Accounts shall be reduced, without duplication, by (x) the amount of all accrued and actual returns, discounts, claims, credits or credits pending, charges, price adjustments, freight or finance charges or other allowances (including any amount that Genesis OLP or any Subsidiary may be obligated to rebate to an Account pursuant to the terms of any agreement or understanding (written or oral)), (y) the aggregate amount of all reserves, limits and deductions provided for in this definition and elsewhere in this Agreement and (z) the aggregate amount of all cash received in respect of Accounts but not yet applied by Genesis OLP or a Subsidiary to reduce the amount of the Accounts and modified to take into account the effects of Compromise of Claims Agreements and Contract Cancelation Agreements. Standards of eligibility may be fixed from time to time solely by the Collateral Agent in the exercise of its reasonable judgment, with any changes in such standards to be effective 10 days after delivery of notice thereof to Genesis OLP. Unless otherwise approved from time to time in writing by the Collateral Agent, no Account shall be an Eligible Receivable: (i) if Genesis OLP or a Subsidiary does not have sole lawful and absolute title to such Account (other than as pledged hereunder); or (ii) if it arises out of a sale made by Genesis OLP or a Subsidiary to an employee, officer, agent, director, stockholder, or Affiliate of Genesis OLP (including Genesis MLP, but excluding Basis, Salomon Inc, Phibro Inc. and Howell); or (iii) if (A) it is unpaid more than 3 Business Days from the due date or (B) it has been written off the books of Genesis OLP or a Subsidiary or has been otherwise designated on such books as uncollectible; or (iv) if more than 50% in face amount of all Accounts of the same Account Debtor are ineligible pursuant to clause (iii) above; or (v) if the Account Debtor (A) is a creditor of Genesis OLP or a Subsidiary other than as a creditor in the capacity of a party to a Crude Oil Contract, Contract Cancelation Agreement or a Compromise of Claims Agreement and other than Basis, Salomon Inc, Phibro Inc. or Howell, (B) has or has asserted a right of setoff against Genesis OLP or a Subsidiary other than in the ordinary course and in accordance with the terms of a Crude Oil Contract, Compromise of Claims Agreement or Contract Cancelation Agreement or (C) has disputed its liability (whether by chargeback or otherwise) or made any claim with respect to the Account or any other Account of Genesis OLP or a Subsidiary which has not been resolved, in each case, without duplication, to the extent of the amount owed by Genesis OLP or a Subsidiary to the Account Debtor, the amount of such actual or asserted right of setoff, or the amount of such dispute or claim, as the case may be; or (vi) if the Account Debtor is insolvent or the subject of any bankruptcy case or insolvency proceeding of any kind; or (vii) if the Account is not payable in dollars or the Account Debtor is either not incorporated under the laws of the United States of America or any State thereof or Canada or is located outside or has its principal place of business or substantially all of its assets outside the continental United States or Canada, except to the extent the Account is supported by an irrevocable letter of credit reasonably satisfactory to the Collateral Agent (as to form, substance and issuer) and assigned to and directly drawable by the Collateral Agent; or (viii) if the goods giving rise to such Account have not been shipped and delivered to and accepted by the Account Debtor, or the Account otherwise does not represent a completed sale; or (ix) if (A) either the perfection, enforceability or validity of the Collateral Agent's security interest or the Secured Parties' right or ability to receive direct payments as to such Account is governed by any Federal or state statutory requirement other than the Uniform Commercial Code, (B) it is not subject to a valid and perfected first priority Lien in favor of the Collateral Agent for the benefit of the Secured Parties, subject to no other Liens other than the Liens (if any) permitted by the Loan Documents, or (C) it does not otherwise conform in all material respects to the representations and warranties contained in the Loan Documents. In determining the aggregate amount of Accounts from the same Account Debtor that are unpaid more than 3 Business Days from the due date pursuant to clause (iii) above, there shall be excluded the amount of any net credit balances relating to Accounts with invoice or payment dates more than 3 Business Days from the due date. "Environmental Laws" shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of Genesis OLP or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with Genesis OLP, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Genesis OLP or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Genesis OLP or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by Genesis OLP or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by Genesis OLP or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Genesis OLP or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Event of Default" shall have the meaning assigned to such term in Article VII. "First Purchase Lien" shall mean any Lien on crude oil under Section 9.319 of the Texas Business and Commerce Code securing the obligation of the first purchaser to purchase and pay for such oil and arising in the ordinary course of business. "Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic Subsidiary. "Forward Exposure" shall mean, for any date, the aggregate hypothetical liability of Genesis OLP to third parties on such date with respect to executory payment and performance obligations pursuant to Guaranteed Contracts which are not Scheduled Obligations, assuming all such Guaranteed Contracts were terminated on such date as a result of the nonpayment or nonperformance of Genesis OLP, calculated in accordance with such Guaranteed Contracts if such contracts specify a measure of such liability upon termination, in the form of liquidated damages or otherwise, or if no such measure is specified, then in accordance with industry standards as determined by the Agent, in each case using the closing prices for the relevant commodities on the date Forward Exposure is calculated as published in Platt's Crude Oil Marketwire. "GAAP" shall mean generally accepted accounting principles applied on a consistent basis. "General Partner" shall mean the operating general partner of Genesis OLP. "Genesis MLP" shall mean Genesis Energy, L.P., a Delaware limited partnership. "Genesis LLC" shall mean Genesis Energy, L.L.C., a Delaware limited liability company. "Genesis OLP Partnership Agreement" shall mean the Agreement of Limited Partnership of Genesis OLP Crude Oil, L.P., as the same may be amended and restated. "Governmental Authority" shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guaranteed Contracts" shall mean Crude Oil Contracts with respect to which the payment and/or performance obligations of Genesis OLP are guaranteed by Salomon Inc pursuant to a Guaranty. "Guaranty" shall mean a guaranty issued by Salomon Inc pursuant to Section 2.1 in form and substance acceptable to Salomon Inc. "Guaranty Disbursement" shall mean any payment or disbursement made by Salomon Inc pursuant to a Guaranty. "Guaranty Exposure" shall mean, for any date, (a) the sum of (i) Priced Exposure, (ii) Unpriced Exposure and (iii) Forward Exposure, in each case for such date, plus (b) the aggregate principal amount of all Guaranty Disbursements that have not yet been reimbursed at such time. "Guaranty Facility Commitment" shall mean the commitment of Salomon Inc to issue Guaranties pursuant to Section 2.1. "Guaranty Facility Maturity Date" shall mean December 31, 1999. "Hazardous Materials" shall mean all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement, forward agreement, futures contract or other interest rate, currency exchange rate or commodity price hedging arrangement or like agreement. "Indebtedness" of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien (other than any First Purchase Lien) on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, to the extent of the book value of the property subject to such Lien, (g) all Contingent Obligations of such Person, (h) all Capitalized Lease Obligations of such Person, (i) all net obligations of such Person in respect of Hedging Agreements, (j) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (k) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. For purposes of clause (g) above, the amount of the net obligation in respect of any Hedging Agreement shall be determined after giving effect to any other Hedging Agreement entered into for the purpose of offsetting the liability with respect to such Hedging Agreement and which has such effect. "Indemnity, Subrogation and Contribution Agreement" shall mean the Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit E hereto, to be entered into by and among the Subsidiary Guarantors and the Collateral Agent. "Investment Grade Entity" shall mean (a) with respect to any U.S. Entity, an entity having long-term unsecured debt obligations which are rated at least BBB- by Standard & Poor's Ratings Service, or any successor thereto ("S&P"), or Baa3 by Moody's Investor Service or any successor thereto ("Moody's"), or a comparable rating from any other rating agency designated by the Securities and Exchange Commission as a nationally recognized statistical rating organization (an "NRSRO") or (b) in the case of an entity which does not have long-term unsecured debt obligations, or whose long-term unsecured debt obligations are not rated by S&P, Moody's or any other NRSRO, or which is not a U.S. Entity, an entity having, in the reasonable judgment of Salomon Inc, credit quality comparable to that of an entity described in clause (a). "L/C Disbursement" shall mean any payment or reimbursement made by Basis to the issuer of any Letter of Credit. "L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. "Letter of Credit" shall mean any letter of credit issued for the benefit of Genesis OLP pursuant to Section 3.2(b). "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan" shall have the meaning assigned to such term in Section 3.1(a). "Loan Parties" shall mean Genesis OLP and the Subsidiary Guarantors. "Loan Documents" shall mean this Agreement, the Guaranties, the Letters of Credit, the Notes, the Security Documents, the Subsidiary Guarantee Agreement, the Pledge Agreement and the Indemnity, Subrogation and Contribution Agreement. "Maintenance Capital Expenditures" shall mean, for any period, capital expenditures made during such period by Genesis OLP and the Subsidiaries to maintain operating capacity, including to maintain or effect environmental compliance, and to maintain the quality and cost-competitiveness of their respective assets and operations, such amount to be offset by the proceeds of the sales of any capital assets; provided that such proceeds are used to make Maintenance Capital Expenditures for capital assets to be employed in a capacity similar to those sold. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of Genesis OLP and the Subsidiaries taken as a whole, (b) the ability of Genesis OLP or any other Loan Party to perform any of its obligations under this Agreement or any other Loan Document or (c) the rights of or benefits available to the Agent, the Collateral Agent, Salomon Inc or Basis under this Agreement and the other Loan Documents. "Maximum Credit Support Amount" shall mean (w) $550,000,000 for the period beginning on the date hereof and ending on June 30, 1997; (x) $500,000,000 for the period beginning on July 1, 1997 and ending on December 31, 1997; (y) $400,000,000 for the period beginning on January 1, 1998 and ending on December 31, 1998; and (z) $300,000,000 for the period beginning on January 1, 1999 and ending on December 31, 1999; provided, however, that the Maximum Credit Support Amount at any time shall be reduced, on a dollar-for-dollar basis, by the Working Capital Exposure at such time and by the amount of any obligation to a third party to the extent that such third party has a security interest in any Collateral (other than a First Purchase Lien) that is prior to the security interest of the Collateral Agent for the benefit of the Secured Parties under the Security Documents. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Note" shall have the meaning assigned to such term in Section 3.5 of this Agreement. "Obligations" shall mean (a) the due and punctual payment of (i) the principal of, premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on, the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by Genesis OLP under this Agreement in respect of any Guaranty or any Letter of Credit, when and as due, including payments in respect of reimbursement of Disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under this Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to this Agreement and the other Loan Documents and (c) all obligations of Genesis OLP, monetary or otherwise, under each Hedging Agreement entered into with Salomon Inc or Basis (or any Affiliate of Salomon Inc or Basis). "Officer's Certificate" shall mean a certificate signed by the President or Chief Financial Officer of the General Partner in a form reasonably acceptable to the Agent. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Perfection Certificate" shall have the meaning assigned to such term in the Security Agreement. "Person" shall mean any individual, partnership, limited liability company, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which Genesis OLP or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement" shall mean the Pledge Agreement, substantially in the form of Exhibit D hereto, to be entered into by and among Genesis OLP, the Subsidiaries party thereto and the Collateral Agent for the benefit of the Secured Parties. "Pre-Approved Eligible Receivable" shall mean an Eligible Receivable, the obligor of which has been, in accordance with the Agent's credit policies in effect at such time, listed on a schedule to be prepared and delivered by the Agent to Genesis OLP from time to time for such purpose. "Priced Exposure" shall mean, for any date, the aggregate actual liability of Genesis OLP to third parties on such date with respect to Scheduled Obligations, the actual liability for the nonpayment or nonperformance of which has been determined, in accordance with the Guaranteed Contracts to which such Scheduled Obligations relate, either by reference to certain fixed prices or by reference to certain average or closing commodity prices for dates on or prior to the date Priced Exposure is calculated. "Prime Rate" shall mean the U.S. annual interest rate published as the "Prime Rate" in the Wall Street Journal under the column headed "Money Rates" or such other title as may succeed such heading for the applicable period in effect from time to time. "Prospectus" shall mean the Prospectus dated November 26, 1996, relating to the initial public offering of the common units of Genesis MLP. "Receivable and Payable Report" shall mean a report itemizing in reasonable detail the accounts receivable and payable of Genesis OLP for the current month, in form and substance reasonably acceptable to the Agent. "Restricted Payment" shall mean any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of or interest in any class of Capital Stock of Genesis OLP or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any such shares of or interest in Capital Stock of Genesis OLP or any option, warrant or other right to acquire any such shares of or interest in Capital Stock of Genesis OLP. "Scheduled Obligations" shall mean, on any date, all executory payment or performance obligations of Genesis OLP to third parties pursuant to Guaranteed Contracts, after taking into account the effects of any Compromise of Claims Agreements or Contract Cancelation Agreements, the time and manner for the payment or performance of which obligations have been determined as of any pipeline scheduling day on or prior to such date. "Secured Parties" shall have the meaning assigned to such term in the Security Documents. "Security Agreement" shall mean the Security Agreement, substantially in the form of Exhibit B hereto, among Genesis OLP, the Collateral Agent and the Secured Parties. "Security Documents" shall mean the Security Agreement and each of the security agreements and other instruments and documents executed and delivered pursuant thereto or pursuant to Section 6.20 hereof. "Subsidiary" shall mean (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by Genesis OLP and/or one or more Subsidiaries of Genesis OLP and (ii) any limited liability company, partnership, association, joint venture or other entity in which Genesis OLP and/or one or more Subsidiaries of Genesis OLP has more than a 50% equity interest at the time. "Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee Agreement, substantially in the form of Exhibit C hereto, to be entered into by and among the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the Secured Parties. "Subsidiary Guarantor" shall mean each Subsidiary that becomes a party to a Subsidiary Guarantee Agreement pursuant to Section 6.20. "Substitute Facility" shall mean one or more bank credit agreements or other third party credit facilities entered into by Genesis OLP or Genesis MLP in substitution or replacement of this Agreement (and which would accordingly result in termination of this Agreement), which agreement or facility or combination thereof is, in the reasonable judgment of the General Partner, fair and reasonable to Genesis OLP, and adequate for Genesis OLP to conduct its business substantially in the manner conducted under this Agreement. "Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Transactions" shall have the meaning assigned to such term in Section 5.2. "Uniform Commercial Code" shall mean, as the context requires, the Uniform Commercial Code as in effect at the relevant time in the relevant jurisdiction. "Unpriced Exposure" shall mean, for any date, any liability of Genesis OLP to third parties on such date with respect to Scheduled Obligations that is not Priced Exposure, i.e. the aggregate hypothetical liability of Genesis OLP to third parties on such date with respect to Scheduled Obligations, the actual liability for the nonpayment or nonperformance of which would be determined, in accordance with the Guaranteed Contracts to which such Scheduled Obligations relate, by reference to certain average or closing commodity prices for dates after the date Unpriced Exposure is calculated, calculated as if such prices were the relevant average or closing commodity prices for the date Unpriced Exposure is calculated as published in Platt's Crude Oil Marketwire. "U.S. Entity" shall mean any entity that is organized under the laws of the United States or any state thereof. "Wholly Owned Subsidiary" of any Person shall mean a subsidiary of such Person of which securities (except for directors' qualifying shares) or other ownership interests representing 100% of the equity or 100% of the ordinary voting power or 100% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by such Person or one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. "Working Capital Facility Commitment" shall mean the commitment of Basis to make Loans pursuant to Section 3.1(a) and to request the issuance of Letters of Credit pursuant to Section 3.2(a). "Working Capital Exposure" shall mean the aggregate principal amount at such time of all outstanding Loans, plus the L/C Exposure at such time. "Working Capital Facility Maturity Date" shall mean May 31, 1997. SECTION 1.2. Terms Generally. The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with the covenants contained in Article VI, all accounting terms herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP as in effect on the date of this Agreement and applied on a basis consistent with the application used in the financial statements referred to in Section 6.5(d) and (e); and, provided further, that to the extent accounting terms herein are applied to periods prior to the Closing Date, such terms shall be calculated on a pro forma basis on a basis consistent with the pro forma financial statements of Genesis OLP contained in the Prospectus. ARTICLE II GUARANTY FACILITY SECTION 2.1. Guaranties. (a) Subject to the terms and conditions set forth herein, upon the request of Genesis OLP, Salomon Inc shall, during the Availability Period (i) issue Guaranties to third parties from time to time with respect to Crude Oil Contracts on behalf of Genesis OLP and (ii) issue Guaranties as soon as reasonably practicable in substitution for guaranties outstanding on the date hereof issued by Basis, Howell or their Affiliates in connection with Crude Oil Contracts entered into prior to the date hereof, in each case on terms reasonably acceptable to Salomon Inc and generally consistent with its prior practices with respect to Basis. (b) The obligations of Salomon Inc pursuant to Section 2.1(a) shall be subject to the following limitations: (i) If (A) Genesis LLC is removed as General Partner of Genesis OLP for any reason without the prior written consent of Salomon Inc, (B) Salomon Inc assigns its obligations hereunder pursuant to Section 8.7 hereof, or (C) Salomon Inc's obligations hereunder are terminated pursuant to Section 8.6 hereof, then Salomon Inc shall have no further obligation hereunder to issue, substitute, keep in effect or available or amend any Guaranty hereunder and shall have the right to cancel in all respects all outstanding Guaranties with respect to any transaction entered into from and after the date of such removal. In addition, Genesis OLP shall promptly obtain full and complete releases of Salomon Inc from all outstanding Guaranties and all related liabilities and obligations; (ii) Salomon Inc shall have no obligation hereunder to issue, substitute or amend any Guaranty hereunder if, at such time, the Guaranty Exposure at such time exceeds the Maximum Credit Support Amount or if, immediately after the issuance, substitution or amendment of such Guaranty, the Guaranty Exposure would exceed the Maximum Credit Support Amount; (iii) Salomon Inc shall have no obligation hereunder to issue or keep in effect or available any Guaranty hereunder with a term extending beyond December 31, 1999; (iv) no Guaranteed Contract shall require payment or performance by Genesis OLP on a date later than December 31, 1999, unless on such date the Guaranty relating thereto is released and canceled in all respects and Salomon has no further liabilities or obligations in respect of such Guaranteed Contract from and after such date; and (v) Salomon Inc shall have no obligation hereunder to provide or extend any Guaranty beyond the amounts or after the periods specified herein (or such earlier date as the Guaranty Facility Commitment has terminated pursuant to Article VII or Section 8.6). (c) Genesis OLP shall not permit the Guaranty Exposure at any time to exceed the Maximum Credit Support Amount at such time. Upon termination of the Guaranty Facility Commitment pursuant to this Agreement, if any Guaranties remain outstanding, Genesis OLP shall immediately deposit in an account with the Collateral Agent an amount in cash equal to the Guaranty Exposure at such time as collateral with respect to the outstanding Guaranties. (d) Notwithstanding anything to the contrary in this Agreement, Genesis OLP will not enter into any Guaranteed Contract or schedule any Scheduled Obligation at any time if, after giving effect to such action, the Guaranty Exposure would exceed the Maximum Credit Support Amount at such time. SECTION 2.2. Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of a Guaranty (or the amendment, renewal or extension of an outstanding Guaranty), Genesis OLP shall hand deliver or telecopy to Salomon Inc or its Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Guaranty, or identifying the Guaranty to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Guaranty is to expire (which shall comply with Section 2.1(b)), the amount of such Guaranty, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Guaranty. A Guaranty shall be issued, amended, renewed or extended at any time only if (and, upon issuance, amendment, renewal or extension of each Guaranty, Genesis OLP shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, the Guaranty Exposure shall not exceed the Maximum Credit Support Amount at such time. SECTION 2.3. Guaranty Fees. (a) Each month, commencing with the first full calendar month following the Closing Date, as soon as practicable after the day of such month scheduled for final discharge by Genesis OLP of all Scheduled Obligations relating to deliveries of crude oil in the immediately preceding month (the "Payment Day"), the Agent shall calculate (i) the Priced Exposure relating to such Scheduled Obligations for each day from and including the later of (A) the Closing Date and (B) the day in the calendar month immediately preceding such month such obligations first became Scheduled Obligations (the "Scheduling Day") through and including the Payment Day, (ii) the Forward Exposure for each day in the immediately preceding month, and (iii) the Guaranty Exposure for each day in the immediately preceding month. The Agent may determine the methodology for making such calculations and may make any assumptions it deems appropriate, including assuming that barrels of crude oil are delivered ratably over the immediately preceding month. (b) The Agent shall calculate and invoice the monthly guaranty fee payable by Genesis OLP in accordance with the following formula: (i) the quotient of (A) the product of (1) the sum of each of the daily amounts in Sections 2.3(a)(i) and 2.3(a)(ii) and (2) the applicable rate in Schedule I hereto and (B) the number of days in the calendar year including the immediately preceding calendar month; plus (ii) to the extent that any of the daily amounts contained in Section 2.3(a)(iii) exceeded the Maximum Credit Support Amount for such day, the quotient of (A) 1% of the sum of such excesses and (B) the number of days in the calendar year including the immediately preceding calendar month. Such guaranty fee so calculated and invoiced by the Agent shall be due and payable by Genesis OLP on the last Business Day of the month of calculation. SECTION 2.4. Agent. Salomon Inc hereby appoints Basis to serve as its agent (the "Agent") with respect to the management and administration of Guaranties to be provided by Salomon Inc pursuant to this Article II (including in respect of monitoring, determining issuance of Guaranties, calculation of certain amounts and collection of fees), subject to Salomon Inc's notification to the parties hereto of the termination or the substitution in its sole discretion of such Agent. Genesis OLP will provide Basis, as Agent, and Salomon Inc, at its request, such information as Basis shall request to enable Basis to maintain in its internal records the Guaranty Exposure and such information necessary to manage the Guaranties. SECTION 2.5. Repayment Obligation. Genesis OLP hereby agrees to reimburse Salomon Inc by making payment to Salomon Inc in immediately available funds for any Guaranty Disbursement made by Salomon Inc or its Agent under any Guaranty immediately upon delivery of notice by Salomon Inc or its Agent of such Guaranty Disbursement, together with interest on the amount so paid or disbursed at the Prime Rate in effect for the period during which any such Guaranty Disbursement remains outstanding. If Genesis OLP fails to make such reimbursement by the second Business Day after the date of notice of such Guaranty Disbursement, interest shall accrue on the outstanding amount at the Prime Rate plus an additional 2.00% per annum until the date of payment, all such interest to be payable on demand. ARTICLE III WORKING CAPITAL FACILITY SECTION 3.1. Loans. (a) Subject to the terms and conditions set forth herein and to availability under Basis's credit facilities as the same may exist from time to time, Basis will use its best efforts to make working capital loans (each, a "Loan") to Genesis OLP, at any time and from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the Working Capital Exposure exceeding the lesser of (A) $50,000,000 and (B) the Borrowing Base in effect at such time or (ii) the aggregate principal amount of Loans outstanding exceeding $35,000,000. Within the limits set forth in the preceding sentence, Genesis OLP may borrow, pay or prepay and reborrow Loans on or after the Closing Date and prior to the Working Capital Facility Maturity Date, subject to the terms, conditions and limitations set forth herein. Each Loan shall have a maturity not to exceed 30 days and be in an aggregate principal amount that is (x) an integral multiple of $250,000 or (y) equal to the remaining available balance of the Working Capital Facility Commitment. Notwithstanding any other provision of this Agreement, Genesis OLP shall not be entitled to request any new Loan after 10:00 a.m., New York City time, on the Business Day prior to the Working Capital Facility Maturity Date. Loans shall be made solely for the purpose of supporting the working capital requirements of Genesis OLP and the Subsidiaries. (b) In order to request a Loan, Genesis OLP shall notify Basis telephonically not later than 10:00 a.m., New York City time, and hand deliver or telecopy to Basis a duly completed request (a "Borrowing Request") not later than 12:00 p.m., New York City time, on the proposed date of such Loan (which shall be a Business Day). Each Borrowing Request shall be irrevocable, signed by or on behalf of Genesis OLP and shall specify the following information: (i) the proposed date of such Loan (which shall be a Business Day); (ii) the number and location of the account to which funds are to be disbursed; (iii) the amount of such Loan; and (iv) the maturity of such Loan; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Loan shall comply with the requirements set forth in Section 3.1(a). SECTION 3.2. Letters of Credit. (a) Issuance of Letters of Credit. Subject to the terms and conditions set forth herein, upon the request of Genesis OLP, at any time and from time to time during the Availability Period, Basis will request the issuance of standby and documentary letters of credit on behalf of Genesis OLP for the benefit of third parties on the terms and subject to availability under Basis's credit facilities as the same may exist from time to time. Such Letters of Credit shall be issued solely for the purpose of supporting Crude Oil Contracts and other general corporate purposes of Genesis OLP and the Subsidiaries. (b) Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), Genesis OLP shall hand deliver or telecopy to Basis (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with Section 3.2(c)), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and, upon issuance, amendment, renewal or extension of each Letter of Credit, Genesis OLP shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, the Working Capital Exposure shall not exceed the lesser of (i) $50,000,000 and (ii) the Borrowing Base in effect at such time. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) up to 120 days after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, up to 120 days after such renewal or extension) and (ii) the date that is five Business Days prior to the Working Capital Facility Maturity Date. (d) Reimbursement. Genesis OLP hereby agrees to reimburse Basis, by making payment to Basis in immediately available funds, for any L/C Disbursement made by Basis under any Letter of Credit issued at its direction or for any other financial liability or obligation incurred by Basis in connection with the Working Capital Facility Commitment immediately after, and in any event on the date of, notice from Basis of such L/C Disbursement, with interest on the amount so paid or disbursed at the rate per annum equal to the Prime Rate plus an additional 2.00% per annum if not reimbursed by the second Business Day after the date of notice of such L/C Disbursement, such interest to be payable on demand. In addition, in the event of the failure of Genesis OLP to reimburse Basis in accordance with this Section 3.2(d) for any such L/C Disbursement by Basis in respect of any standby Letter of Credit, Basis shall have no further obligation to Genesis OLP to request the issuance of Letters of Credit or make Loans, any outstanding Loans shall be repaid immediately and Genesis OLP shall immediately deposit in an account with the Collateral Agent an amount in cash equal to face amount of any outstanding Letters of Credit as collateral with respect to such Letters of Credit. SECTION 3.3. Term. Subject to the limitations set forth in Sections 3.1 and 3.2, the Working Capital Facility Commitment shall expire on the Working Capital Maturity Date (or such earlier date on which the Loans shall become due and payable hereunder pursuant to Article VII or otherwise) and all amounts owing by Genesis OLP thereunder shall be paid in full at such time. If Genesis LLC is removed as General Partner of Genesis OLP for any reason without the prior written consent of Salomon Inc or Basis, the Working Capital Facility Commitment shall terminate and Basis shall have no further obligation to Genesis OLP to cause or facilitate the issuance of Letters of Credit or make Loans, any outstanding Loans shall be repaid immediately and Genesis OLP shall immediately remit cash to Basis equal to the amount of any outstanding Letters of Credit as collateral with respect to such outstanding Letters of Credit. SECTION 3.4. Pricing Terms. Genesis OLP shall pay the amounts set forth on Schedule II in connection with the Working Capital Facility and amounts outstanding thereunder. Genesis OLP shall pay all accrued and unpaid interest on each Loan at the maturity of such Loan and all accrued and unpaid Letter of Credit fees on demand; provided that (i) in the event of any prepayment of any Loan, accrued interest on the principal amount prepaid shall be payable on the date of such prepayment and (ii) all accrued interest and Letter of Credit fees shall be payable upon termination of the Working Capital Facility Commitment. SECTION 3.5. Notes. Each Loan shall bear interest from and including the date such Loan is made on the outstanding principal balance thereof as provided in Section 3.4. Genesis OLP's obligation to pay the principal of, interest on and any and all other fees or payments associated with Loans shall be evidenced by a promissory note (the "Note") duly executed and delivered by Genesis OLP in the form of Exhibit A hereto. Basis will note on its internal records the amount of each such Loan made by it and each payment with respect thereto, and will note on the reverse side of such promissory note the outstanding principal amount of the loans evidenced thereby and the interest payments made thereon; provided that failure to make any such notation shall not affect the obligations of Genesis OLP thereunder. SECTION 3.6. Default Interest. If Genesis OLP shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, by acceleration or otherwise, or under any other Loan Document, Genesis OLP shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount to but excluding the date of actual payment (after as well as before judgment) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be) equal to the sum of the Prime Rate plus 2.00%. SECTION 3.7. Payments Generally. (a) Genesis OLP shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of Disbursements), prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Agent at its offices at One Allen Center, 500 Dallas, Suite 3200, Houston, Texas 77002, or by wire transfer to such account as may be designated by the Agent from time to time. The Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. (b) If at any time insufficient funds are received by and available to the Agent to pay fully all amounts of principal, unreimbursed Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal and unreimbursed Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed Disbursements then due to such parties. ARTICLE IV CONDITIONS OF LENDING SECTION 4.1. Conditions to All Credit Events. The obligations of Salomon Inc to issue (or amend, renew or extend) Guaranties pursuant to Article II and of Basis to make Loans and to cause the issuance (or amendment, renewal or extension) of Letters of Credit pursuant to Article III (each, a "Credit Event") shall be subject to the satisfaction of the following conditions: (a) The Agent shall have received (i) a notice requesting such issuance (or amendment, renewal or extension) of a Guaranty as required by Section 2.2, (ii) a Borrowing Request for such Loan as required by Section 3.1(b) or (iii) a notice requesting such issuance (or amendment, renewal or extension) of a Letter of Credit as required by Section 3.2(b). (b) The representations and warranties set forth in Article V hereof shall be true and correct (or, in the case of those representations and warranties not qualified as to materiality, true and correct in all material respects) on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) Each Loan Party shall be in material compliance with all the terms and provisions set forth herein and in the Security Documents on its part to be observed or performed, and at the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing. Each Credit Event shall be deemed to constitute a representation and warranty by Genesis OLP on the date of such Credit Event as to the matters specified in clauses (b) and (c) of this Section 4.1. SECTION 4.2. Conditions to First Credit Event. On the Closing Date: (a) The Agent shall have received, on behalf of itself, Salomon Inc and Basis, a favorable written opinion of Andrews & Kurth L.L.P., substantially to the effect set forth in Exhibit I hereto (i) dated the Closing Date, (ii) addressed to the Agent, Salomon Inc and Basis and (iii) covering such other matters relating to the Loan Documents as the Agent shall reasonably request, and Genesis OLP hereby requests such counsel to deliver such opinions. (b) The Agent shall have received such documents and certificates as the Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party and the General Partner, the authorization of the Transactions and any other legal matters relating to the each Loan Party and the General Partner, this Agreement, the other Loan Documents or the Transactions, all in form and substance satisfactory to the Agent and its counsel. (c) The Agent shall have received an Officer's Certificate, dated the Closing Date, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.1. (d) The Collateral Agent shall have received a Perfection Certificate with respect to Genesis OLP dated the Closing Date and duly executed by an executive officer of the General Partner. (d) The Collateral Agent shall have received the results of a search of the Uniform Commercial Code filings (or equivalent filings) made with respect to the Loan Parties in the states (or other jurisdictions) in which the chief executive office of each such Person is located, any offices of such Persons in which records have been kept relating to Accounts and the other jurisdictions in which Uniform Commercial Code filings (or equivalent filings) are to be made pursuant to the following paragraph, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to the Collateral Agent that the Liens indicated in any such financing statement (or similar document) would be permitted under Section 6.1 or have been released. (f) The Security Documents shall have been duly executed by Genesis OLP and shall have been delivered to the Collateral Agent and shall be in full force and effect on such date and each document (including each Uniform Commercial Code financing statement) required by law or reasonably requested by the Collateral Agent to be filed, registered, recorded or pledged in order to create in favor of the Collateral Agent for the benefit of the Secured Parties a valid, legal and perfected first-priority security interest in and lien on the Collateral (subject to any Lien expressly permitted by Section 6.1) described in such agreement shall have been delivered to the Collateral Agent. (g) The Conveyance Agreement shall have been executed and delivered by the parties thereto and the Transactions contemplated by the Prospectus shall have been consummated or shall be consummated simultaneously with the initial Credit Event hereunder in accordance with applicable law. (h) All material consents to the Transactions by Governmental Authorities and third parties shall have been obtained to the extent required as of the Closing Date, all applicable appeal periods and waiting periods shall have expired and there shall be no governmental or judicial action, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on the Transactions. (i) The Agent shall have received (i) a certificate substantially in the form of Exhibit F hereto (a "Borrowing Base Certificate"), setting forth on an itemized basis, a good faith estimate of the Borrowing Base, as well as a Receivable and Payable Report, each as of the last day of the preceding month on a pro forma basis, giving effect to the Transactions as if they had occurred on such date, with counterparty transactions identified on such schedule that are subject to a Compromise of Claims Agreement or a Contract Cancelation Agreement, such Certificate to be certified as complete and correct on behalf of Genesis OLP by the chief financial officer of the General Partner and (ii) such other supporting documentation and additional reports with respect to the Borrowing Base as the Agent shall reasonably request. (j) A counterpart of this Agreement and the Note shall have been duly executed and delivered by Genesis OLP. ARTICLE V REPRESENTATIONS AND WARRANTIES Genesis OLP represents and warrants to the Agent, the Collateral Agent, Salomon Inc and Basis that: SECTION 5.1. Organization; Powers. Each of Genesis OLP, the General Partner and the Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted (and, in the case of the General Partner, to act as the general partner of Genesis OLP) and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 5.2. Authorization; Enforceability. The execution, delivery and performance of each of the Loan Documents by each Loan Party, the use of proceeds of the Loans and the issuance of the Guaranties and Letters of Credit, the creation of the security interests contemplated by the Loan Documents and the consummation of the other transactions contemplated by the Prospectus (collectively, the "Transactions") are within the partnership, corporate or company power of each Loan Party and have been duly authorized by all necessary partnership, corporate or company and, if required, partner, stockholder or member action. This Agreement has been duly executed and delivered by Genesis OLP and constitutes a legal, valid and binding obligation of Genesis OLP, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 5.3. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of Genesis OLP, the General Partner or any of the Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon Genesis OLP, the General Partner or any of the Subsidiaries or any of their respective assets, or give rise to a right thereunder to require any payment to be made by Genesis OLP, the General Partner or any of the Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of Genesis OLP, the General Partner or any of the Subsidiaries (other than the Liens under the Loan Documents). SECTION 5.4. No Material Adverse Change. There has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of Genesis OLP and the Subsidiaries, taken as a whole, since the Closing Date. SECTION 5.5. Title to Properties. (a) Each of Genesis OLP and the Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of Genesis OLP and the Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by Genesis OLP and the Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.6. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Genesis OLP, threatened against or affecting Genesis OLP or any of the Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement or the Transactions. (b) Except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither Genesis OLP nor any of the Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any condition or event that could reasonably be expected to result in any Environmental Liability. SECTION 5.7. Compliance with Laws and Agreements. Each of Genesis OLP and the Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 5.8. Investment and Holding Company Status. Neither Genesis OLP nor any of the Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 5.9. Taxes. Each of Genesis OLP and the Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which Genesis OLP or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect; provided, however, that Genesis OLP shall not be deemed to make any representation and warranty under this Section with respect to any Plan of Basis if and for so long as Genesis OLP shall participate in such Plan and Basis shall be a Wholly Owned Subsidiary of Salomon Inc. SECTION 5.11. Disclosure. Genesis OLP has disclosed to Salomon Inc and Basis all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of Genesis OLP to Salomon Inc or Basis in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, Genesis OLP represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. SECTION 5.12. Subsidiaries. The shares of Capital Stock or other ownership interests of each Subsidiary that are owned by Genesis OLP or a Subsidiary are fully paid and non-assessable and are owned by Genesis OLP or a Subsidiary, as applicable, directly or indirectly, free and clear of all Liens. SECTION 5.13. Federal Reserve Regulations. None of Genesis OLP or any of the Subsidiaries is engaged, directly or indirectly, in the business of extending or maintaining credit for the purpose of buying or carrying Margin Stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System of the United States of America (the "Board") as from time to time in effect and all official rulings and interpretations thereunder or thereof). No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation G, U or X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. SECTION 5.14. Security Agreement. The Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified in Schedule 6 to the Perfection Certificate, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral, in each case prior and superior in right to any other Person. SECTION 5.15. Solvency. Immediately after the consummation of the Transactions and the execution and delivery of the Loan Documents, and immediately following the making of each Loan made on the Closing Date and after giving effect to the application of the proceeds of such Loans, (i) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability on its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) each Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date. ARTICLE VI COVENANTS Genesis OLP covenants and agrees that on and after the date hereof and until the commitments of Salomon Inc and Basis hereunder have terminated and all obligations of Genesis OLP incurred hereunder are paid in and performed in full: SECTION 6.1. Liens. Genesis OLP will not, and will not permit any of the Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of Genesis OLP or such Subsidiary, whether now owned or hereafter acquired; provided that the provisions of this Section 6.1 shall not prevent the creation, incurrence, assumption or existence of: (i) Liens for Taxes not yet due, or Liens for Taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established; (ii) Liens in respect of property or assets of Genesis OLP or any Subsidiary imposed by law or agreement, which were incurred in the ordinary course of business, such as carriers', warehousemen's and mechanics' Liens and other similar Liens arising in the ordinary course of business, including First Purchase Liens, and (x) which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of Genesis OLP and the Subsidiaries, and (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (iii) Liens created pursuant to the Security Documents; (iv) pledges or deposits in connection with the worker's compensation, unemployment insurance and other social security legislation in the ordinary course of business; (v) good faith deposits in connection with any tender, lease or real estate, bid or contract, deposits to secure any duty or public or statutory obligation, deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of any Tax or assessment or similar charge, in each case in the ordinary course of business; (vi) Liens on accounts maintained with commodity brokers or finance affiliates thereof incurred in the ordinary course of business; (vii) Liens consisting of any (A) statutory landlord's Lien under any lease to which Genesis OLP or any Subsidiary is a party or any other Lien on leased property reserved in any lease thereof for rent or for compliance with the terms of such lease, (B) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of Genesis OLP or any Subsidiary or to use such property in any manner which does not materially impair the use of such property for the purpose for which it is held by Genesis OLP or any Subsidiary, (C) obligations or duties to any Governmental Authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any Governmental Authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, or (D) zoning laws, ordinances or municipal regulations; (viii) Liens on deposit required by any Person with whom Genesis OLP or any Subsidiary enters into forward contracts, futures contracts, swap agreements or other commodities contracts in the ordinary course of business, including Liens in connection with New York Mercantile Exchange margin obligations; (ix) Liens existing on any property or asset prior to the acquisition thereof by Genesis OLP or any Subsidiary; provided that (A) such Lien is not created in contemplation of or in connection with such acquisition, (B) such Lien does not apply to any other property or asset of Genesis OLP or any Subsidiary and (C) such Lien does not (1) materially interfere with the use, occupancy and operation of such property or asset, (2) materially reduce the fair market value of such property or asset but for such Lien or (3) result in any material increase in the cost of operating, occupying or owning or leasing such property or asset; and (x) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by Genesis OLP or any Subsidiary; provided that (A) such security interests secure Indebtedness permitted by Section 6.7 hereof, (B) such security interests are incurred, and the Indebtedness secured thereby is created, within 90 days after such acquisition (or construction), (C) the Indebtedness secured thereby does not exceed 85% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and (D) such security interests do not apply to any other property or assets of Genesis OLP or any Subsidiary. SECTION 6.2. Management Practices. Genesis OLP shall, and shall cause the Subsidiaries to, operate at all times in conformity with risk management policies, credit and receivable risk exposure practices and cash management practices in effect prior to the date hereof for the crude oil gathering operations of Basis; provided that Salomon Inc may from time to time revise or alter such policies and practices in its reasonable discretion, in which case Genesis OLP and the Subsidiaries shall from and thereafter operate in conformity with such revised or altered policies and practices. SECTION 6.3. Limitation on Transactions. Genesis OLP shall not, and shall not permit any of the Subsidiaries to, acquire or dispose of any business, line of business or any assets, other than in the ordinary course of business and consistent with past practice. For such purpose, (i) transactions which could reasonably be expected to increase or decrease consolidated revenues or net income of Genesis OLP on a pro forma basis for its most recent 12 months of operations as if such transaction has occurred at the beginning of such period, by more than 10% or (ii) any sale or disposition of any business, line of business or any assets (other than inventory or obsolete equipment sold in the ordinary course of business) having a market value in excess of $500,000 shall, in each such case, be deemed to be not in the ordinary course of business. SECTION 6.4. Cash Management. Genesis OLP shall, and shall cause each of the Subsidiaries to, invest its cash with Salomon Inc's designee, in accordance with the cash management practices determined by the Agent; provided that the return of (but not a return on) such investment with Salomon Inc's designee shall be fully guaranteed by Salomon Inc (subject to any right of setoff). In addition to any other rights and remedies which Basis and Salomon Inc may have, if an Event of Default shall have occurred and be continuing, each of Basis and Salomon Inc is hereby authorized to the fullest extent permitted by law to set off and apply any amounts invested with Basis and Salomon Inc, respectively, pursuant to this Section 6.4 against any of the Obligations of the Loan Parties under the Loan Documents, whether matured or unmatured. SECTION 6.5. Information Covenants. Genesis OLP will furnish to Basis: (a) Event of Default. Prompt (but in no event later than three Business Days after any executive officer (or, without limitation, the principal accounting officer, treasurer or controller) of Genesis OLP obtains knowledge thereof) written notice of: (i) any Default or Event of Default, specifying the nature and period of existence thereof and what action has been taken, is being taken or is proposed to be taken with respect thereto; (ii) the filing or commencement of, or any written threat or notice of intention of any Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against Genesis OLP, the General Partner or any Subsidiary that could reasonably be expected to result in a Material Adverse Effect; and (iii) any development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. (b) Monthly Management Reports. As soon as available, and in any event, within 30 days after the end of each monthly accounting period in each fiscal year of Genesis OLP, a monthly report of management of Genesis OLP as to the financial condition of Genesis OLP and the Subsidiaries as at the end of such monthly period, in a form reasonably satisfactory to the Agent. (c) Borrowing Base Reports. As soon as available, and in any event within five Business Days after the end of each month, a Borrowing Base Certificate as of the last day of such preceding month, setting forth on an itemized basis, a good faith estimate of the Borrowing Base, as well as a monthly Receivable and Payable Report, as of the last day of such preceding month, identifying by counterparty transactions on such schedule that are subject to a Compromise of Claims Agreement or a Contract Cancelation Agreement, together with such other supporting documentation and additional reports with respect to the Borrowing Base as the Agent shall reasonably request; provided, however, that Genesis OLP shall provide the information required by this paragraph (c) as often as may be reasonably requested by Salomon Inc, Basis or the Agent if (i) a Default or Event of Default has occurred and is continuing or (ii) Salomon Inc, Basis or the Agent otherwise determines that a material adverse change has occurred with respect to the Loan Parties, their management practices or the Collateral. (d) Quarterly Financial Statements. As soon as available, and in any event, within 45 days after the end of each quarterly accounting period in each fiscal year of Genesis OLP, the consolidated and consolidating balance sheets of Genesis OLP and the Subsidiaries as at the end of such quarterly period and the related consolidated and consolidating statements of operations, partners' capital and cash flows of such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, in each case setting forth comparative figures for the related periods in the prior fiscal year, all of which shall be prepared in accordance with GAAP and certified by an appropriate officer of the General Partner, subject to normal year-end audit adjustments, which certificate shall set forth computations in reasonable detail demonstrating compliance with the covenants contained in Sections 6.8, 6.9, 6.10, 6.11 and 6.12. (e) Annual Financial Statements. As soon as available, and in any event within 90 days after the end of each fiscal year of Genesis OLP, the consolidated and consolidating balance sheets of Genesis OLP and the Subsidiaries as at the end of such fiscal year and the related consolidated statements of operations, partners' capital and cash flows for such fiscal year, in each case setting forth comparative figures for the preceding fiscal year and prepared in accordance with GAAP and certified, in the case of the consolidated financial statements, by independent certified public accountants of recognized national standing reasonably acceptable to Salomon Inc, in each case together with the audit report of such accounting firm. (f) Perfection Certificate. Concurrently with any delivery of annual financial statements under paragraph (e) above, a certificate executed by the Chief Financial Officer and the chief legal officer (if any) of the General Partner (i) certifying that the information contained in the most recently delivered Perfection Certificate is true, complete and correct in all material respects as of such date, and (ii) certifying that none of the Loan Parties has consented to, or is aware of, the filing of any Uniform Commercial Code financing statements with respect to the Collateral naming such Person as the debtor therein by any Person other than the Collateral Agent since the date of the most recently delivered Perfection Certificate, or if any such filing has been made, setting forth a reasonably detailed description thereof and of the related financing. (g) Additional Information. Promptly, from time to time, such other information regarding the operations, business affairs and financial condition of Genesis OLP or any Subsidiary, or compliance with the terms of any Loan Document, as the Agent, Salomon Inc or Basis may reasonably request. SECTION 6.6. Consolidation, Merger, Sale of Assets, etc. Genesis OLP will not, and will not permit any of the Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation (or equivalent transaction), or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any substantial part of its property or assets, or permit any of the Subsidiaries to do any of the foregoing, except that (i) Genesis OLP and the Subsidiaries may make sales of inventory in the ordinary course of business, (ii) Genesis OLP and the Subsidiaries may, in the ordinary course of business, sell equipment which is uneconomic or obsolete and (iii) any subsidiary of Genesis OLP may be merged or consolidated with or into Genesis OLP (provided that Genesis OLP shall be the continuing or surviving entity) and any Subsidiary of Genesis OLP may be merged with or into any one or more Wholly Owned Subsidiaries of Genesis OLP (provided that the Wholly Owned Subsidiary shall be the continuing or surviving entity). SECTION 6.7. Indebtedness. Genesis OLP will not, and will not permit any of the Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness other than: (a) Indebtedness hereunder; (b) Indebtedness in existence on the date of this Agreement; (c) Indebtedness permitted pursuant to Section 6.13(ii); (d) Indebtedness pursuant to Hedging Agreements entered into in the ordinary course of business and not for the purpose of speculation; and (e) APIs (as defined in the Genesis OLP Partnership Agreement). SECTION 6.8. Minimum Tangible Net Worth. Genesis OLP shall not, at any time, permit its Consolidated Tangible Net Worth to be less than $50,000,000. SECTION 6.9. Minimum Working Capital. Genesis OLP shall not, at any time, permit its Consolidated Working Capital to be less than $1,000,000. SECTION 6.10. Working Capital Leverage Ratio. Genesis OLP shall not, at any time, permit the ratio of its Consolidated Current Liabilities to its Consolidated Working Capital plus net property, plant and equipment to exceed 7.5:1.0. SECTION 6.11. Fixed Charge Coverage. Genesis OLP shall not permit, as of the last day of any fiscal quarter, the ratio of (i) the Consolidated EBITDA of Genesis OLP for such fiscal quarter to (ii) the Consolidated Fixed Charges of Genesis OLP for such fiscal quarter to be less than 1.75:1.0. SECTION 6.12. Leverage Ratio. Genesis OLP shall not permit, at any time, the ratio of its Consolidated Total Liabilities to its Consolidated Tangible Net Worth to exceed 10.0:1.0. SECTION 6.13. Advances, Investments and Loans. Genesis OLP will not, and will not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, except that the following shall be permitted: (i) Genesis OLP and its Subsidiaries may acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; and (ii) Genesis OLP may make advances and capital contributions to any of its Wholly Owned Subsidiaries and any Wholly Owned Subsidiary of Genesis OLP may make advances and capital contributions to Genesis OLP or any other Wholly Owned Subsidiary of Genesis OLP; provided that (A) all the outstanding Capital Stock of any such Wholly Owned Subsidiary shall have been pledged under the Pledge Agreement for the ratable benefit of the Secured Parties and (B) any such Wholly Owned Subsidiary shall have executed and delivered each applicable Security Document as required by Section 6.20. SECTION 6.14. Restricted Payments. Genesis OLP will not, and will not permit any of the Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except (a) Genesis OLP may declare and pay (i) dividends or distributions with respect to its outstanding limited partner interests payable solely in additional limited partners interests or (ii) dividends or distributions payable solely to Genesis OLP or a Wholly Owned Subsidiary of Genesis OLP (or pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary of Genesis OLP to minority securityholders), (b) Genesis OLP may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees of Genesis OLP and its Subsidiaries and (c) Genesis OLP may make Restricted Payments pursuant to and in accordance with and as required by the terms of the Genesis OLP Partnership Agreement as in effect on the date of this Agreement. SECTION 6.15. Existence; Conduct of Businesses. Genesis OLP will, and will cause each of the Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.6. SECTION 6.16. Payment of Obligations. Genesis OLP will, and will cause each of the Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Genesis OLP or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 6.17. Maintenance of Properties; Insurance. Genesis OLP will, and will cause each of the Subsidiaries to, (i) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (ii) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 6.18. Books and Records; Inspection Rights. Genesis OLP will, and will cause each of the Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Genesis OLP will, and will cause each of the Subsidiaries to, permit any representatives designated by the Agent, Salomon Inc or Basis, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 6.19. Compliance with Laws. Genesis OLP will, and will cause each of the Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 6.20. Further Assurances. Genesis OLP shall, and shall cause the Subsidiaries to, execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements) that may be required under applicable law, or that the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority of the security interests created or intended to be created by the Security Documents. Genesis OLP will cause any subsequently acquired or organized Domestic Subsidiary to execute the Subsidiary Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement and each applicable Security Document in favor of the Collateral Agent. In addition, from time to time, Genesis OLP will, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with respect to such of its assets and properties as the Collateral Agent shall designate, including the Capital Stock of any subsequently acquired or organized Subsidiary through the execution of the Pledge Agreement. Such security interests and Liens will be created under the Security Documents and other security agreements, and other instruments and documents in form and substance satisfactory to the Collateral Agent, and Genesis OLP shall deliver or cause to be delivered to Salomon Inc and Basis all such instruments and documents (including legal opinions and lien searches) as the Collateral Agent shall reasonably request to evidence compliance with this Section. Genesis OLP agrees to provide such evidence as the Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. The parties hereto acknowledge that the intent of this Agreement is to provide transitional credit support to Genesis OLP and that, during the Availability Period, Genesis OLP and Genesis MLP are expected to be actively seeking to enter into one or more bank credit agreements or third party credit facilities to supplement and eventually replace this Agreement, and Salomon Inc and Basis agree to cooperate with Genesis OLP and Genesis MLP to effect this transition; provided that neither Salomon Inc nor Basis will be obligated to effect any amendment to this Agreement prior to its termination that would adversely affect either Salomon Inc or Basis. In connection with Genesis OLP or Genesis MLP entering into any such agreement or facility, Salomon Inc, as Collateral Agent, will take any action with respect to the Collateral that it deems appropriate at such time, including partially or fully releasing the security interest of the Secured Parties. ARTICLE VII EVENTS OF DEFAULT Upon the occurrence of any of the following specified events (each an "Event of Default"): (ii) Genesis OLP shall (x) default in the payment when due of any principal on any payment obligation to Salomon Inc or Basis hereunder or (y) default, and such default shall continue unremedied for two Business Days, in the payment when due of any interest, fee or other repayment obligation hereunder or under any Loan Document, including, without limitation, pursuant to Section 2.5 or Section 3.2(d), or in any of its other obligations contained in Article II hereof; or (iii) the Guaranty Exposure, as calculated on and for the first day of each calendar month, shall exceed the applicable Maximum Credit Support Amount for such day for two or more consecutive calendar months; or (iv) any Loan Party shall default in the due performance or observance by it of any covenant contained in any Loan Document and such default shall continue unremedied for a period of 30 days after written notice by Salomon Inc or Basis or Genesis OLP (except in the case of a default relating to Section 6.2, with respect to which a period of five days after written notice shall be applicable); or (v) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Guaranties or Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading (or, in the case of any such representation or warranty not qualified as to materiality, false or misleading in any material respect) when so made, deemed made or furnished; (vi) Genesis OLP shall (x) default in any payment of any indebtedness for borrowed money (other than indebtedness incurred under this Agreement) in an aggregate amount of $1,000,000 or more beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such indebtedness was created or (y) default in the observance or performance of any agreement, covenant or condition relating to any indebtedness in an aggregate principal amount of $1,000,000 or more (other than indebtedness incurred under this Agreement) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such indebtedness to become due prior to its stated maturity; or any indebtedness in an aggregate principal amount of $1,000,000 or more of Genesis OLP shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or (vii) Genesis OLP shall commence a voluntary case concerning itself under the Bankruptcy Code; or an involuntary case is commenced against Genesis OLP, and the petition is not controverted within 10 days, or is not stayed or dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Genesis OLP, or Genesis OLP commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Genesis OLP, or there is commenced against Genesis OLP any such proceeding which remains unstayed or undismissed for a period of 60 days, or Genesis OLP is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Genesis OLP suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or Genesis OLP makes a general assignment for the benefit of creditors; or any corporate action is taken by Genesis OLP for the purpose of effecting any of the foregoing; or (viii) any Loan Document or any provision thereof shall cease to be in full force and effect, or shall cease to give the Liens, rights, powers and privileges purported to be created thereby; or (ix) one or more judgments or decrees shall be entered against Genesis OLP involving in the aggregate a liability (not paid or fully covered by insurance except for normal deductibles) of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days after the entry thereof; or (x) an ERISA Event shall have occurred that, in the opinion of the Agent, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; then, and in any such event (other than an event with respect to Genesis OLP described in clause (vi) above), and at any time thereafter, if any Event of Default shall then be continuing, Salomon Inc, acting for itself and on behalf of Basis, or Basis may by written notice to Genesis OLP take any or all of the following actions, without prejudice to any other rights of Salomon Inc or Basis: (A) declare the commitments and obligations of Salomon Inc and Basis to provide credit support to Genesis OLP terminated, whereupon any fees payable hereunder shall forthwith become due and payable without any other notice of any kind; (B) declare the principal of and any accrued interest in respect of all obligations owing hereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Genesis OLP; (C) enforce any or all of the Liens and security interests created pursuant to the Security Documents; (D) terminate any Letter of Credit which may be terminated in accordance with its terms and cash collateralize all other outstanding Letters of Credit; (E) terminate any Guaranty issued by Salomon Inc hereunder which may be terminated in accordance with its terms; and in any event with respect to Genesis OLP described in clause (vi) above, the obligations of Salomon Inc and Basis under this Agreement shall automatically terminate and the principal of and any accrued interest in respect of all obligations owing hereunder shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Genesis OLP. Notwithstanding anything to the contrary in this Agreement, no Event of Default shall be deemed to have occurred under clause (iv) or (ix) above solely as a result of any ERISA Event relating to any Plan of Basis, if and for so long as Genesis OLP shall participate in such Plan and Basis shall be a Wholly Owned Subsidiary of Salomon Inc. ARTICLE VIII MISCELLANEOUS SECTION 8.1. Choice of Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) This Agreement shall be subject to and governed by the laws of State of New York, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state. (b) Genesis OLP hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Agent, the Collateral Agent, Salomon Inc or Basis may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against Genesis OLP or its properties in the courts of any jurisdiction. Genesis OLP hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.2. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. (c) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.1. SECTION 8.2. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party by personal delivery, telex or facsimile at the address or number set forth on the signature pages hereof, confirmed in writing if telex or facsimile at the address set forth in the signature pages (with, in the case of notices to Genesis OLP, a copy to Howell Corporation, 1111 Fannin, Suite 1500, Houston, Texas 77002). Each such notice request or other communication shall be effective upon (i) actual receipt by personal delivery or (ii) such telex or facsimile is transmitted to the telex or facsimile number specified in this Section and the appropriate answer-back is received or accompanied by a telephone call to the party receiving such transmission subject to confirmation given within 72 hours by mail with first class postage prepaid, addressed as aforesaid; if received during the recipient's normal business hours, or at the beginning of the recipient's next Business Day after receipt if not received during the recipient's normal business hours or delivered at the address specified in this Section. All notices to be sent to a party pursuant to this Agreement shall be sent to or made at the number and address set forth below such party's signature to this Agreement, or at such other number and address as such party may stipulate to other parties in the manner provided in this Section 8.2. SECTION 8.3. Entire Agreement. This Agreement constitutes the entire agreement of the parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein. SECTION 8.4. Effect of Waiver or Consent. No waiver or consent, express or implied, by any party to or of any breach or default by any Person in the performance by such Person of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default by such Person of the same or any other obligations of such Person hereunder. Failure on the part of a party to complain of any act of any Person or to declare any Person in default, irrespective of how long such failure continues, shall not constitute a waiver by such party of its rights hereunder until the applicable statute of limitations period has run. SECTION 8.5. Amendment, Modification or Waiver. (a) Except as otherwise provided herein or contemplated hereby, this Agreement may be amended, modified or waived from time to time only by a written instrument signed by all parties hereto; provided that this Agreement may not be amended or modified if in the reasonable judgment of the General Partner such amendment or modification would not be fair and reasonable to Genesis MLP or the limited partners of Genesis MLP. Any such amendment, modification or waiver shall be reduced to writing and shall be designated on its face an "Amendment" or an "Addendum" to this Agreement. Except as expressly provided in the Loan Documents, no full or partial release of any Collateral or any Subsidiary Guarantor shall be effective without the prior written approval of Salomon Inc and Basis. (b) No failure or delay of the Agent, the Collateral Agent, Salomon Inc or Basis in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agent, the Collateral Agent, Salomon Inc and Basis hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by Genesis OLP or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (a) above, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Genesis OLP in any case shall entitle Genesis OLP to any other or further notice or demand in similar or other circumstances. SECTION 8.6. Termination. On the date of the closing of any Substitute Facility entered into by either Genesis OLP or Genesis MLP (i) this Agreement shall terminate and all obligations of Salomon Inc and Basis hereunder shall cease, (ii) Salomon Inc shall have the right to cancel all outstanding Guaranties with respect to any transactions entered into from and after such date and (iii) Genesis OLP shall immediately repay any outstanding Loans to Basis and shall immediately remit cash to Basis equal to the amount of any outstanding Letters of Credit as collateral with respect to such outstanding Letters of Credit. Upon the termination of the Working Capital Facility Commitment, the expiration of all outstanding Letters of Credit, the repayment of all outstanding Loans and the payment of all other amounts owing to Basis hereunder, Basis shall have no further rights or obligations under this Agreement, other than any rights pursuant to Sections 8.9 and 8.14 and any rights or obligations it may have in its capacity as Agent. Upon the termination of this Agreement pursuant to this Section 8.6 and the final satisfaction of all Obligations, the security interest of the Secured Parties in the Collateral shall be released in accordance with Section 9.08 of the Security Agreement. SECTION 8.7. Assignment. No party shall have the right to assign its rights or obligations under this Agreement without the consent of the other applicable party or parties hereto; provided, however, Salomon Inc or Basis may assign any of its rights or obligations under this Agreement (including any Loans at the time owing to it), provided that the assignee thereof (i) unconditionally assumes such obligations of Salomon Inc or Basis, as applicable, under this Agreement, (ii) (x) is a U.S. Entity or (y) agrees to abide by and submit to the jurisdiction of the United Kingdom or the United States of America with respect to matters arising out of this Agreement and at the time of assignment is not organized or based in any jurisdiction that is subject to any general provision under U.S. laws or regulations prohibiting U.S. Persons from making investments in or conducting business with such jurisdiction and (iii) at the time of such transfer and giving effect to such transfer, is an Investment Grade Entity. SECTION 8.8. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. SECTION 8.9. Demands and Claims. Genesis OLP shall use its best efforts to assist Basis and Salomon Inc in defending, pursuing, monitoring or settling any demands or claims for payment of any Guaranties, Letters of Credit, Loans or any other obligations arising hereunder by Basis or Salomon Inc. SECTION 8.10. U.S. Currency. All sums and amounts payable or to be payable pursuant to the provisions of this Agreement shall be payable in coin or currency of the United States of America that, at the time of payment, is legal tender for the payment of public and private debts in the United States of America. SECTION 8.11. Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no party hereto shall be required to take any act, or be prohibited from taking any act, under this Agreement if the effect thereof would be to cause such party to be in violation of any applicable law, statute, rule or regulation. SECTION 8.12. Negation of Rights of Assignees and Third Parties. The provisions of this Agreement are enforceable solely by the parties to this Agreement and Genesis MLP, and no assignee, other than a permitted transferee of Salomon Inc pursuant to Section 8.7 of this Agreement, or other Person shall have the right to enforce any provision of this Agreement or to compel any party to this Agreement to comply with the terms of this Agreement. SECTION 8.13. Maximum Interest Rate. Nothing contained in this Agreement or the promissory notes issued pursuant hereto shall require Genesis OLP to pay interest at a rate exceeding the maximum rate permitted without penalty by applicable law. Each provision in this Agreement and any note, financial document or other agreement executed in connection herewith is expressly limited so that in no event whatsoever shall the amount paid thereunder, or otherwise paid, by Genesis OLP for the use, forbearance or detention of the money to be loaned under this Agreement, exceed that amount of money which would cause the effective rate of interest thereon to exceed the maximum rate of interest permitted without penalty under applicable law, and all amounts payable under any note, financial documents or any other agreement executed in connection herewith, or otherwise payable in connection therewith, shall be subject to reduction so that such amounts paid or payable for the use, forbearance or detention of money to be loaned under this Agreement shall not exceed that amount of money which would cause the effective rate of interest thereon to exceed the maximum rate of interest permitted without penalty under applicable law. SECTION 8.14. Expenses; Indemnification. (a) Genesis OLP agrees to pay all out-of-pocket expenses incurred by the Agent, the Collateral Agent, Salomon Inc and Basis in connection with any amendments, modifications or waivers of the provisions hereof or thereof or incurred by the Agent, the Collateral Agent, Salomon Inc or Basis in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or Guaranties or Letters of Credit issued hereunder, including the fees, charges and disbursements of counsel, and, in connection with any such enforcement or protection, the fees, charges and disbursements of counsel for the Agent, the Collateral Agent, Salomon Inc and Basis. (b) Genesis OLP shall indemnify the Agent, the Collateral Agent, Salomon Inc and Basis, each Affiliate of any of the foregoing Persons and each of their respective directors, officers, employees and agents (each such Person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby, (ii) any Loans, Guaranty or Letter of Credit or the use of proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on any property owned or operated by Genesis OLP or any of the Subsidiaries, or any Environmental Liability related in any way to Genesis OLP or the Subsidiaries, in each case arising out or resulting from any such Person being a party to this Agreement or any other Loan Document, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) The provisions of this Section 8.14 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Working Capital Facility Commitment or the Guaranty Facility Commitment, the expiration of any Guaranty or Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Agent, the Collateral Agent, Salomon Inc or Basis. All amounts due under this Section 8.14 shall be payable on written demand therefor. SECTION 8.15. Cash Collateralization. If any Event of Default shall occur and be continuing (and in addition to any other obligation contained herein), on the Business Day that Genesis OLP receives notice from the Agent or Basis, demanding the deposit of cash collateral pursuant to this paragraph, Genesis OLP shall deposit in an account with the Agent, in the name of the Agent and for the benefit of Basis and Salomon Inc, an amount in cash equal to the Guaranty Exposure and the L/C Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to Genesis OLP described in clause (vi) of Article VII. Such deposit shall be held by the Agent as collateral for the payment and performance of the obligations of Genesis OLP under this Agreement. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Agent and at Genesis OLP's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Agent to reimburse Salomon Inc or Basis, as applicable, for Guaranty Disbursements or L/C Disbursements for which they have not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of Genesis OLP for the Guaranty Exposure and the L/C Exposure at such time or may be applied to satisfy other obligations of Genesis OLP under this Agreement. If Genesis OLP is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to Genesis OLP within three Business Days after all Events of Default have been cured or waived. SECTION 8.16. Survival. All covenants, agreements, representations and warranties made by Genesis OLP herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Guaranty or Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Agent, Salomon Inc or Basis may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Guaranty or Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Section 8.14 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Guaranties or Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 8.17. Obligations Absolute. Genesis OLP's obligation to reimburse Disbursements as provided in Section 2.5 and Section 3.2(d) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of: (i) any lack of validity or enforceability of any Guaranty or Letter of Credit or this Agreement, or any term or provision therein; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Guaranty or Letter of Credit or this Agreement; (iii) the existence of any claim, setoff, defense or other right that Genesis OLP, any other party guaranteeing, or otherwise obligated with, Genesis OLP, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Guaranty or Letter of Credit, the Agent, Salomon Inc, Basis or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a Guaranty or Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by Salomon Inc under any Guaranty or by the issuer of any Letter of Credit under such Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Guaranty or Letter of Credit; and (vi) any other act or omission to act or delay of any kind of the Agent, Salomon Inc, Basis or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of Genesis OLP's obligations hereunder. Neither the Agent, Salomon Inc and Basis nor any of their Affiliates, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Guaranty or Letter of Credit or any payment or failure to make any payment thereunder, including any of the circumstances specified in clauses (i) through (vi) above, as well as any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Guaranty or Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Agent, Salomon Inc or Basis, provided that the foregoing shall not be construed to excuse the Agent, Salomon Inc or Basis from liability to Genesis OLP to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by Genesis OLP to the extent permitted by applicable law) suffered by Genesis OLP that are caused by such Person's gross negligence or wilful misconduct. IN WITNESS WHEREOF, the parties have executed this Agreement on, and effective as of, the Closing Date. GENESIS CRUDE OIL, L.P. By: GENESIS ENERGY, L.L.C., general partner One Allen Center 500 Dallas, Suite 3200 Houston, Texas 77002 Telephone Number: Fax/Telex Number: Attention: By /s/ John P. vonBerg ----------------------- Name: John P. vonBerg Title: President and Chief Executive Officer SALOMON INC Seven World Trade Center 43rd Floor New York, New York 10048 Telephone Number: Fax/Telex Number: Attention: By /s/ Thomas W. Jasper ----------------------- Name: Thomas W. Jasper Title: Treasurer By /s/ Michelle Turner ---------------------- Name: Michelle Turner Title: Authorized Signatory BASIS PETROLEUM, INC. One Allen Center 500 Dallas, Suite 3200 Houston, Texas 77002 Telephone Number: Fax/Telex Number: Attention: By /s/ Jeffrey R. Serra -------------------- Name: Jeffrey R. Serra Title: Chairman of the Board, President and Chief Executive Officer SCHEDULE I Period Fee* Year 1 (beginning on the Closing Date and ending on December 31, 1997) First Quarter** 0.25% Second Quarter 0.25% Third Quarter 0.30% Fourth Quarter 0.30% Year 2 (beginning on January 1 and ending on December 31, 1998) First Quarter 0.50% Second Quarter 0.50% Third Quarter 0.70% Fourth Quarter 0.70% Year 3 (beginning on January 1 and ending on December 31, 1999) First Quarter 0.90% Second Quarter 1.10% Third Quarter 1.25% Fourth Quarter 1.50% - ----------------------- *Fee is based upon the indicated rate on a per annum basis. **Each quarter shall be a three calendar month period except for this First Quarter, which shall extend from the Closing Date through March 31, 1997. SCHEDULE II (to be provided by Basis) EX-10 8 EXHIBIT 10.5 REDEMPTION AND REGISTRATION RIGHTS AGREEMENT REDEMPTION AND REGISTRATION RIGHTS AGREEMENT, dated as of December 3, 1996 by and among BASIS PETROLEUM, INC., a Texas corporation ("Basis"), HOWELL CORPORATION, a Delaware corporation ("Howell"), HOWELL CRUDE OIL COMPANY, a Delaware corporation ("Howell Crude"), HOWELL PIPELINE TEXAS, INC., a Delaware corporation ("Howell Texas" and, collectively with Howell Crude, the "Howell Subsidiaries"), GENESIS ENERGY, L.P., a Delaware limited partnership ("Genesis MLP"), and GENESIS CRUDE OIL, L.P., a Delaware limited partnership ("Genesis OLP"). W I T N E S S E T H: WHEREAS, Basis and Howell have agreed pursuant to the Purchase & Sale and Contribution & Conveyance Agreement (the "Conveyance Agreement") by and among Basis, Howell, the Howell Subsidiaries, Genesis MLP, Genesis OLP and Genesis Energy, L.L.C., a Delaware limited liability company, to transfer their respective crude oil gathering, marketing, transportation and pipeline assets to Genesis OLP in exchange for, among other things, the net proceeds of an offering to the public of Common Units representing limited partner interests of Genesis MLP and for the issuance to each of Basis and the Howell Subsidiaries of a certain number of Subordinated OLP Units representing limited partner interests in Genesis OLP; and WHEREAS, pursuant to the Amended and Restated Agreement of Limited Partnership of Genesis OLP (the "OLP Agreement"), upon the expiration of the Subordination Period (as defined in the OLP Agreement), the Subordinated OLP Units will convert on a one-for-one basis into Common OLP Units and, in addition, up to one half of the Subordinated OLP Units may convert into Common OLP Units prior to the end of the Subordination Period; and WHEREAS, the parties desire that, upon the conversion of all or part of Subordinated OLP Units into Common OLP Units, each of Basis and Howell (on behalf of the Howell Subsidiaries) may, subject to the terms and conditions set forth herein cause Genesis OLP to redeem the Common OLP Units held by either Basis or the Howell Subsidiaries, in either case using the proceeds, net of underwriting discounts and commissions or placement fees, if any, of a public offering or private sale by Genesis MLP of a number of newly issued Common Units equal to the number of Common OLP Units being redeemed. NOW THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following terms, as used herein, have the following meanings (all terms defined herein in the singular to have the correlative meanings when used in the plural and vice versa): "Affiliate" shall have the meaning ascribed to such term in the OLP Agreement. "Aggregate Redemption Number" has the meaning ascribed to it in Section 2.1(a) of this Agreement. "Agreement" means this Redemption and Registration Rights Agreement, as the same shall be amended, modified or supplemented from time to time. "Ancillary Agreement" means the Ancillary Agreement among Salomon Inc and the Howell Entities. "API" has the meaning set forth in the OLP Agreement. "Assignee" has the meaning ascribed to it in Section 10 of this Agreement. "Common OLP Unit" has the meaning assigned to the term "Common LP Unit" in the OLP Agreement. "Common Units" means the Common Units representing limited partner interests of Genesis MLP. "Demand Redemption" means any sale of Common Units effected in accordance with Section 2.1 of this Agreement. "Distribution Support Agreement" means the Distribution Support Agreement between Genesis OLP and Salomon Inc. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute, and the rules and regulations promulgated thereunder. "General Partner" means Genesis Energy, L.L.C., a Delaware limited liability company and the general partner of Genesis MLP and Genesis OLP. "Holders" means the holders of record of Common OLP Units or the agent designated by such holders of record (in the case of the Howell Subsidiaries, Howell). "Howell Entities" means Howell and the Howell Subsidiaries. "Indemnified Party" has the meaning ascribed to it in Section 2.4(a) of this Agreement. "Individual Redemption Number" has the meaning ascribed to it in Section 2.1(a) of this Agreement. "Loss" has the meaning ascribed to it in Section 2.4(a) of this Agreement. "Notice of Demand" has the meaning ascribed to it in Section 2.1(a) of this Agreement. "Offering Expenses" means all expenses incident to Genesis MLP's performance of or compliance with this Agreement, including, without limitation, (a) all registration, filing, securities exchange listing, rating agency and National Association of Securities Dealers fees, (b) all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws of all jurisdictions in which the securities are to be registered and any legal fees and expenses incurred in connection with the blue sky qualifications of the Common Units and the determination of their eligibility for investment under the laws of all such jurisdictions, (c) all word processing, duplicating, printing, messenger and delivery expenses, (d) the fees and disbursements of counsel for Genesis MLP and of its independent public accountants, including, without limitation, the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (e) premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Common Units being registered to the extent Genesis MLP elects to obtain such insurance, (f) the fees of preparing a private placement memorandum, (g) any expenses and disbursements of underwriters or placement agents customarily paid by issuers or sellers of securities (but excluding underwriting discounts and commissions, placement fees and transfer taxes, if any, relating to the Common Units being registered) and (h) fees and expenses of other Persons retained or employed by Genesis MLP. Offering Expenses, to the extent payable by Genesis MLP pursuant to this Agreement, shall not include fees and disbursements of counsel for any Participating Holder. "Participating Holder" means a Holder who has provided a Notice of Demand or a Participation Notice to Genesis MLP requesting the redemption of all or a part of its Common OLP Units. "Participation Notice" has the meaning ascribed to it in Section 2.1(c) of this Agreement. "Person" means a natural person, a corporation, a partnership, a limited liability company, a trust, a joint venture, any regulatory authority or any other entity or organization. "Pledge Agreement" means the Pledge Agreement among Basis, the Howell Entities and Genesis OLP. "Reasonable Efforts," when used with respect to any obligation to be performed or term or provision to be observed hereunder, means such efforts as a prudent Person seeking the benefits of such performance or action would make, use, apply or exercise to preserve, protect or advance its rights or interests, provided, that such efforts do not require such Person to incur a material financial cost or a substantial risk of material liability unless such cost or liability (i) would customarily be incurred in the course of performance or observance of the relevant obligation, term or provision, (ii) is caused by or results from the wrongful act or negligence of the Person whose performance or observance is required hereunder or (iii) is not excessive or unreasonable in view of the rights or interests to be preserved, protected or advanced. Such efforts may include, without limitation, the expenditure of such funds and retention by such Person of such accountants, attorneys or other experts or advisors as may be necessary or appropriate to effect the relevant action; and the commencement, termination or settlement of any action, suit or proceeding involving such Person to the extent necessary or appropriate to effect the relevant action. "Redemption Notice" has the meaning ascribed to it in Section 2.1(e) of this Agreement. "Redemption Price" has the meaning ascribed to it in Section 2.1(a) of this Agreement. "SEC" means the United States Securities and Exchange Commission, or any successor governmental agency or authority thereto. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor statute, and the rules and regulations promulgated thereunder. "Subordinated OLP Units" has the meaning assigned to the term "Subordinated LP Units" in the OLP Agreement. "Successor" means, with respect to any Person, a successor to such Person by merger, consolidation, liquidation or other similar transaction. ARTICLE II SALE OF COMMON UNITS TO EFFECT REDEMPTION OF COMMON OLP UNITS Section 2.1. Right to Demand the Redemption of Common OLP Units. (a) Request to Effect Redemption. At any time and from time to time after any conversion of any of the Subordinated OLP Units held by Basis or any Howell Subsidiary into Common OLP Units pursuant to Section 5.8 of the OLP Agreement, either Basis or Howell (on behalf of the Howell Subsidiaries) may provide Genesis MLP with a request ("Notice of Demand") (with a copy to the non- requesting Holder of Common OLP Units) that Genesis MLP cause Genesis OLP to redeem Common OLP Units held by such requesting Holder at a per unit redemption price (the "Redemption Price") equal to the per unit proceeds, net of underwriting discounts and commissions or placement fees, if any, of a sale by Genesis MLP of a number of Common Units equal to the number (the "Aggregate Redemption Number") of Common OLP Units the Participating Holders request at any one time in the applicable Notice of Demand and, as the case may be, a Participation Notice to have redeemed, as such requested number may be reduced pursuant to Section 2.1(d) of this Agreement. Upon receipt of a Notice of Demand and, as the case may be, a Participation Notice, Genesis MLP shall, subject to Sections 2.1(b) and 2.1(d) of this Agreement, use Reasonable Efforts (i) to sell a number of Common Units at least equal to the Aggregate Redemption Number, (ii) if the sale of Common Units is to be effected pursuant to a registered public offering, to effect at the earliest practicable date the registration under the Securities Act of a number of Common Units at least equal to the Aggregate Redemption Number, (iii) to complete the sale in accordance with terms and conditions satisfactory to the Participating Holders (provided that if such terms are not satisfactory to any Participating Holder, then such Participating Holder may withdraw its participation at any time prior to Genesis MLP's undertaking of any contractual obligations to any underwriter or other purchaser in connection with such sale) and (iv) to apply, pursuant to Section 2.1(e) of this Agreement, the proceeds of such sale, net of underwriting discounts and commissions or placement fees, if any, to the redemption by Genesis OLP of the Common OLP Units with respect to which the Notice of Demand or Participation Notice applies, as adjusted pursuant to Section 2.1(d) of this Agreement. Upon completion of a sale with respect to a Notice of Demand or Participation Notice, pursuant to Section 2.1(e) of this Agreement, each Participating Holder that has not withdrawn in accordance with clause (ii) of the foregoing sentence shall be obligated to transfer to Genesis OLP the number of Common OLP Units (the "Individual Redemption Number") such Participating Holder requested be redeemed in such Notice of Demand or Participation Notice, as such number of Common OLP Units to be redeemed may have been reduced pursuant to Section 2.1(d) of this Agreement. Genesis MLP shall not be obligated pursuant to this Agreement to cause Genesis OLP to redeem Common OLP Units of Holders other than from the proceeds of a sale of Common Units equal to the Aggregate Redemption Number pursuant to this Agreement (net of underwriting discounts and commissions or placement fees, if any, and excluding proceeds from the simultaneous sale of Common Units in excess of the Aggregate Redemption Number, including pursuant to any over-allotment option granted in connection with a sale pursuant to this Agreement). (b) Limitations on Demand Redemption. (i) In case of an underwritten public offering and notwithstanding any of the foregoing, (A) Genesis MLP shall not be obligated to file a registration statement at any time during the six-month period immediately following the effective date of another registration statement subject to this Agreement and (B) Genesis MLP may delay for a period not to exceed 60 days after receipt of a Notice of Demand the filing of a registration statement pursuant to this Section 2.1, and may for a period not to exceed 60 days after receipt of a Notice of Demand withhold efforts to cause the registration statement to become effective, if the General Partner determines in good faith that such registration might (x) interfere with or affect the negotiation or completion of any transaction that is being contemplated by Genesis MLP (whether or not a final decision has been made to undertake such transaction) at the time the right to delay is exercised, or (y) involve disclosure obligations the timing of which is not in the best interests of Genesis MLP, including, but not limited to, the obligation to conduct a special audit prior to the regular audit conducted by Genesis MLP. (ii) The right of a Holder to request Genesis MLP to cause redemption of Common OLP Units shall be limited to one Notice of Demand and one Participation Notice during any period of six (6) consecutive months. (c) Notice to the Non-Requesting Holder. Upon receipt of any Notice of Demand, Genesis MLP will give prompt (but in any event within ten (10) days after such receipt) notice to the non-requesting Holder of the receipt of the Notice of Demand. Upon the request of any such Holder to participate ("Participation Notice") made within fifteen (15) days after the receipt by such Holder of any such notice (which request shall specify the number of Common OLP Units to be redeemed Genesis MLP will (subject to any priorities in redemption rights) use Reasonable Efforts to effect the sale of a number of Common Units equal to at least the number of Common OLP Units to be redeemed from the Participating Holders. (d) Priority in Demand Redemption. Notwithstanding Section 2.1(a) of this Agreement, in the case of an underwritten offering, if the managing underwriter of an underwritten offering of the Common Units being distributed pursuant to this Agreement, or the placement agent in the case of a private sale, shall inform Genesis MLP by letter of its belief that the amount of securities requested to be included in such distribution or private placement exceeds the amount which can be sold in such distribution or placement within a price range acceptable to the Participating Holders, then Genesis MLP will include in such distribution or placement such amount of Common Units which Genesis MLP is so advised can be sold in such sale pro rata on the basis of the Participating Holders' respective aggregate ownership of Subordinated OLP Units and Common OLP Units or otherwise as the Participating Holders may agree. (e) Redemption Mechanics. Prior to the undertaking by Genesis MLP of any contractual obligations to any underwriter or other purchaser to complete any sale of Common Units by Genesis MLP pursuant to this Agreement, the Participating Holders shall transfer to a custodian, pursuant to custodial arrangements satisfactory to Genesis MLP and the Participating Holders, certificates representing Common OLP Units equal to the Aggregate Redemption Number. After the completion of a sale of Common Units by Genesis MLP pursuant to this Agreement, Genesis MLP shall transfer to Genesis OLP the proceeds of the sale of a number of Common Units equal to the Aggregate Redemption Number, net of underwriting discounts and commissions or placement fees, if any, with respect to such sale. Genesis OLP shall thereafter send a notice (a "Redemption Notice") to each Participating Holder that has not withdrawn in accordance with clause (iii) of Section 2.1(a) of this Agreement specifying (i) that the sale is complete and (ii) that Genesis OLP will redeem the Individual Redemption Number of Common OLP Units of such Participating Holder. Within ten (10) days after the date of the Redemption Notice, Genesis OLP shall submit payment of the Redemption Price to the Participating Holders. Section 2.2. Redemption Terms and Procedures. (a) Underwritten Public Offering. If the sale of Common Units pursuant to this Agreement is conducted through a registered underwritten public offering: (i) Registration Statement Form. Registrations pursuant to this Agreement shall be on such appropriate registration forms of the SEC as shall permit the issuance and sale of Common Units. Genesis MLP agrees to include in any such registration statement all information that any Participating Holder shall reasonably request (to the extent such information relates to such Participating Holder), and each Participating Holder shall be obligated to provide to Genesis MLP information concerning such Participating Holder as Genesis MLP shall reasonably request for inclusion in the registration statement. (ii) Registration Procedures. In connection with Genesis MLP's obligations to register Common Units pursuant to this Agreement, Genesis MLP will use Reasonable Efforts to effect such registration so as to permit the sale of any Common Units included in such registration, and pursuant thereto Genesis MLP will as expeditiously as possible: (A) as soon as reasonably practicable after receipt of a Notice of Demand and a Participation Notice (or the expiration of the period for receipt thereof), prepare and file with the SEC the requisite registration statement and thereafter use Reasonable Efforts to cause such registration statement to be declared effective by the SEC, provided that before filing such registration statement or any amendment or supplement thereto, Genesis MLP will furnish to the Participating Holders copies of drafts of all such documents proposed to be filed (excluding exhibits, which shall be made available upon request by any Participating Holder), and any Participating Holder shall have the opportunity to timely object to any information relating to such Participating Holders contained therein and Genesis MLP will make the corrections reasonably requested with respect to information relating to such Participating Holder prior to filing any such registration statement, amendment or supplement; (B) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to complete the distribution of the securities covered thereby and as may be required to comply with Section 4(3) of the Securities Act and Rule 174 thereunder; (C) furnish to each underwriter participating in the distribution of securities under such registration statement, such number of conformed copies of such registration statement and of each amendment thereto (in each case excluding all exhibits and documents incorporated by reference, which exhibits and documents shall be furnished upon request), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, as such underwriter may reasonably request to facilitate the distribution of such Common Units; (D) use Reasonable Efforts to register or qualify all Common Units and other securities covered by such registration statement under all applicable blue sky and other securities laws, and to keep such registration or qualification in effect for so long as such registration statement remains in effect, except that Genesis MLP shall not for any such purpose be required to (a) qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this clause (D) be obligated to be so qualified, (b) subject itself to taxation in any such jurisdiction or (c) consent to general service of process in any jurisdiction; (E) use Reasonable Efforts to cause all Common Units covered by such registration statement to be registered with or approved by such other governmental agencies or authorities applicable to Genesis MLP as may be reasonably necessary to enable Genesis MLP (or underwriter or agent, if any) to consummate the offering and sale of such Common Units pursuant to such registration statement; (F) use Reasonable Efforts to prevent the issuance by the SEC or any other governmental agency or court of a stop order, injunction or other order suspending the effectiveness of such registration statement and, if such an order is issued, use Reasonable Efforts to cause such order to be lifted as promptly as practicable; (G) take such other actions as are reasonably necessary to expedite or facilitate the disposition of such Common Units; and (H) participate, to the extent reasonably requested by the managing underwriter for the offering, in customary efforts to sell the securities under the offering. (b) Private Sale. In the case of a private placement, Genesis MLP will use Reasonable Efforts to effect such private placement as to permit the sale of any Common Units included in such private placement, and pursuant thereto, Genesis MLP will as expeditiously as possible and as soon as reasonably practicable after receipt of a Notice of Demand and a Participation Notice (or the expiration of the period for receipt thereof), prepare and distribute the requisite private placement memorandum, provided that before distributing such private placement memorandum or any amendment or supplement thereto, Genesis MLP will furnish to the Participating Holders copies of drafts of all such documents proposed to be distributed (excluding exhibits, which shall be made available upon request by any Participating Holder), and any Participating Holder shall have the opportunity to timely object to any information relating to such Participating Holders contained therein and Genesis MLP will make the corrections reasonably requested with respect to information relating to such Participating Holder prior to distribution of any such private placement memorandum, amendment or supplement. Each Participating Holder shall be obligated to provide to Genesis MLP information concerning such Participating Holder as Genesis MLP shall reasonably request for inclusion in any such private placement memorandum. (c) General Redemption Terms. (i) Offering Expenses. Genesis MLP will pay all Offering Expenses incurred in connection with one Demand Redemption effected pursuant to a Notice of Demand by Basis and one Demand Redemption effected pursuant to a Notice of Demand by Howell on behalf of the Howell Subsidiaries (including any incremental expenses resulting from the inclusion of additional Common Units by reason of a Participation Notice being given); Offering Expenses associated with subsequent sales effected pursuant to Section 2.1 shall be borne by the Participating Holders. (ii) Effectiveness of Demand Redemption. A Demand Redemption will not be deemed to have been effected under Section 2.1 unless a sale of Common Units has been effected pursuant thereto. (iii) Selection of Underwriter or Placement Agent. The Participating Holders shall select one or more nationally recognized firms of investment bankers to act as the book-running managing underwriter or underwriters in the case of an underwritten public offering, and, in the case of a private placement, as placement agents, in connection with a distribution or private placement effected pursuant to Section 2.1, provided that such selection shall be subject to the consent of Genesis MLP, which consent shall not be unreasonably withheld. Section 2.3. Underwriting Agreement. If the sale of Common Units pursuant to this Agreement is conducted through an underwritten public offering, Genesis MLP hereby agrees to enter into an underwriting agreement with the underwriters for such offering selected pursuant to Section 2.2 (c)(iii), such agreement (a) to be reasonably satisfactory in substance and form to the Participating Holders and (b) to contain such representations and warranties by Genesis MLP and by each of the Participating Holders and such other terms as are generally prevailing in agreements of such type. Section 2.4. Indemnification. (a) Indemnification by Genesis MLP. Genesis MLP agrees to indemnify and hold harmless, to the full extent permitted by law, the Participating Holders, their directors, officers, shareholders, employees, investment advisers, agents and Affiliates, either direct or indirect (and each such Affiliate's directors, officers, shareholders, employees, investment advisers and agents), and each other Person, if any, who controls such Persons within the meaning of the Securities Act (each such Person, an "Indemnified Party"), from and against any losses, claims, damages, liabilities or expenses, joint or several (each a "Loss" and collectively, "Losses"), to which such Indemnified Party may become subject under the Securities Act, to the extent that such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act (including all documents incorporated therein by reference), any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto (or in any private placement memorandum distributed by Genesis MLP to effect a private placement of Common Units pursuant to this Agreement), or any 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 Genesis MLP will reimburse such Indemnified Party for any legal or any other expenses reasonably incurred by it in connection with investigating or defending against any such Loss, action or proceeding; provided that in any such case Genesis MLP shall not be liable to any particular Indemnified Party to the extent that such Loss (or action or proceeding in respect thereof) arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, amendment or supplement (or in any private placement memorandum distributed by Genesis MLP to effect a private placement of Common Units pursuant to this Agreement), in reliance upon and in conformity with written information furnished to Genesis MLP by such Indemnified Party specifically for inclusion therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of such securities by such Indemnified Party. Genesis MLP shall also indemnify each other Person who participates (including as an underwriter) in the offering or sale of Common Units hereunder, its officers and directors and each other Person, if any, who controls any such participating Person within the meaning of the Securities Act to the same extent as provided above with respect to Indemnified Parties. (b) Indemnification by the Participating Holders. (i) Genesis MLP may require, as a condition to filing any registration statement or distributing any private placement memorandum for the issuance and sale of new Common Units pursuant to this Agreement and as a condition to indemnifying the Participating Holders pursuant to this Section 2.4, that Genesis MLP shall have received an undertaking reasonably satisfactory to it from each Participating Holder in which they agree to indemnify and hold harmless and reimburse (in the same manner and to the same extent as set forth in paragraph (a) of this Section 2.4) Genesis MLP, Genesis OLP, each director, officer, employee and agent of Genesis MLP and Genesis OLP, and each other Person, if any, who controls Genesis MLP and Genesis OLP within the meaning of the Securities Act or the Exchange Act, from and against any Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act (including all documents incorporated therein by reference), any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto (or in any private placement memorandum distributed by Genesis MLP to effect a private placement of the Common Units pursuant to this Agreement), or any omission or alleged omission from such registration statement, preliminary prospectus, final prospectus or summary prospectus, or any amendment or supplement thereto required to be stated therein or necessary to make the statements therein not misleading, if (but only if) 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 Genesis MLP by such Participating Holder specifically for inclusion therein; provided, however, that no Participating Holder shall be obligated to provide such indemnity to the extent that such Losses result, directly or indirectly, from the failure of Genesis MLP to promptly amend or take action to correct or supplement any such registration statement, prospectus, amendment or supplement (or in any private placement memorandum distributed by Genesis MLP to effect a private placement of Common Units pursuant to this Agreement), based on corrected or supplemental information provided in writing by such Participating Holder to Genesis MLP expressly for such purpose; and provided further, that the obligation to provide indemnification pursuant to this Section 2.4(b) shall be several, and not joint and several, among such indemnifying parties. Notwithstanding anything in this Section 2.4(b) to the contrary, in no event shall the liability of any Participating Holder under such indemnity be greater in amount than the amount of the proceeds received by such Participating Holder upon the redemption from such Participating Holder of Common OLP Units using proceeds from the sale of Common Units to which the Losses relate. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of Genesis MLP or any such director, officer, employee, agent or participating or controlling Person and shall survive the transfer of such securities by such Participating Holder. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in paragraph (a) or (b) of this Section 2.4, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give prompt written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 2.4, except to the extent that the indemnifying party is actually and materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and to assume the defense thereof (such assumption to constitute its acknowledgment of its agreement to indemnify the indemnified party with respect to such matters), jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal fees or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided, however, that if, in such indemnified party's reasonable judgment, a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, such indemnified party shall be entitled to separate counsel at the expense of the indemnifying party; and provided further, that, unless there exists a conflict of interest among indemnified parties, all indemnified parties in respect of such claim shall be entitled to only one counsel or firm of counsel for all such indemnified parties. In the event an indemnifying party shall not be entitled, or elects not, to assume the defense of a claim, such indemnifying party shall not be obligated to pay the fees and expenses of more than one counsel or firm of counsel for all parties indemnified by such indemnifying party in respect of such claim, unless in the reasonable judgment of any such indemnified party a conflict of interest exists between such indemnified party and any other of such indemnified parties in respect of such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of one additional counsel or firm of counsel for such indemnified parties. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that (i) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all Losses in respect of such claim or litigation or (ii) would impose injunctive relief on such indemnified party. No indemnifying party shall be subject to any Losses for any settlement made without its consent, which consent shall not be unreasonably withheld. (d) Other Indemnification. The provisions of this Section 2.4 shall be in addition to any other rights to indemnification or contribution which an indemnified party may have pursuant to law, equity, contract or otherwise. (e) Indemnification Payments. The indemnification required by this Section shall be made by periodic payments of the amount thereof during the course of the investigation or defense, promptly after receipt by the Indemnifying Party of invoices or other evidence of Losses incurred by the Indemnified Party. (f) Contribution. If for any reason the foregoing indemnity and reimbursement is unavailable or is insufficient to hold harmless an indemnified party under paragraph (a) or (b) of this Section 2.4, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any Loss (or actions or proceedings, whether commenced or threatened, in respect thereof), including, without limitation, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss, action or proceeding, in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. Notwithstanding anything in this Section 2.4(f) to the contrary, no indemnifying party (other than Genesis MLP) shall be required pursuant to this Section 2.4(f) to contribute any amount in excess of the amount by which the net proceeds received by such indemnifying party from the sale of Common Units in the offering to which the Losses of the indemnified parties relate exceeds the amount of any damages which such indemnifying party has otherwise been required to pay by reason of such untrue statement or 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. Section 2.5. Term. This Agreement shall be effective on the date hereof and shall continue in full force and effect until all Subordinated OLP Units have converted into Common OLP Units and all such Common OLP Units have been purchased or redeemed. Section 2.6. Holdback Agreement. If any sale hereunder shall be in connection with an underwritten public offering, each Holder agrees not to sell or request any redemption of Common OLP Units by Genesis OLP and thereby cause Genesis MLP to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of Common Units other than as part of such underwritten public offering within seven (7) days before or 90 days (or such lesser period as the managing underwriter may permit) after the effective date of such registration. Section 2.7. Amendments and Waivers. This Agreement may be amended, supplemented or modified at any time, provided that each of (i) Basis and Howell, on behalf of the Howell Subsidiaries, and (ii) Genesis MLP has provided its written consent to such amendment, supplement or modification. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same term or condition of this Agreement on any future occasion. Section 2.8. Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof. Section 2.9. No Third-Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party and their respective Successors and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person. Section 2.10. Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, (i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. Section 2.11. Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only (i) if delivered personally, (ii) by facsimile transmission, (iii) by Federal Express or other nationally recognized courier service or (iv) mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers: If to Genesis MLP to: Genesis Energy, L.P. 500 Dallas, Suite 3200 Houston, Texas 77002 Attention: President with a copy to: General Counsel Fax No.: (713) 646-5278 If to Basis, to: Basis Petroleum, Inc. 500 Dallas, Suite 3200 Houston, Texas 77002 Attention: President with a copy to: General Counsel Fax No.: (713) 646-5278 If to Howell or any of the Howell Subsidiaries, to: Howell Corporation 1111 Fannin, Suite Houston, Texas 77002 Attention: Robert T. Moffett Fax No.: (713) 658-4007 Section 2.12. Assignment. Basis and the Howell Subsidiaries may assign (by written instruments in form reasonably acceptable to the parties) any of their rights hereunder (in whole or in part) to one or more transferees of Subordinated OLP Units or Common OLP Units ("Assignee"). Any such assignment may provide that each Assignee shall be entitled (subject to priorities in registration rights) to participate in a sale of Common Units pursuant to this Agreement and, with respect to any such participation, to have all of the rights of its assignor provided in this Agreement, provided that the assignment of rights by Basis or any Howell Subsidiary shall not enlarge the rights of Basis or any Howell Subsidiary hereunder, and any such assignment shall establish the procedures for the exercise of the rights originally granted to Basis or such Howell Subsidiary hereunder, as the case may be. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their successors and assigns. In case Basis transfers less than all of its Subordinated OLP Units and Common OLP Units (collectively, the "OLP Units") to one or more transferees, Basis shall retain the right to act on behalf of such transferees for purposes of this Agreement. In case Basis transfers all of its OLP Units to one or more transferees, Basis shall appoint an agent who shall act on behalf of such transferees for purposes of this Agreement. In case any Howell Subsidiary transfers its OLP Units, Howell shall act on behalf of the transferee(s) for purposes of this Agreement. In case all of the Howell Subsidiaries transfer their OLP Units to one or more transferees, Howell shall appoint an agent who shall act on behalf of such transferee(s) for purposes of this Agreement. Section 2.13. Headings; References; Interpretation. All Article or Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of the provisions hereof. The definitions in this Agreement shall apply equally to both the singular and plural forms of the terms defined. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word "including" following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation," "but not limited to," or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. Section 2.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, TO THE EXTENT PERMITTED BY LAW, WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. Section 2.15. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall, to the extent permitted by applicable law, be entitled to recover reasonable attorneys' fees in addition to any other available remedy. Section 2.16. No Inconsistent Agreements. Genesis MLP will not hereafter enter into, modify, amend or waive any agreement with respect to its securities if such agreement, modification or waiver would conflict with the rights granted pursuant to this Agreement to Basis, Howell and the Howell Subsidiaries. Section 2.17. Pledge Agreement. The rights of Basis and Howell or of their Assignees pursuant to this Agreement shall be subject to their obligations under and to the terms of the Pledge Agreement. Section 2.18. Specific Performance. The parties agree that, to the extent permitted by law, (i) the obligations imposed on them in this Agreement are special, unique and of an extraordinary character, and that in the event of a breach by any such party damages would not be an adequate remedy and (ii) each of the other parties shall be entitled to apply for specific performance and injunctive and other equitable relief in addition to any other remedy to which it may be entitled at law or in equity. Section 2.19. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. GENESIS ENERGY, L.P. By: GENESIS ENERGY, L.L.C., its general partner By: /s/ John P. vonBerg - ----------------------------------------------- John P. vonBerg President and Chief Executive Officer GENESIS CRUDE OIL, L.P. By: GENESIS ENERGY, L.L.C., its general partner By: /s/ John P. vonBerg - ----------------------------------------------- John P. vonBerg President and Chief Executive Officer BASIS PETROLEUM, INC. By: /s/ Jeffrey R. Serra - ----------------------------------------------- Jeffrey R. Serra Chairman of the Board, President and Chief Executive Officer HOWELL CORPORATION By: /s/ Paul N. Howell - ----------------------------------------------- Paul N. Howell President and Chief Executive Officer HOWELL CRUDE OIL COMPANY By: /s/ Mark J. Gorman - ----------------------------------------------- Mark J. Gorman President HOWELL PIPELINE TEXAS, INC. By: /s/ Allen R. Stanley - ----------------------------------------------- Allen R. Stanley President EX-10 9 EXHIBIT 10.6 CORPORATE SERVICES AGREEMENT This Corporate Services Agreement, dated as of December 3, 1996 (this "Agreement"), is entered into on, and effective as of, the Closing Date by and among GENESIS ENERGY, L.P., a Delaware limited partnership ("Genesis MLP"), GENESIS CRUDE OIL, L.P., a Delaware limited partnership ("Genesis OLP") and BASIS PETROLEUM, INC., a Texas corporation ("Basis"). R E C I T A L S: WHEREAS, the parties desire by their execution of this Agreement to evidence their understanding concerning the providing of certain services by Basis to Genesis OLP and Genesis MLP. WHEREAS, capitalized terms used herein but not defined shall have the meanings provided therefor in the Amended and Restated Agreement of Limited Partnership of GENESIS CRUDE OIL, L.P., dated as of the Closing Date, as such agreement is in effect on the Closing Date (the "OLP Partnership Agreement"), to which reference is hereby made for all purposes of this Agreement. Other definitions are set forth in Section 8.14. THEREFORE, in consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I SERVICES SECTION 1.1 Services Generally. During the Applicable Period, in exchange for the reimbursement described herein, Basis agrees to use its reasonable best efforts to provide or cause one or more of its Affiliates to provide to Genesis MLP and Genesis OLP (collectively, the "Partnership Entities"), certain corporate and staff services, including those services listed on Exhibit A hereto, and office space (collectively, the "Services") to the extent such Services may be reasonably requested by Genesis Energy L.L.C., a Delaware limited liability company and the operating general partner of Genesis OLP and the general partner of Genesis MLP (the "General Partner"), from time to time during the Applicable Period; provided, at Basis' election, it may engage third-party contractors to provide any Service (an "Outsourced Service") called for by this Agreement; provided, however, any such Outsourced Service provided solely for the Partnership Entities shall require approval of such contractor by the Partnership Entities and approval of the terms and conditions of any such agreement governing the Outsourced Service. The Services shall include, without limitation, and in addition to those Services listed on Exhibit A hereto: (i) computer and telecommunications-related services, (ii) credit, treasury and tax services, (iii) accounting and human resource services, (iv) corporate office services and (v) any additional services not specifically named in this Agreement or listed on Exhibit A hereto that shall be mutually agreed upon by Basis and Genesis OLP or Genesis MLP, as the case may be. It is expressly agreed that Basis shall not be obligated to hire any additional employees or retain or acquire any outside or additional assistance, equipment, computer programs or data to enable it to provide any of the Services. In the event that the employment with Basis of an employee providing Services pursuant to this Agreement ("Terminated Employee") terminates voluntarily or involuntarily, Basis shall use its reasonable efforts to continue to provide the Services provided by the Terminated Employee, but Basis shall not be required to do so if providing such Services would unreasonably disrupt the other operations of Basis or its Affiliates. ARTICLE II CANCELLATION OR REDUCTION OF SERVICES SECTION 2.1 Notice Requirements. Except as provided in Sections 2.2, 5.1 or 8.16 or otherwise mutually agreed between Basis and the General Partner on behalf of the Partnership Entities, either Basis or the General Partner on behalf of the Partnership Entities may terminate or reduce the level of any Service or Services, other than office space or Outsourced Services, on ninety (90) days' prior written notice to the other party; provided, however, the office space may be terminated or reduced in amount on one hundred eighty (180) days' prior written notice to the other party. Genesis MLP or Genesis OLP may terminate any Outsourced Service upon proper notice as provided in and in compliance with the agreement for such Outsourced Service. SECTION 2.2 Consequences of Cancellation. Should Genesis MLP or Genesis OLP terminate or be ineligible for any Service being provided hereunder or cease to be eligible to purchase certain Services from Basis' third party providers (such as the inability of Genesis MLP or Genesis OLP to use computer licenses or otherwise not qualify under certain agreements to purchase equipment or Services as a result of Genesis MLP or Genesis OLP not meeting the definition of "Affiliate" or in the eligibility of Genesis MLP, Genesis OLP or the General Partner to participate in Basis' programs such as any applicable employee related plans), Basis shall have no liability to Genesis MLP or Genesis OLP for their failure or inability to replace such terminated Service or Services, as the case may be. Further, if Genesis MLP or Genesis OLP terminates any Service, Genesis MLP and Genesis OLP agree that Basis shall not be required to provide the terminated Service to the General Partner, Genesis MLP or Genesis OLP in the future. No agreement entered into by Basis or any of its Affiliates after the Closing Date shall give to any third party a preferential right to provide the General Partner or any of the Partnership Entities with Services. ARTICLE III NATURE AND QUALITY OF SERVICES SECTION 3.1 Nature and Quality of Services Generally. The parties agree that the Services described in Exhibit A shall be performed with reasonable care. Basis alone may determine whether or not to Outsource a Service. To the extent Basis Outsources a Service, then Basis shall provide and each of the Partnership Entities agrees that such Services will be of the nature and quality provided in the agreement with the third party provider. This Agreement is subject to all of the provisions of Basis' lease for office space (the "Lease"). The Partnership Entities acknowledge that they have received a copy of the Lease and are familiar with the terms thereof. The Partnership Entities shall observe all of the rules posted by the lessor pursuant to the Lease and will comply with all restrictions. The Partnership Entities shall preserve the premises and personal property covered thereby and keep them free from damage, waste and nuisance and shall deliver up same in good repair and condition, reasonable wear and tear and damage by fire or other casualty excepted, upon expiration of this Agreement. ARTICLE IV PAYMENT SECTION 4.1 Payment Generally. Each of the Partnership Entities, in consideration for the performance of the Services by or on behalf of Basis agrees to reimburse Basis for (i) all direct and indirect expenses actually incurred by Basis relating to the Services provided by Basis hereunder to the General Partner or the Partnership Entities, including all Administrative and General Expenditures ("Direct Charges"), (ii) the actual cost of any item purchased for the General Partner or the Partnership Entities by Basis ("Operating Charges"), (iii) all expenses actually incurred by Basis for Outsourced Services or other contract services or utilities provided by any third party providers for the General Partner or the Partnership Entities under an agreement between Basis or any of its Affiliates and such third party ("Outsourced Charges"), and (iv) all expenses for office space, including any leasehold improvements, as allocated per space and per individual by reasonable determination of Basis ("Office Charges"). ARTICLE V INVOICING SECTION 5.1 Invoicing for Direct Charges, Operating Charges, Outsourced Charges and Office Charges. Basis shall invoice, or cause its Affiliates to invoice, the General Partner, on behalf of the Partnership Entities, by the 15th working day of each month for all Direct Charges, Operating Charges, Outsourced Charges and Office Charges attributable to each of the Partnership Entities with respect to the preceding month and any adjustments that may be necessary to correct prior invoices. All invoices shall reflect in reasonable detail a description of the Services performed during the preceding month, and shall be due and payable on the last day of the month in which the invoice is received. In the event of default in payment by either of the Partnership Entities, upon thirty (30) days' written notice to the General Partner, sent by certified mail to the address specified below, Basis may terminate this Agreement as to those Services which relate to the unpaid portion of the invoice if it has not received payment within such thirty (30) days. In the event of a dispute as to the propriety of invoiced amounts (a "Dispute"), the Partnership Entity shall pay all undisputed amounts on each invoice, but shall be entitled to withhold payment of any amount in dispute and shall notify Basis within ten (10) business days from receipt of the disputed invoice of the disputed amount and the reasons each such charge is disputed by the Partnership Entity. Basis shall provide the General Partner on behalf of the Partnership Entity with records relating to the disputed amount so as to enable the parties to resolve the Dispute. If the Dispute cannot be resolved within fifteen (15) days of Basis receiving such notification, either party may initiate arbitration proceedings in the manner provided for by Section 5.2 herein. So long as the parties are attempting in good faith to resolve the Dispute, including the period during which the Dispute is in arbitration, Basis shall not be entitled to terminate the Services related to and by reason of the disputed charge. SECTION 5.2 Arbitration of Disputed Invoiced Amounts. Resolution of any and all Disputes arising under Section 5.1 herein shall be exclusively governed by and settled in accordance with the provisions of this Section 5.2; provided, however, that nothing contained herein shall preclude any party from seeking or obtaining (i) injunctive relief or (ii) equitable or other judicial relief, in each case to preserve the status quo, pending resolution of Disputes hereunder. Either Basis, Genesis MLP or Genesis OLP may commence proceedings hereunder by delivering a written notice to the other party expressly requesting arbitration hereunder after a Dispute has remained unresolved for the period of time specified under Section 5.1 herein. The parties hereby agree to submit all Disputes to arbitration under the terms hereof, which arbitration shall be final, conclusive and binding upon the parties, their successors and assigns. The arbitration shall be conducted in Houston, Texas by a sole arbitrator selected by mutual agreement of the parties not later than ten (10) days after delivery of such notice or, failing such agreement, appointed pursuant to the commercial arbitration rules of the American Arbitration Association, as amended from time to time (the "AAA Rules"). The arbitrators shall be generally knowledgeable about the crude oil gathering, marketing and pipeline operating industry and the nature of the issues to be arbitrated and shall be qualified by education, experience and training to render a decision upon the issues in arbitration. If the arbitrator so selected becomes unable to serve, his or her successors shall be similarly selected or appointed. The arbitration shall be conducted in accordance with the AAA Rules to the extent such AAA Rules do not conflict with the terms of this Agreement. Notwithstanding the foregoing: (i) each party shall have the right to audit the books and records of the other party that are reasonably related to the Dispute; (ii) each party shall provide to the other party involved in the applicable Dispute, reasonably in advance of any hearing, copies of all documents which such party intends to present in such hearing; and (iii) each party shall be allowed to conduct reasonable discovery through written requests for information, document requests, requests for stipulation of fact and depositions, the nature and extent of which discovery shall be determined by the arbitrator, taking into account the needs of the parties and the desirability of making discovery expeditious and cost effective. All hearings shall be conducted on an expedited schedule, and all proceedings shall be confidential. Any party may, at its expense, make a stenographic record thereof. The arbitrator shall complete all hearings not later than sixty days after his or her selection or appointment and shall make a final award not later than thirty days thereafter. All claims presented for arbitration shall be particularly identified, and the parties to the arbitration shall each prepare a written statement of their position and their proposed course of action. These written statements of positions and proposed courses of action shall be submitted to the arbitrator. In making his or her decision, the arbitrator must accept in its entirety the position of one party or the other and make an arbitration award based on that party's proposed course of action. The arbitrator shall not be empowered in reaching his or her decision to equitably adjust and declare a result utilizing the positions espoused by both parties, or to make decisions beyond the scope of the written statements. All costs and expenses of arbitration, including the fees and expenses of the arbitrator or of any experts, shall be borne equally between the prevailing and non-prevailing party, except that each party shall pay all of its respective attorneys' fees, consultants' fees and other costs of participating in the Arbitration proceeding. Notwithstanding the foregoing, in no event may the arbitrator award multiple, punitive or exemplary damages. Any arbitration award shall be binding and enforceable against each party involved in the particular Dispute and judgment may be entered thereon in any court of competent jurisdiction. Payment of any such award shall be made within five (5) business days of the arbitrator's decision. SECTION 5.3 Finality of Undisputed Statements. Any statement or payment not disputed in writing by either party within six months of the date of such statement shall be considered final and no longer subject to adjustment. Neither Genesis MLP nor Genesis OLP shall be obligated to pay for any Direct Charges, Operating Charges, Outsourced Charges or Office Charges for which statements for payment are submitted more than one year after the termination of this Agreement. ARTICLE VI INPUT FROM THE PARTNERSHIP ENTITIES SECTION 6.1 Input Necessary for Basis to Perform Services. Any input or direction necessary for Basis or any third party provider to perform any Services shall be provided by the Partnership Entities as reasonably requested in a manner consistent with the practices utilized by Basis during the one year period prior to the effective date hereof under this Agreement, which manner shall not be altered except by mutual written agreement of the parties. Should the Partnership Entities' failure to supply such input or direction render performance of any Services by or on behalf of Basis unreasonably difficult, Basis, upon reasonable notice, may provide a lesser quality of Services or refuse to perform such Services. ARTICLE VII BENEFICIARIES SECTION 7.1 Partnership Entities are Sole Beneficiaries. Genesis MLP and Genesis OLP acknowledge that the Services shall be provided only with respect to the business of Genesis MLP and Genesis OLP as described in the Registration Statement. Neither Genesis MLP nor Genesis OLP shall request performance of any Services for the benefit of any entity other than the General Partner, Genesis MLP and Genesis OLP. Each of Genesis MLP and Genesis OLP represents and agrees that it will direct that the Services be conducted only in accordance with all applicable federal, state and local laws and regulations and communications and common carrier tariffs, and in accordance with the reasonable conditions, rules, regulations and specifications which may be set forth in any manuals, materials, documents or instructions furnished from time to time by Basis to Genesis MLP and Genesis OLP. Basis reserves the right to take all actions, including termination of any particular Services, that Basis reasonably believes to be necessary to assure compliance with applicable laws, regulations and tariffs. Basis will notify the General Partner of the reasons for any such termination of Services. ARTICLE VIII MISCELLANEOUS SECTION 8.1 Limited Warranty, Limitation of Liability. BASIS REPRESENTS THAT IT WILL PROVIDE OR CAUSE THE SERVICES TO BE PROVIDED TO THE GENERAL PARTNER AND THE PARTNERSHIP ENTITIES WITH REASONABLE DILIGENCE. EXCEPT AS SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE, ALL PRODUCTS OBTAINED FOR THE GENERAL PARTNER OR THE PARTNERSHIP ENTITIES ARE AS IS, WHERE IS, WITH ALL FAULTS. BASIS AND ITS AFFILIATES MAKE NO (AND HEREBY DISCLAIM AND NEGATE ANY AND ALL) REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SERVICES RENDERED OR PRODUCTS OBTAINED FOR THE GENERAL PARTNER OR THE PARTNERSHIP ENTITIES. FURTHERMORE, NONE OF THE GENERAL PARTNER OR THE PARTNERSHIP ENTITIES MAY RELY UPON ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE MADE TO BASIS OR ITS AFFILIATES BY ANY PARTY (INCLUDING, AN AFFILIATE OF BASIS) PERFORMING SERVICES ON BEHALF ON BASIS OR ITS AFFILIATES HEREUNDER, UNLESS SUCH PARTY MAKES AN EXPRESS WARRANTY TO THE GENERAL PARTNER, GENESIS MLP OR GENESIS OLP. HOWEVER, IN THE CASE OF OUTSOURCED SERVICES PROVIDED SOLELY FOR THE PARTNERSHIP ENTITIES, IF THE THIRD PARTY PROVIDER OF SUCH SERVICES MAKES AN EXPRESS WARRANTY TO BASIS, THE GENERAL PARTNER AND THE PARTNERSHIP ENTITIES ARE ALSO ENTITLED TO CAUSE BASIS TO RELY ON SUCH WARRANTY. IT IS EXPRESSLY UNDERSTOOD BY GENESIS MLP AND GENESIS OLP AND GENESIS MLP AND GENESIS OLP AGREE THAT BASIS AND ITS AFFILIATES SHALL HAVE NO LIABILITY FOR THE FAILURE OF THIRD PARTY PROVIDERS TO PERFORM ANY SERVICES HEREUNDER AND FURTHER THAT BASIS AND ITS AFFILIATES SHALL HAVE NO LIABILITY WHATSOEVER FOR THE SERVICES PROVIDED BY THEM UNLESS SUCH SERVICES ARE PROVIDED IN A MANNER WHICH WOULD EVIDENCE GROSS NEGLIGENCE ON THE PART OF BASIS OR ITS AFFILIATES OR WILLFUL OR INTENTIONAL MISCONDUCT. GENESIS MLP AND GENESIS OLP AGREE THAT THE REMUNERATION PAID TO BASIS OR AN AFFILIATE HEREUNDER FOR THE SERVICES TO BE PERFORMED REFLECT THIS LIMITATION OF LIABILITY AND DISCLAIMER OF WARRANTIES. IN NO EVENT SHALL BASIS OR ITS AFFILIATES BE LIABLE TO THE GENERAL PARTNER, THE PARTNERSHIP ENTITIES OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM ANY ERROR IN THE PERFORMANCE OF SERVICES OR FROM THE BREACH OF THIS AGREEMENT, REGARDLESS OF THE FAULT OF BASIS, ANY BASIS AFFILIATE OR ANY THIRD PARTY PROVIDER OR WHETHER BASIS, ANY BASIS AFFILIATE OR THE THIRD PARTY PROVIDER ARE WHOLLY, CONCURRENTLY, PARTIALLY, OR SOLELY NEGLIGENT. TO THE EXTENT ANY THIRD PARTY PROVIDER HAS LIMITED ITS LIABILITY TO BASIS OR ITS AFFILIATE FOR SERVICES UNDER AN OUTSOURCING OR OTHER AGREEMENT, GENESIS MLP AND GENESIS OLP AGREE TO BE BOUND BY SUCH LIMITATION OF LIABILITY FOR ANY PRODUCT OR SERVICE PROVIDED TO THE GENERAL PARTNER OR ANY PARTNERSHIP ENTITY BY SUCH THIRD PARTY PROVIDER UNDER BASIS'S OR SUCH AFFILIATE'S AGREEMENT. Section 8.2 Indemnity. IT IS EXPRESSLY UNDERSTOOD BY EACH OF GENESIS MLP AND GENESIS OLP AND GENESIS MLP AND GENESIS OLP AGREE TO INDEMNIFY AND HOLD HARMLESS BASIS AND ITS AFFILIATES FROM AND AGAINST ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, JOINT OR SEVERAL, EXPENSES (INCLUDING LEGAL FEES AND EXPENSES), JUDGMENTS, FINES, PENALTIES, INTEREST SETTLEMENTS AND OTHER AMOUNTS ARISING FROM ANY AND ALL CLAIMS, DEMANDS, ACTIONS, SUITS OR PROCEEDINGS, WHETHER CIVIL, CRIMINAL, ADMINISTRATIVE OR INVESTIGATIVE, IN WHICH BASIS OR ITS AFFILIATES MAY BE INVOLVED OR IS BELIEVED TO BE INVOLVED, AS A PARTY OR OTHERWISE, BY REASON OF ITS STATUS OR SERVICES RENDERED OR ARISING FROM THE PROVISION OF SERVICES UNDER THIS AGREEMENT, UNLESS DUE TO GROSS NEGLIGENCE OR WILLFUL OR INTENTIONAL MISCONDUCT ON THE PART OF BASIS OR ITS AFFILIATES. Section 8.3 Force Majeure. BASIS SHALL HAVE NO OBLIGATION TO PERFORM OR CAUSE THE SERVICES TO BE PERFORMED IF ITS FAILURE TO DO SO IS CAUSED BY OR RESULTS FROM ANY ACT OF GOD, GOVERNMENTAL ACTION, NATURAL DISASTER, STRIKE, FAILURE OF ESSENTIAL EQUIPMENT OR ANY OTHER CAUSE OR CIRCUMSTANCE BEYOND THE CONTROL OF BASIS, OR, IF APPLICABLE, ITS AFFILIATES OR THIRD PARTY PROVIDERS OF SERVICES TO BASIS ("Event of Force Majeure"). Basis will notify the General Partner of any Event of Force Majeure. Basis agrees that upon the restoration of Services following any Event of Force Majeure, Basis will allow Genesis MLP and Genesis OLP to have equal priority with Basis and its Affiliates, in accordance with prior practice, with respect to access to the restored Service. SECTION 8.4 Waiver of Trial, by Jury. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.4. SECTION 8.5 Severability. In the event any portion of this Agreement shall be found by a court of competent jurisdiction to be unenforceable, that portion of this Agreement will be null and void and the remainder of this Agreement will be binding on the parties as if the unenforceable provisions had never been contained herein. SECTION 8.6 Assignment. Except for the ability of Basis to cause one or more of the Services to be performed by another Basis Affiliate or third party provider, no party shall have the right to assign its rights or obligations under this Agreement without the consent of the other party. SECTION 8.7 Entire Agreement, Supersedure. This Agreement constitutes the entire agreement of the parties relating to the performance of the Services, and all prior or contemporaneous written or oral agreements are merged herein. SECTION 8.8 Choice of Law. This Agreement shall be subject to and governed by the laws of the State of Texas, to the extent permitted by law, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state. SECTION 8.9 Amendment or Modification. This Agreement may be amended or modified from time to time only by a written amendment signed by Genesis MLP, Genesis OLP and Basis. SECTION 8.10 Conflicts. In the event of any conflict between the terms of this Agreement and the Conveyance Agreement or between the terms of this Agreement and the Transition Services Agreement, the terms of the Conveyance Agreement or this Agreement, as the case may be, shall control. SECTION 8.11 Notices. Any notice, request, instruction, correspondence or other document to be given hereunder by any party to any other party (collectively, "Notice") shall be in writing and delivered personally, by mail, postage prepaid, or by telegram or telecopier, as follows: If to Basis: Basis Petroleum, Inc. 500 Dallas, Suite 3200 Houston, Texas 77002 Attention: President with a copy to General Counsel Fax No.: (713) 646-5278 If to Genesis MLP or Genesis OLP: Genesis Energy, L.P. Genesis Crude Oil, L.P. c/o Genesis Energy, L.L.C. 500 Dallas, Suite 3200 Houston, Texas 77002 Attention: President with a copy to General Counsel Fax No.: (713) 646-5278 Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient's normal business hours, or at the beginning of the recipient's next business day after receipt if not received during the recipient's normal business hours. Any party may change the address to which Notice is to be given to such Party by giving Notice as provided above of such change of address. SECTION 8.12 Further Assurances. In connection with this Agreement and all transactions contemplated by this Agreement each signatory party hereto agrees to execute and deliver such additional documents and instruments as may be required for Basis to provide the Services hereunder and to perform such other additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement. SECTION 8.13 Acknowledgment Regarding Certain Provisions. EACH OF THE PARTIES HERETO SPECIFICALLY ACKNOWLEDGES AND AGREES (a) THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS HEREOF, (b) THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT, AND (c) THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT PROVIDE FOR THE ASSUMPTION BY ONE PARTY OF, AND/OR RELEASE OF THE OTHER PARTY FROM, CERTAIN LIABILITIES ATTRIBUTABLE TO THE MATTERS COVERED BY THIS AGREEMENT THAT SUCH PARTY WOULD OTHERWISE BE RESPONSIBLE FOR UNDER THE LAW. EACH PARTY HERETO FURTHER AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY SUCH PROVISIONS OF THIS AGREEMENT ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT SUCH PROVISIONS ARE NOT "CONSPICUOUS". Section 8.14 Definitions. The following terms shall have the indicated meanings for the purposes of this Agreement: "Administrative and General Expenditures" shall mean all administrative and general expenditures, including (i) salaries, bonus, incentive compensation and related benefits, payroll taxes and expenses of personnel who render Services related to the business or administration of Genesis MLP or Genesis OLP, (ii) charges related to the computer and telecommunications services, (iii) the administrative fee charged by Basis Affiliates to manage, administer and bill for third party contracts related to the provision of Services hereunder, but administrative and general expenditures shall not include charges related to Basis' senior executive management. The Administrative and General Expenditures shall be allocated to the General Partner in a fair and reasonable manner determined by Basis in its sole discretion. "Affiliate" shall mean, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question; provided, however, that for the purposes of this Agreement neither the General Partner, Genesis MLP, Genesis OLP, nor any Person controlled by Genesis MLP, Genesis OLP or the General Partner shall be deemed to be an Affiliate of Basis. Salomon Inc shall be deemed an Affiliate of Basis for purposes of this Agreement. As used herein, the term "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Applicable Period" shall mean the period from the Closing Date to the date that neither the General Partner nor an Affiliate of Basis is the general partner of Genesis OLP. "Outsource" shall mean to cause a Service to be provided by a third party provider. "Transition Services Agreement" shall mean that certain Transition Services Agreement, dated as of the date hereof, among Genesis LLC, Basis and Howell Corporation, a Delaware corporation, Howell Crude Oil Company, a Delaware corporation, and Howell Transportation Services, Inc., a Delaware corporation. SECTION 8.15 No Third Party Beneficiary. The provisions of this Agreement are enforceable solely by the parties to this Agreement, and no Limited Partner, Assignee or other Person shall have the right, separate and apart from the Partnership Entities, to enforce any provision of this Agreement or to compel any party to this Agreement to comply with the terms of this Agreement; provided, however, that Basis' Affiliates and vendors are third party beneficiaries of those provisions of this Agreement that apply to Basis' Affiliates and vendors and may enforce such provisions directly against Genesis MLP and Genesis OLP. SECTION 8.16 Termination. This Agreement shall terminate upon the expiration of the Applicable Period except for liabilities or obligations accruing prior to such termination. In addition to the terms provided in Sections 2.1, 2.2 or 5.1 or as mutually or otherwise agreed between Basis and the Partnership Entities, either the General Partner on behalf of Genesis MLP and Genesis OLP or Basis shall have the right to terminate this Agreement by giving written notice, signed by the terminating party, to the other party and this Agreement shall terminate one hundred eighty (180) days from the date on which notice is delivered. SECTION 8.17 Headings; References; Interpretation. All Article or Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of the provisions hereof. The definitions in this Agreement shall apply equally to both the singular and plural forms of the terms defined. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word "including" following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation," "but not limited to," or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed on their behalf by their duly authorized officers. BASIS PETROLEUM, INC. By: /s/ Jeffrey R. Serra - ---------------------------------------------------- Jeffrey R. Serra Chairman of the Board, President and Chief Executive Officer GENESIS ENERGY, L.P., a Delaware limited partnership By: GENESIS ENERGY, L.L.C., a Delaware limited liability company By: /s/ John P. vonBerg ---------------------------------------------- John P. vonBerg President and Chief Executive Officer GENESIS CRUDE OIL, L.P., a Delaware limited partnership By: GENESIS ENERGY, L.L.C., a Delaware limited liability company By: /s/ John P. vonBerg ---------------------------------------------- John P. vonBerg President and Chief Executive Officer EXHIBIT A Attached to and made part of that certain Corporate Services Agreement Employee Relations Personnel File Management HRIS System Data Entry, Updates & Reports Recruitment (Salaried Employees Only) Termination/COBRA Administration New Employee Orientation: - -- Corporate (full treatment) - -- Field (paperwork only) Employee Counseling Managerial Counseling Drug & Alcohol Policy Administration Development of Affirmative Action Plan Assistance in response to claims: - -- Equal Employment Opportunity - -- State Department on Human Rights Policy Development Unemployment Claims Employee Assistance Program Temporary Hires (Corporate Only) Workers Compensation Federal Compliance (EEO-1, OSHA-200, VETS-100, I-9, FMLA, ADA, FLSA, Site Postings) Budget (Salary & Overhead) Employment Verification: - -- Recruits - -- Mortgage and Loan Processing Compensation Administration Salary Survey Organization Charts Relocation Bus Pass, Parking, Health Club Benefits Plan Creation & Administration: Premium Billing - -- Medical (POS (In/Out & 3 HMO'S) Hardship Withdrawals - -- Dental (Core & Optional) QDROs - -- Short Term Disability 401(k) Match - -- Long Term Disability (Core & Optional) 401(k) Loans - -- Group Term Life (Core & Optional) 401(k) Audit - -- Dependent Life Summary Plan Descriptions - -- AD&D (Core & Optional) 5500 Filing - -- Business Travel & Accident Summary Annual Report - -- Employee Assistance Program ERISA Compliance - -- COBRA Qualified Plan Department of Labor approvals & Plan Documentation Updates - -- Flexible Spending Accounts Benefit Cost Analysis & Reporting - -- Vision Charles Schwab Investments - -- Prescription Drugs - -- Retiree Medical & Life - -- 401(k) - -- Profit Share Payroll Timesheet Processing (hourly & non-exempt) W-2's Driver Logs Federal Taxes (Social Security, Medicare, FIT) Company Vehicle Mileage Reports State Income Taxes Payroll / Bonus / Manual Checks State & Federal Unemployment Check Distribution Bank Reconciliations Direct Deposit Invoice Reconciliations Savings Bonds Workers Comp Billings 401(k) 2-way downloads Automated Systems Maintenance (DG & Ceridian) 401(k) Wire Transfers Stop Payments Payroll Balancing Accounting Overdraft Protection Garnishments Audit Support (Internal & External) Labor Distribution Salary Continuance General Ledger Interface Attendance Reporting Office Services (Corporate Office Only) - -- Receptionist/Switchboard - -- Mail Processing - -- Courier Processing - -- Shipping/Receiving - -- Ordering Supplies and Printed Materials - -- Records Management Services (moving boxes in/out of storage, control system) - -- Facilities Management Services (move coordination, maintenance of furniture, file systems, building services, security, etc.) - -- Equipment acquisition and maintenance coordination (copiers, pagers, fax machines, microfiche reader/printers, typewriters, etc.) Credit and Treasury Credit Services: Negotiate and maintain credit lines (incoming and outgoing) Monitor credit exposures to/from counterparties Provide counterparty credit review and analysis Calculate Salomon guaranty usage fees Maintain credit files Provide credit and information agency reports Treasury Services: Maintain internal and external credit facilities for loans and letters of credit Provide cash management Provide money market investment services Negotiate and maintain bank services Manage NYMEX margin and financial credit support Negotiate and manage derivative collateral requirements Tax Department Service Review work plan of Accounting Firm vendor. Monitor qualified income compliance. Prepare FIT tax adjustments, monthly taxable income schedules, depreciable asset database and state tax information for Genesis OLP. Review asset computation subsystem product. Review and monitor customized tax package production. Monitor and communicate status of process to management. Monitor investor response service during 6 week period and provide same service during balance of the year. Process federal and state filings of Genesis OLP tax returns. Prepare and review federal and state income tax returns and annual reports for the LLC. Provide technical support to division order tax functions. Provide technical support to sales tax function for pipeline. Provide technical support to ad valorem tax function; i.e. maintain property database. EX-10 10 EXHIBIT 10.8 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made as of November 15, 1996 by and between Genesis Energy, L.L.C. (the "Company") and John P. vonBerg ("Executive"). RECITALS: A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP") and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil gathering, marketing and pipeline business. B. Executive is the President and Chief Executive Officer for the Company. C. Executive desires to obtain the benefits and incentives from the Company of a written employment agreement having an initial term through December 31, 1999, and, at the Company's election, certain extension terms. D. The Company desires to enter into such an employment agreement with Executive. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows: SECTION 1. Employment. The Company hereby employs Executive as President and Chief Executive Officer of the Company; provided, however, that Executive will continue as an employee of Executive's employer on the date hereof but will be seconded to the Company until January 1, 1997 at which time Executive will become employed by the Company. In such capacity, Executive will have the responsibilities and perform the services and duties described in Section 3 of this Agreement. Executive hereby accepts such employment and agrees to perform such services and duties for the Company. SECTION 2. Term. This Agreement will be for an initial term commencing on the effective date of that certain initial public offering of limited partnership interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"), unless sooner terminated in accordance with the provisions hereof. Thereafter, the Company will have the option, exercisable by notice to Executive given not less than 60 days prior to the expiration of the Initial Term, or any Extension Term (as hereinafter defined), to extend this Agreement for one additional term of two calendar years ending December 31, 2001, and, if, in each instance, so extended, for five additional terms of one calendar year each with the term of the last extension, if so exercised, expiring on December 31, 2006 (each such extension an "Extension Term"). Anything herein to the contrary notwithstanding, this Agreement, and Executive's employment hereunder, may be terminated at any time, with or without cause, upon notice of termination to Executive; provided, however, that in the event of any such termination without cause (including any Involuntary Termination (as hereinafter defined)), Executive will be entitled to the Termination Compensation (as hereinafter defined) set forth herein. SECTION 3. Duties of Executive. As President and Chief Executive Officer, Executive will report directly to the Non-Executive Chairman of the Board and the Board of Directors of the Company and will have such duties and responsibilities with respect to the Company, Genesis MLP and Genesis OLP as customarily would be undertaken by the president and chief executive officer of companies engaged in businesses similar to, or competitive with, the Company. Executive will not be required to hold any other offices, positions or directorships of the Company and/or any subsidiary or affiliate of the Company during the term of this Agreement. Executive will act in the best interest of the Company, Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the performance of Executive's services and duties under this Agreement. Without the prior consent of the Non-Executive Chairman of the Board of Directors of the Company, Executive will not actively engage in any other business or business activity; provided, however, that nothing herein contained will limit the right of Executive to manage Executive's personal investment activities provided that such personal investment activities do not materially interfere with the performance of Executive's duties and responsibilities hereunder or otherwise materially conflict with any policies which have been promulgated and distributed by the Company. SECTION 4. Compensation. 4.1 Compensation during the Initial Term. Subject to the terms and conditions of this Agreement, the Company will cause Executive to be paid an annual salary of $29,167.00 for the partial year ending December 31, 1996 and will pay Executive an annual salary of $350,000.00 for each of the years ending December 31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base Compensation"). The Base Compensation will be reviewed annually by the Compensation Committee of the Board of Directors of the Company. In addition, Executive will be entitled to participate in the Company's Incentive Plan in accordance with the terms thereof (the "Incentive Plan Amount"). 4.2 Compensation during the Extension Terms. The Base Compensation paid by the Company to Executive during the Extension Terms will be established by the Company in connection with the election to extend the term of this Agreement pursuant to Section 2, will not be less than the Base Compensation multiplied by 1.05 with respect to the first Extension Term and thereafter not less than the Base Compensation in effect immediately prior to such election for any subsequent Extension Term and will be advised to Executive simultaneously with notice from the Company of its election to exercise an Extension Term option. 4.3 Award of Restricted Units. The Company will grant to Executive Restricted Units ("Initial Award Units") in an amount determined by dividing $600,000 by the initial offering price of a limited partnership interest in Genesis MLP, pursuant to the Company's Restricted Unit Plan, in accordance with the terms thereof, promptly upon the adoption of such plan by the Board of Directors of the Company. The Initial Award Units shall vest in accordance with terms of the Restricted Unit Plan. 4.4 Short Term Disability Salary Continuance. In the event of a short term illness or injury that would entitle Executive to salary continuance benefits under the Company's short term disability salary continuance plan (the "STD Plan") in effect from time to time, and Executive's years of service with the Company, as determined in accordance with the STD Plan, are not sufficient to provide 100% of the maximum amount of salary continuance that would otherwise be available to Executive with more years of service (the "Maximum STD Payment") the Company will pay Executive, as and when salary continuance payments are made under the STD Plan, an amount equal to the difference between the Maximum STD Payment and the payment made to Executive under the STD Plan. SECTION 5. Payment of Compensation. The compensation payable to Executive pursuant to Section 4 of this Agreement will be paid as follows: (i) During the term of Executive's employment by the Company (A) the Base Compensation will be paid to Executive in accordance with the Company's customary payroll practices; and (B) the Incentive Plan Amount, if any, will be paid in the manner determined by the Compensation Committee of the Board of Directors of the Company in accordance with the Incentive Plan. (ii) Upon termination of Executive's employment by the Company in accordance with Section 7.5(A) of this Agreement, the Termination Compensation (as hereinafter defined), if any, will be paid in accordance with the provisions of Section 7.5(C). All payments of Base Compensation, the Incentive Plan Amount, Initial Award Units and any other amounts paid to Executive will be subject to such deductions and withholdings as, from time to time, may be required by law or as may be elected by Executive pursuant to the Company's benefit plans in effect from time to time. SECTION 6. Employment Benefits. During the Initial Term or any Extension Term of Executive's employment by the Company, Executive will be entitled to four weeks paid vacation. In addition, Executive will be entitled to sick leave in accordance with the Company's sick leave plans in effect from time to time, and to participate, subject to qualification requirements, in such medical, dental, life or other insurance or employee benefit plans as the Company may have in effect from time to time and generally offer to its employees. SECTION 7. Termination. 7.1 Termination for Cause. This Agreement will be null and void (except for the provisions of Section 8 concerning Confidentiality which will survive any termination of this Agreement) upon the termination of Executive's employment for Cause. As used in this Agreement, "Cause" will mean (a) conviction of Executive, in a final non-appealable decision, in a court of law of a felony, a crime involving moral turpitude or any crime or offense involving the misuse or misappropriation of money, credit or other property of the Company or any subsidiary or affiliate of the Company which hereinafter may employ Executive; provided, however, that the Company may suspend Executive's employment and any payment due Executive under this Agreement during the pendency of any such criminal charge; (b) violation in any material respect of any material rule or policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or any subsidiary or affiliate of the Company which hereinafter may employ Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined in a final non-appealable decision, of any rule or regulation of any regulatory or self-regulatory body to which any of the Genesis Affiliates is subject or of which any of the Genesis Affiliates is a member including without limitation, the New York Stock Exchange, The National Association of Securities Dealers, Inc., the Commodity Futures Trading Commission and the New York Mercantile Exchange, which violation would materially reflect on Executive's character, competence or integrity; (d) a material breach by Executive of Executive's duty of loyalty to any of the Genesis Affiliates including, by way of illustration, Executive's pretermination of employment solicitation of customers or employees of any of the Genesis Affiliates, unauthorized removal of Confidential Business Information (as hereinafter defined) from the premises of any of the Genesis Affiliates and the dissemination thereof or refusal to return such Confidential Business Information to the Company; (e) Executive's material breach of this Agreement; or (f) Executive's gross misconduct, gross insubordination or willful refusal to perform the lawful duties of his employment. In no event will Executive be entitled to any compensation or payments under this Agreement following Executive's termination, or deemed termination, for Cause, provided that Executive's termination for Cause under this Agreement shall not affect Executive's rights with respect to any Initial Award Units that shall have vested at the time of termination. If, after Executive's termination of employment, it is determined that Executive's employment could have been terminated for Cause under items (a),(b),(c) or (d) above and such grounds for termination resulted in or reasonably could be expected to result in injury to the business, reputation or prospects of the Company or the Genesis Affiliates, Executive's employment shall, at the election of the Company in its sole discretion, be deemed to have been terminated for Cause. If Executive's employment and payment are suspended pursuant to item (a) above, Executive will have the right, excercisable by notice to the Company given within 15 days after any such suspension, to treat such suspension as a termination for Cause and resign from the Company without being bound by the non-compete provisions of Section 10 of this Agreement. Prior to any termination of Executive's employment for Cause, the Company shall afford Executive an opportunity to meet with the Company's independent directors and Chairman of the Board and present Executive's position with respect to such grounds for termination. 7.2 Involuntary Termination. Executive's employment will be considered to have been terminated involuntarily (an "Involuntary Termination") upon occurrence of the following: (a) the duties and responsibilities of Executive shall have been substantially and materially reduced such that Executive's duties and responsibilities would no longer reasonably be considered to be comparable to those of the chief financial officers of companies similar to, or competitive with, the Company, (b) reduction in Executive's Base Compensation or exclusion, other than for failure to meet qualification requirements, from the Company's employee benefit plans in effect from time to time and generally offered to its employees, (c) a change of greater than 75 miles in the location, on the date hereof, of the Company's principal executive offices or (d) the Company's material breach of this Agreement. Executive will promptly, but in any event within 30 days after the occurrence or discovery thereof, notify the Company of any event which Executive considers an Involuntary Termination. 7.3 Termination under Benefit Plans. If Executive's employment is terminated in accordance with the terms of the Company's long term disability plan in effect from time to time, any unpaid portion of Executive's Base Compensation will be due Executive pursuant to this Agreement only for periods prior to such termination, and any payment pursuant to the Incentive Plan may be made solely in the discretion of the Compensation Committee and otherwise in accordance with the terms of such plan. 7.4 Termination due to Death. If Executive dies while employed by the Company, this Agreement will immediately terminate and, except for any unpaid portion of Executive's Base Compensation for periods prior to Executive's death, no further payments will be due hereunder, whether to Executive, Executive's heirs, estate or otherwise; provided, however, that Executive's heirs and estate will be entitled to retain any Initial Award Units for a period of six months after Executive's death. Executive shall have the right to designate in writing from time to time a beneficiary or beneficiaries by filing a written notice of such designation with the Company, which Beneficiary shall be entitled to receive any amount required to be paid as provided in this Section 7.4 in the event of the Executive's death. In the event that the beneficiary designated by Executive does not survive Executive and no successor beneficiary is selected or in the event no valid designation has been made, Executive's beneficiary shall be such Executive's estate. In the event of the death of Executive, any payment required to be made hereunder to Executive shall be made to such Executive's beneficiary or beneficiaries. In the event Executive's beneficiary is the Executive's estate, no payment shall be made unless the Company shall have been furnished with such evidence as the Company may deem necessary to establish the validity of the payment. 7.5 Termination Compensation. (A) In the event the Company (i) terminates Executive's employment during the Initial Term or any Extension Term for any reason other than Cause, including any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or (ii) does not exercise its option to extend the Initial Term or any Extension Term of this Agreement, the Company will pay Executive, in full settlement of all sums due Executive from the Company (excluding, however, any sums then due Executive under any of the Company's benefit plans or with respect to accrued vacation), whether under this Agreement or arising at law or in equity, a termination payment (the "Termination Compensation") equal to the greater of (i) Executive's Base Compensation for the remaining period of the Initial Term or Extension Term then in effect, as the case may be, or (ii) one year of Executive's Base Compensation at the level in effect at the time of termination or expiration without exercise of the option to extend. In addition, Executive will be entitled to (a) retain any Initial Award Units for a period of six months after Executive's termination or after expiration of this Agreement without the exercise by the Company of the option to extend, (b) such Incentive Compensation, if any, as may be payable to Executive in accordance with any Incentive Compensation plan then in effect and (c) in the event Executive elects to continue medical and/or dental coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay Executive, as and when required to maintain such coverage, an amount equal to the required premiums for the duration of the Non-Compete Period (as hereinafter defined). (B) As a condition to the right to receive the Termination Compensation, Executive will (i) execute and deliver to the Company a severance and release agreement in the form attached hereto as Exhibit A, and (ii) Executive will not, for a period (the "Non-Compete Period") equal to (a) six months in the event the Company does not exercise its option to extend this Agreement or (b) or in the event of termination of the shorter of one year after the date of Executive's termination or the unexpired portion of the Initial Term or Extension Term, as the case may be, but in no event less than six months, either directly or indirectly, compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including pipeline) business whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise, in the geographical areas in which the Company then operates or is engaged in business. (C) The Termination Compensation will be paid to Executive in the event of a termination pursuant to Section 7.5(A) above, in four equal installments with the first installment due on the date of such termination and the remaining installments at equal intervals thereafter over the applicable Non-Compete Period. SECTION 8. Confidentiality. Executive acknowledges that the business of the Company and the Genesis Affiliates is highly competitive and that the Company's method of operation, crude oil trading practices, financial condition and other matters relating to the conduct of such business, and the conduct of such business as previously conducted by Basis Petroleum, Inc. and Howell Corporation and its affiliates, comprise confidential business information (the "Confidential Business Information") which is unique and valuable to the Company. Executive further acknowledges that the use of the Confidential Business Information by Executive in competition with the Company and the Genesis Affiliates will be highly detrimental to the continued successful operation of the business of the Company and the Genesis Affiliates. Executive will keep the Confidential Business Information confidential and will not disclose it to any unauthorized parties. Executive acknowledges and agrees that the Company shall have the broadest possible protection, consistent with public policy, of the business of the Company and the Genesis Affiliates from the wrongful use by Executive of such Confidential Business Information. Confidential Business Information shall not include any information which is generally available to the public other than as a result of a disclosure by Executive or which was known to Executive prior to Executive's employment with the Company or with Basis Petroleum, Inc. or Howell Corporation and its affiliates, as the case may be. SECTION 9. Remedies. Each of the parties acknowledges that the rights hereunder are necessarily of a special, unique and extraordinary nature, and that the loss arising from a breach hereof cannot reasonably and adequately be compensated by money damages and will cause a party to suffer irreparable harm. Accordingly, upon the breach by a party of any material term of this Agreement at any time, the other party shall be entitled to injunctive or other extraordinary relief in case of such breach, and such injunctive or other extraordinary relief shall be cumulative to, but not in limitation of, any other remedies to which the party may be entitled as a result of the breach of such Agreement. In the event Executive breaches this Agreement, the Company will also have the right, in addition to any other rights it may have at law, in equity or under this Agreement to cancel, withhold and/or offset any payments due Executive hereunder against any payments otherwise due to Executive from the Company, Genesis MLP or Genesis OLP. In any action to enforce any right or remedy hereunder, the prevailing party in a final non-appealable decision of a court of competent jurisdiction shall be entitled to recover such prevailing party's reasonable legal fees and expenses. SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his employment for any reason other than the Company's breach of a material provision of this Agreement, or as a result of an Involuntary Termination, then, Executive will not, for the duration of the Non-Compete Period, directly or indirectly compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including) pipeline business at the time of such resignation or termination whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise in the geographical areas in which the Company then operates or is engaged in business. Executive will not be entitled to any compensation or payments under this Agreement following any such resignation or termination except for Incentive Compensation, if any, payable to Executive in accordance with any Incentive Compensation plan then in effect. SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised, amended or waived in any manner except by an instrument in writing signed on behalf of each of the parties by their respective duly authorized representatives. No delay on the part of either party in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any partial exercise or waiver of any right, power or privilege under this Agreement preclude any other or further exercise of such right, power or privilege. SECTION 12. Severability. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable in any respect, the parties will amend this Agreement to provide a substitute provision which as nearly as possible carries out the intent of the provision so held invalid or unenforceable; provided, however, that no such amendment will in any way materially increase the obligation of either party under this Agreement. Any such determination of invalidity or unenforceability will not affect such provision in any other respect or affect any other provision of this Agreement all of which will remain in full force and effect. SECTION 13. Notices. All notices and other communications under this Agreement will be in writing and will be duly given (i) upon delivery if delivered personally with signed receipt acknowledging delivery; or (ii) upon dispatch if telexed (with answerback confirmation) or telegraphed (and if telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if mailed, by first class mail, postage prepaid, ten business days after date of mailing, addressed as follows: (a) If to the Company Genesis Energy, L.L.C. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Attention: President (b) If to Executive John P. vonBerg at such address as appears on the records of the Company or to such other address as a party may from time to time designate in the manner heretofore provided. SECTION 14. Governing Law and Jurisdiction. This Agreement and the obligations of the parties hereunder will be governed by and construed in accordance with the substantive laws of the State of Texas without regard to any conflict of law rules. Each party consents to the jurisdiction of the courts located in Harris County, Texas with respect to any action arising hereunder. SECTION 15. Assignment. This Agreement, and any rights or obligations hereunder, may not be assigned by either party hereto without written consent of the other; provided, however, that the Company may assign this Agreement to Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all or substantially all of the business of the Company or to a third party acquiring all or substantially all of the business, equity or assets of the Company. SECTION 16. No Third Party Beneficiaries. No person other than Executive and his beneficiaries on the one hand and the Company or its successors and assigns on the other hand shall be made a party to this Agreement directly or indirectly or have any rights or benefits under this Agreement. SECTION 17. Captions. The titles, captions and headings in this Agreement are inserted for convenience of reference only and are not intended to form a part of, or to affect the meaning or interpretation of, this Agreement. SECTION 18. Execution in Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same Agreement, and will become a binding Agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement between Executive and the Company concerning the subject matter hereof and supersedes all previous negotiations, commitments and writings with respect to such subject matter. SECTION 20. Advice of Counsel. Executive represents and warrants that Executive has been advised by competent counsel of his own selection as to the meaning and significance of this Agreement and all of the terms hereof. /s/ John P. vonBerg - ----------------------------------------------- John P. vonBerg GENESIS ENERGY, L.L.C. By: BASIS PETROLEUM, INC. As Member By: /s/ Jeffrey R. Serra - ----------------------------------------------- Jeffrey R. Serra, Chairman, President and Chief Executive Officer EX-10 11 EXHIBIT 10.9 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made as of November 15, 1996 by and between Genesis Energy, L.L.C. (the "Company") and Mark J. Gorman ("Executive"). RECITALS: A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP") and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil gathering, marketing and pipeline business. B. Executive is the Executive Vice President, Marketing and Operations for the Company. C. Executive desires to obtain the benefits and incentives from the Company of a written employment agreement having an initial term through December 31, 1999, and, at the Company's election, certain extension terms. D. The Company desires to enter into such an employment agreement with Executive. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows: SECTION 1. Employment. The Company hereby employs Executive as Executive Vice President, Marketing and Operations of the Company; provided, however, that Executive will continue as an employee of Executive's employer on the date hereof but will be seconded to the Company until January 1, 1997 at which time Executive will become employed by the Company. In such capacity, Executive will have the responsibilities and perform the services and duties described in Section 3 of this Agreement. Executive hereby accepts such employment and agrees to perform such services and duties for the Company. SECTION 2. Term. This Agreement will be for an initial term commencing on the effective date of that certain initial public offering of limited partnership interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"), unless sooner terminated in accordance with the provisions hereof. Thereafter, the Company will have the option, exercisable by notice to Executive given not less than 60 days prior to the expiration of the Initial Term, or any Extension Term (as hereinafter defined), to extend this Agreement for one additional term of two calendar years ending December 31, 2001, and, if, in each instance, so extended, for five additional terms of one calendar year each with the term of the last extension, if so exercised, expiring on December 31, 2006 (each such extension an "Extension Term"). Anything herein to the contrary notwithstanding, this Agreement, and Executive's employment hereunder, may be terminated at any time, with or without cause, upon notice of termination to Executive; provided, however, that in the event of any such termination without cause (including any Involuntary Termination (as hereinafter defined)), Executive will be entitled to the Termination Compensation (as hereinafter defined) set forth herein. SECTION 3. Duties of Executive. As Executive Vice President, Marketing and Operations, Executive will report directly to the President and Chief Executive Officer and will have such duties and responsibilities with respect to the Company, Genesis MLP and Genesis OLP as customarily would be undertaken by the executive vice president, marketing and operations of companies engaged in businesses similar to, or competitive with, the Company. Executive will not be required to hold any other offices, positions or directorships of the Company and/or any subsidiary or affiliate of the Company during the term of this Agreement. Executive will act in the best interest of the Company, Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the performance of Executive's services and duties under this Agreement. Without the prior consent of the Non-Executive Chairman of the Board of Directors of the Company, Executive will not actively engage in any other business or business activity; provided, however, that nothing herein contained will limit the right of Executive to manage Executive's personal investment activities provided that such personal investment activities do not materially interfere with the performance of Executive's duties and responsibilities hereunder or otherwise materially conflict with any policies which have been promulgated and distributed by the Company. SECTION 4. Compensation. 4.1 Compensation during the Initial Term. Subject to the terms and conditions of this Agreement, the Company will cause Executive to be paid an annual salary of $17,500.00 for the partial year ending December 31, 1996 and will pay Executive an annual salary of $210,000.00 for each of the years ending December 31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base Compensation"). The Base Compensation will be reviewed annually by the Compensation Committee of the Board of Directors of the Company. In addition, Executive will be entitled to participate in the Company's Incentive Plan in accordance with the terms thereof (the "Incentive Plan Amount"). 4.2 Compensation during the Extension Terms. The Base Compensation paid by the Company to Executive during the Extension Terms will be established by the Company in connection with the election to extend the term of this Agreement pursuant to Section 2, will not be less than the Base Compensation multiplied by 1.05 with respect to the first Extension Term and thereafter not less than the Base Compensation in effect immediately prior to such election for any subsequent Extension Term and will be advised to Executive simultaneously with notice from the Company of its election to exercise an Extension Term option. 4.3 Award of Restricted Units. The Company will grant to Executive Restricted Units ("Initial Award Units") in an amount determined by dividing $600,000 by the initial offering price of a limited partnership interest in Genesis MLP, pursuant to the Company's Restricted Unit Plan, in accordance with the terms thereof, promptly upon the adoption of such plan by the Board of Directors of the Company. The Initial Award Units shall vest in accordance with terms of the Restricted Unit Plan. 4.4 Short Term Disability Salary Continuance. In the event of a short term illness or injury that would entitle Executive to salary continuance benefits under the Company's short term disability salary continuance plan (the "STD Plan") in effect from time to time, and Executive's years of service with the Company, as determined in accordance with the STD Plan, are not sufficient to provide 100% of the maximum amount of salary continuance that would otherwise be available to Executive with more years of service (the "Maximum STD Payment") the Company will pay Executive, as and when salary continuance payments are made under the STD Plan, an amount equal to the difference between the Maximum STD Payment and the payment made to Executive under the STD Plan. SECTION 5. Payment of Compensation. The compensation payable to Executive pursuant to Section 4 of this Agreement will be paid as follows: (i) During the term of Executive's employment by the Company (A) the Base Compensation will be paid to Executive in accordance with the Company's customary payroll practices; and (B) the Incentive Plan Amount, if any, will be paid in the manner determined by the Compensation Committee of the Board of Directors of the Company in accordance with the Incentive Plan. (ii) Upon termination of Executive's employment by the Company in accordance with Section 7.5(A) of this Agreement, the Termination Compensation (as hereinafter defined), if any, will be paid in accordance with the provisions of Section 7.5(C). All payments of Base Compensation, the Incentive Plan Amount, Initial Award Units and any other amounts paid to Executive will be subject to such deductions and withholdings as, from time to time, may be required by law or as may be elected by Executive pursuant to the Company's benefit plans in effect from time to time. SECTION 6. Employment Benefits. During the Initial Term or any Extension Term of Executive's employment by the Company, Executive will be entitled to four weeks paid vacation. In addition, Executive will be entitled to sick leave in accordance with the Company's sick leave plans in effect from time to time, and to participate, subject to qualification requirements, in such medical, dental, life or other insurance or employee benefit plans as the Company may have in effect from time to time and generally offer to its employees. SECTION 7. Termination. 7.1 Termination for Cause. This Agreement will be null and void (except for the provisions of Section 8 concerning Confidentiality which will survive any termination of this Agreement) upon the termination of Executive's employment for Cause. As used in this Agreement, "Cause" will mean (a) conviction of Executive, in a final non-appealable decision, in a court of law of a felony, a crime involving moral turpitude or any crime or offense involving the misuse or misappropriation of money, credit or other property of the Company or any subsidiary or affiliate of the Company which hereinafter may employ Executive; provided, however, that the Company may suspend Executive's employment and any payment due Executive under this Agreement during the pendency of any such criminal charge; (b) violation in any material respect of any material rule or policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or any subsidiary or affiliate of the Company which hereinafter may employ Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined in a final non-appealable decision, of any rule or regulation of any regulatory or self-regulatory body to which any of the Genesis Affiliates is subject or of which any of the Genesis Affiliates is a member including without limitation, the New York Stock Exchange, The National Association of Securities Dealers, Inc., the Commodity Futures Trading Commission and the New York Mercantile Exchange, which violation would materially reflect on Executive's character, competence or integrity; (d) a material breach by Executive of Executive's duty of loyalty to any of the Genesis Affiliates including, by way of illustration, Executive's pretermination of employment solicitation of customers or employees of any of the Genesis Affiliates, unauthorized removal of Confidential Business Information (as hereinafter defined) from the premises of any of the Genesis Affiliates and the dissemination thereof or refusal to return such Confidential Business Information to the Company; (e) Executive's material breach of this Agreement; or (f) Executive's gross misconduct, gross insubordination or willful refusal to perform the lawful duties of his employment. In no event will Executive be entitled to any compensation or payments under this Agreement following Executive's termination, or deemed termination, for Cause, provided that Executive's termination for Cause under this Agreement shall not affect Executive's rights with respect to any Initial Award Units that shall have vested at the time of termination. If, after Executive's termination of employment, it is determined that Executive's employment could have been terminated for Cause under items (a),(b),(c) or (d) above and such grounds for termination resulted in or reasonably could be expected to result in injury to the business, reputation or prospects of the Company or the Genesis Affiliates, Executive's employment shall, at the election of the Company in its sole discretion, be deemed to have been terminated for Cause. If Executive's employment and payment are suspended pursuant to item (a) above, Executive will have the right, excercisable by notice to the Company given within 15 days after any such suspension, to treat such suspension as a termination for Cause and resign from the Company without being bound by the non-compete provisions of Section 10 of this Agreement. Prior to any termination of Executive's employment for Cause, the Company shall afford Executive an opportunity to meet with the Company's independent directors and Chairman of the Board and present Executive's position with respect to such grounds for termination. 7.2 Involuntary Termination. Executive's employment will be considered to have been terminated involuntarily (an "Involuntary Termination") upon occurrence of the following: (a) the duties and responsibilities of Executive shall have been substantially and materially reduced such that Executive's duties and responsibilities would no longer reasonably be considered to be comparable to those of the chief financial officers of companies similar to, or competitive with, the Company, (b) reduction in Executive's Base Compensation or exclusion, other than for failure to meet qualification requirements, from the Company's employee benefit plans in effect from time to time and generally offered to its employees, (c) a change of greater than 75 miles in the location, on the date hereof, of the Company's principal executive offices or (d) the Company's material breach of this Agreement. Executive will promptly, but in any event within 30 days after the occurrence or discovery thereof, notify the Company of any event which Executive considers an Involuntary Termination. 7.3 Termination under Benefit Plans. If Executive's employment is terminated in accordance with the terms of the Company's long term disability plan in effect from time to time, any unpaid portion of Executive's Base Compensation will be due Executive pursuant to this Agreement only for periods prior to such termination, and any payment pursuant to the Incentive Plan may be made solely in the discretion of the Compensation Committee and otherwise in accordance with the terms of such plan. 7.4 Termination due to Death. If Executive dies while employed by the Company, this Agreement will immediately terminate and, except for any unpaid portion of Executive's Base Compensation for periods prior to Executive's death, no further payments will be due hereunder, whether to Executive, Executive's heirs, estate or otherwise; provided, however, that Executive's heirs and estate will be entitled to retain any Initial Award Units for a period of six months after Executive's death. Executive shall have the right to designate in writing from time to time a beneficiary or beneficiaries by filing a written notice of such designation with the Company, which Beneficiary shall be entitled to receive any amount required to be paid as provided in this Section 7.4 in the event of the Executive's death. In the event that the beneficiary designated by Executive does not survive Executive and no successor beneficiary is selected or in the event no valid designation has been made, Executive's beneficiary shall be such Executive's estate. In the event of the death of Executive, any payment required to be made hereunder to Executive shall be made to such Executive's beneficiary or beneficiaries. In the event Executive's beneficiary is the Executive's estate, no payment shall be made unless the Company shall have been furnished with such evidence as the Company may deem necessary to establish the validity of the payment. 7.5 Termination Compensation. (A) In the event the Company (i) terminates Executive's employment during the Initial Term or any Extension Term for any reason other than Cause, including any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or (ii) does not exercise its option to extend the Initial Term or any Extension Term of this Agreement, the Company will pay Executive, in full settlement of all sums due Executive from the Company (excluding, however, any sums then due Executive under any of the Company's benefit plans or with respect to accrued vacation), whether under this Agreement or arising at law or in equity, a termination payment (the "Termination Compensation") equal to the greater of (i) Executive's Base Compensation for the remaining period of the Initial Term or Extension Term then in effect, as the case may be, or (ii) one year of Executive's Base Compensation at the level in effect at the time of termination or expiration without exercise of the option to extend. In addition, Executive will be entitled to (a) retain any Initial Award Units for a period of six months after Executive's termination or after expiration of this Agreement without the exercise by the Company of the option to extend, (b) such Incentive Compensation, if any, as may be payable to Executive in accordance with any Incentive Compensation plan then in effect and (c) in the event Executive elects to continue medical and/or dental coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay Executive, as and when required to maintain such coverage, an amount equal to the required premiums for the duration of the Non-Compete Period (as hereinafter defined). (B) As a condition to the right to receive the Termination Compensation, Executive will (i) execute and deliver to the Company a severance and release agreement in the form attached hereto as Exhibit A, and (ii) Executive will not, for a period (the "Non-Compete Period") equal to (a) six months in the event the Company does not exercise its option to extend this Agreement or (b) or in the event of termination of the shorter of one year after the date of Executive's termination or the unexpired portion of the Initial Term or Extension Term, as the case may be, but in no event less than six months, either directly or indirectly, compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including pipeline) business whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise, in the geographical areas in which the Company then operates or is engaged in business. (C) The Termination Compensation will be paid to Executive in the event of a termination pursuant to Section 7.5(A) above, in four equal installments with the first installment due on the date of such termination and the remaining installments at equal intervals thereafter over the applicable Non-Compete Period. SECTION 8. Confidentiality. Executive acknowledges that the business of the Company and the Genesis Affiliates is highly competitive and that the Company's method of operation, crude oil trading practices, financial condition and other matters relating to the conduct of such business, and the conduct of such business as previously conducted by Basis Petroleum, Inc. and Howell Corporation and its affiliates, comprise confidential business information (the "Confidential Business Information") which is unique and valuable to the Company. Executive further acknowledges that the use of the Confidential Business Information by Executive in competition with the Company and the Genesis Affiliates will be highly detrimental to the continued successful operation of the business of the Company and the Genesis Affiliates. Executive will keep the Confidential Business Information confidential and will not disclose it to any unauthorized parties. Executive acknowledges and agrees that the Company shall have the broadest possible protection, consistent with public policy, of the business of the Company and the Genesis Affiliates from the wrongful use by Executive of such Confidential Business Information. Confidential Business Information shall not include any information which is generally available to the public other than as a result of a disclosure by Executive or which was known to Executive prior to Executive's employment with the Company or with Basis Petroleum, Inc. or Howell Corporation and its affiliates, as the case may be. SECTION 9. Remedies. Each of the parties acknowledges that the rights hereunder are necessarily of a special, unique and extraordinary nature, and that the loss arising from a breach hereof cannot reasonably and adequately be compensated by money damages and will cause a party to suffer irreparable harm. Accordingly, upon the breach by a party of any material term of this Agreement at any time, the other party shall be entitled to injunctive or other extraordinary relief in case of such breach, and such injunctive or other extraordinary relief shall be cumulative to, but not in limitation of, any other remedies to which the party may be entitled as a result of the breach of such Agreement. In the event Executive breaches this Agreement, the Company will also have the right, in addition to any other rights it may have at law, in equity or under this Agreement to cancel, withhold and/or offset any payments due Executive hereunder against any payments otherwise due to Executive from the Company, Genesis MLP or Genesis OLP. In any action to enforce any right or remedy hereunder, the prevailing party in a final non-appealable decision of a court of competent jurisdiction shall be entitled to recover such prevailing party's reasonable legal fees and expenses. SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his employment for any reason other than the Company's breach of a material provision of this Agreement, or as a result of an Involuntary Termination, then, Executive will not, for the duration of the Non-Compete Period, directly or indirectly compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including) pipeline business at the time of such resignation or termination whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise in the geographical areas in which the Company then operates or is engaged in business. Executive will not be entitled to any compensation or payments under this Agreement following any such resignation or termination except for Incentive Compensation, if any, payable to Executive in accordance with any Incentive Compensation plan then in effect. SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised, amended or waived in any manner except by an instrument in writing signed on behalf of each of the parties by their respective duly authorized representatives. No delay on the part of either party in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any partial exercise or waiver of any right, power or privilege under this Agreement preclude any other or further exercise of such right, power or privilege. SECTION 12. Severability. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable in any respect, the parties will amend this Agreement to provide a substitute provision which as nearly as possible carries out the intent of the provision so held invalid or unenforceable; provided, however, that no such amendment will in any way materially increase the obligation of either party under this Agreement. Any such determination of invalidity or unenforceability will not affect such provision in any other respect or affect any other provision of this Agreement all of which will remain in full force and effect. SECTION 13. Notices. All notices and other communications under this Agreement will be in writing and will be duly given (i) upon delivery if delivered personally with signed receipt acknowledging delivery; or (ii) upon dispatch if telexed (with answerback confirmation) or telegraphed (and if telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if mailed, by first class mail, postage prepaid, ten business days after date of mailing, addressed as follows: (a) If to the Company Genesis Energy, L.L.C. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Attention: President (b) If to Executive Mark J. Gorman at such address as appears on the records of the Company or to such other address as a party may from time to time designate in the manner heretofore provided. SECTION 14. Governing Law and Jurisdiction. This Agreement and the obligations of the parties hereunder will be governed by and construed in accordance with the substantive laws of the State of Texas without regard to any conflict of law rules. Each party consents to the jurisdiction of the courts located in Harris County, Texas with respect to any action arising hereunder. SECTION 15. Assignment. This Agreement, and any rights or obligations hereunder, may not be assigned by either party hereto without written consent of the other; provided, however, that the Company may assign this Agreement to Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all or substantially all of the business of the Company or to a third party acquiring all or substantially all of the business, equity or assets of the Company. SECTION 16. No Third Party Beneficiaries. No person other than Executive and his beneficiaries on the one hand and the Company or its successors and assigns on the other hand shall be made a party to this Agreement directly or indirectly or have any rights or benefits under this Agreement. SECTION 17. Captions. The titles, captions and headings in this Agreement are inserted for convenience of reference only and are not intended to form a part of, or to affect the meaning or interpretation of, this Agreement. SECTION 18. Execution in Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same Agreement, and will become a binding Agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement between Executive and the Company concerning the subject matter hereof and supersedes all previous negotiations, commitments and writings with respect to such subject matter. SECTION 20. Advice of Counsel. Executive represents and warrants that Executive has been advised by competent counsel of his own selection as to the meaning and significance of this Agreement and all of the terms hereof. /s/ Mark J. Gorman - ------------------------------------------------ Mark J. Gorman GENESIS ENERGY, L.L.C. By: BASIS PETROLEUM, INC. As Member By: /s/ Jeffrey R. Serra - ------------------------------------------------ Jeffrey R. Serra, Chairman, President and Chief Executive Officer EX-10 12 EXHIBIT 10.10 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made as of November 15, 1996 by and between Genesis Energy, L.L.C. (the "Company") and John M. Fetzer ("Executive"). RECITALS: A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP") and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil gathering, marketing and pipeline business. B. Executive is the Senior Vice President, Crude Oil for the Company. C. Executive desires to obtain the benefits and incentives from the Company of a written employment agreement having an initial term through December 31, 1999, and, at the Company's election, certain extension terms. D. The Company desires to enter into such an employment agreement with Executive. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows: SECTION 1. Employment. The Company hereby employs Executive as Senior Vice President, Crude Oil of the Company; provided, however, that Executive will continue as an employee of Executive's employer on the date hereof but will be seconded to the Company until January 1, 1997 at which time Executive will become employed by the Company. In such capacity, Executive will have the responsibilities and perform the services and duties described in Section 3 of this Agreement. Executive hereby accepts such employment and agrees to perform such services and duties for the Company. SECTION 2. Term. This Agreement will be for an initial term commencing on the effective date of that certain initial public offering of limited partnership interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"), unless sooner terminated in accordance with the provisions hereof. Thereafter, the Company will have the option, exercisable by notice to Executive given not less than 60 days prior to the expiration of the Initial Term, or any Extension Term (as hereinafter defined), to extend this Agreement for one additional term of two calendar years ending December 31, 2001, and, if, in each instance, so extended, for five additional terms of one calendar year each with the term of the last extension, if so exercised, expiring on December 31, 2006 (each such extension an "Extension Term"). Anything herein to the contrary notwithstanding, this Agreement, and Executive's employment hereunder, may be terminated at any time, with or without cause, upon notice of termination to Executive; provided, however, that in the event of any such termination without cause (including any Involuntary Termination (as hereinafter defined)), Executive will be entitled to the Termination Compensation (as hereinafter defined) set forth herein. SECTION 3. Duties of Executive. As Senior Vice President, Crude Oil, Executive will report directly to the Executive Vice President, Marketing and Operations and will have such duties and responsibilities with respect to the Company, Genesis MLP and Genesis OLP as customarily would be undertaken by the senior vice president, crude oil of companies engaged in businesses similar to, or competitive with, the Company. Executive will not be required to hold any other offices, positions or directorships of the Company and/or any subsidiary or affiliate of the Company during the term of this Agreement. Executive will act in the best interest of the Company, Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the performance of Executive's services and duties under this Agreement. Without the prior consent of the Non-Executive Chairman of the Board of Directors of the Company, Executive will not actively engage in any other business or business activity; provided, however, that nothing herein contained will limit the right of Executive to manage Executive's personal investment activities provided that such personal investment activities do not materially interfere with the performance of Executive's duties and responsibilities hereunder or otherwise materially conflict with any policies which have been promulgated and distributed by the Company. SECTION 4. Compensation. 4.1 Compensation during the Initial Term. Subject to the terms and conditions of this Agreement, the Company will cause Executive to be paid an annual salary of $16,667.00 for the partial year ending December 31, 1996 and will pay Executive an annual salary of $200,000.00 for each of the years ending December 31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base Compensation"). The Base Compensation will be reviewed annually by the Compensation Committee of the Board of Directors of the Company. In addition, Executive will be entitled to participate in the Company's Incentive Plan in accordance with the terms thereof (the "Incentive Plan Amount"). 4.2 Compensation during the Extension Terms. The Base Compensation paid by the Company to Executive during the Extension Terms will be established by the Company in connection with the election to extend the term of this Agreement pursuant to Section 2, will not be less than the Base Compensation multiplied by 1.05 with respect to the first Extension Term and thereafter not less than the Base Compensation in effect immediately prior to such election for any subsequent Extension Term and will be advised to Executive simultaneously with notice from the Company of its election to exercise an Extension Term option. 4.3 Award of Restricted Units. The Company will grant to Executive Restricted Units ("Initial Award Units") in an amount determined by dividing $600,000 by the initial offering price of a limited partnership interest in Genesis MLP, pursuant to the Company's Restricted Unit Plan, in accordance with the terms thereof, promptly upon the adoption of such plan by the Board of Directors of the Company. The Initial Award Units shall vest in accordance with terms of the Restricted Unit Plan. 4.4 Short Term Disability Salary Continuance. In the event of a short term illness or injury that would entitle Executive to salary continuance benefits under the Company's short term disability salary continuance plan (the "STD Plan") in effect from time to time, and Executive's years of service with the Company, as determined in accordance with the STD Plan, are not sufficient to provide 100% of the maximum amount of salary continuance that would otherwise be available to Executive with more years of service (the "Maximum STD Payment") the Company will pay Executive, as and when salary continuance payments are made under the STD Plan, an amount equal to the difference between the Maximum STD Payment and the payment made to Executive under the STD Plan. SECTION 5. Payment of Compensation. The compensation payable to Executive pursuant to Section 4 of this Agreement will be paid as follows: (i) During the term of Executive's employment by the Company (A) the Base Compensation will be paid to Executive in accordance with the Company's customary payroll practices; and (B) the Incentive Plan Amount, if any, will be paid in the manner determined by the Compensation Committee of the Board of Directors of the Company in accordance with the Incentive Plan. (ii) Upon termination of Executive's employment by the Company in accordance with Section 7.5(A) of this Agreement, the Termination Compensation (as hereinafter defined), if any, will be paid in accordance with the provisions of Section 7.5(C). All payments of Base Compensation, the Incentive Plan Amount, Initial Award Units and any other amounts paid to Executive will be subject to such deductions and withholdings as, from time to time, may be required by law or as may be elected by Executive pursuant to the Company's benefit plans in effect from time to time. SECTION 6. Employment Benefits. During the Initial Term or any Extension Term of Executive's employment by the Company, Executive will be entitled to four weeks paid vacation. In addition, Executive will be entitled to sick leave in accordance with the Company's sick leave plans in effect from time to time, and to participate, subject to qualification requirements, in such medical, dental, life or other insurance or employee benefit plans as the Company may have in effect from time to time and generally offer to its employees. SECTION 7. Termination. 7.1 Termination for Cause. This Agreement will be null and void (except for the provisions of Section 8 concerning Confidentiality which will survive any termination of this Agreement) upon the termination of Executive's employment for Cause. As used in this Agreement, "Cause" will mean (a) conviction of Executive, in a final non-appealable decision, in a court of law of a felony, a crime involving moral turpitude or any crime or offense involving the misuse or misappropriation of money, credit or other property of the Company or any subsidiary or affiliate of the Company which hereinafter may employ Executive; provided, however, that the Company may suspend Executive's employment and any payment due Executive under this Agreement during the pendency of any such criminal charge; (b) violation in any material respect of any material rule or policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or any subsidiary or affiliate of the Company which hereinafter may employ Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined in a final non-appealable decision, of any rule or regulation of any regulatory or self-regulatory body to which any of the Genesis Affiliates is subject or of which any of the Genesis Affiliates is a member including without limitation, the New York Stock Exchange, The National Association of Securities Dealers, Inc., the Commodity Futures Trading Commission and the New York Mercantile Exchange, which violation would materially reflect on Executive's character, competence or integrity; (d) a material breach by Executive of Executive's duty of loyalty to any of the Genesis Affiliates including, by way of illustration, Executive's pretermination of employment solicitation of customers or employees of any of the Genesis Affiliates, unauthorized removal of Confidential Business Information (as hereinafter defined) from the premises of any of the Genesis Affiliates and the dissemination thereof or refusal to return such Confidential Business Information to the Company; (e) Executive's material breach of this Agreement; or (f) Executive's gross misconduct, gross insubordination or willful refusal to perform the lawful duties of his employment. In no event will Executive be entitled to any compensation or payments under this Agreement following Executive's termination, or deemed termination, for Cause, provided that Executive's termination for Cause under this Agreement shall not affect Executive's rights with respect to any Initial Award Units that shall have vested at the time of termination. If, after Executive's termination of employment, it is determined that Executive's employment could have been terminated for Cause under items (a),(b),(c) or (d) above and such grounds for termination resulted in or reasonably could be expected to result in injury to the business, reputation or prospects of the Company or the Genesis Affiliates, Executive's employment shall, at the election of the Company in its sole discretion, be deemed to have been terminated for Cause. If Executive's employment and payment are suspended pursuant to item (a) above, Executive will have the right, excercisable by notice to the Company given within 15 days after any such suspension, to treat such suspension as a termination for Cause and resign from the Company without being bound by the non-compete provisions of Section 10 of this Agreement. Prior to any termination of Executive's employment for Cause, the Company shall afford Executive an opportunity to meet with the Company's independent directors and Chairman of the Board and present Executive's position with respect to such grounds for termination. 7.2 Involuntary Termination. Executive's employment will be considered to have been terminated involuntarily (an "Involuntary Termination") upon occurrence of the following: (a) the duties and responsibilities of Executive shall have been substantially and materially reduced such that Executive's duties and responsibilities would no longer reasonably be considered to be comparable to those of the chief financial officers of companies similar to, or competitive with, the Company, (b) reduction in Executive's Base Compensation or exclusion, other than for failure to meet qualification requirements, from the Company's employee benefit plans in effect from time to time and generally offered to its employees, (c) a change of greater than 75 miles in the location, on the date hereof, of the Company's principal executive offices or (d) the Company's material breach of this Agreement. Executive will promptly, but in any event within 30 days after the occurrence or discovery thereof, notify the Company of any event which Executive considers an Involuntary Termination. 7.3 Termination under Benefit Plans. If Executive's employment is terminated in accordance with the terms of the Company's long term disability plan in effect from time to time, any unpaid portion of Executive's Base Compensation will be due Executive pursuant to this Agreement only for periods prior to such termination, and any payment pursuant to the Incentive Plan may be made solely in the discretion of the Compensation Committee and otherwise in accordance with the terms of such plan. 7.4 Termination due to Death. If Executive dies while employed by the Company, this Agreement will immediately terminate and, except for any unpaid portion of Executive's Base Compensation for periods prior to Executive's death, no further payments will be due hereunder, whether to Executive, Executive's heirs, estate or otherwise; provided, however, that Executive's heirs and estate will be entitled to retain any Initial Award Units for a period of six months after Executive's death. Executive shall have the right to designate in writing from time to time a beneficiary or beneficiaries by filing a written notice of such designation with the Company, which Beneficiary shall be entitled to receive any amount required to be paid as provided in this Section 7.4 in the event of the Executive's death. In the event that the beneficiary designated by Executive does not survive Executive and no successor beneficiary is selected or in the event no valid designation has been made, Executive's beneficiary shall be such Executive's estate. In the event of the death of Executive, any payment required to be made hereunder to Executive shall be made to such Executive's beneficiary or beneficiaries. In the event Executive's beneficiary is the Executive's estate, no payment shall be made unless the Company shall have been furnished with such evidence as the Company may deem necessary to establish the validity of the payment. 7.5 Termination Compensation. (A) In the event the Company (i) terminates Executive's employment during the Initial Term or any Extension Term for any reason other than Cause, including any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or (ii) does not exercise its option to extend the Initial Term or any Extension Term of this Agreement, the Company will pay Executive, in full settlement of all sums due Executive from the Company (excluding, however, any sums then due Executive under any of the Company's benefit plans or with respect to accrued vacation), whether under this Agreement or arising at law or in equity, a termination payment (the "Termination Compensation") equal to the greater of (i) Executive's Base Compensation for the remaining period of the Initial Term or Extension Term then in effect, as the case may be, or (ii) one year of Executive's Base Compensation at the level in effect at the time of termination or expiration without exercise of the option to extend. In addition, Executive will be entitled to (a) retain any Initial Award Units for a period of six months after Executive's termination or after expiration of this Agreement without the exercise by the Company of the option to extend, (b) such Incentive Compensation, if any, as may be payable to Executive in accordance with any Incentive Compensation plan then in effect and (c) in the event Executive elects to continue medical and/or dental coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay Executive, as and when required to maintain such coverage, an amount equal to the required premiums for the duration of the Non-Compete Period (as hereinafter defined). (B) As a condition to the right to receive the Termination Compensation, Executive will (i) execute and deliver to the Company a severance and release agreement in the form attached hereto as Exhibit A, and (ii) Executive will not, for a period (the "Non-Compete Period") equal to (a) six months in the event the Company does not exercise its option to extend this Agreement or (b) or in the event of termination of the shorter of one year after the date of Executive's termination or the unexpired portion of the Initial Term or Extension Term, as the case may be, but in no event less than six months, either directly or indirectly, compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including pipeline) business whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise, in the geographical areas in which the Company then operates or is engaged in business. (C) The Termination Compensation will be paid to Executive in the event of a termination pursuant to Section 7.5(A) above, in four equal installments with the first installment due on the date of such termination and the remaining installments at equal intervals thereafter over the applicable Non-Compete Period. SECTION 8. Confidentiality. Executive acknowledges that the business of the Company and the Genesis Affiliates is highly competitive and that the Company's method of operation, crude oil trading practices, financial condition and other matters relating to the conduct of such business, and the conduct of such business as previously conducted by Basis Petroleum, Inc. and Howell Corporation and its affiliates, comprise confidential business information (the "Confidential Business Information") which is unique and valuable to the Company. Executive further acknowledges that the use of the Confidential Business Information by Executive in competition with the Company and the Genesis Affiliates will be highly detrimental to the continued successful operation of the business of the Company and the Genesis Affiliates. Executive will keep the Confidential Business Information confidential and will not disclose it to any unauthorized parties. Executive acknowledges and agrees that the Company shall have the broadest possible protection, consistent with public policy, of the business of the Company and the Genesis Affiliates from the wrongful use by Executive of such Confidential Business Information. Confidential Business Information shall not include any information which is generally available to the public other than as a result of a disclosure by Executive or which was known to Executive prior to Executive's employment with the Company or with Basis Petroleum, Inc. or Howell Corporation and its affiliates, as the case may be. SECTION 9. Remedies. Each of the parties acknowledges that the rights hereunder are necessarily of a special, unique and extraordinary nature, and that the loss arising from a breach hereof cannot reasonably and adequately be compensated by money damages and will cause a party to suffer irreparable harm. Accordingly, upon the breach by a party of any material term of this Agreement at any time, the other party shall be entitled to injunctive or other extraordinary relief in case of such breach, and such injunctive or other extraordinary relief shall be cumulative to, but not in limitation of, any other remedies to which the party may be entitled as a result of the breach of such Agreement. In the event Executive breaches this Agreement, the Company will also have the right, in addition to any other rights it may have at law, in equity or under this Agreement to cancel, withhold and/or offset any payments due Executive hereunder against any payments otherwise due to Executive from the Company, Genesis MLP or Genesis OLP. In any action to enforce any right or remedy hereunder, the prevailing party in a final non-appealable decision of a court of competent jurisdiction shall be entitled to recover such prevailing party's reasonable legal fees and expenses. SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his employment for any reason other than the Company's breach of a material provision of this Agreement, or as a result of an Involuntary Termination, then, Executive will not, for the duration of the Non-Compete Period, directly or indirectly compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including) pipeline business at the time of such resignation or termination whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise in the geographical areas in which the Company then operates or is engaged in business. Executive will not be entitled to any compensation or payments under this Agreement following any such resignation or termination except for Incentive Compensation, if any, payable to Executive in accordance with any Incentive Compensation plan then in effect. SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised, amended or waived in any manner except by an instrument in writing signed on behalf of each of the parties by their respective duly authorized representatives. No delay on the part of either party in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any partial exercise or waiver of any right, power or privilege under this Agreement preclude any other or further exercise of such right, power or privilege. SECTION 12. Severability. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable in any respect, the parties will amend this Agreement to provide a substitute provision which as nearly as possible carries out the intent of the provision so held invalid or unenforceable; provided, however, that no such amendment will in any way materially increase the obligation of either party under this Agreement. Any such determination of invalidity or unenforceability will not affect such provision in any other respect or affect any other provision of this Agreement all of which will remain in full force and effect. SECTION 13. Notices. All notices and other communications under this Agreement will be in writing and will be duly given (i) upon delivery if delivered personally with signed receipt acknowledging delivery; or (ii) upon dispatch if telexed (with answerback confirmation) or telegraphed (and if telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if mailed, by first class mail, postage prepaid, ten business days after date of mailing, addressed as follows: (a) If to the Company Genesis Energy, L.L.C. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Attention: President (b) If to Executive John M. Fetzer at such address as appears on the records of the Company or to such other address as a party may from time to time designate in the manner heretofore provided. SECTION 14. Governing Law and Jurisdiction. This Agreement and the obligations of the parties hereunder will be governed by and construed in accordance with the substantive laws of the State of Texas without regard to any conflict of law rules. Each party consents to the jurisdiction of the courts located in Harris County, Texas with respect to any action arising hereunder. SECTION 15. Assignment. This Agreement, and any rights or obligations hereunder, may not be assigned by either party hereto without written consent of the other; provided, however, that the Company may assign this Agreement to Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all or substantially all of the business of the Company or to a third party acquiring all or substantially all of the business, equity or assets of the Company. SECTION 16. No Third Party Beneficiaries. No person other than Executive and his beneficiaries on the one hand and the Company or its successors and assigns on the other hand shall be made a party to this Agreement directly or indirectly or have any rights or benefits under this Agreement. SECTION 17. Captions. The titles, captions and headings in this Agreement are inserted for convenience of reference only and are not intended to form a part of, or to affect the meaning or interpretation of, this Agreement. SECTION 18. Execution in Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same Agreement, and will become a binding Agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement between Executive and the Company concerning the subject matter hereof and supersedes all previous negotiations, commitments and writings with respect to such subject matter. SECTION 20. Advice of Counsel. Executive represents and warrants that Executive has been advised by competent counsel of his own selection as to the meaning and significance of this Agreement and all of the terms hereof. /s/ John M. Fetzer - ----------------------------------------------- John M. Fetzer GENESIS ENERGY, L.L.C. By: BASIS PETROLEUM, INC. As Member By: /s/ Jeffrey R. Serra - ----------------------------------------------- Jeffrey R. Serra, Chairman, President and Chief Executive Officer EX-10 13 EXHIBIT 10.11 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made as of November 15, 1996 by and between Genesis Energy, L.L.C. (the "Company") and Allyn R. Skelton, II ("Executive"). RECITALS: A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP") and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil gathering, marketing and pipeline business. B. Executive is the Chief Financial Officer and Secretary for the Company. C. Executive desires to obtain the benefits and incentives from the Company of a written employment agreement having an initial term through December 31, 1999, and, at the Company's election, certain extension terms. D. The Company desires to enter into such an employment agreement with Executive. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows: SECTION 1. Employment. The Company hereby employs Executive as Chief Financial Officer of the Company; provided, however, that Executive will continue as an employee of Executive's employer on the date hereof but will be seconded to the Company until January 1, 1997 at which time Executive will become employed by the Company. In such capacity, Executive will have the responsibilities and perform the services and duties described in Section 3 of this Agreement. Executive hereby accepts such employment and agrees to perform such services and duties for the Company. SECTION 2. Term. This Agreement will be for an initial term commencing on the effective date of that certain initial public offering of limited partnership interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"), unless sooner terminated in accordance with the provisions hereof. Thereafter, the Company will have the option, exercisable by notice to Executive given not less than 60 days prior to the expiration of the Initial Term, or any Extension Term (as hereinafter defined), to extend this Agreement for one additional term of two calendar years ending December 31, 2001, and, if, in each instance, so extended, for five additional terms of one calendar year each with the term of the last extension, if so exercised, expiring on December 31, 2006 (each such extension an "Extension Term"). Anything herein to the contrary notwithstanding, this Agreement, and Executive's employment hereunder, may be terminated at any time, with or without cause, upon notice of termination to Executive; provided, however, that in the event of any such termination without cause (including any Involuntary Termination (as hereinafter defined)), Executive will be entitled to the Termination Compensation (as hereinafter defined) set forth herein. SECTION 3. Duties of Executive. As Chief Financial Officer and Secretary, Executive will report directly to the President and Chief Executive Officer and will have such duties and responsibilities with respect to the Company, Genesis MLP and Genesis OLP as customarily would be undertaken by the chief financial officer and by the secretary of companies engaged in businesses similar to, or competitive with, the Company. Executive will not be required to hold any other offices, positions or directorships of the Company and/or any subsidiary or affiliate of the Company during the term of this Agreement. Executive will act in the best interest of the Company, Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the performance of Executive's services and duties under this Agreement. Without the prior consent of the Non-Executive Chairman of the Board of Directors of the Company, Executive will not actively engage in any other business or business activity; provided, however, that nothing herein contained will limit the right of Executive to manage Executive's personal investment activities provided that such personal investment activities do not materially interfere with the performance of Executive's duties and responsibilities hereunder or otherwise materially conflict with any policies which have been promulgated and distributed by the Company. SECTION 4. Compensation. 4.1 Compensation during the Initial Term. Subject to the terms and conditions of this Agreement, the Company will cause Executive to be paid an annual salary of $14,584.00 for the partial year ending December 31, 1996 and will pay Executive an annual salary of $175,000.00 for each of the years ending December 31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base Compensation"). The Base Compensation will be reviewed annually by the Compensation Committee of the Board of Directors of the Company. In addition, Executive will be entitled to participate in the Company's Incentive Plan in accordance with the terms thereof (the "Incentive Plan Amount"). 4.2 Compensation during the Extension Terms. The Base Compensation paid by the Company to Executive during the Extension Terms will be established by the Company in connection with the election to extend the term of this Agreement pursuant to Section 2, will not be less than the Base Compensation multiplied by 1.05 with respect to the first Extension Term and thereafter not less than the Base Compensation in effect immediately prior to such election for any subsequent Extension Term and will be advised to Executive simultaneously with notice from the Company of its election to exercise an Extension Term option. 4.3 Award of Restricted Units. The Company will grant to Executive Restricted Units ("Initial Award Units") in an amount determined by dividing $600,000 by the initial offering price of a limited partnership interest in Genesis MLP, pursuant to the Company's Restricted Unit Plan, in accordance with the terms thereof, promptly upon the adoption of such plan by the Board of Directors of the Company. The Initial Award Units shall vest in accordance with terms of the Restricted Unit Plan. 4.4 Short Term Disability Salary Continuance. In the event of a short term illness or injury that would entitle Executive to salary continuance benefits under the Company's short term disability salary continuance plan (the "STD Plan") in effect from time to time, and Executive's years of service with the Company, as determined in accordance with the STD Plan, are not sufficient to provide 100% of the maximum amount of salary continuance that would otherwise be available to Executive with more years of service (the "Maximum STD Payment") the Company will pay Executive, as and when salary continuance payments are made under the STD Plan, an amount equal to the difference between the Maximum STD Payment and the payment made to Executive under the STD Plan. SECTION 5. Payment of Compensation. The compensation payable to Executive pursuant to Section 4 of this Agreement will be paid as follows: (i) During the term of Executive's employment by the Company (A) the Base Compensation will be paid to Executive in accordance with the Company's customary payroll practices; and (B) the Incentive Plan Amount, if any, will be paid in the manner determined by the Compensation Committee of the Board of Directors of the Company in accordance with the Incentive Plan. (ii) Upon termination of Executive's employment by the Company in accordance with Section 7.5(A) of this Agreement, the Termination Compensation (as hereinafter defined), if any, will be paid in accordance with the provisions of Section 7.5(C). All payments of Base Compensation, the Incentive Plan Amount, Initial Award Units and any other amounts paid to Executive will be subject to such deductions and withholdings as, from time to time, may be required by law or as may be elected by Executive pursuant to the Company's benefit plans in effect from time to time. SECTION 6. Employment Benefits. During the Initial Term or any Extension Term of Executive's employment by the Company, Executive will be entitled to four weeks paid vacation. In addition, Executive will be entitled to sick leave in accordance with the Company's sick leave plans in effect from time to time, and to participate, subject to qualification requirements, in such medical, dental, life or other insurance or employee benefit plans as the Company may have in effect from time to time and generally offer to its employees. SECTION 7. Termination. 7.1 Termination for Cause. This Agreement will be null and void (except for the provisions of Section 8 concerning Confidentiality which will survive any termination of this Agreement) upon the termination of Executive's employment for Cause. As used in this Agreement, "Cause" will mean (a) conviction of Executive, in a final non-appealable decision, in a court of law of a felony, a crime involving moral turpitude or any crime or offense involving the misuse or misappropriation of money, credit or other property of the Company or any subsidiary or affiliate of the Company which hereinafter may employ Executive; provided, however, that the Company may suspend Executive's employment and any payment due Executive under this Agreement during the pendency of any such criminal charge; (b) violation in any material respect of any material rule or policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or any subsidiary or affiliate of the Company which hereinafter may employ Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined in a final non-appealable decision, of any rule or regulation of any regulatory or self-regulatory body to which any of the Genesis Affiliates is subject or of which any of the Genesis Affiliates is a member including without limitation, the New York Stock Exchange, The National Association of Securities Dealers, Inc., the Commodity Futures Trading Commission and the New York Mercantile Exchange, which violation would materially reflect on Executive's character, competence or integrity; (d) a material breach by Executive of Executive's duty of loyalty to any of the Genesis Affiliates including, by way of illustration, Executive's pretermination of employment solicitation of customers or employees of any of the Genesis Affiliates, unauthorized removal of Confidential Business Information (as hereinafter defined) from the premises of any of the Genesis Affiliates and the dissemination thereof or refusal to return such Confidential Business Information to the Company; (e) Executive's material breach of this Agreement; or (f) Executive's gross misconduct, gross insubordination or willful refusal to perform the lawful duties of his employment. In no event will Executive be entitled to any compensation or payments under this Agreement following Executive's termination, or deemed termination, for Cause, provided that Executive's termination for Cause under this Agreement shall not affect Executive's rights with respect to any Initial Award Units that shall have vested at the time of termination. If, after Executive's termination of employment, it is determined that Executive's employment could have been terminated for Cause under items (a),(b),(c) or (d) above and such grounds for termination resulted in or reasonably could be expected to result in injury to the business, reputation or prospects of the Company or the Genesis Affiliates, Executive's employment shall, at the election of the Company in its sole discretion, be deemed to have been terminated for Cause. If Executive's employment and payment are suspended pursuant to item (a) above, Executive will have the right, excercisable by notice to the Company given within 15 days after any such suspension, to treat such suspension as a termination for Cause and resign from the Company without being bound by the non-compete provisions of Section 10 of this Agreement. Prior to any termination of Executive's employment for Cause, the Company shall afford Executive an opportunity to meet with the Company's independent directors and Chairman of the Board and present Executive's position with respect to such grounds for termination. 7.2 Involuntary Termination. Executive's employment will be considered to have been terminated involuntarily (an "Involuntary Termination") upon occurrence of the following: (a) the duties and responsibilities of Executive shall have been substantially and materially reduced such that Executive's duties and responsibilities would no longer reasonably be considered to be comparable to those of the chief financial officers of companies similar to, or competitive with, the Company, (b) reduction in Executive's Base Compensation or exclusion, other than for failure to meet qualification requirements, from the Company's employee benefit plans in effect from time to time and generally offered to its employees, (c) a change of greater than 75 miles in the location, on the date hereof, of the Company's principal executive offices or (d) the Company's material breach of this Agreement. Executive will promptly, but in any event within 30 days after the occurrence or discovery thereof, notify the Company of any event which Executive considers an Involuntary Termination. 7.3 Termination under Benefit Plans. If Executive's employment is terminated in accordance with the terms of the Company's long term disability plan in effect from time to time, any unpaid portion of Executive's Base Compensation will be due Executive pursuant to this Agreement only for periods prior to such termination, and any payment pursuant to the Incentive Plan may be made solely in the discretion of the Compensation Committee and otherwise in accordance with the terms of such plan. 7.4 Termination due to Death. If Executive dies while employed by the Company, this Agreement will immediately terminate and, except for any unpaid portion of Executive's Base Compensation for periods prior to Executive's death, no further payments will be due hereunder, whether to Executive, Executive's heirs, estate or otherwise; provided, however, that Executive's heirs and estate will be entitled to retain any Initial Award Units for a period of six months after Executive's death. Executive shall have the right to designate in writing from time to time a beneficiary or beneficiaries by filing a written notice of such designation with the Company, which Beneficiary shall be entitled to receive any amount required to be paid as provided in this Section 7.4 in the event of the Executive's death. In the event that the beneficiary designated by Executive does not survive Executive and no successor beneficiary is selected or in the event no valid designation has been made, Executive's beneficiary shall be such Executive's estate. In the event of the death of Executive, any payment required to be made hereunder to Executive shall be made to such Executive's beneficiary or beneficiaries. In the event Executive's beneficiary is the Executive's estate, no payment shall be made unless the Company shall have been furnished with such evidence as the Company may deem necessary to establish the validity of the payment. 7.5 Termination Compensation. (A) In the event the Company (i) terminates Executive's employment during the Initial Term or any Extension Term for any reason other than Cause, including any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or (ii) does not exercise its option to extend the Initial Term or any Extension Term of this Agreement, the Company will pay Executive, in full settlement of all sums due Executive from the Company (excluding, however, any sums then due Executive under any of the Company's benefit plans or with respect to accrued vacation), whether under this Agreement or arising at law or in equity, a termination payment (the "Termination Compensation") equal to the greater of (i) Executive's Base Compensation for the remaining period of the Initial Term or Extension Term then in effect, as the case may be, or (ii) one year of Executive's Base Compensation at the level in effect at the time of termination or expiration without exercise of the option to extend. In addition, Executive will be entitled to (a) retain any Initial Award Units for a period of six months after Executive's termination or after expiration of this Agreement without the exercise by the Company of the option to extend, (b) such Incentive Compensation, if any, as may be payable to Executive in accordance with any Incentive Compensation plan then in effect and (c) in the event Executive elects to continue medical and/or dental coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay Executive, as and when required to maintain such coverage, an amount equal to the required premiums for the duration of the Non-Compete Period (as hereinafter defined). (B) As a condition to the right to receive the Termination Compensation, Executive will (i) execute and deliver to the Company a severance and release agreement in the form attached hereto as Exhibit A, and (ii) Executive will not, for a period (the "Non-Compete Period") equal to (a) six months in the event the Company does not exercise its option to extend this Agreement or (b) or in the event of termination of the shorter of one year after the date of Executive's termination or the unexpired portion of the Initial Term or Extension Term, as the case may be, but in no event less than six months, either directly or indirectly, compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including pipeline) business whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise, in the geographical areas in which the Company then operates or is engaged in business. (C) The Termination Compensation will be paid to Executive in the event of a termination pursuant to Section 7.5(A) above, in four equal installments with the first installment due on the date of such termination and the remaining installments at equal intervals thereafter over the applicable Non-Compete Period. SECTION 8. Confidentiality. Executive acknowledges that the business of the Company and the Genesis Affiliates is highly competitive and that the Company's method of operation, crude oil trading practices, financial condition and other matters relating to the conduct of such business, and the conduct of such business as previously conducted by Basis Petroleum, Inc. and Howell Corporation and its affiliates, comprise confidential business information (the "Confidential Business Information") which is unique and valuable to the Company. Executive further acknowledges that the use of the Confidential Business Information by Executive in competition with the Company and the Genesis Affiliates will be highly detrimental to the continued successful operation of the business of the Company and the Genesis Affiliates. Executive will keep the Confidential Business Information confidential and will not disclose it to any unauthorized parties. Executive acknowledges and agrees that the Company shall have the broadest possible protection, consistent with public policy, of the business of the Company and the Genesis Affiliates from the wrongful use by Executive of such Confidential Business Information. Confidential Business Information shall not include any information which is generally available to the public other than as a result of a disclosure by Executive or which was known to Executive prior to Executive's employment with the Company or with Basis Petroleum, Inc. or Howell Corporation and its affiliates, as the case may be. SECTION 9. Remedies. Each of the parties acknowledges that the rights hereunder are necessarily of a special, unique and extraordinary nature, and that the loss arising from a breach hereof cannot reasonably and adequately be compensated by money damages and will cause a party to suffer irreparable harm. Accordingly, upon the breach by a party of any material term of this Agreement at any time, the other party shall be entitled to injunctive or other extraordinary relief in case of such breach, and such injunctive or other extraordinary relief shall be cumulative to, but not in limitation of, any other remedies to which the party may be entitled as a result of the breach of such Agreement. In the event Executive breaches this Agreement, the Company will also have the right, in addition to any other rights it may have at law, in equity or under this Agreement to cancel, withhold and/or offset any payments due Executive hereunder against any payments otherwise due to Executive from the Company, Genesis MLP or Genesis OLP. In any action to enforce any right or remedy hereunder, the prevailing party in a final non-appealable decision of a court of competent jurisdiction shall be entitled to recover such prevailing party's reasonable legal fees and expenses. SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his employment for any reason other than the Company's breach of a material provision of this Agreement, or as a result of an Involuntary Termination, then, Executive will not, for the duration of the Non-Compete Period, directly or indirectly compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including) pipeline business at the time of such resignation or termination whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise in the geographical areas in which the Company then operates or is engaged in business. Executive will not be entitled to any compensation or payments under this Agreement following any such resignation or termination except for Incentive Compensation, if any, payable to Executive in accordance with any Incentive Compensation plan then in effect. SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised, amended or waived in any manner except by an instrument in writing signed on behalf of each of the parties by their respective duly authorized representatives. No delay on the part of either party in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any partial exercise or waiver of any right, power or privilege under this Agreement preclude any other or further exercise of such right, power or privilege. SECTION 12. Severability. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable in any respect, the parties will amend this Agreement to provide a substitute provision which as nearly as possible carries out the intent of the provision so held invalid or unenforceable; provided, however, that no such amendment will in any way materially increase the obligation of either party under this Agreement. Any such determination of invalidity or unenforceability will not affect such provision in any other respect or affect any other provision of this Agreement all of which will remain in full force and effect. SECTION 13. Notices. All notices and other communications under this Agreement will be in writing and will be duly given (i) upon delivery if delivered personally with signed receipt acknowledging delivery; or (ii) upon dispatch if telexed (with answerback confirmation) or telegraphed (and if telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if mailed, by first class mail, postage prepaid, ten business days after date of mailing, addressed as follows: (a) If to the Company Genesis Energy, L.L.C. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Attention: President (b) If to Executive Allyn R. Skelton, II at such address as appears on the records of the Company or to such other address as a party may from time to time designate in the manner heretofore provided. SECTION 14. Governing Law and Jurisdiction. This Agreement and the obligations of the parties hereunder will be governed by and construed in accordance with the substantive laws of the State of Texas without regard to any conflict of law rules. Each party consents to the jurisdiction of the courts located in Harris County, Texas with respect to any action arising hereunder. SECTION 15. Assignment. This Agreement, and any rights or obligations hereunder, may not be assigned by either party hereto without written consent of the other; provided, however, that the Company may assign this Agreement to Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all or substantially all of the business of the Company or to a third party acquiring all or substantially all of the business, equity or assets of the Company. SECTION 16. No Third Party Beneficiaries. No person other than Executive and his beneficiaries on the one hand and the Company or its successors and assigns on the other hand shall be made a party to this Agreement directly or indirectly or have any rights or benefits under this Agreement. SECTION 17. Captions. The titles, captions and headings in this Agreement are inserted for convenience of reference only and are not intended to form a part of, or to affect the meaning or interpretation of, this Agreement. SECTION 18. Execution in Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same Agreement, and will become a binding Agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement between Executive and the Company concerning the subject matter hereof and supersedes all previous negotiations, commitments and writings with respect to such subject matter. SECTION 20. Advice of Counsel. Executive represents and warrants that Executive has been advised by competent counsel of his own selection as to the meaning and significance of this Agreement and all of the terms hereof. /s/ Allyn R. Skelton, II - ------------------------------------------------------ Allyn R. Skelton, II GENESIS ENERGY, L.L.C. By: BASIS PETROLEUM, INC. As Member By: /s/ Jeffrey R. Serra - ------------------------------------------------------ Jeffrey R. Serra, Chairman, President and Chief Executive Officer EX-10 14 EXHIBIT 10.12 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made as of December 1, 1996 by and between Genesis Energy, L.L.C. (the "Company") and Paul A. Scoff ("Executive"). RECITALS: A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP") and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil gathering, marketing and pipeline business. B. Executive is the General Counsel for the Company. C. Executive desires to obtain the benefits and incentives from the Company of a written employment agreement having an initial term through December 31, 1999, and, at the Company's election, certain extension terms. D. The Company desires to enter into such an employment agreement with Executive. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows: SECTION 1. Employment. The Company hereby employs Executive as General Counsel of the Company; provided, however, that Executive will continue as an employee of Executive's employer on the date hereof but will be seconded to the Company until January 1, 1997 at which time Executive will become employed by the Company. In such capacity, Executive will have the responsibilities and perform the services and duties described in Section 3 of this Agreement. Executive hereby accepts such employment and agrees to perform such services and duties for the Company. SECTION 2. Term. This Agreement will be for an initial term commencing on the effective date of that certain initial public offering of limited partnership interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"), unless sooner terminated in accordance with the provisions hereof. Thereafter, the Company will have the option, exercisable by notice to Executive given not less than 60 days prior to the expiration of the Initial Term, or any Extension Term (as hereinafter defined), to extend this Agreement for one additional term of two calendar years ending December 31, 2001, and, if, in each instance, so extended, for five additional terms of one calendar year each with the term of the last extension, if so exercised, expiring on December 31, 2006 (each such extension an "Extension Term"). Anything herein to the contrary notwithstanding, this Agreement, and Executive's employment hereunder, may be terminated at any time, with or without cause, upon notice of termination to Executive; provided, however, that in the event of any such termination without cause (including any Involuntary Termination (as hereinafter defined)), Executive will be entitled to the Termination Compensation (as hereinafter defined) set forth herein. SECTION 3. Duties of Executive. Executive will render his services to the Company as General Counsel and will have such other duties and responsibilities with respect to the Company as the President and CEO of the Company may, from time to time, designate. Executive will act in the best interest of the Company, Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the performance of Executive's services and duties under this Agreement. Without the prior consent of the President and CEO of the Company, Executive will not actively engage in any other business or business activity; provided, however, that nothing herein contained will limit the right of Executive to manage Executive's personal investment activities provided that such personal investment activities do not materially interfere with the performance of Executive's duties and responsibilities hereunder or otherwise materially conflict with any policies which have been promulgated and distributed by the Company. SECTION 4. Compensation. 4.1 Compensation during the Initial Term. Subject to the terms and conditions of this Agreement, the Company will cause Executive to be paid an annual salary of $10,417.00 for the partial year ending December 31, 1996 and will pay Executive an annual salary of $125,000.00 for each of the years ending December 31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base Compensation"). The Base Compensation will be reviewed annually by the Compensation Committee of the Board of Directors of the Company. In addition, Executive will be entitled to participate in the Company's Incentive Plan in accordance with the terms thereof (the "Incentive Plan Amount"). 4.2 Compensation during the Extension Terms. The Base Compensation paid by the Company to Executive during the Extension Terms will be established by the Company in connection with the election to extend the term of this Agreement pursuant to Section 2, will not be less than the Base Compensation multiplied by 1.05 with respect to the first Extension Term and thereafter not less than the Base Compensation in effect immediately prior to such election for any subsequent Extension Term and will be advised to Executive simultaneously with notice from the Company of its election to exercise an Extension Term option. 4.3 Award of Restricted Units. The Company will grant to Executive Restricted Units ("Initial Award Units") in an amount determined by dividing $200,000 by the initial offering price of a limited partnership interest in Genesis MLP, pursuant to the Company's Restricted Unit Plan, in accordance with the terms thereof, promptly upon the adoption of such plan by the Board of Directors of the Company. The Initial Award Units shall vest in accordance with terms of the Restricted Unit Plan. 4.4 Short Term Disability Salary Continuance. In the event of a short term illness or injury that would entitle Executive to salary continuance benefits under the Company's short term disability salary continuance plan (the "STD Plan") in effect from time to time, and Executive's years of service with the Company, as determined in accordance with the STD Plan, are not sufficient to provide 100% of the maximum amount of salary continuance that would otherwise be available to Executive with more years of service (the "Maximum STD Payment") the Company will pay Executive, as and when salary continuance payments are made under the STD Plan, an amount equal to the difference between the Maximum STD Payment and the payment made to Executive under the STD Plan. SECTION 5. Payment of Compensation. The compensation payable to Executive pursuant to Section 4 of this Agreement will be paid as follows: (i) During the term of Executive's employment by the Company (A) the Base Compensation will be paid to Executive in accordance with the Company's customary payroll practices; and (B) the Incentive Plan Amount, if any, will be paid in the manner determined by the Compensation Committee of the Board of Directors of the Company in accordance with the Incentive Plan. (ii) Upon termination of Executive's employment by the Company in accordance with Section 7.5(A) of this Agreement, the Termination Compensation (as hereinafter defined), if any, will be paid in accordance with the provisions of Section 7.5(C). All payments of Base Compensation, the Incentive Plan Amount, Initial Award Units and any other amounts paid to Executive will be subject to such deductions and withholdings as, from time to time, may be required by law or as may be elected by Executive pursuant to the Company's benefit plans in effect from time to time. SECTION 6. Employment Benefits. During the Initial Term or any Extension Term of Executive's employment by the Company, Executive will be entitled to four weeks paid vacation. In addition, Executive will be entitled to sick leave in accordance with the Company's sick leave plans in effect from time to time, and to participate, subject to qualification requirements, in such medical, dental, life or other insurance or employee benefit plans as the Company may have in effect from time to time and generally offer to its employees. SECTION 7. Termination. 7.1 Termination for Cause. This Agreement will be null and void (except for the provisions of Section 8 concerning Confidentiality which will survive any termination of this Agreement) upon the termination of Executive's employment for Cause. As used in this Agreement, "Cause" will mean (a) conviction of Executive, in a final non-appealable decision, in a court of law of a felony, a crime involving moral turpitude or any crime or offense involving the misuse or misappropriation of money, credit or other property of the Company or any subsidiary or affiliate of the Company which hereinafter may employ Executive; provided, however, that the Company may suspend Executive's employment and any payment due Executive under this Agreement during the pendency of any such criminal charge; (b) violation in any material respect of any material rule or policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or any subsidiary or affiliate of the Company which hereinafter may employ Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined in a final non-appealable decision, of any rule or regulation of any regulatory or self-regulatory body to which any of the Genesis Affiliates is subject or of which any of the Genesis Affiliates is a member including without limitation, the New York Stock Exchange, The National Association of Securities Dealers, Inc., the Commodity Futures Trading Commission and the New York Mercantile Exchange, which violation would materially reflect on Executive's character, competence or integrity; (d) a material breach by Executive of Executive's duty of loyalty to any of the Genesis Affiliates including, by way of illustration, Executive's pretermination of employment solicitation of customers or employees of any of the Genesis Affiliates, unauthorized removal of Confidential Business Information (as hereinafter defined) from the premises of any of the Genesis Affiliates and the dissemination thereof or refusal to return such Confidential Business Information to the Company; (e) Executive's material breach of this Agreement; or (f) Executive's gross misconduct, gross insubordination or willful refusal to perform the lawful duties of his employment. In no event will Executive be entitled to any compensation or payments under this Agreement following Executive's termination, or deemed termination, for Cause, provided that Executive's termination for Cause under this Agreement shall not affect Executive's rights with respect to any Initial Award Units that shall have vested at the time of termination. If, after Executive's termination of employment, it is determined that Executive's employment could have been terminated for Cause under items (a),(b),(c) or (d) above and such grounds for termination resulted in or reasonably could be expected to result in injury to the business, reputation or prospects of the Company or the Genesis Affiliates, Executive's employment shall, at the election of the Company in its sole discretion, be deemed to have been terminated for Cause. If Executive's employment and payment are suspended pursuant to item (a) above, Executive will have the right, excercisable by notice to the Company given within 15 days after any such suspension, to treat such suspension as a termination for Cause and resign from the Company without being bound by the non-compete provisions of Section 10 of this Agreement. 7.2 Involuntary Termination. Executive's employment will be considered to have been terminated involuntarily (an "Involuntary Termination") upon occurrence of the following: (a) reduction in Executive's Base Compensation or exclusion, other than for failure to meet qualification requirements, from the Company's employee benefit plans in effect from time to time and generally offered to its employees or (b) the Company's material breach of this Agreement. Executive will promptly, but in any event within 30 days after the occurrence or discovery thereof, notify the Company of any event which Executive considers an Involuntary Termination. 7.3 Termination under Benefit Plans. If Executive's employment is terminated in accordance with the terms of the Company's long term disability plan in effect from time to time, any unpaid portion of Executive's Base Compensation will be due Executive pursuant to this Agreement only for periods prior to such termination, and any payment pursuant to the Incentive Plan may be made solely in the discretion of the Compensation Committee and otherwise in accordance with the terms of such plan. 7.4 Termination due to Death. If Executive dies while employed by the Company, this Agreement will immediately terminate and, except for any unpaid portion of Executive's Base Compensation for periods prior to Executive's death, no further payments will be due hereunder, whether to Executive, Executive's heirs, estate or otherwise; provided, however, that Executive's heirs and estate will be entitled to retain any Initial Award Units for a period of six months after Executive's death. Executive shall have the right to designate in writing from time to time a beneficiary or beneficiaries by filing a written notice of such designation with the Company, which Beneficiary shall be entitled to receive any amount required to be paid as provided in this Section 7.4 in the event of the Executive's death. In the event that the beneficiary designated by Executive does not survive Executive and no successor beneficiary is selected or in the event no valid designation has been made, Executive's beneficiary shall be such Executive's estate. In the event of the death of Executive, any payment required to be made hereunder to Executive shall be made to such Executive's beneficiary or beneficiaries. In the event Executive's beneficiary is the Executive's estate, no payment shall be made unless the Company shall have been furnished with such evidence as the Company may deem necessary to establish the validity of the payment. 7.5 Termination Compensation. (A) In the event the Company (i) terminates Executive's employment during the Initial Term or any Extension Term for any reason other than Cause, including any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or (ii) does not exercise its option to extend the Initial Term or any Extension Term of this Agreement, the Company will pay Executive, in full settlement of all sums due Executive from the Company (excluding, however, any sums then due Executive under any of the Company's benefit plans or with respect to accrued vacation), whether under this Agreement or arising at law or in equity, a termination payment (the "Termination Compensation") equal to the greater of (i) Executive's Base Compensation for the remaining period of the Initial Term or Extension Term then in effect, as the case may be, or (ii) one year of Executive's Base Compensation at the level in effect at the time of termination or expiration without exercise of the option to extend. In addition, Executive will be entitled to (a) retain any Initial Award Units for a period of six months after Executive's termination or after expiration of this Agreement without the exercise by the Company of the option to extend, (b) such Incentive Compensation, if any, as may be payable to Executive in accordance with any Incentive Compensation plan then in effect and (c) in the event Executive elects to continue medical and/or dental coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay Executive, as and when required to maintain such coverage, an amount equal to the required premiums for the duration of the Non-Compete Period (as hereinafter defined). (B) As a condition to the right to receive the Termination Compensation, Executive will (i) execute and deliver to the Company a severance and release agreement in the form attached hereto as Exhibit A, and (ii) Executive will not, for a period (the "Non-Compete Period") equal to (a) six months in the event the Company does not exercise its option to extend this Agreement or (b) or in the event of termination of the shorter of one year after the date of Executive's termination or the unexpired portion of the Initial Term or Extension Term, as the case may be, but in no event less than six months, either directly or indirectly, compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including pipeline) business whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise, in the geographical areas in which the Company then operates or is engaged in business. (C) The Termination Compensation will be paid to Executive in the event of a termination pursuant to Section 7.5(A) above, in four equal installments with the first installment due on the date of such termination and the remaining installments at equal intervals thereafter over the applicable Non-Compete Period. SECTION 8. Confidentiality. Executive acknowledges that the business of the Company and the Genesis Affiliates is highly competitive and that the Company's method of operation, crude oil trading practices, financial condition and other matters relating to the conduct of such business, and the conduct of such business as previously conducted by Basis Petroleum, Inc. and Howell Corporation and its affiliates, comprise confidential business information (the "Confidential Business Information") which is unique and valuable to the Company. Executive further acknowledges that the use of the Confidential Business Information by Executive in competition with the Company and the Genesis Affiliates will be highly detrimental to the continued successful operation of the business of the Company and the Genesis Affiliates. Executive will keep the Confidential Business Information confidential and will not disclose it to any unauthorized parties. Executive acknowledges and agrees that the Company shall have the broadest possible protection, consistent with public policy, of the business of the Company and the Genesis Affiliates from the wrongful use by Executive of such Confidential Business Information. Confidential Business Information shall not include any information which is generally available to the public other than as a result of a disclosure by Executive or which was known to Executive prior to Executive's employment with the Company or with Basis Petroleum, Inc. or Howell Corporation and its affiliates, as the case may be. SECTION 9. Remedies. Each of the parties acknowledges that the rights hereunder are necessarily of a special, unique and extraordinary nature, and that the loss arising from a breach hereof cannot reasonably and adequately be compensated by money damages and will cause a party to suffer irreparable harm. Accordingly, upon the breach by a party of any material term of this Agreement at any time, the other party shall be entitled to injunctive or other extraordinary relief in case of such breach, and such injunctive or other extraordinary relief shall be cumulative to, but not in limitation of, any other remedies to which the party may be entitled as a result of the breach of such Agreement. In the event Executive breaches this Agreement, the Company will also have the right, in addition to any other rights it may have at law, in equity or under this Agreement to cancel, withhold and/or offset any payments due Executive hereunder against any payments otherwise due to Executive from the Company, Genesis MLP or Genesis OLP. In any action to enforce any right or remedy hereunder, the prevailing party in a final non-appealable decision of a court of competent jurisdiction shall be entitled to recover such prevailing party's reasonable legal fees and expenses. SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his employment for any reason other than the Company's breach of a material provision of this Agreement, or as a result of an Involuntary Termination, then, Executive will not, for the duration of the Non-Compete Period, directly or indirectly compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including) pipeline business at the time of such resignation or termination whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise in the geographical areas in which the Company then operates or is engaged in business. Executive will not be entitled to any compensation or payments under this Agreement following any such resignation or termination except for Incentive Compensation, if any, payable to Executive in accordance with any Incentive Compensation plan then in effect. SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised, amended or waived in any manner except by an instrument in writing signed on behalf of each of the parties by their respective duly authorized representatives. No delay on the part of either party in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any partial exercise or waiver of any right, power or privilege under this Agreement preclude any other or further exercise of such right, power or privilege. SECTION 12. Severability. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable in any respect, the parties will amend this Agreement to provide a substitute provision which as nearly as possible carries out the intent of the provision so held invalid or unenforceable; provided, however, that no such amendment will in any way materially increase the obligation of either party under this Agreement. Any such determination of invalidity or unenforceability will not affect such provision in any other respect or affect any other provision of this Agreement all of which will remain in full force and effect. SECTION 13. Notices. All notices and other communications under this Agreement will be in writing and will be duly given (i) upon delivery if delivered personally with signed receipt acknowledging delivery; or (ii) upon dispatch if telexed (with answerback confirmation) or telegraphed (and if telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if mailed, by first class mail, postage prepaid, ten business days after date of mailing, addressed as follows: (a) If to the Company Genesis Energy, L.L.C. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Attention: President (b) If to Executive Paul A. Scoff at such address as appears on the records of the Company or to such other address as a party may from time to time designate in the manner heretofore provided. SECTION 14. Governing Law and Jurisdiction. This Agreement and the obligations of the parties hereunder will be governed by and construed in accordance with the substantive laws of the State of Texas without regard to any conflict of law rules. Each party consents to the jurisdiction of the courts located in Harris County, Texas with respect to any action arising hereunder. SECTION 15. Assignment. This Agreement, and any rights or obligations hereunder, may not be assigned by either party hereto without written consent of the other; provided, however, that the Company may assign this Agreement to Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all or substantially all of the business of the Company or to a third party acquiring all or substantially all of the business, equity or assets of the Company. SECTION 16. No Third Party Beneficiaries. No person other than Executive and his beneficiaries on the one hand and the Company or its successors and assigns on the other hand shall be made a party to this Agreement directly or indirectly or have any rights or benefits under this Agreement. SECTION 17. Captions. The titles, captions and headings in this Agreement are inserted for convenience of reference only and are not intended to form a part of, or to affect the meaning or interpretation of, this Agreement. SECTION 18. Execution in Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same Agreement, and will become a binding Agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement between Executive and the Company concerning the subject matter hereof and supersedes all previous negotiations, commitments and writings with respect to such subject matter. SECTION 20. Advice of Counsel. Executive represents and warrants that Executive has been advised by competent counsel of his own selection as to the meaning and significance of this Agreement and all of the terms hereof. /s/ Paul A. Scoff - ------------------------------------------------------- Paul A. Scoff GENESIS ENERGY, L.L.C. By: BASIS PETROLEUM, INC. As Member By:/s/ Jeffrey R. Serra - ------------------------------------------------------- Jeffrey R. Serra, Chairman, President and Chief Executive Officer EX-10 15 EXHIBIT 10.13 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made as of December 1, 1996 by and between Genesis Energy, L.L.C. (the "Company") and Allen R. Stanley ("Executive"). RECITALS: A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP") and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil gathering, marketing and pipeline business. B. Executive is the Vice President, Pipeline Operations for the Company. C. Executive desires to obtain the benefits and incentives from the Company of a written employment agreement having an initial term through December 31, 1999, and, at the Company's election, certain extension terms. D. The Company desires to enter into such an employment agreement with Executive. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows: SECTION 1. Employment. The Company hereby employs Executive as an executive officer of the Company, to perform such executive, managerial and senior operations services as may be assigned to Executive from time to time; provided, however, that Executive will continue as an employee of Executive's employer on the date hereof but will be seconded to the Company until January 1, 1997 at which time Executive will become employed by the Company. In such capacity, Executive will have the responsibilities and perform the services and duties described in Section 3 of this Agreement. Executive hereby accepts such employment and agrees to perform such services and duties for the Company. SECTION 2. Term. This Agreement will be for an initial term commencing on the effective date of that certain initial public offering of limited partnership interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"), unless sooner terminated in accordance with the provisions hereof. Thereafter, the Company will have the option, exercisable by notice to Executive given not less than 60 days prior to the expiration of the Initial Term, or any Extension Term (as hereinafter defined), to extend this Agreement for one additional term of two calendar years ending December 31, 2001, and, if, in each instance, so extended, for five additional terms of one calendar year each with the term of the last extension, if so exercised, expiring on December 31, 2006 (each such extension an "Extension Term"). Anything herein to the contrary notwithstanding, this Agreement, and Executive's employment hereunder, may be terminated at any time, with or without cause, upon notice of termination to Executive; provided, however, that in the event of any such termination without cause (including any Involuntary Termination (as hereinafter defined)), Executive will be entitled to the Termination Compensation (as hereinafter defined) set forth herein. SECTION 3. Duties of Executive. Executive will render his services to the Company as Vice President, Pipeline Operations, and/or in such other executive or managerial capacities as the President and CEO of the Company may, from time to time, designate. Executive will act in the best interest of the Company, Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the performance of Executive's services and duties under this Agreement. Without the prior consent of the President and CEO of the Company, Executive will not actively engage in any other business or business activity; provided, however, that nothing herein contained will limit the right of Executive to manage Executive's personal investment activities provided that such personal investment activities do not materially interfere with the performance of Executive's duties and responsibilities hereunder or otherwise materially conflict with any policies which have been promulgated and distributed by the Company. SECTION 4. Compensation. 4.1 Compensation during the Initial Term. Subject to the terms and conditions of this Agreement, the Company will cause Executive to be paid an annual salary of $11,667.00 for the partial year ending December 31, 1996 and will pay Executive an annual salary of $140,000.00 for each of the years ending December 31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base Compensation"). The Base Compensation will be reviewed annually by the Compensation Committee of the Board of Directors of the Company. In addition, Executive will be entitled to participate in the Company's Incentive Plan in accordance with the terms thereof (the "Incentive Plan Amount"). 4.2 Compensation during the Extension Terms. The Base Compensation paid by the Company to Executive during the Extension Terms will be established by the Company in connection with the election to extend the term of this Agreement pursuant to Section 2, will not be less than the Base Compensation multiplied by 1.05 with respect to the first Extension Term and thereafter not less than the Base Compensation in effect immediately prior to such election for any subsequent Extension Term and will be advised to Executive simultaneously with notice from the Company of its election to exercise an Extension Term option. 4.3 Award of Restricted Units. The Company will grant to Executive Restricted Units ("Initial Award Units") in an amount determined by dividing $300,000 by the initial offering price of a limited partnership interest in Genesis MLP, pursuant to the Company's Restricted Unit Plan, in accordance with the terms thereof, promptly upon the adoption of such plan by the Board of Directors of the Company. The Initial Award Units shall vest in accordance with terms of the Restricted Unit Plan. 4.4 Short Term Disability Salary Continuance. In the event of a short term illness or injury that would entitle Executive to salary continuance benefits under the Company's short term disability salary continuance plan (the "STD Plan") in effect from time to time, and Executive's years of service with the Company, as determined in accordance with the STD Plan, are not sufficient to provide 100% of the maximum amount of salary continuance that would otherwise be available to Executive with more years of service (the "Maximum STD Payment") the Company will pay Executive, as and when salary continuance payments are made under the STD Plan, an amount equal to the difference between the Maximum STD Payment and the payment made to Executive under the STD Plan. SECTION 5. Payment of Compensation. The compensation payable to Executive pursuant to Section 4 of this Agreement will be paid as follows: (i) During the term of Executive's employment by the Company (A) the Base Compensation will be paid to Executive in accordance with the Company's customary payroll practices; and (B) the Incentive Plan Amount, if any, will be paid in the manner determined by the Compensation Committee of the Board of Directors of the Company in accordance with the Incentive Plan. (ii) Upon termination of Executive's employment by the Company in accordance with Section 7.5(A) of this Agreement, the Termination Compensation (as hereinafter defined), if any, will be paid in accordance with the provisions of Section 7.5(C). All payments of Base Compensation, the Incentive Plan Amount, Initial Award Units and any other amounts paid to Executive will be subject to such deductions and withholdings as, from time to time, may be required by law or as may be elected by Executive pursuant to the Company's benefit plans in effect from time to time. SECTION 6. Employment Benefits. During the Initial Term or any Extension Term of Executive's employment by the Company, Executive will be entitled to four weeks paid vacation. In addition, Executive will be entitled to sick leave in accordance with the Company's sick leave plans in effect from time to time, and to participate, subject to qualification requirements, in such medical, dental, life or other insurance or employee benefit plans as the Company may have in effect from time to time and generally offer to its employees. SECTION 7. Termination. 7.1 Termination for Cause. This Agreement will be null and void (except for the provisions of Section 8 concerning Confidentiality which will survive any termination of this Agreement) upon the termination of Executive's employment for Cause. As used in this Agreement, "Cause" will mean (a) conviction of Executive, in a final non-appealable decision, in a court of law of a felony, a crime involving moral turpitude or any crime or offense involving the misuse or misappropriation of money, credit or other property of the Company or any subsidiary or affiliate of the Company which hereinafter may employ Executive; provided, however, that the Company may suspend Executive's employment and any payment due Executive under this Agreement during the pendency of any such criminal charge; (b) violation in any material respect of any material rule or policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or any subsidiary or affiliate of the Company which hereinafter may employ Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined in a final non-appealable decision, of any rule or regulation of any regulatory or self-regulatory body to which any of the Genesis Affiliates is subject or of which any of the Genesis Affiliates is a member including without limitation, the New York Stock Exchange, The National Association of Securities Dealers, Inc., the Commodity Futures Trading Commission and the New York Mercantile Exchange, which violation would materially reflect on Executive's character, competence or integrity; (d) a material breach by Executive of Executive's duty of loyalty to any of the Genesis Affiliates including, by way of illustration, Executive's pretermination of employment solicitation of customers or employees of any of the Genesis Affiliates, unauthorized removal of Confidential Business Information (as hereinafter defined) from the premises of any of the Genesis Affiliates and the dissemination thereof or refusal to return such Confidential Business Information to the Company; (e) Executive's material breach of this Agreement; or (f) Executive's gross misconduct, gross insubordination or willful refusal to perform the lawful duties of his employment. In no event will Executive be entitled to any compensation or payments under this Agreement following Executive's termination, or deemed termination, for Cause, provided that Executive's termination for Cause under this Agreement shall not affect Executive's rights with respect to any Initial Award Units that shall have vested at the time of termination. If, after Executive's termination of employment, it is determined that Executive's employment could have been terminated for Cause under items (a),(b),(c) or (d) above and such grounds for termination resulted in or reasonably could be expected to result in injury to the business, reputation or prospects of the Company or the Genesis Affiliates, Executive's employment shall, at the election of the Company in its sole discretion, be deemed to have been terminated for Cause. If Executive's employment and payment are suspended pursuant to item (a) above, Executive will have the right, excercisable by notice to the Company given within 15 days after any such suspension, to treat such suspension as a termination for Cause and resign from the Company without being bound by the non-compete provisions of Section 10 of this Agreement. 7.2 Involuntary Termination. Executive's employment will be considered to have been terminated involuntarily (an "Involuntary Termination") upon occurrence of the following: (a) reduction in Executive's Base Compensation or exclusion, other than for failure to meet qualification requirements, from the Company's employee benefit plans in effect from time to time and generally offered to its employees or (b) the Company's material breach of this Agreement. Executive will promptly, but in any event within 30 days after the occurrence or discovery thereof, notify the Company of any event which Executive considers an Involuntary Termination. 7.3 Termination under Benefit Plans. If Executive's employment is terminated in accordance with the terms of the Company's long term disability plan in effect from time to time, any unpaid portion of Executive's Base Compensation will be due Executive pursuant to this Agreement only for periods prior to such termination, and any payment pursuant to the Incentive Plan may be made solely in the discretion of the Compensation Committee and otherwise in accordance with the terms of such plan. 7.4 Termination due to Death. If Executive dies while employed by the Company, this Agreement will immediately terminate and, except for any unpaid portion of Executive's Base Compensation for periods prior to Executive's death, no further payments will be due hereunder, whether to Executive, Executive's heirs, estate or otherwise; provided, however, that Executive's heirs and estate will be entitled to retain any Initial Award Units for a period of six months after Executive's death. Executive shall have the right to designate in writing from time to time a beneficiary or beneficiaries by filing a written notice of such designation with the Company, which Beneficiary shall be entitled to receive any amount required to be paid as provided in this Section 7.4 in the event of the Executive's death. In the event that the beneficiary designated by Executive does not survive Executive and no successor beneficiary is selected or in the event no valid designation has been made, Executive's beneficiary shall be such Executive's estate. In the event of the death of Executive, any payment required to be made hereunder to Executive shall be made to such Executive's beneficiary or beneficiaries. In the event Executive's beneficiary is the Executive's estate, no payment shall be made unless the Company shall have been furnished with such evidence as the Company may deem necessary to establish the validity of the payment. 7.5 Termination Compensation. (A) In the event the Company (i) terminates Executive's employment during the Initial Term or any Extension Term for any reason other than Cause, including any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or (ii) does not exercise its option to extend the Initial Term or any Extension Term of this Agreement, the Company will pay Executive, in full settlement of all sums due Executive from the Company (excluding, however, any sums then due Executive under any of the Company's benefit plans or with respect to accrued vacation), whether under this Agreement or arising at law or in equity, a termination payment (the "Termination Compensation") equal to the greater of (i) Executive's Base Compensation for the remaining period of the Initial Term or Extension Term then in effect, as the case may be, or (ii) one year of Executive's Base Compensation at the level in effect at the time of termination or expiration without exercise of the option to extend. In addition, Executive will be entitled to (a) retain any Initial Award Units for a period of six months after Executive's termination or after expiration of this Agreement without the exercise by the Company of the option to extend, (b) such Incentive Compensation, if any, as may be payable to Executive in accordance with any Incentive Compensation plan then in effect and (c) in the event Executive elects to continue medical and/or dental coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay Executive, as and when required to maintain such coverage, an amount equal to the required premiums for the duration of the Non-Compete Period (as hereinafter defined). (B) As a condition to the right to receive the Termination Compensation, Executive will (i) execute and deliver to the Company a severance and release agreement in the form attached hereto as Exhibit A, and (ii) Executive will not, for a period (the "Non-Compete Period") equal to (a) six months in the event the Company does not exercise its option to extend this Agreement or (b) or in the event of termination of the shorter of one year after the date of Executive's termination or the unexpired portion of the Initial Term or Extension Term, as the case may be, but in no event less than six months, either directly or indirectly, compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including pipeline) business whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise, in the geographical areas in which the Company then operates or is engaged in business. (C) The Termination Compensation will be paid to Executive in the event of a termination pursuant to Section 7.5(A) above, in four equal installments with the first installment due on the date of such termination and the remaining installments at equal intervals thereafter over the applicable Non-Compete Period. SECTION 8. Confidentiality. Executive acknowledges that the business of the Company and the Genesis Affiliates is highly competitive and that the Company's method of operation, crude oil trading practices, financial condition and other matters relating to the conduct of such business, and the conduct of such business as previously conducted by Basis Petroleum, Inc. and Howell Corporation and its affiliates, comprise confidential business information (the "Confidential Business Information") which is unique and valuable to the Company. Executive further acknowledges that the use of the Confidential Business Information by Executive in competition with the Company and the Genesis Affiliates will be highly detrimental to the continued successful operation of the business of the Company and the Genesis Affiliates. Executive will keep the Confidential Business Information confidential and will not disclose it to any unauthorized parties. Executive acknowledges and agrees that the Company shall have the broadest possible protection, consistent with public policy, of the business of the Company and the Genesis Affiliates from the wrongful use by Executive of such Confidential Business Information. Confidential Business Information shall not include any information which is generally available to the public other than as a result of a disclosure by Executive or which was known to Executive prior to Executive's employment with the Company or with Basis Petroleum, Inc. or Howell Corporation and its affiliates, as the case may be. SECTION 9. Remedies. Each of the parties acknowledges that the rights hereunder are necessarily of a special, unique and extraordinary nature, and that the loss arising from a breach hereof cannot reasonably and adequately be compensated by money damages and will cause a party to suffer irreparable harm. Accordingly, upon the breach by a party of any material term of this Agreement at any time, the other party shall be entitled to injunctive or other extraordinary relief in case of such breach, and such injunctive or other extraordinary relief shall be cumulative to, but not in limitation of, any other remedies to which the party may be entitled as a result of the breach of such Agreement. In the event Executive breaches this Agreement, the Company will also have the right, in addition to any other rights it may have at law, in equity or under this Agreement to cancel, withhold and/or offset any payments due Executive hereunder against any payments otherwise due to Executive from the Company, Genesis MLP or Genesis OLP. In any action to enforce any right or remedy hereunder, the prevailing party in a final non-appealable decision of a court of competent jurisdiction shall be entitled to recover such prevailing party's reasonable legal fees and expenses. SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his employment for any reason other than the Company's breach of a material provision of this Agreement, or as a result of an Involuntary Termination, then, Executive will not, for the duration of the Non-Compete Period, directly or indirectly compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including) pipeline business at the time of such resignation or termination whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise in the geographical areas in which the Company then operates or is engaged in business. Executive will not be entitled to any compensation or payments under this Agreement following any such resignation or termination except for Incentive Compensation, if any, payable to Executive in accordance with any Incentive Compensation plan then in effect. SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised, amended or waived in any manner except by an instrument in writing signed on behalf of each of the parties by their respective duly authorized representatives. No delay on the part of either party in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any partial exercise or waiver of any right, power or privilege under this Agreement preclude any other or further exercise of such right, power or privilege. SECTION 12. Severability. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable in any respect, the parties will amend this Agreement to provide a substitute provision which as nearly as possible carries out the intent of the provision so held invalid or unenforceable; provided, however, that no such amendment will in any way materially increase the obligation of either party under this Agreement. Any such determination of invalidity or unenforceability will not affect such provision in any other respect or affect any other provision of this Agreement all of which will remain in full force and effect. SECTION 13. Notices. All notices and other communications under this Agreement will be in writing and will be duly given (i) upon delivery if delivered personally with signed receipt acknowledging delivery; or (ii) upon dispatch if telexed (with answerback confirmation) or telegraphed (and if telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if mailed, by first class mail, postage prepaid, ten business days after date of mailing, addressed as follows: (a) If to the Company Genesis Energy, L.L.C. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Attention: President (b) If to Executive Allen R. Stanley at such address as appears on the records of the Company or to such other address as a party may from time to time designate in the manner heretofore provided. SECTION 14. Governing Law and Jurisdiction. This Agreement and the obligations of the parties hereunder will be governed by and construed in accordance with the substantive laws of the State of Texas without regard to any conflict of law rules. Each party consents to the jurisdiction of the courts located in Harris County, Texas with respect to any action arising hereunder. SECTION 15. Assignment. This Agreement, and any rights or obligations hereunder, may not be assigned by either party hereto without written consent of the other; provided, however, that the Company may assign this Agreement to Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all or substantially all of the business of the Company or to a third party acquiring all or substantially all of the business, equity or assets of the Company. SECTION 16. No Third Party Beneficiaries. No person other than Executive and his beneficiaries on the one hand and the Company or its successors and assigns on the other hand shall be made a party to this Agreement directly or indirectly or have any rights or benefits under this Agreement. SECTION 17. Captions. The titles, captions and headings in this Agreement are inserted for convenience of reference only and are not intended to form a part of, or to affect the meaning or interpretation of, this Agreement. SECTION 18. Execution in Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same Agreement, and will become a binding Agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement between Executive and the Company concerning the subject matter hereof and supersedes all previous negotiations, commitments and writings with respect to such subject matter. SECTION 20. Advice of Counsel. Executive represents and warrants that Executive has been advised by competent counsel of his own selection as to the meaning and significance of this Agreement and all of the terms hereof. /s/ Allen R. Stanley - ---------------------------------------------------- Allen R. Stanley GENESIS ENERGY, L.L.C. By: BASIS PETROLEUM, INC. As Member By: /s/ Jeffrey R. Serra - ---------------------------------------------------- Jeffrey R. Serra, Chairman, President and Chief Executive Officer EX-10 16 EXHIBIT 10.14 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made as of December 1, 1996 by and between Genesis Energy, L.L.C. (the "Company") and Ben F. Runnels ("Executive"). RECITALS: A. The Company is the general partner of Genesis Energy L.P. ("Genesis MLP") and Genesis Crude Oil, L.P. ("Genesis OLP") and is engaged in the crude oil gathering, marketing and pipeline business. B. Executive is the Vice President, Trucking Operations for the Company. C. Executive desires to obtain the benefits and incentives from the Company of a written employment agreement having an initial term through December 31, 1999, and, at the Company's election, certain extension terms. D. The Company desires to enter into such an employment agreement with Executive. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows: SECTION 1. Employment. The Company hereby employs Executive as an executive officer of the Company to perform such executive, managerial and senior operations services as may be assigned to Executive from time to time; provided, however, that Executive will continue as an employee of Executive's employer on the date hereof but will be seconded to the Company until January 1, 1997 at which time Executive will become employed by the Company. In such capacity, Executive will have the responsibilities and perform the services and duties described in Section 3 of this Agreement. Executive hereby accepts such employment and agrees to perform such services and duties for the Company. SECTION 2. Term. This Agreement will be for an initial term commencing on the effective date of that certain initial public offering of limited partnership interests in Genesis MLP and ending on December 31, 1999 (the "Initial Term"), unless sooner terminated in accordance with the provisions hereof. Thereafter, the Company will have the option, exercisable by notice to Executive given not less than 60 days prior to the expiration of the Initial Term, or any Extension Term (as hereinafter defined), to extend this Agreement for one additional term of two calendar years ending December 31, 2001, and, if, in each instance, so extended, for five additional terms of one calendar year each with the term of the last extension, if so exercised, expiring on December 31, 2006 (each such extension an "Extension Term"). Anything herein to the contrary notwithstanding, this Agreement, and Executive's employment hereunder, may be terminated at any time, with or without cause, upon notice of termination to Executive; provided, however, that in the event of any such termination without cause (including any Involuntary Termination (as hereinafter defined)), Executive will be entitled to the Termination Compensation (as hereinafter defined) set forth herein. SECTION 3. Duties of Executive. Executive will render his services to the Company as Vice President, Trucking Operations, and/or in such other executive or managerial capacities as the President and CEO of the Company may, from time to time, designate. Executive will act in the best interest of the Company, Genesis MLP and Genesis OLP and their subsidiaries and affiliates in the performance of Executive's services and duties under this Agreement. Without the prior consent of the President and CEO of the Company, Executive will not actively engage in any other business or business activity; provided, however, that nothing herein contained will limit the right of Executive to manage Executive's personal investment activities provided that such personal investment activities do not materially interfere with the performance of Executive's duties and responsibilities hereunder or otherwise materially conflict with any policies which have been promulgated and distributed by the Company. SECTION 4. Compensation. 4.1 Compensation during the Initial Term. Subject to the terms and conditions of this Agreement, the Company will cause Executive to be paid an annual salary of $10,000.00 for the partial year ending December 31, 1996 and will pay Executive an annual salary of $120,000.00 for each of the years ending December 31, 1997, 1998 and 1999 (such annual salary hereinafter referred to as the "Base Compensation"). The Base Compensation will be reviewed annually by the Compensation Committee of the Board of Directors of the Company. In addition, Executive will be entitled to participate in the Company's Incentive Plan in accordance with the terms thereof (the "Incentive Plan Amount"). 4.2 Compensation during the Extension Terms. The Base Compensation paid by the Company to Executive during the Extension Terms will be established by the Company in connection with the election to extend the term of this Agreement pursuant to Section 2, will not be less than the Base Compensation multiplied by 1.05 with respect to the first Extension Term and thereafter not less than the Base Compensation in effect immediately prior to such election for any subsequent Extension Term and will be advised to Executive simultaneously with notice from the Company of its election to exercise an Extension Term option. 4.3 Award of Restricted Units. The Company will grant to Executive Restricted Units ("Initial Award Units") in an amount determined by dividing $200,000 by the initial offering price of a limited partnership interest in Genesis MLP, pursuant to the Company's Restricted Unit Plan, in accordance with the terms thereof, promptly upon the adoption of such plan by the Board of Directors of the Company. The Initial Award Units shall vest in accordance with terms of the Restricted Unit Plan. 4.4 Short Term Disability Salary Continuance. In the event of a short term illness or injury that would entitle Executive to salary continuance benefits under the Company's short term disability salary continuance plan (the "STD Plan") in effect from time to time, and Executive's years of service with the Company, as determined in accordance with the STD Plan, are not sufficient to provide 100% of the maximum amount of salary continuance that would otherwise be available to Executive with more years of service (the "Maximum STD Payment") the Company will pay Executive, as and when salary continuance payments are made under the STD Plan, an amount equal to the difference between the Maximum STD Payment and the payment made to Executive under the STD Plan. SECTION 5. Payment of Compensation. The compensation payable to Executive pursuant to Section 4 of this Agreement will be paid as follows: (i) During the term of Executive's employment by the Company (A) the Base Compensation will be paid to Executive in accordance with the Company's customary payroll practices; and (B) the Incentive Plan Amount, if any, will be paid in the manner determined by the Compensation Committee of the Board of Directors of the Company in accordance with the Incentive Plan. (ii) Upon termination of Executive's employment by the Company in accordance with Section 7.5(A) of this Agreement, the Termination Compensation (as hereinafter defined), if any, will be paid in accordance with the provisions of Section 7.5(C). All payments of Base Compensation, the Incentive Plan Amount, Initial Award Units and any other amounts paid to Executive will be subject to such deductions and withholdings as, from time to time, may be required by law or as may be elected by Executive pursuant to the Company's benefit plans in effect from time to time. SECTION 6. Employment Benefits. During the Initial Term or any Extension Term of Executive's employment by the Company, Executive will be entitled to four weeks paid vacation. In addition, Executive will be entitled to sick leave in accordance with the Company's sick leave plans in effect from time to time, and to participate, subject to qualification requirements, in such medical, dental, life or other insurance or employee benefit plans as the Company may have in effect from time to time and generally offer to its employees. SECTION 7. Termination. 7.1 Termination for Cause. This Agreement will be null and void (except for the provisions of Section 8 concerning Confidentiality which will survive any termination of this Agreement) upon the termination of Executive's employment for Cause. As used in this Agreement, "Cause" will mean (a) conviction of Executive, in a final non-appealable decision, in a court of law of a felony, a crime involving moral turpitude or any crime or offense involving the misuse or misappropriation of money, credit or other property of the Company or any subsidiary or affiliate of the Company which hereinafter may employ Executive; provided, however, that the Company may suspend Executive's employment and any payment due Executive under this Agreement during the pendency of any such criminal charge; (b) violation in any material respect of any material rule or policy promulgated and distributed by the Company, Genesis MLP, Genesis OLP or any subsidiary or affiliate of the Company which hereinafter may employ Executive (hereinafter the "Genesis Affiliates"); (c) violation, as determined in a final non-appealable decision, of any rule or regulation of any regulatory or self-regulatory body to which any of the Genesis Affiliates is subject or of which any of the Genesis Affiliates is a member including without limitation, the New York Stock Exchange, The National Association of Securities Dealers, Inc., the Commodity Futures Trading Commission and the New York Mercantile Exchange, which violation would materially reflect on Executive's character, competence or integrity; (d) a material breach by Executive of Executive's duty of loyalty to any of the Genesis Affiliates including, by way of illustration, Executive's pretermination of employment solicitation of customers or employees of any of the Genesis Affiliates, unauthorized removal of Confidential Business Information (as hereinafter defined) from the premises of any of the Genesis Affiliates and the dissemination thereof or refusal to return such Confidential Business Information to the Company; (e) Executive's material breach of this Agreement; or (f) Executive's gross misconduct, gross insubordination or willful refusal to perform the lawful duties of his employment. In no event will Executive be entitled to any compensation or payments under this Agreement following Executive's termination, or deemed termination, for Cause, provided that Executive's termination for Cause under this Agreement shall not affect Executive's rights with respect to any Initial Award Units that shall have vested at the time of termination. If, after Executive's termination of employment, it is determined that Executive's employment could have been terminated for Cause under items (a),(b),(c) or (d) above and such grounds for termination resulted in or reasonably could be expected to result in injury to the business, reputation or prospects of the Company or the Genesis Affiliates, Executive's employment shall, at the election of the Company in its sole discretion, be deemed to have been terminated for Cause. If Executive's employment and payment are suspended pursuant to item (a) above, Executive will have the right, excercisable by notice to the Company given within 15 days after any such suspension, to treat such suspension as a termination for Cause and resign from the Company without being bound by the non-compete provisions of Section 10 of this Agreement. 7.2 Involuntary Termination. Executive's employment will be considered to have been terminated involuntarily (an "Involuntary Termination") upon occurrence of the following: (a) reduction in Executive's Base Compensation or exclusion, other than for failure to meet qualification requirements, from the Company's employee benefit plans in effect from time to time and generally offered to its employeesor (b) the Company's material breach of this Agreement. Executive will promptly, but in any event within 30 days after the occurrence or discovery thereof, notify the Company of any event which Executive considers an Involuntary Termination. 7.3 Termination under Benefit Plans. If Executive's employment is terminated in accordance with the terms of the Company's long term disability plan in effect from time to time, any unpaid portion of Executive's Base Compensation will be due Executive pursuant to this Agreement only for periods prior to such termination, and any payment pursuant to the Incentive Plan may be made solely in the discretion of the Compensation Committee and otherwise in accordance with the terms of such plan. 7.4 Termination due to Death. If Executive dies while employed by the Company, this Agreement will immediately terminate and, except for any unpaid portion of Executive's Base Compensation for periods prior to Executive's death, no further payments will be due hereunder, whether to Executive, Executive's heirs, estate or otherwise; provided, however, that Executive's heirs and estate will be entitled to retain any Initial Award Units for a period of six months after Executive's death. Executive shall have the right to designate in writing from time to time a beneficiary or beneficiaries by filing a written notice of such designation with the Company, which Beneficiary shall be entitled to receive any amount required to be paid as provided in this Section 7.4 in the event of the Executive's death. In the event that the beneficiary designated by Executive does not survive Executive and no successor beneficiary is selected or in the event no valid designation has been made, Executive's beneficiary shall be such Executive's estate. In the event of the death of Executive, any payment required to be made hereunder to Executive shall be made to such Executive's beneficiary or beneficiaries. In the event Executive's beneficiary is the Executive's estate, no payment shall be made unless the Company shall have been furnished with such evidence as the Company may deem necessary to establish the validity of the payment. 7.5 Termination Compensation. (A) In the event the Company (i) terminates Executive's employment during the Initial Term or any Extension Term for any reason other than Cause, including any Involuntary Termination, or as provided in Section 7.3 of this Agreement, or (ii) does not exercise its option to extend the Initial Term or any Extension Term of this Agreement, the Company will pay Executive, in full settlement of all sums due Executive from the Company (excluding, however, any sums then due Executive under any of the Company's benefit plans or with respect to accrued vacation), whether under this Agreement or arising at law or in equity, a termination payment (the "Termination Compensation") equal to the greater of (i) Executive's Base Compensation for the remaining period of the Initial Term or Extension Term then in effect, as the case may be, or (ii) one year of Executive's Base Compensation at the level in effect at the time of termination or expiration without exercise of the option to extend. In addition, Executive will be entitled to (a) retain any Initial Award Units for a period of six months after Executive's termination or after expiration of this Agreement without the exercise by the Company of the option to extend, (b) such Incentive Compensation, if any, as may be payable to Executive in accordance with any Incentive Compensation plan then in effect and (c) in the event Executive elects to continue medical and/or dental coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company will pay Executive, as and when required to maintain such coverage, an amount equal to the required premiums for the duration of the Non-Compete Period (as hereinafter defined). (B) As a condition to the right to receive the Termination Compensation, Executive will (i) execute and deliver to the Company a severance and release agreement in the form attached hereto as Exhibit A, and (ii) Executive will not, for a period (the "Non-Compete Period") equal to (a) six months in the event the Company does not exercise its option to extend this Agreement or (b) or in the event of termination of the shorter of one year after the date of Executive's termination or the unexpired portion of the Initial Term or Extension Term, as the case may be, but in no event less than six months, either directly or indirectly, compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including pipeline) business whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise, in the geographical areas in which the Company then operates or is engaged in business. (C) The Termination Compensation will be paid to Executive in the event of a termination pursuant to Section 7.5(A) above, in four equal installments with the first installment due on the date of such termination and the remaining installments at equal intervals thereafter over the applicable Non-Compete Period. SECTION 8. Confidentiality. Executive acknowledges that the business of the Company and the Genesis Affiliates is highly competitive and that the Company's method of operation, crude oil trading practices, financial condition and other matters relating to the conduct of such business, and the conduct of such business as previously conducted by Basis Petroleum, Inc. and Howell Corporation and its affiliates, comprise confidential business information (the "Confidential Business Information") which is unique and valuable to the Company. Executive further acknowledges that the use of the Confidential Business Information by Executive in competition with the Company and the Genesis Affiliates will be highly detrimental to the continued successful operation of the business of the Company and the Genesis Affiliates. Executive will keep the Confidential Business Information confidential and will not disclose it to any unauthorized parties. Executive acknowledges and agrees that the Company shall have the broadest possible protection, consistent with public policy, of the business of the Company and the Genesis Affiliates from the wrongful use by Executive of such Confidential Business Information. Confidential Business Information shall not include any information which is generally available to the public other than as a result of a disclosure by Executive or which was known to Executive prior to Executive's employment with the Company or with Basis Petroleum, Inc. or Howell Corporation and its affiliates, as the case may be. SECTION 9. Remedies. Each of the parties acknowledges that the rights hereunder are necessarily of a special, unique and extraordinary nature, and that the loss arising from a breach hereof cannot reasonably and adequately be compensated by money damages and will cause a party to suffer irreparable harm. Accordingly, upon the breach by a party of any material term of this Agreement at any time, the other party shall be entitled to injunctive or other extraordinary relief in case of such breach, and such injunctive or other extraordinary relief shall be cumulative to, but not in limitation of, any other remedies to which the party may be entitled as a result of the breach of such Agreement. In the event Executive breaches this Agreement, the Company will also have the right, in addition to any other rights it may have at law, in equity or under this Agreement to cancel, withhold and/or offset any payments due Executive hereunder against any payments otherwise due to Executive from the Company, Genesis MLP or Genesis OLP. In any action to enforce any right or remedy hereunder, the prevailing party in a final non-appealable decision of a court of competent jurisdiction shall be entitled to recover such prevailing party's reasonable legal fees and expenses. SECTION 10. Noncompetition. If Executive resigns or otherwise terminates his employment for any reason other than the Company's breach of a material provision of this Agreement, or as a result of an Involuntary Termination, then, Executive will not, for the duration of the Non-Compete Period, directly or indirectly compete with the Company in the crude oil gathering, marketing (including domestic crude oil trading but excluding trading solely on the New York Mercantile Exchange or other commodities exchanges) and transportation (including) pipeline business at the time of such resignation or termination whether as an employee, officer, director, shareholder (other than as an ordinary shareholder of a publicly traded entity), partner, proprietor or otherwise in the geographical areas in which the Company then operates or is engaged in business. Executive will not be entitled to any compensation or payments under this Agreement following any such resignation or termination except for Incentive Compensation, if any, payable to Executive in accordance with any Incentive Compensation plan then in effect. SECTION 11. Amendments; Waivers. This Agreement may not be modified, revised, amended or waived in any manner except by an instrument in writing signed on behalf of each of the parties by their respective duly authorized representatives. No delay on the part of either party in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any partial exercise or waiver of any right, power or privilege under this Agreement preclude any other or further exercise of such right, power or privilege. SECTION 12. Severability. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable in any respect, the parties will amend this Agreement to provide a substitute provision which as nearly as possible carries out the intent of the provision so held invalid or unenforceable; provided, however, that no such amendment will in any way materially increase the obligation of either party under this Agreement. Any such determination of invalidity or unenforceability will not affect such provision in any other respect or affect any other provision of this Agreement all of which will remain in full force and effect. SECTION 13. Notices. All notices and other communications under this Agreement will be in writing and will be duly given (i) upon delivery if delivered personally with signed receipt acknowledging delivery; or (ii) upon dispatch if telexed (with answerback confirmation) or telegraphed (and if telegraphed confirmed by first-class mail as hereinafter provided); or (iii) if mailed, by first class mail, postage prepaid, ten business days after date of mailing, addressed as follows: (a) If to the Company Genesis Energy, L.L.C. One Allen Center, Suite 3200 500 Dallas Houston, Texas 77002 Attention: President (b) If to Executive Ben F. Runnels at such address as appears on the records of the Company or to such other address as a party may from time to time designate in the manner heretofore provided. SECTION 14. Governing Law and Jurisdiction. This Agreement and the obligations of the parties hereunder will be governed by and construed in accordance with the substantive laws of the State of Texas without regard to any conflict of law rules. Each party consents to the jurisdiction of the courts located in Harris County, Texas with respect to any action arising hereunder. SECTION 15. Assignment. This Agreement, and any rights or obligations hereunder, may not be assigned by either party hereto without written consent of the other; provided, however, that the Company may assign this Agreement to Genesis MLP, Genesis OLP, an affiliate of the Company which has succeeded to all or substantially all of the business of the Company or to a third party acquiring all or substantially all of the business, equity or assets of the Company. SECTION 16. No Third Party Beneficiaries. No person other than Executive and his beneficiaries on the one hand and the Company or its successors and assigns on the other hand shall be made a party to this Agreement directly or indirectly or have any rights or benefits under this Agreement. SECTION 17. Captions. The titles, captions and headings in this Agreement are inserted for convenience of reference only and are not intended to form a part of, or to affect the meaning or interpretation of, this Agreement. SECTION 18. Execution in Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same Agreement, and will become a binding Agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. SECTION 19. Entire Agreement. This Agreement constitutes the entire agreement between Executive and the Company concerning the subject matter hereof and supersedes all previous negotiations, commitments and writings with respect to such subject matter. SECTION 20. Advice of Counsel. Executive represents and warrants that Executive has been advised by competent counsel of his own selection as to the meaning and significance of this Agreement and all of the terms hereof. /s/ Ben F. Runnels - ----------------------------------------------- Ben F. Runnels GENESIS ENERGY, L.L.C. By: BASIS PETROLEUM, INC. As Member By: /s/ Jeffrey R. Serra - ----------------------------------------------- Jeffrey R. Serra, Chairman, President and Chief Executive Officer EX-21 17 EXHIBIT 21.1 GENESIS ENERGY, L.P. SUBSIDIARIES OF THE REGISTRANT Genesis Crude Oil, L.P. (a Delaware limited partnership) EX-27 18
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT ON FORM 10-K OF GENESIS ENERGY, L.P. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 1-MO DEC-31-1996 DEC-01-1996 DEC-31-1996 11,878 0 388,807 0 8,290 410,371 100,097 11,160 509,900 398,563 0 0 0 0 0 509,900 370,559 371,985 366,723 368,994 0 0 0 1,684 0 1,347 0 0 0 1,347 0 0 GENESIS ENERGY, L.P. IS A MASTER LIMITED PARTNERSHIP AND THERFORE HAS NO COMMON STOCK OUTSTANDING. GENESIS ENERGY, L.P. IS AMASTER LIMITED PARTNERSHIP. ITS BALANCE SHEET INCLUDES MINORITY INTERESTS IN ITS SUBSIDIARY, GENESIS CRUDE OIL, L.P. OF $26,257 AND PARTNERS' CAPITAL CONSISTING OF THE CAPITAL OF THE COMMON UNITHOLDERS OF $83,378 AND THE CAPITAL OF THE GENERAL PARTNER OF $1,702. TOTAL COSTS INCLUDES DEPRECIATION AND AMORTIZATION OF $518. THE MINORITY INTERESTS IN NET INCOME OF GENESIS ENERGY, L.P. IS $337. NET INCOME PER COMMON UNIT IS $0.15.
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