Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of
report (date of earliest event reported): November 19, 2009
SEMGROUP
ENERGY PARTNERS, L.P.
(Exact
name of Registrant as specified in its charter)
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DELAWARE
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001-33503
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20-8536826
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(State
of incorporation
or
organization)
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(Commission
file number)
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(I.R.S.
employer identification number)
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Two
Warren Place
6120
South Yale Avenue, Suite 500
Tulsa,
Oklahoma
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74136
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(Address
of principal executive offices)
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(Zip
code)
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Registrant’s
telephone number, including area code: (918) 237-4000
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
[
] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act(17 CFR
240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act(17 CFR
240.13e-4(c))
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Item
1.01.
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Entry
into a Material Definitive
Agreement.
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In connection
with the Vitol Change of Control described under Item 5.01 below, SemGroup
Energy Partners, L.P. (the “Partnership”) entered into an Amendment to Credit
Agreement (the “Amendment”) with its lenders on November 19,
2009. The Amendment allowed for the Vitol Change of
Control. In addition, among other things, the Amendment (i)
permanently reduced the Partnership’s revolving credit facility under the Credit
Agreement from $50.0 million to $40.0 million, (ii) requires the Partnership to
make annual prepayments with 75% of excess cash flow, (iii) prohibits the
Partnership from entering into any contract or arrangement for the purpose of
hedging or speculating in the price of any commodity and (iv) eliminates the
Partnership’s ability to repurchase amounts outstanding under the Credit
Agreement via a Dutch auction process. The Partnership paid the
Lenders executing the Amendment a fee equal to 0.10% of the aggregate
commitments of such Lenders under the Credit Agreement after the above described
commitment reduction.
After giving
effect to the Amendment, the Partnership is expected to have $422.5 million in
outstanding borrowings under its credit facility (including $22.5 million under
its revolving credit facility and $400.0 million under its term loan facility),
with an aggregate unused credit availability under its revolving credit facility
and cash on hand of approximately $19.3 million. Amounts outstanding under the
Partnership’s revolving credit facility will never exceed $40.0
million.
This
description of the Amendment is qualified in its entirety by reference to the
Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on
Form 8-K and is incorporated into this Item 1.01 by reference.
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Item
5.01.
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Changes
in Control of Registrant.
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As previously
disclosed in a Current Report on Form 8-K, filed with the Securities and
Exchange Commission on October 8, 2009, Vitol, Inc. (“Vitol”) and Manchester
Securities Corp. entered into an agreement pursuant to which Vitol would acquire
100% of the membership interests in SemGroup Energy Partners G.P., L.L.C., the
Partnership’s general partner (the “General Partner”), and the Partnership’s
subordinated units. On November 24, 2009, the transactions
contemplated by the agreement were consummated and Vitol acquired 100% of the
membership interests in the General Partner and the Partnership’s subordinated
units (the “Vitol Change of Control”). As owner of 100% of the
membership interests in the General Partner, Vitol effectively controls the
General Partner and the Partnership, and SemGroup, L.P., the Partnership’s
former parent, no longer has any ownership interest in the General
Partner.
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Item
5.02.
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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Reorganization
of the Board
In connection
with the Vitol Change of Control, the Board of Directors of the General Partner
(the “Board”) was reconstituted. Pursuant to notices given on
November 20, 2009, Messrs. Edward F. Kosnik and Gabriel Hammond resigned from
the Board effective as of the closing of the Vitol Change of Control, which
occurred on November 24, 2009. In addition, on November 24, 2009,
Messrs. David N. Bernfeld and Dave Miller resigned from the
Board. The resignations by Messrs. Kosnik, Hammond, Bernfeld and
Miller were not due to any disagreements with the Partnership or the General
Partner.
In addition,
on November 24, 2009, Messrs. Miguel A. (“Mike”) Loya, Javed Ahmed, James C.
Dyer, IV, Christopher G. Brown, Steven M. Bradshaw and John A. Shapiro were
appointed to the Board. Messrs. Loya, Ahmed, Dyer and Brown are
affiliated with Vitol. Messrs. Bradshaw and Shapiro will serve as
independent members of the Board and will be members of the Conflicts Committee,
Audit Committee and Compensation Committee of the Board. Mr. Bradshaw
will chair the Conflicts Committee while Mr. Shapiro will chair the Compensation
Committee. Mr. Duke R. Ligon will continue to serve on the Board and
will remain as the Chairman of the Board, the chair of the Audit Committee and a
member of the Compensation Committee and the Conflicts Committee of the
Board.
As
independent members of the Board, Messrs. Bradshaw, Shapiro and Ligon will
receive the following compensation: (i) $75,000 per year as an annual retainer
fee, (ii) $5,000 per year for serving on each committee of the Board (except
that the chairperson of each committee will receive $10,000 per year for serving
as chairperson of such committee), (iii) $10,000 per year if Chairman of the
Board, (iv) $2,000 per diem for each Board or committee meeting attended, (v)
5,000 restricted common units upon becoming a director, vesting in one-third
increments over a three-year period, (vi) 2,500 restricted common units on each
anniversary of becoming a director, vesting in one-third increments over a
three-year period, (vii) reimbursement for out-of-pocket expenses associated
with attending Board or committee meetings and (viii) director and officer
liability insurance coverage. The initial grants of restricted common
units to Messrs. Bradshaw and Shapiro were made pursuant to a restricted common
unit agreement, the form of which is filed as Exhibit 10.9 to the Partnership’s
Registration Statement on Form S-1 (Reg. No. 333-141196), filed May 25,
2007.
Mr. Loya has
served as a director of Vitol since 1997 and as the President of Vitol, Inc.
since 1999. As such, he is Vitol’s senior shareholder responsible for
the management of the Vitol Group’s trading activities, companies and assets in
North and South America. Previously, Mr. Loya has enjoyed positions
with Transworld Oil U.S.A., Inc., Tenneco Inc. and Exxon Mobile Corporation. He
currently serves on the board of OTC Global Holdings Co., Yes Prep Public
Schools and Pilot Travel Centers LLC. Mr. Loya holds an MBA from
Harvard University and a Bachelors degree in mechanical engineering from the
University of Texas at El Paso.
Mr. Ahmed has
served as the Head of Acquisitions and Investments for the Vitol Group since
June 2009. Prior to joining Vitol, Mr. Ahmed was at Morgan Stanley from
1997 to 2009, and was a Managing Director in that firm’s Commodities Group.
Mr. Ahmed currently serves on the board of directors of Vitol Tank
Terminals International, which owns and controls significant oil products
tankage globally. He has previously served on the board of directors of
Heidmar Group Inc., TransMontaigne Inc. and TransMontaigne GP L.L.C., the
general partner of TransMontaigne Partners L.P. Mr. Ahmed holds a Juris
Doctor degree and an MBA from Harvard University and a Bachelors degree from
Yale University.
Mr. Dyer has
served as a director and Vice President, Projects and Business Development, of
Vitol, Inc. since 2005. Mr. Dyer first joined Vitol in 1990, where he
was responsible for structured financing and project
development. From 2001 to 2003, Mr. Dyer served as Corporate Senior
Vice President and Chief Commercial Officer for El Paso Merchant Petroleum, and
from 1998 to 2001 he served as an officer in various capacities at Engage Energy
US, L.P., a natural gas and electric power marketing joint venture between the
Coastal Corporation and Westcoast Energy (Canada). From 1996 to 1998,
he was President and CEO of Euromin, Inc., a Vitol subsidiary engaged in trading
aluminum and other nonferrous metals. Prior to that time, he was
Chief Economist for Texas Commerce Bank. Mr. Dyer is a Chartered
Financial Analyst and a Financial Analysts Federation, Fellow and holds degrees
in accounting and economics.
Mr. Brown has
served as a crude oil trader at Vitol since February 2005. Prior to
joining Vitol, Mr. Brown had served as a crude oil trader for Koch Supply and
Trading, LP since 1997. Previously, he had served in various
positions with Koch Oil Company and Koch Refining Company. Mr. Brown
holds a Bachelors degree in chemical engineering from the University of
Minnesota.
Mr. Bradshaw
has over 30 years of experience in the global logistics and transportation
industry and currently serves as the Managing Director at Global Logistics
Solutions. From 2005 to 2009, he served as Vice President - Administration
of Premium Drilling, Inc., an offshore drilling contractor that provides jack-up
drilling services to the oil and gas industry in the United States and
internationally. Previously, he served as Executive Vice President of
Skaugen PetroTrans, Inc. from 2001 to 2003 and as President, Refined
Products Division at Kirby Corporation, from 1992 to 1996. Mr.
Bradshaw also served as an officer in the United States Navy and holds an MBA
from Harvard University and a Bachelors degree in mathematics from the
University of Missouri-Columbia. There is no arrangement or
understanding between Mr. Bradshaw and any other persons or entities pursuant to
which Mr. Bradshaw was appointed as a director.
Mr. Shapiro
recently retired as an officer at Morgan Stanley & Co. where he had served
for more than 24 years in various capacities, most recently as Global Head of
Commodities. While an officer at Morgan Stanley, Mr. Shapiro
participated in the successful acquisitions of TransMontaigne Inc. and Heidmar
Inc. and served as a member of the board of directors of both
companies. Prior to joining Morgan Stanley & Co., Mr. Shapiro
worked for Conoco, Inc. and New England Merchants National Bank. Mr.
Shapiro has been a lecturer at Princeton University, Harvard University School
of Government, HEC Business School (Paris, France) and Oxford University Energy
Program (Oxford, UK). In addition, he serves on the board of
directors of Citymeals-on-Wheels and holds an MBA from Harvard University and a
Bachelors degree in economics from Princeton University. There is no
arrangement or understanding between Mr. Shapiro and any other persons or
entities pursuant to which Mr. Shapiro was appointed as a director.
Reorganization
of the Management Team
On November
24, 2009, Mr. J. Michael Cockrell was appointed as the President and Chief
Operating Officer of the General Partner. In addition, Messrs. Kevin
L. Foxx and Michael J. Brochetti are stepping down from their current positions
as President and Chief Executive Officer of the General Partner and Executive
Vice President—Corporate Development and Treasurer of the General Partner,
respectively, but are expected to remain as consultants to the General Partner
until March 1, 2010 to facilitate an orderly transition. The General
Partner expects to enter into consulting agreements with Messrs. Foxx and
Brochetti in the near future.
Mr. Cockrell,
age 62, has extensive experience in the crude oil industry and prior to joining
the General Partner served as Senior Vice President, Commercial Upstream, of the
general partner of TEPPCO Partners, L.P. from February 2003 until November 2009.
Previously he had served in various positions with the general partner of TEPPCO
Partners, L.P. including serving as Vice President, Commercial
Upstream.
In connection
with his appointment as the President and Chief Operating Officer of the General
Partner, Mr. Cockrell will enter into an employment agreement
substantially in the form attached hereto as Exhibit 10.2 (the “Employment
Agreement”) and the General Partner’s customary indemnification agreement
substantially in the form filed as Exhibit 10.7 to the Partnership’s
Registration Statement on Form S-1 (Reg. No. 333-141196), filed May 25,
2007.
Pursuant to
the Employment Agreement, Mr. Cockrell will be paid an initial annual base
salary of $282,000. The Employment Agreement has a five year term. In addition,
during the period from 2010 to 2013, Mr. Cockrell is entitled to certain
deferred payments as compensation for long-term incentive awards which he
forfeited upon leaving his prior employer, which payments will total $2,080,377,
and may be made in the form of cash or equity incentives. These
deferred payment amounts will be accelerated upon a Change of Control (as
defined below), or upon his termination without Cause (as defined below), for
Good Reason (as defined below) or due to death or disability. Mr.
Cockrell is also eligible for discretionary bonus awards and long-term
incentives which may be made from time to time in the sole discretion of the
Board. The Employment Agreement also provides that Mr. Cockrell is
eligible to participate in any employee benefit plans maintained by the General
Partner and is entitled to reimbursement for certain out-of-pocket
expenses. Mr. Cockrell has agreed not to disclose any confidential
information obtained by him while employed under the Employment Agreement and
has agreed to a one year non-solicitation covenant, which in no event will
continue past the 5th anniversary of the effective date of the
agreement.
Except in the
event of termination for Cause (as defined below), termination by Mr. Cockrell
other than for Good Reason (as defined below), termination after the expiration
of the term of the Employment Agreement or termination due to death or
disability, the Employment Agreement provides for payment of any unpaid base
salary and vested benefits under any incentive plans, a lump sum payment equal
to his base salary for the lesser of (i) two years or (ii) the remainder of the
employment term, and Mr. Cockrell will also be entitled to continued
participation in the General Partner’s welfare benefit programs for the same
period of time. Based upon Mr. Cockrell's current base salary, the maximum
amount of the lump sum severance payment would be $564,000, in addition to
continued participation in the General Partner’s welfare benefit programs and
the amounts of unpaid base salary and benefits under any incentive
plans. Furthermore, the deferred payment amounts described above
would be accelerated and paid in a lump sum. Upon termination of his
employment due to death or disability, Mr. Cockrell and/or his dependents would
be entitled to the benefits continuation described above, his unpaid base salary
and accelerated payment of the deferred payment amounts described
above.
For purposes
of the Employment Agreement:
“Cause” means
(i) conviction of the officer by a court of competent jurisdiction of any felony
or a crime involving moral turpitude; (ii) the officer’s willful and intentional
failure or willful intentional refusal to follow reasonable and lawful
instructions of the Board; (iii) the officer’s material breach or default in the
performance of his obligations under the Employment Agreement; or (iv) the
officer’s act of misappropriation, embezzlement, intentional fraud or similar
conduct involving the General Partner.
“Good Reason”
means (i) a material reduction in the officer’s base salary; (ii) a material
diminution of the officer’s duties, authority or responsibilities as in effect
immediately prior to such diminution; or (iii) the relocation of the officer’s
principal work location to a location more than 100 miles from its current
location.
“Change of
Control” means any of the following events: (i) any person or group other than
SemGroup, L.P. or Vitol, Inc., or their respective affiliates, shall become the
beneficial owner, by way of merger, consolidation, recapitalization,
reorganization or otherwise, of 50% or more of the combined voting power of the
equity interests in the Partnership or in the General Partner; (ii) the
Partnership’s limited partners approve, in one or a series of transactions, a
plan of complete liquidation of the Partnership; (iii) the sale or other
disposition by either the General Partner or the Partnership of all or
substantially all of the assets of the General Partner or the Partnership in one
or more transactions to any person other than the General Partner and its
affiliates; or (iv) a transaction resulting in a person other than the General
Partner or an affiliate of the General Partner being the Partnership’s general
partner.
This
description of the Employment Agreement is qualified in its entirety by
reference to the Employment Agreement a copy of which is filed as Exhibit 10.2
to this Current Report on Form 8-K and is incorporated into this Item 5.02 by
reference.
Acceleration
of Awards and Payments
The Vitol
Change of Control constituted a change of control under the General Partner’s
Long-Term Incentive Plan (the “LTIP”), which resulted in the vesting of all
outstanding awards under the LTIP at the time of the change of
control.
In addition,
the Vitol Change of Control resulted in a change of control under the employment
agreements of Messrs. Foxx, Brochetti, Schwiering, Alex G. Stallings and Jerry
A. Parsons. If within one year after the Vitol Change of Control any such
officer is terminated by the General Partner without Cause (as defined in the
employment agreements) or such officer terminates the agreement for Good Reason
(as defined in the employment agreements), he will be entitled to payment of any
unpaid base salary and vested benefits under any incentive plans, a lump sum
payment equal to 24 months of base salary and continued participation in the
General Partner’s welfare benefit programs for the longer of the remainder of
the term of the employment agreement or one year after termination. Upon such an
event, Messrs Foxx, Brochetti, Stallings, Schwiering and Parsons would be
entitled to lump sum payments of $900,000, $600,000, $600,000, $500,000 and
$500,000, respectively, in addition to continued participation in the general
partner’s welfare benefit programs and the amounts of unpaid base salary and
benefits under any incentive plans. It is anticipated that Messrs.
Foxx and Brochetti will be paid these amounts at the termination of their
service as consultants to the General Partner on March 1, 2010.
The Vitol
Change of Control also constituted a change of control under the General
Partner’s 2009 Executive Cash Bonus Plan (the “Executive Cash Bonus
Plan”). As such, awards under the Executive Cash Bonus Plan will be
determined on a pro-rata basis as of the date of the Vitol Change of Control
with the actual earnings before interest, taxes, depreciation and amortization,
and restructuring and certain other non-cash charges (“EBITDA”) of the
Partnership, the crude business and the asphalt business, respectively, being
calculated as of the most recently completed month prior to the Vitol Change of
Control (the “Change of Control Period”) for which financial statements are
available and the target performance measures being adjusted for the Change of
Control Period as described in “Part II. Item 9B. Other Information” in the
Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008,
filed with the Securities and Exchange Commission on July 2,
2009. The Partnership currently estimates such payments to be
approximately $270,000, $180,000, $180,000, $193,750 and $150,000 to Messrs.
Foxx, Brochetti, Stallings, Schwiering and Parsons, respectively.
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Item
5.03.
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Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
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Effective
December 1, 2009, the Board approved a change to the name of the Partnership
from SemGroup Energy Partners, L.P. to Blueknight Energy Partners,
L.P. The name change was effected by a Certificate of Amendment to
the Certificate of Limited Partnership of the Partnership (the “Certificate”),
as filed with the Secretary of State of the State of Delaware on November 19,
2009.
Additionally,
effective December 1, 2009, the General Partner approved a change to the name of
the General Partner from SemGroup Energy Partners G.P., L.L.C. to Blueknight
Energy Partners G.P., L.L.C. The name change was effected by a
Certificate of Amendment to the Certificate of Formation of the General Partner
(the “General Partner Certificate”), as filed with the Secretary of State of the
State of Delaware on November 20, 2009.
Copies of the
Certificate and the General Partner Certificate are filed herewith as Exhibits
3.1 and 3.2, respectively, and incorporated herein by reference.
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Item
7.01.
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Regulation
FD Disclosure.
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On November
24, 2009, the Partnership issued a press release announcing the Vitol Change of
Control and the reconstitution of the Board and the management
team. A copy of the press release is furnished as Exhibit 99.1 to
this Current Report on Form 8-K.
Baker Botts
L.L.P. has been counsel to the Partnership and will continue as counsel
subsequent to the Vitol Change of Control.
In accordance
with General Instruction B.2 of Form 8-K, the information set forth in this Item
7.01 and in the attached exhibit shall be deemed to be “furnished” and shall not
be deemed to be “filed” for purposes of the Securities and Exchange Act of 1934,
as amended (the “Exchange Act”).
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Item
9.01.
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Financial
Statements and Exhibits.
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(d) Exhibits
In accordance with General Instruction
B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 is
deemed to be “furnished” and shall not be deemed to be “filed” for purposes of
the Exchange Act.
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EXHIBIT
NUMBER
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DESCRIPTION
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3.1
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—
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Amended
and Restated Certificate of Limited Partnership of the Registrant, dated
as of November 19, 2009, to be effective as of December 1,
2009.
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3.2
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—
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Amended
and Restated Certificate of Formation of the General Partner dated as of
November 20, 2009, to be effective as of December 1,
2009.
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10.1
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—
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Amendment
to Credit Agreement, dated as of November 19, 2009, by and among SemGroup
Energy Partners, L.P., as Borrower, SemGroup Energy Partners Operating,
L.L.C., SemGroup Energy Partners, L.L.C., SemGroup Crude Storage, L.L.C.,
SemPipe, L.P., SemPipe G.P., L.L.C., SGLP Management, Inc., SemMaterials
Energy Partners, L.L.C. and SGLP Asphalt, L.L.C., as Guarantors, Wachovia
Bank, National Association, as Administrative Agent, L/C Issuer and Swing
Line Lender, and the Lenders party thereto.
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10.2
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—
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Form
of Employment Agreement.
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99.1
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—
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Press
release dated November 24, 2009.
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SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
SEMGROUP ENERGY PARTNERS,
L.P.
By: SemGroup Energy
Partners G.P., L.L.C.
its
General Partner
Date: November
24,
2009 By: /s/ Alex G.
Stallings
Alex G. Stallings
Chief
Financial Officer and Secretary
INDEX
TO EXHIBITS
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EXHIBIT
NUMBER
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DESCRIPTION
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3.1
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—
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Amended
and Restated Certificate of Limited Partnership of the Registrant, dated
as of November 19, 2009.
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3.2
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—
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Amended
and Restated Certificate of Formation of the General Partner dated as of
November 20, 2009.
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10.1
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—
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Amendment
to Credit Agreement, dated as of November 19, 2009, by and among SemGroup
Energy Partners, L.P., as Borrower, SemGroup Energy Partners Operating,
L.L.C., SemGroup Energy Partners, L.L.C., SemGroup Crude Storage, L.L.C.,
SemPipe, L.P., SemPipe G.P., L.L.C., SGLP Management, Inc., SemMaterials
Energy Partners, L.L.C. and SGLP Asphalt, L.L.C., as Guarantors, Wachovia
Bank, National Association, as Administrative Agent, L/C Issuer and Swing
Line Lender, and the Lenders party thereto.
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10.2
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—
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Form
of Employment Agreement.
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99.1
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—
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Press
release dated November 24, 2009.
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