Exhibit 10.1
SEVERANCE AGREEMENT
This Severance Agreement is made as
of the 17th day of February, 2009, by and between Buckeye Partners,
L.P., a Delaware limited partnership (“BPL”), Buckeye
Pipe Line Services Company, a Pennsylvania corporation
(“BPLSC”), and Clark C. Smith, residing at 366
Tynebridge Lane, Houston, Texas 77024
(“Employee”).
WHEREAS, Employee has been elected
the President and Chief Operating Officer of Buckeye GP LLC
(“Buckeye GP”), the general partner of BPL, and the
President and Chief Operating Officer of MainLine Management LLC
(“MainLine Management”), the general partner of Buckeye
GP Holdings L.P., a Delaware limited partnership
(“BGH”);
WHEREAS, pursuant to the terms of
Services Agreements, BPLSC has agreed to employ and compensate
certain employees on behalf of BPL, and BPL has agreed to reimburse
BPLSC for the costs and expenses incurred by BPLSC in connection
with the provision of employment and other services to
BPL;
WHEREAS, BPLSC, on behalf of BPL, is
commencing employment of Employee as its President and Chief
Operating Officer; and
WHEREAS, in consideration of
Employee’s commencement of employment with BPLSC and his
agreement to keep information of the Partnerships (defined below)
confidential and not to compete with the Partnerships in the event
Employee’s employment is terminated, BPLSC agrees that
Employee shall receive the compensation set forth in this Agreement
as a cushion against the financial and career impact on Employee in
the event Employee’s employment with BPLSC is terminated
under the circumstances described herein;
NOW, THEREFORE, in consideration of
the foregoing and the mutual covenants and agreements hereinafter
set forth and intending to be legally bound hereby, the parties
hereto agree as follows:
1.
Definitions .
“Affiliate” shall have
the meaning ascribed to such term in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act.
“Annual Base
Compensation” shall mean $325,000 or such other amount as may
be determined from time to time to be the Annual Base Compensation
by the Compensation Committee of the Board.
“Annual Target Bonus
Opportunity” means the annual target cash bonus opportunity
(initially established as 100% of Annual Base Compensation) for
which Employee is eligible for any relevant year pursuant to any
BPL annual incentive compensation plan or program, as determined by
the Compensation Committee of the Board.
“BGH Entities” means
BGH, MainLine Management, Buckeye GP, MainLine GP, Inc., and
MainLine L.P., collectively.
“BPL Entities” means
BPL, its operating partnerships and other subsidiaries, and BPLSC,
collectively.
“Board” means the board
of directors or similar governing body of Buckeye GP.
“Cause” means
(i) habitual insobriety or substance abuse, (ii) engaging
in acts of disloyalty to BPL or BGH including fraud, embezzlement,
theft, commission of a felony, or proven dishonesty, or
(iii) willful misconduct by Employee in the performance of his
duties, or the willful failure of Employee to perform a material
function of Employee’s duties hereunder.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended.
“Internal Revenue Code”
means the Internal Revenue Code of 1986, as amended.
“Partnerships” means the
BGH Entities and the BPL Entities, collectively.
“Person” shall have the
same meaning as in Section 13(d) and 14(d) of the
Exchange Act.
“Subsidiary” means any
entity in which the BGH Entities or the BPL Entities, directly or
indirectly, own at least a 50% interest or an unincorporated entity
of which the BGH Entities or the BPL Entities, directly or
indirectly, owns at least 50% of the profits or capital
interests.
“Termination Date” means
the date of receipt of the Notice of Termination described in
Section 2 hereof or any later date specified therein, as the
case may be.
“Termination of
Employment” means the termination of Employee’s
employment relationship with the Partnerships, which event shall
constitute a “separation from service” under section
409A of the Internal Revenue Code.
2.
Notice of Termination . Any Termination of Employment
shall be communicated by a Notice of Termination in accordance with
Section 15 hereof. For purposes of this Agreement, a
“Notice of Termination” means a written notice which
(i) indicates the specific reasons for the termination,
(ii) briefly summarizes the facts and circumstances deemed to
provide a basis for termination of Employee’s employment, and
(iii) if the Termination Date is other than the date of
receipt of such notice, specifies the Termination Date (which date
shall not be more than 15 days after the giving of such
notice).
3.
Severance Compensation upon Termination .
(a)
Subject to the last sentence of this paragraph, Employee shall
receive severance compensation as described below upon a
Termination of Employment that is either:
(i)
initiated by BPLSC for any reason
other than (x) Employee’s continuous illness, injury or
incapacity for a period of six consecutive months or (y) for
“Cause”; or
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(ii)
initiated by Employee for
“Good Reason” upon one or more of the following
occurrences, subject to subsection (c) below:
(A)
any material failure of BPLSC to comply with and satisfy any of the
terms of this Agreement;
(B)
any significant reduction by BPLSC of the authority, duties, or
responsibilities of Employee;
(C)
any elimination of Employee from eligibility to participate in, or
any exclusion of Employee from participation in, employee benefit
plans or policies, except to the extent such elimination or
exclusion is applicable to Buckeye GP’s named executive
officers as a group;
(D)
any reduction in Employee’s Annual Base Compensation or any
reduction in Employee’s Annual Target Bonus Opportunity
(unless such reduction in Annual Target Bonus Opportunity is made
in connection with similar reductions in the bonus opportunities of
Buckeye GP’s named executive officers as a group);
or
(E)
a transfer of Employee, without his express written consent, to a
location that is more than 100 miles from Breinigsville,
Pennsylvania.
In the event of a Termination of Employment
described above, and subject to the last sentence of this
paragraph, BPLSC shall pay to Employee, within fifteen days after
the Termination Date, an amount in cash, payable in a lump sum,
equal to two hundred percent (200%) of Employee’s Annual Base
Compensation plus two hundred percent (200%) of Employee’s
Annual Target Bonus Opportunity for such year.
Notwithstanding the foregoing, no such payment shall be made unless
Employee executes, and does not revoke, a written release,
substantially in the form attached hereto as Annex 1 (the
“Release”), of any and all claims against the
Partnerships, BPLSC and all related parties with respect to all
matters arising out of Employee’s employment by BPLSC (other
than any entitlements under the terms of this Agreement or under
any other plans or programs of BPLSC in which Employee participated
and under which Employee has accrued or become entitled to a
benefit) or the termination thereof.
(b)
In the event a severance payment is made under paragraph
(a) above, BPLSC will provide Employee with the following
payments for a period of 24 months from the Termination Date;
provided , however , that this obligation shall cease
upon Employee’s obtaining new employment that provides
Employee with eligibility for medical benefits without a
pre-existing condition limitation (such period is referred to as
the “Benefit Period”):
(i)
During the Benefit Period, BPLSC will pay Employee a monthly
payment on the first payroll date of each month equal to the COBRA
cost of continued health and dental coverage under health and
dental plans of BPLSC pursuant to section 4980B of the Internal
Revenue Code, less the amount that Employee would be required to
contribute for health and dental coverage if Employee were an
active employee. These payments will commence on
BPLSC’s
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first payroll date after the
Termination Date and will continue until the end of the Benefit
Period.
(ii)
On each date on which a payment is made under subsection
(i) above, BPLSC will pay Employee an additional tax gross-up
amount equal to the federal, state and local income and payroll
taxes, if any, that Employee incurs on the amount paid under
subsection (i), and on the amount paid under this subsection (ii),
on that date; provided , however , that for purposes
of this subsection (ii), the aggregate tax rate for the federal,
state and local income and payroll taxes above shall be assumed to
be 25%. This gross up payment will be made with respect to
each payment under subsection (i) and will cease when payments
under subsection (i) cease.
(c)
If Employee incurs a Termination of Employment other than as
described in Section 3(a), Employee shall receive no severance
compensation under this Agreement, and this Agreement shall
terminate; provided that the obligations of Employee under Sections
10, 11, 12, 22 and 23 shall continue in effect according to their
terms.
(d)
In order for the Employee to resign for Good Reason as described in
Section 3(a)(ii) above, the Employee must provide written
notice of termination for Good Reason to BPLSC within 30 days after
the event constituting Good Reason. BPLSC shall have a period
of 30 days in which it may correct the act or failure to act that
constitutes the grounds for Good Reason as set forth in the
Employee’s notice of termination. If BPLSC does not
correct the act or failure to act, the Employee must terminate his
or her employment for Good Reason within 30 days after the end of
the cure period, in order for the termination to be considered a
Good Reason termination.
4.
Other Payments . The payment due under Section 3
hereof shall be in addition to and not in lieu of accrued but not
yet paid compensation and payments or benefits due to Employee
under any other plan, policy or program of BPLSC, except for
severance compensation as described in Section 7
below.
5.
Enforcement .
(a)
In the event that BPLSC shall fail or refuse to make payment of any
amounts due Employee under this Agreement, BPL agrees to make such
payment on behalf of BPLSC.
(b)
In the event that BPLSC shall fail or refuse to make payment of any
amounts due Employee under Sections 3 and 4 hereof within the
respective time periods provided therein, BPL shall pay to an
escrow agent, who shall invest such sum with interest to be paid to
the prevailing party, any amount remaining unpaid under Sections 3
or 4. In such event, the parties shall engage in arbitration in the
City of Philadelphia, Pennsylvania, in accordance with the National
Rules for the Resolution of Employment Disputes then in effect
of the American Arbitration Association, before a panel of three
arbitrators, one of whom shall be selected by BPLSC and one by
Employee, and the third of whom shall be selected by the other two
arbitrators. Any award entered by the arbitrators shall be
final, binding and nonappealable and judgment may
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be entered thereon by either party in accordance
with applicable law in any court of competent jurisdiction.
This arbitration provision shall be specifically enforceable.
The arbitrators shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by
virtue of the Agreement.
(c)
BPLSC shall pay Employee on demand the amount necessary to
reimburse Employee in full for all reasonable expenses (including
reasonable attorneys’ fees and expenses) incurred by Employee
in enforcing any of the obligations of BPLSC and BPL under this
Agreement subject to Employee’s duty to repay such sums to
BPLSC and BPL in the event that the Employee does not prevail
on any material issue which is the subject of such
arbitration. If Employee prevails on at least one material
issue which is the subject of such arbitration, BPL shall be
responsible for all of the fees of the American Arbitration
Association and the arbitrators and any expenses relating to the
conduct of the arbitration (including Employee’s reasonable
attorneys’ fees and expenses). Otherwise, each party
shall be responsible for his or its own expenses relating to the
conduct of the arbitration (including reasonable attorneys’
fees and expenses) and shall equally share the fees of the American
Arbitration Association. All reimbursements shall be made in
accordance with section 409A of the Internal Revenue
Code.
6.
No Mitigation . Employee shall not be required to
mitigate the amount of any payment or benefit provided for in this
Agreement by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for herein be reduced by
any compensation earned by other employment or
otherwise.
7.
Non-exclusivity of Rights . Nothing in this Agreement
shall prevent or limit Employee’s continuing or future
participation in or rights under any benefit, bonus, incentive or
other plan or program provided by the BGH Entities or the BPL
Entities, and for which Employee may qualify, from the date hereof
through the Termination Date; provided , however ,
that Employee hereby waives Employee’s right to receive any
payments under any severance pay plan or similar program applicable
to other employees of BPLSC, the BPL Entities or the BGH
Entities.
8.
No Set-Off . Except as specifically provided for
herein, the obligation of BPL and BPLSC to make the payments
provided for in this Agreement and otherwise to perform their
obligations hereunder shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the BGH Entities or the
BPL Entities may have against Employee or others.
9.
Taxes . Any payment required under this Agreement
shall be subject to all requirements of law with regard to the
withholding of taxes, filing, making of reports and the like, and
BPL and BPLSC shall use their best efforts to satisfy promptly all
such requirements.
10.
Confidential Information . Employee recognizes and
acknowledges that, by reason of his relationship to the
Partnerships, he has had and will continue to have access to
confidential information of the Partnerships, including, without
limitation, information and knowledge pertaining to products and
services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods
and systems, sales and profit
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figures, customer and client lists, and
relationships between the entities (“Confidential
Information”). Employee acknowledges that such
Confidential Information is a valuable and unique asset and
covenants that he will not, either during or after his employment
by BPLSC, disclose or use any such Confidential Information to any
person for any reason whatsoever without the prior written
authorization of the Board; unless such information is in the
public domain through no fault of Employee or except as may be
required by law.
11.
Non-Competition .
(a)
During his employment by BPLSC and for a period of one year
thereafter, Employee will not, unless acting with the prior written
consent of the Board, directly or indirectly, own, manage, operate,
join, control or participate in the ownership, management,
operation or control, or be connected as an officer, director,
manager, member, emplo
