Exhibit 4.07


 




 


 





KANEB PIPE LINE
OPERATING PARTNERSHIP, L.P.


 


Issuer


 


and


 


JPMORGAN CHASE BANK


 


Trustee


 


 


FOURTH SUPPLEMENTAL
INDENTURE


 


 


Dated as of May 27,
2003


 


 


5.875% SENIOR UNSECURED
NOTES DUE 2013


 




 





 





















 


TABLE OF CONTENTS


 


	
  ARTICLE 1

  	
   

  	
  Relation to Indenture; Definitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 1.01.

  	
   

  	
  Relation to Indenture

  	
   

  
	
   

  	
  Section 1.02.

  	
   

  	
  Definitions and References

  	
   

  
	
   

  	
  Section 1.03.

  	
   

  	
  General References

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  The Series of Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.01.

  	
   

  	
  The Form and Title of the Debt
  Securities

  	
   

  
	
   

  	
  Section 2.02.

  	
   

  	
  Amount

  	
   

  
	
   

  	
  Section 2.03.

  	
   

  	
  Stated Maturity

  	
   

  
	
   

  	
  Section 2.04.

  	
   

  	
  Interest and Interest Rates

  	
   

  
	
   

  	
  Section 2.05.

  	
   

  	
  Place of Payment

  	
   

  
	
   

  	
  Section 2.06.

  	
   

  	
  Optional Redemption

  	
   

  
	
   

  	
  Section 2.07.

  	
   

  	
  Sinking Fund Obligations

  	
   

  
	
   

  	
  Section 2.08.

  	
   

  	
  Defeasance and Discharge; Covenant
  Defeasance

  	
   

  
	
   

  	
  Section 2.09.

  	
   

  	
  Global Securities

  	
   

  
	
   

  	
  Section 2.10.

  	
   

  	
  Registrar

  	
   

  
	
   

  	
  Section 2.11.

  	
   

  	
  Applicability of Additional Covenants and
  Definitions to the Notes.

  	
   

  
	
   

  	
  Section 2.12.

  	
   

  	
  Other Terms: Percentage of Principal Amount

  	
   

  
	
   

  	
  Section 2.13.

  	
   

  	
  Cusip Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
   

  	
  Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.01.

  	
   

  	
  Limitations on Liens

  	
   

  
	
   

  	
  Section 3.02.

  	
   

  	
  Restriction of Sale-Leaseback Transaction

  	
   

  
	
   

  	
  Section 3.03.

  	
   

  	
  Transactions with Affiliates

  	
   

  
	
   

  	
  Section 3.04.

  	
   

  	
  Restricted Payments

  	
   

  
	
   

  	
  Section 3.05.

  	
   

  	
  Sale of Assets

  	
   

  
	
   

  	
  Section 3.06.

  	
   

  	
  Fundamental Changes

  	
   

  
	
   

  	
  Section 3.07.

  	
   

  	
  Waiver of Certain Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.01.

  	
   

  	
  Modified Event of Default

  	
   

  
	
   

  	
  Section 4.02.

  	
   

  	
  Additional Event of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  Miscellaneous

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.01.

  	
   

  	
  Certain Trustee Matters

  	
   

  
	
   

  	
  Section 5.02.

  	
   

  	
  Continued Effect

  	
   

  
	
   

  	
  Section 5.03.

  	
   

  	
  Governing Law

  	
   

  
	
   

  	
  Section 5.04.

  	
   

  	
  Counterparts

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Exhibit A:

  	
  Form of Note

  	
   

  



 





















 


FOURTH SUPPLEMENTAL INDENTURE, dated as of May 27,
2003 (the “Supplemental Indenture”), between KANEB PIPE LINE OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the “Company”), having its principal
office at 2435 North Central Expressway, Richardson, Texas, and JPMORGAN CHASE
BANK, a New York banking corporation (“JPMorgan”), as trustee under the
Indenture referred to below (in such capacity, the “Trustee”).


 


RECITALS OF THE COMPANY


 


WHEREAS, the Company has heretofore entered into
an Indenture, dated as of February 21, 2002 (the “Original Indenture”),
with JPMorgan, as trustee;


 


WHEREAS, the Original Indenture is incorporated herein
by this reference and the Original Indenture, as supplemented by this
Supplemental Indenture, is herein called the “Indenture”;


 


WHEREAS, under the Original Indenture, a new
series of Debt Securities may at any time be established by the Board of Directors
in accordance with the provisions of the Original Indenture, and the terms of
such series may be established by a supplemental Indenture executed by the
Company and the Trustee;


 


WHEREAS, pursuant to the Original Indenture, as
amended and supplemented by the First Supplemental Indenture dated as of February 21,
2002, between the Company and the Trustee, the Company issued $250,000,000 aggregate
principal amount of its 7.750% Senior Notes due 2012;


 


WHEREAS, the Company proposes to create under
the Indenture a new series of Debt Securities;


 


WHEREAS, additional Debt Securities of other
series hereafter established, except as may be limited in the Original Indenture
as at the time supplemented and modified, may be issued from time to time pursuant
to the Indenture as at the time supplemented and modified; and


 


WHEREAS, all acts and things necessary to make
the Notes (as herein defined), when executed by the Company and authenticated and
delivered by the Trustee as provided in the Original Indenture and this
Supplemental Indenture, the valid and binding obligations of the Company and to
make this Supplemental Indenture a valid and binding agreement in accordance with
the Original Indenture have been done or performed;


 


NOW, THEREFORE, in consideration of the premises,
agreements and obligations set forth herein and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto hereby agree, for the equal and proportionate benefit of all Holders of
the Notes, as follows:


 


ARTICLE 1
- RELATION TO INDENTURE; DEFINITIONS


 


Section 1.01.
Relation to Indenture.


 


With respect to the Notes, this Supplemental Indenture
constitutes an integral part of the Indenture.


 


Section 1.02.
Definitions and References.


 


For all purposes of this Supplemental Indenture,
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned in the Original Indenture. The following are definitions used
in this Supplemental Indenture:


 


“Affiliate” of any
specified Person means any other Person, directly or indirectly, controlling or
controlled by, or under direct or indirect common control with, such specified Person.
For purposes of this definition, “control,” as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise. For
purposes of this definition, the terms “controlling,” “controlled by” and “under
common control with” shall have correlative meanings. Notwithstanding the foregoing,
the term “Affiliate” shall not include a Subsidiary of any specified Person.


 


“Comparable Treasury
Issue” means the United States Treasury security or securities selected by the
Independent Investment Banker as having an actual or interpolated maturity comparable
to the remaining term of the Notes to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of a comparable maturity to the
remaining term of the Notes.


 


“Comparable Treasury
Price” means, for any redemption date relating to the Notes, (i) the
average of four Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury Dealer Quotations,
or (ii) if the Independent Investment Banker obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.


 


“Consolidated Net Tangible
Assets” means, at any date of determination, the aggregate amount of total assets
after deducting therefrom (i) all current liabilities (excluding (A) any
current liabilities that by their terms are extendable or renewable at the
option of the obligor thereon to a time more than 12 months after the time as
of which the amount thereof is being computed, and (B) current maturities
of long-term debt), and (ii) the value (net of any applicable reserves) of
all goodwill, trade names, trademarks, patents and other like intangible assets,
all as set forth on the consolidated balance sheet of the Company and its
consolidated Subsidiaries for the Company’s most recently completed fiscal
quarter, prepared in accordance with GAAP.


 


“Debt” means any obligation
created or assumed for the repayment of money borrowed or indebtedness for the
repayment of money borrowed and, without duplication, any guarantee therefor.


 


“Disqualified Equity”
means, with respect to any Person, any Equity Interests to the extent that by their
terms (or by the terms of any security into which they are convertible or for which
they are exchangeable) or upon the happening of any event, they mature or are mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, or are
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the date that the Notes mature, except such Equity Interests that are
solely redeemable with, or solely exchangeable for, any Equity Interests of
such Person that are not a Disqualified Equity.


 


“Distribution” shall
mean, with respect to any Equity Interests issued by a Person (i) the
retirement, redemption, purchase or other acquisition for value of those Equity
Interests by such Person, (ii) the declaration or payment of any dividend
or distribution on or with respect to those Equity Interests by such Person, (iii) any
Investment in the holder of any of those Equity Interests, and (iv) any
other payment with respect to those Equity Interests.


 


“Equity Interests” shall
mean, (i) with respect to a corporation, shares of capital stock of such corporation
or any other interest convertible or exchangeable into any such interest, (ii) with
respect to a


 





















 


limited liability company, membership interests
in such limited liability company, (iii) with respect to a partnership,
partnership interests in such partnership, and (iv) with respect to any
other Person, interests in such Person analogous to interests described in
clauses (i) through (iii).


 


“Excluded Subsidiary” shall
mean any Subsidiary of the Company (i) that has no Debt other than
Permitted Non-Recourse Debt and (ii) the sole purpose of which is to
engage in the acquisition, construction, development and/or operation activities
financed or refinanced with such Permitted Non-Recourse Debt.


 


“Funded Debt” means, as applied
to the Company or any of its Subsidiaries, Debt maturing one year or more from the
date of the incurrence, creation or assumption thereof by the Company or any of
its Subsidiaries, Debt directly or indirectly renewable or extendible, at the option
of the obligor, by its terms or by the terms of any instrument or agreement
relating thereto, to a date one year or more from the date of the incurrence, creation
or assumption thereof by the Company or any of its Subsidiaries, and Debt under
a revolving credit or similar agreement obligating the lender or lenders to
extend credit over a period of one year or more.


 


“Independent Investment
Banker” means either Banc One Capital Markets, Inc. or BNP Paribas, as
specified by the Company, or any successor firm, or if such firm is unwilling or
unable to select the Comparable Treasury Issue, an independent investment banking
institution of national standing appointed by the Trustee after consultation
with the Company.


 


“Interest Payment Date”
has the meaning assigned in Section 2.04 hereof.


 


“Investment” shall mean,
in respect of any Person, any loan, advance, extension of credit or capital contribution
to that Person, any other investment in that Person, or any purchase or commitment
to purchase any Equity Interests or Debt issued by that Person or substantially
all of the assets or a division or other business unit of that Person.


 


“Lien” means, at to any
Person, any mortgage, lien, pledge, security interest or other similar charge
or encumbrance.


 


“Notes” has the meaning
assigned in Section 2.01 hereof.


 


“Pari Passu Debt” means
any Funded Debt or Debt of the Company or any of its Subsidiaries, whether outstanding
on the date of original issuance of the Notes or thereafter created, incurred
or assumed, unless, in the case of any particular Funded Debt or Debt, as the case
may be, the instrument creating or evidencing the same or pursuant to which the
same is outstanding expressly provides that such Funded Debt or Debt, as the
case may be, shall be subordinated in right of payment to the Notes.


 


“Permitted Liens” means:


 


(1) Liens upon
rights-of-way for pipeline purposes;


 


(2) any statutory or
governmental Liens or Liens arising by operation of law, or mechanics’, repairmen’s,
materialmen’s, suppliers’, carriers’, landlords’, warehousemen’s or similar
Liens incurred in the ordinary course of business which are not yet due or which
are being contested in good faith by appropriate proceedings;


 


(3) rights reserved
to, or vested in, any municipality or governmental, statutory or public
authority by the terms of any right, power, franchise, grant, license, lease,
permit, or by any provision of law, to control or regulate, to use, to purchase
or recapture, to designate a purchaser of, to terminate any franchise, grant,
license, lease or permit, or to condemn or expropriate, any property, or zoning
laws, ordinances or municipal regulations;


 


(4) Liens of taxes and
assessments which are (i) for the then current year, (ii) not at the
time delinquent, or (iii) delinquent but the validity of which are being contested
at the time by the Company or any of its Subsidiaries in good faith by
appropriate proceedings;


 


(5) Liens of, or to
secure the payment or performance of, leases, other than capital leases;


 


(6) Liens upon, or
deposits of, any assets in favor of any surety company or clerk of court for
the purpose of obtaining indemnity or stay of, or appeal from, judicial
proceedings;


 


(7) any Lien for
any judgment, attachment, decree or order of any governmental or court
authority which when combined with other similar Liens are not in excess of $10,000,000
in the aggregate or any Lien arising by reason of any attachment, judgment,
decree or order of any governmental or court authority, so long as any
proceeding initiated to review such attachment, judgment, decree or order shall
not have been terminated or the period within which such proceeding may be initiated
shall not expire, or such attachment, judgment, decree or order shall otherwise
be effectively stayed;


 


(8) Liens upon
property or assets acquired or sold by the Company or any of its Subsidiaries resulting
from the exercise of any rights arising out of defaults on receivables or other
sums owed to the Company or any of its Subsidiaries;


 


(9) Liens incurred
or deposits made in the ordinary course of business in connection with workmen’s
compensation, unemployment insurance, temporary disability, social security, retiree
health or similar laws or regulations or to secure obligations imposed by statute
or governmental regulations;


 


(10) Liens in favor
of the Company or any of its Subsidiaries;


 


(11) Liens in favor of
the United States of America or any other country or of any State, province, territory
or any political subdivision thereof, or any department, agency or
instrumentality or political subdivision of any of the foregoing, (i) in
order to permit the Company or any of its Subsidiaries to perform any contract
or subcontract made with or at the request of such governmental entity, securing
any partial, progress, advance or other payments pursuant to any contract or
statute, or (ii) to secure any Debt incurred by the Company or any of its
Subsidiaries for the purpose of financing all or any part of the purchase price
of, or the cost of constructing, developing, repairing or improving, the
property or assets subject to such Lien;


 


(12) Liens securing
industrial development, pollution control or similar revenue bonds, or Liens
created or assumed by the Company or any Restricted Subsidiary in connection
with the issuance of Debt the interest on which is excludable from gross income
of the holder of such Debt pursuant to the Code for the purpose of financing, in
whole or in part, the acquisition, development or construction of, or repair or
improvement on, property or assets to be used by the Company or any of its
Subsidiaries;


 


(13) Liens in favor of
any Person to secure obligations under the


 





















 


provisions of any letters of credit, bank
guarantees, bonds or surety obligations required or requested, in the ordinary
course of business by any governmental authority in connection with any contract
or statute;


 


(14) Liens upon property
or assets to secure performance of tenders, bids, trade or government contracts,
leases, statutory obligations, performance bonds or other similar obligations or
to secure obligations arising under statutory, regulatory, contractual or warranty
requirements;


 


(15) Easements, rights-of-way,
restrictions, exceptions, reservations, defects and irregularities in title and
other similar charges, claims and encumbrances in any property or assets which
do not, individually or in the aggregate, materially interfere with the ordinary
conduct of the business or businesses of the Company and its Subsidiaries,
taken as a whole; or


 


(16) Liens arising under
joint venture agreements, transportation or exchange agreements, preferential rights
to purchase, and other agreements arising in the ordinary course of the Company’s
or any of its Subsidiaries’ business.


 


“Permitted Non-Recourse Debt”
shall mean Debt of any Person that is non-recourse to the Company or any of its
Subsidiaries (other than an Excluded Subsidiary) and is used by such Person to acquire,
construct, develop and/or operate assets not owned by the Company or any of its
Subsidiaries (other than an Excluded Subsidiary) as of the date hereof or to
refinance Permitted Non-Recourse Debt.


 


“Predecessor Security”
of any particular Debt Security means every previous Debt Security evidencing all
or part of the same Debt as that evidenced by such particular Debt Security; and
for the purpose of this definition, any Debt Security authenticated and delivered
under the Indenture in exchange for or in lieu of a mutilated, destroyed, lost
or stolen Debt Security shall be deemed to evidence the same Debt as the mutilated,
destroyed, lost or stolen Debt Security.


 


“Principal Property” means,
whether owned or leased on the date of original issuance of the Notes or
thereafter acquired, (i) pipeline assets of the Company or any of its
Subsidiaries, including any related facilities employed in the transportation, distribution,
terminalling, storage or marketing of refined petroleum products, petroleum
products and specialty liquids which are located in the United States of
America or any territory or political subdivision thereof, and (ii) any
processing or manufacturing plant or terminal owned or leased by the Company or
any of its Subsidiaries which is located within the United States of America or
any territory or political subdivision thereof, except, in the case of either
clause (i) or (ii), (y) any assets consisting of inventories, office fixtures
and equipment (including data processing equipment), vehicles and equipment used
on, or useful with, vehicles, and (z) any such assets, plant or terminal which,
in the opinion of the Board of Directors, is not material in relation to the
activities of the Company and its Subsidiaries, taken as a whole.


 


“Reference Treasury Dealer”
means each of Banc One Capital Markets, Inc. and BNP Paribas, plus two
additional dealers selected by the Trustee that are at the time primary U.S.
Government securities dealers in New York City, and their respective successors;
provided, if Banc One Capital Markets, Inc. or BNP Paribas or any primary U.S.
Government securities dealer selected by the Trustee shall cease to be a
primary U.S. Government securities dealer, then such other primary U.S. Government
securities dealers as may be substituted by the Trustee.


 


“Reference Treasury Dealer
Quotations” means, for each Reference Treasury Dealer and any redemption date
relating to the Notes, the average, as determined by the Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business
Day preceding such redemption date.





 


“Regular Record Date”
has the meaning assigned in Section 2.04 hereof.


 


“Restricted Payment” has
the meaning assigned in Section 3.04 hereof.


 


“Restricted Subsidiary”
means any Subsidiary of the Company which owns or, as a lessee, leases any
Principal Property.


 


“Right” has the meaning
assigned in Section 3.04 hereof.


 


“Sale-Leaseback
Transaction” means the sale or transfer by the Company or any Restricted Subsidiary
of any Principal Property to a Person (other than the Company or any of its Subsidiaries)
and the taking back by the Company or any such Restricted Subsidiary, as the
case may be, of a lease of such Principal Property.


 


“Treasury Rate” means,
with respect to any redemption date relating to the Notes, (i) the yield, under
the heading which represents the average for the immediately preceding week, appearing
in the most recently published statistical release designated “H.15(519)” or
any successor publication which is published weekly by the Board of Governors of
the Federal Reserve System and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption “Treasury
Constant Maturities,” for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the remaining term
of the Notes to be redeemed, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall be determined and
the Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such redemption
date. The Treasury Rate shall be calculated on the third Business Day preceding
the redemption date. Any weekly average yields calculated by interpolation or
extrapolation will be ranked to the nearest 1/100th of 1% with any figure of 1/200th
of 1% or above being rounded upward.


 


Section 1.03.
General References.


 


All references in this Supplemental Indenture to
Articles and Sections, unless otherwise specified, refer to the corresponding
Articles and Sections of this Supplemental Indenture; and the term “herein”, “hereof”,
“hereunder” and any other word of similar import refers to this Supplemental
Indenture.


 


ARTICLE 2 - THE
SERIES OF SECURITIES


 


Section 2.01.
The Form and Title of the Debt Securities.


 


There is hereby established a new series of Debt
Securities to be issued under the Indenture and to be designated as the Company’s
5.875% Senior Unsecured Notes due 2013 (the “Notes”). The Notes shall be executed,


 





















 


authenticated
and delivered in accordance with the provisions of, and shall in all respects
be subject to, the terms, conditions and covenants of the Original Indenture
and this Supplemental Indenture (including the form of Note set forth as Exhibit A
hereto (the terms of which are incorporated in and made a part of the Supplemental
Indenture for all intents and purposes) and the additional covenants set forth
in Article 3 hereof).


 


The Notes shall be substantially in the form
attached as Exhibit A hereto. The Notes shall be registered in such names,
shall be in such amounts and shall have such other specific terms contemplated
in the form of Note attached hereto as Exhibit A, as shall be communicated
by the Company to the Trustee in accordance with the administrative procedures,
as in effect from time to time, established to provide for the issuance of the
Notes.


 


Section 2.02.
Amount.


 


The Trustee shall authenticate and deliver the
Notes for original issue in an aggregate principal amount of up to $250,000,000
upon the Company’s order for the authentication and delivery of the Notes. The
authorized aggregate principal amount of the Notes may be increased at any time
hereafter and the series may be reopened for issuances of additional Notes,
upon the Company’s order without the consent of any Holder. The Notes issued on
the date hereof and any such additional Notes that may be issued hereafter
shall be part of the same series of Debt Securities.


 


Section 2.03.
Stated Maturity.


 


The Notes may be issued on any Business Day on
or after May 27, 2003, and the Stated Maturity of the Notes shall be June 1,
2013.


 


Section 2.04.
Interest and Interest Rates.


 


The rate of interest on each Note shall be
5.875% per annum, accruing from May 27, 2003 and interest shall be
payable, semi-annually in arrears, on June 1 and December 1, of each
year (each such date, an “Interest Payment Date”), commencing December 1, 2003,
to the Persons in whose names the Notes are registered at the close of business
on the immediately preceding May 15 and November 15, respectively, whether
or not such day is a Business Day (each such date, a “Regular Record Date”). The
amount of interest payable for any period shall be computed on the basis of
twelve 30-day months and a 360-day year. The amount of interest payable for any
partial period shall be computed on the basis of a 360-day year of twelve 30-day
months and the days elapsed in any partial month. In the event that any date on
which interest is payable on a Note is not a Business Day, then a payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay) with the same force and effect as if made on the date the payment
was originally payable. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will be paid to the Person in whose name
such Note (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date and shall either (i) be paid to the Person
in whose name such Note (or one or more Predecessor Securities) is registered at
the close of business on the special record date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice of which shall be given to Holders
of the Notes not less than 10 days prior to such special record date, or (ii) be
paid at such time in any other lawful manner not inconsistent with the
requirements of any securities exchange or automated quotation system on which the
Notes may be listed or traded, and upon such notice as may be required by such exchange
or automated quotation system, all as more fully provided in the Indenture.


 


Section 2.05.
Place of Payment.


 


The Place of Payment where the Notes may be
presented or surrendered for payment shall at all times be in the city and state
of New York and shall initially be the Corporate Trust Office of the Trustee in
the City and State of New York.


 


Section 2.06.
Optional Redemption.


 


At its option, the Company may choose to redeem
the Notes, as a whole or in part, in principal amounts of $1,000 or any
integral multiple thereof, at any time or from time to time upon notification
to the Holders of the Notes given at least 30 and not more than 60 days prior
to the date fixed for such redemption, at a redemption price equal to the
greater of (i) 100% of the principal amount of the Notes to be redeemed and
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest on such Notes, exclusive of interest accrued to the redemption
date therefor, discounted to such redemption date on a semiannual basis, assuming
a 360-day year consisting of twelve 30-day months, at the Treasury Rate plus 30
basis points, plus, in either case, accrued and unpaid interest on the principal
amount of the Notes being redeemed to such redemption date; provided that installments
of interest on Notes that are due and payable on any date on or prior to a redemption
date shall be payable to the registered Holders of such Notes (or one or more Predecessor
Securities), registered as such as of the close of business on the relevant Regular
Record Dates. The redemption price shall be calculated and certified to the
Trustee by the Independent Investment Banker; provided that if the institution so
appointed has notified the Trustee in writing at least 15 days prior to the redemption
date that it is unwilling or unable to make such calculation, such calculation
shall be made by another Independent Investment Banker appointed by the Trustee
after consultation with the Company and at the cost and expense of the Company.
The notice to the Holders shall state that the redemption price shall be
calculated in accordance with this Section 2.06.


 


Section 2.07.
Sinking Fund Obligations.


 


The Company has no obligation to redeem or
purchase any Notes pursuant to any sinking fund or analogous requirement or
upon the happening of a specified event or at the option of a Holder thereof.


 


Section 2.08.
Defeasance and Discharge; Covenant Defeasance.


 


Article 11 of the Original Indenture,
including without limitation, Section 11.02(b) thereof, shall apply
to the additional covenants set forth in Article 3 hereof and the Notes, and
such additional covenants set forth in Article 3 hereof shall be subject
to the covenant defeasance option pursuant to Section 11.02(b) of the
Original Indenture.


 


Section 2.09.
Global Securities.


 


The Notes shall initially be issuable in the
form of one or more Global Securities. Such Global Securities (i) shall be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York, which shall act as Depositary with respect to the Notes, (ii) shall
bear the legends set forth in the form of Note attached as Exhibit A
hereto, (iii) may be exchanged in whole or in part for Debt Securities in definitive
form upon the terms and subject to the conditions provided in Section 2.15
of the Original Indenture and (iv) shall otherwise be subject to the
applicable provisions of the Indenture.


 


Section 2.10.
Registrar.


 


The
Trustee shall serve as the initial Registrar.


 


Section 2.11.
Applicability of Additional Covenants and Definitions to the Notes


 





















 


In addition to the covenants and definitions set
forth in the Original Indenture, the definitions set forth in Section 1.02
hereof and the covenants and provisions set forth in Article 3 hereof are applicable
to the Notes. The additional covenants and provisions set forth in Article 3
hereof are solely for the benefit of the Notes and its Holders, and shall not
be applicable, in whole or part, to any other series of Debt Securities unless the
instruments establishing any of them shall so expressly provide, and each such
case, as therein expressly provided.


 


Section 2.12.
Other Terms: Percentage of Principal Amount.


 


The Notes shall be issued at 99.760% of their
principal amount.


 


Section 2.13.
Cusip Number.


 


The Cusip Number for the Notes is 484168 AC 3.


 


ARTICLE 3
- COVENANTS


 


Section 3.01.
Limitations on Liens.


 


If any of the Notes are Outstanding, the Company
will not, nor will it permit any Restricted Subsidiary to, create, assume or
incur, except in favor of the Company or any of its Subsidiaries, any Lien upon
any Principal Property or upon any shares of capital stock or other equity interests
of any Restricted Subsidiary at any time owned by them, to secure any Debt of
the Company or any other Person (other than the Notes issued hereunder), without
effectively providing that all of the Notes Outstanding (together with, if the
Company shall so determine, any other indebtedness or obligation of the Company
which is similarly entitled to be equally and ratably secured) shall be secured
equally and ratably with, or prior to, such Debt so long as such Debt shall be
so secured. The foregoing restriction shall not apply to, or prevent the
creation or existence of, any of the following:


 


(1) Permitted
Liens;


 


(2) Liens upon any property
or assets created at the time of acquisition of such property or assets by the Company
or any of its Restricted Subsidiaries or within one year after such time, to
secure all or part of the purchase price for such property or assets or Debt
incurred to finance such purchase price, whether such Debt was incurred prior
to, at the time of, or within one year of, such acquisition;


 


(3) Liens upon any property
or assets to secure all or part of the cost of construction, development, repair
or improvements thereon or to secure Debt incurred prior to, at the time of, or
within one year after, completion of such construction, development, repair or
improvements or the commencement of full operations thereof (whichever is
later), to provide funds for any such purpose;


 


(4) Liens upon any
property or assets existing thereon at the time of the acquisition thereof by the
Company or any of its Restricted Subsidiaries (whether or not the obligations
secured thereby are assumed by the Company or any of its Restricted Subsidiaries),
or the assumption by the Company or any Restricted Subsidiary of obligations
secured by any Lien that exists at the time of acquisition by the Company or
any of its Restricted Subsidiaries of the property or assets subject to such
Lien or at the time of the acquisition of the Person that owns such property or
assets; provided, however, that any such Lien only encumbers the property or
assets so acquired;


 


(5) Liens upon any
property or assets of a Person existing thereon at the time (i) such
Person becomes a Restricted Subsidiary of the Company, (ii) such Person is
merged with or into, or consolidated with, the Company or any of its Restricted
Subsidiaries or (iii) of a sale, lease or other disposition of the properties
of a Person (or division thereof) as an entirety or substantially as an entirety
to the Company or any of its Restricted Subsidiaries; provided, however, than any
such Lien only encumbers the property or assets of such Person at the time such
Person becomes a Restricted Subsidiary;


 


(6) Liens upon any property
or assets of the Company or any of its Restricted Subsidiaries in existence on
the date of original issuance of the Notes or provided for or created pursuant to
an “after-acquired property” clause or similar term in existence on the date of
original issuance of the Notes or any mortgage, pledge agreement, security
agreement or other similar instrument in existence on the date of original issuance
of the Notes;


 


(7) Liens imposed
by law or order as a result of any proceeding before any court or regulatory body
that is being contested in good faith by appropriate proceedings, and Liens which
secure a judgment or other court-ordered award or settlement as to which the Company
or any of its applicable Restricted Subsidiaries has not exhausted its
applicable rights;


 


(8) Liens upon any additions,
improvements, replacements, repairs, fixtures, appurtenances or component parts
thereof attaching to or required to be attached to property or assets pursuant
to the terms of any mortgage, pledge agreement, security agreement or other
similar instrument, creating a Lien upon such property or assets permitted by
clauses (1) through (7) inclusive, of this Section;


 


(9) Liens securing Debt
of the Company or any of its Restricted Subsidiaries, all or a portion of the
net proceeds of which are used substantially concurrent with the funding thereof
(and for purposes of determining such “substantial concurrence,” taking into consideration,
among other things, required notices to be given to holders of Outstanding Notes
in connection with such refunding, refinancing or repurchase, and the required corresponding
durations thereof), to refinance, refund or repurchase all Outstanding Notes, including
the amount of all accrued interest thereon and reasonable fees and expenses and
premium, if any, incurred by the Company or any of its Subsidiaries in connection
therewith;


 


(10) Liens resulting
from the deposit of moneys, U.S. Government Obligations or evidence of indebtedness
in trust for the purpose of defeasing Debt of the Company or any of its
Restricted Subsidiaries;


 


(11) any Lien upon any property
or assets to secure Debt incurred by the Company or any of its Restricted Subsidiaries,
the proceeds of which, in whole or part, were used to defease, in a defeasance or
a covenant defeasance, or obligations on any series of the Debt Securities; or


 


(12) any extension,
renewal, refinancing, refunding or replacement (or successive extensions,
renewals, refinancing, refunding or replacements) of any Lien, in whole or in
part, that is referred to in clause (1) through (11), inclusive, of this
Section, or of any Debt secured thereby; provided, however, than any such extension,
renewal, refinancing, refunding or replacement Lien shall be limited to the
property or assets covered by the Lien extended, renewed, refinanced, refunded
or replaced and that the principal amount secured by any such extension, renewal,
refinancing, refunding or replacement Lien shall be in an amount not greater
than the principal amount of (plus accrued interest on) the obligations secured
by the Lien extended, renewed, refinanced, refunded or replaced plus any expenses
of the Company and its Restricted Subsidiaries (including any premium) incurred
in connection with such extension, renewal, refinancing, refunding or
replacement.


 





















 


Notwithstanding the foregoing provisions of this
Section 3.01, the Company may, and may permit any Restricted Subsidiary to,
create, assume or incur any Lien upon any Principal Property to secure any Debt
of the Company or any other Person (other than the Notes) that is not excepted
by clauses (1) through (12), inclusive, of this Section 3.01 without
securing the Outstanding Notes, provided that after giving effect to the
creation, assumption or incurrence of such Lien and Debt, and the application
of the proceeds of such Debt, if any, received as a result thereof, the
aggregate principal amount of all Debt then outstanding secured by such Lien
and all similar Liens (not including Debt permitted to be secured under clauses
(1) through (12) inclusive, of this Section 3.01), together with all
net sale proceeds received by the Company or any of its Subsidiaries from Sale-Leaseback
Transactions (excluding Sale-Leaseback Transactions permitted by clauses (1) through
(4), inclusive, of the first paragraph of Section 3.02), would not exceed
10% of Consolidated Net Tangible Assets.


 


Section 3.02.
Restriction of Sale-Leaseback Transaction.


 


The Company will not, nor will it permit any Restricted
Subsidiary to, engage in a Sale-Leaseback Transaction, unless: 


 


(1) such Sale-Leaseback
Transaction occurs within one year from the date of completion of the acquisition
of the Principal Property subject thereto or the date of the completion of construction,
development of, or substantial repair or improvement on, or commencement of
full operations of, such Principal Property, whichever is later;


 


(2) the Sale-Leaseback
Transaction involves a lease for a period, including renewals, of not more than
three years;


 


(3) the Company or
such Restricted Subsidiary would be entitled to incur Debt secured by a Lien on
Principal Property subject thereto in a principal amount equal to or exceeding the
net proceeds received by the Company or such Restricted Subsidiary from such
Sale-Leaseback Transaction without equally and ratably securing the Notes
pursuant to Section 3.01; or


 


(4) the Company or
such Restricted Subsidiary, within a one-year period after such Sale-Leaseback Transaction,
applies or causes to be applied an amount not less than the net sale proceeds from
such Sale-Leaseback Transaction to (i) the prepayment, repayment, reduction,
redemption or retirement of Pari Passu Debt of the Company or any of its Subsidiaries,
or (ii) the expenditure or expenditures for (y) the acquisition, development
or construction of, or repair or improvement on, Principal Property or (z)
capital stock or other equity interests in a Person that is or with such
expenditure becomes a Restricted Subsidiary of the Company or in a joint
venture, and in each case, whose principal assets consists of Principal
Property.


 


Notwithstanding the foregoing provisions of this
Section 3.02, the Company may, and may permit any Restricted Subsidiary to,
effect any Sale-Leaseback Transaction that is not excepted by clauses (1) through
(4), inclusive, of this Section 3.02, provided that after giving effect
thereto and the application of the proceeds, if any, received as a result thereof,
the net sales proceeds received by the Company or any of its Restricted Subsidiaries
from such Sale-Leaseback Transaction, together with the aggregate principal
amount of then outstanding Debt (other than the Notes) secured by Liens upon
Principal Property not excepted by clauses (1) through (12), inclusive, of
Section 3.01, would not exceed 10% of the Consolidated Net Tangible
Assets.


 


Section 3.03.
Transactions with Affiliates.


 


The Company will not, and will not permit any of
its Subsidiaries to, sell, lease or otherwise transfer any Principal Property
to, or purchase, lease or otherwise acquire any Principal Property from, any of
its Affiliates, except (i) on terms and conditions not less favorable to
the Company or such Subsidiary than could be obtained on an arm’s-length basis
from unrelated third parties, (ii) transactions between or among the
Company and its wholly-owned Subsidiaries not involving any other Affiliates
and (iii) any Restricted Payment permitted by Section 3.04.


 


Section 3.04.
Restricted Payments.


 


The Company will not, and will not permit its Subsidiaries
to, make or agree to make, directly or indirectly, any Distribution, or make
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, retirement, defeasance or other acquisition
of, any Equity Interests or Debt subordinated to the Notes, or any options, warrants,
or other rights (each, a “Right”) to purchase Equity Interests or such Debt, whether
now or hereafter outstanding (each, a “Restricted Payment”), unless, at the
time and after giving effect to such Restricted Payment, the aggregate amount
of the Restricted Payment together with the aggregate amount of all other
Restricted Payments made by the Company or any of its Subsidiaries after the date
of original issuance of the Notes (excluding Restricted Payments permitted by clauses
(i), (ii), (v), (vi), (vii), (viii) or (ix) of the next succeeding paragraph),
is less than the sum of the aggregate net cash proceeds and the fair market value
of any assets or rights used or useful in a business activity not prohibited by
Section 3.06 which are received by the Company or any of its Subsidiaries
in connection with (i) a capital contribution to the Company from any Person
(other than any of its Subsidiaries) made after the date of the original
issuance of the Notes or a capital contribution to a Subsidiary of the Company from
any Person (other than the Company or another Subsidiary of the Company) made
after the date of the original issuance of the Notes, or (ii) an issuance
and sale made after the issuance date of Equity Interests (other than Disqualified
Equity) of the Company or from the issuance or sale made after the issuance date
of convertible or exchangeable Disqualified Equity or convertible or
exchangeable debt securities of the Company which have been converted into or exchanged
for such Equity Interests (other than Disqualified Equity).


 


The foregoing
provisions shall not prohibit:


 


(i) Distributions payable
by the Company solely in its Equity Interests;


 


(ii) Restricted Payments
made by any Subsidiary of the Company to the Company or to another Subsidiary
of the Company;


 


(iii) cash Distributions
paid on, and cash redemptions of, the Equity Interests of the Company made
within 60 days after the declaration thereof; provided that no Default has
occurred and is continuing at the time of such declaration;


 


(iv) Restricted
Payments on, or of, Debt subordinated to the Notes, or Rights related thereto, provided
that no Default has occurred and is continuing at the time such Restricted
Payment is made;


 


(v) the redemption,
repurchase, retirement, defeasance or other acquisition of any Equity Interests
of the Company or any of its Subsidiaries, or Rights related thereto, in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale or issuance (a sale or issuance will be deemed substantially concurrent if
such redemption, repurchase, retirement or acquisition occurs not more than 90
days after such sale or issuance) (other than to a Subsidiary of the Company)
of, Equity Interests of the Company (other than any Disqualified Equity), provided
that the amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other


 





















 


acquisition, or payments, shall be excluded from
clause (ii) of the preceding paragraph;


 


(vi) (A) the purchase
or other acquisition of one or more Equity Interests in the Company from former
employees or directors of the Company or any of its Subsidiaries (or any of its
or their general partners), provided that the aggregate price paid for all such
purchased or acquired Equity Interests shall not exceed $2,000,000 in any 12-month
period; and (B) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any of its Subsidiaries
held by any current or former officer, employee or director of the Company or
any of its Subsidiaries (or any of its or their general partners) pursuant to the
terms of any agreements (including employment agreements) and plans approved by
the Board of Directors, including any management equity plan or stock option plan
or any other management or employee benefit plan, agreement or trust, provided,
however, that the aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests pursuant to this clause (vi) shall not exceed
the sum of (y) $5,000,000 in any twelve-month period and (z) the aggregate net
proceeds received by the Company during such 12-month period from issuance of
such Equity Interests pursuant to such agreements or plans, provided, however,
if the amount so paid in any calendar year is less than $5,000,000, such shortfall
may be used to repurchase, redeem, acquire or retire such Equity Interests in either
of the next two 12-month periods in addition to the $5,000,000 that may
otherwise be paid in each such 12-month periods;


 


(vii) repurchases of
Equity Interests deemed to occur upon the cashless exercise of stock options;


 


(viii) reasonable
and customary directors’ fees to the members of the Board of Directors, provided
that such fees are consistent with past practice or current requirements;


 


(ix) other
Restricted Payments in an aggregate principal amount since the date of original
issuance of the Notes not to exceed $50,000,000;


 


provided,
further, that, with respect to clauses (v), (vi), (vii), (viii) and (ix) above,
no Default or Event of Default shall have occurred and be continuing.


 


In determining whether any Restricted Payment is
permitted by the foregoing covenant, the Company may allocate or reallocate all
or any portion of such Restricted Payment among the clauses (i) through (ix) of
the preceding paragraph or among such clauses and the first paragraph of this Section 3.04,
provided that at the time of such allocation or reallocation, all such Restricted
Payments, or allocated portions thereof, would be permitted under the various provisions
of the foregoing covenant.


 


The amount of all Restricted Payments (other
than cash) shall be the fair market value (as determined by the Board of Directors
and as evidenced by a resolution of the Board of Directors set forth in an Officers’
Certificate delivered to the Trustee) on the date of the transfer, incurrence
or issuance of such non-cash Restricted Payment.


 


Section 3.05.
Sale of Assets.


 


The Company will not, and will not permit any of
its Subsidiaries (other than any Excluded Subsidiary) to, convey, sell, lease, assign,
transfer or otherwise dispose of, any of its Principal Properties (each, a “disposition”),
other than as follows: (i) dispositions of assets in the ordinary course
of business having a fair market value of not more than the greater of (A) $25,000,000
and (B) 5% of Consolidated Net Tangible Assets in the aggregate during any
fiscal year of the Company; (ii) dispositions of assets, the proceeds of
which are (A) reinvested in other assets (or Persons owning other assets) used
by or useful to the Company or such Subsidiary in conducting its business that
is not prohibited by Section 3.06, (B) used to repay, repurchase,
redeem or defease, in whole or part, Debt, or (C) used to make capital
expenditures; (iii) leases permitted by Section 3.02; (iv) leases
of such assets entered into in the ordinary course of business and with respect
to which the Company or any of its Subsidiaries is the lessor and the lessee
has no option to purchase such assets for less than fair market value at any
time the right to acquire such asset occurs; (v) dispositions between and
among the Company and its Subsidiaries, (vi) any Restricted Payment permitted
by Section 3.04; (vii) abandonment or relinquishment of such assets
in the ordinary course of business; and (viii) dispositions of such assets
received in settlement of debts accrued in the ordinary course of business.


 


Section 3.06.
Fundamental Changes.


 


The Company will not, and will not permit any of
its Subsidiaries to, engage in any business other than businesses of the type (i) conducted
by the Company and its Subsidiaries on the date hereof; (ii) conducted by
Statia Terminals Group N.V. and its Subsidiaries on the date hereof; and (iii) businesses
reasonably related thereto.


 


Section 3.07.
Waiver of Certain Covenants.


 


The Company may, with respect to the Notes, omit
in any particular instance to comply with any term, provision or condition set
forth in any covenant provided pursuant to Section 3.01, 3.02, 3.03, 3.04,
3.05 or 3.06, if before the time for such compliance the Holders of at least a majority
in aggregate principal amount of the of all Outstanding Notes (voting as one
class) shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or condition, but
no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force and effect.


 


A waiver which changes or eliminates any term, provision
or condition of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Debt Securities, or which modifies
the rights of the Holders of Debt Securities of such series with respect to
such term, provision or condition, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.


 


ARTICLE 4 - EVENTS
OF DEFAULT


 


Section 4.01.
Modified Event of Default


 


With respect to the Notes, the following provision
in this Section 4.01 shall preempt, in its entirety, the provision and
application of clause (a) of Section 6.01 of the Original Indenture
in relation to the Notes and shall, in relation to the Notes, replace such clause
(a); and for reference to the Indenture in relation to the Notes, the following
clause shall be referred to as being set forth in Section 6.01(a-1)
thereof:


 


(a-1) the Company defaults for a period of 30
days in the payment when due of interest on any of the Notes.


 


Section 4.02.
Additional Event of Default


 


With respect to the Notes, the occurrence of any
of the following events shall, in addition to the other events or circumstances
described as Events of


 





















 


Default
at clauses (a) through (g) of Section 6.01 of the Original Indenture,
constitute an Event of Default, and for reference to the Indenture in relation to
the Notes, such events shall be referred to as being set forth in Section 6.01(h-2)
thereof:


 


(h-2) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Debt for money borrowed by the Company or any of its Restricted Subsidiaries,
or the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries, whether such Debt or guarantee now exists, or is created after
the date of the Supplemental Indenture, which default results in the acceleration
of such Debt prior to its express maturity, and the principal amount of any
such Debt, together with the principal amount of any other such Debt the
maturity of which has been so accelerated, aggregates, without duplication, $5,000,000
or more, and such acceleration shall not have been rescinded, or such Debt is
repaid or otherwise discharged, within a period of 30 days from the occurrence
of such acceleration; provided, that if any such acceleration is rescinded, or
such Debt is repaid or otherwise discharged, within such period of 30 days,
then such Event of Default and any consequential acceleration of the Notes
shall be automatically rescinded, so long as such rescission does not conflict with
any related judgment or decree;


 


ARTICLE 5 -
MISCELLANEOUS


 


Section 5.01.
Certain Trustee Matters.


 


The recitals contained herein shall be taken as
the statements of the Company, and the Trustee assumes no responsibility for
their correctness.


 


The Trustee makes no representations as to the
validity or sufficiency of this Supplemental Indenture or the Notes or the
proper authorization or the due execution hereof or thereof by the Company.


 


Section 5.02.
Continued Effect.


 


Except as expressly supplemented and amended
hereby, the Original Indenture shall continue in full force and effect in accordance
with the provisions thereof, and the Original Indenture, as supplemented and
amended hereby, is in all respects hereby ratified and confirmed. This
Supplemental Indenture and all its provisions shall be deemed a part of the
Original Indenture in the manner and to the extent herein and therein provided.


 


Section 5.03.
Governing Law.


 


This Supplemental Indenture and the Notes shall be
governed by and construed in accordance with the laws of the State of New York.


 


Section 5.04.
Counterparts.


 


This instrument may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.


 


[Remainder of Page Intentionally
Left Blank]


 





















 


IN WITNESS WHEREOF, the parties hereto have caused
this Supplemental Indenture to be duly executed and delivered, all as of the
day and year first above written.


 


	
   

  	
  KANEB
  PIPE LINE OPERATING

  PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kaneb
  Pipe Line Company LLC,

  Its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/E. D. DOHERTY

  	
   

  
	
   

  	
   

  	
  Name:
  Edward D. Doherty

  
	
   

  	
   

  	
  Title:

  	
  Chairman
  of the Board

  
	
   

  	
   

  	
   

  	
  and
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK

  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ CAROL LOGAN

  	
   

  
	
   

  	
   

  	
  Name:
  Carol Logan

  	
   

  
	
   

  	
   

  	
  Title:
  Authorized Officer

  	
   

  
						



 





















 


[FORM OF FACE OF
NOTE]


 


[If the Note is a Global Security, insert - THIS
NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF, AND HELD BY, THE DEPOSITARY (AS
DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF. THIS NOTE IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (i) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.08 OF
THE ORIGINAL INDENTURE, (ii) THIS GLOBAL SECURITY MAY BE EXCHANGED IN
WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.15 OF THE ORIGINAL INDENTURE,
(iii) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION
PURSUANT TO SECTION 2.10 OF THE ORIGINAL INDENTURE AND (iv) THIS
GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE
PRIOR WRITTEN CONSENT OF THE COMPANY.


 


UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION (“DTC”), TO ISSUER OR ITS AGENT FOR REGISTRATION IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]


 


KANEB PIPE LINE
OPERATING PARTNERSHIP, L.P.


 


5.875% SENIOR UNSECURED
NOTE DUE 2013


 


NO. U.S.$               


 


CUSIP No. 484168 AC
3


 


KANEB PIPE LINE OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership (herein called the “Company”, which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to                      ,
or registered assigns, the principal sum of $                     
United States Dollars on June 1, 2013, and to pay interest thereon from May 27,
2003, or from the most recent Interest Payment Date to which interest has been paid
or duly provided for, semi-annually on June 1 and December 1 in each
year, commencing December 1, 2003, at the rate of 5.875% per annum, until the
principal hereof is paid or made available for payment, and at a rate of 5.875%
per annum on any overdue principal or redemption price, as applicable, and on any
overdue installment of interest. The amount of interest payable for any period shall
be computed on the basis of twelve 30-day months and a 360-day year. The amount
of interest payable for any partial period shall be computed on the basis of a
360-day year of twelve 30-day months and the days elapsed in any partial month.
In the event that any date on which interest is payable on this Note is not a
Business Day, then a payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay) with the same force and effect as
if made on the date the payment was originally payable. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be May 15 or November 15
(whether or not a Business Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date
and shall either (i) be paid to the Person in whose name this Note (or one
or more Predecessor Securities) is registered at the close of business on a
special record date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice of which shall be given to Holders of Notes not less than 10
days prior to such special record date, or (ii) be paid at such time in
any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes may be
listed or traded, and upon such notice as may be required by such exchange or automated
quotation system, all as more fully provided in such Indenture.


 


[If the Note is a Global Security, insert -
Payment of the principal or redemption price (as applicable) of and interest on
this Note will be made by transfer of immediately available funds to a bank
account in the City and State of New York designated by the Holder in such coin
or currency of the United States of America as at the time of payment is legal tender
for payment of public and private debts.]


 


[If the Note is a Definitive Security, insert -
Payment of the principal or redemption price (as applicable) and interest on
this Note will be made at the office or agency of the Company maintained for
that purpose in the City and State of New York or at such other offices or agencies
as the Company may designate, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and private
debts, or subject to any laws or regulations applicable thereto, at the option
of the Company, by United States Dollar check drawn on, or transfer to a United
States Dollar account maintained by the payee with, a bank in the City and
State of New York (so long as the applicable paying agent has received proper transfer
instructions in writing by the Regular Record Date or special record date, as applicable,
prior to the applicable payment date); provided, however, that payment at
maturity will only be made against presentation and surrender of this Note; and
provided, further, that any Holder of this Note who is the Holder of at least
$1.0 million aggregate principal amount of Notes may request to have any
payment of interest on this Note be made by transfer to a United States Dollar
account maintained by the payee with a bank in the United States (so long as
the applicable paying agent has received proper transfer instructions in writing
by the Regular Record Date or special record date, as applicable, prior to the
applicable Interest Payment Date).]


 


Reference is hereby made to the further provisions
of this Note set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.


 


Unless the certificate of authentication hereon
has been executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.


 


IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed and delivered.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KANEB
  PIPE LINE OPERATING

  PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
    By:

  	
  Kaneb
  Pipe Line Company LLC,

  
	
   

  	
   

  	
  Its
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
							



 





















 


Trustee’s Certificate of
Authentication


 


This is one of the Notes referred to in the
within-mentioned Indenture.


 


	
   

  	
  As
  Trustee

  
	
   

  	
   

  
	
   

  	
    By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  	
   

  
	
   

  
	
  Date
  of Authentication:

  	
   

  	
   

  
						



 





















 


[FORM OF REVERSE OF
NOTE]


This Note is one of a duly authorized series of
Debt Securities of the Company (the “Notes”) issued under an Indenture dated as
of February 21, 2002 (the “Original Indenture”), as supplemented by the
Fourth Supplemental Indenture dated as of May 27, 2003 (the “Supplemental Indenture”,
and together with the Original Indenture, the “Indenture”), between the Company
and JPMorgan Chase Bank, a New York banking corporation, as Trustee (the “Trustee”,
which term includes any successor trustee under the Indenture), to which
Indenture and all applicable indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, obligations,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Notes and of the terms upon which the Notes are, and are to be, authenticated
and delivered. As provided in the Indenture, the Debt Securities may be issued in
one or more series, which different series may be issued in various aggregate principal
amounts, may mature at different times, may bear interest, if any, at different
rates, may be subject to different redemption provisions, if any, may be
subject to different sinking, purchase or analogous funds, if any, may be subject
to different covenants and Events of Default and may otherwise vary as in the Indenture
provided or permitted. This Note is one of a series of Debt Securities designated
on the face hereof, which series is not limited in aggregate principal amount.


 


At its option, the Company may choose to redeem
the Notes, as a whole or in part, in principal amounts of $1,000 or any
integral multiple thereof, at any time or from time to time upon notification
to the Holders of the Notes given at least 30 and not more than 60 days prior
to the date fixed for such redemption, at a redemption price equal to the
greater of (i) 100% of the principal amount of the Notes to be redeemed and
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest on such Notes, exclusive of interest accrued to the redemption
date therefor, discounted to such redemption date on a semiannual basis, assuming
a 360-day year consisting of twelve 30-day months, at the Treasury Rate plus 30
basis points, plus, in either case, accrued and unpaid interest on the principal
amount of the Notes being redeemed to such redemption date; provided, that installments
of interest on Notes that are due and payable on any date on or prior to a redemption
date shall be payable to the registered Holders of such Notes (or one or more Predecessor
Securities), registered as such as of the close of business on the relevant
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.


 


Capitalized terms used herein shall have the
meanings specified herein or in the Indenture, as the case may be.


 


 “Comparable Treasury Issue” means the United
States Treasury security or securities selected by the Independent Investment Banker
as having an actual or interpolated maturity comparable to the remaining term
of the Notes to be redeemed that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of corporate
debt securities of a comparable maturity to the remaining term of the Notes.


 


“Comparable Treasury
Price” means, for any redemption date relating to the Notes, (i) the
average of four Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury Dealer Quotations,
or (ii) if the Independent Investment Banker obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.


 


“Independent Investment
Banker” means either Banc One Capital Markets, Inc. or BNP Paribas, as
specified by the Company, or any successor firm, or if such firm is unwilling or
unable to select the Comparable Treasury Issue, an independent investment
banking institution of national standing appointed by the Trustee after consultation
with the Company.


 


“Reference Treasury Dealer”
means each of Banc One Capital Markets, Inc. and BNP Paribas, plus two
additional dealers selected by the Trustee that are at the time primary U.S.
Government securities dealers in New York City, and their respective successors;
provided, if Banc One Capital Markets, Inc. or BNP Paribas or any primary U.S.
Government securities dealer selected by the Trustee shall cease to be a
primary U.S. Government securities dealer, then such other primary U.S. Government
securities dealers as may be substituted by the Trustee.


 


“Reference Treasury Dealer
Quotations” means, for each Reference Treasury Dealer and any redemption date relating
to the Notes, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealers at 5:00 p.m., New York City time, on the third Business Day
preceding such redemption date.


 


“Treasury Rate” means
with respect to any redemption date relating to the Notes, (i) the yield, under
the heading which represents the average for the immediately preceding week, appearing
in the most recently published statistical release designated “H.15(519)” or
any successor publication which is published weekly by the Board of Governors of
the Federal Reserve System and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption “Treasury
Constant Maturities,” for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the remaining term
of the Notes to be redeemed, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall be determined and
the Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such redemption
date. The Treasury Rate shall be calculated on the third Business Day preceding
the redemption date. Any weekly average yields calculated by interpolation or
extrapolation will be ranked to the nearest 1/100th of 1% with any figure of 1/200th
of 1% or above being rounded upward.


 


In the event of redemption of this Note in part
only, a new Note or Notes of like tenor for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.


 


If an Event of Default with respect to the Notes
shall occur and be continuing, the principal of the Notes may be declared due
and payable in the manner and with the effect provided in the Indenture.


 


The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the modification of the rights
and obligations of the Company and the rights of the Holders of the Notes to be
affected under the Indenture at any time by the Company and the Trustee with
the consent of not less than the Holders of a majority in aggregate principal amount
of the Outstanding Debt Securities of all series to be affected (voting as one
class). The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of
all affected series (voting as one class), on behalf of the Holders of all
Securities of such series, to waive compliance by the Company with certain provisions
of the


 





















 


Indenture.
The Indenture permits, with certain exceptions as therein provided, the Holders
of a majority in principal amount of Notes then Outstanding to waive past defaults
under the Indenture with respect to the Notes and their consequences. Any such consent
or waiver by the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof, whether
or not notation of such consent or waiver is made upon this Note.


 


As provided in and subject to the provisions of
the Indenture, the Holder of this Note shall not have the right to institute
any proceeding with respect to the Indenture or for the appointment of a
receiver or trustee or for any other remedy thereunder, unless such Holder
shall have previously given the Trustee written notice of a continuing Event of
Default with respect to the Notes, the Holders of not less than 25% in
principal amount of the Notes at the time Outstanding shall have made written request
to the Trustee to institute proceedings in respect of such Event of Default as
Trustee and offered the Trustee reasonable indemnity and the Trustee shall not
have received from the Holders of a majority in principal amount of the Notes
at the time Outstanding a direction inconsistent with such request, and shall
have failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Note for the enforcement of any payment
of principal, premium, if any, or interest hereon on or after the respective
due dates expressed herein.


 


No reference herein to the Indenture and no
provision of this Note or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of, premium,
if any, and interest on this Note at the times, place(s) and rate, and in the
coin or currency, herein prescribed.


 


[If the Note is a Global Security, insert - This
Global Security or portion hereof may not be exchanged for Definitive Securities
except in the limited circumstances provided in the Indenture.


 


The holders of beneficial interests in this
Global Security will not be entitled to receive physical delivery of Definitive
Securities except as described in the Indenture and will not be considered the
Holders thereof for any purpose under the Indenture.]


 


[If the Note is a Definitive Security, insert -
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note is registrable in the Debt Security Register, upon
surrender of this Note for registration of transfer at the office or agency of
the Company in the City and State of New York or at such other offices or agencies
as the Company may designate, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Debt Security Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Notes and of like tenor, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.]


 


The Notes are issuable only in registered form, without
coupons, in denominations of U.S. $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Notes are transferable and exchangeable at the office of the Registrar and
any co-registrar for a like aggregate principal amount of Notes and of like
tenor of a different authorized denomination, as requested by the Holder
surrendering the same.


 


No service charge shall be made for any such registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar government charge payable
in connection with certain transfers and exchanges.


 


Prior to due presentment of this Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.


 


Obligations of the Company under the Indenture and
the Securities thereunder, including this Note, are non-recourse to Kaneb Pipe
Line Company LLC, a Delaware limited liability company (the “General Partner”),
and Kaneb Pipe Line Partners, L.P., a Delaware limited partnership (“MLP”), and
their respective Affiliates (other than the Company), and payable only out of
cash flow and assets of the Company. The Trustee, and each Holder of a Note by
its acceptance hereof, will be deemed to have agreed in the Indenture that (i) neither
the General Partner nor its assets nor the MLP nor its assets (nor any of their
respective Affiliates other than the Company, nor their respective assets) shall
be liable for any of the obligations of the Company under the Indenture or such
Securities, including this Note, and (ii) no past, present or future
director, officer, partner, employee, incorporator, stockholder, member or
manager or unitholder, as such, of the Company, the Trustee, the General Partner,
the MLP or any Affiliate of any of the foregoing entities or any other Person
an obligor on the Notes, as such, shall have any liability in respect of any obligations
of the Company under the Indenture or such Debt Securities or for any claim
based on, in respect of, or by reason of, such obligation or their creation. The
foregoing agreements by the Trustee and each Holder are part of the
consideration for the issuance of the Notes.


 


The Indenture contains provisions that relieve the
Company from the obligation to comply with certain restrictive covenants in the
Indenture and for satisfaction and discharge at any time of the entire indebtedness
upon compliance by the Company with certain conditions set forth in the
Indenture.


 


This Note shall be governed by and construed in
accordance with the laws of the State of New York.


 


All terms used in this Note which are defined in
the Indenture shall have the meanings assigned to them in the Indenture.


 


[If the Note is a Definitive Security, insert as
a separate page -


 


FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto                                                 
(Please Print or Typewrite Name and Address of Assignee) the within instrument of
KANEB PIPE LINE OPERATING PARTNERSHIP, L.P., and does hereby irrevocably constitute
and appoint                                                  
Attorney to transfer said instrument on the books of the within-named Company,
with full power of substitution in the premises.


 


Please
Insert Social Security or

Other Identifying Number of Assignee:


 


 


	
  Dated:

  	
   

  	
   

  	
  (Signature)

  	
   

  	
   

  



 


NOTICE:
The signature to this assignment must correspond with the name as written upon
the face of the within instrument in every particular, without alteration or
enlargement or any change whatever.]