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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to _____________
Commission file number: 1-14569
PLAINS ALL AMERICAN PIPELINE, L.P.
(Exact name of registrant as specified in its charter)
Delaware 76-0582150
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Dallas
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 654-1414
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Units New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes [x] No [_]
The aggregate value of the Common Units held by non-affiliates of the registrant
(treating all executive officers and directors of the registrant, for this
purpose, as if they may be affiliates of the registrant) was approximately
$223,207,250 on March 22, 1999 based on $17.125 per unit, the closing price of
the Common Units as reported on the New York Stock Exchange on such date).
At March 22, 1999, there were outstanding 20,059,239 Common Units and 10,029,619
Subordinated Units.
DOCUMENTS INCORPORATED BY REFERENCE: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
1998 FORM 10-K ANNUAL REPORT
Table of Contents
<TABLE>
<CAPTION>
Page
Part I
<S> <C> <C>
Items 1. and 2. Business and Properties 3
Item 3. Legal Proceedings 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Part II
Item 5. Market for Registrant's Common Units and Related Unitholder Matters 20
Item 6. Selected Financial Data 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23
Item 7a. Quantitative and Qualitative - Disclosures About Market Risks 30
Item 8. Financial Statements and Supplementary Data 31
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 31
Part III
Item 10. Directors and Executive Officers of the General Partner 32
Item 11. Executive Compensation 33
Item 12. Security Ownership of Certain Beneficial Owners and Management 36
Item 13. Certain Relationships and Related Transactions 36
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 37
</TABLE>
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements and
information that are based on the beliefs of Plains All American Pipeline, L.P.
and its general partner, as well as assumptions made by, and information
currently available to, the partnership and the general partner. All statements,
other than statements of historical fact, included in this Report are forward-
looking statements, including, but not limited to, statements identified by the
words "anticipate," "believe," "estimate," "expect," "plan," "intend" and
"forecast" and similar expressions and statements regarding the partnership's
business strategy, plans and objectives of management of the partnership for
future operations. Such statements reflect the current views of the partnership
and the general partner with respect to future events, based on what they
believe are reasonable assumptions. These statements, however, are subject to
certain risks, uncertainties and assumptions, including, but not limited to (i)
the availability of adequate supplies of and demand for crude oil in the areas
in which the partnership operates, (ii) the impact of crude oil price
fluctuations, (iii) the effects of competition, (iv) the success of the
partnership=s risk management activities, (v) the availability (or lack thereof)
of acquisition or combination opportunities, (vi) the impact of current and
future laws and governmental regulations, (vii) environmental liabilities that
are not covered by an indemnity or insurance, (viii) general economic, market or
business conditions and (ix) uncertainties inherent in the Year 2000 Issue. If
one or more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect, actual results may vary materially from those in
the forward-looking statements. Except as required by applicable securities
laws, the partnership does not intend to update these forward-looking statements
and information.
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PART I
Items 1. and 2. BUSINESS AND PROPERTIES
General
Plains All American Pipeline, L.P. ("PAA") and its operating partnerships,
Plains Marketing, L.P. ("Marketing") and All American Pipeline, L.P. ("AAPL")
(PAA, Marketing and AAPL collectively the "Partnership") were formed in late
1998 to acquire and operate the midstream crude oil business and assets of
certain wholly owned subsidiaries ("Plains Midstream Subsidiaries" or
"Predecessor") of Plains Resources Inc. ("Plains Resources"). All 1998 operating
data included herein includes the results of the Partnership and the
Predecessor. Plains All American Inc. (the "General Partner"), a wholly owned
subsidiary of Plains Resources, is the general partner of the Partnership and
the Partnership. The Partnership is engaged in interstate and intrastate crude
oil pipeline transportation and crude oil terminalling and storage activities
and gathering and marketing activities. The Partnership's operations are
concentrated in California, Texas, Oklahoma, Louisiana and the Gulf of Mexico.
The Partnership owns and operates the All American Pipeline, a 1,233-mile
seasonally heated, 30-inch, common carrier crude oil pipeline extending from
California to West Texas, and the SJV Gathering System, a 45-mile, 16-inch,
crude oil gathering system in the San Joaquin Valley of California, both of
which the General Partner purchased from Wingfoot Ventures Seven, Inc.
("Wingfoot"), a wholly owned subsidiary of The Goodyear Tire & Rubber Company
("Goodyear"), in July 1998 for approximately $400 million (the "Acquisition").
The All American Pipeline is one of the newest interstate crude oil pipelines in
the United States, having been constructed by Goodyear between 1985 and 1987 at
a cost of approximately $1.6 billion, and is the largest capacity crude oil
pipeline connecting California and Texas, with a design capacity of 300,000
barrels per day of heavy crude oil. In West Texas, the All American Pipeline
interconnects with other crude oil pipelines that serve the Gulf Coast and
Cushing, Oklahoma, the largest crude oil trading hub in the United States (the
"Cushing Interchange") and the designated delivery point for New York Mercantile
Exchange ("NYMEX") crude oil futures contracts.
Production currently transported on the All American Pipeline originates
from the Santa Ynez field operated by Exxon and the Point Arguello field
operated by Chevron, both offshore California, and from the San Joaquin Valley.
Exxon and Chevron, as well as Texaco and Sun Operating L.P., which are other
working interest owners, are contractually obligated to ship all of their
production from these offshore fields on the All American Pipeline through
August 2007. The SJV Gathering System is used primarily to transport crude oil
from fields in the San Joaquin Valley to the All American Pipeline and to
intrastate pipelines owned by third parties. The capacity of the SJV Gathering
System is approximately 140,000 barrels per day. In addition to transporting
third-party volumes for a tariff, the Partnership is engaged in merchant
activities designed to capture price differentials between the cost to purchase
and transport crude oil to a sales point and the price received for such crude
oil at the sales point.
At the Cushing Interchange, the Partnership owns and operates a two million
barrel, above-ground crude oil terminalling and storage facility that has an
estimated daily throughput capacity of approximately 800,000 barrels per day
(the "Cushing Terminal"). The Cushing Terminal was completed in 1993, making it
the most modern facility in the area, and includes state-of-the-art design
features. The Partnership has initiated an expansion project that will add one
million barrels of storage capacity at an aggregate cost of approximately $10
million. The expansion project is expected to be completed in the second quarter
of 1999. Upon completion of the expansion project, management believes the
Cushing Terminal will be the third largest facility at the Cushing Interchange
(and the largest not owned by a major oil company) with an estimated 12% of that
area's storage capacity. The Partnership also owns 586,000 barrels of tank
capacity along the SJV Gathering System, 955,000 barrels of tank capacity along
the All American Pipeline and 360,000 barrels of tank capacity at Ingleside,
Texas on the Gulf Coast (the "Ingleside Terminal").
The Partnership's terminalling and storage operations generate revenue from
the Cushing Terminal through a combination of storage and throughput fees from
(i) refiners and gatherers seeking to segregate or custom blend crude oil for
refining feedstocks, (ii) pipelines, refiners and traders requiring segregated
tankage for foreign crude oil, (iii) traders who make or take delivery under
NYMEX contracts and (iv) producers seeking to increase their marketing
alternatives. The Cushing Terminal and the Partnership's other storage
facilities also facilitate the Partnership's merchant activities by enabling the
Partnership to buy and store crude oil when the price of crude oil in a given
month is less than the price of crude oil in a subsequent month (a "contango"
market) and to simultaneously sell crude oil futures contracts for delivery of
the crude oil in such subsequent month at the higher futures price, thereby
locking in a profit.
The Partnership's gathering and marketing operations include the purchase
of crude oil at the wellhead and the bulk purchase of crude oil at pipeline and
terminal facilities, the transportation of crude oil on trucks, barges or
pipelines, and the subsequent resale or exchange of crude oil at various points
along the crude oil distribution chain. The crude oil distribution chain extends
from the wellhead where crude oil moves by truck and gathering systems to
terminal and pipeline injection stations and major pipelines and
3
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is transported to major crude oil trading locations for ultimate consumption
by refineries. In many cases, the Partnership matches supply and demand needs by
performing a merchant function--generating gathering and marketing margins by
buying crude oil at competitive prices, efficiently transporting or exchanging
the crude oil along the distribution chain and marketing the crude oil to
refineries or other customers. When there is a higher demand than supply of
crude oil in the near term, the price of crude oil in a given month exceeds the
price of crude oil in a subsequent month (a "backward" market). A backward
market has a positive impact on marketing margins because crude oil gatherers
can capture a premium for prompt deliveries. As premiums are paid for prompt
deliveries, storage opportunities are generally not profitable.
For the year ended December 31, 1998, the Partnership's pro forma gross
margin, earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA") and net income totaled $74.1 million, $68.2 million and
$43.9 million, respectively. On a pro forma basis, the All American Pipeline and
the SJV Gathering System accounted for approximately 69% of the Partnership's
gross margin for the year ended December 31, 1998, while the terminalling and
storage activities and gathering and marketing activities accounted for
approximately 31%. See Item 6, "Selected Financial and Operating Data".
Initial Public Offering and Concurrent Transactions
On November 23, 1998, the Partnership completed an initial public offering
(the "IPO") of 13,085,000 common units representing limited partner interests
(the "Common Units") and received therefrom net proceeds of approximately $244.7
million. Concurrently with the closing of the IPO, certain transactions
described in the following paragraphs were consummated in connection with the
formation of the Partnership and the Partnership. Such transactions and the
transactions which occurred in conjunction with the IPO are referred to in this
report as the "Transactions."
Certain of the Plains Midstream Subsidiaries were merged into Plains
Resources, which sold the assets of these subsidiaries to the Partnership in
exchange for $64.1 million and the assumption of $11.0 million of related
indebtedness. At the same time, the General Partner conveyed all of its interest
in the All American Pipeline and the SJV Gathering System to the Partnership in
exchange for (i) 6,974,239 Common Units, 10,029,619 Subordinated Units and an
aggregate 2% general partner interest in the Partnership, (ii) the right to
receive Incentive Distributions as defined in the Partnership Agreement; and
(iii) the assumption by the Partnership of $175 million of indebtedness incurred
by the General Partner in connection with the acquisition of the All American
Pipeline and the SJV Gathering System.
In addition to the $64.1 million paid to Plains Resources, the Partnership
distributed approximately $177.6 million to the General Partner and used
approximately $3 million of the remaining proceeds to pay expenses incurred in
connection with the Transactions. The General Partner used $121.0 million of the
cash distributed to it to retire the remaining indebtedness incurred in
connection with the acquisition of the All American Pipeline and the SJV
Gathering System and to pay certain other costs associated with the Transactions
for the Partnership. The balance, $56.6 million, was distributed to Plains
Resources, which used the cash to repay indebtedness and for other general
corporate purposes.
In addition, concurrently with the closing of the IPO, the Partnership
entered into a $225 million bank credit agreement (the "Bank Credit Agreement")
that includes a $175 million term loan facility (the "Term Loan Facility") and a
$50 million revolving credit facility (the "Revolving Credit Facility"). The
Partnership may borrow up to $50 million under the Revolving Credit Facility for
acquisitions, capital improvements, working capital and general business
purposes. At closing, the Partnership had $175 million outstanding under the
Term Loan Facility, representing indebtedness assumed from the General Partner.
The following chart depicts the organization and ownership of PAA,
Marketing and AAPL after giving effect to the consummation of the Transactions,
including the sale of the Common Units sold in the IPO. The percentages
reflected in the organization chart represent the approximate ownership interest
in each of PAA, Marketing and AAPL individually and not on an aggregate basis.
The effective aggregate ownership percentages at the top of the chart reflect
the ownership interest of the Unitholders in the Partnership, Marketing and AAPL
on a combined basis. The 2% ownership of the General Partner reflects the
approximate effective ownership interest of the General Partner in the
Partnership, Marketing and AAPL on a combined basis.
4
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[CHART APPEARS HERE]
5
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Market Overview
The Department of Energy segregates the United States into five Petroleum
Administration Defense Districts ("PADDs") to gather information relating to
crude oil supply to key refining areas in the event of a national emergency. The
oil industry utilizes these districts in reporting statistics regarding crude
oil supply and demand. The All American Pipeline serves, directly or through
connecting lines, PADD V, which consists of seven western states, including
Alaska and Hawaii, PADD II, which consists of 15 states in the Midwest, and PADD
III, which consists of six states located in the South, principally bordering
the Gulf of Mexico. The table below sets forth supply, demand and shortfall
information for each PADD for 1998 and is derived from information published by
the Energy Information Administration.
<TABLE>
<CAPTION>
Refinery Regional Supply
Petroleum Administration Defense District Demand Supply Shortfall
- ----------------------------------------- -------- -------- ---------
(thousands of barrels per day)
<S> <C> <C> <C>
PADD I (East Coast) 1,600 -- 1,600
PADD II (Midwest) 3,300 500 2,800
PADD III (South) 6,900 3,300 3,600
PADD IV (Rockies) 500 300 200
PADD V (West Coast) 2,500 2,100 400
-------- -------- ---------
Total 14,800 6,200 8,600
======== ======== =========
</TABLE>
As reflected in the table above, only 15% of the total refinery demand for
crude oil in PADD II can be supplied with crude oil produced in PADD II, with
the remainder (approximately 2.8 million barrels per day) provided by intra-U.S.
transfers of domestic crude oil production and imports from Canada and foreign
sources. In the 15-year period ending December 31, 1998, production from PADD II
has fallen approximately 52%, declining from approximately 1.1 million barrels
per day in 1984 to approximately 523,000 barrels per day in 1998. Over this same
time period, refinery demand for crude oil in this area has risen approximately
18%, increasing from approximately 2.8 million barrels per day in 1984 to
approximately 3.3 million barrels per day in 1998. Accordingly, over the last 15
years PADD II's reliance on sources outside the region has increased by
approximately 1.1 million barrels per day. Historically, PADD II refiners have
relied on crude oil production from PADD V to meet a portion of their refinery
input requirements.
Within PADD V, the supply/demand trend is quite different. Despite
significant population growth, PADD V refinery inputs (crude oil demand) have
decreased from a high of approximately 2.6 million barrels per day in 1989 to an
average of approximately 2.5 million barrels per day over the last five years.
This net decrease in refinery inputs is primarily due to (i) a reduction in the
number of operating refineries and (ii) an increase in the conversion capacity
of California refineries (which represent approximately 70% of the total PADD V
refinery inputs). Between 1985 and 1998, the number of operating California
refineries has declined from 34 (at approximately 79% of total capacity) to 21
(at approximately 95% of total capacity). A portion of the capacity lost due to
refinery closures has been met by higher capacity utilization at the continuing
refineries. Meanwhile, these units have been upgrading facilities to produce
legislatively-mandated cleaner-burning gasolines. As California refineries have
become more efficient, producing greater volumes of higher value products such
as gasoline from a lesser quantity of crude oil, overall refinery demand for
crude oil in PADD V has decreased. Excluding Hawaii, which imports approximately
80,000 barrels per day of foreign crude oil, and taking into account
geographically captive Canadian volumes which are transported to the Washington
state area, PADD V supply currently exceeds demand. In 1997 and 1998, a number
of large producers in California and Alaska announced multi-year capital
programs designed to increase production in California and Alaska. Subsequently,
several of these producers announced reductions in their 1999 capital spending
programs in response to the record low oil prices experienced in late-1998 and
early 1999, dampening the outlook for near term production growth. As a result,
the Partnership is unable to determine the long-term effects the low oil price
environment will have on California and Alaskan production volumes. However,
because of its low cost structure and the demand for crude oil in PADD II, the
Partnership believes the All American Pipeline will continue to be used to
transport California crude oil to connections with pipelines in Texas that will
deliver such crude oil to the Cushing Interchange in PADD II as well as the Gulf
Coast areas in PADD III.
Pending Acquisition
On March 17, 1999, the Partnership signed a definitive agreement with
Marathon Ashland Petroleum LLC to acquire Scurlock Permian LLC and certain other
pipeline assets. The cash purchase price for the acquisition is approximately
$138 million, plus associated closing and financing costs. The purchase price is
subject to adjustment at closing for working capital on April 1, 1999, the
effective date of the acquisition. Closing of the transaction is subject to
regulatory review and approval, consents from third parties, and customary due
diligence. Subject to satisfaction of the foregoing conditions, the transaction
is expected to close in the second quarter of 1999. The Partnership has received
a financing commitment from one of its existing lenders, which in addition to
other
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financial resources currently available to the Partnership, will provide the
funds necessary to complete the transaction. The definitive agreement provides
that if either party fails to perform its obligations thereunder through no
fault of the other party, such defaulting party shall pay the nondefaulting
party $7.5 million as liquidated damages.
Scurlock Permian LLC, a wholly owned subsidiary of Marathon Ashland
Petroleum LLC, is engaged in crude oil transportation, trading and marketing,
operating in 14 states with more than 2,400 miles of active pipelines, numerous
storage terminals and a fleet of more than 225 trucks. Its largest asset is an
800-mile pipeline and gathering system located in the Spraberry Trend in West
Texas that extends into Andrews, Glasscock, Howard, Martin, Midland, Regan,
Upton and Irion Counties, Texas. The assets to be acquired also include
approximately one million barrels of crude oil used for working inventory.
Crude Oil Pipeline Operations
All American Pipeline
The All American Pipeline is a common carrier crude oil pipeline system
that transports crude oil produced from fields offshore and onshore California
to locations in California and West Texas pursuant to tariff rates regulated by
the Federal Energy Regulatory Commission ("FERC"). As a common carrier, the All
American Pipeline offers transportation services to any shipper of crude oil,
provided that the crude oil tendered for transportation satisfies the conditions
and specifications contained in the applicable tariff. The All American Pipeline
transports crude oil for third parties as well as for the Partnership.
The All American Pipeline is comprised of a heated pipeline system which
extends approximately 10 miles from Exxon's onshore facilities at Las Flores on
the California coast to Chevron's onshore facilities at Gaviota, California (24-
inch diameter pipe) and continues from Gaviota approximately 1,223 miles through
Arizona and New Mexico to West Texas (30-inch diameter pipe) where it
interconnects with other pipelines. These interconnecting common carrier
pipelines transport crude oil to the refineries located along the Gulf Coast and
to the Cushing Interchange. At the Cushing Interchange, these pipelines connect
with other pipelines that deliver crude oil to Midwest refiners. The All
American Pipeline also includes various pumping and heating stations, as well as
approximately one million barrels of crude oil storage tank capacity, to
facilitate the transportation of crude oil. The tank capacity is located at
stations in Sisquoc, Pentland and Cadiz, California, and at the station in Wink,
Texas. The Partnership owns approximately 5.0 million barrels of crude oil that
is used to maintain the All American Pipeline's linefill requirements.
The All American Pipeline has a designed throughput capacity of 300,000
barrels per day of heavy crude oil and larger volumes of lighter crude oils. As
currently configured, the pipeline's daily throughput capacity is approximately
216,000 barrels of heavy oil. In order to achieve designed capacity, certain
nominal capital expenditures would be required. The All American Pipeline is
operated from a control room in Bakersfield, California with a supervisory
control and data acquisition ("SCADA") computer system designed to continuously
monitor quantities of crude oil injected in and delivered through the All
American Pipeline as well as pressure and temperature variations. This
technology also allows for the batching of several different types of crude oil
with varying gravities. The SCADA system is designed to enhance leak detection
capabilities and provides for remote-controlled shut-down at every pump station
on the All American Pipeline. Pumping stations are linked by telephone and
microwave communication systems for remote-control operation of the All American
Pipeline which allows most of the pump stations to operate without full time
site personnel.
The Partnership performs scheduled maintenance on the pipeline and makes
repairs and replacements when necessary or appropriate. As one of the most
recently constructed major crude oil pipeline systems in the United States, the
All American Pipeline requires a relatively low level of maintenance capital
expenditures. The Partnership attempts to control corrosion of the pipeline
through the use of corrosion inhibiting chemicals injected into the crude
stream, external pipe coatings and an anode bed based cathodic protection
system. The Partnership monitors the structural integrity of the All American
Pipeline through a program of periodic internal inspections using electronic
"smart pig" instruments. The Partnership conducts a weekly aerial surveillance
of the entire pipeline and right-of-way to monitor activities or encroachments
on rights-of-way. Maintenance facilities containing equipment for pipe repair,
digging and light equipment maintenance are strategically located along the
pipeline. The Partnership believes that the All American Pipeline has been
constructed and is maintained in all material respects in accordance with
applicable federal, state and local laws and regulations, standards prescribed
by the American Petroleum Institute and accepted industry standards of practice.
System Supply
The All American Pipeline transports several different types of crude oil,
including (i) Outer Continental Shelf ("OCS") crude oil received at the onshore
facilities of the Santa Ynez field at Las Flores, California and the onshore
facilities of the Point Arguello field located at Gaviota, California, (ii) Elk
Hills crude oil, received at Pentland, California from a connection with the SJV
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Gathering System and (iii) various crude oil blends received at Pentland from
the SJV Gathering System, including West Coast Heavy and Mojave Blend.
OCS Supply. Exxon, which owns all of the Santa Ynez production, and
Chevron, Texaco and Sun Operating L.P., which own approximately one-half of the
Point Arguello production, have entered into transportation agreements
committing to transport all of their production from these fields on the All
American Pipeline. These agreements, which expire in August 2007, provide for a
minimum tariff with annual escalations. At December 31, 1998, the tariffs
averaged $1.41 per barrel for deliveries to connecting pipelines in California
and $2.96 per barrel for deliveries to connecting pipelines in West Texas. The
agreements do not require these owners to transport a minimum volume. The
producers from the Point Arguello field who do not have contracts with the
Partnership have no other means of transporting their production and, therefore,
ship their volumes on the All American Pipeline at the posted tariffs. During
1998, approximately $33.6 million, or 45%, of the Partnership's pro forma gross
margin was attributable to volumes received from the Santa Ynez field and
approximately $12.9 million, or 17%, was attributable to volumes received from
the Point Arguello field. Transportation of volumes from the Point Arguello
field on the All American Pipeline commenced in 1991 and from the Santa Ynez
field in 1994. The table below sets forth the historical volumes received from
both of these fields.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------ -------
(barrels in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average daily volumes received from:
Point Arguello (at Gaviota) 26 30 41 60 73 63 47 29
Santa Ynez (at Las Flores) 68 85 95 92 34 -- -- --
------ ------ ------ ------ ------ ------ ------ -------
Total 94 115 136 152 107 63 47 29
====== ====== ====== ====== ====== ====== ====== =======
</TABLE>
Absent operational or economic disruptions, the Partnership anticipates
that production from Point Arguello will continue to decline at percentage rates
which approximate historical decline rates, but that average production received
from the Santa Ynez field for 1999 will generally approximate 60,000 to 65,000
barrels per day. In connection with a proposed transfer of its ownership in
Point Arguello to a private independent oil company, Chevron provided notice to
the other working interest owners of its resignation as operator of the Point
Arguello field. The Partnership is unable to determine at this time if the
proposed transfer will occur or the consequences any such transfer or the
absence of any such transfer will have on Point Arguello production and the
resulting pipeline transportation volumes.
According to information published by the Minerals Management Service
("MMS"), significant additional proved, undeveloped reserves have been
identified offshore California which have the potential to be delivered on the
All American Pipeline. Future volumes of crude oil deliveries on the All
American Pipeline will depend on a number of factors that are beyond the
Partnership's control, including (i) the economic feasibility of developing the
reserves, (ii) the economic feasibility of connecting such reserves to the All
American Pipeline and (iii) the ability of the owners of such reserves to obtain
the necessary governmental approvals to develop such reserves. The owners of
these reserves are currently participating in a study (California Offshore Oil
and Gas Energy Resources, "COOGER") with various private organizations and
regulatory agencies to determine the best sites to locate onshore facilities
that will be required to handle and process potential production from these
undeveloped fields as well as the best methods of controlling potential
environmental dangers associated with offshore drilling and production. These
owners have also agreed to suspend drilling on the undeveloped leases until the
COOGER study is completed. The COOGER study is anticipated to be completed by
June 30, 1999, at which time owners of these undeveloped reserves must submit
their development plans to the MMS. There can be no assurance that the owners
will develop such reserves, that the MMS will approve development plans or that
future regulations or litigation will not prevent or retard their ultimate
development and production. There also can be no assurance that, if such
reserves were developed, a competing pipeline might not be built to transport
the production. In addition, a June 12, 1998 Executive Order of the President of
the United States extends until the year 2012 a statutory moratorium on new
leasing of offshore California fields. Existing fields are authorized to
continue production, but federal, state and local agencies may restrict permits
and authorizations for their development, and may restrict new onshore
facilities designed to serve offshore production of crude oil. San Luis Obispo
and Santa Barbara counties have adopted zoning ordinances that prohibit
development, construction, installation or expansion of any onshore support
facility for offshore oil and gas activity in the area, unless approved by a
majority of the votes cast by the voters of either county in an authorized
election. Any such restrictions, should they be imposed, could adversely affect
the future delivery of crude oil to the All American Pipeline.
San Joaquin Valley Supply. In addition to OCS production, crude oil from
fields in the San Joaquin Valley is delivered into the All American Pipeline at
Pentland through connections with the SJV Gathering System and pipelines
operated by EOTT, L.P. and ARCO. The San Joaquin Valley is one of the most
prolific oil producing regions in the continental United States, producing
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approximately 591,000 barrels per day of crude oil during the first nine months
of 1998 that accounted for approximately 65% of total California production and
11% of the total production in the lower 48 states. The following table reflects
the historical production for the San Joaquin Valley as well as total California
production (excluding OCS volumes) as reported by the California Division of Oil
and Gas.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1998(1) 1997 1996 1995 1994 1993 1992 1991 1990 1989
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(barrels in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average daily volumes:
San Joaquin Valley production 591 584 579 569 578 588 609 634 629 646
Total California production
(excluding OCS volumes) 780 781 772 764 784 803 835 875 879 907
</TABLE>
- --------------
(1) Reflects information through September 1998.
Drilling and exploitation activities have increased in the San Joaquin
Valley over the last few years, primarily due to the change in ownership of
several large fields and technological advances in horizontal drilling and steam
assisted recovery methods that have improved the overall economics of field
development and reductions in the operating costs of these fields. The near term
outlook for any potential production increases has been adversely affected by
the depressed price of oil and related reductions in capital spending plans
announced by several California producers.
Alaskan North Slope Supply. Historically, the All American Pipeline had
also transported volumes of Alaskan North Slope crude oil. In 1996, the U.S.
government repealed the export ban on crude oil produced from the Alaskan North
Slope which had effectively prohibited the sale of Alaskan North Slope crude oil
to sources outside the U.S. Prior to its repeal, this ban had the impact of
increasing volumes of Alaskan crude oil delivered into the California market.
Shipments of Alaskan North Slope crude oil on the All American Pipeline ceased
in February 1997, shortly after the repeal of the export ban. In addition, ARCO
sold the only pipeline that could bring Alaskan North Slope crude oil to the All
American Pipeline. This pipeline will be converted to natural gas service
thereby eliminating the physical capability to ship Alaskan North Slope crude
oil on the All American Pipeline.
System Demand
Deliveries from the All American Pipeline are made to refineries within
California, along the Gulf Coast or in the Midwest through connecting pipelines
of other companies. Demand for crude oil shipped on the All American Pipeline in
each of these markets is affected by numerous factors, including refinery
utilization and crude oil slate requirements, regional crude oil production,
foreign imports, intra-U.S. transfers of crude oil and the price differential
(net of transportation cost) between the California and Midwest markets.
Deliveries are made to California refineries through connections with
third-party pipelines at Sisquoc, Pentland and Mojave. The deliveries at Sisquoc
and Pentland are OCS crude oil while the deliveries at Mojave are primarily
Mojave Blend. Crude oil transported to West Texas is primarily West Coast Heavy
and is delivered to third-party pipelines at Wink and McCamey, Texas. At Wink,
West Coast Heavy crude is blended with Domestic Sweet Crude to increase the
gravity (the blend is commonly referred to as West Coast Sour), permitting
delivery into third party pipelines that can transport the crude to the Cushing
Interchange. At McCamey, West Coast Heavy and OCS crude oil are delivered to a
third-party pipeline that supplies refiners on the Gulf Coast.
The following table sets forth All American Pipeline average deliveries per
day within and outside California for each of the years in the five-year period
ended December 31, 1998.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997 1996 1995 1994
------- ------ ------ ------ ------
(barrels in thousands)
<S> <C> <C> <C> <C> <C>
Average daily volumes delivered to:
California
Sisquoc 24 21 17 11 21
Pentland 69 74 71 65 56
Mojave 22 32 6 -- --
------- ------ ------ ------ ------
Total California 115 127 94 76 77
Texas 59 68 113 141 108
------- ------ ------ ------ ------
Total 174 195 207 217 185
======= ====== ====== ====== ======
</TABLE>
9
<PAGE>
SJV Gathering System
The SJV Gathering System is a proprietary pipeline system that only
transports crude oil purchased by the Partnership. As a proprietary pipeline,
the SJV Gathering System is not subject to common carrier regulations and does
not transport crude oil for third parties. The primary purpose of the pipeline
is to gather crude oil from various sources in the San Joaquin Valley and to
blend such crude oil along the pipeline system in order to deliver either West
Coast Heavy or Mojave Blend into the All American Pipeline. Certain crude
streams are segregated and delivered into either the All American Pipeline or to
third party pipelines connected to the SJV Gathering System.
The SJV Gathering System was constructed in 1987 with a design capacity of
approximately 140,000 barrels per day. The system consists of a 16-inch pipeline
that originates at the Belridge station and extends 45 miles south to a
connection with the All American Pipeline at the Pentland station. The SJV
Gathering System is connected to several fields, including the South Belridge,
Elk Hills and Midway Sunset fields, three of the seven largest producing fields
in the lower 48 states. The SJV Gathering System also includes approximately
586,000 barrels of tank capacity, which has historically been used to facilitate
movements along the pipeline system.
The SJV Gathering System is operated in conjunction with, and with the same
SCADA system used in the operations of, the All American Pipeline. The
Partnership also takes measures to protect the pipeline from corrosion and
routinely inspects the pipeline using the same procedures and practices employed
in the operation of the All American Pipeline. Like the All American Pipeline,
the SJV Gathering System was constructed and is maintained in all material
respects in accordance with applicable federal, state and local laws and
regulations, standards recommended by the American Petroleum Institute and
accepted industry standards of practice.
The SJV Gathering System is supplied with the crude oil production
primarily from major oil companies' equity production from the South Belridge,
Cymeric, Midway Sunset and Elk Hills fields. The table below sets forth the
historical volumes received into the SJV Gathering System.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997 1996 1995 1994
------- ------ ------ ------ ------
(barrels in thousands)
<S> <C> <C> <C> <C> <C>
Total average daily volumes 85 91 67 50 54
</TABLE>
To increase utilization and margins relating to the SJV Gathering System,
the Partnership has initiated a wellhead gathering, transportation and marketing
program in the San Joaquin Valley. The new program is similar to a program to
purchase crude oil from independent producers successfully implemented by the
Plains Midstream Subsidiaries in Texas, Oklahoma, Kansas and Louisiana under
which volumes increased from 1,300 barrels per day in 1990 to 88,000 barrels per
day in 1998. The Partnership has committed resources to its new gathering
program by hiring an additional lease buyer, activating an existing truck
unloading station and arranging to make additional connections with other
pipeline systems in the San Joaquin Valley, including access into the Pacific
Pipeline. In addition, the Partnership has entered into an arrangement with
various parties whereby the Partnership has reserved up to 40,000 barrels per
day of capacity for movements into the Pacific Pipeline, and all crude oil
sourced by one such party from the Midway Sunset field will be delivered by the
Partnership into the Pacific Pipeline via the SJV Gathering System. Construction
of the Pacific Pipeline, a pipeline system that will serve the LA Basin, was
completed in early 1999. See "Competition."
Terminalling and Storage Activities and Gathering and Marketing Activities
Terminalling and Storage
The Cushing Terminal was constructed in 1993 to capitalize on the crude oil
supply and demand imbalance in the Midwest caused by the continued decline of
regional production supplies, increasing imports and an inadequate pipeline and
terminal infrastructure. The Cushing Terminal is also used to support and
enhance the margins associated with the Partnership's merchant activities
relating to its lease gathering and bulk trading activities. The Ingleside
Terminal was constructed in 1979 and purchased by the Plains Midstream
Subsidiaries in 1996 to enhance its lease gathering activities in South Texas.
The Cushing Terminal has a total storage capacity of two million barrels,
comprised of fourteen 100,000 barrel tanks and four 150,000 barrel tanks used to
store and terminal crude oil. The Cushing Terminal also includes a pipeline
manifold and pumping system that has an estimated daily throughput capacity of
approximately 800,000 barrels per day. The pipeline manifold and pumping system
is designed to support up to ten million barrels of tank capacity. The Cushing
Terminal is connected to the major pipelines and terminals in the Cushing
Interchange through pipelines that range in size from 10 inches to 24 inches in
diameter. A one million
10
<PAGE>
barrel expansion project to add four 250,000 barrel tanks is currently underway
at the Cushing Terminal with completion targeted for the second quarter of 1999.
The Cushing Terminal is a state-of-the-art facility designed to serve the
needs of refiners in the Midwest. In order to service an expected increase in
the volumes as well as the varieties of foreign and domestic crude oil projected
to be transported through the Cushing Interchange, the Partnership incorporated
certain attributes into the design of the Cushing Terminal including (i)
multiple, smaller tanks to facilitate simultaneous handling of multiple crude
varieties in accordance with normal pipeline batch sizes, (ii) dual header
systems connecting each tank to the main manifold system to facilitate efficient
switching between crude grades with minimal contamination, (iii) bottom drawn
sump pumps that enable each tank to be efficiently drained down to minimal
remaining volumes to minimize crude contamination and maintain crude integrity,
(iv) a mixer on each tank to facilitate blending crude grades to refinery
specifications, and (v) a manifold and pump system that allows for receipts and
deliveries with connecting carriers at their maximum operating capacity. As a
result of incorporating these attributes into the design of the Cushing
Terminal, the Partnership believes it is favorably positioned to serve the needs
of Midwest refiners to handle increasing varieties of crude transported through
the Cushing Interchange.
The Cushing Terminal also incorporates numerous environmental and
operational safeguards. The Partnership believes that its terminal is the only
one at the Cushing Interchange for which each tank has a secondary liner (the
equivalent of double bottoms), leak detection devices and secondary seals. The
Cushing Terminal is the only terminal at the Cushing Interchange equipped with
above ground pipelines. Like the All American Pipeline and the SJV Gathering
System, the Cushing Terminal is operated by a SCADA system and each tank is
cathodically protected. In addition, each tank is equipped with an audible and
visual high level alarm system to prevent overflows; a floating roof that
minimizes air emissions and prevents the possible accumulation of potentially
flammable gases between fluid levels and the roof of the tank; and a foam line
that, in the event of a fire, is connected to the automated fire water
distribution system.
The Cushing Interchange is the largest wet barrel trading hub in the U.S.
and the delivery point for crude oil futures contracts traded on the NYMEX. The
Cushing Terminal has been designated by the NYMEX as an approved delivery
location for crude oil delivered under the NYMEX light sweet crude oil futures
contract. As a NYMEX delivery point and a cash market hub, the Cushing
Interchange serves as the primary source of refinery feedstock for the Midwest
refiners and plays an integral role in establishing and maintaining markets for
many varieties of foreign and domestic crude oil.
The Ingleside Terminal was constructed in 1979 and purchased by the Plains
Midstream Subsidiaries in 1996 to enhance its lease gathering activities in
South Texas. The Ingleside Terminal is located near the Gulf Coast port of
Corpus Christi, Texas. The Ingleside Terminal is comprised of 11 tanks ranging
in size from a minimum of 15,000 barrels to a maximum of 50,000 barrels. Three
of these tanks are heated, which allows for storage of heavier products. The
terminal has access to the receipt of crude oil and refined petroleum products
from trucks and barges. Likewise, the terminal can deliver crude oil and refined
petroleum products to barges and trucks. The Partnership leases a barge dock
approximately one mile from the Ingleside Terminal and is connected to the dock
by four pipelines ranging in size from 8 inches to 12 inches in diameter. The
dock lease can be extended in five-year intervals through 2021.
The Partnership's terminalling and storage operations generate revenue
through terminalling and storage fees paid by third parties as well as by
utilizing the tankage in conjunction with its merchant activities. Storage fees
are generated when the Partnership leases tank capacity to third parties.
Terminalling fees, also referred to as throughput fees, are generated when the
Partnership receives crude oil from one connecting pipeline (generally received
in batch sizes of 25,000 to 400,000 barrels) and redelivers such crude oil to
another connecting carrier in volumes that allow the refinery to receive its
crude oil on a ratable basis throughout a delivery period (which is generally
three to ten days). Both terminalling and storage fees are generally earned from
(i) refiners and gatherers that segregate or custom blend crudes for refining
feedstocks, (ii) pipeline operators, refiners or traders that need segregated
tankage for foreign cargoes, (iii) traders who make or take delivery under NYMEX
contracts and (iv) producers and resellers that seek to increase their marketing
alternatives. The tankage that is used to support the Partnership's arbitrage
activities position the Partnership to capture margins in a contango market or
when the market switches from contango to backwardation. The following table
sets forth the daily throughput volumes for the Partnership's terminalling and
storage operations, and quantity of tankage leased to third parties from 1994
through 1998.
11
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997 1996 1995 1994
------- ------ ------ ------ ------
(barrels in thousands)
<S> <C> <C> <C> <C> <C>
Throughput volumes (average
daily volumes):
Cushing Terminal 69 69 56 43 29
Ingelside Terminal 11 8 3 -- --
------- ------ ------ ------ ------
Total 80 77 59 43 29
======= ====== ====== ====== ======
Storeage leased to third parties
(monthly average volumes):
Cushing Terminal 890 414 203 208 464
Ingleside Terminal 260 254 211 -- --
------- ------ ------ ------ ------
Total 1,150 668 414 208 464
======= ====== ====== ====== ======
</TABLE>
The Partnership has committed 1.5 million barrels of its capacity at the
Cushing Terminal to storage arrangements with third parties through mid-1999.
Gathering and Marketing Activities
The Partnership's gathering and marketing activities are primarily
conducted in Louisiana, Texas, Oklahoma and Kansas and include (i) purchasing
crude oil from producers at the wellhead and in bulk from aggregators at major
pipeline interconnects and trading locations, (ii) transporting such crude oil
on its own proprietary gathering assets or assets owned and operated by third
parties when necessary or cost effective, (iii) exchanging such crude oil for
another grade of crude oil or at a different geographic location, as
appropriate, in order to maximize margins or meet contract delivery requirements
and (iv) marketing crude oil to refiners or other resellers. For the year ended
December 31, 1998 the Partnership purchased approximately 88,000 barrels per day
of crude oil directly at the wellhead. The Partnership purchases crude oil from
producers under contracts that range in term from a thirty-day evergreen to two
years. Gathering and marketing activities are characterized by large volumes of
transactions with lower margins relative to pipeline and terminalling and
storage operations.
The following table shows the average daily volume of the Partnership's
lease gathering and bulk purchases from 1995 through 1998.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997 1996 1995
-------- ------- ------ ------
(barrels in thousands)
<S> <C> <C> <C> <C>
Lease gathering 88 71 59 46
Bulk purchases 95 49 32 10
-------- ------- ------ ------
Total volumes 183 120 91 56
======== ======= ====== ======
</TABLE>
Crude Oil Purchases. In a typical producer's operation, crude oil flows
from the wellhead to a separator where the petroleum gases are removed. After
separation, the crude oil is treated to remove water, sand and other
contaminants and is then moved into the producer's on-site storage tanks. When
the tank is full, the producer contacts the Partnership's field personnel to
purchase and transport the crude oil to market. The Partnership utilizes
pipelines, trucks and barges owned and operated by third parties and the
Partnership's truck fleet and gathering pipelines to transport the crude oil to
market. The Partnership owns approximately 29 trucks, 30 tractor-trailers and 22
injection stations.
Pursuant to a Crude Oil Marketing Agreement with Plains Resources (the
"Crude Oil Marketing Agreement"), the Partnership is the exclusive
marketer/purchaser for all of Plains Resources' equity crude oil production. The
Crude Oil Marketing Agreement provides that the Partnership will purchase for
resale at market prices all of Plains Resources' crude oil production for which
it will charge a fee of $0.20 per barrel. This fee will be adjusted every three
years based upon then existing market conditions. The Crude Oil Marketing
Agreement will terminate upon a "change of control" of Plains Resources or the
General Partner. On a pro forma basis, revenues generated under the Crude Oil
Marketing Agreement for the year ended December 31, 1998 would have been
approximately $1.5 million. For the year ended December 31, 1998, Plains
Resources produced approximately 20,800 barrels per day which would be subject
to the Crude Oil Marketing Agreement. Plains Resources owns an approximate 100%
working interest in each of its fields.
Bulk Purchases. In addition to purchasing crude oil at the wellhead from
producers, the Partnership purchases crude oil in bulk at major pipeline
terminal points. This production is transported from the wellhead to the
pipeline by major oil companies, large independent producers or other gathering
and marketing companies. The Partnership purchases crude oil in bulk when it
believes additional opportunities exist to realize margins further downstream in
the crude oil distribution chain. The opportunities to earn additional margins
vary over time with changing market conditions. Accordingly, the margins
associated with the Partnership's bulk
12
<PAGE>
purchases fluctuate from period to period. The Partnership's bulk purchasing
activities are concentrated in California, Texas, Louisiana and at the Cushing
Interchange.
Crude Oil Sales. The marketing of crude oil is complex and requires
detailed current knowledge of crude oil sources and end markets and a
familiarity with a number of factors including grades of crude oil, individual
refinery demand for specific grades of crude oil, area market price structures
for the different grades of crude oil, location of customers, availability of
transportation facilities and timing and costs (including storage) involved in
delivering crude oil to the appropriate customer. The Partnership sells its
crude oil to major integrated oil companies and independent refiners in various
types of sale and exchange transactions, generally at market-responsive prices
for terms ranging from one month to three years.
As the Partnership purchases crude oil, it establishes a margin by selling
crude oil for physical delivery to third party users, such as independent
refiners or major oil companies, or by entering into a future delivery
obligation with respect to futures contracts on the NYMEX. Through these
transactions, the Partnership seeks to maintain a position that is substantially
balanced between crude oil purchases and sales and future delivery obligations.
The Partnership from time to time enters into fixed price delivery contracts,
floating price collar arrangements, financial swaps and oil futures contracts as
hedging devices. To ensure a fixed price for future production, the Partnership
may sell a futures contract and thereafter either (i) make physical delivery of
its crude oil to comply with such contract or (ii) buy a matching futures
contract to unwind its futures position and sell its crude oil to a customer.
The Partnership's policy is generally to purchase only crude oil for which it
has a market and to structure its sales contracts so that crude oil price
fluctuations do not materially affect the gross margin which it receives. The
Partnership does not acquire and hold crude oil, futures contracts or other
derivative products for the purpose of speculating on crude oil price changes
that might expose the Partnership to indeterminable losses.
Risk management strategies, including those involving price hedges using
NYMEX futures contracts, have become increasingly important in creating and
maintaining margins. Such hedging techniques require significant resources
dedicated to managing futures positions. The Partnership's management monitors
crude oil volumes, grades, locations and delivery schedules and coordinates
marketing and exchange opportunities, as well as NYMEX hedging positions. This
coordination ensures that the Partnership's NYMEX hedging activities are
successfully implemented.
Crude Oil Exchanges. The Partnership pursues exchange opportunities to
enhance margins throughout the gathering and marketing process. When
opportunities arise to increase its margin or to acquire a grade of crude oil
that more nearly matches its delivery requirement or the preferences of its
refinery customers, the Partnership exchanges physical crude oil with third
parties. These exchanges are effected through contracts called exchange or buy-
sell agreements. Through an exchange agreement, the Partnership agrees to buy
crude oil that differs in terms of geographic location, grade of crude oil or
delivery schedule from crude oil it has available for sale. Generally, the
Partnership enters into exchanges to acquire crude oil at locations that are
closer to its end markets, thereby reducing transportation costs and increasing
its margin. The Partnership also exchanges its crude oil to be delivered at an
earlier or later date, if the exchange is expected to result in a higher margin
net of storage costs, and enters into exchanges based on the grade of crude oil
(which includes such factors as sulfur content and specific gravity) in order to
meet the quality specifications of its delivery contracts.
Producer Services. Crude oil purchasers who buy from producers compete on
the basis of competitive prices and highly responsive services. The Partnership
believes that its ability to offer high-quality field and administrative
services to producers is a key factor in maintaining volumes of purchased crude
oil and obtaining new volumes. High-quality field services include efficient
gathering capabilities, availability of trucks, willingness to construct
gathering pipelines where economically justified, timely pickup of crude oil
from tank batteries at the lease or production point, accurate measurement of
crude oil volumes received, avoidance of spills and effective management of
pipeline deliveries. Accounting and other administrative services include
securing division orders (statements from interest owners affirming the division
of ownership in crude oil purchased by the Partnership), providing statements of
the crude oil purchased each month, disbursing production proceeds to interest
owners and calculation and payment of ad valorem and production taxes on behalf
of interest owners. In order to compete effectively, the Partnership must
maintain records of title and division order interests in an accurate and timely
manner for purposes of making prompt and correct payment of crude oil production
proceeds, together with the correct payment of all severance and production
taxes associated with such proceeds.
Credit. The Partnership's merchant activities involve the purchase of crude
oil for resale and require significant extensions of credit by the Partnership's
suppliers of crude oil. In order to assure the Partnership's ability to perform
its obligations under crude purchase agreements, various credit arrangements are
negotiated with the Partnership's crude oil suppliers. Such arrangements include
open lines of credit directly with the Partnership and standby letters of credit
issued under the Letter of Credit Facility. See Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Capital
Resources, Liquidity and Financial Condition."
13
<PAGE>
When the Partnership markets crude oil, it must determine the amount, if
any, of the line of credit to be extended to any given customer. If the
Partnership determines that a customer should receive a credit line, it must
then decide on the amount of credit that should be extended. Since typical
Partnership sales transactions can involve tens of thousands of barrels of crude
oil, the risk of nonpayment and nonperformance by customers is a major
consideration in the Partnership's business. The Partnership believes its sales
are made to creditworthy entities or entities with adequate credit support.
Credit review and analysis are also integral to the Partnership's leasehold
purchases. Payment for all or substantially all of the monthly leasehold
production is sometimes made to the operator of the lease. The operator, in
turn, is responsible for the correct payment and distribution of such production
proceeds to the proper parties. In these situations, the Partnership must
determine whether the operator has sufficient financial resources to make such
payments and distributions and to indemnify and defend the Partnership in the
event any third party should bring a protest, action or complaint in connection
with the ultimate distribution of production proceeds by the operator.
Operating Activities
The following table presents certain information with respect to the
Predecessor's and the Partnership's pipeline activities and its terminalling and
storage and gathering and marketing activities during the year ended December
31, 1998.
<TABLE>
<CAPTION>
November 23, January 1,
1998 1998
Through Through Combined
December 31, November 22, Total
1998 1998 1998
------------- ------------- --------
(Predecessor)
(in thousands)
<S> <C> <C> <C>
Sales to unaffiliated customers:
Pipeline $ 56,118 $221,305 $277,423
Terminalling and storage and
gathering and marketing 122,785 755,496 878,281
Operating profits:
Pipeline(1) $ 3,546 $ 13,222 $ 16,768
Terminalling and storage and
gathering and marketing 3,953 17,759 21,712
Identifiable assets:
Pipeline N/A N/A $472,144
Terminalling and storage and
gathering and marketing N/A N/A 138,064
</TABLE>
- ----------------
(1) Consists primarily of pipeline tariff and margin revenues less pipeline
margin purchases and operating costs.
(2) Consists primarily of crude oil sales and terminalling and storage revenues
less crude oil purchases and operating costs.
Customers
Sempra Energy Trading Corporation and Koch Oil Company accounted for 30%
and 17%, respectively, of the Partnership's 1998 revenues. No other individual
customer accounted for greater than 10% of the Partnership's revenue.
Competition
The All American Pipeline encounters competition from foreign oil imports
and other pipelines that serve the California market and the refining centers in
the Midwest and on the Gulf Coast.
Construction of the Pacific Pipeline, a competing crude oil pipeline system
connecting the San Joaquin Valley to refinery markets in the Los Angeles Basin
was completed in March 1999. A substantial portion of the shipments expected to
be transported on the Pacific Pipeline will be redirected from barge and train
service. However, the Partnership expects that certain volumes currently
transported on the All American Pipeline may be redirected to Los Angeles on
such pipeline.
Competition among common carrier pipelines is based primarily on
transportation charges, access to producing areas and demand for the crude oil
by end users. The Partnership believes that high capital requirements,
environmental considerations and the difficulty in acquiring rights of way and
related permits make it unlikely that a competing pipeline system comparable in
size and scope to the All American Pipeline will be built in the foreseeable
future.
14
<PAGE>
The Partnership faces intense competition in its terminalling and storage
activities and gathering and marketing activities. Its competitors include other
crude oil pipelines, the major integrated oil companies, their marketing
affiliates and independent gatherers, brokers and marketers of widely varying
sizes, financial resources and experience. Some of these competitors have
capital resources many times greater than the Partnership's and control
substantially greater supplies of crude oil.
Regulation
The Partnership's operations are subject to extensive regulation. Many
departments and agencies, both federal and state, are authorized by statute to
issue and have issued rules and regulations binding on the oil industry and its
individual participants. The failure to comply with such rules and regulations
can result in substantial penalties. The regulatory burden on the oil industry
increases the Partnership's cost of doing business and, consequently, affects
its profitability. However, the Partnership does not believe that it is affected
in a significantly different manner by these regulations than its competitors.
Due to the myriad and complex federal and state statutes and regulations which
may affect the Partnership, directly or indirectly, the following discussion of
certain statutes and regulations should not be relied upon as an exhaustive
review of all regulatory considerations affecting the Partnership's operations.
Pipeline Regulation
The Partnership's pipelines are subject to regulation by the Department of
Transportation ("DOT") under the Hazardous Liquids Pipeline Safety Act of
1979, as amended ("HLPSA") relating to the design, installation, testing,
construction, operation, replacement and management of pipeline facilities. The
HLPSA requires the Partnership and other pipeline operators to comply with
regulations issued pursuant to HLPSA, to permit access to and allow copying of
records and to make certain reports and provide information as required by the
Secretary of Transportation.
The Pipeline Safety Act of 1992 (the "Pipeline Safety Act") amends the
HLPSA in several important respects. It requires the Research and Special
Programs Administration ("RSPA") of DOT to consider environmental impacts, as
well as its traditional public safety mandate, when developing pipeline safety
regulations. In addition, the Pipeline Safety Act mandates the establishment by
DOT of pipeline operator qualification rules requiring minimum training
requirements for operators, and requires that pipeline operators provide maps
and records to RSPA. It also authorizes RSPA to require that pipelines be
modified to accommodate internal inspection devices, to mandate the installation
of emergency flow restricting devices for pipelines in populated or sensitive
areas and to order other changes to the operation and maintenance of petroleum
pipelines. The Partnership believes that its pipeline operations are in
substantial compliance with applicable HLPSA and Pipeline Safety Act
requirements. Nevertheless, significant expenses could be incurred in the future
if additional safety measures are required or if safety standards are raised and
exceed the current pipeline control system capabilities.
States are largely preempted by federal law from regulating pipeline safety
but may assume responsibility for enforcing federal intrastate pipeline
regulations and inspection of intrastate pipelines. In practice, states vary
considerably in their authority and capacity to address pipeline safety. The
Partnership does not anticipate any significant problems in complying with
applicable state laws and regulations in those states in which it operates.
Transportation and Sale of Crude Oil
In October 1992 Congress passed the Energy Policy Act of 1992 ("Energy
Policy Act"). The Energy Policy Act deemed petroleum pipeline rates in effect
for the 365-day period ending on the date of enactment of the Energy Policy Act
or that were in effect on the 365th day preceding enactment and had not been
subject to complaint, protest or investigation during the 365-day period to be
just and reasonable under the Interstate Commerce Act. The Energy Policy Act
also provides that complaints against such rates may only be filed under the
following limited circumstances: (i) a substantial change has occurred since
enactment in either the economic circumstances or the nature of the services
which were a basis for the rate; (ii) the complainant was contractually barred
from challenging the rate prior to enactment; or (iii) a provision of the tariff
is unduly discriminatory or preferential.
The Energy Policy Act further required the FERC to issue rules establishing
a simplified and generally applicable ratemaking methodology for petroleum
pipelines, and to streamline procedures in petroleum pipeline proceedings. On
October 22, 1993, the FERC responded to the Energy Policy Act directive by
issuing Order No. 561, which adopts a new indexing rate methodology for
petroleum pipelines. Under the new regulations, which were effective January 1,
1995, petroleum pipelines are able to change their rates within prescribed
ceiling levels that are tied to the Producer Price Index for Finished Goods,
minus one percent. Rate increases made pursuant to the index will be subject to
protest, but such protests must show that the portion of the rate increase
resulting from application of the index is substantially in excess of the
pipeline's increase in costs. The new indexing methodology can be applied to any
existing rate, even if the rate is under investigation. If such rate is
subsequently adjusted, the ceiling level established under the index must be
likewise adjusted.
15
<PAGE>
In Order No. 561, the FERC said that as a general rule pipelines must
utilize the indexing methodology to change their rates. The FERC indicated,
however, that it was retaining cost-of-service ratemaking, market-based rates,
and settlements as alternatives to the indexing approach. A pipeline can follow
a cost-of-service approach when seeking to increase its rates above index levels
for uncontrollable circumstances. A pipeline can seek to charge market-based
rates if it can establish that it lacks market power. In addition, a pipeline
can establish rates pursuant to settlement if agreed upon by all current
shippers. Initial rates for new services can be established through a cost-of-
service proceeding or through an uncontested agreement between the pipeline and
at least one shipper not affiliated with the pipeline.
On May 10, 1996, the Court of Appeals for the District of Columbia Circuit
affirmed Order No. 561. The Court held that by establishing a general indexing
methodology along with limited exceptions to indexed rates, FERC had reasonably
balanced its dual responsibilities of ensuring just and reasonable rates and
streamlining ratemaking through generally applicable procedures.
In a recent proceeding involving Lakehead Pipe Line Company, Limited
Partnership (Opinion No. 397), FERC concluded that there should not be a
corporate income tax allowance built into a petroleum pipeline's rates to
reflect income attributable to noncorporate partners since noncorporate
partners, unlike corporate partners, do not pay a corporate income tax. This
result comports with the principle that, although a regulated entity is entitled
to an allowance to cover its incurred costs, including income taxes, there
should not be an element included in the cost of service to cover costs not
incurred. Opinion No. 397 was affirmed on rehearing in May 1996. Appeals of the
Lakehead opinions were taken, but the parties to the Lakehead proceeding
subsequently settled the case, with the result that appellate review of the tax
and other issues never took place.
There is also pending at the FERC a proceeding involving another publicly
traded limited partnership engaged in the common carrier transportation of crude
oil (the "Santa Fe Proceeding") in which the FERC could further limit its
current position related to the tax allowance permitted in the rates of publicly
traded partnerships, as well as possibly alter the FERC's current application of
the FERC oil pipeline ratemaking methodology. On September 25, 1997, the
administrative law judge in the Santa Fe Proceeding issued an initial decision
addressing various aspects of the tax allowance issue as it affects publicly
traded partnerships, as well as various technical issues involving the
application of the FERC oil pipeline ratemaking methodology. The administrative
law judge's initial decision in the Santa Fe Proceeding is currently pending
review by the FERC. In such review, it is possible that the FERC could alter its
current rulings on the tax allowance issue or on the application of the FERC oil
pipeline ratemaking methodology.
The FERC generally has not investigated rates, such as those currently
charged by the Partnership, which have been mutually agreed to by the pipeline
and the shippers or which are significantly below cost of service rates that
might otherwise be justified by the pipeline under the FERC's cost-based
ratemaking methods. Substantially all of the Partnership's gross margins on
transportation are produced by rates that are either grandfathered or set by
agreement of the parties. The rates for substantially all of the crude oil
transported from California to West Texas are grandfathered and not subject to
decreases through the application of indexing. These rates have not been
decreased through application of the indexing method. Rates for OCS crude are
set by transportation agreements with shippers that do not expire until 2007 and
provide for a minimum tariff with annual escalation. The FERC has twice approved
the agreed OCS rates, although application of the PPFIG-1 index method would
have required their reduction. When these OCS agreements expire in 2007, they
will be subject to renegotiation or to any of the other methods for establishing
rates under Order No. 561. As a result, the Partnership believes that the rates
now in effect can be sustained, although no assurance can be given that the
rates currently charged by the Partnership would ultimately be upheld if
challenged. In addition, the Partnership does not believe that an adverse
determination on the tax allowance issue in the Santa Fe Proceeding would have a
detrimental impact upon the current rates charged by the Partnership.
Trucking Regulation
The Partnership operates a fleet of trucks to transport crude oil as a
private carrier. As a private carrier, the Partnership is subject to certain
motor carrier safety regulations issued by the DOT. The trucking regulations
cover, among other things, driver operations, keeping of log books, truck
manifest preparations, the placement of safety placards on the trucks and
trailer vehicles, drug and alcohol testing, safety of operation and equipment,
and many other aspects of truck operations. The Partnership is also subject to
OSHA with respect to its trucking operations.
Environmental Regulation
General
Various federal, state and local laws and regulations governing the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, affect the Partnership's operations and costs. In
particular, the Partnership's activities in connection with storage and
transportation of crude oil and other liquid hydrocarbons and its use of
facilities for treating, processing
16
<PAGE>
or otherwise handling hydrocarbons and wastes therefrom are subject to stringent
environmental regulation. As with the industry generally, compliance with
existing and anticipated regulations increases the Partnership's overall cost of
business. Such areas affected include capital costs to construct, maintain and
upgrade equipment and facilities. While these regulations affect the
Partnership's capital expenditures and earnings, the Partnership believes that
such regulations do not affect its competitive position in that the operations
of its competitors that comply with such regulations are similarly affected.
Environmental regulations have historically been subject to frequent change by
regulatory authorities, and the Partnership is unable to predict the ongoing
cost to it of complying with these laws and regulations or the future impact of
such regulations on its operation. Violation of federal or state environmental
laws, regulations and permits can result in the imposition of significant civil
and criminal penalties, injunctions and construction bans or delays. A discharge
of hydrocarbons or hazardous substances into the environment could, to the
extent such event is not insured, subject the Partnership to substantial
expense, including both the cost to comply with applicable regulations and
claims by neighboring landowners and other third parties for personal injury and
property damage.
Water
The Oil Pollution Act ("OPA") was enacted in 1990 and amends provisions
of the Federal Water Pollution Control Act of 1972 ("FWPCA") and other
statutes as they pertain to prevention and response to oil spills. The OPA
subjects owners of facilities to strict, joint and potentially unlimited
liability for removal costs and certain other consequences of an oil spill,
where such spill is into navigable waters, in certain environmentally sensitive
areas, along shorelines or in the exclusive economic zone of the U.S. In the
event of an oil spill into such waters, substantial liabilities could be imposed
upon the Partnership. States in which the Partnership operates have also enacted
similar laws. Regulations are currently being developed under OPA and state laws
that may also impose additional regulatory burdens on the Partnership.
The FWPCA imposes restrictions and strict controls regarding the discharge
of pollutants into navigable waters. Permits must be obtained to discharge
pollutants to state and federal waters. The FWPCA imposes substantial potential
liability for the costs of removal, remediation and damages. The Partnership
believes that compliance with existing permits and compliance with foreseeable
new permit requirements will not have a material adverse effect on the
Partnership's financial condition or results of operations.
Some states maintain groundwater protection programs that require permits
for discharges or operations that may impact groundwater conditions. The
Partnership believes that it is in substantial compliance with these state
requirements.
Air Emissions
The operations of the Partnership are subject to the Federal Clean Air Act
and comparable state and local statutes. The Partnership believes that its
operations are in substantial compliance with such statutes in all states in
which they operate.
Amendments to the Federal Clean Air Act enacted in late 1990 (the "1990
Federal Clean Air Act Amendments") require or will require most industrial
operations in the U.S. to incur capital expenditures in order to meet air
emission control standards developed by the Environmental Protection Agency (the
"EPA") and state environmental agencies. In addition, the 1990 Federal Clean
Air Act Amendments include a new operating permit for major sources ("Title V
permits"), which applies to some of the Partnership's facilities. Although no
assurances can be given, the Partnership believes implementation of the 1990
Federal Clean Air Act Amendments will not have a material adverse effect on the
Partnership's financial condition or results of operations.
Solid Waste
The Partnership generates hazardous and non-hazardous solid wastes that are
subject to the requirements of the Federal Resource Conservation and Recovery
Act ("RCRA") and comparable state statutes. The EPA is considering the
adoption of stricter disposal standards for non-hazardous wastes, including oil
and gas wastes that are currently exempt from RCRA requirements. At present, the
Partnership is not required to comply with a substantial portion of the RCRA
requirements because the Partnership's operations generate minimal quantities of
hazardous wastes. However, it is possible that oil and wastes, currently
generated during operations, will in the future be designated as "hazardous
wastes." Hazardous wastes are subject to more rigorous and costly disposal
requirements than are non-hazardous wastes. Such changes in the regulations
could result in additional capital expenditures or operating expenses by the
Partnership.
Hazardous Substances
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as "Superfund," imposes liability, without regard to
fault or the legality of the original act, on certain classes of persons that
contributed to the release of a "hazardous substance" into the environment.
These persons include the owner or operator of the site and companies that
disposed or arranged for the disposal of the hazardous substances found at the
site. CERCLA also authorizes the EPA and, in some instances,
17
<PAGE>
third parties to act in response to threats to the public health or the
environment and to seek to recover from the responsible classes of persons the
costs they incur. In the course of its ordinary operations, the Partnership may
generate waste that may fall within CERCLA's definition of a "hazardous
substance." The Partnership may be jointly and severally liable under CERCLA for
all or part of the costs required to clean up sites at which such hazardous
substances have been disposed or released into the environment.
The Partnership currently owns or leases, and has in the past owned or
leased, properties where hydrocarbons are being or have been handled. Although
the Partnership has utilized operating and disposal practices that were standard
in the industry at the time, hydrocarbons or other wastes may have been disposed
of or released on or under the properties owned or leased by the Partnership or
on or under other locations where such wastes have been taken for disposal. In
addition, many of these properties have been operated by third parties whose
treatment and disposal or release of hydrocarbons or other wastes was not under
the Partnership's control. These properties and wastes disposed thereon may be
subject to CERCLA, RCRA and analogous state laws. Under such laws, the
Partnership could be required to remove or remediate previously disposed wastes
(including wastes disposed of or released by prior owners or operators), to
clean up contaminated property (including contaminated groundwater) or to
perform remedial plugging operations to prevent future contamination.
OSHA
The Partnership is also subject to the requirements of the Federal
Occupational Safety and Health Act ("OSHA") and comparable state statutes that
regulate the protection of the health and safety of workers. In addition, the
OSHA hazard communication standard requires that certain information be
maintained about hazardous materials used or produced in operations and that
this information be provided to employees, state and local government
authorities and citizens. The Partnership believes that its operations are in
substantial compliance with OSHA requirements, including general industry
standards, record keeping requirements, employee training regulations and
monitoring of occupational exposure to regulated substances.
Endangered Species Act
The Endangered Species Act ("ESA") restricts activities that may affect
endangered species or their habitats. While certain facilities of the
Partnership are in areas that may be designated as habitat for endangered
species, the Partnership believes that it is in substantial compliance with the
ESA. However, the discovery of previously unidentified endangered species could
cause the Partnership to incur additional costs or operation restrictions or
bans in the affected area.
Hazardous Materials Transportation Requirements
The DOT regulations affecting pipeline safety require pipeline operators to
implement measures designed to reduce the environmental impact of oil discharge
from onshore oil pipelines. These regulations require operators to maintain
comprehensive spill response plans, including extensive spill response training
for pipeline personnel. In addition, DOT regulations contain detailed
specifications for pipeline operation and maintenance. The Partnership believes
that its operations are in substantial compliance with such regulations.
Environmental Remediation
During 1997, the All American Pipeline experienced a leak in a segment of
its pipeline in California which resulted in an estimated 12,000 barrels of
crude oil being released into the soil. Immediate action was taken to repair the
pipeline leak, contain the spill and to recover the released crude oil. The
Partnership has submitted a closure plan to the Regional Water Quality Board
("RWQB"). At the request of the RWQB, groundwater monitoring wells have been
installed from which water samples will be analyzed semi-annually. No
hydrocarbon contamination was detected in initial analyses taken in January
1999. The RWQB approval of PAA's closure plan is not expected until subsequent
semi-annual analyses have been performed. If the Partnership's closure plan is
disapproved, a government mandated remediation of the spill could require
significant expenditures (currently estimated to be approximately $350,000),
provided however, no assurance can be given that the actual cost thereof will
not exceed such estimate. The Partnership does not believe the ultimate
resolution of this issue will have a material adverse affect on the
Partnership's consolidated financial position, results of operations or cash
flows.
Prior to being acquired by the Partnership's predecessors in 1996, the
Ingleside Terminal experienced releases of refined petroleum products into the
soil and groundwater underlying the site due to activities on the property. The
Partnership has proposed a voluntary state-administered remediation of the
contamination on the property to determine whether the contamination extends
outside the property boundaries. If the Partnership's plan is disapproved, a
government mandated remediation of the spill could require more significant
expenditures, currently estimated to approximate $250,000, although no assurance
can be given that the actual cost could not exceed such estimate. In addition, a
portion of any such costs may be reimbursed to the Partnership from Plains
Resources. The Partnership does not believe the ultimate resolution of this
issue will have a material adverse affect on the Partnership's
18
<PAGE>
consolidated financial position, results of operations or cash flows. See Item
13, "Certain Relationships and Related Transactions--Relationship with Plains
Resources--Indemnity from the General Partner."
The Partnership may experience future releases of crude oil into the
environment from its pipeline and storage operations, or discover releases that
were previously unidentified. While the Partnership maintains an extensive
inspection program designed to prevent and, as applicable, to detect and address
such releases promptly, damages and liabilities incurred due to any future
environmental releases from the All American Pipeline, the SJV Gathering System,
the Cushing Terminal, the Ingleside Terminal or other Partnership assets may
substantially affect the Partnership's business.
Operational Hazards and Insurance
A pipeline may experience damage as a result of an accident or other
natural disaster. These hazards can cause personal injury and loss of life,
severe damage to and destruction of property and equipment, pollution or
environmental damages and suspension of operations. The Partnership maintains
insurance of various types that it considers to be adequate to cover its
operations and properties. The insurance covers all of the Partnership's assets
in amounts considered reasonable. The insurance policies are subject to
deductibles that the Partnership considers reasonable and not excessive. The
Partnership's insurance does not cover every potential risk associated with
operating pipelines, including the potential loss of significant revenues.
Consistent with insurance coverage generally available to the industry, the
Partnership's insurance policies provide limited coverage for losses or
liabilities relating to pollution, with broader coverage for sudden and
accidental occurrences.
The occurrence of a significant event not fully insured or indemnified
against, or the failure of a party to meet its indemnification obligations,
could materially and adversely affect the Partnership's operations and financial
condition. The Partnership believes that it is adequately insured for public
liability and property damage to others with respect to its operations. With
respect to all of its coverage, no assurance can be given that the Partnership
will be able to maintain adequate insurance in the future at rates it considers
reasonable.
Title to Properties
Substantially all of the Partnership's pipelines are constructed on rights-
of-way granted by the apparent record owners of such property and in some
instances such rights-of-way are revocable at the election of the grantor. In
many instances, lands over which rights-of-way have been obtained are subject to
prior liens which have not been subordinated to the right-of-way grants. In some
cases, not all of the apparent record owners have joined in the right-of-way
grants, but in substantially all such cases, signatures of the owners of
majority interests have been obtained. Permits have been obtained from public
authorities to cross over or under, or to lay facilities in or along water
courses, county roads, municipal streets and state highways, and in some
instances, such permits are revocable at the election of the grantor. Permits
have also been obtained from railroad companies to cross over or under lands or
rights-of-way, many of which are also revocable at the grantor's election. In
some cases, property for pipeline purposes was purchased in fee. All of the pump
stations are located on property owned in fee or property under long-term
leases. In certain states and under certain circumstances, the Partnership has
the right of eminent domain to acquire rights-of-way and lands necessary for the
operations of the All American Pipeline, a common carrier pipeline.
Some of the leases, easements, rights-of-way, permits and licenses
transferred to the Partnership, upon its formation in 1998, required the consent
of the grantor to transfer such rights, which in certain instances is a
governmental entity. The General Partner believes that it has obtained such
third-party consents, permits and authorizations as are sufficient for the
transfer to the Partnership of the assets necessary for the Partnership to
operate its business in all material respects as described in this report. With
respect to any consents, permits or authorizations which have not yet been
obtained, the General Partner believes that such consents, permits or
authorizations will be obtained within a reasonable period, or that the failure
to obtain such consents, permits or authorizations will have no material adverse
effect on the operation of the Partnership's business.
The General Partner believes that the Partnership has satisfactory title to
all of its assets. Although title to such properties are subject to encumbrances
in certain cases, such as customary interests generally retained in connection
with acquisition of real property, liens related to environmental liabilities
associated with historical operations, liens for current taxes and other burdens
and minor easements, restrictions and other encumbrances to which the underlying
properties were subject at the time of acquisition by the Plains Midstream
Subsidiaries or the Partnership, the General Partner believes that none of such
burdens will materially detract from the value of such properties or from the
Partnership's interest therein or will materially interfere with their use in
the operation of the Partnership's business.
19
<PAGE>
Employees
To carry out the operations of the Partnership, the General Partner or its
affiliates employ approximately 210 employees. None of such employees of the
General Partner is represented by labor unions, and the General Partner
considers its employee relations to be good.
Item 3. LEGAL PROCEEDINGS
The Partnership, in the ordinary course of business, is a claimant and/or a
defendant in various legal proceedings in which its exposure, individually and
in the aggregate, is not considered material to the Partnership.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders, through
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON UNITS AND RELATED UNITHOLDER MATTERS
The Common Units, representing limited partner interests in the
Partnership, are listed and traded on the New York Stock Exchange under the
symbol "PAA". The Common Units began trading on November 18, 1998, at an initial
public offering price of $20.00 per Common Unit. On March 22, 1999, the market
price for the Common Units was $17.125 per unit and there were approximately
12,300 record holders and beneficial owners (held in street name) of the
Partnership's Common Units.
The following table sets forth, for the portion of the fourth quarter 1998
in which the Common Units were traded, the range of high and low closing sales
prices for the Common Units as reported on the New York Stock Exchange Composite
Tape, and the amount of cash distribution paid per Common Unit for the portion
of the fourth quarter 1998 commencing November 23, 1998, the date of closing of
the IPO.
<TABLE>
<CAPTION>
Common Unit Price Range
-----------------------
High Low Cash Distribution Paid Per Unit
------ ------ -------------------------------
<S> <C> <C> <C>
1998:
4th Quarter $20.06 $16.75 $0.193 (paid February 12, 1999
for period from November
23, 1998, through
December 31, 1998)
</TABLE>
The Partnership has also issued Subordinated Units, all of which are held
by an affiliate of the General Partner, for which there is no established public
trading market. The Partnership will distribute to its partners (including
holders of Subordinated Units), on a quarterly basis, all of its Available Cash
in the manner described herein. Available Cash generally means, with respect to
any quarter of the Partnership, all cash on hand at the end of such quarter less
the amount of cash reserves that is necessary or appropriate in the reasonable
discretion of the General Partner to (i) provide for the proper conduct of the
Partnership's business, (ii) comply with applicable law or any Partnership debt
instrument or other agreement, or (iii) provide funds for distributions to
Unitholders and the General Partner in respect of any one or more of the next
four quarters. Available Cash is defined in the Second Amended and Restated
Agreement of Limited Partnership of Plains All American Pipeline, L.P. (the
APartnership Agreement") listed as an exhibit to this report. The Partnership
Agreement defines Minimum Quarterly Distributions as $ 0.45 for each full fiscal
quarter (prorated for the initial partial fiscal quarter commencing November 23,
1998, the closing date of the IPO through year-end 1998). The Partnership made a
cash distribution in the amount of $ 5.8 million on February 12, 1999, in
respect to its Common Units and Subordinated Units for the period of November
23, 1998 through year-end 1998. This payment was based upon $ 0.193 per unit,
which was the Minimum Quarterly Distribution prorated for the partial quarter in
accordance with the Partnership Agreement. Distributions of Available Cash to
the holder of Subordinated Units are subject to the prior rights of the holders
of Common Units to receive the Minimum Quarterly Distributions for each quarter
during the Subordination Period, and to receive any arrearages in the
distribution of Minimum Quarterly Distributions on the Common Units for prior
quarters during the Subordination Period. The expiration of the Subordination
Period will generally not occur prior to December 31, 2003.
20
<PAGE>
Under the terms of the Partnership's Bank Credit Agreement and Letter of
Credit Facility, the Partnership is prohibited from declaring or paying any
distribution to Unitholders if a Default or Event of Default (as defined in such
agreements) exists thereunder. See Management's Discussion and Analysis of
Financial Condition and Results of Operations - Capital Resources, Liquidity and
Financial Condition in Item 7 of this report.
Item 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL AND OPERATING DATA
On November 23, 1998, the Partnership completed the IPO and the
Transactions whereby the Partnership became the successor to the business of the
Predecessor. The following selected pro forma and historical financial
information was derived from the audited consolidated financial statements of
the Partnership as of December 31, 1998, and for the period from November 23,
1998 through December 31, 1998, and the audited combined financial statements of
the Predecessor, as of December 31, 1997, 1996, 1995 and 1994 and for the period
from January 1, 1998 through November 22, 1998 and for the years ended December
31, 1997, 1996, 1995 and 1994, including the notes thereto, certain of which
appear elsewhere in this Report. The Predecessor operating data for all periods
is derived from the records of the Partnership and the Predecessor. Commencing
July 30, 1998, (the date of the acquisition of the All American Pipeline and the
SJV Gathering System from Goodyear), the results of operations of the All
American Pipeline and the SJV Gathering System are included in the results of
operations of the Predecessor. The selected financial data should be read in
conjunction with the consolidated and combined financial statements, including
the notes thereto, and Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
Year November 23, January 1,
Ended 1998 to 1998 to Year Ended December 31,
December 31, December 31, November 22, -------------------------------------------------------
1998(1) 1998 1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------ ----------
(Pro forma) (Predecessor) (Predecessor)
(Unaudited) (in thousands, except unit data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenues $1,568,853 $ 176,445 $ 953,244 $ 752,522 $ 531,698 $ 339,825 $ 199,239
Cost of Sales and
Operations 1,494,732 168,946 922,263 740,042 522,167 333,459 193,050
------------ ------------ ------------ ------------ ------------ ------------ ----------
Gross Margin 74,121 7,499 30,981 12,480 9,531 6,366 6,189
------------ ------------ ------------ ------------ ------------ ------------ ----------
General and administrative
expenses 6,501 771 4,526 3,529 2,974 2,415 2,376
Depreciation and
amortization 11,303 1,192 4,179 1,165 1,140 944 906
------------ ------------ ------------ ------------ ------------ ------------ ----------
Total expenses 17,804 1,963 8,705 4,694 4,114 3,359 3,282
------------ ------------ ------------ ------------ ------------ ------------ ----------
Operating income 56,317 5,536 22,276 7,786 5,417 3,007 2,907
Interest expense 12,991 1,371 11,260 4,516 3,559 3,460 3,550
Interest and other income 584 12 572 138 90 115 115
------------ ------------ ------------ ------------ ------------ ------------ ----------
Net income (loss) before
provision (benefit) in
lieu of income taxes $ 43,910 $ 4,177 $ 11,588 $ 3,408 $ 1,948 $ (338) $ (528)
Provision (benefit) in lieu
of income taxes - - 4,563 1,268 726 (93) (151)
------------ ------------ ------------ ------------ ------------ ------------ ----------
Net Income (loss) $ 43,910 $ 4,177 $ 7,025 $ 2,140 $ 1,222 $ (245) $ (377)
============ ============ ============ ============ ============ ============ ==========
Basic and Diluted Net
Income (loss) Per Limited
Partner Unit(2) $ 1.43 $ 0.14 $ 0.40 $ 0.12 $ 0.07 $ (0.01) $ (0.02)
============ ============ ============ ============ ============ ============ ==========
Weighted Average Number
of Limited Partner
Units Outstanding 30,088,858 30,088,858 17,003,858 17,003,858 17,003,858 17,003,858 17,003,858
============ ============ ============ ============ ============ ============ ==========
</TABLE>
(Financial data continued on the next page. See footnotes on next page.)
21
<PAGE>
<TABLE>
<CAPTION>
Year November 23, January 1,
Ended 1998 to 1998 to Year Ended December 31,
December 31, December 31, November 22, -------------------------------------------------------
1998(1) 1998 1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------ ----------
(Pro forma) (Predecessor) (Predecessor)
(Unaudited) (in thousands, except barrel amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
(at end of period):
Working capital(3) $ 17,099 $ 17,099 N/A $ 10,962 $ 12,087 $ 9,579 $ 4,734
Total assets 610,208 610,208 N/A 149,619 122,557 82,076 62,847
Related party debt
Short-term 10,790 10,790 N/A 8,945 9,501 6,524 -
Long-term - - N/A 28,531 31,811 32,095 35,854
Total debt(3) 184,750 184,750 N/A 18,000 - - -
Partners' Equity 277,643 277,643 N/A - - - -
Combined Equity - - N/A 5,975 3,835 2,613 2,858
Other Data:
EBITDA(4) $ 68,204 $ 6,740 $ 27,027 $ 9,089 $ 6,647 $ 4,066 $ 3,928
Maintenance capital
expenditures(5) 1,679 200 1,479 678 1,063 571 274
Operating Data:
Volumes (barrels per day):
Tariff(6) 124,500 110,200 113,700 - - - -
Margin(7) 49,200 50,900 49,100 - - - -
-------- -------- -------- ------- -------- ------- -------
Total pipeline 173,700 161,100 162,800 - - - -
======== ======== ======== ======= ======== ======= =======
Lease gathering(8) 112,900 126,200 87,100 71,400 58,500 45,900 29,600
Bulk purchases(9) 97,900 133,600 94,700 48,500 31,700 10,200 -
Terminal throughput(10) 79,800 61,900 81,400 76,700 59,800 42,500 28,900
- ----------------------
</TABLE>
(1) The unaudited selected pro forma financial and operating data for the year
ended December 31, 1998, is based on the historical financial statements of
the Partnership, the Predecessor and Wingfoot. The historical financial
statements of Wingfoot reflect the historical operating results of the All
American Pipeline and the SJV Gathering System through July 30, 1998.
Effective July 30 1998, the Predecessor acquired the All American Pipeline
and SJV Gathering system from Goodyear for approximately $400 million. The
pro forma selected financial data reflects certain pro forma adjustments to
the historical results of operations as if the Partnership had been formed
and the Acquisition had taken place on January 1, 1998. The pro forma
adjustments include: (i) pro forma depreciation and amortization expense
based on the purchase price of the Wingfoot assets by the Predecessor; (ii)
the elimination of interest expense on loans from Goodyear to Wingfoot as
all such debt was extinguished in connection with the Acquisition; (iii)
the reduction in compensation and benefits expense due to the termination
of personnel in connection with the Acquisition; (iv) the elimination of
interest expense of the Predecessor related to debt owed to Plains
Resources as such debt was extinguished in connection with the
Transactions; (v) pro forma interest on debt assumed by the Partnership on
the closing date of the IPO; and (vi) the elimination of income tax expense
as income taxes will be borne by the partners and not the Partnership. The
pro forma adjustments do not include approximately $0.9 million of general
and administrative expenses that the General Partner believes will be
incurred by the Partnership as a result of its being a separate public
entity.
(2) Basic and diluted net income (loss) per Unit for the Partnership is
computed by dividing the limited partners' 98% interest in net income by
the number of outstanding Common and Subordinated Units. For periods prior
to November 23, 1998, such units are equal to the Common and Subordinated
Units received by the General Partner in exchange for the assets
contributed to the Partnership
(3) Excludes intercompany debt.
(4) EBITDA means earnings before interest expense, income taxes, depreciation
and amortization. EBITDA provides additional information for evaluating the
Partnership's ability to make the Minimum Quarterly Distribution and is
presented solely as a supplemental measure. EBITDA is not a measurement
presented in accordance with generally accepted accounting principles
("GAAP") and is not intended to be used in lieu of GAAP presentations of
results of operations and cash provided by operating activities. The
Partnership's EBITDA may not be comparable to EBITDA of other entities as
other entities may not calculate EBITDA in the same manner as the
Partnership.
(5) Maintenance capital expenditures are capital expenditures made to replace
partially or fully depreciated assets to maintain the existing operating
capacity of existing assets or extend their useful lives. Capital
expenditures made to expand the Partnership's existing capacity, whether
through construction or acquisition, are not considered maintenance capital
22
<PAGE>
expenditures. Repair and maintenance expenditures associated with existing
assets that do not extend the useful life or expand operating capacity are
charged to expense as incurred.
(6) Represents crude oil deliveries on the All American Pipeline for the
account of third parties.
(7) Represents crude oil deliveries on the All American Pipeline and the SJV
Gathering System for the account of affiliated entities
(8) Represents barrels of crude oil purchased at the wellhead, including
volumes which would have been purchased under the Crude Oil Marketing
Agreement.
(9) Represents barrels of crude oil purchased at collection points, terminals
and pipelines.
(10) Represents total crude oil barrels delivered from the Cushing Terminal and
the Ingleside Terminal
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations for the Partnership and its predecessor entities should be read in
conjunction with the historical consolidated and combined financial statements
and notes thereto of the Partnership and the Plains Midstream Subsidiaries
included elsewhere in this report. For more detailed information regarding the
basis of presentation for the following financial information, see the notes to
the historical consolidated and combined financial statements.
General
The Partnership is a limited partnership which was formed in the third
quarter of 1998 to acquire and operate the midstream crude oil business and
assets of Plains Resources. The Partnership is engaged in interstate and
intrastate crude oil pipeline transportation and crude oil terminalling and
storage activities and gathering and marketing activities. The Partnership's
operations are primarily concentrated in California, Texas, Oklahoma, Louisiana
and the Gulf of Mexico. The historical results of operations discussed below are
derived from the historical financial statements of the Partnership and the
Predecessor included elsewhere herein.
Pipeline Operations. The activities from pipeline operations generally
consist of transporting third-party volumes of crude oil for a tariff ("Tariff
Activities") and merchant activities designed to capture price differentials
between the cost to purchase and transport crude oil to a sales point and the
price received for such crude oil at the sales point ("Margin Activities").
Tariffs on the All American Pipeline vary by receipt point and delivery point.
Tariffs for OCS crude oil delivered to California markets averaged $1.41 per
barrel and tariffs for OCS volumes delivered to West Texas were $2.96 per barrel
as of December 31, 1998. Tariffs for San Joaquin Valley crude oil delivered to
West Texas were $1.25 per barrel as of December 31, 1998. The gross margin
generated by Tariff Activities depends on the volumes transported on the
pipeline and the level of the tariff charged, as well as the fixed and variable
costs of operating the pipeline. As is common with most merchant activities, the
ability of the Partnership to generate a profit on Margin Activities is not tied
to the absolute level of crude oil prices but is generated by the difference
between the price paid and other costs incurred in the purchase of crude oil and
the price at which it sells crude oil. The Partnership is well positioned to
take advantage of these price differentials due to its ability to move purchased
volumes on the All American Pipeline. The Partnership combines reporting of
gross margin for Tariff Activities and Margin Activities due to the sharing of
fixed costs between the two activities.
Terminalling and Storage Activities and Gathering and Marketing Activities.
Gross margin from terminalling and storage activities is dependent on the
throughput volume of crude oil stored and the level of fees generated at the
Cushing Terminal. Gross margin from the Partnership's gathering and marketing
activities is dependent on the Partnership's ability to sell crude oil at a
price in excess of the cost. These operations are not directly affected by the
absolute level of crude oil prices, but are affected by overall levels of supply
and demand for crude oil.
During periods when the demand for crude oil is weak (as was the case in
late 1997, 1998 and the first quarter of 1999), the market for crude oil is
often in contango, meaning that the price of crude oil in a given month is less
than the price of crude oil in a subsequent month. A contango market has a
generally negative impact on marketing margins, but is favorable to the storage
business, because storage owners at major trading locations (such as the Cushing
Interchange) can simultaneously purchase production at low current prices for
storage and sell at higher prices for future delivery. When there is a higher
demand than supply of crude oil in the near term, the market is backward,
meaning that the price of crude oil in a given month exceeds the price of crude
oil in a subsequent month. A backward market has a positive impact on marketing
margins because crude oil gatherers can capture a premium for prompt deliveries.
The Partnership believes that the combination of its terminalling and storage
activities and gathering and marketing activities provides a counter-cyclical
balance which has a stabilizing effect on the Partnership's operations and cash
flow.
As the Partnership purchases crude oil, it establishes a margin by selling
crude oil for physical delivery to third party users, such as independent
refiners or major oil companies, or by entering into a future delivery
obligation with respect to futures contracts
23
<PAGE>
on the NYMEX. Through these transactions, the Partnership seeks to maintain a
position that is substantially balanced between crude oil purchases and sales
and future delivery obligations. The Partnership purchases crude oil on both a
fixed and floating price basis. As fixed price barrels are purchased, the
Partnership enters into sales arrangements with refiners, trade partners or on
the NYMEX, which establishes a margin and protects it against future price
fluctuations. When floating price barrels are purchased, the Partnership matches
those contracts with similar type sales agreements with its customers, or
likewise establishes a hedge position using the NYMEX futures market. From time
to time, the Partnership will enter into arrangements which will expose it to
basis risk. Basis risk occurs when crude oil is purchased based on a crude oil
specification and location which is different from the countervailing sales
arrangement. The Partnership's policy is only to purchase crude oil for which it
has a market and to structure its sales contracts so that crude oil price
fluctuations do not materially affect the gross margin which it receives. The
Partnership does not acquire and hold crude oil futures contracts or other
derivative products for the purpose of speculating on crude oil price changes
that might expose the Partnership to indeterminable losses.
The Partnership
Analysis of Pro Forma Results of Operations
The pro forma results of operations discussed below are derived from the
historical financial statements of the Partnership, Wingfoot (which reflect the
historical operating results of the All American Pipeline and the SJV Gathering
System) and the Predecessor, certain of which are included elsewhere herein.
Commencing July 30, 1998, (the date of the acquisition of the All American
Pipeline and the SJV Gathering System from Goodyear), the results of operations
of the All American Pipeline and the SJV Gathering System are included in the
results of operations of the Predecessor. The pro forma results of operations
reflect certain pro forma adjustments to the historical results of operations as
if the Partnership had been formed and the acquisition of the All American
Pipeline and the SJV Gathering System had taken place on January 1, 1997. The
pro forma adjustments include: (i) pro forma depreciation and amortization
expense based on the purchase price of the Wingfoot assets by the Predecessor;
(ii) the elimination of interest expense on loans from Goodyear to Wingfoot as
all such debt was extinguished in connection with the Acquisition, (iii) the
reduction in compensation and benefits expense due to the termination of
personnel in connection with the Acquisition; (iv) the elimination of interest
expense of the Predecessor related to debt owed to Plains Resources as such debt
was extinguished in connection with the Transactions; (v) pro forma interest on
debt assumed by the Partnership on the Closing Date and (vi) the elimination of
income tax expense as income taxes will be borne by the partners and not the
Partnership. The pro forma adjustments do not include approximately $0.9 million
of general and administrative expenses for the years ended December 31, 1998 and
1997, respectively, that the General Partner believes will be incurred by the
Partnership as a result of its being a separate public entity.
Year Ended December 31, 1998 and 1997
The following table sets forth certain pro forma financial and operating
information of the Partnership for the periods presented.
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------------
1998 1997
------------- --------------
(in thousands)
(pro forma)
<S> <C> <C>
Operating Results:
Revenues $ 1,568,853 $ 1,746,491
=========== ===========
Gross margin
Pipeline $ 50,893 $ 70,078
Terminalling and storage and gathering and marketing 23,228 14,131
----------- -----------
Total 74,121 84,209
General and administrative expense (6,501) (6,182)
----------- -----------
Gross profit $ 67,620 $ 78,027
=========== ===========
Net income (loss) $ 43,910 $ (10,097)
=========== ===========
Average Daily Volumes (barrels)
Pipeline tariff activities 125 165
Pipeline margin activities 49 30
----------- -----------
Total 174 195
=========== ===========
Lease gathering 113 94
Bulk purchases 98 49
Terminal throughput 80 77
</TABLE>
24
<PAGE>
The following analysis compares the pro forma results of the Partnership
for the years ended December 31, 1998 and 1997.
For the year ended December 31, 1998, the Partnership's net income was
$43.9 million on total revenue of $1.6 billion compared to a net loss for the
year ended December 31, 1997 of $10.1 million on total revenue of $1.7 billion.
The pro forma net loss for the year ended December 31, 1997 includes a non-cash
impairment charge of $64.2 million related to the writedown of pipeline assets
and linefill by Wingfoot in connection with the sale of Wingfoot by Goodyear to
the General Partner. Based on the Partnership's purchase price allocation to
property and equipment and pipeline linefill, an impairment charge would not
have been required had the Partnership actually acquired Wingfoot effective
January 1, 1997. Excluding this impairment charge, the Partnership's pro forma
net income for 1997 would have been $54.1 million. The Partnership reported
gross margin (revenues less direct expenses of purchases, transportation,
terminalling and storage and other operating and maintenance expenses) of $74.1
million for the year ended December 31, 1998, reflecting a 12% decrease from the
$84.2 million reported for the same period in 1997. Gross profit (gross margin
less general and administrative expense) decreased 13% to $67.6 million for the
year ended December 31,1998 as compared to $78.0 million for the same period in
1997.
Pipeline Operations. Tariff revenues were $57.5 million for the year ended
December 31, 1998, a 30% decline from the $82.1 million reported for the same
period in 1997. This decrease in tariff revenues resulted primarily from a 24%
decrease in tariff transport volumes from 165,000 barrels per day for the year
ended December 31, 1997 to 125,000 barrels per day for the same period in 1998
due to a decline in average daily production from the Santa Ynez field. Most of
the production loss from the Santa Ynez field was of volumes that had been
previously transported to West Texas at an average tariff of $2.83 per barrel.
Volumes related to Margin Activities increased by 63% to an average of
approximately 49,000 barrels per day. The margin between revenue and direct cost
of crude purchased decreased from $17.6 million for the year ended December 31,
1997 to $14.5 million for the same period in 1998 as a result of a decline in
margins between prices paid in California and prices received in West Texas.
The following table sets forth All American Pipeline average deliveries per
day within and outside California for the periods presented.
Year Ended
December 31,
-----------------------
1998 1997
--------- ---------
(in thousands)
(pro forma)
Deliveries:
Average daily volumes (barrels):
Within California 113 127
Outside California 61 68
--- ---
Total 174 195
=== ===
Terminalling and Storage Activities and Gathering and Marketing Activities.
The Partnership reported gross margin of $23.2 million from its terminalling and
storage activities and gathering and marketing activities for the year ended
December 31, 1998, reflecting a 64% increase over the $14.1 million reported for
the same period in 1997. Including interest expense associated with contango
inventory transactions, gross margin for the year ended December 31, 1998 was
$22.5 million, representing an increase of approximately 70% over the 1997
amount. The increase in gross margin was primarily attributable to an increase
in the volumes gathered and marketed, principally in West Texas, Louisiana and
the Gulf of Mexico of approximately 20% to 113,000 barrels per day for the year
ended December 31, 1998 from 94,000 barrels per day during the same period in
1997. The balance of the increase in gross margin was a result of an increase in
bulk purchases.
Expenses. Operations and maintenance expenses included in cost of sales and
operations (generally property taxes, electricity, fuel, labor, repairs and
certain other expenses) decreased to $24.9 million for the year ended December
31, 1998 from $32.5 million for the comparable period in 1997. This decrease was
a function both of variable costs that decline with reduced transportation
volumes and average miles transported per barrel. Operations and maintenance
expenses are included in the determination of gross margin. General and
administrative expenses increased approximately $0.3 million to $6.5 million for
the year ended December 31, 1998 compared to $6.2 million for the same period in
1997. Such increase was primarily related to additional personnel hired to
further expand marketing activities. Depreciation and amortization expense was
$11.3 million for the year ended December 31, 1998 compared to $11.0 million for
the 1997 comparative period. The increase is due primarily to the addition of
trucking equipment. Interest expense was $13.0 million for the year ended
December 31, 1998 compared to $13.1 million for 1997.
25
<PAGE>
Analysis of Historical Results of Operations
On November 23, 1998, the Partnership completed the IPO and the
Transactions whereby the Partnership became the successor to the business of the
Predecessor. The historical results of operations discussed below are derived
from the historical financial statements of the Partnership for the period from
November 23, 1998, through December 31, 1998, and the combined financial
statements of the Plains Midstream Subsidiaries for the period from January 1,
1998, through November 22, 1998, which in the following discussion are combined
and referred to as the year ended December 31, 1998. Commencing July 30, 1998,
(the date of the acquisition of the All American Pipeline and the SJV Gathering
System from Goodyear), the results of operations of the All American Pipeline
and the SJV Gathering System are included in the results of operations of the
Predecessor. The Partnership and the Predecessor are referred to for purposes of
this analysis of historical results as the "Partnership".
Three Years Ended December 31, 1998
For 1998, the Partnership reported net income before taxes of $15.8 million
on total revenue of $1.1 billion compared to net income before taxes for 1997 of
$3.4 million on total revenue of $752.5 million and net income before taxes for
1996 of $1.9 million on total revenue of $531.7 million. Results for the year
ended December 31, 1998 include activities of the All American Pipeline and SJV
Gathering System since July 30, 1998 (the date of acquisition from Goodyear).
The following table sets forth certain financial and operating information
of the Partnership for the periods presented:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1998 1997 1996
-------------- -------------- --------------
(in thousands)
<S> <C> <C> <C>
Operating Results:
Revenues $ 1,129,689 $ 752,522 $ 531,698
=========== ========= =========
Gross margin
Pipeline $ 16,768 $ - $ -
Terminalling and storage
and gathering and marketing 21,712 12,480 9,531
----------- --------- ---------
Total 38,480 12,480 9,531
General and administrative expense (5,297) (3,529) (2,974)
----------- --------- ---------
Gross profit $ 33,183 $ 8,951 $ 6,557
=========== ========= =========
Net Income $ 11,202 $ 2,140 $ 1,222
=========== ========= =========
Average Daily Volumes (barrels)
Pipeline tariff activities 113 - -
Pipeline margin activities 50 - -
----------- --------- ---------
Total 163 - -
=========== ========= =========
Lease gathering 88 71 59
Bulk purchases 95 49 32
Terminal throughput 80 77 59
</TABLE>
Pipeline Operations. As noted above, the results of operations of the
Partnership includes approximately five months of operations of the All American
Pipeline and the SJV Gathering System which were acquired effective July 30,
1998. Tariff revenues for this period were $19.0 million and are primarily
attributable to transport volumes from the Santa Ynez field (approximately
65,300 barrels per day) and the Point Arguello field (approximately 24,300
barrels per day). The margin between revenue and direct cost of crude purchased
was approximately $3.9 million. Operations and maintenance expenses were $6.1
million.
The following table sets forth the All American Pipeline average deliveries
per day within and outside California from July 30, 1998 through December 31,
1998 (in thousands).
Deliveries:
Average daily volumes (barrels):
Within California 111
Outside California 52
---------
Total 163
=========
Terminalling and Storage Activities and Gathering and Marketing Activities.
Gross margin from terminalling and storage and gathering and marketing
activities was $21.7 million for the year ended December 31, 1998, reflecting a
74% increase over the $12.5 million reported for the 1997 period and an
approximate 128% increase over the $9.5 million reported for 1996. Including
interest expense associated with contango inventory transactions, gross margin
for 1998 was $21.0 million, representing an increase
26
<PAGE>
of approximately 81% over the 1997 amount. The Partnership did not have any
material contango inventory transactions in 1996. The increase in gross margin
was primarily attributable to an increase in the volumes gathered and marketed
in West Texas, Louisiana and the Gulf of Mexico and activities at the Cushing
Terminal.
Total general and administrative expenses were $5.3 million for the year
ended December 31, 1998, compared to $3.5 million and $3.0 million for 1997 and
1996, respectively. Such increases were primarily attributable to increased
personnel as a result of the continued expansion of the Partnership's
terminalling and storage activities and gathering and marketing activities as
well as general and administrative expenses associated with the addition of the
All American Pipeline and the SJV Gathering System. Depreciation and
amortization was $5.4 million in 1998, $1.2 million in 1997 and $1.1 million in
1996. The increase is due the acquisition of the All American Pipeline and the
SJV Gathering System in 1998.
Interest expense was $12.6 million in 1998, $4.5 million in 1997 and $3.6
million in 1996. The increase in 1998 is due to interest associated with the
debt incurred for the acquisition of the All American Pipeline and the SJV
Gathering System. Interest expense in 1997 and 1996 is comprised principally of
interest charged to the Predecessor by Plains Resources for amounts borrowed to
construct the Cushing Terminal in 1993 and subsequent capital additions,
including the Ingleside Terminal. The interest rate on the Cushing Terminal
construction loan was 10.25%. Interest expense also includes interest incurred
in connection with contango inventory transactions of $0.8 million in 1998 and
$.9 million in 1997.
The Predecessor is included in the consolidated federal income tax return
of Plains Resources. Federal income taxes are calculated as if the Predecessor
had filed its return on a separate company basis utilizing a federal statutory
rate of 35%. The Predecessor reported a total tax provision of approximately
$4.6 million, $1.3 million and $0.7 million for the period from January 1, 1998
to November 22, 1998 and for the years ended December 31, 1997 and 1996,
respectively.
Capital Resources, Liquidity and Financial Condition
Concurrently with the closing of the IPO, the Partnership entered into the
Bank Credit Agreement that includes the Term Loan Facility and the Revolving
Credit Facility. The Partnership may borrow up to $50 million under the
Revolving Credit Facility for acquisitions, capital improvements, working
capital and general business purposes.
The Term Loan Facility bears interest at the Partnership's option at either
(i) the Base Rate, as defined, or (ii) reserve-adjusted LIBOR plus an applicable
margin. Borrowings under the Revolving Credit Facility bear interest at the
Partnership's option at either (i) the Base Rate, as defined, or (ii) reserve-
adjusted LIBOR plus an applicable margin. The Partnership incurs a commitment
fee on the unused portion of the Revolving Credit Facility.
At December 31, 1998, $175 million was outstanding under the Term Loan
Facility, which amount represents indebtedness assumed from the General Partner.
The Partnership has two 10-year interest rate swaps (each of which can be
terminated by the counterparty at the end of the seventh year) aggregating $175
million which fix the LIBOR portion of the interest rate (not including the
applicable margin) at a weighted average rate of approximately 5.24%. The Term
Loan Facility matures in 2005, and no principal is scheduled for payment prior
to maturity. The Term Loan Facility may be prepaid at any time without penalty.
The Revolving Credit Facility expires in 2000. All borrowings for working
capital purposes outstanding under the Revolving Credit Facility must be reduced
to no more than $8 million for at least 15 consecutive days during each fiscal
year. At December 31, 1998, there were no amounts outstanding under the
Revolving Credit Facility. The Bank Credit Agreement is collateralized by a lien
on substantially all of the assets of the Partnership.
Simultaneously with the IPO, Marketing entered into a $175 million letter
of credit and borrowing facility which replaced an existing facility. The
purpose of the Letter of Credit Facility is to provide (i) standby letters of
credit to support the purchase and exchange of crude oil for resale and (ii)
borrowings to finance crude oil inventory which has been hedged against future
price risk or designated as working inventory. The Letter of Credit Facility is
collateralized by a lien on substantially all of the assets of the Partnership.
Aggregate availability under the Letter of Credit Facility for direct borrowings
and letters of credit is limited to a borrowing base which is determined monthly
based on certain current assets and current liabilities of the Partnership
primarily crude oil inventory and accounts receivable and accounts payable
related to the purchase and sale of crude oil. At December 31, 1998, the
borrowing base under the Letter of Credit Facility was approximately $175
million.
The Letter of Credit Facility has a $40 million sublimit for borrowings to
finance crude oil purchased in connection with operations at the Partnership's
crude oil terminal and storage facilities. All purchases of crude oil inventory
financed are required to be hedged against future price risk on terms acceptable
to the lenders. At December 31, 1998, approximately $9.8 million was outstanding
under the sublimit.
27
<PAGE>
Letters of credit under the Letter of Credit Facility are generally issued
for up to 70 day periods. Borrowings bear interest at the Partnership's option
at either (i) the Base Rate (as defined) or (ii) reserve-adjusted LIBOR plus the
applicable margin. The Partnership incurs a commitment fee on the unused portion
of the borrowing sublimit under the Letter of Credit Facility and an issuance
fee for each letter of credit issued. The Letter of Credit Facility expires July
31, 2001. At December 31, 1998, there were outstanding letters of credit of
approximately $62 million issued under the Letter of Credit Facility.
Both the Letter of Credit Facility and the Bank Credit Agreement contain a
prohibition on distributions on, or purchases or redemptions of, Units if any
Default or Event of Default (as defined) is continuing. In addition, both
facilities contain various covenants limiting the ability of the Partnership to
(i) incur indebtedness, (ii) grant certain liens, (iii) sell assets in excess of
certain limitations, (iv) engage in transactions with affiliates, (v) make
investments, (vi) enter into hedging contracts and (vii) enter into a merger,
consolidation or sale of its assets. In addition, the terms of the Letter of
Credit Facility and the Bank Credit Agreement require the Partnership to
maintain (i) a Current Ratio (as defined) of at least 1.0 to 1.0; (ii) a Debt
Coverage Ratio (as defined) which is not greater than 5.0 to 1.0; (iii) an
Interest Coverage Ratio (as defined) which is not less than 3.0 to 1.0; (iv) a
Fixed Charge Coverage Ratio (as defined) which is not less than 1.25 to 1.0; and
(v) a Debt to Capital Ratio (as defined) of not greater than .60 to 1.0. In both
the Letter of Credit Facility and the Bank Credit Agreement, a Change in Control
(as defined) of Plains Resources or the General Partner constitutes an Event of
Default.
The Partnership will distribute 100% of its Available Cash within 45 days
after the end of each quarter to Unitholders of record and to the General
partner. Available Cash is generally defined as all cash and cash equivalents
of the Partnership on hand at the end of each quarter less reserves established
by the General partner for future requirements. Distributions of Available Cash
to holders of Subordinated units are subject to the prior rights of holders of
Common Units to receive the minimum quarterly distribution ("MQD") for each
quarter during the Subordination Period (which will not end earlier than
December 31, 2003) and to receive any arrearages in the distribution of the MQD
on the Common Units for the prior quarters during the Subordination Period. The
MQD is $0.45 per unit ($1.80 per unit on an annual basis). Upon expiration of
the Subordination Period, all Subordinated Units will be converted on a one-for-
one basis into Common Units and will participate pro rata with all other Common
Units in future distributions of Available Cash. Under certain circumstances,
up to 50% of the Subordinated Units may convert into Common Units prior to the
expiration of the Subordination Period. Common Units will not accrue arrearages
with respect to distributions for any quarter after the Subordination Period and
Subordinated Units will not accrue any arrearages with respect to distributions
for any quarter.
If quarterly distributions of Available Cash exceed the MQD or the Target
Distribution Levels (as defined), the General Partner will receive distributions
which are generally equal to 15%, then 25% and then 50% of the distributions of
Available Cash that exceed the MQD or Target Distribution Level. The Target
Distribution Levels are based on the amounts of Available Cash from the
Partnership's Operating Surplus (as defined) distributed with respect to a given
quarter that exceed distributions made with respect to the MQD and Common Unit
arrearages, if any.
On February 12, 1999, the Partnership paid a cash distribution of $0.193
per unit on its outstanding Common Units and Subordinated Units. The $5.8
million distribution was paid to Unitholders of record at the close of business
on January 29, 1999. A distribution of approximately $118,000 was paid to the
General Partner. The distributions represented a partial quarterly distribution
for the 39-day period from November 23, 1998, the closing of the IPO, through
December 31, 1998.
Commitments
Historically, capital expenditures for the Partnership have not been
significant. Due to the relatively recent construction of the All American
Pipeline, the SJV Gathering System and the Cushing Terminal, material
maintenance capital expenditures have not been required, and the majority of
capital expenditures have been associated with expansion opportunities. While
the actual level of maintenance capital expenditures will vary from year to
year, the Partnership expects such expenditures to average approximately $2
million to $4 million annually for the next several years. It is anticipated
that such maintenance capital expenditures will be funded from cash flow
generated by operating activities.
The Partnership has entered into a turnkey contract to construct an
additional one million barrels of tankage at the Cushing Terminal, expanding its
existing tank capacity by 50% to three million barrels. Construction of the
expansion project began in September 1998 and is expected to be completed in the
second quarter of 1999 at a total cost of approximately $10 million.
Approximately $4.2 million of such cost was incurred in 1998. It is anticipated
that the remaining expenditures for the expansion will be funded from borrowings
under the Revolving Credit Facility. To date, the Partnership has no material
commitments to fund additional capital expenditures.
28
<PAGE>
The Partnership owns approximately 5.0 million barrels of crude oil that is
used to maintain the All American Pipeline's linefill requirements. The
Partnership has amended its tariff with the FERC to require third party shippers
to buy linefill from the Partnership and replenish the linefill when their
movement of crude oil on the All American Pipeline is completed. Accordingly,
the Partnership does not anticipate large variations in the amounts of linefill
provided by the Partnership in the future.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 is effective for all
fiscal years beginning after June 15, 1999. SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. For fair-value hedge transactions in which the Partnership is
hedging changes in an asset's, liability's, or firm commitment's fair value,
changes in the fair value of the derivative instrument will generally be offset
in the income statement by changes in the hedged item's fair value. For cash-
flow hedge transactions, in which the Partnership is hedging the variability of
cash flows related to a variable-rate asset, liability, or a forecasted
transaction, changes in the fair value of the derivative instrument will be
reported in other comprehensive income. The gains and losses on the derivative
instrument that are reported in other comprehensive income will be reclassified
as earnings in the periods in which earnings are affected by the variability of
the cash flows of the hedged item. SFAS 133 is required to be applied to
financial statements issued by the Partnership beginning in 2000. The
Partnership has not yet determined the effect that the adoption of SFAS 133 will
have on its results of operations or financial position.
In November 1998, the Emerging Issues Task Force ("EITF") released Issue
No. 98-10, "Accounting for Energy Trading and Risk Management Activities". EITF
98-10 deals with entities that enter into derivatives and other third-party
contracts for the purchase and sale of a commodity in which they normally do
business (for example, crude oil and natural gas). The EITF reached a consensus
that energy trading contracts should be measured at fair value, determined as of
the balance sheet date, with the gains and losses included in earnings and
separately disclosed in the financial statements or footnotes thereto. The EITF
acknowledged that determining whether or when an entity is involved in energy
trading activities is a matter of judgment that depends on the relevant facts
and circumstances. As such, certain factors or indicators have been identified
by the EITF which should be considered in evaluating whether an operation's
energy contracts are entered into for trading purposes. EITF 98-10 is required
to be applied to financial statements issued by the Partnership beginning in
1999. The adoption of this consensus is not expected to have a material impact
on the Partnership's results of operations or financial position.
Year 2000
Year 2000 Issue. Some software applications, hardware and equipment and
embedded chip systems identify dates using only the last two digits of the year.
These products may be unable to distinguish between dates in the Year 2000 and
dates in the year 1900. That inability (referred to as the "Year 2000" issue),
if not addressed, could cause applications, equipment or systems to fail or
provide incorrect information after December 31, 1999, or when using dates after
December 31, 1999. This in turn could have an adverse effect on the Partnership,
because the Partnership directly depends on its own applications, equipment and
systems and indirectly depends on those of other entities with which the
Partnership must interact.
Compliance Program. In order to address the Year 2000 issues, the
Partnership is participating in the Year 2000 project which Plains Resources has
implemented for all of its business units. A project team has been established
to coordinate the six phases of this Year 2000 project to assure that key
automated systems and related processes will remain functional through Year
2000. Those phases include: (i) awareness, (ii) assessment, (iii) remediation,
(iv) testing, (v) implementation of the necessary modifications and (vi)
contingency planning. The key automated systems consist of (a) financial systems
applications, (b) hardware and equipment, (c) embedded chip systems and (d)
third-party developed software. The evaluation of the Year 2000 issue includes
the evaluation of the Year 2000 exposure of third parties material to the
operations of the Partnership or any of its business units. Plains Resources
retained a Year 2000 consulting firm to review the operations of all of its
business units and to assess the impact of the Year 2000 issue on such
operations. Such review has been completed and the consultant's recommendations
are being utilized in the Year 2000 project.
The Partnership's State of Readiness. The awareness phase of the Year 2000
project has begun with a company-wide awareness program which will continue to
be updated throughout the life of the project. The portion of the assessment
phase related to financial systems applications has been substantially completed
and the necessary modifications and conversions are underway. The portion of the
assessment phase which will determine the nature and impact of the Year 2000
issue for hardware and equipment, embedded chip systems, and third-party
developed software is continuing. The Partnership has retained a Year 2000
consulting firm which is currently identifying and evaluating field equipment
which has embedded chip systems. The assessment phase of the project involves,
among other things, efforts to obtain representations and assurances from third
parties, including third party vendors, that
29
<PAGE>
their hardware and equipment, embedded chip systems, and software being used by
or impacting the Partnership or any of its business units are or will be
modified to be Year 2000 compliant. To date, the responses from such third
parties are inconclusive. As a result, management cannot predict the potential
consequences if these or other third parties are not Year 2000 compliant. The
exposure associated with the Partnership's interaction with third parties is
currently being evaluated. Management expects that the remediation, testing and
implementation phases will be substantially completed by the third quarter of
1999.
Contingency Planning. As part of the Year 2000 project, the Partnership
will seek to determine which of its business activities may be vulnerable to a
Year 2000 disruption. Appropriate contingency plans will then be developed for
each "at risk" business activity to provide an alternative means of functioning
which minimizes the effect of the potential Year 2000 disruption, both
internally and on those with whom it does business. Such contingency plans are
expected to be completed by the fourth quarter of 1999.
Costs to Address Year 2000 Compliance Issues. Through December 31, 1998,
the Partnership has borne approximately $264,000 as its share of expenses for
the Year 2000 project. While the total cost to the Partnership of the Year 2000
project is still being evaluated, management currently estimates that the costs
to be incurred in 1999 and 2000 associated with assessing, testing, modifying or
replacing financial system applications, hardware and equipment, embedded chip
systems and third party developed software is between $350,000 and $450,000.
The Partnership expects to fund these expenditures with cash from operations or
borrowings. Based upon these estimates, the Partnership does not expect the
costs of its Year 2000 project to have a material adverse effect on its
financial position, results of operation or cash flows.
Risk of Non-Compliance. The major applications that pose the greatest Year
2000 risks for the Partnership if implementation of the Year 2000 compliance
program is not successful are the Partnership's financial systems applications
and the Partnership's SCADA computer systems and embedded chip systems in field
equipment. The potential problems if the Year 2000 compliance program is not
successful are disruptions of the Partnership's revenue gathering from and
distribution to its customers and vendors and the inability to perform its other
financial and accounting functions. Failures of embedded chip systems in field
equipment of the Partnership or its customers could disrupt the Partnership's
crude oil transportation, terminalling and storage activities and gathering and
marketing activities.
While the Partnership believes that its Year 2000 project will
substantially reduce the risks associated with the Year 2000 issue, there can be
no assurance that it will be successful in completing each and every aspect of
the project on schedule, and if successful, the project will have the expected
results. Due to the general uncertainty inherent in the Year 2000 issues, the
Partnership cannot conclude that its failure or the failure of third parties to
achieve Year 2000 compliance will not adversely affect its financial position,
results of operations or cash flows.
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Partnership is exposed to various market risks, including volatility in
crude oil commodity prices and interest rates. To manage such exposure, the
Partnership monitors its inventory levels, current economic conditions and its
expectations of future commodity prices and interest rates when making decisions
with respect to risk management. The Partnership does not enter into derivative
transactions for speculative trading purposes. Substantially all the
Partnership's derivative contracts are exchanged or traded with major financial
institutions and the risk of credit loss is considered remote.
As the Partnership purchases crude oil, it establishes a margin by selling
crude oil for physical delivery to third party users, such as independent
refiners or major oil companies, or by entering into a future delivery
obligation with respect to futures contracts on the NYMEX. Through these
transactions, the Partnership seeks to maintain a position that is substantially
balanced between crude oil purchases and sales and future delivery obligations.
From time to time, the Partnership enters into fixed price delivery contracts,
floating price collar arrangements, financial swaps and oil futures contracts as
hedging devices. To hedge the price exposure related to crude oil that the
Partnership is committed to purchase, the Partnership may sell futures contracts
and thereafter either (i) make physical delivery of such purchased crude oil
against the futures contract or (ii) buy a matching futures contract to unwind
its futures position and sell its crude oil to a customer. Such contracts may
expose the Partnership to the risk of financial loss in certain circumstances,
including instances where production is less than expected, the Partnership's
customers fail to purchase or deliver the contracted quantities of crude oil, or
a sudden, unexpected event materially affects crude oil prices. Such contracts
may also restrict the ability of the Partnership to benefit from unexpected
increases in crude oil prices. The Partnership's policy is generally to purchase
only crude oil for which it has a market and to structure its sales contracts so
that crude oil price fluctuations do not materially affect the gross margin
which it receives.
30
<PAGE>
The Partnership has interest rate swaps for an aggregate notional principal
amount of $175 million which fix the LIBOR portion of the interest rate (not
including the applicable margin) on the Term Loan Facility. At December 31,
1998, the Partnership would be required to pay approximately $2.2 million to
terminate the interest rate swaps as of such date.
Commodity Price Risk
The fair value of outstanding derivative commodity instruments and the
change in fair value that would be expected from a 10 percent adverse price
change are shown in the table below:
Change in Fair
Fair Value from 10%
At December 31, 1998 Value Adverse Price Change
-------------------- ---------------- -----------------------
(in millions)
Crude oil
futures contracts $ 1.8 $(0.3)
The fair values of the futures contracts are based on quoted market prices
obtained from the NYMEX. All hedge positions offset physical positions exposed
to the cash market; none of these offsetting physical positions are included in
the above table. Price-risk sensitivities were calculated by assuming an across-
the-board 10 percent adverse change in prices regardless of term or historical
relationships between the contractual price of the instruments and the
underlying commodity price. In the event of an actual 10 percent change in
prompt month crude prices, the fair value of the Partnership's derivative
portfolio would typically change less than that shown in the table due to lower
volatility in out-month prices.
Additional details regarding accounting policy for these financial
statements are set forth in Note 1 to the Consolidated and Combined Financial
Statements.
Interest Rate Risk
The Partnership's debt instruments are sensitive to market fluctuations in
interest rates. The table below presents principal cash flows and the related
weighted average interest rates by expected maturity dates. The Partnership's
variable rate debt bears interest at LIBOR plus the applicable margin. The
average interest rates presented below are based upon rates in effect at
December 31, 1998. The carrying value of variable rate bank debt approximates
fair value as interest rates are variable, based on prevailing market rates.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------------
Expected Year of Maturity Fair
1999 2000 2001 2002 2003 Thereafter Total Value
--------- -------- -------- -------- -------- ------------ ----------- ---------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities:
Short-term debt - variable rate $ 9.7 $ - $ - $ - $ - $ - $ 9.7 $ 9.7
Average interest rate 6.80%
Long-term debt - variable rate - - - - - 175.0 175.0 175.0
Average interest rate 6.75%
</TABLE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required to be provided in this item is included in the
Consolidated and Combined Financial Statements of the Partnership and the Plains
Midstream Subsidiaries, including the notes thereto, attached hereto as pages
F-1 to F-20 and such information is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
31
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER
Partnership Management
The General Partner manages and operates the activities of the Partnership.
The Unitholders do not directly or indirectly participate in the management or
operation of the Partnership or have actual or apparent authority to enter into
contracts on behalf of, or to otherwise bind, the Partnership. Notwithstanding
any limitation on its obligations or duties, the General Partner is liable, as
general partner of the Partnership, for all debts of the Partnership (to the
extent not paid by the Partnership), except to the extent that indebtedness or
other obligations incurred by the Partnership are made specifically non-recourse
to the General Partner. Whenever possible, the General Partner intends to make
any such indebtedness or other obligations non-recourse to the General Partner.
The General Partner recently appointed Arthur L. Smith to its Board of
Directors. Mr. Smith, who is neither an officer nor employee of the General
Partner nor a director, officer or employee of any affiliate of the General
Partner, serves on the Conflicts Committee, which has the authority to review
specific matters as to which the Board of Directors believes there may be a
conflict of interest in order to determine if the resolution of such conflict
proposed by the General Partner is fair and reasonable to the Partnership. An
additional independent director is expected to be appointed during the year to
serve on the General Partner's Board of Directors and the Conflicts Committee.
Any matters approved by the Conflicts Committee will be conclusively deemed to
be fair and reasonable to the Partnership, approved by all partners of the
Partnership and not a breach by the General Partner or its Board of Directors of
any duties they may owe the Partnership or the Unitholders. The Audit Committee,
comprised of Messrs. Smith and Robert V. Sinnott, reviews the external financial
reporting of the Partnership, recommends engagement of the Partnership's
independent public accountants and reviews the Partnership's procedures for
internal auditing and the adequacy of the Partnership's internal accounting
controls. The Compensation Committee, comprised of Messrs. Smith and Sinnott,
oversees compensation decisions for the officers of the General Partner as well
as the compensation plans described below.
As is commonly the case with publicly traded limited partnerships, the
Partnership does not directly employ any of the persons responsible for managing
or operating the Partnership. These functions are provided by employees of the
General Partner and Plains Resources.
Directors and Executive Officers of the General Partner
The following table sets forth certain information with respect to the
executive officers and members of the Board of Directors of the General Partner.
Executive officers and directors are elected annually and have held the
following positions with the General Partner since its formation in February
1998, except for Messrs. Sinnott and Smith who were appointed to the Board in
September 1998 and February 1999, respectively.
<TABLE>
<CAPTION>
Name Age Position with General Partner
- --------------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Greg L. Armstrong 40 Chairman of the Board, Chief Executive Officer and Director
Harry N. Pefanis 41 President, Chief Operating Officer and Director
Phillip D. Kramer 43 Executive Vice President and Chief Financial Officer
George R. Coiner 47 Senior Vice President
Michael R. Patterson 51 Senior Vice President, General Counsel and Secretary
Cynthia A. Feeback 41 Treasurer
Robert V. Sinnott 49 Director
Arthur L. Smith 46 Director
</TABLE>
Greg L. Armstrong has been President, Chief Executive Officer and Director
of Plains Resources since 1992. He previously served Plains Resources as:
President and Chief Operating Officer from October to December 1992; Executive
Vice President and Chief Financial Officer from June to October 1992; Senior
Vice President and Chief Financial Officer from 1991 to 1992; Vice President and
Chief Financial Officer from 1984 to 1991; Corporate Secretary from 1981 to
1988; and Treasurer from 1984 to 1987.
Harry N. Pefanis has been Executive Vice President - Midstream of Plains
Resources since May 1998. He previously served Plains Resources as: Senior Vice
President from February 1996 until May 1998; Vice President - Products Marketing
from 1988 to February 1996; Manager of Products Marketing from 1987 to 1988; and
Special Assistant for Corporate Planning from 1983 to 1987. Mr. Pefanis is also
President of the Plains Midstream Subsidiaries.
32
<PAGE>
Phillip D. Kramer has been Executive Vice President, Chief Financial
Officer and Treasurer of Plains Resources since May 1998. He previously served
Plains Resources as: Senior Vice President, Chief Financial Officer and
Treasurer from May 1997 until May 1998; Vice President, Chief Financial Officer
and Treasurer from 1992 to 1997; Vice President and Treasurer from 1988 to 1992;
Treasurer from 1987 to 1988; and Controller from 1983 to 1987.
George R. Coiner has been Vice President of Plains Marketing &
Transportation Inc., a Plains Midstream Subsidiary, since November 1995. Prior
to joining Plains Marketing & Transportation Inc., he was Senior Vice President,
Marketing with Scurlock Permian Corp.
Michael R. Patterson has been Vice President, General Counsel and Secretary
of Plains Resources since 1988. He previously served Plains Resources as Vice
President and General Counsel from 1985 to 1988.
Cynthia A. Feeback has been Assistant Treasurer and Controller of Plains
Resources since May 1998. She previously served Plains Resources as Controller
and Principal Accounting Officer from 1993 to 1998; Controller from 1990 to
1993; and Accounting Manager from 1988 to 1990.
Robert V. Sinnott has been Senior Vice President of Kayne Anderson
Investment Management, Inc. (an investment management firm) since 1992. He was
Vice President and Senior Securities Officer of the Investment Banking Division
of Citibank from 1986 to 1992. He is also a director of Plains Resources and
Glacier Water Services, Inc. (a vended water company).
Arthur L. Smith is Chairman of John S. Herold, Inc. (a petroleum research
and consulting firm), a position he has held since 1984. For the period from May
1998 to October 1998, he served as Chairman and Chief Executive Officer of Torch
Energy Advisors Incorporated. Mr. Smith served as a director of Pioneer Natural
Resources Company from 1997 to 1998 and of Parker & Parsley Petroleum Company
from 1991 to 1997.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires
directors, executive officers and persons who beneficially own more than ten
percent of a registered class of the Partnership's equity securities to file
with the SEC and the New York Stock Exchange initial reports of ownership and
reports of changes in ownership of such equity securities. Such persons are also
required to furnish the Partnership with copies of all Section 16(a) forms that
they file. Based solely upon a review of the copies of the forms furnished to
it, or written representations from certain reporting persons that no Forms 5
were required, the Partnership believes that during 1998 its officers and
directors complied with all filing requirements with respect to the
Partnership's equity securities.
Reimbursement of Expenses of the General Partner and its Affiliates
The General Partner does not receive any management fee or other
compensation in connection with its management of the Partnership. The General
Partner and its affiliates, including Plains Resources, performing services for
the Partnership are reimbursed for all expenses incurred on behalf of the
Partnership, including the costs of employee, officer and director compensation
and benefits properly allocable to the Partnership, and all other expenses
necessary or appropriate to the conduct of the business of, and allocable to,
the Partnership. The Partnership Agreement provides that the General Partner
will determine the expenses that are allocable to the Partnership in any
reasonable manner determined by the General Partner in its sole discretion.
Item 11. EXECUTIVE COMPENSATION
The Partnership was formed in September 1998 but conducted no business
until late November 1998. Mr. Armstrong, the General Partner's Chief Executive
Officer received no compensation for services to the Partnership in 1998. No
officer of the General Partner received compensation for services to the
Partnership in 1998 in amounts greater than $100,000.
Employment Agreement
Mr. Pefanis has an employment agreement with Plains Resources. Pursuant to
the employment agreement, Mr. Pefanis serves as President and Chief Operating
Officer of the General Partner as well as an Executive Vice President of Plains
Resources and is responsible for the overall operations of the General Partner
and the marketing operations of Plains Resources. The employment agreement
provides that Plains Resources will not require Mr. Pefanis to engage in
activities that materially detract from his duties and responsibilities as an
officer of the General Partner. The employment agreement has an initial term,
commencing November 23, 1998, of three years subject to annual extensions and
includes confidentiality, nonsolicitation and noncompete provisions, which, in
general, will continue for 24 months following Mr. Pefanis' termination of
employment. The agreement provides for an annual base salary of $235,000,
subject to such increases as the Board of Directors of Plains Resources may
authorize from time to time. In
33
<PAGE>
addition, Mr. Pefanis is eligible to receive an annual cash bonus to be
determined by the Board of Directors of Plains Resources. Mr. Pefanis
participates in the Long-Term Incentive Plan of the General Partner as described
below and is also entitled to participate in such other benefit plans and
programs as the General Partner may provide for its employees in general. Upon a
Change in Control of Plains Resources or a Marketing Operations Disposition (as
such terms are defined in the employment agreement), the term of the employment
agreement will be automatically extended for three years, and if Mr. Pefanis'
employment is terminated during the one-year period following either event by
him for a Good Reason or by Plains Resources other than for death, disability or
Cause (as such terms are defined in the employment agreement), he will be
entitled to a lump sum severance amount equal to three times the sum of (i) his
highest rate of annual base salary and (ii) the largest annual bonus paid during
the three preceding years.
Long-Term Incentive Plan
The General Partner has adopted the Plains All American Inc. 1998 Long-Term
Incentive Plan (the "Long-Term Incentive Plan") for employees and directors of
the General Partner and its affiliates who perform services for the Partnership.
The Long-Term Incentive Plan consists of two components, a restricted unit plan
(the "Restricted Unit Plan") and a unit option plan (the "Unit Option
Plan"). The Long-Term Incentive Plan currently permits the grant of Restricted
Units and Unit Options covering an aggregate of 975,000 Common Units. The plan
is administered by the Compensation Committee of the General Partner's Board of
Directors.
Restricted Unit Plan. A Restricted Unit is a "phantom" unit that entitles
the grantee to receive a Common Unit upon the vesting of the phantom unit. As of
March 22, 1999, an aggregate of approximately 500,000 Restricted Units have been
granted to employees of the General Partner, including 60,000 and 30,000 units
granted to Messrs. Pefanis and Coiner, respectively. The Compensation Committee
may, in the future, determine to make additional grants under such plan to
employees and directors containing such terms as the Compensation Committee
shall determine. In general, Restricted Units granted to employees during the
Subordination Period will vest only upon, and in the same proportions as, the
conversion of the Subordinated Units to Common Units. Grants made to non-
employee directors of the General Partner will be eligible to vest prior to
termination of the Subordination Period.
If a grantee terminates employment or membership on the Board for any
reason, the grantee's Restricted Units will be automatically forfeited unless,
and to the extent, the Compensation Committee provides otherwise. Common Units
to be delivered upon the "vesting" of rights may be Common Units acquired by
the General Partner in the open market, Common Units already owned by the
General Partner, Common Units acquired by the General Partner directly from the
Partnership or any other person, or any combination of the foregoing. The
General Partner will be entitled to reimbursement by the Partnership for the
cost incurred in acquiring such Common Units. If the Partnership issues new
Common Units upon vesting of the Restricted Units, the total number of Common
Units outstanding will increase. Following the Subordination Period, the
Compensation Committee, in its discretion, may grant tandem distribution
equivalent rights with respect to Restricted Units.
The issuance of the Common Units pursuant to the Restricted Unit Plan is
intended to serve as a means of incentive compensation for performance and not
primarily as an opportunity to participate in the equity appreciation in respect
of the Common Units. Therefore, no consideration will be payable by the plan
participants upon receipt of the Common Units, and the Partnership will receive
no remuneration for such Units.
Unit Option Plan. The Unit Option Plan currently permits the grant of
options ("Unit Options") covering Common Units. No grants have been made under
the Unit Option Plan. The Compensation Committee may, in the future, determine
to make grants under such plan to employees and directors containing such terms
as the Committee shall determine.
Unit Options will have an exercise price equal to the fair market value of
the Units on the date of grant. Unit Options granted during the Subordination
Period will become exercisable automatically upon, and in the same proportions
as, the conversion of the Subordinated Units to Common Units, unless a later
vesting date is provided.
Upon exercise of a Unit Option, the General Partner will acquire Common
Units in the open market at a price equal to the then-prevailing price on the
principal national securities exchange upon which the Common Units are then
traded, or directly from the Partnership or any other person, or use Common
Units already owned by the General Partner, or any combination of the foregoing.
The General Partner will be entitled to reimbursement by the Partnership for the
difference between the cost incurred by the General Partner in acquiring such
Common Units and the proceeds received by the General Partner from an optionee
at the time of exercise. Thus, the cost of the Unit Options will be borne by the
Partnership. If the Partnership issues new Common Units upon exercise of the
Unit Options, the total number of Common Units outstanding will increase, and
the General Partner will remit to the Partnership the proceeds it received from
the optionee upon exercise of the Unit Option to the Partnership.
The Unit Option Plan has been designed to furnish additional compensation
to employees and directors and to align their economic interests with those of
Common Unitholders.
34
<PAGE>
The General Partner's Board of Directors in its discretion may terminate
the Long-Term Incentive Plan at any time with respect to any Common Units for
which a grant has not theretofore been made. The General Partner's Board of
Directors also has the right to alter or amend the Long-Term Incentive Plan or
any part thereof from time to time, including increasing the number of Common
Units with respect to which awards may be granted; provided, however, that no
change in any outstanding grant may be made that would materially impair the
rights of the participant without the consent of such participant.
Transaction Grant Agreements
In addition to the grants made under the Restricted Unit Plan described
above, the General Partner, at no cost to the Partnership, agreed to transfer
approximately 325,000 of its affiliates' Common Units to certain key employees
of the General Partner. Generally, approximately 72,000 of such Common Units
will vest in each of the years ending December 31, 1999, 2000 and 2001 if the
Operating Surplus generated in such year equals or exceeds the amount necessary
to pay the Minimum Quarterly Distribution on all outstanding Common Units and
the related distribution on the General Partner interest. If a tranche of Common
Units does not vest in a particular year, such Common Units will vest at the
time the Common Unit Arrearages for such year have been paid. In addition,
approximately 36,000 of such Common Units will vest in each of the years ending
December 31, 1999, 2000 and 2001 if the Operating Surplus generated in such year
exceeds the amount necessary to pay the Minimum Quarterly Distribution on all
outstanding Common Units and Subordinated Units and the related distribution on
the General Partner interest. Any Common Units remaining unvested shall vest
upon, and in the same proportion as, the conversion of Subordinated Units to
Common Units. Notwithstanding the foregoing, all Common Units become vested if
Plains All American Inc. is removed as General Partner of the Partnership prior
to January 1, 2002. The compensation expense incurred in connection with these
grants will be funded by the General Partner, without reimbursement by the
Partnership. Of the 325,000 Common Units, 75,000 were allocated to Mr. Pefanis
and 50,000 were allocated to Mr. Coiner.
Management Incentive Plan
The General Partner has adopted the Plains All American Inc. Management
Incentive Plan (the "Management Incentive Plan"). The Management Incentive
Plan is designed to enhance the financial performance of the General Partner's
key employees by rewarding them with cash awards for achieving quarterly and/or
annual financial performance objectives. The Management Incentive Plan is
administered by the Compensation Committee. Individual participants and
payments, if any, for each fiscal quarter and year are determined by and in the
discretion of the Compensation Committee. Any incentive payments are at the
discretion of the Compensation Committee, and the General Partner may amend or
change the Management Incentive Plan at any time. The General Partner is
entitled to reimbursement by the Partnership for payments and costs incurred
under the plan.
Compensation of Directors
Each director of the General Partner who is not an employee of the General
Partner (a "Non-employee Director") is paid an annual retainer fee of $20,000,
an attendance fee of $2,000 for each Board meeting he attends (excluding
telephonic meetings), an attendance fee of $500 for each committee meeting or
telephonic Board meeting he attends plus reimbursement for related out-of-pocket
expenses. Messrs. Armstrong and Pefanis, as officers of the General Partner, are
otherwise compensated for their services to the General Partner and therefore
receive no separate compensation for their services as directors of the General
Partner.
35
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 22, 1999,
regarding the beneficial ownership of Units held by (i) each person known by the
General Partner to be the beneficial owner of 5% or more of the Units, (ii) each
director and executive officer of the General Partner and (iii) by all directors
and executive officers of the General Partner as a group.
<TABLE>
<CAPTION>
Percentage Of Percentage of Percentage
Common Common Subordinated Subordinated Of Total
Units Units Units Units Units
Beneficially Beneficially Beneficially Beneficially Beneficially
Name of Beneficial Owner Owned Owned Owned Owned Owned
- -------------------------------------- --------------- -------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C>
Plains All American Inc. (1) 6,974,239(2) 34.8% 10,029,619 100% 56.5%
Greg L. Armstrong 18,000 * - - *
Harry N. Pefanis 12,000 * - - *
Phillip D. Kramer 6,000 * - - *
George R. Coiner - - - - -
Michael R. Patterson 7,000 * - - *
Cynthia A. Feeback 500 * - - *
Robert V. Sinnott - - - - -
Arthur L. Smith 7,500 * - - *
All directors and executive officers
as a group (7 persons) 51,000 * - - *
</TABLE>
- ---------------------
* Less than one percent
(1) The record holder of such Common Units and Subordinated Units is PAAI LLC,
a wholly owned subsidiary of Plains All American Inc., the General Partner
of the Partnership. Plains All American Inc. is a wholly owned subsidiary
of Plains Resources Inc. The address for each is 500 Dallas, Suite 700,
Houston, Texas 77002.
(2) Includes 325,000 Common Units to be transferred, subject to certain vesting
conditions, to certain key employees of the General Partner pursuant to
certain Transaction Grant Agreements.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Rights of the General Partner
The General Partner and its affiliates own 6,974,239 Common Units and
10,029,619 Subordinated Units, representing an aggregate 55.4% limited partner
interest in the Partnership. In addition, the General Partner owns an aggregate
2% general partner interest in the Partnership and the Partnership on a combined
basis. Through the General Partner's ability, as general partner, to manage and
operate the Partnership and the ownership of 6,974,239 Common Units and all of
the outstanding Subordinated Units by the General Partner and its affiliates
(effectively giving the General Partner the ability to veto certain actions of
the Partnership), the General Partner has the ability to control the management
of the Partnership.
Agreements Governing the Transactions
In connection with the Transactions, the Partnership, the General Partner
and certain other parties entered into the various documents and agreements to
effect the Transactions, including the vesting of assets in, and the assumption
of liabilities by, the Partnership, and the application of the proceeds of the
IPO. See Item 1. "Business - Initial Public Offering and Concurrent
Transactions".
Relationship with Plains Resources
General
The Partnership has extensive ongoing relationships with Plains Resources.
These relationships include (i) Plains Resources' wholly owned subsidiary,
Plains All American Inc., serving as General Partner of the Partnership, (ii) an
Omnibus Agreement, providing for the resolution of certain conflicts arising
from the conduct of the Partnership and Plains Resources of related businesses
and for the General Partner's indemnification of the Partnership for certain
matters and (iii) the Crude Oil Marketing Agreement with Plains Resources,
providing for the marketing of Plains Resources' crude oil production.
36
<PAGE>
Transactions with Affiliates
On the Closing Date, the Partnership and Plains Resources Inc. entered into
the Crude Oil Marketing Agreement which provides for the marketing by the
Partnership of Plains Resources' crude oil production for a fee of $0.20 per
barrel. The Partnership paid Plains Resources approximately $4.1 for the
purchase of crude oil under such agreement for the period from November 23, 1998
to December 31, 1998, and recognized approximately $120,000 of profit for such
period.
Prior to the Crude Oil Marketing Agreement, the Plains Midstream
Subsidiaries marketed crude oil production of Plains Resources, its subsidiaries
and its royalty owners. The Plains Midstream Subsidiaries paid approximately
$83.4 million, $101.2 million and $100.5 million for the purchase of these
products for the period from January 1, 1998 to November 22, 1998 and the years
ended December 31, 1997 and 1996, respectively. In management's opinion, such
purchases were made at prevailing market rates. The Plains Midstream
Subsidiaries did not recognize a profit on the sale of the crude oil purchased
from Plains Resources.
The Partnership does not directly employ any persons to manage or operate
its business. These functions are provided by employees of the General Partner
and Plains Resources. The General partner does not receive a management fee or
other compensation in connection with its management of the Partnership. The
Partnership reimburses the General Partner and Plains Resources for all direct
and indirect costs of services provided, including the costs of employee,
officer and director compensation and benefits properly allocable to the
Partnership, and all other expenses necessary or appropriate to the conduct of
the business of, and allocable to the Partnership. The Partnership Agreement
provides that the General Partner will determine the expenses that are allocable
to the Partnership in any reasonable manner determined by the General Partner in
its sole discretion. Total costs reimbursed to the General Partner and Plains
Resources by the Partnership were approximately $0.5 million for the period from
November 23, 1998 to December 31, 1998. Such costs include, (I) allocated
personnel costs (such as salaries and employee benefits) of the personnel
providing such services, (ii) rent on office space allocated to the General
partner in Plains Resources' offices in Houston, Texas and (iii) out-of-pocket
expenses related to the provision of such services.
Plains Resources allocated certain general and administrative expenses to
the Plains Midstream Subsidiaries during 1998, 1997 and 1996. The types of
indirect expenses allocated to the Plains Midstream Subsidiaries during this
period were office rent, utilities, telephone services, data processing
services, office supplies and equipment maintenance. Direct expenses allocated
by Plains Resources were primarily salaries and benefits of employees engaged in
the business activities of the Plains Midstream Subsidiaries.
Indemnity from the General Partner
In connection with the acquisition of the All American Pipeline and the SJV
Gathering System, Wingfoot agreed to indemnify the General Partner for certain
environmental and other liabilities. The indemnity is subject to limits of (i)
$10 million with respect to matters of corporate authorization and title to
shares, (ii) $21.5 million with respect to condition of rights of way, lease
rights and undisclosed liabilities and litigation and (iii) $30 million with
respect to environmental liabilities resulting from certain undisclosed and pre-
existing conditions. Wingfoot has no liability, however, until the aggregate
amount of losses, with respect to each such limit, is in excess of $1 million.
The indemnities will remain in effect for a two year period after the date of
the acquisition, with the exception of the environmental indemnity, which will
remain in effect for a period of three years after the date of the Acquisition.
The environmental indemnity is also subject to certain sharing ratios which
change based on whether the claim is made in the first, second or third year of
the indemnity as well as the amount of such claim. The Partnership has also
agreed to be solely responsible for the cumulative aggregate amount of losses
resulting from an oil leak from the All American Pipeline that occurred in 1997
to the extent such losses do not exceed $350,000. Any costs in excess of
$350,000 will be applied to the $1 million deductible for the Wingfoot
environmental indemnity. The General Partner has agreed to indemnify the
Partnership for environmental and other liabilities to the extent it is
indemnified by Wingfoot.
Plains Resources has agreed to indemnify the Partnership for environmental
liabilities related to the assets of the Plains Midstream Subsidiaries
transferred to the Partnership that arose prior to closing and are discovered
within three years after closing (excluding liabilities resulting from a change
in law after closing). Plains Resources' indemnification obligation is capped at
$3 million.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(1) Financial Statements
The financial statements filed as part of this report are listed in the
"Index to Consolidated Financial Statements" on Page F-1 hereof.
37
<PAGE>
<TABLE>
<CAPTION>
(2) Exhibits
<S> <C>
3.1 + --Second Amended and Restated Agreement of Limited Partnership of Plains All American
Pipeline, L.P. dated as of November 23, 1998.
3.2 + --Amended and Restated Agreement of Limited Partnership of Plains Marketing, L.P. dated as
of November 23, 1998.
3.3 + --Amended and Restated Agreement of Limited Partnership of All American Pipeline, L.P.
dated as of November 23, 1998.
3.4 --Certificate of Limited Partnership of Plains All American Pipeline, L.P. (incorporated by reference
to Exhibit 3.4 to Registration Statement, file No. 333-64107).
3.5 + --Certificate of Limited Partnership of Plains Marketing, L.P. dated as of November 10, 1998.
3.6 + --Articles of Conversion of All American Pipeline Company dated as of November 10, 1998.
10.1 + --Credit Agreement among All American Pipeline, L.P., Plains All American Pipeline, L.P., Plains Marketing, L.P.,
ING (U.S.) Capital Corporation and certain other banks dated as of November 17, 1998.
10.2 + --Amended and Restated Credit Agreement among Plains Marketing, L.P., Plains All American Pipeline, L.P.,
All American Pipeline, L.P., BankBoston, N.A., and certain other banks dated as of November 17, 1998.
10.3 + --Contribution, Conveyance and Assumption Agreement among Plains All American Pipeline, L.P. and certain other
parties dated as of November 23, 1998.
*10.4 + --Plains All American Inc., 1998 Long-Term Incentive Plan.
*10.5 + --Plains All American Inc., 1998 Management Incentive Plan.
*10.6 + --Employment Agreement between Plains Resources Inc. and Harry N. Pefanis dated as of November 23, 1998.
10.7 + --Crude Oil Marketing Agreement among Plains Resources Inc., Plains Illinois Inc., Stocker Resources, L.P.,
Calumet Florida, Inc. and Plains Marketing, L.P. dated as of November 23, 1998.
10.8 + --Omnibus Agreement among Plains Resources Inc., Plains All American Pipeline, L.P., Plains Marketing, L.P.,
All American Pipeline, L.P. and Plains All American Inc. dated as of November 23, 1998.
10.9 + --Transportation Agreement dated July 30, 1993 between All American Pipeline Company and Exxon Company, U.S.A.
(incorporated by reference to Exhibit 10.9 to Registration Statement, file No. 333-64107).
10.10 --Transportation Agreement dated August 2, 1993 between All American Pipeline Company and Texaco Trading and
Transportation Inc., Chevron U.S.A. and Sun Operating Limited Partnership (incorporated by reference to
Exhibit 10.10 to Registration Statement, file No. 333-64107).
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
*10.11 --Form of Transaction Grant Agreement (Deferred Payment) (incorporated by reference to Exhibit 10.11 to Registration
Statement, file No. 333-64107).
*10.12 --Form of Transaction Grant Agreement (Payment on Vesting) (incorporated by reference to Exhibit 10.12 to
Registration Statement, file No. 333-64107).
10.13 + --First Amendment to Contribution, Conveyance and Assumption Agreement dated as of December 15, 1998
10.14 + --First Amendment dated as of March 18, 1999, to Credit Agreement among All American Pipeline, L.P., Plains All
American Pipeline, L.P., Plains Marketing, L.P., ING (U.S.) Capital Corporation and certain other banks.
10.15 + --First Amendment dated as of March 18, 1999, to Amended and Restated Credit Agreement among Plains Marketing,
L.P., Plains All American Pipeline, L.P., All American Pipeline, L.P., BankBoston, N.A. and certain other banks.
10.16 + --Agreement for Purchase and Sale of Membership Interest in Scurlock Permian LLC between Marathon Ashland LLC
and Plains Marketing, L.P. dated as of March 17, 1999.
21.1 --List of subsidiaries of the Partnership (incorporated by reference to Exhibit 21.1 to Registration Statement,
file No. 333-64107).
27.1 + --Financial Data Schedule
</TABLE>
- ---------------------
+ Filed herewith
* Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
None
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PLAINS ALL AMERICAN PIPELINE, L.P..
By: PLAINS ALL AMERICAN INC.,
Its General Partner
Date: March 31, 1999 By: /s/ Phillip D. Kramer
------------------------------------------
Phillip D. Kramer,
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 31, 1999 By: /s/ Greg L. Armstrong
------------------------------------------
Greg L. Armstrong, Chairman of the Board,
Chief Executive Officer and
Director of the General Partner
(Principal Executive Officer)
Date: March 31, 1999 By: /s/ Harry N. Pefanis
------------------------------------------
Harry N. Pefanis, President,
Chief Operating Officer and Director
of the General Partner
Date: March 31, 1999 By: /s/ Phillip D. Kramer
------------------------------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
(Principal Financial Officer) of
the General Partner
Date: March 31, 1999 By: /s/ Cynthia A. Feeback
------------------------------------------
Cynthia A. Feeback, Treasurer
(Principal Accounting Officer) of the
General Partner
Date: March 31, 1999 By: /s/ Robert V. Sinnott
------------------------------------------
Robert V. Sinnott, Director of the General
Partner
Date: March 31, 1999 By: /s/ Arthur L. Smith
------------------------------------------
Arthur L. Smith, Director of the General
Partner
40
<PAGE>
INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS Page
<S> <C>
Report of Independent Accountants F-2
Consolidated and Combined Balance Sheets as of December 31, 1998 and 1997 (Predecessor) F-3
Consolidated and Combined Statements of Income:
For the period from inception (November 23, 1998) to December 31, 1998
For the period from January 1, 1998 to November 22,1998, and
the years ended December 31, 1997 and 1996 (Predecessor) F-4
Consolidated and Combined Statements of Cash Flows:
For the period from inception (November 23, 1998) to December 31, 1998
For the period from January 1, 1998 to November 22, 1998, and
the years ended December 31, 1997 and 1996 (Predecessor) F-5
Consolidated Statement of Changes in Partners' Equity for the period from
inception (November 23, 1998) to December 31, 1998 F-6
Notes to Consolidated and Combined Financial Statements F-7
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of the General Partner and the Unitholders of
Plains All American Pipeline, L.P.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in partners' equity and of cash
flows present fairly, in all material respects, the consolidated financial
position of Plains All American Pipeline, L.P. and subsidiaries (the
"Partnership") at December 31, 1998 and the consolidated results of their
operations and their cash flows for the period from inception (November 23,
1998) to December 31, 1998 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
In our opinion, the accompanying combined balance sheet and related combined
statements of income and of cash flows of the Plains Midstream Subsidiaries, the
predecessor entity of the Partnership, present fairly, in all material respects,
the combined financial position of the Plains Midstream Subsidiaries at December
31, 1997 and the combined results of their operations and their cash flows for
the period from January 1, 1998 to November 22, 1998 and the years ended
December 31, 1997 and 1996 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Plains
Midstream Subsidiaries' management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Houston, Texas
March 29, 1999
F-2
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
------------- --------------
(Predecessor)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,503 $ 2
Accounts receivable 119,514 96,319
Due from affiliates 3,022 -
Inventory 37,711 18,909
Prepaid expenses and other 1,101 197
-------- --------
Total current assets 166,851 115,427
-------- --------
PROPERTY AND EQUIPMENT
Crude oil pipeline, gathering and terminal assets 378,254 35,591
Other property and equipment 581 698
-------- --------
378,835 36,289
Less allowance for depreciation and amortization (799) (3,903)
-------- --------
378,036 32,386
-------- --------
OTHER ASSETS
Pipeline linefill 54,511 -
Other 10,810 1,806
-------- --------
$610,208 $149,619
======== ========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $135,713 $ 86,415
Interest payable 1,267 50
Due to affiliates 10,790 8,945
Notes payable 9,750 18,000
-------- --------
Total current liabilities 157,520 113,410
LONG-TERM LIABILITIES
Bank debt 175,000 -
Due to affiliates - 28,531
Payable in lieu of deferred taxes - 1,703
Other 45 -
-------- --------
Total liabilities 332,565 143,644
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
COMBINED EQUITY - 5,975
-------- --------
PARTNERS' EQUITY
Common unit holders (20,059,239 units outstanding) 256,997 -
Subordinated unit holders (10,029,619 units outstanding) 19,454 -
General partner 1,192 -
-------- --------
277,643 -
-------- --------
$610,208 $149,619
======== ========
</TABLE>
See notes to consolidated and combined financial statements.
F-3
<PAGE>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(in thousands, except unit and per unit data)
<TABLE>
<CAPTION>
NOVEMBER 23, JANUARY 1,
1998 TO 1998 TO YEAR ENDED DECEMBER 31,
DECEMBER 31, NOVEMBER 22, ----------------------------
1998 1998 1997 1996
------------ ------------ ----------- ------------
(PREDECESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C> <C>
REVENUES $ 176,445 $ 953,244 $ 752,522 $ 531,698
COST OF SALES
AND OPERATIONS 168,946 922,263 740,042 522,167
---------- ---------- ---------- ----------
Gross Margin 7,499 30,981 12,480 9,531
---------- ---------- ---------- ----------
EXPENSES
General and administrative 771 4,526 3,529 2,974
Depreciation and amortization 1,192 4,179 1,165 1,140
---------- ---------- ---------- ----------
Total expenses 1,963 8,705 4,694 4,114
---------- ---------- ---------- ----------
Operating income 5,536 22,276 7,786 5,417
Interest expense 1,371 8,492 894 -
Related party interest expense - 2,768 3,622 3,559
Interest and other income 12 572 138 90
---------- ---------- ---------- ----------
Net income before provision
in lieu of income taxes 4,177 11,588 3,408 1,948
Provision in lieu of income taxes - 4,563 1,268 726
---------- ---------- ---------- ----------
NET INCOME $ 4,177 $ 7,025 $ 2,140 $ 1,222
========== ========== ========== ==========
BASIC AND DILUTED
NET INCOME PER
LIMITED PARTNER UNIT $ 0.14 $ 0.40 $ 0.12 $ 0.07
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF UNITS OUTSTANDING 30,088,858 17,003,858 17,003,858 17,003,858
========== ========== ========== ==========
</TABLE>
See notes to consolidated and combined financial statements.
F-4
<PAGE>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
NOVEMBER 23, JANUARY 1,
1998 TO 1998 TO YEAR ENDED DECEMBER 31,
DECEMBER 31, NOVEMBER 22, ----------------------------
1998 1998 1997 1996
------------ ------------ ----------- ------------
(PREDECESSOR) (PREDECESSOR) (PREDECESSOR)
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 4,177 $ 7,025 $ 2,140 $ 1,222
Items not affecting cash flows
from operating activities:
Depreciation and amortization 1,192 4,179 1,165 1,140
(Gain) loss on sale of
property and equipment - 117 (28) (34)
Change in payable in lieu of deferred taxes - 4,108 1,131 706
Other non cash items 45 - - -
Change in assets and liabilities, net of Acquisition:
Accounts receivable (10,203) 38,794 (10,415) (38,771)
Inventory (14,805) (3,336) (16,450) 435
Prepaid expenses and other (42) (1,296) (39) 41
Accounts payable and
other current liabilities 33,008 (30,511) 9,577 35,994
Interest payable 1,267 (39) 50 -
Pipeline linefill (6,247) 2,343 - -
---------- ---------- ---------- ----------
Net cash provided by (used in)
operating activities 8,392 21,384 (12,869) 733
---------- ---------- ---------- ----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Acquisition (see Note 2): - (394,026) - -
Additions to property and equipment (2,887) (5,528) (678) (3,346)
Disposals of property and equipment - 8 85 97
Additions to other assets (202) (65) (1,261) (36)
---------- ---------- ---------- ----------
Net cash used in investing activities (3,089) (399,611) (1,854) (3,285)
---------- ---------- ---------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Advances from (payments to) affiliates (1,174) 3,349 (3,679) 2,759
Debt issue costs incurred in connection
with Acquisition (see Note 2) - (9,938) - -
Proceeds from initial public offering (see Note 1) 244,690 - - -
Distributions upon formation (see Note 1) (241,690) - - -
Payment of formation costs (3,000) - - -
Cash balance at formation 224 - - -
Proceeds from long-term debt - 331,300 - -
Proceeds from short-term debt 1,150 30,600 39,000 -
Principal payments of long-term debt - (39,300) - -
Principal payments of short-term debt - (40,000) (21,000) -
Capital contribution from Parent - 113,700 - -
Dividend to Parent - (3,557) - -
---------- ---------- ---------- ----------
Net cash provided by financing activities 200 386,154 14,321 2,759
---------- ---------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents 5,503 7,927 (402) 207
Cash and cash equivalents, beginning of period - 2 404 197
---------- ---------- ---------- ----------
Cash and cash equivalents, end of period $ 5,503 $ 7,929 $ 2 $ 404
========== ========== ========== ==========
</TABLE>
See notes to consolidated and combined financial statements.
F-5
<PAGE>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' EQUITY
FOR THE PERIOD FROM INCEPTION (NOVEMBER 23, 1998) TO DECEMBER 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Total
General Partners'
Common Units Subordinated Units Partner Equity
---------------------- ------------------- --------- ----------
Units Amount Units Amount Amount Amount
---------- --------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of units to public 13,085 $241,690 $ - $ - $ 241,690
Contribution of assets and
debt assumed 6,974 108,253 10,030 155,680 9,533 273,466
Distribution at time
of formation (95,675) (137,590) (8,425) (241,690)
Net income for the period
from November 23, 1998
to December 31, 1998 2,729 1,364 84 4,177
---------- --------- --------- -------- --------- ----------
BALANCE AT
DECEMBER 31, 1998 20,059 $ 256,997 10,030 $ 19,454 $ 1,192 $ 277,643
========== ========= ========= ======== ========= ==========
</TABLE>
See notes to consolidated and combined financial statements.
F-6
<PAGE>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Note 1--Organization and Significant Accounting Policies
Organization
Plains All American Pipeline, L.P. (the "Partnership") is a Delaware
limited partnership that was formed in the third quarter of 1998, to acquire and
operate the midstream crude oil business and assets of Plains Resources Inc.
("Plains Resources") and its wholly owned subsidiaries (the "Plains Midstream
Subsidiaries" or the "Predecessor"). The operations of the Partnership are
conducted through Plains Marketing, L.P. and All American Pipeline, L.P.
(collectively referred to as the "Operating Partnerships"). Plains All American
Inc., one of the Plains Midstream Subsidiaries, is the general partner ("General
Partner") of the Partnership and the Partnership. The Partnership is engaged in
interstate and intrastate crude oil pipeline transportation and crude oil
terminalling and storage activities and gathering and marketing activities. The
Partnership's operations are concentrated in California, Texas, Oklahoma,
Louisiana and the Gulf of Mexico.
The Partnership owns and operates a 1,233-mile seasonally heated, 30-inch,
common carrier crude oil pipeline extending from California to West Texas (the
"All American Pipeline") and a 45-mile, 16-inch, crude oil gathering system in
the San Joaquin Valley of California (the "SJV Gathering System"), both of
which the General Partner purchased from Wingfoot Ventures Seven, Inc.
("Wingfoot"), a wholly owned subsidiary of The Goodyear Tire & Rubber Company
("Goodyear") in July 1998 for approximately $400 million (the "Acquisition")
(See Note 2). The Partnership also owns and operates a two million barrel,
above-ground crude oil terminalling and storage facility in Cushing, Oklahoma,
(the "Cushing Terminal").
Initial Public Offering and Concurrent Transactions
On November 23, 1998, the Partnership completed an initial public offering
(the "IPO") of 13,085,000 common units representing limited partner interests
(the "Common Units") and received therefrom net proceeds of approximately $244.7
million. Concurrently with the closing of the IPO, certain transactions
described in the following paragraphs were consummated in connection with the
formation of the Partnership. Such transactions and the transactions which
occurred in conjunction with the IPO are referred to herein as the
"Transactions."
Certain of the Plains Midstream Subsidiaries were merged into Plains
Resources, which sold the assets of these subsidiaries to the Partnership in
exchange for $64.1 million and the assumption of $11.0 million of related
indebtedness. At the same time, the General Partner conveyed all of its interest
in the All American Pipeline and the SJV Gathering System, which it acquired in
July 1998 for approximately $400 million, to the Partnership in exchange for (i)
6,974,239 Common Units, 10,029,619 Subordinated Units and an aggregate 2%
general partner interest in the Partnership, (ii) the right to receive Incentive
Distributions as defined in the Partnership agreement; and (iii) the assumption
by the Partnership of $175 million of indebtedness incurred by the General
Partner in connection with the acquisition of the All American Pipeline and the
SJV Gathering System.
In addition to the $64.1 million paid to Plains Resources, the Partnership
distributed approximately $177.6 million to the General Partner and used
approximately $3 million of the remaining proceeds to pay expenses incurred in
connection with the Transactions. The General Partner used $121.0 million of the
cash distributed to it to retire the remaining indebtedness incurred in
connection with the acquisition of the All American Pipeline and the SJV
Gathering System and to pay other costs associated with the Transactions. The
balance, $56.6 million, was distributed to Plains Resources, which used the cash
to repay indebtedness and for other general corporate purposes.
In addition, concurrently with the closing of the IPO, the Partnership
entered into a $225 million bank credit agreement (the "Bank Credit
Agreement") that includes a $175 million term loan facility (the "Term Loan
Facility") and a $50 million revolving credit facility (the "Revolving Credit
Facility"). The Partnership may borrow up to $50 million under the Revolving
Credit Facility for acquisitions, capital improvements, working capital and
general business purposes. At closing, the Partnership had $175 million
outstanding under the Term Loan Facility, representing indebtedness assumed from
the General Partner.
Basis of Consolidation and Presentation
The accompanying financial statements and related notes present the
consolidated financial position as of December 31, 1998, of the Partnership and
the results of its operations, cash flows and changes in partners' equity for
the period from
F-7
<PAGE>
November 23, 1998 to December 31, 1998. The combined financial statements of
the Predecessor include the accounts of the Plains Midstream Subsidiaries. All
significant intercompany transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although management believes these estimates are reasonable,
actual results could differ from these estimates.
Revenue Recognition
Gathering and marketing revenues are accrued at the time title to the
product sold transfers to the purchaser, which typically occurs upon receipt of
the product by the purchaser, and purchases are accrued at the time title to the
product purchased transfers to the Partnership, which typically occurs upon
receipt of the product by the Partnership. Terminalling and storage revenues are
recognized at the time service is performed. As a regulated interstate pipeline,
revenues for the transportation of crude oil on the All American Pipeline are
recognized based upon Federal Energy Regulatory Commission and the Public
Utilities Commission of the State of California filed tariff rates and the
related transported volumes. Tariff revenue is recognized at the time such
volume is delivered.
Cost of Sales and Operations
Cost of sales consists of the cost of crude oil and field and pipeline
operating expenses. Field and pipeline operating expenses consist primarily of
fuel and power costs, telecommunications, labor costs for pipeline field
personnel, maintenance, utilities, insurance and property taxes.
Cash and Cash Equivalents
Cash and cash equivalents consist of all demand deposits and funds invested
in highly liquid instruments. The Predecessor's cash management program resulted
in book overdraft balances which have been reclassified to current liabilities.
Inventory
Inventory consists of crude oil in pipelines and in storage tanks which is
valued at the lower of cost or market, with cost determined using the average
cost method.
Property and Equipment and Pipeline Linefill
Property and equipment is stated at cost and consists primarily of (i) crude
oil pipelines and pipeline facilities (primarily the All American Pipeline and
SJV Gathering System), (ii) crude oil terminal and storage facilities (primarily
the Cushing Terminal), and (iii) trucking equipment, injection stations and
other. Other property and equipment consists primarily of office furniture and
fixtures and computer equipment and software. Depreciation is computed using the
straight-line method over estimated useful lives as follows: (i) crude oil
pipelines - 40 years, (ii) crude oil pipeline facilities - 25 years, (iii) crude
oil terminal and storage facilities - 30 to 40 years, (iv) trucking equipment,
injection stations and other - 5 to 10 years and (v) other property and
equipment - 5 to 7 years. Acquisitions and improvements are capitalized;
maintenance and repairs are expensed as incurred. Net gains or losses on
property and equipment disposed of is included in interest and other income.
Pipeline linefill is recorded at cost and consists of crude oil linefill
used to pack a pipeline such that when an incremental barrel enters a pipeline
if forces a barrel out at another location. The Partnership owns approximately
5.0 million barrels of crude oil that is used to maintain the All American
Pipeline's linefill requirements. Proceeds from the sale and repurchase of
pipeline linefill are reflected as cash flows from operating activities in the
accompanying consolidated and combined statements of cash flows.
F-8
<PAGE>
The following is a summary of the components of property and equipment:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
------------ -------------
(in thousands)
<S> <C> <C>
Crude oil pipelines $ 268,219 $ -
Crude oil pipeline facilities 70,870 -
Crude oil storage and terminal facilities 34,606 33,491
Trucking equipment, injection stations and other 5,140 2,798
--------- ----------
378,835 36,289
Less accumulated depreciation and amortization (799) (3,903)
--------- ----------
$ 378,036 $ 32,386
========= ==========
</TABLE>
Impairment of Long-Lived Assets
Long-lived assets with recorded values that are not expected to be recovered
through future cash flows are written-down to estimated fair value in accordance
with Statement of Financial Accounting Standards No. 121. Fair value is
generally determined from estimated discounted future net cash flows.
Other Assets
Other assets consist of the following:
December 31,
-----------------------
1998 1997
-------- -------
(in thousands)
Debt issue costs $ 10,171 $ 232
Goodwill and other 1,134 2,096
------- ------
$ 11,305 $ 2,328
Accumulated amortization $ (495) $ (522)
------- ------
$ 10,810 $ 1,806
======= ======
Costs incurred in connection with the issuance of long-term debt are
capitalized and amortized using the straight-line method over the term of the
related debt. The increase in debt issue costs is due to the IPO and the
acquisition of the All American Pipeline and the SJV Gathering System. Goodwill
was recorded as the amount of the purchase price in excess of the fair value of
certain transportation and crude oil gathering assets purchased by the
Predecessor and is amortized using the straight-line method over a period of
twenty years.
Federal Income Taxes
No provision for income taxes related to the operations of the Partnership
is included in the accompanying consolidated financial statements because, as a
partnership, it is not subject to Federal or state income tax and the tax effect
of it's activities accrues to the Unitholders. Net earnings for financial
statement purposes may differ significantly from taxable income reportable to
Unitholders as a result of differences between the tax bases and financial
reporting bases of assets and liabilities and the taxable income allocation
requirements under the Partnership agreement. Individual Unitholders will have
different investment bases depending upon the timing and price of acquisition of
partnership units. Further, each Unitholder's tax accounting, which is partially
dependent upon his/her tax position, may differ from the accounting followed in
the consolidated financial statements. Accordingly, there could be significant
differences between each individual Unitholder's tax basis and his/her share of
the net assets reported in the consolidated financial statements. The
Partnership does not have access to information about each individual
Unitholder's tax attributes in the Partnership, and the aggregate tax bases
cannot be readily determined. Accordingly, management does not believe that, in
the Partnership's circumstances, the aggregate difference would be meaningful
information.
The Predecessor is included in the combined federal income tax return of
Plains Resources. Income taxes are calculated as if the Predecessor had filed a
return on a separate company basis utilizing a federal statutory rate of 35%.
Payables in lieu of deferred taxes represent deferred tax liabilities which are
recognized based on the temporary differences between the tax basis of the
Predecessor's assets and liabilities and the amounts reported in the financial
statements. These amounts were owed to Plains Resources. Current amounts payable
were also owed to Plains Resources and are included in due to affiliates in the
accompanying combined balance sheet of the Predecessor.
F-9
<PAGE>
Hedging
The Partnership and Predecessor utilize various derivative instruments, for
purposes other than trading, to hedge their exposure to price fluctuations on
crude in storage and expected purchases, sales and transportation of crude oil.
The derivative instruments consist primarily of futures and option contracts
traded on the New York Mercantile Exchange ("NYMEX") and crude oil swap
contracts entered into with financial institutions. The Partnership also
utilizes interest rate swaps to manage the interest rate exposure on its long-
term debt.
These derivative instruments qualify for hedge accounting as they reduce
the price risk of the underlying hedged item and are designated as a hedge at
inception. Additionally, the derivatives result in financial impacts which are
inversely correlated to those of the items being hedged. This correlation,
generally in excess of 80%, (a measure of hedge effectiveness) is measured both
at the inception of the hedge and on an ongoing basis. If correlation ceases to
exist, the Partnership would discontinue hedge accounting and apply mark to
market accounting. Gains and losses on the termination of hedging instruments
are deferred and recognized in income as the impact of the hedged item is
recorded.
Unrealized changes in the market value of crude oil hedge contracts are not
generally recognized in the Partnership's and Predecessor's Statements of Income
until the underlying hedged transaction occurs. The financial impacts of crude
oil hedge contracts are included in the Partnership's and Predecessor's
statements of income as a component of revenues. Such financial impacts are
offset by gains or losses realized in the physical market. Cash flows from crude
oil hedging activities are included in operating activities in the accompanying
statements of cash flows. Net deferred gains and losses on futures contracts,
including closed futures contracts, entered into to hedge anticipated crude oil
purchases and sales are included in accounts payable and accrued liabilities in
the accompanying balance sheets. Deferred gains or losses from inventory hedges
are included as part of the inventory costs and recognized when the related
inventory is sold.
Amounts paid or received from interest rate swaps are charged or credited to
interest expense and matched with the cash flows and interest expense of the
long-term debt being hedged, resulting in an adjustment to the effective
interest rate.
Net income per unit
Basic and diluted net income per unit is determined by dividing net income,
after deducting the General Partner's 2% interest, by the weighted average
number of outstanding Common Units and Subordinated Units (a total of 30,088,858
units as of December 31, 1998). For periods prior to November 23, 1998, such
units are equal to the Common and Subordinated Units received by the General
Partner in exchange for assets contributed to the Partnership.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 is effective for
fiscal years beginning after June 15, 1999. SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. For fair value hedge transactions in which the Partnership is
hedging changes in an asset's, liability's, or firm commitment's fair value,
changes in the fair value of the derivative instrument will generally be offset
in the income statement by changes in the hedged item's fair value. For cash
flow hedge transactions, in which the Partnership is hedging the variability of
cash flows related to a variable-rate asset, liability, or a forecasted
transaction, changes in the fair value of the derivative instrument will be
reported in other comprehensive income. The gains and losses on the derivative
instrument that are reported in other comprehensive income will be reclassified
as earnings in the periods in which earnings are affected by the variability of
the cash flows of the hedged item. The Partnership is required to adopt this
statement beginning in 2000. The Partnership has not yet determined the affect
that the adoption of SFAS 133 will have on its financial position or results of
operations
In November 1998, the Emerging Issues Task Force ("EITF") released Issue No.
98-10, "Accounting for Energy Trading and Risk Management Activities". EITF
98-10 deals with entities that enter into derivatives and other third-party
contracts for the purchase and sale of a commodity in which they normally do
business (for example, crude oil and natural gas). The EITF reached a consensus
that energy trading contracts should be measured at fair value determined as of
the balance sheet date with the gains and losses included in earnings and
separately disclosed in the financial statements or footnotes thereto. The EITF
acknowledged that determining whether or when an entity is involved in energy
trading activities is a matter of judgment that depends on the relevant facts
and circumstances. As such, certain factors or indicators have been identified
by the EITF which should be considered in evaluating whether an operation's
energy contracts are entered into for trading purposes. EITF 98-10 is
F-10
<PAGE>
required to be applied to financial statements issued by the Partnership
beginning in 1999. The adoption of this consensus is not expected to have a
material impact on the Partnership's results of operations or financial
position.
Note 2--Acquisition
On July 30, 1998, the Predecessor acquired all of the outstanding capital
stock of the All American Pipeline Company, Celeron Gathering Corporation and
Celeron Trading & Transportation Company (collectively the "Celeron
Companies") from Wingfoot, a wholly owned subsidiary of Goodyear, for
approximately $400 million, including transaction costs. The principal assets of
the entities acquired include the All American Pipeline and the SJV Gathering
System, as well as other assets related to such operations. The acquisition was
accounted for utilizing the purchase method of accounting with the assets,
liabilities and results of operations included in the combined financial
statements of the Predecessor effective July 30, 1998. The following unaudited
pro forma information is presented to show the pro forma revenues and net income
had the acquisition been consummated on January 1, 1997.
January 1, Year
1998 to Ended
November 22, December 31,
1998 1997
----------- -----------
(in thousands)
Revenues $ 1,390,893 $ 1,744,840
=========== ===========
Net income (loss) $ 14,448 $ (17,039)
=========== ===========
Basic and diluted net income (loss)
per limited partner unit $ 0.83 $ (0.98)
=========== ===========
The pro forma net loss for the year ended December 31, 1997, includes a non-
cash impairment charge of $64.2 million related to the writedown of pipeline
assets and linefill by Wingfoot in connection with the sale of the Celeron
Companies by Goodyear to the Predecessor. Based on the Predecessor's purchase
price allocation to property and equipment and pipeline linefill, an impairment
charge would not have been required had the Predecessor actually acquired the
Celeron Companies effective January 1, 1997. Excluding this impairment charge,
the Predecessor's pro forma net income for 1997 would have been $23.4 million
($1.35 per basic and diluted limited partner unit).
The acquisition was accounted for utilizing the purchase method of
accounting and the purchase price was allocated in accordance with Accounting
Principles Board Opinion No. 16 as follows (in thousands):
Crude oil pipeline, gathering and terminal assets $ 392,528
Other assets (debt issue costs) 6,138
Net working capital items (excluding cash received
of $7,481) 1,498
--------
$ 400,164
========
Financing for the acquisition was provided through (i) a $325 million, limited
recourse bank facility and (ii) an approximate $114 million capital contribution
by Plains Resources. Actual borrowings at closing were $300 million.
Note 3 - Credit Facilities
Bank Credit Agreement. The Partnership has a $225 million Bank Credit
Agreement which consists of the $175 million Term Loan Facility and the $50
million Revolving Credit Facility. The $50 million Revolving Credit Facility is
used for capital improvements and working capital and general business purposes
and contains a $10 million sublimit for letters of credit issued for general
corporate purposes. The Bank Credit Agreement is collateralized by a lien on
substantially all of the assets of the Partnership.
The Term Loan Facility bears interest at the Partnership's option at either
(i) the Base Rate, as defined, or (ii) reserve-adjusted LIBOR plus an applicable
margin. The Partnership has two ten year interest rate swaps (subject to
cancellation by the counterparty after seven years) aggregating $175 million
notional principal amount which fix the LIBOR portion of the interest rate (not
including the applicable margin) at a weighted average rate of approximately
5.24%. Borrowings under the Revolving Credit Facility bear interest at the
Partnership's option at either (i) the Base Rate, as defined, or (ii) reserve-
adjusted LIBOR plus an applicable margin. The Partnership incurs a commitment
fee on the unused portion of the Revolving Credit Facility and, with respect to
each issued letter of credit, an issuance fee.
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<PAGE>
At December 31, 1998, the Partnership had $175 million outstanding under the
Term Loan Facility, which amount represents indebtedness assumed from the
General Partner. The Term Loan Facility matures in seven years, and no principal
is scheduled for payment prior to maturity. The Term Loan Facility may be
prepaid at any time without penalty. The Revolving Credit Facility expires in
two years. All borrowings for working capital purposes outstanding under the
Revolving Credit Facility must be reduced to no more than $8 million for at
least 15 consecutive days during each fiscal year. At December 31, 1998, there
are no amounts outstanding under the Revolving Credit Facility.
Letter of Credit Facility. In connection with the IPO, the Partnership
entered into a $175 million letter of credit and borrowing facility with
BankBoston, N.A. ("BankBoston"), ING (U.S.) Capital Corporation ("ING
Baring") and certain other lenders (the "Letter of Credit Facility"), which
replaced the Predecessor's similar facility. The purpose of the Letter of Credit
Facility is to provide (i) standby letters of credit to support the purchase and
exchange of crude oil for resale and (ii) borrowings to finance crude oil
inventory which has been hedged against future price risk or has been designated
as working inventory. The Letter of Credit Facility is collateralized by a lien
on substantially all of the assets of the Partnership. Aggregate availability
under the Letter of Credit Facility for direct borrowings and letters of credit
is limited to a borrowing base which is determined monthly based on certain
current assets and current liabilities of the Partnership, primarily crude oil
inventory and accounts receivable and accounts payable related to the purchase
and sale of crude oil. At December 31, 1998, the borrowing base under the Letter
of Credit Facility was approximately $175 million.
The Letter of Credit Facility has a $40 million sublimit for borrowings to
finance crude oil purchased in connection with operations at the Partnership's
crude oil terminal and storage facilities. All purchases of crude oil inventory
financed are required to be hedged against future price risk on terms acceptable
to the lenders. At December 31, 1998, approximately $9.8 million was outstanding
under the sublimit. The interest rate in effect at December 31, 1998 was 6.8%.
At December 31, 1997, approximately $18 million in borrowings was outstanding
under a similar sublimit under the Predecessor's credit facility.
Letters of credit under the Letter of Credit Facility are generally issued for
up to 70 day periods. Borrowings bear interest at the Partnership's option at
either (i) the Base Rate (as defined) or (ii) reserve-adjusted LIBOR plus the
applicable margin. The Partnership incurs a commitment fee on the unused portion
of the borrowing sublimit under the Letter of Credit Facility and an issuance
fee for each letter of credit issued. The Letter of Credit Facility expires July
31, 2001.
At December 31, 1998 and 1997, there were outstanding letters of credit of
approximately $62 million and $38 million, respectively, issued under the Letter
of Credit Facility and the Predecessor's letter of credit facility,
respectively. To date, no amounts have been drawn on such letters of credit
issued by the Partnership or the Predecessor.
Both the Letter of Credit Facility and the Bank Credit Agreement contain a
prohibition on distributions on, or purchases or redemptions of, Units if any
Default or Event of Default (as defined) is continuing. In addition, both
facilities contain various covenants limiting the ability of the Partnership to
(i) incur indebtedness, (ii) grant certain liens, (iii) sell assets in excess of
certain limitations, (iv) engage in transactions with affiliates, (v) make
investments, (vi) enter into hedging contracts and (vii) enter into a merger,
consolidation or sale of its assets. In addition, the terms of the Letter of
Credit Facility and the Bank Credit Agreement require the Partnership to
maintain (i) a Current Ratio (as defined) of at least 1.0 to 1.0; (ii) a Debt
Coverage Ratio (as defined) which is not greater than 5.0 to 1.0; (iii) an
Interest Coverage Ratio (as defined) which is not less than 3.0 to 1.0; (iv) a
Fixed Charge Coverage Ratio (as defined) which is not less than 1.25 to 1.0; and
(v) a Debt to Capital Ratio (as defined) of not greater than .60 to 1.0. In both
the Letter of Credit Facility and the Bank Credit Agreement, a Change in Control
(as defined) of Plains Resources constitutes an Event of Default.
Note 4 - Partnership Capital and Distributions
Partner's capital consists of 20,059,239 Common Units representing a
65.3% limited partner interest, (a subsidiary of the General Partner owns
6,974,239 of such Common Units), 10,029,619 Subordinated Units owned by a
subsidiary of the General Partner representing a 32.7% limited partner interest
and a 2% general partner interest. In the aggregate, the General Partner's
interests represent an effective 57.4% ownership of the Partnership's equity.
The Partnership will distribute 100% of its Available Cash within 45 days
after the end of each quarter to Unitholders of record and to the General
Partner. Available Cash is generally defined as all cash and cash equivalents of
the Partnership on hand at the end of each quarter less reserves established by
the General Partner for future requirements. Distributions of Available Cash to
holders of Subordinated Units are subject to the prior rights of holders of
Common Units to receive the minimum quarterly distribution ("MQD") for each
quarter during the Subordinated Period (which will not end earlier than December
31, 2003) and to receive any arrearages in the distribution of the MQD on the
Common Units for the prior quarters during the Subordinated Period. The MQD is
$0.45 per unit ($1.80 per unit on an annual basis). Upon expiration of the
Subordination Period, all Subordinated Units will be converted on a one-for-one
basis into Common Units and will participate pro rata with all other
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<PAGE>
Common Units in future distributions of Available Cash. Under certain
circumstances, up to 50% of the Subordinated Units may convert into Common Units
prior to the expiration of the Subordination Period. Common Units will not
accrue arrearages with respect to distributions for any quarter after the
Subordination Period and Subordinated Units will not accrue any arrearages with
respect to distributions for any quarter.
If quarterly distributions of Available Cash exceed the MQD or the Target
Distribution Levels (as defined), the General Partner will receive distributions
which are generally equal to 15%, then 25% and then 50% of the distributions of
Available Cash that exceed the MQD or Target Distribution Level. The Target
Distribution Levels are based on the amounts of Available Cash from the
Partnership's Operating Surplus (as defined) distributed with respect to a given
quarter that exceed distributions made with respect to the MQD and Common Unit
arrearages, if any.
On February 12, 1999, the Partnership paid a cash distribution of $0.193
per unit on its outstanding Common Units and Subordinated Units. The $5.8
million distribution was paid to Unitholders of record at the close of business
on January 29, 1999. A distribution of approximately $118,000 was paid to the
General Partner. The distribution represented the MQD prorated for the 39-day
period from November 23, 1998, the closing of the IPO, through December 31,
1998.
Note 5 -- Major Customers and Concentration of Credit Risk
During the period from January 1, 1998 to November 22, 1998, Sempra Energy
Trading Corporation ("Sempra") and Koch Oil Company ("Koch") accounted for 31%
and 19%, respectively of the Plains Midstream Subsidiaries' total sales. During
the period from November 23, 1998 to December 31, 1998, Sempra and Exxon Company
USA accounted for 20% and 11%, respectively of the Partnership's sales. For 1997
and 1996, customers accounting for more than 10% of total sales are as follows:
1997 - Koch - 30%, Sempra - 12% and Basis Petroleum Inc. ("Basis"), formerly
Phibro Energy U.S.A., Inc. - 11%; 1996 - Koch - 16% and Basis - 11%. No other
customer accounted for as much as 10% of total sales during 1998, 1997 and 1996.
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of trade receivables. The
Partnership's accounts receivable are primarily from purchasers and shippers of
crude oil. This industry concentration has the potential to impact the
Partnership's overall exposure to credit risk, either positively or negatively,
in that the customers may be similarly affected by changes in economic, industry
or other conditions. The Partnership generally requires letters of credit for
receivables from customers which are not considered investment grade, unless the
credit risk can otherwise be reduced.
Note 6--Related Party Transactions
The Partnership does not directly employ any persons to manage or operate its
business. These functions are provided by employees of the General Partner and
Plains Resources. The General Partner does not receive a management fee or other
compensation in connection with its management of the Partnership. The
Partnership reimburses the General Partner and Plains Resources for all direct
and indirect costs of services provided, including the costs of employee,
officer and director compensation and benefits properly allocable to the
Partnership, and all other expenses necessary or appropriate to the conduct of
the business of, and allocable to the Partnership. The Partnership Agreement
provides that the General Partner will determine the expenses that are allocable
to the Partnership in any reasonable manner determined by the General Partner in
its sole discretion. Total costs reimbursed to the General Partner and Plains
Resources by the Partnership were approximately $0.5 million for the period from
November 23, 1998 to December 31, 1998. Such costs include, (i) allocated
personnel costs (such as salaries and employee benefits) of the personnel
providing such services, (ii) rent on office space allocated to the General
Partner in Plains Resources' offices in Houston, Texas and (iii) out-of-pocket
expenses related to the provision of such services.
In connection with the IPO, the Partnership and Plains Resources entered into
the Crude Oil Marketing Agreement which provides for the marketing by Plains
Marketing, L.P. of Plains Resources crude oil production for a fee of $0.20 per
barrel. The Partnership paid Plains Resources approximately $4.1 million for the
purchase of crude oil under such agreement for the period from November 23, 1998
to December 31, 1998, and recognized approximately $120,000 of profit for such
period.
The Predecessor marketed certain crude oil production of Plains Resources, its
subsidiaries and its royalty owners. The Predecessor paid approximately $83.4
million, $101.2 million and $100.5 million for the purchase of these products
for the period from January 1, 1998 to November 22, 1998, and for the years
ended December 31, 1997 and 1996, respectively. In management's opinion, such
purchases were made at prevailing market rates. The Predecessor did not
recognize a profit on the sale of the barrels purchased from Plains Resources.
Prior to the IPO, the Plains Midstream Subsidiaries were guarantors of
Plains Resources' $225 million revolving credit facility and $200 million 10
1/4% Senior Subordinated Notes due 2006. The agreements under which such debt
was issued contain
F-13
<PAGE>
covenants which, among other things, restricted the Plains Midstream
Subsidiaries' ability to make certain loans and investments and restricted
additional borrowings by the Plains Midstream Subsidiaries.
Plains Resources allocated certain direct and indirect general and
administrative expenses to the Predecessor during the period from January 1,
1998 to November 22, 1998, and for the years ended December 31, 1997 and 1996.
Indirect costs were allocated based on the number of employees. The types of
indirect expenses allocated to the Predecessor during these periods were office
rent, utilities, telephone services, data processing services, office supplies
and equipment maintenance. Direct expenses allocated by Plains Resources were
primarily salaries and benefits of employees engaged in the business activities
of the Plains Midstream Subsidiaries. Management believes that the method used
to allocate expenses is reasonable.
Prior to the IPO, the Plains Midstream Subsidiaries funded the acquisition of
certain asset and inventory purchases through borrowings from Plains Resources.
In addition, the Plains Midstream Subsidiaries participated in a cash management
arrangement with Plains Resources covering the funding of daily cash
requirements and the investing of excess cash. Amounts due to Plains Resources
under the arrangements bore interest at a rate of 10 1/4%. The balance due to
Plains Resources as of December 31, 1997, was approximately $26.7 million,
including $0.3 million of cumulative federal and state income taxes payable
Amounts due to other subsidiaries of Plains Resources as of December 31, 1997
aggregated approximately $10.8 million.
Note 7 -- Financial Instruments
Derivatives
The Partnership utilizes derivative financial instruments, as defined in SFAS
No. 119, "Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments," to hedge its exposure to price volatility on crude oil
and does not use such instruments for speculative trading purposes. These
arrangements expose the Partnership to credit risk (as to counterparties) and to
risk of adverse price movements in certain cases where the Partnership's
purchases are less than expected. In the event of non-performance of a
counterparty, the Partnership might be forced to acquire alternative hedging
arrangements or be required to honor the underlying commitment at then-current
market prices. In order to minimize credit risk relating the non-performance of
a counterparty, the Partnership enters into such contracts with counterparties
that are considered investment grade, periodically reviews the financial
condition of such counterparties and continually monitors the effectiveness of
derivative financial instruments in achieving the Partnership's objectives. In
view of the Partnership's criteria for selecting counterparties, its process for
monitoring the financial strength of these counterparties and its experience to
date in successfully completing these transactions, the Partnership believes
that the risk of incurring significant financial statement loss due to the non-
performance of counterparties to these transactions is minimal.
At December 31, 1998, the Partnership's hedging activities included crude oil
futures contracts maturing in 1999, covering approximately 3.3 million barrels
of crude oil. Since such contracts are designated as hedges and correlate to
price movements of crude oil, any gains or losses resulting from market changes
will be largely offset by losses or gains on the Partnerships hedged inventory
or anticipated purchases of crude oil. Net deferred losses from the
Partnership's hedging activities were approximately $1.8 million at December 31,
1998.
Fair Value of Financial Instruments
In accordance with the requirements of SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments," the carrying values of items comprising
current assets and current liabilities approximate fair value due to the short-
term maturities of these instruments. Crude oil futures contracts permit
settlement by delivery of the crude oil and, therefore, are not financial
instruments, as defined. The carrying value of bank debt approximates fair value
as interest rates are variable, based on prevailing market rates. The fair value
of crude oil and interest rate swap agreements are based on current termination
values or quoted market prices of comparable contracts.
F-14
<PAGE>
The Partnership has two 10-year interest rate swaps (subject to cancellation
by the counterparty after seven years) aggregating a notional principal amount
of $175 million which fix the LIBOR portion of the interest rate (not including
the applicable margin) on the Term Loan Facility at a weighted average rate of
approximately 5.24%. The carrying amounts and fair values of the Partnership's
financial instruments are as follows:
December 31,
--------------------------
1998
--------------------------
Carrying Fair
Amount Value
------------ ------------
(in thousands)
Unrealized loss or interest rate swaps $ - $ (2,164)
Note 8 -- Commitments and Contingencies
The Partnership leases office space under leases accounted for as operating
leases. Rental expense amounted to $0.7 million and $0.1 million for the period
from January 1, 1998 to November 22, 1998, and the period from November 23, 1998
to December 31, 1998, respectively. Minimum rental payments under operating
leases are $3.0 million for 1999; $1.4 million annually for 2000 through 2002;
$1.3 million for 2003 and thereafter $2.9 million.
The Partnership incurred costs associated with leased land, rights-of-way,
permits and regulatory fees of $0.2 million and $0.1 million for the period from
January 1, 1998 to November 22, 1998, and the period from November 23, 1998 to
December 31, 1998, respectively. At December 31, 1998, minimum future payments,
net of sublease income, associated with these contracts are approximately $0.3
million for the following year. Generally these contracts extend beyond one year
but can be canceled at any time should they not be required for operations.
In order to receive electrical power service at certain remote locations,
the Partnership has entered into facilities contracts with several utility
companies. These facilities charges are calculated periodically based upon,
among other factors, actual electricity energy used. Minimum future payments for
these contracts at December 31, 1998, are approximately $0.8 million annually
for each of the next five years.
During 1997, the All American Pipeline experienced a leak in a segment of its
pipeline in California which resulted in an estimated 12,000 barrels of crude
oil being released into the soil. Immediate action was taken to repair the
pipeline leak, contain the spill and to recover the released crude oil. The
Partnership has submitted a closure plan to the Regional Water Quality Board
("RWQB"). At the request of the RWQB, groundwater monitoring wells have been
installed from which water samples will be analyzed semi-annually. No
hydrocarbon contamination was detected in initial analyses taken in January
1999. The RWQB approval of the Partnership's closure plan is not expected until
subsequent semi-annual analyses have been performed. If the Partnership's
closure plan is disapproved, a government mandated remediation of the spill
could require significant expenditures, currently estimated to be approximately
$350,000, provided however, no assurance can be given that the actual cost
thereof will not exceed such estimate. The Partnership does not believe the
ultimate resolution of this issue will have a material adverse affect on the
Partnership's consolidated financial position, results of operations or cash
flows.
Prior to being acquired by the Predecessor in 1996, the Partnership's
terminal at Ingleside Texas (the "Ingleside Terminal") experienced releases of
refined petroleum products into the soil and groundwater underlying the site due
to activities on the property. The Partnership has proposed a voluntary state-
administered remediation of the contamination on the property to determine
whether the contamination extends outside the property boundaries. If the
Partnership's plan is disapproved, a government mandated remediation of the
spill could require more significant expenditures, currently estimated to
approximate $250,000, although no assurance can be given that the actual cost
could not exceed such estimate. In addition, a portion of any such costs may be
reimbursed to the Partnership from Plains Resources. The Partnership does not
believe the ultimate resolution of this issue will have a material adverse
affect on the Partnership's consolidated financial position, results of
operations or cash flows.
The Partnership may experience future releases of crude oil into the
environment from its pipeline and storage operations, or discover releases that
were previously unidentified. While the Partnership maintains an extensive
inspection program designed to prevent and, as applicable, to detect and address
such releases promptly, damages and liabilities incurred due to any future
environmental releases from the All American Pipeline, the SJV Gathering System,
the Cushing Terminal, the Ingleside Terminal or other Partnership assets may
substantially affect the Partnership's business.
In March 1999, the Partnership signed a definitive agreement to acquire
Scurlock Permian LLC and certain other pipeline assets (see Note 14).
F-15
<PAGE>
The Partnership, in the ordinary course of business, is a defendant in
various legal proceedings in which its exposure, individually and in the
aggregate, is not considered material to the accompanying financial statements.
At December 31, 1998, the Partnership had approximately $0.9 million accrued for
its various environmental and litigation contingencies.
Note 9 -- Supplemental Disclosures of Cash Flow Information
In connection with the formation of the Partnership, certain investing and
financial activities occurred. Effective November 23, 1998, substantially all of
the assets and liabilities of the Predecessor were conveyed at historical cost
to the Partnership. Net assets assumed by the Operating Partnership are as
follows (in thousands):
Cash and cash equivalent $ 224
Accounts receivable 109,311
Inventory 22,906
Prepaid expenses and other current assets 1,059
Property and equipment, net 375,948
Pipeline linefill 48,264
Intangible assets, net 11,001
--------
Total assets conveyed 568,713
--------
Accounts payable and other current liabilities 102,705
Due to affiliates 8,942
Bank debt 183,600
--------
Total liabilities assumed 295,247
--------
Net assets assumed by the Partnership $273,466
========
Interest paid totaled $0.1 million for the period from November 23, 1998 to
December 31, 1998, and $8.5 million, $4.5 million, and $3.6 million for the
period from January 1, 1998 to November 22, 1998 and the years ended
December 31, 1997 and 1996, respectively.
Note 10 -- Long-Term Incentive Plans
The General Partner adopted the Plains All American Inc. 1998 Long-Term
Incentive Plan (the "Long-Term Incentive Plan") for employees and directors of
the General Partner and its affiliates who perform services for the Partnership.
The Long-Term Incentive Plan consists of two components, a restricted unit plan
(the "Restricted Unit Plan") and a unit option plan (the "Unit Option
Plan"). The Long-Term Incentive Plan currently permits the grant of Restricted
Units and Unit Options covering an aggregate of 975,000 Common Units. The plan
is administered by the Compensation Committee of the General Partner's Board of
Directors.
Restricted Unit Plan. A Restricted Unit is a "phantom" unit that entitles
the grantee to receive a Common Unit upon the vesting of the phantom unit.
Approximately 500,000 Restricted Units were granted upon consummation of the IPO
to employees of the General Partner at a weighted average grant date fair value
of $20.00 per Unit. The Compensation Committee may, in the future, determine to
make additional grants under such plan to employees and directors containing
such terms as the Compensation Committee shall determine. In general, Restricted
Units granted to employees during the Subordination Period will vest only upon,
and in the same proportions as, the conversion of the Subordinated Units to
Common Units. Grants made to non-employee directors of the General Partner will
be eligible to vest prior to termination of the Subordination Period. There have
been no grants to nonemployee directors as of December 31, 1998.
If a grantee terminates employment or membership on the Board of Directors for
any reason, the grantee's Restricted Units will be automatically forfeited
unless, and to the extent, the Compensation Committee provides otherwise. Common
Units to be delivered upon the "vesting" of rights may be Common Units
acquired by the General Partner in the open market, Common Units already owned
by the General Partner, Common Units acquired by the General Partner directly
from the Partnership or any other person, or any combination of the foregoing.
The General Partner will be entitled to reimbursement by the Partnership for the
cost incurred in acquiring such Common Units. If the Partnership issues new
Common Units upon vesting of the Restricted Units, the total number of Common
Units outstanding will increase. Following the Subordination Period, the
Compensation Committee, in its discretion, may grant tandem distribution
equivalent rights with respect to Restricted Units.
The issuance of the Common units pursuant to the Restricted Unit Plan is
intended to serve as a means of incentive compensation for performance and not
primarily as an opportunity to participate in the equity appreciation in respect
of the Common Units. Therefore, no consideration will be payable by the plan
participants upon receipt of the Common Units, and the Partnership will receive
no remuneration for such Units.
F-16
<PAGE>
Unit Option Plan. The Unit Option Plan currently permits the grant of options
("Unit Options") covering Common Units. No grants were initially made under
the Unit Option Plan. The Compensation Committee may, in the future, determine
to make grants under such plan to employees and directors containing such terms
as the Committee shall determine.
Unit Options will have an exercise price equal to the fair market value of the
Units on the date of grant. Unit Options granted during the Subordination
Period will become exercisable automatically upon, and in the same proportions
as, the conversion of the Subordinated Units to Common Units, unless a later
vesting date is provided.
Upon exercise of a Unit Option, the General Partner will acquire Common Units
in the open market at a price equal to the then-prevailing price on the
principal national securities exchange upon which the Common Units are then
traded, or directly from the partnership or any other person, or use Common
Units already owned by the General Partner, or any combination of the foregoing.
The General Partner will be entitled to reimbursement by the partnership for the
difference between the cost incurred by the General Partner in acquiring such
Common Units and the proceeds received by the General Partner from an optionee
at the time of exercise. Thus, the cost of the Unit Options will be borne by
the Partnership. If the Partnership issues new Common Units upon exercise of the
Unit Options, the total number of Common Units outstanding will increase, and
the General Partner will remit to the Partnership the proceeds it received from
the optionee upon exercise of the Unit Option to the Partnership.
The Unit Option Plan has been designed to furnish additional compensation to
employees and directors and to align their economic interests with those of
Common Unitholders.
Transaction Grant Agreements. In addition to the grants made under the
Restricted Unit Plan described above, the General Partner agreed to transfer
approximately 325,000 of its affiliates' Common Units at a weighted average
grant fair value of $20.00 per Unit to certain key employees of the General
Partner (the "Transaction Grants"). Generally, approximately 72,000 of such
Common Units will vest in each of the years ending December 31, 1999, 2000 and
2001 if the Operating Surplus generated in such year equals or exceeds the
amount necessary to pay the MQD on all outstanding Common Units and the related
distribution on the general partner interest. If a tranche of Common Units does
not vest in a particular year, such Common Units will vest at the time the
Common Unit Arrearages for such year has been paid. In addition, approximately
36,000 of such Common Units will vest in each of the years ending December 31,
1999, 2000 and 2001 if the Operating Surplus generated in such year exceeds the
amount necessary to pay the MQD on all outstanding Common Units and Subordinated
Units and the related distribution on the general partner interest. Any Common
Units remaining unvested shall vest upon, and in the same proportion as, the
conversion of Subordinated Units.
The Partnership will recognize compensation expense in the future for the
Unit Options and Restricted Units described above when vesting becomes probable.
In addition, although, the Partnership is not required to reimburse the General
Partner for the Transaction Grants, accounting pronouncements will require the
Partnership to record compensation expense for such Units and a corresponding
capital contribution from the General Partner when vesting becomes probable.
Note 11 -- Operating Segments
The Partnership's operations consist of two operating segments: (1)
Pipeline Operations - engages in the interstate and intrastate crude oil
pipeline transportation and related gathering and marketing activities; (2)
Marketing, Gathering, Terminalling and Storage Operations - engages in crude oil
terminalling, storage, gathering and marketing activities other than related to
Pipeline Operations. Prior to the July 1998 acquisition of the All American
Pipeline and SJV Gathering System, the Predecessor had only marketing,
gathering, terminalling and storage operations.
The accounting policies of the segments are the same as those
described in Note 1. The Partnership evaluates segment performance based on
gross margin, gross profit and income before income taxes and extraordinary
items.
F-17
<PAGE>
The following summarizes segment revenues, gross margin, gross profit and
income before income taxes and extraordinary items.
<TABLE>
<CAPTION>
Marketing
Gathering,
Terminalling
(In thousands) Pipeline & Storage Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
January 1, 1998 to November 22, 1998
(Predecessor)
Revenues:
External Customers(a) $221,305 $755,496 $ 976,801
Intersegment(b) 21,166 2,391 23,557
Other 603 (31) 572
-------- -------- ----------
Total revenues of reportable
segments $243,074 $757,856 $1,000,930
======== ======== ==========
Segment gross margin(c) $ 13,222 $ 17,759 $ 30,981
Segment gross profit(d) $ 12,394 $ 14,061 $ 26,455
Income before income taxes and
extraordinary income $ 2,152 $ 9,436 $ 11,588
Interest expense $ 7,787 $ 3,473 $ 11,260
Depreciation and amortization $ 3,058 $ 1,121 $ 4,179
Provision in lieu of income taxes $ 4,563 $ -- $ 4,563
Capital Expenditures $393,379 $ 4,677 $ 398,056
- --------------------------------------------------------------------------------
November 23, 1998 to December 31, 1998
Revenues:
External Customers(a) $ 56,118 $122,785 $ 178,903
Intersegment(b) 2,029 429 2,458
Other -- 12 12
-------- -------- ----------
Total revenues of reportable
segments $ 58,147 $123,226 $ 181,373
======== ======== ==========
Segment gross margin(c) $ 3,546 $ 3,953 $ 7,499
Segment gross profit(d) $ 3,329 $ 3,399 $ 6,728
Income before income taxes and
extraordinary income $ 1,035 $ 3,142 $ 4,177
Interest expense $ 1,321 $ 50 $ 1,371
Depreciation and amortization $ 973 $ 219 $ 1,192
Capital Expenditures $ 352 $ 2,535 $ 2,887
Total Assets $472,144 $138,064 $ 610,208
- --------------------------------------------------------------------------------
Combined Total For the Year Ended December 31, 1998
Revenues:
External Customers(a) $277,423 $878,281 $1,155,704
Intersegment(b) 23,195 2,820 26,015
Other 603 (19) 584
-------- -------- ----------
Total revenues of reportable
segments $301,221 $881,082 $1,182,303
======== ======== ==========
Segment gross margin(c) $ 16,768 $ 21,712 $ 38,480
Segment gross profit(d) $ 15,723 $ 17,460 $ 33,183
Income before income taxes and
extraordinary income $ 3,187 $ 12,578 $ 15,765
Interest expense $ 9,108 $ 3,523 $ 12,631
Depreciation and amortization $ 4,031 $ 1,340 $ 5,371
Provision in lieu of income taxes $ 4,563 $ -- $ 4,563
Capital Expenditures $393,731 $ 7,212 $ 400,943
Total Assets $472,144 $138,064 $ 610,208
- --------------------------------------------------------------------------------
</TABLE>
(a) Differences between total segment revenues and consolidated revenues relate
to intersegment revenues.
(b) Intersegment sales and transfers were conducted on an arm's-length basis.
(c) Gross margin is calculated as revenues less cost of sales and operations.
(d) Gross profit is calculated as revenues less cost of sales and operations
and general and administrative expenses.
F-18
<PAGE>
Note 12 -- Income Taxes
As discussed in Note 1, the Predecessor's results are included in Plains
Resources' combined federal income tax return. The amounts presented below were
calculated as if the Predecessor filed a separate tax return.
Provision in lieu of income taxes of the Predecessor consists of the
following components:
January 1, Year Ended
1998 To December 31,
November 22, -----------------------------
1998 1997 1996
------------ -------------- ------------
(in thousands)
Federal
Current $ 455 $ 38 $ 1
Deferred 3,390 1,131 706
State
Current - 99 19
Deferred 718 - -
------- ------- ------
Total $ 4,563 $ 1,268 $ 726
======= ======= ======
Actual provision in lieu of income taxes differs from provision in lieu of
income taxes computed by applying the U.S. federal statutory corporate tax rate
of 35% to income before such provision as follows:
January 1, Year Ended
1998 To December 31,
November 22, -----------------------------
1998 1997 1996
------------ -------------- ------------
(in thousands)
Provision at statutory rate $ 4,056 $ 1,169 $ 682
State income tax, net of
benefit for federal deduction 467 65 12
Permanent differences 40 34 32
-------- -------- --------
Total $ 4,563 $ 1,268 $ 726
======== ======== ========
The Plains Midstream Subsidiaries' payable in lieu of deferred taxes at
December 31, 1997 results from differences in depreciation methods used for
financial purposes and for tax purposes.
Note 13 -- Combined Equity
The following is a reconciliation of the combined equity balance of the Plains
Midstream Subsidiaries (in thousands):
Balance at December 31, 1995 $ 2,613
Net income for the year 1,222
-------
Balance at December 31, 1996 3,835
Net income for the year 2,140
-------
Balance at December 31, 1997 5,975
Capital contribution in connection with the
acquisition of the Celeron Companies 113,700
Dividend to Plains Resources (3,557)
Net income for the period from
January 1, 1998 to November 22, 1998 7,025
-------
$123,143
=======
Note 14 -- Subsequent Events
On March 17, 1999, the Partnership signed a definitive agreement with
Marathon Ashland Petroleum LLC to acquire Scurlock Permian LLC and certain other
pipeline assets. The cash purchase price for the acquisition is approximately
$138 million, plus associated closing and financing costs. The purchase price is
subject to adjustment at closing for working capital on April 1, 1999, the
effective date of the acquisition. Closing of the transaction is subject to
regulatory review and approval,
F-19
<PAGE>
consents from third parties, and customary due diligence. Subject to
satisfaction of the foregoing conditions, the transaction is expected to close
in the second quarter of 1999. The Partnership has received a financing
commitment from one of its existing lenders, which in addition to other
financial resources currently available to the Partnership, will provide the
funds necessary to complete the transaction.
Scurlock Permian LLC, a wholly owned subsidiary of Marathon Ashland
Petroleum LLC, is engaged in crude oil transportation, trading and marketing,
operating in 14 states with more than 2,400 miles of active pipelines, numerous
storage terminals and a fleet of more than 225 trucks. Its largest asset is an
800-mile pipeline and gathering system located in the Spraberry Trend in West
Texas that extends into Andrews, Glasscock, Howard, Martin, Midland, Regan,
Upton and Irion Counties, Texas. The assets to be acquired also include
approximately one million barrels of crude oil used for working inventory. The
definitive agreement provides that if either party fails to perform its
obligations thereunder through no fault of the other party, such defaulting
party shall pay the nondefaulting party $7.5 million as liquidated damages.
In March 1999, the Partnership adopted a plan to reduce staff in its
pipeline operations and to relocate certain functions. The Partnership estimates
that it will incur a charge to first quarter earnings of approximately $400,000
in connection with such plan.
F-20
<PAGE>
EXHIBIT 3.1
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PLAINS ALL AMERICAN PIPELINE, L.P.
Plains All American Pipeline, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions 1
Section 1.2 Construction 21
ARTICLE II
ORGANIZATION
Section 2.1 Formation 22
Section 2.2 Name 22
Section 2.3 Registered Office; Registered Agent; Principal Office;
Other Offices 22
Section 2.4 Purpose and Business 23
Section 2.5 Powers 23
Section 2.6 Power of Attorney 23
Section 2.7 Term 25
Section 2.8 Title to Partnership Assets 25
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability 26
Section 3.2 Management of Business 26
Section 3.3 Outside Activities of the Limited Partners 26
Section 3.4 Rights of Limited Partners 26
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
Section 4.1 Certificates 27
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates 28
Section 4.3 Record Holders 29
Section 4.4 Transfer Generally 29
Section 4.5 Registration and Transfer of Limited Partner Interests 29
Section 4.6 Transfer of the General Partner's General Partner Interest 31
Section 4.7 Transfer of Incentive Distribution Rights 31
Section 4.8 Restrictions on Transfers 32
Section 4.9 Citizenship Certificates; Non-citizen Assignees 32
Section 4.10 Redemption of Partnership Interests of Non-citizen
Assignees 33
Plains All American Pipeline, L.P.
-i-
<PAGE>
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Organizational Contributions 35
Section 5.2 Contributions by the General Partner and its Affiliates 35
Section 5.3 Contributions by Initial Limited Partners and
Reimbursement of the General Partner 36
Section 5.4 Interest and Withdrawal 36
Section 5.5 Capital Accounts 37
Section 5.6 Issuances of Additional Partnership Securities 40
Section 5.7 Limitations on Issuance of Additional Partnership
Securities 41
Section 5.8 Conversion of Subordinated Units 42
Section 5.9 Limited Preemptive Right 44
Section 5.10 Splits and Combination 44
Section 5.11 Fully Paid and Non-Assessable Nature of Limited Partner
Interests 45
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes 45
Section 6.2 Allocations for Tax Purposes 53
Section 6.3 Requirement and Characterization of Distributions;
Distributions to Record Holders 55
Section 6.4 Distributions of Available Cash from Operating Surplus 56
Section 6.5 Distributions of Available Cash from Capital Surplus 58
Section 6.6 Adjustment of Minimum Quarterly Distribution and
Target Distribution Levels 58
Section 6.7 Special Provisions Relating to the Holders of Subordinated
Units 59
Section 6.8 Special Provisions Relating to the Holders of Incentive
Distribution Rights 59
Section 6.9 Entity-Level Taxation 59
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management 60
Section 7.2 Certificate of Limited Partnership 62
Section 7.3 Restrictions on General Partner's Authority 63
Section 7.4 Reimbursement of the General Partner 63
Section 7.5 Outside Activities 64
Section 7.6 Loans from the General Partner; Loans or Contributions
from the Partnership; Contracts with Affiliates;
Certain Restrictions on the General Partner 66
Section 7.7 Indemnification 67
Plains All American Pipeline, L.P.
-ii-
<PAGE>
Section 7.8 Liability of Indemnitees 69
Section 7.9 Resolution of Conflicts of Interest 70
Section 7.10 Other Matters Concerning the General Partner 72
Section 7.11 Purchase or Sale of Partnership Securities 72
Section 7.12 Registration Rights of the General Partner and
its Affiliates 73
Section 7.13 Reliance by Third Parties 75
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting 75
Section 8.2 Fiscal Year 76
Section 8.3 Reports 76
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information 76
Section 9.2 Tax Elections 76
Section 9.3 Tax Controversies 77
Section 9.4 Withholding 77
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Initial Limited Partners 77
Section 10.2 Admission of Substituted Limited Partner 78
Section 10.3 Admission of Successor General Partner 78
Section 10.4 Admission of Additional Limited Partners 79
Section 10.5 Amendment of Agreement and Certificate of Limited
Partnership 79
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner 79
Section 11.2 Removal of the General Partner 81
Section 11.3 Interest of Departing Partner and Successor 82
General Partner
Section 11.4 Termination of Subordination Period, Conversion of
Subordinated Units and Extinguishment of Cumulative
Common Unit Arrearages 83
Section 11.5 Withdrawal of Limited Partners 83
Plains All American Pipeline, L.P.
-iii-
<PAGE>
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution 84
Section 12.2 Continuation of the Business of the Partnership After
Dissolution 84
Section 12.3 Liquidator 85
Section 12.4 Liquidation 86
Section 12.5 Cancellation of Certificate of Limited Partnership 86
Section 12.6 Return of Contributions 87
Section 12.7 Waiver of Partition 87
Section 12.8 Capital Account Restoration 87
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Section 13.1 Amendment to be Adopted Solely by the General Partner 87
Section 13.2 Amendment Procedures 89
Section 13.3 Amendment Requirements 89
Section 13.4 Special Meetings 90
Section 13.5 Notice of a Meeting 90
Section 13.6 Record Date 91
Section 13.7 Adjournment 91
Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes 91
Section 13.9 Quorum 92
Section 13.10 Conduct of a Meeting 92
Section 13.11 Action Without a Meeting 93
Section 13.12 Voting and Other Rights 93
ARTICLE XIV
MERGER
Section 14.1 Authority 94
Section 14.2 Procedure for Merger or Consolidation 94
Section 14.3 Approval by Limited Partners of Merger or Consolidation 95
Section 14.4 Certificate of Merger 96
Section 14.5 Effect of Merger 96
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1 Right to Acquire Limited Partner Interests 97
Plains All American Pipeline, L.P.
-iv-
<PAGE>
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1 Addresses and Notices 99
Section 16.2 Further Action 99
Section 16.3 Binding Effect 99
Section 16.4 Integration 100
Section 16.5 Creditors 100
Section 16.6 Waiver 100
Section 16.7 Counterparts 100
Section 16.8 Applicable Law 100
Section 16.9 Invalidity of Provisions 100
Section 16.10 Consent of Partners 100
Plains All American Pipeline, L.P.
-v-
<PAGE>
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
PLAINS ALL AMERICAN PIPELINE, L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF PLAINS
ALL AMERICAN PIPELINE, L.P. dated as of November 23, 1998, is entered into by
and among Plains All American Inc., a Delaware corporation, as the General
Partner, and Michael R. Patterson, as the Organizational Limited Partner,
together with any other Persons who become Partners in the Partnership or
parties hereto as provided herein. In consideration of the covenants, conditions
and agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or
business of another Person for the purpose of increasing the operating
capacity or revenues of the Partnership Group from the operating capacity
or revenues of the Partnership Group existing immediately prior to such
transaction.
"Additional Book Basis" means the portion of any remaining Carrying
Value of an Adjusted Property that is attributable to positive adjustments
made to such Carrying Value as a result of Book-Up Events. For purposes of
determining the extent that Carrying Value constitutes Additional Book
Basis:
(i) Any negative adjustment made to the Carrying Value of an
Adjusted Property as a result of either a Book-Down Event or a Book-Up
Event shall first be deemed to offset or decrease that portion of the
Carrying Value of such Adjusted Property that is attributable to any
prior positive adjustments made thereto pursuant to a Book-Up Event or
Book-Down Event.
(ii) If Carrying Value that constitutes Additional Book Basis is
reduced as a result of a Book-Down Event and the Carrying Value of
other property is increased as a result of such Book-Down Event, an
allocable portion of any such increase in Carrying Value shall be
treated as Additional Book Basis; provided that the amount treated as
Additional Book Basis pursuant hereto as a result of such Book-Down
Event shall not exceed the amount by which the Aggregate Remaining Net
Positive Adjustments after such Book-Down Event exceeds the remaining
Plains All American Pipeline, L.P.
<PAGE>
Additional Book Basis attributable to all of the Partnership's
Adjusted Property after such Book-Down Event (determined without
regard to the application of this clause (ii) to such Book-Down
Event).
"Additional Book Basis Derivative Items" means any Book Basis
Derivative Items that are computed with reference to Additional Book Basis.
To the extent that the Additional Book Basis attributable to all of the
Partnership's Adjusted Property as of the beginning of any taxable period
exceeds the Aggregate Remaining Net Positive Adjustments as of the
beginning of such period (the "Excess Additional Book Basis"), the
Additional Book Basis Derivative Items for such period shall be reduced by
the amount that bears the same ratio to the amount of Additional Book Basis
Derivative Items determined without regard to this sentence as the Excess
Additional Book Basis bears to the Additional Book Basis as of the
beginning of such period.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 10.4 and who is shown
as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year of the Partnership, (a)
increased by any amounts that such Partner is obligated to restore under
the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or
is deemed obligated to restore under Treasury Regulation Sections 1.704-
2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all losses
and deductions that, as of the end of such fiscal year, are reasonably
expected to be allocated to such Partner in subsequent years under Sections
704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-
1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end
of such fiscal year, are reasonably expected to be made to such Partner in
subsequent years in accordance with the terms of this Agreement or
otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to)
the year in which such distributions are reasonably expected to be made
(other than increases as a result of a minimum gain chargeback pursuant to
Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of Adjusted
Capital Account is intended to comply with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith. The "Adjusted Capital Account" of a Partner in
respect of a General Partner Interest, a Common Unit, a Subordinated Unit
or an Incentive Distribution Right or any other specified interest in the
Partnership shall be the amount which such Adjusted Capital Account would
be if such General Partner Interest, Common Unit, Subordinated Unit,
Incentive Distribution Right or other interest in the Partnership were the
only interest in the Partnership held by a Partner from and after the date
on which such General Partner Interest, Common Unit, Subordinated Unit,
Incentive Distribution Right or other interest was first issued.
Plains All American Pipeline, L.P.
-2-
<PAGE>
"Adjusted Operating Surplus" means, with respect to any period,
Operating Surplus generated during such period (a) less (i) any net
increase in Working Capital Borrowings during such period and (ii) any net
reduction in cash reserves for Operating Expenditures during such period
not relating to an Operating Expenditure made during such period, and (b)
plus (i) any net decrease in Working Capital Borrowings during such period
and (ii) any net increase in cash reserves for Operating Expenditures
during such period required by any debt instrument for the repayment of
principal, interest or premium. Adjusted Operating Surplus does not include
that portion of Operating Surplus included in clause (a)(i) of the
definition of Operating Surplus.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted
Property is deemed contributed to a new partnership in exchange for an
interest in the new partnership, followed by a deemed liquidation of the
Partnership for federal income tax purposes upon a termination of the
Partnership pursuant to Treasury Regulation Section 1.708-(b)(1)(iv), such
property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is subsequently adjusted pursuant to
Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As
used herein, the term "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Aggregate Remaining Net Positive Adjustments" means, as of the end of
any taxable period, the sum of the Remaining Net Positive Adjustments of
all the Partners.
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative
Allocation (if appropriate to the context in which the term "Agreed
Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution as
determined by the General Partner using such reasonable method of valuation
as it may adopt. The General Partner shall, in its discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate
Agreed Value of Contributed Properties contributed to the Partnership in a
single or integrated transaction among each separate property on a basis
proportional to the fair market value of each Contributed Property.
"Agreement" means this Second Amended and Restated Agreement of
Limited Partnership of Plains All American Pipeline, L.P., as it may be
amended, supplemented or restated from time to time.
Plains All American Pipeline, L.P.
-3-
<PAGE>
"Assignee" means a Non-citizen Assignee or a Person to whom one or
more Limited Partner Interests have been transferred in a manner permitted
under this Agreement and who has executed and delivered a Transfer
Application as required by this Agreement, but who has not been admitted as
a Substituted Limited Partner.
"Associate" means, when used to indicate a relationship with any
Person, (a) any corporation or organization of which such Person is a
director, officer or partner or is, directly or indirectly, the owner of
20% or more of any class of voting stock or other voting interest; (b) any
trust or other estate in which such Person has at least a 20% beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such Person, or any
relative of such spouse, who has the same principal residence as such
Person.
"Available Cash" means, with respect to any Quarter ending prior to
the Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the Partnership
Group on hand at the end of such Quarter, and (ii) all additional cash and
cash equivalents of the Partnership Group on hand on the date of
determination of Available Cash with respect to such Quarter resulting from
Working Capital Borrowings made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that is necessary or appropriate
in the reasonable discretion of the General Partner to (i) provide for the
proper conduct of the business of the Partnership Group (including reserves
for future capital expenditures and for anticipated future credit needs of
the Partnership Group) subsequent to such Quarter, (ii) comply with
applicable law or any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which any Group Member is a
party or by which it is bound or its assets are subject or (iii) provide
funds for distributions under Section 6.4 or 6.5 in respect of any one or
more of the next four Quarters; provided, however, that the General Partner
may not establish cash reserves pursuant to (iii) above if the effect of
such reserves would be that the Partnership is unable to distribute the
Minimum Quarterly Distribution on all Common Units, plus any Cumulative
Common Unit Arrearage on all Common Units, with respect to such Quarter;
and, provided further, that disbursements made by a Group Member or cash
reserves established, increased or reduced after the end of such Quarter
but on or before the date of determination of Available Cash with respect
to such Quarter shall be deemed to have been made, established, increased
or reduced, for purposes of determining Available Cash, within such Quarter
if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter
shall equal zero.
"Book Basis Derivative Items" means any item of income, deduction,
gain or loss included in the determination of Net Income or Net Loss that
is computed with reference to
Plains All American Pipeline, L.P.
-4-
<PAGE>
the Carrying Value of an Adjusted Property (e.g., depreciation, depletion,
or gain or loss with respect to an Adjusted Property).
"Book-Down Event" means an event which triggers a negative adjustment
to the Capital Accounts of the Partners pursuant to Section 5.5(d).
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will
be reflected by the difference between such Partner's Capital Account
balance as maintained pursuant to Section 5.5 and the hypothetical balance
of such Partner's Capital Account computed as if it had been maintained
strictly in accordance with federal income tax accounting principles.
"Book-Up Event" means an event which triggers a positive adjustment to
the Capital Accounts of the Partners pursuant to Section 5.5(d).
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Texas shall not be regarded as a
Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest, a Common Unit, a Subordinated Unit, an Incentive
Distribution Right or any other Partnership Interest shall be the amount
which such Capital Account would be if such General Partner Interest,
Common Unit, Subordinated Unit, Incentive Distribution Right or other
Partnership Interest were the only interest in the Partnership held by a
Partner from and after the date on which such General Partner Interest,
Common Unit, Subordinated Unit, Incentive Distribution Right or other
Partnership Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership pursuant to this Agreement or the Contribution and Conveyance
Agreement.
"Capital Improvement" means any (a) addition or improvement to the
capital assets owned by any Group Member or (b) acquisition of existing, or
the construction of new, capital assets (including, without limitation,
pipeline systems, terminalling and storage facilities and related assets),
in each case made to increase the operating capacity or revenues of the
Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such addition, improvement,
acquisition or construction.
"Capital Surplus" has the meaning assigned to such term in Section
6.3(a).
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"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' and Assignees' Capital Accounts in respect of such Contributed
Property, and (b) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of
the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Sections 5.5(d)(i) and
5.5(d)(ii) and to reflect changes, additions or other adjustments to the
Carrying Value for dispositions and acquisitions of Partnership properties,
as deemed appropriate by the General Partner.
"Cause" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding the General Partner liable for actual
fraud, gross negligence or willful or wanton misconduct in its capacity as
general partner of the Partnership.
"Certificate" means a certificate (i) substantially in the form of
Exhibit A to this Agreement, (ii) issued in global form in accordance with
the rules and regulations of the Depositary or (iii) in such other form as
may be adopted by the General Partner in its discretion, issued by the
Partnership evidencing ownership of one or more Common Units or a
certificate, in such form as may be adopted by the General Partner in its
discretion, issued by the Partnership evidencing ownership of one or more
other Partnership Securities.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the
State of Delaware as referenced in Section 2.1, as such Certificate of
Limited Partnership may be amended, supplemented or restated from time to
time.
"Citizenship Certification" means a properly completed certificate in
such form as may be specified by the General Partner by which an Assignee
or a Limited Partner certifies that he (and if he is a nominee holding for
the account of another Person, that to the best of his knowledge such other
Person) is an Eligible Citizen.
"Claim" has the meaning assigned to such term in Section 7.12(c).
"Closing Date" means the first date on which Common Units are sold by
the Partnership to the Underwriters pursuant to the provisions of the
Underwriting Agreement.
"Closing Price" has the meaning assigned to such term in Section
15.1(a).
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of successor law.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
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"Commission" means the United States Securities and Exchange
Commission.
"Common Unit" means a Partnership Security representing a fractional
part of the Partnership Interests of all Limited Partners and Assignees and
of the General Partner (exclusive of its interest as a holder of the
General Partner Interest and Incentive Distribution Rights) and having the
rights and obligations specified with respect to Common Units in this
Agreement. The term "Common Unit" does not refer to a Subordinated Unit
prior to its conversion into a Common Unit pursuant to the terms hereof.
"Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, as to any Quarter within the Subordination Period, the
excess, if any, of (a) the Minimum Quarterly Distribution with respect to a
Common Unit in respect of such Quarter over (b) the sum of all Available
Cash distributed with respect to a Common Unit in respect of such Quarter
pursuant to Section 6.4(a)(i).
"Conflicts Committee" means a committee of the Board of Directors of
the General Partner composed entirely of two or more directors who are
neither security holders, officers nor employees of the General Partner nor
officers, directors or employees of any Affiliate of the General Partner.
"Contributed Property" means each property or other asset, in such
form as may be permitted by the Delaware Act, but excluding cash,
contributed to the Partnership (or deemed contributed to a new partnership
on termination of the Partnership pursuant to Section 708 of the Code).
Once the Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.5(d), such property shall no longer constitute a Contributed
Property, but shall be deemed an Adjusted Property.
"Contribution and Conveyance Agreement" means that certain
Contribution, Conveyance and Assumption Agreement, dated as of the Closing
Date, among the General Partner, the Plains Midstream Subsidiaries, the
Partnership, the Operating Partnership and certain other parties, together
with the additional conveyance documents and instruments contemplated or
referenced thereunder.
"Cumulative Common Unit Arrearage" means, with respect to any Common
Unit, whenever issued, and as of the end of any Quarter, the excess, if
any, of (a) the sum resulting from adding together the Common Unit
Arrearage as to an Initial Common Unit for each of the Quarters within the
Subordination Period ending on or before the last day of such Quarter over
(b) the sum of any distributions theretofore made pursuant to Section
6.4(a)(ii) and the second sentence of Section 6.5 with respect to an
Initial Common Unit (including any distributions to be made in respect of
the last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
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"Current Market Price" has the meaning assigned to such term in
Section 15.1(a).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del C. (S)17-101, et seq., as amended, supplemented or restated from
time to time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"Depositary" means, with respect to any Units issued in global form,
The Depository Trust Company and its successors and permitted assigns.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or
proposes to do business from time to time, and whose status as a Limited
Partner or Assignee does not or would not subject such Group Member to a
significant risk of cancellation or forfeiture of any of its properties or
any interest therein.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Final Subordinated Units" has the meaning assigned to such term in
Section 6.1(d)(x).
"First Liquidation Target Amount" has the meaning assigned to such
term in Section 6.1(c)(i)(D).
"First Target Distribution" means $0.495 per Unit per Quarter (or,
with respect to the period commencing on the Closing Date and ending on
December 31, 1998, it means the product of $0.495 multiplied by a fraction
of which the numerator is the number of days in such period, and of which
the denominator is 91), subject to adjustment in accordance with Sections
6.6 and 6.9.
"General Partner" means Plains All American Inc. and its successors
and permitted assigns as general partner of the Partnership.
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it) which may be
evidenced by Partnership Securities or a combination thereof or interest
therein, and includes any and all benefits to which the General Partner is
entitled
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as provided in this Agreement, together with all obligations of the General
Partner to comply with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except voting pursuant to a revocable proxy
or consent given to such Person in response to a proxy or consent
solicitation made to 10 or more Persons) or disposing of any Partnership
Securities with any other Person that beneficially owns, or whose
Affiliates or Associates beneficially own, directly or indirectly,
Partnership Securities.
"Group Member" means a member of the Partnership Group.
"Holder" as used in Section 7.12, has the meaning assigned to such
term in Section 7.12(a).
"Incentive Distribution Right" means a non-voting Limited Partner
Interest issued to the General Partner in connection with the transfer of
substantially all of its general partner interest in the Operating
Partnership to the Partnership pursuant to Section 5.2, which Partnership
Interest will confer upon the holder thereof only the rights and
obligations specifically provided in this Agreement with respect to
Incentive Distribution Rights (and no other rights otherwise available to
or other obligations of a holder of a Partnership Interest).
Notwithstanding anything in this Agreement to the contrary, the holder of
an Incentive Distribution Right shall not be entitled to vote such
Incentive Distribution Right on any Partnership matter except as may
otherwise be required by law.
"Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections
6.4(a)(iv), (v) and (vi) and 6.4(b)(ii), (iii) and (iv).
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).
"Indemnitee" means (a) the General Partner, (b) any Departing Partner,
(c) any Person who is or was an Affiliate of the General Partner or any
Departing Partner, (d) any Person who is or was a member, partner, officer,
director, employee, agent or trustee of any Group Member, the General
Partner or any Departing Partner or any Affiliate of any Group Member, the
General Partner or any Departing Partner, and (e) any Person who is or was
serving at the request of the General Partner or any Departing Partner or
any Affiliate of the General Partner or any Departing Partner as an
officer, director, employee, member, partner, agent, fiduciary or trustee
of another Person; provided, that a Person shall not be an Indemnitee by
reason of providing, on a fee-for-services basis, trustee, fiduciary or
custodial services.
"Initial Common Units" means the Common Units sold in the Initial
Offering.
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"Initial Limited Partners" means the General Partner (with respect to
the Common Units, Subordinated Units and the Incentive Distribution Rights
received by it pursuant to Section 5.2) and the Underwriters, in each case
upon being admitted to the Partnership in accordance with Section 10.1.
"Initial Offering" means the initial offering and sale of Common Units
to the public, as described in the Registration Statement.
"Initial Unit Price" means (a) with respect to the Common Units and
the Subordinated Units, the initial public offering price per Common Unit
at which the Underwriters offered the Common Units to the public for sale
as set forth on the cover page of the prospectus included as part of the
Registration Statement and first issued at or after the time the
Registration Statement first became effective or (b) with respect to any
other class or series of Units, the price per Unit at which such class or
series of Units is initially sold by the Partnership, as determined by the
General Partner, in each case adjusted as the General Partner determines to
be appropriate to give effect to any distribution, subdivision or
combination of Units.
"Interim Capital Transactions" means the following transactions if
they occur prior to the Liquidation Date: (a) borrowings, refinancings or
refundings of indebtedness and sales of debt securities (other than Working
Capital Borrowings and other than for items purchased on open account in
the ordinary course of business) by any Group Member; (b) sales of equity
interests by any Group Member (other than the Common Units sold to the
Underwriters pursuant to the exercise of their over-allotment option); and
(c) sales or other voluntary or involuntary dispositions of any assets of
any Group Member other than (i) sales or other dispositions of inventory,
accounts receivable and other assets in the ordinary course of business,
and (ii) sales or other dispositions of assets as part of normal
retirements or replacements.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
"Limited Partner" means, unless the context otherwise requires, (a)
the Organizational Limited Partner prior to its withdrawal from the
Partnership, each Initial Limited Partner, each Substituted Limited
Partner, each Additional Limited Partner and any Partner upon the change of
its status from General Partner to Limited Partner pursuant to Section 11.3
or (b) solely for purposes of Articles V, VI, VII and IX and Sections 12.3
and 12.4, each Assignee; provided, however, that when the term "Limited
Partner" is used herein in the context of any vote or other approval,
including without limitation Articles XIII and XIV, such term shall not,
solely for such purpose, include any holder of an Incentive Distribution
Right except as may otherwise be required by law.
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"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common
Units, Subordinated Units, Incentive Distribution Rights or other
Partnership Securities or a combination thereof or interest therein, and
includes any and all benefits to which such Limited Partner or Assignee is
entitled as provided in this Agreement, together with all obligations of
such Limited Partner or Assignee to comply with the terms and provisions of
this Agreement; provided, however, that when the term "Limited Partner
Interest" is used herein in the context of any vote or other approval,
including without limitation Articles XIII and XIV, such term shall not,
solely for such purpose, include any holder of an Incentive Distribution
Right except as may otherwise be required by law.
"Liquidation Date" means (a) in the case of an event giving rise to
the dissolution of the Partnership of the type described in clauses (a) and
(b) of the first sentence of Section 12.2, the date on which the applicable
time period during which the holders of Outstanding Units have the right to
elect to reconstitute the Partnership and continue its business has expired
without such an election being made, and (b) in the case of any other event
giving rise to the dissolution of the Partnership, the date on which such
event occurs.
"Liquidator" means one or more Persons selected by the General Partner
to perform the functions described in Section 12.3 as liquidating trustee
of the Partnership within the meaning of the Delaware Act.
"Merger Agreement" has the meaning assigned to such term in Section
14.1.
"Minimum Quarterly Distribution" means $0.45 per Unit per Quarter (or
with respect to the period commencing on the Closing Date and ending on
December 31, 1998, it means the product of $0.45 multiplied by a fraction
of which the numerator is the number of days in such period and of which
the denominator is 91), subject to adjustment in accordance with Sections
6.6 and 6.9.
"National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to
such statute, or the Nasdaq Stock Market or any successor thereto.
"Net Agreed Value" means, (a) in the case of any Contributed Property,
the Agreed Value of such property reduced by any liabilities either assumed
by the Partnership upon such contribution or to which such property is
subject when contributed, and (b) in the case of any property distributed
to a Partner or Assignee by the Partnership, the Partnership's Carrying
Value of such property (as adjusted pursuant to Section 5.5(d)(ii)) at the
time such property is distributed, reduced by any indebtedness either
assumed by such Partner or Assignee upon such distribution or to which such
property is subject at the time of distribution, in either case, as
determined under Section 752 of the Code.
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"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss)
for such taxable year over the Partnership's items of loss and deduction
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Income shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d); provided that the determination of the items that
have been specially allocated under Section 6.1(d) shall be made as if
Section 6.1(d)(xii) were not in this Agreement.
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken
into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable year over the Partnership's items of income and gain
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Loss shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d); provided that the determination of the items that
have been specially allocated under Section 6.1(d) shall be made as if
Section 6.1(d)(xii) were not in this Agreement.
"Net Positive Adjustments" means, with respect to any Partner, the
excess, if any, of the total positive adjustments over the total negative
adjustments made to the Capital Account of such Partner pursuant to Book-Up
Events and Book-Down Events.
"Net Termination Gain" means, for any taxable year, the sum, if
positive, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the
determination of Net Termination Gain shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain or loss
specially allocated under Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if
negative, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the
determination of Net Termination Loss shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain or loss
specially allocated under Section 6.1(d).
"Non-citizen Assignee" means a Person whom the General Partner has
determined in its discretion does not constitute an Eligible Citizen and as
to whose Partnership Interest the General Partner has become the
Substituted Limited Partner, pursuant to Section 4.9.
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would
be allocated to the Partners pursuant to
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Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and 6.2(b)(iii) if such properties
were disposed of in a taxable transaction in full satisfaction of such
liabilities and for no other consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b),
are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"Notice of Election to Purchase" has the meaning assigned to such term
in Section 15.1(b).
"Omnibus Agreement" means that Omnibus Agreement, dated as of the
Closing Date, among Plains Resources Inc., the General Partner, the
Partnership and each Operating Partnership.
"Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the General
Partner, debt service payments, and capital expenditures, subject to the
following:
(a) Payments (including prepayments) of principal of and premium on
indebtedness shall not be an Operating Expenditure if the payment is (i)
required in connection with the sale or other disposition of assets or (ii)
made in connection with the refinancing or refunding of indebtedness with
the proceeds from new indebtedness or from the sale of equity interests.
For purposes of the foregoing, at the election and in the reasonable
discretion of the General Partner, any payment of principal or premium
shall be deemed to be refunded or refinanced by any indebtedness incurred
or to be incurred by the Partnership Group within 180 days before or after
such payment to the extent of the principal amount of such indebtedness.
(b) Operating Expenditures shall not include (i) capital expenditures
made for Acquisitions or for Capital Improvements, (ii) payment of
transaction expenses relating to Interim Capital Transactions or (iii)
distributions to Partners. Where capital expenditures are made in part for
Acquisitions or for Capital Improvements and in part for other purposes,
the General Partner's good faith allocation between the amounts paid for
each shall be conclusive.
"Operating Partnerships" means Plains Marketing, L.P., a Delaware
limited partnership, All American Pipeline, L.P., a Texas limited
partnership, and any successors thereto.
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"Operating Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of each of the Operating Partnerships, as
they may be amended, supplemented or restated from time to time.
"Operating Surplus" means, with respect to any period ending prior to
the Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) $25 million plus all cash and cash equivalents of
the Partnership Group on hand as of the close of business on the Closing
Date, (ii) all cash receipts of the Partnership Group for the period
beginning on the Closing Date and ending with the last day of such period,
other than cash receipts from Interim Capital Transactions (except to the
extent specified in Section 6.5) and (iii) all cash receipts of the
Partnership Group after the end of such period but on or before the date of
determination of Operating Surplus with respect to such period resulting
from Working Capital Borrowings, less
(b) the sum of (i) Operating Expenditures for the period beginning on
the Closing Date and ending with the last day of such period and (ii) the
amount of cash reserves that is necessary or advisable in the reasonable
discretion of the General Partner to provide funds for future Operating
Expenditures; provided, however, that disbursements made (including
contributions to a Group Member or disbursements on behalf of a Group
Member) or cash reserves established, increased or reduced after the end of
such period but on or before the date of determination of Available Cash
with respect to such period shall be deemed to have been made, established,
increased or reduced, for purposes of determining Operating Surplus, within
such period if the General Partner so determines.
Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter
shall equal zero.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner in its reasonable discretion.
"Organizational Limited Partner" means Michael R. Patterson in his
capacity as the organizational limited partner of the Partnership pursuant
to this Agreement.
"Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group
(other than the General Partner or its Affiliates) beneficially owns 20% or
more of any Outstanding Partnership Securities of any class then
Outstanding, all Partnership Securities owned by such Person or Group shall
not be voted on any matter and shall not be considered to be Outstanding
when sending notices of a meeting of Limited Partners to vote on any matter
(unless otherwise required by law), calculating required votes, determining
the
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presence of a quorum or for other similar purposes under this Agreement,
except that Common Units so owned shall be considered to be Outstanding for
purposes of Section 11.1(b)(iv) (such Common Units shall not, however, be
treated as a separate class of Partnership Securities for purposes of this
Agreement); provided, further, that the foregoing limitation shall not
apply (i) to any Person or Group who acquired 20% or more of any
Outstanding Partnership Securities of any class then Outstanding directly
from the General Partner or its Affiliates or (ii) to any Person or Group
who acquired 20% or more of any Outstanding Partnership Securities of any
class then Outstanding directly or indirectly from a Person or Group
described in clause (i) provided that the General Partner shall have
notified such Person or Group in writing that such limitation shall not
apply.
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"Parity Units" means Common Units and all other Units having rights to
distributions or in liquidation ranking on a parity with the Common Units.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
"Partners" means the General Partner and the Limited Partners.
"Partnership" means Plains All American Pipeline, L.P., a Delaware
limited partnership, and any successors thereto.
"Partnership Group" means the Partnership, the Operating Partnerships
and any Subsidiary of any such entity, treated as a single consolidated
entity.
"Partnership Interest" means an interest in the Partnership, which
shall include the General Partner Interest and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
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"Partnership Security" means any class or series of equity interest in
the Partnership (but excluding any options, rights, warrants and
appreciation rights relating to an equity interest in the Partnership),
including without limitation, Common Units, Subordinated Units and
Incentive Distribution Rights.
"Percentage Interest" means as of any date of determination (a) as to
the General Partner (with respect to its General Partner Interest), an
aggregate 1.0%, (b) as to any Unitholder or Assignee holding Units, the
product obtained by multiplying (i) 99% less the percentage applicable to
paragraph (c) by (ii) the quotient obtained by dividing (A) the number of
Units held by such Unitholder or Assignee by (B) the total number of all
Outstanding Units, and (c) as to the holders of additional Partnership
Securities issued by the Partnership in accordance with Section 5.6, the
percentage established as a part of such issuance. The Percentage Interest
with respect to an Incentive Distribution Right shall at all times be zero.
"Person" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other
entity.
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partner or any Affiliate of the General
Partner who holds Units.
"Pro Rata" means (a) when modifying Units or any class thereof,
apportioned equally among all designated Units in accordance with their
relative Percentage Interests, (b) when modifying Partners and Assignees,
apportioned among all Partners and Assignees in accordance with their
relative Percentage Interests and (c) when modifying holders of Incentive
Distribution Rights, apportioned equally among all holders of Incentive
Distribution Rights in accordance with the relative number of Incentive
Distribution Rights held by each such holder.
"Purchase Date" means the date determined by the General Partner as
the date for purchase of all Outstanding Units of a certain class (other
than Units owned by the General Partner and its Affiliates) pursuant to
Article XV.
"Quarter" means, unless the context requires otherwise, a fiscal
quarter of the Partnership.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or
Section 743 of the Code) upon the disposition of any property or asset of
the Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
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"Record Date" means the date established by the General Partner for
determining (a) the identity of the Record Holders entitled to notice of,
or to vote at, any meeting of Limited Partners or entitled to vote by
ballot or give approval of Partnership action in writing without a meeting
or entitled to exercise rights in respect of any lawful action of Limited
Partners or (b) the identity of Record Holders entitled to receive any
report or distribution or to participate in any offer.
"Record Holder" means the Person in whose name a Common Unit is
registered on the books of the Transfer Agent as of the opening of business
on a particular Business Day, or with respect to other Partnership
Securities, the Person in whose name any such other Partnership Security is
registered on the books which the General Partner has caused to be kept as
of the opening of business on such Business Day.
"Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-64107) as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the
Commission under the Securities Act to register the offering and sale of
the Common Units in the Initial Offering.
"Remaining Net Positive Adjustments" means as of the end of any
taxable period, (i) with respect to the Unitholders holding Common Units or
Subordinated Units, the excess of (a) the Net Positive Adjustments of the
Unitholders holding Common Units or Subordinated Units as of the end of
such period over (b) the sum of those Partners' Share of Additional Book
Basis Derivative Items for each prior taxable period, (ii) with respect to
the General Partner (as holder of the General Partner Interest), the excess
of (a) the Net Positive Adjustments of the General Partner as of the end of
such period over (b) the sum of the General Partner's Share of Additional
Book Basis Derivative Items with respect to the General Partner Interest
for each prior taxable period, and (iii) with respect to the holders of
Incentive Distribution Rights, the excess of (a) the Net Positive
Adjustments of the holders of Incentive Distribution Rights as of the end
of such period over (b) the sum of the Share of Additional Book Basis
Derivative Items of the holders of the Incentive Distribution Rights for
each prior taxable period.
"Required Allocations" means (a) any limitation imposed on any
allocation of Net Losses or Net Termination Losses under Section 6.1(b) or
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss or
deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv),
6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss"means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent
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such item of gain or loss is not allocated pursuant to Section 6.2(b)(i)(A)
or 6.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities.
"Restricted Business" has the meaning assigned to such term in the
Omnibus Agreement.
"Second Liquidation Target Amount" has the meaning assigned to such
term in Section 6.1(c)(i)(E).
"Second Target Distribution" means $0.675 per Unit per Quarter (or,
with respect to the period commencing on the Closing Date and ending on
December 31, 1998, it means the product of $0.675 multiplied by a fraction
of which the numerator is equal to the number of days in such period and of
which the denominator is 91), subject to adjustment in accordance with
Sections 6.6 and 6.9.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such
statute.
"Share of Additional Book Basis Derivative Items" means in connection
with any allocation of Additional Book Basis Derivative Items for any
taxable period, (i) with respect to the Unitholders holding Common Units or
Subordinated Units, the amount that bears the same ratio to such Additional
Book Basis Derivative Items as the Unitholders' Remaining Net Positive
Adjustments as of the end of such period bears to the Aggregate Remaining
Net Positive Adjustments as of that time, (ii) with respect to the General
Partner (as holder of the General Partner Interest), the amount that bears
the same ratio to such additional Book Basis Derivative Items as the
General Partner's Remaining Net Positive Adjustments as of the end of such
period bears to the Aggregate Remaining Net Positive Adjustment as of that
time, and (iii) with respect to the Partners holding Incentive Distribution
Rights, the amount that bears the same ratio to such Additional Book Basis
Derivative Items as the Remaining Net Positive Adjustments of the Partners
holding the Incentive Distribution Rights as of the end of such period
bears to the Aggregate Remaining Net Positive Adjustments as of that time.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee.
"Subordinated Unit" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees (other than of
holders of the Incentive Distribution Rights) and having the rights and
obligations specified with respect to Subordinated Units in this Agreement.
The term "Subordinated Unit" as used herein does not include a Common Unit.
"Subordination Period" means the period commencing on the Closing Date
and ending on the first to occur of the following dates:
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(a) the first day of any Quarter beginning after December 31, 2003 in
respect of which (i) (A) distributions of Available Cash from Operating
Surplus on each of the Outstanding Common Units and Subordinated Units with
respect to each of the three consecutive, non-overlapping four-Quarter
periods immediately preceding such date equaled or exceeded the sum of the
Minimum Quarterly Distribution on all Outstanding Common Units and
Subordinated Units during such periods and (B) the Adjusted Operating
Surplus generated during each of the three consecutive, non-overlapping
four-Quarter periods immediately preceding such date equaled or exceeded
the sum of the Minimum Quarterly Distribution on all of the Common Units
and Subordinated Units that were Outstanding during such periods on a fully
diluted basis (i.e., taking into account for purposes of such determination
all Outstanding Common Units, all Outstanding Subordinated Units, all
Common Units and Subordinated Units issuable upon exercise of employee
options that have, as of the date of determination, already vested or are
scheduled to vest prior to the end of the Quarter immediately following the
Quarter with respect to which such determination is made, and all Common
Units and Subordinated Units that have as of the date of determination,
been earned by but not yet issued to management of the Partnership in
respect of incentive compensation), plus the related distribution on the
General Partner Interest in the Partnership and on the general partner
interest in the Operating Partnership, during such periods and (ii) there
are no Cumulative Common Unit Arrearages; and
(b) the date on which the General Partner is removed as general
partner of the Partnership upon the requisite vote by holders of
Outstanding Units under circumstances where Cause does not exist and Units
held by the General Partner and its Affiliates are not voted in favor of
such removal.
"Subsidiary" means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard
to the occurrence of any contingency) to vote in the election of directors
or other governing body of such corporation is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person or a combination thereof, (b) a partnership
(whether general or limited) in which such Person or a Subsidiary of such
Person is, at the date of determination, a general or limited partner of
such partnership, but only if more than 50% of the partnership interests of
such partnership (considering all of the partnership interests of the
partnership as a single class) is owned, directly or indirectly, at the
date of determination, by such Person, by one or more Subsidiaries of such
Person, or a combination thereof, or (c) any other Person (other than a
corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or
indirectly, at the date of determination, has (i) at least a majority
ownership interest or (ii) the power to elect or direct the election of a
majority of the directors or other governing body of such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 10.2 in place of and
with all the rights of a Limited Partner and who is shown as a Limited
Partner on the books and records of the Partnership.
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"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Trading Day" has the meaning assigned to such term in Section
15.1(a).
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Transfer Agent" means such bank, trust company or other Person
(including the General Partner or one of its Affiliates) as shall be
appointed from time to time by the Partnership to act as registrar and
transfer agent for the Common Units; provided that if no Transfer Agent is
specifically designated for any other Partnership Securities, the General
Partner shall act in such capacity.
"Transfer Application" means an application and agreement for transfer
of Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.
"Underwriter" means each Person named as an underwriter in Schedule I
to the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated
November 17, 1998 among the Underwriters, the Partnership and certain other
parties, providing for the purchase of Common Units by such Underwriters.
"Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units and Subordinated Units but shall not include (i)
a General Partner Interest or (ii) Incentive Distribution Rights.
"Unitholders" means the holders of Common Units and Subordinated
Units.
"Unit Majority" means, during the Subordination Period, at least a
majority of the Outstanding Common Units voting as a class and at least a
majority of the Outstanding Subordinated Units voting as a class, and
thereafter, at least a majority of the Outstanding Common Units.
"Unpaid MQD" has the meaning assigned to such term in Section
6.1(c)(i)(B).
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under Section
5.5(d)) over (b) the Carrying Value of such property as of such date (prior
to any adjustment to be made pursuant to Section 5.5(d) as of such date).
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"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any adjustment to
be made pursuant to Section 5.5(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under Section
5.5(d)).
"Unrecovered Capital" means at any time, with respect to a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in
kind) in connection with the dissolution and liquidation of the Partnership
theretofore made in respect of an Initial Common Unit, adjusted as the
General Partner determines to be appropriate to give effect to any
distribution, subdivision or combination of such Units.
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term
in Section 11.1(b).
"Working Capital Borrowings" means borrowings exclusively for working
capital purposes made pursuant to a credit facility or other arrangement
requiring all such borrowings thereunder to be reduced to a relatively
small amount each year for an economically meaningful period of time.
Section 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE II
ORGANIZATION
Section 2.1 Formation.
The General Partner and the Organizational Limited Partner have previously
formed the Partnership as a limited partnership pursuant to the provisions of
the Delaware Act and hereby amend and restate the original Agreement of Limited
Partnership of Plains All American Pipeline, L.P. in its entirety. This
amendment and restatement shall become effective on the date of this Agreement.
Except as expressly provided to the contrary in this Agreement, the rights,
duties (including fiduciary
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duties), liabilities and obligations of the Partners and the administration,
dissolution and termination of the Partnership shall be governed by the Delaware
Act. All Partnership Interests shall constitute personal property of the owner
thereof for all purposes and a Partner has no interest in specific Partnership
property.
Section 2.2 Name.
The name of the Partnership shall be "Plains All American Pipeline, L.P."
The Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General Partner in its sole discretion,
including the name of the General Partner. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purpose of complying with the laws of
any jurisdiction that so requires. The General Partner in its discretion may
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners.
Section 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Delaware shall be located at 1013 Center Road,
Wilmington, Delaware 19805-1297, and the registered agent for service of process
on the Partnership in the State of Delaware at such registered office shall be
Corporation Service Company. The principal office of the Partnership shall be
located at 500 Dallas, Suite 700, Houston, Texas 77002 or such other place as
the General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems necessary
or appropriate. The address of the General Partner shall be 500 Dallas, Suite
700, Houston, Texas 77002 or such other place as the General Partner may from
time to time designate by notice to the Limited Partners.
Section 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) serve as a partner of either or both of the Operating
Partnerships and, in connection therewith, to exercise all the rights and powers
conferred upon the Partnership as a partner of an Operating Partnership pursuant
to the Operating Partnership Agreement for such Operating Partnership or
otherwise, (b) engage directly in, or enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage indirectly in, any business activity that the Operating Partnerships are
permitted to engage in by the Operating Partnership Agreements and, in
connection therewith, to exercise all of the rights and powers conferred upon
the Partnership pursuant to the agreements relating to such business activity,
(c) engage directly in, or enter into or form any corporation, partnership,
joint venture, limited liability company or other arrangement to engage
indirectly in, any business activity that is approved by the General Partner and
which lawfully may be conducted by a limited partnership organized pursuant to
the Delaware Act and, in connection
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therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity;
provided, however, that the General Partner reasonably determines, as of the
date of the acquisition or commencement of such activity, that such activity (i)
generates "qualifying income" (as such term is defined pursuant to Section 7704
of the Code) or (ii) enhances the operations of an activity of the Operating
Partnership or a Partnership activity that generates qualifying income, and (d)
do anything necessary or appropriate to the foregoing, including the making of
capital contributions or loans to a Group Member. The General Partner has no
obligation or duty to the Partnership, the Limited Partners, or the Assignees to
propose or approve, and in its discretion may decline to propose or approve, the
conduct by the Partnership of any business.
Section 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
Section 2.6 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner and, if a Liquidator shall have been selected
pursuant to Section 12.3, the Liquidator, (and any successor to the Liquidator
by merger, transfer, assignment, election or otherwise) and each of their
authorized officers and attorneys-in-fact, as the case may be, with full power
of substitution, as his true and lawful agent and attorney-in-fact, with full
power and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
General Partner or the Liquidator deems necessary or appropriate to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all other jurisdictions
in which the Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the General Partner or
the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of this
Agreement; (C) all certificates, documents and other instruments (including
conveyances and a certificate of cancellation) that the General Partner or
the Liquidator deems necessary or appropriate to reflect the dissolution
and liquidation of the Partnership pursuant to the terms of this Agreement;
(D) all certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to,
or other events described in, Article IV, X, XI or XII; (E) all
certificates, documents and other instruments relating to the determination
of the rights, preferences and privileges of any class or series of
Partnership Securities issued
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pursuant to Section 5.6; and (F) all certificates, documents and other
instruments (including agreements and a certificate of merger) relating to
a merger or consolidation of the Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the General
Partner or the Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action that is made or given by
the Partners hereunder or is consistent with the terms of this Agreement or
is necessary or appropriate, in the discretion of the General Partner or
the Liquidator, to effectuate the terms or intent of this Agreement;
provided, that when required by Section 13.3 or any other provision of this
Agreement that establishes a percentage of the Limited Partners or of the
Limited Partners of any class or series required to take any action, the
General Partner and the Liquidator may exercise the power of attorney made
in this Section 2.6(a)(ii) only after the necessary vote, consent or
approval of the Limited Partners or of the Limited Partners of such class
or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be bound
by any representation made by the General Partner or the Liquidator acting in
good faith pursuant to such power of attorney; and each such Limited Partner or
Assignee, to the maximum extent permitted by law, hereby waives any and all
defenses that may be available to contest, negate or disaffirm the action of the
General Partner or the Liquidator taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within 15 days after receipt of the request
therefor, such further designation, powers of attorney and other instruments as
the General Partner or the Liquidator deems necessary to effectuate this
Agreement and the purposes of the Partnership.
Section 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2088 or until
the earlier dissolution of the Partnership in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal
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entity shall continue until the cancellation of the Certificate of Limited
Partnership as provided in the Delaware Act.
Section 2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner, one or more of its Affiliates or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership assets for which record title is held in the name
of the General Partner or one or more of its Affiliates or one or more nominees
shall be held by the General Partner or such Affiliate or nominee for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use reasonable
efforts to cause record title to such assets (other than those assets in respect
of which the General Partner determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership impracticable) to
be vested in the Partnership as soon as reasonably practicable; provided,
further, that, prior to the withdrawal or removal of the General Partner or as
soon thereafter as practicable, the General Partner shall use reasonable efforts
to effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the General Partner. All Partnership assets shall be recorded as the property of
the Partnership in its books and records, irrespective of the name in which
record title to such Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.
Section 3.2 Management of Business.
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware Act)
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership. Any
action taken by any Affiliate of the General Partner or any officer, director,
employee, member, general partner, agent or trustee of the General Partner or
any of its Affiliates, or any officer, director, employee, member, general
partner, agent or trustee of a Group Member, in its capacity as such, shall not
be deemed to be participation in the control of the business of the Partnership
by a limited partner of the Partnership (within the meaning of Section 17-303(a)
of the
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Delaware Act) and shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5 and the Omnibus Agreement, which
shall continue to be applicable to the Persons referred to therein, regardless
of whether such Persons shall also be Limited Partners or Assignees, any Limited
Partner or Assignee shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership Group. Neither the Partnership nor any of the other Partners or
Assignees shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee.
Section 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon reasonable written demand
and at such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
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(b) The General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the General Partner deems
reasonable, (i) any information that the General Partner reasonably believes to
be in the nature of trade secrets or (ii) other information the disclosure of
which the General Partner in good faith believes (A) is not in the best
interests of the Partnership Group, (B) could damage the Partnership Group or
(C) that any Group Member is required by law or by agreement with any third
party to keep confidential (other than agreements with Affiliates of the
Partnership the primary purpose of which is to circumvent the obligations set
forth in this Section 3.4).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF
PARTNERSHIP INTERESTS
Section 4.1 Certificates.
Upon the Partnership's issuance of Common Units or Subordinated Units to
any Person, the Partnership shall issue one or more Certificates in the name of
such Person evidencing the number of such Units being so issued. In addition,
(a) upon the General Partner's request, the Partnership shall issue to it one or
more Certificates in the name of the General Partner evidencing its interests in
the Partnership and (b) upon the request of any Person owning Incentive
Distribution Rights or any other Partnership Securities other than Common Units
or Subordinated Units, the Partnership shall issue to such Person one or more
certificates evidencing such Incentive Distribution Rights or other Partnership
Securities other than Common Units or Subordinated Units. Certificates shall be
executed on behalf of the Partnership by the Chairman of the Board, President or
any Executive Vice President or Vice President and the Secretary or any
Assistant Secretary of the General Partner. No Common Unit Certificate shall be
valid for any purpose until it has been countersigned by the Transfer Agent;
provided, however, that if the General Partner elects to issue Common Units in
global form, the Common Unit Certificates shall be valid upon receipt of a
certificate from the Transfer Agent certifying that the Common Units have been
duly registered in accordance with the directions of the Partnership and the
Underwriters. Subject to the requirements of Section 6.7(b), the Partners
holding Certificates evidencing Subordinated Units may exchange such
Certificates for Certificates evidencing Common Units on or after the date on
which such Subordinated Units are converted into Common Units pursuant to the
terms of Section 5.8.
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent,
the appropriate officers of the General Partner on behalf of the Partnership
shall execute, and the Transfer Agent shall countersign and deliver in exchange
therefor, a new Certificate evidencing the same number and type of Partnership
Securities as the Certificate so surrendered.
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(b) The appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver, and the Transfer Agent shall countersign
a new Certificate in place of any Certificate previously issued if the Record
Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to
the Partnership, that a previously issued Certificate has been lost,
destroyed or stolen;
(ii) requests the issuance of a new Certificate before the Partnership
has notice that the Certificate has been acquired by a purchaser for value
in good faith and without notice of an adverse claim;
(iii) if requested by the Partnership, delivers to the Partnership a
bond, in form and substance satisfactory to the Partnership, with surety or
sureties and with fixed or open penalty as the Partnership may reasonably
direct, in its sole discretion, to indemnify the Partnership, the Partners,
the General Partner and the Transfer Agent against any claim that may be
made on account of the alleged loss, destruction or theft of the
Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Limited Partner Interests represented by the
Certificate is registered before the Partnership, the General Partner or the
Transfer Agent receives such notification, the Limited Partner or Assignee shall
be precluded from making any claim against the Partnership, the General Partner
or the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 4.2, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) reasonably connected therewith.
Section 4.3 Record Holders.
The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee with respect to any Partnership Interest and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Partnership Interest on the part of any other Person, regardless of whether
the Partnership shall have actual or other notice thereof, except as otherwise
provided by law or any applicable rule, regulation, guideline or requirement of
any National Securities Exchange on which such Partnership Interests are listed
for trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company or clearing corporation or an agent of any of the
foregoing) is acting as nominee, agent or in some other representative capacity
for another Person in acquiring and/or holding Partnership Interests, as between
the Partnership on the one hand, and such other Persons on the other, such
representative Person (a) shall be the Partner or Assignee
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(as the case may be) of record and beneficially, (b) must execute and deliver a
Transfer Application and (c) shall be bound by this Agreement and shall have the
rights and obligations of a Partner or Assignee (as the case may be) hereunder
and as, and to the extent, provided for herein.
Section 4.4 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its General Partner Interest to another Person who
becomes the General Partner, by which the holder of a Limited Partner Interest
assigns such Limited Partner Interest to another Person who is or becomes a
Limited Partner or an Assignee, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent
a disposition by any stockholder of the General Partner of any or all of the
issued and outstanding stock of the General Partner.
Section 4.5 Registration and Transfer of Limited Partner Interests.
(a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the General Partner on behalf of the Partnership shall execute and
deliver, and in the case of Common Units, the Transfer Agent shall countersign
and deliver, in the name of the holder or the designated transferee or
transferees, as required pursuant to the holder's instructions, one or more new
Certificates evidencing the same aggregate number and type of Limited Partner
Interests as was evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.9, the Partnership shall
not recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer and such Certificates are accompanied by a Transfer Application duly
executed by the transferee (or the transferee's attorney-in-fact duly authorized
in writing). No charge shall be imposed by the Partnership for such transfer;
provided, that
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as a condition to the issuance of any new Certificate under this Section 4.5,
the Partnership may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed with respect thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to
Section 10.2, the Record Holder of a Limited Partner Interest shall be an
Assignee in respect of such Limited Partner Interest. Limited Partners may
include custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this Agreement, (iii) represented and warranted that such
transferee has the right, power and authority and, if an individual, the
capacity to enter into this Agreement, (iv) granted the powers of attorney set
forth in this Agreement and (v) given the consents and approvals and made the
waivers contained in this Agreement.
(f) The General Partner and its Affiliates shall have the right at any
time to transfer their Subordinated Units and Common Units (whether issued upon
conversion of the Subordinated Units or otherwise) to one or more Persons.
Section 4.6 Transfer of the General Partner's General Partner Interest.
(a) Subject to Section 4.6(c) below, prior to December 31, 2008, the
General Partner shall not transfer all or any part of its General Partner
Interest to a Person unless such transfer (i) has been approved by the prior
written consent or vote of the holders of at least a majority of the Outstanding
Common Units (excluding Common Units held by the General Partner and its
Affiliates) or (ii) is of all, but not less than all, of its General Partner
Interest to (A) an Affiliate of the General Partner or (B) another Person in
connection with the merger or consolidation of the General Partner with or into
another Person or the transfer by the General Partner of all or substantially
all of its assets to another Person.
(b) Subject to Section 4.6(c) below, on or after December 31, 2008,
the General Partner may transfer all or any of its General Partner Interest
without Unitholder approval.
(c) Notwithstanding anything herein to the contrary, no transfer by
the General Partner of all or any part of its General Partner Interest to
another Person shall be permitted unless (i) the transferee agrees to assume the
rights and duties of the General Partner under this Agreement and the Operating
Partnership Agreements and to be bound by the provisions of this Agreement and
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the Operating Partnership Agreements, (ii) the Partnership receives an Opinion
of Counsel that such transfer would not result in the loss of limited liability
of any Limited Partner or of any limited partner of the Operating Partnerships
or cause the Partnership or the Operating Partnerships to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes (to the extent not already so treated or taxed) and
(iii) such transferee also agrees to purchase all (or the appropriate portion
thereof, if applicable) of the partnership interest of the General Partner as
the general partner or managing member of each other Group Member. In the case
of a transfer pursuant to and in compliance with this Section 4.6, the
transferee or successor (as the case may be) shall, subject to compliance with
the terms of Section 10.3, be admitted to the Partnership as a General Partner
immediately prior to the transfer of the Partnership Interest, and the business
of the Partnership shall continue without dissolution.
Section 4.7 Transfer of Incentive Distribution Rights.
Prior to December 31, 2008, a holder of Incentive Distribution Rights may
transfer any or all of the Incentive Distribution Rights held by such holder
without any consent of the Unitholders (a) to an Affiliate or (b) to another
Person in connection with (i) the merger or consolidation of such holder of
Incentive Distribution Rights with or into such other Person or (ii) the
transfer by such holder of all or substantially all of its assets to such other
Person. Any other transfer of the Incentive Distribution Rights prior to
December 31, 2008, shall require the prior approval of holders at least a
majority of the Outstanding Common Units (excluding Common Units held by the
General Partner and its Affiliates). On or after December 31, 2008, the General
Partner or any other holder of Incentive Distribution Rights may transfer any or
all of its Incentive Distribution Rights without Unitholder approval.
Notwithstanding anything herein to the contrary, no transfer of Incentive
Distribution Rights to another Person shall be permitted unless the transferee
agrees to be bound by the provisions of this Agreement. The General Partner
shall have the authority (but shall not be required) to adopt such reasonable
restrictions on the transfer of Incentive Distribution Rights and requirements
for registering the transfer of Incentive Distribution Rights as the General
Partner, in its sole discretion, shall determine are necessary or appropriate.
Section 4.8 Restrictions on Transfers.
(a) Except as provided in Section 4.8(d) below, but notwithstanding
the other provisions of this Article IV, no transfer of any Partnership
Interests shall be made if such transfer would (i) violate the then applicable
federal or state securities laws or rules and regulations of the Commission, any
state securities commission or any other governmental authority with
jurisdiction over such transfer, (ii) terminate the existence or qualification
of the Partnership or either Operating Partnership under the laws of the
jurisdiction of its formation, or (iii) cause the Partnership or either
Operating Partnership to be treated as an association taxable as a corporation
or otherwise to be taxed as an entity for federal income tax purposes (to the
extent not already so treated or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid
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a significant risk of the Partnership or either Operating Partnership becoming
taxable as a corporation or otherwise to be taxed as an entity for federal
income tax purposes. The restrictions may be imposed by making such amendments
to this Agreement as the General Partner may determine to be necessary or
appropriate to impose such restrictions; provided, however, that any amendment
that the General Partner believes, in the exercise of its reasonable discretion,
could result in the delisting or suspension of trading of any class of Limited
Partner Interests on the principal National Securities Exchange on which such
class of Limited Partner Interests is then traded must be approved, prior to
such amendment being effected, by the holders of at least a majority of the
Outstanding Limited Partner Interests of such class.
(c) The transfer of a Subordinated Unit that has converted into a
Common Unit shall be subject to the restrictions imposed by Section 6.7(b).
(d) Nothing contained in this Article IV, or elsewhere in this
Agreement, shall preclude the settlement of any transactions involving
Partnership Interests entered into through the facilities of any National
Securities Exchange on which such Partnership Interests are listed for trading.
Section 4.9 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that, in the reasonable determination of the General
Partner, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the
General Partner may request any Limited Partner or Assignee to furnish to the
General Partner, within 30 days after receipt of such request, an executed
Citizenship Certification or such other information concerning his nationality,
citizenship or other related status (or, if the Limited Partner or Assignee is a
nominee holding for the account of another Person, the nationality, citizenship
or other related status of such Person) as the General Partner may request. If a
Limited Partner or Assignee fails to furnish to the General Partner within the
aforementioned 30-day period such Citizenship Certification or other requested
information or if upon receipt of such Citizenship Certification or other
requested information the General Partner determines, with the advice of
counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the
Partnership Interests owned by such Limited Partner or Assignee shall be subject
to redemption in accordance with the provisions of Section 4.10. In addition,
the General Partner may require that the status of any such Partner or Assignee
be changed to that of a Non-citizen Assignee and, thereupon, the General Partner
shall be substituted for such Non-citizen Assignee as the Limited Partner in
respect of his Limited Partner Interests.
(b) The General Partner shall, in exercising voting rights in respect
of Limited Partner Interests held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Partners (including
without limitation the General Partner) in respect of Limited Partner Interests
other than those of Non-citizen Assignees are cast, either for, against or
abstaining as to the matter.
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(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall
have no right to receive a distribution in kind pursuant to Section 12.4 but
shall be entitled to the cash equivalent thereof, and the Partnership shall
provide cash in exchange for an assignment of the Non-citizen Assignee's share
of the distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request admission as a Substituted Limited Partner with respect to any
Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.10, and upon his admission pursuant to Section 10.2, the General
Partner shall cease to be deemed to be the Limited Partner in respect of the
Non-citizen Assignee's Limited Partner Interests.
Section 4.10 Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the General Partner determines, with the
advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the General Partner that such Limited Partner or Assignee
is an Eligible Citizen or has transferred his Partnership Interests to a Person
who is an Eligible Citizen and who furnishes a Citizenship Certification to the
General Partner prior to the date fixed for redemption as provided below, redeem
the Partnership Interest of such Limited Partner or Assignee as follows:
(i) The General Partner shall, not later than the 30th day before the
date fixed for redemption, give notice of redemption to the Limited Partner
or Assignee, at his last address designated on the records of the
Partnership or the Transfer Agent, by registered or certified mail, postage
prepaid. The notice shall be deemed to have been given when so mailed. The
notice shall specify the Redeemable Interests, the date fixed for
redemption, the place of payment, that payment of the redemption price will
be made upon surrender of the Certificate evidencing the Redeemable
Interests and that on and after the date fixed for redemption no further
allocations or distributions to which the Limited Partner or Assignee would
otherwise be entitled in respect of the Redeemable Interests will accrue or
be made.
(ii) The aggregate redemption price for Redeemable Interests shall be
an amount equal to the Current Market Price (the date of determination of
which shall be the date fixed for redemption) of Limited Partner Interests
of the class to be so redeemed multiplied by the number of Limited Partner
Interests of each such class included among the Redeemable Interests. The
redemption price shall be paid, in the discretion of the General Partner,
in cash or by delivery of a promissory note of the Partnership in the
principal amount of the
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redemption price, bearing interest at the rate of 10% annually and payable
in three equal annual installments of principal together with accrued
interest, commencing one year after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the
Certificate evidencing the Redeemable Interests, duly endorsed in blank or
accompanied by an assignment duly executed in blank, the Limited Partner or
Assignee or his duly authorized representative shall be entitled to receive
the payment therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.10 shall also be applicable to
Limited Partner Interests held by a Limited Partner or Assignee as nominee of a
Person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.10 shall prevent the recipient of a
notice of redemption from transferring his Limited Partner Interest before the
redemption date if such transfer is otherwise permitted under this Agreement.
Upon receipt of notice of such a transfer, the General Partner shall withdraw
the notice of redemption, provided the transferee of such Limited Partner
Interest certifies to the satisfaction of the General Partner in a Citizenship
Certification delivered in connection with the Transfer Application that he is
an Eligible Citizen. If the transferee fails to make such certification, such
redemption shall be effected from the transferee on the original redemption
date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Organizational Contributions.
In connection with the formation of the Partnership under the Delaware Act,
the General Partner made an initial Capital Contribution to the Partnership in
the amount of $990.00, for a certain interest in the Partnership and has been
admitted as the General Partner and as a Limited Partner of the Partnership, and
the predecessor in interest to the Organizational Limited Partner made an
initial Capital Contribution to the Partnership in the amount of $990.00 for an
interest in the Partnership and has been admitted as a Limited Partner of the
Partnership. As of the Closing Date, the interest of the Organizational Limited
Partner shall be redeemed as provided in the Contribution and Conveyance
Agreement; the initial Capital Contributions of each Partner shall thereupon be
refunded; and the Organizational Limited Partner shall cease to be a Limited
Partner of the Partnership. Fifty percent of any interest or other profit that
may have resulted from the investment or other use of such initial Capital
Contributions shall be allocated and distributed to the Organizational Limited
Partner, and the balance thereof shall be allocated and distributed to the
General Partner.
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Section 5.2 Contributions by the General Partner and its Affiliates.
(a) On the Closing Date and pursuant to the Contribution and
Conveyance Agreement, (i) the General Partner shall contribute to the
Partnership, as a Capital Contribution, all but 1.0101% of its general partner
interest in Plains Marketing, L.P. and all of its limited partner interest in
All American Pipeline, L.P. in exchange for (A) the continuation of its General
Partner Interest, subject to all of the rights, privileges and duties of the
General Partner under this Agreement, (B) 6,974,239 Common Units, (C) 9,859,581
Subordinated Units and (D) the Incentive Distribution Rights and (ii) PAAI LLC,
a Delaware limited liability company, will contribute to the Partnership, as a
Capital Contribution, all of its limited partner interest in Plains Marketing in
exchange for 170,038 Subordinated Units.
(b) Upon the issuance of any additional Limited Partner Interests by
the Partnership (other than the issuance of the Common Units issued in the
Initial Offering or pursuant to the Over-Allotment Option), the General Partner
shall be required to make additional Capital Contributions equal to 1/99th of
any amount contributed to the Partnership by the Limited Partners in exchange
for such additional Limited Partner Interests. Except as set forth in the
immediately preceding sentence and Article XII, the General Partner shall not be
obligated to make any additional Capital Contributions to the Partnership.
Section 5.3 Contributions by Initial Limited Partners and Reimbursement of
the General Partner.
(a) On the Closing Date and pursuant to the Underwriting Agreement,
each Underwriter shall contribute to the Partnership cash in an amount equal to
the Issue Price per Initial Common Unit, multiplied by the number of Common
Units specified in the Underwriting Agreement to be purchased by such
Underwriter at the Closing Date. In exchange for such Capital Contributions by
the Underwriters, the Partnership shall issue Common Units to each Underwriter
on whose behalf such Capital Contribution is made in an amount equal to the
quotient obtained by dividing (i) the cash contribution to the Partnership by or
on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.
(b) Notwithstanding anything else herein contained, $147,989,500 of
the proceeds received by the Partnership from the issuance of Common Units
pursuant to Section 5.3(a) will be distributed to the General Partner. Such
distribution shall be a reimbursement for certain capital expenditures incurred
by the General Partner within two years preceding the Closing Date with respect
to Assets contributed to the Partnership Group.
(c) Upon the exercise of the Over-Allotment Option, each Underwriter
shall contribute to the Partnership cash in an amount equal to the Issue Price
per Initial Common Unit, multiplied by the number of Common Units specified in
the Underwriting Agreement to be purchased by such Underwriter at the Option
Closing Date. In exchange for such Capital Contributions by the Underwriters,
the Partnership shall issue Common Units to each Underwriter on whose behalf
such Capital Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash
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contributions to the Partnership by or on behalf of such Underwriter by (ii) the
Issue Price per Initial Common Unit. Upon receipt by the Partnership of the
Capital Contributions from the Underwriters as provided in this Section 5.3(b),
the Partnership shall use such cash to redeem from the General Partner or its
Affiliates that number of Common Units held by the General Partner or its
Affiliates equal to the number of Common Units issued to the Underwriters as
provided in this Section 5.3(b).
(d) No Limited Partner Interests will be issued or issuable as of or
at the Closing Date other than (i) the Common Units issuable pursuant to
subparagraph (a) hereof in aggregate number equal to 13,085,000, (ii) the
"Additional Units" as such term is used in the Underwriting Agreement in an
aggregate number up to 1,959,429 issuable upon exercise of the Over-Allotment
Option pursuant to subparagraph (c) hereof, (iii) the 10,029,619 Subordinated
Units issuable to the General Partner or its Affiliates pursuant to Section 5.2
hereof, and (iv) the Incentive Distribution Rights.
Section 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered as such
by law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Partner or Assignee shall have
priority over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions. Any such return shall
be a compromise to which all Partners and Assignees agree within the meaning of
17-502(b) of the Delaware Act.
Section 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion) owning a Partnership Interest a
separate Capital Account with respect to such Partnership Interest in accordance
with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (i) the amount of all Capital Contributions made
to the Partnership with respect to such Partnership Interest pursuant to this
Agreement and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
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(b) For purposes of computing the amount of any item of income, gain,
loss or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
General Partner based upon the provisions of the Operating Partnership
Agreements) of all property owned by the Operating Partnerships or any
other Subsidiary that is classified as a partnership for federal income tax
purposes.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization attributable
to any Contributed Property shall be determined as if the adjusted basis of
such property on the date it was acquired by the Partnership were equal to
the Agreed Value of such property. Upon an adjustment pursuant to Section
5.5(d) to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions for
such depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such property
were equal to the Carrying Value of such
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property immediately following such adjustment and (B) using a rate of
depreciation, cost recovery or amortization derived from the same method
and useful life (or, if applicable, the remaining useful life) as is
applied for federal income tax purposes; provided, however, that, if the
asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be determined
using any reasonable method that the General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
(c) (i) A transferee of a Partnership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(ii) Immediately prior to the transfer of a Subordinated Unit or of a
Subordinated Unit that has converted into a Common Unit pursuant to Section
5.8 by a holder thereof (other than a transfer to an Affiliate unless the
General Partner elects to have this subparagraph 5.5(c)(ii) apply), the
Capital Account maintained for such Person with respect to its Subordinated
Units or converted Subordinated Units will (A) first, be allocated to the
Subordinated Units or converted Subordinated Units to be transferred in an
amount equal to the product of (x) the number of such Subordinated Units or
converted Subordinated Units to be transferred and (y) the Per Unit Capital
Amount for a Common Unit, and (B) second, any remaining balance in such
Capital Account will be retained by the transferor, regardless of whether
it has retained any Subordinated Units or converted Subordinated Units.
Following any such allocation, the transferor's Capital Account, if any,
maintained with respect to the retained Subordinated Units or converted
Subordinated Units, if any, will have a balance equal to the amount
allocated under clause (B) hereinabove, and the transferee's Capital
Account established with respect to the transferred Subordinated Units or
converted Subordinated Units will have a balance equal to the amount
allocated under clause (A) hereinabove.
(d) (i) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or
Contributed Property or the conversion of the General Partner's Combined
Interest to Common Units pursuant to Section 11.3(b), the Capital Account of all
Partners and the Carrying Value of each Partnership property immediately prior
to such issuance shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 6.1 in the same manner as any item
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of gain or loss actually recognized during such period would have been
allocated. In determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the General Partner
using such reasonable method of valuation as it may adopt; provided, however,
that the General Partner, in arriving at such valuation, must take fully into
account the fair market value of the Partnership Interests of all Partners at
such time. The General Partner shall allocate such aggregate value among the
assets of the Partnership (in such manner as it determines in its discretion to
be reasonable) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-
1(b) (2)(iv)(f), immediately prior to any actual or deemed distribution to
a Partner of any Partnership property (other than a distribution of cash
that is not in redemption or retirement of a Partnership Interest), the
Capital Accounts of all Partners and the Carrying Value of all Partnership
property shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership property, as if
such Unrealized Gain or Unrealized Loss had been recognized in a sale of
such property immediately prior to such distribution for an amount equal to
its fair market value, and had been allocated to the Partners, at such
time, pursuant to Section 6.1 in the same manner as any item of gain or
loss actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to a distribution
shall (A) in the case of an actual distribution which is not made pursuant
to Section 12.4 or in the case of a deemed contribution and/or distribution
occurring as a result of a termination of the Partnership pursuant to
Section 708 of the Code, be determined and allocated in the same manner as
that provided in Section 5.5(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 12.4, be determined and allocated by the
Liquidator using such reasonable method of valuation as it may adopt.
Section 5.6 Issuances of Additional Partnership Securities.
(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any time
and from time to time to such Persons for such consideration and on such terms
and conditions as shall be established by the General Partner in its sole
discretion, all without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by
the Partnership pursuant to Section 5.6(a) may be issued in one or more classes,
or one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the General Partner in the
exercise of its sole discretion, including (i) the right to share Partnership
profits and losses or items thereof; (ii) the right to share in Partnership
distributions; (iii) the rights upon dissolution and
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liquidation of the Partnership; (iv) whether, and the terms and conditions upon
which, the Partnership may redeem the Partnership Security; (v) whether such
Partnership Security is issued with the privilege of conversion or exchange and,
if so, the terms and conditions of such conversion or exchange; (vi) the terms
and conditions upon which each Partnership Security will be issued, evidenced by
certificates and assigned or transferred; and (vii) the right, if any, of each
such Partnership Security to vote on Partnership matters, including matters
relating to the relative rights, preferences and privileges of such Partnership
Security.
(c) The General Partner is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities pursuant to this Section
5.6, (ii) the conversion of the General Partner Interest and Incentive
Distribution Rights into Units pursuant to the terms of this Agreement, (iii)
the admission of Additional Limited Partners and (iv) all additional issuances
of Partnership Securities. The General Partner is further authorized and
directed to specify the relative rights, powers and duties of the holders of the
Units or other Partnership Securities being so issued. The General Partner shall
do all things necessary to comply with the Delaware Act and is authorized and
directed to do all things it deems to be necessary or advisable in connection
with any future issuance of Partnership Securities or in connection with the
conversion of the General Partner Interest and Incentive Distribution Rights
into Units pursuant to the terms of this Agreement, including compliance with
any statute, rule, regulation or guideline of any federal, state or other
governmental agency or any National Securities Exchange on which the Units or
other Partnership Securities are listed for trading.
Section 5.7 Limitations on Issuance of Additional Partnership Securities.
The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:
(a) During the Subordination Period, the Partnership shall not issue
(and shall not issue any options, rights, warrants or appreciation rights
relating to) an aggregate of more than 10,030,000 additional Parity Units
without the prior approval of the holders of a Unit Majority. In applying this
limitation, there shall be excluded Common Units and other Parity Units issued
(A) in connection with the exercise of the Over-Allotment Option, (B) in
accordance with Sections 5.7(b) and 5.7(c), (C) upon conversion of Subordinated
Units pursuant to Section 5.8, (D) upon conversion of the General Partner
Interest and Incentive Distribution Rights pursuant to Section 11.3(b), (D)
pursuant to the employee benefit plans of the General Partner, the Partnership
or any other Group Member and (E) in the event of a combination or subdivision
of Common Units.
(b) The Partnership may also issue an unlimited number of Parity
Units, prior to the end of the Subordination Period and without the prior
approval of the Unitholders, if such issuance occurs (i) in connection with an
Acquisition or a Capital Improvement or (ii) within 365 days of, and the net
proceeds from such issuance are used to repay debt incurred in connection with,
an Acquisition or a Capital Improvement, in each case where such Acquisition or
Capital Improvement
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involves assets that, if acquired by the Partnership as of the date that is one
year prior to the first day of the Quarter in which such Acquisition is to be
consummated or such Capital Improvement is to be completed, would have resulted,
on a pro forma basis, in an increase in:
(A) the amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) with
respect to each of the four most recently completed Quarters (on a pro
forma basis as described below) as compared to
(B) the actual amount of Adjusted Operating Surplus generated by
the Partnership on a per-Unit basis (for all Outstanding Units)
(excluding Adjusted Operating Surplus attributable to the Acquisition
or Capital Improvement) with respect to each of such four most
recently completed Quarters.
If the issuance of Parity Units with respect to an Acquisition or Capital
Improvement occurs within the first four full Quarters after the Closing Date,
then Adjusted Operating Surplus as used in clauses (A) (subject to the
succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if
any, that commenced after the Closing Date for which actual results of
operations are available, based on the actual Adjusted Operating Surplus of the
Partnership generated with respect to such Quarter, and (ii) for each other
Quarter, on a pro forma basis consistent with the procedures, as applicable, set
forth in Appendix D to the Registration Statement. Furthermore, the amount in
clause (A) shall be determined on a pro forma basis assuming that (1) all of the
Parity Units to be issued in connection with or within 365 days of such
Acquisition or Capital Improvement had been issued and outstanding, (2) all
indebtedness for borrowed money to be incurred or assumed in connection with
such Acquisition or Capital Improvement (other than any such indebtedness that
is to be repaid with the proceeds of such issuance of Parity Units) had been
incurred or assumed, in each case as of the commencement of such four-Quarter
period, (3) the personnel expenses that would have been incurred by the
Partnership in the operation of the acquired assets are the personnel expenses
for employees to be retained by the Partnership in the operation of the acquired
assets, and (4) the non-personnel costs and expenses are computed on the same
basis as those incurred by the Partnership in the operation of the Partnership's
business at similarly situated Partnership facilities.]
(c) The Partnership may also issue an unlimited number of Parity
Units, prior to the end of the Subordination Period and without the approval of
the Unitholders, if the proceeds from such issuance are used exclusively to
repay up to $40 million of indebtedness of a Group Member where the aggregate
amount of distributions that would have been paid with respect to such newly
issued Units or Partnership Securities, plus the related distributions on the
General Partner Interest in the Partnership and the Operating Partnership in
respect of the four-Quarter period ending prior to the first day of the Quarter
in which the issuance is to be consummated (assuming such additional Units or
Partnership Securities had been Outstanding throughout such period and that
distributions equal to the distributions that were actually paid on the
Outstanding Units during the period were paid on such additional Units or
Partnership Securities) did not exceed the interest costs actually incurred
during such period on the indebtedness that is to be repaid (or, if such
indebtedness was not
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outstanding throughout the entire period, would have been incurred had such
indebtedness been outstanding for the entire period). In the event that the
Partnership is required to pay a prepayment penalty in connection with the
repayment of such indebtedness, for purposes of the foregoing test the number of
Parity Units issued to repay such indebtedness shall be deemed increased by the
number of Parity Units that would need to be issued to pay such penalty.
(d) During the Subordination Period, the Partnership shall not issue
(and shall not issue any options, rights, warrants or appreciation rights
relating to) additional Partnership Securities having rights to distributions or
in liquidation ranking prior or senior to the Common Units, without the prior
approval of the holders of a Unit Majority.
(e) No fractional Units shall be issued by the Partnership.
Section 5.8 Conversion of Subordinated Units.
(a) A total of 2,507,405 of the Outstanding Subordinated Units will
convert into Common Units on a one-for-one basis on the first day after the
Record Date for distribution in respect of any Quarter ending on or after
December 31, 2001, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units during such
periods;
(ii) the Adjusted Operating Surplus generated during each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Common Units and Subordinated Units that were Outstanding
during such periods on a fully-diluted basis (i.e. taking into account for
purposes of such determination all Outstanding Common Units, all
Outstanding Subordinated Units, all Common Units and Subordinated Units
issuable upon exercise of employee options that have, as of the date of
determination, already vested or are scheduled to vest prior to the end of
the Quarter immediately following the Quarter with respect to which such
determination is made, and all Common Units and Subordinated Units that
have, as of the date of determination, been earned by but not yet issued to
management of the Partnership in respect of incentive compensation), plus
the related distribution on the General Partner Interest in the Partnership
and the Operating Partnerships, during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.
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(b) An additional 2,507,405 of the Outstanding Subordinated Units will
convert into Common Units on a one-for-one basis on the first day after the
Record Date for distribution in respect of any Quarter ending on or after
December 31, 2002, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units during such
periods;
(ii) the Adjusted Operating Surplus generated during each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Common Units and Subordinated Units that were Outstanding
during such periods on a fully-diluted basis (i.e. taking into account for
purposes of such determination all Outstanding Common Units, all
Outstanding Subordinated Units, all Common Units and Subordinated Units
issuable upon exercise of employee options that have, as of the date of
determination, already vested or are scheduled to vest prior to the end of
the Quarter immediately following the Quarter with respect to which such
determination is made, and all Common Units and Subordinated Units that
have, as of the date of determination, been earned by but not yet issued to
management of the Partnership in respect of incentive compensation), plus
the related distribution on the General Partner Interest in the Partnership
and the Operating Partnerships, during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero;
provided, however, that the conversion of Subordinated Units pursuant to this
Section 5.8(b) may not occur until at least one year following the conversion of
Subordinated Units pursuant to Section 5.8(a).
(c) In the event that less than all of the Outstanding Subordinated
Units shall convert into Common Units pursuant to Section 5.8(a) or 5.8(b) at a
time when there shall be more than one holder of Subordinated Units, then,
unless all of the holders of Subordinated Units shall agree to a different
allocation, the Subordinated Units that are to be converted into Common Units
shall be allocated among the holders of Subordinated Units pro rata based on the
number of Subordinated Units held by each such holder.
(d) Any Subordinated Units that are not converted into Common Units
pursuant to Sections 5.8(a) and (b) shall convert into Common Units on a one-
for-one basis on the first day following the Record Date for distributions in
respect of the final Quarter of the Subordination Period.
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(e) Notwithstanding any other provision of this Agreement, all the
then Outstanding Subordinated Units will automatically convert into Common Units
on a one-for-one basis as set forth in, and pursuant to the terms of, Section
11.4.
(f) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).
Section 5.9 Limited Preemptive Right.
Except as provided in this Section 5.9 and in Section 5.2, no Person shall
have any preemptive, preferential or other similar right with respect to the
issuance of any Partnership Security, whether unissued, held in the treasury or
hereafter created. The General Partner shall have the right, which it may from
time to time assign in whole or in part to any of its Affiliates, to purchase
Partnership Securities from the Partnership whenever, and on the same terms
that, the Partnership issues Partnership Securities to Persons other than the
General Partner and its Affiliates, to the extent necessary to maintain the
Percentage Interests of the General Partner and its Affiliates equal to that
which existed immediately prior to the issuance of such Partnership Securities.
Section 5.10 Splits and Combination.
(a) Subject to Sections 5.10(d), 6.6 and 6.9 (dealing with adjustments
of distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any Common
Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of
Units (including the number of Subordinated Units that may convert prior to the
end of the Subordination Period and the number of additional Parity Units that
may be issued pursuant to Section 5.7 without a Unitholder vote) are
proportionately adjusted retroactive to the beginning of the Partnership.
(b) Whenever such a distribution, subdivision or combination of
Partnership Securities is declared, the General Partner shall select a Record
Date as of which the distribution, subdivision or combination shall be effective
and shall send notice thereof at least 20 days prior to such Record Date to each
Record Holder as of a date not less than 10 days prior to the date of such
notice. The General Partner also may cause a firm of independent public
accountants selected by it to calculate the number of Partnership Securities to
be held by each Record Holder after giving effect to such distribution,
subdivision or combination. The General Partner shall be entitled to rely on any
certificate provided by such firm as conclusive evidence of the accuracy of such
calculation.
(c) Promptly following any such distribution, subdivision or
combination, the Partnership may issue Certificates to the Record Holders of
Partnership Securities as of the applicable Record Date representing the new
number of Partnership Securities held by such Record Holders, or the General
Partner may adopt such other procedures as it may deem appropriate to reflect
such
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changes. If any such combination results in a smaller total number of
Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.
(d) The Partnership shall not issue fractional Units upon any
distribution, subdivision or combination of Units. If a distribution,
subdivision or combination of Units would result in the issuance of fractional
Units but for the provisions of Section 5.7(e) and this Section 5.10(d), each
fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall
be rounded to the next higher Unit).
Section 5.11 Fully Paid and Non-Assessable Nature of Limited Partner
Interests.
All Limited Partner Interests issued pursuant to, and in accordance with
the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non-assessability
may be affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations set
forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated as follows:
(i) First, 100% to the General Partner in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(iii) for all previous taxable years until the aggregate Net Income
allocated to the General Partner pursuant to this Section 6.1(a)(i) for the
current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(iii) for all previous taxable years;
(ii) Second, 1% to the General Partner in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(ii) for all previous taxable years and 99% to the Unitholders, in
accordance with their respective Percentage Interests, until the aggregate
Net Income allocated to such Partners pursuant to this Section 6.1(a)(ii)
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for the current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to such Partners pursuant to Section
6.1(b)(ii) for all previous taxable years; and
(iii) Third, the balance, if any, 100% to the General Partner and the
Unitholders in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated as follows:
(i) First, 1% to the General Partner and 99% to the Unitholders, in
accordance with their respective Percentage Interests, until the aggregate
Net Losses allocated pursuant to this Section 6.1(b)(i) for the current
taxable year and all previous taxable years is equal to the aggregate Net
Income allocated to such Partners pursuant to Section 6.1(a)(iii) for all
previous taxable years, provided that the Net Losses shall not be allocated
pursuant to this Section 6.1(b)(i) to the extent that such allocation would
cause any Unitholder to have a deficit balance in its Adjusted Capital
Account at the end of such taxable year (or increase any existing deficit
balance in its Adjusted Capital Account);
(ii) Second, 1% to the General Partner and 99% to the Unitholders in
accordance with their respective Percentage Interests; provided, that Net
Losses shall not be allocated pursuant to this Section 6.1(b)(ii) to the
extent that such allocation would cause any Unitholder to have a deficit
balance in its Adjusted Capital Account at the end of such taxable year (or
increase any existing deficit balance in its Adjusted Capital Account);
(iii) Third, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Sections 6.4
and 6.5 have been made; provided, however, that solely for purposes of this
Section 6.1(c), Capital Accounts shall not be adjusted for distributions made
pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of the
Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
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(A) First, to each Partner having a deficit balance in its
Capital Account, in the proportion that such deficit balance bears to
the total deficit balances in the Capital Accounts of all Partners,
until each such Partner has been allocated Net Termination Gain equal
to any such deficit balance in its Capital Account;
(B) Second, 99% to all Unitholders holding Common Units, Pro
Rata, and 1% to the General Partner until the Capital Account in
respect of each Common Unit then Outstanding is equal to the sum of
(1) its Unrecovered Capital plus (2) the Minimum Quarterly
Distribution for the Quarter during which the Liquidation Date occurs,
reduced by any distribution pursuant to Section 6.4(a)(i) or (b)(i)
with respect to such Common Unit for such Quarter (the amount
determined pursuant to this clause (2) is hereinafter defined as the
"Unpaid MQD") plus (3) any then existing Cumulative Common Unit
Arrearage;
(C) Third, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the expiration of the Subordination
Period, 99% to all Unitholders holding Subordinated Units, Pro Rata,
and 1% to the General Partner until the Capital Account in respect of
each Subordinated Unit then Outstanding equals the sum of (1) its
Unrecovered Capital, determined for the taxable year (or portion
thereof) to which this allocation of gain relates, plus (2) the
Minimum Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(iii) with respect to such Subordinated Unit for such
Quarter;
(D) Fourth, 85.8673% to all Unitholders, Pro Rata, 13.1327% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to
the General Partner until the Capital Account in respect of each
Common Unit then Outstanding is equal to the sum of (1) its
Unrecovered Capital, plus (2) the Unpaid MQD, plus (3) any then
existing Cumulative Common Unit Arrearage, plus (4) the excess of (aa)
the First Target Distribution less the Minimum Quarterly Distribution
for each Quarter of the Partnership's existence over (bb) the
cumulative per Unit amount of any distributions of Operating Surplus
that was distributed pursuant to Sections 6.4(a)(iv) and 6.4(b)(ii)
(the sum of (1) plus (2) plus (3) plus (4) is hereinafter defined as
the "First Liquidation Target Amount");
(E) Fifth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until the Capital Account in respect of each Common
Unit then Outstanding is equal to the sum of (1) the First Liquidation
Target Amount, plus (2) the excess of (aa) the Second Target
Distribution less the First Target Distribution for each Quarter of
the Partnership's existence over (bb) the cumulative per Unit amount
of any distributions of Operating Surplus that was distributed
pursuant to Sections 6.4(a)(v) and
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6.4(b)(iii) (the sum of (1) plus (2) is hereinafter defined as the
"Second Liquidation Target Amount");
(F) Finally, any remaining amount 50.5102% to all Unitholders,
Pro Rata, 48.4898% to the holders of the Incentive Distribution
Rights, Pro Rata, and 1% to the General Partner.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
among the Partners in the following manner:
(A) First, if such Net Termination Loss is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, 99% to the Unitholders holding
Subordinated Units, Pro Rata, and 1% to the General Partner until the
Capital Account in respect of each Subordinated Unit then Outstanding
has been reduced to zero;
(B) Second, 99% to all Unitholders holding Common Units, Pro
Rata, and 1% to the General Partner until the Capital Account in
respect of each Common Unit then Outstanding has been reduced to zero;
and
(C) Third, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-
2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This Section
6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of
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Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable
period shall be allocated items of Partnership income and gain for such
period (and, if necessary, subsequent periods) in the manner and amounts
provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-
2(j)(2)(ii), or any successor provisions. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d), other than Section 6.1(d)(i) and other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii), with respect to
such taxable period. This Section 6.1(d)(ii) is intended to comply with the
chargeback of items of income and gain requirement in Treasury Regulation
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any property
distributed (except cash or property distributed pursuant to Section
12.4) to any Unitholder with respect to its Units for a taxable year
is greater (on a per Unit basis) than the amount of cash or the Net
Agreed Value of property distributed to the other Unitholders with
respect to their Units (on a per Unit basis), then (1) each Unitholder
receiving such greater cash or property distribution shall be
allocated gross income in an amount equal to the product of (aa) the
amount by which the distribution (on a per Unit basis) to such
Unitholder exceeds the distribution (on a per Unit basis) to the
Unitholders receiving the smallest distribution and (bb) the number of
Units owned by the Unitholder receiving the greater distribution; and
(2) the General Partner shall be allocated gross income in an
aggregate amount equal to 1/99th of the sum of the amounts allocated
in clause (1) above.
(B) After the application of Section 6.1(d)(iii)(A), all or any
portion of the remaining items of Partnership gross income or gain for
the taxable period, if any, shall be allocated 100% to the holders of
Incentive Distribution Rights, Pro Rata, until the aggregate amount of
such items allocated to the holders of Incentive Distribution Rights
pursuant to this paragraph 6.1(d)(iii)(B) for the current taxable year
and all previous taxable years is equal to the cumulative amount of
all Incentive Distributions made to the holders of Incentive
Distribution Rights from the Closing Date to a date 45 days after the
end of the current taxable year.
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income
and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as
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possible unless such deficit balance is otherwise eliminated pursuant to
Section 6.1(d)(i) or (ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period
in excess of the sum of (A) the amount such Partner is required to restore
pursuant to the provisions of this Agreement and (B) the amount such
Partner is deemed obligated to restore pursuant to Treasury Regulation
Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially
allocated items of Partnership gross income and gain in the amount of such
excess as quickly as possible; provided, that an allocation pursuant to
this Section 6.1(d)(v) shall be made only if and to the extent that such
Partner would have a deficit balance in its Capital Account as adjusted
after all other allocations provided for in this Section 6.1 have been
tentatively made as if this Section 6.1(d)(v) were not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of
the Treasury Regulations promulgated under Section 704(b) of the Code, the
General Partner is authorized, upon notice to the other Partners, to revise
the prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner bears
the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(c) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially
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allocated to the Partners in a manner consistent with the manner in which
their Capital Accounts are required to be adjusted pursuant to such Section
of the Treasury Regulations.
(x) Economic Uniformity. At the election of the General Partner with
respect to any taxable period ending upon, or after, the termination of the
Subordination Period, all or a portion of the remaining items of
Partnership gross income or gain for such taxable period, after taking into
account allocations pursuant to Section 6.1(d)(iii), shall be allocated
100% to each Partner holding Subordinated Units that are Outstanding as of
the termination of the Subordination Period ("Final Subordinated Units") in
the proportion of the number of Final Subordinated Units held by such
Partner to the total number of Final Subordinated Units then Outstanding,
until each such Partner has been allocated an amount of gross income or
gain which increases the Capital Account maintained with respect to such
Final Subordinated Units to an amount equal to the product of (A) the
number of Final Subordinated Units held by such Partner and (B) the Per
Unit Capital Amount for a Common Unit. The purpose of this allocation is to
establish uniformity between the Capital Accounts underlying Final
Subordinated Units and the Capital Accounts underlying Common Units held by
Persons other than the General Partner and its Affiliates immediately prior
to the conversion of such Final Subordinated Units into Common Units. This
allocation method for establishing such economic uniformity will only be
available to the General Partner if the method for allocating the Capital
Account maintained with respect to the Subordinated Units between the
transferred and retained Subordinated Units pursuant to Section 5.5(c)(ii)
does not otherwise provide such economic uniformity to the Final
Subordinated Units.
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations shall be
taken into account in making the Agreed Allocations so that, to the
extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each
such Partner under the Agreed Allocations had the Required Allocations
and the related Curative Allocation not otherwise been provided in
this Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be taken
into account except to the extent that there has been a decrease in
Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall
not be taken into account except to the extent that there has been a
decrease in Partner Nonrecourse Debt Minimum Gain. Allocations
pursuant to this Section 6.1(d)(xi)(A) shall only be made with respect
to Required Allocations to the extent the General Partner reasonably
determines that such allocations will otherwise be inconsistent with
the economic agreement among the Partners. Further, allocations
pursuant to this Section 6.1(d)(xi)(A) shall be deferred with respect
to allocations pursuant to clauses (1) and
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(2) hereof to the extent the General Partner reasonably determines
that such allocations are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of Section
6.1(d)(xi)(A) in whatever order is most likely to minimize the
economic distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to Section
6.1(d)(xi)(A) among the Partners in a manner that is likely to
minimize such economic distortions.
(xi) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any
recognition of a Net Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis
Derivative Items (other than an allocation of Unrealized Gain or
Unrealized Loss under Section 5.5(d) hereof), the General Partner
shall allocate additional items of gross income and gain away from the
holders of Incentive Distribution Rights to the Unitholders and the
General Partner, or additional items of deduction and loss away from
the Unitholders and the General Partner to the holders of Incentive
Distribution Rights, to the extent that the Additional Book Basis
Derivative Items allocated to the Unitholders or the General Partner
exceed their Share of Additional Book Basis Derivative Items. For this
purpose, the Unitholders and the General Partner shall be treated as
being allocated Additional Book Basis Derivative Items to the extent
that such Additional Book Basis Derivative Items have reduced the
amount of income that would otherwise have been allocated to the
Unitholders or the General Partner under the Partnership Agreement
(e.g., Additional Book Basis Derivative Items taken into account in
computing cost of goods sold would reduce the amount of book income
otherwise available for allocation among the Partners). Any allocation
made pursuant to this Section 6.1(d)(xii)(A) shall be made after all
of the other Agreed Allocations have been made as if this Section
6.1(d)(xii) were not in this Agreement and, to the extent necessary,
shall require the reallocation of items that have been allocated
pursuant to such other Agreed Allocations.
(B) In the case of any negative adjustments to the Capital
Accounts of the Partners resulting from a Book-Down Event or from the
recognition of a Net Termination Loss, such negative adjustment (1)
shall first be allocated, to the extent of the Aggregate Remaining Net
Positive Adjustments, in such a manner, as reasonably determined by
the General Partner, that to the extent possible the aggregate Capital
Accounts of the Partners will equal the amount which would have been
the Capital Account balance of the Partners if no prior Book-Up Events
had occurred, and (2) any negative adjustment in excess of the
Aggregate Remaining Net Positive Adjustments shall be allocated
pursuant to Section 6.1(c) hereof.
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(C) In making the allocations required under this Section
6.1(d)(xii), the General Partner, in its sole discretion, may apply
whatever conventions or other methodology it deems reasonable to
satisfy the purpose of this Section 6.1(d)(xii).
Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
second, in the event such property was originally a Contributed Property,
be allocated among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall have sole discretion to (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury
Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise
to preserve or achieve uniformity of the Limited Partner Interests (or any class
or classes thereof). The
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General Partner may adopt such conventions, make such allocations and make such
amendments to this Agreement as provided in this Section 6.2(c) only if such
conventions, allocations or amendments would not have a material adverse effect
on the Partners, the holders of any class or classes of Limited Partner
Interests issued and Outstanding or the Partnership, and if such allocations are
consistent with the principles of Section 704 of the Code.
(d) The General Partner in its discretion may determine to depreciate
or amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of
the Code. If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring Limited Partner Interests in
the same month would receive depreciation and amortization deductions, based
upon the same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the General Partner chooses not to utilize such
aggregate method, the General Partner may use any other reasonable depreciation
and amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any Limited Partner Interests that would not have a material
adverse effect on the Limited Partners or the Record Holders of any class or
classes of Limited Partner Interests.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized
by the Partnership for federal income tax purposes and allocated to the Partners
in accordance with the provisions hereof shall be determined without regard to
any election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction
attributable to a transferred Partnership Interest, shall for federal income tax
purposes, be determined on an annual basis and prorated on a monthly basis and
shall be allocated to the Partners as of the opening of the New York Stock
Exchange on the first Business Day of each month; provided, however, that (i)
such items for the period beginning on the Closing Date and ending on the last
day of the month in which the Option Closing Date or the expiration of the Over-
allotment Option occurs shall be allocated to the Partners as of the opening of
the New York Stock Exchange on the first Business Day of the next
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succeeding month; and provided, further, that gain or loss on a sale or other
disposition of any assets of the Partnership other than in the ordinary course
of business shall be allocated to the Partners as of the opening of the New York
Stock Exchange on the first Business Day of the month in which such gain or loss
is recognized for federal income tax purposes. The General Partner may revise,
alter or otherwise modify such methods of allocation as it determines necessary,
to the extent permitted or required by Section 706 of the Code and the
regulations or rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner
under the provisions of this Article VI shall instead be made to the beneficial
owner of Limited Partner Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion.
Section 6.3 Requirement and Characterization of Distributions; Distributions
to Record Holders.
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on December 31, 1998, an amount equal to 100% of Available
Cash with respect to such Quarter shall, subject to Section 17-607 of the
Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners as of the Record Date selected by the General
Partner in its reasonable discretion. All amounts of Available Cash distributed
by the Partnership on any date from any source shall be deemed to be Operating
Surplus until the sum of all amounts of Available Cash theretofore distributed
by the Partnership to the Partners pursuant to Section 6.4 equals the Operating
Surplus from the Closing Date through the close of the immediately preceding
Quarter. Any remaining amounts of Available Cash distributed by the Partnership
on such date shall, except as otherwise provided in Section 6.5, be deemed to be
"Capital Surplus." All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution
and liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied and
distributed solely in accordance with, and subject to the terms and conditions
of, Section 12.4.
(c) The General Partner shall have the discretion to treat taxes paid
by the Partnership on behalf of, or amounts withheld with respect to, all or
less than all of the Partners, as a distribution of Available Cash to such
Partners.
(d) Each distribution in respect of a Partnership Interest shall be
paid by the Partnership, directly or through the Transfer Agent or through any
other Person or agent, only to the Record Holder of such Partnership Interest as
of the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
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payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
Section 6.4 Distributions of Available Cash from Operating Surplus.
(a) During Subordination Period. Available Cash with respect to any
Quarter within the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5 shall, subject to Section 17-
607 of the Delaware Act, be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:
(i) First, 99% to the Unitholders holding Common Units, Pro Rata, and
1% to the General Partner until there has been distributed in respect of
each Common Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution for such Quarter;
(ii) Second, 99% to the Unitholders holding Common Units, Pro Rata,
and 1% to the General Partner until there has been distributed in respect
of each Common Unit then Outstanding an amount equal to the Cumulative
Common Unit Arrearage existing with respect to such Quarter;
(iii) Third, 99% to the Unitholders holding Subordinated Units, Pro
Rata, and 1% to the General Partner until there has been distributed in
respect of each Subordinated Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(iv) Fourth, 85.8673% to all Unitholders, Pro Rata, 13.1327% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the First Target
Distribution over the Minimum Quarterly Distribution for such Quarter;
(v) Fifth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter; and
(vi) Thereafter, 50.5102% to all Unitholders, Pro Rata, 48.4898% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution and the Second Target Distribution have been reduced to zero
pursuant to the second sentence of Section 6.6(a), the distribution of Available
Cash that is deemed to be Operating Surplus with respect to any Quarter will be
made solely in accordance with Section 6.4(a)(vi).
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(b) After Subordination Period. Available Cash with respect to any
Quarter after the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of
the Delaware Act, shall be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:
(i) First, 99% to all Unitholders, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each Unit then
Outstanding an amount equal to the Minimum Quarterly Distribution for such
Quarter;
(ii) Second, 85.8673% to all Unitholders, Pro Rata, and 13.1327% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the First Target
Distribution over the Minimum Quarterly Distribution for such Quarter;
(iii) Third, 75.7653% to all Unitholders, Pro Rata, and 23.2347% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter; and
(iv) Thereafter, 50.5102% to all Unitholders, Pro Rata, and 48.4898%
to the holders of the Incentive Distribution Rights, Pro Rata, and 1% to
the General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution and the Second Target Distribution have been reduced to zero
pursuant to the second sentence of Section 6.6(a), the distribution of Available
Cash that is deemed to be Operating Surplus with respect to any Quarter will be
made solely in accordance with Section 6.4(b)(iv).
Section 6.5 Distributions of Available Cash from Capital Surplus.
Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise, 99%
to all Unitholders, Pro Rata, and 1% to the General Partner until a hypothetical
holder of a Common Unit acquired on the Closing Date has received with respect
to such Common Unit, during the period since the Closing Date through such date,
distributions of Available Cash that are deemed to be Capital Surplus in an
aggregate amount equal to the Initial Unit Price. Available Cash that is deemed
to be Capital Surplus shall then be distributed 99% to all Unitholders holding
Common Units, Pro Rata, and 1% to the General Partner until there has been
distributed in respect of each Common Unit then Outstanding an amount equal to
the Cumulative Common Unit Arrearage. Thereafter, all Available Cash shall be
distributed as if it were Operating Surplus and shall be distributed in
accordance with Section 6.4.
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Section 6.6 Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels.
(a) The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution, Common Unit Arrearages and Cumulative Common Unit
Arrearages shall be proportionately adjusted in the event of any distribution,
combination or subdivision (whether effected by a distribution payable in Units
or otherwise) of Units or other Partnership Securities in accordance with
Section 5.10. In the event of a distribution of Available Cash that is deemed to
be from Capital Surplus, the then applicable Minimum Quarterly Distribution,
First Target Distribution and Second Target Distribution shall be adjusted
proportionately downward to equal the product obtained by multiplying the
otherwise applicable Minimum Quarterly Distribution, First Target Distribution
and Second Target Distribution, as the case may be, by a fraction of which the
numerator is the Unrecovered Capital of the Common Units immediately after
giving effect to such distribution and of which the denominator is the
Unrecovered Capital of the Common Units immediately prior to giving effect to
such distribution.
(b) The Minimum Quarterly Distribution, First Target Distribution and
Second Target Distribution shall also be subject to adjustment pursuant to
Section 6.9.
Section 6.7 Special Provisions Relating to the Holders of Subordinated Units.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Subordinated Unit shall have all of the rights and obligations of a Unitholder
holding Common Units hereunder; provided, however, that immediately upon the
conversion of Subordinated Units into Common Units pursuant to Section 5.8, the
Unitholder holding a Subordinated Unit shall possess all of the rights and
obligations of a Unitholder holding Common Units hereunder, including the right
to vote as a Common Unitholder and the right to participate in allocations of
income, gain, loss and deduction and distributions made with respect to Common
Units; provided, however, that such converted Subordinated Units shall remain
subject to the provisions of Sections 5.5(c)(ii), 6.1(d)(x) and 6.7(b).
(b) The Unitholder holding a Subordinated Unit which has converted
into a Common Unit pursuant to Section 5.8 shall not be issued a Common Unit
Certificate pursuant to Section 4.1, and shall not be permitted to transfer its
converted Subordinated Units to a Person which is not an Affiliate of the holder
until such time as the General Partner determines, based on advice of counsel,
that a converted Subordinated Unit should have, as a substantive matter, like
intrinsic economic and federal income tax characteristics, in all material
respects, to the intrinsic economic and federal income tax characteristics of an
Initial Common Unit. In connection with the condition imposed by this Section
6.7(b), the General Partner may take whatever reasonable steps are required to
provide economic uniformity to the converted Subordinated Units in preparation
for a transfer of such converted Subordinated Units, including the application
of Sections 5.5(c)(ii) and 6.1(d)(x);
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provided, however, that no such steps may be taken that would have a material
adverse effect on the Unitholders holding Common Units represented by Common
Unit Certificates.
Section 6.8 Special Provisions Relating to the Holders of Incentive
Distribution Rights.
Notwithstanding anything to the contrary set forth in this Agreement, the
holders of the Incentive Distribution Rights (a) shall (i) possess the rights
and obligations provided in this Agreement with respect to a Limited Partner
pursuant to Articles III and VII and (ii) have a Capital Account as a Partner
pursuant to Section 5.5 and all other provisions related thereto and (b) shall
not (i) be entitled to vote on any matters requiring the approval or vote of the
holders of Outstanding Units, (ii) be entitled to any distributions other than
as provided in Sections 6.4(a)(iv), (v) and (vi), 6.4(b)(ii), (iii) and (iv),
and 12.4 or (iii) be allocated items of income, gain, loss or deduction other
than as specified in this Article VI.
Section 6.9 Entity-Level Taxation.
If legislation is enacted or the interpretation of existing language is
modified by the relevant governmental authority which causes the Partnership or
an Operating Partnership to be treated as an association taxable as a
corporation or otherwise subjects the Partnership or an Operating Partnership to
entity-level taxation for federal income tax purposes, the then applicable
Minimum Quarterly Distribution, First Target Distribution and Second Target
Distribution shall be adjusted to equal the product obtained by multiplying (a)
the amount thereof by (b) one minus the sum of (i) the highest marginal federal
corporate (or other entity, as applicable) income tax rate of the Partnership or
such Operating Partnership for the taxable year of the Partnership or such
Operating Partnership in which such Quarter occurs (expressed as a percentage)
plus (ii) the effective overall state and local income tax rate (expressed as a
percentage) applicable to the Partnership or such Operating Partnership for the
calendar year next preceding the calendar year in which such Quarter occurs
(after taking into account the benefit of any deduction allowable for federal
income tax purposes with respect to the payment of state and local income
taxes), but only to the extent of the increase in such rates resulting from such
legislation or interpretation. Such effective overall state and local income tax
rate shall be determined for the taxable year next preceding the first taxable
year during which the Partnership or such Operating Partnership is taxable for
federal income tax purposes as an association taxable as a corporation or is
otherwise subject to entity-level taxation by determining such rate as if the
Partnership or such Operating Partnership had been subject to such state and
local taxes during such preceding taxable year.
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ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management.
(a) The General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and no Limited
Partner or Assignee shall have any management power over the business and
affairs of the Partnership. In addition to the powers now or hereafter granted a
general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 7.3, shall have full power and authority to
do all things and on such terms as it, in its sole discretion, may deem
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 2.5 and to effectuate the purposes set forth in
Section 2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of money,
the assumption or guarantee of, or other contracting for, indebtedness and
other liabilities, the issuance of evidences of indebtedness, including
indebtedness that is convertible into Partnership Securities, and the
incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash on hand)
for any purpose consistent with the terms of this Agreement, including the
financing of the conduct of the operations of the Partnership Group;
subject to Section 7.6(a), the lending of funds to other Persons (including
the Operating Partnerships); the repayment of obligations of the
Partnership Group and the making of capital contributions to any member of
the Partnership Group;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partner or its assets other than
its interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be
the case);
(vi) the distribution of Partnership cash;
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(vi) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(vii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations or other relationships
(including the acquisition of interests in, and the contributions of
property to, the Operating Partnerships from time to time) subject to the
restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and obligations of
the Partnership, including the bringing and defending of actions at law or
in equity and otherwise engaging in the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation;
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Limited Partner
Interests from, or requesting that trading be suspended on, any such
exchange (subject to any prior approval that may be required under Section
4.8);
(xiii) unless restricted or prohibited by Section 5.7, the purchase,
sale or other acquisition or disposition of Partnership Securities, or the
issuance of additional options, rights, warrants and appreciation rights
relating to Partnership Securities; and
(xiv) the undertaking of any action in connection with the
Partnership's participation in the Operating Partnership as a partner.
(b) Notwithstanding any other provision of this Agreement, the
Operating Partnership Agreements, the Delaware Act or any applicable law, rule
or regulation, each of the Partners and the Assignees and each other Person who
may acquire an interest in Partnership Securities hereby (i) approves, ratifies
and confirms the execution, delivery and performance by the parties thereto of
the Operating Partnership Agreements, the Underwriting Agreement, the Omnibus
Agreement, the Contribution and Conveyance Agreement, and the other agreements
and other described in or filed as exhibits to the Registration Statement that
are related to the transactions contemplated by the Registration Statement; (ii)
agrees that the General Partner (on its own or through any officer of the
Partnership) is authorized to execute, deliver and perform the agreements
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referred to in clause (i) of this sentence and the other agreements, acts,
transactions and matters described in or contemplated by the Registration
Statement on behalf of the Partnership without any further act, approval or vote
of the Partners or the Assignees or the other Persons who may acquire an
interest in Partnership Securities; and (iii) agrees that the execution,
delivery or performance by the General Partner, any Group Member or any
Affiliate of any of them, of this Agreement or any agreement authorized or
permitted under this Agreement (including the exercise by the General Partner or
any Affiliate of the General Partner of the rights accorded pursuant to Article
XV), shall not constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement (or any other agreements) or of any duty stated or
implied by law or equity.
Section 7.2 Certificate of Limited Partnership.
The General Partner has caused the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity in which
the limited partners have limited liability) under the laws of the State of
Delaware or of any other state in which the Partnership may elect to do business
or own property. Subject to the terms of Section 3.4(a), the General Partner
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership, any qualification document or any amendment
thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without written approval of the
specific act by holders of all of the Outstanding Limited Partner Interests or
by other written instrument executed and delivered by holders of all of the
Outstanding Limited Partner Interests subsequent to the date of this Agreement,
take any action in contravention of this Agreement, including, except as
otherwise provided in this Agreement, (i) committing any act that would make it
impossible to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner; or (v) transferring its interest as
general partner of the Partnership.
(b) Except as provided in Articles XII and XIV, the General Partner
may not sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single
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transaction or a series of related transactions (including by way of merger,
consolidation or other combination) or approve on behalf of the Partnership the
sale, exchange or other disposition of all or substantially all of the assets of
the Operating Partnerships, taken as a whole, without the approval of holders of
a Unit Majority; provided however that this provision shall not preclude or
limit the General Partner's ability to mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of the assets of the Partnership
or Operating Partnerships and shall not apply to any forced sale of any or all
of the assets of the Partnership or Operating Partnerships pursuant to the
foreclosure of, or other realization upon, any such encumbrance. Without the
approval of holders of a Unit Majority, the General Partner shall not, on behalf
of the Partnership, (i) consent to any amendment to the Operating Partnership
Agreement or, except as expressly permitted by Section 7.9(d), take any action
permitted to be taken by a partner of an Operating Partnership, in either case,
that would have a material adverse effect on the Partnership as a partner of an
Operating Partnership or (ii) except as permitted under Sections 4.6, 11.1 and
11.2, elect or cause the Partnership to elect a successor general partner of the
Partnership or an Operating Partnership.
Section 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the Operating Partnership Agreement, the General Partner shall
not be compensated for its services as general partner or managing member of any
Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or
such other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties to the Partnership), and (ii) all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business (including expenses allocated to the General Partner by
its Affiliates). The General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Reimbursements pursuant to this Section 7.4
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole
discretion and without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices
(including plans, programs and practices involving the issuance of Partnership
Securities or options to purchase Partnership Securities), or cause the
Partnership to issue Partnership Securities in connection with, or pursuant to,
any employee benefit plan, employee program or employee practice maintained or
sponsored by the General Partner or any of its Affiliates, in each case for the
benefit of employees of the General Partner, any Group Member or any Affiliate,
or any of them, in respect of services performed, directly or indirectly, for
the benefit of the Partnership Group. The
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Partnership agrees to issue and sell to the General Partner or any of its
Affiliates any Partnership Securities that the General Partner or such Affiliate
is obligated to provide to any employees pursuant to any such employee benefit
plans, employee programs or employee practices. Expenses incurred by the General
Partner in connection with any such plans, programs and practices (including the
net cost to the General Partner or such Affiliate of Partnership Securities
purchased by the General Partner or such Affiliate from the Partnership to
fulfill options or awards under such plans, programs and practices) shall be
reimbursed in accordance with Section 7.4(b). Any and all obligations of the
General Partner under any employee benefit plans, employee programs or employee
practices adopted by the General Partner as permitted by this Section 7.4(c)
shall constitute obligations of the General Partner hereunder and shall be
assumed by any successor General Partner approved pursuant to Section 11.1 or
11.2 or the transferee of or successor to all of the General Partner's General
Partner Interest pursuant to Section 4.6.
Section 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is
the General Partner of the Partnership (i) agrees that its sole business will be
to act as the general partner of the Partnership, each Operating Partnership,
and any other partnership or limited liability company of which the Partnership
or an Operating Partnership is, directly or indirectly, a partner and to
undertake activities that are ancillary or related thereto (including being a
limited partner in the Partnership), (ii) shall not engage in any business or
activity or incur any debts or liabilities except in connection with or
incidental to (A) its performance as general partner of one or more Group
Members or as described in or contemplated by the Registration Statement or (B)
the acquiring, owning or disposing of debt or equity securities in any Group
Member and (iii) except to the extent permitted in the Omnibus Agreement, shall
not, and shall cause its Affiliates not to, engage in any Restricted Business.
(b) Plains Resources Inc. has entered into the Omnibus Agreement with
the Partnership and the Operating Partnerships, which agreement sets forth
certain restrictions on the ability of Plains Resources Inc. and its Affiliates
to engage in Restricted Businesses.
(c) Except as specifically restricted by Section 7.5(a) and the
Omnibus Agreement, each Indemnitee (other than the General Partner) shall have
the right to engage in businesses of every type and description and other
activities for profit and to engage in and possess an interest in other business
ventures of any and every type or description, whether in businesses engaged in
or anticipated to be engaged in by any Group Member, independently or with
others, including business interests and activities in direct competition with
the business and activities of any Group Member, and none of the same shall
constitute a breach of this Agreement or any duty express or implied by law to
any Group Member or any Partner or Assignee. Neither any Group Member, any
Limited Partner nor any other Person shall have any rights by virtue of this
Agreement, either Operating Partnership Agreement or the partnership
relationship established hereby or thereby in any business ventures of any
Indemnitee.
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(d) Subject to the terms of Section 7.5(a), Section 7.5(b), Section
7.5(c) and the Omnibus Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any
Indemnitees (other than the General Partner) in accordance with the provisions
of this Section 7.5 is hereby approved by the Partnership and all Partners, (ii)
it shall be deemed not to be a breach of the General Partner's fiduciary duty or
any other obligation of any type whatsoever of the General Partner for the
Indemnitees (other than the General Partner) to engage in such business
interests and activities in preference to or to the exclusion of the Partnership
and (iii) except as set forth in the Omnibus Agreement, the General Partner and
the Indemnities shall have no obligation to present business opportunities to
the Partnership.
(e) The General Partner and any of its Affiliates may acquire Units or
other Partnership Securities in addition to those acquired on the Closing Date
and, except as otherwise provided in this Agreement, shall be entitled to
exercise all rights of the General Partner or Limited Partner, as applicable,
relating to such Units or Partnership Securities.
(f) The term "Affiliates" when used in Section 7.5(a) and Section
7.5(e) with respect to the General Partner shall not include any Group Member or
any Subsidiary of the Group Member.
(g) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of this
Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partner to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such restriction, such provisions shall be inapplicable and have no
effect in determining whether the General Partner has complied with its
fiduciary duties in connection with determinations made by it under this Section
7.5.
Section 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on
the General Partner.
(a) The General Partner or its Affiliates may lend to any Group
Member, and any Group Member may borrow from the General Partner or any of its
Affiliates, funds needed or desired by the Group Member for such periods of time
and in such amounts as the General Partner may determine; provided, however,
that in any such case the lending party may not charge the borrowing party
interest at a rate greater than the rate that would be charged the borrowing
party or impose terms less favorable to the borrowing party than would be
charged or imposed on the borrowing party by unrelated lenders on comparable
loans made on an arm's-length basis (without reference to the lending party's
financial abilities or guarantees). The borrowing party shall reimburse the
lending party for any costs (other than any additional interest costs) incurred
by the lending party in connection with the borrowing of such funds. For
purposes of this Section 7.6(a) and Section 7.6(b), the term "Group Member"
shall include any Affiliate of a Group Member that is controlled by the Group
Member. No Group Member may lend funds to the General Partner or any of its
Affiliates (other than another Group Member).
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(b) The Partnership may lend or contribute to any Group Member, and
any Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement
with any of its Affiliates to, render services to a Group Member or to the
General Partner in the discharge of its duties as general partner of the
Partnership. Any services rendered to a Group Member by the General Partner or
any of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, taking into account the
totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).
(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution and
Conveyance Agreement and any other transactions described in or contemplated by
the Registration Statement, (ii) any transaction approved by Special Approval,
(iii) any transaction, the terms of which are no less favorable to the
Partnership than those generally being provided to or available from unrelated
third parties, or (iv) any transaction that, taking into account the totality of
the relationships between the parties involved (including other transactions
that may be particularly favorable or advantageous to the Partnership), is
equitable to the Partnership. With respect to any contribution of assets to the
Partnership in exchange for Partnership Securities, the Conflicts Committee, in
determining whether the appropriate number of Partnership Securities are being
issued, may take into account, among other things, the fair market value of the
assets, the liquidated and contingent liabilities assumed, the tax basis in the
assets, the extent to which tax-only allocations to the transferor will protect
the existing partners of the
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Partnership against a low tax basis, and such other factors as the Conflicts
Committee deems relevant under the circumstances.
(f) The General Partner and its Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partner
and its Affiliates, except as may be provided in contracts entered into from
time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
Section 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partner with respect to its obligations
incurred pursuant to the Underwriting Agreement or the Contribution and
Conveyance Agreement (other than obligations incurred by the General Partner on
behalf of the Partnership or any Operating Partnership). The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
the Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, it being agreed that the General Partner shall not be
personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal
fees and expenses) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the
Partnership of any undertaking by or on behalf of the Indemnitee to repay such
amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.
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(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the holders of Outstanding Limited Partner
Interests, as a matter of law or otherwise, both as to actions in the
Indemnitee's capacity as an Indemnitee and as to actions in any other capacity
(including any capacity under the Underwriting Agreement), and shall continue as
to an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the
General Partner or its Affiliates for the cost of) insurance, on behalf of the
General Partner, its Affiliates and such other Persons as the General Partner
shall determine, against any liability that may be asserted against or expense
that may be incurred by such Person in connection with the Partnership's
activities or such Person's activities on behalf of the Partnership, regardless
of whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Partnership also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
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Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Partnership Securities, for losses sustained or
liabilities incurred as a result of any act or omission if such Indemnitee acted
in good faith.
(b) Subject to its obligations and duties as General Partner set forth
in Section 7.1(a), the General Partner may exercise any of the powers granted to
it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents, and the General Partner shall not
be responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Partners, the General Partner and any other Indemnitee acting in
connection with the Partnership's business or affairs shall not be liable to the
Partnership or to any Partner for its good faith reliance on the provisions of
this Agreement. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors, officers
and employees under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or an
Operating Partnership Agreement, whenever a potential conflict of interest
exists or arises between the General Partner or any of its Affiliates, on the
one hand, and the Partnership, an Operating Partnership, any Partner or any
Assignee, on the other, any resolution or course of action by the General
Partner or its Affiliates in respect of such conflict of interest shall be
permitted and deemed approved by all Partners, and shall not constitute a breach
of this Agreement, of any Operating Partnership Agreement, of any agreement
contemplated herein or therein, or of any duty stated or implied by law or
equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Partnership. The General
Partner shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution.
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Any conflict of interest and any resolution of such conflict of interest shall
be conclusively deemed fair and reasonable to the Partnership if such conflict
of interest or resolution is (i) approved by Special Approval (as long as the
material facts known to the General Partner or any of its Affiliates regarding
any proposed transaction were disclosed to the Conflicts Committee at the time
it gave its approval), (ii) on terms no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
(iii) fair to the Partnership, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership). The General
Partner may also adopt a resolution or course of action that has not received
Special Approval. The General Partner (including the Conflicts Committee in
connection with Special Approval) shall be authorized in connection with its
determination of what is "fair and reasonable" to the Partnership and in
connection with its resolution of any conflict of interest to consider (A) the
relative interests of any party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interest; (B) any
customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Conflicts Committee) determines in its sole
discretion to be relevant, reasonable or appropriate under the circumstances.
Nothing contained in this Agreement, however, is intended to nor shall it be
construed to require the General Partner (including the Conflicts Committee) to
consider the interests of any Person other than the Partnership. In the absence
of bad faith by the General Partner, the resolution, action or terms so made,
taken or provided by the General Partner with respect to such matter shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or a breach of any standard of care or duty imposed herein or therein or, to the
extent permitted by law, under the Delaware Act or any other law, rule or
regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion," that
it deems "necessary or appropriate" or "necessary or advisable" or under a grant
of similar authority or latitude, except as otherwise provided herein, the
General Partner or such Affiliate shall be entitled to consider only such
interests and factors as it desires and shall have no duty or obligation to give
any consideration to any interest of, or factors affecting, the Partnership, any
Operating Partnership, any Limited Partner or any Assignee, (ii) it may make
such decision in its sole discretion (regardless of whether there is a reference
to "sole discretion" or "discretion") unless another express standard is
provided for, or (iii) in "good faith" or under another express standard, the
General Partner or such Affiliate shall act under such express standard and
shall not be subject to any other or different standards imposed by this
Agreement, any Operating Partnership Agreement, any other agreement contemplated
hereby or under the Delaware Act or any other law, rule or regulation. In
addition, any actions taken by the General Partner or such Affiliate consistent
with the standards of "reasonable discretion" set forth in the definitions of
Available Cash or Operating Surplus shall not constitute a breach of any duty of
the General Partner to the Partnership or the Limited Partners. The General
Partner shall have no duty, express or implied, to sell or otherwise dispose of
any asset of the Partnership Group other than in the ordinary course of
business. No borrowing by any Group Member or the approval thereof by the
General
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Partner shall be deemed to constitute a breach of any duty of the General
Partner to the Partnership or the Limited Partners by reason of the fact that
the purpose or effect of such borrowing is directly or indirectly to (A) enable
distributions to the General Partner or its Affiliates (including in their
capacities as Limited Partners) to exceed 1% of the total amount distributed to
all partners or (B) hasten the expiration of the Subordination Period or the
conversion of any Subordinated Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Unitholders hereby authorize the General Partner, on behalf of
the Partnership as a partner of a Group Member, to approve of actions by the
general partner of such Group Member similar to those actions permitted to be
taken by the General Partner pursuant to this Section 7.9.
Section 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or under
the Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the extent permitted by law, as required to permit the
General Partner to act under this Agreement or any other agreement contemplated
by this Agreement and to make any decision pursuant to the authority prescribed
in this Agreement, so long as such action is reasonably believed by the General
Partner to be in, or not inconsistent with, the best interests of the
Partnership.
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Section 7.11 Purchase or Sale of Partnership Securities.
The General Partner may cause the Partnership to purchase or otherwise
acquire Partnership Securities; provided that, except as permitted pursuant to
Section 4.10, the General Partner may not cause any Group Member to purchase
Subordinated Units during the Subordination Period. As long as Partnership
Securities are held by any Group Member, such Partnership Securities shall not
be considered Outstanding for any purpose, except as otherwise provided herein.
The General Partner or any Affiliate of the General Partner may also purchase or
otherwise acquire and sell or otherwise dispose of Partnership Securities for
its own account, subject to the provisions of Articles IV and X.
Section 7.12 Registration Rights of the General Partner and its Affiliates.
(a) If (i) the General Partner or any Affiliate of the General
Partner (including for purposes of this Section 7.12, any Person that is an
Affiliate of the General Partner at the date hereof notwithstanding that it may
later cease to be an Affiliate of the General Partner) holds Partnership
Securities that it desires to sell and (ii) Rule 144 of the Securities Act (or
any successor rule or regulation to Rule 144) or another exemption from
registration is not available to enable such holder of Partnership Securities
(the "Holder") to dispose of the number of Partnership Securities it desires to
sell at the time it desires to do so without registration under the Securities
Act, then upon the request of the General Partner or any of its Affiliates, the
Partnership shall file with the Commission as promptly as practicable after
receiving such request, and use all reasonable efforts to cause to become
effective and remain effective for a period of not less than six months
following its effective date or such shorter period as shall terminate when all
Partnership Securities covered by such registration statement have been sold, a
registration statement under the Securities Act registering the offering and
sale of the number of Partnership Securities specified by the Holder; provided,
however, that the Partnership shall not be required to effect more than three
registrations pursuant to this Section 7.12(a); and provided further, however,
that if the Conflicts Committee determines in its good faith judgment that a
postponement of the requested registration for up to six months would be in the
best interests of the Partnership and its Partners due to a pending transaction,
investigation or other event, the filing of such registration statement or the
effectiveness thereof may be deferred for up to six months, but not thereafter.
In connection with any registration pursuant to the immediately preceding
sentence, the Partnership shall promptly prepare and file (x) such documents as
may be necessary to register or qualify the securities subject to such
registration under the securities laws of such states as the Holder shall
reasonably request; provided, however, that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Partnership would
become subject to general service of process or to taxation or qualification to
do business as a foreign corporation or partnership doing business in such
jurisdiction solely as a result of such registration, and (y) such documents as
may be necessary to apply for listing or to list the Partnership Securities
subject to such registration on such National Securities Exchange as the Holder
shall reasonably request, and do any and all other acts and things that may
reasonably be necessary or advisable to enable the Holder to consummate a public
sale of such Partnership Securities in such states. Except as set forth in
Section 7.12(c), all costs and expenses of any such registration and offering
(other than
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the underwriting discounts and commissions) shall be paid by the Partnership,
without reimbursement by the Holder.
(b) If the Partnership shall at any time propose to file a
registration statement under the Securities Act for an offering of equity
securities of the Partnership for cash (other than an offering relating solely
to an employee benefit plan), the Partnership shall use all reasonable efforts
to include such number or amount of securities held by the Holder in such
registration statement as the Holder shall request. If the proposed offering
pursuant to this Section 7.12(b) shall be an underwritten offering, then, in the
event that the managing underwriter or managing underwriters of such offering
advise the Partnership and the Holder in writing that in their opinion the
inclusion of all or some of the Holder's Partnership Securities would adversely
and materially affect the success of the offering, the Partnership shall include
in such offering only that number or amount, if any, of securities held by the
Holder which, in the opinion of the managing underwriter or managing
underwriters, will not so adversely and materially affect the offering. Except
as set forth in Section 7.12(c), all costs and expenses of any such registration
and offering (other than the underwriting discounts and commissions) shall be
paid by the Partnership, without reimbursement by the Holder.
(c) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "Indemnified Persons") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including interest, penalties and reasonable
attorneys' fees and disbursements), resulting to, imposed upon, or incurred by
the Indemnified Persons, directly or indirectly, under the Securities Act or
otherwise (hereinafter referred to in this Section 7.12(c) as a "claim" and in
the plural as "claims") based upon, arising out of or resulting from any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which any Partnership Securities were registered
under the Securities Act or any state securities or Blue Sky laws, in any
preliminary prospectus (if used prior to the effective date of such registration
statement), or in any summary or final prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership shall not be liable to
any Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Partnership by or on
behalf of such Indemnified Person specifically for use in the preparation
thereof.
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(d) The provisions of Section 7.12(a) and 7.12(b) shall continue to be
applicable with respect to the General Partner (and any of the General Partner's
Affiliates) after it ceases to be a Partner of the Partnership, during a period
of two years subsequent to the effective date of such cessation and for so long
thereafter as is required for the Holder to sell all of the Partnership
Securities with respect to which it has requested during such two-year period
inclusion in a registration statement otherwise filed or that a registration
statement be filed; provided, however, that the Partnership shall not be
required to file successive registration statements covering the same
Partnership Securities for which registration was demanded during such two-year
period. The provisions of Section 7.12(c) shall continue in effect thereafter.
(e) Any request to register Partnership Securities pursuant to this
Section 7.12 shall (i) specify the Partnership Securities intended to be offered
and sold by the Person making the request, (ii) express such Person's present
intent to offer such shares for distribution, (iii) describe the nature or
method of the proposed offer and sale of Partnership Securities, and (iv)
contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
Section 7.13 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner and any officer of the General Partner authorized by the General Partner
to act on behalf of and in the name of the Partnership has full power and
authority to encumber, sell or otherwise use in any manner any and all assets of
the Partnership and to enter into any authorized contracts on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
or any such officer as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the General Partner or any such officer in
connection with any such dealing. In no event shall any Person dealing with the
General Partner or any such officer or its representatives be obligated to
ascertain that the terms of the Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
any such officer or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner or
its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
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ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide to
the Limited Partners any information required to be provided pursuant to Section
3.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including the record of the Record Holders
and Assignees of Units or other Partnership Securities, books of account and
records of Partnership proceedings, may be kept on, or be in the form of,
computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the books
and records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial reporting purposes, on an accrual basis in accordance
with U.S. GAAP.
Section 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending December
31.
Section 8.3 Reports.
(a) As soon as practicable, but in no event later than 120 days after
the close of each fiscal year of the Partnership, the General Partner shall
cause to be mailed or furnished to each Record Holder of a Unit as of a date
selected by the General Partner in its discretion, an annual report containing
financial statements of the Partnership for such fiscal year of the Partnership,
presented in accordance with U.S. GAAP, including a balance sheet and statements
of operations, Partnership equity and cash flows, such statements to be audited
by a firm of independent public accountants selected by the General Partner.
(b) As soon as practicable, but in no event later than 90 days after
the close of each Quarter except the last Quarter of each fiscal year, the
General Partner shall cause to be mailed or furnished to each Record Holder of a
Unit, as of a date selected by the General Partner in its discretion, a report
containing unaudited financial statements of the Partnership and such other
information as may be required by applicable law, regulation or rule of any
National Securities Exchange on which the Units are listed for trading, or as
the General Partner determines to be necessary or appropriate.
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ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by Record Holders for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the
Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the General
Partner's determination that such revocation is in the best interests of the
Limited Partners. Notwithstanding any other provision herein contained, for the
purposes of computing the adjustments under Section 743(b) of the Code, the
General Partner shall be authorized (but not required) to adopt a convention
whereby the price paid by a transferee of a Limited Partner Interest will be
deemed to be the lowest quoted closing price of the Limited Partner Interests on
any National Securities Exchange on which such Limited Partner Interests are
traded during the calendar month in which such transfer is deemed to occur
pursuant to Section 6.2(g) without regard to the actual price paid by such
transferee.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
Section 9.3 Tax Controversies.
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in the Code) and is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with all
examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
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Section 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership and each Operating Partnership
to comply with any withholding requirements established under the Code or any
other federal, state or local law including, without limitation, pursuant to
Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the
Partnership is required or elects to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to
any Partner or Assignee (including, without limitation, by reason of Section
1446 of the Code), the amount withheld may at the discretion of the General
Partner be treated by the Partnership as a distribution of cash pursuant to
Section 6.3 in the amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Initial Limited Partners.
Upon the issuance by the Partnership of Common Units, Subordinated Units
and Incentive Distribution Rights to the General Partner as described in Section
5.2, the General Partner shall be deemed to have been admitted to the
Partnership as a Limited Partner in respect of the Common Units, Subordinated
Units and Incentive Distribution Rights issued to it. Upon the issuance by the
Partnership of Common Units to the Underwriters as described in Section 5.3 in
connection with the Initial Offering and the execution by each Underwriter of a
Transfer Application, the General Partner shall admit the Underwriters to the
Partnership as Initial Limited Partners in respect of the Common Units purchased
by them.
Section 10.2 Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to such purchaser or other transferee in
respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest (including any nominee holder or an agent acquiring
such Limited Partner Interest for the account of another Person) who executes
and delivers a Transfer Application shall, by virtue of such execution and
delivery, be an Assignee and be deemed to have applied to become a Substituted
Limited Partner with respect to the Limited Partner Interests so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the General Partner consents thereto, which consent may be given or
withheld in the General Partner's discretion, and (y) when any such
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admission is shown on the books and records of the Partnership. If such consent
is withheld, such transferee shall be an Assignee. An Assignee shall have an
interest in the Partnership equivalent to that of a Limited Partner with respect
to allocations and distributions, including liquidating distributions, of the
Partnership. With respect to voting rights attributable to Limited Partner
Interests that are held by Assignees, the General Partner shall be deemed to be
the Limited Partner with respect thereto and shall, in exercising the voting
rights in respect of such Limited Partner Interests on any matter, vote such
Limited Partner Interests at the written direction of the Assignee who is the
Record Holder of such Limited Partner Interests. If no such written direction is
received, such Limited Partner Interests will not be voted. An Assignee shall
have no other rights of a Limited Partner.
Section 10.3 Admission of Successor General Partner.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or
the transferee of or successor to all of the General Partner Interest pursuant
to Section 4.6 who is proposed to be admitted as a successor General Partner
shall be admitted to the Partnership as the General Partner, effective
immediately prior to the withdrawal or removal of the predecessor or
transferring General Partner pursuant to Section 11.1 or 11.2 or the transfer of
the General Partner Interest pursuant to Section 4.6, provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.6 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.
Section 10.4 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, an Initial Limited
Partner or a Substituted Limited Partner) who makes a Capital Contribution to
the Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including the power of
attorney granted in Section 2.6, and (ii) such other documents or instruments as
may be required in the discretion of the General Partner to effect such Person's
admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
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Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act to
amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the Partnership by
giving written notice to the other Partners (and it shall be deemed that
the General Partner has withdrawn pursuant to this Section 11.1(a)(i) if
the General Partner voluntarily withdraws as general partner of an
Operating Partnership);
(ii) The General Partner transfers all of its rights as General
Partner pursuant to Section 4.6;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief
under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
or answer seeking for itself a liquidation, dissolution or similar relief
(but not a reorganization) under any law; (D) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in a proceeding of the type
described in clauses (A)-(C) of this Section 11.1(a)(iv); or (E) seeks,
consents to or acquiesces in the appointment of a trustee (but not a
debtor-in-possession), receiver or liquidator of the General Partner or of
all or any substantial part of its properties;
(v) A final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner; or
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(vi) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the General
Partner, or 90 days expire after the date of notice to the General Partner
of revocation of its charter without a reinstatement of its charter, under
the laws of its state of incorporation; (B) in the event the General
Partner is a partnership or a limited liability company, the dissolution
and commencement of winding up of the General Partner; (C) in the event the
General Partner is acting in such capacity by virtue of being a trustee of
a trust, the termination of the trust; (D) in the event the General Partner
is a natural person, his death or adjudication of incompetency; and (E)
otherwise in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A),
(B), (C) or (E) occurs, the withdrawing General Partner shall give notice to the
Limited Partners within 30 days after such occurrence. The Partners hereby agree
that only the Events of Withdrawal described in this Section 11.1 shall result
in the withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on December 31, 2008, the General Partner voluntarily withdraws by giving
at least 90 days' advance notice of its intention to withdraw to the Limited
Partners; provided that prior to the effective date of such withdrawal, the
withdrawal is approved by Unitholders holding at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partner and
its Affiliates) and the General Partner delivers to the Partnership an Opinion
of Counsel ("Withdrawal Opinion of Counsel") that such withdrawal (following the
selection of the successor General Partner) would not result in the loss of the
limited liability of any Limited Partner or of a limited partner of an Operating
Partnership or cause the Partnership or an Operating Partnership to be treated
as an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not previously treated as such);
(ii) at any time after 12:00 midnight, Eastern Standard Time, on December 31,
2008, the General Partner voluntarily withdraws by giving at least 90 days'
advance notice to the Unitholders, such withdrawal to take effect on the date
specified in such notice; (iii) at any time that the General Partner ceases to
be the General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to
Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any time
that the General Partner voluntarily withdraws by giving at least 90 days'
advance notice of its intention to withdraw to the Limited Partners, such
withdrawal to take effect on the date specified in the notice, if at the time
such notice is given one Person and its Affiliates (other than the General
Partner and its Affiliates) own beneficially or of record or control at least
50% of the Outstanding Units. The withdrawal of the General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the General Partner as general partner or managing member, as
the case may be, of the other Group Members. If the General Partner gives a
notice of withdrawal pursuant to Section 11.1(a)(i), the holders of a Unit
Majority, may, prior to the effective date of such withdrawal, elect a successor
General Partner. The Person so elected as successor General Partner shall
automatically become the successor general partner or managing member, as the
case may be,
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of the other Group Members of which the General Partner is a general partner or
a managing member. If, prior to the effective date of the General Partner's
withdrawal, a successor is not selected by the Unitholders as provided herein or
the Partnership does not receive a Withdrawal Opinion of Counsel, the
Partnership shall be dissolved in accordance with Section 12.1. Any successor
General Partner elected in accordance with the terms of this Section 11.1 shall
be subject to the provisions of Section 10.3.
Section 11.2 Removal of the General Partner.
The General Partner may be removed if such removal is approved by the
Unitholders holding at least 66 2/3% of the Outstanding Units (including Units
held by the General Partner and its Affiliates). Any such action by such holders
for removal of the General Partner must also provide for the election of a
successor General Partner by the Unitholders holding a Unit Majority (including
Units held by the General Partner and its Affiliates). Such removal shall be
effective immediately following the admission of a successor General Partner
pursuant to Section 10.3. The removal of the General Partner shall also
automatically constitute the removal of the General Partner as general partner
or managing member, as the case may be, of the other Group Members of which the
General Partner is a general partner or a managing member. If a Person is
elected as a successor General Partner in accordance with the terms of this
Section 11.2, such Person shall, upon admission pursuant to Section 10.3,
automatically become a successor general partner or managing member, as the case
may be, of the other Group Members of which the General Partner is a general
partner or a managing member. The right of the holders of Outstanding Units to
remove the General Partner shall not exist or be exercised unless the
Partnership has received an opinion opining as to the matters covered by a
Withdrawal Opinion of Counsel. Any successor General Partner elected in
accordance with the terms of this Section 11.2 shall be subject to the
provisions of Section 10.3.
Section 11.3 Interest of Departing Partner and Successor General Partner.
(a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding Units under
circumstances where Cause does not exist, if a successor General Partner is
elected in accordance with the terms of Section 11.1 or 11.2, the Departing
Partner shall have the option exercisable prior to the effective date of the
departure of such Departing Partner to require its successor to purchase its
General Partner Interest and its general partner interest (or equivalent
interest) in the other Group Members and all of its Incentive Distribution
Rights (collectively, the "Combined Interest") in exchange for an amount in cash
equal to the fair market value of such Combined Interest, such amount to be
determined and payable as of the effective date of its departure. If the General
Partner is removed by the Unitholders under circumstances where Cause exists or
if the General Partner withdraws under circumstances where such withdrawal
violates this Agreement or an Operating Partnership Agreement, and if a
successor General Partner is elected in accordance with the terms of Section
11.1 or 11.2, such successor shall have the option, exercisable prior to the
effective date of the departure of such Departing Partner, to purchase the
Combined Interest for such fair market value of such Combined Interest. In
either event, the
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Departing Partner shall be entitled to receive all reimbursements due such
Departing Partner pursuant to Section 7.4, including any employee-related
liabilities (including severance liabilities), incurred in connection with the
termination of any employees employed by the General Partner for the benefit of
the Partnership or the other Group Members.
For purposes of this Section 11.3(a), the fair market value of the Combined
Interest shall be determined by agreement between the Departing Partner and its
successor or, failing agreement within 30 days after the effective date of such
Departing Partner's departure, by an independent investment banking firm or
other independent expert selected by the Departing Partner and its successor,
which, in turn, may rely on other experts, and the determination of which shall
be conclusive as to such matter. If such parties cannot agree upon one
independent investment banking firm or other independent expert within 45 days
after the effective date of such departure, then the Departing Partner shall
designate an independent investment banking firm or other independent expert,
the Departing Partner's successor shall designate an independent investment
banking firm or other independent expert, and such firms or experts shall
mutually select a third independent investment banking firm or independent
expert, which third independent investment banking firm or other independent
expert shall determine the fair market value of the Combined Interest. In making
its determination, such third independent investment banking firm or other
independent expert may consider the then current trading price of Units on any
National Securities Exchange on which Units are then listed, the value of the
Partnership's assets, the rights and obligations of the Departing Partner and
other factors it may deem relevant.
(b) If the Combined Interest is not purchased in the manner set forth
in Section 11.3(a), the Departing Partner (or its transferee) shall become a
Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing Partner (or its transferee) as to all debts and liabilities of the
Partnership arising on or after the date on which the Departing Partner (or its
transferee) becomes a Limited Partner. For purposes of this Agreement,
conversion of the Combined Interest to Common Units will be characterized as if
the General Partner (or its transferee) contributed its Combined Interest to the
Partnership in exchange for the newly issued Common Units.
(c) If a successor General Partner is elected in accordance with the
terms of Section 11.1 or 11.2 and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to 1/99th of the Net Agreed Value
of the Partnership's assets on such date. In such event, such successor General
Partner shall, subject to the following sentence, be entitled to 1% of all
Partnership allocations and distributions. The successor General Partner shall
cause this Agreement to be amended to reflect that, from and after the date of
such successor General Partner's admission, the successor General Partner's
interest in all Partnership distributions and allocations shall be 1%.
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Section 11.4 Termination of Subordination Period, Conversion of Subordinated
Units and Extinguishment of Cumulative Common Unit Arrearages.
Notwithstanding any provision of this Agreement, if the General Partner is
removed as general partner of the Partnership under circumstances where Cause
does not exist and Units held by the General Partner and its Affiliates are not
voted in favor of such removal, (i) the Subordination Period will end and all
Outstanding Subordinated Units will immediately and automatically convert into
Common Units on a one-for-one basis and (ii) all Cumulative Common Unit
Arrearages on the Common Units will be extinguished.
Section 11.5 Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's Limited Partner
Interest becomes a Record Holder of the Limited Partner Interest so transferred,
such transferring Limited Partner shall cease to be a Limited Partner with
respect to the Limited Partner Interest so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected
and an Opinion of Counsel is received as provided in Section 11.1(b) or 11.2 and
such successor is admitted to the Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner
that is approved by the holders of a Unit Majority;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
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(e) the sale of all or substantially all of the assets and properties
of the Partnership Group.
Section 12.2 Continuation of the Business of the Partnership After
Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Unit Majority may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as the successor general partner a Person
approved by the holders of a Unit Majority. Unless such an election is made
within the applicable time period as set forth above, the Partnership shall
conduct only activities necessary to wind up its affairs. If such an election is
so made, then:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 unless earlier dissolved in accordance with
this Article XII;
(ii) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be treated
in the manner provided in Section 11.3; and
(iii) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary,
to file a new partnership agreement and certificate of limited partnership,
and the successor general partner may for this purpose exercise the powers
of attorney granted the General Partner pursuant to Section 2.6; provided,
that the right of the holders of a Unit Majority to approve a successor
General Partner and to reconstitute and to continue the business of the
Partnership shall not exist and may not be exercised unless the Partnership
has received an Opinion of Counsel that (x) the exercise of the right would
not result in the loss of limited liability of any Limited Partner and (y)
neither the Partnership, the reconstituted limited partnership nor an
Operating Partnership would be treated as an association taxable as a
corporation or otherwise be taxable as an entity for federal income tax
purposes upon the exercise of such right to continue.
Section 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be entitled
to receive such compensation for its services as may be approved by holders of
at least a majority of the Outstanding Common Units and Subordinated Units
voting as a single class. The
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Liquidator (if other than the General Partner) shall agree not to resign at any
time without 15 days' prior notice and may be removed at any time, with or
without cause, by notice of removal approved by holders of at least a majority
of the Outstanding Common Units and Subordinated Units voting as a single class.
Upon dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by holders of at least a majority of the Outstanding Common Units and
Subordinated Units voting as a single class. The right to approve a successor or
substitute Liquidator in the manner provided herein shall be deemed to refer
also to any such successor or substitute Liquidator approved in the manner
herein provided. Except as expressly provided in this Article XII, the
Liquidator approved in the manner provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto, all of
the powers conferred upon the General Partner under the terms of this Agreement
(but subject to all of the applicable limitations, contractual and otherwise,
upon the exercise of such powers, other than the limitation on sale set forth in
Section 7.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.
Section 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
(a) Disposition of Assets. The assets may be disposed of by public or
private sale or by distribution in kind to one or more Partners on such terms as
the Liquidator and such Partner or Partners may agree. If any property is
distributed in kind, the Partner receiving the property shall be deemed for
purposes of Section 12.4(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Partners. The Liquidator may, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale or distribution of all or some of
the Partnership's assets would be impractical or would cause undue loss to the
Partners. The Liquidator may, in its absolute discretion, distribute the
Partnership's assets, in whole or in part, in kind if it determines that a sale
would be impractical or would cause undue loss to the Partners.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution rights
under Article VI. With respect to any liability that is contingent, conditional
or unmatured or is otherwise not yet due and payable, the Liquidator shall
either settle such claim for such amount as it thinks appropriate or establish a
reserve of cash or other assets to provide for its payment. When paid, any
unused portion of the reserve shall be distributed as additional liquidation
proceeds.
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(c) Liquidation Distributions. All property and all cash in excess of
that required to discharge liabilities as provided in Section 12.4(b) shall be
distributed to the Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
Section 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6 Return of Contributions.
The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners or Unitholders, or any portion thereof, it being expressly understood
that any such return shall be made solely from Partnership assets.
Section 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
Section 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
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ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Section 13.1 Amendment to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure that
the Partnership and the Operating Partnerships will not be treated as an
association taxable as a corporation or otherwise taxed as an entity for federal
income tax purposes;
(d) a change that, in the discretion of the General Partner, (i) does
not adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal
or state agency or judicial authority or contained in any federal or state
statute (including the Delaware Act) or (B) facilitate the trading of the
Limited Partner Interests (including the division of any class or classes of
Outstanding Limited Partner Interests into different classes to facilitate
uniformity of tax consequences within such classes of Limited Partner Interests)
or comply with any rule, regulation, guideline or requirement of any National
Securities Exchange on which the Limited Partner Interests are or will be listed
for trading, compliance with any of which the General Partner determines in its
discretion to be in the best interests of the Partnership and the Limited
Partners, (iii) is necessary or advisable in connection with action taken by the
General Partner pursuant to Section 5.10 or (iv) is required to effect the
intent expressed in the Registration Statement or the intent of the provisions
of this Agreement or is otherwise contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership and
any changes that, in the discretion of the General Partner, are necessary or
advisable as a result of a change in the fiscal year or taxable year of the
Partnership including, if the General Partner shall so determine, a change in
the definition of "Quarter" and the dates on which distributions are to be made
by the Partnership;
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(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its directors, officers,
trustees or agents from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, regardless of whether such are
substantially similar to plan asset regulations currently applied or proposed by
the United States Department of Labor;
(g) subject to the terms of Section 5.7, an amendment that, in the
discretion of the General Partner, is necessary or advisable in connection with
the authorization of issuance of any class or series of Partnership Securities
pursuant to Section 5.6;
(h) any amendment expressly permitted in this Agreement to be made by
the General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately the
formation by the Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability company or other
entity, in connection with the conduct by the Partnership of activities
permitted by the terms of Section 2.4;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
Section 13.2 Amendment Procedures.
Except as provided in Sections 13.1 and 13.3, all amendments to this
Agreement shall be made in accordance with the following requirements.
Amendments to this Agreement may be proposed only by or with the consent of the
General Partner which consent may be given or withheld in its sole discretion. A
proposed amendment shall be effective upon its approval by the holders of a Unit
Majority, unless a greater or different percentage is required under this
Agreement or by Delaware law. Each proposed amendment that requires the approval
of the holders of a specified percentage of Outstanding Units shall be set forth
in a writing that contains the text of the proposed amendment. If such an
amendment is proposed, the General Partner shall seek the written approval of
the requisite percentage of Outstanding Units or call a meeting of the
Unitholders to consider and vote on such proposed amendment. The General Partner
shall notify all Record Holders upon final adoption of any such proposed
amendments.
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Section 13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Sections 13.1 and 13.2, no
provision of this Agreement that establishes a percentage of Outstanding Units
(including Units deemed owned by the General Partner) required to take any
action shall be amended, altered, changed, repealed or rescinded in any respect
that would have the effect of reducing such voting percentage unless such
amendment is approved by the written consent or the affirmative vote of holders
of Outstanding Units whose aggregate Outstanding Units constitute not less than
the voting requirement sought to be reduced.
(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no
amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner without its consent, unless such shall be deemed to have occurred as a
result of an amendment approved pursuant to Section 13.3(c), (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in any
way the amounts distributable, reimbursable or otherwise payable to, the General
Partner or any of its Affiliates without its consent, which consent may be given
or withheld in its sole discretion, (iii) change Section 12.1(a) or 12.1(c), or
(iv) change the term of the Partnership or, except as set forth in Section
12.1(c), give any Person the right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and except as otherwise
provided, and without limitation of the General Partner's authority to adopt
amendments to this Agreement as contemplated in Section 13.1, any amendment that
would have a material adverse effect on the rights or preferences of any class
of Partnership Interests in relation to other classes of Partnership Interests
must be approved by the holders of not less than a majority of the Outstanding
Partnership Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 13.1 and except as otherwise provided by Section
14.3(b), no amendments shall become effective without the approval of the
holders of at least 90% of the Outstanding Common Units and Subordinated Units
voting as a single class unless the Partnership obtains an Opinion of Counsel to
the effect that such amendment will not affect the limited liability of any
Limited Partner under applicable law.
(e) Except as provided in Section 13.1, this Section 13.3 shall only
be amended with the approval of the holders of at least 90% of the Outstanding
Units.
Section 13.4 Special Meetings.
All acts of Limited Partners to be taken pursuant to this Agreement shall
be taken in the manner provided in this Article XIII. Special meetings of the
Limited Partners may be called by the General Partner or by Limited Partners
owning 20% or more of the Outstanding Limited Partner Interests of the class or
classes for which a meeting is proposed. Limited Partners shall call a special
meeting by delivering to the General Partner one or more requests in writing
stating that the signing
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Limited Partners wish to call a special meeting and indicating the general or
specific purposes for which the special meeting is to be called. Within 60 days
after receipt of such a call from Limited Partners or within such greater time
as may be reasonably necessary for the Partnership to comply with any statutes,
rules, regulations, listing agreements or similar requirements governing the
holding of a meeting or the solicitation of proxies for use at such a meeting,
the General Partner shall send a notice of the meeting to the Limited Partners
either directly or indirectly through the Transfer Agent. A meeting shall be
held at a time and place determined by the General Partner on a date not less
than 10 days nor more than 60 days after the mailing of notice of the meeting.
Limited Partners shall not vote on matters that would cause the Limited Partners
to be deemed to be taking part in the management and control of the business and
affairs of the Partnership so as to jeopardize the Limited Partners' limited
liability under the Delaware Act or the law of any other state in which the
Partnership is qualified to do business.
Section 13.5 Notice of a Meeting.
Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders of the class or classes of Limited Partner Interests for which a
meeting is proposed in writing by mail or other means of written communication
in accordance with Section 16.1. The notice shall be deemed to have been given
at the time when deposited in the mail or sent by other means of written
communication.
Section 13.6 Record Date.
For purposes of determining the Limited Partners entitled to notice of or
to vote at a meeting of the Limited Partners or to give approvals without a
meeting as provided in Section 13.11 the General Partner may set a Record Date,
which shall not be less than 10 nor more than 60 days before (a) the date of the
meeting (unless such requirement conflicts with any rule, regulation, guideline
or requirement of any National Securities Exchange on which the Limited Partner
Interests are listed for trading, in which case the rule, regulation, guideline
or requirement of such exchange shall govern) or (b) in the event that approvals
are sought without a meeting, the date by which Limited Partners are requested
in writing by the General Partner to give such approvals.
Section 13.7 Adjournment.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the
time and place thereof are announced at the meeting at which the adjournment is
taken, unless such adjournment shall be for more than 45 days. At the adjourned
meeting, the Partnership may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 45 days
or if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with this Article XIII.
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Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a meeting
duly held after regular call and notice, if a quorum is present either in person
or by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner does not approve, at
the beginning of the meeting, of the transaction of any business because the
meeting is not lawfully called or convened; and except that attendance at a
meeting is not a waiver of any right to disapprove the consideration of matters
required to be included in the notice of the meeting, but not so included, if
the disapproval is expressly made at the meeting.
Section 13.9 Quorum.
The holders of a majority of the Outstanding Limited Partner Interests of
the class or classes for which a meeting has been called (including Limited
Partner Interests deemed owned by the General Partner) represented in person or
by proxy shall constitute a quorum at a meeting of Limited Partners of such
class or classes unless any such action by the Limited Partners requires
approval by holders of a greater percentage of such Limited Partner Interests,
in which case the quorum shall be such greater percentage. At any meeting of
the Limited Partners duly called and held in accordance with this Agreement at
which a quorum is present, the act of Limited Partners holding Outstanding
Limited Partner Interests that in the aggregate represent a majority of the
Outstanding Limited Partner Interests entitled to vote and be present in person
or by proxy at such meeting shall be deemed to constitute the act of all Limited
Partners, unless a greater or different percentage is required with respect to
such action under the provisions of this Agreement, in which case the act of the
Limited Partners holding Outstanding Limited Partner Interests that in the
aggregate represent at least such greater or different percentage shall be
required. The Limited Partners present at a duly called or held meeting at which
a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Limited Partners to leave less than a
quorum, if any action taken (other than adjournment) is approved by the required
percentage of Outstanding Limited Partner Interests specified in this Agreement
(including Limited Partner Interests deemed owned by the General Partner). In
the absence of a quorum any meeting of Limited Partners may be adjourned from
time to time by the affirmative vote of holders of at least a majority of the
Outstanding Limited Partner Interests entitled to vote at such meeting
(including Limited Partner Interests deemed owned by the General Partner)
represented either in person or by proxy, but no other business may be
transacted, except as provided in Section 13.7.
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Section 13.10 Conduct of a Meeting.
The General Partner shall have full power and authority concerning the
manner of conducting any meeting of the Limited Partners or solicitation of
approvals in writing, including the determination of Persons entitled to vote,
the existence of a quorum, the satisfaction of the requirements of Section 13.4,
the conduct of voting, the validity and effect of any proxies and the
determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting. The General Partner shall designate a
Person to serve as chairman of any meeting and shall further designate a Person
to take the minutes of any meeting. All minutes shall be kept with the records
of the Partnership maintained by the General Partner. The General Partner may
make such other regulations consistent with applicable law and this Agreement as
it may deem advisable concerning the conduct of any meeting of the Limited
Partners or solicitation of approvals in writing, including regulations in
regard to the appointment of proxies, the appointment and duties of inspectors
of votes and approvals, the submission and examination of proxies and other
evidence of the right to vote, and the revocation of approvals in writing.
Section 13.11 Action Without a Meeting.
If authorized by the General Partner, any action that may be taken at a
meeting of the Limited Partners may be taken without a meeting if an approval in
writing setting forth the action so taken is signed by Limited Partners owning
not less than the minimum percentage of the Outstanding Limited Partner
Interests (including Limited Partner Interests deemed owned by the General
Partner) that would be necessary to authorize or take such action at a meeting
at which all the Limited Partners were present and voted (unless such provision
conflicts with any rule, regulation, guideline or requirement of any National
Securities Exchange on which the Limited Partner Interests are listed for
trading, in which case the rule, regulation, guideline or requirement of such
exchange shall govern). Prompt notice of the taking of action without a meeting
shall be given to the Limited Partners who have not approved in writing. The
General Partner may specify that any written ballot submitted to Limited
Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time period, which shall be not less than
20 days, specified by the General Partner. If a ballot returned to the
Partnership does not vote all of the Limited Partner Interests held by the
Limited Partners the Partnership shall be deemed to have failed to receive a
ballot for the Limited Partner Interests that were not voted. If approval of the
taking of any action by the Limited Partners is solicited by any Person other
than by or on behalf of the General Partner, the written approvals shall have no
force and effect unless and until (a) they are deposited with the Partnership in
care of the General Partner, (b) approvals sufficient to take the action
proposed are dated as of a date not more than 90 days prior to the date
sufficient approvals are deposited with the Partnership and (c) an Opinion of
Counsel is delivered to the General Partner to the effect that the exercise of
such right and the action proposed to be taken with respect to any particular
matter (i) will not cause the Limited Partners to be deemed to be taking part in
the management and control of the business and affairs of the Partnership so as
to jeopardize the Limited Partners' limited liability, and (ii) is otherwise
permissible under the state statutes then governing the rights, duties and
liabilities of the Partnership and the Partners.
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Section 13.12 Voting and Other Rights.
(a) Only those Record Holders of the Limited Partner Interests on the
Record Date set pursuant to Section 13.6 (and also subject to the limitations
contained in the definition of "Outstanding") shall be entitled to notice of,
and to vote at, a meeting of Limited Partners or to act with respect to matters
as to which the holders of the Outstanding Limited Partner Interests have the
right to vote or to act. All references in this Agreement to votes of, or other
acts that may be taken by, the Outstanding Limited Partner Interests shall be
deemed to be references to the votes or acts of the Record Holders of such
Outstanding Limited Partner Interests.
(b) With respect to Limited Partner Interests that are held for a
Person's account by another Person (such as a broker, dealer, bank, trust
company or clearing corporation, or an agent of any of the foregoing), in whose
name such Limited Partner Interests are registered, such other Person shall, in
exercising the voting rights in respect of such Limited Partner Interests on any
matter, and unless the arrangement between such Persons provides otherwise, vote
such Limited Partner Interests in favor of, and at the direction of, the Person
who is the beneficial owner, and the Partnership shall be entitled to assume it
is so acting without further inquiry. The provisions of this Section 13.12(b)
(as well as all other provisions of this Agreement) are subject to the
provisions of Section 4.3.
ARTICLE XIV
MERGER
Section 14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.
Section 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner shall
determine, in the exercise of its discretion, to consent to the merger or
consolidation, the General Partner shall approve the Merger Agreement, which
shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
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(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partner interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are not to be exchanged
or converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partner.
Section 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon
its approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.
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(b) Except as provided in Section 14.3(d), the Merger Agreement shall
be approved upon receiving the affirmative vote or consent of the holders of a
Unit Majority unless the Merger Agreement contains any provision that, if
contained in an amendment to this Agreement, the provisions of this Agreement or
the Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Limited Partner Interests or of any class of
Limited Partners, in which case such greater percentage vote or consent shall be
required for approval of the Merger Agreement.
(c) Except as provided in Section 14.3(d), after such approval by vote
or consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation may
be abandoned pursuant to provisions therefor, if any, set forth in the Merger
Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in
this Agreement, the General Partner is permitted, in its discretion, without
Limited Partner approval, to merge the Partnership or any Group Member into, or
convey all of the Partnership's assets to, another limited liability entity
which shall be newly formed and shall have no assets, liabilities or operations
at the time of such Merger other than those it receives from the Partnership or
other Group Member if (i) the General Partner has received an Opinion of Counsel
that the merger or conveyance, as the case may be, would not result in the loss
of the limited liability of any Limited Partner or any partner in the Operating
Partnership or cause the Partnership or Operating Partnership to be treated as
an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not previously treated as such),
(ii) the sole purpose of such merger or conveyance is to effect a mere change in
the legal form of the Partnership into another limited liability entity and
(iii) the governing instruments of the new entity provide the Limited Partners
and the General Partner with the same rights and obligations as are herein
contained.
Section 14.4 Certificate of Merger.
Upon the required approval by the General Partner and the Unitholders of a
Merger Agreement, a certificate of merger shall be executed and filed with the
Secretary of State of the State of Delaware in conformity with the requirements
of the Delaware Act.
Section 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
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(ii) the title to any real property vested by deed or otherwise in any
of those constituent business entities shall not revert and is not in any
way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall
not be deemed to result in a transfer or assignment of assets or liabilities
from one entity to another.
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1 Right to Acquire Limited Partner Interests.
(a) Notwithstanding any other provision of this Agreement, if at any
time not more than 20% of the total Limited Partner Interests of any class then
Outstanding is held by Persons other than the General Partner and its
Affiliates, the General Partner shall then have the right, which right it may
assign and transfer in whole or in part to the Partnership or any Affiliate of
the General Partner, exercisable in its sole discretion, to purchase all, but
not less than all, of such Limited Partner Interests of such class then
Outstanding held by Persons other than the General Partner and its Affiliates,
at the greater of (x) the Current Market Price as of the date three days prior
to the date that the notice described in Section 15 is mailed and (y) the
highest price paid by the General Partner or any of its Affiliates for any such
Limited Partner Interest of such class purchased during the 90-day period
preceding the date that the notice described in Section 15.1(b) is mailed. As
used in this Agreement, (i) "Current Market Price" as of any date of any class
of Limited Partner Interests listed or admitted to trading on any National
Securities Exchange means the average of the daily Closing Prices (as
hereinafter defined) per limited partner interest of such class for the 20
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) "Closing Price" for any day means the last sale price on such day,
regular way, or in case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange (other than the Nasdaq Stock Market) on which such Limited
Partner Interests of such class are listed or admitted to trading or, if such
Limited Partner Interests of such class are not listed or admitted to trading on
any National Securities Exchange (other than the Nasdaq Stock Market), the last
quoted price on such day or, if not so quoted, the average of the high bid and
low asked prices on such day in the over-the-counter market, as reported by the
Nasdaq Stock Market or such other system then in use, or, if on any such day
such
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Limited Partner Interests of such class are not quoted by any such organization,
the average of the closing bid and asked prices on such day as furnished by a
professional market maker making a market in such Limited Partner Interests of
such class selected by the General Partner, or if on any such day no market
maker is making a market in such Limited Partner Interests of such class, the
fair value of such Limited Partner Interests on such day as determined
reasonably and in good faith by the General Partner; and (iii) "Trading Day"
means a day on which the principal National Securities Exchange on which such
Limited Partner Interests of any class are listed or admitted to trading is open
for the transaction of business or, if Limited Partner Interests of a class are
not listed or admitted to trading on any National Securities Exchange, a day on
which banking institutions in New York City generally are open.
(b) If the General Partner, any Affiliate of the General Partner or
the Partnership elects to exercise the right to purchase Limited Partner
Interests granted pursuant to Section 15.1(a), the General Partner shall deliver
to the Transfer Agent notice of such election to purchase (the "Notice of
Election to Purchase") and shall cause the Transfer Agent to mail a copy of such
Notice of Election to Purchase to the Record Holders of Limited Partner
Interests of such class (as of a Record Date selected by the General Partner) at
least 10, but not more than 60, days prior to the Purchase Date. Such Notice of
Election to Purchase shall also be published for a period of at least three
consecutive days in at least two daily newspapers of general circulation printed
in the English language and published in the Borough of Manhattan, New York. The
Notice of Election to Purchase shall specify the Purchase Date and the price
(determined in accordance with Section 15.1(a)) at which Limited Partner
Interests will be purchased and state that the General Partner, its Affiliate or
the Partnership, as the case may be, elects to purchase such Limited Partner
Interests, upon surrender of Certificates representing such Limited Partner
Interests in exchange for payment, at such office or offices of the Transfer
Agent as the Transfer Agent may specify, or as may be required by any National
Securities Exchange on which such Limited Partner Interests are listed or
admitted to trading. Any such Notice of Election to Purchase mailed to a Record
Holder of Limited Partner Interests at his address as reflected in the records
of the Transfer Agent shall be conclusively presumed to have been given
regardless of whether the owner receives such notice. On or prior to the
Purchase Date, the General Partner, its Affiliate or the Partnership, as the
case may be, shall deposit with the Transfer Agent cash in an amount sufficient
to pay the aggregate purchase price of all of such Limited Partner Interests to
be purchased in accordance with this Section 15.1. If the Notice of Election to
Purchase shall have been duly given as aforesaid at least 10 days prior to the
Purchase Date, and if on or prior to the Purchase Date the deposit described in
the preceding sentence has been made for the benefit of the holders of Limited
Partner Interests subject to purchase as provided herein, then from and after
the Purchase Date, notwithstanding that any Certificate shall not have been
surrendered for purchase, all rights of the holders of such Limited Partner
Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall
thereupon cease, except the right to receive the purchase price (determined in
accordance with Section 15.1(a)) for Limited Partner Interests therefor, without
interest, upon surrender to the Transfer Agent of the Certificates representing
such Limited Partner Interests, and such Limited Partner Interests shall
thereupon be deemed to be transferred to the General Partner, its Affiliate or
the Partnership, as the case may be, on the record books of the Transfer Agent
and the Partnership, and the General Partner or any
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Affiliate of the General Partner, or the Partnership, as the case may be, shall
be deemed to be the owner of all such Limited Partner Interests from and after
the Purchase Date and shall have all rights as the owner of such Limited Partner
Interests (including all rights as owner of such Limited Partner Interests
pursuant to Articles IV, V, VI and XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a), therefor, without interest thereon.
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee hereunder
shall be deemed conclusively to have been given or made, and the obligation to
give such notice or report or to make such payment shall be deemed conclusively
to have been fully satisfied, upon sending of such notice, payment or report to
the Record Holder of such Partnership Securities at his address as shown on the
records of the Transfer Agent or as otherwise shown on the records of the
Partnership, regardless of any claim of any Person who may have an interest in
such Partnership Securities by reason of any assignment or otherwise. An
affidavit or certificate of making of any notice, payment or report in
accordance with the provisions of this Section 16.1 executed by the General
Partner, the Transfer Agent or the mailing organization shall be prima facie
evidence of the giving or making of such notice, payment or report. If any
notice, payment or report addressed to a Record Holder at the address of such
Record Holder appearing on the books and records of the Transfer Agent or the
Partnership is returned by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver it, such notice,
payment or report and any subsequent notices, payments and reports shall be
deemed to have been duly given or made without further mailing (until such time
as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his address) if they are available for the Partner or
Assignee at the principal office of the Partnership for a period of one year
from the date of the giving or making of such notice, payment or report to the
other Partners and Assignees. Any notice to the Partnership shall be deemed
given if received by the General Partner at the principal office of the
Partnership designated pursuant to Section 2.3. The General Partner may rely and
shall be protected in relying on any notice or other document from a Partner,
Assignee or other Person if believed by it to be genuine.
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Section 16.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 16.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 16.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
Section 16.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
Section 16.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
Section 16.7 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto or, in the case of a Person acquiring a Unit, upon accepting
the certificate evidencing such Unit or executing and delivering a Transfer
Application as herein described, independently of the signature of any other
party.
Section 16.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
Section 16.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
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Section 16.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
PLAINS ALL AMERICAN INC.
By: /s/ Michael R. Patterson
---------------------------------------------
Name: Michael R. Patterson
-------------------------------------------
Title: Senior Vice President
------------------------------------------
ORGANIZATIONAL LIMITED PARTNER:
/s/ Michael R. Patterson
-------------------------------------------------
MICHAEL R. PATTERSON
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as
Limited Partners of the Partnership, pursuant to
powers of attorney now and hereafter executed in
favor of, and granted and delivered to the General
Partner.
PLAINS ALL AMERICAN INC.
By: /s/ Michael R. Patterson
---------------------------------------------
Name: Michael R. Patterson
-------------------------------------------
Title: Senior Vice President
------------------------------------------
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EXHIBIT 3.2
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PLAINS MARKETING, L.P.
Plains Marketing, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1.1 Definitions................................................................................ 1
Section 1.2 Construction............................................................................... 12
ARTICLE II
ORGANIZATION
Section 2.1 Formation.................................................................................. 13
Section 2.2 Name....................................................................................... 13
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices....................... 13
Section 2.4 Purpose and Business....................................................................... 13
Section 2.5 Powers..................................................................................... 14
Section 2.6 Power of Attorney.......................................................................... 14
Section 2.7 Term....................................................................................... 16
Section 2.8 Title to Partnership Assets................................................................ 16
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability.................................................................... 17
Section 3.2 Management of Business..................................................................... 17
Section 3.3 Outside Activities of the Limited Partners................................................. 17
Section 3.4 Rights of Limited Partners................................................................. 17
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
Section 4.1 Transfer Generally......................................................................... 18
Section 4.2 Transfer of General Partner's Partnership Interest......................................... 19
Section 4.3 Transfer of a Limited Partner's Partnership Interest....................................... 19
Section 4.4 Restrictions on Transfers.................................................................. 19
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
<S> <C> <C>
Section 5.1 Initial Contributions...................................................................... 20
Section 5.2 Contributions Pursuant to the Contribution and Conveyance Agreement........................ 20
Section 5.3 Additional Capital Contributions........................................................... 21
Section 5.4 Interest and Withdrawal.................................................................... 21
Section 5.5 Capital Accounts........................................................................... 21
Section 5.6 Loans from Partners........................................................................ 24
Section 5.7 Limited Preemptive Rights.................................................................. 24
Section 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests.............................. 25
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes................................................... 25
Section 6.2 Allocations for Tax Purposes............................................................... 29
Section 6.3 Distributions.............................................................................. 31
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management................................................................................. 32
Section 7.2 Certificate of Limited Partnership......................................................... 34
Section 7.3 Restrictions on General Partner's Authority................................................ 34
Section 7.4 Reimbursement of the General Partner....................................................... 35
Section 7.5 Outside Activities......................................................................... 36
Section 7.6 Partnership; Loans from the General Partner; Loans or Contributions from the Partnership;
Contracts with Affiliates; Certain Restrictions on the General Partner..................... 37
Section 7.7 Indemnification............................................................................ 39
Section 7.8 Liability of Indemnitees................................................................... 41
Section 7.9 Resolution of Conflicts of Interest........................................................ 42
Section 7.10 Other Matters Concerning the General Partner............................................... 43
Section 7.11 Reliance by Third Parties.................................................................. 44
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting..................................................................... 45
Section 8.2 Fiscal Year................................................................................ 45
</TABLE>
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ARTICLE IX
TAX MATTERS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 9.1 Tax Returns and Information................................................................ 45
Section 9.2 Tax Elections.............................................................................. 45
Section 9.3 Tax Controversies.......................................................................... 46
Section 9.4 Withholding................................................................................ 46
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Partners...................................................................... 46
Section 10.2 Admission of Substituted Limited Partner................................................... 46
Section 10.3 Admission of Additional Limited Partners................................................... 47
Section 10.4 Admission of Successor or Transferee General Partner....................................... 47
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.............................. 48
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner.......................................................... 48
Section 11.2 Removal of the General Partner............................................................. 50
Section 11.3 Interest of Departing Partner.............................................................. 50
Section 11.4 Withdrawal of a Limited Partner............................................................ 51
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution................................................................................ 51
Section 12.2 Continuation of the Business of the Partnership After Dissolution.......................... 51
Section 12.3 Liquidator................................................................................. 52
Section 12.4 Liquidation................................................................................ 53
Section 12.5 Cancellation of Certificate of Limited Partnership......................................... 54
Section 12.6 Return of Contributions.................................................................... 54
Section 12.7 Waiver of Partition........................................................................ 54
Section 12.8 Capital Account Restoration................................................................ 54
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
<S> <C> <C>
Section 13.1 Amendment to be Adopted Solely by the General Partner...................................... 55
Section 13.2 Amendment Procedures....................................................................... 56
ARTICLE XIV
MERGER
Section 14.1 Authority.................................................................................. 57
Section 14.2 Procedure for Merger or Consolidation...................................................... 57
Section 14.3 Approval by Limited Partners of Merger or Consolidation.................................... 58
Section 14.4 Certificate of Merger...................................................................... 59
Section 14.5 Effect of Merger........................................................................... 59
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices...................................................................... 60
Section 15.2 Further Action............................................................................. 60
Section 15.3 Binding Effect............................................................................. 60
Section 15.4 Integration................................................................................ 60
Section 15.5 Creditors.................................................................................. 60
Section 15.6 Waiver..................................................................................... 60
Section 15.7 Counterparts............................................................................... 61
Section 15.8 Applicable Law............................................................................. 61
Section 15.9 Invalidity of Provisions................................................................... 61
Section 15.10 Consent of Partners........................................................................ 61
</TABLE>
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PLAINS MARKETING, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of PLAINS
MARKETING, L.P., dated as of November 23, 1998 is entered into by and between
Plains All American Inc., a Delaware corporation, as the General Partner, and
Plains All American Pipeline, L.P., a Delaware limited partnership, as the
Limited Partner, together with any other Persons who hereafter become Partners
in the Partnership or parties hereto as provided herein.
R E C I T A L S:
- - - - - - - -
WHEREAS, Plains All American Inc. and Plains All American Pipeline, L.P.
formed the Partnership pursuant to the Agreement of Limited Partnership of
Plains Marketing, L.P. dated as of November 10, 1998 (the "Prior Agreement") and
a Certificate of Limited Partnership filed with the Secretary of State of the
State of Delaware on such date; and
WHEREAS, the Partners of the Partnership now desire to amend the Prior
Agreement to reflect additional contributions by the Partners and certain other
matters.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby amend the Prior Agreement
and, as so amended, restate it in its entirety as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 10.4 and who is shown
as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year of the Partnership, (a)
increased by any amounts that such Partner is obligated to restore under
the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or
is deemed obligated to restore under Treasury Regulation Sections 1.704-
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2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all losses
and deductions that, as of the end of such fiscal year, are reasonably
expected to be allocated to such Partner in subsequent years under Sections
704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-
1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end
of such fiscal year, are reasonably expected to be made to such Partner in
subsequent years in accordance with the terms of this Agreement or
otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to)
the year in which such distributions are reasonably expected to be made
(other than increases as a result of a minimum gain chargeback pursuant to
Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of Adjusted
Capital Account is intended to comply with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith. The "Adjusted Capital Account" of a Partner in
respect of a General Partner Interest or any other specified interest in
the Partnership shall be the amount which such Adjusted Capital Account
would be if such General Partner Interest or other interest in the
Partnership were the only interest in the Partnership held by a Partner
from and after the date on which such general partner interest or other
interest was first issued.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted
Property is deemed contributed to a new partnership in exchange for an
interest in the new partnership, followed by a deemed liquidation of the
Partnership for federal income tax purposes upon a termination of the
Partnership pursuant to Treasury Regulation Section 1.708-(b)(1)(iv), such
property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is subsequently adjusted pursuant to
Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As
used herein, the term "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative
Allocation (if appropriate to the context in which the term "Agreed
Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution as
determined by the General Partner using such reasonable method of valuation
as it may adopt. The General Partner shall, in its discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate
Agreed Value of Contributed Properties contributed to the Partnership in a
single
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or integrated transaction among each separate property on a basis
proportional to the fair market value of each Contributed Property.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership of Plains Marketing, L.P., as it may be amended, supplemented
or restated from time to time.
"All American" means All American Pipeline, L.P., a Delaware limited
partnership.
"All American Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of All American Pipeline, L.P., as it may
be amended, supplemented or restated from time to time.
"Assets" means the assets being conveyed to the Partnership on the
Closing Date pursuant to Section 5.2 and the Contribution and Conveyance
Agreement.
"Assignee" means a Person to whom one or more Partnership Interests
have been transferred in a manner permitted under this Agreement, but who
has not been admitted as a Substituted Limited Partner.
"Associate" means, when used to indicate a relationship with any
Person, (a) any corporation or organization of which such Person is a
director, officer or partner or is, directly or indirectly, the owner of
20% or more of any class of voting stock or other voting interest; (b) any
trust or other estate in which such Person has at least a 20% beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such Person, or any
relative of such spouse, who has the same principal residence as such
Person.
"Assumed Liabilities" means the liabilities that the Partnership is
either assuming or taking subject to in connection with the conveyance of
the Assets pursuant to Section 5.2 and the Contribution and Conveyance
Agreement.
"Available Cash" means, with respect to any Quarter ending prior to
the Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the
Partnership Group on hand at the end of such Quarter, and (ii) all
additional cash and cash equivalents of the Partnership Group on hand on
the date of determination of Available Cash with respect to such Quarter
resulting from Working Capital Borrowings made subsequent to the end of
such Quarter, less
(b) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner to (i)
provide for the proper conduct of the
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business of the Partnership Group (including reserves for future capital
expenditures and for anticipated future credit needs of the Partnership
Group) subsequent to such Quarter, (ii) comply with applicable law or any
loan agreement, security agreement, mortgage, debt instrument or other
agreement or obligation to which any Group Member is a party or by which it
is bound or its assets are subject or (iii) provide funds for distributions
under Section 6.4 or 6.5 of the MLP Agreement in respect of any one or more
of the next four Quarters; provided, however, that the General Partner may
not establish cash reserves pursuant to (iii) above if the effect of such
reserves would be that the MLP is unable to distribute the Minimum
Quarterly Distribution on all Common Units, plus any Cumulative Common Unit
Arrearage on all Common Units, with respect to such Quarter; and provided
further that disbursements made by a Group Member or cash reserves
established, increased or reduced after the end of such Quarter but on or
before the date of determination of Available Cash with respect to such
Quarter shall be deemed to have been made, established, increased or
reduced, for purposes of determining Available Cash, within such Quarter if
the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to
the Quarter in which the Liquidation Date occurs and any subsequent Quarter
shall equal zero.
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will
be reflected by the difference between such Partner's Capital Account
balance as maintained pursuant to Section 5.5 and the hypothetical balance
of such Partner's Capital Account computed as if it had been maintained
strictly in accordance with federal income tax accounting principles.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Texas shall not be regarded as a
Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest or any other specified interest in the Partnership
shall be the amount which such Capital Account would be if such General
Partner Interest or other specified interest in the Partnership were the
only interest in the Partnership held by a Partner from and after the date
on which such General Partner Interest or other specified interest in the
Partnership was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership pursuant to this Agreement or the Contribution and Conveyance
Agreement.
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"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' and Assignees' Capital Accounts in respect of such Contributed
Property, and (b) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of
the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Sections 5.5(d)(i) and
5.5(d)(ii) and to reflect changes, additions or other adjustments to the
Carrying Value for dispositions and acquisitions of Partnership properties,
as deemed appropriate by the General Partner.
"CT&T" means Celeron Trading & Transportation Company, a Delaware
corporation.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the
State of Delaware as referenced in Section 2.1, as such Certificate of
Limited Partnership may be amended, supplemented or restated from time to
time.
"Closing Date" means the first date on which Common Units are sold by
the MLP to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of successor law.
"Commission" means the United States Securities and Exchange
Commission.
"Common Unit" has the meaning assigned to such term in the MLP
Agreement.
"Contributed Property" means each property or other asset, in such
form as may be permitted by the Delaware Act, but excluding cash,
contributed to the Partnership (or deemed contributed to a new partnership
on termination of the Partnership pursuant to Section 708 of the Code. Once
the Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.5(d), such property shall no longer constitute a Contributed
Property, but shall be deemed an Adjusted Property.
"Contribution and Conveyance Agreement" means that certain
Contribution, Conveyance and Assumption Agreement, dated as of the Closing
Date, among the General Partner, the Plains Midstream Subsidiaries, the
MLP, the Partnership and certain other parties, together with the
additional conveyance documents and instruments contemplated or referenced
thereunder.
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"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(ix).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. (S)17-101, et seq., as amended, supplemented or restated
from time to time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Gathering LLC" means Gathering LLC, a Delaware limited liability
company.
"General Partner" means Plains All American Inc. and its successors
and permitted assigns as general partner of the Partnership.
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner) and
includes any and all benefits to which the General Partner is entitled as
provided in this Agreement, together with all obligations of the General
Partner to comply with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except voting pursuant to a revocable proxy
or consent given to such Person in response to a proxy or consent
solicitation made to 10 or more Persons) or disposing of any MLP Securities
with any other Person that beneficially owns, or whose Affiliates or
Associates beneficially own, directly or indirectly, MLP Securities.
"Group Member" means a member of the Partnership Group.
"Indemnitee" means (a) the General Partner, (b) any Departing Partner,
(c) any Person who is or was an Affiliate of the General Partner or any
Departing Partner, (d) any Person who is or was a member, partner, officer,
director, employee, agent or trustee of any Group Member, the General
Partner or any Departing Partner or any Affiliate of any Group Member, the
General Partner or any Departing Partner, and (e) any Person who is or was
serving at the request of the General Partner or any Departing Partner or
any Affiliate of the General Partner or any Departing Partner as an
officer, director, employee, member, partner,
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agent, fiduciary or trustee of another Person; provided, that a Person
shall not be an Indemnitee by reason of providing, on a fee-for-services
basis, trustee, fiduciary or custodial services.
"Initial Offering" means the initial offering and sale of Common Units
to the public, as described in the Registration Statement.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership and includes any and all benefits to
which such Limited Partner or Assignee is entitled as provided in this
Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement.
"Liquidation Date" means (a) in the case of an event giving rise to
the dissolution of the Partnership of the type described in clauses (a) and
(b) of the first sentence of Section 12.2, the date on which the applicable
time period during which the Partners have the right to elect to
reconstitute the Partnership and continue its business has expired without
such an election being made, and (b) in the case of any other event giving
rise to the dissolution of the Partnership, the date on which such event
occurs.
"Liquidator" means one or more Persons selected by the General Partner
to perform the functions described in Section 12.3 as liquidating trustee
of the Partnership within the meaning of the Delaware Act.
"Limited Partner" means any Person that is admitted to the Partnership
as a limited partner pursuant to the terms and conditions of this
Agreement; but the term Limited Partner shall not include any Person from
and after the time such Person withdraws as a Limited Partner from the
Partnership.
"Merger Agreement" has the meaning assigned to such term in Section
14.1.
"Minimum Quarterly Distribution" has the meaning assigned to such term
in the MLP Agreement.
"MLP" means Plains All American Pipeline, L.P.
"MLP Agreement" means the Amended and Restated Agreement of Limited
Partnership of Plains All American Pipeline, L.P., as it may be amended,
supplemented or restated from time to time.
"MLP Security" has the meaning assigned to the term "Partnership
Security" in the MLP Agreement.
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"Net Agreed Value" means, (a) in the case of any Contributed Property,
the Agreed Value of such property reduced by any liabilities either assumed
by the Partnership upon such contribution or to which such property is
subject when contributed, and (b) in the case of any property distributed
to a Partner or Assignee by the Partnership, the Partnership's Carrying
Value of such property (as adjusted pursuant to Section 5.5(d)(ii)) at the
time such property is distributed, reduced by any indebtedness either
assumed by such Partner or Assignee upon such distribution or to which such
property is subject at the time of distribution, in either case, as
determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss)
for such taxable year over the Partnership's items of loss and deduction
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Income shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d).
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken
into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable year over the Partnership's items of income and gain
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Loss shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d).
"Net Termination Gain" means, for any taxable year, the sum, if
positive, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the
determination of Net Termination Gain shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain or loss
specially allocated under Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if
negative, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the
determination of Net Termination Loss shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain or loss
specially allocated under Section 6.1(d).
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would
be allocated to the Partners pursuant to Sections 6.2(b)(i)(A),
6.2(b)(ii)(A) and 6.2(b)(iii) if such properties were disposed of in a
taxable transaction in full satisfaction of such liabilities and for no
other consideration.
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"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b),
are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"OLP Subsidiary" means a Subsidiary of the OLP.
"Omnibus Agreement" means that Omnibus Agreement, dated as of the
Closing Date, among Plains Resources, Inc., the General Partner, the MLP,
the Partnership and All American, L.P.
"Opinion of Counsel" means a written opinion of counsel (which may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner in its reasonable discretion.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
"Partnership" means Plains Marketing, L.P., a Delaware limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership and all OLP Subsidiaries,
treated as a single consolidated entity.
"Partnership Interest" means an ownership interest of a Partner in the
Partnership, which shall include the General Partner Interest and the
Limited Partner Interest(s).
"Partnership Minimum Gain" means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
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"Percentage Interest" means the percentage interest in the Partnership
held by each Partner upon completion of the transactions in Section 5.4 and
shall mean, (a) as to the General Partner, an aggregate 1.0101% and (b) as
to the MLP, 98.9899%.
"Person" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other
entity.
"Prior Agreement" is defined in the Recitals.
"Pro Rata" means, when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their relative
Percentage Interests.
"Quarter" means, unless the context requires otherwise, a fiscal
quarter of the Partnership.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or
Section 743 of the Code) upon the disposition of any property or asset of
the Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-64107) as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Commission under
the Securities Act to register the offering and sale of the Common Units in
the Initial Offering.
"Required Allocations" means (a) any limitation imposed on any
allocation of Net Losses or Net Termination Losses under Section 6.1(b) or
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss or
deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv),
6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent such item of gain
or loss is not allocated pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A),
respectively, to eliminate Book-Tax Disparities.
"Restricted Business" has the meaning assigned to such term in the
Omnibus Agreement.
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"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such
statute.
"Special Approval" has the meaning assigned to such term in the MLP
Agreement.
"Subsidiary" means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard
to the occurrence of any contingency) to vote in the election of directors
or other governing body of such corporation is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person or a combination thereof, (b) a partnership
(whether general or limited) in which such Person or a Subsidiary of such
Person is, at the date of determination, a general or limited partner of
such partnership, but only if more than 50% of the partnership interests of
such partnership (considering all of the partnership interests of the
partnership as a single class) is owned, directly or indirectly, at the
date of determination, by such Person, by one or more Subsidiaries of such
Person, or a combination thereof, or (c) any other Person (other than a
corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or
indirectly, at the date of determination, has (i) at least a majority
ownership interest or (ii) the power to elect or direct the election of a
majority of the directors or other governing body of such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 10.2 in place of and
with all the rights of a Limited Partner and who is shown as a Limited
Partner on the books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Underwriter" means each Person named as an underwriter in Schedule I
to the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated
November 17, 1998 among the Underwriters, the MLP and certain other
parties, providing for the purchase of Common Units by such Underwriters.
"Unit" has the meaning assigned to such term in the MLP Agreement.
"Unit Majority" has the meaning assigned to such term in the MLP
Agreement.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of
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such date (as determined under Section 5.5(d)) over (b) the Carrying Value
of such property as of such date (prior to any adjustment to be made
pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any adjustment to
be made pursuant to Section 5.5(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under Section
5.5(d)).
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Working Capital Borrowings" means borrowings exclusively for working
capital purposes made pursuant to a credit facility or other arrangement
requiring all such borrowings thereunder to be reduced to a relatively
small amount each year for an economically meaningful period of time.
Section 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE II
ORGANIZATION
Section 2.1 Formation.
The Partnership was previously formed as a limited partnership pursuant to
the provisions of the Delaware Act. The Partners hereby amend and restate the
Prior Agreement in its entirety. This amendment and restatement shall become
effective on the date of this Agreement. Except as expressly provided to the
contrary in this Agreement, the rights, duties (including fiduciary duties),
liabilities and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Delaware Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes and a Partner has no interest in specific Partnership property.
Section 2.2 Name.
The name of the Partnership shall be "Plains Marketing, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General
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Partner in its sole discretion, including the name of the General Partner. The
words "Limited Partnership," "L.P." or "Ltd." or similar words or letters shall
be included in the Partnership's name where necessary for the purpose of
complying with the laws of any jurisdiction that so requires. The General
Partner in its discretion may change the name of the Partnership at any time and
from time to time and shall notify the other Partner(s) of such change in the
next regular communication to the Partners.
Section 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Delaware shall be located at 1013 Center Road,
Wilmington, Delaware 19805-1297, and the registered agent for service of process
on the Partnership in the State of Delaware at such registered office shall be
Corporation Service Company. The principal office of the Partnership shall be
located at 500 Dallas, Suite 700, Houston, Texas 77002 or such other place as
the General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems necessary
or appropriate. The address of the General Partner shall be 500 Dallas, Suite
700, Houston, Texas 77002 or such other place as the General Partner may from
time to time designate by notice to the Limited Partners.
Section 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) acquire, manage, operate and sell the Assets and any similar
assets or properties now or hereafter acquired by the Partnership, (b) to serve
as a limited partner of All American and, in connection therewith, to exercise
all the rights and powers conferred upon the Partnership as a partner of All
American pursuant to the All American Partnership Agreement, (c) engage directly
in, or enter into or form any corporation, partnership, joint venture, limited
liability company or other arrangement to engage indirectly in, any business
activity that the Partnership is permitted to engage in, or any type of business
or activity engaged in by the General Partner prior to the Closing Date and, in
connection therewith, to exercise all of the rights and powers conferred upon
the Partnership pursuant to the agreements relating to such business activity,
(d) engage directly in, or enter into or form any corporation, partnership,
joint venture, limited liability company or other arrangement to engage
indirectly in, any business activity that is approved by the General Partner and
which lawfully may be conducted by a limited partnership organized pursuant to
the Delaware Act and, in connection therewith, to exercise all of the rights and
powers conferred upon the Partnership pursuant to the agreements relating to
such business activity; provided, however, that the General Partner reasonably
determines, as of the date of the acquisition or commencement of such activity,
that such activity (i) generates "qualifying income" (as such term is defined
pursuant to Section 7704 of the Code) or (ii) enhances the operations of an
activity of the Partnership that generates qualifying income, and (e) do
anything necessary or appropriate to the foregoing, including the making of
capital contributions or loans to a Group Member, the MLP or any Subsidiary of
the MLP. The General
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Partner has no obligation or duty to the Partnership, the Limited Partners, or
the Assignees to propose or approve, and in its discretion may decline to
propose or approve, the conduct by the Partnership of any business.
Section 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
Section 2.6 Power of Attorney.
(a) Each Partner and each Assignee hereby constitutes and appoints
the General Partner and, if a Liquidator shall have been selected pursuant to
Section 12.3, the Liquidator (and any successor to the Liquidator by merger,
transfer, assignment, election or otherwise) and each of their authorized
officers and attorneys-in-fact, as the case may be, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
General Partner or the Liquidator deems necessary or appropriate to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all other jurisdictions
in which the Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the General Partner or
the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of this
Agreement; (C) all certificates, documents and other instruments (including
conveyances and a certificate of cancellation) that the General Partner or
the Liquidator deems necessary or appropriate to reflect the dissolution
and liquidation of the Partnership pursuant to the terms of this Agreement;
(D) all certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to,
or other events described in, Article IV, X, XI or XII; (E) all
certificates, documents and other instruments relating to the determination
of the rights, preferences and privileges of any class or series of
Partnership Interests issued pursuant hereto; and (F) all certificates,
documents and other instruments (including agreements and a certificate of
merger) relating to a merger or consolidation of the Partnership pursuant
to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate,
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in the discretion of the General Partner or the Liquidator, to make,
evidence, give, confirm or ratify any vote, consent, approval, agreement or
other action that is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or is necessary or appropriate,
in the discretion of the General Partner or the Liquidator, to effectuate
the terms or intent of this Agreement; provided, that when required by any
provision of this Agreement that establishes a percentage of the Limited
Partners or of the Limited Partners of any class or series required to take
any action, the General Partner and the Liquidator may exercise the power
of attorney made in this Section 2.6(a)(ii) only after the necessary vote,
consent or approval of the Limited Partners or of the Limited Partners of
such class or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's successors and assigns. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or the Liquidator acting in good faith pursuant to such power of
attorney; and each such Limited Partner or Assignee, to the maximum extent
permitted by law, hereby waives any and all defenses that may be available to
contest, negate or disaffirm the action of the General Partner or the Liquidator
taken in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or the Liquidator,
within 15 days after receipt of the request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator deems necessary to effectuate this Agreement and the purposes of the
Partnership.
Section 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2088 or until
the earlier dissolution of the Partnership in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Delaware Act.
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Section 2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner, one or more of its Affiliates or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership assets for which record title is held in the name
of the General Partner or one or more of its Affiliates or one or more nominees
shall be held by the General Partner or such Affiliate or nominee for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use reasonable
efforts to cause record title to such assets (other than those assets in respect
of which the General Partner determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership impracticable) to
be vested in the Partnership as soon as reasonably practicable; provided,
further, that, prior to the withdrawal or removal of the General Partner or as
soon thereafter as practicable, the General Partner shall use reasonable efforts
to effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the General Partner. All Partnership assets shall be recorded as the property of
the Partnership in its books and records, irrespective of the name in which
record title to such Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or in the Delaware Act.
Section 3.2 Management of Business.
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware Act)
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership. Any
action taken by any Affiliate of the General Partner or any officer, director,
employee, member, general partner, agent or trustee of the General Partner or
any of its Affiliates, or any officer, director, employee, member, general
partner, agent or trustee of a Group Member, in its capacity as such, shall not
be deemed to be participation in the control of the business of the Partnership
by a limited partner of the Partnership (within the meaning of Section 17-303(a)
of the Delaware Act) and shall not affect, impair or eliminate the limitations
on the liability of the Limited Partners or Assignees under this Agreement.
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Section 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5 and the Omnibus Agreement, which
shall continue to be applicable to the Persons referred to therein, regardless
of whether such Persons shall also be Limited Partners or Assignees, any Limited
Partner or Assignee shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership Group. Neither the Partnership nor any of the other Partners or
Assignees shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee.
Section 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon reasonable written demand
and at such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the General Partner deems
reasonable, (i) any information that the General Partner reasonably believes to
be in the nature of trade secrets or (ii) other information
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the disclosure of which the General Partner in good faith believes (A) is not in
the best interests of the MLP or the Partnership Group, (B) could damage the MLP
or the Partnership Group or (C) that any Group Member is required by law or by
agreement with any third party to keep confidential (other than agreements with
Affiliates of the Partnership the primary purpose of which is to circumvent the
obligations set forth in this Section 3.4).
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
Section 4.1 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its General Partner Interest to another Person who
becomes the General Partner (or an Assignee) or by which the holder of a Limited
Partner Interest assigns such Limited Partner Interest to another Person who
becomes a Limited Partner (or an Assignee), and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent
a disposition by any shareholder of the General Partner of any or all of the
issued and outstanding capital stock of the General Partner.
Section 4.2 Transfer of General Partner's Partnership Interest.
If the General Partner transfers its interest as the general partner
of the MLP to any Person in accordance with the provisions of the MLP Agreement,
the General Partner shall contemporaneously therewith transfer all, but not less
than all, of its General Partner Interest herein to such Person, and the Limited
Partners and Assignees, if any, hereby expressly consent to such transfer.
Except as set forth in the immediately preceding sentence and in Section 5.2, a
General Partner may not transfer all or any part of its Partnership Interest as
the General Partner.
Section 4.3 Transfer of a Limited Partner's Partnership Interest.
A Limited Partner may transfer all, but not less than all, of its
Partnership Interest as a Limited Partner in connection with the merger,
consolidation or other combination of such Limited Partner with or into any
other Person or the transfer by such Limited Partner of all or substantially all
of its assets to another Person, and following any such transfer such Person may
become a Substituted Limited Partner pursuant to Article X. Except as set forth
in the immediately preceding
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sentence and in Section 5.2, or in connection with any pledge of (or any related
foreclosure on) a Partnership Interest as a Limited Partner solely for the
purpose of securing, directly or indirectly, indebtedness of the Partnership or
the MLP, and except for the transfers contemplated by Sections 5.2 and 10.1, a
Limited Partner may not transfer all or any part of its Partnership Interest or
withdraw from the Partnership.
Section 4.4 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article IV, no
transfer of any Partnership Interest shall be made if such transfer would (i)
violate the then applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii) terminate the
existence or qualification of the Partnership or the MLP under the laws of the
jurisdiction of its formation or (iii) cause the Partnership or the MLP to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or the
MLP becoming taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes. The restrictions may be imposed by making such
amendments to this Agreement as the General Partner may determine to be
necessary or appropriate to impose such restrictions.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Initial Contributions.
In connection with the formation of the Partnership under the Delaware Act,
the General Partner made an initial Capital Contribution to the Partnership in
the amount of $500.00 in exchange for an interest in the Partnership and was
admitted as General Partner and as a Limited Partner, and the MLP made an
initial Capital Contribution to the Partnership in the amount of $500.00 in
exchange for an interest in the Partnership and was admitted as a Limited
Partner.
Section 5.2 Contributions Pursuant to the Contribution and Conveyance
Agreement.
(a) Pursuant to the Contribution and Conveyance Agreement, the
General Partner has contributed to the Partnership, as a Capital Contribution,
all of its interest in Gathering LLC and certain assets acquired by it from CT&T
in exchange for a continuation of its General Partner Interest and a Limited
Partner Interest. Immediately following such contribution, the General Partner
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transferred all of its Partnership Interests except a 1.0101% General Partner
Interest to the MLP in exchange for certain interests therein as more
particularly described in the Registration Statement.
(b) Pursuant to the Contribution and Conveyance Agreement, the MLP
has contributed to the Partnership, as a Capital Contribution (i) cash in the
amount of $96,700,000, (ii) all of the syndication costs incurred by the
Partnership in connection with the Initial Offering and (iii) all of its limited
partner interest in All American, in exchange for its Limited Partner Interest.
(c) Pursuant to the Contribution and Conveyance Agreement, the
Partnership has assumed certain indebtedness relating to the Assets as described
in the Contribution and Conveyance Agreement.
(d) Notwithstanding anything else herein contained, if the aggregate
excess net working capital reflected on the balance sheets of the Partnership
and All American that are prepared in accordance with Section 7.3 of the
Contribution and Conveyance Agreement is in excess of $8,000,000 then the
Partnership shall distribute to the General Partner an amount of cash equal to
the difference between (i) such excess and (ii) the amount of any similar
distribution made to the General Partner by All American. In the event that
such aggregate excess net working capital is less than $8,000,000, the General
Partner shall contribute to the Partnership, as a Capital Contribution, cash in
an amount equal to the amount that, when added to the amount of the similar
contribution made to All American by the General Partner, would cause the
aggregate excess net working capital of the Partnership and All American to be
equal to $8,000,000.
(e) Following the foregoing transactions, the General Partner holds
a 1.0101% Partnership Interest as General Partner and the MLP holds a 98.9899%
Partnership Interest as a Limited Partner.
Section 5.3 Additional Capital Contributions.
With the consent of the General Partner, any Limited Partner may, but shall
not be obligated to, make additional Capital Contributions to the Partnership.
Contemporaneously with the making of any Capital Contributions by a Limited
Partner, in addition to those provided in Sections 5.1 and 5.2, the General
Partner shall be obligated to make an additional Capital Contribution to the
Partnership in an amount equal to 1.0101 divided by 98.9899 times the amount of
the additional Capital Contribution then made by such Limited Partner. Except
as set forth in the immediately preceding sentence and in Article XII, the
General Partner shall not be obligated to make any additional Capital
Contributions to the Partnership.
Section 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any,
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that distributions made pursuant to this Agreement or upon termination of the
Partnership may be considered as such by law and then only to the extent
provided for in this Agreement. Except to the extent expressly provided in this
Agreement, no Partner or Assignee shall have priority over any other Partner or
Assignee either as to the return of Capital Contributions or as to profits,
losses or distributions. Any such return shall be a compromise to which all
Partners and Assignees agree within the meaning of Section 17-502(b) of the
Delaware Act.
Section 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion) owning a Partnership Interest a
separate Capital Account with respect to such Partnership Interest in accordance
with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (i) the amount of all Capital Contributions made
to the Partnership with respect to such Partnership Interest pursuant to this
Agreement and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income,
gain, loss or deduction which is to be allocated pursuant to Article VI and is
to be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including, without limitation, any method of depreciation, cost recovery or
amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall
be treated as owning directly its proportionate share (as determined by the
General Partner) of all property owned by any OLP Subsidiary that is
classified as a partnership for federal income tax purposes.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to Section 6.1.
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(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of
the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership were equal to the Agreed Value of such property. Upon an
adjustment pursuant to Section 5.5(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost recovery
or amortization attributable to such property shall be determined (A) as if
the adjusted basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B) using a rate of
depreciation, cost recovery or amortization derived from the same method
and useful life (or, if applicable, the remaining useful life) as is
applied for federal income tax purposes; provided, however, that, if the
asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization derived from the same method
and useful life (or, if applicable, the remaining useful life) as is
applied for federal income tax purposes; provided, however, that, if the
asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be determined
using any reasonable method that the General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
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(c) A transferee of a Partnership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash
or Contributed Property or the conversion of the General Partner's
Partnership Interest to Common Units pursuant to Section 11.3(a), the
Capital Accounts of all Partners and the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss
had been recognized on an actual sale of each such property immediately
prior to such issuance and had been allocated to the Partners at such time
pursuant to Section 6.1 in the same manner as any item of gain or loss
actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the General Partner
using such reasonable method of valuation as it may adopt; provided,
however, that the General Partner, in arriving at such valuation, must take
fully into account the fair market value of the Partnership Interests of
all Partners at such time. The General Partner shall allocate such
aggregate value among the assets of the Partnership (in such manner as it
determines in its discretion to be reasonable) to arrive at a fair market
value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a
Partner of any Partnership property (other than a distribution of cash that
is not in redemption or retirement of a Partnership Interest), the Capital
Accounts of all Partners and the Carrying Value of all Partnership property
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized in a sale of such
property immediately prior to such distribution for an amount equal to its
fair market value, and had been allocated to the Partners, at such time,
pursuant to Section 6.1 in the same manner as any item of gain or loss
actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to a distribution
shall (A) in the case of an actual distribution which is not made pursuant
to Section 12.4 or in the case of a deemed contribution and/or distribution
occurring as a result of a termination of the Partnership pursuant to
Section 708 of the Code, be determined and allocated in the same manner as
that provided in Section 5.5(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 12.4, be determined and allocated by the
Liquidator using such reasonable method of valuation as it may adopt.
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Section 5.6 Loans from Partners.
Loans by a Partner to the Partnership shall not constitute Capital
Contributions. If any Partner shall advance funds to the Partnership in excess
of the amounts required hereunder to be contributed by it to the capital of the
Partnership, the making of such excess advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
excess advances shall be a debt obligation of the Partnership to such Partner
and shall be payable or collectible only out of the Partnership assets in
accordance with the terms and conditions upon which such advances are made.
Section 5.7 Limited Preemptive Rights.
Except as provided in Section 5.3, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Partnership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Partnership convertible into or exchangeable for, or carrying or accompanied
by any rights to receive, purchase or subscribe to, any such Partnership
Interests; (d) issuance of any right of subscription to or right to receive, or
any warrant or option for the purchase of, any such Partnership Interests; or
(e) issuance or sale of any other securities that may be issued or sold by the
Partnership.
Section 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests.
All Partnership Interests issued to Limited Partners pursuant to, and in
accordance with the requirements of, this Article V shall be fully paid and non-
assessable Partnership Interests, except as such non-assessability may be
affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations set
forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated among the Partners as follows:
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(i) First, 100% to the General Partner, until the aggregate
Net Income allocated to the General Partner pursuant to this Section
6.1(a)(i) for the current taxable year and all previous taxable years is
equal to the aggregate Net Losses allocated to the General Partner pursuant
to Section 6.1(b)(ii) for all previous taxable years;
(ii) Second, 1.0101% to the General Partner and 98.9899% to the
Limited Partners in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated among the Partners as follows:
(i) First, 1.0101% to the General Partner and 98.9899% to the
Limited Partners, in accordance with their respective Percentage Interests;
provided, however, that Net Losses shall not be allocated to a Limited
Partner pursuant to this Section 6.1(b)(i) to the extent that such
allocation would cause a Limited Partner to have a deficit balance in its
Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in such Limited Partners's original signed
Agreement has this Adjusted Capital Account);
(ii) Second, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder.
All allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Section 6.4
have been made with respect to the taxable period ending on or before the
Liquidation Date; provided, however, that solely for purposes of this Section
6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant
to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed
recognized pursuant to Section 5.5(d)), such Net Termination Gain shall be
allocated among the Partners in the following manner (and the Capital
Accounts of the Partners shall be increased by the amount so allocated in
each of the following subclauses, in the order listed, before an allocation
is made pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its
Capital Account, in the proportion that such deficit balance bears to
the total deficit balances in the Capital Accounts of all Partners,
until each such Partner has been allocated Net Termination Gain equal
to any such deficit balance in its Capital Account; and
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(B) Second, 1.0101% to the General Partner and 98.9899% to the
Limited Partners, in accordance with their respective Percentage
Interests.
(ii) If a Net Termination Loss is recognized (or deemed
recognized pursuant to Section 5.5(d)), such Net Termination Loss shall be
allocated among the Partners in the following manner:
(A) First, to the General Partner and the Limited Partners in
proportion to, and to the extent of, the positive balances in their
respective Capital Accounts; and
(B) Second, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 6.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each
Partner shall be allocated items of Partnership income and gain for such
period (and, if necessary, subsequent periods) in the manner and amounts
provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi)). This Section
6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-
2(j)(2)(ii), or any successor provisions. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d), other than Section 6.1(d)(i) and other than an
allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi), with respect to
such taxable period. This Section 6.1(d)(ii) is intended to comply with the
chargeback of items of income and gain
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requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income
and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or (ii).
(iv) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership
taxable period in excess of the sum of (A) the amount such Partner is
required to restore pursuant to the provisions of this Agreement and (B)
the amount such Partner is deemed obligated to restore pursuant to Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain in the
amount of such excess as quickly as possible; provided, that an allocation
pursuant to this Section 6.1(d)(iv) shall be made only if and to the extent
that such Partner would have a deficit balance in its Capital Account as
adjusted after all other allocations provided for in this Section 6.1 have
been tentatively made as if this Section 6.1(d)(iv) were not in this
Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of
the Treasury Regulations promulgated under Section 704(b) of the Code, the
General Partner is authorized, upon notice to the other Partners, to revise
the prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any taxable period shall be allocated 100% to the Partner
that bears the Economic Risk of Loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Treasury Regulation Section 1.704-2(i). If
more than one Partner bears the Economic Risk of Loss with respect to a
Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable
thereto shall be allocated between or among such Partners in accordance
with the ratios in which they share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of Treasury
Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse
Liabilities of the Partnership in excess of the sum of (A) the amount of
Partnership Minimum Gain and (B) the total amount of Nonrecourse
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Built-in Gain shall be allocated among the Partners in accordance with
their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an adjustment
to the adjusted tax basis of any Partnership asset pursuant to Section
734(b) or 743(c) of the Code is required, pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the basis
of the asset) or loss (if the adjustment decreases such basis), and such
item of gain or loss shall be specially allocated to the Partners in a
manner consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such Section of the Treasury
Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this Section
6.1, other than the Required Allocations, the Required
Allocations shall be taken into account in making the Agreed
Allocations so that, to the extent possible, the net amount of
items of income, gain, loss and deduction allocated to each
Partner pursuant to the Required Allocations and the Agreed
Allocations, together, shall be equal to the net amount of such
items that would have been allocated to each such Partner under
the Agreed Allocations had the Required Allocations and the
related Curative Allocation not otherwise been provided in this
Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be
taken into account except to the extent that there has been a
decrease in Partnership Minimum Gain and (2) Partner Nonrecourse
Deductions shall not be taken into account except to the extent
that there has been a decrease in Partner Nonrecourse Debt
Minimum Gain. Allocations pursuant to this Section 6.1(d)(ix)(A)
shall only be made with respect to Required Allocations to the
extent the General Partner reasonably determines that such
allocations will otherwise be inconsistent with the economic
agreement among the Partners. Further, allocations pursuant to
this Section 6.1(d)(ix)(A) shall be deferred with respect to
allocations pursuant to clauses (1) and (2) hereof to the extent
the General Partner reasonably determines that such allocations
are likely to be offset by subsequent Required Allocations.
(B) The General Partner shall have reasonable discretion,
with respect to each taxable period, to (1) apply the provisions
of Section 6.1(d)(ix)(A) in whatever order is most likely to
minimize the economic distortions that might otherwise result
from the Required Allocations, and (2) divide all allocations
pursuant to Section 6.1(d)(ix)(A) among the Partners in a manner
that is likely to minimize such economic distortions.
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Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to
a Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted basis
at the time of contribution; and (B) any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
second, in the event such property was originally a Contributed Property,
be allocated among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Units or other limited partner interests of
the MLP (or any class or classes thereof), the General Partner shall have sole
discretion to (i) adopt such conventions as it deems appropriate in determining
the amount of depreciation, amortization and cost recovery deductions; (ii) make
special allocations for federal income tax purposes of income (including,
without limitation, gross income) or deductions; and (iii) amend the provisions
of this Agreement as appropriate (x) to reflect the proposal or promulgation of
Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y)
otherwise to preserve or achieve uniformity of the Units or other limited
partner interests of the MLP (or any class or classes thereof). The General
Partner may adopt such conventions, make such allocations and make such
amendments to this Agreement as provided in this Section 6.2(c) only if such
conventions, allocations or amendments would not have a material adverse effect
on the Partners, the holders of any class or classes of Units or other limited
partner interests of the MLP
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issued and outstanding or the Partnership and if such allocations are consistent
with the principles of Section 704 of the Code.
(d) The General Partner in its discretion may determine to depreciate
or amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of
the Code. If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring limited partner interests of
the MLP in the same month would receive depreciation and amortization
deductions, based upon the same applicable rate as if they had purchased a
direct interest in the Partnership's property. If the General Partner chooses
not to utilize such aggregate method, the General Partner may use any other
reasonable depreciation and amortization conventions to preserve the uniformity
of the intrinsic tax characteristics of any limited partner interests of the MLP
that would not have a material adverse effect on the Partners or the holders of
any class or classes of limited partner interests of the MLP.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized
by the Partnership for federal income tax purposes and allocated to the Partners
in accordance with the provisions hereof shall be determined without regard to
any election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation of
income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.
(h) Allocations that would otherwise be made to a Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership
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in accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion.
Section 6.3 Distributions.
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on December 31, 1998, an amount equal to 100% of Available
Cash with respect to such Quarter shall, subject to Section 17-607 of the
Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not require any distribution
of cash if and to the extent such distribution would be prohibited by applicable
law or by any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Partnership is a party or by which it
is bound or its assets are subject. All distributions required to be made under
this Agreement shall be made subject to Section 17-607 of the Delaware Act.
(b) In the event of the dissolution and liquidation of the
Partnership, all receipts received during or after the Quarter in which the
Liquidation Date occurs, other than from borrowings described in (a)(ii) of the
definition of Available Cash, shall be applied and distributed solely in
accordance with, and subject to the terms and conditions of, Section 12.4.
(c) The General Partner shall have the discretion to treat taxes paid
by the Partnership on behalf of, or amounts withheld with respect to, all or
less than all of the Partners, as a distribution of Available Cash to such
Partners.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management.
(a) The General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and no Limited
Partner or Assignee shall have any management power over the business and
affairs of the Partnership. In addition to the powers now or hereafter granted a
general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 7.3, shall have full power and authority to
do all things and on such terms as it, in its sole discretion, may deem
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 2.5 and to effectuate the purposes set forth in
Section 2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the
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issuance of evidences of indebtedness, including indebtedness that is
convertible into a Partnership Interest, and the incurring of any other
obligations;
(ii) the making of tax, regulatory and other filings, or rendering
of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash on
hand) for any purpose consistent with the terms of this Agreement,
including the financing of the conduct of the operations of the Partnership
Group, subject to Section 7.6, the lending of funds to other Persons
(including the MLP and any member of the Partnership Group), the repayment
of obligations of the MLP or any member of the Partnership Group and the
making of capital contributions to any member of the Partnership Group;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partner or its assets other than
its interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be
the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations or other relationships
subject to the restrictions set forth in Section 2.4;
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(x) the control of any matters affecting the rights and obligations
of the Partnership, including the bringing and defending of actions at law
or in equity and otherwise engaging in the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation; and
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law.
(b) Notwithstanding any other provision of this Agreement, the MLP
Agreement, the Delaware Act or any applicable law, rule or regulation, each of
the Partners and Assignees and each other Person who may acquire an interest in
the Partnership hereby (i) approves, ratifies and confirms the execution,
delivery and performance by the parties thereto of the Partnership Agreement,
the MLP Agreement, the Underwriting Agreement, the Omnibus Agreement, the
Contribution and Conveyance Agreement and the other agreements and documents
described in or filed as exhibits to the Registration Statement that are related
to the transactions contemplated by the Registration Statement; (ii) agrees that
the General Partner (on its own or through any officer of the Partnership) is
authorized to execute, deliver and perform the agreements referred to in clause
(i) of this sentence and the other agreements, acts, transactions and matters
described in or contemplated by the Registration Statement on behalf of the
Partnership without any further act, approval or vote of the Partners or the
Assignees or the other Persons who may acquire an interest in the Partnership;
and (iii) agrees that the execution, delivery or performance by the General
Partner, the MLP, any Group Member or any Affiliate of any of them, of this
Agreement or any agreement authorized or permitted under this Agreement
(including the exercise by the General Partner or any Affiliate of the General
Partner of the rights accorded pursuant to Article XV), shall not constitute a
breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement
(or any other agreements) or of any duty stated or implied by law or equity.
Section 7.2 Certificate of Limited Partnership.
The General Partner has caused the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity in which
the limited partners have limited liability) under the laws of the State of
Delaware or of any other state in which the Partnership may elect to do business
or own property. Subject to the terms
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of Section 3.4(a), the General Partner shall not be required, before or after
filing, to deliver or mail a copy of the Certificate of Limited Partnership, any
qualification document or any amendment thereto to any Limited Partner or
Assignee.
Section 7.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without written approval of the
specific act by the Limited Partners or by other written instrument executed and
delivered by the Limited Partners subsequent to the date of this Agreement, take
any action in contravention of this Agreement, including, except as otherwise
provided in this Agreement, (i) committing any act that would make it impossible
to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner or (v) transferring its General
Partner Interest.
(b) Except as provided in Articles XII and XIV, the General Partner
may not sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Partnership, without the approval of the
Limited Partners; provided however that this provision shall not preclude or
limit the General Partner's ability to mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of the assets of the Partnership
and shall not apply to any forced sale of any or all of the assets of the
Partnership pursuant to the foreclosure of, or other realization upon, any such
encumbrance. Without the approval of at least a Unit Majority, the General
Partner shall not, on behalf of the MLP, (i) consent to any amendment to this
Agreement or, except as expressly permitted by Section 7.9(d) of the MLP
Agreement, take any action permitted to be taken by a Partner, in either case,
that would have a material adverse effect on the MLP as a Partner or (ii) except
as permitted under Sections 4.6, 11.1 and 11.2 of the MLP Agreement, elect or
cause the MLP to elect a successor general partner of the Partnership.
Section 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the MLP Agreement, the General Partner shall not be compensated
for its services as General Partner, general partner of the MLP or as general
partner of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or
such other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties
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to the Partnership), and (ii) all other necessary or appropriate expenses
allocable to the Partnership or otherwise reasonably incurred by the General
Partner in connection with operating the Partnership's business (including
expenses allocated to the General Partner by its Affiliates). The General
Partner shall determine the expenses that are allocable to the Partnership in
any reasonable manner determined by the General Partner in its sole discretion.
Reimbursements pursuant to this Section 7.4 shall be in addition to any
reimbursement to the General Partner as a result of indemnification pursuant to
Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole
discretion and without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices, or
cause the Partnership to issue Partnership Interests, in connection with,
pursuant to any employee benefit plan, employee program or employee practice
maintained or sponsored by the General Partner or any of its Affiliates, in each
case for the benefit of employees of the General Partner any Group Member or any
Affiliate, or any of them, in respect of services performed, directly or
indirectly, for the benefit of the Partnership Group. Expenses incurred by the
General Partner in connection with any such plans, programs and practices shall
be reimbursed in accordance with Section 7.4(b). Any and all obligations of the
General Partner under any employee benefit plans, employee programs or employee
practices adopted by the General Partner as permitted by this Section 7.4(c)
shall constitute obligations of the General Partner hereunder and shall be
assumed by any successor General Partner approved pursuant to Section 11.1 or
11.2 or the transferee of or successor to all of the General Partner's General
Partner Interest pursuant to Section 4.2.
Section 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is
the General Partner of the Partnership (i) agrees that its sole business will be
to act as the General Partner of the Partnership, the general partner of the
MLP, and a general partner of any other partnership of which the Partnership or
the MLP is, directly or indirectly, a partner and to undertake activities that
are ancillary or related thereto (including being a limited partner in the MLP),
(ii) shall not engage in any business or activity or incur any debts or
liabilities except in connection with or incidental to (A) its performance as
general partner of the Partnership, the MLP or one or more Group Members or as
described in or contemplated by the Registration Statement or (B) the acquiring,
owning or disposing of debt or equity securities in any Group Member and (iii)
except to the extent permitted in the Omnibus Agreement, shall not, and shall
cause its Affiliates not to, engage in any Restricted Business.
(b) The Omnibus Agreement, to which the Partnership is a party, sets
forth certain restrictions on the ability of Plains Resources Inc. to engage in
Restricted Businesses.
(c) Except as specifically restricted by Section 7.5(a) and the
Omnibus Agreement, each Indemnitee (other than the General Partner) shall have
the right to engage in businesses of every type and description and other
activities for profit and to engage in and possess an interest in other
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business ventures of any and every type or description, whether in businesses
engaged in or anticipated to be engaged in by the MLP or any Group Member,
independently or with others, including business interests and activities in
direct competition with the business and activities of the MLP or any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to the MLP or any Group Member or any Partner or
Assignee. Neither the MLP nor any Group Member, any Limited Partner, nor any
other Person shall have any rights by virtue of this Agreement, the MLP
Agreement or the partnership relationship established hereby or thereby in any
business ventures of any Indemnitee.
(d) Subject to the terms of Section 7.5(a), Section 7.5(b), Section
7.5(c) and the Omnibus Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any
Indemnitees (other than the General Partner) in accordance with the provisions
of this Section 7.5 is hereby approved by the Partnership and all Partners, (ii)
it shall be deemed not to be a breach of the General Partner's fiduciary duty or
any other obligation of any type whatsoever of the General Partner for the
Indemnitees (other than the General Partner) to engage in such business
interests and activities in preference to or to the exclusion of the Partnership
and (iii) except as set forth in the Omnibus Agreement, the General Partner and
the Indemnities shall have no obligation to present business opportunities to
the Partnership.
(e) The General Partner and any of its Affiliates may acquire Units
or other MLP Securities in addition to those acquired on the Closing Date and,
except as otherwise provided in this Agreement, shall be entitled to exercise
all rights relating to such Units or MLP Securities.
(f) The term "Affiliates" when used in Section 7.5(a) and Section
7.5(e) with respect to the General Partner shall not include any Group Member or
any Subsidiary of the MLP or any Group Member.
(g) Anything in this Agreement to the contrary notwithstanding, to
the extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of
this Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partner to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such restriction, such provisions shall be inapplicable and have no
effect in determining whether the General Partner has complied with its
fiduciary duties in connection with determinations made by it under this Section
7.5.
Section 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the General
Partner.
(a) The General Partner or its Affiliates may lend to the MLP or any
Group Member, and the MLP or any Group Member may borrow from the General
Partner or any of its Affiliates, funds needed or desired by the MLP or the
Group Member for such periods of time and
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in such amounts as the General Partner may determine; provided, however, that in
any such case the lending party may not charge the borrowing party interest at a
rate greater than the rate that would be charged the borrowing party or impose
terms less favorable to the borrowing party than would be charged or imposed on
the borrowing party by unrelated lenders on comparable loans made on an arm's-
length basis (without reference to the lending party's financial abilities or
guarantees). The borrowing party shall reimburse the lending party for any costs
(other than any additional interest costs) incurred by the lending party in
connection with the borrowing of such funds. For purposes of this Section 7.6(a)
and Section 7.6(b), the term "Group Member" shall include any Affiliate of a
Group Member that is controlled by the Group Member. No Group Member may lend
funds to the General Partner or any of its Affiliates (other than the MLP, a
Subsidiary of the MLP or a Subsidiary of another Group Member).
(b) The Partnership may lend or contribute to any Group Member, and
any Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement
with any of its Affiliates to, render services to a Group Member or to the
General Partner in the discharge of its duties as general partner of the
Partnership. Any services rendered to a Group Member by the General Partner or
any of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, taking into account the
totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).
(d) The Partnership Group may transfer assets to joint ventures,
other partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates shall
sell, transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution and
Conveyance Agreement and any other
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transactions described in or contemplated by the Registration Statement, (ii)
any transaction approved by Special Approval, (iii) any transaction, the terms
of which are no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties, or (iv) any transaction
that, taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or
advantageous to the Partnership), is equitable to the Partnership.
(f) The General Partner and its Affiliates will have no obligation
to permit any Group Member to use any facilities or assets of the General
Partner and its Affiliates, except as may be provided in contracts entered into
from time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
Section 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partner with respect to its obligations
incurred pursuant to the Underwriting Agreement or the Contribution and
Conveyance Agreement (other than obligations incurred by the General Partner on
behalf of the MLP or the Partnership). The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that the
Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, it being agreed that the General Partner shall not be
personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal
fees and expenses) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership
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prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Partnership of any undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that the Indemnitee is
not entitled to be indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and
as to actions in any other capacity (including any capacity under the
Underwriting Agreement), and shall continue as to an Indemnitee who has ceased
to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the
General Partner or its Affiliates for the cost of) insurance, on behalf of the
General Partner, its Affiliates and such other Persons as the General Partner
shall determine, against any liability that may be asserted against or expense
that may be incurred by such Person in connection with the Partnership's
activities or such Person's activities on behalf of the Partnership, regardless
of whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Partnership also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify
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any such Indemnitee under and in accordance with the provisions of this Section
7.7 as in effect immediately prior to such amendment, modification or repeal
with respect to claims arising from or relating to matters occurring, in whole
or in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Units or other Partnership Securities of the MLP, for
losses sustained or liabilities incurred as a result of any act or omission if
such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner set
forth in Section 7.1(a), the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Limited Partners, the General Partner and any other Indemnitee acting
in connection with the Partnership's business or affairs shall not be liable to
the Partnership or to any Partner for its good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors, officers
and employees under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or the MLP
Agreement, whenever a potential conflict of interest exists or arises between
the General Partner or any of its Affiliates, on the one hand, and the
Partnership, the MLP, any Partner or any Assignee, on the other, any resolution
or course of action by the General Partner or its Affiliates in respect of such
conflict of interest shall be permitted and deemed approved by all Partners, and
shall not constitute
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a breach of this Agreement of the MLP Agreement, of any agreement contemplated
herein or therein, or of any duty stated or implied by law or equity, if the
resolution or course of action is, or by operation of this Agreement is deemed
to be, fair and reasonable to the Partnership. The General Partner shall be
authorized but not required in connection with its resolution of such conflict
of interest to seek Special Approval of such resolution. Any conflict of
interest and any resolution of such conflict of interest shall be conclusively
deemed fair and reasonable to the Partnership if such conflict of interest or
resolution is (i) approved by Special Approval (as long as the material facts
known to the General Partner or any of its Affiliates regarding any proposed
transaction were disclosed to the Conflicts Committee at the time it gave its
approval), (ii) on terms no less favorable to the Partnership than those
generally being provided to or available from unrelated third parties or (iii)
fair to the Partnership, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Partnership). The General Partner
may also adopt a resolution or course of action that has not received Special
Approval. The General Partner (including the Conflicts Committee in connection
with Special Approval) shall be authorized in connection with its determination
of what is "fair and reasonable" to the Partnership and in connection with its
resolution of any conflict of interest to consider (A) the relative interests of
any party to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interest; (B) any customary or accepted industry
practices and any customary or historical dealings with a particular Person; (C)
any applicable generally accepted accounting practices or principles; and (D)
such additional factors as the General Partner (including the Conflicts
Committee) determines in its sole discretion to be relevant, reasonable or
appropriate under the circumstances. Nothing contained in this Agreement,
however, is intended to nor shall it be construed to require the General Partner
(including the Conflicts Committee) to consider the interests of any Person
other than the Partnership. In the absence of bad faith by the General Partner,
the resolution, action or terms so made, taken or provided by the General
Partner with respect to such matter shall not constitute a breach of this
Agreement or any other agreement contemplated herein or a breach of any standard
of care or duty imposed herein or therein or, to the extent permitted by law,
under the Delaware Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated
hereby provides that the General Partner or any of its Affiliates is permitted
or required to make a decision (i) in its "sole discretion" or "discretion,"
that it deems "necessary or appropriate" or "necessary or advisable" or under a
grant of similar authority or latitude, except as otherwise provided herein, the
General Partner or such Affiliate shall be entitled to consider only such
interests and factors as it desires and shall have no duty or obligation to give
any consideration to any interest of, or factors affecting, the Partnership, the
MLP, any Limited Partner or any Assignee, (ii) it may make such decision in its
sole discretion (regardless of whether there is a reference to "sole discretion"
or "discretion") unless another express standard is provided for, or (iii) in
"good faith" or under another express standard, the General Partner or such
Affiliate shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the MLP Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation. In addition, any actions taken by the General Partner or
such Affiliate consistent with the
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standards of "reasonable discretion" set forth in the definition of Available
Cash shall not constitute a breach of any duty of the General Partner to the
Partnership or the Limited Partners. The General Partner shall have no duty,
express or implied, to sell or otherwise dispose of any asset of the Partnership
Group other than in the ordinary course of business. No borrowing by any Group
Member or the approval thereof by the General Partner shall be deemed to
constitute a breach of any duty of the General Partner to the Partnership or the
Limited Partners by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to (A) enable distributions to the General
Partner or its Affiliates to exceed 1.0101% of the total amount distributed to
all Partners or (B) hasten the expiration of the Subordination Period or the
conversion of any Subordinated Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Limited Partner hereby authorizes the General Partner, on
behalf of the Partnership as a partner or member of a Group Member, to approve
of actions by the general partner of such Group Member similar to those actions
permitted to be taken by the General Partner pursuant to this Section 7.9.
Section 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or under
the Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the extent permitted by law, as required to permit the
General Partner to act under this Agreement or any
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other agreement contemplated by this Agreement and to make any decision pursuant
to the authority prescribed in this Agreement, so long as such action is
reasonably believed by the General Partner to be in, or not inconsistent with,
the best interests of the Partnership.
Section 7.11 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner and any officer of the General Partner authorized by the General Partner
to act on behalf of and in the name of the Partnership has full power and
authority to encumber, sell or otherwise use in any manner any and all assets of
the Partnership and to enter into any authorized contracts on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
or any such officer as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the General Partner or any such officer in
connection with any such dealing. In no event shall any Person dealing with the
General Partner or any such officer or its representatives be obligated to
ascertain that the terms of the Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
any such officer or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner or
its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide to
the Limited Partners any information required to be provided pursuant to Section
3.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including books of account and records of
Partnership proceedings, may be kept on, or be in the form of, computer disks,
hard drives, punch cards, magnetic tape, photographs, micrographics or any other
information storage device; provided, that the books and records so maintained
are convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial reporting
purposes, on an accrual basis in accordance with U.S. GAAP.
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Section 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending
December 31.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by the Partners for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the
Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the General
Partner's determination that such revocation is in the best interests of the
Limited Partners.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
Section 9.3 Tax Controversies.
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in the Code) and is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with all
examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
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Section 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required or elects to withhold
and pay over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld may at
the discretion of the General Partner be treated by the Partnership as a
distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Partners.
Upon the consummation of the transfers and conveyances described in Section
5.2, the General Partner shall be the sole general partner of the Partnership
and the MLP shall be the sole limited partner of the Partnership.
Section 10.2 Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Limited Partner
Interest shall, however, only have the authority to convey to a purchaser or
other transferee (a) the right to negotiate such Limited Partner Interest to a
purchaser or other transferee and (b) the right to request admission as a
Substituted Limited Partner to such purchaser or other transferee in respect of
the transferred Limited Partner Interests. Each transferee of a Limited Partner
Interest shall be an Assignee and be deemed to have applied to become a
Substituted Limited Partner with respect to the Limited Partner Interests so
transferred to such Person. Such Assignee shall become a Substituted Limited
Partner (x) at such time as the General Partner consents thereto, which consent
may be given or withheld in the General Partner's discretion, and (y) when any
such admission is shown on the books and records of the Partnership. If such
consent is withheld, such transferee shall remain an Assignee. An Assignee shall
have an interest in the Partnership equivalent to that of a Limited Partner with
respect to allocations and distributions, including liquidating distributions,
of the Partnership. With respect to voting rights attributable to Limited
Partner Interests that are held by Assignees, the General Partner shall be
deemed to be the Limited Partner with respect thereto and shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
vote such Limited Partner Interests at the written direction of the Assignee. If
no such written
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direction is received, such Partnership Interests will not be voted. An Assignee
shall have no other rights of a Limited Partner.
Section 10.3 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, the MLP or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including the power of attorney granted
in Section 2.6, and (ii) such other documents or instruments as may be required
in the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.3, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
Section 10.4 Admission of Successor or Transferee General Partner.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or
the transferee of or successor to all of the General Partner's Partnership
Interest pursuant to Section 4.2 who is proposed to be admitted as a successor
General Partner shall, subject to compliance with the terms of Section 11.3, if
applicable, be admitted to the Partnership as the General Partner, effective
immediately prior to the withdrawal or removal of the predecessor or
transferring General Partner pursuant to Section 11.1 or 11.2 or the transfer of
the General Partner Interest pursuant to Section 4.2, provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.2 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act to
amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.
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ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the Partnership
by giving written notice to the other Partners;
(ii) The General Partner transfers all of its rights as General
Partner pursuant to Section 4.2;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner withdraws from, or is removed as the General
Partner of, the MLP;
(v) The General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief
under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
or answer seeking for itself a liquidation, dissolution or similar relief
(but not a reorganization) under any law; (D) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in a proceeding of the type
described in clauses (A)-(C) of this Section 11.1(a)(v); or (E) seeks,
consents to or acquiesces in the appointment of a trustee (but not a debtor
in possession), receiver or liquidator of the General Partner or of all or
any substantial part of its properties;
(vi) A final and non-appealable order of relief under Chapter 7 of
the United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner; or
(vii) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the General
Partner, or 90 days expire after the date of notice to the General Partner
of revocation of its charter without a reinstatement of its charter, under
the laws of its state of incorporation; (B) in the event the General
Partner is a partnership or limited liability company, the dissolution and
commencement of winding up of the General Partner; (C) in the event the
General Partner is acting in such capacity by virtue of being a trustee of
a trust, the termination of the trust; (D) in the event the General Partner
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is a natural person, his death or adjudication of incompetency; and (E)
otherwise in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv)(with respect to
withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the withdrawing
General Partner shall give notice to the Limited Partners within 30 days after
such occurrence. The Partners hereby agree that only the Events of Withdrawal
described in this Section 11.1 shall result in the withdrawal of the General
Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on December 31, 2008, the General Partner voluntarily withdraws by giving
at least 90 days' advance notice of its intention to withdraw to the Limited
Partners; provided that prior to the effective date of such withdrawal, the
withdrawal is approved by the Limited Partners and the General Partner delivers
to the Partnership an Opinion of Counsel ("Withdrawal Opinion of Counsel") that
such withdrawal (following the selection of the successor General Partner) would
not result in the loss of the limited liability of any Limited Partner or of the
limited partners of the MLP or cause the Partnership or the MLP to be treated as
an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not previously treated as such);
(ii) at any time after 12:00 midnight, Eastern Standard Time, on December 31,
2008, the General Partner voluntarily withdraws by giving at least 90 days'
advance notice to the Limited Partners, such withdrawal to take effect on the
date specified in such notice; (iii) at any time that the General Partner ceases
to be the General Partner pursuant to Section 11.1(a)(ii), (iii) or (iv). If
the General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i)
hereof or Section 11.1(a)(i) of the MLP Agreement, the Limited Partners may,
prior to the effective date of such withdrawal, elect a successor General
Partner; provided, however, that such successor shall be the same person, if
any, that is elected by the limited partners of the MLP pursuant to Section 11.1
of the MLP Agreement as the successor to the general partner of the MLP. If,
prior to the effective date of the General Partner's withdrawal, a successor is
not selected by the Limited Partners as provided herein or the Partnership does
not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved
in accordance with Section 12.1. Any successor General Partner elected in
accordance with the terms of this Section 11.1 shall be subject to the
provisions of Section 10.3.
Section 11.2 Removal of the General Partner.
The General Partner shall be removed if the General Partner is removed as
the general partner of the MLP pursuant to Section 11.2 of the MLP Agreement.
Such removal shall be effective concurrently with the effectiveness of the
removal of the General Partner as the general partner of the MLP pursuant to the
terms of the MLP Agreement. If a successor general partner for the MLP is
elected in connection with the removal of the General Partner, such successor
general partner for
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the MLP shall, upon admission pursuant to Article X, automatically become the
successor General Partner of the Partnership. The admission of any such
successor General Partner to the Partnership shall be subject to the provisions
of Section 10.3.
Section 11.3 Interest of Departing Partner.
(a) The Partnership Interest of the Departing Partner departing as a
result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall (unless
it is otherwise required to be converted into Common Units pursuant to Section
11.3(b) of the MLP Agreement) be purchased by the successor to the Departing
Partner for cash in the manner specified in the MLP Agreement. Such purchase
(or conversion into Common Units, as applicable) shall be a condition to the
admission to the Partnership of the successor as the General Partner. Any
successor General Partner shall indemnify the Departing Partner as to all debts
and liabilities of the Partnership arising on or after the effective date of the
withdrawal or removal of the Departing Partner.
(b) The Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by such Departing
Partner for the benefit of the Partnership.
Section 11.4 Withdrawal of a Limited Partner.
Without the prior written consent of the General Partner, which may be
granted or withheld in its sole discretion, and except as provided in Section
10.1, no Limited Partner shall have the right to withdraw from the Partnership.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected
and an Opinion of
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Counsel is received as provided in Section 11.1(b) or 11.2 and such successor is
admitted to the Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner
that is approved by all of the Limited Partners;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and properties
of the Partnership Group; or
(f) the dissolution of the MLP.
Section 12.2 Continuation of the Business of the Partnership After
Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi) of the MLP Agreement, then, to the maximum extent permitted by law, within
180 days thereafter, all of the Limited Partners may elect to reconstitute the
Partnership and continue its business on the same terms and conditions set forth
in this Agreement by forming a new limited partnership on terms identical to
those set forth in this Agreement and having as a general partner a Person
approved by a majority in interest of the Limited Partners. In addition, upon
dissolution of the Partnership pursuant to Section 12.1(f), if the MLP is
reconstituted pursuant to Section 12.2 of the MLP Agreement, the reconstituted
MLP may, within 180 days after such event of dissolution, acting alone,
regardless of whether there are any other Limited Partners, elect to
reconstitute the Partnership in accordance with the immediately preceding
sentence. Upon any such election by the Limited Partners or the MLP, as the
case may be, all Partners shall be bound thereby and shall be deemed to have
approved same. Unless such an election is made within the applicable time
period as set forth above, the Partnership shall conduct only activities
necessary to wind up its affairs. If such an election is so made, then:
(a) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 unless earlier dissolved in accordance with this
Article XII;
(b) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be purchased by
the successor General Partner or converted into Common Units as provided in the
MLP Agreement; and
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(c) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary, to
file, a new partnership agreement and certificate of limited partnership, and
the successor General Partner may for this purpose exercise the power of
attorney granted the General Partner pursuant to Section 2.6; provided, that the
right to approve a successor General Partner and to reconstitute and to continue
the business of the Partnership shall not exist and may not be exercised unless
the Partnership has received an Opinion of Counsel that (x) the exercise of the
right would not result in the loss of limited liability of the Limited Partners
or any limited partner of the MLP and (y) neither the Partnership, the
reconstituted limited partnership, the MLP nor any Group Member would be treated
as an association taxable as a corporation or otherwise be taxable as an entity
for federal income tax purposes upon the exercise of such right to continue.
Section 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be entitled
to receive such compensation for its services as may be approved by a majority
of the Limited Partners. The Liquidator (if other than the General Partner)
shall agree not to resign at any time without 15 days' prior notice and may be
removed at any time, with or without cause, by notice of removal approved by a
majority in interest of the Limited Partners. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall within 30 days thereafter be approved by at least a majority in interest
of the Limited Partners. The right to approve a successor or substitute
Liquidator in the manner provided herein shall be deemed to refer also to any
such successor or substitute Liquidator approved in the manner herein provided.
Except as expressly provided in this Article XII, the Liquidator approved in the
manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set forth in
Section 7.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.
Section 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
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(a) Disposition of Assets. The assets may be disposed of by public
or private sale or by distribution in kind to one or more Partners on such terms
as the Liquidator and such Partner or Partners may agree. If any property is
distributed in kind, the Partner receiving the property shall be deemed for
purposes of Section 12.4(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Partners. The Liquidator may, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale or distribution of all or some of
the Partnership's assets would be impractical or would cause undue loss to the
Partners. The Liquidator may, in its absolute discretion, distribute the
Partnership's assets, in whole or in part, in kind if it determines that a sale
would be impractical or would cause undue loss to the Partners.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution rights
under Article VI. With respect to any liability that is contingent, conditional
or unmatured or is otherwise not yet due and payable, the Liquidator shall
either settle such claim for such amount as it thinks appropriate or establish a
reserve of cash or other assets to provide for its payment. When paid, any
unused portion of the reserve shall be distributed as additional liquidation
proceeds.
(c) Liquidation Distributions. All property and all cash in excess
of that required to discharge liabilities as provided in Section 12.4(b) shall
be distributed to the Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
Section 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership,
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware, shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6 Return of Contributions.
The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners, or any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
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Section 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
Section 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
Section 13.1 Amendment to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure that no
Group Member will be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the General Partner, (i) does
not adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal
or state agency or judicial authority or contained in any federal or state
statute (including the Delaware Act) or (B) facilitate the trading of limited
partner interests of the MLP (including the division of any class or classes of
outstanding limited partner interests of the MLP into different classes to
facilitate uniformity of tax consequences within such classes of limited partner
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interests of the MLP) or comply with any rule, regulation, guideline or
requirement of any National Securities Exchange on which such limited partner
interests are or will be listed for trading, compliance with any of which the
General Partner determines in its discretion to be in the best interests of the
MLP and the limited partners of the MLP, (iii) is required to effect the intent
expressed in the Registration Statement or the intent of the provisions of this
Agreement or is otherwise contemplated by this Agreement or (iv) is required to
conform the provisions of this Agreement with the provisions of the MLP
Agreement as the provisions of the MLP Agreement may be amended, supplemented or
restated from time to time;
(e) a change in the fiscal year or taxable year of the Partnership
and any changes that, in the discretion of the General Partner, are necessary or
advisable as a result of a change in the fiscal year or taxable year of the
Partnership including, if the General Partner shall so determine, a change in
the definition of "Quarter" and the dates on which distributions are to be made
by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its directors, officers,
trustees or agents from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, regardless of whether such are
substantially similar to plan asset regulations currently applied or proposed by
the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be made by
the General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately the
formation by the Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability company or other
entity, in connection with the conduct by the Partnership of activities
permitted by the terms of Section 2.4;
(j) a merger or conveyance pursuant to Section 14.3(d); or
(k) any other amendments substantially similar to the foregoing.
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Section 13.2 Amendment Procedures.
Except with respect to amendments of the type described in Section 13.1,
all amendments to this Agreement shall be made in accordance with the following
requirements: Amendments to this Agreement may be proposed only by or with the
consent of the General Partner which consent may be given or withheld in its
sole discretion. A proposed amendment shall be effective upon its approval by
the Limited Partner.
ARTICLE XIV
MERGER
Section 14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.
Section 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner shall
determine, in the exercise of its discretion, to consent to the merger or
consolidation, the General Partner shall approve the Merger Agreement, which
shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partner interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are not to be exchanged
or converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or
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obligations of the Surviving Business Entity, the cash, property or general or
limited partner interests, rights, securities or obligations of any limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity) which the holders of such general or limited partner interests,
securities or rights are to receive in exchange for, or upon conversion of their
general or limited partner interests, securities or rights, and (ii) in the case
of securities represented by certificates, upon the surrender of such
certificates, which cash, property or general or limited partner interests,
rights, securities or obligations of the Surviving Business Entity or any
general or limited partnership, corporation, trust or other entity (other than
the Surviving Business Entity), or evidences thereof, are to be delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partner.
Section 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon
its approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of the Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall
be approved upon receiving the affirmative vote or consent of the Limited
Partners.
(c) Except as provided in Section 14.3(d), after such approval by
vote or consent of the Limited Partners, and at any time prior to the filing of
the certificate of merger pursuant to Section 14.4, the merger or consolidation
may be abandoned pursuant to provisions therefor, if any, set forth in the
Merger Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in
this Agreement, the General Partner is permitted, in its discretion, without
Limited Partner approval, to
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merge the Partnership or any Group Member into, or convey all of the
Partnership's assets to, another limited liability entity which shall be newly
formed and shall have no assets, liabilities or operations at the time of such
Merger other than those it receives from the Partnership or other Group Member
if (i) the General Partner has received an Opinion of Counsel that the merger or
conveyance, as the case may be, would not result in the loss of the limited
liability of any Limited Partner or any limited partner in the MLP or cause the
Partnership or the MLP to be treated as an association taxable as a corporation
or otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such), (ii) the sole purpose of such merger or
conveyance is to effect a mere change in the legal form of the Partnership into
another limited liability entity and (iii) the governing instruments of the new
entity provide the Limited Partners and the General Partner with the same rights
and obligations as are herein contained.
Section 14.4 Certificate of Merger.
Upon the required approval by the General Partner and the Limited Partners
of a Merger Agreement, a certificate of merger shall be executed and filed with
the Secretary of State of the State of Delaware in conformity with the
requirements of the Delaware Act.
Section 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in
any of those constituent business entities shall not revert and is not in
any way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article
shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.
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ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner at the address described below. Any notice to the
Partnership shall be deemed given if received by the General Partner at the
principal office of the Partnership designated pursuant to Section 2.3. The
General Partner may rely and shall be protected in relying on any notice or
other document from a Partner, Assignee or other Person if believed by it to be
genuine.
Section 15.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
Section 15.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
Section 15.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
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Section 15.7 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto, independently of the signature of any other party.
Section 15.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
Section 15.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
PLAINS ALL AMERICAN INC.
By: /s/ Michael R. Patterson
--------------------------------------
Name: Michael R. Patterson
Its: Senior Vice President, General Counsel and
Secretary
LIMITED PARTNER:
PLAINS ALL AMERICAN PIPELINE, L.P.
By: Plains All American Inc.
Its: General Partner
By: /s/ Michael R. Patterson
--------------------------------
Name: Michael R. Patterson
Its: Senior Vice President, General
Counsel and Secretary
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EXHIBIT 3.3
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALL AMERICAN PIPELINE, L.P.
All American Pipeline, L.P.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions 1
Section 1.2 Construction 12
ARTICLE II
ORGANIZATION
Section 2.1 Formation 13
Section 2.2 Name 13
Section 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices 13
Section 2.4 Purpose and Business 14
Section 2.5 Powers 14
Section 2.6 Power of Attorney 14
Section 2.7 Term 16
Section 2.8 Title to Partnership Assets 16
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability 17
Section 3.2 Management of Business 17
Section 3.3 Outside Activities of the Limited Partners 17
Section 3.4 Rights of Limited Partners 17
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
Section 4.1 Transfer Generally 18
Section 4.2 Transfer of General Partner's Partnership Interest 19
Section 4.3 Transfer of a Limited Partner's Partnership Interest 19
Section 4.4 Restrictions on Transfers 19
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Initial Contributions 20
Section 5.2 Contributions Pursuant to the Contribution and Conveyance
Agreement 20
Section 5.3 Additional Capital Contributions 21
Section 5.4 Interest and Withdrawal 21
Section 5.5 Capital Accounts 21
Section 5.6 Loans from Partners 24
Section 5.7 Limited Preemptive Rights 24
Section 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests 25
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes 25
Section 6.2 Allocations for Tax Purposes 29
Section 6.3 Distributions 31
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management 32
Section 7.2 Certificate of Limited Partnership 34
Section 7.3 Restrictions on General Partner's Authority 34
Section 7.4 Reimbursement of the General Partner 35
Section 7.5 Outside Activities 36
Section 7.6 Loans from the General Partner; Loans or Contributions
from the Partnership; Contracts with Affiliates; Certain
Restrictions on the General Partner 37
Section 7.7 Indemnification 39
Section 7.8 Liability of Indemnitees 41
Section 7.9 Resolution of Conflicts of Interest 41
Section 7.10 Other Matters Concerning the General Partner 43
Section 7.11 Reliance by Third Parties 44
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting 44
Section 8.2 Fiscal Year 45
</TABLE>
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<TABLE>
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ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information 45
Section 9.2 Tax Elections 45
Section 9.3 Tax Controversies 45
Section 9.4 Withholding 46
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Partners 46
Section 10.2 Admission of Substituted Limited Partner 46
Section 10.3 Admission of Additional Limited Partners 47
Section 10.4 Admission of Successor or Transferee General Partner 47
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership 48
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner 48
Section 11.2 Removal of the General Partner 50
Section 11.3 Interest of Departing Partner 50
Section 11.4 Withdrawal of a Limited Partner 50
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution 51
Section 12.2 Continuation of the Business of the Partnership After
Dissolution 51
Section 12.3 Liquidator 52
Section 12.4 Liquidation 53
Section 12.5 Cancellation of Certificate of Limited Partnership 54
Section 12.6 Return of Contributions 54
Section 12.7 Waiver of Partition 54
Section 12.8 Capital Account Restoration 54
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
Section 13.1 Amendment to be Adopted Solely by the General Partner 54
Section 13.2 Amendment Procedures 56
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE XIV
MERGER
Section 14.1 Authority 56
Section 14.2 Procedure for Merger or Consolidation 57
Section 14.3 Approval by Limited Partners of Merger or Consolidation 58
Section 14.4 Certificate of Merger 58
Section 14.5 Effect of Merger 59
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices 59
Section 15.2 Further Action 60
Section 15.3 Binding Effect 60
Section 15.4 Integration 60
Section 15.5 Creditors 60
Section 15.6 Waiver 60
Section 15.7 Counterparts 60
Section 15.8 Applicable Law 60
Section 15.9 Invalidity of Provisions 61
Section 15.10 Consent of Partners 61
</TABLE>
All American Pipeline, L.P.
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALL AMERICAN PIPELINE, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of ALL AMERICAN
PIPELINE, L.P., dated as of November 23, is entered into by and between Plains
All American Inc., a Delaware corporation, as the General Partner, and Plains
Marketing, L.P., a Delaware limited partnership, as the Limited Partner,
together with any other Persons who hereafter become Partners in the Partnership
or parties hereto as provided herein.
R E C I T A L S:
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WHEREAS, All American Pipeline Company converted into a Texas limited
partnership pursuant to Articles of Conversion filed with the Texas Secretary of
State on November 16, 1998 with Plains All American Inc. as the sole general
partner and as a limited partner, and PAAI LLC, a Delaware limited liability
company, as a limited partner pursuant to the Agreement of Limited Partnership
of All American Pipeline, L.P. dated as of November 16, 1998 (the "Prior
Agreement"); and
WHEREAS, PAAI LLC has contributed all of its interest in the Partnership to
Plains All American Pipeline, L.P., a Delaware limited partnership (the "MLP");
and
WHEREAS, the Partners of the Partnership now desire to amend the Prior
Agreement to reflect the admission of the MLP as Limited Partner and to make
certain other changes.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby amend the Prior Agreement
and, as so amended, restate it in its entirety as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 10.4 and who is shown
as such on the books and records of the Partnership.
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"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year of the Partnership, (a)
increased by any amounts that such Partner is obligated to restore under
the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or
is deemed obligated to restore under Treasury Regulation Sections 1.704-
2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all losses
and deductions that, as of the end of such fiscal year, are reasonably
expected to be allocated to such Partner in subsequent years under Sections
704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-
1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end
of such fiscal year, are reasonably expected to be made to such Partner in
subsequent years in accordance with the terms of this Agreement or
otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to)
the year in which such distributions are reasonably expected to be made
(other than increases as a result of a minimum gain chargeback pursuant to
Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of Adjusted
Capital Account is intended to comply with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith. The "Adjusted Capital Account" of a Partner in
respect of a General Partner Interest or any other specified interest in
the Partnership shall be the amount which such Adjusted Capital Account
would be if such General Partner Interest or other interest in the
Partnership were the only interest in the Partnership held by a Partner
from and after the date on which such general partner interest or other
interest was first issued.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted
Property is deemed contributed to a new partnership in exchange for an
interest in the new partnership, followed by a deemed liquidation of the
Partnership for federal income tax purposes upon a termination of the
Partnership pursuant to Treasury Regulation Section 1.708-(b)(1)(iv), such
property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is subsequently adjusted pursuant to
Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As
used herein, the term "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative
Allocation (if appropriate to the context in which the term "Agreed
Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution as
determined by the General Partner using such reasonable method of valuation
as it may adopt. The General Partner shall,
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in its discretion, use such method as it deems reasonable and appropriate
to allocate the aggregate Agreed Value of Contributed Properties
contributed to the Partnership in a single or integrated transaction among
each separate property on a basis proportional to the fair market value of
each Contributed Property.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership of All American Pipeline, L.P., as it may be amended,
supplemented or restated from time to time.
"Assets" means the assets being conveyed to the Partnership on the
Closing Date pursuant to Section 5.2 and the Contribution and Conveyance
Agreement.
"Assignee" means a Person to whom one or more Partnership Interests
have been transferred in a manner permitted under this Agreement, but who
has not been admitted as a Substituted Limited Partner.
"Associate" means, when used to indicate a relationship with any
Person, (a) any corporation or organization of which such Person is a
director, officer or partner or is, directly or indirectly, the owner of
20% or more of any class of voting stock or other voting interest; (b) any
trust or other estate in which such Person has at least a 20% beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such Person, or any
relative of such spouse, who has the same principal residence as such
Person.
"Assumed Liabilities" means the liabilities that the Partnership is
either assuming or taking subject to in connection with the conveyance of
the Assets pursuant to Section 5.2 and the Contribution and Conveyance
Agreement.
"Available Cash" means, with respect to any Quarter ending prior to
the Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the
Partnership Group on hand at the end of such Quarter, and (ii) all
additional cash and cash equivalents of the Partnership Group on hand on
the date of determination of Available Cash with respect to such Quarter
resulting from Working Capital Borrowings made subsequent to the end of
such Quarter, less
(b) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner to (i)
provide for the proper conduct of the business of the Partnership Group
(including reserves for future capital expenditures and for anticipated
future credit needs of the Partnership Group) subsequent to such Quarter,
(ii) comply with applicable law or any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which any
Group Member is a party or by
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which it is bound or its assets are subject or (iii) provide funds for
distributions under Section 6.4 or 6.5 of the MLP Agreement in respect of
any one or more of the next four Quarters; provided, however, that the
General Partner may not establish cash reserves pursuant to (iii) above if
the effect of such reserves would be that the MLP is unable to distribute
the Minimum Quarterly Distribution on all Common Units, plus any Cumulative
Common Unit Arrearage on all Common Units, with respect to such Quarter;
and provided further that disbursements made by a Group Member or cash
reserves established, increased or reduced after the end of such Quarter
but on or before the date of determination of Available Cash with respect
to such Quarter shall be deemed to have been made, established, increased
or reduced, for purposes of determining Available Cash, within such Quarter
if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to
the Quarter in which the Liquidation Date occurs and any subsequent Quarter
shall equal zero.
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will
be reflected by the difference between such Partner's Capital Account
balance as maintained pursuant to Section 5.5 and the hypothetical balance
of such Partner's Capital Account computed as if it had been maintained
strictly in accordance with federal income tax accounting principles.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Texas shall not be regarded as a
Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest or any other specified interest in the Partnership
shall be the amount which such Capital Account would be if such General
Partner Interest or other specified interest in the Partnership were the
only interest in the Partnership held by a Partner from and after the date
on which such General Partner Interest or other specified interest in the
Partnership was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership pursuant to this Agreement or the Contribution and Conveyance
Agreement.
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' and Assignees' Capital Accounts in respect of such Contributed
Property, and (b) with respect to any other Partnership property, the
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adjusted basis of such property for federal income tax purposes, all as of
the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Sections 5.5(d)(i) and
5.5(d)(ii) and to reflect changes, additions or other adjustments to the
Carrying Value for dispositions and acquisitions of Partnership properties,
as deemed appropriate by the General Partner.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the
State of Texas as referenced in Section 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"Closing Date" means the first date on which Common Units are sold by
the MLP to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of successor law.
"Commission" means the United States Securities and Exchange
Commission.
"Common Unit" has the meaning assigned to such term in the MLP
Agreement.
"Contributed Property" means each property or other asset, in such
form as may be permitted by the Texas Act, but excluding cash, contributed
to the Partnership (or deemed contributed to a new partnership on
termination of the Partnership pursuant to Section 708 of the Code. Once
the Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.5(d), such property shall no longer constitute a Contributed
Property, but shall be deemed an Adjusted Property.
"Contribution and Conveyance Agreement" means that certain
Contribution, Conveyance and Assumption Agreement, dated as of the Closing
Date, among the General Partner, the Plains Midstream Subsidiaries, the
MLP, the Partnership and certain other parties, together with the
additional conveyance documents and instruments contemplated or referenced
thereunder.
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(ix).
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
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"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Gathering LLC" means Gathering LLC, a Delaware limited liability
company.
"General Partner" means Plains All American Inc. and its successors
and permitted assigns as general partner of the Partnership.
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner) and
includes any and all benefits to which the General Partner is entitled as
provided in this Agreement, together with all obligations of the General
Partner to comply with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except voting pursuant to a revocable proxy
or consent given to such Person in response to a proxy or consent
solicitation made to 10 or more Persons) or disposing of any MLP Securities
with any other Person that beneficially owns, or whose Affiliates or
Associates beneficially own, directly or indirectly, MLP Securities.
"Group Member" means a member of the Partnership Group.
"Indemnitee" means (a) the General Partner, (b) any Departing Partner,
(c) any Person who is or was an Affiliate of the General Partner or any
Departing Partner, (d) any Person who is or was a member, partner, officer,
director, employee, agent or trustee of any Group Member, the General
Partner or any Departing Partner or any Affiliate of any Group Member, the
General Partner or any Departing Partner, and (e) any Person who is or was
serving at the request of the General Partner or any Departing Partner or
any Affiliate of the General Partner or any Departing Partner as an
officer, director, employee, member, partner, agent, fiduciary or trustee
of another Person; provided, that a Person shall not be an Indemnitee by
reason of providing, on a fee-for-services basis, trustee, fiduciary or
custodial services.
"Initial Offering" means the initial offering and sale of Common Units
to the public, as described in the Registration Statement.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership and includes any and all benefits to
which such Limited Partner or Assignee is entitled as provided in this
Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement.
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"Liquidation Date" means (a) in the case of an event giving rise to
the dissolution of the Partnership of the type described in clauses (a) and
(b) of the first sentence of Section 12.2, the date on which the applicable
time period during which the Partners have the right to elect to
reconstitute the Partnership and continue its business has expired without
such an election being made, and (b) in the case of any other event giving
rise to the dissolution of the Partnership, the date on which such event
occurs.
"Liquidator" means one or more Persons selected by the General Partner
to perform the functions described in Section 12.3 as liquidating trustee
of the Partnership within the meaning of the Texas Act.
"Limited Partner" means any Person that is admitted to the Partnership
as a limited partner pursuant to the terms and conditions of this
Agreement; but the term Limited Partner shall not include any Person from
and after the time such Person withdraws as a Limited Partner from the
Partnership.
"Marketing" means Plains Marketing, L.P., a Delaware limited
partnership.
"Marketing Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of Plains Marketing, L.P., as it may be
amended, supplemented or restated from time to time.
"Merger Agreement" has the meaning assigned to such term in Section
14.1.
"Minimum Quarterly Distribution" has the meaning assigned to such term
in the MLP Agreement.
"MLP" means Plains All American Pipeline, L.P.
"MLP Agreement" means the Amended and Restated Agreement of Limited
Partnership of Plains All American Pipeline, L.P., as it may be amended,
supplemented or restated from time to time.
"MLP Security" has the meaning assigned to the term "Partnership
Security" in the MLP Agreement.
"Net Agreed Value" means, (a) in the case of any Contributed Property,
the Agreed Value of such property reduced by any liabilities either assumed
by the Partnership upon such contribution or to which such property is
subject when contributed, and (b) in the case of any property distributed
to a Partner or Assignee by the Partnership, the Partnership's Carrying
Value of such property (as adjusted pursuant to Section 5.5(d)(ii)) at the
time such property is distributed, reduced by any indebtedness either
assumed by such Partner or Assignee upon
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such distribution or to which such property is subject at the time of
distribution, in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss)
for such taxable year over the Partnership's items of loss and deduction
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Income shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d).
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken
into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable year over the Partnership's items of income and gain
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Loss shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d).
"Net Termination Gain" means, for any taxable year, the sum, if
positive, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the
determination of Net Termination Gain shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain or loss
specially allocated under Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if
negative, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the
determination of Net Termination Loss shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain or loss
specially allocated under Section 6.1(d).
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would
be allocated to the Partners pursuant to Sections 6.2(b)(i)(A),
6.2(b)(ii)(A) and 6.2(b)(iii) if such properties were disposed of in a
taxable transaction in full satisfaction of such liabilities and for no
other consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b),
are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
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"OLP Subsidiary" means a Subsidiary of the OLP.
"Omnibus Agreement" means that Omnibus Agreement, dated as of the
Closing Date, among Plains Resources, Inc., the General Partner, the MLP,
Marketing and the Partnership.
"Opinion of Counsel" means a written opinion of counsel (which may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner in its reasonable discretion.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
"Partnership" means All American Pipeline, L.P., a Texas limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership and all OLP Subsidiaries,
treated as a single consolidated entity.
"Partnership Interest" means an ownership interest of a Partner in the
Partnership, which shall include the General Partner Interest and the
Limited Partner Interest(s).
"Partnership Minimum Gain" means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
"Percentage Interest" means the percentage interest in the Partnership
held by each Partner upon completion of the transactions in Section 5.4 and
shall mean, (a) as to the General Partner, an aggregate .001% and (b) as to
the MLP, 99.999%.
"Person" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other
entity.
"Prior Agreement" is defined in the Recitals.
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"Pro Rata" means, when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their relative
Percentage Interests.
"Quarter" means, unless the context requires otherwise, a fiscal
quarter of the Partnership.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or
Section 743 of the Code) upon the disposition of any property or asset of
the Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-64107) as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Commission under
the Securities Act to register the offering and sale of the Common Units in
the Initial Offering.
"Required Allocations" means (a) any limitation imposed on any
allocation of Net Losses or Net Termination Losses under Section 6.1(b) or
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss or
deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv),
6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent such item of gain
or loss is not allocated pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A),
respectively, to eliminate Book-Tax Disparities.
"Restricted Business" has the meaning assigned to such term in the
Omnibus Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such
statute.
"Special Approval" has the meaning assigned to such term in the MLP
Agreement.
"Subsidiary" means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard
to the occurrence of any contingency) to vote in the election of directors
or other governing body of such corporation is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person or a combination thereof, (b) a partnership
(whether general or limited) in which such Person or a Subsidiary of such
Person is, at the date of determination, a general or limited partner of
such partnership, but only if more than 50% of the partnership
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interests of such partnership (considering all of the partnership interests
of the partnership as a single class) is owned, directly or indirectly, at
the date of determination, by such Person, by one or more Subsidiaries of
such Person, or a combination thereof, or (c) any other Person (other than
a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or
indirectly, at the date of determination, has (i) at least a majority
ownership interest or (ii) the power to elect or direct the election of a
majority of the directors or other governing body of such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 10.2 in place of and
with all the rights of a Limited Partner and who is shown as a Limited
Partner on the books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Texas Act" means the Texas Revised Limited Partnership Act, Tex. Rev.
Civ. Stat. Ann., art. 6132a-1 (Vernon's Texas Statutes), et seq., as
amended, supplemented or restated from time to time, and any successor to
such statute.
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Underwriter" means each Person named as an underwriter in Schedule I
to the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated
November 17, 1998 among the Underwriters, the MLP and certain other
parties, providing for the purchase of Common Units by such Underwriters.
"Unit" has the meaning assigned to such term in the MLP Agreement.
"Unit Majority" has the meaning assigned to such term in the MLP
Agreement.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under Section
5.5(d)) over (b) the Carrying Value of such property as of such date (prior
to any adjustment to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any adjustment to
be made pursuant to Section 5.5(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under Section
5.5(d)).
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"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Working Capital Borrowings" means borrowings exclusively for working
capital purposes made pursuant to a credit facility or other arrangement
requiring all such borrowings thereunder to be reduced to a relatively
small amount each year for an economically meaningful period of time.
Section 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE II
ORGANIZATION
Section 2.1 Formation.
The Partnership was previously formed as a limited partnership pursuant to
the provisions of the Texas Act. The Partners hereby amend and restate the
Prior Agreement in its entirety. This amendment and restatement shall become
effective on the date of this Agreement. Except as expressly provided to the
contrary in this Agreement, the rights, duties (including fiduciary duties),
liabilities and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Texas Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes and a Partner has no interest in specific Partnership property.
Section 2.2 Name.
The name of the Partnership shall be "All American Pipeline, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General Partner in its sole discretion,
including the name of the General Partner. The words "Limited Partnership,"
"L.P." or "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purpose of complying with the laws of
any jurisdiction that so requires. The General Partner in its discretion may
change the name of the Partnership at any time and from time to time and shall
notify the other Partner(s) of such change in the next regular communication to
the Partners.
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Section 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Texas shall be located at 500 Dallas, Suite 700,
Houston, Texas 77002, and the registered agent for service of process on the
Partnership in the State of Texas at such registered office shall be Michael R.
Patterson. The principal office of the Partnership shall be located at 500
Dallas, Suite 700, Houston, Texas 77002 or such other place as the General
Partner may from time to time designate by notice to the Limited Partners. The
Partnership may maintain offices at such other place or places within or outside
the State of Texas as the General Partner deems necessary or appropriate. The
address of the General Partner shall be 500 Dallas, Suite 700, Houston, Texas
77002 or such other place as the General Partner may from time to time designate
by notice to the Limited Partners.
Section 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) acquire, manage, operate and sell the Assets and any similar
assets or properties now or hereafter acquired by the Partnership, (b) engage
directly in, or enter into or form any corporation, partnership, joint venture,
limited liability company or other arrangement to engage indirectly in, any
business activity that the Partnership is permitted to engage in, or any type of
business or activity engaged in by the General Partner prior to the Closing Date
and, in connection therewith, to exercise all of the rights and powers conferred
upon the Partnership pursuant to the agreements relating to such business
activity, (c) engage directly in, or enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage indirectly in, any business activity that is approved by the General
Partner and which lawfully may be conducted by a limited partnership organized
pursuant to the Texas Act and, in connection therewith, to exercise all of the
rights and powers conferred upon the Partnership pursuant to the agreements
relating to such business activity; provided, however, that the General Partner
reasonably determines, as of the date of the acquisition or commencement of such
activity, that such activity (i) generates "qualifying income" (as such term is
defined pursuant to Section 7704 of the Code) or (ii) enhances the operations of
an activity of the Partnership that generates qualifying income, and (d) do
anything necessary or appropriate to the foregoing, including the making of
capital contributions or loans to a Group Member, the MLP or any Subsidiary of
the MLP. The General Partner has no obligation or duty to the Partnership, the
Limited Partners, or the Assignees to propose or approve, and in its discretion
may decline to propose or approve, the conduct by the Partnership of any
business.
Section 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
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Section 2.6 Power of Attorney.
(a) Each Partner and each Assignee hereby constitutes and appoints the
General Partner and, if a Liquidator shall have been selected pursuant to
Section 12.3, the Liquidator (and any successor to the Liquidator by merger,
transfer, assignment, election or otherwise) and each of their authorized
officers and attorneys-in-fact, as the case may be, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
General Partner or the Liquidator deems necessary or appropriate to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Texas and in all other jurisdictions in
which the Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the General Partner or
the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of this
Agreement; (C) all certificates, documents and other instruments (including
conveyances and a certificate of cancellation) that the General Partner or
the Liquidator deems necessary or appropriate to reflect the dissolution
and liquidation of the Partnership pursuant to the terms of this Agreement;
(D) all certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to,
or other events described in, Article IV, X, XI or XII; (E) all
certificates, documents and other instruments relating to the determination
of the rights, preferences and privileges of any class or series of
Partnership Interests issued pursuant hereto; and (F) all certificates,
documents and other instruments (including agreements and a certificate of
merger) relating to a merger or consolidation of the Partnership pursuant
to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the General
Partner or the Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action that is made or given by
the Partners hereunder or is consistent with the terms of this Agreement or
is necessary or appropriate, in the discretion of the General Partner or
the Liquidator, to effectuate the terms or intent of this Agreement;
provided, that when required by any provision of this Agreement that
establishes a percentage of the Limited Partners or of the Limited Partners
of any class or series required to take any action, the General Partner and
the Liquidator may exercise the power of attorney made in this Section
2.6(a)(ii) only after the necessary vote, consent or approval of the
Limited Partners or of the Limited Partners of such class or series, as
applicable.
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Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's successors and assigns. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or the Liquidator acting in good faith pursuant to such power of
attorney; and each such Limited Partner or Assignee, to the maximum extent
permitted by law, hereby waives any and all defenses that may be available to
contest, negate or disaffirm the action of the General Partner or the Liquidator
taken in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or the Liquidator,
within 15 days after receipt of the request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator deems necessary to effectuate this Agreement and the purposes of the
Partnership.
Section 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Texas Act and shall continue in
existence until the close of Partnership business on December 31, 2088 or until
the earlier dissolution of the Partnership in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Texas Act.
Section 2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner, one or more of its Affiliates or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership assets for which record title is held in the name
of the General Partner or one or more of its Affiliates or one or more nominees
shall be held by the General Partner or such Affiliate or nominee for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use reasonable
efforts to cause record title to such assets (other than those assets in respect
of which the General Partner determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership impracticable) to
be vested in the Partnership as soon as reasonably practicable; provided,
further, that, prior to the withdrawal or removal of the General
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Partner or as soon thereafter as practicable, the General Partner shall use
reasonable efforts to effect the transfer of record title to the Partnership
and, prior to any such transfer, will provide for the use of such assets in a
manner satisfactory to the General Partner. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which record title to such Partnership assets is
held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or in the Texas Act.
Section 3.2 Management of Business.
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Texas Act) of
the Partnership's business, transact any business in the Partnership's name or
have the power to sign documents for or otherwise bind the Partnership. Any
action taken by any Affiliate of the General Partner or any officer, director,
employee, member, general partner, agent or trustee of the General Partner or
any of its Affiliates, or any officer, director, employee, member, general
partner, agent or trustee of a Group Member, in its capacity as such, shall not
be deemed to be participation in the control of the business of the Partnership
by a limited partner of the Partnership (within the meaning of Section 3.03(a)
of the Texas Act) and shall not affect, impair or eliminate the limitations on
the liability of the Limited Partners or Assignees under this Agreement.
Section 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5 and the Omnibus Agreement, which
shall continue to be applicable to the Persons referred to therein, regardless
of whether such Persons shall also be Limited Partners or Assignees, any Limited
Partner or Assignee shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership Group. Neither the Partnership nor any of the other Partners or
Assignees shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee.
Section 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon reasonable written demand
and at such Limited Partner's own expense:
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(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the General Partner deems
reasonable, (i) any information that the General Partner reasonably believes to
be in the nature of trade secrets or (ii) other information the disclosure of
which the General Partner in good faith believes (A) is not in the best
interests of the MLP or the Partnership Group, (B) could damage the MLP or the
Partnership Group or (C) that any Group Member is required by law or by
agreement with any third party to keep confidential (other than agreements with
Affiliates of the Partnership the primary purpose of which is to circumvent the
obligations set forth in this Section 3.4).
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
Section 4.1 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its General Partner Interest to another Person who
becomes the General Partner (or an Assignee) or by which the holder of a Limited
Partner Interest assigns such Limited Partner Interest to another Person who
becomes a Limited Partner (or an Assignee), and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
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(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent
a disposition by any shareholder of the General Partner of any or all of the
issued and outstanding capital stock of the General Partner.
Section 4.2 Transfer of General Partner's Partnership Interest.
If the General Partner transfers its interest as the general partner
of the MLP to any Person in accordance with the provisions of the MLP Agreement,
the General Partner shall contemporaneously therewith transfer all, but not less
than all, of its General Partner Interest herein to such Person, and the Limited
Partners and Assignees, if any, hereby expressly consent to such transfer.
Except as set forth in the immediately preceding sentence and in Section 5.2, a
General Partner may not transfer all or any part of its Partnership Interest as
the General Partner.
Section 4.3 Transfer of a Limited Partner's Partnership Interest.
A Limited Partner may transfer all, but not less than all, of its
Partnership Interest as a Limited Partner in connection with the merger,
consolidation or other combination of such Limited Partner with or into any
other Person or the transfer by such Limited Partner of all or substantially all
of its assets to another Person, and following any such transfer such Person may
become a Substituted Limited Partner pursuant to Article X. Except as set forth
in the immediately preceding sentence and in Section 5.2, or in connection with
any pledge of (or any related foreclosure on) a Partnership Interest as a
Limited Partner solely for the purpose of securing, directly or indirectly,
indebtedness of the Partnership or the MLP, and except for the transfers
contemplated by Sections 5.2 and 10.1, a Limited Partner may not transfer all or
any part of its Partnership Interest or withdraw from the Partnership.
Section 4.4 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article IV, no
transfer of any Partnership Interest shall be made if such transfer would (i)
violate the then applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii) terminate the
existence or qualification of the Partnership or the MLP under the laws of the
jurisdiction of its formation or (iii) cause the Partnership or the MLP to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).
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(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or the
MLP becoming taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes. The restrictions may be imposed by making such
amendments to this Agreement as the General Partner may determine to be
necessary or appropriate to impose such restrictions.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Initial Contributions.
In connection with the conversion of All American Pipeline Company to the
Partnership, the investment of the General Partner and PAAI LLC in the stock of
All American Pipeline Company prior to its conversion became its respective
capital contribution to the Partnership.
Section 5.2 Contributions Pursuant to the Contribution and Conveyance
Agreement.
(a) Pursuant to the Contribution and Conveyance Agreement, the
Partnership has assumed certain indebtedness relating to the Assets as described
in the Contribution and Conveyance Agreement.
(b) Pursuant to the Contribution and Conveyance Agreement, the
Partnership has distributed to the General Partner all of its interest in
Gathering LLC.
(c) Notwithstanding anything else herein contained, if the aggregate
excess net working capital reflected on the balance sheets of the Partnership
and Marketing that are prepared in accordance with Section 7.3 of the
Contribution and Conveyance Agreement is in excess of $8,000,000, then the
Partnership shall distribute to the General Partner all of its excess net
working capital up to the total amount of such excess. In the event that such
aggregate excess net working capital is less than $8,000,000, the General
Partner shall contribute to the Partnership, as a Capital Contribution, cash in
an amount equal to the amount that, when added to the amount of the similar
contribution made to Marketing by the General Partner, would cause the aggregate
excess net working capital of the Partnership and Marketing to be equal to
$8,000,000.
(d) Following the foregoing transactions, the General Partner holds a
.001% General Partner Interest and the MLP holds a 99.999% Limited Partner
Interest.
Section 5.3 Additional Capital Contributions.
With the consent of the General Partner, any Limited Partner may, but shall
not be obligated to, make additional Capital Contributions to the Partnership.
Contemporaneously with the making of any Capital Contributions by a Limited
Partner, in addition to those provided in Sections 5.1 and
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5.2, the General Partner shall be obligated to make an additional Capital
Contribution to the Partnership in an amount equal to .001 divided by 99.999
times the amount of the additional Capital Contribution then made by such
Limited Partner. Except as set forth in the immediately preceding sentence and
in Article XII, the General Partner shall not be obligated to make any
additional Capital Contributions to the Partnership.
Section 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered as such
by law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Partner or Assignee shall have
priority over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions.
Section 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion) owning a Partnership Interest a
separate Capital Account with respect to such Partnership Interest in accordance
with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (i) the amount of all Capital Contributions made
to the Partnership with respect to such Partnership Interest pursuant to this
Agreement and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain,
loss or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
General Partner) of all property
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owned by any OLP Subsidiary that is classified as a partnership for federal
income tax purposes.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of
the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization attributable
to any Contributed Property shall be determined as if the adjusted basis of
such property on the date it was acquired by the Partnership were equal to
the Agreed Value of such property. Upon an adjustment pursuant to Section
5.5(d) to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions for
such depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such property
were equal to the Carrying Value of such property immediately following
such adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income tax
purposes; provided, however, that, if the asset has a zero adjusted basis
for federal income tax purposes, depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income tax
purposes; provided, however, that, if the asset has a zero adjusted basis
for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the General Partner may adopt.
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(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash
or Contributed Property or the conversion of the General Partner's
Partnership Interest to Common Units pursuant to Section 11.3(a), the
Capital Accounts of all Partners and the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss
had been recognized on an actual sale of each such property immediately
prior to such issuance and had been allocated to the Partners at such time
pursuant to Section 6.1 in the same manner as any item of gain or loss
actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the General Partner
using such reasonable method of valuation as it may adopt; provided,
however, that the General Partner, in arriving at such valuation, must take
fully into account the fair market value of the Partnership Interests of
all Partners at such time. The General Partner shall allocate such
aggregate value among the assets of the Partnership (in such manner as it
determines in its discretion to be reasonable) to arrive at a fair market
value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a
Partner of any Partnership property (other than a distribution of cash that
is not in redemption or retirement of a Partnership Interest), the Capital
Accounts of all Partners and the Carrying Value of all Partnership property
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized in a sale of such
property immediately prior to such distribution for an amount equal to its
fair market value, and had been allocated to the Partners, at such time,
pursuant to Section 6.1 in the same manner as any item of gain or loss
actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior
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to a distribution shall (A) in the case of an actual distribution which is
not made pursuant to Section 12.4 or in the case of a deemed contribution
and/or distribution occurring as a result of a termination of the
Partnership pursuant to Section 708 of the Code, be determined and
allocated in the same manner as that provided in Section 5.5(d)(i) or (B)
in the case of a liquidating distribution pursuant to Section 12.4, be
determined and allocated by the Liquidator using such reasonable method of
valuation as it may adopt.
Section 5.6 Loans from Partners.
Loans by a Partner to the Partnership shall not constitute Capital
Contributions. If any Partner shall advance funds to the Partnership in excess
of the amounts required hereunder to be contributed by it to the capital of the
Partnership, the making of such excess advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
excess advances shall be a debt obligation of the Partnership to such Partner
and shall be payable or collectible only out of the Partnership assets in
accordance with the terms and conditions upon which such advances are made.
Section 5.7 Limited Preemptive Rights.
Except as provided in Section 5.3, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Partnership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Partnership convertible into or exchangeable for, or carrying or accompanied
by any rights to receive, purchase or subscribe to, any such Partnership
Interests; (d) issuance of any right of subscription to or right to receive, or
any warrant or option for the purchase of, any such Partnership Interests; or
(e) issuance or sale of any other securities that may be issued or sold by the
Partnership.
Section 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests.
All Partnership Interests issued to Limited Partners pursuant to, and in
accordance with the requirements of, this Article V shall be fully paid and non-
assessable Partnership Interests, except as such non-assessability may be
affected by Section 6.07 of the Texas Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
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(a) Net Income. After giving effect to the special allocations set
forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated among the Partners as follows:
(i) First, 100% to the General Partner, until the aggregate Net Income
allocated to the General Partner pursuant to this Section 6.1(a)(i) for the
current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(ii) for all previous taxable years;
(ii) Second, .001% to the General Partner and 99.999% to the Limited
Partners in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated among the Partners as follows:
(i) First, .001% to the General Partner and 99.999% to the Limited
Partners, in accordance with their respective Percentage Interests;
provided, however, that Net Losses shall not be allocated to a Limited
Partner pursuant to this Section 6.1(b)(i) to the extent that such
allocation would cause a Limited Partner to have a deficit balance in its
Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in such Limited Partners's Adjusted Capital
Account);
(ii) Second, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder.
All allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Section 6.4
have been made with respect to the taxable period ending on or before the
Liquidation Date; provided, however, that solely for purposes of this Section
6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant
to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of the
Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
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(A) First, to each Partner having a deficit balance in its
Capital Account, in the proportion that such deficit balance bears to
the total deficit balances in the Capital Accounts of all Partners,
until each such Partner has been allocated Net Termination Gain equal
to any such deficit balance in its Capital Account; and
(B) Second, .001% to the General Partner and 99.999% to the
Limited Partners, in accordance with their respective Percentage
Interests.
(ii) If a Net Termination Loss is recognized (or deemed
recognized pursuant to Section 5.5(d)), such Net Termination Loss shall be
allocated among the Partners in the following manner:
(A) First, to the General Partner and the Limited Partners in
proportion to, and to the extent of, the positive balances in their
respective Capital Accounts; and
(B) Second, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-
2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi)). This Section
6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-
2(j)(2)(ii), or any successor provisions. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations
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pursuant to this Section 6.1(d), other than Section 6.1(d)(i) and other
than an allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi), with
respect to such taxable period. This Section 6.1(d)(ii) is intended to
comply with the chargeback of items of income and gain requirement in
Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or (ii).
(iv) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership
taxable period in excess of the sum of (A) the amount such Partner is
required to restore pursuant to the provisions of this Agreement and (B)
the amount such Partner is deemed obligated to restore pursuant to Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain in the
amount of such excess as quickly as possible; provided, that an allocation
pursuant to this Section 6.1(d)(iv) shall be made only if and to the extent
that such Partner would have a deficit balance in its Capital Account as
adjusted after all other allocations provided for in this Section 6.1 have
been tentatively made as if this Section 6.1(d)(iv) were not in this
Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of
the Treasury Regulations promulgated under Section 704(b) of the Code, the
General Partner is authorized, upon notice to the other Partners, to revise
the prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner bears
the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such Economic Risk of Loss.
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(vii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
(viii) Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b)
or 743(c) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations shall be
taken into account in making the Agreed Allocations so that, to the
extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each
such Partner under the Agreed Allocations had the Required Allocations
and the related Curative Allocation not otherwise been provided in
this Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be taken
into account except to the extent that there has been a decrease in
Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall
not be taken into account except to the extent that there has been a
decrease in Partner Nonrecourse Debt Minimum Gain. Allocations
pursuant to this Section 6.1(d)(ix)(A) shall only be made with respect
to Required Allocations to the extent the General Partner reasonably
determines that such allocations will otherwise be inconsistent with
the economic agreement among the Partners. Further, allocations
pursuant to this Section 6.1(d)(ix)(A) shall be deferred with respect
to allocations pursuant to clauses (1) and (2) hereof to the extent
the General Partner reasonably determines that such allocations are
likely to be offset by subsequent Required Allocations.
(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of Section
6.1(d)(ix)(A) in whatever order is most likely to minimize the
economic distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to Section
6.1(d)(ix)(A) among the Partners in a manner that is likely to
minimize such economic distortions.
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Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
second, in the event such property was originally a Contributed Property,
be allocated among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Units or other limited partner interests of
the MLP (or any class or classes thereof), the General Partner shall have sole
discretion to (i) adopt such conventions as it deems appropriate in determining
the amount of depreciation, amortization and cost recovery deductions; (ii) make
special allocations for federal income tax purposes of income (including,
without limitation, gross income) or deductions; and (iii) amend the provisions
of this Agreement as appropriate (x) to reflect the proposal or promulgation of
Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y)
otherwise to preserve or achieve uniformity of the Units or other limited
partner interests of the MLP (or any class or classes thereof). The General
Partner may adopt such conventions, make such allocations and make such
amendments to this Agreement as provided in this Section 6.2(c) only if such
conventions, allocations or amendments would not have a material adverse effect
on the Partners, the holders of any class or classes of Units or other limited
partner interests of the MLP
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issued and outstanding or the Partnership and if such allocations are consistent
with the principles of Section 704 of the Code.
(d) The General Partner in its discretion may determine to depreciate
or amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of
the Code. If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring limited partner interests of
the MLP in the same month would receive depreciation and amortization
deductions, based upon the same applicable rate as if they had purchased a
direct interest in the Partnership's property. If the General Partner chooses
not to utilize such aggregate method, the General Partner may use any other
reasonable depreciation and amortization conventions to preserve the uniformity
of the intrinsic tax characteristics of any limited partner interests of the MLP
that would not have a material adverse effect on the Partners or the holders of
any class or classes of limited partner interests of the MLP.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized
by the Partnership for federal income tax purposes and allocated to the Partners
in accordance with the provisions hereof shall be determined without regard to
any election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation of
income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.
(h) Allocations that would otherwise be made to a Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion.
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Section 6.3 Distributions.
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on December 31, 1998, an amount equal to 100% of Available
Cash with respect to such Quarter shall, subject to Section 6.07 of the Texas
Act, be distributed in accordance with this Article VI by the Partnership to the
Partners in accordance with their respective Percentage Interests. The
immediately preceding sentence shall not require any distribution of cash if and
to the extent such distribution would be prohibited by applicable law or by any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which the Partnership is a party or by which it is bound or its
assets are subject. All distributions required to be made under this Agreement
shall be made subject to Section 6.07 of the Texas Act.
(b) In the event of the dissolution and liquidation of the
Partnership, all receipts received during or after the Quarter in which the
Liquidation Date occurs, other than from borrowings described in (a)(ii) of the
definition of Available Cash, shall be applied and distributed solely in
accordance with, and subject to the terms and conditions of, Section 12.4.
(c) The General Partner shall have the discretion to treat taxes paid
by the Partnership on behalf of, or amounts withheld with respect to, all or
less than all of the Partners, as a distribution of Available Cash to such
Partners.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management.
(a) The General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and no Limited
Partner or Assignee shall have any management power over the business and
affairs of the Partnership. In addition to the powers now or hereafter granted a
general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 7.3, shall have full power and authority to
do all things and on such terms as it, in its sole discretion, may deem
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 2.5 and to effectuate the purposes set forth in
Section 2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of money,
the assumption or guarantee of, or other contracting for, indebtedness and
other liabilities, the issuance of evidences of indebtedness, including
indebtedness that is convertible into a Partnership Interest, and the
incurring of any other obligations;
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(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash on hand)
for any purpose consistent with the terms of this Agreement, including the
financing of the conduct of the operations of the Partnership Group,
subject to Section 7.6, the lending of funds to other Persons (including
the MLP and any Member of the Partnership Group), the repayment of
obligations of the MLP or any member of the Partnership Group and the
making of capital contributions to any member of the Partnership Group;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partner or its assets other than
its interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be
the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations or other relationships
subject to the restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and obligations of
the Partnership, including the bringing and defending of actions at law or
in equity and otherwise engaging in the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation; and
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(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law.
(b) Notwithstanding any other provision of this Agreement, the MLP
Agreement, the Texas Act or any applicable law, rule or regulation, each of the
Partners and Assignees and each other Person who may acquire an interest in the
Partnership hereby (i) approves, ratifies and confirms the execution, delivery
and performance by the parties thereto of the Partnership Agreement, the MLP
Agreement, the Underwriting Agreement, the Omnibus Agreement, the Contribution
and Conveyance Agreement and the other agreements and documents described in or
filed as exhibits to the Registration Statement that are related to the
transactions contemplated by the Registration Statement; (ii) agrees that the
General Partner (on its own or through any officer of the Partnership) is
authorized to execute, deliver and perform the agreements referred to in clause
(i) of this sentence and the other agreements, acts, transactions and matters
described in or contemplated by the Registration Statement on behalf of the
Partnership without any further act, approval or vote of the Partners or the
Assignees or the other Persons who may acquire an interest in the Partnership;
and (iii) agrees that the execution, delivery or performance by the General
Partner, the MLP, any Group Member or any Affiliate of any of them, of this
Agreement or any agreement authorized or permitted under this Agreement
(including the exercise by the General Partner or any Affiliate of the General
Partner of the rights accorded pursuant to Article XV), shall not constitute a
breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement
(or any other agreements) or of any duty stated or implied by law or equity.
Section 7.2 Certificate of Limited Partnership.
The Certificate of Limited Partnership has been filed with the Secretary of
State of the State of Texas as required by the Texas Act and the General Partner
shall use all reasonable efforts to cause to be filed such other certificates or
documents as may be determined by the General Partner in its sole discretion to
be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Texas or any other
state in which the Partnership may elect to do business or own property. To the
extent that such action is determined by the General Partner in its sole
discretion to be reasonable and necessary or appropriate, the General Partner
shall file amendments to and restatements of the Certificate of Limited
Partnership and do all things to maintain the Partnership as a limited
partnership (or a partnership or other entity in which the limited partners have
limited liability) under the laws of the State of Texas or of any other state in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 3.4(a), the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate of Limited
Partnership, any qualification document or any amendment thereto to any Limited
Partner or Assignee.
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Section 7.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without written approval of the
specific act by the Limited Partners or by other written instrument executed and
delivered by the Limited Partners subsequent to the date of this Agreement, take
any action in contravention of this Agreement, including, except as otherwise
provided in this Agreement, (i) committing any act that would make it impossible
to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner or (v) transferring its General
Partner Interest.
(b) Except as provided in Articles XII and XIV, the General Partner
may not sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Partnership, without the approval of the
Limited Partners; provided however that this provision shall not preclude or
limit the General Partner's ability to mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of the assets of the Partnership
and shall not apply to any forced sale of any or all of the assets of the
Partnership pursuant to the foreclosure of, or other realization upon, any such
encumbrance. Without the approval of at least a Unit Majority, the General
Partner shall not, on behalf of the MLP, (i) consent to any amendment to this
Agreement or, except as expressly permitted by Section 7.9(d) of the MLP
Agreement, take any action permitted to be taken by a Partner, in either case,
that would have a material adverse effect on the MLP as a Partner or (ii) except
as permitted under Sections 4.6, 11.1 and 11.2 of the MLP Agreement, elect or
cause the MLP to elect a successor general partner of the Partnership.
Section 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the MLP Agreement, the General Partner shall not be compensated
for its services as General Partner, general partner of the MLP or as general
partner of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or
such other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties to the Partnership), and (ii) all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business (including expenses allocated to the General Partner by
its Affiliates). The General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Reimbursements pursuant to this
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Section 7.4 shall be in addition to any reimbursement to the General Partner as
a result of indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole
discretion and without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices, or
cause the Partnership to issue Partnership Interests, in connection with,
pursuant to any employee benefit plan, employee program or employee practice
maintained or sponsored by the General Partner or any of its Affiliates, in each
case for the benefit of employees of the General Partner any Group Member or any
Affiliate, or any of them, in respect of services performed, directly or
indirectly, for the benefit of the Partnership Group. Expenses incurred by the
General Partner in connection with any such plans, programs and practices shall
be reimbursed in accordance with Section 7.4(b). Any and all obligations of the
General Partner under any employee benefit plans, employee programs or employee
practices adopted by the General Partner as permitted by this Section 7.4(c)
shall constitute obligations of the General Partner hereunder and shall be
assumed by any successor General Partner approved pursuant to Section 11.1 or
11.2 or the transferee of or successor to all of the General Partner's General
Partner Interest pursuant to Section 4.2.
Section 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is
the General Partner of the Partnership (i) agrees that its sole business will be
to act as the General Partner of the Partnership, the general partner of the
MLP, and a general partner of any other partnership of which the Partnership or
the MLP is, directly or indirectly, a partner and to undertake activities that
are ancillary or related thereto (including being a limited partner in the MLP),
(ii) shall not engage in any business or activity or incur any debts or
liabilities except in connection with or incidental to (A) its performance as
general partner of the Partnership, the MLP or one or more Group Members or as
described in or contemplated by the Registration Statement or (B) the acquiring,
owning or disposing of debt or equity securities in any Group Member and (iii)
except to the extent permitted in the Omnibus Agreement, shall not, and shall
cause its Affiliates not to, engage in any Restricted Business.
(b) The Omnibus Agreement, to which the Partnership is a party, sets
forth certain restrictions on the ability of Plains Resources Inc. to engage in
Restricted Businesses.
(c) Except as specifically restricted by Section 7.5(a) and the
Omnibus Agreement, each Indemnitee (other than the General Partner) shall have
the right to engage in businesses of every type and description and other
activities for profit and to engage in and possess an interest in other business
ventures of any and every type or description, whether in businesses engaged in
or anticipated to be engaged in by the MLP or any Group Member, independently or
with others, including business interests and activities in direct competition
with the business and activities of the MLP or any Group Member, and none of the
same shall constitute a breach of this Agreement or any duty express or implied
by law to the MLP or any Group Member or any Partner or Assignee. Neither the
MLP nor any Group Member, any Limited Partner, nor any other Person shall have
any rights by
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virtue of this Agreement, the MLP Agreement or the partnership relationship
established hereby or thereby in any business ventures of any Indemnitee.
(d) Subject to the terms of Section 7.5(a), Section 7.5(b), Section
7.5(c) and the Omnibus Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any
Indemnitees (other than the General Partner) in accordance with the provisions
of this Section 7.5 is hereby approved by the Partnership and all Partners, (ii)
it shall be deemed not to be a breach of the General Partner's fiduciary duty or
any other obligation of any type whatsoever of the General Partner for the
Indemnitees (other than the General Partner) to engage in such business
interests and activities in preference to or to the exclusion of the Partnership
and (iii) except as set forth in the Omnibus Agreement, the General Partner and
the Indemnities shall have no obligation to present business opportunities to
the Partnership.
(e) The General Partner and any of its Affiliates may acquire Units or
other MLP Securities in addition to those acquired on the Closing Date and,
except as otherwise provided in this Agreement, shall be entitled to exercise
all rights relating to such Units or MLP Securities.
(f) The term "Affiliates" when used in Section 7.5(a) and Section
7.5(e) with respect to the General Partner shall not include any Group Member or
any Subsidiary of the MLP or any Group Member.
(g) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of this
Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Texas or other applicable
law, be owed by the General Partner to the Partnership and its Limited Partners,
or to constitute a waiver or consent by the Limited Partners to any such
restriction, such provisions shall be inapplicable and have no effect in
determining whether the General Partner has complied with its fiduciary duties
in connection with determinations made by it under this Section 7.5.
Section 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on
the General Partner.
(a) The General Partner or its Affiliates may lend to the MLP or any
Group Member, and the MLP or any Group Member may borrow from the General
Partner or any of its Affiliates, funds needed or desired by the MLP or the
Group Member for such periods of time and in such amounts as the General Partner
may determine; provided, however, that in any such case the lending party may
not charge the borrowing party interest at a rate greater than the rate that
would be charged the borrowing party or impose terms less favorable to the
borrowing party than would be charged or imposed on the borrowing party by
unrelated lenders on comparable loans made on an arm's-length basis (without
reference to the lending party's financial abilities or guarantees). The
borrowing party shall reimburse the lending party for any costs (other than any
additional interest costs) incurred by the lending party in connection with the
borrowing of such funds. For purposes
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of this Section 7.6(a) and Section 7.6(b), the term "Group Member" shall include
any Affiliate of a Group Member that is controlled by the Group Member. No Group
Member may lend funds to the General Partner or any of its Affiliates (other
than the MLP, a Subsidiary of the MLP or a Subsidiary of another Group Member).
(b) The Partnership may lend or contribute to any Group Member, and
any Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement
with any of its Affiliates to, render services to a Group Member or to the
General Partner in the discharge of its duties as general partner of the
Partnership. Any services rendered to a Group Member by the General Partner or
any of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, taking into account the
totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).
(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution and
Conveyance Agreement and any other transactions described in or contemplated by
the Registration Statement, (ii) any transaction approved by Special Approval,
(iii) any transaction, the terms of which are no less favorable to the
Partnership than those generally being provided to or available from unrelated
third parties, or (iv) any transaction that, taking into account the totality of
the relationships between the parties involved (including other transactions
that may be particularly favorable or advantageous to the Partnership), is
equitable to the Partnership.
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(f) The General Partner and its Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partner
and its Affiliates, except as may be provided in contracts entered into from
time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
Section 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partner with respect to its obligations
incurred pursuant to the Underwriting Agreement or the Contribution and
Conveyance Agreement (other than obligations incurred by the General Partner on
behalf of the MLP or the Partnership). The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that the
Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, it being agreed that the General Partner shall not be
personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal
fees and expenses) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the
Partnership of any undertaking by or on behalf of the Indemnitee to repay such
amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and
as to actions in any other capacity (including any capacity under the
Underwriting
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Agreement), and shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors, assigns
and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the
General Partner or its Affiliates for the cost of) insurance, on behalf of the
General Partner, its Affiliates and such other Persons as the General Partner
shall determine, against any liability that may be asserted against or expense
that may be incurred by such Person in connection with the Partnership's
activities or such Person's activities on behalf of the Partnership, regardless
of whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Partnership also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the
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Assignees or any other Persons who have acquired interests in the Units or other
Partnership Securities of the MLP, for losses sustained or liabilities incurred
as a result of any act or omission if such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner set forth
in Section 7.1(a), the General Partner may exercise any of the powers granted to
it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents, and the General Partner shall not
be responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Limited Partners, the General Partner and any other Indemnitee acting
in connection with the Partnership's business or affairs shall not be liable to
the Partnership or to any Partner for its good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors, officers
and employees under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or the MLP
Agreement, whenever a potential conflict of interest exists or arises between
the General Partner or any of its Affiliates, on the one hand, and the
Partnership, the MLP, any Partner or any Assignee, on the other, any resolution
or course of action by the General Partner or its Affiliates in respect of such
conflict of interest shall be permitted and deemed approved by all Partners, and
shall not constitute a breach of this Agreement of the MLP Agreement, of any
agreement contemplated herein or therein, or of any duty stated or implied by
law or equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Partnership. The General
Partner shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution. Any
conflict of interest and any resolution of such conflict of interest shall be
conclusively deemed fair and reasonable to the Partnership if such conflict of
interest or resolution is (i) approved by Special Approval (as long as the
material facts known to the General Partner or any of its Affiliates regarding
any proposed transaction were disclosed to the Conflicts Committee at the time
it gave its approval), (ii) on terms no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
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(iii) fair to the Partnership, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership). The General
Partner may also adopt a resolution or course of action that has not received
Special Approval. The General Partner (including the Conflicts Committee in
connection with Special Approval) shall be authorized in connection with its
determination of what is "fair and reasonable" to the Partnership and in
connection with its resolution of any conflict of interest to consider (A) the
relative interests of any party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interest; (B) any
customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Conflicts Committee) determines in its sole
discretion to be relevant, reasonable or appropriate under the circumstances.
Nothing contained in this Agreement, however, is intended to nor shall it be
construed to require the General Partner (including the Conflicts Committee) to
consider the interests of any Person other than the Partnership. In the absence
of bad faith by the General Partner, the resolution, action or terms so made,
taken or provided by the General Partner with respect to such matter shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or a breach of any standard of care or duty imposed herein or therein or, to the
extent permitted by law, under the Texas Act or any other law, rule or
regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion," that
it deems "necessary or appropriate" or "necessary or advisable" or under a grant
of similar authority or latitude, except as otherwise provided herein, the
General Partner or such Affiliate shall be entitled to consider only such
interests and factors as it desires and shall have no duty or obligation to give
any consideration to any interest of, or factors affecting, the Partnership, the
MLP, any Limited Partner or any Assignee, (ii) it may make such decision in its
sole discretion (regardless of whether there is a reference to "sole discretion"
or "discretion") unless another express standard is provided for, or (iii) in
"good faith" or under another express standard, the General Partner or such
Affiliate shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the MLP Agreement, any
other agreement contemplated hereby or under the Texas Act or any other law,
rule or regulation. In addition, any actions taken by the General Partner or
such Affiliate consistent with the standards of "reasonable discretion" set
forth in the definition of Available Cash shall not constitute a breach of any
duty of the General Partner to the Partnership or the Limited Partners. The
General Partner shall have no duty, express or implied, to sell or otherwise
dispose of any asset of the Partnership Group other than in the ordinary course
of business. No borrowing by any Group Member or the approval thereof by the
General Partner shall be deemed to constitute a breach of any duty of the
General Partner to the Partnership or the Limited Partners by reason of the fact
that the purpose or effect of such borrowing is directly or indirectly to (A)
enable distributions to the General Partner or its Affiliates to exceed .001% of
the total amount distributed to all Partners or (B) hasten the expiration of the
Subordination Period or the conversion of any Subordinated Units into Common
Units.
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(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Limited Partner hereby authorizes the General Partner, on
behalf of the Partnership as a partner or member of a Group Member, to approve
of actions by the general partner of such Group Member similar to those actions
permitted to be taken by the General Partner pursuant to this Section 7.9.
Section 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or under
the Texas Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the extent permitted by law, as required to permit the
General Partner to act under this Agreement or any other agreement contemplated
by this Agreement and to make any decision pursuant to the authority prescribed
in this Agreement, so long as such action is reasonably believed by the General
Partner to be in, or not inconsistent with, the best interests of the
Partnership.
Section 7.11 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner and any officer of the General Partner authorized by the General Partner
to act on behalf of and in the name of the Partnership has full power and
authority to encumber, sell or otherwise use in any manner any and all assets of
the Partnership and to enter into any authorized contracts on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
or any such officer as if it were the Partnership's sole
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party in interest, both legally and beneficially. Each Limited Partner hereby
waives any and all defenses or other remedies that may be available against such
Person to contest, negate or disaffirm any action of the General Partner or any
such officer in connection with any such dealing. In no event shall any Person
dealing with the General Partner or any such officer or its representatives be
obligated to ascertain that the terms of the Agreement have been complied with
or to inquire into the necessity or expedience of any act or action of the
General Partner or any such officer or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (a) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (b) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (c)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide to
the Limited Partners any information required to be provided pursuant to Section
3.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including books of account and records of
Partnership proceedings, may be kept on, or be in the form of, computer disks,
hard drives, punch cards, magnetic tape, photographs, micrographics or any other
information storage device; provided, that the books and records so maintained
are convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial reporting
purposes, on an accrual basis in accordance with U.S. GAAP.
Section 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending December
31.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by the Partners for federal and state income
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tax reporting purposes with respect to a taxable year shall be furnished to them
within 90 days of the close of the calendar year in which the Partnership's
taxable year ends. The classification, realization and recognition of income,
gain, losses and deductions and other items shall be on the accrual method of
accounting for federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the
Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the General
Partner's determination that such revocation is in the best interests of the
Limited Partners.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
Section 9.3 Tax Controversies.
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in the Code) and is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with all
examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
Section 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required or elects to withhold
and pay over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld may at
the discretion of the General Partner be treated by the Partnership as a
distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
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ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Partners.
Upon the consummation of the transfers and conveyances described in Section
5.2, the General Partner shall be the sole general partner of the Partnership
and the MLP shall be the sole limited partner of the Partnership.
Section 10.2 Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Limited Partner
Interest shall, however, only have the authority to convey to a purchaser or
other transferee (a) the right to negotiate such Limited Partner Interest to a
purchaser or other transferee and (b) the right to request admission as a
Substituted Limited Partner to such purchaser or other transferee in respect of
the transferred Limited Partner Interests. Each transferee of a Limited Partner
Interest shall be an Assignee and be deemed to have applied to become a
Substituted Limited Partner with respect to the Limited Partner Interests so
transferred to such Person. Such Assignee shall become a Substituted Limited
Partner (x) at such time as the General Partner consents thereto, which consent
may be given or withheld in the General Partner's discretion, and (y) when any
such admission is shown on the books and records of the Partnership. If such
consent is withheld, such transferee shall remain an Assignee. An Assignee shall
have an interest in the Partnership equivalent to that of a Limited Partner with
respect to allocations and distributions, including liquidating distributions,
of the Partnership. With respect to voting rights attributable to Limited
Partner Interests that are held by Assignees, the General Partner shall be
deemed to be the Limited Partner with respect thereto and shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
vote such Limited Partner Interests at the written direction of the Assignee. If
no such written direction is received, such Partnership Interests will not be
voted. An Assignee shall have no other rights of a Limited Partner.
Section 10.3 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, the MLP or a Substituted
Limited Partner) who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including the power of attorney granted
in Section 2.6, and (ii) such other documents or instruments as may be required
in the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner.
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(b) Notwithstanding anything to the contrary in this Section 10.3, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
Section 10.4 Admission of Successor or Transferee General Partner.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or
the transferee of or successor to all of the General Partner's Partnership
Interest pursuant to Section 4.2 who is proposed to be admitted as a successor
General Partner shall, subject to compliance with the terms of Section 11.3, if
applicable, be admitted to the Partnership as the General Partner, effective
immediately prior to the withdrawal or removal of the predecessor or
transferring General Partner pursuant to Section 11.1 or 11.2 or the transfer of
the General Partner Interest pursuant to Section 4.2, provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.2 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Texas Act to
amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the Partnership by
giving written notice to the other Partners;
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(ii) The General Partner transfers all of its rights as General
Partner pursuant to Section 4.2;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner withdraws from, or is removed as the General
Partner of, the MLP;
(v) The General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief
under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
or answer seeking for itself a liquidation, dissolution or similar relief
(but not a reorganization) under any law; (D) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in a proceeding of the type
described in clauses (A)-(C) of this Section 11.1(a)(v); or (E) seeks,
consents to or acquiesces in the appointment of a trustee (but not a debtor
in possession), receiver or liquidator of the General Partner or of all or
any substantial part of its properties;
(vi) A final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner; or
(vii) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the General
Partner, or 90 days expire after the date of notice to the General Partner
of revocation of its charter without a reinstatement of its charter, under
the laws of its state of incorporation; (B) in the event the General
Partner is a partnership or limited liability company, the dissolution and
commencement of winding up of the General Partner; (C) in the event the
General Partner is acting in such capacity by virtue of being a trustee of
a trust, the termination of the trust; (D) in the event the General Partner
is a natural person, his death or adjudication of incompetency; and (E)
otherwise in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv)(with respect to
withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the withdrawing
General Partner shall give notice to the Limited Partners within 30 days after
such occurrence. The Partners hereby agree that only the Events of Withdrawal
described in this Section 11.1 shall result in the withdrawal of the General
Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on December 31, 2008, the General Partner voluntarily withdraws by giving
at least 90 days' advance notice of its intention to withdraw to the Limited
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Partners; provided that prior to the effective date of such withdrawal, the
withdrawal is approved by the Limited Partners and the General Partner delivers
to the Partnership an Opinion of Counsel ("Withdrawal Opinion of Counsel") that
such withdrawal (following the selection of the successor General Partner) would
not result in the loss of the limited liability of any Limited Partner or of the
limited partners of the MLP or cause the Partnership or the MLP to be treated as
an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not previously treated as such);
(ii) at any time after 12:00 midnight, Eastern Standard Time, on December 31,
2008, the General Partner voluntarily withdraws by giving at least 90 days'
advance notice to the Limited Partners, such withdrawal to take effect on the
date specified in such notice; (iii) at any time that the General Partner ceases
to be the General Partner pursuant to Section 11.1(a)(ii), (iii) or (iv). If
the General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i)
hereof or Section 11.1(a)(i) of the MLP Agreement, the Limited Partners may,
prior to the effective date of such withdrawal, elect a successor General
Partner; provided, however, that such successor shall be the same person, if
any, that is elected by the limited partners of the MLP pursuant to Section 11.1
of the MLP Agreement as the successor to the general partner of the MLP. If,
prior to the effective date of the General Partner's withdrawal, a successor is
not selected by the Limited Partners as provided herein or the Partnership does
not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved
in accordance with Section 12.1. Any successor General Partner elected in
accordance with the terms of this Section 11.1 shall be subject to the
provisions of Section 10.3.
Section 11.2 Removal of the General Partner.
The General Partner shall be removed if the General Partner is removed as
the general partner of the MLP pursuant to Section 11.2 of the MLP Agreement.
Such removal shall be effective concurrently with the effectiveness of the
removal of the General Partner as the general partner of the MLP pursuant to the
terms of the MLP Agreement. If a successor general partner for the MLP is
elected in connection with the removal of the General Partner, such successor
general partner for the MLP shall, upon admission pursuant to Article X,
automatically become the successor General Partner of the Partnership. The
admission of any such successor General Partner to the Partnership shall be
subject to the provisions of Section 10.3.
Section 11.3 Interest of Departing Partner.
(a) The Partnership Interest of the Departing Partner departing as a
result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall (unless
it is otherwise required to be converted into Common Units pursuant to Section
11.3(b) of the MLP Agreement) be purchased by the successor to the Departing
Partner for cash in the manner specified in the MLP Agreement. Such purchase
(or conversion into Common Units, as applicable) shall be a condition to the
admission to the Partnership of the successor as the General Partner. Any
successor General Partner shall indemnify the Departing Partner as to all debts
and liabilities of the Partnership arising on or after the effective date of the
withdrawal or removal of the Departing Partner.
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(b) The Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by such Departing
Partner for the benefit of the Partnership.
Section 11.4 Withdrawal of a Limited Partner.
Without the prior written consent of the General Partner, which may be
granted or withheld in its sole discretion, and except as provided in Section
10.1, no Limited Partner shall have the right to withdraw from the Partnership.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected
and an Opinion of Counsel is received as provided in Section 11.1(b) or 11.2 and
such successor is admitted to the Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner
that is approved by all of the Limited Partners;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Texas Act;
(e) the sale of all or substantially all of the assets and properties
of the Partnership Group; or
(f) the dissolution of the MLP.
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Section 12.2 Continuation of the Business of the Partnership After
Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi) of the MLP Agreement, then, to the maximum extent permitted by law, within
180 days thereafter, all of the Limited Partners may elect to reconstitute the
Partnership and continue its business on the same terms and conditions set forth
in this Agreement by forming a new limited partnership on terms identical to
those set forth in this Agreement and having as a general partner a Person
approved by a majority in interest of the Limited Partners. In addition, upon
dissolution of the Partnership pursuant to Section 12.1(f), if the MLP is
reconstituted pursuant to Section 12.2 of the MLP Agreement, the reconstituted
MLP may, within 180 days after such event of dissolution, acting alone,
regardless of whether there are any other Limited Partners, elect to
reconstitute the Partnership in accordance with the immediately preceding
sentence. Upon any such election by the Limited Partners or the MLP, as the
case may be, all Partners shall be bound thereby and shall be deemed to have
approved same. Unless such an election is made within the applicable time
period as set forth above, the Partnership shall conduct only activities
necessary to wind up its affairs. If such an election is so made, then:
(a) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 unless earlier dissolved in accordance with this
Article XII;
(b) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be purchased by
the successor General Partner or converted into Common Units as provided in the
MLP Agreement; and
(c) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary, to
file, a new partnership agreement and certificate of limited partnership, and
the successor General Partner may for this purpose exercise the power of
attorney granted the General Partner pursuant to Section 2.6; provided, that the
right to approve a successor General Partner and to reconstitute and to continue
the business of the Partnership shall not exist and may not be exercised unless
the Partnership has received an Opinion of Counsel that (x) the exercise of the
right would not result in the loss of limited liability of the Limited Partners
or any limited partner of the MLP and (y) neither the Partnership, the
reconstituted limited partnership, the MLP nor any Group Member would be treated
as an association taxable as a corporation or otherwise be taxable as an entity
for federal income tax purposes upon the exercise of such right to continue.
Section 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select
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one or more Persons to act as Liquidator. The Liquidator (if other than the
General Partner) shall be entitled to receive such compensation for its services
as may be approved by a majority of the Limited Partners. The Liquidator (if
other than the General Partner) shall agree not to resign at any time without 15
days' prior notice and may be removed at any time, with or without cause, by
notice of removal approved by a majority in interest of the Limited Partners.
Upon dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by at least a majority in interest of the Limited Partners. The right to approve
a successor or substitute Liquidator in the manner provided herein shall be
deemed to refer also to any such successor or substitute Liquidator approved in
the manner herein provided. Except as expressly provided in this Article XII,
the Liquidator approved in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the parties hereto,
all of the powers conferred upon the General Partner under the terms of this
Agreement (but subject to all of the applicable limitations, contractual and
otherwise, upon the exercise of such powers, other than the limitation on sale
set forth in Section 7.3(b)) to the extent necessary or desirable in the good
faith judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidator to complete the winding up
and liquidation of the Partnership as provided for herein.
Section 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 8.05 of the Texas Act and the following:
(a) Disposition of Assets. The assets may be disposed of by public
or private sale or by distribution in kind to one or more Partners on such terms
as the Liquidator and such Partner or Partners may agree. If any property is
distributed in kind, the Partner receiving the property shall be deemed for
purposes of Section 12.4(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Partners. The Liquidator may, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale or distribution of all or some of
the Partnership's assets would be impractical or would cause undue loss to the
Partners. The Liquidator may, in its absolute discretion, distribute the
Partnership's assets, in whole or in part, in kind if it determines that a sale
would be impractical or would cause undue loss to the Partners.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution rights
under Article VI. With respect to any liability that is contingent, conditional
or unmatured or is otherwise not yet due and payable, the Liquidator shall
either settle such claim for such amount as it thinks appropriate or establish a
reserve of cash or other assets to provide for its payment. When paid, any
unused portion of the reserve shall be distributed as additional liquidation
proceeds.
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(c) Liquidation Distributions. All property and all cash in excess
of that required to discharge liabilities as provided in Section 12.4(b) shall
be distributed to the Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
Section 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership,
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Texas, shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6 Return of Contributions.
The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners, or any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
Section 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
Section 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
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ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
Section 13.1 Amendment to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure that no
Group Member will be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the General Partner, (i) does
not adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal
or state agency or judicial authority or contained in any federal or state
statute (including the Texas Act) or (B) facilitate the trading of limited
partner interests of the MLP (including the division of any class or classes of
outstanding limited partner interests of the MLP into different classes to
facilitate uniformity of tax consequences within such classes of limited partner
interests of the MLP) or comply with any rule, regulation, guideline or
requirement of any National Securities Exchange on which such limited partner
interests are or will be listed for trading, compliance with any of which the
General Partner determines in its discretion to be in the best interests of the
MLP and the limited partners of the MLP, (iii) is required to effect the intent
expressed in the Registration Statement or the intent of the provisions of this
Agreement or is otherwise contemplated by this Agreement or (iv) is required to
conform the provisions of this Agreement with the provisions of the MLP
Agreement as the provisions of the MLP Agreement may be amended, supplemented or
restated from time to time;
(e) a change in the fiscal year or taxable year of the Partnership and
any changes that, in the discretion of the General Partner, are necessary or
advisable as a result of a change in the fiscal year or taxable year of the
Partnership including, if the General Partner shall so determine, a change in
the definition of "Quarter" and the dates on which distributions are to be made
by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its directors, officers,
trustees or agents from in any manner
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being subjected to the provisions of the Investment Company Act of 1940, as
amended, the Investment Advisers Act of 1940, as amended, or "plan asset"
regulations adopted under the Employee Retirement Income Security Act of 1974,
as amended, regardless of whether such are substantially similar to plan asset
regulations currently applied or proposed by the United States Department of
Labor;
(g) any amendment expressly permitted in this Agreement to be made by
the General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately the
formation by the Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability company or other
entity, in connection with the conduct by the Partnership of activities
permitted by the terms of Section 2.4;
(j) a merger or conveyance pursuant to Section 14.3(d); or
(k) any other amendments substantially similar to the foregoing.
Section 13.2 Amendment Procedures.
Except with respect to amendments of the type described in Section 13.1,
all amendments to this Agreement shall be made in accordance with the following
requirements: Amendments to this Agreement may be proposed only by or with the
consent of the General Partner which consent may be given or withheld in its
sole discretion. A proposed amendment shall be effective upon its approval by
the Limited Partner.
ARTICLE XIV
MERGER
Section 14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Texas or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.
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Section 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner shall
determine, in the exercise of its discretion, to consent to the merger or
consolidation, the General Partner shall approve the Merger Agreement, which
shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partner interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are not to be exchanged
or converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partner.
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Section 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon
its approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of the Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall
be approved upon receiving the affirmative vote or consent of the Limited
Partners.
(c) Except as provided in Section 14.3(d), after such approval by vote
or consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation may
be abandoned pursuant to provisions therefor, if any, set forth in the Merger
Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in
this Agreement, the General Partner is permitted, in its discretion, without
Limited Partner approval, to merge the Partnership or any Group Member into, or
convey all of the Partnership's assets to, another limited liability entity
which shall be newly formed and shall have no assets, liabilities or operations
at the time of such Merger other than those it receives from the Partnership or
other Group Member if (i) the General Partner has received an Opinion of Counsel
that the merger or conveyance, as the case may be, would not result in the loss
of the limited liability of any Limited Partner or any limited partner in the
MLP or cause the Partnership or the MLP to be treated as an association taxable
as a corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously treated as such), (ii) the sole purpose
of such merger or conveyance is to effect a mere change in the legal form of the
Partnership into another limited liability entity and (iii) the governing
instruments of the new entity provide the Limited Partners and the General
Partner with the same rights and obligations as are herein contained.
Section 14.4 Certificate of Merger.
Upon the required approval by the General Partner and the Limited Partners
of a Merger Agreement, a certificate of merger shall be executed and filed with
the Secretary of State of the State of Texas in conformity with the requirements
of the Texas Act.
Section 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any
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of those business entities and all other things and causes of action
belonging to each of those business entities, shall be vested in the
Surviving Business Entity and after the merger or consolidation shall be
the property of the Surviving Business Entity to the extent they were of
each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in
any of those constituent business entities shall not revert and is not in
any way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall
not be deemed to result in a transfer or assignment of assets or liabilities
from one entity to another.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner at the address described below. Any notice to the
Partnership shall be deemed given if received by the General Partner at the
principal office of the Partnership designated pursuant to Section 2.3. The
General Partner may rely and shall be protected in relying on any notice or
other document from a Partner, Assignee or other Person if believed by it to be
genuine.
Section 15.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
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Section 15.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
Section 15.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
Section 15.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
Section 15.7 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto, independently of the signature of any other party.
Section 15.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Texas, without regard to the principles of conflicts of
law.
Section 15.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
PLAINS ALL AMERICAN INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Its: Senior Vice President, General Counsel and
Secretary
LIMITED PARTNER:
PLAINS MARKETING, L.P.
By: Plains All American Inc.
Its: General Partner
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Its: Senior Vice President, General Counsel
and Secretary
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EXHIBIT 3.5
CERTIFICATE OF LIMITED PARTNERSHIP
OF
PLAINS MARKETING, L.P.
The undersigned represents that it has formed a limited partnership
pursuant to the Delaware Revised Uniform Limited Partnership Act (the "Act") and
that the undersigned has executed this Certificate in compliance with the
requirements of the Act. The undersigned further states:
1. The name of the limited partnership is PLAINS MARKETING, L.P. (the
"Partnership").
2. The address of the registered office of the Partnership in the State of
Delaware and the name and address of the registered agent of the
Partnership required to be maintained by Section 17-104 of the Act at
such address are as follows:
Name and Address
of Registered Agent Address of Registered Office
------------------------------- ----------------------------
Corporation Service Company 1013 Centre Road
1013 Centre Road Wilmington, DE 19805-1297
Wilmington, Delaware 19805-1297
3. The name and business address of the General Partner is as follows:
General Partner Address
------------------------ ---------------------
Plains All American Inc. 500 Dallas, Suite 700
Houston, Texas 77002
WHEREFORE, the undersigned has executed this Certificate as of the 10th day
of November, 1998.
PLAINS ALL AMERICAN INC.
as General Partner
By: /s/ Michael R. Patterson
--------------------------------
Name: Michael R. Patterson
Title: Vice President
<PAGE>
EXHIBIT 3.6
ARTICLES OF CONVERSION
OF
ALL AMERICAN PIPELINE COMPANY
Pursuant to the provisions of Articles 5.17 through 5.20 of the Texas
Business Corporation Act, All American Pipeline Company, a Texas corporation
(the "Converting Entity"), does hereby adopt the following Articles of
Conversion for the purpose of converting the Converting Entity into All American
Pipeline, L.P., a Texas limited partnership (the "Converted Entity").
1. The name, address, form of organization and date of incorporation
of the Converting Entity and the state under the laws of which it is organized
are:
Name of Entity Form of Date of
and Address Organization State Incorporation
---------------- ------------ ----- -------------
All American Pipeline Company Corporation Texas 6/22/83
500 Dallas, Suite 700
Houston, Texas 77002
2. The name, address, type of entity of the Converted Entity and the
state under the laws of which it is organized are:
Name of Entity Form of
and Address Organization State
---------------- ------------------- -----
All American Pipeline, L.P. Limited Partnership Texas
500 Dallas, Suite 700
Houston, Texas 77002
3. The Converted Entity is being created pursuant to the Plan of
Conversion of The Converting Entity as set forth in the Plan attached hereto as
Exhibit "A" (the "Plan"). The Plan was approved, adopted, certified, executed
and acknowledged by the Converting Entity in the manner prescribed by the Texas
Business Corporation Act.
4. The executed Plan is on file at the principal place of business
of the Converting Entity, located at 500 Dallas, Suite 700, Houston, Texas
77002. Additionally, the executed Plan will be on file, from and after the date
of conversion, at the principal place of business of the Converted Entity,
located at 500 Dallas, Suite 700, Houston, Texas 77002.
5. A copy of the Plan will be furnished by the Converting Entity
(prior to conversion) or the Converted Entity (after the conversion), upon
written request and without cost, to any shareholder of the Converting Entity or
any partner of the Converted Entity.
<PAGE>
6. The number of shares outstanding, and the number of shares voted
for and against the Conversion are as follows:
Votes
Votes For Against
Outstanding Shares Conversion Conversion
- ------------------ ----------- -------------
1,100 1,100 -0-
7. In lieu of the Comptroller's certificate, the Converted Entity
will be responsible for the payment of all fees and franchise taxes.
8. The conversion will become effective on the date and time of the
filing of these Articles of Conversion in accordance with the provisions of the
Texas Business Corporation Act.
Dated: November 10, 1998
All American Pipeline Company
By: /s/ Michael R. Patterson
----------------------------
Name: Michael R. Patterson
Title: Vice President
<PAGE>
EXHIBIT "A"
-----------
PLAN OF CONVERSION
OF
ALL AMERICAN PIPELINE COMPANY
1. The following are the domestic converting and converted entities that
are a party to the conversion:
A. All American Pipeline Company, a Texas corporation (the "Converting
Entity"); and
B. All American Pipeline, L.P., a Texas limited partnership (the
"Converted Entity").
2. The Converting Entity shall continue in its existence in the
organizational form of the Converted Entity, which shall be a Texas limited
partnership organized under the Texas Revised Limited Partnership Act.
3. Each share of the Converting Entity shall be canceled and extinguished
and shall be convertible into and become a right to receive from the Converted
Entity general and limited partner interests in the Converted Entity. Each such
general and limited partner interest shall have the same value as each share of
the Converting Entity.
4. Attached hereto as Annex "A" is the Certificate of Limited Partnership
of the Converted Entity.
<PAGE>
ANNEX A
<PAGE>
CERTIFICATE OF LIMITED PARTNERSHIP
OF
ALL AMERICAN PIPELINE, L.P.
1. The name of the limited partnership is All American Pipeline, L.P.
2. The address of the registered office and the name and address of the
registered agent for service of process is as follows:
Michael R. Patterson
500 Dallas, Suite 700
Houston, Texas 77002
3. The address of the principal office in the United States where records
of the limited partnership are to be kept or made available is as
follows:
500 Dallas, Suite 700
Houston, Texas 77002
4. The name, mailing address and the street address of the business of
the sole general partner is as follows:
Plains All American Inc.
500 Dallas, Suite 700
Houston, Texas 77002
5. The limited partnership is to be formed as of the time of the filing
of this Certificate of Limited Partnership with the Secretary of State
of Texas.
6. This limited partnership is being organized pursuant to a plan of
conversion. The name, address, prior form of organization, date of
incorporation and the jurisdiction of incorporation of the converting
entity are as follows:
Name Prior Form of Date of Jurisdiction of
and Address Organization Incorporation Incorporation
----------- ------------- ------------- ---------------
All American Corporation 6/22/83 Texas
Pipeline Company
500 Dallas, Suite 700
Houston, Texas 77002
<PAGE>
EXHIBIT 10.1
================================================================================
CREDIT AGREEMENT
_______________________________________________________
ALL AMERICAN PIPELINE, L.P.,
as Borrower,
PLAINS MARKETING, L.P.
as Guarantor,
and
PLAINS ALL AMERICAN PIPELINE, L.P.,
as Guarantor,
ING (U.S.) CAPITAL CORPORATION,
as Administrative Agent,
ING BARING FURMAN SELZ LLC,
as Syndication Agent,
BANCBOSTON ROBERTSON STEPHENS INC.,
as Documentation Agent,
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
_______________________________________________________
$50,000,000 Revolving Credit Facility
$175,000,000 Term Loan
November 17, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
CREDIT AGREEMENT............................................................. 1
ARTICLE I - Definitions and References....................................... 1
Section 1.1. Defined Terms............................................. 1
Section 1.2. Exhibits and Schedules; Additional Definitions............ 19
Section 1.3. Amendment of Defined Instruments.......................... 19
Section 1.4. References and Titles..................................... 19
Section 1.5. Calculations and Determinations........................... 20
ARTICLE II - The Loans....................................................... 20
Section 2.1. Commitments to Lend; Notes................................ 20
Section 2.2. Requests for Revolver Loans............................... 21
Section 2.3. Continuations and Conversions of Existing Loans........... 22
Section 2.4. Use of Proceeds........................................... 23
Section 2.5. Interest Rates and Fees................................... 24
Section 2.6. Optional Prepayments...................................... 25
Section 2.7. Mandatory Prepayments..................................... 25
Section 2.8. Letters of Credit......................................... 26
Section 2.9. Requesting Letters of Credit.............................. 27
Section 2.10. Reimbursement and Participations.......................... 27
Section 2.11. Letter of Credit Fees..................................... 28
Section 2.12. No Duty to Inquire........................................ 29
Section 2.13. LC Collateral............................................. 30
ARTICLE III - Payments to Lenders............................................ 31
Section 3.1. General Procedures........................................ 31
Section 3.2. Capital Reimbursement..................................... 32
Section 3.3. Increased Cost of Eurodollar Loans or Letters
of Credit................................................. 32
Section 3.4. Notice; Change of Applicable Lending Office............... 33
Section 3.5. Availability.............................................. 33
Section 3.6. Funding Losses............................................ 34
Section 3.7. Reimbursable Taxes........................................ 34
ARTICLE IV - Conditions Precedent to Lending................................. 37
Section 4.1. Documents to be Delivered................................. 37
Section 4.2. Additional Conditions to Initial Credit................... 38
Section 4.3. Additional Conditions Precedent........................... 39
ARTICLE V - Representations and Warranties................................... 40
Section 5.1. No Default................................................ 40
Section 5.2. Organization and Good Standing............................ 40
Section 5.3. Authorization............................................. 41
Section 5.4. No Conflicts or Consents.................................. 41
i
<PAGE>
Section 5.5. Enforceable Obligations................................... 41
Section 5.6. Initial Financial Statements.............................. 41
Section 5.7. Other Obligations and Restrictions........................ 41
Section 5.8. Full Disclosure........................................... 42
Section 5.9. Litigation................................................ 42
Section 5.10. Labor Disputes and Acts of God............................ 42
Section 5.11. ERISA Plans and Liabilities............................... 42
Section 5.12. Compliance with Laws...................................... 42
Section 5.13. Environmental Laws........................................ 43
Section 5.14. Names and Places of Business.............................. 44
Section 5.15. Borrower's Subsidiaries................................... 45
Section 5.16. Title to Properties; Licenses............................. 45
Section 5.17. Government Regulation..................................... 45
Section 5.18. Insider................................................... 45
Section 5.19. Solvency.................................................. 45
Section 5.20. Credit Arrangements....................................... 45
Section 5.21. Year 2000................................................. 46
ARTICLE VI - Affirmative Covenants........................................... 46
Section 6.1. Payment and Performance................................... 46
Section 6.2. Books, Financial Statements and Reports................... 46
Section 6.3. Other Information and Inspections......................... 48
Section 6.4. Notice of Material Events and Change of Address........... 49
Section 6.5. Maintenance of Properties................................. 50
Section 6.6. Maintenance of Existence and Qualifications............... 50
Section 6.7. Payment of Trade Liabilities, Taxes, etc.................. 50
Section 6.8. Insurance................................................. 50
Section 6.9. Performance on Borrower's Behalf.......................... 51
Section 6.10. Interest.................................................. 51
Section 6.11. Compliance with Agreements and Law........................ 51
Section 6.12. Environmental Matters; Environmental Reviews.............. 51
Section 6.13. Evidence of Compliance.................................... 52
Section 6.14. Agreement to Deliver Security Documents................... 52
Section 6.15. Perfection and Protection of Security Interests
and Liens................................................. 52
Section 6.16. Bank Accounts; Offset..................................... 52
Section 6.17. Guaranties of Subsidiaries................................ 53
Section 6.18. Interest Rate Hedging Agreements.......................... 53
Section 6.19. Compliance with Agreements................................ 53
Section 6.20. Year 2000................................................. 53
Section 6.21. Rents..................................................... 54
Section 6.22. Working Capital Borrowings................................ 54
ARTICLE VII - Negative Covenants............................................. 54
Section 7.1. Indebtedness.............................................. 54
Section 7.2. Limitation on Liens....................................... 55
Section 7.3. Hedging Contracts......................................... 56
ii
<PAGE>
Section 7.4. Limitation on Mergers, Issuances of Securities............ 57
Section 7.5. Limitation on Sales of Property........................... 58
Section 7.6. Limitation on Dividends and Redemptions................... 58
Section 7.7. Limitation on Investments and New Businesses.............. 59
Section 7.8. Limitation on Credit Extensions........................... 59
Section 7.9. Transactions with Affiliates.............................. 59
Section 7.10. Prohibited Contracts...................................... 59
Section 7.11. Current Ratio............................................. 60
Section 7.12. Debt Coverage Ratio....................................... 60
Section 7.13. Interest Coverage Ratio................................... 60
Section 7.14. Fixed Charge Coverage Ratio............................... 60
Section 7.15. Debt to Capital Ratio..................................... 60
ARTICLE VIII - Events of Default and Remedies................................ 60
Section 8.1. Events of Default......................................... 60
Section 8.2. Remedies.................................................. 63
ARTICLE IX - Administrative Agent............................................ 63
Section 9.1. Appointment and Authority................................. 63
Section 9.2. Exculpation, Administrative Agent's Reliance, Etc......... 64
Section 9.3. Credit Decisions.......................................... 64
Section 9.4. INDEMNIFICATION........................................... 65
Section 9.5. Rights as Lender.......................................... 65
Section 9.6. Sharing of Set-Offs and Other Payments.................... 66
Section 9.7. Investments............................................... 66
Section 9.8. Benefit of Article IX..................................... 66
Section 9.9. Resignation............................................... 67
Section 9.10. Other Agents.............................................. 67
ARTICLE X - Miscellaneous.................................................... 67
Section 10.1. Waivers and Amendments; Acknowledgments................... 67
Section 10.2. Survival of Agreements; Cumulative Nature................. 69
Section 10.3. Notices................................................... 69
Section 10.4. Payment of Expenses; Indemnity............................ 70
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments............................................... 71
Section 10.6. Confidentiality........................................... 74
Section 10.7. GOVERNING LAW; SUBMISSION TO PROCESS...................... 74
Section 10.8. Limitation on Interest.................................... 75
Section 10.9. Termination; Limited Survival............................. 75
Section 10.10. Severability.............................................. 76
Section 10.11. Counterparts.............................................. 76
Section 10.12. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC............... 76
iii
<PAGE>
Schedules and Exhibits:
Schedule 1 - Lender Schedule
Schedule 2 - Disclosure Schedule
Schedule 3 - Security Schedule
Schedule 4 - Insurance Schedule
Schedule 5 - Pro Forma EBITDA
Schedule 6 - Offering Documents
Exhibit A-1 - Revolver Note
Exhibit A-2 - Term Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E-1 - Opinion of In-House Counsel for Restricted Persons
Exhibit E-2 - Opinion of Counsel for Restricted Persons
Exhibit E-3 - Opinion of Counsel for Restricted Persons
Exhibit F - Environmental Compliance Certificate
Exhibit G - Letter of Credit Application and Agreement
Exhibit H - Assignment and Acceptance Agreement
Exhibit I - Intercreditor Agreement
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of November 17, 1998, by and among ALL
AMERICAN PIPELINE, L.P., a Texas limited partnership ("All American" or
"Borrower"), PLAINS MARKETING, L.P., a Delaware limited partnership
("Marketing"), PLAINS ALL AMERICAN PIPELINE, L.P. ("Plains MLP"), a Delaware
limited partnership, ING (U.S.) CAPITAL CORPORATION, as administrative agent (in
such capacity, "Administrative Agent"), ING BARING FURMAN SELZ LLC, as
syndication agent (in such capacity, "Syndication Agent") and BANCBOSTON
ROBERTSON STEPHENS INC., as documentation agent (in such capacity,
"Documentation Agent") and the Lenders referred to below. In consideration of
the mutual covenants and agreements contained herein the parties hereto agree as
follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given to such term in this Section 1.1 or in
the sections and subsections referred to below:
"Adjusted Eurodollar Rate" means, with respect to each particular
Eurodollar Loan and the related Interest Period, the rate per annum (rounded
upwards, if necessary, to the nearest 1/1000 of 1% determined by Administrative
Agent to be equal to the quotient obtained by dividing (i) the rate reported, on
the date two Business Days prior to the first day of such Interest Period, on
Dow Jones Market Service (formerly Telerate Access Service) Page 3750 (British
Bankers Association Settlement Rate) as the London Interbank Offered Rate for
dollar deposits having a term comparable to such Interest Period and in an
amount of $1,000,000 or more (or, if such Page shall cease to be publicly
available or if the information contained on such Page, in Administrative
Agent's sole judgment, shall cease to accurately reflect such London Interbank
Offered Rate, as reported by any publicly available source of similar market
data selected by Administrative Agent that, in Administrative Agent's sole
judgment, accurately reflects such London Interbank Offered Rate) by (ii) 1
minus the Reserve Requirement for such Eurodollar Loan for such Interest Period.
The Adjusted Eurodollar Rate for any Eurodollar Loan shall change whenever the
Reserve Requirement changes.
"Administrative Agent" means ING (U.S.) Capital Corporation, as
Administrative Agent hereunder, and its successors in such capacity.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 5% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
1
<PAGE>
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Affiliate Agreements" means the Crude Oil Marketing Agreement, the Omnibus
Agreement, and the Contribution Agreement.
"Agreement" means this Credit Agreement.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of Base Rate Loans and such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans.
"Applicable Leverage Level" means the level set forth below that
corresponds to the ratio of (i) Consolidated Funded Indebtedness of Plains MLP
and its Subsidiaries to (ii) the Consolidated EBITDA for the applicable period
of four Fiscal Quarters (the "Leverage Ratio"):
Applicable
Leverage Level Leverage Ratio
====================================================
Level I greater than or equal to 4.0
to 1.0
----------------------------------------------------
Level II greater than or equal to 3.0
to 1.0 but less than 4.0 to 1.0
----------------------------------------------------
Level III greater than or equal to 2.0
to 1.0 but less than 3.0 to 1.0
----------------------------------------------------
Level IV less than 2.0 to 1.0
====================================================
The Leverage Ratio will be determined quarterly by Administrative Agent within
two (2) Business Days after Administrative Agent's receipt of Plains MLP's
Consolidated financial statements for the immediate preceding Fiscal Quarter
based upon: (i) Consolidated Funded Indebtedness as of the end of such Fiscal
Quarter, and (ii) the Consolidated EBITDA for the four Fiscal Quarters ending
with such Fiscal Quarter. The Applicable Leverage Level shall become effective
upon such determination of the Leverage Ratio by Administrative Agent and shall
remain effective until the next such determination by Administrative Agent of
the Leverage Ratio. From the date hereof until the date the Administrative
Agent has determined the Leverage Ratio based on the December 31, 1998 Fiscal
Quarter, the Applicable Leverage Level shall be Level III.
"Applicable Rating Level" means, for any day, the level set forth below
that corresponds to the higher of the ratings publicly announced by Moody's or
S&P, as applicable on that day, to the Term Loans; provided that if ratings
announced by Moody's and S&P differ by more than two (2) levels on such day,
then the Applicable Rating Level shall be based upon the level which is one
level lower than the higher.
2
<PAGE>
=================================
Applicable
Rating Level Moody's S&P
---------------------------------
Level A *Baa3 *BBB-
---------------------------------
Level B **Baa3 **BBB-
=================================
"*" means greater than or equal to and "**" means less than. If neither Moody's
or S&P shall have in effect a rating for the Term Loans, then the Applicable
Rating Level shall be deemed to be Level B. If the rating system of either
rating agency shall change, or if a rating agency shall cease to be in the
business of rating corporate debt obligations, Plains MLP and the Revolver
Lenders shall negotiate in good faith to amend this definition to reflect such
changed rating system or the unavailability of ratings from such rating agency,
but until such an agreement shall be reached, the Applicable Rating Level shall
be based only upon the rating by the remaining rating agency.
"Available Cash" has the meaning given such term in the Partnership
Agreement.
"Base Rate" means, for any day, the higher of (a) the Reference Rate and
(b) the Federal Funds Rate plus one-half percent (0.5%) per annum. For purposes
of this definition, "Reference Rate" means the arithmetic average of the rates
of interest publicly announced by The Chase Manhattan Bank, Citibank, N.A. and
Morgan Guaranty Trust Company of New York (or their respective successors) as
their respective prime commercial lending rates (or, as to any such bank that
does not announce such a rate, such bank's 'base' or other rate determined by
Administrative Agent to be the equivalent rate announced by such bank), except
that, if any such bank shall, for any period, cease to announce publicly its
prime commercial lending (or equivalent) rate, Administrative Agent shall,
during such period, determine the "Base Rate" based upon the prime commercial
lending (or equivalent) rates announced publicly by the other such banks.
"Base Rate Loan" means a Loan which does not bear interest at the Adjusted
Eurodollar Rate.
"Borrower" means All American Pipeline, L.P., a Texas limited partnership.
"Borrowing" means a borrowing of new Revolver Loans of a single Type
pursuant to Section 2.2 or a Continuation or Conversion of all or a portion of
an existing Loan (whether alone or as a combination with a new Loan) into a
single Type (and, in the case of Eurodollar Loans, with the same Interest
Period) pursuant to Section 2.3.
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in New York, New York.
Any Business Day in any way relating to Eurodollar Loans (such as the day on
which an Interest Period begins or ends) must also be a day on which, in the
judgment of Administrative Agent, significant transactions in dollars are
carried out in the London interbank eurocurrency market.
3
<PAGE>
"Capital Lease" means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
"Cash and Carry Purchases" means purchases of crude oil for physical
storage at a Plains Terminal or in transit in pipelines Currently Approved by
Majority Lenders which constitutes Hedged Eligible Inventory, as such terms are
defined in the Marketing Credit Agreement.
"Cash Equivalents" means Investments in:
(a) marketable obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America or
an instrumentality or agency thereof and entitled to the full faith and credit
of the United States of America;
(b) demand deposits and time deposits (including certificates of deposit)
maturing within 12 months from the date of deposit thereof, (i) with any office
of any Lender or (ii) with a domestic office of any national or state bank or
trust company which is organized under the Laws of the United States of America
or any state therein, which has capital, surplus and undivided profits of at
least $500,000,000, and whose long term certificates of deposit are rated at
least Aa3 by Moody's or AA- by S&P;
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subsection (a) above entered
into with (i) any Lender or (ii) any other commercial bank meeting the
specifications of subsection (b) above;
(d) open market commercial paper, maturing within 270 days after
acquisition thereof, which are rated at least P-1 by Moody's or A-1 by S&P; and
(e) money market or other mutual funds substantially all of whose assets
comprise securities of the types described in subsections (a) through (d) above.
"Change of Control" means the occurrence of any of the following events:
(i) an event or series of events by which any Person or other entity or group of
Persons or other entities acting in concert as a partnership or other group (a
"Group of Persons") shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases, merger, consolidation or
otherwise, have become the beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of (A) 50% or more of the
combined voting power of the then outstanding voting stock of Resources, in the
case of any Person or Group of Persons constituting or controlled by Affiliates
of Kayne Anderson Investment Management, Inc., or (B) 40% or more of such
combined voting power in the case of any other Person or Group of Persons, (ii)
during any period of two consecutive years (A) the members of the board of
directors of Resources (the "Board") as of January 1, 1998, (B) any director
elected thereafter in any annual meeting of the stockholders of Resources upon
the recommendation of the Board, and
4
<PAGE>
(C) any other member of the Board who will be recommended or elected to succeed
those Persons described in subclauses (A) and (B) of this clause (ii) by a
majority of such Persons who are then members of the Board, cease for any reason
to constitute collectively a majority of the Board then in office, (iii) the
direct or indirect sale, lease, exchange or other transfer of all or
substantially all of the Consolidated assets of Resources and its Subsidiaries,
to any Person or Group of Persons, or (iv) Resources, either directly or through
a Wholly Owned Subsidiary of Resources, shall cease to be the legal and
beneficial owner (as defined above) of more than 50% of the voting power of the
outstanding voting stock of General Partner, or General Partner shall cease to
be the sole legal and beneficial owner (as defined above) of all of the general
partner interests (including all securities which are convertible into general
partner interests), of Plains MLP, All American, or Borrower, (v) any Person or
Group of Persons other than Resources or any Subsidiary of Resources shall be
the beneficial owner (as defined above) of 50% or more of the combined voting
power of the then total partnership interests in Plains MLP, or (vi) Resources
and its Wholly Owned Subsidiaries taken as a whole shall hold legal and
beneficial ownership of issued and outstanding partnership interests of Plains
MLP representing less than 5% of the total outstanding partnership interests of
Plains MLP.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with all rules and regulations promulgated with respect thereto.
"Collateral" means all property of any kind which is subject to a Lien in
favor of Lenders (or in favor of Administrative Agent for the benefit of
Lenders) or which, under the terms of any Security Document, is purported to be
subject to such a Lien, in each case granted or created to secure all or part of
the Obligations.
"Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated EBITDA" means, for any four-Fiscal Quarter period, the sum of
(1) the Consolidated Net Income of Plains MLP and its Subsidiaries during such
period, plus (2) all interest expense which was deducted in determining such
Consolidated Net Income for such period, plus (3) all income taxes (including
any franchise taxes to the extent based upon net income) which were deducted in
determining such Consolidated Net Income, plus (4) all depreciation,
amortization (including amortization of good will and debt issue costs) and
other non-cash charges (including any provision for the reduction in the
carrying value of assets recorded in accordance with GAAP) which were deducted
in determining such Consolidated Net Income, minus (5) all non-cash items of
income which were included in determining such Consolidated Net Income. For the
Fiscal Quarters preceding the date hereof, Consolidated EBITDA shall be mean the
pro forma Consolidated EBITDA reflected on Schedule 5 for such Fiscal Quarter.
"Consolidated Funded Indebtedness" means as of any date, the sum of the
following (without duplication): (i) all Indebtedness which is classified as
"long-term indebtedness" on a
5
<PAGE>
consolidated balance sheet of Plains MLP and its Consolidated Subsidiaries
prepared as of such date in accordance with GAAP and any current maturities or
other principal amount in respect of such Indebtedness due within one year but
which was classified as "long-term indebtedness" at the creation thereof, (ii)
indebtedness for borrowed money of Plains MLP and its Consolidated Subsidiaries
outstanding under a revolving credit or similar agreement providing for
borrowings (and renewals and extensions thereof) over a period of more than one
year, notwithstanding the fact that any such borrowing is made within one year
of the expiration of such agreement, and (iii) Indebtedness in respect of
Capital Leases of Plains MLP and its Consolidated Subsidiaries; provided,
however, Consolidated Funded Indebtedness shall not include Indebtedness in
respect of letters of credit or in respect of Cash and Carry Purchases.
"Consolidated Net Income" means, for any period, Plains MLP's and its
Subsidiaries' gross revenues for such period, including any cash dividends or
distributions actually received from any other Person during such period, minus
Plains MLP's and its Subsidiaries' expenses and other proper charges against
income (including taxes on income, to the extent imposed), determined on a
Consolidated basis after eliminating earnings or losses attributable to
outstanding minority interests and excluding the net earnings of any Person
other than a Subsidiary in which Plains MLP or any of its Subsidiaries has an
ownership interest. Consolidated Net Income shall not include any gain or loss
from the sale of assets or any extraordinary gains or losses.
"Consolidated Net Worth" means the remainder of all Consolidated assets, as
determined in accordance with GAAP, of Plains MLP and its Subsidiaries minus the
sum of (a) Plains MLP's Consolidated liabilities, as determined in accordance
with GAAP, and (b) all outstanding Minority Interests. The effect of any
increase or decrease in net worth in any period as a result of any unrealized
gains or losses from a mark to market of any Hedging Contracts not reflected in
the determination of net income but reflected in the determination of
comprehensive income shall be excluded in determining Consolidated Net Worth.
"Minority Interests" means the book value of any equity interests in any of
Plains MLP's Subsidiaries (exclusive of the general partner interests held by
the General Partner in Marketing, All American or any other Restricted Person of
up to two percent (2%) of the aggregate ownership interest in any such Person)
which equity interests are owned by a Person other than Plains MLP or a Wholly
Owned Subsidiary of Plains MLP.
"Continuation/Conversion Notice" means a written or telephonic request, or
a written confirmation, made by Borrower which meets the requirements of Section
2.3.
"Continue", "Continuation", and "Continued" shall refer to the continuation
pursuant to Section 2.3 hereof of a Eurodollar Loan as a Eurodollar Loan from
one Interest Period to the next Interest Period.
"Contribution Agreement" means that certain Contribution, Conveyance and
Assumption Agreement between Resources, Plains MLP, Marketing and certain other
parties, subject to Section 1.3.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.3 or Article III of one Type of Loan into another Type of
Loan.
6
<PAGE>
"Crude Oil Marketing Agreement" means that certain Crude Oil Marketing
Agreement among Resources, Plains Illinois Inc., Stocker Resources, L.P.,
Calumet Florida, Inc. and Marketing, subject to Section 1.3.
"Cushing Terminal" means that certain storage facility owned by Marketing
located in Cushing, Oklahoma.
"Default" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"Default Rate" means, at the time in question, (i) three and three-fourths
percent (3.75%) per annum plus the Adjusted Eurodollar Rate then in effect for
any Eurodollar Loan (up to the end of the applicable Interest Period) or (ii)
two percent (2%) per annum plus the Base Rate for each Base Rate Loan; provided,
however, the Default Rate shall never exceed the Highest Lawful Rate
"Default Rate Period" means (i) any period during which an Event of
Default, other than pursuant to Section 8.1 (a) or (b), is continuing, provided
that such period shall not begin until notice of the commencement of the Default
Rate has been given to Borrower by Administrative Agent upon the instruction by
Majority Lenders and (ii) any period during which any Event of Default pursuant
to Section 8.1 (a) or (b) is continuing unless Borrower has been notified
otherwise by Administrative Agent upon the instruction by Majority Lenders.
"Disclosure Schedule" means Schedule 2 hereto.
"Domestic Lending Office" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" in the Lender Schedule
hereto, or such other office as such Lender may from time to time specify to
Borrower and Administrative Agent; with respect to LC Issuer, the office,
branch, or agency through which it issues Letters of Credit; and, with respect
to Administrative Agent, the office, branch, or agency through which it
administers this Agreement.
"Eligible Transferee" means a Person which either (a) is a Lender, or (b)
is consented to as an Eligible Transferee by Administrative Agent and, so long
as no Default or Event of Default is continuing, by Borrower, which consents in
each case will not be unreasonably withheld (provided that no Person organized
outside the United States may be an Eligible Transferee if Borrower would be
required to pay withholding taxes on interest or principal owed to such Person).
"Environmental Laws" means any and all Laws relating to the environment or
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
7
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means each Restricted Person and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control that, together with such Restricted Person,
are treated as a single employer under Section 414 of the Code.
"ERISA Plan" means any employee pension benefit plan subject to Title IV of
ERISA maintained by any ERISA Affiliate with respect to which any Restricted
Person has a fixed or contingent liability.
"Eurodollar Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Eurodollar Lending Office" on the Lender
Schedule hereto (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to Borrower and Administrative Agent.
"Eurodollar Loan" means a Loan that bears interest at a rate based upon the
Adjusted Eurodollar Rate.
"Event of Default" has the meaning given to such term in Section 8.1.
"Existing Agreement" means that certain Credit Agreement among General
Partner, Administrative Agent, Documentation Agent, and Syndication Agent and
other financial institutions dated as of July 30, 1998, as amended, restated or
supplemented to the date hereof.
"Facility Usage" means, at the time in question, the aggregate amount of
outstanding Revolver Loans and LC Obligations at such time.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/1000th of one percent) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Administrative Agent on such day on such transactions as
determined by Administrative Agent.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
8
<PAGE>
"Funding Date" means the Business Day, no later than four (4) Business Days
after the date of this Agreement, on which the Offering is completed.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Plains MLP and its
Consolidated Subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the Initial Financial Statements. If any change in any accounting
principle or practice is required by the Financial Accounting Standards Board
(or any such successor) in order for such principle or practice to continue as a
generally accepted accounting principle or practice, all reports and financial
statements required hereunder with respect to Plains MLP or with respect to
Plains MLP and its Consolidated Subsidiaries may be prepared in accordance with
such change, but all calculations and determinations to be made hereunder may be
made in accordance with such change only after notice of such change is given to
each Lender and Majority Lenders agree to such change insofar as it affects the
accounting of Plains MLP or of Plains MLP and its Consolidated Subsidiaries.
"General Partner" means Plains All American Inc., a Delaware corporation.
"Guarantors" means Plains MLP and all of its Subsidiaries (including
Marketing but excluding Borrower) and any other Person who has guaranteed some
or all of the Obligations and who has been accepted by Administrative Agent as a
Guarantor or any Subsidiary of Plains MLP which now or hereafter executes and
delivers a guaranty to Administrative Agent pursuant to Section 6.17.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options, swaps,
floors, caps, collars, forward sales or forward purchases involving interest
rates, commodities or commodity prices, equities, currencies, bonds, or indexes
based on any of the foregoing, (b) any option, futures or forward contract
traded on an exchange, and (c) any other derivative agreement or other similar
agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender Party to whom
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
"Incentive and Option Plans" means the Plains All American Inc. 1998 Long-
Term Incentive Plan as in effect on the date hereof, the Plains All American
Inc. Management Incentive
9
<PAGE>
Plan as in effect on the date hereof and those certain Transaction Grant
Agreements disclosed in writing to Administrative Agent prior to the date of
this Agreement.
"Indebtedness" of any Person means its Liabilities (without duplication) in
any of the following categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d) Liabilities (other than reserves for taxes and reserves for contingent
obligations) which (i) would under GAAP be shown on such Person's balance sheet
as a liability and (ii are payable more than one year from the date of creation
or incurrence thereof,
(e) Liabilities arising under Hedging Contracts (on a net basis to the
extent netting is provided for in the applicable Hedging Contract),
(f) Liabilities constituting principal under Capital Leases,
(g) Liabilities arising under conditional sales or other title retention
agreements,
(h) Liabilities owing under direct or indirect guaranties of Liabilities
of any other Person or otherwise constituting obligations to purchase or acquire
or to otherwise protect or insure a creditor against loss in respect of
Liabilities of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
Liabilities, assets, goods, securities or services), but excluding endorsements
in the ordinary course of business of negotiable instruments in the course of
collection,
(i) Liabilities consisting of an obligation to purchase or redeem
securities or other property, if such Liabilities arises out of or in connection
with the sale or issuance of the same or similar securities or property (for
example, repurchase agreements, mandatorily redeemable preferred stock and
sale/leaseback agreements),
(j) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Liabilities with respect to banker's acceptances, or
(l) Liabilities with respect to obligations to deliver goods or services
in consideration of advance payments therefor;
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred in the ordinary course of business by such Person
on ordinary trade terms to vendors,
10
<PAGE>
suppliers, or other Persons providing goods and services for use by such Person
in the ordinary course of its business, unless and until such Liabilities are
outstanding more than 120 days after the date the respective goods are delivered
or the respective services are rendered, other than Liabilities contested in
good faith by appropriate proceedings, if required, and for which adequate
reserves are maintained on the books of such Person in accordance with GAAP.
"Initial Financial Statements" means the audited pro forma Consolidated
financial statements of Plains MLP as of September 30, 1998.
"Insurance Schedule" means Schedule 4 attached hereto.
"Interest Expense" means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between Plains MLP and its Subsidiaries and all other items required
to be eliminated in the course of the preparation of Consolidated financial
statements of Plains MLP and its Subsidiaries in accordance with GAAP): (a) all
interest and commitment fees in respect of Indebtedness of Plains MLP or any of
its Subsidiaries (including imputed interest on Capital Lease Obligations) which
are accrued during such period and whether expensed in such period or
capitalized; plus (b) all fees, expenses and charges in respect of letters of
credit issued for the account of Plains MLP or any of its Subsidiaries, which
are accrued during such period and whether expensed in such period or
capitalized.
"Interest Payment Date" means (a) with respect to each Base Rate Loan, the
last day of each March, June, September and December, and (b) with respect to
each Eurodollar Loan, the last day of the Interest Period that is applicable
thereto and, if such Interest Period is six, or twelve months in length, the
dates specified by Administrative Agent which are approximately three, six, and
nine months (as appropriate) after such Interest Period begins; provided that
the last Business Day of each calendar month shall also be an Interest Payment
Date for each such Loan so long as any Event of Default exists under Section 8.1
(a) or (b).
"Interest Period" means, with respect to each particular Eurodollar Loan in
a Borrowing, the period specified in the Borrowing Notice or
Continuation/Conversion Notice applicable thereto, beginning on and including
the date specified in such Borrowing Notice or Continuation/Conversion Notice
(which must be a Business Day), and ending one, two, three, six or twelve months
(if twelve months is available for each Lender) thereafter, as Borrower may
elect in such notice; provided that: (a) any Interest Period which would
otherwise end on a day which is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day; (b) any Interest Period which begins on the last Business Day in a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day in a calendar month; and (c) notwithstanding the foregoing, no
Interest Period may be selected for a Revolver Loan that would end after the
Revolver Maturity Date and no Interest Period may be selected for a Term Loan
that would end after the Term Maturity Date.
11
<PAGE>
"Investment" means any investment made, directly or indirectly in any
Person, whether by acquisition of shares of capital stock, indebtedness or other
obligations or securities or by loan, advance, capital contribution or
otherwise, and whether made in cash, by the transfer of property or by any other
means.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given to such term in Section 2.13(a).
"LC Issuer" means BankBoston, N.A., in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity.
Administrative Agent may, with the consent of Borrower and the Lender in
question, appoint any Lender hereunder as an LC Issuer in place of or in
addition to BankBoston, N.A.
"LC Obligations" means, at the time in question, the sum of all Matured LC
Obligations plus the maximum amounts which LC Issuer might then or thereafter be
called upon to advance under all Letters of Credit then outstanding.
"Lease Rentals" means, with respect to any period, the sum of the rental
and other obligations required to be paid during such period by Plains MLP or
any Subsidiary of Plains MLP as lessee under all leases of real or personal
property (other than Capital Leases), excluding any amount required to be paid
by the lessee (whether or not therein designated as rental or additional rental)
on account of maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges, provisions that, if at the date of determination, any
such rental or other obligations are contingent or not otherwise definitely
determinable by terms of the related lease, the amount of such obligations (i)
shall be assumed to be equal to the amount of such obligations for the period of
12 consecutive calendar months immediately preceding the date of determination
or (ii) if the related lease was not in effect during such preceding 12-month
period, shall be the amount estimated by a senior financial officer of the
General Partner on a reasonable basis and in good faith.
"Lender Parties" means Administrative Agent, Syndication Agent,
Documentation Agent, LC Issuer, and all Lenders.
"Lender Schedule" means Schedule 1 hereto.
"Lenders" means each signatory hereto (other than Borrower and any
Restricted Person that is a party hereto), including ING (U.S.) Capital
Corporation in its capacity as a Lender hereunder rather than as Administrative
Agent, and the successors of each such party as holder of a Note.
12
<PAGE>
"Letter of Credit" means any letter of credit issued by LC Issuer hereunder
at the application of Borrower.
"Letter of Credit Fee Rate" means, on any day, the rate per annum set forth
below based on the Applicable Leverage Level and Applicable Rating Level on such
date.
======================================================
Applicable Leverage Level Applicable Rating Level
------------------------------------------------------
Level A Level B
------------------------------------------------------
Level I 1.50% 1.75%
------------------------------------------------------
Level II 1.25% 1.50%
------------------------------------------------------
Level III 1.00% 1.25%
------------------------------------------------------
Level IV .75% 1.00%
======================================================
"Liabilities" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"Lien" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to it or any other arrangement
with such creditor which provides for the payment of such Liabilities out of
such property or assets or which allows such creditor to have such Liabilities
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic's
or materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business.
"Lien" also means any filed financing statement, any registration of a pledge
(such as with an issuer of uncertificated securities), or any other arrangement
or action which would serve to perfect a Lien described in the preceding
sentence, regardless of whether such financing statement is filed, such
registration is made, or such arrangement or action is undertaken before or
after such Lien exists.
"Loans" means all Revolver Loans and Term Loans.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Letters of Credit, the LC Applications, the Hedging Contracts described in
Section 2.14, and all other agreements, certificates, documents, instruments and
writings at any time delivered in connection herewith or therewith (exclusive of
term sheets and commitment letters).
"Majority Lenders" means Lenders whose aggregate Percentage Shares equal or
exceed sixty-six and two-thirds percent (66 2/3%).
13
<PAGE>
"Marketing" means Plains Marketing, L.P., a Delaware limited partnership.
"Marketing Credit Agreement" means that certain Amended and Restated Credit
Agreement of even date herewith among Marketing, as Borrower, All American and
Plains MLP as Guarantors, and the Agents and Lenders named therein, subject to
Section 1.3.
"Material Adverse Change" means a material and adverse change, from the
state of affairs presented in the Initial Financial Statements or as represented
or warranted in any Loan Document, to (a) Plains MLP's Consolidated financial
condition, (b) Plains MLP's Consolidated operations, properties or prospects,
considered as a whole, (c) Borrower's ability to timely pay the Obligations, or
(d) the enforceability of the material terms of any Loan Document.
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts or
demands for payment drawn or made under or purported to be under any Letter of
Credit and all other amounts due and owing to LC Issuer under any LC Application
for any Letter of Credit, to the extent the same have not been repaid to LC
Issuer (with the proceeds of Loans or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Moody's" means Moody's Investor Service, Inc., or its successor.
"Notes" means all Revolver Notes and all Term Notes.
"Obligations" means all Liabilities from time to time owing by any
Restricted Person to any Lender Party under or pursuant to any of the Loan
Documents, including all LC Obligations. "Obligation" means any part of the
Obligations.
"Offering" means the public issuance of limited partnership interests of
Plains MLP as described in the Preliminary Prospectus.
"Offering Documents" means the documents listed on Schedule 6 hereto.
"Omnibus Agreement" means that certain Omnibus Agreement between Resources,
Plains MLP, Borrower, Marketing and General Partner, subject to Section 1.3.
"Open Position" means the aggregate volume of crude oil on which Restricted
Persons have commodity price risk, which may include, without limitation, (i)
the aggregate volume of crude oil owned for which Restricted Persons do not
have, on an aggregate basis, contracts for sale at a fixed price and (ii) the
aggregate volumes of crude oil under contracts for purchase for which Restricted
Persons do not have, on an aggregate basis, contracts for sale on the
substantially same pricing basis (i.e. at a fixed price for sale substantially
equivalent to or above the fixed price for purchase of such crude oil, or at an
index price for sale substantially equivalent to the index price for purchase of
such crude oil, or at an index price for sale substantially equivalent to a
margin above the index price for purchase of such crude oil). "Open Position"
14
<PAGE>
shall not include, during the period from the first to the 25th day of a
calendar month, any volumes of crude oil which Restricted Persons are obligated
to gather in the next succeeding calendar month at a price based upon the posted
price from time to time in effect during such next calendar month.
"Partnership Agreement" means the Amended and Restated Agreement of Limited
Partnership of Plains MLP, subject to Section 1.3.
"Percentage Share" means, with respect to any Lender, the percentage
obtained by dividing (i) the sum of the unpaid principal balance of such
Lender's Term Loans at the time in question plus such Lender's Revolver
Commitment, by (ii) the sum of the aggregate unpaid principal balance of all
Term Loans at such time plus the total Revolver Commitment.
"Permitted Acquisitions" means (A) the acquisition of all of the capital
stock or other equity interest in a Person (exclusive of general partner
interests held by General Partner or another Wholly Owned Subsidiary of
Resources not in excess of a 1% economic interest and exclusive of director
qualifying shares and other equity interests required to be held by an Affiliate
to comply with a requirement of Law) or (B) any acquisition of all or a portion
of the business, assets or operations of a Person, provided that (i) prior to
and after giving effect to such acquisition no Default or Event of Default shall
have occurred and be continuing; (ii) all representations and warranties shall
be true and correct as if restated immediately following the consummation of
such acquisition; and (iii) substantially all of such business, assets and
operations so acquired, or of the Person so acquired, consists of crude oil
and/or gas marketing, gathering, transportation, storage, terminaling and
pipeline operation.
"Permitted Investments" means (a) Cash Equivalents, (b) Investments
described in the Disclosure Schedule, (c) Investments by Plains MLP or any of
its Subsidiaries in any Wholly Owned Subsidiary of Plains MLP which is a
Guarantor and (d) Permitted Acquisitions.
"Permitted Lien" has the meaning given to such term in Section 7.2.
"Person" means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, Tribunal, or any
other legally recognizable entity.
"Plains MLP" means Plains All American Pipeline, L.P., a Delaware limited
partnership.
"Preliminary Prospectus" has the meaning given such term in Schedule 6
hereto.
"Rating Agency" means either S&P or Moody's.
"Registration Statement" means that certain Registration Statement on Form
S-1 filed with the Securities and Exchange Commission by Plains MLP under
registration number 333-64107 (as amended prior to the date hereof), together
with its referenced exhibits and other appendices.
15
<PAGE>
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (a) any category of liabilities
which includes deposits by reference to which the Adjusted Eurodollar Rate is to
be determined, or (b) any category of extensions of credit or other assets which
include Eurodollar Loans.
"Resources" means Plains Resources Inc., a Delaware corporation.
"Restricted Person" means any of Plains MLP and each Subsidiary of Plains
MLP, including but not limited to Borrower, Marketing and each Subsidiary of
Borrower and/or Marketing.
"Revolver Commitment" means $50,000,000. Each Lender's Revolver Commitment
shall be the amount set forth on the Lender Schedule.
"Revolver Commitment Period" means the period from and including the date
hereof until the Revolver Maturity Date (or, if earlier, the day on which the
obligation of Lenders to make Loans hereunder and the obligation of LC Issuer to
issue Letters of Credit hereunder has terminated or the day on which the
Revolver Notes first become due and payable in full).
"Revolver Eurodollar Rate Margin" means the percent per annum set forth
below based on the Applicable Leverage Level and Applicable Ratig Level in
effect on such date.
======================================================
Applicable Leverage Level Applicable Rating Level
------------------------------------------------------
Level A Level B
------------------------------------------------------
Level I 1.50% 1.75%
------------------------------------------------------
Level II 1.25% 1.50%
------------------------------------------------------
Level III 1.00% 1.25%
------------------------------------------------------
Level IV .75% 1.00%
======================================================
Changes in the applicable Revolver Eurodollar Rate Margin will occur
automatically without prior notice as changes in the Applicable Leverage Level
or Applicable Rating Level occur. Administrative Agent will give notice promptly
to Borrower and the Revolver Lenders of changes in the Revolver Eurodollar Rate
Margin.
16
<PAGE>
"Revolver Lender" means each holder of a Revolver Note.
"Revolver Loan" has the meaning given such term in Section 2.1(a).
"Revolver Maturity Date" means November 17, 2000.
"Revolver Note" has the meaning given such term in Section 2.1(a).
"Revolver Percentage Share" means, with respect to any Revolver Lender, the
Revolver Percentage Share set forth opposite such Revolver Lender's name on the
Lender Schedule.
"S&P" means Standard & Poor's Ratings Group (a division of McGraw Hill,
Inc.) or its successor.
"Security Documents" means the instruments listed in the Security Schedule
and all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Restricted Person to Administrative Agent in connection with
this Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or the performance of any Restricted
Person's other duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 3 hereto.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or other
business or corporate entity, enterprise or organization which is directly or
indirectly (through one or more intermediaries) controlled or owned more than
fifty percent by such Person.
"Term Lender" means each holder of a Term Note.
"Term Loan" has the meaning given such term in Section 2.1(b).
"Term Loan Base Rate Margin" means on each day during the applicable period
set forth below the percent per annum set forth below based on the Applicable
Leverage Level in effect on such date and for such period:
<TABLE>
<CAPTION>
=======================================================================================
Applicable Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Applicable November 17, 1998 November 17, 2002 November 17, 2004
Leverage Level through November 16, through November 16, through November 17,
2002, inclusive 2004, inclusive 2005, inclusive
- ---------------------------------------------------------------------------------------
Level I .25% .75% 1.00%
- ---------------------------------------------------------------------------------------
Level II 0 .50% .75%
- ---------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Level III 0 .25% .50%
- ---------------------------------------------------------------------------------------
Level IV 0 0 .25%
=======================================================================================
</TABLE>
Changes in the applicable Term Loan Base Rate Margin will occur automatically
without prior notice as changes in the Applicable Leverage Level occur.
Administrative Agent will give notice promptly to Borrower and the Term Lenders
of changes in the Term Loan Base Rate Margin.
"Term Loan Eurodollar Rate Margin" means on each day during the applicable
period set forth below, the percent per annum set forth below based on the
Applicable Leverage Level in effect on such date and for such period:
<TABLE>
<CAPTION>
=======================================================================================
Applicable Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Applicable November 17, 1998 November 17, 2002 November 17, 2004
Leverage Level through November 16, through November 16, through November 17,
2002, inclusive 2004, inclusive 2005, inclusive
- ---------------------------------------------------------------------------------------
Level I 2.00% 2.50% 2.75%
- ---------------------------------------------------------------------------------------
Level II 1.75% 2.25% 2.50%
- ---------------------------------------------------------------------------------------
Level III 1.50% 2.00% 2.25%
- ---------------------------------------------------------------------------------------
Level IV 1.25% 1.75% 2.00%
========================================================================================
</TABLE>
Changes in the applicable Term Loan Eurodollar Rate Margin will occur
automatically without prior notice as changes in the Applicable Leverage Level
occur. Administrative Agent will give notice promptly to Borrower and the Term
Lenders of changes in the Term Loan Eurodollar Rate Margin.
"Term Loan Maturity Date" means November 17, 2005.
"Term Note" has the meaning given such term in Section 2.1(b).
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(c) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an
ERISA Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent
to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of proceedings
to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under
Section 4042 of ERISA, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Plan.
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"Tribunal" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency or instrumentality of
the United States of America or any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted or existing.
"Type" means, with respect to any Loans, the characterization of such Loans
as either Base Rate Loans or Eurodollar Loans.
"Wholly Owned Subsidiary" means any Subsidiary of a Person, all of the
issued and outstanding stock, limited liability company membership interests, or
partnership interests of which (including all rights or options to acquire such
stock or interests) are directly or indirectly (through one or more
Subsidiaries) owned by such Person, excluding any general partner interests
owned by General Partner in any such Subsidiary that is a partnership, such
general partner interests not to exceed two percent (2%) of the aggregate
ownership interests of any such partnership and directors' qualifying shares if
applicable.
"Working Capital Borrowings" has the meaning given to such term in Section
2.2(c) hereof.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement. All references to the terms
"Contribution Agreement", "Crude Oil Marketing Agreement", "Marketing Credit
Agreement", "Omnibus Agreement", and "Partnership Agreement" shall be deemed to
be references to those agreements as such agreements are executed and delivered
by the parties thereto on the Funding Date, provided each such agreement is in
the form of such agreement attached as an exhibit to the Registration Statement,
with changes to such form that are non-substantive or that the Administrative
Agent approves on or prior to the Funding Date. The terms "All American
Pipeline" and "SJV Gathering System shall have the meanings given in the
Preliminary Prospectus.
Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement," "this instrument," "herein," "hereof," "hereby," "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and
19
<PAGE>
"this subsection" and similar phrases refer only to the sections or subsections
hereof in which such phrases occur. The word "or" is not exclusive, and the word
"including" (in its various forms) means "including without limitation."
Pronouns in masculine, feminine and neuter genders shall be construed to include
any other gender, and words in the singular form shall be construed to include
the plural and vice versa, unless the context otherwise requires.
Section 1.5. Calculations and Determinations. All calculations under the
Loan Documents of interest chargeable with respect to Eurodollar Loans and of
fees shall be made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by a Lender Party of amounts to be
paid under Article III or any other matters which are to be determined hereunder
by a Lender Party (such as any Eurodollar Rate, Adjusted Eurodollar Rate,
Business Day, Interest Period, or Reserve Requirement) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Majority Lenders otherwise consent all financial statements and
reports furnished to any Lender Party hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
ARTICLE II - The Loans and Letters of Credit
Section 2.1. Commitments to Lend; Notes.
(a) Revolver Loans. Subject to the terms and conditions hereof, each
Revolver Lender agrees to make loans to Borrower (herein called such Lender's
"Revolver Loans") upon Borrower's request from time to time during the Revolver
Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all
Revolver Lenders are requested to make Revolver Loans of the same Type in
accordance with their respective Revolver Percentage Shares and as part of the
same Borrowing, (b) after giving effect to such Revolver Loans, the Facility
Usage does not exceed the Revolver Commitment determined as of the date on which
the requested Revolver Loans are to be made and (c) after giving effect to such
Revolver Loans the Revolver Loans by each Revolver Lender plus the existing LC
Obligations of such Revolver Lender does not exceed such Lender's Revolver
Commitment. The aggregate amount of all Revolver Loans in any Borrowing must be
equal to $2,000,000 or any higher integral multiple of $250,000. The obligation
of Borrower to repay to each Revolver Lender the aggregate amount of all
Revolver Loans made by such Revolver Lender, together with interest accruing in
connection therewith, shall be evidenced by a single promissory note (herein
called such Lender's "Revolver Note") made by Borrower payable to the order of
such Revolver Lender in the form of Exhibit A-1 with appropriate insertions.
The amount of principal owing on any Revolver Lender's Revolver Note at any
given time shall be the aggregate amount of all Revolver Loans theretofore made
by such Revolver Lender minus all payments of principal theretofore received by
such Revolver Lender on such Revolver Note. Interest on each Revolver Note
shall accrue and be due and payable as provided herein and therein. Each
Revolver Note shall be due and payable as provided herein and therein, and shall
be due and payable in full on the Revolver Maturity Date. Subject to the terms
and conditions of this Agreement, Borrower may borrow, repay, and reborrow under
this Section
20
<PAGE>
2.1(a). Borrower may have no more than seven Borrowings of Eurodollar Loans
outstanding at any time.
(b) Term Loans. Subject to the terms and conditions hereof, each Term
Lender agrees to make a single advance to Borrower (herein called such Lender's
"Term Loan") upon Borrower's request on or before November 23, 1998, provided
that (a) such Term Loan does not exceed such Term Lender's Term Loan amount set
forth on the Lender Schedule and (b) the aggregate amount of all Term Loans does
not exceed $175,000,000. Portions of each Lender's Term Loan may from time to
time be designated as a Base Rate Loan or Eurodollar Loan as provided herein.
The obligation of Borrower to repay to each Term Lender the amount of the Term
Loan made by such Term Lender, together with interest accruing in connection
therewith, shall be evidenced by a single promissory note (herein called such
Term Lender's "Term Note") made by Borrower payable to the order of such Term
Lender in the form of Exhibit A-2 with appropriate insertions. The amount of
principal owing on any Term Lender's Term Note at any given time shall be the
amount of such Term Lender's Term Loan minus all payments of principal
theretofore received by such Term Lender on such Term Note. Interest on each
Term Note shall accrue and be due and payable as provided herein and therein.
Each Term Note shall be due and payable as provided herein and therein, and
shall be due and payable in full on the Term Loan Maturity Date. No portion of
any Term Loan which has been repaid may be reborrowed.
Section 2.2. Requests for Revolver Loans. Borrower must give to
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of any requested Borrowing of Revolver Loans to be funded by Revolver
Lenders. Each such notice constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of new Base
Rate Loans and the date on which such Base Rate Loans are to be advanced,
or (ii) the aggregate amount of any such Borrowing of new Eurodollar Loans,
the date on which such Eurodollar Loans are to be advanced (which shall be
the first day of the Interest Period which is to apply thereto), and the
length of the applicable Interest Period; and
(b) be received by Administrative Agent not later than 11:00 a.m., New
York, New York time, on (i) the day on which any such Base Rate Loans are
to be made, or (ii) the third Business Day preceding the day on which any
such Eurodollar Loans are to be made.
(c) If any requested Borrowing of Revolver Loans or portion thereof is
to be utilized by Borrower exclusively for working capital purposes (such
Borrowing or such portion being called a "Working Capital Borrowing"), Borrower
shall specify in the Borrowing Notice that such Borrowing or such portion is a
Working Capital Borrowing. In addition, any repayment of a Revolver Loan that
is intended as a repayment of all or any part of the outstanding amount of one
or more Working Capital Borrowings shall be so identified to the Administrative
Agent at the time of such repayment.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request
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<PAGE>
shall be deemed a representation, warranty, acknowledgment and agreement by
Borrower as to the matters which are required to be set out in such written
confirmation. Upon receipt of any such Borrowing Notice, Administrative Agent
shall give each Revolver Lender prompt notice of the terms thereof. If all
conditions precedent to such new Revolver Loans have been met, each Revolver
Lender will on the date requested promptly remit to Administrative Agent at
Administrative Agent's office in New York, New York the amount of such Revolver
Lender's new Revolver Loan in immediately available funds, and upon receipt of
such funds, unless to its actual knowledge any conditions precedent to such
Revolver Loans have been neither met nor waived as provided herein,
Administrative Agent shall promptly make such Revolver Loans available to
Borrower. Unless Administrative Agent shall have received prompt notice from a
Revolver Lender that such Revolver Lender will not make available to
Administrative Agent such Revolver Lender's new Revolver Loan, Administrative
Agent may in its discretion assume that such Revolver Lender has made such
Revolver Loan available to Administrative Agent in accordance with this section,
and Administrative Agent may if it chooses, in reliance upon such assumption,
make such Revolver Loan available to Borrower. If and to the extent such
Revolver Lender shall not so make its new Revolver Loan available to
Administrative Agent, such Lender and Borrower severally agree to pay or repay
to Administrative Agent within three days after demand the amount of such
Revolver Loan together with interest thereon, for each day from the date such
amount was made available to Borrower until the date such amount is paid or
repaid to Administrative Agent, with interest at (i) the Federal Funds Rate, if
such Lender is making such payment and (ii) the interest rate applicable at the
time to the other new Revolver Loans made on such date, if Borrower is making
such repayment. If neither such Revolver Lender nor Borrower pays or repays to
Administrative Agent such amount within such three-day period, Administrative
Agent shall, be entitled to recover from Borrower, on demand in lieu of the
interest provided for in the preceding sentence, interest thereon at the Default
Rate, calculated from the date such amount was made available to Borrower. The
failure of any Revolver Lender to make any new Revolver Loan to be made by it
hereunder shall not relieve any other Revolver Lender of its obligation
hereunder, if any, to make its new Revolver Loan, but no Revolver Lender shall
be responsible for the failure of any other Revolver Lender to make any new
Revolver Loan to be made by such other Revolver Lender.
Section 2.3. Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Revolver Loans or Term Loans
already outstanding: to Convert, in whole or in part, Base Rate Loans to
Eurodollar Loans, to Convert, in whole or in part, Eurodollar Loans to Base Rate
Loans on the last day of the Interest Period applicable thereto, and to
Continue, in whole or in part, Eurodollar Loans beyond the expiration of such
Interest Period by designating a new Interest Period to take effect at the time
of such expiration. In making such elections, Borrower may combine existing
Loans made pursuant to separate Borrowings into one new Borrowing or divide
existing Loans made pursuant to one Borrowing into separate new Borrowings,
provided that (i) Borrower may have no more than seven Borrowings of Eurodollar
Loans outstanding at any time and (ii) no combinations may be made between
Borrowings constituting Revolver Loans on the one hand and Borrowings
constituting Term Loans on the other hand. To make any such election, Borrower
must give to Administrative Agent written notice (or telephonic notice promptly
confirmed in writing) of any such Conversion or Continuation of existing Loans,
with a separate notice given for each new
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<PAGE>
Borrowing. Each such notice constitutes a "Continuation/Conversion Notice"
hereunder and must:
(a) specify the existing Loans which are to be Continued or Converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate
Loans into which such existing Loans are to be Continued or Converted and
the date on which such Continuation or Conversion is to occur, or (ii) the
aggregate amount of any Borrowing of Eurodollar Loans into which such
existing Loans are to be Continued or Converted, the date on which such
Continuation or Conversion is to occur (which shall be the first day of the
Interest Period which is to apply to such Eurodollar Loans), and the length
of the applicable Interest Period; and
(c) be received by Administrative Agent not later than 11:00 a.m., New
York, New York time, on (i) the day on which any such Continuation or
Conversion to Base Rate Loans is to occur, or (ii) the third Business Day
preceding the day on which any such Continuation or Conversion to
Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Continuation/Conversion Notice, Administrative Agent shall give each Lender
prompt notice of the terms thereof. Each Continuation/Conversion Notice shall
be irrevocable and binding on Borrower. During the continuance of any Default,
Borrower may not make any election to Convert existing Loans into Eurodollar
Loans or Continue existing Loans as Eurodollar Loans beyond the expiration of
their respective and corresponding Interest Period then in effect. If (due to
the existence of a Default or for any other reason) Borrower fails to timely and
properly give any Continuation/Conversion Notice with respect to a Borrowing of
existing Eurodollar Loans at least three days prior to the end of the Interest
Period applicable thereto, such Eurodollar Loans, to the extent not prepaid at
the end of such Interest Period, shall automatically be Converted into Base Rate
Loans at the end of such Interest Period. No new funds shall be repaid by
Borrower or advanced by any Lender in connection with any Continuation or
Conversion of existing Loans pursuant to this section, and no such Continuation
or Conversion shall be deemed to be a new advance of funds for any purpose; such
Continuations and Conversions merely constitute a change in the interest rate
applicable to already outstanding Loans.
Section 2.4. Use of Proceeds. Borrower shall use (i) all Term Loans to
repay up to $175,000,000 of the unpaid principal balance of the term loans
outstanding under the Existing Agreement as of the date hereof, (ii) All
Revolver Loans designated as Working Capital Borrowings pursuant to Section
2.2(c) to provide working capital for operations or to make distributions to the
partners of Restricted Persons and (iii) all Revolver Loans not designated as
Working Capital Loans pursuant to Section 2.2(c) to finance capital expenditures
of any Restricted Person, to pay reimbursement obligations of Letters of Credit,
to provide working capital for operations and for other general business
purposes, including acquisitions, but not to
23
<PAGE>
pay distributions to partners of Restricted Persons; provided, however, that no
Revolver Loan shall be used to repay any Indebtedness under the Existing
Agreement. Borrower shall use all Letters of Credit for its and its
Subsidiaries' general corporate purposes, but not to pay distributions to
partners of Restricted Persons. In no event shall the funds from any Loan or any
Letter of Credit be used directly or indirectly by any Person for personal,
family, household or agricultural purposes or for the purpose, whether
immediate, incidental or ultimate, of purchasing, acquiring or carrying any
"margin stock" (as such term is defined in Regulation U promulgated by the Board
of Governors of the Federal Reserve System) or to extend credit to others
directly or indirectly for the purpose of purchasing or carrying any such margin
stock. Borrower represents and warrants that Borrower is not engaged
principally, or as one of Borrower's important activities, in the business of
extending credit to others for the purpose of purchasing or carrying such margin
stock.
Section 2.5. Interest Rates and Fees.
(a) Revolver Interest Rates. Each Revolver Loan shall bear interest as
follows: (i) unless the Default Rate shall apply, (A) each Base Rate Loan shall
bear interest on each day outstanding at the Base Rate in effect on such day,
and (B) each Eurodollar Loan shall bear interest on each day during the related
Interest Period at the related Adjusted Eurodollar Rate plus the Revolver
Eurodollar Rate Margin in effect on such day, and (ii) during a Default Rate
Period, all Revolver Loans shall bear interest on each day outstanding at the
Default Rate. If an Event of Default based upon Section 8.1(a), Section 8.1(b)
or, with respect to Borrower, based upon Section 8.1(i)(i), (i)(ii) or (i)(iii)
exists and the Revolver Loans are not bearing interest at the Default Rate, the
past due principal and past due interest shall bear interest on each day
outstanding at the Default Rate. The interest rate shall change whenever the
applicable Base Rate, the Adjusted Eurodollar Rate or the Revolver Eurodollar
Rate Margin changes. In no event shall the interest rate on any Revolver Loan
exceed the Highest Lawful Rate.
(b) Term Loan Interest Rates. Each Term Loan shall bear interest as
follows: (i) unless the Default Rate shall apply, (A) each Base Rate Loan shall
bear interest on each day outstanding at the Base Rate plus the Term Loan Base
Rate Margin in effect on such day, and (B) each Eurodollar Loan shall bear
interest on each day during the related Interest Period at the related Adjusted
Eurodollar Rate plus the Term Loan Eurodollar Rate Margin in effect on such day
and (ii) during a Default Rate Period, all Term Loans shall bear interest on
each day outstanding at the Default Rate. If an Event of Default based upon
Section 8.1(a) or Section 8.1(b) or, with respect to Borrower, based upon
Section 8.1(i)(i), (i)(ii) or (i)(iii) exists and the Term Loans are not bearing
interest at the Default Rate, the past due principal and past due interest shall
bear interest on each day outstanding at the Default Rate. The interest rate
shall change whenever the applicable Base Rate, Term Loan Base Rate Margin,
Adjusted Eurodollar Rate, or Term Loan Eurodollar Rate Margin changes. In no
event shall the interest rate on any Term Loan exceed the Highest Lawful Rate.
(c) Revolver Commitment Fees. In consideration of each Revolver Lender's
commitment to make Revolver Loans, Borrower will pay to Administrative Agent for
the account of each Revolver Lender a commitment fee determined on a daily basis
by applying a rate of one-half of one percent (.50%) per annum to such Revolver
Lender's Revolver Percentage Share of
24
<PAGE>
the unused portion of the Revolver Commitment on each day during the Revolver
Commitment Period, determined for each such day by deducting from the amount of
the Revolver Commitment at the end of such day the Facility Usage. This
commitment fee shall be due and payable in arrears on the last day of each
Fiscal Quarter and at the end of the Revolver Commitment Period. Borrower shall
have the right from time to time to permanently reduce the Revolver Commitment,
provided that (i) notice of such reduction is given not less than 2 Business
Days prior to such reduction, (ii) the resulting Revolver Commitment is not less
than the Facility Usage and (iii) each partial reduction shall be in an amount
at least equal to $500,000 and in multiples of $100,000 in excess thereof.
(d) Administrative Agent's Fees. In addition to all other amounts due to
Administrative Agent under the Loan Documents, Borrower will pay fees to
Administrative Agent as described in a letter agreement dated November 17, 1998,
between Administrative Agent and Borrower.
Section 2.6. Optional Prepayments.
(a) Revolver Loans. Borrower may, upon five Business Days' notice to
Administrative Agent (and Administrative Agent will promptly give notice to the
other Lenders) from time to time and without premium or penalty prepay the
Revolver Loans, in whole or in part, so long as the aggregate amounts of all
partial prepayments of principal on the Revolver Loans equals $1,000,000 or any
higher integral multiple of $250,000, and so long as Borrower does not make any
prepayments which would reduce the unpaid principal balance of the Revolver
Loans to less than $100,000 without first either (i) terminating this Agreement
or (ii) providing assurance satisfactory to Administrative Agent in its
discretion that Revolver Lenders' legal rights under the Loan Documents are in
no way affected by such reduction. Upon receipt of any such notice,
Administrative Agent shall give each Revolver Lender prompt notice of the terms
thereof.
(b) Term Loans. Borrower may, upon five Business Days' notice to each Term
Lender from time to time and without premium or penalty prepay the Term Loans,
in whole or in part, so long as the aggregate of amounts of all partial
prepayments of principal on the Term Loans equals $5,000,000 or any higher
integral multiple of $1,000,000.
(c) Interest on Prepayment. Each prepayment of principal under Section
2.6(a) or 2.6(b) shall be accompanied by all interest then accrued and unpaid on
the principal so prepaid. Any principal or interest prepaid pursuant to Section
2.6(a) or 2.6(b) shall be in addition to, and not in lieu of, all payments
otherwise required to be paid under the Loan Documents at the time of such
prepayment.
Section 2.7. Mandatory Prepayments.
(a) Without limiting the requirements of Section 7.5 hereof regarding the
consent of Majority Lenders to sales of property by Restricted Persons which are
not permitted by Section 7.5, the proceeds of any sale of property (net of all
reasonable costs and expenses, but excluding proceeds consisting of tangible
property to be used in the business of Restricted Persons) by any Restricted
Person (other than a sale of property permitted under Section 7.5 hereof) shall
25
<PAGE>
be placed in a collateral account under the control of Administrative Agent in a
manner satisfactory to Administrative Agent immediately upon such Restricted
Person's receipt of such proceeds and maintained therein for a period of ninety
(90) days following the date of receipt thereof in cash (in this Section 2.7(a)
referred to as the "Collateral Period"). If any consideration consists of an
instrument or security, the Collateral Period shall, with respect to each amount
of cash received in respect thereof, continue until ninety (90) days following
such Restricted Person's receipt of such cash unless, pursuant to the following
sentence, an approved investment included such cash; any cash in a collateral
account may be invested in Cash Equivalents designated by Borrower. During each
Collateral Period, Borrower may propose to invest such proceeds in other
property subject to the approval of Majority Lenders, and shall thereafter
invest such proceeds in such property so approved by Majority Lenders. At the
end of each Collateral Period or, if an investment is so proposed and approved
during such Collateral Period, within one hundred-eighty (180) days after such
proposed investment has been so approved by Majority Lenders, any such proceeds
which have not been so invested by Borrower shall be applied pro rata to the
reduction of the outstanding principal balance of the Term Loans and the
Revolver Loans at such time, and the Revolver Commitment shall be reduced by an
amount equal to the prepayment applied to the Revolver Loans.
(b) If at any time the Facility Usage exceeds the Revolver Commitment
(whether due to a reduction in the Revolver Commitment in accordance with this
Agreement, or otherwise), Borrower shall immediately upon demand prepay the
principal of the Revolver Loans in an amount at least equal to such excess. Each
prepayment of principal under this section shall be accompanied by all interest
then accrued and unpaid on the principal so prepaid. Any principal or interest
prepaid pursuant to this section shall be in addition to, and not in lieu of,
all payments otherwise required to be paid under the Loan Documents at the time
of such prepayment.
Section 2.8. Letters of Credit. Subject to the terms and conditions
hereof, Borrower may during the Revolver Commitment Period request LC Issuer to
issue, amend, or extend the expiration date of, one or more Letters of Credit,
provided that, after taking such Letter of Credit into account:
(a) the Facility Usage does not exceed the Revolver Commitment at such
time;
(b) the aggregate amount of LC Obligations at such time does not
exceed $10,000,000;
(c) the expiration date of such Letter of Credit is prior to the
earlier of (i) one (1) year after the date of issuance of such Letter of
Credit or (ii) the end of the Revolver Commitment Period;
(d) such Letter of Credit is to be used for general corporate purposes
of Borrower or any of its Subsidiaries and is not directly or indirectly
used to assure payment of or otherwise support any Indebtedness of any
Person, except Indebtedness of a Restricted Person;
26
<PAGE>
(e) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will
not subject LC Issuer to any cost which is not reimbursable under Article
III;
(f) the form and terms of such Letter of Credit are acceptable to LC
Issuer in its sole and absolute discretion; and
(g) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(g) (in the following Section 2.9 called the "LC Conditions") have been met as
of the date of issuance, amendment, or extension of the expiration, of such
Letter of Credit.
Section 2.9. Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least two Business Days before the date
on which Borrower desires for LC Issuer to issue such Letter of Credit. By
making any such written application, unless otherwise expressly stated therein,
Borrower shall be deemed to have represented and warranted that the LC
Conditions described in Section 2.8 will be met as of the date of issuance of
such Letter of Credit. Each such written application for a Letter of Credit must
be made in writing in the form and substance of Exhibit G, the terms and
provisions of which are hereby incorporated herein by reference (or in such
other form as may mutually be agreed upon by LC Issuer and Borrower). If all LC
Conditions for a Letter of Credit have been met as described in Section 2.8 on
any Business Day before 11:00 a.m., New York, New York time, LC Issuer will
issue such Letter of Credit on the same Business Day at LC Issuer's office in
Boston, Massachusetts. If the LC Conditions are met as described in Section 2.8
on any Business Day on or after 11:00 a.m., New York, New York time, LC Issuer
will issue such Letter of Credit on the next succeeding Business Day at LC
Issuer's office in Boston, Massachusetts. If any provisions of any LC
Application conflict with any provisions of this Agreement, the provisions of
this Agreement shall govern and control.
Section 2.10. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation shall constitute
a loan by LC Issuer to Borrower. Borrower promises to pay to LC Issuer, or to LC
Issuer's order, on demand, the full amount of each Matured LC Obligation,
together with interest thereon (i) at the Base Rate to and including the second
Business Day after the Matured LC Obligation is incurred and (ii) at the Default
Rate on each day thereafter.
(b) Letter of Credit Advances. If the beneficiary of any Letter of Credit
makes a draft or other demand for payment thereunder then Borrower may, during
the interval between the making thereof and the honoring thereof by LC Issuer,
request Revolver Lenders to make Revolver Loans to Borrower in the amount of
such draft or demand, which Revolver Loans shall be made concurrently with LC
Issuer's payment of such draft or demand and shall be immediately used by LC
Issuer to repay the amount of the resulting Matured LC Obligation. Such a
request by Borrower shall be made in compliance with all of the provisions
hereof, provided that for the
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purposes of the first sentence of Section 2.1(a), the amount of such Revolver
Loans shall be considered, but the amount of the Matured LC Obligation to be
concurrently paid by such Revolver Loans shall not be considered.
(c) Participation by Revolver Lenders. LC Issuer irrevocably agrees to
grant and hereby grants to each Revolver Lender, and -- to induce LC Issuer to
issue Letters of Credit hereunder -- each Revolver Lender irrevocably agrees to
accept and purchase and hereby accepts and purchases from LC Issuer, on the
terms and conditions hereinafter stated and for such Revolver Lender's own
account and risk an undivided interest equal to such Revolver Lender's Revolver
Percentage Share of LC Issuer's obligations and rights under each Letter of
Credit issued hereunder and the amount of each Matured LC Obligation paid by LC
Issuer thereunder. Each Revolver Lender unconditionally and irrevocably agrees
with LC Issuer that, if a Matured LC Obligation is paid under any Letter of
Credit for which LC Issuer is not reimbursed in full by Borrower in accordance
with the terms of this Agreement and the related LC Application (including any
reimbursement by means of concurrent Loans or by the application of LC
Collateral), such Revolver Lender shall (in all circumstances and without set-
off or counterclaim) pay to LC Issuer on demand, in immediately available funds
at LC Issuer's address for notices hereunder, such Lender's Revolver Percentage
Share of such Matured LC Obligation (or any portion thereof which has not been
reimbursed by Borrower). Each Revolver Lender's obligation to pay LC Issuer
pursuant to the terms of this subsection is irrevocable and unconditional. If
any amount required to be paid by any Revolver Lender to LC Issuer pursuant to
this subsection is paid by such Revolver Lender to LC Issuer within three
Business Days after the date such payment is due, LC Issuer shall in addition to
such amount be entitled to recover from such Revolver Lender, on demand,
interest thereon calculated from such due date at the Federal Funds Rate. If any
amount required to be paid by any Revolver Lender to LC Issuer pursuant to this
subsection is not paid by such Revolver Lender to LC Issuer within three
Business Days after the date such payment is due, LC Issuer shall in addition to
such amount be entitled to recover from such Revolver Lender, on demand,
interest thereon calculated from such due date at the Base Rate.
(d) Distributions to Participants. Whenever LC Issuer has in accordance
with this section received from any Revolver Lender payment of such Lender's
Revolver Percentage Share of any Matured LC Obligation, if LC Issuer thereafter
receives any payment of such Matured LC Obligation or any payment of interest
thereon (whether directly from Borrower or by application of LC Collateral or
otherwise, and excluding only interest for any period prior to LC Issuer's
demand that such Revolver Lender make such payment of its Revolver Percentage
Share), LC Issuer will distribute to such Lender its Revolver Percentage Share
of the amounts so received by LC Issuer; provided, however, that if any such
payment received by LC Issuer must thereafter be returned by LC Issuer, such
Revolver Lender shall return to LC Issuer the portion thereof which LC Issuer
has previously distributed to it.
(e) Calculations. A written advice setting forth in reasonable detail the
amounts owing under this section, submitted by LC Issuer to Borrower or any
Revolver Lender from time to time, shall be conclusive, absent manifest error,
as to the amounts thereof.
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Section 2.11. Letter of Credit Fees. In consideration of LC Issuer's
issuance of any Letter of Credit, Borrower agrees to pay (i) to Administrative
Agent for the account of each Revolver Lender in proportion to its Revolver
Percentage Share, a letter of credit fee equal to the Letter of Credit Fee Rate
applicable each day times the face amount of such Letter of Credit and (ii) to
such LC Issuer for its own account, a letter of credit fronting fee at a rate
equal to one-eighth percent (.125%) per annum times the face amount of such
Letter of Credit. Each such fee will be calculated on the face amount of each
Letter of Credit outstanding on each day at the above applicable rates and will
be payable quarterly in arrears. In addition, Borrower will pay to LC Issuer a
minimum administrative issuance fee of $100 for each Letter of Credit and such
other fees and charges customarily charged by the LC Issuer in respect of any
amendment or negotiation of any Letter of Credit in accordance with the LC
Issuer's published schedule of such charges effective as of the date of such
amendment or negotiation.
Section 2.12. No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to accept
and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower releases each Lender Party
from, and agrees to hold each Lender Party harmless and indemnified against, any
liability or claim in connection with or arising out of the subject matter of
this section, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no
Lender Party shall be entitled to indemnification for that portion, if any, of
any liability or claim which is proximately caused by its own individual gross
negligence or willful misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of Borrower, or if the
amount of any Letter of Credit is increased at the request of Borrower, this
Agreement shall be binding upon all Restricted Persons with respect to such
Letter of Credit as so extended, increased or otherwise modified, with respect
to drafts and property covered thereby, and with respect to any action taken by
LC Issuer, LC Issuer's correspondents, or any Lender Party in accordance with
such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides that
it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and
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payment by LC Issuer to any purported transferee or transferees as determined by
LC Issuer is hereby authorized and approved, and Borrower releases each Lender
Party from, and agrees to hold each Lender Party harmless and indemnified
against, any liability or claim in connection with or arising out of the
foregoing, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no
Lender Party shall be entitled to indemnification for that portion, if any, of
any liability or claim which is proximately caused by its own individual gross
negligence or willful misconduct, as determined in a final judgment.
Section 2.13. LC Collateral.
(a) LC Obligations in Excess of Revolver Commitment. If, after the making
of all mandatory prepayments required under Section 2.7, the outstanding LC
Obligations will exceed the Revolver Commitment, then in addition to prepayment
of the entire principal balance of the Revolver Loans Borrower will immediately
pay to LC Issuer an amount equal to such excess. LC Issuer will hold such amount
as collateral security for the remaining LC Obligations (all such amounts held
as collateral security for LC Obligations being herein collectively called "LC
Collateral") and the Revolver Loans, and such collateral may be applied from
time to time to pay Matured LC Obligations. Neither this subsection nor the
following subsection shall, however, limit or impair any rights which LC Issuer
may have under any other document or agreement relating to any Letter of Credit,
LC Collateral or LC Obligation, including any LC Application, or any rights
which any Lender Party may have to otherwise apply any payments by Borrower and
any LC Collateral under Section 3.1.
(b) Acceleration of LC Obligations. If the Obligations or any part thereof
become immediately due and payable pursuant to Section 8.1 then, unless all
Revolver Lenders otherwise specifically elect to the contrary (which election
may thereafter be retracted by any Revolver Lender at any time), all LC
Obligations shall become immediately due and payable without regard to whether
or not actual drawings or payments on the Letters of Credit have occurred, and
Borrower shall be obligated to pay to LC Issuer immediately an amount equal to
the aggregate LC Obligations which are then outstanding to be held as LC
Collateral.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by LC Issuer in such Cash Equivalents as LC Issuer
may choose in its sole discretion. All interest on (and other proceeds of) such
Investments shall be reinvested or applied to Matured LC Obligations or the
Revolver Loans which are due and payable. When all Obligations have been
satisfied in full, including all LC Obligations, all Letters of Credit have
expired or been terminated, and all of Borrower's reimbursement obligations in
connection therewith have been satisfied in full, LC Issuer shall release any
remaining LC Collateral. Borrower hereby assigns and grants to LC Issuer for the
benefit of Revolver Lenders a continuing security interest in all LC Collateral
paid by it to LC Issuer, all Investments purchased with such LC Collateral, and
all proceeds thereof to secure its Matured LC Obligations and its Obligations
under this Agreement, each Note, and the other Loan Documents, and Borrower
agrees that such LC Collateral, Investments and proceeds shall be subject to all
of the terms and conditions of the Security
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Documents. Borrower further agrees that LC Issuer shall have all of the rights
and remedies of a secured party under the Uniform Commercial Code as adopted in
the State of New York with respect to such security interest and that an Event
of Default under this Agreement shall constitute a default for purposes of such
security interest.
(d) Payment of LC Collateral. When Borrower is required to provide LC
Collateral for any reason and fails to do so on the day when required, LC Issuer
or Administrative Agent may without prior notice to Borrower or any other
Restricted Person provide such LC Collateral (whether by application of proceeds
of other Collateral, by transfers from other accounts maintained with LC Issuer,
or otherwise) using any available funds of Borrower or any other Person also
liable to make such payments, and LC Issuer or Administrative Agent will give
notice thereof to Borrower promptly after such application or transfer. Any such
amounts which are required to be provided as LC Collateral and which are not
provided on the date required shall, for purposes of each Security Document, be
considered past due Obligations owing hereunder, and LC Issuer is hereby
authorized to exercise its respective rights under each Security Document to
obtain such amounts.
Section 2.14. Hedging Contracts. All Hedging Contracts permitted
hereunder entered into with any one or more Lenders or their Affiliates shall be
deemed to be Obligations and be secured by all Collateral; subject, however, to
the provisions of Section 3.9 hereof.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Administrative Agent for the account of the
Lender Party to whom such payment is owed in lawful money of the United States
of America, without set-off, deduction or counterclaim, and in immediately
available funds. Each such payment must be received by Administrative Agent not
later than noon, New York, New York time, on the date such payment becomes due
and payable. Any payment received by Administrative Agent after such time will
be deemed to have been made on the next following Business Day. Should any such
payment become due and payable on a day other than a Business Day, the maturity
of such payment shall be extended to the next succeeding Business Day, and, in
the case of a payment of principal or past due interest, interest shall accrue
and be payable thereon for the period of such extension as provided in the Loan
Document under which such payment is due. Each payment under a Loan Document
shall be due and payable at the place provided therein and, if no specific place
of payment is provided, shall be due and payable at the place of payment of
Administrative Agent's Note. When Administrative Agent collects or receives
money on account of the Obligations, other than as provided in Section 3.9,
Administrative Agent shall distribute all money so collected or received, and
each Lender Party shall apply all such money so distributed, as follows:
(a) first, for the payment of all Obligations which are then due (and
if such money is insufficient to pay all such Obligations, first to any
reimbursements due Administrative Agent under Section 6.9 or 10.4 and then
to the partial payment of all other Obligations then due in proportion to
the amounts thereof, or as Lender Parties shall otherwise agree);
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(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.6 and 2.7. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Administrative Agent pro rata to each Lender
Party then owed Obligations described in such subsection in proportion to all
amounts owed to all Lender Parties which are described in such subsection;
provided that if any Lender then owes payments to LC Issuer for the purchase of
a participation under Section 2.13(c) or to Administrative Agent under Section
9.4, any amounts otherwise distributable under this section to such Lender shall
be deemed to belong to LC Issuer, or Administrative Agent, respectively, to the
extent of such unpaid payments, and Administrative Agent shall apply such
amounts to make such unpaid payments rather than distribute such amounts to such
Lender.
Section 3.2. Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects or
would affect the amount of capital required or expected to be maintained by any
Lender Party or any corporation controlling any Lender Party, then, within five
Business Days after demand by such Lender Party, Borrower will pay to
Administrative Agent for the benefit of such Lender Party, from time to time as
specified by such Lender Party, such additional amount or amounts which such
Lender Party shall determine to be appropriate to compensate such Lender Party
or any corporation controlling such Lender Party in light of such circumstances,
to the extent that such Lender Party reasonably determines that the amount of
any such capital would be increased or the rate of return on any such capital
would be reduced by or in whole or in part based on the existence of the face
amount of such Lender Party's Loans, Letters of Credit, participations in
Letters of Credit or commitments under this Agreement.
Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit. If
any applicable Law (whether now in effect or hereinafter enacted or promulgated,
including Regulation D) or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of Law):
(a) shall change the basis of taxation of payments to any Lender Party
of any principal, interest, or other amounts attributable to any Eurodollar
Loan or Letter of Credit or otherwise due under this Agreement in respect
of any Eurodollar Loan or Letter of Credit (other than taxes imposed on, or
measured by, the overall net income of such Lender Party or any Applicable
Lending Office of such Lender Party by any jurisdiction in which such
Lender Party or any such Applicable Lending Office is located); or
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(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any
Eurodollar Loan or any Letter of Credit (excluding those for which such
Lender Party is fully compensated pursuant to adjustments made in the
definition of Eurodollar Rate) or against assets of, deposits with or for
the account of, or credit extended by, such Lender Party; or
(c) shall impose on any Lender Party or the interbank eurocurrency
deposit market any other condition affecting any Eurodollar Loan or Letter
of Credit, the result of which is to increase the cost to any Lender Party
of funding or maintaining any Eurodollar Loan or of issuing any Letter of
Credit or to reduce the amount of any sum receivable by any Lender Party in
respect of any Eurodollar Loan or Letter of Credit by an amount deemed by
such Lender Party to be material,
then such Lender Party shall promptly notify Administrative Agent and Borrower
in writing of the happening of such event and of the amount required to
compensate such Lender Party for such event (on an after-tax basis, taking into
account any taxes on such compensation), whereupon (i) Borrower shall, within
five Business Days after demand therefor by such Lender Party, pay such amount
to Administrative Agent for the account of such Lender Party and (ii) Borrower
may elect, by giving to Administrative Agent and such Lender Party not less than
three Business Days' notice, to Convert all (but not less than all) of any such
Eurodollar Loans into Base Rate Loans.
Section 3.4. Notice; Change of Applicable Lending Office. A Lender Party
shall notify Borrower of any event occurring after the date of this Agreement
that will entitle such Lender Party to compensation under Section 3.2, 3.3 or
3.5 hereof as promptly as practicable, but in any event within 90 days, after
such Lender Party obtains actual knowledge thereof; provided, that (i) if such
Lender Party fails to give such notice within 90 days after it obtains actual
knowledge of such an event, such Lender Party shall, with respect to
compensation payable pursuant to Section 3.2, 3.3 or 3.5 in respect of any costs
resulting from such event, only be entitled to payment under Section 3.2, 3.3 or
3.5 hereof for costs incurred from and after the date 90 days prior to the date
that such Lender Party does give such notice and (ii) such Lender Party will
designate a different Applicable Lending Office for the Loans affected by such
event if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender Party, be
disadvantageous to such Lender Party, except that such Lender Party shall have
no obligation to designate an Applicable Lending Office located in the United
States of America. Each Lender Party will furnish to Borrower a certificate
setting forth the basis and amount of each request by such Lender Party for
compensation under Section 3.2, 3.3, or 3.5 hereof.
Section 3.5. Availability. If (a) any change in applicable Laws, or in
the interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or impracticable for any
Lender Party to fund or maintain Eurodollar Loans or to issue or participate in
Letters of Credit, or shall materially restrict the authority of any Lender
Party to purchase or take offshore deposits of dollars (i.e., "eurodollars"), or
(b) any Lender Party determines that matching deposits appropriate to fund or
maintain any Eurodollar Loan are not available to it, or (c) any Lender Party
determines that the formula for calculating the Eurodollar Rate does not fairly
reflect the cost to such Lender Party of making or maintaining loans based on
such rate, then, upon notice by such Lender Party to Borrower and Administrative
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Agent, Borrower's right to elect Eurodollar Loans from such Lender Party (or, if
applicable, to obtain Letters of Credit) shall be suspended to the extent and
for the duration of such illegality, impracticability or restriction and all
Eurodollar Loans of such Lender Party which are then outstanding or are then the
subject of any Borrowing Notice and which cannot lawfully or practicably be
maintained or funded shall immediately become or remain, or shall be funded as,
Base Rate Loans of such Lender Party. Borrower agrees to indemnify each Lender
Party and hold it harmless against all costs, expenses, claims, penalties,
liabilities and damages which may result from any such change in Law,
interpretation or administration. Such indemnification shall be on an after-tax
basis, taking into account any taxes imposed on the amounts paid as indemnity.
Section 3.6. Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify each Lender Party against, and reimburse each
Lender Party on demand for, any loss or expense incurred or sustained by such
Lender Party (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by a Lender
Party to fund or maintain Eurodollar Loans), as a result of (a) any payment or
prepayment (whether or not authorized or required hereunder) of all or a portion
of a Eurodollar Loan on a day other than the day on which the applicable
Interest Period ends, (b) any payment or prepayment, whether or not required
hereunder, of a Loan made after the delivery, but before the effective date, of
a Continuation/Conversion Notice, if such payment or prepayment prevents such
Continuation/Conversion Notice from becoming fully effective, (c) the failure of
any Loan to be made or of any Continuation/Conversion Notice to become effective
due to any condition precedent not being satisfied or due to any other action or
inaction of any Restricted Person, or (d) any Conversion (whether or not
authorized or required hereunder) of all or any portion of any Eurodollar Loan
into a Base Rate Loan or into a different Eurodollar Loan on a day other than
the day on which the applicable Interest Period ends. Such indemnification
shall be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
Section 3.7. Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify each Lender Party against and reimburse
each Lender Party for all present and future income, stamp and other taxes,
levies, costs and charges whatsoever imposed, assessed, levied or collected
on or in respect of this Agreement or any Eurodollar Loans or Letters of
Credit (whether or not legally or correctly imposed, assessed, levied or
collected), excluding, however, any taxes imposed on or measured by the
overall net income of Administrative Agent or such Lender Party or any
Applicable Lending Office of such Lender Party by any jurisdiction in which
such Lender Party or any such Applicable Lending Office is located (all
such non-excluded taxes, levies, costs and charges being collectively
called "Reimbursable Taxes" in this section). Such indemnification shall
be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on, each
Lender Party's Loans and Note, and all other amounts payable by Borrower to
any Lender Party hereunder, shall be made in full without set-off or
counterclaim and shall be made free and clear of and without deductions or
withholdings of any nature by reason of any Reimbursable Taxes, all of
which will be for the account of Borrower. In the event of
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Borrower being compelled by Law to make any such deduction or withholding
from any payment to any Lender Party, Borrower shall pay on the due date of
such payment, by way of additional interest, such additional amounts as are
needed to cause the amount receivable by such Lender Party after such
deduction or withholding to equal the amount which would have been
receivable in the absence of such deduction or withholding. If Borrower
should make any deduction or withholding as aforesaid, Borrower shall
within 60 days thereafter forward to such Lender Party an official receipt
or other official document evidencing payment of such deduction or
withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Eurodollar Loan, Borrower may elect, by giving to
Administrative Agent and such Lender Party not less than three Business
Days' notice, to Convert all (but not less than all) of any such Eurodollar
Loan into a Base Rate Loan, but such election shall not diminish Borrower's
obligation to pay all Reimbursable Taxes.
(d) Notwithstanding the foregoing provisions of this section, Borrower
shall be entitled, to the extent it is required to do so by Law, to deduct
or withhold (and not to make any indemnification or reimbursement for)
income or other similar taxes imposed by the United States of America
(other than any portion thereof attributable to a change in federal income
tax Laws effected after the date hereof) from interest, fees or other
amounts payable hereunder for the account of any Lender Party, other than a
Lender Party (i) who is a U.S. person for Federal income tax purposes or
(ii) who has the Prescribed Forms on file with Administrative Agent (with
copies provided to Borrower) for the applicable year to the extent
deduction or withholding of such taxes is not required as a result of the
filing of such Prescribed Forms, provided that if Borrower shall so deduct
or withhold any such taxes, it shall provide a statement to Administrative
Agent and such Lender Party, setting forth the amount of such taxes so
deducted or withheld, the applicable rate and any other information or
documentation which such Lender Party may reasonably request for assisting
such Lender Party to obtain any allowable credits or deductions for the
taxes so deducted or withheld in the jurisdiction or jurisdictions in which
such Lender Party is subject to tax. As used in this section, "Prescribed
Forms" means such duly executed forms or statements, and in such number of
copies, which may, from time to time, be prescribed by Law and which,
pursuant to applicable provisions of (x) an income tax treaty between the
United States and the country of residence of the Lender Party providing
the forms or statements, (y) the Code, or (z) any applicable rules or
regulations thereunder, permit Borrower to make payments hereunder for the
account of such Lender Party free of such deduction or withholding of
income or similar taxes.
Section 3.8 Replacement of Lenders. If any Lender Party seeks
reimbursement for increased costs under Sections 3.2 through 3.7, then within
ninety days thereafter -- provided no Event of Default then exists -- Borrower
shall have the right (unless such Lender Party withdraws its request for
additional compensation) to replace such Lender Party by requiring such Lender
Party to assign its Loans and Notes and its commitments hereunder to an Eligible
Transferee reasonably acceptable to Administrative Agent and to Borrower,
provided that: (i) all Obligations of Borrower owing to such Lender Party being
replaced (including such increased costs, but excluding principal and accrued
interest on the Notes being assigned) shall be paid in full to such
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Lender Party concurrently with such assignment, and (ii) the replacement
Eligible Transferee shall purchase the Note being assigned by paying to such
Lender Party a price equal to the principal amount thereof plus accrued and
unpaid interest and accrued and unpaid commitment fees thereon. In connection
with any such assignment Borrower, Administrative Agent, such Lender Party and
the replacement Eligible Transferee shall otherwise comply with Section 10.5.
Notwithstanding the foregoing rights of Borrower under this section, however,
Borrower may not replace any Lender Party which seeks reimbursement for
increased costs under Section 3.2 through 3.7 unless Borrower is at the same
time replacing all Lender Parties which are then seeking such compensation.
Section 3.9. Application of Proceeds After Acceleration. If any Event of
Default shall have occurred and be continuing, and if the Obligations have
become due and payable, all cash collateral held by Administrative Agent under
this Agreement and the proceeds of any sale, disposition, or other realization
by Administrative Agent upon the Collateral (or any portion thereof) pursuant to
the Security Documents, shall be distributed in whole or in part by
Administrative Agent in the following order of priority, unless otherwise
directed by all of the Lenders:
First, to the Administrative Agent, in an amount equal to all
reimbursements to Administrative Agent due and payable as of the date of such
distribution;
Second, to the Lenders, ratably, in an amount equal to all accrued and
unpaid interest and fees owing to the Lenders under this Agreement due and
payable as of the date of such distribution; provided, however, that in case
such proceeds shall be insufficient to pay in full all such Obligations, then to
the payment thereof to the Lenders, ratably, in proportion to its percentage of
the sum of the aggregate amounts of all such Obligations;
Third, to the Lenders, ratably, in an amount equal to all Loans plus LC
Obligations; provided, however, that in the case such proceeds shall be
insufficient to pay in full all such Obligations, then to the payment thereof to
the Lenders, ratably, in proportion to its percentage of the sum of the
aggregate amounts of all such Obligations;
Fourth, to the Lenders, ratably, in an amount equal to all amounts owing to
the Lenders under all Obligations with respect to Hedging Contracts between any
Restricted Person and any Lender or an Affiliate; provided, however, that in
case such proceeds shall be insufficient to pay in full all such Obligations,
then to the payment thereof to the Lenders, ratably, in proportion to its
percentage of the sum of the aggregate amounts of all such Obligations;
Fifth, to the Lenders in an amount equal to all other Obligations;
provided, however, that in the case such proceeds shall be insufficient to pay
in full such Obligations, then to the payment thereof to the Lenders, ratably,
in proportion to its percentage of the sum of the aggregate amounts of all such
Obligations; and
Sixth, to the extent of any surplus, to the Restricted Persons as their
respective interests may appear, except as may be provided otherwise by law;
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it being understood that the Restricted Persons shall remain liable to the
extent of any deficiency between the amount of proceeds of the Collateral and
the aggregate sums referred to in clauses First through Fifth above.
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Documents to be Delivered. No Lender has any obligation to
make its first Loan, and LC Issuer has no obligation to issue the first Letter
of Credit unless Administrative Agent shall have received all of the following,
at Administrative Agent's office in New York, New York, duly executed and
delivered and in form, substance and date satisfactory to Administrative Agent:
(a) This Agreement and any other documents that Lenders are to execute
in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) Certain certificates including:
(i) An "Omnibus Certificate" of the secretary and of the
president of General Partner, which shall contain the names and
signatures of the officers of General Partner authorized to execute
Loan Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (1) a copy of
resolutions duly adopted by the Board of Directors of General Partner
and in full force and effect at the time this Agreement is entered
into, authorizing the execution of this Agreement and the other Loan
Documents delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (2)
a copy of the charter documents of each Restricted Person and all
amendments thereto, certified by the appropriate official of such
Restricted Person's state of organization, and (3) a copy of any
bylaws or agreement of limited partnership of each Restricted Person;
and
(ii) A certificate of the president and of the chief financial
officer of General Partner, regarding satisfaction of Section 4.2.
(e) A certificate (or certificates) of the due formation, valid
existence and good standing of each Restricted Person in its respective
state of organization, issued by the appropriate authorities of such
jurisdiction, and certificates of each Restricted Person's good standing
and due qualification to do business, issued by appropriate officials in
any states in which such Restricted Person owns property subject to
Security Documents.
(f) Documents similar to those specified in subsections (d)(i) and (e)
of this section with respect to each Guarantor and the execution by it of
its guaranty of Borrower's Obligations.
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(g) A favorable opinion of Michael Patterson, Esq., General Counsel
for Restricted Persons, substantially in the form set forth in Exhibit E-1,
Fulbright & Jaworski L.L.P., special Texas and New York counsel to
Restricted Persons, substantially in the form set forth in Exhibit E-2,
Andrews & Kurth L.L.P., special counsel to Restricted Persons,
substantially in the form of Exhibit E-3, and local counsel for the states
of Arizona, California, New Mexico and Oklahoma satisfactory to
Administrative Agent.
(h) The Initial Financial Statements.
(i) Certificates or binders evidencing Restricted Persons' insurance
in effect on the date hereof.
(j) Copies of such permits and approvals regarding the property and
business of Restricted Persons as Administrative Agent may request.
(k) A certificate signed by the chief executive officer of General
Partner in form and detail acceptable to Administrative Agent confirming
the insurance that is in effect as of the date hereof and certifying that
such insurance is customary for the businesses conducted by Restricted
Persons and is in compliance with the requirements of this Agreement.
(l) Payment of all commitment, facility, agency and other fees
required to be paid to any Lender pursuant to any Loan Documents or any
commitment agreement heretofore entered into.
(m) The Intercreditor Agreement with the lenders party to the
Marketing Credit Agreement in the form of Exhibit I hereto.
Section 4.2. Additional Conditions to Initial Credit. No Lender has any
obligation to make its first Loan, and LC Issuer has no obligation to issue the
first Letter of Credit unless, prior to or contemporaneously with the initial
Loan or initial Letter of Credit issuance hereunder, the following conditions
precedent have been satisfied:
(a) The Offering and all of the transactions contemplated under the
Offering Documents shall have been consummated, in compliance with the
terms and conditions thereof and all representations and warranties made by
any party to the Offering Documents shall be true and correct.
(b) Each Restricted Person shall have executed and delivered the
Marketing Credit Agreement and all conditions precedent to the Marketing
Credit Agreement shall have been satisfied.
(c) After giving effect to each of the transactions under the Offering
Documents, all representations and warranties made by any Restricted Person
in any Loan Document shall be true on and as of the date of such Loan or
the date of issuance of such
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Letter of Credit as if such representations and warranties had been made as
of the date of such Loan or the date of issuance of such Letter of Credit.
(d) General Partner shall have (i) received sufficient funds from the
net proceeds of the Offering in order to fully repay that portion of the
outstanding principal balance of the term loans under the Existing
Agreement that exceeds $175,000,000 and to repay the revolving credit loans
under the Existing Credit Agreement in full, and (ii) made such repayment
of such term loans and such revolving credit loans.
(e) General Partner shall have delivered to Administrative Agent a
Consolidated balance sheet for Plains MLP and its Subsidiaries certified by
the chief financial officer of General Partner, reflecting compliance with
each event specified in Sections 7.11 through 7.15, inclusive.
(f) Plains MLP shall have a market capitalization of at least
$500,000,000, calculated based upon the total issued partnership units of
Plains MLP and the market price of the publicly held portion of such
partnership units of Plains MLP.
(g) Plains MLP shall have a minimum tangible net worth of
$225,000,000.
(h) Each condition precedent set forth in Section 4.3 has been
satisfied as of such effective date of this Agreement.
Section 4.3. Additional Conditions Precedent. No Lender has any
obligation to make any Loan (including its first), and LC Issuer has no
obligation to issue any Letter of Credit (including its first), unless the
following conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted Person
in any Loan Document shall be true on and as of the date of such Loan or
the date of issuance of such Letter of Credit as if such representations
and warranties had been made as of the date of such Loan or the date of
issuance of such Letter of Credit except to the extent that such
representation or warranty was made as of a specific date or updated,
modified or supplemented as of a subsequent date with the consent of
Majority Lenders.
(b) No Default shall exist at the date of such Loan or the date of
issuance of such Letter of Credit.
(c) No Material Adverse Change shall have occurred to, and no event or
circumstance shall have occurred that could cause a Material Adverse Change
to, Plains MLP's or Borrower's Consolidated financial condition or
businesses since the date of the Initial Financial Statements.
(d) Each Restricted Person shall have performed and complied with all
agreements and conditions required in the Loan Documents to be performed or
complied with by it on or prior to the date of such Loan or the date of
issuance of such Letter of Credit.
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(e) The making of such Loan or the issuance of such Letter of Credit
shall not be prohibited by any Law and shall not subject any Lender or any
LC Issuer to any penalty or other onerous condition under or pursuant to
any such Law.
(f) Administrative Agent shall have received all documents and
instruments which Administrative Agent has then requested, in addition to
those described in Section 4.1 (including opinions of legal counsel for
Restricted Persons and Administrative Agent; corporate documents and
records; documents evidencing governmental authorizations, consents,
approvals, licenses and exemptions; and certificates of public officials
and of officers and representatives of Borrower and other Persons), as to
(i) the accuracy and validity of or compliance with all representations,
warranties and covenants made by any Restricted Person in this Agreement
and the other Loan Documents, (ii) the satisfaction of all conditions
contained herein or therein, and (iii) all other matters pertaining hereto
and thereto. All such additional documents and instruments shall be
satisfactory to Administrative Agent in form, substance and date.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted Persons and
Restricted Persons' businesses, properties and obligations and to induce each
Lender to enter into this Agreement and to extend credit hereunder, Plains MLP
and Borrower represent and warrant to each Lender that:
Section 5.1. No Default. No Restricted Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
Each Restricted Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary except where the failure to
so qualify would not cause a Material Adverse Change. Each Restricted Person
has taken all actions and procedures customarily taken in order to enter, for
the purpose of conducting business or owning property, each jurisdiction outside
the United States wherein the character of the properties owned or held by it or
the nature of the business transacted by it makes such actions and procedures
necessary except where the failure to so qualify would not cause a Material
Adverse Change.
Section 5.3. Authorization. Each Restricted Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
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Section 5.4. No Conflicts or Consents. The execution and delivery by the
various Restricted Persons of the Loan Documents and Offering Documents to which
each is a party, the performance by each of its obligations under such Loan
Documents and Offering Documents, and the consummation of the transactions
contemplated by the various Loan Documents and various Offering Documents, do
not and will not (i) conflict with any provision of (1) any Law, (2) the
organizational documents of any Restricted Person or any of its Affiliates, or
(3) any agreement, judgment, license, order or permit applicable to or binding
upon any Restricted Person or any of its Affiliates, (ii) result in the
acceleration of any Indebtedness owed by any Restricted Person or any of its
Affiliates, or (iii) result in or require the creation of any Lien upon any
assets or properties of any Restricted Person or any of its Affiliates except as
expressly contemplated in the Loan Documents. Except as expressly contemplated
in the Loan Documents or the Offering Documents, no consent, approval,
authorization or order of, and no notice to or filing with, any Tribunal or
third party is required in connection with the execution, delivery or
performance by any Restricted Person of any Loan Document or Offering Document
or to consummate any transactions contemplated by the Loan Documents and the
Offering Documents.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents and the Offering Documents when duly executed and delivered will
be, legal, valid and binding obligations of each Restricted Person which is a
party hereto or thereto, enforceable in accordance with their terms except as
such enforcement may be limited by bankruptcy, insolvency or similar Laws of
general application relating to the enforcement of creditors' rights.
Section 5.6. Initial Financial Statements. Plains MLP has heretofore
delivered to each Lender true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present Plains
MLP's Consolidated financial position at the date thereof and the Consolidated
results of Plains MLP's operations and Consolidated cash flows for the period
thereof. Since the date of the annual Initial Financial Statements no Material
Adverse Change has occurred, except as reflected in the quarterly Initial
Financial Statements or in the Disclosure Schedule. All Initial Financial
Statements were prepared in accordance with GAAP.
Section 5.7. Other Obligations and Restrictions. No Restricted Person
has any outstanding Liabilities of any kind (including contingent obligations,
tax assessments, and unusual forward or long-term commitments) which are, in the
aggregate, material to Plains MLP or material with respect to Plains MLP's
Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in the Disclosure Schedule. Except as shown in the
Initial Financial Statements or disclosed in the Disclosure Schedule, no
Restricted Person is subject to or restricted by any franchise, contract, deed,
charter restriction, or other instrument or restriction which could cause a
Material Adverse Change.
Section 5.8. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Lender in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading as of the date made or deemed made. All
written information furnished after the date hereof by or on behalf of any
Restricted Person to Administrative Agent or any Lender Party in
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connection with this Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect or based on reasonable estimates on the date as of which such
information is stated or certified. There is no fact known to any Restricted
Person that has not been disclosed to each Lender in writing which could cause a
Material Adverse Change.
Section 5.9. Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (i) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which could cause a Material Adverse Change, and (ii) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section 5.10. Labor Disputes and Acts of God. Except as disclosed in the
Disclosure Schedule, neither the business nor the properties of any Restricted
Person has been affected by any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy or other casualty (whether or not covered by insurance), which
could cause a Material Adverse Change.
Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed in the Disclosure Schedule. Except as disclosed in the Initial
Financial Statements or in the Disclosure Schedule, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Affiliates are in
compliance with ERISA in all material respects. No ERISA Affiliate is required
to contribute to, or has any other absolute or contingent liability in respect
of, any "multiemployer plan" as defined in Section 4001 of ERISA. Except as set
forth in the Disclosure Schedule: (i) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Code) exists with respect to any ERISA Plan,
whether or not waived by the Secretary of the Treasury or his delegate, and (ii)
the current value of each ERISA Plan's benefits does not exceed the current
value of such ERISA Plan's assets available for the payment of such benefits by
more than $500,000.
Section 5.12. Compliance with Laws. Except as set forth in the
Disclosure Schedule, each Restricted Person is conducting its businesses in
compliance with all applicable Laws, including Environmental Laws, and has all
permits, licenses and authorizations required in connection with the conduct of
its businesses, except to the extent failure to have any such permit, license or
authorization could not cause a Material Adverse Change. Each Restricted Person
is in compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Law, including applicable
Environmental Law, or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply could not cause a Material
Adverse Change. Without limiting the foregoing, each Restricted Person (i) has
filed and maintained all tariffs applicable to its business with each applicable
commission, (ii) and all such tariffs are in compliance with all Laws
administered or promulgated by each applicable commission and (iii) has imposed
charges on its customers in
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compliance with such tariffs, all contracts applicable to its business and all
applicable Laws. As used herein, "commission" includes the Federal Energy
Regulatory Commission, the Public Utility Commission of the State of California
and each other federal, state or local governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any Restricted
Person or its properties.
Section 5.13. Environmental Laws. As used in this section: "CERCLA"
means the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, "CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System List of the Environmental
Protection Agency, and "Release" has the meaning given such term in 42 U.S.C.
(S) 9601(22). Without limiting the provisions of Section 5.12, and except as
set forth in the Disclosure Schedule:
(a) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed, and no investigation or review is pending or threatened by any
Tribunal or any other Person with respect to any of the following which in the
aggregate could cause a Material Adverse Change: (i) any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release of any
Hazardous Materials, either by any Restricted Person or on any property owned by
any Restricted Person, (ii) any remedial action which might be needed to respond
to any such alleged generation, treatment, storage, recycling, transportation,
disposal, or Release, or (iii) any alleged failure by any Restricted Person to
have any permit, license or authorization required in connection with the
conduct of its business or with respect to any such generation, treatment,
storage, recycling, transportation, disposal, or Release.
(b) No Restricted Person otherwise has any known material contingent
liability in connection with any alleged generation, treatment, storage,
recycling, transportation, disposal, or Release of any Hazardous Materials.
(c) No Restricted Person has handled any Hazardous Materials, other than as
a generator, on any properties now or previously owned or leased by any
Restricted Person to an extent that such handling has caused, or could cause, a
Material Adverse Change.
(d) Except to the extent that the following in the aggregate has not caused
and could not cause a Material Adverse Change:
(i) no PCBs are or have been present at any properties now or
previously owned or leased by any Restricted Person;
(ii) no asbestos is or has been present at any properties now or
previously owned or leased by any Restricted Person;
(iii) there are no underground storage tanks for Hazardous Materials,
active or abandoned, at any properties now or previously owned or leased by
any Restricted Person; and
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(iv) no Hazardous Materials have been Released at, on or under any
properties now or previously owned or leased by any Restricted Person.
(e) No Restricted Person has transported or arranged for the transportation
of any Hazardous Material to any location which is listed on the National
Priorities List under CERCLA, any location listed for possible inclusion on the
National Priorities List by the Environmental Protection Agency in CERCLIS, nor,
except to the extent that has not caused and could not cause a Material Adverse
Change, any location listed on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations which may
lead to claims against any Restricted Person for clean-up costs, remedial work,
damages to natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA.
(f) No property now or previously owned or leased by any Restricted Person
is listed or proposed for listing on the National Priority list promulgated
pursuant to CERCLA, in CERCLIS, nor, except to the extent that has not caused
and could not cause a Material Adverse Change, on any similar state list of
sites requiring investigation or clean-up.
(g) There are no Liens arising under or pursuant to any Environmental Laws
on any of the real properties or properties owned or leased by any Restricted
Person, and no government actions of which Borrower is aware have been taken or
are in process which could subject any of such properties to such Liens; nor
would any Restricted Person be required to place any notice or restriction
relating to the presence of Hazardous Materials at any properties owned by it in
any deed to such properties.
(h) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses for ground water or soil contamination relating
to the Release of Hazardous Materials conducted by or which are in the
possession of any Restricted Person in relation to any properties or facility
now or previously owned or leased by any Restricted Person which have not been
made available to Administrative Agent.
Section 5.14. Names and Places of Business. No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule, the chief executive office and
principal place of business of each Restricted Person are (and for the preceding
five years have been) located at the address of Borrower set out in Section
10.3. Except as indicated in the Disclosure Schedule, no Restricted Person has
any other office or place of business.
Section 5.15. Borrower's Subsidiaries. Borrower does not presently have
any Subsidiary or own any stock in any other corporation or association except
those listed in the Disclosure Schedule. Neither Borrower nor any Restricted
Person is a member of any general or limited partnership, joint venture or
association of any type whatsoever except those listed in the Disclosure
Schedule. Borrower owns, directly or indirectly, the equity interest in each of
its Subsidiaries which is indicated in the Disclosure Schedule.
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Section 5.16. Title to Properties; Licenses. Each Restricted Person has
good and defensible title to all of its material properties and assets, free and
clear of all Liens other than Permitted Liens and of all impediments to the use
of such properties and assets in such Restricted Person's business. Each
Restricted Person possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, and other intellectual property (or
otherwise possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and no Restricted Person is in violation in any material respect of
the terms under which it possesses such intellectual property or the right to
use such intellectual property.
Section 5.17. Government Regulation. Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Investment Company Act of 1940 (as any
of the preceding acts have been amended) or any other Law which regulates the
incurring by such Person of Indebtedness, including Laws relating to common
contract carriers or the sale of electricity, gas, steam, water or other public
utility services. Neither Borrower nor any other Restricted Person is subject
to regulation under the Federal Power Act which would violate, result in a
default of, or prohibit the effectiveness or the performance of any of the
provisions of the Loan Documents.
Section 5.18. Insider. No Restricted Person, nor any Person having
"control" (as that term is defined in 12 U.S.C. (S) 375b(9) or in regulations
promulgated pursuant thereto) of any Restricted Person, is a "director" or an
"executive officer" or "principal shareholder" (as those terms are defined in 12
U.S.C. (S) 375b(8) or (9) or in regulations promulgated pursuant thereto) of any
Lender, of a bank holding company of which any Lender is a Subsidiary or of any
Subsidiary of a bank holding company of which any Lender is a Subsidiary.
Section 5.19. Solvency. Upon giving effect to the issuance of the Notes,
the execution of the Loan Documents by Borrower and each Guarantor and the
consummation of the transactions contemplated hereby, Borrower and each
Guarantor will be solvent (as such term is used in applicable bankruptcy,
liquidation, receivership, insolvency or similar Laws).
Section 5.20. Credit Arrangements. The Disclosure Schedule contains a
complete and correct list, as of the date of this Agreement, of each credit
agreement, loan agreement, indenture, purchase agreement, guaranty or other
arrangement providing for or otherwise relating to any Indebtedness or any
extension of credit (or commitment for any extension of credit) to, or guaranty
by, any Restricted Person, or to which any Restricted Person is subject, other
than the Loan Documents, and the aggregate principal or face amount outstanding
or which may become outstanding under each such arrangement is correctly
described in the Disclosure Schedule. No Restricted Person is subject to any
restriction under any credit agreement, loan agreement, indenture, purchase
agreement, guaranty or other arrangement providing for or otherwise relating to
any Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guaranty by, any Affiliate, other than another Restricted Person.
Section 5.21. Year 2000.
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(a) Restricted Persons have (i) begun analyzing the operations of
Restricted Persons and their Subsidiaries and Affiliates that could be adversely
affected by failure to be become Year 2000 compliant (that is, that computer
applications, imbedded microchips and other systems will be able to perform
date-sensitive functions prior to and after December 31, 1999) and (ii)
developed a plan for becoming Year 2000 compliant in a timely manner, the
implementation of which is on schedule in all material respects. Plains MLP and
Borrower reasonably believe that Restricted Persons and their Affiliates will
become Year 2000 compliant for their operations on a timely basis except to the
extent that a failure to do so could not reasonably be expected to cause a
Material Adverse Change.
(b) Plains MLP and Borrower reasonably believe any suppliers and vendors
that are material to the operations of Restricted Persons or their Subsidiaries
and Affiliates will be Year 2000 compliant for their own computer applications
except to the extent that a failure to do so could not reasonably be expected to
cause a Material Adverse Change.
ARTICLE VI - Affirmative Covenants
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and extend credit hereunder, Plains MLP and Borrower covenant and
agree that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders, or all Lenders as
required under Section 10.1, have previously agreed otherwise:
Section 6.1. Payment and Performance. Each Restricted Person will pay
all amounts due under the Loan Documents, to which it is a party, in accordance
with the terms thereof and will observe, perform and comply with every covenant,
term and condition expressed in the Loan Documents to which it is a party.
Section 6.2. Books, Financial Statements and Reports. Each Restricted
Person will at all times maintain full and accurate books of account and
records. Plains MLP will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to each Lender at Restricted Person's
expense:
(a) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year (i) complete Consolidated financial
statements of Plains MLP together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an unqualified
opinion, based on an audit using generally accepted auditing standards, by
PricewaterhouseCoopers LLP, or other independent certified public
accountants selected by General Partner and acceptable to Majority Lenders,
stating that such Consolidated financial statements have been so prepared
and (ii) supporting unaudited consolidating balance sheets and statements
of income of each other Restricted Person (except for any Restricted Person
whose financial statements are substantially the same as those of Plains
MLP). These financial statements shall contain a Consolidated and
consolidating balance sheet as of the end of such Fiscal Year and
Consolidated and
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consolidating statements of earnings for such Fiscal Year. Such
Consolidated financial statements shall set forth in comparative form the
corresponding figures for the preceding Fiscal Year. In addition, within
ninety (90) days after the end of each Fiscal Year Plains MLP will furnish
a certificate signed by such accountants (i) stating that they have read
this Agreement, (ii) containing calculations showing compliance (or non-
compliance) at the end of such Fiscal Year with the requirements of
Sections 7.11 through 7.15, inclusive, and (iii) further stating that in
making their examination and reporting on the Consolidated financial
statements described above they obtained no knowledge of any Default
existing at the end of such Fiscal Year, or, if they did so conclude that a
Default existed, specifying its nature and period of existence.
(b) As soon as available, and in any event within forty-five (45) days
after the end of each of the first three Fiscal Quarters of each Fiscal
Year, (i) Plains MLP's Consolidated balance sheet as of the end of such
Fiscal Quarter and Consolidated statements of Plains MLP's earnings and
cash flows for such Fiscal Quarter and for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter, and (ii)
supporting consolidating balance sheets and statements of income of each
other Restricted Person (except for any Restricted Person whose financial
statements are substantially the same as those of Plains MLP), all in
reasonable detail and prepared in accordance with GAAP, subject to changes
resulting from normal year-end adjustments; and as soon as available, and
in any event within forty-five (45) days after the end of the last Fiscal
Quarter of each Fiscal Year, Plains MLP's unaudited Consolidated balance
sheet as of the end of such Fiscal Quarter and income statement for such
Fiscal Quarter and for the period from the beginning of the current Fiscal
Year to the end of such Fiscal Quarter. In addition Plains MLP will,
together with each such set of financial statements and each set of
financial statements furnished under subsection (a) of this section,
furnish a certificate in the form of Exhibit D signed by the chief
financial officer of General Partner stating that such financial statements
are accurate and complete in all material respects (subject to normal year-
end adjustments), stating that he has reviewed the Loan Documents,
containing calculations showing compliance (or non-compliance) at the end
of such Fiscal Quarter with the requirements of Sections 7.11 through 7.15,
inclusive and stating that no Default exists at the end of such Fiscal
Quarter or at the time of such certificate or specifying the nature and
period of existence of any such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by Plains MLP to its
unit holders and all registration statements, periodic reports and other
statements and schedules filed by Plains MLP with any securities exchange,
the Securities and Exchange Commission or any similar governmental
authority.
(d) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, a five-year business and financial plan
for Plains MLP (in form reasonably satisfactory to Administrative Agent),
prepared or caused to be prepared by a senior financial officer thereof,
setting forth for the first year thereof, quarterly financial projections
and budgets for Plains MLP, and thereafter yearly financial projections and
budgets for the next four Fiscal Years.
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(e) As soon as available, and in any event within forty-five (45) days
after the end of each month, throughput volume reports setting forth in
detail pipeline volumes of crude oil delivered by Restricted Persons for
such month in connection with, and transportation fees charged and margins
realized by the Restricted Persons for such month delivered through all
pipeline facilities of Plains MLP and its Subsidiaries.
(f) As soon as available, and in any event within forty-five (45) days
after the end of each Fiscal Quarter, a report setting forth volumes and
margins for all marketing activities of Restricted Persons.
(g) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Year, an environmental compliance certificate
signed by the president or chief executive officer of General Partner in
the form attached hereto as Exhibit F. Further, if requested by
Administrative Agent, Restricted Persons shall permit and cooperate with an
environmental and safety review made in connection with the operations of
Restricted Persons' properties one time during each Fiscal Year beginning
with the Fiscal Year 1999, by Pilko & Associates, Inc. or other consultants
selected by Administrative Agent which review shall, if requested by
Administrative Agent, be arranged and supervised by environmental legal
counsel for Administrative Agent, all at Restricted Persons' cost and
expense. The consultant shall render a verbal or written report, as
specified by Administrative Agent, based upon such review at Restricted
Persons' cost and expense and a copy thereof will be provided to Restricted
Persons.
(h) Concurrently with the annual renewal of Restricted Persons'
insurance policies, Restricted Persons shall at their own cost and expense,
if requested by Administrative Agent in writing, cause a certificate or
report to be issued by Administrative Agent's professional insurance
consultants or other insurance consultants satisfactory to Administrative
Agent certifying that Restricted Persons' insurance for the next succeeding
year after such renewal (or for such longer period for which such insurance
is in effect) complies with the provisions of this Agreement and the
Security Documents.
Section 6.3. Other Information and Inspections. In each case subject to
the last sentence of this Section 6.3, each Restricted Person will furnish to
each Lender any information which Administrative Agent or any Lender may from
time to time request concerning any covenant, provision or condition of the Loan
Documents or any matter in connection with Restricted Persons' businesses and
operations. In each case subject to the last sentence of this Section 6.3, each
Restricted Person will permit representatives appointed by Administrative Agent
(including independent accountants, auditors, agents, attorneys, appraisers and
any other Persons) to visit and inspect during normal business hours any of such
Restricted Person's property, including its books of account, other books and
records, and any facilities or other business assets, and to make extra copies
therefrom and photocopies and photographs thereof, and to write down and record
any information such representatives obtain, and each Restricted Person shall
permit Administrative Agent or its representatives to investigate and verify the
accuracy of the information furnished to Administrative Agent or any Lender in
connection with the Loan Documents and to discuss all such matters with its
officers, employees and, upon prior notice to
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Borrower, its representatives. Each of the foregoing inspections shall be made
subject to compliance with applicable safety standards and the same conditions
applicable to any Restricted Person in respect of property of that Restricted
Person on the premises of Persons other than a Restricted Person or an Affiliate
of a Restricted Person, and all information, books and records furnished or
requested to be furnished, or of which copies, photocopies or photographs are
made or requested to be made, all information to be investigated or verified and
all discussions conducted with any officer, employee or representative of any
Restricted Person shall be subject to any applicable attorney-client privilege
exceptions which the Restricted Person determines is reasonably necessary and
compliance with conditions to disclosures under non-disclosure agreements
between any Restricted Person and Persons other than a Restricted Person or an
Affiliate of a Restricted Person and the express undertaking of each Person
acting at the direction of or on behalf of any Lender Party to be bound by the
confidentiality provisions of Section 10.6 of this Agreement.
Section 6.4. Notice of Material Events and Change of Address. Each
Restricted Person will notify each Lender Party, not later than five (5)
Business Days after any executive officer of Restricted Persons has knowledge
thereof, stating that such notice is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed by any
Restricted Person or of any default by any Restricted Person under any
indenture, mortgage, agreement, contract or other instrument to which any
of them is a party or by which any of them or any of their properties is
bound, if such acceleration or default could cause a Material Adverse
Change,
(d) the occurrence of any Termination Event,
(e) any claim of $1,000,000 or more, any notice of potential liability
under any Environmental Laws which might be reasonably likely to exceed
such amount, or any other material adverse claim asserted against any
Restricted Person or with respect to any Restricted Person's properties
taken as a whole, and
(f) the filing of any suit or proceeding against any Restricted Person
in which an adverse decision could cause a Material Adverse Change.
Upon the occurrence of any of the foregoing Restricted Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Restricted Persons will
also notify Administrative Agent and Administrative Agent's counsel in writing
at least twenty Business Days prior to the date that any Restricted Person
changes its name or the location of its chief executive office or principal
place of business or the place where it keeps its
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books and records concerning the Collateral, furnishing with such notice any
necessary financing statement amendments or requesting Administrative Agent and
its counsel to prepare the same.
Borrower will promptly notify Administrative Agent in the event Borrower
determines that any computer application which is material to the operations of
Borrower, its Subsidiaries, its Affiliates or any of its material vendors or
suppliers will not be fully Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to cause a Material
Adverse Change.
Section 6.5. Maintenance of Properties. Each Restricted Person will
maintain, preserve, protect, and keep all Collateral and all other property used
or useful in the conduct of its business in good condition (ordinary wear and
tear excepted) and in compliance with all applicable Laws, and will from time to
time make all repairs, renewals and replacements needed to enable the business
and operations carried on in connection therewith to be promptly and
advantageously conducted at all times.
Section 6.6. Maintenance of Existence and Qualifications. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure so to qualify will not cause a Material Adverse Change.
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted
Person will (a) timely file all required tax returns (including any extensions);
(b) timely pay all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income, profits or property; (c) within one hundred
twenty (120) days after the date such goods are delivered or such services are
rendered, pay all Liabilities owed by it on ordinary trade terms to vendors,
suppliers and other Persons providing goods and services used by it in the
ordinary course of its business; (d) pay and discharge when due all other
Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals
and reserves for all of the foregoing in accordance with GAAP. Each Restricted
Person may, however, delay paying or discharging any of the foregoing so long as
it is in good faith contesting the validity thereof by appropriate proceedings,
if necessary, and has set aside on its books adequate reserves therefor which
are required by GAAP.
Section 6.8. Insurance. Each Restricted Person shall at all times
maintain insurance for its property in accordance with the Insurance Schedule,
which insurance shall be by financially sound and reputable insurers. Borrower
will maintain any additional insurance coverage as described in the respective
Security Documents. Upon demand by Administrative Agent any insurance policies
covering Collateral shall be endorsed (a) to provide for payment of losses to
Administrative Agent as its interests may appear, (b) to provide that such
policies may not be canceled or reduced or affected in any material manner for
any reason without fifteen days prior notice to Administrative Agent, and (c) to
provide for any other matters specified in any applicable Security Document or
which Administrative Agent may reasonably require. Each Restricted Person shall
at all times maintain insurance against its liability for injury to persons or
property in accordance with the Insurance Schedule, which insurance shall be by
financially sound and reputable insurers. Without limiting the foregoing, each
Restricted Person shall at all time maintain liability insurance in accordance
with the Insurance Schedule.
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Section 6.9. Performance on Borrower's Behalf. If any Restricted Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Administrative Agent may
pay the same after notice of such payment by Administrative Agent is given to
Borrower. Borrower shall immediately reimburse Administrative Agent for any
such payments and each amount paid by Administrative Agent shall constitute an
Obligation owed hereunder which is due and payable on the date such amount is
paid by Administrative Agent.
Section 6.10. Interest. Borrower hereby promises to each Lender to pay
interest at the Default Rate on all Obligations (including Obligations to pay
fees or to reimburse or indemnify any Lender) which Borrower has in this
Agreement promised to pay to such Lender and which are not paid when due. Such
interest shall accrue from the date such Obligations become due until they are
paid.
Section 6.11. Compliance with Agreements and Law. Each Restricted Person
will perform all material obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease, and
franchise, and each material agreement, contract or other instrument or
obligation to which it is a party or by which it or any of its properties is
bound. Each Restricted Person will conduct its business and affairs in
compliance with all Laws applicable thereto.
Section 6.12. Environmental Matters; Environmental Reviews.
(a) Each Restricted Person will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Restricted Person as well
as all contractual obligations and agreements with respect to environmental
remediation or other environmental matters, and shall obtain, at or prior to the
time required by applicable Environmental Laws, all environmental, health and
safety permits, licenses and other authorizations necessary for its operations
and will maintain such authorizations in full force and effect.
(b) Each Restricted Person will promptly furnish to Administrative Agent
all written notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any Restricted Person or
General Partner, or of which it has notice, pending or threatened against any
Restricted Person, the potential liability of which exceeds $1,000,000 or would
cause a Material Adverse Change if resolved adversely against any Restricted
Person, by any governmental authority with respect to any alleged violation of
or non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its properties or the
operation of its business.
(c) Each Restricted Person will promptly furnish to Administrative Agent
all requests for information, notices of claim, demand letters, and other
notifications, received by any Restricted Person or General Partner in
connection with its ownership or use of its properties or the conduct of its
business, relating to potential responsibility with respect to any investigation
or clean-up of Hazardous Material at any location, the potential liability of
which exceeds $1,000,000 or would cause a Material Adverse Change if resolved
adversely against any Restricted Person.
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Section 6.13. Evidence of Compliance. Subject to the last sentence of
Section 6.3, each Restricted Person will furnish to each Lender at such
Restricted Person's expense all evidence which Administrative Agent from time to
time reasonably requests in writing as to the accuracy and validity of or
compliance with all representations, warranties and covenants made by any
Restricted Person in the Loan Documents, the satisfaction of all conditions
contained therein, and all other matters pertaining thereto.
Section 6.14. Agreement to Deliver Security Documents. Restricted
Persons will deliver to further secure the Obligations whenever requested by
Administrative Agent in its sole and absolute discretion, deeds of trust,
mortgages, chattel mortgages, security agreements, financing statements and
other Security Documents in form and substance satisfactory to Administrative
Agent for the purpose of granting, confirming, and perfecting first and prior
liens or security interests in any real or personal property now owned or
hereafter acquired by any Restricted Person.
Section 6.15. Perfection and Protection of Security Interests and Liens.
Each Restricted Person will from time to time deliver to Administrative Agent
any financing statements, continuation statements, extension agreements and
other documents, properly completed and executed (and acknowledged when
required) by Restricted Persons in form and substance satisfactory to
Administrative Agent, which Administrative Agent requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
Section 6.16. Bank Accounts; Offset. To secure the repayment of the
Obligations, each Restricted Person hereby grants to each Lender a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of any Lender at common Law, under the
Loan Documents, or otherwise, and each of which shall be upon and against (a)
any and all moneys, securities or other property (and the proceeds therefrom) of
such Restricted Person now or hereafter held or received by or in transit to any
Lender from or for the account of such Restricted Person, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and
all deposits (general or special, time or demand, provisional or final) of such
Restricted Person with any Lender, and (c) any other credits and claims of such
Restricted Person at any time existing against any Lender, including claims
under certificates of deposit. At any time and from time to time during the
continuance of any Event of Default, each Lender is hereby authorized to
foreclose upon, or to offset against the Obligations then due and payable (in
either case without notice to any Restricted Person), any and all items herein
above referred to. The remedies of foreclosure and offset are separate and
cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.
Section 6.17. Guaranties of Subsidiaries. Each Subsidiary of Plains MLP
now existing or created, acquired or coming into existence after the date hereof
shall, promptly upon request by Administrative Agent, execute and deliver to
Administrative Agent an absolute and unconditional guaranty of the timely
repayment of the Obligations and the due and punctual performance of the
obligations of Borrower hereunder, which guaranty shall be satisfactory to
Administrative Agent in form and substance. Each Subsidiary of Plains MLP
existing on the date hereof shall duly execute and deliver such a guaranty prior
to the making of any Loan hereunder. Plains MLP will
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cause each of its Subsidiaries to deliver to Administrative Agent,
simultaneously with its delivery of such a guaranty, written evidence
satisfactory to Administrative Agent and its counsel that such Subsidiary has
taken all corporate or partnership action necessary to duly approve and
authorize its execution, delivery and performance of such guaranty and any other
documents which it is required to execute.
Section 6.18. Interest Rate Hedging Agreements. Borrower shall at all
times maintain interest rate Hedging Contracts which are: (a) for combined
durations as of any day of not less than 24 months following such time, (b) in
combined notional amounts not less than fifty percent (50%) of the outstanding
principal balance of the Term Loans, (c) in compliance with Section 7.3, and (d)
otherwise on terms acceptable to Administrative Agent in its sole discretion.
Section 6.19. Compliance with Agreements. Each Restricted Person shall
observe, perform or comply with any agreement with any Person or any term or
condition of any instrument, if such agreement or instrument is materially
significant to such Restricted Person or to Restricted Persons on a Consolidated
basis or materially significant to any Guarantor, and such failure is not
remedied within the applicable period of grace (if any) provided in such
agreement or instrument.
Section 6.20. Year 2000.
(a) Restricted Persons (i) no later than December 31, 1998 shall have
completed the analysis of the operations of Restricted Persons and their
Affiliates that could be adversely affected by failure to become Year 2000
compliant (that is, that computer applications, imbedded microchips and other
systems will be able to perform date-sensitive functions prior to and after
December 31, 1999) and developed a plan for Restricted Persons and their
Affiliates for becoming Year 2000 compliant in a timely manner, and (ii) shall
at all times after development of such plan implement such plan in all material
respects, in a timely manner, and in accordance with the schedule of such plan.
Contemporaneously with the delivery of each compliance certificate under Section
6.2 (a) or (b) on and after December 31, 1998, Each Restricted Person shall
certify that it reasonably believes that Restricted Persons and their Affiliates
will become Year 2000 compliant for their operations on a timely basis except to
the extent that a failure to do so could not reasonably be expected to cause a
Material Adverse Change.
(b) Contemporaneously with the delivery of each compliance certificate
under Section 6.2 (a) or (b) on and after December 31, 1998, Plains MLP shall
certify that it reasonably believes any suppliers and vendors that are material
to the operations of Plains MLP or its Subsidiaries and Affiliates will be Year
2000 compliant for their own computer applications except to the extent that a
failure to do so could not reasonably be expected to cause a Material Adverse
Change.
Section 6.21. Rents. By the terms of the various Security Documents,
certain Restricted Persons are and will be assigning to Administrative Agent,
for the benefit of Lender Parties, all of the "Rents" (as defined therein)
accruing to the property covered thereby. Notwithstanding any such assignments,
so long as no Default has occurred and is continuing, (i) such Restricted
Persons may continue to receive and collect from the payors of such Rents all
such Rents, subject, however, to the Liens created under the Security Documents,
which Liens are hereby affirmed
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and ratified, and free and clear of such Liens, use the proceeds of the Rents,
and (ii) the Administrative Agent will not notify the obligors of such Rents or
take any other action to cause proceeds thereof to be remitted to the
Administrative Agent. Upon the occurrence of a Default, Administrative Agent may
exercise all rights and remedies granted under the Security Documents, including
the right to obtain possession of all Rents then held by such Restricted Persons
or to receive directly from the payors of such Rents all other Rents until such
time as such Default is no longer continuing. If the Administrative Agent shall
receive any Rent proceeds from any payor at any time other than during the
continuance of a Default, then it shall notify Borrower thereof and (i) upon
request and pursuant to the instructions of Borrower, it shall, if no Default is
then continuing, remit such proceeds to the Borrower and (ii) at the request and
expense of Borrower, execute and deliver a letter to such payors confirming
Restricted Persons' right to receive and collect Rents until otherwise notified
by Administrative Agent. In no case shall any failure, whether purposed or
inadvertent, by Administrative Agent to collect directly any such Rents
constitute in any way a waiver, remission or release of any of its rights under
the Security Documents, nor shall any release of any Rents by Administrative
Agent to such Restricted Persons constitute a waiver, remission, or release of
any other Rents or of any rights of Administrative Agent to collect other Rents
thereafter.
Section 6.22. Working Capital Borrowings. For at least fifteen (15)
consecutive calendar days in each Fiscal Year, the aggregate outstanding
principal balance of all Working Capital Borrowings shall be less than or equal
to $8,000,000.
ARTICLE VII - Negative Covenants
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and make the Loans, Plains MLP and Borrower covenant and agree
that until the full and final payment of the Obligations and the termination of
this Agreement, unless Majority Lenders, or all Lenders as required under
Section 10.1, have previously agreed otherwise:
Section 7.1. Indebtedness. No Restricted Person will in any manner owe
or be liable for Indebtedness except:
(a) the Obligations;
(b) Indebtedness arising under Hedging Contracts permitted under Section
7.3;
(c) Indebtedness of any Restricted Person owing to another Restricted
Person;
(d) Liabilities with respect to obligations to deliver crude oil or to
render terminaling or storage services in consideration for advance payments to
a Restricted Person provided such delivery or rendering, as applicable, is to be
made within 60 days after such payment;
(e) Indebtedness under the Marketing Credit Agreement, provided that the
principal amount of loans and face amount of letters of credit thereunder at any
one time outstanding shall not exceed $175,000,000;
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(f) guaranties by Plains MLP of trade payables of any Restricted Person
incurred and paid in the ordinary course of business on ordinary trade terms;
and
(g) other Indebtedness not to exceed in the aggregate in respect of all
Restricted Persons the principal amount of $25,000,000 at any one time
outstanding.
Section 7.2. Limitation on Liens. No Restricted Person will create,
assume or permit to exist any Lien upon any of the properties or assets which it
now owns or hereafter acquires, except the following ("Permitted Liens"):
(a) Liens created pursuant to this Agreement or the Security Documents and
Liens existing on the date of this Agreement and listed in the Disclosure
Schedule or Liens created pursuant to the Marketing Credit Agreement, subject to
the terms of the Intercreditor Agreement referred to in Section 4.1(m).
(b) Liens imposed by any governmental authority for taxes, assessments or
charges not yet due or the validity of which is being contested in good faith
and by appropriate proceedings, if necessary, for which adequate reserves are
maintained on the books of any Restricted Person in accordance with GAAP;
(c) pledges or deposits under worker's compensation, unemployment insurance
or other social security legislation;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's, or other like Liens (including without limitation, Liens on property
of Marketing in the possession of storage facilities, pipelines or barges)
arising in the ordinary course of business for amounts which are not more than
60 days past due or the validity of which is being contested in good faith and
by appropriate proceedings, if necessary, and for which adequate reserves are
maintained on the books of any Restricted Person in accordance with GAAP;
(e) deposits of cash or securities to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of real
property or minor imperfections in title thereto which, in the aggregate, are
not material in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the business of any Restricted Person;
(g) Liens in respect of operating leases and Capital Leases permitted under
Section 7.1;
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(h) Liens upon any property or assets acquired after the date hereof by a
Restricted Person, each of which either (i) existed on such property or asset
before the time of its acquisition and was not created in anticipation thereof,
or (ii) was created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
the cost of construction) of such property or asset; provided that no such Lien
shall extend to or cover any property or asset of a Restricted Person other than
the property or asset so acquired (or constructed) and the Indebtedness secured
thereby is permitted under Section 7.1(g) hereof; and any extension, renewal,
refinancing, refunding or replacement (or successive extensions, renewals,
refinancings, refundings or replacements), in whole or part, of the foregoing,
provided, however, that such Liens shall not cover or secure any additional
Indebtedness, obligations, property or asset;
(i) rights reserved to or vested in any governmental authority by the terms
of any right, power, franchise, grant, license or permit, or by any provision of
law, to revoke or terminate any such right, power, franchise, grant, license or
permit or to condemn or acquire by eminent domain or similar process;
(j) rights reserved to or vested by Law in any governmental authority to in
any manner, control or regulate in any manner any of the properties of any
Restricted Person or the use thereof or the rights and interests of any
Restricted Person therein, in any manner under any and all Laws;
(k) rights reserved to the grantors of any properties of any Restricted
Person, and the restrictions, conditions, restrictive covenants and limitations,
in respect thereto, pursuant to the terms, conditions and provisions of any
rights-of-way agreements, contracts or other agreements therewith;
(l) Inchoate Liens in respect of pending litigation or with respect to a
judgment which has not resulted in an Event of Default under Section 8.1; and
(m) Liens on property of Marketing permitted pursuant to the terms of the
Marketing Credit Agreement.
Section 7.3. Hedging Contracts. No Restricted Person will be a party to
or in any manner be liable on any Hedging Contract, except:
(a) Hedging Contracts entered into by a Restricted Person with the purpose
and effect of fixing interest rates on a principal amount of indebtedness of
such Restricted Person that is accruing interest at a variable rate, provided
that (i) the aggregate notional amount of such contracts never exceeds one
hundred percent (100%) of the anticipated outstanding principal balance of the
indebtedness to be hedged by such contracts or an average of such principal
balances calculated using a generally accepted method of matching interest swap
contracts to declining principal balances, (ii) the floating rate index of each
such contract generally matches the index used to determine the floating rates
of interest on the corresponding indebtedness to be hedged by such contract and
(iii) each such contract is with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is a Lender or one
of its
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Affiliates) at the time the contract is made has long-term unsecured and
unenhanced debt obligations rated AA or Aa2 or better, respectively, by either
Rating Agency or is an investment grade-rated industry participant or otherwise
acceptable to Majority Lenders.
(b) Hedging Contracts entered into with the purpose and effect of fixing
prices on crude oil then owned by a Restricted Person or which a Restricted
Person is then obligated to purchase, provided that at all times: (i) no such
contract fixes a price for a term of more than twelve (12) months, except for
time trades in which the length of time between the purchase and sale contracts
shall not exceed thirty-six (36) months and further provided that such time
trades shall not exceed 30% of the Cushing Terminal's storage capacity; (ii)
with respect to crude oil constituting the linefill carried in the All American
Pipeline, the aggregate amount of oil so hedged at any one time does not exceed
500,000 barrels, (iii) with respect to crude oil owned by Restricted Persons
other than linefill carried in the All American Pipeline, the aggregate amount
of such other crude oil so hedged at any one time does not exceed the aggregate
Open Position at such time, (iv) such contract is entered into for the purpose
of hedging the price risk on oil anticipated to be disposed of and for which no
other fixed sale price or other price fixing arrangement exists, and (v) each
such contract is either (A) with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is a Lender Party
or one of its Affiliates) at the time the contract is made has long-term
unsecured and unenhanced debt obligations rated AA or Aa2 or better,
respectively, by either Rating Agency or (B) entered into on the New York
Mercantile Exchange ("Nymex") through a broker listed on the Disclosure Schedule
or otherwise approved by Majority Lenders; provided that if a Nymex position is
converted to a physical position by way of an "exchange for physicals" or an
"alternative delivery procedure" then such Restricted Person may extend credit
in connection with such physical position so long as such credit would comply
with the credit requirements of the definition of "Approved Eligible
Receivables."
Section 7.4. Limitation on Mergers, Issuances of Securities. Except as
expressly provided in this section, no Restricted Person will (a) enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), (b) acquire any
business or property from, or capital stock of, or be a party to any acquisition
of, any Person except for purchases of inventory and other property to be sold
or used in the ordinary course of business and Investments permitted under
Section 7.7 hereof or (c) sell, transfer, lease, exchange, alienate or
otherwise dispose of, in one transaction or a series of transactions, any part
of its business or property, whether now owned or hereafter acquired, except for
sales or transfers not prohibited by under Section 7.5 hereof. Any Person,
other than Borrower, that is a Subsidiary of a Restricted Person may, however,
be merged into or consolidated with (i) another Subsidiary of such Restricted
Person, so long as a Guarantor is the surviving business entity, or (ii such
Restricted Person, so long as such Restricted Person is the surviving business
entity. Plains MLP will not issue any securities other than (i) limited
partnership interests and any options or warrants giving the holders thereof
only the right to acquire such interests, (ii) general or subordinate
partnership interests issued to Resources or a Wholly Owned Subsidiary of
Resources and (iii) debt securities permitted by Section 7.1(g). No Subsidiary
of Plains MLP will issue any additional shares of its capital stock or other
securities or any options, warrants or other rights to acquire such additional
shares or other securities except a direct Subsidiary of a Restricted Person may
issue additional shares or other securities to such
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Restricted Person, to Plains MLP or to General Partner so long as such
Subsidiary is a Wholly Owned Subsidiary of Plains MLP after giving effect
thereto. No Subsidiary of Borrower which is a partnership will allow any
diminution of Borrower's interest (direct or indirect) therein.
Section 7.5. Limitation on Sales of Property. No Restricted Person will
sell, transfer, lease, exchange, alienate or dispose of any Collateral or any of
its material assets or properties or any material interest therein except:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value;
(b) inventory (including pipeline linefill) which is sold in the ordinary
course of business on ordinary trade terms;
(c) in other property which is sold for fair consideration not in the
aggregate in excess of $10,000,000 in any Fiscal Year, the sale of which will
not materially impair or diminish the value of the Collateral or any Restricted
Person's financial condition, business or operations; and
(d) sales or transfers, subject to the Security Documents, by a Person
(other than Borrower) that is a Subsidiary of a Restricted Person to such
Restricted Person or to a Wholly Owned Subsidiary of such Restricted Person that
is a Guarantor.
No Restricted Person will sell, transfer or otherwise dispose of capital stock
of or interest in any of its Subsidiaries except to Plains MLP or a Wholly Owned
Subsidiary of Plains MLP. No Restricted Person will discount, sell, pledge or
assign any notes payable to it, accounts receivable or future income. So long
as no Default then exists, Administrative Agent will, at Borrower's request and
expense, execute a release, satisfactory to Borrower and Administrative Agent,
of any Collateral so sold, transferred, leased, exchanged, alienated or disposed
of pursuant to the clause (a) or (c) of this Section.
Section 7.6. Limitation on Dividends and Redemptions. No Restricted
Person will declare or pay any dividends on, or make any other distribution in
respect of, any class of its capital stock or any partnership or other interest
in it, nor will any Restricted Person directly or indirectly make any capital
contribution to or purchase, redeem, acquire or retire any shares of the capital
stock of or partnership interests in any Restricted Person (whether such
interests are now or hereafter issued, outstanding or created), or cause or
permit any reduction or retirement of the capital stock of any Restricted
Person, while the Revolver Loan is outstanding. Notwithstanding the foregoing,
but subject to Section 7.5, (i) Subsidiaries of Plains MLP, Borrower, or of any
Guarantor shall not be restricted, directly or indirectly, from declaring and
paying dividends or making any other distributions to Plains MLP, Borrower, or
any such Guarantor, respectively, (ii) no Restricted Person shall be restricted
from making capital contributions to a Wholly Owned Subsidiary of such
Restricted Person that is a Guarantor, and (iii) so long as no Default or Event
of Default has occurred and is continuing or would result therefrom, Plains MLP
shall not be restricted from (A) distributing Available Cash (other than
amounts required to be applied as otherwise required in any Loan Document) to
its partners in accordance with the Partnership
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Agreement or (B) purchasing its partnership units on the open market in
connection with the Incentive and Option Plans.
Section 7.7. Limitation on Investments and New Businesses. No Restricted
Person will (a) make any expenditure or commitment or incur any obligation or
enter into or engage in any transaction except in the ordinary course of
business, (b) engage directly or indirectly in any business or conduct any
operations except in connection with or incidental to its present businesses and
operations, (c) make any acquisitions of or capital contributions to or other
Investments in any Person, other than Permitted Investments and Permitted
Acquisitions, or (d) make any acquisitions of properties other than Permitted
Acquisitions. All transactions permitted under the foregoing subsections (a)
through (d), inclusive, are subject to Section 7.5.
Section 7.8. Limitation on Credit Extensions. Except for Permitted
Investments and Hedging Contracts permitted under Section 7.3(b) hereof, no
Restricted Person will extend credit, make advances or make loans other than
normal and prudent extensions of credit to customers buying goods and services
in the ordinary course of business or to another Restricted Person in the
ordinary course of business, which extensions shall not be for longer periods
than those extended by similar businesses operated in a normal and prudent
manner.
Section 7.9. Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of its Affiliates except: (a)
transactions among Plains MLP and Wholly Owned Subsidiaries of Plains MLP,
subject to the other provisions of this Agreement, (b) transactions governed by
the Affiliate Agreements, and (c) transactions entered into in the ordinary
course of business of such Restricted Person on terms which are no less
favorable to such Restricted Person than those which would have been obtainable
at the time in arm's-length transactions with Persons other than such
Affiliates.
Section 7.10. Prohibited Contracts. Except as expressly provided for in
the Loan Documents and as described in the Disclosure Schedule, no Restricted
Person will, directly or indirectly, enter into, create, or otherwise allow to
exist any contract or other consensual restriction on the ability of any
Subsidiary of Plains MLP, including but not limited to Borrower and any
Subsidiary of Borrower to: (a) pay dividends or make other distributions to
Borrower or Plains MLP, (b) redeem equity interests held in it by Borrower or
Plains MLP, (c) repay loans and other indebtedness owing by it to Borrower or
Plains MLP, or (d) transfer any of its assets to Borrower or Plains MLP. No
Restricted Person will enter into any "take-or-pay" contract or other contract
or arrangement for the purchase of goods or services which obligates it to pay
for such goods or service regardless of whether they are delivered or furnished
to it. No Restricted Persons will amend, modify or release any of the Affiliate
Agreements. No Restricted Person will amend or permit any amendment to any
contract or lease which releases, qualifies, limits, makes contingent or
otherwise detrimentally affects the rights and benefits of Administrative Agent
or any Lender under or acquired pursuant to any Security Documents. No ERISA
Affiliate will incur any obligation to contribute to any "multiemployer plan" as
defined in Section 4001 of ERISA that is subject to Title IV of ERISA.
Section 7.11. Current Ratio. The ratio of (i) the sum of Plains MLP's
Consolidated current assets plus the excess, if any, of the Revolver Commitment
over the Revolver Usage to
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(ii) Plains MLP's Consolidated current liabilities will never be less than 1.0
to 1.0. For purposes of this section, Plains MLP's Consolidated current
liabilities will be calculated without including (a) any payments of principal
on the Notes which are required to be repaid within one year from the time of
calculation and (b) all Liabilities arising under permitted Hedging Contracts.
Section 7.12. Debt Coverage Ratio. At the end of any Fiscal Quarter, the
ratio of (a) Consolidated Funded Indebtedness to (b) Consolidated EBITDA for the
four Fiscal Quarter period ending with such Fiscal Quarter will not be greater
than 5.0 to 1.0.
Section 7.13. Interest Coverage Ratio. At the end of any Fiscal Quarter,
the ratio of (a) Consolidated EBITDA to (b) Interest Expense for the four-Fiscal
Quarter period ending with such Fiscal Quarter will not be less than 3.0 to 1.0.
Section 7.14. Fixed Charge Coverage Ratio. At the end of any Fiscal
Quarter, the ratio of (a) the sum of Consolidated EBITDA plus Consolidated Lease
Rentals to (b) the sum of Interest Expense plus Consolidated Lease Rentals plus
any principal payments due on any Indebtedness during the next four-Fiscal
Quarter period (exclusive of principal payments due on the Loans or on any
Indebtedness under the Marketing Credit Agreement) plus capital expenditure
required to maintain the assets and properties of the Restricted Persons in
accordance with the covenants contained in each Loan Document, in each case for
the four-Fiscal Quarter period ending with such Fiscal Quarter will not be less
than 1.25 to 1 for any such period.
Section 7.15. Debt to Capital Ratio. The ratio of (a) all Consolidated
Funded Indebtedness to (b) the sum of Consolidated Funded Indebtedness plus
Consolidated Net Worth will never be greater than .60 to 1.0 at any time.
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events constitutes
an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay the principal component of any Loan
or any reimbursement obligation with respect to any Letter of Credit when due
and payable, whether at a date for the payment of a fixed installment or as a
contingent or other payment becomes due and payable or as a result of
acceleration or otherwise;
(b) Any Restricted Person fails to pay any Obligation (other than the
Obligations in subsection (a) above) when due and payable, whether at a date for
the payment of a fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise, within three
Business Days after the same becomes due;
(c) Any event defined as a "default" or "event of default" in any Loan
Document occurs, and the same is not remedied within the applicable period of
grace (if any) provided in such Loan Document;
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(d) Any Restricted Person fails to duly observe, perform or comply with any
covenant, agreement or provision of Section 6.4 or Article VII;
(e) Any Restricted Person fails (other than as referred to in subsections
(a), (b), (c) or (d) above) to duly observe, perform or comply with any
covenant, agreement, condition or provision of any Loan Document to which it is
a party, and such failure remains unremedied for a period of thirty (30) days
after notice of such failure is given by Administrative Agent to Borrower;
(f) Any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Restricted Person in connection with any Loan
Document shall prove to have been false or incorrect in any material respect on
any date on or as of which made, or any Loan Document at any time ceases to be
valid, binding and enforceable as warranted in Section 5.5 for any reason other
than its release or subordination by Administrative Agent;
(g) Any Restricted Person shall default in the payment when due of any
principal of or interest on any of its other Indebtedness in excess of
$2,500,000 in the aggregate (other than Indebtedness the validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves with respect thereto are maintained on the books of such Restricted
Person in accordance with GAAP), or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if the effect of such event is to cause, or (with the giving of any
notice or the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, such Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity;
(h) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Code) in excess of $500,000 exists with respect to any ERISA Plan,
whether or not waived by the Secretary of the Treasury or his delegate, or (ii)
any Termination Event occurs with respect to any ERISA Plan and the then current
value of such ERISA Plan's benefit liabilities exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefit liabilities
by more than $500,000 (or in the case of a Termination Event involving the
withdrawal of a substantial employer, the withdrawing employer's proportionate
share of such excess exceeds such amount);
(i) General Partner or any Restricted Person:
(i) has entered against it of a judgment, decree or order for relief
by a Tribunal of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar Law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it, in each case, which remains undismissed for a period
of sixty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the federal
Bankruptcy Code, as from
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time to time amended; or applies for or consents to the entry of an order
for relief in an involuntary case under any such Law; or makes a general
assignment for the benefit of creditors; or is generally unable to pay (or
admits in writing its inability to so pay) its debts as such debts become
due; or takes corporate or other action to authorize any of the foregoing;
or
(iii) has entered against it the appointment of or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets in a proceeding
brought against or initiated by it, and such appointment or taking
possession is neither made ineffective nor discharged within sixty days
after the making thereof, or such appointment or taking possession is at
any time consented to, requested by, or acquiesced to by it; or
(iv) has entered against it the appointment of or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of any part of the Collateral of a value in excess of
$2,500,000 in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor discharged
within sixty days after the making thereof, or such appointment or taking
possession is at any time consented to, requested by, or acquiesced to by
it; or
(v) has entered against it a final judgment for the payment of money
in excess of $2,500,000 (in each case not covered by insurance satisfactory
to Administrative Agent in its discretion), unless the same is stayed or
discharged within thirty days after the date of entry thereof or an appeal
or appropriate proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(vi) suffers a writ or warrant of attachment or any similar process
to be issued by any Tribunal against all or any substantial part of its
assets or any part of the Collateral of a value in excess of $2,500,000,
and such writ or warrant of attachment or any similar process is not stayed
or released within thirty days after the entry or levy thereof or after any
stay is vacated or set aside;
(j) General Partner shall default in the payment when due of any principal
of or interest on any of its Indebtedness in excess of $1,000,000 in the
aggregate, or any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Indebtedness shall occur if the
effect of such event is to cause, or (with the giving of any notice or the lapse
of time or both) to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by redemption,
purchase, offer to purchase or otherwise), prior to its stated maturity; or
(k) Any Change in Control occurs.
Upon the occurrence of an Event of Default described in subsection (i)(i),
(i)(ii) or (i)(iii) of this section with respect to Borrower or Plains MLP, all
of the Obligations shall thereupon be immediately due and payable, without
demand, presentment, notice of demand or of dishonor and
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nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by Borrower and each Restricted
Person who at any time ratifies or approves this Agreement. Upon any such
acceleration, any obligation of any Lender to make any further Loans and any
obligation of LC Issuer to issue Letters of Credit hereunder shall be
permanently terminated. During the continuance of any other Event of Default,
Administrative Agent at any time and from time to time may (and upon written
instructions from Majority Lenders, Administrative Agent shall), without notice
to Borrower or any other Restricted Person, do either or both of the following:
(1) terminate any obligation of Lenders to make Loans hereunder and any
obligation of LC Issuer to issue Letters of Credit hereunder, and (2) declare
any or all of the Obligations immediately due and payable, and all such
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Lender Party
may enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Lender Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.
ARTICLE IX - Administrative Agent
Section 9.1. Appointment and Authority. Each Lender Party hereby
irrevocably authorizes Administrative Agent, and Administrative Agent hereby
undertakes, to receive payments of principal, interest and other amounts due
hereunder as specified herein and to take all other actions and to exercise such
powers under the Loan Documents as are specifically delegated to Administrative
Agent by the terms hereof or thereof, together with all other powers reasonably
incidental thereto. The relationship of Administrative Agent to the other
Lender Parties is only that of one commercial lender acting as administrative
agent for others, and nothing in the Loan Documents shall be construed to
constitute Administrative Agent a trustee or other fiduciary for any Lender
Party or any holder of any participation in a Note nor to impose on
Administrative Agent duties and obligations other than those expressly provided
for in the Loan Documents. With respect to any matters not expressly provided
for in the Loan Documents and any matters which the Loan Documents place within
the discretion of Administrative Agent, Administrative Agent shall not be
required to exercise any discretion or take any action, and it may request
instructions from Lenders with respect to any such matter, in which case it
shall be required to act or to refrain from acting (and shall be fully protected
and free from liability to all Lender Parties in so acting or refraining from
acting) upon the instructions of Majority Lenders (including itself), provided,
however, that Administrative Agent shall not be required to take any action
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which exposes it to a risk of personal liability that it considers unreasonable
or which is contrary to the Loan Documents or to applicable Law. Upon receipt
by Administrative Agent from Borrower of any communication calling for action on
the part of Lenders or upon notice from Borrower or any Lender to Administrative
Agent of any Default or Event of Default, Administrative Agent shall promptly
notify each other Lender thereof.
Section 9.2. Exculpation, Administrative Agent's Reliance, Etc. Neither
Administrative Agent nor any of its directors, officers, agents, attorneys, or
employees shall be liable for any action taken or omitted to be taken by any of
them under or in connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE
OF ANY KIND, except that each shall be liable for its own gross negligence or
willful misconduct. Without limiting the generality of the foregoing,
Administrative Agent (a) may treat the payee of any Note as the holder thereof
until Administrative Agent receives written notice of the assignment or transfer
thereof in accordance with this Agreement, signed by such payee and in form
satisfactory to Administrative Agent; (b) may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any other
Lender Party and shall not be responsible to any other Lender Party for any
statements, warranties or representations made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of the
Loan Documents on the part of any Restricted Person or to inspect the property
(including the books and records) of any Restricted Person; (e) shall not be
responsible to any other Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
instrument or document furnished in connection therewith; (f) may rely upon the
representations and warranties of each Restricted Person or Lender Party in
exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any facsimile, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
Section 9.3. Credit Decisions. Each Lender Party acknowledges that it
has, independently and without reliance upon any other Lender Party, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender Party also acknowledges that it will, independently and without
reliance upon any other Lender Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents.
SECTION 9.4. INDEMNIFICATION. EACH LENDER AGREES TO INDEMNIFY
ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY BORROWER WITHIN TEN (10)
DAYS AFTER DEMAND) FROM AND AGAINST SUCH LENDER'S PERCENTAGE SHARE OF ANY AND
ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, FINES,
ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES OR DISBURSEMENTS
(INCLUDING
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REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS AND ADVISORS) OF ANY KIND OR
NATURE WHATSOEVER (IN THIS SECTION COLLECTIVELY CALLED "LIABILITIES AND COSTS")
WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST ADMINISTRATIVE AGENT GROWING OUT OF, RESULTING FROM OR IN ANY
OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN DOCUMENTS AND THE
TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT THEREOF) AT ANY TIME
ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER ARISING IN CONTRACT OR IN
TORT OR OTHERWISE AND INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH ANY
ENVIRONMENTAL LAWS BY ANY PERSON OR ANY LIABILITIES OR DUTIES OF ANY PERSON WITH
RESPECT TO HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ADMINISTRATIVE AGENT, provided only that no
Lender shall be obligated under this section to indemnify Administrative Agent
for that portion, if any, of any liabilities and costs which is proximately
caused by Administrative Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing,
each Lender agrees to reimburse Administrative Agent promptly upon demand for
such Lender's Percentage Share of any costs and expenses to be paid to
Administrative Agent by Borrower under Section 10.4(a) to the extent that
Administrative Agent is not timely reimbursed for such expenses by Borrower as
provided in such section. As used in this section the term "Administrative
Agent" shall refer not only to the Person designated as such in Section 1.1 but
also to each director, officer, agent, attorney, employee, representative and
Affiliate of such Person.
Section 9.5. Rights as Lender. In its capacity as a Lender,
Administrative Agent shall have the same rights and obligations as any Lender
and may exercise such rights as though it were not Administrative Agent.
Administrative Agent may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with any
Restricted Person or their Affiliates, all as if it were not Administrative
Agent hereunder and without any duty to account therefor to any other Lender.
Section 9.6. Sharing of Set-Offs and Other Payments. Each Lender Party
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Administrative Agent
under Section 3.1, causes such Lender Party to have received more than it would
have received had such payment been received by Administrative Agent and
distributed
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pursuant to Section 3.1, then (a) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the Obligations as
necessary to cause all Lender Parties to share all payments as provided for in
Section 3.1, and (b) such other adjustments shall be made from time to time as
shall be equitable to ensure that Administrative Agent and all Lender Parties
share all payments of Obligations as provided in Section 3.1; provided, however,
that nothing herein contained shall in any way affect the right of any Lender
Party to obtain payment (whether by exercise of rights of banker's lien, set-off
or counterclaim or otherwise) of indebtedness other than the Obligations.
Borrower expressly consents to the foregoing arrangements and agrees that any
holder of any such interest or other participation in the Obligations, whether
or not acquired pursuant to the foregoing arrangements, may to the fullest
extent permitted by Law and, subject to the provisions of Section 6.16, exercise
any and all rights of banker's lien, set-off, or counterclaim as fully as if
such holder were a holder of the Obligations in the amount of such interest or
other participation. If all or any part of any funds transferred pursuant to
this section is thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to the order of a Tribunal to be paid on
account of the possession of such funds prior to such recovery.
Section 9.7. Investments. Whenever Administrative Agent in good faith
determines that it is uncertain about how to distribute to Lender Parties any
funds which it has received, or whenever Administrative Agent in good faith
determines that there is any dispute among Lender Parties about how such funds
should be distributed, Administrative Agent may choose to defer distribution of
the funds which are the subject of such uncertainty or dispute. If
Administrative Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Administrative Agent is otherwise required to
invest funds pending distribution to Lender Parties, Administrative Agent shall
invest such funds pending distribution; all interest on any such Investment
shall be distributed upon the distribution of such Investment and in the same
proportion and to the same Persons as such Investment. All moneys received by
Administrative Agent for distribution to Lender Parties (other than to the
Person who is Administrative Agent in its separate capacity as a Lender Party)
shall be held by Administrative Agent pending such distribution solely as
Administrative Agent for such Lender Parties, and Administrative Agent shall
have no equitable title to any portion thereof.
Section 9.8. Benefit of Article IX. The provisions of this Article are
intended solely for the benefit of Lender Parties, and no Restricted Person
shall be entitled to rely on any such provision or assert any such provision in
a claim or defense against any Lender (other than in relation to the reference
to Section 6.16 contained in Section 9.6 or the right to reasonably approve a
successor Administrative Agent under Section 9.9). Lender Parties may waive or
amend such provisions as they desire without any notice to or consent of
Borrower or any other Restricted Person.
Section 9.9. Resignation. Administrative Agent may resign at any time by
giving written notice thereof to Lenders and Borrower. Each such notice shall
set forth the date of such resignation. Upon any such resignation Majority
Lenders shall have the right to appoint a successor Administrative Agent,
subject to the approval of Borrower, which approval will not be unreasonably
withheld. A successor must be appointed for any retiring Administrative Agent,
and
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such Administrative Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty days after the date of the
retiring Administrative Agent's resignation, no successor Administrative Agent
has been appointed and has accepted such appointment, then the retiring
Administrative Agent may appoint a successor Administrative Agent, which shall
be a commercial bank organized or licensed to conduct a banking or trust
business under the Laws of the United States of America or of any state thereof.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, the retiring Administrative Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any retiring Administrative Agent's resignation hereunder
the provisions of this Article IX shall continue to inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under the Loan Documents.
Section 9.10. Other Agents. Neither the Syndication Agent nor the
Documentation Agent, in such capacities, shall have any duties or
responsibilities or incur any liabilities under this Agreement or the other Loan
Documents.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender Party may have under any of the Loan Documents shall operate
as a waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by any Lender Party of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
as provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Restricted Person shall in any case of itself entitle any Restricted Person to
any other or further notice or demand in similar or other circumstances. This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if
such party is Administrative Agent or LC Issuer, by such party, and (iii) if
such party is a Lender, by such Lender or by Administrative Agent on behalf of
Lenders with the written consent of Majority Lenders (which consent has already
been given as to the termination of the Loan Documents as provided in Section
10.9). Notwithstanding the foregoing or anything to the contrary herein,
Administrative Agent shall not, without the prior consent of each individual
Lender, execute and deliver on behalf of such Lender any waiver or amendment
which would: (1) waive any of the conditions specified in Article IV (provided
that Administrative Agent may in its discretion withdraw any request it has made
under
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Section 4.3), (2) increase the maximum amount which such Lender is committed
hereunder to lend, (3) reduce any fees payable to such Lender hereunder, or the
principal of, or interest on, such Lender's Note, (4) change any date fixed for
any payment of any such fees, principal or interest, (5) amend the definition
herein of "Majority Lenders" or otherwise change the aggregate amount of
Percentage Shares which is required for Administrative Agent, Lenders or any of
them to take any particular action under the Loan Documents, (6) release
Borrower from its obligation to pay such Lender's Note or any Guarantor from its
guaranty of such payment, or (7) release any Collateral, except such releases
relating to sales of property as permitted under Section 7.5.
(b) Acknowledgments and Admissions. Borrower hereby represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Administrative Agent or any
other Lender Party, whether written, oral or implicit, other than as expressly
set out in this Agreement or in another Loan Document delivered on or after the
date hereof, (iii) there are no representations, warranties, covenants,
undertakings or agreements by any Lender Party as to the Loan Documents except
as expressly set out in this Agreement or in another Loan Document delivered on
or after the date hereof, (iv) no Lender Party has any fiduciary obligation
toward Borrower with respect to any Loan Document or the transactions
contemplated thereby, (v) the relationship pursuant to the Loan Documents
between Borrower and the other Restricted Persons, on one hand, and each Lender
Party, on the other hand, is and shall be solely that of debtor and creditor,
respectively, (vi) no partnership or joint venture exists with respect to the
Loan Documents between any Restricted Person and any Lender Party, (vii)
Administrative Agent is not Borrower's Administrative Agent, but Administrative
Agent for Lenders, (viii) should an Event of Default or Default occur or exist,
each Lender Party will determine in its sole discretion and for its own reasons
what remedies and actions it will or will not exercise or take at that time,
(ix) without limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by any Lender Party, or any representative thereof,
and no such representation or covenant has been made, that any Lender Party
will, at the time of an Event of Default or Default, or at any other time,
waive, negotiate, discuss, or take or refrain from taking any action permitted
under the Loan Documents with respect to any such Event of Default or Default or
any other provision of the Loan Documents, and (x) all Lender Parties have
relied upon the truthfulness of the acknowledgments in this section in deciding
to execute and deliver this Agreement and to become obligated hereunder.
(c) Representation by Lenders. Each Lender hereby represents that it will
acquire its Note for its own account in the ordinary course of its commercial
lending or investing business; however, the disposition of such Lender's
property shall at all times be and remain within its control and, in particular
and without limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other rights
and obligations under the Loan Documents subject to compliance with Sections
10.5(b) through (f), inclusive, and applicable Law.
(d) JOINT ACKNOWLEDGMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
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THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Lender Party and all of Lender Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any Restricted Person to any
Lender Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements and covenants of Borrower under this
Agreement. The representations, warranties, indemnities, and covenants made by
Restricted Persons in the Loan Documents, and the rights, powers, and privileges
granted to Lender Parties in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or otherwise reduce the benefit to
any Lender Party of any such representation, warranty, indemnity, covenant,
right, power or privilege. In particular and without limitation, no exception
set out in this Agreement to any representation, warranty, indemnity, or
covenant herein contained shall apply to any similar representation, warranty,
indemnity, or covenant contained in any other Loan Document, and each such
similar representation, warranty, indemnity, or covenant shall be subject only
to those exceptions which are expressly made applicable to it by the terms of
the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Administrative Agent may give telephonic notices to the other Lender
Parties), and shall be deemed sufficiently given or furnished if delivered by
personal delivery, by facsimile or other electronic transmission, by delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, to Borrower and Restricted Persons at the address of
Borrower specified on the signature pages hereto and to each Lender Party at its
address specified on the signature pages hereto (unless changed by similar
notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during normal business hours at the address provided
herein, (b) in the case of facsimile or other electronic transmission, upon
receipt, or (c) in the case of registered or certified United States mail, three
days after deposit in the mail; provided, however, that no Borrowing Notice or
Continuation/Conversion Notice shall become effective until actually received by
Administrative Agent.
Section 10.4. Payment of Expenses; Indemnity.
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(a) Payment of Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, Borrower will promptly (and in any event, within
30 days after any invoice or other statement or notice) pay: (i) all transfer,
stamp, mortgage, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
any of the other Loan Documents or any other document referred to herein or
therein, (ii) all reasonable costs and expenses incurred by or on behalf of
Administrative Agent (including attorneys' fees, consultants' fees and
engineering fees, travel costs and miscellaneous expenses) in connection with
(1) the negotiation, preparation, execution and delivery of the Loan Documents,
and any and all consents, waivers or other documents or instruments relating
thereto, (2) the filing, recording, refiling and re-recording of any Loan
Documents and any other documents or instruments or further assurances required
to be filed or recorded or refiled or re-recorded by the terms of any Loan
Document, (3) the borrowings hereunder and other action reasonably required in
the course of administration hereof, (4) monitoring or confirming (or
preparation or negotiation of any document related to) Borrower's compliance
with any covenants or conditions contained in this Agreement or in any Loan
Document, and (iii) all reasonable costs and expenses incurred by or on behalf
of any Lender Party (including attorneys' fees, consultants' fees and accounting
fees) in connection with the defense or enforcement of any of the Loan Documents
(including this section) or the defense of any Lender Party's exercise of its
rights thereunder. In addition to the foregoing, until all Obligations have been
paid in full, Borrower will also pay or reimburse Administrative Agent for all
reasonable out-of-pocket costs and expenses of Administrative Agent or its
agents or employees in connection with the continuing administration of the
Loans and the related due diligence of Administrative Agent, including travel
and miscellaneous expenses and fees and expenses of Administrative Agent's
outside counsel, reserve engineers and consultants engaged in connection with
the Loan Documents.
(b) Indemnity. Borrower agrees to indemnify each Lender Party, upon
demand, from and against any and all liabilities, obligations, claims, losses,
damages, penalties, fines, actions, judgments, suits, settlements, costs,
expenses or disbursements (including reasonable fees of attorneys, accountants,
experts and advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") which to any extent (in whole or in
part) may be imposed on, incurred by, or asserted against such Lender Party
growing out of, resulting from or in any other way associated with any of the
Collateral, the Loan Documents and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein (whether arising in contract or in tort or otherwise and including any
violation or noncompliance with any Environmental Laws by any Lender Party or
any other Person or any liabilities or duties of any Lender Party or any other
Person with respect to Hazardous Materials found in or released into the
environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no Lender
Party shall be entitled under this section to receive indemnification for that
portion, if any, of any liabilities and costs which is proximately caused by its
own individual gross negligence or willful misconduct, as determined in a final
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judgment. If any Person (including Borrower or any of its Affiliates) ever
alleges such gross negligence or willful misconduct by any Lender Party, the
indemnification provided for in this section shall nonetheless be paid upon
demand, subject to later adjustment or reimbursement, until such time as a court
of competent jurisdiction enters a final judgment as to the extent and effect of
the alleged gross negligence or willful misconduct. As used in this section the
term "Lender Party" shall refer not only to each Person designated as such in
Section 1.1 but also to each director, officer, trustee, agent, attorney,
employee, representative and Affiliate of such Persons.
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments.
(a) All Obligations which are incurred by two or more Restricted Persons
shall be their joint and several obligations and liabilities. All grants,
covenants and agreements contained in the Loan Documents shall bind and inure to
the benefit of the parties thereto and their respective successors and permitted
assigns; provided, however, that no Restricted Person may assign or transfer any
of its rights or delegate any of its duties or obligations under any Loan
Document without the prior consent of all Lenders. Neither Borrower nor any
Affiliates of Borrower shall directly or indirectly purchase or otherwise retire
any Obligations owed to any Lender nor will any Lender accept any offer to do
so, unless each Lender shall have received substantially the same offer with
respect to the same Percentage Share of the Obligations owed to it. If Borrower
or any Affiliate of Borrower at any time purchases some but less than all of the
Obligations owed to all Lender Parties, such purchaser shall not be entitled to
any rights of any Lender under the Loan Documents unless and until Borrower or
its Affiliates have purchased all of the Obligations.
(b) No Lender shall sell any participation interest in its commitment
hereunder or any of its rights under its Loans or under the Loan Documents to
any Person unless the agreement between such Lender and such participant at all
times provides: (i) that such participation exists only as a result of the
agreement between such participant and such Lender and that such transfer does
not give such participant any right to vote as a Lender or any other direct
claims or rights against any Person other than such Lender, (ii) that such
participant is not entitled to payment from any Restricted Person under Sections
3.2 through 3.6 of amounts in excess of those payable to such Lender under such
sections (determined without regard to the sale of such participation), and
(iii) unless such participant is an Affiliate of such Lender, that such
participant shall not be entitled to require such Lender to take any action
under any Loan Document or to obtain the consent of such participant prior to
taking any action under any Loan Document, except for actions which would
require the consent of all Lenders under subsection (a) of Section 10.1. No
Lender selling such a participation shall, as between the other parties hereto
and such Lender, be relieved of any of its obligations hereunder as a result of
the sale of such participation. Each Lender which sells any such participation
to any Person (other than an Affiliate of such Lender) shall give prompt notice
thereof to Administrative Agent and Borrower; provided, however, that no
liability shall arise if any such Lender fails to give such notice to Borrower.
(c) Except for sales of participations under the immediately preceding
subsection, no Lender shall make any assignment or transfer of any kind of its
commitments or any of its rights under its Loans or under the Loan Documents,
except for assignments to an Eligible Transferee or, subject to the provisions
of Subsection (g) below, to an Affiliate, and then only if such assignment is
made in accordance with the following requirements:
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(i) In the case of an assignment by a Revolver Lender of less than
all of its Revolver Loans, LC Obligations, and Revolver Commitments, each
such assignment shall apply to a consistent percentage of all Revolver
Loans and LC Obligations owing to the assignor Revolver Lender hereunder
and to the same percentage of the unused portion of the assignor Lender's
Revolver Commitments, so that after such assignment is made both the
assignee Revolver Lender and the assignor Revolver Lender shall have a
fixed (and not a varying) Revolver Percentage Share in its Revolver Loans
and LC Obligations and be committed to make that Revolver Percentage Share
of all future Revolver Loans and make that Revolver Percentage Share of all
future participations in LC Obligations, and the Revolver Percentage Share
of the Revolver Commitment of both the assignor and assignee shall equal or
exceed $5,000,000.
(ii) In the case of an assignment by a Term Lender, after such
assignment is made the outstanding Term Loans of both the assignor and
assignee shall equal or exceed $5,000,000, except with respect to an
assignment of all such Lender's Term Loans or such lesser amount as may be
agreed to by the Administrative Agent and Borrower (except that no such
minimum shall be applicable with respect to an assignment to a Lender).
(iii) The parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the "Register"
(as defined below in this section), an Assignment and Acceptance in the
form of Exhibit H, appropriately completed, together with the Note subject
to such assignment and a processing fee payable by such assignor Lender
(and not at Borrower's expense) to Administrative Agent of $3,500. Upon
such execution, delivery, and payment and upon the satisfaction of the
conditions set out in such Assignment and Acceptance, then (i) Borrower
shall issue new Notes to such assignor and assignee upon return of the old
Notes to Borrower, and (ii) as of the "Settlement Date" specified in such
Assignment and Acceptance the assignee thereunder shall be a party hereto
and a Lender hereunder and Administrative Agent shall thereupon deliver to
Borrower and each Lender a revised Schedule 1 hereto showing the revised
Revolver Percentage Shares and total Percentage Shares of such assignor
Lender and such assignee Lender and the revised Revolver Percentage Shares
and total Percentage Shares of all other Lenders.
(iv) Each assignee Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for Federal income
tax purposes, shall (to the extent it has not already done so) provide
Administrative Agent and Borrower with the "Prescribed Forms" referred to
in Section 3.7(d).
(d) Nothing contained in this section shall prevent or prohibit any Lender
from assigning or pledging all or any portion of its Loans and Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; provided that (i) no such assignment or
pledge shall relieve such Lender from its obligations hereunder and (ii) all
related costs, fees and expenses incurred by such Lender in connection with such
assignment and
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the reassignment back to it, free of any interests of such Federal Reserve Banks
shall be for the sole account of such Lender.
(e) By executing and delivering an Assignment and Acceptance, each assignee
Lender thereunder will be confirming to and agreeing with Borrower,
Administrative Agent and each other Lender Party that such assignee understands
and agrees to the terms hereof, including Article IX hereof.
(f) Administrative Agent shall maintain a copy of each Assignment and
Acceptance and a register for the recordation of the names and addresses of
Lenders and the Percentage Shares of, and principal amount of the Loans owing
to, each Lender from time to time (in this section called the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and Borrower and each Lender Party may treat each Person whose name is recorded
in the Register as a Lender Party hereunder for all purposes. The Register
shall be available for inspection by Borrower or any Lender Party at any
reasonable time and from time to time upon reasonable prior notice.
(g) Any Lender may assign or transfer its commitment or its rights under
its Loans or under the Loan Documents to (i) any Affiliate that is wholly-owned
direct or indirect subsidiary of such Lender or of any Person that wholly owns,
directly or indirectly, such Lender, or (ii) if such Lender is a fund that makes
or invests in bank loans, any other fund that makes or invests in bank loans and
is advised or managed by (A) the same investment advisor as any Lender or (B)
any Affiliate of such investment advisor that is a wholly-owned direct or
indirect subsidiary of any Person that wholly owns, directly or indirectly, such
investment advisor, subject to the following additional conditions:
(x) any right of such Lender assignor and such assignee to vote as a
Lender, or any other direct claims or rights against any other Persons,
shall be uniformly exercised or pursued in the manner that such Lender
assignor would have so exercised such vote, claim or right if it had not
made such assignment or transfer;
(y) such assignee shall not be entitled to payment from any Restricted
Person under Sections 3.2 through 3.7 of amounts in excess of those payable
to such Lender assignor under such sections (determined without regard to
such assignment or transfer); and
(z) if such Lender assignor is a Revolver Lender that assigns or transfers
to such assignee any of such Lender Revolver Commitment, assignee may
become primarily liable for such Revolver Commitment, but such assignment
or transfer shall not relieve or release such Lender from such Revolver
Commitment.
Section 10.6. Confidentiality. Each Lender Party agrees (on behalf of
itself and each of its Affiliates, and each of its and their directors,
officers, agents, attorneys, employees, and representatives) that it (and each
of them) will take all reasonable steps to keep confidential any non-public
information supplied to it by or at the direction of any Restricted Person so
identified when delivered, provided, however, that this restriction shall not
apply to information which (a) has at the time in question entered the public
domain, (b) is required to be disclosed by Law
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(whether valid or invalid) of any Tribunal, (c) is disclosed to any Lender
Party's Affiliates, auditors, attorneys, or agents, (d) is furnished to any
other Lender Party or to any purchaser or prospective purchaser of
participations or other interests in any Loan or Loan Document (provided each
such purchaser or prospective purchaser first agrees to hold such information in
confidence on the terms provided in this section), or (d) is disclosed in the
course of enforcing its rights and remedies during the existence of an Event of
Default.
Section 10.7. GOVERNING LAW; SUBMISSION TO PROCESS. EXCEPT TO THE EXTENT
THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT,
THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED
STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. BORROWER
HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST BORROWER WITH RESPECT
TO THIS AGREEMENT, THE NOTES OR ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AS LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND
DELIVERY HEREOF, BORROWER ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. BORROWER AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THE LOAN
DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING
BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE
OF THE FOREGOING, BORROWER HEREBY IRREVOCABLY DESIGNATES AND APPOINTS
CORPORATION SERVICE COMPANY, 80 STATE STREET, ALBANY, NEW YORK 12207, AS AGENT
OF BORROWER TO RECEIVE SERVICE OF ALL PROCESS BROUGHT AGAINST BORROWER WITH
RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN NEW YORK, SUCH SERVICE BEING
HEREBY ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY LAW,
BE SENT BY REGISTERED MAIL TO BORROWER AT ITS ADDRESS SET FORTH BELOW, BUT THE
FAILURE OF BORROWER TO RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS AS AFORESAID. BORROWER SHALL FURNISH TO LENDER PARTIES
A CONSENT OF CORPORATION SERVICE COMPANY AGREEING TO ACT HEREUNDER PRIOR
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TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF LENDER PARTIES TO BRING PROCEEDINGS AGAINST BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. IF FOR ANY REASON CORPORATION SERVICE COMPANY
SHALL RESIGN OR OTHERWISE CEASE TO ACT AS BORROWER'S AGENT, BORROWER HEREBY
IRREVOCABLY AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT
ACCEPTABLE TO ADMINISTRATIVE AGENT TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT,
SUCH NEW AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR CORPORATION SERVICE COMPANY
FOR ALL PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO AGENT THE WRITTEN CONSENT
(IN FORM AND SUBSTANCE SATISFACTORY TO ADMINISTRATIVE AGENT) OF SUCH NEW AGENT
AGREEING TO SERVE IN SUCH CAPACITY.
Section 10.8. Limitation on Interest. Lender Parties, Restricted Persons
and the other parties to the Loan Documents intend to contract in strict
compliance with applicable usury Law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to provide
for interest in excess of the maximum amount of interest permitted to be charged
by applicable Law from time to time in effect. Neither any Restricted Person
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under applicable Law from time
to time in effect, and the provisions of this section shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith.
Section 10.9. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing or outstanding
elect in a written notice delivered to Administrative Agent to terminate this
Agreement. Upon receipt by Administrative Agent of such a notice, if no
Obligations are then owing or outstanding this Agreement and all other Loan
Documents shall thereupon be terminated and the parties thereto released from
all prospective obligations thereunder. Notwithstanding the foregoing or
anything herein to the contrary, any waivers or admissions made by any
Restricted Person in any Loan Document, any Obligations under Sections 3.2
through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender Party shall survive any termination of this Agreement or
any other Loan Document. At the request and expense of Borrower, Administrative
Agent shall prepare and execute all necessary instruments to reflect and effect
such termination of the Loan Documents. Administrative Agent is hereby
authorized to execute all such instruments on behalf of all Lenders, without the
joinder of or further action by any Lender.
Section 10.10. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents
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shall nevertheless remain effective and shall be enforced to the fullest extent
permitted by applicable Law.
Section 10.11. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.12. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. TO THE
EXTENT PERMITTED BY LAW, LENDER PARTIES AND BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF SUCH PERSONS OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR LENDER PARTIES' ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
BORROWER AND EACH LENDER PARTY HEREBY FURTHER (A) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES," AS DEFINED BELOW, (B) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (C)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR
DELIVER TO ANY OTHER PARTY HERETO.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC., its
general partner
By: /s/ Phillip D. Kramer
-------------------------------
Name: Phillip D. Kramer
Title: Executive Vice President
Address:
500 Dallas Street
Suite 700
Houston, Texas 77002
Attention: Phil Kramer
Telephone: (713) 654-1414
Fax: (713) 654-1523
PLAINS MARKETING, L.P.
By: PLAINS ALL AMERICAN INC., its
general partner
By: /s/ Phillip D. Kramer
-------------------------------
Name: Phillip D. Kramer
Title: Executive Vice President
Address:
500 Dallas Street
Suite 700
Houston, Texas 77002
Attention: Phil Kramer
Telephone: (713) 654-1414
Fax: (713) 654-1523
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PLAINS ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC., its
general partner
By: /s/ Phillip D. Kramer
-------------------------------
Name: Phillip D. Kramer
Title: Executive Vice President
Address:
500 Dallas Street
Suite 700
Houston, Texas 77002
Attention: Phil Kramer
Telephone: (713) 654-1414
Fax: (713) 654-1523
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ING (U.S.) CAPITAL CORPORATION,
Administrative Agent and Lender
By: /s/ Christopher R. Wagner
-------------------------------
Name: Christopher R. Wagner
Title: Senior Vice President
Address:
ING (U.S.) Capital Corporation
135 East 57th Street
New York, New York
Attention: Christopher Wagner
Telephone: (212) 409-1500
Fax: (212) 832-3616
ING BARING FURMAN SELZ LLC,
Syndication Agent
By: /s/ Christopher R. Wagner
-------------------------------
Name: Christopher R. Wagner
Title: Senior Vice President
Address:
ING Baring (U.S.) Capital Corporation
135 East 57th Street
New York, New York
Attention:
Telephone: (212)
Fax: (212)
79
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BANCBOSTON ROBERTSON STEPHENS INC.,
Documentation Agent
By: /s/ Richard J. Makin
-------------------------------
Name: Richard J. Makin
Title: Managing Director
Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Terrence Ronan
Mail Code: 01-08-04
Telephone: (617) 434-5472
Fax: (617) 434-3652
BANKBOSTON, N.A., LC Issuer and Lender
By: /s/ Terrence Ronan
-------------------------------
Name: Terrence Ronan
Title: Director
Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Terrence Ronan
Mail Code: 01-08-04
Telephone: (617) 434-5472
Fax: (617) 434-3652
80
<PAGE>
EXHIBIT 10.2
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
_______________________________________________________
PLAINS MARKETING, L.P.,
as Borrower,
and
ALL AMERICAN PIPELINE, L.P.,
as Guarantor
and
PLAINS ALL AMERICAN PIPELINE, L.P.,
as Guarantor,
and
BANKBOSTON, N.A.,
as Administrative Agent,
BANCBOSTON ROBERTSON STEPHENS INC.,
as Syndication Agent,
ING BARING FURMAN SELZ LLC
as Documentation Agent,
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
_______________________________________________________
$175,000,000
November 17, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
AMENDED AND RESTATED CREDIT AGREEMENT...................................... 1
ARTICLE I - Definitions and References................................... 1
Section 1.1. Defined Terms................................................ 1
Section 1.2. Exhibits and Schedules; Additional Definitions............... 23
Section 1.3. Amendment of Defined Instruments............................. 23
Section 1.4. References and Titles........................................ 24
Section 1.5. Calculations and Determinations.............................. 24
ARTICLE II - The Loans.................................................... 24
Section 2.1. Commitments to Lend; Notes................................... 24
Section 2.2. Requests for New Loans....................................... 25
Section 2.3. Continuations and Conversions of Existing Loans.............. 26
Section 2.4. Use of Proceeds.............................................. 27
Section 2.5. Optional Prepayments of Loans................................ 27
Section 2.6. Mandatory Prepayments........................................ 27
Section 2.7. Letters of Credit............................................ 28
Section 2.8. Requesting Letters of Credit................................. 28
Section 2.9. Reimbursement and Participations............................. 29
Section 2.10. No Duty to Inquire........................................... 30
Section 2.11. LC Collateral................................................ 31
Section 2.12. Interest Rates and Fees; Reduction in Commitment............. 32
Section 2.13. Borrowing Base Reporting..................................... 33
ARTICLE III - Payments to Lenders.......................................... 33
Section 3.1. General Procedures........................................... 33
Section 3.2. Capital Reimbursement........................................ 34
Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit...... 34
Section 3.4. Notice; Change of Applicable Lending Office.................. 35
Section 3.5. Availability................................................. 35
Section 3.6. Funding Losses............................................... 36
Section 3.7. Reimbursable Taxes........................................... 36
ARTICLE IV - Conditions Precedent to Credit............................... 38
Section 4.1. Documents to be Delivered.................................... 38
Section 4.2. Additional Conditions to Initial Credit...................... 39
Section 4.3. Additional Conditions Precedent.............................. 40
ARTICLE V - Representations and Warranties............................... 41
Section 5.1. No Default................................................... 41
Section 5.2. Organization and Good Standing............................... 41
Section 5.3. Authorization................................................ 42
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<PAGE>
Section 5.4. No Conflicts or Consents..................................... 42
Section 5.5. Enforceable Obligations...................................... 42
Section 5.6. Initial Financial Statements................................. 42
Section 5.7. Other Obligations and Restrictions........................... 42
Section 5.8. Full Disclosure.............................................. 43
Section 5.9. Litigation................................................... 43
Section 5.10. Labor Disputes and Acts of God............................... 43
Section 5.11. ERISA Plans and Liabilities.................................. 43
Section 5.12. Compliance with Laws......................................... 43
Section 5.13. Environmental Laws........................................... 44
Section 5.14. Names and Places of Business................................. 45
Section 5.15. Borrower's Subsidiaries...................................... 46
Section 5.16. Title to Properties; Licenses................................ 46
Section 5.17. Government Regulation........................................ 46
Section 5.18. Insider...................................................... 46
Section 5.19. Solvency..................................................... 46
Section 5.20. Credit Arrangements.......................................... 46
Section 5.21. Year 2000.................................................... 47
ARTICLE VI - Affirmative Covenants........................................ 47
Section 6.1. Payment and Performance...................................... 47
Section 6.2. Books, Financial Statements and Reports...................... 47
Section 6.3. Other Information and Inspections............................ 50
Section 6.4. Notice of Material Events and Change of Address.............. 50
Section 6.5. Maintenance of Properties.................................... 51
Section 6.6. Maintenance of Existence and Qualifications.................. 51
Section 6.7. Payment of Trade Liabilities, Taxes, etc..................... 51
Section 6.8. Insurance.................................................... 51
Section 6.9. Performance on Borrower's Behalf............................. 52
Section 6.10. Interest..................................................... 52
Section 6.11. Compliance with Agreements and Law........................... 52
Section 6.12. Environmental Matters; Environmental Reviews................. 52
Section 6.13. Evidence of Compliance....................................... 53
Section 6.14. Agreement to Deliver Security Documents...................... 53
Section 6.15. Perfection and Protection of Security Interests and Liens.... 53
Section 6.16. Bank Accounts; Offset........................................ 53
Section 6.17. Guaranties of Subsidiaries................................... 54
Section 6.18. Compliance with Agreements................................... 54
Section 6.19. Year 2000.................................................... 54
Section 6.20. Rents........................................................ 55
ARTICLE VII - Negative Covenants........................................... 55
Section 7.1. Indebtedness................................................. 55
Section 7.2. Limitation on Liens.......................................... 56
Section 7.3. Hedging Contracts............................................ 57
Section 7.4. Limitation on Mergers, Issuances of Securities............... 58
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<PAGE>
Section 7.5. Limitation on Sales of Property.............................. 59
Section 7.6. Limitation on Dividends and Redemptions...................... 59
Section 7.7. Limitation on Investments and New Businesses................. 60
Section 7.8. Limitation on Credit Extensions.............................. 60
Section 7.9. Transactions with Affiliates................................. 60
Section 7.10. Prohibited Contracts........................................ 60
Section 7.11. Current Ratio................................................ 61
Section 7.12. Debt Coverage Ratio.......................................... 61
Section 7.13. Interest Coverage Ratio...................................... 61
Section 7.14. Fixed Charge Coverage Ratio.................................. 61
Section 7.15. Debt to Capital Ratio........................................ 61
Section 7.16. Open Inventory Position...................................... 61
ARTICLE VIII -Events of Default and Remedies............................... 61
Section 8.1. Events of Default............................................ 61
Section 8.2. Remedies..................................................... 64
ARTICLE IX - Administrative Agent......................................... 64
Section 9.1. Appointment and Authority.................................... 64
Section 9.2. Exculpation, Administrative Agent's Reliance, Etc............ 65
Section 9.3. Credit Decisions............................................. 65
Section 9.4. Indemnification.............................................. 66
Section 9.5. Rights as Lender............................................. 66
Section 9.6. Sharing of Set-Offs and Other Payments....................... 67
Section 9.7. Investments.................................................. 67
Section 9.8. Benefit of Article IX........................................ 67
Section 9.9. Resignation.................................................. 68
Section 9.10. Other Agents................................................. 68
ARTICLE X - Miscellaneous............................................... 68
Section 10.1. Waivers and Amendments; Acknowledgments..................... 68
Section 10.2. Survival of Agreements; Cumulative Nature................... 70
Section 10.3. Notices..................................................... 70
Section 10.4. Payment of Expenses; Indemnity.............................. 71
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments................................................ 72
Section 10.6. Confidentiality............................................. 74
Section 10.7. Governing Law; Submission to Process........................ 75
Section 10.8. Limitation on Interest...................................... 76
Section 10.9. Termination; Limited Survival............................... 76
Section 10.10. Severability................................................ 76
Section 10.11. Counterparts................................................ 76
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc................. 77
Section 10.13. Amendment and Restatement................................... 77
iii
<PAGE>
Schedules and Exhibits:
Schedule 1 Lender Schedule
Schedule 2 Disclosure Schedule
Schedule 3 Security Schedule
Schedule 4 Insurance Schedule
Schedule 5 Pro Forma EBITDA
Schedule 6 Offering Documents
Schedule 7 Borrowing Base Procedures
Exhibit A Promissory Note
Exhibit B Borrowing Notice
Exhibit C Continuation/Conversion Notice
Exhibit D Forms of Letter of Credit
Exhibit E Letter of Credit Application and Agreement
Exhibit F Certificate Accompanying Financial Statements
Exhibit G-1 Opinion of In-House Counsel for Restricted Persons
Exhibit G-2 Opinion of Counsel for Restricted Persons
Exhibit G-3 Opinion of Counsel for Restricted Persons
Exhibit H Borrowing Base Report
Exhibit I Environmental Compliance Certificate
Exhibit J Assignment and Acceptance Agreement
Exhibit K Intercreditor Agreement
iv
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of November 17, 1998,
by and among PLAINS MARKETING, L.P. ("Borrower"), a Delaware limited
partnership, ALL AMERICAN PIPELINE, L.P. ("All American"), a Texas limited
partnership, PLAINS ALL AMERICAN PIPELINE, L.P. ("Plains MLP"), a Delaware
limited partnership, and BANKBOSTON, N.A., as administrative agent (in such
capacity, "Administrative Agent"), BANCBOSTON ROBERTSON STEPHENS INC., as
syndication agent (in such capacity, "Syndication Agent"), ING BARING FURMAN
SELZ LLC, as documentation agent (in such capacity, "Documentation Agent") and
the Lenders referred to below.
RECITALS
1. Plains Marketing & Transportation Inc., a Delaware corporation
("PMTI"), is party to a Credit Agreement dated as of July 30, 1998 with
Administrative Agent, BancBoston Robertson Stephens Inc., as Syndication Agent,
ING (U.S.) Capital Corporation, as Documentation Agent, and certain Lenders
named therein (the "Existing Agreement").
2. On the Funding Date (as defined herein) PMTI and certain other
Subsidiaries of Plains Resources Inc. ("Resources") will be merged with and into
Resources and the liabilities of PMTI and such Subsidiaries of Resources will be
assumed by Resources.
3. Pursuant to the Contribution Agreement (as defined herein) on the
Funding Date all of the assets and liabilities of PMTI and certain other
Subsidiaries of Resources to be acquired and assumed by Resources pursuant to
such merger will be conveyed to and assumed by Borrower.
4. The Administrative Agent and Lenders party to the Existing Agreement
have consented to such transactions, subject to the agreement by Borrower to
amend and restate the Existing Agreement as provided herein;
In consideration of the mutual covenants and agreements contained herein
the parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given to such term in this Section 1.1 or in
the sections and subsections referred to below:
"Acceptable Issuer" means any national or state bank or trust company which
is organized under the laws of the United States of America or any state thereof
or any branch licensed to operate under the laws of the United States of America
or any state thereof, which is a branch of a bank organized under any country
which is a member of the Organization for Economic
<PAGE>
Cooperation and Development, in each case which has capital, surplus and
undivided profits of at least $500,000,000 and whose commercial paper is rated
at least P-1 by Moody's or A-1 by S&P.
"Account" shall have the meaning given that term in the UCC.
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account.
"Adjusted Eurodollar Rate" means, with respect to each particular
Eurodollar Loan and the related Interest Period, the rate per annum (rounded
upwards, if necessary, to the nearest 1/1000 of 1%) determined by Administrative
Agent to be equal to the quotient obtained by dividing (i) the Eurodollar Rate
for such Eurodollar Loan for such Interest Period by (ii) 1 minus the Reserve
Requirement for such Eurodollar Loan for such Interest Period. The Adjusted
Eurodollar Rate for any Eurodollar Loan shall change whenever the Reserve
Requirement changes.
"Administrative Agent" means BankBoston, N.A., as Administrative Agent
hereunder, and its successors in such capacity.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 5% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Affiliate Agreements" means the Crude Oil Marketing Agreement, the Omnibus
Agreement and the Contribution Agreement.
"Agreement" means this Amended and Restated Credit Agreement.
"All American" means All American Pipeline, L.P., a Texas limited
partnership.
"All American Agreement" means that certain Credit Agreement of even date
herewith among Borrower, All American, Plains MLP, the Agents named therein and
certain financial institutions as Lenders.
"All American Revolver Availability" means for any day, the unutilized
portion available on such day of the commitment for revolving credit loans to
All American pursuant to the All American Agreement.
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<PAGE>
"All American Term Loans" means those certain loans made to All American
pursuant to the All American Agreement which are evidenced by a "Term Note" (as
such term is defined in the All American Agreement).
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of Base Rate Loans and such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans.
"Applicable Leverage Level" means the level set forth below that
corresponds to the ratio of (i) Consolidated Funded Indebtedness of Plains MLP
and its Subsidiaries to (ii) the Consolidated EBITDA for the applicable period
of four Fiscal Quarters (the "Leverage Ratio"):
Applicable
Leverage Level Leverage Ratio
- ---------------- ----------------
Level I greater than or equal to 4.0
to 1.0
Level II greater than or equal to 3.0
to 1.0 but less than 4.0 to 1.0
Level III greater than or equal to 2.0
to 1.0 but less than 3.0 to 1.0
Level IV less than 2.0 to 1.0
The Leverage Ratio will be determined quarterly by Administrative Agent within
two (2) Business Days after Administrative Agent's receipt of Plains MLP's
Consolidated financial statements for the immediate preceding Fiscal Quarter
based upon: (i) Consolidated Funded Indebtedness as of the end of such Fiscal
Quarter, and (ii) the Consolidated EBITDA for the four Fiscal Quarters ending
with such Fiscal Quarter. The Applicable Leverage Level shall become effective
upon such determination of the Leverage Ratio by Administrative Agent and shall
remain effective until the next such determination by Administrative Agent of
the Leverage Ratio. From the date hereof until the date the Administrative
Agent has determined the Leverage Ratio based on the December 31, 1998 Fiscal
Quarter, the Applicable Leverage Level shall be Level III.
"Applicable Rating Level" means, for any day, the level set forth below
that corresponds to the higher of the ratings publicly announced by Moody's or
S&P, as applicable on that day, to the All American Term Loans; provided that if
ratings announced by Moody's and S&P differ by more than two (2) levels on such
day, then the Applicable Rating Level shall be based upon the level which is one
level lower than the higher.
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<PAGE>
Applicable
Rating Level Moody's S&P
- --------------- ------- -----
Level A *Baa3 *BBB-
Level B **Baa3 **BBB-
"*" means greater than or equal to and "**" means less than. If neither Moody's
or S&P shall have in effect a rating for the All American Term Loans, then the
Applicable Rating Level shall be deemed to be Level B. If the rating system of
either rating agency shall change, or if a rating agency shall cease to be in
the business of rating corporate debt obligations, Plains MLP and the Lenders
shall negotiate in good faith to amend this definition to reflect such changed
rating system or the unavailability of ratings from such rating agency, but
until such an agreement shall be reached, the Applicable Rating Level shall be
based only upon the rating by the remaining rating agency.
"Approved Eligible Receivables" means each Eligible Receivable (other than
Eligible Exchange Balances) (a) from a Person whose Debt Rating is either at
least Baa3 by Moody's or at least BBB- by S&P; (b) fully and unconditionally
guaranteed as to payment by a Person whose Debt Rating is either at least Baa3
by Moody's or at least BBB- by S&P; (c) from any other Person Currently Approved
by Majority Lenders; or (d) fully covered by a letter of credit from an
Acceptable Issuer.
"Available Cash" has the meaning given such term in the Partnership
Agreement.
"Base Rate" means the higher of (a) the annual rate of interest announced
from time to time by Administrative Agent at its "base rate" at its head office
in Boston, Massachusetts, or (b) the Federal Funds Rate plus one-half percent
(0.5%) per annum; provided that such rate may not be the lowest rate at which
funds are made available to customers of Administrative Agent at such time.
Each change in the Base Rate shall become effective without prior notice to
Borrower automatically as of the opening of business on the date of such change
in the Base Rate.
"Base Rate Loan" means a Loan which does not bear interest at the Adjusted
Eurodollar Rate.
"Borrower" means Plains Marketing, L.P., a Delaware limited partnership.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to
Section 2.2 or a Continuation or Conversion of all or a portion of an existing
Loan (whether alone or as a combination with a new Loan) into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.3.
"Borrowing Base" means the remainder of (a) minus (b) below as of the date
of determination:
(a) the sum of the following as of the date of determination :
(i) 100% of Eligible Cash Equivalents; plus
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<PAGE>
(ii) 90% of Approved Eligible Receivables; plus
(iii) the lesser of (A) 85% of Other Eligible Receivables or (B) 1/3
of the sum of the amounts of clauses (a)(i) plus (a)(ii) [(i.e., (a)(i)
plus (a)(ii) must be 75% of (a)(i) plus (a)(ii) plus (a)(iii); plus
(iv) 85% of Eligible Margin Deposits; plus
(v) the lesser of (A) 95% of Hedged Eligible Inventory plus 100% of
Other Eligible Inventory Value or (B) $40,000,000; plus
(vi) 80% of Eligible Exchange Balances, plus
(vii) 100% of all Paid but Unexpired Letters of Credit
MINUS (b) the following as of the date of determination:
(i) 100% of First Purchase Crude Payables; plus
(ii) 100% of Other Priority Claims, plus
(iii) The Estimate Adjustment Amount as provided in Section 2.13.
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Boston, Massachusetts.
Any Business Day in any way relating to Eurodollar Loans (such as the day on
which an Interest Period begins or ends) must also be a day on which, in the
judgment of Administrative Agent, significant transactions in dollars are
carried out in the London interbank eurocurrency market.
"Capital Lease" means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
"Cash and Carry Purchases" means purchases of crude oil for physical
storage at a Plains Terminal or in transit in pipelines Currently Approved by
Majority Lenders which constitutes Hedged Eligible Inventory.
"Cash Equivalents" means Investments in:
5
<PAGE>
(a) marketable obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America or
an instrumentality or agency thereof and entitled to the full faith and credit
of the United States of America;
(b) demand deposits and time deposits (including certificates of deposit)
maturing within 12 months from the date of deposit thereof, (i) with any office
of any Lender or (ii) with a domestic office of any national or state bank or
trust company which is organized under the Laws of the United States of America
or any state therein, which has capital, surplus and undivided profits of at
least $500,000,000, and whose long-term certificates of deposit are rated at
least Aa3 by Moody's or AA- by S&P;
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subsection (a) above entered
into with (i) any Lender or (ii) any other commercial bank meeting the
specifications of subsection (b) above;
(d) open market commercial paper, maturing within 270 days after
acquisition thereof, which are rated at least P-1 by Moody's or A-1 by S&P; and
(e) money market or other mutual funds substantially all of whose assets
comprise securities of the types described in subsections (a) through (d) above.
"Change of Control" means the occurrence of any of the following events:
(i) an event or series of events by which any Person or other entity or group of
Persons or other entities acting in concert as a partnership or other group (a
"Group of Persons") shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases, merger, consolidation or
otherwise, have become the beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of (A) 50% or more of the
combined voting power of the then outstanding voting stock of Resources, in the
case of any Person or Group of Persons constituting or controlled by Affiliates
of Kayne Anderson Investment Management, Inc., or (B) 40% or more of such
combined voting power in the case of any other Person or Group of Persons, (ii)
during any period of two consecutive years (A) the members of the board of
directors of Resources (the "Board") as of January 1, 1998, (B) any director
elected thereafter in any annual meeting of the stockholders of Resources upon
the recommendation of the Board, and (C) any other member of the Board who will
be recommended or elected to succeed those Persons described in subclauses (A)
and (B) of this clause (ii) by a majority of such Persons who are then members
of the Board, cease for any reason to constitute collectively a majority of the
Board then in office, (iii) the direct or indirect sale, lease, exchange or
other transfer of all or substantially all of the Consolidated assets of
Resources and its Subsidiaries, to any Person or Group of Persons, or (iv)
Resources, either directly or through a Wholly Owned Subsidiary of Resources,
shall cease to be the legal and beneficial owner (as defined above) of more than
50% of the voting power of the outstanding voting stock of General Partner, or
General Partner shall cease to be the sole legal and beneficial owner (as
defined above) of all of the general partner interests (including all securities
which are convertible into general partner interests), of Plains MLP, All
American, or Borrower, (v) any Person or Group of Persons other than Resources
or any Subsidiary of Resources shall be the beneficial owner (as defined above)
of 50% or more of the combined voting power of the then total partnership
interests in Plains MLP, or (vi) Resources
6
<PAGE>
and its Wholly Owned Subsidiaries taken as a whole shall hold legal and
beneficial ownership of issued and outstanding partnership interests of Plains
MLP representing less than 5% of the total outstanding partnership interests of
Plains MLP.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with all rules and regulations promulgated with respect thereto.
"Collateral" means all property of any kind which is subject to a Lien in
favor of Lenders (or in favor of Administrative Agent for the benefit of
Lenders) or which, under the terms of any Security Document, is purported to be
subject to such a Lien, in each case granted or created to secure all or part of
the Obligations.
"Commitment Period" means the period from and including the date hereof
until July 31, 2001 (or, if earlier, the day on which (i) the obligation of
Lenders to make Loans hereunder and the obligations of LC Issuer to issue
Letters of Credit hereunder have terminated, (ii) the obligation of LC Issuer to
issue Letters of Credit hereunder has terminated, or (iii) the Notes first
become due and payable in full, whichever shall first occur).
"Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated EBITDA" means, for any four-Fiscal Quarter period, the sum of
(1) the Consolidated Net Income of Plains MLP and its Subsidiaries during such
period, plus (2) all interest expense which was deducted in determining such
Consolidated Net Income for such period, plus (3) all income taxes (including
any franchise taxes to the extent based upon net income) which were deducted in
determining such Consolidated Net Income, plus (4) all depreciation,
amortization (including amortization of good will and debt issue costs) and
other non-cash charges (including any provision for the reduction in the
carrying value of assets recorded in accordance with GAAP) which were deducted
in determining such Consolidated Net Income, minus (5) all non-cash items of
income which were included in determining such Consolidated Net Income. For the
Fiscal Quarters preceding the date hereof, Consolidated EBITDA shall be mean the
pro forma Consolidated EBITDA reflected on Schedule 5 for such Fiscal Quarter.
"Consolidated Funded Indebtedness" means as of any date, the sum of the
following (without duplication): (i) all Indebtedness which is classified as
"long-term indebtedness" on a consolidated balance sheet of Plains MLP and its
Consolidated Subsidiaries prepared as of such date in accordance with GAAP and
any current maturities and other principal amount in respect of such
Indebtedness due within one year but which was classified as "long-term
indebtedness" at the creation thereof, (ii) indebtedness for borrowed money of
Plains MLP and its Consolidated Subsidiaries outstanding under a revolving
credit or similar agreement providing for borrowings (and renewals and
extensions thereof) over a period of more than one year, notwithstanding the
fact that any such borrowing is made within one year of the expiration of such
agreement, and (iii)
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<PAGE>
Indebtedness in respect of Capital Leases of Plains MLP and its Consolidated
Subsidiaries; provided, however, Consolidated Funded Indebtedness shall not
include Indebtedness in respect of letters of credit or in respect of Cash and
Carry Purchases.
"Consolidated Net Income" means, for any period, Plains MLP's and its
Subsidiaries' gross revenues for such period, including any cash dividends or
distributions actually received from any other Person during such period, minus
Plains MLP's and its Subsidiaries' expenses and other proper charges against
income (including taxes on income to the extent imposed), determined on a
Consolidated basis after eliminating earnings or losses attributable to
outstanding minority interests and excluding the net earnings of any Person
other than a Subsidiary in which Plains MLP or any of its Subsidiaries has an
ownership interest. Consolidated Net Income shall not include any gain or loss
from the sale of assets or any extraordinary gains or losses.
"Consolidated Net Worth" means the remainder of all Consolidated assets, as
determined in accordance with GAAP, of Plains MLP and its Subsidiaries minus the
sum of (a) Plains MLP's Consolidated liabilities, as determined in accordance
with GAAP, and (b) all outstanding Minority Interests. The effect of any
increase or decrease in net worth in any period as a result of any unrealized
gains or losses from a mark to market of any Hedging Contracts not reflected in
the determination of net income but reflected in the determination of
comprehensive income shall be excluded in determining Consolidated Net Worth.
"Minority Interests" means the book value of any equity interests in any of
Plains MLP's Subsidiaries (exclusive of the general partner interests held by
the General Partner in Marketing, All American or any other Restricted Person of
up to two percent (2%) of the aggregate ownership interest in any such Person)
which equity interests are owned by a Person other than Plains MLP or a Wholly
Owned Subsidiary of Plains MLP.
"Continuation/Conversion Notice" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
Section 2.3.
"Continue", "Continuation", and "Continued" shall refer to the continuation
pursuant to Section 2.3 hereof of a Eurodollar Loan as a Eurodollar Loan from
one Interest Period to the next Interest Period.
"Contribution Agreement" means that certain Contribution, Conveyance and
Assumption Agreement between Resources, Plains MLP, Borrower and certain other
parties, subject to Section 1.3.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.3 or Article III of one Type of Loan into another Type of
Loan.
"Crude Oil Marketing Agreement" means that certain Crude Oil Marketing
Agreement among Resources, Plains Illinois Inc., Stocker Resources, L.P.,
Calumet Florida, Inc. and Marketing, subject to Section 1.3.
"Currently Approved by Majority Lenders" means such Person (including a
limit on the maximum credit exposure to any such Person), storage location,
pipeline, form of Letter of Credit or other matter as the case may be, as
reflected in the most recent written notice given by
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Administrative Agent to Borrower as being approved by Majority Lenders. Each
such written notice will supersede and revoke each prior notice.
"Cushing Terminal" means that certain storage facility owned by Borrower
located in Cushing, Oklahoma.
"Debt Rating" means with respect to a Person, the rating then in effect by
a Rating Agency for the long term senior unsecured non-credit enhanced debt of
such Person.
"Default" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"Default Rate" means, at the time in question, (i) three and three-fourths
percent (3.75%) per annum plus the Adjusted Eurodollar Rate then in effect for
any Eurodollar Loan (up to the end of the applicable Interest Period) or (ii)
two percent (2%) per annum plus the Base Rate for each Base Rate Loan; provided,
however, the Default Rate shall never exceed the Highest Lawful Rate.
"Default Rate Period" means (i) any period during which an Event of
Default, other than pursuant to Section 8.1 (a) or (b), is continuing, provided
that such period shall not begin until notice of the commencement of the Default
Rate has been given to Borrower by Administrative Agent upon the instruction by
Majority Lenders and (ii) any period during which any Event of Default pursuant
to Section 8.1 (a) or (b) is continuing unless Borrower has been notified
otherwise by Administrative Agent upon the instruction by Majority Lenders.
"Disclosure Schedule" means Schedule 2 hereto.
"Domestic Lending Office" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" in the Lender Schedule
hereto, or such other office as such Lender may from time to time specify to
Borrower and Administrative Agent; with respect to LC Issuer, the office,
branch, or agency through which it issues Letters of Credit; and, with respect
to Administrative Agent, the office, branch, or agency through which it
administers this Agreement.
"Eligible Cash Equivalents" means Cash Equivalents in which Borrower has
lawful and absolute title, which are free from any express or implied at law
Lien, trust or other beneficial interest, in which Administrative Agent holds a
fully perfected first-priority security interest prior to the rights of, and
enforceable as such against, any other Persons pursuant to an account agreement
satisfactory to Administrative Agent and which remain under the sole dominion
and control of Administrative Agent.
"Eligible Exchange Balances" means each Approved Eligible Receivable
(including for this purpose only either the right to receive crude oil in kind
or to receive money) arising from the trading, lending, borrowing or exchange of
crude oil, net of any netted obligations or other offsets or counterclaims
determined in accordance with prices set forth in the applicable exchange
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contracts, based on current value at the Market Price, in which Borrower has
lawful and absolute title, which is not subject to any Lien in favor of any
Person (other than Permitted Inventory Liens), and which is subject to a fully
perfected first-priority security interest (subject only to Permitted Inventory
Liens) in favor of Administrative Agent pursuant to the Loan Documents prior to
the rights of, and enforceable as such against, any other Persons minus without
duplication the amount of any Permitted Inventory Lien on any crude oil
receivable in kind.
"Eligible Inventory" means inventories of crude oil in which Borrower has
lawful and absolute title (specifically excluding, however, crude oil line fill
carried in the SJV Gathering System or in the All American Pipeline), which are
not subject to any Lien in favor of any Person (other than Permitted Inventory
Liens), which are subject to a fully perfected first priority security interest
(subject only to Permitted Inventory Liens) in favor of Administrative Agent
pursuant to the Loan Documents prior to the rights of, and enforceable as such
against, any other Person, which are otherwise satisfactory to Majority Lenders
in their reasonable business judgment and which are located in storage locations
(including pipelines) which are either (a) owned by a Restricted Person or (b)
Currently Approved by Majority Lenders minus without duplication the amount of
any Permitted Inventory Lien on any such inventory.
"Eligible Margin Deposit" means net equity value of investments by Borrower
in margin deposit accounts with commodities brokers on nationally recognized
exchanges subject to a perfected security interest in favor of Administrative
Agent and a three-party agreement among Borrower, Administrative Agent and the
depository institution, in form and substance satisfactory to Administrative
Agent.
"Eligible Receivables" means, at the time of any determination thereof (and
without duplication), each Account and, with respect to each determination made
on or after the 20th day of each calendar month and prior to the first day of
the next calendar month, each amount which will be, in the good faith estimate
reasonably determined by Borrower, an Account of the Borrower with respect to
sales and deliveries of crude oil during such calendar month or deliveries of
crude oil during the next calendar month under firm written purchase and sale
agreements, in either event as to which the following requirements have been
fulfilled (or as to future Accounts, will be fulfilled as of the date of such
sales and deliveries of crude oil), to the reasonable satisfaction of
Administrative Agent:
(i) Borrower has lawful and absolute title to such Account;
(ii) such Account is a valid, legally enforceable obligation of an
Account Debtor payable in United States dollars, arising from the sale and
delivery of crude oil to such Person in the United States of America in the
ordinary course of business of Borrower, to the extent of the volumes of
crude oil delivered to such Person prior to the date of determination;
(iii) there has been excluded from such Account (A) any portion that
is subject to any dispute, rejection, loss, non-conformance , counterclaim
or other claim or defense on the part of any Account Debtor or to any claim
on the part of any Account Debtor denying liability under such Account, and
(B) the amount of any account payable or other
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liability owed by Borrower to the Account Debtor on such Account, whether
or not a specific netting agreement may exist, excluding, however, any
portion of any such account payable or other liability which is at the time
in question covered by a Letter of Credit;
(iv) Borrower has the full and unqualified right to assign and grant a
security interest in such Account to Administrative Agent as security for
the Obligation;
(v) such Account (A) is evidenced by an invoice rendered to the
Account Debtor, or (B) represents the uninvoiced amount in respect to
actual deliveries of crude oil not earlier than 45 days prior to the date
of determination and is governed by a purchase and sale agreement,
exchange agreement or other written agreement, and in either event such
Account is not evidenced by any promissory note or other instrument;
(vi) such Account is not subject to any Lien in favor of any Person
and is subject to a fully perfected first priority security interest in
favor of Administrative Agent pursuant to the Loan Documents, prior to the
rights of, and enforceable as such against, any other Person except for a
Lien in respect of First Purchase Crude Payables;
(vii) such Account is due not more than 30 days following the last
day of the calendar month in which the crude oil delivery occurred and is
not more than 30 days past due (except that Accounts of a single Account
Debtor in excess of $500,000 which are not Approved Eligible Receivables
shall be excluded from Eligible Receivables if not paid within three
Business Days after the due date);
(viii) such Account is not payable by an Account Debtor with more
than twenty percent (20%) of its Accounts to Borrower that are outstanding
more than 60 days from the invoice date;
(ix) the Account Debtor in respect of such Account (A) is located, is
conducting significant business or has significant assets in the United
States of America or is a Person Currently Approved by Majority Lenders,
(B) is not an Affiliate of Borrower, and (C) is not the subject of any
event of the type described in Section 8.1(i);
(x) the Account Debtor in respect of such Account is not a
governmental authority, domestic or foreign; and
(xi) such Account is not the obligation of an Account Debtor that
Administrative Agent or Majority Lenders determine in good faith that there
is a legitimate concern over the timing or collection of such receivable.
"Eligible Transferee" means a Person which either (a) is a Lender, or (b)
is consented to as an Eligible Transferee by Administrative Agent and, so long
as no Default or Event of Default is continuing, by Borrower, which consents in
each case will not be unreasonably withheld (provided that no Person organized
outside the United States may be an Eligible Transferee if Borrower would be
required to pay withholding taxes on interest or principal owed to such Person).
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"Environmental Laws" means any and all Laws relating to the environment or
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means each Restricted Person and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control that, together with such Restricted Person,
are treated as a single employer under Section 414 of the Code.
"ERISA Plan" means any employee pension benefit plan subject to Title IV of
ERISA maintained by any ERISA Affiliate with respect to which any Restricted
Person has a fixed or contingent liability.
"Eurodollar Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Eurodollar Lending Office" on the Lender
Schedule hereto (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to Borrower and Administrative Agent.
"Eurodollar Loan" means a Loan that bears interest at a rate based upon the
Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan within a Borrowing and
with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/1000 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period. If for any reason such rate is not available, the term
"Eurodollar Rate" shall mean, for any Eurodollar Loan within a Borrowing and
with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/1000 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/1000 of 1%).
"Eurodollar Rate Margin" means the percent per annum set forth below on the
Applicable Leverage Level and Applicable Rating Level in effect on such date.
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Applicable Leverage Level Applicable Rating Level
- -------------------------------------------------------
Level A Level B
-----------------------
Level I 1.50% 1.75%
Level II 1.25% 1.50%
Level III 1.00% 1.25%
Level IV .75% 1.00%
Changes in the Eurodollar Rate Margin will occur automatically without prior
notice as changes in the Applicable Leverage Level or Applicable Rating Level
occur. Administrative Agent will give notice promptly to Borrower and the
Lenders of Applicable Rating Level changes in the Eurodollar Rate Margin.
"Event of Default" has the meaning given to such term in Section 8.1.
"Existing Agreement" means that certain Credit Agreement among PMTI,
Administrative Agent, ING (U.S.) Capital Corporation, as Documentation Agent,
BancBoston Securities, Inc., as Syndication Agent and other financial
institutions dated as of July 30, 1998, as amended, restated or supplemented to
the date hereof.
"Facility Usage" means, at the time in question, the aggregate amount of
outstanding Loans and LC Obligations at such time.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of one percent) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Administrative Agent on such day on such transactions as
determined by Administrative Agent.
"First Purchase Crude Payables" means the unpaid amount of any payable
obligation related to the purchase of crude oil by Borrower which Administrative
Agent determines will be secured by a statutory Lien, including but not limited
to the statutory Liens created under the laws of Texas, New Mexico and Wyoming,
to the extent such payable obligation is not at the time in question covered by
a Letter of Credit.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
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"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Funding Date" means the Business Day, no later than four (4) Business Days
after the date of this Agreement, on which the Offering is completed.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Plains MLP and its
Consolidated Subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the Initial Financial Statements. If any change in any accounting
principle or practice is required by the Financial Accounting Standards Board
(or any such successor) in order for such principle or practice to continue as a
generally accepted accounting principle or practice, all reports and financial
statements required hereunder with respect to Plains MLP or with respect to
Plains MLP and its Consolidated Subsidiaries may be prepared in accordance with
such change, but all calculations and determinations to be made hereunder may be
made in accordance with such change only after notice of such change is given to
each Lender, and Majority Lenders agree to such change insofar as it affects the
accounting of Plains MLP or of Plains MLP and its Consolidated Subsidiaries.
"General Partner" means Plains All American Inc., a Delaware corporation.
"Guarantors" means Plains MLP and all of its Subsidiaries (including All
American but excluding Borrower) and any other Person who has guaranteed some or
all of the Obligations and who has been accepted by Administrative Agent as a
Guarantor or any Subsidiary of Plains MLP which now or hereafter executes and
delivers a guaranty to Administrative Agent pursuant to Section 6.17.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedged Eligible Inventory" means Eligible Inventory, which has been (a)
hedged on the New York Mercantile Exchange arranged through brokers approved by
Administrative Agent and with whom a three party agreement among Borrower,
Administrative Agent and such broker has been entered in form and substance
satisfactory to Administrative Agent or (b) otherwise hedged in a manner
satisfactory to Majority Lenders. The value of Hedged Eligible Inventory shall
be the volume of the inventory times the prices fixed in such hedge, minus all
storage, transportation and other applicable costs.
"Hedging Contract" means (a) any agreement providing for options, swaps,
floors, caps, collars, forward sales or forward purchases involving interest
rates, commodities or commodity prices, equities, currencies, bonds, or indexes
based on any of the foregoing, (b) any option, futures or forward contract
traded on an exchange, and (c) any other derivative agreement or other similar
agreement or arrangement.
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"Highest Lawful Rate" means, with respect to each Lender Party to whom
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
"Incentive and Option Plans" means the Plains All American Inc. 1998 Long-
Term Incentive Plan as in effect on the date hereof, the Plains All American
Inc. Management Incentive Plan as in effect on the date hereof and those certain
Transaction Grant Agreements disclosed in writing to Administrative Agent prior
to the date of this Agreement.
"Indebtedness" of any Person means its Liabilities (without duplication) in
any of the following categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d) Liabilities (other than reserves for taxes and reserves for contingent
obligations) which (i) would under GAAP be shown on such Person's balance sheet
as a liability and (ii) are payable more than one year from the date of creation
or incurrence thereof,
(e) Liabilities arising under Hedging Contracts (on a net basis to the
extent netting is provided for in the applicable Hedging Contract),
(f) Liabilities constituting principal under Capital Leases,
(g) Liabilities arising under conditional sales or other title retention
agreements,
(h) Liabilities owing under direct or indirect guaranties of Liabilities
of any other Person or otherwise constituting obligations to purchase or acquire
or to otherwise protect or insure a creditor against loss in respect of
Liabilities of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
Liabilities, assets, goods, securities or services), but excluding endorsements
in the ordinary course of business of negotiable instruments in the course of
collection,
(i) Liabilities consisting of an obligation to purchase or redeem
securities or other property, if such Liabilities arises out of or in connection
with the sale or issuance of the same or similar securities or property (for
example, repurchase agreements, mandatorily redeemable preferred stock and
sale/leaseback agreements),
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(j) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Liabilities with respect to banker's acceptances, or
(l) Liabilities with respect to obligations to deliver goods or services
in consideration of advance payments therefor;
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred in the ordinary course of business by such Person
on ordinary trade terms to vendors, suppliers or other Persons providing goods
and services for use by such Person in the ordinary course of its business,
unless and until such Liabilities are outstanding more than 120 days after the
date the respective goods are delivered or the respective services are rendered,
other than Liabilities contested in good faith by appropriate proceedings, if
required, and for which adequate reserves are maintained on the books of such
Person in accordance with GAAP.
"Initial Financial Statements" means the audited pro forma Consolidated
financial statements of Plains MLP as of September 30, 1998.
"Insurance Schedule" means Schedule 4 attached hereto.
"Interest Expense" means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between Plains MLP and its Subsidiaries and all other items required
to be eliminated in the course of the preparation of Consolidated financial
statements of Plains MLP and its Subsidiaries in accordance with GAAP): (a) all
interest and commitment fees in respect of Indebtedness of Plains MLP or any of
its Subsidiaries (including imputed interest on Capital Lease Obligations) which
are accrued during such period and whether expensed in such period or
capitalized; plus (b) all fees, expenses and charges in respect of letters of
credit issued for the account of Plains MLP or any of its Subsidiaries, which
are accrued during such period and whether expensed in such period or
capitalized.
"Interest Payment Date" means (a) with respect to each Base Rate Loan, the
last day of each March, June, September and December, and (b) with respect to
each Eurodollar Loan, the last day of the Interest Period that is applicable
thereto.
"Interest Period" means, with respect to each particular Eurodollar Loan in
a Borrowing, the period specified in the Borrowing Notice or
Continuation/Conversion Notice applicable thereto, beginning on and including
the date specified in such Borrowing Notice or Continuation/Conversion Notice
(which must be a Business Day), and ending one, two or three months thereafter,
as Borrower may elect in such notice; provided that: (a) any Interest Period
which would otherwise end on a day which is not a Business Day shall be extended
to the next succeeding Business Day unless such Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Business Day; (b) any Interest Period which begins on the last
Business Day in a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last
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Business Day in a calendar month; and (c) notwithstanding the foregoing, no
Interest Period may be selected that would end after the last day of the
Commitment Period.
"Investment" means any investment made, directly or indirectly in any
Person, whether by acquisition of shares of capital stock, indebtedness or other
obligations or securities or by loan, advance, capital contribution or otherwise
and whether made in cash, by the transfer of property or by any other means.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given to such term in Section 2.11(a).
"LC Issuer" means BankBoston, N.A. in its capacity as the issuer of Letters
of Credit hereunder, and its successors in such capacity. Administrative Agent
may, with the consent of Borrower and the Lender in question, appoint any Lender
hereunder as an LC Issuer in place of or in addition to BankBoston, N.A.
"LC Obligations" means, at the time in question, the sum of all Matured LC
Obligations plus the maximum amounts which LC Issuer might then or thereafter be
called upon to advance under all Letters of Credit then outstanding.
"Lease Rentals" means, with respect to any period, the sum of the rental
and other obligations required to be paid during such period by Plains MLP or
any Subsidiary of Plains MLP as lessee under all leases of real or personal
property (other than Capital Leases), excluding any amount required to be paid
by the lessee (whether or not therein designated as rental or additional rental)
on account of maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges, provisions that, if at the date of determination, any
such rental or other obligations are contingent or not otherwise definitely
determinable by terms of the related lease, the amount of such obligations (i)
shall be assumed to be equal to the amount of such obligations for the period of
12 consecutive calendar months immediately preceding the date of determination
or (ii) if the related lease was not in effect during such preceding 12-month
period, shall be the amount estimated by a senior financial officer of General
Partner on a reasonable basis and in good faith.
"Lender Parties" means Administrative Agent, Syndication Agent,
Documentation Agent, LC Issuer, and all Lenders.
"Lender Schedule" means Schedule 1 hereto.
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"Lenders" means each signatory hereto (other than Borrower and any
Restricted Person that is a party hereto), including BankBoston, N.A. in its
capacity as a Lender hereunder rather than as Administrative Agent and LC
Issuer, and the successors of each such party as holder of a Note.
"Letter of Credit" means any letter of credit issued by LC Issuer hereunder
at the application of Borrower.
"Liabilities" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"Lien" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to it or any other arrangement
with such creditor which provides for the payment of such Liabilities out of
such property or assets or which allows such creditor to have such Liabilities
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic's
or materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business.
"Lien" also means any filed financing statement, any registration of a pledge
(such as with an issuer of uncertificated securities), or any other arrangement
or action which would serve to perfect a Lien described in the preceding
sentence, regardless of whether such financing statement is filed, such
registration is made, or such arrangement or action is undertaken before or
after such Lien exists.
"Loans" has the meaning given to such term in Section 2.1.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Letters of Credit, the LC Applications, and all other agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith (exclusive of term sheets and commitment
letters).
"Majority Lenders" means Lenders whose aggregate Percentage Shares equal or
exceed sixty-six and two-thirds percent (66-2/3%).
"Market Price" means on each day a spot price for the inventory of crude
oil being valued, determined by published prices and methodology approved by
Administrative Agent from time to time, based on an index gravity and grade of
crude oil at a delivery point reflecting as nearly as practical the actual
gravity, grade, and location of the crude oil being valued, adjusted to reflect
any differences in gravity and grade between the index crude oil and the actual
inventory and to reflect transportation costs or other appropriate location
price differential from the actual location to the index location.
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"Material Adverse Change" means a material and adverse change, from the
state of affairs presented in the Initial Financial Statements or as represented
or warranted in any Loan Document, to (a) Plains MLP's Consolidated financial
condition, (b) Plains MLP's Consolidated operations, properties or prospects,
considered as a whole, (c) Borrower's ability to timely pay the Obligations, or
(d) the enforceability of the material terms of any Loan Document.
"Material Market Open Position Loss" means a cumulative amount of net
losses resulting from open inventory positions of all Restricted Persons on a
mark to market basis during any period of 12 consecutive months in excess of
$5,000,000 (exclusive of linefill carried in the All American Pipeline).
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts or
demands for payment drawn or made under or purported to be under any Letter of
Credit and all other amounts due and owing to LC Issuer under any LC Application
for any Letter of Credit, to the extent the same have not been repaid to LC
Issuer (with the proceeds of Loans or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Maximum Facility Amount" means the amount of $175,000,000, as such amount
may be reduced by Borrower from time to time as provided in Section 2.12.
"Merger Agreement" means that certain Merger Agreement among Resources,
PMTI, and certain other Subsidiaries of Resources, subject to Section 1.3.
"Moody's" means Moody's Investor Service, Inc., or its successor.
"Note" has the meaning given to such term in Section 2.1.
"Obligations" means all Liabilities from time to time owing by any
Restricted Person to any Lender Party under or pursuant to any of the Loan
Documents, including all LC Obligations. "Obligation" means any part of the
Obligations.
"Offering" means the public issuance of limited partnership interests of
Plains MLP as described in the Preliminary Prospectus.
"Offering Documents" means the documents listed on Schedule 6 hereto.
"Omnibus Agreement" means that certain Omnibus Agreement between Resources,
Plains MLP, Borrower, All American and General Partner.
"Open Position" means the aggregate volume of crude oil on which Restricted
Persons have commodity price risk, which may include, without limitation, (i)
the aggregate volume of crude oil owned for which Restricted Persons do not
have, on an aggregate basis, contracts for sale at a fixed price and (ii) the
aggregate volumes of crude oil under contracts for purchase for
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which Restricted Persons do not have, on an aggregate basis, contracts for sale
on the substantially same pricing basis (i.e. at a fixed price for sale
substantially equivalent to or above the fixed price for purchase of such crude
oil, or at an index price for sale substantially equivalent to the index price
for purchase of such crude oil, or at an index price for sale substantially
equivalent to a margin above the index price for purchase of such crude oil).
"Open Position" shall not include, during the period from the first to the
25/th/ day of a calendar month, any volumes of crude oil which Restricted
Persons are obligated to gather in the next succeeding calendar month at a price
based upon the posted price from time to time in effect during such next
calendar month.
"Other Eligible Inventory Value" means the following amount of Eligible
Inventory, other than Hedged Eligible Inventory: (a) if the WTI Price is less
than or equal to $30 per barrel, 80% of the product of the volume of such crude
oil times the Market Price, or (b) if the WTI Price is greater than $30 per
barrel the greater of (i) 70% of the product of the volume of such crude oil
times the Market Price or (ii) 80% of the product of the volume of such crude
oil times $30 per barrel; minus, in each case, all storage, transportation and
other applicable costs. As used herein "WTI Price" means on each day the
Platt's Average Spot Price for West Texas intermediate crude oil (Cushing,
Oklahoma).
"Other Eligible Receivable" means any Eligible Receivable which is not an
Approved Eligible Receivable nor an Eligible Exchange Balance. The portions of
the aggregate of the Other Eligible Receivables owed by any obligor and its
Affiliates exceeding 20% of the aggregate amount of all Other Eligible
Receivables shall not be included without the prior written approval of the
Majority Lenders.
"Other Priority Claims" means any account payable, obligation or liability
which Administrative Agent has determined has or will have a Lien upon or claim
against any Cash Equivalent, account or inventory of Borrower senior or equal in
priority to the security interests in favor of Administrative Agent for the
benefit of Lenders, in each case to the extent such Cash Equivalent, account or
inventory of Borrower is otherwise included in the determination of the
Borrowing Base and the included portion thereof has not already been reduced by
such Lien or claim.
"Paid but Unexpired Letters of Credit" means, on any day, the maximum
drawing amount of Letters of Credit on such day where no underlying obligation
exists on such day, or if the amount of the Letter of Credit exceeds the
underlying obligation on such day, the amount of such excess. As used herein,
"underlying obligation" includes without limitation, all existing and future
obligations to the beneficiary of such Letter of Credit in respect of crude oil
purchased or received on or prior to such day or in respect of crude oil
Borrower is then obligated to purchase or receive or has then nominated to
purchase or receive.
"Partnership Agreement" means the Amended and Restated Agreement of Limited
Partnership of Plains MLP, subject to Section 1.3.
"Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1, 2.2 or 2.12, in any Borrowing Notice or when no Loans are
outstanding hereunder, the percentage set
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forth opposite such Lender's name on the Lender Schedule hereto, and (b) when
used otherwise, the percentage obtained by dividing (i) the sum of the unpaid
principal balance of such Lender's Loans at the time in question plus the
Matured LC Obligations which such Lender has funded pursuant to Section 2.9(c)
plus the portion of the Maximum Drawing Amount which such Lender might be
obligated to fund under Section 2.9(c), by (ii) the sum of the aggregate unpaid
principal balance of all Loans at such time plus the aggregate amount of LC
Obligations outstanding at such time.
"Permitted Acquisitions" means (A) the acquisition of all of the capital
stock or other equity interest in a Person (exclusive of general partner
interests held by General Partner or another Wholly Owned Subsidiary of
Resources not in excess of a 1% economic interest) and exclusive of director
qualifying shares and other equity interests required to be held by an Affiliate
to comply with a requirement of Law) or (B) any acquisition of all or a portion
of the business, assets or operations of a Person, provided that (i) prior to
and after giving effect to such acquisition no Default or Event of Default shall
have occurred and be continuing; (ii) all representations and warranties shall
be true and correct as if restated immediately following the consummation of
such acquisition; and (iii) substantially all of such business, assets and
operations so acquired, or of the Person so acquired, consists of crude oil
and/or gas marketing, gathering, transportation, storage, terminaling and
pipeline operation.
"Permitted Inventory Liens" means any Lien, and the amount of any Liability
secured thereby, on crude oil inventory which would be a Permitted Lien under
Section 7.2(d).
"Permitted Investments" means (a) Cash Equivalents, (b) Investments
described in the Disclosure Schedule, (c) Investments by Plains MLP or any of
its Subsidiaries in any Wholly Owned Subsidiary of Plains MLP which is a
Guarantor and (d) Permitted Acquisitions.
"Permitted Lien" has the meaning given to such term in Section 7.2.
"Person" means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, Tribunal, or any
other legally recognizable entity.
"Plains MLP" means Plains All American Pipeline, L.P., a Delaware limited
partnership.
"Plains Terminal" means either the storage terminal in Ingleside, Texas
owned by Borrower or the Cushing Terminal.
"Preliminary Prospectus" has the meaning given such term in Schedule 6
hereto.
"PMTI" means Plains Marketing & Transportation, Inc., a Delaware
corporation.
"Qualified Inventory Purchases" means (i) Cash and Carry Purchases and (ii)
purchases of crude oil designated as working inventory at a Plains Terminal and
line fill in pipelines Currently Approved by Majority Lenders.
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"Rating Agency" means either S&P or Moody's.
"Registration Statement" means that certain Registration Statement on Form
S-1 filed with the Securities and Exchange Commission by Plains MLP under
registration number 333-64107 (as amended prior to the date hereof), together
with its referenced exhibits and other appendices.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (a) any category of liabilities
which includes deposits by reference to which the Adjusted Eurodollar Rate is to
be determined, or (b) any category of extensions of credit or other assets which
include Eurodollar Loans.
"Resources" means Plains Resources Inc., a Delaware corporation.
"Restricted Person" means any of Plains MLP and each Subsidiary of Plains
MLP, including but not limited to Borrower, All American, and each Subsidiary of
Borrower and/or All American.
"S&P" means Standard & Poor's Ratings Group (a division of McGraw Hill,
Inc.) or its successor.
"Security Documents" means the instruments listed in the Security Schedule
and all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Restricted Person to Administrative Agent in connection with
this Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or the performance of any Restricted
Person's other duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 3 hereto.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or other
business or corporate entity, enterprise or organization which is directly or
indirectly (through one or more intermediaries) controlled or owned more than
fifty percent by such Person.
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or
(ii) any other reportable
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event described in Section 4043(c) of ERISA other than a reportable event not
subject to the provision for 30-day notice to the Pension Benefit Guaranty
Corporation pursuant to a waiver by such corporation under Section 4043(a) of
ERISA, or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any
ERISA Plan or the treatment of any ERISA Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to terminate any
ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of
ERISA, or (e) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any ERISA Plan.
"Tribunal" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency or instrumentality of
the United States of America or any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted or existing.
"Type" means, with respect to any Loans, the characterization of such Loans
as either Base Rate Loans or Eurodollar Loans.
"UCC" means the Uniform Commercial Code as in effect in the State of New
York.
"Wholly Owned Subsidiary" means any Subsidiary of a Person, all of the
issued and outstanding stock, limited liability company membership interests, or
partnership interests of which (including all rights or options to acquire such
stock or interests) are directly or indirectly (through one or more
Subsidiaries) owned by such Person, excluding any general partner interests
owned by General Partner in any such Subsidiary that is a partnership, such
general partner interests not to exceed two percent (2%) of the aggregate
ownership interests of any such partnership and directors' qualifying shares if
applicable.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement. All references to the terms
"Contribution Agreement", "Crude Oil Marketing Agreement", "Merger Agreement",
"Omnibus Agreement", and "Partnership Agreement" shall be deemed to be
references to those agreements as such agreements are executed and delivered by
the parties thereto on the Funding Date, provided each such agreement is in the
form of such agreement attached as an exhibit to the Registration Statement,
with changes to such form that are non-substantive or that the Administrative
Agent
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approves on or prior to the Funding Date. The terms "All American Pipeline" and
"SJV Gathering System" shall have the meanings given in the Preliminary
Prospectus.
Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement," "this instrument," "herein," "hereof," "hereby," "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation." Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under the
Loan Documents of interest chargeable with respect to Eurodollar Loans and of
fees shall be made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by a Lender Party of amounts to be
paid under Article III or any other matters which are to be determined hereunder
by a Lender Party (such as any Eurodollar Rate, Adjusted Eurodollar Rate,
Business Day, Interest Period, or Reserve Requirement) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Majority Lenders otherwise consent all financial statements and
reports furnished to any Lender Party hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
ARTICLE II - The Loans and Letters of Credit
Section 2.1. Commitments to Lend; Notes. Subject to the terms and
conditions hereof, each Lender agrees to make loans to Borrower (herein called
such Lender's "Loans") upon Borrower's request from time to time during the
Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all
Lenders are requested to make Loans of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing, (b) after giving
effect to such loans, the aggregate principal amount of outstanding Loans will
not exceed $40,000,000, and (c) after giving effect to such Loans, the Facility
Usage does not exceed the lesser of (i) the Maximum Facility Amount and (ii) the
Borrowing Base determined as of the date on which the requested Loans are to be
made. The aggregate amount of all Loans in any Borrowing must be equal to
$2,000,000 or any higher integral multiple of $250,000. Borrower may have no
more than five Borrowings of Eurodollar Loans outstanding at any time. The
obligation of Borrower to repay to each Lender the aggregate amount of all Loans
made by such
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Lender, together with interest accruing in connection therewith, shall be
evidenced by a single promissory note (herein called such Lender's "Note") made
by Borrower payable to the order of such Lender in the form of Exhibit A with
appropriate insertions. The amount of principal owing on any Lender's Note at
any given time shall be the aggregate amount of all Loans theretofore made by
such Lender minus all payments of principal theretofore received by such Lender
on such Note. Interest on each Note shall accrue and be due and payable as
provided herein and therein. Each Note shall be due and payable as provided
herein and therein, and shall be due and payable in full on the last day of the
Commitment Period. Subject to the terms and conditions of this Agreement,
Borrower may borrow, repay, and reborrow hereunder.
Section 2.2. Requests for New Loans. Borrower must give to
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of any requested Borrowing of Loans to be funded by Lenders. Each such
notice constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of Base
Rate Loans and the date on which such Base Rate Loans are to be advanced,
or (ii) the aggregate amount of any such Borrowing of Eurodollar Loans, the
date on which such Eurodollar Loans are to be advanced (which shall be the
first day of the Interest Period which is to apply thereto), and the length
of the applicable Interest Period; and
(b) be received by Administrative Agent not later than 11:00 a.m.,
Boston, Massachusetts time, on (i) the day on which any such Base Rate
Loans are to be made, or (ii) the third Business Day preceding the day on
which any such Eurodollar Loans are to be made.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. Upon receipt of any such Borrowing
Notice, Administrative Agent shall give each Lender prompt notice of the terms
thereof. If all conditions precedent to such new Loans have been met, each
Lender will on the date requested promptly remit to Administrative Agent at
Administrative Agent's office in Boston, Massachusetts the amount of such
Lender's Loan in immediately available funds, and upon receipt of such funds,
unless to its actual knowledge any conditions precedent to such Loans have been
neither met nor waived as provided herein, Administrative Agent shall promptly
make such Loans available to Borrower. Unless Administrative Agent shall have
received prompt notice from a Lender that such Lender will not make available to
Administrative Agent such Lender's new Loan, Administrative Agent may in its
discretion assume that such Lender has made such Loan available to
Administrative Agent in accordance with this section and Administrative Agent
may if it chooses, in reliance upon such assumption, make such Loan available to
Borrower. If and to the extent such Lender shall not so make its new Loan
available to Administrative Agent, such Lender and Borrower severally agree to
pay or repay to Administrative Agent within three days after demand the amount
of such Loan together with interest thereon, for each day from the date such
amount was made available to Borrower until the date such amount is paid or
repaid to Administrative Agent, with interest at (i) the Federal Funds Rate, if
such Lender is making such
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payment and (ii) the interest rate applicable at the time to the other new Loans
made on such date, if Borrower is making such repayment. If neither such Lender
nor Borrower pays or repays to Administrative Agent such amount within such
three-day period, Administrative Agent shall be entitled to recover from
Borrower, on demand, in lieu of interest provided for in the preceding sentence,
interest thereon at the Default Rate, calculated from the date such amount was
made available to Borrower. The failure of any Lender to make any new Loan to be
made by it hereunder shall not relieve any other Lender of its obligation
hereunder, if any, to make its new Loan, but no Lender shall be responsible for
the failure of any other Lender to make any new Loan to be made by such other
Lender.
Section 2.3. Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Loans already outstanding: to
Convert, in whole or in part, Base Rate Loans to Eurodollar Loans, to Convert,
in whole or in part, Eurodollar Loans to Base Rate Loans on the last day of the
Interest Period applicable thereto, and to Continue, in whole or in part,
Eurodollar Loans beyond the expiration of such Interest Period by designating a
new Interest Period to take effect at the time of such expiration. In making
such elections, Borrower may combine existing Loans made pursuant to separate
Borrowings into one new Borrowing or divide existing Loans made pursuant to one
Borrowing into separate new Borrowings, provided that Borrower may have no more
than five Borrowings of Eurodollar Loans outstanding at any time. To make any
such election, Borrower must give to Administrative Agent written notice (or
telephonic notice promptly confirmed in writing) of any such Conversion or
Continuation of existing Loans, with a separate notice given for each new
Borrowing. Each such notice constitutes a "Continuation/Conversion Notice"
hereunder and must:
(a) specify the existing Loans which are to be Continued or
Converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate
Loans into which such existing Loans are to be Continued or Converted and
the date on which such Continuation or Conversion is to occur, or (ii) the
aggregate amount of any Borrowing of Eurodollar Loans into which such
existing Loans are to be Continued or Converted, the date on which such
Continuation or Conversion is to occur (which shall be the first day of the
Interest Period which is to apply to such Eurodollar Loans), and the length
of the applicable Interest Period; and
(c) be received by Administrative Agent not later than 11:00 a.m.,
Boston, Massachusetts time, on (i) the day on which any such Continuation
or Conversion to Base Rate Loans is to occur, or (ii) the third Business
Day preceding the day on which any such Continuation or Conversion to
Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Continuation/Conversion Notice, Administrative Agent shall give each Lender
prompt notice of the terms thereof. Each Continuation/Conversion Notice shall
be irrevocable and binding on Borrower. During the continuance of any Default,
Borrower may not make any
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election to Convert existing Loans into Eurodollar Loans or Continue existing
Loans as Eurodollar Loans beyond the expiration of their respective and
corresponding Interest Period then in effect. If (due to the existence of a
Default or for any other reason) Borrower fails to timely and properly give any
Continuation/Conversion Notice with respect to a Borrowing of existing
Eurodollar Loans at least three days prior to the end of the Interest Period
applicable thereto, such Eurodollar Loans, to the extent not prepaid at the end
of such Interest Period, shall automatically be Converted into Base Rate Loans
at the end of such Interest Period. No new funds shall be repaid by Borrower or
advanced by any Lender in connection with any Continuation or Conversion of
existing Loans pursuant to this section, and no such Continuation or Conversion
shall be deemed to be a new advance of funds for any purpose; such Continuations
and Conversions merely constitute a change in the interest rate applicable to
already outstanding Loans.
Section 2.4. Use of Proceeds. Borrower shall use the proceeds of all
Loans to make Qualified Inventory Purchases and to refinance Matured LC
Obligations. In no event shall any Loan or any Letter of Credit be used (i) to
fund distributions by Plains MLP, (ii) directly or indirectly by any Person for
personal, family, household or agricultural purposes, (iii) for the purpose,
whether immediate, incidental or ultimate, of purchasing, acquiring or carrying
any "margin stock" (as such term is defined in Regulation U promulgated by the
Board of Governors of the Federal Reserve System) or (iv) to extend credit to
others directly or indirectly for the purpose of purchasing or carrying any such
margin stock. Borrower represents and warrants that Borrower is not engaged
principally, or as one of Borrower's important activities, in the business of
extending credit to others for the purpose of purchasing or carrying such margin
stock.
Section 2.5. Optional Prepayments of Loans. Borrower may, upon five
Business Days' notice to Administrative Agent (and Administrative Agent will
promptly give notice to the other Lenders), from time to time and without
premium or penalty prepay the Loans, in whole or in part, so long as the
aggregate amounts of all partial prepayments of principal on the Loans equals
$2,000,000 or any higher integral multiple of $250,000. Each prepayment of
principal under this section shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid. Any principal or interest prepaid
pursuant to this section shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Loan Documents at the time of
such prepayment.
Section 2.6. Mandatory Prepayments. If at any time the Facility Usage
exceeds the Borrowing Base (whether due to a reduction in the Borrowing Base in
accordance with this Agreement, or otherwise), Borrower shall immediately upon
demand prepay the principal of the Loans in an amount at least equal to such
excess. Each prepayment of principal under this section shall be accompanied by
all interest then accrued and unpaid on the principal so prepaid. Any principal
or interest prepaid pursuant to this section shall be in addition to, and not in
lieu of, all payments otherwise required to be paid under the Loan Documents at
the time of such prepayment.
Section 2.7. Letters of Credit. Subject to the terms and conditions
hereof, Borrower may during the Commitment Period request LC Issuer to issue,
amend, or extend the expiration date of, one or more Letters of Credit, provided
that:
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(a) after taking such Letter of Credit into account (i) the Facility
Usage does not exceed the lesser of (A) the Maximum Facility Amount at such
time or (B) the Borrowing Base at such time and (ii) such Letter of Credit
can be incurred by Borrower pursuant to the Permitted Debt Limit at such
time;
(b) the expiration date of such Letter of Credit is prior to the
earlier of (i) 70 days (or 100 days, if the beneficiary thereof is Exxon
Company U.S.A.) after the date of issuance of such Letter of Credit (or 180
days after the date of issuance in the case of a Surety Letter of Credit)
or (ii) 30 days prior to the end of the Commitment Period;
(c) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will
not subject LC Issuer to any cost which is not reimbursable under Article
III;
(d) either (i) such Letter of Credit is related to the purchase or
exchange by Borrower of crude oil and is in the Form of Exhibit D hereto or
such other form and terms as shall be acceptable to LC Issuer in its sole
and absolute discretion and Currently Approved by Majority Lenders, or (ii)
such Letter of Credit is a Surety Letter of Credit and after taking such
Letter of Credit into account the aggregate amount of LC Obligations in
respect to all Surety Letters of Credit does not exceed $1,000,000; and
(e) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(e) (in the following Section 2.8 called the "LC Conditions") have been met as
of the date of issuance, amendment, or extension of such Letter of Credit. The
outstanding letters of credit issued by LC Issuer under the Existing Agreement
shall be deemed to be Letters of Credit issued hereunder; Borrower hereby
represents and warrants that the LC Conditions have been met as of the date
hereof with respect to each such Letter of Credit.
Section 2.8. Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least two Business Days before the date
on which Borrower desires for LC Issuer to issue such Letter of Credit. By
making any such written application, unless otherwise expressly stated therein,
Borrower shall be deemed to have represented and warranted that the LC
Conditions described in Section 2.7 will be met as of the date of issuance of
such Letter of Credit. Each such written application for a Letter of Credit must
be made in writing in the form and substance of Exhibit E, the terms and
provisions of which are hereby incorporated herein by reference (or in such
other form as may mutually be agreed upon by LC Issuer and Borrower). If all LC
Conditions for a Letter of Credit have been met as described in Section 2.7 on
any Business Day before 11:00 a.m, Boston, Massachusetts time, LC Issuer will
issue such Letter of Credit on the same Business Day at LC Issuer's office in
Boston, Massachusetts. If the LC Conditions are met as described in Section 2.7
on any Business Day on or after 11:00 a.m, Boston, Massachusetts time, LC Issuer
will issue such Letter of Credit on the next succeeding Business Day at LC
Issuer's office in Boston, Massachusetts. If any provisions of any LC
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Application conflict with any provisions of this Agreement, the provisions of
this Agreement shall govern and control.
Section 2.9. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation shall
constitute a loan by LC Issuer to Borrower. Borrower promises to pay to LC
Issuer, or to LC Issuer's order, on demand, the full amount of each Matured LC
Obligation, together with interest thereon (i) at the Base Rate to and including
the second Business Day after the Matured LC Obligation is incurred and (ii) at
the Default Rate on each day thereafter.
(b) Letter of Credit Advances. If the beneficiary of any Letter of Credit
makes a draft or other demand for payment thereunder then Borrower may, during
the interval between the making thereof and the honoring thereof by LC Issuer,
request Lenders to make Loans to Borrower in the amount of such draft or demand,
which Loans shall be made concurrently with LC Issuer's payment of such draft or
demand and shall be immediately used by LC Issuer to repay the amount of the
resulting Matured LC Obligation. Such a request by Borrower shall be made in
compliance with all of the provisions hereof, provided that for the purposes of
the first sentence of Section 2.1, the amount of such Loans shall be considered,
but the amount of the Matured LC Obligation to be concurrently paid by such
Loans shall not be considered.
(c) Participation by Lenders. LC Issuer irrevocably agrees to grant and
hereby grants to each Lender, and -- to induce LC Issuer to issue Letters of
Credit hereunder -- each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from LC Issuer, on the terms and conditions
hereinafter stated and for such Lender's own account and risk an undivided
interest equal to such Lender's Percentage Share of LC Issuer's obligations and
rights under each Letter of Credit issued hereunder and the amount of each
Matured LC Obligation paid by LC Issuer thereunder. Each Lender unconditionally
and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid
under any Letter of Credit for which LC Issuer is not reimbursed in full by
Borrower in accordance with the terms of this Agreement and the related LC
Application (including any reimbursement by means of concurrent Loans or by the
application of LC Collateral), such Lender shall (in all circumstances and
without set-off or counterclaim) pay to LC Issuer on demand, in immediately
available funds at LC Issuer's address for notices hereunder, such Lender's
Percentage Share of such Matured LC Obligation (or any portion thereof which has
not been reimbursed by Borrower). Each Lender's obligation to pay LC Issuer
pursuant to the terms of this subsection is irrevocable and unconditional. If
any amount required to be paid by any Lender to LC Issuer pursuant to this
subsection is paid by such Lender to LC Issuer within three Business Days after
the date such payment is due, LC Issuer shall in addition to such amount be
entitled to recover from such Lender, on demand, interest thereon calculated
from such due date at the Federal Funds Rate. If any amount required to be paid
by any Lender to LC Issuer pursuant to this subsection is not paid by such
Lender to LC Issuer within three Business Days after the date such payment is
due, LC Issuer shall in addition to such amount be entitled to recover from such
Lender, on demand, interest thereon calculated from such due date at the Base
Rate.
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(d) Distributions to Participants. Whenever LC Issuer has in accordance
with this section received from any Lender payment of such Lender's Percentage
Share of any Matured LC Obligation, if LC Issuer thereafter receives any payment
of such Matured LC Obligation or any payment of interest thereon (whether
directly from Borrower or by application of LC Collateral or otherwise, and
excluding only interest for any period prior to LC Issuer's demand that such
Lender make such payment of its Percentage Share), LC Issuer will distribute to
such Lender its Percentage Share of the amounts so received by LC Issuer;
provided, however, that if any such payment received by LC Issuer must
thereafter be returned by LC Issuer, such Lender shall return to LC Issuer the
portion thereof which LC Issuer has previously distributed to it.
(e) Calculations. A written advice setting forth in reasonable detail the
amounts owing under this section, submitted by LC Issuer to Borrower or any
Lender from time to time, shall be conclusive, absent manifest error, as to the
amounts thereof.
Section 2.10. No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to accept
and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower releases each Lender Party
from, and agrees to hold each Lender Party harmless and indemnified against, any
liability or claim in connection with or arising out of the subject matter of
this section, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no
Lender Party shall be entitled to indemnification for that portion, if any, of
any liability or claim which is proximately caused by its own individual gross
negligence or willful misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of Borrower, or if the
amount of any Letter of Credit is increased at the request of Borrower, this
Agreement shall be binding upon all Restricted Persons with respect to such
Letter of Credit as so extended, increased or otherwise modified, with respect
to drafts and property covered thereby, and with respect to any action taken by
LC Issuer, LC Issuer's correspondents, or any Lender Party in accordance with
such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any
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nature or character for the validity or correctness of any transfer or
successive transfers, and payment by LC Issuer to any purported transferee or
transferees as determined by LC Issuer is hereby authorized and approved, and
Borrower releases each Lender Party from, and agrees to hold each Lender Party
harmless and indemnified against, any liability or claim in connection with or
arising out of the foregoing, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY
SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN
PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided
only that no Lender Party shall be entitled to indemnification for that portion,
if any, of any liability or claim which is proximately caused by its own
individual gross negligence or willful misconduct, as determined in a final
judgment.
Section 2.11. LC Collateral.
(a) LC Obligations in Excess of Borrowing Base. If, after the making of
all mandatory prepayments required under Section 2.6, the outstanding LC
Obligations will exceed the Borrowing Base, then in addition to prepayment of
the entire principal balance of the Loans Borrower will immediately pay to LC
Issuer an amount equal to such excess. LC Issuer will hold such amount as
collateral security for the remaining LC Obligations (all such amounts held as
collateral security for LC Obligations being herein collectively called "LC
Collateral") and the other Obligations, and such collateral may be applied from
time to time to pay Matured LC Obligations. Neither this subsection nor the
following subsection shall, however, limit or impair any rights which LC Issuer
may have under any other document or agreement relating to any Letter of Credit,
LC Collateral or LC Obligation, including any LC Application, or any rights
which any Lender Party may have to otherwise apply any payments by Borrower and
any LC Collateral under Section 3.1.
(b) Acceleration of LC Obligations. If the Obligations or any part
thereof become immediately due and payable pursuant to Section 8.1 then, unless
all Lenders otherwise specifically elect to the contrary (which election may
thereafter be retracted by all Lenders at any time), all LC Obligations shall
become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC
Obligations which are then outstanding to be held as LC Collateral.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by LC Issuer in such Cash Equivalents as LC Issuer
may choose in its sole discretion. All interest on (and other proceeds of) such
Investments shall be reinvested or applied to Matured LC Obligations or other
Obligations which are due and payable. When all Obligations have been satisfied
in full, including all LC Obligations, all Letters of Credit have expired or
been terminated, and all of Borrower's reimbursement obligations in connection
therewith have been satisfied in full, LC Issuer shall release any remaining LC
Collateral. Borrower hereby assigns and grants to LC Issuer a continuing
security interest in all LC Collateral paid by it to LC Issuer, all Investments
purchased with such LC Collateral, and all proceeds thereof to secure its
Matured LC Obligations and its Obligations under this Agreement, each Note, and
the other Loan Documents, and Borrower agrees that such LC Collateral,
Investments and proceeds shall be subject to all of
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the terms and conditions of the Security Documents. Borrower further agrees that
LC Issuer shall have all of the rights and remedies of a secured party under the
UCC with respect to such security interest and that an Event of Default under
this Agreement shall constitute a default for purposes of such security
interest.
(d) Payment of LC Collateral. When Borrower is required to provide LC
Collateral for any reason and fails to do so on the day when required, LC Issuer
or Administrative Agent may without prior notice to Borrower or any other
Restricted Person provide such LC Collateral (whether by application of proceeds
of other Collateral, by transfers from other accounts maintained with LC Issuer,
or otherwise) using any available funds of Borrower or any other Person also
liable to make such payments, and LC Issuer or Administrative Agent will give
notice thereof to Borrower promptly after such application or transfer. Any
such amounts which are required to be provided as LC Collateral and which are
not provided on the date required shall, for purposes of each Security Document,
be considered past due Obligations owing hereunder, and LC Issuer is hereby
authorized to exercise its respective rights under each Security Document to
obtain such amounts.
Section 2.12. Interest Rates and Fees; Reduction in Commitment.
(a) Interest Rates. Unless the Default Rate shall apply, (i) each Base
Rate Loan shall bear interest on each day outstanding at the Base Rate in effect
on such day and (ii) each Eurodollar Loan shall bear interest on each day during
the related Interest Period at the related Adjusted Eurodollar Rate plus the
Eurodollar Rate Margin in effect on such day. During a Default Rate Period, all
Loans shall bear interest on each day outstanding at the Default Rate. If an
Event of Default based upon Section 8.1(a), Section 8.1(b) or, with respect to
Borrower, based upon Section 8.1(i)(i), (i)(ii) or (i)(iii) exists and the Loans
are not bearing interest at the Default Rate, the past due principal and past
due interest shall bear interest on each day outstanding at the Default Rate.
The interest rate shall change whenever the applicable Base Rate, the Adjusted
Eurodollar Rate or the Eurodollar Rate Margin changes. In no event shall the
interest rate on any Loan exceed the Highest Lawful Rate.
(b) Commitment Fees. In consideration of each Lender's commitment to make
Loans, Borrower will pay to Administrative Agent for the account of each Lender
a commitment fee determined on a daily basis by applying a rate of one quarter
of one percent (0.25%) per annum to such Lender's Percentage Share of the unused
portion of the Maximum Facility Amount on each day during the Commitment Period,
determined for each such day by deducting from the amount of the Maximum
Facility Amount at the end of such day the Facility Usage. This commitment fee
shall be due and payable in arrears on the last day of each Fiscal Quarter and
at the end of the Commitment Period. Borrower shall have the right from time to
time to permanently reduce the Maximum Facility Amount, provided that (i) notice
of such reduction is given not less than 2 business Days prior to such
reduction, (ii) the resulting Maximum Facility Amount is not less than the
Facility Usage, and (iii) each partial reduction shall be in an amount at least
equal to $500,000 and in multiples of $100,000 in excess thereof.
(c) Letter of Credit Fees. In consideration of LC Issuer's issuance of
any Letter of Credit, Borrower agrees to pay (i) to Administrative Agent, for
the account of all Lenders in accordance
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with their respective Percentage Shares, a letter of credit fee at a rate equal
to nine-tenths of one percent (0.9%) per annum, and (ii) to such LC Issuer for
its own account, a letter of credit fronting fee at a rate equal to one-tenth of
one percent (.10%) per annum. Each such fee will be calculated on the face
amount of each Letter of Credit outstanding on each day at the above applicable
rates and will be payable monthly in arrears on the last day of each month. In
addition, Borrower will pay to LC Issuer a minimum administrative issuance fee
of $100 for each Letter of Credit and such other fees and charges customarily
charged by the LC Issuer in respect of any amendment or negotiation of any
Letter of Credit in accordance with the LC Issuer's published schedule of such
charges as of the date of such amendment or negotiation.
(d) Administrative Agent's Fees. In addition to all other amounts due to
Administrative Agent under the Loan Documents, Borrower will pay fees to
Administrative Agent as described in a letter agreement between Administrative
Agent and Borrower.
Section 2.13. Borrowing Base Reporting. The Borrowing Base Reports are
subject to the procedures set forth on Schedule 7.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Administrative Agent for the account of the
Lender Party to whom such payment is owed in lawful money of the United States
of America, without set-off, deduction or counterclaim, and in immediately
available funds. Each such payment must be received by Administrative Agent not
later than noon, Boston, Massachusetts time, on the date such payment becomes
due and payable. Any payment received by Administrative Agent after such time
will be deemed to have been made on the next following Business Day. Should any
such payment become due and payable on a day other than a Business Day, the
maturity of such payment shall be extended to the next succeeding Business Day,
and, in the case of a payment of principal or past due interest, interest shall
accrue and be payable thereon for the period of such extension as provided in
the Loan Document under which such payment is due. Each payment under a Loan
Document shall be due and payable at the place provided therein and, if no
specific place of payment is provided, shall be due and payable at the place of
payment of Administrative Agent's Note. When Administrative Agent collects or
receives money on account of the Obligations, Administrative Agent shall
distribute all money so collected or received, and each Lender Party shall apply
all such money so distributed, as follows:
(a) first, for the payment of all Obligations which are then due (and
if such money is insufficient to pay all such Obligations, first to any
reimbursements due Administrative Agent under Section 6.9 or 10.4 and then
to the partial payment of all other Obligations then due in proportion to
the amounts thereof, or as Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
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(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.5 and 2.6. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Administrative Agent pro rata to each Lender
Party then owed Obligations described in such subsection in proportion to all
amounts owed to all Lender Parties which are described in such subsection;
provided that if any Lender then owes payments to LC Issuer for the purchase of
a participation under Section 2.9(c) or to Administrative Agent under Section
9.4, any amounts otherwise distributable under this section to such Lender shall
be deemed to belong to LC Issuer or Administrative Agent, respectively, to the
extent of such unpaid payments, and Administrative Agent shall apply such
amounts to make such unpaid payments rather than distribute such amounts to such
Lender.
Section 3.2. Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects or
would affect the amount of capital required or expected to be maintained by any
Lender Party or any corporation controlling any Lender Party, then, within five
Business Days after demand by such Lender Party, Borrower will pay to
Administrative Agent for the benefit of such Lender Party, from time to time as
specified by such Lender Party, such additional amount or amounts which such
Lender Party shall determine to be appropriate to compensate such Lender Party
or any corporation controlling such Lender Party in light of such circumstances,
to the extent that such Lender Party reasonably determines that the amount of
any such capital would be increased or the rate of return on any such capital
would be reduced by or in whole or in part based on the existence of the face
amount of such Lender Party's Loans, Letters of Credit, participations in
Letters of Credit or commitments under this Agreement.
Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit. If
any applicable Law (whether now in effect or hereinafter enacted or promulgated,
including Regulation D) or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of Law):
(a) shall change the basis of taxation of payments to any Lender
Party of any principal, interest, or other amounts attributable to any
Eurodollar Loan or Letter of Credit or otherwise due under this Agreement
in respect of any Eurodollar Loan or Letter of Credit (other than taxes
imposed on, or measured by, the overall net income of such Lender Party or
any Applicable Lending Office of such Lender Party by any jurisdiction in
which such Lender Party or any such Applicable Lending Office is located);
or
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any
Eurodollar Loan or any Letter of Credit
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(excluding those for which such Lender Party is fully compensated pursuant
to adjustments made in the definition of Eurodollar Rate) or against assets
of, deposits with or for the account of, or credit extended by, such Lender
Party; or
(c) shall impose on any Lender Party or the interbank eurocurrency
deposit market any other condition affecting any Eurodollar Loan or Letter
of Credit, the result of which is to increase the cost to any Lender Party
of funding or maintaining any Eurodollar Loan or of issuing any Letter of
Credit or to reduce the amount of any sum receivable by any Lender Party in
respect of any Eurodollar Loan or Letter of Credit by an amount deemed by
such Lender Party to be material,
then such Lender Party shall promptly notify Administrative Agent and Borrower
in writing of the happening of such event and of the amount required to
compensate such Lender Party for such event (on an after-tax basis, taking into
account any taxes on such compensation), whereupon (i) Borrower shall, within
five Business Days after demand therefor by such Lender Party, pay such amount
to Administrative Agent for the account of such Lender Party and (ii) Borrower
may elect, by giving to Administrative Agent and such Lender Party not less than
three Business Days' notice, to Convert all (but not less than all) of any such
Eurodollar Loans into Base Rate Loans.
Section 3.4. Notice; Change of Applicable Lending Office. A Lender Party
shall notify Borrower of any event occurring after the date of this Agreement
that will entitle such Lender Party to compensation under Section 3.2, 3.3 or
3.5 hereof as promptly as practicable, but in any event within 90 days, after
such Lender Party obtains actual knowledge thereof; provided, that (i) if such
Lender Party fails to give such notice within 90 days after it obtains actual
knowledge of such an event, such Lender Party shall, with respect to
compensation payable pursuant to Section 3.2, 3.3 or 3.5 in respect of any costs
resulting from such event, only be entitled to payment under Section 3.2, 3.3 or
3.5 hereof for costs incurred from and after the date 90 days prior to the date
that such Lender Party does give such notice and (ii) such Lender Party will
designate a different Applicable Lending Office for the Loans affected by such
event if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender Party, be
disadvantageous to such Lender Party, except that such Lender Party shall have
no obligation to designate an Applicable Lending Office located in the United
States of America. Each Lender Party will furnish to Borrower a certificate
setting forth the basis and amount of each request by such Lender Party for
compensation under Section 3.2, 3.3 or 3.5 hereof.
Section 3.5. Availability. If (a) any change in applicable Laws, or in
the interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or impracticable for any
Lender Party to fund or maintain Eurodollar Loans or to issue or participate in
Letters of Credit, or shall materially restrict the authority of any Lender
Party to purchase or take offshore deposits of dollars (i.e., "eurodollars"), or
(b) any Lender Party determines that matching deposits appropriate to fund or
maintain any Eurodollar Loan are not available to it, or (c) any Lender Party
determines that the formula for calculating the Eurodollar Rate does not fairly
reflect the cost to such Lender Party of making or maintaining loans based on
such rate, then, upon notice by such Lender Party to Borrower and Administrative
Agent, Borrower's right to elect Eurodollar Loans from such Lender Party (or, if
applicable, to obtain Letters of Credit) shall be suspended to the extent and
for the duration of such illegality,
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impracticability or restriction and all Eurodollar Loans of such Lender Party
which are then outstanding or are then the subject of any Borrowing Notice and
which cannot lawfully or practicably be maintained or funded shall immediately
become or remain, or shall be funded as, Base Rate Loans of such Lender Party.
Borrower agrees to indemnify each Lender Party and hold it harmless against all
costs, expenses, claims, penalties, liabilities and damages which may result
from any such change in Law, interpretation or administration. Such
indemnification shall be on an after-tax basis, taking into account any taxes
imposed on the amounts paid as indemnity.
Section 3.6. Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify each Lender Party against, and reimburse each
Lender Party on demand for, any loss or expense incurred or sustained by such
Lender Party (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by a Lender
Party to fund or maintain Eurodollar Loans), as a result of (a) any payment or
prepayment (whether or not authorized or required hereunder) of all or a portion
of a Eurodollar Loan on a day other than the day on which the applicable
Interest Period ends, (b) any payment or prepayment, whether or not required
hereunder, of a Loan made after the delivery, but before the effective date, of
a Continuation/Conversion Notice, if such payment or prepayment prevents such
Continuation/Conversion Notice from becoming fully effective, (c) the failure of
any Loan to be made or of any Continuation/Conversion Notice to become effective
due to any condition precedent not being satisfied or due to any other action or
inaction of any Restricted Person, or (d) any Conversion (whether or not
authorized or required hereunder) of all or any portion of any Eurodollar Loan
into a Base Rate Loan or into a different Eurodollar Loan on a day other than
the day on which the applicable Interest Period ends. Such indemnification
shall be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
Section 3.7. Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify each Lender Party against and reimburse
each Lender Party for all present and future income, stamp and other taxes,
levies, costs and charges whatsoever imposed, assessed, levied or collected
on or in respect of this Agreement or any Eurodollar Loans or Letters of
Credit (whether or not legally or correctly imposed, assessed, levied or
collected), excluding, however, any taxes imposed on or measured by the
overall net income of Administrative Agent or such Lender Party or any
Applicable Lending Office of such Lender Party by any jurisdiction in which
such Lender Party or any such Applicable Lending Office is located (all
such non-excluded taxes, levies, costs and charges being collectively
called "Reimbursable Taxes" in this section). Such indemnification shall
be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on,
each Lender Party's Loans and Note, and all other amounts payable by
Borrower to any Lender Party hereunder, shall be made in full without set-
off or counterclaim and shall be made free and clear of and without
deductions or withholdings of any nature by reason of any Reimbursable
Taxes, all of which will be for the account of Borrower. In the event of
Borrower being compelled by Law to make any such deduction or withholding
from any payment to any Lender Party, Borrower shall pay on the due date of
such payment, by
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way of additional interest, such additional amounts as are needed to cause
the amount receivable by such Lender Party after such deduction or
withholding to equal the amount which would have been receivable in the
absence of such deduction or withholding. If Borrower should make any
deduction or withholding as aforesaid, Borrower shall within 60 days
thereafter forward to such Lender Party an official receipt or other
official document evidencing payment of such deduction or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Eurodollar Loan, Borrower may elect, by giving to
Administrative Agent and such Lender Party not less than three Business
Days' notice, to Convert all (but not less than all) of any such Eurodollar
Loan into a Base Rate Loan, but such election shall not diminish Borrower's
obligation to pay all Reimbursable Taxes.
(d) Notwithstanding the foregoing provisions of this section,
Borrower shall be entitled, to the extent it is required to do so by Law,
to deduct or withhold (and not to make any indemnification or reimbursement
for) income or other similar taxes imposed by the United States of America
(other than any portion thereof attributable to a change in federal income
tax Laws effected after the date hereof) from interest, fees or other
amounts payable hereunder for the account of any Lender Party, other than a
Lender Party (i) who is a U.S. person for Federal income tax purposes or
(ii) who has the Prescribed Forms on file with Administrative Agent (with
copies provided to Borrower) for the applicable year to the extent
deduction or withholding of such taxes is not required as a result of the
filing of such Prescribed Forms, provided that if Borrower shall so deduct
or withhold any such taxes, it shall provide a statement to Administrative
Agent and such Lender Party, setting forth the amount of such taxes so
deducted or withheld, the applicable rate and any other information or
documentation which such Lender Party may reasonably request for assisting
such Lender Party to obtain any allowable credits or deductions for the
taxes so deducted or withheld in the jurisdiction or jurisdictions in which
such Lender Party is subject to tax. As used in this section, "Prescribed
Forms" means such duly executed forms or statements, and in such number of
copies, which may, from time to time, be prescribed by Law and which,
pursuant to applicable provisions of (x) an income tax treaty between the
United States and the country of residence of the Lender Party providing
the forms or statements, (y) the Code, or (z) any applicable rules or
regulations thereunder, permit Borrower to make payments hereunder for the
account of such Lender Party free of such deduction or withholding of
income or similar taxes.
Section 3.8 Replacement of Lenders. If any Lender Party seeks
reimbursement for increased costs under Sections 3.2 through 3.7, then within
ninety days thereafter -- provided no Event of Default then exists -- Borrower
shall have the right (unless such Lender Party withdraws its request for
additional compensation) to replace such Lender Party by requiring such Lender
Party to assign its Loans and Notes and its commitments hereunder to an Eligible
Transferee reasonably acceptable to Administrative Agent and to Borrower,
provided that: (i) all Obligations of Borrower owing to such Lender Party being
replaced (including such increased costs, but excluding principal and accrued
interest on the Notes being assigned) shall be paid in full to such Lender Party
concurrently with such assignment, and (ii) the replacement Eligible Transferee
shall purchase the Note being assigned by paying to such Lender Party a price
equal to the principal
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amount thereof plus accrued and unpaid interest and accrued and unpaid
commitment fees thereon. In connection with any such assignment Borrower,
Administrative Agent, such Lender Party and the replacement Eligible Transferee
shall otherwise comply with Section 10.5. Notwithstanding the foregoing rights
of Borrower under this section, however, Borrower may not replace any Lender
Party which seeks reimbursement for increased costs under Section 3.2 through
3.7 unless Borrower is at the same time replacing all Lender Parties which are
then seeking such compensation.
ARTICLE IV - Conditions Precedent to Credit
Section 4.1. Documents to be Delivered. This Agreement shall not be
effective to amend or restate the Existing Agreement or govern the indebtedness,
obligations or liabilities thereunder and no Lender has any obligation to make
its first Loan, and LC Issuer has no obligation to issue the first Letter of
Credit unless Administrative Agent shall have received all of the following, at
Administrative Agent's office in Boston, Massachusetts, duly executed and
delivered and in form, substance and date satisfactory to Administrative Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) Certain certificates including:
(i) An "Omnibus Certificate" of the secretary and of the
president of General Partner, which shall contain the names and
signatures of the officers of General Partner authorized to execute
Loan Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (1) a copy of
resolutions duly adopted by the Board of Directors of General Partner
and in full force and effect at the time this Agreement is entered
into, authorizing the execution of this Agreement and the other Loan
Documents delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (2)
a copy of the charter documents of each Restricted Person and all
amendments thereto, certified by the appropriate official of such
Restricted Person's state of organization, and (3) a copy of any
bylaws or agreement of limited partnership of each Restricted Person;
and
(ii) A certificate of the president and of the chief financial
officer of General Partner, regarding satisfaction of Section 4.2.
(e) A certificate (or certificates) of the due formation, valid
existence and good standing of each Restricted Person in its respective
state of organization, issued by the appropriate authorities of such
jurisdiction, and certificates of each Restricted Person's
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good standing and due qualification to do business, issued by appropriate
officials in any states in which such Restricted Person owns property
subject to Security Documents.
(f) Documents similar to those specified in subsections (d)(i) and
(e) of this section with respect to each Guarantor and the execution by it
of its guaranty of Borrower's Obligations.
(g) A favorable opinion of Michael Patterson, Esq., General Counsel
for Restricted Persons, substantially in the form set forth in Exhibit G-1,
Fulbright & Jaworski L.L.P., special Texas and New York counsel to
Restricted Persons, substantially in the form set forth in Exhibit G-2,
Andrews & Kurth L.L.P., special counsel to Restricted Persons,
substantially in the form of Exhibit G-3, and local counsel for the states
of Arizona, California, New Mexico and Oklahoma satisfactory to
Administrative Agent.
(h) The Initial Financial Statements.
(i) Certificates or binders evidencing Restricted Persons' insurance
in effect on the date hereof.
(j) Copies of such permits and approvals regarding the property and
business of Restricted Persons as Administrative Agent may request.
(k) A certificate signed by the chief executive officer of General
Partner in form and detail acceptable to Administrative Agent confirming
the insurance that is in effect as of the date hereof and certifying that
such insurance is customary for the businesses conducted by Restricted
Persons and is in compliance with the requirements of this Agreement.
(l) Payment of all commitment, facility, agency and other fees
required to be paid to any Lender pursuant to any Loan Documents or any
commitment agreement heretofore entered into.
(m) The Intercreditor Agreement with the lenders party to the All
American Agreement in the form of Exhibit K hereto.
Section 4.2. Additional Conditions to Initial Credit. This Agreement
shall not be effective to amend or restate the Existing Agreement or govern the
indebtedness, obligations or liabilities thereunder and no Lender has any
obligation to make its first Loan, and LC Issuer has no obligation to issue the
first Letter of Credit unless prior to or contemporaneously with the initial
Loan or initial Letter of Credit issuance hereunder the following conditions
precedent have been satisfied:
(a) The Offering and all of the transactions contemplated under the
Offering Documents shall have been consummated, in compliance with the
terms and conditions thereof, and all representations and warranties made
by any party to the Offering Documents shall be true and correct.
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(b) Each Restricted Person shall have executed and delivered the All
American Credit Agreement and all conditions precedent to the All American
Agreement have been satisfied.
(c) After giving effect to each of the transactions under the
Offering Documents, all representations and warranties made by any
Restricted Person in any Loan Document shall be true on and as of the date
of such Loan or the date of issuance of such Letter of Credit as if such
representations and warranties had been made as of the date of such Loan or
the date of issuance of such Letter of Credit.
(d) General Partner shall have delivered to Administrative Agent a
Consolidated balance sheet for Plains MLP and its Subsidiaries certified by
the chief financial officer of General Partner, reflecting compliance with
each event specified in Sections 7.11 through 7.15, inclusive.
(e) The Borrowing Base as of the date of such first Loan and first
Letter of Credit shall be at least $5,000,000 more than the initial
Facility Usage on such date after giving effects to the Loans and Letters
of Credit requested for such date, and General Partner shall have delivered
to the Administrative Agent a Borrowing Base Report in reasonable detail
demonstrating compliance with this requirement.
(f) Plains MLP shall have a market capitalization of at least
$500,000,000 calculated based upon the total issued partnership units of
Plains MLP and the market price of the publicly held portion of such
partnership units of Plains MLP.
(g) Plains MLP shall have a minimum tangible net worth of
$225,000,000.
(h) Each condition precedent set forth in Section 4.3 has been
satisfied as of such effective date of this Agreement.
Section 4.3. Additional Conditions Precedent. No Lender has any
obligation to make any Loan (including its first), and LC Issuer has no
obligation to issue any Letter of Credit (including its first), unless the
following conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted Person
in any Loan Document shall be true on and as of the date of such Loan or
the date of issuance of such Letter of Credit as if such representations
and warranties had been made as of the date of such Loan or the date of
issuance of such Letter of Credit except to the extent that such
representation or warranty was made as of a specific date or updated,
modified or supplemented as of a subsequent date with the consent of
Majority Lenders.
(b) No Default shall exist at the date of such Loan or the date of
issuance of such Letter of Credit.
(c) No Material Adverse Change shall have occurred to, and no event
or circumstance shall have occurred that could cause a Material Adverse
Change to, Plains
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MLP's or Borrower's Consolidated financial condition or businesses since
the date of the Initial Financial Statements.
(d) Each Restricted Person shall have performed and complied with all
agreements and conditions required in the Loan Documents to be performed or
complied with by it on or prior to the date of such Loan or the date of
issuance of such Letter of Credit.
(e) The making of such Loan or the issuance of such Letter of Credit
shall not be prohibited by any Law and shall not subject any Lender or any
LC Issuer to any penalty or other onerous condition under or pursuant to
any such Law.
(f) Administrative Agent shall have received all documents and
instruments which Administrative Agent has then requested, in addition to
those described in Section 4.1 (including opinions of legal counsel for
Restricted Persons and Administrative Agent; corporate documents and
records; documents evidencing governmental authorizations, consents,
approvals, licenses and exemptions; and certificates of public officials
and of officers and representatives of Borrower and other Persons), as to
(i) the accuracy and validity of or compliance with all representations,
warranties and covenants made by any Restricted Person in this Agreement
and the other Loan Documents, (ii the satisfaction of all conditions
contained herein or therein, and (ii all other matters pertaining hereto
and thereto. All such additional documents and instruments shall be
satisfactory to Administrative Agent in form, substance and date.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted Persons and
Restricted Persons' businesses, properties and obligations and to induce each
Lender to enter into this Agreement and to extend credit hereunder, Plains MLP
and Borrower represent and warrant to each Lender that:
Section 5.1. No Default. No Restricted Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
Each Restricted Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary except where the failure to
so qualify would not cause a Material Adverse Change. Each Restricted Person
has taken all actions and procedures customarily taken in order to enter, for
the purpose of conducting business or owning property, each jurisdiction outside
the United States wherein the character of the properties owned or held by it or
the nature of the business transacted by it makes such actions and procedures
necessary except where the failure to so qualify would not cause a Material
Adverse Change.
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Section 5.3. Authorization. Each Restricted Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and delivery by the
various Restricted Persons of the Loan Documents and Offering Documents to which
each is a party, the performance by each of its obligations under such Loan
Documents and Offering Documents, and the consummation of the transactions
contemplated by the various Loan Documents and various Offering Documents, do
not and will not (i) conflict with any provision of (1) any Law, (2) the
organizational documents of any Restricted Person or any of its Affiliates, or
(3) any agreement, judgment, license, order or permit applicable to or binding
upon any Restricted Person or any of its Affiliates, (ii result in the
acceleration of any Indebtedness owed by any Restricted Person, or any of its
Affiliates, or (ii result in or require the creation of any Lien upon any assets
or properties of any Restricted Person or any of its Affiliates except as
expressly contemplated in the Loan Documents. Except as expressly contemplated
in the Loan Documents or the Offering Documents no consent, approval,
authorization or order of, and no notice to or filing with, any Tribunal or
third party is required in connection with the execution, delivery or
performance by any Restricted Person of any Loan Document or Offering Document
or to consummate any transactions contemplated by the Loan Documents and the
Offering Documents.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents and the Offering Documents when duly executed and delivered will
be, legal, valid and binding obligations of each Restricted Person which is a
party hereto or thereto, enforceable in accordance with their terms except as
such enforcement may be limited by bankruptcy, insolvency or similar Laws of
general application relating to the enforcement of creditors' rights.
Section 5.6. Initial Financial Statements. Plains MLP has heretofore
delivered to each Lender true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present Plains
MLP's Consolidated financial position at the date thereof and the Consolidated
results of Plains MLP's operations and Consolidated cash flows for the period
thereof. Since the date of the annual Initial Financial Statements no Material
Adverse Change has occurred, except as reflected in the quarterly Initial
Financial Statements or in the Disclosure Schedule. All Initial Financial
Statements were prepared in accordance with GAAP.
Section 5.7. Other Obligations and Restrictions. No Restricted Person
has any outstanding Liabilities of any kind (including contingent obligations,
tax assessments, and unusual forward or long-term commitments) which are, in the
aggregate, material to Plains MLP or material with respect to Plains MLP's
Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in the Disclosure Schedule. Except as shown in the
Initial Financial Statements or disclosed in the Disclosure Schedule, no
Restricted Person is subject to or restricted by any franchise, contract, deed,
charter restriction, or other instrument or restriction which could cause a
Material Adverse Change.
Section 5.8. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Lender in connection with the negotiation
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of this Agreement or in connection with any transaction contemplated hereby
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained herein or therein, in light of
the circumstances under which they were made, not misleading as of the date made
or deemed made. All written information furnished after the date hereof by or on
behalf of any Restricted Person to Administrative Agent or any Lender Party in
connection with this Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect or based on reasonable estimates on the date as of which such
information is stated or certified. There is no fact known to any Restricted
Person that has not been disclosed to each Lender in writing which could cause a
Material Adverse Change.
Section 5.9. Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (i) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which could cause a Material Adverse Change, and (ii) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section 5.10. Labor Disputes and Acts of God. Except as disclosed in the
Disclosure Schedule, neither the business nor the properties of any Restricted
Person has been affected by any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy or other casualty (whether or not covered by insurance), which
could cause a Material Adverse Change.
Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed in the Disclosure Schedule. Except as disclosed in the Initial
Financial Statements or in the Disclosure Schedule, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Affiliates are in
compliance with ERISA in all material respects. No ERISA Affiliate is required
to contribute to, or has any other absolute or contingent liability in respect
of, any "multiemployer plan" as defined in Section 4001 of ERISA. Except as set
forth in the Disclosure Schedule: (i) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Code exists with respect to any ERISA Plan,
whether or not waived by the Secretary of the Treasury or his delegate, and (ii)
the current value of each ERISA Plan's benefits does not exceed the current
value of such ERISA Plan's assets available for the payment of such benefits by
more than $500,000.
Section 5.12. Compliance with Laws. Except as set forth in the
Disclosure Schedule, each Restricted Person is conducting its businesses in
compliance with all applicable Laws, including Environmental Laws, and has all
permits, licenses and authorizations required in connection with the conduct of
its businesses, except to the extent failure to have any such permit, license or
authorization could not cause a Material Adverse Change. Each Restricted Person
is in compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Law, including applicable
Environmental Law, or in any regulation, code, plan, order, decree, judgment,
injunction, notice
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or demand letter issued, entered, promulgated or approved thereunder, except to
the extent failure to comply could not cause a Material Adverse Change.
Section 5.13. Environmental Laws. As used in this section: "CERCLA"
means the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, "CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System List of the Environmental
Protection Agency, and "Release" has the meaning given such term in 42 U.S.C.
(S) 9601(22). Without limiting the provisions of Section 5.12 and except as set
forth in the Disclosure Schedule:
(a) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed, and no investigation or review is pending or threatened by any
Tribunal or any other Person with respect to any of the following which in the
aggregate could cause a Material Adverse Change (i) any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release of any
Hazardous Materials, either by any Restricted Person or on any property owned by
any Restricted Person, (ii) any remedial action which might be needed to respond
to any such alleged generation, treatment, storage, recycling, transportation,
disposal, or Release, or (iii) any alleged failure by any Restricted Person to
have any permit, license or authorization required in connection with the
conduct of its business or with respect to any such generation, treatment,
storage, recycling, transportation, disposal, or Release.
(b) No Restricted Person otherwise has any known material contingent
liability in connection with any alleged generation, treatment, storage,
recycling, transportation, disposal, or Release of any Hazardous Materials.
(c) No Restricted Person has handled any Hazardous Materials, other than
as a generator, on any properties now or previously owned or leased by any
Restricted Person to an extent that such handling has caused, or could cause, a
Material Adverse Change.
(d) Except to the extent that the following in the aggregate has not
caused and could not cause a Material Adverse Change:
(i) no PCBs are or have been present at any properties now or previously
owned or leased by any Restricted Person;
(ii) no asbestos is or has been present at any properties now or previously
owned or leased by any Restricted Person;
(iii) there are no underground storage tanks for Hazardous Materials,
active or abandoned, at any properties now or previously owned or leased by
any Restricted Person; and
(iv) no Hazardous Materials have been Released at, on or under any
properties now or previously owned or leased by any Restricted Person.
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(e) No Restricted Person has transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under CERCLA, any location listed for possible
inclusion on the National Priorities List by the Environmental Protection Agency
in CERCLIS, nor, except to the extent that has not caused and could not cause a
Material Adverse Change, any location listed on any similar state list or which
is the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against any Restricted Person for clean-
up costs, remedial work, damages to natural resources or for personal injury
claims, including, but not limited to, claims under CERCLA.
(f) No property now or previously owned or leased by any Restricted Person
is listed or proposed for listing on the National Priority list promulgated
pursuant to CERCLA, in CERCLIS, nor, except to the extent that has not caused
and could not cause a Material Adverse Change, on any similar state list of
sites requiring investigation or clean-up.
(g) There are no Liens arising under or pursuant to any Environmental Laws
on any of the real properties or properties owned or leased by any Restricted
Person, and no government actions of which Borrower is aware have been taken or
are in process which could subject any of such properties to such Liens; nor
would any Restricted Person be required to place any notice or restriction
relating to the presence of Hazardous Materials at any properties owned by it in
any deed to such properties.
(h) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses for ground water or soil contamination relating
to the Release of Hazardous Materials conducted by or which are in the
possession of any Restricted Person in relation to any properties or facility
now or previously owned or leased by any Restricted Person which have not been
made available to Administrative Agent.
Section 5.14. Names and Places of Business. No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule, the chief executive office and
principal place of business of each Restricted Person are (and for the preceding
five years have been) located at the address of Borrower set out in Section
10.3. Except as indicated in the Disclosure Schedule, no Restricted Person has
any other office or place of business.
Section 5.15. Borrower's Subsidiaries. Borrower does not presently have
any Subsidiary or own any stock in any other corporation or association except
those listed in the Disclosure Schedule. Neither Borrower nor any Restricted
Person is a member of any general or limited partnership, joint venture or
association of any type whatsoever except those listed in the Disclosure
Schedule. Borrower owns, directly or indirectly, the equity interest in each of
its Subsidiaries which is indicated in the Disclosure Schedule.
Section 5.16. Title to Properties; Licenses. Each Restricted Person has
good and defensible title to all of its material properties and assets, free and
clear of all Liens other than Permitted Liens and of all impediments to the use
of such properties and assets in such Restricted Person's business. Each
Restricted Person possesses all licenses, permits, franchises, patents,
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copyrights, trademarks and trade names, and other intellectual property (or
otherwise possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and no Restricted Person is in violation in any material respect of
the terms under which it possesses such intellectual property or the right to
use such intellectual property.
Section 5.17. Government Regulation. Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Investment Company Act of 1940 (as any
of the preceding acts have been amended) or any other Law which regulates the
incurring by such Person of Indebtedness, including Laws relating to common
contract carriers or the sale of electricity, gas, steam, water or other public
utility services. Neither Borrower nor any other Restricted Person is subject
to regulation under the Federal Power Act which would violate, result in a
default of, or prohibit the effectiveness or the performance of any of the
provisions of the Loan Documents.
Section 5.18. Insider. No Restricted Person, nor any Person having
"control" (as that term is defined in 12 U.S.C. (S) 375b(9) or in regulations
promulgated pursuant thereto) of any Restricted Person, is a "director" or an
"executive officer" or "principal shareholder" (as those terms are defined in 12
U.S.C. (S) 375b(8) or (9) or in regulations promulgated pursuant thereto) of any
Lender, of a bank holding company of which any Lender is a Subsidiary or of any
Subsidiary of a bank holding company of which any Lender is a Subsidiary.
Section 5.19. Solvency. Upon giving effect to the issuance of the Notes,
the execution of the Loan Documents by Borrower and each Guarantor and the
consummation of the transactions contemplated hereby, Borrower and each
Guarantor will be solvent (as such term is used in applicable bankruptcy,
liquidation, receivership, insolvency or similar Laws).
Section 5.20. Credit Arrangements. The Disclosure Schedule contains a
complete and correct list, as of the date of this Agreement, of each credit
agreement, loan agreement, indenture, purchase agreement, guaranty or other
arrangement providing for or otherwise relating to any Indebtedness or any
extension of credit (or commitment for any extension of credit) to, or guaranty
by, any Restricted Person, or to which any Restricted Person is subject, other
than the Loan Documents, and the aggregate principal or face amount outstanding
or which may become outstanding under each such arrangement is correctly
described in the Disclosure Schedule. No Restricted Person is subject to any
restriction under any credit agreement, loan agreement, indenture, purchase
agreement, guaranty or other arrangement providing for or otherwise relating to
any Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guaranty by, any Affiliate, other than another Restricted Person.
Section 5.21. Year 2000.
(a) Restricted Persons have (i) begun analyzing the operations of
Restricted Persons and their Subsidiaries and Affiliates that could be adversely
affected by failure to be become Year 2000 compliant (that is, that computer
applications, imbedded microchips and other systems will be able to perform
date-sensitive functions prior to and after December 31, 1999) and (ii)
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developed a plan for becoming Year 2000 compliant in a timely manner, the
implementation of which is on schedule in all material respects. Plains MLP and
Borrower reasonably believe that Restricted Persons and their Affiliates will
become Year 2000 compliant for their operations on a timely basis except to the
extent that a failure to do so could not reasonably be expected to cause a
Material Adverse Change.
(b) Plains MLP and Borrower reasonably believe any suppliers and vendors
that are material to the operations of Restricted Persons or their Subsidiaries
and Affiliates will be Year 2000 compliant for their own computer applications
except to the extent that a failure to do so could not reasonably be expected to
cause a Material Adverse Change.
ARTICLE VI - Affirmative Covenants
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and extend credit hereunder, Plains MLP and Borrower covenant and
agree that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders, or all Lenders as
required under Section 10.1, have previously agreed otherwise:
Section 6.1. Payment and Performance. Each Restricted Person will pay
all amounts due under the Loan Documents, to which it is a party, in accordance
with the terms thereof and will observe, perform and comply with every covenant,
term and condition expressed in the Loan Documents to which it is a party.
Section 6.2. Books, Financial Statements and Reports. Each Restricted
Person will at all times maintain full and accurate books of account and
records. Plains MLP will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to each Lender at Restricted Person's
expense:
(a) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year (i) complete Consolidated financial
statements of Plains MLP together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an unqualified
opinion, based on an audit using generally accepted auditing standards, by
PricewaterhouseCoopers LLP, or other independent certified public
accountants selected by General Partner and acceptable to Majority Lenders,
stating that such Consolidated financial statements have been so prepared
and (ii) supporting unaudited consolidating balance sheets and statements
of income of each other Restricted Person (except for any Restricted Person
whose financial statements are substantially the same as those of Plains
MLP). These financial statements shall contain a Consolidated and
consolidating balance sheet as of the end of such Fiscal Year and
Consolidated and consolidating statements of earnings for such Fiscal Year.
Such Consolidated financial statements shall set forth in comparative form
the corresponding figures for the preceding Fiscal Year. In addition,
within ninety (90) days after the end of each Fiscal Year Plains MLP will
furnish a certificate signed by such accountants (i) stating that they have
read
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this Agreement, (ii) containing calculations showing compliance (or
non-compliance) at the end of such Fiscal Year with the requirements of
Sections 7.11 through 7.15, inclusive, and (iii) further stating that in
making their examination and reporting on the Consolidated financial
statements described above they obtained no knowledge of any Default
existing at the end of such Fiscal Year, or, if they did so conclude that a
Default existed, specifying its nature and period of existence.
(b) As soon as available, and in any event within forty-five (45)
days after the end of each of the first three Fiscal Quarters of each
Fiscal Year (i) Plains MLP's Consolidated balance sheet as of the end of
such Fiscal Quarter and Consolidated statements of Plains MLP's earnings
and cash flows for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter, and (ii) supporting consolidating balance sheets and statements of
income of each other Restricted Person (except for any Restricted Person
whose financial statements are substantially the same as those of Plains
MLP), all in reasonable detail and prepared in accordance with GAAP,
subject to changes resulting from normal year-end adjustments, and as soon
as available, and in any event within forty-five (45) days after the end of
the last Fiscal Quarter of each Fiscal Year, Plains MLP's unaudited
Consolidated balance sheet as of the end of such Fiscal Quarter and income
statement for such Fiscal Quarter and for the period from the beginning of
the current Fiscal Year to the end of such Fiscal Quarter. In addition
Plains MLP will, together with each such set of financial statements and
each set of financial statements furnished under subsection (a) of this
section, furnish a certificate in the form of Exhibit F signed by the chief
financial officer of General Partner stating that such financial statements
are accurate and complete in all material respects (subject to normal year-
end adjustments), stating that he has reviewed the Loan Documents,
containing calculations showing compliance (or non-compliance) at the end
of such Fiscal Quarter with the requirements of Sections 7.11 through 7.16,
inclusive and stating that no Default exists at the end of such Fiscal
Quarter or at the time of such certificate or specifying the nature and
period of existence of any such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by Plains MLP to its
unit holders and all registration statements, periodic reports and other
statements and schedules filed by Plains MLP with any securities exchange,
the Securities and Exchange Commission or any similar governmental
authority.
(d) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, a business and financial plan for
Plains MLP (in form reasonably satisfactory to Administrative Agent),
prepared or caused to be prepared by a senior financial officer thereof,
setting forth for the first year thereof, quarterly financial projections
and budgets for Plains MLP, and thereafter yearly financial projections and
budgets during the Commitment Period.
(e) On the twenty-sixth (26th) day of each calendar month (i) a
Borrowing Base Report in the form of Exhibit H duly completed by an
authorized officer of General Partner and conforming with the requirements
of Section 2.13, and (ii) a statement
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reconciling such report with the Borrowing Base Report delivered on the
26th day of the preceding calendar month.
(f) As soon as available, and in any event within thirty-five (35)
days after the end of each calendar month, a report setting forth for such
month aggregate volumes and margins for all marketing activities of
Restricted Persons.
(g) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Year, an environmental compliance certificate
signed by the president or chief executive officer of General Partner in
the form attached hereto as Exhibit I. Further, if requested by
Administrative Agent, Restricted Persons shall permit and cooperate with an
environmental and safety review made in connection with the operations of
Restricted Persons' properties one time during each Fiscal Year beginning
with the Fiscal Year 1999, by Pilko & Associates, Inc. or other consultants
selected by Administrative Agent which review shall, if requested by
Administrative Agent, be arranged and supervised by environmental legal
counsel for Administrative Agent, all at Restricted Persons' cost and
expense. The consultant shall render a verbal or written report, as
specified by Administrative Agent, based upon such review at Restricted
Persons' cost and expense and a copy thereof will be provided to Restricted
Persons.
(h) Concurrently with the annual renewal of Restricted Persons'
insurance policies, Restricted Persons shall at their own cost and expense,
if requested by Administrative Agent in writing, cause a certificate or
report to be issued by Administrative Agent's professional insurance
consultants or other insurance consultants satisfactory to Administrative
Agent certifying that Restricted Persons' insurance for the next succeeding
year after such renewal (or for such longer period for which such insurance
is in effect) complies with the provisions of this Agreement and the
Security Documents.
Section 6.3. Other Information and Inspections. In each case subject to
the last sentence of this Section 6.3, each Restricted Person will furnish to
each Lender any information which Administrative Agent or any Lender may from
time to time request concerning any covenant, provision or condition of the Loan
Documents or any matter in connection with Restricted Persons' businesses and
operations. In each case subject to the last sentence of this Section 6.3, each
Restricted Person will permit representatives appointed by Administrative Agent
(including independent accountants, auditors, agents, attorneys, appraisers and
any other Persons) to visit and inspect during normal business hours any of such
Restricted Person's property, including its books of account, other books and
records, and any facilities or other business assets, and to make extra copies
therefrom and photocopies and photographs thereof, and to write down and record
any information such representatives obtain, and each Restricted Person shall
permit Administrative Agent or its representatives to investigate and verify the
accuracy of the information furnished to Administrative Agent or any Lender in
connection with the Loan Documents and to discuss all such matters with its
officers, employees and, upon prior notice to Borrower, its representatives.
Each of the foregoing inspections shall be made subject to compliance with
applicable safety standards and the same conditions applicable to any Restricted
Person in respect of property of that Restricted Person on the premises of
Persons other than a Restricted Person or an Affiliate of a Restricted Person,
and all information, books and records
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furnished or requested to be furnished, or of which copies, photocopies or
photographs are made or requested to be made, all information to be investigated
or verified and all discussions conducted with any officer, employee or
representative of any Restricted Person shall be subject to any applicable
attorney-client privilege exceptions which the Restricted Person determines is
reasonably necessary and compliance with conditions to disclosures under non-
disclosure agreements between any Restricted Person and Persons other than a
Restricted Person or an Affiliate of a Restricted Person and the express
undertaking of each Person acting at the direction of or on behalf of any Lender
Party to be bound by the confidentiality provisions of Section 10.6 of this
Agreement.
Section 6.4. Notice of Material Events and Change of Address. Each
Restricted Person will notify each Lender Party, not later than five (5)
Business Days after any executive officer of Restricted Persons has knowledge
thereof, stating that such notice is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed by any
Restricted Person or of any default by any Restricted Person under any
indenture, mortgage, agreement, contract or other instrument to which any
of them is a party or by which any of them or any of their properties is
bound, if such acceleration or default could cause a Material Adverse
Change,
(d) the occurrence of any Termination Event,
(e) any claim of $1,000,000 or more, any notice of potential
liability under any Environmental Laws which might be reasonably likely to
exceed such amount, or any other material adverse claim asserted against
any Restricted Person or with respect to any Restricted Person's properties
taken as a whole, and
(f) the filing of any suit or proceeding against any Restricted
Person in which an adverse decision could cause a Material Adverse Change.
Upon the occurrence of any of the foregoing, Restricted Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default, or Termination Event to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Restricted Persons will
also notify Administrative Agent and Administrative Agent's counsel in writing
at least twenty Business Days prior to the date that any Restricted Person
changes its name or the location of its chief executive office or principal
place of business or the place where it keeps its books and records concerning
the Collateral, furnishing with such notice any necessary financing statement
amendments or requesting Administrative Agent and its counsel to prepare the
same.
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Borrower will promptly notify Administrative Agent in the event Borrower
determines that any computer application which is material to the operations of
Borrower, its Subsidiaries, its Affiliates or any of its material vendors or
suppliers will not be fully Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to cause a Material
Adverse Change.
Section 6.5. Maintenance of Properties. Each Restricted Person will
maintain, preserve, protect, and keep all Collateral and all other property used
or useful in the conduct of its business in good condition (ordinary wear and
tear excepted) and in compliance with all applicable Laws, and will from time to
time make all repairs, renewals and replacements needed to enable the business
and operations carried on in connection therewith to be promptly and
advantageously conducted at all times.
Section 6.6. Maintenance of Existence and Qualifications. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure so to qualify will not cause a Material Adverse Change.
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted
Person will (a) timely file all required tax returns including any extensions;
(b) timely pay all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income, profits or property; (c) within one hundred
twenty (120) days after the date such goods are delivered or such services are
rendered, pay all Liabilities owed by it on ordinary trade terms to vendors,
suppliers and other Persons providing goods and services used by it in the
ordinary course of its business; (d) pay and discharge when due all other
Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals
and reserves for all of the foregoing in accordance with GAAP. Each Restricted
Person may, however, delay paying or discharging any of the foregoing so long as
it is in good faith contesting the validity thereof by appropriate proceedings,
if necessary, and has set aside on its books adequate reserves therefor which
are required by GAAP.
Section 6.8. Insurance. Each Restricted Person shall at all times
maintain insurance for its property in accordance with the Insurance Schedule
which insurance shall be by financially sound and reputable insurers. Borrower
will maintain any additional insurance coverage as described in the respective
Security Documents. Upon demand by Administrative Agent any insurance policies
covering Collateral shall be endorsed (a) to provide for payment of losses to
Administrative Agent as its interests may appear, (b) to provide that such
policies may not be canceled or reduced or affected in any material manner for
any reason without fifteen days prior notice to Administrative Agent, and (c) to
provide for any other matters specified in any applicable Security Document or
which Administrative Agent may reasonably require. Each Restricted Person shall
at all times maintain insurance against its liability for injury to persons or
property in accordance with the Insurance Schedule, which insurance shall be by
financially sound and reputable insurers. Without limiting the foregoing, each
Restricted Person shall at all time maintain liability insurance in accordance
with the Insurance Schedule.
Section 6.9. Performance on Borrower's Behalf. If any Restricted Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under
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any Loan Document, Administrative Agent may pay the same after notice of such
payment by Administrative Agent is given to Borrower. Borrower shall immediately
reimburse Administrative Agent for any such payments and each amount paid by
Administrative Agent shall constitute an Obligation owed hereunder which is due
and payable on the date such amount is paid by Administrative Agent.
Section 6.10. Interest. Borrower hereby promises to each Lender to pay
interest at the Default Rate on all Obligations (including Obligations to pay
fees or to reimburse or indemnify any Lender) which Borrower has in this
Agreement promised to pay to such Lender and which are not paid when due. Such
interest shall accrue from the date such Obligations become due until they are
paid.
Section 6.11. Compliance with Agreements and Law. Each Restricted Person
will perform all material obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease, and
franchise, and each material agreement, contract or other instrument or
obligation to which it is a party or by which it or any of its properties is
bound. Each Restricted Person will conduct its business and affairs in
compliance with all Laws applicable thereto.
Section 6.12. Environmental Matters; Environmental Reviews.
(a) Each Restricted Person will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Restricted Person as well
as all contractual obligations and agreements with respect to environmental
remediation or other environmental matters and shall obtain, at or prior to the
time required by applicable Environmental Laws, all environmental, health and
safety permits, licenses and other authorizations necessary for its operations
and will maintain such authorizations in full force and effect.
(b) Each Restricted Person will promptly furnish to Administrative Agent
all written notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any Restricted Person or
General Partner, or of which it has notice, pending or threatened against any
Restricted Person, the potential liability of which exceeds $1,000,000 or would
cause a Material Adverse Change if resolved adversely against any Restricted
Person, by any governmental authority with respect to any alleged violation of
or non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its properties or the
operation of its business.
(c) Each Restricted Person will promptly furnish to Administrative Agent
all requests for information, notices of claim, demand letters, and other
notifications, received by any Restricted Person or General Partner in
connection with its ownership or use of its properties or the conduct of its
business, relating to potential responsibility with respect to any investigation
or clean-up of Hazardous Material at any location, the potential liability of
which exceeds $1,000,000 or would cause a Material Adverse Change if resolved
adversely against any Restricted Person.
Section 6.13. Evidence of Compliance. Subject to the last sentence of
Section 6.3, each Restricted Person will furnish to each Lender at such
Restricted Person's expense all evidence
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which Administrative Agent from time to time reasonably requests in writing as
to the accuracy and validity of or compliance with all representations,
warranties and covenants made by any Restricted Person in the Loan Documents,
the satisfaction of all conditions contained therein, and all other matters
pertaining thereto.
Section 6.14. Agreement to Deliver Security Documents. Restricted
Persons will deliver to further secure the Obligations whenever requested by
Administrative Agent in its sole and absolute discretion, deeds of trust,
mortgages, chattel mortgages, security agreements, financing statements and
other Security Documents in form and substance satisfactory to Administrative
Agent for the purpose of granting, confirming, and perfecting first and prior
liens or security interests in any real or personal property now owned or
hereafter acquired by any Restricted Person.
Section 6.15. Perfection and Protection of Security Interests and Liens.
Each Restricted Person will from time to time deliver to Administrative Agent
any financing statements, continuation statements, extension agreements and
other documents, properly completed and executed (and acknowledged when
required) by Restricted Persons in form and substance satisfactory to
Administrative Agent, which Administrative Agent requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
Section 6.16. Bank Accounts; Offset. To secure the repayment of the
Obligations each Restricted Person hereby grants to each Lender a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of any Lender at common Law, under the
Loan Documents, or otherwise, and each of which shall be upon and against (a)
any and all moneys, securities or other property (and the proceeds therefrom) of
such Restricted Person now or hereafter held or received by or in transit to any
Lender from or for the account of such Restricted Person, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and
all deposits (general or special, time or demand, provisional or final) of such
Restricted Person with any Lender, and (c) any other credits and claims of such
Restricted Person at any time existing against any Lender, including claims
under certificates of deposit. At any time and from time to time during the
continuance of any Event of Default, each Lender is hereby authorized to
foreclose upon, or to offset against the Obligations then due and payable (in
either case without notice to any Restricted Person), any and all items herein
above referred to. The remedies of foreclosure and offset are separate and
cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.
Section 6.17. Guaranties of Subsidiaries. Each Subsidiary of Plains MLP
now existing or created, acquired or coming into existence after the date hereof
shall, promptly upon request by Administrative Agent, execute and deliver to
Administrative Agent an absolute and unconditional guaranty of the timely
repayment of the Obligations and the due and punctual performance of the
obligations of Borrower hereunder, which guaranty shall be satisfactory to
Administrative Agent in form and substance. Each Subsidiary of Plains MLP
existing on the date hereof shall duly execute and deliver such a guaranty prior
to the making of any Loan hereunder. Plains MLP will cause each of its
Subsidiaries to deliver to Administrative Agent, simultaneously with its
delivery of such a guaranty, written evidence satisfactory to Administrative
Agent and its counsel that such
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Subsidiary has taken all corporate or partnership action necessary to duly
approve and authorize its execution, delivery and performance of such guaranty
and any other documents which it is required to execute.
Section 6.18. Compliance with Agreements. Each Restricted Person shall
observe, perform or comply with any agreement with any Person or any term or
condition of any instrument, if such agreement or instrument is materially
significant to such Restricted Person or to Restricted Persons on a Consolidated
basis or materially significant to any Guarantor, and such failure is not
remedied within the applicable period of grace (if any) provided in such
agreement or instrument.
Section 6.19. Year 2000.
(a) Restricted Persons (i) no later than December 31, 1998 shall have
completed the analysis of the operations of Restricted Persons and their
Affiliates that could be adversely affected by failure to become Year 2000
compliant (that is, that computer applications, imbedded microchips and other
systems will be able to perform date-sensitive functions prior to and after
December 31, 1999) and developed a plan for Restricted Persons and their
Affiliates for becoming Year 2000 compliant in a timely manner, and (ii) shall
at all times after development of such plan implement such plan in all material
respects, in a timely manner, and in accordance with the schedule of such plan.
Contemporaneously with the delivery of each compliance certificate under Section
6.2 (a) or (b) on and after December 31, 1998, Each Restricted Person shall
certify that it reasonably believes that Restricted Persons and their Affiliates
will become Year 2000 compliant for their operations on a timely basis except to
the extent that a failure to do so could not reasonably be expected to cause a
Material Adverse Change.
(b) Contemporaneously with the delivery of each compliance certificate
under Section 6.2 (a) or (b) on and after December 31, 1998, Plains MLP shall
certify that it reasonably believes any suppliers and vendors that are material
to the operations of Plains MLP or its Subsidiaries and Affiliates will be Year
2000 compliant for their own computer applications except to the extent that a
failure to do so could not reasonably be expected to cause a Material Adverse
Change.
Section 6.20. Rents. By the terms of the various Security Documents,
certain Restricted Persons are and will be assigning to Administrative Agent,
for the benefit of Lender Parties, all of the "Rents" (as defined therein)
accruing to the property covered thereby. Notwithstanding any such assignments,
so long as no Default has occurred and is continuing, (i) such Restricted
Persons may continue to receive and collect from the payors of such Rents all
such Rents, subject, however, to the Liens created under the Security Documents,
which Liens are hereby affirmed and ratified, and free and clear of such Liens,
use the proceeds of the Rents, and (ii) the Administrative Agent will not notify
the obligors of such Rents or take any other action to cause proceeds thereof to
be remitted to the Administrative Agent. Upon the occurrence of a Default,
Administrative Agent may exercise all rights and remedies granted under the
Security Documents, including the right to obtain possession of all Rents then
held by such Restricted Persons or to receive directly from the payors of such
Rents all other Rents until such time as such Default is no longer continuing.
If the Administrative Agent shall receive any Rent proceeds from any payor at
any time other than during the continuance of a Default, then it shall notify
Borrower thereof and
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(i) upon request and pursuant to the instructions of Borrower, it shall, if no
Default is then continuing, remit such proceeds to the Borrower and (ii) at the
request and expense of Borrower, execute and deliver a letter to such payors
confirming Restricted Persons' right to receive and collect Rents until
otherwise notified by Administrative Agent. In no case shall any failure,
whether purposed or inadvertent, by Administrative Agent to collect directly any
such Rents constitute in any way a waiver, remission or release of any of its
rights under the Security Documents, nor shall any release of any Rents by
Administrative Agent to such Restricted Persons constitute a waiver, remission,
or release of any other Rents or of any rights of Administrative Agent to
collect other Rents thereafter.
ARTICLE VII - Negative Covenants
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and make the Loans, Plains MLP and Borrower covenant and agree
that until the full and final payment of the Obligations and the termination of
this Agreement, unless Majority Lenders, or all Lenders as required under
Section 10.1, have previously agreed otherwise:
Section 7.1. Indebtedness. No Restricted Person will in any manner owe
or be liable for Indebtedness except:
(a) the Obligations;
(b) Indebtedness arising under Hedging Contracts permitted under Section
7.3;
(c) Indebtedness of any Restricted Person owing to another Restricted
Person;
(d) Liabilities with respect to obligations to deliver crude oil or to
render terminaling or storage services in consideration for advance payments to
a Restricted Person provided such delivery or rendering, as applicable, is to be
made within 60 days after such payment;
(e) Indebtedness under the All American Agreement, provided that the
principal amount of loans and face amount of letters of credit thereunder at any
one time outstanding shall not exceed $225,000,000;
(f) guaranties by Plains MLP of trade payables of any Restricted Person
incurred and paid in the ordinary course of business on ordinary trade terms;
and
(g) other Indebtedness not to exceed in the aggregate in respect of all
Restricted Persons the principal amount of $25,000,000 at any one time
outstanding.
Section 7.2. Limitation on Liens. No Restricted Person will create,
assume or permit to exist (i) any Lien upon any Collateral except (A) Permitted
Inventory Liens, (B) Liens created pursuant to the Security Documents, (C)
statutory Liens in respect of First Purchase Crude
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Payables, (D) Liens of the type described in clause (e) below in connection with
any Eligible Margin Deposit to secure Hedging Contracts permitted under Section
7.1 with the broker that is the holder of such Eligible Margin Deposit, and (E)
any other Liens expressly permitted to encumber such Collateral under any
Security Document covering such Collateral or (ii) any Lien upon any of the
properties or assets other than Collateral (except as provided in the preceding
clause (i)) which it now owns or hereafter acquires except the following (Liens,
to the extent permitted by this Section, herein called "Permitted Liens"):
(a) Liens existing on the date of this Agreement and listed in the
Disclosure Schedule or Liens created pursuant to the All American Agreement,
subject to the terms of the Intercreditor Agreement referred to in Section
4.1(m);
(b) Liens imposed by any governmental authority for taxes, assessments or
charges not yet due or the validity of which is being contested in good faith
and by appropriate proceedings, if necessary, for which adequate reserves are
maintained on the books of any Restricted Person in accordance with GAAP;
(c) pledges or deposits under worker's compensation, unemployment insurance
or other social security legislation;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's, or other like Liens (including, without limitation, Liens on
property in the possession of storage facilities, pipelines or barges) arising
in the ordinary course of business for amounts which are not more than 60 days
past due or the validity of which is being contested in good faith and by
appropriate proceedings, if necessary, and for which adequate reserves are
maintained on the books of any Restricted Person in accordance with GAAP;
(e) Liens under or with respect to accounts with brokers or counterparties
with respect to Hedging Contracts consisting of cash, commodities or futures
contracts, options, securities, instruments, and other like assets securing only
Hedging Contracts permitted under Section 7.1;
(f) deposits of cash or securities to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of real
property or minor imperfections in title thereto which, in the aggregate, are
not material in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the business of any Restricted Person;
(h) Liens in respect of operating leases and Capital Leases permitted under
Section 7.1;
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(i) Liens upon any property or assets acquired after the date hereof by a
Restricted Person, each of which either (i) existed on such property or asset
before the time of its acquisition and was not created in anticipation thereof,
or (ii) was created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
the cost of construction) of such property or asset; provided that no such Lien
shall extend to or cover any property or asset of a Restricted Person other than
the property or asset so acquired (or constructed) and the Indebtedness secured
thereby is permitted under Section 7.1(g) hereof; and any extension, renewal,
refinancing, refunding or replacement (or successive extensions, renewals,
refinancings, refundings or replacements), in whole or part, of the foregoing,
provided, however, that such Liens shall not cover or secure any additional
Indebtedness, obligations, property or asset;
(j) rights reserved to or vested in any governmental authority by the terms
of any right, power, franchise, grant, license or permit, or by any provision of
law, to revoke or terminate any such right, power, franchise, grant, license or
permit or to condemn or acquire by eminent domain or similar process;
(k) rights reserved to or vested by Law in any governmental authority to in
any manner, control or regulate in any manner any of the properties of any
Restricted Person or the use thereof or the rights and interests of any
Restricted Person therein, in any manner under any and all Laws;
(l) rights reserved to the grantors of any properties of any Restricted
Person, and the restrictions, conditions, restrictive covenants and limitations,
in respect thereto, pursuant to the terms, conditions and provisions of any
rights-of-way agreements, contracts or other agreements therewith; and
(m) Inchoate Liens in respect of pending litigation or with respect to a
judgment which has not resulted in an Event of Default under Section 8.1.
Section 7.3. Hedging Contracts. No Restricted Person will be a party to
or in any manner be liable on any Hedging Contract, except:
(a) Hedging Contracts entered into by a Restricted Person with the purpose
and effect of fixing interest rates on a principal amount of indebtedness of
such Restricted Person that is accruing interest at a variable rate, provided
that (i) the aggregate notional amount of such contracts never exceeds one
hundred percent (100%) of the anticipated outstanding principal balance of the
indebtedness to be hedged by such contracts or an average of such principal
balances calculated using a generally accepted method of matching interest swap
contracts to declining principal balances, (ii) the floating rate index of each
such contract generally matches the index used to determine the floating rates
of interest on the corresponding indebtedness to be hedged by such contract and
(iii) each such contract is with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is a Lender or one
of its Affiliates) at the time the contract is made has long-term unsecured and
unenhanced debt obligations rated AA or Aa2 or better, respectively, by either
Rating Agency or is an investment grade-rated industry participant or otherwise
acceptable to Majority Lenders.
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(b) Hedging Contracts entered into with the purpose and effect of fixing
prices on crude oil then owned by a Restricted Person or which a Restricted
Person is then obligated to purchase, provided that at all times: (i) no such
contract fixes a price for a term of more than twelve (12) months, except for
time trades in which the length of time between the purchase and sale contracts
shall not exceed thirty-six (36) months and further provided that such time
trades shall not exceed 30% of the Cushing Terminal's storage capacity; (ii)
with respect to crude oil constituting the linefill carried in the All American
Pipeline, the aggregate amount of oil so hedged at any one time does not exceed
500,000 barrels, (iii) with respect to crude oil owned by Restricted Persons
other than linefill carried in the All American Pipeline, the aggregate amount
of such other crude oil so hedged at any one time does not exceed the aggregate
Open Position at such time, (iv) such contract is entered into for the purpose
of hedging the price risk on oil anticipated to be disposed of and for which no
other fixed sale price or other price fixing arrangement exists, and (v) each
such contract is either (A) with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is a Lender Party
or one of its Affiliates) at the time the contract is made has long-term
unsecured and unenhanced debt obligations rated AA or Aa2 or better,
respectively, by either Rating Agency or (B) entered into on the New York
Mercantile Exchange ("Nymex") through a broker listed on the Disclosure Schedule
or otherwise approved by Majority Lenders; provided that if a Nymex position is
converted to a physical position by way of an "exchange for physicals" or an
"alternative delivery procedure" then such Restricted Person may extend credit
in connection with such physical position so long as such credit would comply
with the credit requirements of the definition of "Approved Eligible
Receivables."
Section 7.4. Limitation on Mergers, Issuances of Securities. Except as
expressly provided in this section, no Restricted Person will (a) enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), (b) acquire any
business or property from, or capital stock of, or be a party to any acquisition
of, any Person except for purchases of inventory and other property to be sold
or used in the ordinary course of business and Investments permitted under
Section 7.7 hereof or (c) sell, transfer, lease, exchange, alienate or
otherwise dispose of, in one transaction or a series of transactions, any part
of its business or property, whether now owned or hereafter acquired, except for
sales or transfers not prohibited by under Section 7.5 hereof. Any Person,
other than Borrower, that is a Subsidiary of a Restricted Person may, however,
be merged into or consolidated with (i) another Subsidiary of such Restricted
Person, so long as a Guarantor is the surviving business entity, or (ii such
Restricted Person, so long as such Restricted Person is the surviving business
entity. Plains MLP will not issue any securities other than (i) limited
partnership interests and any options or warrants giving the holders thereof
only the right to acquire such interests, (ii) general or subordinate
partnership interests issued to Resources or a Wholly Owned Subsidiary of
Resources and (iii) debt securities permitted by Section 7.1(g). No Subsidiary
of Plains MLP will issue any additional shares of its capital stock or other
securities or any options, warrants or other rights to acquire such additional
shares or other securities except a direct Subsidiary of a Restricted Person may
issue additional shares or other securities to such Restricted Person, to Plains
MLP or to General Partner so long as such Subsidiary is a Wholly Owned
Subsidiary of Plains MLP after giving effect thereto. No Subsidiary of Borrower
which is a partnership will allow any diminution of Borrower's interest (direct
or indirect) therein.
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Section 7.5. Limitation on Sales of Property. No Restricted Person will
sell, transfer, lease, exchange, alienate or dispose of any Collateral or any of
its material assets or properties or any material interest therein except:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value;
(b) inventory (including pipeline linefill) which is sold in the ordinary
course of business on ordinary trade terms;
(c) in other property which is sold for fair consideration not in the
aggregate in excess of $10,000,000 in any Fiscal Year, the sale of which will
not materially impair or diminish the value of the Collateral or any Restricted
Person's financial condition, business or operations; and
(d) sales or transfers, subject to the Security Documents, by a Person
(other than Borrower) that is a Subsidiary of a Restricted Person to such
Restricted Person or to a Wholly Owned Subsidiary of such Restricted Person that
is a Guarantor.
No Restricted Person will sell, transfer or otherwise dispose of capital stock
of or interest in any of its Subsidiaries except to Plains MLP or a Wholly Owned
Subsidiary of Plains MLP. No Restricted Person will discount, sell, pledge or
assign any notes payable to it, accounts receivable or future income. So long
as no Default then exists, Administrative Agent will, at Borrower's request and
expense, execute a release, satisfactory to Borrower and Administrative Agent,
of any Collateral so sold, transferred, leased, exchanged, alienated or disposed
of pursuant to the clause (a) or (c) of this Section.
Section 7.6. Limitation on Dividends and Redemptions. No Restricted
Person will declare or pay any dividends on, or make any other distribution in
respect of, any class of its capital stock or any partnership or other interest
in it, nor will any Restricted Person directly or indirectly make any capital
contribution to or purchase, redeem, acquire or retire any shares of the capital
stock of or partnership interests in any Restricted Person (whether such
interests are now or hereafter issued, outstanding or created), or cause or
permit any reduction or retirement of the capital stock of any Restricted
Person, while any Loan is outstanding. Notwithstanding the foregoing, but
subject to Section 7.5, (i) Subsidiaries of Plains MLP, Borrower, or of any
Guarantor shall not be restricted, directly or indirectly, from declaring and
paying dividends or making any other distributions to Plains MLP, Borrower, or
any such Guarantor, respectively, (ii) no Restricted Person shall be restricted
from making capital contributions to a Wholly Owned Subsidiary of such
Restricted Person that is a Guarantor, and (iii) so long as no Default or Event
of Default has occurred and is continuing or would result therefrom, Plains MLP
shall not be restricted from (A) distributing Available Cash (other than amounts
required to be applied as otherwise required in any Loan Document) to its
partners in accordance with the Partnership Agreement or (B) purchasing its
partnership units on the open market in connection with the Incentive and Option
Plans.
Section 7.7. Limitation on Investments and New Businesses. No Restricted
Person will (a) make any expenditure or commitment or incur any obligation or
enter into or engage in any
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transaction except in the ordinary course of business, (b) engage directly or
indirectly in any business or conduct any operations except in connection with
or incidental to its present businesses and operations, (c) make any
acquisitions of or capital contributions to or other Investments in any Person,
other than Permitted Investments and Permitted Acquisitions, or (d) make any
acquisitions of properties other than Permitted Acquisitions. All transactions
permitted under the foregoing subsections (a) through (d), inclusive, are
subject to Section 7.5.
Section 7.8. Limitation on Credit Extensions. Except for Permitted
Investments and Hedging Contracts permitted under Section 7.3(b) hereof, no
Restricted Person will extend credit, make advances or make loans other than
normal and prudent extensions of credit to customers buying goods and services
in the ordinary course of business or to another Restricted Person in the
ordinary course of business, which extensions shall not be for longer periods
than those extended by similar businesses operated in a normal and prudent
manner.
Section 7.9. Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of its Affiliates except: (a)
transactions among Plains MLP and Wholly Owned Subsidiaries of Plains MLP,
subject to the other provisions of this Agreement, (b) transactions governed by
the Affiliate Agreements, and (c) transactions entered into in the ordinary
course of business of such Restricted Person on terms which are no less
favorable to such Restricted Person than those which would have been obtainable
at the time in arm's-length transactions with Persons other than such
Affiliates.
Section 7.10. Prohibited Contracts. Except as expressly provided for in
the Loan Documents and as described in the Disclosure Schedule, no Restricted
Person will, directly or indirectly, enter into, create, or otherwise allow to
exist any contract or other consensual restriction on the ability of any
Subsidiary of Plains MLP, including but not limited to Borrower and any
Subsidiary of Borrower to: (a) pay dividends or make other distributions to
Borrower or Plains MLP, (b) redeem equity interests held in it by Borrower or
Plains MLP, (c) repay loans and other indebtedness owing by it to Borrower or
Plains MLP, or (d) transfer any of its assets to Borrower or Plains MLP. No
Restricted Person will enter into any "take-or-pay" contract or other contract
or arrangement for the purchase of goods or services which obligates it to pay
for such goods or service regardless of whether they are delivered or furnished
to it. No Restricted Persons will amend, modify or release any of the Affiliate
Agreements. No Restricted Person will amend or permit any amendment to any
contract or lease which releases, qualifies, limits, makes contingent or
otherwise detrimentally affects the rights and benefits of Administrative Agent
or any Lender under or acquired pursuant to any Security Documents. No ERISA
Affiliate will incur any obligation to contribute to any "multiemployer plan" as
defined in Section 4001 of ERISA that is subject to Title IV of ERISA.
Section 7.11. Current Ratio. The ratio of (i) the sum of Plains MLP's
Consolidated current assets plus the All American Revolver Availability to (ii)
Plains MLP's Consolidated current liabilities will never be less than 1.0 to
1.0. For purposes of this section, Plains MLP's Consolidated current
liabilities will be calculated without including (a) any payments of principal
on the Notes which are required to be repaid within one year from the time of
calculation and (b) all Liabilities arising under permitted Hedging Contracts.
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Section 7.12. Debt Coverage Ratio. At the end of any Fiscal Quarter, the
ratio of (a) Consolidated Funded Indebtedness to (b) Consolidated EBITDA for the
four Fiscal Quarter period ending with such Fiscal Quarter will not be greater
than 5.0 to 1.0.
Section 7.13. Interest Coverage Ratio. At the end of any Fiscal Quarter,
the ratio of (a) Consolidated EBITDA to (b) Interest Expense for the four-Fiscal
Quarter period ending with such Fiscal Quarter will not be less than 3.0 to 1.0.
Section 7.14. Fixed Charge Coverage Ratio. At the end of any Fiscal
Quarter, the ratio of (a) the sum of Consolidated EBITDA plus Consolidated Lease
Rentals to (b) the sum of Interest Expense plus Consolidated Lease Rentals plus
any principal payments due on any Indebtedness during the next four-Fiscal
Quarter period (exclusive of principal payments due on the Loans or on any
Indebtedness under the All American Credit Agreement) plus capital expenditure
required to maintain the assets and properties of the Restricted Persons in
accordance with the covenants contained in each Loan Document, in each case for
the four-Fiscal Quarter period ending with such Fiscal Quarter will not be less
than 1.25 to 1 for any such period.
Section 7.15. Debt to Capital Ratio. The ratio of (a) all Consolidated
Funded Indebtedness to (b) the sum of Consolidated Funded Indebtedness plus
Consolidated Net Worth will never be greater than .60 to 1.0 at any time.
Section 7.16. Open Inventory Position. Borrower shall not at any time
have an Open Position (exclusive of line fill carried in the All American
Pipeline) greater than 600,000 barrels.
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events constitutes
an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay the principal component of any Loan
or any reimbursement obligation with respect to any Letter of Credit when due
and payable, whether at a date for the payment of a fixed installment or as a
contingent or other payment becomes due and payable or as a result of
acceleration or otherwise;
(b) Any Restricted Person fails to pay any Obligation (other than the
Obligations in subsection (a) above) when due and payable, whether at a date for
the payment of a fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise, within three
Business Days after the same becomes due;
(c) Any event defined as a "default" or "event of default" in any Loan
Document occurs, and the same is not remedied within the applicable period of
grace (if any) provided in such Loan Document;
(d) Any Restricted Person fails to duly observe, perform or comply with
any covenant, agreement or provision of Section 6.4 or Article VII;
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(e) Any Restricted Person fails (other than as referred to in subsections
(a), (b), (c) or (d) above) to duly observe, perform or comply with any
covenant, agreement, condition or provision of any Loan Document to which it is
a party, and such failure remains unremedied for a period of thirty (30) days
after notice of such failure is given by Administrative Agent to Borrower;
(f) Any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Restricted Person in connection with any Loan
Document shall prove to have been false or incorrect in any material respect on
any date on or as of which made, or any Loan Document at any time ceases to be
valid, binding and enforceable as warranted in Section 5.5 for any reason other
than its release or subordination by Administrative Agent;
(g) Any Restricted Person shall default in the payment when due of any
principal of or interest on any of its other Indebtedness in excess of
$2,500,000 in the aggregate (other than Indebtedness the validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves with respect thereto are maintained on the books of such Restricted
Person in accordance with GAAP), or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if the effect of such event is to cause, or (with the giving of any
notice or the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, such Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity;
(h) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Code) in excess of $500,000 exists with respect to any ERISA Plan,
whether or not waived by the Secretary of the Treasury or his delegate, or (ii
any Termination Event occurs with respect to any ERISA Plan and the then current
value of such ERISA Plan's benefit liabilities exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefit liabilities
by more than $500,000 (or in the case of a Termination Event involving the
withdrawal of a substantial employer, the withdrawing employer's proportionate
share of such excess exceeds such amount);
(i) General Partner or any Restricted Person:
(i) has entered against it of a judgment, decree or order for relief
by a Tribunal of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar Law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it, in each case, which remains undismissed for a period
of sixty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents
to the entry of an order for relief in an involuntary case under any such
Law; or makes a general assignment for the benefit of creditors; or is
generally unable to pay (or admits in writing its inability to so pay) its
debts
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as such debts become due; or takes corporate or other action to authorize
any of the foregoing; or
(iii) has entered against it the appointment of or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets in a proceeding
brought against or initiated by it, and such appointment or taking
possession is neither made ineffective nor discharged within sixty days
after the making thereof, or such appointment or taking possession is at
any time consented to, requested by, or acquiesced to by it; or
(iv) has entered against it the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of any part of the Collateral of a value in excess of
$2,500,000 in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor discharged
within sixty days after the making thereof, or such appointment or taking
possession is at any time consented to, requested by, or acquiesced to by
it; or
(v) has entered against it a final judgment for the payment of money
in excess of $2,500,000 (in each case not covered by insurance satisfactory
to Administrative Agent in its discretion), unless the same is stayed or
discharged within thirty days after the date of entry thereof or an appeal
or appropriate proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(vi) suffers a writ or warrant of attachment or any similar process
to be issued by any Tribunal against all or any substantial part of its
assets or any part of the Collateral of a value in excess of $2,500,000,
and such writ or warrant of attachment or any similar process is not stayed
or released within thirty days after the entry or levy thereof or after any
stay is vacated or set aside;
(j) General Partner shall default in the payment when due of any principal
of or interest on any of its Indebtedness in excess of $1,000,000 in the
aggregate, or any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Indebtedness shall occur if the
effect of such event is to cause, or (with the giving of any notice or the lapse
of time or both) to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by redemption,
purchase, offer to purchase or otherwise), prior to its stated maturity;
(k) Any Change in Control occurs; or
(l) Any Material Market Open Position Loss occurs.
Upon the occurrence of an Event of Default described in subsection (i)(i),
(i)(ii) or (i)(iii) of this section with respect to Borrower or Plains MLP, all
of the Obligations shall thereupon be immediately due and payable, without
demand, presentment, notice of demand or of dishonor and nonpayment, protest,
notice of protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly
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waived by Borrower and each Restricted Person who at any time ratifies or
approves this Agreement. Upon any such acceleration, any obligation of any
Lender to make any further Loans and any obligation of LC Issuer to issue
Letters of Credit hereunder shall be permanently terminated. During the
continuance of any other Event of Default, Administrative Agent at any time and
from time to time may (and upon written instructions from Majority Lenders,
Administrative Agent shall), without notice to Borrower or any other Restricted
Person, do either or both of the following: (1) terminate any obligation of
Lenders to make Loans hereunder and any obligation of LC Issuer to issue Letters
of Credit hereunder, and (2) declare any or all of the Obligations immediately
due and payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by Borrower and each Restricted
Person who at any time ratifies or approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Lender Party
may enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Lender Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.
ARTICLE IX - Administrative Agent
Section 9.1. Appointment and Authority. Each Lender Party hereby
irrevocably authorizes Administrative Agent, and Administrative Agent hereby
undertakes, to receive payments of principal, interest and other amounts due
hereunder as specified herein and to take all other actions and to exercise such
powers under the Loan Documents as are specifically delegated to Administrative
Agent by the terms hereof or thereof, together with all other powers reasonably
incidental thereto. The relationship of Administrative Agent to the other
Lender Parties is only that of one commercial lender acting as administrative
agent for others, and nothing in the Loan Documents shall be construed to
constitute Administrative Agent a trustee or other fiduciary for any Lender
Party or any holder of any participation in a Note nor to impose on
Administrative Agent duties and obligations other than those expressly provided
for in the Loan Documents. With respect to any matters not expressly provided
for in the Loan Documents and any matters which the Loan Documents place within
the discretion of Administrative Agent, Administrative Agent shall not be
required to exercise any discretion or take any action, and it may request
instructions from Lenders with respect to any such matter, in which case it
shall be required to act or to refrain from acting (and shall be fully protected
and free from liability to all Lender Parties in so acting or refraining from
acting) upon the instructions of Majority Lenders (including itself), provided,
however, that Administrative Agent shall not be required to take any action
which exposes it to a risk of personal liability that it considers unreasonable
or which is contrary to the Loan Documents or to applicable Law. Upon receipt
by Administrative Agent from Borrower of
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any communication calling for action on the part of Lenders or upon notice from
Borrower or any Lender to Administrative Agent of any Default or Event of
Default, Administrative Agent shall promptly notify each other Lender thereof.
Section 9.2. Exculpation, Administrative Agent's Reliance, Etc. Neither
Administrative Agent nor any of its directors, officers, agents, attorneys, or
employees shall be liable for any action taken or omitted to be taken by any of
them under or in connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE
OF ANY KIND, except that each shall be liable for its own gross negligence or
willful misconduct. Without limiting the generality of the foregoing,
Administrative Agent (a) may treat the payee of any Note as the holder thereof
until Administrative Agent receives written notice of the assignment or transfer
thereof in accordance with this Agreement, signed by such payee and in form
satisfactory to Administrative Agent; (b) may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any other
Lender Party and shall not be responsible to any other Lender Party for any
statements, warranties or representations made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of the
Loan Documents on the part of any Restricted Person or to inspect the property
(including the books and records) of any Restricted Person; (e) shall not be
responsible to any other Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
instrument or document furnished in connection therewith; (f) may rely upon the
representations and warranties of each Restricted Person or Lender Party in
exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any facsimile, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
Section 9.3. Credit Decisions. Each Lender Party acknowledges that it
has, independently and without reliance upon any other Lender Party, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender Party also acknowledges that it will, independently and without
reliance upon any other Lender Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents.
Section 9.4. Indemnification. EACH LENDER AGREES TO INDEMNIFY
ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY BORROWER WITHIN TEN (10)
DAYS AFTER DEMAND) FROM AND AGAINST SUCH LENDER'S PERCENTAGE SHARE OF ANY AND
ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, FINES,
ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES OR DISBURSEMENTS
(INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS AND ADVISORS) OF
ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION COLLECTIVELY CALLED "LIABILITIES
AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE IMPOSED ON,
INCURRED BY, OR ASSERTED AGAINST ADMINISTRATIVE AGENT GROWING OUT OF, RESULTING
FROM OR IN ANY
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OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN DOCUMENTS AND THE
TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT THEREOF) AT ANY TIME
ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER ARISING IN CONTRACT OR IN
TORT OR OTHERWISE AND INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH ANY
ENVIRONMENTAL LAWS BY ANY PERSON OR ANY LIABILITIES OR DUTIES OF ANY PERSON WITH
RESPECT TO HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ADMINISTRATIVE AGENT,
provided only that no Lender shall be obligated under this section to indemnify
Administrative Agent for that portion, if any, of any liabilities and costs
which is proximately caused by Administrative Agent's own individual gross
negligence or willful misconduct, as determined in a final judgment. Cumulative
of the foregoing, each Lender agrees to reimburse Administrative Agent promptly
upon demand for such Lender's Percentage Share of any costs and expenses to be
paid to Administrative Agent by Borrower under Section 10.4(a) to the extent
that Administrative Agent is not timely reimbursed for such expenses by Borrower
as provided in such section. As used in this section the term "Administrative
Agent" shall refer not only to the Person designated as such in Section 1.1 but
also to each director, officer, agent, attorney, employee, representative and
Affiliate of such Person.
Section 9.5. Rights as Lender. In its capacity as a Lender,
Administrative Agent shall have the same rights and obligations as any Lender
and may exercise such rights as though it were not Administrative Agent.
Administrative Agent may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with any
Restricted Person or their Affiliates, all as if it were not Administrative
Agent hereunder and without any duty to account therefor to any other Lender.
Section 9.6. Sharing of Set-Offs and Other Payments. Each Lender Party
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Administrative Agent
under Section 3.1, causes such Lender Party to have received more than it would
have received had such payment been received by Administrative Agent and
distributed pursuant to Section 3.1, then (a) it shall be deemed to have
simultaneously purchased and shall be obligated to purchase interests in the
Obligations as necessary to cause all Lender Parties to share all payments as
provided for in Section 3.1, and (b) such other adjustments shall be made from
time to time as shall be equitable to ensure that Administrative Agent and all
Lender Parties share all payments of Obligations as provided in Section 3.1;
provided, however, that nothing herein contained shall in any way affect the
right of any Lender Party to obtain payment (whether by exercise of rights of
banker's lien, set-off or counterclaim or otherwise) of indebtedness other than
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the Obligations. Borrower expressly consents to the foregoing arrangements and
agrees that any holder of any such interest or other participation in the
Obligations, whether or not acquired pursuant to the foregoing arrangements, may
to the fullest extent permitted by Law and, subject to the provisions of Section
6.16, exercise any and all rights of banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller under this
section which received the same, the purchase provided for in this section shall
be deemed to have been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to the order of a Tribunal to
be paid on account of the possession of such funds prior to such recovery.
Section 9.7. Investments. Whenever Administrative Agent in good faith
determines that it is uncertain about how to distribute to Lender Parties any
funds which it has received, or whenever Administrative Agent in good faith
determines that there is any dispute among Lender Parties about how such funds
should be distributed, Administrative Agent may choose to defer distribution of
the funds which are the subject of such uncertainty or dispute. If
Administrative Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Administrative Agent is otherwise required to
invest funds pending distribution to Lender Parties, Administrative Agent shall
invest such funds pending distribution; all interest on any such Investment
shall be distributed upon the distribution of such Investment and in the same
proportion and to the same Persons as such Investment. All moneys received by
Administrative Agent for distribution to Lender Parties (other than to the
Person who is Administrative Agent in its separate capacity as a Lender Party)
shall be held by Administrative Agent pending such distribution solely as
Administrative Agent for such Lender Parties, and Administrative Agent shall
have no equitable title to any portion thereof.
Section 9.8. Benefit of Article IX. The provisions of this Article are
intended solely for the benefit of Lender Parties, and no Restricted Person
shall be entitled to rely on any such provision or assert any such provision in
a claim or defense against any Lender (other than in relation to the reference
to Section 6.16 contained in Section 9.6 or the right to reasonably approve a
successor Administrative Agent under Section 9.9). Lender Parties may waive or
amend such provisions as they desire without any notice to or consent of
Borrower or any other Restricted Person.
Section 9.9. Resignation. Administrative Agent may resign at any time by
giving written notice thereof to Lenders and Borrower. Each such notice shall
set forth the date of such resignation. Upon any such resignation Majority
Lenders shall have the right to appoint a successor Administrative Agent,
subject to the approval of Borrower, which approval will not be unreasonably
withheld. A successor must be appointed for any retiring Administrative Agent,
and such Administrative Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty days after the date of
the retiring Administrative Agent's resignation, no successor Administrative
Agent has been appointed and has accepted such appointment, then the retiring
Administrative Agent may appoint a successor Administrative Agent, which shall
be a commercial bank organized or licensed to conduct a banking or trust
business under the Laws of the United States of America or of any state thereof.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative
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Agent, the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Administrative Agent's resignation hereunder the provisions of this
Article IX shall continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under the Loan
Documents.
Section 9.10. Other Agents. Neither the Syndication Agent nor the
Documentation Agent, in such capacities, shall have any duties or
responsibilities or incur any liabilities under this Agreement or the other Loan
Documents.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender Party may have under any of the Loan Documents shall operate
as a waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by any Lender Party of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
as provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Restricted Person shall in any case of itself entitle any Restricted Person to
any other or further notice or demand in similar or other circumstances. This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is Borrower, by Borrower, (ii if
such party is Administrative Agent or LC Issuer, by such party, and (ii if such
party is a Lender, by such Lender or by Administrative Agent on behalf of
Lenders with the written consent of Majority Lenders (which consent has already
been given as to the termination of the Loan Documents as provided in Section
10.9). Notwithstanding the foregoing or anything to the contrary herein,
Administrative Agent shall not, without the prior consent of each individual
Lender, execute and deliver on behalf of such Lender any waiver or amendment
which would: (1) waive any of the conditions specified in Article IV (provided
that Administrative Agent may in its discretion withdraw any request it has made
under Section 4.3(f)), (2) increase the Percentage Share of any such Lender or
the maximum amount any such Lender is committed to fund in respect of Letter of
Credit Obligations and Loans or subject such Lender to any additional
obligations, (3) reduce any fees payable to such Lender hereunder, or the
principal of, or interest on, such Lender's Note, (4) change any date fixed for
any payment of any such fees, principal or interest, (5) amend the definition
herein of "Borrowing Base" or any of the terms used in that definition, (6)
amend the definition herein of "Majority Lenders" or otherwise change the
aggregate amount of Percentage Shares which is required for
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Administrative Agent, Lenders or any of them to take any particular action under
the Loan Documents, (7) release Borrower from its obligation to pay such
Lender's Note or any Guarantor from its guaranty of such payment, or (8) release
any Collateral, except such releases relating to sales of property permitted
under Section 7.5.
(b) Acknowledgments and Admissions. Borrower hereby represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Administrative Agent or any
other Lender Party, whether written, oral or implicit, other than as expressly
set out in this Agreement or in another Loan Document delivered on or after the
date hereof, (ii there are no representations, warranties, covenants,
undertakings or agreements by any Lender Party as to the Loan Documents except
as expressly set out in this Agreement or in another Loan Document delivered on
or after the date hereof, (iv no Lender Party has any fiduciary obligation
toward Borrower with respect to any Loan Document or the transactions
contemplated thereby, (v) the relationship pursuant to the Loan Documents
between Borrower and the other Restricted Persons, on one hand, and each Lender
Party, on the other hand, is and shall be solely that of debtor and creditor,
respectively, (vi no partnership or joint venture exists with respect to the
Loan Documents between any Restricted Person and any Lender Party, (vi
Administrative Agent is not Borrower's Administrative Agent, but Administrative
Agent for Lenders, (vi should an Event of Default or Default occur or exist,
each Lender Party will determine in its sole discretion and for its own reasons
what remedies and actions it will or will not exercise or take at that time, (ix
without limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by any Lender Party, or any representative thereof,
and no such representation or covenant has been made, that any Lender Party
will, at the time of an Event of Default or Default, or at any other time,
waive, negotiate, discuss, or take or refrain from taking any action permitted
under the Loan Documents with respect to any such Event of Default or Default or
any other provision of the Loan Documents, and (x) all Lender Parties have
relied upon the truthfulness of the acknowledgments in this section in deciding
to execute and deliver this Agreement and to become obligated hereunder.
(c) Representation by Lenders. Each Lender hereby represents that it will
acquire its Note for its own account in the ordinary course of its commercial
lending business; however, the disposition of such Lender's property shall at
all times be and remain within its control and, in particular and without
limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other rights
and obligations under the Loan Documents subject to compliance with Sections
10.5(b) through (f), inclusive, and applicable Law.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
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THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Lender Party and all of Lender Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any Restricted Person to any
Lender Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements and covenants of Borrower under this
Agreement. The representations, warranties, indemnities, and covenants made by
Restricted Persons in the Loan Documents, and the rights, powers, and privileges
granted to Lender Parties in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or otherwise reduce the benefit to
any Lender Party of any such representation, warranty, indemnity, covenant,
right, power or privilege. In particular and without limitation, no exception
set out in this Agreement to any representation, warranty, indemnity, or
covenant herein contained shall apply to any similar representation, warranty,
indemnity, or covenant contained in any other Loan Document, and each such
similar representation, warranty, indemnity, or covenant shall be subject only
to those exceptions which are expressly made applicable to it by the terms of
the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Administrative Agent may give telephonic notices to the other Lender
Parties), and shall be deemed sufficiently given or furnished if delivered by
personal delivery, by facsimile or other electronic transmission, by delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, to Borrower and Restricted Persons at the address of
Borrower specified on the signature pages hereto and to each Lender Party at its
address specified on the signature pages hereto (unless changed by similar
notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during normal business hours at the address provided
herein, (b) in the case of facsimile or other electronic transmission, upon
receipt, or (c) in the case of registered or certified United States mail, three
days after deposit in the mail; provided, however, that no Borrowing Notice or
Continuation/Conversion Notice shall become effective until actually received by
Administrative Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, Borrower will promptly (and in any event, within
30 days after any invoice or other statement or notice) pay: (i) all transfer,
stamp, mortgage, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect
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of this Agreement or any of the other Loan Documents or any other document
referred to herein or therein, (ii all reasonable costs and expenses incurred by
or on behalf of Administrative Agent (including attorneys' fees, consultants'
fees and engineering fees, travel costs and miscellaneous expenses) in
connection with (1) the negotiation, preparation, execution and delivery of the
Loan Documents, and any and all consents, waivers or other documents or
instruments relating thereto, (2) the filing, recording, refiling and re-
recording of any Loan Documents and any other documents or instruments or
further assurances required to be filed or recorded or refiled or re-recorded by
the terms of any Loan Document, (3) the borrowings hereunder and other action
reasonably required in the course of administration hereof, (4) monitoring or
confirming (or preparation or negotiation of any document related to) Borrower's
compliance with any covenants or conditions contained in this Agreement or in
any Loan Document, and (ii all reasonable costs and expenses incurred by or on
behalf of any Lender Party (including attorneys' fees, consultants' fees and
accounting fees) in connection with the defense or enforcement of any of the
Loan Documents (including this section) or the defense of any Lender Party's
exercise of its rights thereunder. In addition to the foregoing, until all
Obligations have been paid in full, Borrower will also pay or reimburse
Administrative Agent for all reasonable out-of-pocket costs and expenses of
Administrative Agent or its agents or employees in connection with the
continuing administration of the Loans and the related due diligence of
Administrative Agent, including travel and miscellaneous expenses and fees and
expenses of Administrative Agent's outside counsel, reserve engineers and
consultants engaged in connection with the Loan Documents.
(b) Indemnity. Borrower agrees to indemnify each Lender Party, upon
demand, from and against any and all liabilities, obligations, claims, losses,
damages, penalties, fines, actions, judgments, suits, settlements, costs,
expenses or disbursements (including reasonable fees of attorneys, accountants,
experts and advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") which to any extent (in whole or in
part) may be imposed on, incurred by, or asserted against such Lender Party
growing out of, resulting from or in any other way associated with any of the
Collateral, the Loan Documents and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein whether arising in contract or in tort or otherwise and including any
violation or noncompliance with any Environmental Laws by any Lender Party or
any other Person or any liabilities or duties of any Lender Party or any other
Person with respect to Hazardous Materials found in or released into the
environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY,
provided only that no Lender Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any Person (including
Borrower or any of its Affiliates) ever alleges such gross negligence or willful
misconduct by any Lender Party, the indemnification provided for in this section
shall nonetheless
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be paid upon demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction enters a final judgment as to the
extent and effect of the alleged gross negligence or willful misconduct. As used
in this section the term "Lender Party" shall refer not only to each Person
designated as such in Section 1.1 but also to each director, officer, agent,
attorney, employee, representative and Affiliate of such Persons.
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments.
(a) All Obligations which are incurred by two or more Restricted Persons
shall be their joint and several obligations and liabilities. All grants,
covenants and agreements contained in the Loan Documents shall bind and inure to
the benefit of the parties thereto and their respective successors and permitted
assigns; provided, however, that no Restricted Person may assign or transfer any
of its rights or delegate any of its duties or obligations under any Loan
Document without the prior consent of all Lenders. Neither Borrower nor any
Affiliates of Borrower shall directly or indirectly purchase or otherwise retire
any Obligations owed to any Lender nor will any Lender accept any offer to do
so, unless each Lender shall have received substantially the same offer with
respect to the same Percentage Share of the Obligations owed to it. If Borrower
or any Affiliate of Borrower at any time purchases some but less than all of the
Obligations owed to all Lender Parties, such purchaser shall not be entitled to
any rights of any Lender under the Loan Documents unless and until Borrower or
its Affiliates have purchased all of the Obligations.
(b) No Lender shall sell any participation interest in its commitment
hereunder or any of its rights under its Loans or under the Loan Documents to
any Person unless the agreement between such Lender and such participant at all
times provides: (i) that such participation exists only as a result of the
agreement between such participant and such Lender and that such transfer does
not give such participant any right to vote as a Lender or any other direct
claims or rights against any Person other than such Lender, (ii) that such
participant is not entitled to payment from any Restricted Person under Sections
3.2 through 3.6 of amounts in excess of those payable to such Lender under such
sections (determined without regard to the sale of such participation), and
(iii) unless such participant is an Affiliate of such Lender, that such
participant shall not be entitled to require such Lender to take any action
under any Loan Document or to obtain the consent of such participant prior to
taking any action under any Loan Document, except for actions which would
require the consent of all Lenders under subsection (a) of Section 10.1. No
Lender selling such a participation shall, as between the other parties hereto
and such Lender, be relieved of any of its obligations hereunder as a result of
the sale of such participation. Each Lender which sells any such participation
to any Person (other than an Affiliate of such Lender) shall give prompt notice
thereof to Administrative Agent and Borrower; provided, however, that no
liability shall arise if any Lender fails to give such notice to Borrower.
(c) Except for sales of participations under the immediately preceding
subsection, no Lender shall make any assignment or transfer of any kind of its
commitments or any of its rights under its Loans or under the Loan Documents,
except for assignments to an Eligible Transferee, or, subject to the provisions
of subsection (g) below, to an Affiliate and then only if such assignment is
made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing to the
assignor Lender hereunder and to the unused portion of the assignor
Lender's commitments, so that after such assignment is made the assignor
Lender shall have
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a fixed (and not a varying) Percentage Share in its Loans and Note and be
committed to make that Percentage Share of all future Loans, the assignee
shall have a fixed Percentage Share in such Loans and Note and be committed
to make that Percentage Share of all future Loans, and the Percentage Share
of the Maximum Loan Amount of both the assignor and assignee shall equal or
exceed $5,000,000.
(ii) The parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the "Register"
(as defined below in this section), an Assignment and Acceptance in the
form of Exhibit J, appropriately completed, together with the Note subject
to such assignment and a processing fee payable by such assignor Lender
(and not at Borrower's expense) to Administrative Agent of $3,500. Upon
such execution, delivery, and payment and upon the satisfaction of the
conditions set out in such Assignment and Acceptance, then (i) Borrower
shall issue new Notes to such assignor and assignee upon return of the old
Notes to Borrower, and (ii) as of the "Settlement Date" specified in such
Assignment and Acceptance the assignee thereunder shall be a party hereto
and a Lender hereunder and Administrative Agent shall thereupon deliver to
Borrower and each Lender a revised Schedule 1 hereto showing the revised
Percentage Shares of such assignor Lender and such assignee Lender and the
Percentage Shares of all other Lenders.
(iii) Each assignee Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for Federal income
tax purposes, shall (to the extent it has not already done so) provide
Administrative Agent and Borrower with the "Prescribed Forms" referred to
in Section 3.6(d).
(d) Nothing contained in this section shall prevent or prohibit any Lender
from assigning or pledging all or any portion of its Loans and Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; provided that (i) no such assignment or
pledge shall relieve such Lender from its obligations hereunder and (ii) all
related costs, fees and expenses incurred by such Lender in connection with such
assignment and the reassignment back to it, free of any interests of such
Federal Reserve Banks, shall be for the sole account of such Lender.
(e) By executing and delivering an Assignment and Acceptance, each
assignee Lender thereunder will be confirming to and agreeing with Borrower,
Administrative Agent and each other Lender Party that such assignee understands
and agrees to the terms hereof, including Article IX hereof.
(f) Administrative Agent shall maintain a copy of each Assignment and
Acceptance and a register for the recordation of the names and addresses of
Lenders and the Percentage Shares of, and principal amount of the Loans owing
to, each Lender from time to time (in this section called the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and Borrower and each Lender Party may treat each Person whose name is recorded
in the Register as a Lender Party hereunder for all purposes. The Register
shall be available for
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inspection by Borrower or any Lender Party at any reasonable time and from time
to time upon reasonable prior notice.
(g) Any Lender may assign or transfer its commitment or its rights under
its Loans or under the Loan Documents to (i) any Affiliate that is wholly-owned
direct or indirect subsidiary of such Lender or of any Person that wholly owns,
directly or indirectly, such Lender, or (ii) if such Lender is a fund that
invests in bank loans, any other fund that invests in bank loans and is advised
or managed by (A) the same investment advisor as any Lender or (B) any Affiliate
of such investment advisor that is a wholly-owned direct or indirect subsidiary
of any Person that wholly owns, directly or indirectly, such investment advisor,
subject to the following additional conditions:
(x) any right of such Lender assignor and such assignee to vote as a
Lender, or any other direct claims or rights against any other Persons,
shall be uniformly exercised or pursued in the manner that such Lender
assignor would have so exercised such vote, claim or right if it had not
made such assignment or transfer;
(y) such assignee shall not be entitled to payment from any Restricted
Person under Sections 3.2 through 3.7 of amounts in excess of those payable
to such Lender assignor under such sections (determined without regard to
such assignment or transfer); and
(z) if such Lender assignor assigns or transfers to such assignee any of
such Lender's commitment, such assignee may become primarily liable for
such commitment, but such assignment or transfer shall not relieve or
release such Lender from such commitment.
Section 10.6. Confidentiality. Each Lender Party agrees (on behalf of
itself and each of its Affiliates, and each of its and their directors,
officers, agents, attorneys, employees, and representatives) that it (and each
of them) will take all reasonable steps to keep confidential any non-public
information supplied to it by or at the direction of any Restricted Person so
identified when delivered, provided, however, that this restriction shall not
apply to information which (a) has at the time in question entered the public
domain, (b) is required to be disclosed by Law (whether valid or invalid) of any
Tribunal, (c) is disclosed to any Lender Party's Affiliates, auditors,
attorneys, or agents, (d) is furnished to any other Lender Party or to any
purchaser or prospective purchaser of participations or other interests in any
Loan or Loan Document (provided each such purchaser or prospective purchaser
first agrees to hold such information in confidence on the terms provided in
this section), or (d) is disclosed in the course of enforcing its rights and
remedies during the existence of an Event of Default.
Section 10.7. Governing Law; Submission to Process. EXCEPT TO THE EXTENT
THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT,
THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED
STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. BORROWER
HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST BORROWER WITH RESPECT
TO THIS AGREEMENT, THE NOTES OR ANY OF THE LOAN
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DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS LENDER PARTIES MAY
ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, BORROWER ACCEPTS AND CONSENTS FOR
ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-
EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. BORROWER AGREES THAT SECTIONS
5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL
APPLY TO THE LOAN DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY
ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON
CONVENIENS. IN FURTHERANCE OF THE FOREGOING, BORROWER HEREBY IRREVOCABLY
DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY, 80 STATE STREET, ALBANY,
NEW YORK 12207, AS AGENT OF BORROWER TO RECEIVE SERVICE OF ALL PROCESS BROUGHT
AGAINST BORROWER WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN NEW
YORK, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL
ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO BORROWER AT ITS ADDRESS
SET FORTH BELOW, BUT THE FAILURE OF BORROWER TO RECEIVE SUCH COPIES SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID. BORROWER SHALL
FURNISH TO LENDER PARTIES A CONSENT OF CORPORATION SERVICE COMPANY AGREEING TO
ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO BRING PROCEEDINGS
AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. IF FOR ANY REASON
CORPORATION SERVICE COMPANY SHALL RESIGN OR OTHERWISE CEASE TO ACT AS BORROWER'S
AGENT, BORROWER HEREBY IRREVOCABLY AGREES TO (A) IMMEDIATELY DESIGNATE AND
APPOINT A NEW AGENT ACCEPTABLE TO ADMINISTRATIVE AGENT TO SERVE IN SUCH CAPACITY
AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR
CORPORATION SERVICE COMPANY FOR ALL PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO
AGENT THE WRITTEN CONSENT (IN FORM AND SUBSTANCE SATISFACTORY TO ADMINISTRATIVE
AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY.
Section 10.8. Limitation on Interest. Lender Parties, Restricted Persons
and the other parties to the Loan Documents intend to contract in strict
compliance with applicable usury Law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to provide
for interest in excess of the maximum amount of interest permitted to be charged
by applicable Law from time to time in effect. Neither any Restricted Person
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under applicable Law from time
to time in effect, and the provisions of this section shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith.
Section 10.9. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing or outstanding
elect in a written notice delivered to Administrative Agent to terminate this
Agreement. Upon receipt by Administrative Agent of such
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a notice, if no Obligations are then owing or outstanding this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Restricted Person in any Loan Document, any Obligations under Sections 3.2
through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender Party shall survive any termination of this Agreement or
any other Loan Document. At the request and expense of Borrower, Administrative
Agent shall prepare and execute all necessary instruments to reflect and effect
such termination of the Loan Documents. Administrative Agent is hereby
authorized to execute all such instruments on behalf of all Lenders, without the
joinder of or further action by any Lender.
Section 10.10. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
Section 10.11. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc. TO THE
EXTENT PERMITTED BY LAW, LENDER PARTIES AND BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF SUCH PERSONS OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR LENDER PARTIES' ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
BORROWER AND EACH LENDER PARTY HEREBY FURTHER (A) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES," AS DEFINED BELOW, (B) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (C)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR
DELIVER TO ANY OTHER PARTY HERETO.
Section 10.13. Amendment and Restatement. Upon satisfaction with each of
the conditions set forth in Sections 4.1 and 4.2 (except any condition the
performance of which has been waived as a condition to the initial Loan or
initial issuance of a Letter of Credit pursuant to
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this Agreement), this Agreement shall be deemed to amend and restate in its
entirety the Existing Agreement, at which time (the "Effective Time") each
Lender and each Restricted Person hereby agrees that (i) the Percentage Share of
each Lender shall be as set forth in the definition to this Agreement, (ii) the
Loans outstanding under the Existing Agreement and all accrued and unpaid
interest thereon, all letters of credit issued and outstanding under the
Existing Agreement and reimbursement obligations with respect thereto, and all
accrued and unpaid fees and expenses under the Existing Agreement (the
"Outstanding Obligations") shall be deemed to be outstanding under and governed
by this Agreement, and (iii) any party named as a "Lender" under the Existing
Agreement that is not a signatory hereto as a Lender under this Agreement (an
"Exiting Lender") shall cease to be a Lender and shall be released from its
obligations under the Existing Agreement and this Agreement. At the Effective
Time, the Borrower shall make such adjustments in the Loans, including the
borrowing of additional Loans and the repayment of Loans under the Existing
Agreement plus all applicable accrued interest, fees and expenses (including any
costs under Article III of the Existing Agreement) as shall be necessary to
repay in full all Exiting Lenders and to provide for Loans by each Lender in the
amount of its new Percentage Share of all Loans as of the Effective Time. At the
Effective Time the liability of Resources in respect to the Outstanding
Obligations (including any liability of Resources under its Guaranty thereof and
the liability of PMTI under the Existing Agreement, Notes or other Loan
Documents, as defined in the Existing Agreement, and the liability of PLX Crude
Lines Inc. and Plains Terminal & Transfer Corporation under their Guaranties
which had been assumed by Resources), and any Lien securing such Outstanding
Obligations upon any assets or properties of Resources retained by Resources
after giving effect to the Contribution Agreement, shall be terminated and
released in full. At Resources expense, each Lender and Administrative Agent
agrees to execute such documents and file such releases as Resources shall
reasonable request to further memorialize the foregoing.
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IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
PLAINS MARKETING, L.P., Borrower
By: PLAINS ALL AMERICAN INC., its general
partner
By: /s/ Phillip D. Kramer
----------------------
Name: Phillip D. Kramer
Title: Executive Vice President
Address:
500 Dallas Street
Suite 700
Houston, Texas 77002
Attention: Phil Kramer
Telephone: (713) 654-1414
Fax: (713) 654-1523
PLAINS ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC., its general
partner
By:/s/ Phillip D. Kramer
---------------------
Name: Phillip D. Kramer
Title: Executive Vice President
Address:
500 Dallas Street
Suite 700
Houston, Texas 77002
Attention: Phil Kramer
Telephone: (713) 654-1414
Fax: (713) 654-1523
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ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC., its general
partner
By:/s/ Phillip D. Kramer
---------------------
Name: Phillip D. Kramer
Title: Executive Vice President
Address:
500 Dallas Street
Suite 700
Houston, Texas 77002
Attention: Phil Kramer
Telephone: (713) 654-1414
Fax: (713) 654-1523
BANKBOSTON, N.A.,
Administrative Agent,
LC Issuer and Lender
By: /s/ Terrence Ronan
-------------------
Name: Terrence Ronan
Title: Director
Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Terrence Ronan
Mail Code: 01-08-04
Telephone: (617) 434-5472
Fax: (617) 434-3652
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BANCBOSTON ROBERTSON STEPHENS INC.,
Syndication Agent
By: /s/ John R. Barlow
-------------------
Name: John R. Barlow
Title: Director
Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Richard Makin
Mail Code: 01-11-04
Telephone: (617) 434-7381
Fax: (617) 434-0382
ING BARING FURMAN SELZ, LLC,
Documentation Agent
By: /s/ Christopher R. Wagner
--------------------------
Name: Christopher R. Wagner
Title: Senior Vice President
Address:
135 East 57th Street
New York, New York 10022
Attention:
Telephone: (212)
Fax: (212)
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ING (U.S.) CAPITAL CORPORATION, Lender
By: /s/ Christopher R. Wagner
--------------------------
Name: Christopher R. Wagner
Title: Senior Vice President
Address:
135 East 57th Street
New York, New York 10022
Attention:
Telephone: (212)
Fax: (212)
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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Leonard Russo
----------------------
Name: Leonard Russo
Title: Managing Director
Address:
333 Clay St., Suite 4550
Houston, Texas 77002
Attention: Irene Rummel
Telephone: (713) 651-4921
Fax: (713) 651-4921
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BANK OF SCOTLAND
By: /s/ Annie Chin Tat
---------------------
Name: Annie Chin Tat
Title:
Address:
565 Fifth Avenue
New York, New York 10017
Attention: Annie Chin Tat
Telephone: (212) 450-0871
Fax: (212) 557-9460
With Copy to:
1200 Smith Street
Houston, Texas 77002
Attention: Richard C. Butler
Telephone: (713) 651-1870
Fax: (713) 651-9714
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DEN NORSKE BANK ASA
By: /s/ J. Morten Kreutz
---------------------
Name: J. Morten Kreutz
Title: Vice President
By: /s/ William V. Moyer
---------------------
Name: William V. Moyer
Title: Senior Vice President
Address:
Three Allen Center
333 Clay Street, Suite 4890
Houston, Texas 77002
Attention: Byron L. Cooley
Telephone: (713) 844-9258
Fax: (713) 757-1167
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COMERICA BANK - TEXAS
By: /s/ Daniel P. Tralmer
----------------------
Name: Daniel P. Tralmer
Title: Vice President
Address:
910 Louisiana, Suite 410
Houston, Texas 77002
Attention: Jim Kimble
Telephone: (713) 220-5614
Fax: (713) 220-5650
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HIBERNIA NATIONAL BANK
By: /s/ Tammy Angelety
--------------------
Name: Tammy Angelety
Title: Assistant Vice President
Address:
313 Carondelet Street
New Orleans, Louisiana 70130
Attention: Tammy Angelety
Telephone: (504) 533-2045
Fax: (504) 533-5434
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MEESPIERSON CAPITAL CORP.
By: /s/ Deirdre M. Sanborn
-----------------------
Name: Deirdre M. Sanborn
Title: Assistant Vice President
By: /s/ Darrell W. Holley
----------------------
Name: Darrell W. Holley
Title: Senior Vice President
Address:
300 Crescent Court, Suite 1750
Dallas, Texas 75201
Attention: Darrell W. Holley
Telephone: (214) 953-9307
Fax: (214) 754-5981
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U.S. BANK NATIONAL ASSOCIATION
By: /s/ Monte E. Deckerd
-----------------------
Name: Monte E. Deckerd
Title: Vice President
Address:
918 17TH Street
Denver, Colorado 80202
Attention: Monte E. Deckerd
Telephone: (303) 585-4212
Fax: (303) 585-4362
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FIRST UNION NATIONAL BANK
By: /s/ Robert R. Wetteroff
--------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
Address:
1001 Fannin, Suite 2255
Houston, Texas 77002
Attention: David Humphreys
Telephone: (713) 650-9843
Fax: (713) 650-6354
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EXHIBIT 10.3
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
THIS CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT, dated as of
November 23, 1998, is entered into by and among PLAINS RESOURCES INC., a
Delaware corporation ("Plains Resources"), PLAINS ALL AMERICAN INC., a Delaware
corporation ("PAAI"), PLAINS ALL AMERICAN PIPELINE, L.P., a Delaware limited
partnership (the "Partnership"), PLAINS MARKETING, L.P., a Delaware limited
partnership ("Plains Marketing"), ALL AMERICAN PIPELINE, L.P., a Texas limited
partnership ("All American L.P."), PAAI LLC, a Delaware limited liability
company ("PAAI LLC"), and GATHERING LLC, a Delaware limited liability company
("Gathering LLC").
RECITALS
WHEREAS, PAAI and Plains Resources have formed the Partnership
pursuant to the Delaware Revised Uniform Limited Partnership Act (the "Delaware
Act") for the purpose of serving as the sole limited partner of Plains
Marketing;
WHEREAS, PAAI contributed $990.00 to the capital of the Partnership
and received a 1% general partner interest and a 49% limited partner interest
therein; and Plains Resources contributed $990.00 to the capital of the
Partnership and received a 50% limited partner interest therein;
WHEREAS, Plains Resources sold its 50% limited partner interest in the
Partnership to Michael Patterson (the "Organizational Limited Partner");
WHEREAS, PAAI and the Partnership have heretofore formed Plains
Marketing pursuant to the Delaware Act for the purpose of acquiring, owning and
operating the midstream
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crude oil business and assets of Plains Resources and its subsidiaries,
including, without limitation, the business of crude oil marketing, gathering,
transportation, storage, terminaling and pipeline operation and the assets
(other than the Plains Excluded Assets) of Plains Transportation, Plains
Terminal, PLX Crude and PLX Ingleside (as defined herein) (the "Business");
WHEREAS, PAAI contributed $500 to the capital of Plains Marketing and
received a 1% general partner interest and a 49% limited partner interest
therein; and the Partnership contributed $500 to the capital of Plains Marketing
and received a 50% limited partner interest therein;
WHEREAS, All American Pipeline Company, a Texas corporation ("All
American"), has previously formed Gathering LLC as a wholly owned subsidiary of
All American and has caused its subsidiary Celeron Gathering Corporation, a
Delaware corporation ("CGC"), to merge into Gathering LLC;
WHEREAS, PAAI has previously formed PAAI LLC as a wholly-owned
subsidiary of PAAI to hold one share of All American stock;
WHEREAS, All American has previously adopted articles of conversion
and converted to All American L.P. in which PAAI holds a .001% general partner
interest and a 98.999% limited partner interest (such limited partner interest,
the "All American LP Interest"), and PAAI LLC holds a 1% limited partner
interest;
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, All American L.P. will assume $175 million of PAAI's
outstanding debt and will distribute its ownership interest in Gathering LLC
(the "Gathering LLC Interest") to PAAI;
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WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, each of Plains Marketing & Transportation Inc., a Delaware
corporation ("Plains Transportation"), Plains Terminal & Transfer Corporation, a
Delaware corporation ("Plains Terminal"), PLX Crude Lines Inc., a Delaware
corporation ("PLX Crude"), and PLX Ingleside, Inc., a Delaware corporation ("PLX
Ingleside"), will be merged with and into Plains Resources;
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby Celeron Trading & Transportation Company, a Delaware
corporation ("CT&T"), shall be merged with and into PAAI;
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, PAAI and the Partnership have entered into that certain
Amended and Restated Agreement of Limited Partnership of Plains Marketing (the
"Operating Partnership Agreement");
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, PAAI and the Organizational Limited Partner have entered
into that certain Second Amended and Restated Agreement of Limited Partnership
of the Partnership (the "Partnership Agreement");
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the parties to this Agreement undertake and agree as
follows:
ARTICLE I
DEFINITIONS; CONCURRENT TRANSACTIONS
1.1 Definitions. The following capitalized terms shall have the meanings
given below.
"Agreement" means this Contribution, Conveyance and Assumption
Agreement.
"All American" has the meaning assigned to such term in the Recitals
to this Agreement.
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"Additional All American L.P. Interest" has the meaning assigned to
such term in Section 2.3.
"All American L.P." has the meaning assigned to such term in the
opening paragraph of this Agreement.
"All American LP Interest" has the meaning assigned to such term in
the Recitals to this Agreement.
"Assets" means the Plains Assets and the PAAI Assets.
"Business" has the meaning assigned to such term in the Recitals to
this Agreement.
"CGC" has the meaning assigned to such term in the Recitals to this
Agreement.
"Common Units" means common limited partner interests in the
Partnership.
"Conveyance, Assignment and Bill of Sale" means a Conveyance,
Assignment and Bill of Sale in recordable form from each of Plains Resources and
PAAI, as the case may be, to Plains Marketing, the form of which is attached
hereto as Exhibit A.
"CT&T" has the meaning assigned to such term in the Recitals to this
Agreement.
"CT&T Assets" means all of the assets owned, leased or held by CT&T,
as of the Effective Time, of every kind and description, whether tangible or
intangible, whether real, personal or mixed, and wherever located, including,
without limitation, all of the crude oil inventory (line fill) owned by CT&T and
located in the crude oil pipeline system owned by All American L.P.
"Cushing Terminal" means the crude oil terminal and storage facility
located in Payne and Lincoln Counties, Oklahoma, including, without limitation,
the real property and other property interests described in that certain
Conveyance, Assignment and Bill of Sale (Cushing) of even date herewith from
Plains Resources to Plains Marketing (a copy of the form of which is attached
hereto
4
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as Exhibit A) along with the Plains Midstream Subsidiaries' Assets described
below that are a part of or are used exclusively in connection with the crude
oil terminal and storage facility:
(i) storage tanks, stations, substations, terminal facilities and
related properties and assets, along with all crude oil inventory located
in such facilities;
(ii) all motor vehicles, tractors, trailers, tanks, railcars, other
vehicles, machinery and related equipment, whether owned or leased;
(iii) every contract, agreement, arrangement, grant, gift, trust or
other arrangement or understanding of any kind;
(iv) any and all rights, claims and causes of action under warranties,
insurance policies, contracts and related rights;
(v) communication equipment, computer equipment and software and
leasehold interests therein;
(vi) all know-how, every trade secret, every customer list and all
other confidential information of every kind;
(vii) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
(viii) every other proprietary right of any kind;
(ix) all governmental licenses, permits, approvals, franchises,
registrations and authorizations of every kind;
(x) copies of all of the books, records, papers and instruments,
including without limitation, accounting and financial records;
5
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(xi) any and all monies, rents, revenues, accounts receivable or other
proceeds receivable;
(xii) all deposits, prepayments and prepaid expenses;
(xiii) all unbilled receivables;
(xiv) all trade names, trademarks, service marks, logos, marks and
symbols of any kind, together with all goodwill associated therewith and
all other trade names, trademarks and service marks;
(xv) all rights, benefits, privileges and appurtenances pertaining to
any of the foregoing;
excluding, however, any of such assets that constitute Plains Excluded
Assets.
"Delaware Act" has the meaning assigned to such term in the Recitals
to this Agreement.
"Effective Time" means 12:01 a.m. Eastern Standard Time on November
23, 1998.
"Existing Indebtedness" means indebtedness, liabilities and
obligations of PAAI under that certain $325 million Senior Secured Credit
Facility dated July 30, 1998 with ING (U.S.) Capital Corporation, as
Administrative Agent, executed in connection with the acquisition of all of the
capital stock of CT&T and All American by PAAI.
"Gathering LLC" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Gathering LLC Interest" has the meaning assigned to such term in the
Recitals to this Agreement.
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"Ingleside Terminal" means the crude oil terminal and storage facility
located in San Patricio County, Texas, including, without limitation, the real
property and other property interests described in that certain Conveyance,
Assignment and Bill of Sale (Ingleside) of even date herewith from Plains
Resources to Plains Marketing (a copy of the form of which is attached hereto as
Exhibit A) along with the Plains Midstream Subsidiaries' Assets described below
that are a part of or are used exclusively in connection with the crude oil
terminal and storage facility:
(i) storage tanks, stations, substations, terminal facilities and
related properties and assets, along with all crude oil inventory located
in such facilities;
(ii) all motor vehicles, tractors, trailers, tanks, railcars, other
vehicles, machinery and related equipment, whether owned or leased;
(iii) every contract, agreement, arrangement, grant, gift, trust or
other arrangement or understanding of any kind;
(iv) any and all rights, claims and causes of action under warranties,
insurance policies, contracts and related rights;
(v) communication equipment, computer equipment and software and
leasehold interests therein;
(vi) all know-how, every trade secret, every customer list and all
other confidential information of every kind;
(vii) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
(viii) every other proprietary right of any kind;
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(ix) all governmental licenses, permits, approvals, franchises,
registrations and authorizations of every kind;
(x) copies of all of the books, records, papers and instruments,
including without limitation, accounting and financial records;
(xi) any and all monies, rents, revenues, accounts receivable or other
proceeds receivable;
(xii) all deposits, prepayments and prepaid expenses;
(xiii) all unbilled receivables;
(xiv) all trade names, trademarks, service marks, logos, marks and
symbols of any kind, together with all goodwill associated therewith and
all other trade names, trademarks and service marks;
(xv) all rights, benefits, privileges and appurtenances pertaining to
any of the foregoing;
excluding, however, any of such assets that constitute Plains Excluded
Assets.
"Laws" means any and all laws, statutes, ordinances, rules or
regulations promulgated by a governmental authority, orders of a governmental
authority, judicial decisions, decisions of arbitrators or determinations of any
governmental authority or court.
"Operating Partnership Agreement" has the meaning assigned to such
term in the Recitals to this Agreement.
"Organizational Limited Partner" has the meaning assigned to such term
in the Recitals to this Agreement.
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<PAGE>
"PAAI" has the meaning assigned to such term in the opening paragraph
of this Agreement.
"PAAI Assets" means the CT&T Assets and the Gathering LLC Interest of
PAAI.
"PAAI Assumed Liabilities" means all of PAAI's liabilities arising
from or relating to the PAAI Assets or the Business, as of the Effective Time,
of every kind, character and description, whether known or unknown, accrued or
contingent, and whether or not reflected on the books and records of PAAI as of
the Effective Time, excluding, however, any of such liabilities that constitute
PAAI Excluded Liabilities.
"PAAI Excluded Liabilities" means (i) all of the liabilities and
obligations of CT&T and CGC for the Existing Indebtedness, (ii) all federal,
state and local income tax liabilities attributable to operation of the PAAI
Assets prior to the Effective Time, including any such income tax liabilities
that may result from the consummation of the transactions contemplated by this
Agreement and (iii) all of the liabilities that arise pursuant to the
indemnification obligation of PAAI under the Omnibus Agreement dated of even
date with this Agreement among Plains Resources, PAAI, the Partnership, Plains
Marketing and All American L.P.
"PAAI LLC" has the meaning assigned to such term in the Recitals to
this Agreement.
"PAAI OLP Interest" has the meaning assigned to such term in Section
2.1.
"Partnership" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Partnership Agreement" has the meaning assigned to such term in the
Recitals to this Agreement.
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"Plains Assets" means (a) the Cushing Terminal and the Ingleside
Terminal and (b) the Plains Midstream Subsidiaries' Assets described below, to
the extent the following comprise a part of or are used exclusively in
connection with the operation of the Business, and without duplication of the
Cushing Terminal and the Ingleside Terminal:
(i) the real property and other property interests described in that
certain Conveyance, Assignment and Bill of Sale (Other Assets) of even date
herewith from Plains Resources to Plains Marketing;
(ii) storage tanks, stations, substations, terminal facilities and
related properties and assets, along with all crude oil inventory located
in such facilities;
(iii) all motor vehicles, tractors, trailers, tanks, railcars, other
vehicles, machinery and related equipment, whether owned or leased;
(iv) every contract, agreement, arrangement, grant, gift, trust or
other arrangement or understanding of any kind;
(v) any and all rights, claims and causes of action under warranties,
insurance policies, contracts or related rights;
(vi) communication equipment, computer equipment and software and
leasehold interests therein;
(vii) all know-how, every trade secret, every customer list and all
other confidential information of every kind;
(viii) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
(ix) every other proprietary right of any kind;
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(x) all governmental licenses, permits, approvals, franchises,
registrations and authorizations of every kind;
(xi) copies of all of the books, records, papers and instruments,
including without limitation, accounting and financial records;
(xii) any and all monies, rents, revenues, accounts receivable or
other proceeds receivable;
(xiii) all deposits, prepayments and prepaid expenses;
(xiv) all unbilled receivables;
(xv) all trade names, trademarks, service marks, logos, marks and
symbols of any kind, together with all goodwill associated therewith and
all other trade names, trademarks and service marks;
(xvi) all rights, benefits, privileges and appurtenances pertaining to
any of the foregoing;
excluding, however, any of such assets that constitute Plains Excluded
Assets.
"Plains Assumed Liabilities" means all of Plains Resources'
liabilities arising from or relating to the Plains Assets or the Business, as of
the Effective Time, of every kind, character and description, whether known or
unknown, accrued or contingent, and whether or not reflected on the books and
records of Plains Resources as of the Effective Time, specifically including the
indebtedness, obligations and liabilities under that certain Credit Agreement
dated July 30, 1998 among Plains Transportation, BankBoston, N.A., as
Administrative Agent and certain other Agents and Lenders party thereto
providing for loans and letters of credit up to the amount of $175 million,
excluding, however, any of such liabilities that constitute Plains Excluded
Liabilities.
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"Plains Excluded Assets" means the Employment Agreement between Plains
Resources and Harry Pefanis.
"Plains Excluded Liabilities" means (i) all of the liabilities that
arise pursuant to the indemnification obligations of Plains Resources under the
Omnibus Agreement dated of even date with this Agreement among Plains Resources,
PAAI, the Partnership, Plains Marketing and All American L.P., (ii) the
Subsidiary Debt and (iii) all federal, state and local income tax liabilities
attributable to operation of the Plains Assets prior to the Effective Time,
including any such income tax liabilities that may result from the consummation
of the transactions contemplated by this Agreement.
"Plains Grantors" means Plains Resources and PAAI.
"Plains Marketing" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Plains Midstream Subsidiaries" means, collectively, Plains
Transportation, Plains Terminal, PLX Crude and PLX Ingleside.
"Plains Midstream Subsidiaries' Assets" means, collectively, all of
the assets, properties, titles, interests, benefits and rights owned by each of
the Plains Midstream Subsidiaries at the time of its merger into Plains
Resources, which, as a result of such merger, became the assets, properties,
titles, interests, benefits and rights of Plains Resources.
"Plains Resources" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Plains Terminal" has the meaning assigned to such term in the
Recitals to this Agreement.
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"Plains Transportation" has the meaning assigned to such term in the
Recitals to this Agreement.
"PLX Crude" has the meaning assigned to such term in the Recitals to
this Agreement.
"PLX Ingleside" has the meaning assigned to such term in the Recitals
to this Agreement.
"Restriction" has the meaning assigned to such term in Section 9.2.
"Restriction-Asset" has the meaning assigned to such term in Section
9.2.
"Specific Conveyances" has the meaning assigned to such term in
Section 2.9.
"Subordinated Units" means subordinated limited partner interests in
the Partnership.
"Subsidiary Debt" shall mean (i) all indebtedness of the Plains
Midstream Subsidiaries owed to Plains Resources that was extinguished in the
merger of the Plains Midstream Subsidiaries into Plains Resources and (ii) all
indebtedness owed by the Plains Midstream Subsidiaries to affiliates of Plains
Resources, other than the Plains Midstream Subsidiaries.
1.2 Concurrent Transactions.
(a) All American L.P. hereby assumes and agrees to pay $175 million of
Existing Indebtedness.
(b) All American L.P. hereby distributes 100% of its ownership
interest in Gathering LLC to PAAI.
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ARTICLE II
CONTRIBUTIONS AND SALE OF ASSETS
2.1 Contribution of Assets by PAAI to Plains Marketing. PAAI hereby
grants, contributes, transfers and conveys to Plains Marketing, its successors
and assigns, for its and their own use forever, all right, title and interest in
and to the PAAI Assets in exchange for (i) the continuation of a 1.0101% general
partner interest and a limited partner interest (such limited partner interest,
the "PAAI OLP Interest") in Plains Marketing and (ii) other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
Plains Marketing hereby accepts the PAAI Assets, as a contribution to the
capital of Plains Marketing.
TO HAVE AND TO HOLD the PAAI Assets unto Plains Marketing, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in any wise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.
2.2 Contribution by PAAI to the Partnership. PAAI hereby grants,
contributes, transfers and conveys to the Partnership, its successors and
assigns, for its and their own use forever, all right, title and interest of
PAAI in and to the PAAI OLP Interest and the All American LP Interest in
exchange for (i) a 1% general partner interest in the Partnership, (ii)
9,859,581 Subordinated Units and 6,974,239 Common Units and (iii) other good and
valuable consideration, the sufficiency of which is hereby acknowledged, and the
Partnership hereby accepts the PAAI OLP Interest and the All American LP
Interest, as a contribution to the capital of the Partnership.
TO HAVE AND TO HOLD the PAAI OLP Interest and the All American L.P.
Interest unto the Partnership, its successors and assigns, together with all and
singular the rights and
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appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.
2.3 Contribution by PAAI LLC to the Partnership. PAAILLC hereby grants,
contributes, transfers and conveys to the Partnership, its successors and
assigns, for its and their own use forever, all right, title and interest of
PAAILLC in and to its 1% limited partner interest (the "Additional All American
L.P. Interest") in All American L.P. in exchange for 170,038 Subordinated Units
and other good and valuable consideration, the sufficiency of which is hereby
acknowledged, and the Partnership hereby accepts the 1% limited partner interest
in All American L.P., as a contribution to the capital of the Partnership.
TO HAVE AND TO HOLD the Additional All American L.P. Interest unto the
Partnership, its successors and assigns, together with all and singular the
rights and appurtenances thereto in anywise belonging, subject, however, to the
terms and conditions stated in this Agreement, forever.
2.4 Public Cash Contribution. The parties to this Agreement acknowledge a
cash contribution of $244,689,500 from the public in exchange for Common Units.
2.5 Partnership Cash Distribution and Contribution. PAAI acknowledges
that the Partnership has distributed cash in the amount of $147,989,500 to PAAI
as a reimbursement for certain capital expenditures and Plains Marketing
acknowledges that the Partnership has contributed (i) cash in the amount of
$96,700,000 to Plains Marketing and (ii) all of the syndication costs incurred
by the Partnership in connection with the public offering of the Common Units.
2.6 Sale of Assets by Plains Resources. Plains Resources hereby sells and
conveys to Plains Marketing, its successors and assigns, for its and their own
use forever, all right, title and
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interest in and to the Plains Assets in exchange for (i) the payment of $93.7
million in cash, (ii) the assumption of certain liabilities by Plains Marketing
as provided in Section 4.1 and (iii) other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged.
TO HAVE AND TO HOLD the Plains Assets unto Plains Marketing, its
successors and assigns, together with all and singular, the rights and
appurtenances thereto in any wise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.
2.7 PAAI Use of Proceeds. The parties to this Agreement acknowledge that
PAAI has used a portion of the cash received from the Partnership in Section 2.5
above to discharge approximately $110 million of the Existing Indebtedness plus
all accrued and unpaid interest, prepayment premiums, fees and expenses in
connection with the Existing Indebtedness and has distributed the balance of
cash to Plains Resources.
2.8 Contribution by the Partnership to Plains Marketing. The Partnership
hereby grants, contributes, transfers and conveys to Plains Marketing, its
successors and assigns, for its and their own use forever, all right, title and
interest of the Partnership in and to the All American LP Interest and the
Additional All American L.P. Interest, as a contribution to the capital of
Plains Marketing, and Plains Marketing hereby accepts the All American LP
Interest and the Additional All American L.P. Interest, as a contribution to the
capital of Plains Marketing.
TO HAVE AND TO HOLD the All American LP Interest and the Additional
All American L.P. Interest, unto Plains Marketing, its successors and assigns,
together with all and singular the rights and appurtenances thereto in anywise
belonging, subject, however, to the terms and conditions stated in this
Agreement, forever.
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2.9 Specific Conveyances. To further evidence the asset conveyances
recited in this Article II and more fully and effectively convey record title
with respect to the real property included in the Assets, Plains Resources has
executed and delivered to Plains Marketing certain Conveyance, Assignment and
Bill of Sale instruments (the "Specific Conveyances"). The Specific Conveyances
shall evidence and perfect the sale and contribution made by this Agreement and
shall not constitute a second conveyance of the Plains Assets or interests
therein and shall be subject to the terms of this Agreement. The Specific
Conveyances are not intended to modify, and shall not modify, any of the terms,
covenants and conditions herein set forth and are not intended to create, and
shall not create, any additional covenants or warranties of or by Plains
Resources.
ARTICLE III
ADDITIONAL TRANSACTIONS
3.1 Merger of Gathering LLC and Plains Marketing. The parties to this
Agreement acknowledge that, concurrent with the transactions referred to in
Article II of this Agreement, Gathering LLC has been merged with and into Plains
Marketing.
3.2 PAAI Contribution to PAAI LLC. PAAI hereby grants, contributes,
transfers and conveys to PAAI LLC, its successors and assigns, for its and their
own use forever, all right, title and interest of PAAI in and to all of the
Subordinated Units and Common Units held by PAAI as a contribution to the
capital of PAAI LLC, and PAAI LLC hereby accepts all of such Subordinated Units
and Common Units, as a contribution to the capital of PAAI LLC.
TO HAVE AND TO HOLD such Subordinated Units and Common Units unto PAAI
LLC, its successors and assigns, together with all and singular the rights and
appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.
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3.3 All American L.P. Refinancing. The parties to this Agreement
acknowledge that All American L.P. shall refinance the portion of Existing
Indebtedness assumed in Section 1.2(a) above.
ARTICLE IV
ASSUMPTION OF CERTAIN LIABILITIES
4.1. Assumption of Certain Plains Liabilities by Plains Marketing. In
connection with the sale and transfer of the Plains Assets to Plains Marketing
by Plains Resources, Plains Marketing hereby assumes and agrees to duly and
timely pay, perform and discharge the Plains Assumed Liabilities, to the full
extent that Plains Resources has been heretofore or would have been in the
future, were it not for the execution and delivery of this Agreement, obligated
to pay, perform and discharge the Plains Assumed Liabilities; provided, however,
that said assumption and agreement to duly and timely pay, perform and discharge
the Plains Assumed Liabilities shall not (i) increase the obligation of Plains
Marketing with respect to the Plains Assumed Liabilities beyond that of Plains
Resources, (ii) waive any valid defense that was available to Plains Resources
with respect to the Plains Assumed Liabilities or (iii) enlarge any rights or
remedies of any third party under any of the Plains Assumed Liabilities.
4.2. Assumption of Certain PAAI Liabilities by Plains Marketing. In
connection with the contribution and transfer of the PAAI Assets to Plains
Marketing by PAAI, Plains Marketing hereby assumes and agrees to duly and timely
pay, perform and discharge the PAAI Assumed Liabilities, to the full extent that
PAAI has been heretofore or would have been in the future, were it not for the
execution and delivery of this Agreement, obligated to pay, perform and
discharge the PAAI Assumed Liabilities; provided, however, that said assumption
and agreement to duly and timely pay, perform and discharge the PAAI Assumed
Liabilities shall not (i) increase the obligation of Plains
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Marketing with respect to the PAAI Assumed Liabilities beyond that of PAAI, (ii)
waive any valid defense that was available to PAAI with respect to the PAAI
Assumed Liabilities or (iii) enlarge any rights or remedies of any third party
under any of the PAAI Assumed Liabilities.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification With Respect to Plains Excluded Liabilities. Plains
Resources shall indemnify, defend and hold harmless the Partnership, Plains
Marketing, their respective officers and directors and their respective
successors and assigns from and against any and all claims, demands, costs,
liabilities (including, without limitation, liabilities arising by way of active
or passive negligence) and expenses (including court costs and reasonable
attorneys' fees) of every kind, character and description, whether known or
unknown, accrued or contingent, and whether or not reflected on the books and
records of Plains Resources as of the Effective Time, arising from or relating
to (i) the Plains Excluded Liabilities or (ii) any failure of Plains Resources
to comply with any applicable bulk sales law of any jurisdiction in connection
with the transfer of the Plains Assets to Plains Marketing.
5.2. Indemnification With Respect to PAAI Excluded Liabilities. PAAI shall
indemnify, defend and hold harmless the Partnership, Plains Marketing, their
respective officers and directors and their respective successors and assigns
from and against any and all claims, demands, costs, liabilities (including,
without limitation, liabilities arising by way of active or passive negligence)
and expenses (including court costs and reasonable attorneys' fees) of every
kind, character and description, whether known or unknown, accrued or
contingent, and whether or not reflected on the books and records of PAAI as of
the Effective Time, arising from or relating to (i) the PAAI
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Excluded Liabilities or (ii) any failure of PAAI to comply with any applicable
bulk sales law of any jurisdiction in connection with the transfer of the PAAI
Assets to Plains Marketing.
5.3. Indemnification With Respect to Plains Assumed Liabilities.
Plains Marketing shall indemnify, defend and hold harmless Plains Resources, its
officers and directors, its successors and assigns from and against any and all
claims, demands, costs, liabilities (including, without limitation, liabilities
arising by way of active or passive negligence) and expenses (including court
costs and reasonable attorneys' fees) of every kind, character and description,
whether known or unknown, accrued or contingent, and whether or not reflected on
the books and records of Plains Resources as of the Effective Time, arising from
or relating to the Plains Assumed Liabilities.
5.4. Indemnification With Respect to PAAI Assumed Liabilities. Plains
Marketing shall indemnify, defend and hold harmless PAAI, its officers and
directors, its successors and assigns from and against any and all claims,
demands, costs, liabilities (including, without limitation, liabilities arising
by way of active or passive negligence) and expenses (including court costs and
reasonable attorneys' fees) of every kind, character and description, whether
known or unknown, accrued or contingent, and whether or not reflected on the
books and records of PAAI as of the Effective Time, arising from or relating to
the PAAI Assumed Liabilities.
ARTICLE VI
TITLE MATTERS
6.1. Encumbrances. The contribution and sale of the Assets made under
this Agreement are made expressly subject to (a) all recorded and unrecorded
liens, encumbrances, agreements, defects, restrictions, adverse claims and all
laws, rules, regulations, ordinances, judgments and orders of governmental
authorities or tribunals having or asserting jurisdiction over the Assets or the
Business
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and operations conducted thereon or therewith, in each case to the extent the
same are valid and enforceable and affect the Assets, including, without
limitation, all matters that a current on the ground survey or visual inspection
of the Assets would reflect, (b) the Plains Assumed Liabilities, (c) the PAAI
Assumed Liabilities and (d) all matters contained in the Specific Conveyances.
6.2. Disclaimer of Warranties; Subrogation; Waiver of Bulk Sales Laws.
(a) THE PLAINS GRANTORS ARE CONVEYING THE ASSETS "AS IS" WITHOUT
REPRESENTATION OR WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY (ALL OF
WHICH THE PLAINS GRANTORS HEREBY DISCLAIM), AS TO (i) TITLE, (ii) FITNESS
FOR ANY PARTICULAR PURPOSE OR MERCHANTABILITY OR DESIGN OR QUALITY, OR
(iii) ANY OTHER MATTER WHATSOEVER. THE PROVISIONS OF THIS SECTION 6.2 HAVE
BEEN NEGOTIATED BY PLAINS MARKETING AND THE PLAINS GRANTORS AFTER DUE
CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF
ANY REPRESENTATIONS OR WARRANTIES OF THE PLAINS GRANTORS, WHETHER EXPRESS,
IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS THAT MAY ARISE PURSUANT TO
ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS EXPRESSLY SET
FORTH HEREIN.
(b) The contribution of the Assets made under this Agreement is made
with full rights of substitution and subrogation of Plains Marketing, and
all persons claiming by, through and under Plains Marketing, to the extent
assignable, in and to all covenants and warranties by the predecessors-in-
title of the Plains Grantors, and with full subrogation of all
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rights accruing under applicable statutes of limitation and all rights of
action of warranty against all former owners of the Assets.
(c) The Plains Grantors and Plains Marketing agree that the
disclaimers contained in this Section 6.2 are "conspicuous" disclaimers.
Any covenants implied by statute or law by the use of the words "grant,"
"convey," "bargain," "sell," "assign," "transfer," "deliver," or "set over"
or any of them or any other words used in this Agreement are hereby
expressly disclaimed, waived and negated.
(d) Each of the parties hereto hereby waives compliance with any
applicable bulk sales law or any similar law in any applicable jurisdiction
in respect of the transactions contemplated by this Agreement.
ARTICLE VII
FURTHER ASSURANCES
7.1. Further Assurances. From time to time after the date hereof, and
without any further consideration, Plains Resources or PAAI, as the case may be,
shall execute, acknowledge and deliver all such additional deeds, assignments,
bills of sale, conveyances, instruments, notices, releases, acquittances and
other documents, and will do all such other acts and things, all in accordance
with applicable law, as may be necessary or appropriate (i) more fully to assure
Plains Marketing, its successors and assigns, all of the properties, rights,
titles, interests, estates, remedies, powers and privileges by this Agreement
granted to Plains Marketing or intended so to be and (ii) more fully and
effectively to vest in the Partnership and its successors and assigns beneficial
and record title to the interests hereby contributed and assigned to the
Partnership or intended so to be and to more fully and effectively carry out the
purposes and intent of this Agreement.
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7.2. Partnership and Operating Partnership Assurances. From time to time
after the date hereof, and without any further consideration, the Partnership
and Plains Marketing shall execute, acknowledge and deliver all such additional
instruments, notices and other documents, and will do all such other acts and
things, all in accordance with applicable law, as may be necessary or
appropriate to more fully and effectively carry out the purposes and intent of
this Agreement.
7.3. Post-Closing Adjustment. On or before December 31, 1998, PAAI shall
prepare balance sheets as of the Effective Time for All American L.P. and Plains
Marketing and determine the aggregate excess net working capital of All American
L.P. and Plains Marketing. In the event such aggregate excess net working
capital of All American L.P. and Plains Marketing does not equal $8 million,
PAAI shall either (i) if the aggregate excess net working capital is less than
$8 million, contribute cash sufficient to cause such aggregate excess net
working capital to equal $8 million, or (ii) if the aggregate excess net working
capital is more than $8 million, be distributed cash in an amount equal to the
excess over $8 million.
ARTICLE VIII
POWER OF ATTORNEY
The Plains Grantors hereby constitute and appoint Plains Marketing, its
successors and assigns, their true and lawful attorney-in-fact with full power
of substitution for it and in its name, place and stead or otherwise on behalf
of the Plains Grantors, their successors and assigns, and for the benefit of
Plains Marketing, its successors and assigns, to demand and receive from time to
time the Assets and to execute in the name of the Plains Grantors and their
successors and assigns instruments of conveyance, instruments of further
assurance and to give receipts and releases in respect of the same, and from
time to time to institute and prosecute in the name of Plains Marketing
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or the Plains Grantors for the benefit of Plains Marketing, as may be
appropriate, any and all proceedings at law, in equity or otherwise which Plains
Marketing, its successors and assigns may deem proper in order to collect,
assert or enforce any claims, rights or titles of any kind in and to the Assets,
and to defend and compromise any and all actions, suits or proceedings in
respect of any of the Assets and to do any and all such acts and things in
furtherance of this Agreement as Plains Marketing, its successors or assigns
shall deem advisable. The Plains Grantors hereby declare that the appointment
hereby made and the powers hereby granted are coupled with an interest and are
and shall be irrevocable and perpetual and shall not be terminated by any act of
the Plains Grantors, their successors or assigns or by operation of law.
ARTICLE IX
MISCELLANEOUS
9.1. Order of Completion of Transactions; Effective Time.
(a) The transactions provided for in Articles I, II, III and IV of
this Agreement shall be completed on the date of this Agreement in the
following order:
First, the transactions provided for in Article I shall be completed;
Second, the transactions provided for in Article II shall be
completed;
Third, the transactions provided for in Article III shall be
completed; and
Fourth, the transactions provided for in Article IV shall be
completed.
(b) The sale of the Assets to Plains Marketing shall be effective for
all purposes as of the Effective Time.
9.2. Consents; Restriction on Assignment. If there are prohibitions
against or conditions to the conveyance of one or more portions of the Assets
without the prior written consent of third
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parties, including, without limitation, governmental agencies (other than
consents of a ministerial nature which are normally granted in the ordinary
course of business), which if not satisfied would result in a breach of such
prohibitions or conditions or would give an outside party the right to terminate
Plains Marketing's rights with respect to such portion of the Assets (herein
called a "Restriction"), then any provision contained in this Agreement to the
contrary notwithstanding, the transfer of title to or interest in each such
portion of the Assets (herein called the "Restriction-Asset") pursuant to this
Agreement shall not become effective unless and until such Restriction is
satisfied, waived or no longer applies. When and if such a Restriction is so
satisfied, waived or no longer applies, to the extent permitted by applicable
law and any applicable contractual provisions, the assignment of the
Restriction-Asset subject thereto shall become effective automatically as of the
Effective Time, without further action on the part of Plains Marketing or either
of the Plains Grantors. The Plains Grantors and Plains Marketing agree to use
their reasonable best efforts to obtain satisfaction of any Restriction on a
timely basis. The description of any portion of the Assets as a "Restriction-
Asset" shall not be construed as an admission that any Restriction exists with
respect to the transfer of such portion of the Assets. In the event that any
Restriction-Asset exists, the Plains Grantors agree to hold such Restriction-
Asset in trust for the exclusive benefit of Plains Marketing and to otherwise
use their reasonable best efforts to provide Plains Marketing with the benefits
thereof, and the Plains Grantors will enter into other agreements, or take such
other action as they deem necessary, in order to help ensure that Plains
Marketing has the assets and concomitant rights necessary to enable it to
operate the Assets contributed to Plains Marketing in all material respects as
they were operated prior to the Effective Time.
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9.3. Costs. Plains Marketing shall pay all sales, use and similar taxes
arising out of the contributions, conveyances and deliveries to be made
hereunder, and shall pay all documentary, filing, recording, transfer, deed, and
conveyance taxes and fees required in connection therewith. In addition, Plains
Marketing shall be responsible for all costs, liabilities and expenses
(including court costs and reasonable attorneys' fees) incurred in connection
with the satisfaction or waiver of any Restriction pursuant to Section 9.2.
9.4. Headings: References: Interpretation. All Article and Section
headings in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any of the provisions hereof.
The words "hereof," "herein" and "hereunder" and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole, including,
without limitation, all Schedules and Exhibits attached hereto, and not to any
particular provision of this Agreement. All references herein to Articles,
Sections, Schedules and Exhibits shall, unless the context requires a different
construction, be deemed to be references to the Articles and Sections of this
Agreement and the Schedules and Exhibits attached hereto, and all such Schedules
and Exhibits attached hereto are hereby incorporated herein and made a part
hereof for all purposes. All personal pronouns used in this Agreement, whether
used in the masculine, feminine or neuter gender, shall include all other
genders, and the singular shall include the plural and vice versa. The use
herein of the word "including" following any general statement, term or matter
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not non-limiting language (such as "without limitation,"
"but not limited to," or words of similar import) is used with reference
thereto,
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but rather shall be deemed to refer to all other items or matters that could
reasonably fall within the broadest possible scope of such general statement,
term or matter.
9.5. Successors and Assigns. The Agreement shall be binding upon and
inure to the benefit of the parties signatory hereto and their respective
successors and assigns.
9.6. No Third Party Rights. The provisions of this Agreement are
intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is intended to
be a third party beneficiary of any of the provisions of this Agreement.
9.7. Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
9.8. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas applicable to contracts made
and to be performed wholly within such state without giving effect to conflict
of law principles thereof, except to the extent that it is mandatory that the
law of some other jurisdiction, wherein the Assets are located, shall apply.
9.9. Severability. If any of the provisions of this Agreement are held
by any court of competent jurisdiction to contravene, or to be invalid under,
the laws of any political body having jurisdiction over the subject matter
hereof, such contravention or invalidity shall not invalidate the entire
Agreement. Instead, this Agreement shall be construed as if it did not contain
the particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provision added so as to give effect to
the intention of the parties as expressed in this Agreement at the time of
execution of this Agreement.
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9.10. Deed; Bill of Sale; Assignment. To the extent required by
applicable law, this Agreement shall also constitute a "deed," "bill of sale" or
"assignment" of the Assets.
9.11. Amendment or Modification. This Agreement may be amended or
modified from time to time only by the written agreement of all the parties
hereto.
9.12 Integration. This Agreement supersedes all previous understandings
or agreements between the parties, whether oral or written, with respect to its
subject matter. This document is an integrated agreement which contains the
entire understanding of the parties. No understanding, representation, promise
or agreement, whether oral or written, is intended to be or shall be included in
or form part of this Agreement unless it is contained in a written amendment
hereto executed by the parties hereto after the date of this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
PLAINS RESOURCES INC., a Delaware corporation
By: /s/ Phillip D. Kramer
---------------------
Phillip D. Kramer, Executive Vice President
and Chief Financial Officer
PLAINS MARKETING, L.P., a Delaware limited
partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Phillip D. Kramer
---------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
PLAINS ALL AMERICAN PIPELINE, L.P., a
Delaware limited partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Phillip D. Kramer
---------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
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ALL AMERICAN PIPELINE, L.P., a Texas limited
partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Phillip D. Kramer
---------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
PLAINS ALL AMERICAN INC., a Delaware corporation
By: /s/ Phillip D. Kramer
---------------------
Phillip D. Kramer, Executive Vice President
and Chief Financial Officer
PAAI LLC, a Delaware limited liability company
By: Plains All American Inc., a Delaware
corporation, its sole member
By: /s/ Phillip D. Kramer
---------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
GATHERING LLC, a Delaware limited liability
company
By: Plains All American Inc., a Delaware
corporation, its sole member
By: /s/ Phillip D. Kramer
---------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
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EXHIBIT 10.4
PLAINS ALL AMERICAN INC.
1998 LONG-TERM INCENTIVE PLAN
SECTION 1. Purpose of the Plan.
The Plains All American Inc. 1998 Long-Term Incentive Plan (the "Plan") is
intended to promote the interests of Plains All American Pipeline, L.P., a
Delaware limited partnership (the "Partnership"), by providing to employees and
directors of Plains All American Inc. (the "Company") and its Affiliates who
perform services for the Partnership incentive compensation awards for superior
performance that are based on Units. The Plan is also contemplated to enhance
the ability of the Company and its Affiliates to attract and retain the services
of individuals who are essential for the growth and profitability of the
Partnership and to encourage them to devote their best efforts to the business
of the Partnership, thereby advancing the interests of the Partnership and its
partners.
SECTION 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Award" means an Option or Restricted Unit granted under the Plan.
"Board" means the Board of Directors of the Company.
"Committee" means the Compensation Committee of the Board or such other
committee of the Board appointed to administer the Plan.
"DER" means a contingent right, granted in tandem with a specific
Restricted Unit, to receive an amount in cash equal to the cash distributions
made by the Partnership with respect to a Unit during the period such Restricted
Unit is outstanding.
"Director" means a "non-employee director" of the Company, as defined in
Rule 16b-3.
"Employee" means any employee of the Company or an Affiliate, as determined
by the Committee.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing sales price of a Unit on the
applicable date (or if there is no trading in the Units on such date, on the
next preceding date on which there was trading) as reported in The Wall Street
Journal (or other reporting service approved by the Committee). In the event
Units are not publicly traded at the time a determination of fair market value
is required to be made hereunder, the determination of fair market value shall
be made in good faith by the Committee.
"Option" means an option to purchase Units granted under the Plan.
"Participant" means any Employee or Director granted an Award under the
Plan.
"Partnership Agreement" means the Amended and Restated Agreement of Limited
Partnership of Plains All American Pipeline, L.P.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Restricted Period" means the period established by the Committee with
respect to an Award during which the Award either remains subject to forfeiture
or is not exercisable by the Participant. Notwithstanding anything in the Plan
to the contrary, the Restricted Period with respect to any Award granted to an
Employee may not terminate prior to the end of the Subordination Period (as
defined in the Partnership Agreement).
"Restricted Unit" means a phantom unit granted under the Plan which upon or
following vesting entitles the Participant to receive a Unit.
"Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the Exchange
Act, or any successor rule or regulation thereto as in effect from time to time.
"SEC" means the Securities and Exchange Commission, or any successor
thereto.
"Unit" means a Common Unit of the Partnership.
SECTION 3. Administration.
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum, and the acts of the members of the
Committee who are present at any meeting thereof at which a quorum is present,
or acts unanimously approved by the members of the Committee in writing, shall
be the acts of the Committee. Subject to the following, the Committee, in its
sole discretion, may delegate any or all of its powers and duties under the
Plan, including the power to grant Awards under the Plan, to the Chief Executive
Officer of the Company, subject to
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such limitations on such delegated powers and duties as the Committee may
impose. Upon any such delegation all references in the Plan to the "Committee",
other than in Section 7, shall be deemed to include the Chief Executive Officer;
provided, however, that such delegation shall not limit the Chief Executive
Officer's right to receive Awards under the Plan. Notwithstanding the foregoing,
the Chief Executive Officer may not grant Awards to, or take any action with
respect to any Award previously granted to, a person who is an officer subject
to Rule 16b-3 or a member of the Board. Subject to the terms of the Plan and
applicable law, and in addition to other express powers and authorizations
conferred on the Committee by the Plan, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to a Participant; (iii) determine the number of Units to be
covered by Awards; (iv) determine the terms and conditions of any Award; (v)
determine whether, to what extent, and under what circumstances Awards may be
settled, exercised, canceled, or forfeited; (vi) interpret and administer the
Plan and any instrument or agreement relating to an Award made under the Plan;
(vii) establish, amend, suspend, or waive such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of the
Plan; and (viii) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, the Partnership, any Affiliate, any Participant,
and any beneficiary of any Award.
SECTION 4. Units Available for Awards.
(a) Units Available. Subject to adjustment as provided in Section 4(c),
the number of Units with respect to which Awards may be granted under the Plan
is 975,000. If any Award is forfeited or otherwise terminates or is canceled
without the delivery of Units, then the Units covered by such Award, to the
extent of such forfeiture, termination or cancellation, shall again be Units
with respect to which Awards may be granted.
(b) Sources of Units Deliverable Under Awards. Any Units delivered
pursuant to an Award shall consist, in whole or in part, of Units acquired in
the open market, from any Affiliate, the Partnership or any other Person, or any
combination of the foregoing, as determined by the Committee in its discretion.
(c) Adjustments. In the event that the Committee determines that any
distribution (whether in the form of cash, Units, other securities, or other
property), recapitalization, split, reverse split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of Units
or other securities of the Partnership, issuance of warrants or other rights to
purchase Units or other securities of the Partnership, or other similar
transaction or event affects the Units such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and type of Units (or other securities or property) with
respect to which Awards may be granted, (ii) the
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number and type of Units (or other securities or property) subject to
outstanding Awards, and (iii) the grant or exercise price with respect to any
Award or, if deemed appropriate, make provision for a cash payment to the holder
of an outstanding Award; provided, that the number of Units subject to any Award
shall always be a whole number.
SECTION 5. Eligibility.
Any Employee and Director shall be eligible to be designated a Participant.
SECTION 6. Awards.
(a) Options. The Committee shall have the authority to determine the
Employees and Directors to whom Options shall be granted, the number of Units to
be covered by each Option, the purchase price therefor and the conditions and
limitations applicable to the exercise of the Option, including the following
terms and conditions and such additional terms and conditions, as the Committee
shall determine, that are not inconsistent with the provisions of the Plan.
(i) Exercise Price. The purchase price per Unit purchasable under an
Option shall be determined by the Committee at the time the Option is
granted but shall not be less than its Fair Market Value as of the date of
grant.
(ii) Time and Method of Exercise. The Committee shall determine the
Restricted Period, i.e., the time or times at which an Option may be
exercised in whole or in part, and the method or methods by which payment
of the exercise price with respect thereto may be made or deemed to have
been made which may include, without limitation, cash, check acceptable to
the Company, a "cashless-broker" exercise (through procedures approved by
the Company), other securities or other property, a note from the
Participant (in a form acceptable to the Company), or any combination
thereof, having a Fair Market Value on the exercise date equal to the
relevant exercise price.
(iii) Term. Subject to earlier termination as provided in the grant
agreement or the Plan, each Option shall expire on the 10th anniversary of
its date of grant.
(iv) Forfeiture. Except as otherwise provided in the terms of the
Option grant, upon termination of a Participant's employment with the
Company and its Affiliates or membership on the Board, whichever is
applicable, for any reason during the applicable Restricted Period, all
Options shall be forfeited by the Participant. The Committee may, in its
discretion, waive in whole or in part such forfeiture with respect to a
Participant's Options.
(b) Restricted Units. The Committee shall have the authority to determine
the Employees and Directors to whom Restricted Units shall be granted, the
number of Restricted Units to be granted to each such Participant, the duration
of the Restricted Period, the conditions under which the Restricted Units may
become vested or forfeited, and such other terms and conditions as the
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Committee may establish with respect to such Awards, including whether DERs are
granted with respect to such Restricted Units.
(i) DERs. To the extent provided by the Committee, in its discretion,
a grant of Restricted Units may include a tandem DER grant, which may
provide that such DERs shall be paid directly to the Participant, be
credited to a bookkeeping account (with or without interest in the
discretion of the Committee) subject to the same restrictions as the tandem
Award, or be subject to such other provisions or restrictions as determined
by the Committee in its discretion. Notwithstanding the foregoing however,
DERs shall not be granted with respect to any Award prior to the end of the
Subordination Period.
(ii) Forfeiture. Except as otherwise provided in the terms of the
Restricted Units grant, upon termination of a Participant's employment with
the Company and its Affiliates or membership on the Board, whichever is
applicable, for any reason during the applicable Restricted Period, all
Restricted Units shall be forfeited by the Participant. The Committee may,
in its discretion, waive in whole or in part such forfeiture with respect
to a Participant's Restricted Units.
(iii) Lapse of Restrictions. Upon the vesting of each Restricted
Unit, the Participant shall be entitled to receive from the Company one
Unit, subject to the provisions of Section 8(b).
(c) General.
(i) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with, or in substitution for any other Award granted under the Plan
or any award granted under any other plan of the Company or any Affiliate,
including the Management Incentive Plan. Awards granted in addition to or
in tandem with other Awards or awards granted under any other plan of the
Company or any Affiliate may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.
(ii) Limits on Transfer of Awards.
(A) Except as provided in (C) below, each Option shall be
exercisable only by the Participant during the Participant's lifetime,
or by the person to whom the Participant's rights shall pass by will
or the laws of descent and distribution.
(B) Except as provided in (C) below, no Award and no right under
any such Award may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant otherwise than by
will or by the laws of descent and distribution and any such purported
assignment, alienation, pledge,
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attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate.
(C) To the extent specifically provided by the Committee with
respect to an Option grant, an Option may be transferred by a
Participant without consideration to immediate family members or
related family trusts, limited partnerships or similar entities or on
such terms and conditions as the Committee may from time to time
establish.
(iii) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee.
(iv) Unit Certificates. All certificates for Units or other
securities of the Partnership delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan
or the rules, regulations, and other requirements of the SEC, any stock
exchange upon which such Units or other securities are then listed, and any
applicable federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.
(v) Consideration for Grants. Awards may be granted for no cash
consideration or for such consideration as the Committee determines
including, without limitation, such minimal cash consideration as may be
required by applicable law.
(vi) Delivery of Units or other Securities and Payment by Participant
of Consideration. Notwithstanding anything in the Plan or any grant
agreement to the contrary, delivery of Units pursuant to the exercise or
vesting of an Award may be deferred for any period during which, in the
good faith determination of the Committee, the Company is not reasonably
able to obtain Units to deliver pursuant to such Award without violating
the rules or regulations of any applicable law or securities exchange. No
Units or other securities shall be delivered pursuant to any Award until
payment in full of any amount required to be paid pursuant to the Plan or
the applicable Award grant agreement (including, without limitation, any
exercise price or tax withholding) is received by the Company. Such
payment may be made by such method or methods and in such form or forms as
the Committee shall determine, including, without limitation, cash, other
Awards, withholding of Units, cashless-broker exercises with simultaneous
sale, or any combination thereof; provided that the combined value, as
determined by the Committee, of all cash and cash equivalents and the Fair
Market Value of any such Units or other property so tendered to the
Company, as of the date of such tender, is at least equal to the full
amount required to be paid to the Company pursuant to the Plan or the
applicable Award agreement.
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SECTION 7. Amendment and Termination.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award agreement or in the Plan:
(i) Amendments to the Plan. Except as required by applicable law or
the rules of the principal securities exchange on which the Units are
traded and subject to Section 7(ii) below, the Board or the Committee may
amend, alter, suspend, discontinue, or terminate the Plan in any manner,
including increasing the number of Units available for Awards under the
Plan, without the consent of any partner, Participant, other holder or
beneficiary of an Award, or other Person; provided, however, that no
amendment may be made without the approval of a Unit Majority (as defined
in the Partnership Agreement) that would either accelerate, with respect to
an Award granted to an Employee, vesting to a date prior to the end of the
Subordination Period or permit DERs to be granted prior to the end of the
Subordination Period.
(ii) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, or alter any Award theretofore granted,
provided no change, other than pursuant to Section 7(iii), in any Award
shall materially reduce the benefit to Participant without the consent of
such Participant.
(iii) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(c) of the Plan) affecting the
Partnership or the financial statements of the Partnership, or of changes
in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan.
SECTION 8. General Provisions.
(a) No Rights to Awards. No Person shall have any claim to be granted any
Award, and there is no obligation for uniformity of treatment of Participants.
The terms and conditions of Awards need not be the same with respect to each
recipient.
(b) Withholding. The Company or any Affiliate is authorized to withhold
from any Award, from any payment due or transfer made under any Award or from
any compensation or other amount owing to a Participant the amount (in cash,
Units, other securities, Units that would otherwise be issued pursuant to such
Award or other property) of any applicable taxes payable in respect of the grant
of an Award, its exercise, the lapse of restrictions thereon, or any payment or
transfer under an Award or under the Plan and to take such other action as may
be necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes.
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(c) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Affiliate or to remain on the Board, as applicable. Further, the Company or
an Affiliate may at any time dismiss a Participant from employment, free from
any liability or any claim under the Plan, unless otherwise expressly provided
in the Plan or in any Award agreement.
(d) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware and applicable federal law.
(e) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(f) Other Laws. The Committee may refuse to issue or transfer any Units or
other consideration under an Award if, in its sole discretion, it determines
that the issuance or transfer or such Units or such other consideration might
violate any applicable law or regulation, the rules of the principal securities
exchange on which the Units are then traded, or entitle the Partnership or an
Affiliate to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.
(g) No Trust or Fund Created. Neither the Plan nor the Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any general unsecured creditor of the Company or any
Affiliate.
(h) No Fractional Units. No fractional Units shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Units or whether such fractional Units or any rights thereto
shall be canceled, terminated, or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof.
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SECTION 9. Term of the Plan.
The Plan shall be effective on the date of its approval by the Board and
shall continue until the date terminated by the Board or Units are no longer
available for grants of Awards under the Plan, whichever occurs first. However,
unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted prior to such termination, and the authority of the
Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under such Award,
shall extend beyond such termination date.
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EXHIBIT 10.5
PLAINS ALL AMERICAN INC.
MANAGEMENT INCENTIVE PLAN
SECTION 1. Objectives. The objectives of the Plains All American Inc.
Management Incentive Plan (the "Plan") are:
-- To communicate and focus management's attention on achieving the
business goals of Plains All American Pipeline, L.P. (the
"Partnership"),
-- To attract and retain highly qualified key employees upon whom
the success of the Partnership depends, and
-- To reward superior performance.
The Plan is intended to encourage management to achieve and surpass the business
objectives of the Partnership through establishing quarterly and/or annual
objectives, reviewing performance and awarding quarterly and/or annual bonuses
based on the achievement of such objectives.
SECTION 2. Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors (the "Committee") of Plains All
American Inc. (the "Company"). The Committee shall have such discretionary
authority to administer the Plan, to construe and interpret the Plan, to decide
all questions of eligibility, to determine the amount, manner and time of
payment of any payments hereunder and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
SECTION 3. Eligibility. Employees eligible under the Plan are the
officers of the Company and its affiliates who may have a substantial impact on
the performance of the Partnership. Each calendar year ("Plan Year") (generally
at or near the beginning of such Plan Year, or, with respect to an individual
hired or promoted after the beginning of the Plan Year, on or within a
reasonable period following the date such individual becomes an eligible
employee) the Committee shall select the employees who shall be participants for
that year and shall assign levels of participation to each such employee. The
incentive award opportunity with respect to an eligible employee shall be
designed to reflect the overall impact of the employee on the performance of the
Partnership.
SECTION 4. Basis for Determining the Incentive Award. (a) The incentive
award for any fiscal quarter or Plan Year shall be based upon the achievement of
financial and operating results of the Partnership for such fiscal quarter or
year as may be established by the Committee, in its sole discretion.
(b) The factors, and their respective weights, if applicable, used in
determining the target award for an eligible employee shall be established by
the Committee. The target award with respect
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to a participant may be expressed as a percentage of the participant's base
salary at the beginning of the Plan Year (or when he first became a participant
for such Plan Year), a dollar amount or a percentage of a bonus pool or other
bonus formula. An eligible employee's basis of participation in the Plan as a
participant for a Plan Year will be communicated to him in writing as early as
possible following his selection for the Plan Year.
SECTION 5. Performance Objectives. (a) The Committee shall establish in
advance the performance objectives for the applicable performance period.
Performance objectives are intended to further the success of the Partnership
and shall be:
-- Specific and based, in whole or in part, as determined by the
Committee, upon measurable results and/or subjective factors as
determined, and weighted, by the Committee, and
-- Challenging, but attainable.
(b) The basis and amount of the incentive award to be provided for
different levels of performance achievement will be established by the
Committee. A performance schedule shall be established by the Committee to
indicate the award payable at varying levels of performance. Performance
objectives may be revised at any time during a Plan Year by the Committee in
light of unanticipated or extraordinary events.
(c) Specific objectives will be based primarily on the Partnership's
business plans and levels of performance.
(d) The Committee may assign objectives that are appropriate to the impact
of each participant's position and different objectives may be assigned to
different participants or groups of participants.
SECTION 6. Performance. At the end of each fiscal quarter and/or Plan
Year, the determination of the achievement of the objectives established for
such fiscal quarter and/or Plan Year and the payment of awards earned will occur
as soon as practicable after the compilation of the financial and operating
results for such period. All financial and operating results will be reviewed
and approved by the Committee prior to the payment of earned awards.
SECTION 7. Award Payments. (a) Subject to (d) below, payment of earned
awards will be made or begin as soon as reasonably practical after the close of
each performance period following the approval of the Committee. Payments will
be subject to all applicable tax withholding requirements.
(b) If a participant's employment terminates during a performance period,
whether voluntarily or involuntarily, the participant shall forfeit all rights
to any incentive award for that performance period, unless the Committee, in its
discretion, elects to pay all or a portion of the
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award. If a participant's employment terminates after the end of the performance
period and before payment of the award for any reason other than death or
retirement after 15 continuous years of employment with the Company and its
affiliates, unless waived by the Committee in its discretion, the participant
shall forfeit the incentive award payment, if any, he would otherwise have been
eligible to receive had he remained with the Company and its affiliates.
However, if such termination is due to the death of the participant, payment of
the incentive award, if any, the participant would have received had he lived
and remained with the Company and its affiliates shall be made to the
participant's beneficiary, in accordance with the designation filed by the
participant with the Company or, if no designation has been filed or such
designation is ineffective for any reason, the participant's estate.
(c) Earned awards shall be paid in cash, less applicable withholding
requirements.
(d) Annual awards (not fiscal quarter awards) to the extent earned for a
Plan Year shall be paid as follows, unless the Committee provides otherwise: (i)
40% of the award shall be payable by April 1 following the end of the Plan Year
and (ii) 20% of the award shall be payable as soon as reasonably practical on or
following each April 1 next following the year of the 40% payment until the
earned award is paid in full; provided, however, if a participant's employment
with the Company and its affiliates terminates prior to any such payment, all
such remaining payment(s) shall be forfeited, unless waived by the Committee, in
its discretion.
SECTION 8. Terminations or Amendment. The Plan may be terminated or
amended at any time by the Company.
SECTION 9. Effective Date. This Plan is effective as of November 23,
1998.
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), made as of the 23rd day of November,
1998 (the "Effective Date"), between Plains Resources Inc., a Delaware
corporation (the "Company"), and Harry N. Pefanis ("Employee").
W I T N E S S E T H:
- - - - - - - - - -
1. Employment and Term of Employment. The Company hereby employs the
Employee, and the Employee hereby agrees to serve the Company, on the terms and
conditions set forth herein. Subject to the provisions of Sections 7 and 8, the
term of this Agreement shall be for an initial period of three years from the
Effective Date hereof. Not more than 90 days and not less than 60 days prior to
the first anniversary of the Effective Date hereof and again during the same
period prior to each subsequent anniversary of the Effective Date hereof (each a
"Contract Anniversary Date"), the Employee may provide written notice (an
"Extension Notice") to the President and Chief Executive Officer of the Company
stating that he wishes to extend the remaining term of this Agreement for one
year. Unless the Employee receives, prior to the Contract Anniversary Date
immediately following delivery of such Extension Notice, a written response from
the Chairman of the Board of Directors of the Company (the "Board") (or, if
applicable, the Chairman of the Compensation Committee) to the effect that the
Board has voted not to extend the remaining term of this Agreement, then the
term of this Agreement shall be automatically extended for such one-year period.
Failure of the Employee to provide a timely Extension Notice as contemplated by
this Section 1 shall automatically cause the term of this Agreement to conclude
two years following the Contract Anniversary Date prior to which the Extension
Notice would have otherwise been provided. Notwithstanding the foregoing, on
the effective date of a "Change in Control of the Company", as defined in
Section 7(d), or on the Disposition Date, as defined in Section 7(e), the term
of this Agreement automatically shall be extended for three years from such
effective date or Disposition Date, as the case may be.
2. Position and Duties. The Employee shall serve as an Executive Vice
President of the Company and the President and Chief Operating Officer of Plains
All American Inc. ("PAAI"), shall report to the President and Chief Executive
Officer of the Company, and shall have supervision and control over and
responsibility for (i) the marketing operations of the Company and its
subsidiaries, and (ii) the overall operations of PAAI, with such other powers
and duties as may from time to time be prescribed by the President and Chief
Executive Officer of the Company, provided that such duties are consistent with
the Employee's positions. The Employee shall, during the term of this
Agreement, devote such of his entire working time, attention, energies and
business efforts to his duties and responsibilities hereunder as are reasonably
necessary to carry out the duties and responsibilities generally appertaining to
such offices, it being agreed that the Employee's principal
<PAGE>
duties and responsibilities shall be serving as President and Chief Operating
Officer of PAAI and that the Company shall not require the Employee to engage in
activities that materially detract from the Employee's ability to satisfactorily
discharge his duties and responsibilities as President and Chief Operating
Officer of PAAI. The Employee shall not, during the term of this Agreement,
engage in any other business activity (regardless of whether such business
activity is pursued for gain, profit or other pecuniary advantage) without the
prior written approval of the President and Chief Executive Officer of the
Company (which approval shall not be unreasonably withheld). Nothing in this
Section 2 shall be deemed to restrict the Employee from investing his personal
assets as a passive investor in the publicly traded securities of other
companies.
3. Place of Performance. Subject to such business travel from time to
time as may be reasonably required in the discharge of his duties and
responsibilities under this Agreement, the Employee shall perform his
obligations hereunder at the Company's principal place of business in Houston,
Texas.
4. Compensation.
(a) Base Salary and Bonus. Subject to the provisions of Section 7 and
8, during the period of the Employee's employment hereunder, the Company shall
pay the Employee an aggregate base salary at an annual rate which shall be
determined from time to time by the Board or its Compensation Committee. The
Employee's initial base salary as of the date hereof, shall be $235,000 per
annum. Such initial base salary as the same may be increased from time to time
as provided herein shall be hereinafter referred to as the "Base Salary." The
Base Salary shall be paid in equal installments pursuant to the Company's
customary payroll policies in force at the time of payment (but in no event less
frequently than semi-monthly), less required payroll deductions. The Base
Salary shall be reviewed in January of each year and may be increased as of each
January 1st to reflect the Employee's performance and contribution, such
increases, if any, to be in such amounts as the Board or the Compensation
Committee shall determine is reasonable. During the term of this Agreement, the
Employee's Base Salary shall not be reduced below its then-current rate unless
the Board shall implement across-the-board salary reductions for all executive
officers of the Company, in which event the Employee's Base Salary shall not,
without his consent, be reduced to an amount which is less than the greater of
(i) $200,000 or (ii) 85% of the Base Salary in effect immediately prior to such
reduction. In addition to Base Salary, the Employee shall be entitled to
receive such incentive compensation payments as the Board or its Compensation
Committee may determine, including an annual bonus. Factors to be considered in
determining the amount of any such bonus will include the Employee's
contributions to the Company's upstream activities, the performance of Plains
All American Pipeline, L.P. and the correlation of the Employee's bonus to the
bonuses paid by PAAI to its other key employees pursuant to its annual incentive
programs.
(b) Expenses. During the term of his employment hereunder, the
Employee shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by him (in accordance with the policies and procedures
established by the Company) in performing services hereunder.
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(c) Fringe Benefits. The Employee shall be entitled to participate in
or receive benefits under any pension plan, profit-sharing plan, savings plan,
stock option plan, life insurance, health-and-accident plan or arrangement made
available by the Company to its executives and key management employees, subject
to and on a basis consistent with the terms, conditions, and overall
administration of such plans and arrangements. The Employee shall be entitled
to prompt payment or reimbursement by the Company for monthly dues and Company-
related charges at such social club or clubs as may be approved during the term
of this Agreement by the President and Chief Executive Officer of the Company or
his delegate. Except for proceeds from key-man life insurance purchased and
maintained by the Company, if applicable, for the purpose, among others, of
funding its obligations to the Employee or his estate under Section 8, nothing
paid to the Employee under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of compensation to the
Employee hereunder.
(d) Working Facilities. The Company shall furnish the Employee with a
private office, secretary and such other facilities and services suitable to his
position and adequate for the performance of his duties.
(e) Vacations. The Employee shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers, but not less than 15 business days in any
calendar year (prorated in any calendar year during which the Employee is
employed hereunder for less than the entire such year in accordance with the
number of days in such calendar year during which he is so employed). All such
vacation days shall accumulate from calendar year to calendar year during the
term of this contract (or any predecessor or successor contracts or
arrangements) in the event that the Employee shall be unable to utilize the full
allotment to which he may become entitled in any calendar year. The Employee
shall also be entitled to all other paid holidays given by the Company to its
senior executive officers.
5. Offices. In addition to his duties as set forth hereunder, the
Employee agrees to serve without additional compensation, if elected or
appointed thereto, in one or more offices or as a director of any of the
Company's subsidiaries, provided, however, that the Employee shall not be
required to serve as an officer or director of any such subsidiary if such
service would expose him to adverse financial consequences.
6. Confidential Information; Non-solicitation. During the period of his
employment hereunder and, except as provided below, for the two-year period
following the termination of employment, the Employee shall not, without the
written consent of the Board or a person authorized thereby, (i) disclose to any
person, other than an employee of the Company or PAAI or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by the Employee of his duties as an executive of the Company and
PAAI, any confidential information obtained by him while in the employ of the
Company or PAAI with respect to the Company's or PAAI's business, including but
not limited to technology, know-how, processes, maps, geological and geophysical
data, information regarding any of PAAI's or its affiliates' pipeline
terminalling and marketing customers, practices, or operations, and other
proprietary information, the disclosure of which he knows or should know will be
damaging to the Company or PAAI; provided however, that
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confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by the Employee),
any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Company, or any information which the Employee may be required to disclose by
any applicable law, order, or judicial or administrative proceeding, (ii)
associate in any capacity whatsoever, whether as a promoter, owner, officer,
director, employee, partner, lessee, lessor, lender, agent, consultant, broker,
commission salesman or otherwise, in any business engaged in the marketing
business conducted by the Company or its subsidiaries of a type competitive,
directly or indirectly, with the business of the Company or its subsidiaries,
other than passive ownership of up to 5% of the outstanding shares of a publicly
traded company, or (iii) directly or indirectly, for whatever reason, whether
for his own account or for the account of any other person, firm, corporation or
other organization solicit, take away, hire, employ or endeavor to employ any
person who is an employee of the Company or any of its subsidiaries.
Notwithstanding the foregoing, if the Employee is terminated by the Company
other than for Cause prior to January 1, 2001, the noncompetition restrictions
in clause (ii) above shall terminate on the first anniversary of the Date of
Termination. If any portion of this Section 6 shall be invalid or unenforceable,
such invalidity or unenforceability shall in no way be deemed or construed to
affect in any way the enforceability of any other portion of this Section 6. If
any court in which the Company seeks to have the provision of this Section 6
specifically enforced determines that the activities, time or geographic area
hereinabove specified are too broad, such court may determine a reasonable
activity, time or geographic area.
7. Termination.
(a) Death. The Employee's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have been absent from his duties
hereunder on a full time basis for twelve consecutive months, and, within 30
days after Notice of Termination is given, shall not have returned to the
performance of his duties hereunder on a full-time basis, the Company may
terminate the Employee's employment hereunder.
(c) Cause. The Company may terminate the Employee's employment
hereunder for Cause. For the purpose of this Agreement, the Company shall have
"Cause" to terminate the Employee's employment hereunder only upon (i) the
willful engaging by the Employee in gross misconduct, or (ii) the nonappealable
conviction of the Employee of a felony involving moral turpitude. For purposes
of this paragraph, no act, or failure to act, on the Employee's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his act or omission was in the best
interests of the Company or PAAI or otherwise likely to result in no material
injury thereto. Notwithstanding the foregoing, the Employee shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of the Board at a meeting duly called and held for the purpose
(after reasonable notice to the Employee and an opportunity for him, together
with his counsel, to be heard before the Board), finding that in the good
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faith opinion of the Board, the Employee was guilty of conduct set forth above
in clause (i) or (ii) and specifying the particulars thereof in detail.
(d) Termination by the Employee. The Employee may terminate his
employment hereunder (i) for Good Reason, provided that a Notice of Termination
shall have been given by the Employee to the Company within 90 days following
the occurrence of the event constituting such Good Reason, (ii) if his health
should become impaired to an extent that makes the continued performance of his
duties hereunder hazardous to his physical or mental health or his life, or
(iii) at any time by giving three months' written notice to the Company of his
intention to terminate. For purposes of this Agreement, "Good Reason" shall
mean the occurrence of any of the following circumstances: (A) any removal of
the Employee from, or any failure to re-elect the Employee to, the positions
indicated in Section 2 hereof, except in connection with termination of the
Employee's employment either for Cause or as provided in Section 7(e), or (B) a
reduction in the Employee's rate of Base Salary other than as permitted by
Section 4(a), a material reduction in the Employee's fringe benefits, or any
other material failure by the Company to comply with Section 4 hereof, or (C)
failure of the Company to obtain the express assumption of and the agreement to
perform this Agreement by any successor as contemplated in Section 9 hereof.
Under certain circumstances set forth in Section 8, if the Employee terminates
employment on or following a Change in Control of the Company, he may be
entitled to additional benefits. A "Change in Control of the Company" shall
conclusively be deemed to have occurred (i) on the date when any person,
including any partnership, limited partnership, syndicate or other group deemed
a "person" for purposes of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended, (A) becomes the beneficial owner, directly or indirectly,
of shares of the Company's capital stock having 25% or more of the total number
of votes that may be cast in the election of directors of the Company and (B)
seeks to elect or cause to be elected two or more members of the Board or
otherwise exerts or attempts to exert a controlling influence on the management
of the Company, or (ii) on the date the individuals who are Directors of the
Company on the date hereof constitute less than a majority of the Board unless
the election, or the nomination for election by the Company's stockholders, of
each new Director has been approved by a majority of the Directors still then in
office who are Directors of the Company on the date hereof; provided, however,
that a restructuring of the Company as a wholly-owned subsidiary of another
corporation in a transaction in which the owners of shares of capital stock of
the Company become the owners, in substantially identical proportions, of all or
substantially all of the shares of capital stock of such other corporation shall
not be deemed to be a "Change in Control of the Company" for purposes of the
foregoing clause (ii); and provided further that no "Change in Control of the
Company" shall be deemed to have occurred solely as a result of the issuance of
the authorized and unissued capital stock of the Company or of any parent of the
Company in connection with a financing or acquisition initiated by the Company
or such parent.
(e) Disposition of Marketing Operations. If a Marketing Operations
Disposition (hereinafter defined) is consummated involving the Company's
principal marketing subsidiary, currently Plains Marketing & Transportation Inc.
and, effective upon the initial public offering of Common Units of Plains All
American Pipeline, L.P. ("PAAP"), PAAI (the "Principal Marketing Subsidiary"),
and an entity or person other than an entity or person of which more than 50% of
the equity interests are owned, directly or indirectly, by the Company (the
"Acquirer"), and as a condition
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to the Marketing Operations Disposition, the Acquirer requires that the Employee
be employed exclusively by the Acquirer or an affiliate of the Acquirer, the
Employee's termination of employment with the Company on the date of
consummation of the Marketing Operations Disposition (the "Disposition Date")
shall not entitle the Employee to any further payments or benefits from the
Company pursuant to this Agreement, provided the Acquirer expressly assumes this
Agreement pursuant to Section 9 hereof on the Disposition Date "as if" it were a
successor to the Company and all obligations of the Company hereunder.
Notwithstanding anything in this Agreement to the contrary, a removal of the
Employee from, or failure to re-elect the Employee to, the positions indicated
in Section 2 hereof on or in connection with a Marketing Operations Disposition
and the assumption of this Agreement by the Acquirer shall not constitute a Good
Reason event provided the Employee's status, responsibilities and duties,
including reporting responsibilities, with the Acquirer and its affiliate, if
applicable, are substantially comparable to those positions indicated in Section
2. As used herein, "Marketing Operations Disposition" shall mean (i) the sale or
transfer of 50% or more of the capital stock of the Principal Marketing
Subsidiary, (ii) a merger or consolidation of the Principal Marketing
Subsidiary, (iii) the sale or transfer of all or substantially all of the assets
of the Principal Marketing Subsidiary or of PAAP, or (iv) the Principal
Marketing Subsidiary and any other 50% or more owned entity of the Company
ceasing to be the general partner of PAAP. If the Acquirer either does not
require the Employee to be employed exclusively by the Acquirer or an affiliate
of the Acquirer, or it fails to assume this Agreement on the Disposition Date as
provided above, a termination of the Employee's employment on or within one year
following the Disposition Date either by the Company, other than pursuant to
Sections 7(a), 7(b) or 7(c), or by the Employee for a Good Reason shall be
deemed a termination pursuant to this Section 7(e).
(f) Notice of Termination. Any termination by the Company pursuant
to subsection (b) or (c) above or by the Employee pursuant to subsection (d) or
(e) above shall be communicated by written Notice of Termination to the other
party hereto. For purposes of the Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
(g) Date of Termination. The "Date of Termination" shall mean (i) if
the Employee's employment is terminated by his death, the date of his death,
(ii) if the Employee's employment is terminated pursuant to subsection (b)
above, 30 days after Notice of Termination is given (provided that the Employee
shall not have returned to the performance of his duties on a full-time basis
during such 30-day period), (iii) if the Employee's employment is terminated
pursuant to subsection (c) or (d)(iii) above, the date specified in the Notice
of Termination, (iv) if the Employee's employment is terminated pursuant to
subsection (e) above, the Disposition Date, and (v) if the Employee's employment
is terminated for any other reason, the date on which a Notice of Termination is
given.
6
<PAGE>
8. Compensation Upon Termination or During Disability.
(a) If the Employee's employment shall be terminated by reason of his
death, the Company shall pay to such person as the Employee shall designate in a
notice filed with the Company, or, if no such person shall be designated, to his
estate as a lump sum death benefit, an amount equal to the highest annual rate
at which his Base Salary hereunder was paid prior to the date of death,
multiplied by the lesser of (i) two years or (ii) the number of days remaining
in the term of this Agreement as provided in Section 1 divided by 360 days per
year. So long as the Employee is employed hereunder, subject to availability at
a cost which does not reflect any abnormal health or other risks, the Company
may purchase and maintain insurance on the life of the Employee with death
benefits thereunder payable to the Employee's designated beneficiary or estate
which are at least equal to the death benefit provided for in the preceding
sentence. Such death benefit shall be exclusive of and in addition to any
payments the Employee's widow, beneficiaries or estate may be entitled to
receive pursuant to any pension or employee benefit plan maintained by the
Company for its executive officers generally.
(b) During any period that the Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, the
Employee shall continue to receive his full Base Salary at the rate in effect
prior to the date of such incapacity until the Date of Termination if the
Employee's employment is terminated pursuant to Section 7(b) hereof.
(c) If the Employee's employment shall be terminated for Cause as
provided in Section 7(c) hereof, the Company shall pay the Employee his full
Base Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given and the Company shall have no further payment
obligations to the Employee under this Agreement.
(d) If the Company shall terminate the Employee's employment other
than pursuant to Sections 7(a), 7(b), 7(c) or 7(e) hereof or if the Employee
shall terminate his employment pursuant to Section 7(d)(i) or 7(d)(ii) hereof,
then
(i) the Company shall pay the Employee his full Base Salary plus
any accumulated vacation pay through the Date of Termination at the
rate in effect at the time Notice of Termination is given; and
(ii) in lieu of any further payments to the Employee for periods
subsequent to the Date of Termination, the Company shall make a
severance payment to the Employee not later than the tenth business
day following the Date of Termination, in a lump sum amount equal to
the highest annual rate at which his Base Salary hereunder was paid
prior to the Date of Termination multiplied by the lesser of (A) two
years or (B) the number of days remaining in the term of this
Agreement as provided in Section 1 divided by 360 days per year;
provided, however, that if the Employee shall terminate his employment
pursuant to Section 7(d)(i) on or within one year following a Change
in Control of the Company, then such lump sum amount shall equal three
times the aggregate of (x) the highest annual rate at which the
Employee's Base Salary was paid prior to Date
7
<PAGE>
of Termination plus (y) the highest amount of any annual bonus paid to the
Employee during the three years prior to the Date of Termination.
The Employee shall not be required to mitigate the amount of any payment
provided for in this Section 8 by seeking other employment or otherwise.
(e) If the Employee terminates this Agreement pursuant to Section
7(d)(iii) hereof, the Employee shall receive his full Base Salary through the
Date of Termination including any accrued vacation days at the rate then in
effect and the Company shall have no further payment obligations to the Employee
under this Agreement.
(f) If the Employee's employment with the Company is terminated
pursuant to Section 7(e), then the Company shall make a severance payment to the
Employee not later than the tenth business day following the Date of Termination
in a lump sum amount equal to three times the aggregate of (x) the highest
annual rate at which the Employee's Base Salary was paid prior to Date of
Termination plus (y) the highest amount of any annual bonus paid to the Employee
during the three years prior to the Date of Termination.
(g) Unless the Employee is terminated for Cause or the Employee's
employment is terminated pursuant to Section 7(a) or 7(d)(iii) hereof, the
Employee shall be entitled to continue to participate, for a period which is the
lesser of two years from the Date of Termination or the remaining term of this
Agreement, in such health and accident plan or arrangement as is made available
by the Company to its executive officers generally. The Employee shall not be
entitled to participate in any other employee benefit plan or arrangement of the
Company following the Date of Termination except as expressly provided by the
terms of any such plan.
(h) The Company will reimburse the Employee for the federal excise
tax, if any, which is due pursuant to Section 4999 of the Internal Revenue Code
of 1986, as amended, on the compensation payments (but not this reimbursement
payment) described in this Agreement.
9. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Employee, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he had terminated
his employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid, and shall also include any Acquirer as defined in Section
7(e),
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<PAGE>
which executes and delivers the agreement provided for in this Section 9 (or
Section 7(e), if applicable) or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Employee hereunder shall
inure to the benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee should die while any amounts would still
be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Employee's devisee, legatee, or other designee or, if
there be no such designee, to the Employee's estate.
10. Indemnification. The Company shall, to the fullest extent permitted
by law, indemnify and hold harmless the Employee against any loss, liability,
claim, damage and expense, including the cost of defense, incurred in the course
of the Employee's employment hereunder. The Company's liability hereunder shall
be reduced by the amount of insurance proceeds paid to or on behalf of the
Employee with respect to an event giving rise to indemnification hereunder.
This indemnification shall survive the death or other termination of employment
of the Employee and the termination of this Agreement. Any legal fees incurred
by the Employee in the enforcement of this or any other provision of this
Agreement shall be promptly reimbursed by the Company as the same are incurred.
11. Survival. The provisions of Sections 6, 8, and 10 shall survive the
termination of employment of the Employee. In addition, all obligations of the
Company to make payments hereunder shall survive any termination of this
Agreement.
12. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
parties at their addresses set forth below, or to such other addresses as either
party may have furnished to the other in writing in accordance herewith except
that notices of change of address shall be effective only upon receipt.
If to the Company:
Plains Resources Inc.
500 Dallas Street, Suite 700
Houston, Texas 77002
Attention: General Counsel
If to the Employee:
Harry N. Pefanis
4103 University Blvd.
Houston, Texas 77005
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<PAGE>
13. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Texas.
14. Entire Agreement. This Agreement contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior oral and
written agreements and understandings between the parties with respect to such
subject matter and supersedes all subsequent agreements or understandings
between the parties with respect to all employee benefit plans or arrangements
in effect on the date hereof or hereafter adopted to the extent that such plans
or arrangements conflict with the terms of this Agreement.
15. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any provision of this Agreement, which shall remain in full force and effect.
16. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PLAINS RESOURCES INC.
By: /s/ John H. Lollar
-------------------
Chairman of the Compensation
Committee of the Board of Directors
HARRY N. PEFANIS
/s/ Harry N. Pefanis
--------------------
Employee
11
<PAGE>
EXHIBIT 10.7
================================================================================
CRUDE OIL MARKETING AGREEMENT
among
PLAINS RESOURCES INC.
PLAINS ILLINOIS INC.
STOCKER RESOURCES, L.P.
CALUMET FLORIDA, INC.
and
PLAINS MARKETING, L.P.
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS................................................. -5-
1.1 Definitions............................................ -5-
ARTICLE II
PURCHASE AND SALE........................................... -3-
2.1 Purchase and Sale...................................... -3-
2.2 Addition or Release of Properties or Sellers........... -4-
2.3 Delivery............................................... -5-
2.4 Price.................................................. -5-
2.5 Payment................................................ -5-
2.6 General Provisions..................................... -6-
2.7 No Restrictions........................................ -6-
ARTICLE III
RENEGOTIATION............................................... -6-
ARTICLE IV
ADDITIONAL SERVICES......................................... -7-
4.1 Additional Services.................................... -7-
4.2 Sellers Indemnity...................................... -7-
ARTICLE V
TERM........................................................ -8-
ARTICLE VI
REPRESENTATIONS AND WARRANTIES.............................. -8-
6.1 Representations and Warranties of Sellers.............. -8-
6.2 Representations and Warranties of Buyer................ -9-
ARTICLE VII
CREDIT REQUIREMENTS......................................... -9-
ARTICLE VIII
SPECIFIED EVENTS............................................ -10-
8.1 Buyer Specified Events................................. -10-
8.2 Seller Specified Events................................ -11-
8.3 Early Termination...................................... -12-
8.4 Specified Damages...................................... -12-
<PAGE>
ARTICLE IX
FORCE MAJEURE............................................... -12-
9.1 Excuse for Nonperformance.............................. -12-
9.2 Definition............................................. -12-
9.3 Notice and Cure........................................ -13-
ARTICLE X
GENERAL PROVISIONS.......................................... -13-
10.1 No Survival of Representations and Warranties......... -13-
10.2 Headings.............................................. -13-
10.3 Rights and Remedies Cumulative........................ -13-
10.4 Entire Agreement; Supersedure......................... -13-
10.5 Severability.......................................... -13-
10.6 Choice of Law; Submission to Jurisdiction............. -13-
10.7 Binding Agreement..................................... -14-
10.8 No Agency............................................. -14-
10.9 Notice................................................ -14-
10.10 Effect of Waiver or Consent.......................... -14-
10.11 Assignment........................................... -14-
10.12 Counterparts......................................... -14-
10.13 Amendment or Modification............................ -15-
10.14 Further Assurances................................... -15-
10.15 Withholding or Granting of Consent................... -15-
10.16 U.S. Currency........................................ -15-
10.17 Laws and Regulations................................. -15-
10.18 Construction of Agreement............................ -15-
3
<PAGE>
CRUDE OIL MARKETING AGREEMENT
This CRUDE OIL MARKETING AGREEMENT (this "Agreement"), dated November ___,
1998, is by and between PLAINS RESOURCES INC., a Delaware corporation ("Plains
Resources"), PLAINS ILLINOIS INC., a Delaware corporation ("Plains Illinois"),
STOCKER RESOURCES, L.P., a California limited partnership ("Stocker"), CALUMET
FLORIDA, INC., a Delaware corporation ("Calumet"), and PLAINS MARKETING, L.P., a
Delaware limited partnership ("Buyer"). Plains Resources, Plains Illinois,
Stocker, and Calumet are sometimes referred to herein individually as a "Seller"
and collectively as the "Sellers." Sellers and Buyer are sometimes referred to
herein individually as a "Party" and collectively as the "Parties."
R E C I T A L S:
A. Sellers own and produce crude oil from properties located within the
lower 48 states of the United States.
B. Sellers desire to sell and Buyer desires to purchase all of the crude
oil which is produced and owned by Sellers from such properties.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Agreement" means this Agreement and all exhibits, schedules, amendments,
modifications, and supplements to this Agreement.
"Anniversary Date" has the meaning assigned in Article III.
"Barrel" means forty-two (42) United States gallons of Crude Oil measured in
accordance with the General Provisions.
"Business Day" means Monday through Friday of each week, except that a legal
holiday recognized as such by the government of the United States of America or
the states of New York or Texas shall not be regarded as a Business Day.
<PAGE>
"Buyer Specified Event" has the meaning assigned in Section 8.1.
"Change of Control" has the meaning assigned in that certain Omnibus
Agreement, dated as of the Closing Date (as defined therein), among Plains
Resources, Buyer, General Partner, Plains All American Pipeline, L.P., a
Delaware limited partnership, and All American, L.P., a Texas limited
partnership.
"Conflicts Committee" means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors who are neither
securityholders, officers nor employees of the General Partner nor officers,
directors or employees of any Affiliate of the General Partner.
"Corporate Governance Documents" means, with respect to any Person, the
Certificate or Articles of Incorporation, or Partnership Agreement (or their
equivalents), the by-laws (or their equivalents), and the other corporate
governance documents of such Person.
"Crude Oil" means crude oil meeting the specifications set forth in the
General Provisions.
"Defaulting Party" means (a) in the case of a Buyer Specified Event, Buyer,
and (b) in the case of a Seller Specified Event, any Seller affected by such
Seller Specified Event.
"Delivery Point" has the meaning assigned in Section 2.3.
"Effective Date" means the date of execution of this Agreement.
"Existing Contract" has the meaning assigned in Section 2.2(g).
"Force Majeure" has the meaning assigned in Article IX.
"General Partner" means Plains All American Inc., a Delaware corporation,
and its predecessors, successors and permitted assigns as general partner of the
Buyer.
"General Provisions" has the meaning assigned in Section 2.6.
"Governmental Requirements" means all judgments, orders, writs, injunctions,
decrees, awards, laws, ordinances, statutes, regulations, rules, franchises,
permits, certificates, licenses, authorizations, and the like of any government,
or any commission, board, court, agency, instrumentality, or political
subdivision thereof.
"Marketing and Administrative Fee" has the meaning assigned in Section 2.4.
"Marketing Area" means the lower 48 states of the United States.
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<PAGE>
"Non-defaulting Party" means (i) in the case of a Buyer Specified Event, any
Seller which is affected by such Buyer Specified Event, and (ii) in the case of
a Seller Specified Event, Buyer.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Platt's P+ Average" means the arithmetic average of the Platt's Prices for
P-Plus WTI during a Trading Cycle.
"Platt's Difference" means the arithmetic average for a Trading Cycle of
the difference between the Platt's Prices of the applicable grade of crude to be
exchanged (i.e. WTS, LLS, HLS, Eugene Island, Bonito, etc.) and the prompt month
WTI.
"Platt's Prices" means the average of the price range of a particular grade
of crude oil as published in the Crude Price Assessments table of Platt's
Oilgram Price Report.
"Purchase Price" has the meaning assigned in Section 2.4.
"Sales Price" has the meaning assigned in Section 2.4.
"Seller Specified Event" has the meaning assigned in Section 8.2.
"Specified Event" means a Buyer Specified Event or a Seller Specified Event,
as the case may be.
"Trading Cycle" means for a particular month of delivery, a cycle
beginning on the 26th day of the second month preceding such month of delivery
through the 25th day of the month preceding such month of delivery.
"Trade Location" has the meaning assigned in Section 2.4(b).
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. Buyer hereby agrees to purchase and receive and
Sellers hereby agree to sell and deliver all of the Crude Oil produced and owned
by Sellers from properties located within the Marketing Area. Currently, such
properties are set forth on Exhibit A attached hereto and incorporated herein.
Exhibit A shall be promptly updated to add or delete, as the case may be, Crude
Oil production dedicated to this Agreement.
3
<PAGE>
2.2 Addition or Release of Properties or Sellers. Crude Oil producing
properties and Sellers shall be added or released from the terms and provisions
of this Agreement upon the occurrence of the following events:
(a) If a Person who owns Crude Oil producing properties within the
Marketing Area becomes an Affiliate of Plains Resources, Plains Resources shall
cause such Affiliate to become a Seller hereunder by executing and delivering a
ratification of this Agreement to Buyer as soon as practicable after the date
such Person became an Affiliate of Plains Resources.
(b) If a Seller acquires additional Crude Oil properties within the
Marketing Area, such additional properties and the Crude Oil owned and produced
therefrom by such Seller shall become subject to this Agreement as soon as
practicable after the date of acquisition of such properties.
(c) If a Seller, other than Plains Resources, ceases to be an Affiliate of
Plains Resources, this Agreement shall terminate with respect to such Seller,
its properties, and the Crude Oil produced therefrom, with such termination to
be effective as soon as practicable following the date such Seller gives written
notice to Buyer that it has ceased to be an Affiliate of Plains Resources.
(d) If a Seller sells, transfers or otherwise disposes of any of its
properties or the interests therein which are within the Marketing Area, such
properties or interests shall cease to be subject to this Agreement as soon as
practicable following the date of such sale, transfer or disposition; but in no
event shall such properties or interests cease to be subject to this Agreement
prior to the termination of any agreement Buyer has previously entered into for
the sale of Crude Oil attributable to production from such properties or
interests.
(e) If a Seller and Buyer determine that it is impracticable for Buyer to
purchase Crude Oil from any property owned by such Seller within the Marketing
Area, such Seller and Buyer may, by mutual written agreement with the
concurrence of the Conflicts Committee, terminate this Agreement with respect to
such properties. Thereafter, neither such Seller nor Buyer shall have any
further obligations under this Agreement with respect to such properties.
(f) Upon the occurrence of any of the foregoing events under subparagraphs
(a), (b), (c), (d) or (e) above, the affected Seller shall give written notice
to Buyer as soon as practicable and Exhibit A shall be revised to reflect the
effect of such event. Upon request by any Party affected by such event, all
Parties hereto shall execute and deliver to the requesting Party such documents
and instruments as may be reasonably necessary to evidence additions or releases
of Parties or properties to this Agreement.
(g) Notwithstanding the provisions of subparagraphs (a) and (b) above, the
addition of any Seller or properties to this Agreement shall be subject to any
crude oil sales contract to which such Seller or properties are bound at the
time such Seller or properties would otherwise become subject to this Agreement
(an "Existing Contract"). Accordingly, no Crude Oil shall be sold
4
<PAGE>
hereunder in contravention of an Existing Contract by such Seller or from such
properties until the Existing Contract has expired or been terminated.
2.3 Delivery. Delivery shall be made from the lease tankage on the
properties, or such other point as is mutually agreed to and reflected on
Exhibit A (a "Delivery Point"), into transportation facilities designated by
Buyer.
2.4 Price. The price to be paid by Buyer for Crude Oil sold hereunder
(the "Purchase Price") shall be equal to the Sales Price for each Barrel as
determined in this Section 2.4, less the sum of (i) a marketing and
administrative fee of $.20 for each Barrel sold (the "Marketing and
Administrative Fee") and (ii) with respect to Crude Oil which is not sold by
Buyer at a Delivery Point, the reasonable out-of-pocket expenses (if any)
incurred by Buyer to transport or exchange each Barrel of such Crude Oil.
(a) For Crude Oil which Buyer resells at a Delivery Point, the Sales Price
shall be the price received by Buyer for each Barrel sold at the Delivery Point.
(b) For Crude Oil which Buyer either (i) transports to a location other
than a Delivery Point (a "Trade Location") or (ii) exchanges for other Crude Oil
at a Trade Location, the Sales Price shall be determined as follows:
(x) if such Crude Oil is not aggregated with other Crude Oil owned by
Buyer, the Sales Price shall be equal to the price received by Buyer
for each Barrel sold at the Trade Location; or
(y) if such Crude Oil is aggregated with other Crude Oil owned by
Buyer, the Sales Price shall be equal to the sum of (i) the posted
price received by Buyer for each Barrel sold at the Trade Location and
(ii) a premium equal to the Platt's P+ Average and plus or minus, as
applicable, the Platt's Difference at the Trade Location. If the
Platt's P+ Average or the Platt's Difference is not published, then
the price shall be the weighted average for each Barrel of Buyer's
sales at such Trade Location.
2.5 Payment. Payments by Buyer for Crude Oil purchased hereunder shall
be based on the applicable Purchase Price, the volumes delivered by Sellers, and
100% of the interest shown on Exhibit A attached hereto, less state taxes which
are withheld by Buyer. All payments shall be wired to Plains Resources for the
account of the Sellers in accordance with written instructions from Plains
Resources. Such wire transfers shall be made on the twentieth day of the month
following the month of actual receipt of Crude Oil; provided that, if the
twentieth day of the month falls on a Sunday or a banking holiday, payment will
be made on the following Business Day, or if the twentieth day of the month
falls on a Saturday, payment will be made on the preceding Business Day.
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<PAGE>
2.6 General Provisions. Plains Marketing, L.P.'s General Provisions
dated November 1, 1998, is attached hereto as Exhibit B and is incorporated by
reference and made a part of this Agreement. If any conflict should arise
between the General Provisions and the information stated herein, this Agreement
shall apply.
2.7 No Restrictions. No provision contained in this Agreement shall in
any way be interpreted as being a restriction on the ability of any Seller to
convey or transfer Crude Oil to any other Seller, or to any of their
subsidiaries. However, all such Crude Oil conveyed or transferred to a Seller
or subsidiary is and shall remain subject to this Agreement including the
obligations contained in this Article II.
ARTICLE III
RENEGOTIATION
Prior to the third anniversary of this Agreement, and the end of each
successive three-year period thereafter (an "Anniversary Date"), either the
Sellers or Buyer may request, in writing, to renegotiate the Marketing and
Administrative Fee. Any such renegotiation request must be accompanied with
documentation supporting the request to either increase or decrease the
Marketing and Administrative Fee, and shall be in accordance with the following
procedures:
(a) At least 120 days prior to the applicable Anniversary Date, either the
Sellers or Buyer may request, in writing, to renegotiate the Marketing and
Administrative Fee.
(b) Sellers and Buyer shall renegotiate the Marketing and Administrative
Fee in good faith. If a revised Marketing and Administrative Fee has not been
agreed upon at least 75 days prior to the applicable Anniversary Date, then
Sellers may enter into negotiations for the sale of their Crude Oil with any
Person who is not an Affiliate of Sellers. If Sellers do not reach an agreement
with such non-affiliated Person at least 30 days prior to applicable
Anniversary Date, then this Agreement shall continue and the Marketing and
Administrative Fee shall be revised, effective the first day after the
applicable Anniversary Date, to equal the Marketing and Administrative Fee last
offered by Buyer.
(c) If Sellers are successful in reaching agreement with such non-
affiliated Person which provides for (i) a term of not less than one year nor
more than three years; (ii) a Marketing and Administrative Fee which is less
than the Marketing and Administrative Fee last offered by Buyer; and (iii)
additional services substantially similar to those provided for in Article IV
below, this Agreement shall terminate. Such termination shall be effective on
the next Anniversary Date and, thereafter, Sellers may sell their Crude Oil to
such non-affiliated Person during the term of their agreement with such Person.
Within 120 days prior to the end of the term of such other agreement, either the
Sellers or Buyer may request negotiations to resume this Agreement and to
negotiate a revised Marketing and Administrative Fee in accordance with the
procedures set forth above.
6
<PAGE>
(d) Sellers' and Buyer's right to request a renegotiation of the Marketing
and Administrative Fee in order to resume this Agreement shall continue until
such time that this Agreement terminates pursuant to Article V, or until such
time that Sellers have sold their Crude Oil production to a Person who is not an
Affiliate of Sellers for a period of five (5) consecutive years.
ARTICLE IV
ADDITIONAL SERVICES
4.1 Additional Services. Upon request, Buyer agrees to provide Sellers
with the following services which shall be provided at no additional cost to
Sellers except for reimbursement of all reasonable out-of-pocket costs incurred
by Buyer to provide such services:
(a) Provide Sellers with (i) historical information related to crude oil
and natural gas prices in the possession of, or accessible to, Buyer,
and (ii) Buyer's assessment of crude oil and natural gas prices to
assist Sellers in their hedging strategies and decisions.
(b) Execute hedges on behalf of, or for the benefit of, Sellers' crude oil
and natural gas production.
(c) Assist Sellers in their evaluation of potential acquisitions of oil
and gas properties.
(d) Assist Sellers in preparing information relating to their potential
disposition of any of their crude oil and natural gas properties.
(e) Market the production of their natural gas and natural gas liquids
produced in association with Sellers' crude oil production.
(f) Negotiate natural gas purchase agreements required for the operation
of Sellers' properties.
(g) Provide royalty distribution services.
4.2 SELLERS INDEMNITY. SELLERS AGREE TO RELEASE, PROTECT, DEFEND,
INDEMNIFY AND HOLD BUYER, THE GENERAL PARTNER, AND THEIR PARENTS, SUBSIDIARIES,
AFFILIATES, SUCCESSORS AND ASSIGNS, AND THEIR AGENTS, OFFICERS, DIRECTORS,
EMPLOYEES, REPRESENTATIVES AND CONTRACTORS (HEREINAFTER COLLECTIVELY REFERRED TO
AS THE "BUYER GROUP") HARMLESS FROM AND AGAINST ALL CLAIMS, LOSSES, COSTS,
DEMANDS, DAMAGES, SUITS, JUDGMENTS, PENALTIES, LIABILITIES, DEBTS, EXPENSES AND
CAUSES OF ACTION OF WHATSOEVER NATURE OR CHARACTER, INCLUDING BUT NOT LIMITED TO
REASONABLE ATTORNEY'S FEES AND OTHER COSTS AND EXPENSES, WHICH IN ANY WAY ARISE
OUT OF OR ARE RELATED TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, (I) THE
PERFORMANCE OR SUBJECT MATTER OF THIS AGREEMENT, (II) THE PERFORMANCE OF THE
SERVICES IN SECTION 4.1, (III) THE BREACH BY SELLERS OF ANY TERMS OF THIS
AGREEMENT, OR (IV) THE INGRESS, EGRESS OR PRESENCE ON ANY PREMISES, WHETHER
LAND, BUILDINGS, OR OTHERWISE, IN CONJUNCTION WITH THIS AGREEMENT (COLLECTIVELY,
THE "CLAIMS"), INCLUDING CLAIMS DUE TO PERSONAL INJURY, DEATH, OR LOSS OR DAMAGE
OF PROPERTY, WHETHER OR NOT CAUSED BY THE SOLE, JOINT AND/OR CONCURRENT
NEGLIGENCE, FAULT OR STRICT LIABILITY OF ANY MEMBER
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OF THE BUYER GROUP, BUT IN NO EVENT DOES THIS INDEMNITY INCLUDE CLAIMS CAUSED BY
THE BUYER GROUP'S OWN GROSS NEGLIGENCE OR WILFUL MISCONDUCT.
ARTICLE V
TERM
The term of this Agreement shall commence on the date of this Agreement,
and unless sooner terminated as provided herein, shall continue in effect until
the earlier to occur of: (i) the time at which any Affiliate of Plains Resources
ceases to be the general partner of Buyer, or (ii) a Change of Control of Plains
Resources.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Sellers. Each Seller represents
and warrants to Buyer as of the date hereof that:
(a) Each Seller is a corporation or limited partnership duly organized,
validly existing, and in good standing under the laws of the state of their
respective formation, and has all requisite corporate or partnership power and
authority to execute, deliver, and perform this Agreement.
(b) The execution, delivery, and performance by each Seller of this
Agreement, and the consummation of the transactions contemplated herein, are
within its corporate or partnership power and authority and have been duly
authorized by all necessary corporate or partnership action.
(c) No authorization, consent, or approval of, or other action by, or
notice to, or filing with, any governmental authority, regulatory body, or any
other Person is required for the due authorization, execution, delivery, or
performance by any Seller of this Agreement, or the consummation of the
transactions contemplated herein, except those authorizations, consents, and
approvals which have been obtained and remain in full force and effect, and
those notices and filings which have been made and remain in full force and
effect.
(d) This Agreement has been duly executed and delivered by each Seller, and
is the legal, valid, and binding obligation of each Seller enforceable against
it in accordance with its terms, except that enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the rights of creditors generally, and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
(e) Neither the execution, delivery, or performance by any Seller of this
Agreement, nor the consummation of the transactions contemplated herein, will
violate any provision of any Seller's Corporate Governance Documents, or any
agreement, indenture, or instrument to which any Seller
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is a party or by which any of its property or assets are bound, or any provision
of any existing Governmental Requirement.
6.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers as of the date hereof that:
(a) Buyer is a limited partnership duly organized, validly existing, and in
good standing under the laws of the state of Delaware, and has all requisite
power and authority to execute, deliver, and perform this Agreement.
(b) The execution, delivery, and performance by Buyer of this Agreement,
and the consummation of the transactions contemplated herein, are within Buyer's
partnership power and authority and have been duly authorized by all necessary
partnership action.
(c) No authorization, consent, or approval of, or other action by, or
notice to, or filing with, any governmental authority, regulatory body, or any
other Person is required for the due authorization, execution, delivery, or
performance by Buyer of this Agreement, or the consummation of the transactions
contemplated by this Agreement, except those authorizations, consents, and
approvals which have been obtained and remain in full force and effect, and
those notices and filings which have been made and remain in full force and
effect.
(d) This Agreement has been duly executed and delivered by Buyer, and is
the legal, valid, and binding obligation of Buyer enforceable against Buyer in
accordance with its terms, except that enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the rights of creditors generally, and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
(e) Neither the execution, delivery, or performance by Buyer of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any provision of Buyer's Corporate Governance Documents, or any
agreement, indenture, or instrument to which Buyer is a party or by which any of
its property or assets are bound, or any provision of any existing Governmental
Requirement.
ARTICLE VII
CREDIT REQUIREMENTS
Purchases made by Buyer hereunder shall be on open account provided that:
(a) Buyer or its Affiliates are not in default in the payment when due of
any of its indebtedness in excess of $2,500,000 in the aggregate; and
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(b) Buyer's sales of Crude Oil hereunder are in accordance with the credit
policies set forth by Plains Resources' chief financial officer.
ARTICLE VIII
SPECIFIED EVENTS
8.1 Buyer Specified Events. Each of the following shall constitute a
Buyer Specified Event for all purposes of this Agreement:
(a) Any amount due hereunder for the purchase of Crude Oil shall not be
paid in full when due and Buyer does not cause the cure of such failure on or
before the fifteenth (15th) Business Day after notice from a Seller of such
failure is received by Buyer;
(b) Buyer fails to receive and purchase Crude Oil production dedicated to
this Agreement for reasons other than Force Majeure or any action or inaction of
a Seller, and such failure is not remedied on or before the earlier of the
thirtieth (30th) day after (i) any officer of the General Partner becomes aware
of such failure or (ii) a Seller has given written notice of such failure to
Buyer;
(c) any representation and warranty made in Section 6.2 shall prove to have
been incorrect in any material respect when made, and (i) such default or breach
shall continue unremedied for a period of thirty (30) days after the earlier of
(x) any officer of the General Partner becomes aware of such default or (y) a
Seller has given written notice of such default to Buyer, and (ii) a Seller
reasonably determines that the continuation of such default or breach may
materially and adversely affect Buyer's ability to satisfy its obligations
hereunder;
(d) Buyer and Sellers fail to agree upon a revised Marketing and
Administrative Fee as provided in Article III;
(e) Buyer (i) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or
fails or admits in writing its inability generally to pay its debts as they
become due; (iii) makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (iv) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment or insolvency or
bankruptcy or the entry of an order for relief or the making of an order for its
winding-up or liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within thirty (30) days of the institution or
presentation thereof, (v) has a resolution passed for its winding-up or
liquidation (other than pursuant to a consolidation, amalgamation or merger);
(vi) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official
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for it, or for all or substantially all its assets; (vii) has a secured party
take possession of all or substantially all of its assets or has an execution,
attachment, sequestration or other legal process levied, enforced or sued on or
against all or substantially all of its assets and such secured party maintains
possession or any such process is not dismissed, discharged, stayed or
restrained in each case within thirty (30) days thereafter; (viii) causes or is
subject to any event with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified in clauses
(i) to (vii) (inclusive); or (ix) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the foregoing
acts.
8.2 Seller Specified Events. Each of the following shall constitute a
Seller Specified Event for all purposes of this Agreement:
(a) A Seller shall fail to deliver Crude Oil production subject to this
Agreement and such failure is not remedied by such Seller on or before the
fifteenth (15th) Business Day after notice from Buyer of such failure is
received by the Seller;
(b) Any representation and warranty made in Section 6.1 shall prove to have
been incorrect in any material respect when made, and (i) such default or breach
shall continue unremedied for a period of thirty (30) days after the earlier of
(x) any officer of a Seller becomes aware of such default or (y) Buyer has given
written notice of such default to a Seller, and (ii) Buyer reasonably determines
that the continuation of such default or breach may materially adversely affect
Seller's ability to satisfy its obligations hereunder;
(c) A Seller (i) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or
fails or admits in writing its inability generally to pay its debts as they
become due; (iii) makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (iv) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment or insolvency or
bankruptcy or the entry of an order for relief or the making of an order for its
winding-up or liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within thirty (30) days of the institution or
presentation thereof, (v) has a resolution passed for its winding-up or
liquidation (other than pursuant to a consolidation, amalgamation or merger);
(vi) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets; (vii) has a
secured party take possession of all or substantially all of its assets or has
an execution, attachment, sequestration or other legal process levied, enforced
or sued on or against all or substantially all its assets and such secured party
maintains possession, or any such process is not dismissed, discharged, stayed
or restrained, in each case within thirty (30) days thereafter; (viii) causes or
is subject to any event with respect to it which, under the applicable laws of
any jurisdiction, had an analogous effect to any of the events specified
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in clauses (i) to (vii) (inclusive); or (ix) takes any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the
foregoing acts;
(d) Sellers and Buyer fail to agree upon a revised Marketing and
Administrative Fee as provided in Article III.
8.3 Early Termination. If any Specified Event shall have occurred and be
continuing, then the Non-defaulting Party may by notice to the Defaulting Party
designate a date (which date shall not be earlier than 60 days after receipt of
such notice) on which this Agreement shall terminate as between the Non-
defaulting Party and the Defaulting Party, and this Agreement shall terminate as
between the Non-defaulting Party and the Defaulting Party on such designated
date whether or not such Specified Event is then continuing; provided that the
provisions of Section 8.4 shall survive such termination.
8.4 Specified Damages. The Defaulting Party shall pay all damages and
expenses incurred by the Non-defaulting Party as a result of the termination of
this Agreement under Section 8.3 arising out of or in connection with any
collection, bankruptcy, insolvency, or other enforcement proceedings resulting
from the occurrence of the Specified Event giving rise to such termination.
Payment of such damages and expenses shall be the Defaulting Party's only
liability, and the Non-defaulting Party's sole remedy and exclusive claim, as a
result of the Specified Event and the resulting termination of this Agreement
under Section 8.3 as between the Non-defaulting Party and the Defaulting Party.
ARTICLE IX
FORCE MAJEURE
9.1 Excuse for Nonperformance. Subject to the other provisions of this
Agreement, the obligations of a Party under this Agreement (including the
obligation of Sellers to deliver Crude Oil), except the obligation to pay money
to the other Party, may be suspended for a reasonable period as a result of an
event of Force Majeure, to the extent that nonperformance is caused by Force
Majeure, and the affected Party shall be relieved of liability for failing to
perform from the inception of such event and during the continuance thereof and
the time of any such suspension of obligations shall be added to the term of
this Agreement.
9.2 Definition. An event of "Force Majeure" means war, riots,
insurrections, fire, explosions, sabotage, strikes, and other labor or
industrial disturbances, acts of God or the elements, Governmental Requirements,
disruption or breakdown of production or transportation facilities, delays of
pipeline carrier in receiving and delivering crude oil tendered, or any other
cause, whether similar or not, reasonably beyond the control of the affected
Party.
9.3 Notice and Cure. A Party affected by Force Majeure shall, as a
condition to invoking Force Majeure as an excuse for nonperformance under this
Agreement, promptly give notice of the
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occurrence of Force Majeure to the other Party, with reasonably detailed
information about the event of Force Majeure and the effect it has had, and is
anticipated to have, on the performance of the invoking Party, and shall confirm
such notice of Force Majeure and its consequences in writing no later than two
(2) Business Days after the occurrence of such event of Force Majeure. The
invoking Party shall exercise due diligence in good faith to remedy the Force
Majeure and resume full performance under this Agreement as soon as reasonably
practicable.
ARTICLE X
GENERAL PROVISIONS
10.1 No Survival of Representations and Warranties. Notwithstanding
anything to the contrary herein, all representations and warranties provided by
Sellers and Buyer in Article VI shall not survive the termination of this
Agreement.
10.2 Headings. The headings, captions, and arrangements contained in this
Agreement have been inserted for convenience only and shall not be deemed in any
manner to modify, explain, enlarge, or restrict any of the provisions hereof.
10.3 Rights and Remedies Cumulative. Except as provided in Section 8.4,
the rights and remedies of each of the Parties under this Agreement shall be
cumulative and non-exclusive of any other rights or remedies which each Party
may have under any other agreement or instrument, by operation of law, or
otherwise.
10.4 Entire Agreement; Supersedure. This Agreement constitutes the entire
agreement of the parties relating to the matters contained herein, superseding
all prior contracts or agreements, whether oral or written, relating to the
matters contained herein.
10.5 Severability. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
10.6 Choice of Law; Submission to Jurisdiction. This Agreement shall be
subject to and governed by the laws of the State of Texas, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state. Each party
hereby submits to the jurisdiction of the state and federal courts in the State
of Texas and to venue in Houston, Harris County, Texas.
10.7 Binding Agreement. This Agreement is entered into for the benefit of
the Parties and their permitted successors and assigns. It shall be binding
upon and shall inure to the benefit of such Parties and their successors and
assigns.
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10.8 No Agency. Except as otherwise provided in this Agreement, nothing
herein shall serve to create any agency, employment, master and servant
relationship, partnership, or joint venture between Sellers and Buyer, their
Affiliates, or any officer, director, employee or agent thereof.
10.9 Notice. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the United States mail, addressed to the Person to
be notified, postpaid, and registered or certified with return receipt requested
or by delivering such notice in person or by telecopier or telegram to such
party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices to be sent to a party
pursuant to this Agreement shall be sent to or made at the address set forth
below, or at such other address as such party may stipulate to the other parties
in the manner provided in this Section 10.9.
If to Buyer: If to Sellers:
Plains Marketing, L.P. Plains Resources Inc.
500 Dallas, Suite 700 500 Dallas, Suite 700
Houston, Texas 77002 Houston, Texas 77002
Attention: President of Attention: President
Plains All American Inc.
10.10 Effect of Waiver or Consent. No waiver or consent, express or
implied, by any party to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such Person of the same or any other obligations of such Person
hereunder. Failure on the part of a party to complain of any act of any Person
or to declare any Person in default, irrespective of how long such failure
continues, shall not constitute a waiver by such party of its rights hereunder
until the applicable statute of limitations period has run.
10.11 Assignment. No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto.
10.12 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall
constitute one and the same instrument.
10.13 Amendment or Modification. This Agreement may be amended or modified
from time to time only by the written agreement of all the parties hereto. Each
such instrument shall be reduced to writing and shall be designated on its face
an "Amendment" or an "Addendum" to this Agreement.
10.14 Further Assurances. In connection with this Agreement and all
transactions
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contemplated by this Agreement, each signatory party hereto agrees to execute
and deliver such additional documents and instruments and to perform such
additional acts as may be necessary or appropriate to effectuate, carry out and
perform all of the terms, provisions and conditions of this Agreement and all
such transactions.
10.15 Withholding or Granting of Consent. Each party may, with respect to
any consent or approval that it is entitled to grant pursuant to this Agreement,
grant or withhold such consent or approval in its sole and uncontrolled
discretion, with or without cause, and subject to such conditions as it shall
deem appropriate.
10.16 U.S. Currency. All sums and amounts payable to or to be payable
pursuant to the provisions of this Agreement shall be payable in coin or
currency of the United States of America that, at the time of payment, is legal
tender for the payment of public and private debts in the United States of
America.
10.17 Laws and Regulations. Notwithstanding any provision of this
Agreement to the contrary, no party hereto shall be required to take any act, or
fail to take any act, under this Agreement if the effect thereof would be to
cause such party to be in violation of any applicable law, statute, rule or
regulation.
10.18 Construction of Agreement. In construing this Agreement:
(a) no consideration shall be given to the fact or presumption that one
Party had a greater or lesser hand in drafting this Agreement;
(b) examples shall not be construed to limit, expressly or by implication,
the matter they illustrate;
(c) the word "includes" and its derivatives means "includes, but is not
limited to" and corresponding derivative expressions;
(d) a defined term has its defined meaning throughout this Agreement,
regardless of whether it appears before or after the place where it is defined;
(e) the plural shall be deemed to include the singular, and vice versa;
(f) each gender shall be deemed to include the other genders;
(g) each reference to an article, section, or subsection refers to an
article, section, or subsection of this Agreement unless expressly otherwise
provided; and
(h) all references to a party shall include all successors and permitted
assigns of such party.
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[The next page is the signature page]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
and year first above written.
BUYER:
PLAINS MARKETING, L.P.
By: Plains All American Inc.,
its General Partner
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
SELLERS:
PLAINS RESOURCES INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
PLAINS ILLINOIS INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
STOCKER RESOURCES, L.P.
By: Stocker Resources, Inc., its General Partner
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
CALUMET FLORIDA INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
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EXHIBIT 10.8
================================================================================
OMNIBUS AGREEMENT
among
PLAINS RESOURCES INC.
PLAINS ALL AMERICAN PIPELINE, L.P.
PLAINS MARKETING, L.P.
ALL AMERICAN PIPELINE, L.P.
and
PLAINS ALL AMERICAN INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions............................................ 1
1.1 Definitions...................................... 1
ARTICLE II
Business Opportunities................................. 4
2.1 Restricted Businesses............................ 4
2.2 Permitted Exceptions............................. 4
2.3 Procedures....................................... 4
2.4 Termination...................................... 6
2.5 Scope of Restricted Business Prohibition......... 6
2.6 Enforcement...................................... 6
ARTICLE III
Indemnification........................................ 7
3.1 Wingfoot Indemnification......................... 7
3.2 Plains Resources Indemnification................. 7
3.3 Limitations Regarding Indemnification............ 8
3.4 Indemnification Procedures....................... 8
ARTICLE IV
Miscellaneous.......................................... 9
4.1 Choice of Law; Submission to Jurisdiction........ 9
4.2 Notice........................................... 9
4.3 Entire Agreement; Supersedure.................... 9
4.4 Effect of Waiver or Consent...................... 9
4.5 Amendment or Modification........................ 9
4.6 Assignment....................................... 10
4.7 Counterparts..................................... 10
4.8 Severability..................................... 10
4.9 Gender, Parts, Articles and Sections............. 10
4.10 Further Assurances............................... 10
4.11 Withholding or Granting of Consent............... 10
4.12 U.S. Currency.................................... 10
4.13 Laws and Regulations............................. 10
4.14 Negotiation of Rights of Limited Partners,
Assignees, and Third Parties.................... 10
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OMNIBUS AGREEMENT
THIS OMNIBUS AGREEMENT is entered into on, and effective as of, the Closing
Date among Plains Resources Inc., a Delaware corporation ("Plains Resources"),
Plains All American Pipeline, L.P., a Delaware limited partnership (the "MLP"),
Plains All American Inc., a Delaware corporation ("PAAI"), Plains Marketing,
L.P., a Delaware limited partnership ("Operating OLP"), and All American
Pipeline, L.P., a Delaware limited partnership ("All American OLP" and, together
with Operating OLP, the "OLPs").
R E C I T A L S:
1. Plains Resources, the MLP, the OLPs and PAAI, in its capacity as the
general partner of the MLP and the OLPs, desire by their execution of this
Agreement to evidence their understanding, as more fully set forth in Article II
of this Agreement, with respect to (a) those business opportunities that Plains
Resources will not avail itself of during the Applicable Period unless each of
the MLP and the OLPs has declined to engage in such business opportunity for its
own account and (b) the procedures whereby such business opportunities are to be
offered to the MLP and the OLPs and accepted or declined.
2. Plains Resources, PAAI, the MLP and the OLPs desire by their execution
of this Agreement to evidence their understanding, as more fully set forth in
Article III of this Agreement, with respect to certain indemnification
obligations of Plains Resources and PAAI in favor of the MLP and the OLPs.
In consideration of the premises and the covenants, conditions, and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. (a) Capitalized terms used herein but not defined
shall have the meanings given them in the MLP Agreement.
(b) As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Affiliate" shall have the meaning attributed to such term in the MLP
Agreement.
"Agreement" shall mean this Omnibus Agreement, as it may be amended,
modified, or supplemented from time to time.
<PAGE>
"Applicable Period" shall mean the period commencing on the Closing
Date and terminating on the date on which PAAI (or any Affiliate of Plains
Resources) ceases to be the general partner of the MLP and the OLPs.
"Change of Control" shall have the meaning attributed to such term in
Section 2.4.
"Closing Date" shall mean the date of the closing of the initial
public offering of common units representing limited partner interests in
the MLP.
"Conflicts Committee" shall have the meaning attributed to such term
in the MLP Agreement.
"Conveyance and Contribution Agreement" shall have the meaning
attributed to such term in the MLP Agreement.
"Environmental Laws" shall mean any federal, state or local law, rule,
regulation, or enforceable order, as in effect as of the date of this
Agreement, that regulates or imposes liability with respect to the health,
environment, ecology, or work place.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"General Partner" shall mean PAAI and its successors as general
partner of the MLP and the OLPs, unless the context otherwise requires.
"Hazardous Materials" shall mean those materials in any way regulated
by any Environmental Law.
"Losses" shall have the meaning attributed to such term in Section
2.3.
"Marketing Agreement" shall mean that Crude Oil Marketing Agreement
dated as of the date hereof among Plains Resources, Plains Illinois Inc.,
Stocker Resources, L.P., Calumet Florida, Inc. and Operating OLP.
"MLP Agreement" shall mean the Amended and Restated Agreement of
Limited Partnership of the MLP, dated as of the Closing Date, as such
agreement is in effect on the Closing Date, to which reference is hereby
made for all purposes of this Agreement. No amendment or modification to
the MLP Agreement subsequent to the Closing Date shall be given effect for
the purposes of this Agreement unless consented to by each of the parties
to this Agreement.
"NonAffiliate Purchaser" shall have the meaning attributed to such
term in Section 2.3.
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"Offer" shall have the meaning attributed to such term in Section 2.3.
"Partnership Entities" shall mean the General Partner, the MLP, the
OLPs and any Affiliate controlled by the General Partner, the MLP or the
OLPs.
"Partnership Group" shall mean the MLP, the OLPs and any subsidiary of
any such entities.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, limited liability company, unincorporated organization or
any other entity.
"Plains Entities" shall mean Plains Resources and any of its
Affiliates, other than the Partnership Entities.
"Plains Facility" shall mean any storage or terminalling facility or
gathering line or system constituting part of the Plains Real Property.
"Plains Leased Property" shall mean all of the real and personal
properties leased by Plains Resources or the Plains Midstream Subsidiaries,
including rights-of-way, which leases were conveyed or assigned to the OLPs
by the Conveyance and Contribution Agreement.
"Plains Midstream Subsidiaries" shall mean Plains Marketing &
Transportation Inc., a Delaware corporation, Plains Terminal & Transfer
Corporation, a Delaware corporation, PLX Crude Lines Inc., a Delaware
corporation, and PLX Ingleside Inc., a Delaware corporation, each a wholly-
owned subsidiary of Plains Resources prior to their merger into Plains
Resources as of the date hereof.
"Plains Real Property" shall mean all of the real properties,
including the land, improvements and buildings located thereon, owned in
fee simple by Plains Resources or the Plains Midstream Subsidiaries, which
properties were conveyed to the OLPs by the Conveyance and Contribution
Agreement.
"Restricted Business" shall have the meaning attributed to such term
in Section 2.1.
"Second Offer" shall have the meaning attributed to such term in
Section 2.3.
"Voting Stock" means securities of any class of Plains Resources
entitling the holders thereof to vote on a regular basis in the election of
members of the board of directors of Plains Resources.
"Wingfoot" shall have the meaning attributed to such term in Section
3.1.
"Wingfoot Agreement" shall have the meaning attributed to such term in
Section 3.1.
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ARTICLE II
BUSINESS OPPORTUNITIES
2.1 RESTRICTED BUSINESSES. During the Applicable Period, each of the
Plains Entities shall be prohibited from engaging in or acquiring any business
engaged in the following activities (a "Restricted Business"): (a) crude oil
storage, terminalling and gathering activities in any state in the United
States, except for Alaska and Hawaii, for any Person other than a Plains Entity
or Partnership Entity, (b) crude oil marketing activities, and (c)
transportation of crude oil by pipeline in any state in the United States,
except for Alaska and Hawaii, for any Person other than a Plains Entity. A
Restricted Business shall not include any activities required to be performed by
a Plains Entity as the operator pursuant to any operating agreement entered into
by such Plains Entity with respect to oil and gas properties owned jointly with
other Persons.
2.2 PERMITTED EXCEPTIONS. Notwithstanding any provision of Section 2.1
to the contrary, a Plains Entity may engage in a Restricted Business under the
following circumstances:
(a) The Restricted Business was engaged in by the Plains Entity on the
date of this Agreement.
(b) The Restricted Business is conducted pursuant to and in accordance
with the terms of the Marketing Agreement or any other arrangement entered into
with the MLP or either of the OLPs with the concurrence of the Conflicts
Committee.
(c) The value of the assets acquired in a transaction that comprise a
Restricted Business does not exceed $10 million, as determined by the Board of
Directors of Plains Resources.
(d) (i) The value of the assets acquired in a transaction that
comprise a Restricted Business exceed $10 million, as determined by the Board of
Directors of Plains Resources and (ii) the General Partner (with the approval of
the Conflicts Committee) has elected not to cause a member of the Partnership
Group to pursue such opportunity in accordance with the procedures set forth in
Section 2.3.
2.3 PROCEDURES. In the event that a Plains Entity acquires a Restricted
Business comprised of assets valued in excess of $10 million, as determined by
the Board of Directors of Plains Resources, then not later than 30 days after
the consummation of the acquisition by such Plains Entity of the Restricted
Business, such Plains Entity shall notify the General Partner of such purchase
and offer the Partnership the opportunity to purchase such Restricted Business.
As soon as practicable, but in any event, within 30 days after receipt of such
notification, the General Partner shall notify the Plains Entity that either (i)
the General Partner has elected, with the approval of the Conflicts Committee,
not to cause a member of the Partnership Group to purchase such Restricted
Business, in which event the Plains Entity shall be free to continue to engage
in such Restricted Business, or
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(ii) the General Partner has elected to cause a member of the Partnership Group
to purchase such Restricted Business, in which event the following procedures
shall be followed:
(a) The Plains Entity shall submit a good faith offer to the General
Partner to sell the Restricted Business (the "Offer") to any member of the
Partnership Group on the terms and for the consideration stated in the Offer.
(b) The Plains Entity and the General Partner shall negotiate in good
faith, for 60 days after receipt of such Offer by the General Partner, the terms
on which the Restricted Business will be sold to a member of the Partnership
Group. The Plains Entity shall provide all information concerning the business,
operations and finances of such Restricted Business as may be reasonably
requested by the General Partner.
(i) If the Plains Entity and the General Partner agree on such terms
within 60 days after receipt by the General Partner of the Offer, a member
of the Partnership Group shall purchase the Restricted Business on such
terms as soon as commercially practicable after such agreement has been
reached.
(ii) If the Plains Entity and the General Partner are unable to agree
on the terms of a sale during such 60-day period, the Plains Entity shall
attempt to sell the Restricted Business to a Person that is not an
Affiliate of the Plains Entity (a "NonAffiliate Purchaser") within nine
months of the termination of such 60-day period. Any such sale to a
NonAffiliate Purchaser must be for a purchase price, as determined by the
Board of Directors of Plains Resources, not less than 95% of the purchase
price last offered by a member of the Partnership Group.
(c) If, after the expiration of such nine-month period, the Plains
Entity has not sold the Restricted Business to a NonAffiliate Purchaser, it
shall submit another Offer (the "Second Offer") to the General Partner within
seven days after the expiration of such nine-month period. The Plains Entity
shall provide all information concerning the business, operations and finances
of such Restricted Business as may be reasonably requested by the General
Partner.
(i) If the General Partner, with the concurrence of the Conflicts
Committee, elects not to cause a member of the Partnership Group to pursue
the Second Offer, the Plains Entity shall be free to continue to engage in
such Restricted Business.
(ii) If the General Partner shall elect to cause a member of the
Partnership Group to purchase such Restricted Business, then the General
Partner and the Plains Entity shall negotiate the terms of such purchase
for 60 days. If the Plains Entity and the General Partner agree on such
terms within 60 days after receipt by the General Partner of the Second
Offer, a member of the Partnership Group shall purchase the Restricted
Business on such terms as soon as commercially practicable after such
agreement has been reached.
5
<PAGE>
(iii) If during such 60-day period, no agreement has been reached
between the Plains Entity and the General Partner or a member of the
Partnership, the Plains Entity and the General Partner will engage an
independent investment banking firm with a national reputation to determine
the value of the Restricted Business. Such investment banking firm will
determine the value of the Restricted Business within 30 days and furnish
the Plains Entity and the General Partner its opinion of such value. The
Plains Entity will pay the fees and expenses of such investment banking
firm. Upon receipt of such opinion, the General Partner will have the
option, subject to the approval of the Conflicts Committee, to (A) cause a
member of the Partnership Group to purchase the Restricted Business for an
amount equal to the value determined by such investment banking firm or (B)
decline to purchase such Restricted Business, in which event the Plains
Entity will be free to continue to engage in such Restricted Business.
2.4 TERMINATION. The provisions of this Article II may be terminated by
Plains Resources upon a "Change of Control" of Plains Resources. A Change of
Control of Plains Resources shall be deemed to have occurred upon the occurrence
of one or more of the following events: (i) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Plains Entities to any Person and its
Affiliates unless immediately following such sale, lease, exchange or other
transfer such assets are owned, directly or indirectly, by the Plains Entities;
(ii) the consolidation or merger of Plains Resources with or into another Person
pursuant to a transaction in which the outstanding Voting Stock of Plains
Resources is changed into or exchanged for cash, securities or other property,
other than any such transaction where (a) the outstanding Voting Stock of Plains
Resources is changed into or exchanged for Voting Stock of the surviving
corporation or its parent and (b) the holders of the Voting Stock of Plains
Resources immediately prior to such transaction own, directly or indirectly, not
less than a majority of the Voting Stock of the surviving corporation or its
parent immediately after such transaction; and (iii) a "person" or "group"
(within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act) being or
becoming the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of more than 50% of all Voting Stock of Plains Resources, then
outstanding, except in a merger or consolidation which would not constitute a
Change of Control under clause (ii) above.
2.5 SCOPE OF RESTRICTED BUSINESS PROHIBITION. Except as provided in
this Article II and the Partnership Agreement, each Plains Entity shall be free
to engage in any business activity whatsoever, including those that may be in
direct competition with any Partnership Entity.
2.6 ENFORCEMENT. The Plains Entities agree and acknowledge that the
Partnership Group does not have an adequate remedy at law for the breach by the
Plains Entities of the covenants and agreements set forth in this Article II,
and that any breach by the Plains Entities of the covenants and agreements set
forth in Article II would result in irreparable injury to the Partnership Group.
The Plains Entities further agree and acknowledge that any member of the
Partnership Group may, in addition to the other remedies which may be available
to the Partnership Group, file a suit in equity to enjoin the Plains Entities
from such breach, and consent to the issuance of injunctive relief hereunder.
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ARTICLE III
INDEMNIFICATION
3.1 WINGFOOT INDEMNIFICATION. PAAI shall indemnify, defend and hold
harmless the MLP and the OLPs from and against Losses (as hereinafter defined)
to the extent that PAAI is entitled to and receives indemnification from
Wingfoot Ventures Seven, Inc., a Delaware corporation ("Wingfoot"), pursuant to
Article VIII of the Stock Purchase Agreement, dated as of March 15, 1998, among
Plains Resources, PAAI and Wingfoot, as amended and in effect from time to time
(the "Wingfoot Agreement"). "Losses" shall have the meaning set forth in the
Wingfoot Agreement.
3.2 PLAINS RESOURCES INDEMNIFICATION. Plains Resources shall indemnify,
defend and hold harmless the General Partner, the MLP and the OLPs from and
against Losses that are caused by, arise out of or are attributable to:
(a) Any enforcement proceeding under any federal, state or local
Environmental Law to the extent arising out of any action or omission to act by
Plains Resources or any of the Plains Midstream Subsidiaries prior to the date
of this Agreement with respect to any Plains Real Property, Plains Leased
Property, or Plains Facility, whether such proceeding arises before or after the
date of this Agreement.
(b) Any disposal, release, spill or leakage of Hazardous Materials to
the soil or surface or ground water to the extent that it has occurred prior to
the date of this Agreement (i) on any Plains Real Property during the period
owned by Plains Resources or any of the Plains Midstream Subsidiaries and (ii)
on any Plains Leased Property during the period Plains Resources or any of the
Plains Midstream Subsidiaries has been in possession of such Plains Leased
Property.
(c) Any release, spill, leakage or migration of Hazardous Materials
onto, under or upon the property of any Person (other than property owned,
leased or used by Plains Resources or any of the Plains Midstream Subsidiaries)
to the extent that it has occurred prior to the date of this Agreement as a
result of the operations of Plains Resources or any of the Plains Midstream
Subsidiaries.
(d) Hazardous Materials to the extent that they are demonstrated to
have been present on any Plains Real Property or Plains Leased Property on the
date of this Agreement.
(e) Hazardous Materials to the extent transported prior to the date of
this Agreement by Plains Resources or any of the Plains Midstream Subsidiaries
to any waste treatment, storage, disposal, reclaiming, or recycling site other
than (i) any site located on any Plains Real Property or any Plains Leased
Property, (ii) any site located on any property owned, leased or used by any
Partnership Entity, or (iii) any site used (whether before or after the date of
this Agreement) by any Partnership Entity, or (iv) any site used by Plains
Resources or any of the Plains Midstream Subsidiaries after the date of this
Agreement.
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3.3 LIMITATIONS REGARDING INDEMNIFICATION. Plains Resources shall have
no indemnification obligation under Section 3.2 for claims made after the third
anniversary of the date of this Agreement. The aggregate liability of Plains
Resources in respect of all Losses under Section 3.2 shall not exceed $3 million
(including up to $500,000 of reserves included in the MLP's working capital upon
closing of the MLP's initial public offering).
3.4 INDEMNIFICATION PROCEDURES.
(a) The Partnership Entities agree that within a reasonable period of
time after they become aware of facts giving rise to a claim for indemnification
pursuant to Section 3.2, they will provide notice thereof in writing to Plains
Resources specifying the nature of and specific basis for such claim.
(b) Plains Resources shall have the right to control all aspects of
the defense of (and any counterclaims with respect to) any claims brought
against the Partnership Entities that are covered by the indemnification set
forth in Section 3.2, including, without limitation, the selection of counsel,
determination of whether to appeal any decision of any court and the settling of
any such matter or any issues relating thereto; provided, however, that no such
settlement shall be entered into without the consent of the Partnership Entities
unless it includes a full release of the Partnership Entities from such matter
or issues, as the case may be.
(c) The Partnership Entities agree, at their own cost and expense, to
cooperate fully with Plains Resources with respect to all aspects of the
defense of any claims covered by the indemnification set forth in Section 3.2,
including, without limitation, the prompt furnishing to Plains of any
correspondence or other notice relating thereto that the General Partner or the
Partnership Entities may receive, permitting the names of the General Partner
and the Partnership Entities to be utilized in connection with such defense, the
making available to Plains Resources of any files, records or other information
of the General Partner or the Partnership Entities that Plains Resources
considers relevant to such defense and the making available to Plains Resources
of any employees of the Partnership Entities or the General Partner; provided,
however, that in connection therewith Plains Resources agrees to use reasonable
efforts to minimize the impact thereof on the operations of such Partnership
Entities. In no event shall the obligation of the Partnership Entities to
cooperate with Plains Resources as set forth in the immediately preceding
sentence be construed as imposing upon the Partnership Entities an obligation to
hire and pay for counsel in connection with the defense of any claims covered by
the indemnification set forth in this Article III; provided, however, that the
Partnership Entities may, at their own option, cost and expense, hire and pay
for counsel in connection with any such defense. Plains Resources agrees to
keep any such counsel hired by the Partnership Entities reasonably informed as
to the status of any such defense, but Plains Resources shall have the right to
retain sole control over such defense.
(d) In determining the amount of any loss, liability or expense for
which any of the Partnership Entities are entitled to indemnification under this
Agreement, the gross amount thereof will be reduced by any insurance proceeds
realized or to be realized by the Partnership Entities, and
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such correlative insurance benefit shall be net of any insurance premium that
becomes due as a result of such claim.
ARTICLE IV
MISCELLANEOUS
4.1 CHOICE OF LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
subject to and governed by the laws of the State of Texas, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state. Each party
hereby submits to the jurisdiction of the state and federal courts in the State
of Texas and to venue in Houston, Harris County, Texas.
4.2 NOTICE. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the United States mail, addressed to the Person to
be notified, postpaid, and registered or certified with return receipt requested
or by delivering such notice in person or by telecopier or telegram to such
party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices to be sent to a party
pursuant to this Agreement shall be sent to or made at the address set forth
below such party's signature to this Agreement, or at such other address as such
party may stipulate to the other parties in the manner provided in this Section
4.2.
4.3 ENTIRE AGREEMENT; SUPERSEDURE. This Agreement constitutes the
entire agreement of the parties relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written, relating
to the matters contained herein.
4.4 EFFECT OF WAIVER OR CONSENT. No waiver or consent, express or
implied, by any party to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such Person of the same or any other obligations of such Person
hereunder. Failure on the part of a party to complain of any act of any Person
or to declare any Person in default, irrespective of how long such failure
continues, shall not constitute a waiver by such party of its rights hereunder
until the applicable statute of limitations period has run.
4.5 AMENDMENT OR MODIFICATION. This Agreement may be amended or
modified from time to time only by the written agreement of all the parties
hereto; provided, however, that the MLP and the OLPs may not, without the prior
approval of the Conflicts Committee, agree to any amendment or modification of
this Agreement that, in the reasonable discretion of the General Partner, will
adversely affect the holders of Common Units. Each such instrument shall be
reduced to writing and shall be designated on its face an "Amendment" or an
"Addendum" to this Agreement.
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4.6 ASSIGNMENT. No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto.
4.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall
constitute one and the same instrument.
4.8 SEVERABILITY. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
4.9 GENDER, PARTS, ARTICLES AND SECTIONS. Whenever the context
requires, the gender of all words used in this Agreement shall include the
masculine, feminine and neuter, and the number of all words shall include the
singular and plural. All references to Article numbers and Section numbers
refer to Parts, Articles and Sections of this Agreement.
4.10 FURTHER ASSURANCES. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.
4.11 WITHHOLDING OR GRANTING OF CONSENT. Each party may, with respect to
any consent or approval that it is entitled to grant pursuant to this Agreement,
grant or withhold such consent or approval in its sole and uncontrolled
discretion, with or without cause, and subject to such conditions as it shall
deem appropriate.
4.12 U.S. CURRENCY. All sums and amounts payable to or to be payable
pursuant to the provisions of this Agreement shall be payable in coin or
currency of the United States of America that, at the time of payment, is legal
tender for the payment of public and private debts in the United States of
America.
4.13 LAWS AND REGULATIONS. Notwithstanding any provision of this
Agreement to the contrary, no party hereto shall be required to take any act, or
fail to take any act, under this Agreement if the effect thereof would be to
cause such party to be in violation of any applicable law, statute, rule or
regulation.
4.14 NEGOTIATION OF RIGHTS OF LIMITED PARTNERS, ASSIGNEES, AND THIRD
PARTIES. The provisions of this Agreement are enforceable solely by the parties
to this Agreement, and no Limited Partner, Assignee or other Person shall have
the right, separate and apart from the MLP or the OLP, to enforce any provision
of this Agreement or to compel any party to this Agreement to comply with the
terms of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on, and
effective as of, the Closing Date.
PLAINS RESOURCES INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 654-1523
PLAINS ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC., its sole general
partner
By: /s/ Michael R. Patterson
-------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 652-2730
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PLAINS MARKETING, L.P.
By: PLAINS ALL AMERICAN INC., its sole general
partner
By: /s/ Michael R. Patterson
-------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 652-2730
ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC., its sole general
partner
By: /s/ Michael R. Patterson
-------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 652-2730
PLAINS ALL AMERICAN INC.
By: /s/ Michael R. Patterson
-------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 652-2730
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<PAGE>
EXHIBIT 10.13
FIRST AMENDMENT TO CONTRIBUTION,
CONVEYANCE AND ASSUMPTION AGREEMENT
THIS FIRST AMENDMENT TO CONTRIBUTION, CONVEYANCE AND ASSUMPTION
AGREEMENT (this "Agreement"), dated as of December 15, 1998, is entered into by
and among PLAINS RESOURCES INC., a Delaware corporation ("Plains Resources"),
PLAINS ALL AMERICAN INC., a Delaware corporation ("PAAI"), PLAINS ALL AMERICAN
PIPELINE, L.P., a Delaware limited partnership (the "Partnership"), PLAINS
MARKETING, L.P., a Delaware limited partnership ("Plains Marketing"), ALL
AMERICAN PIPELINE, L.P., a Texas limited partnership ("All American L.P."), and
PAAI LLC, a Delaware limited liability company ("PAAI LLC").
WHEREAS, the parties to this Agreement desire to make certain
amendments to the terms of the Contribution, Conveyance and Assumption Agreement
(the "Contribution Agreement"), dated as of November 13, 1998, in order to
correctly state certain amounts incorrectly recited therein;
NOW THEREFORE, in consideration of their mutual undertakings and
agreements hereunder and under the Contribution Agreement, the parties to this
Agreement agree to amend the Contribution Agreement as follows:
1. The amount of cash distributed by the Partnership to PAAI as a
reimbursement for certain capital expenditures as set forth in Section 2.5 of
the Contribution Agreement is hereby amended to be $177,589,500. The amount of
the cash contributed by the Partnership to Plains Marketing as set forth in
Section 2.5(i) of the Contribution Agreement is hereby amended to be
$67,100,000.
2. The cash payment made by Plains Marketing to Plains Resources for
the sale of the Plain Assets as set forth in Section 2.6(i) of the Contribution
Agreement is hereby amended to be $64,100,000.
3. Except as expressly amended herein, the parties to this Agreement
confirm all of the terms of the Contribution Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
PLAINS RESOURCES INC., a Delaware corporation
By: /s/ Michael R. Patterson
------------------------
Michael R. Patterson, Senior Vice President
PLAINS MARKETING, L.P., a Delaware limited
partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Michael R. Patterson
------------------------
Michael R. Patterson, Senior Vice
President
PLAINS ALL AMERICAN PIPELINE, L.P., a
Delaware limited partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Michael R. Patterson
------------------------
Michael R. Patterson, Senior Vice
President
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ALL AMERICAN PIPELINE, L.P., a Texas limited
partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Michael R. Patterson
------------------------
Michael R. Patterson, Senior Vice
President
PLAINS ALL AMERICAN INC., a Delaware corporation
By: /s/ Michael R. Patterson
------------------------
Michael R. Patterson, Senior Vice President
PAAI LLC, a Delaware limited liability company
By: Plains All American Inc., a Delaware
corporation, its sole member
By: /s/ Michael R. Patterson
------------------------
Michael R. Patterson, Senior Vice
President
3
<PAGE>
EXHIBIT 10.14
[PIPELINE]
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as of the
18th day of March, 1999, by and among ALL AMERICAN PIPELINE, L.P. ("All
American" or "Borrower"), PLAINS MARKETING, L.P. ("Marketing"), PLAINS ALL
AMERICAN PIPELINE, L.P. ("Plains MLP"), ING (U.S.) CAPITAL LLC, successor in
interest to ING (U.S.) CAPITAL CORPORATION, as Administrative Agent (in such
capacity, "Administrative Agent"), BANCBOSTON ROBERTSON STEPHENS INC., as
documentation agent (in such capacity, "Documentation Agent") and the Lenders a
party hereto.
W I T N E S S E T H:
WHEREAS, Borrower, Marketing, Plains MLP, Administrative Agent, Syndication
Agent, Documentation Agent and Lenders entered into that certain Credit
Agreement dated as of November 17, 1998 (as amended, restated, or supplemented
to the date hereof, the "Original Agreement") for the purposes and consideration
therein expressed, pursuant to which Lenders became obligated to make and made
loans to Borrower as therein provided; and
WHEREAS, Borrower, Marketing, Plains MLP, Administrative Agent, Syndication
Agent, Documentation Agent and the Lenders a party hereto desire to amend the
Original Agreement for the purposes described herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, in consideration
of the loans which may hereafter be made by Lenders to Borrower, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I. -- Definitions and References
(S) 1.1. Terms Defined in the Original Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
(S) 1.2. Other Defined Terms. Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned to
them in this (S) 1.2.
"Amendment" means this First Amendment to Credit Agreement.
"Amendment Documents" means this Amendment.
"Credit Agreement" means the Original Agreement as amended hereby.
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ARTICLE II. -- Amendments
(S) 2.1. Definitions. The definition of "Permitted Investments" set forth
in Section 1.1 of the Original Agreement is hereby amended by replacing "and
(d)" with ", (d)" and adding a new clause (e) at the end thereof, to read as
follows:
and (e) Investments directly or indirectly by Restricted Persons in
Unrestricted Subsidiaries in an aggregate amount not to exceed, at any one
time outstanding, the sum of (i) $25,000,000, plus (ii) the lesser of
$40,000,000 or the amount, if any, of Investments of cash in Restricted
Persons by General Partner or by PAAI LLC (less any amount of such
Investment returned) at the time in question, provided such Investment of
cash was made during the period from March 1, 1999 through December 31,
1999.
The definition of "Restricted Person" set forth in Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:
"Restricted Person" means any of Plains MLP and each Subsidiary of
Plains MLP, including but not limited to Borrower, Marketing and each
Subsidiary of Borrower and/or Marketing, but excluding Unrestricted
Subsidiaries.
The definition of "Subsidiary" set forth in Section 1.1 of the Original
Agreement is hereby amended in its entirety to read as follows:
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or
other business or corporate entity, enterprise or organization which is
directly or indirectly (through one or more intermediaries) controlled or
owned more than fifty percent by such Person; provided, however, that no
Unrestricted Subsidiary shall be deemed a "Subsidiary" of Borrower or
Plains MLP for purposes of any Loan Document except as provided in Section
7.16.
The following definition of "Unrestricted Subsidiary" is hereby added to
Section 1.1 of the Original Agreement immediately following the definition of
"Type":
"Unrestricted Subsidiary" shall have the meaning given it in Section
7.16.
(S) 2.2. Use of Proceeds. Clause (iii) of the first sentence of Section
2.4 of the Original Agreement is hereby amended in its entirety to read as
follows:
(iii) all Revolver Loans not designated as Working Capital Loans
pursuant to Section 2.2(c) to finance capital expenditures of any
Restricted Person, to pay reimbursement obligations of Letters of Credit,
to provide working capital for operations and for other general business
purposes, including acquisitions, but not to pay distributions to partners
of Restricted Persons; provided, Borrower may use up to $25,000,000 of the
proceeds of Revolver Loans to make Investments in to Marketing, provided
Marketing contemporaneously therewith uses the full amount of such
Investments to make "Permitted Investments" as described in clause (e)(i)
of the definition of such term.
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(S) 2.3. Agreements to Deliver Security Documents. Section 6.14 of the
Original Agreement is hereby amended by adding to such section the following
sentence:
"In no event shall any Restricted Person be required to grant a Lien in
favor of Administrative Agent for the benefit of Lenders encumbering such
Restricted Person's ownership interest in any Unrestricted Subsidiary."
(S) 2.4. Unrestricted Subsidiaries. Article VII of the Original Agreement
is hereby amended by adding a new Section 7.16 at the end thereof, to read as
follows:
Section 7.16 Unrestricted Subsidiaries. Marketing may form one direct
Subsidiary (such Subsidiary, and each of its Subsidiaries, each an
"Unrestricted Subsidiary"), which Unrestricted Subsidiaries shall be
subject to the following:
(a) Subject to subsection (d) below, no Unrestricted Subsidiary shall be
deemed to be a "Restricted Person" or a "Subsidiary" of Marketing or
Plains MLP for purposes of this Agreement or any other Loan Document,
and no Unrestricted Subsidiary shall be subject to or included within
the scope of any provision herein or in any other Loan Document,
including without limitation any representation, warranty, covenant or
Event of Default herein or in any other Loan Document, except as set
forth in this Section 7.16.
(b) No Restricted Person shall guarantee or otherwise become liable in
respect of any Liability or other obligation of, grant any Lien on any
of its property to secure any Liability or other obligation of, make
any Investment in (except as described in clause (e) of the definition
of Permitted Investments), or provide any other form of credit
support to, any Unrestricted Subsidiary, and no Restricted Person
shall enter into (i) any management contract or agreement with any
Unrestricted Subsidiary, except upon the prior written consent of
Majority Lenders, not to be unreasonably withheld, or (ii) any other
contract or agreement with any Unrestricted Subsidiary, except in the
course of ordinary business on terms no less favorable to such
Restricted Person, as applicable, than could be obtained in a
comparable arm's length transaction with a non-Affiliate of such
Restricted Person.
(c) No Unrestricted Subsidiary shall enter into any contract or agreement
to acquire, or acquire any property, except upon the prior approval of
Majority Lenders with respect to (i) existing or potential
environmental or litigation liabilities and (ii) satisfaction as to
any governmental approval as required which in any event or in the
aggregate could cause a Material Adverse Change.
(d) If any Unrestricted Subsidiary shall fail to consummate one or more
acquisitions of property as of December 31, 1999 with a fair market
value equal to or greater than the amount of Investments made in such
Unrestricted Subsidiaries by General Partner, PAAI LLC, or Restricted
Persons pursuant to clause (e) of the definition of Permitted
Investments as of December
3
<PAGE>
31, 1999, then on and after December 31, 1999 each Unrestricted
Subsidiary shall be deemed to be a "Subsidiary" of Marketing for
purposes of this Agreement and shall be subject to the terms and
conditions hereof.
(e) Borrower shall at all times maintain the separate existence of each
Unrestricted Subsidiary.
ARTICLE III. -- Conditions of Effectiveness
(S) 3.1. Effective Date. This Amendment shall become effective as of
the date first above written when and only when Administrative Agent shall have
received, at Administrative Agent's office, a counterpart of this Amendment
executed and delivered by Borrower, Marketing, Plains MLP, Administrative Agent,
Syndication Agent, Documentation Agent and Majority Lenders.
ARTICLE IV. -- Representations and Warranties
(S) 4.1. Representations and Warranties of Plains MLP and Borrower. In
order to induce Administrative Agent and Lenders to enter into this Amendment,
Plains MLP and Borrower represent and warrant to Administrative Agent and each
Lender that:
(a) The representations and warranties contained in Article V of the
Original Agreement, are true and correct at and as of the time of the
effectiveness hereof, subject to the amendment of certain of the Schedules
to the Credit Agreement as attached hereto and except to the extent that
such representation and warranty was made as of a specific date.
(b) Each Restricted Person is duly authorized to execute and deliver
this Amendment and the other Amendment Documents to the extent a party
thereto, and Borrower is and will continue to be duly authorized to borrow
and perform its obligations under the Credit Agreement. Each Restricted
Person has duly taken all corporate action necessary to authorize the
execution and delivery of this Amendment and the other Amendment Documents,
to the extent a party thereto, and to authorize the performance of their
respective obligations thereunder.
(c) The execution and delivery by each Restricted Person of this
Amendment and the other Amendment Documents, to the extent a party thereto,
the performance by each Restricted Person of their respective obligations
hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with any
provision of law, statute, rule or regulation or of the certificate or
articles of incorporation and bylaws of any Restricted Person, or of any
material agreement, judgment, license, order or permit applicable to or
binding upon any Restricted Person, or result in the creation of any lien,
charge or encumbrance upon any assets or properties of any Restricted
Person, except in favor of Administrative Agent for the benefit of Lenders.
Except for those which have been duly obtained, no consent, approval,
authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by any
Restricted Person of this Amendment or any other
4
<PAGE>
Amendment Document, to the extent a party thereto, or to consummate the
transactions contemplated hereby and thereby.
(d) When this Amendment and the other Amendment Documents have been
duly executed and delivered, each of the Loan Documents, as amended by this
Amendment and the other Amendment Documents, will be a legal and binding
instrument and agreement of each Restricted Person, to the extent a party
thereto, enforceable in accordance with its terms, (subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency and similar
laws applicable to creditors' rights generally and to general principles of
equity).
ARTICLE V. -- Miscellaneous
(S) 5.1. Ratification of Agreements. The Original Agreement, as hereby
amended, is hereby ratified and confirmed in all respects. The Loan Documents,
as they may be amended or affected by this Amendment and/or the other Amendment
Documents, are hereby ratified and confirmed in all respects. Any reference to
the Credit Agreement in any Loan Document shall be deemed to refer to this
Amendment also. The execution, delivery and effectiveness of this Amendment and
the other Amendment Documents shall not, except as expressly provided herein or
therein, operate as a waiver of any right, power or remedy of Administrative
Agent or any Lender under the Credit Agreement or any other Loan Document nor
constitute a waiver of any provision of the Credit Agreement or any other Loan
Document.
(S) 5.2. Ratification of Security Documents. Restricted Persons,
Administrative Agent and Lenders each acknowledge and agree that any and all
indebtedness, liabilities or obligations arising under or in connection with the
Notes are Obligations and is secured indebtedness under, and is secured by, each
and every Security Document to which any Restricted Person is a party. Each
Restricted Person hereby re-pledges, re-grants and re-assigns a security
interest in and lien on every asset of the such Restricted Person described as
Collateral in any Security Document.
(S) 5.3. Survival of Agreements. All representations, warranties,
covenants and agreements of the Restricted Persons herein and in the other
Amendment Documents shall survive the execution and delivery of this Amendment
and the other Amendment Documents and the performance hereof and thereof,
including without limitation the making or granting of each Loan, and shall
further survive until all of the Obligations are paid in full. All statements
and agreements contained in any certificate or instrument delivered by any
Restricted Person hereunder, under the other Amendment Documents or under the
Credit Agreement to Administrative Agent or any Lender shall be deemed to
constitute representations and warranties by, or agreements and covenants of,
such Restricted Person under this Amendment and under the Credit Agreement.
(S) 5.4. Loan Documents. This Amendment and each of the other Amendment
Documents is a Loan Document, and all provisions in the Credit Agreement
pertaining to Loan Documents apply hereto and thereto.
(S) 5.5. GOVERNING LAW. THIS AMENDMENT AND THE OTHER AMENDMENT
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN
5
<PAGE>
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA IN ALL RESPECTS, INCLUDING CONSTRUCTION, VALIDITY AND
PERFORMANCE.
(S) 5.6. Counterparts. This Amendment and each of the other Amendment
Documents may be separately executed in counterparts and by the different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to constitute one and the same Amendment or Amendment Document, as the
case may be.
6
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
----------------------------
Name: Michael R. Patterson
Title: Senior Vice President and
General Counsel
PLAINS MARKETING, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
----------------------------
Name: Michael R. Patterson
Title: Senior Vice President and
General Counsel
PLAINS ALL AMERICAN PIPELINE, L.P.
By: /s/ Michael R. Patterson
----------------------------
Name: Michael R. Patterson
Title: Senior Vice President and
General Counsel
7
<PAGE>
ING (U.S.) CAPITAL LLC,
Administrative Agent and a Lender
By: /s/ Peter Y. Clinton
-----------------------
Name: Peter Y. Clinton
Title: Senior Vice President
ING BARING FURMAN SELZ LLC,
Syndication Agent
By:
-----------------------
Name:
Title:
8
<PAGE>
BANKBOSTON, N.A., LC Issuer and Lender
By: /s/ Terrence Ronan
-----------------------
Terence Ronan, Director
BANCBOSTON ROBERTSON STEPHENS INC., Documentation
Agent
By: /c/ Richard J. Makin
----------------------------------
Richard J. Makin, Managing Director
9
<PAGE>
FIRST UNION NATIONAL BANK, Lender
By: /s/ Robert R. Wetteroff
--------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
10
<PAGE>
DEN NORSKE BANK ASA, Lender
By: /s/ J. Morten Kreutz
------------------------
Name: J. Morten Kreutz
Title: Vice President
By: /s/ William V. Moyer
------------------------
Name: William V. Moyer
Title: Senior Vice President
11
<PAGE>
MEESPIERSON CAPITAL CORP., Lender
By: /s/ Deirdre M. Sanborn
--------------------------
Name: Deirdre M. Sanborn
Title: Assistant Vice President
By: /s/ D. Thomas Abbott
------------------------
Name: D. Thomas Abbott
Title: Chairman
12
<PAGE>
BANK OF SCOTLAND, Lender
By: /s/ Annie Chin Tat
---------------------
Name: Annie Chin Tat
Title: Senior Vice President
13
<PAGE>
CREDIT AGRICOLE INDOSUEZ, Lender
By: /s/ David Bouhl
------------------
Name: David Bouhl
Title: First Vice President, Managing Director
By: /s/ Katherine L. Abbott
---------------------------
Name: Katherine L. Abbott
Title: First Vice President
14
<PAGE>
UNION BANK OF CALIFORNIA, N.A., Lender
By: /s/ Dustin Gaspari
---------------------
Name: Dustin Gaspari
Title: Assistant Vice President
By: /s/ Carl Stutzman
--------------------
Name: Carl Stutzman
Title: Senior Vice President and Manager
15
<PAGE>
HIBERNIA NATIONAL BANK, Lender
By: /s/ Tammy Angelety
-------------------------
Name: Tammy Angelety
Title: Vice President
16
<PAGE>
EXHIBIT 10.15
[MARKETING]
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as of the
18th day of March, 1999, by and among PLAINS MARKETING, L.P. ("Borrower"), ALL
AMERICAN PIPELINE, L.P.("All American"), PLAINS ALL AMERICAN PIPELINE, L.P.
("Plains MLP"), BANKBOSTON, N.A., as Administrative Agent (in such capacity,
"Administrative Agent"), BANCBOSTON ROBERTSON STEPHENS INC., as syndication
agent (in such capacity, "Syndication Agent"), ING BARING FURMAN SELZ LLC, as
documentation agent (in such capacity, "Documentation Agent") and the Lenders a
party hereto.
W I T N E S S E T H:
WHEREAS, Borrower, All American, Plains MLP, Administrative Agent,
Syndication Agent, Documentation Agent and Lenders entered into that certain
Amended and Restated Credit Agreement dated as of November 17, 1998 (as amended,
restated, or supplemented to the date hereof, the "Original Agreement") for the
purposes and consideration therein expressed, pursuant to which Lenders became
obligated to make and made loans to Borrower as therein provided; and
WHEREAS, Borrower, All American, Plains MLP, Administrative Agent,
Syndication Agent, Documentation Agent and the Lenders a party hereto desire to
amend the Original Agreement for the purposes described herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, in consideration
of the loans which may hereafter be made by Lenders to Borrower, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I. -- Definitions and References
(S) 1.1. Terms Defined in the Original Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
(S) 1.2. Other Defined Terms. Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned to
them in this (S) 1.2.
"Amendment" means this First Amendment to Credit Agreement.
"Amendment Documents" means this Amendment.
"Credit Agreement" means the Original Agreement as amended hereby.
ARTICLE II. -- Amendments
-1-
<PAGE>
(S) 2.1. Definitions. The definition of "Permitted Investments" set forth
in Section 1.1 of the Original Agreement is hereby amended by replacing "and
(d)" with ", (d)" and adding a new clause (e) at the end thereof, to read as
follows:
and (e) Investments directly or indirectly by Restricted Persons in
Unrestricted Subsidiaries in an aggregate amount not to exceed, at any one
time outstanding, the sum of (i) $25,000,000, plus (ii) the lesser of
$40,000,000 or the amount, if any, of Investments of cash in Restricted
Persons by General Partner or by PAAI LLC (less any amount of such
Investment returned) at the time in question, provided such Investment of
cash was made during the period from March 1, 1999 through December 31,
1999.
The definition of "Restricted Person" set forth in Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:
"Restricted Person" means any of Plains MLP and each Subsidiary of Plains
MLP, including but not limited to Borrower, All American and each
Subsidiary of Borrower and/or All American, but excluding Unrestricted
Subsidiaries.
The definition of "Subsidiary" set forth in Section 1.1 of the Original
Agreement is hereby amended in its entirety to read as follows:
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or
other business or corporate entity, enterprise or organization which is
directly or indirectly (through one or more intermediaries) controlled or
owned more than fifty percent by such Person; provided, however, that no
Unrestricted Subsidiary shall be deemed a "Subsidiary" of Borrower or
Plains MLP for purposes of any Loan Document except as provided in Section
7.17.
The following definition of "Unrestricted Subsidiary" is hereby added to
Section 1.1 of the Original Agreement immediately following the definition of
"Type":
"Unrestricted Subsidiary" shall have the meaning given it in Section 7.17.
(S) 2.2. Agreements to Deliver Security Documents. Section 6.14 of the
Original Agreement is hereby amended by adding to such section the following
sentence:
"In no event shall any Restricted Person be required to grant a Lien in
favor of Administrative Agent for the benefit of Lenders encumbering such
Restricted Person's ownership interest in any Unrestricted Subsidiary."
(S) 2.3. Unrestricted Subsidiaries. Article VII of the Original Agreement
is hereby amended by adding a new Section 7.17 at the end thereof, to read as
follows:
Section 7.17 Unrestricted Subsidiaries. Borrower may form one direct
Subsidiary (such Subsidiary, and each of its Subsidiaries, each an
"Unrestricted Subsidiary"), which Unrestricted Subsidiaries shall be
subject to the following:
-2-
<PAGE>
(a) Subject to subsection (d) below, no Unrestricted Subsidiary shall be
deemed to be a "Restricted Person" or a "Subsidiary" of Borrower or
Plains MLP for purposes of this Agreement or any other Loan Document,
and no Unrestricted Subsidiary shall be subject to or included within
the scope of any provision herein or in any other Loan Document,
including without limitation any representation, warranty, covenant or
Event of Default herein or in any other Loan Document, except as set
forth in this Section 7.17.
(b) No Restricted Person shall guarantee or otherwise become liable in
respect of any Liability or other obligation of, grant any Lien on any
of its property to secure any Liability or other obligation of, make
any Investment in (except as described in clause (e) of the definition
of Permitted Investments), or provide any other form of credit
support to, any Unrestricted Subsidiary, and no Restricted Person
shall enter into (i) any management contract or agreement with any
Unrestricted Subsidiary, except upon the prior written consent of
Majority Lenders, not to be unreasonably withheld, or (ii) any other
contract or agreement with any Unrestricted Subsidiary, except in the
course of ordinary business on terms no less favorable to such
Restricted Person, as applicable, than could be obtained in a
comparable arm's length transaction with a non-Affiliate of such
Restricted Person
(c) No Unrestricted Subsidiary shall enter into any contract or agreement
to acquire, or acquire any property, except upon the prior approval of
Majority Lenders with respect to (i) existing or potential
environmental or litigation liabilities and (ii) satisfaction as to
any governmental approval as required which in any event or in the
aggregate could cause a Material Adverse Change.
(d) If any Unrestricted Subsidiary shall fail to consummate one or more
acquisitions of property as of December 31, 1999 with a fair market
value equal to or greater than the amount of Investments made in such
Unrestricted Subsidiaries by General Partner, PAAI LLC, or Restricted
Persons pursuant to clause (e) of the definition of Permitted
Investments as of December 31, 1999, then on and after December 31,
1999 each Unrestricted Subsidiary shall be deemed to be a "Subsidiary"
of Borrower for purposes of this Agreement and shall be subject to the
terms and conditions hereof.
(e) Borrower shall at all times maintain the separate existence of each
Unrestricted Subsidiary.
ARTICLE III. -- Conditions of Effectiveness
(S) 3.1. Effective Date. This Amendment shall become effective as of
the date first above written when and only when Administrative Agent shall have
received, at Administrative Agent's office, a counterpart of this Amendment
executed and delivered by Borrower, All American,
-3-
<PAGE>
Plains MLP, Administrative Agent, Syndication Agent, Documentation Agent and
Majority Lenders.
ARTICLE IV. -- Representations and Warranties
(S) 4.1. Representations and Warranties of Plains MLP and Borrower. In
order to induce Administrative Agent and Lenders to enter into this Amendment,
Plains MLP and Borrower represent and warrant to Administrative Agent and each
Lender that:
(a) The representations and warranties contained in Article V of the
Original Agreement, are true and correct at and as of the time of the
effectiveness hereof, subject to the amendment of certain of the Schedules
to the Credit Agreement as attached hereto and except to the extent that
such representation and warranty was made as of a specific date.
(b) Each Restricted Person is duly authorized to execute and deliver
this Amendment and the other Amendment Documents to the extent a party
thereto, and Borrower is and will continue to be duly authorized to borrow
and perform its obligations under the Credit Agreement. Each Restricted
Person has duly taken all corporate action necessary to authorize the
execution and delivery of this Amendment and the other Amendment Documents,
to the extent a party thereto, and to authorize the performance of their
respective obligations thereunder.
(c) The execution and delivery by each Restricted Person of this
Amendment and the other Amendment Documents, to the extent a party thereto,
the performance by each Restricted Person of their respective obligations
hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with any
provision of law, statute, rule or regulation or of the certificate or
articles of incorporation and bylaws of any Restricted Person, or of any
material agreement, judgment, license, order or permit applicable to or
binding upon any Restricted Person, or result in the creation of any lien,
charge or encumbrance upon any assets or properties of any Restricted
Person, except in favor of Administrative Agent for the benefit of Lenders.
Except for those which have been duly obtained, no consent, approval,
authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by any
Restricted Person of this Amendment or any other Amendment Document, to the
extent a party thereto, or to consummate the transactions contemplated
hereby and thereby.
(d) When this Amendment and the other Amendment Documents have been
duly executed and delivered, each of the Loan Documents, as amended by this
Amendment and the other Amendment Documents, will be a legal and binding
instrument and agreement of each Restricted Person, to the extent a party
thereto, enforceable in accordance with its terms, (subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency and similar
laws applicable to creditors' rights generally and to general principles of
equity).
-4-
<PAGE>
ARTICLE V. -- Miscellaneous
(S) 5.1. Ratification of Agreements. The Original Agreement, as hereby
amended, is hereby ratified and confirmed in all respects. The Loan Documents,
as they may be amended or affected by this Amendment and/or the other Amendment
Documents, are hereby ratified and confirmed in all respects. Any reference to
the Credit Agreement in any Loan Document shall be deemed to refer to this
Amendment also. The execution, delivery and effectiveness of this Amendment and
the other Amendment Documents shall not, except as expressly provided herein or
therein, operate as a waiver of any right, power or remedy of Administrative
Agent or any Lender under the Credit Agreement or any other Loan Document nor
constitute a waiver of any provision of the Credit Agreement or any other Loan
Document.
(S) 5.2. Ratification of Security Documents. Restricted Persons,
Administrative Agent and Lenders each acknowledge and agree that any and all
indebtedness, liabilities or obligations arising under or in connection with the
Notes are Obligations and is secured indebtedness under, and is secured by, each
and every Security Document to which any Restricted Person is a party. Each
Restricted Person hereby re-pledges, re-grants and re-assigns a security
interest in and lien on every asset of the such Restricted Person described as
Collateral in any Security Document.
(S) 5.3. Survival of Agreements. All representations, warranties,
covenants and agreements of the Restricted Persons herein and in the other
Amendment Documents shall survive the execution and delivery of this Amendment
and the other Amendment Documents and the performance hereof and thereof,
including without limitation the making or granting of each Loan, and shall
further survive until all of the Obligations are paid in full. All statements
and agreements contained in any certificate or instrument delivered by any
Restricted Person hereunder, under the other Amendment Documents or under the
Credit Agreement to Administrative Agent or any Lender shall be deemed to
constitute representations and warranties by, or agreements and covenants of,
such Restricted Person under this Amendment and under the Credit Agreement.
(S) 5.4. Loan Documents. This Amendment and each of the other Amendment
Documents is a Loan Document, and all provisions in the Credit Agreement
pertaining to Loan Documents apply hereto and thereto.
(S) 5.5. GOVERNING LAW. THIS AMENDMENT AND THE OTHER AMENDMENT
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA IN ALL
RESPECTS, INCLUDING CONSTRUCTION, VALIDITY AND PERFORMANCE.
(S) 5.6. Counterparts. This Amendment and each of the other Amendment
Documents may be separately executed in counterparts and by the different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to constitute one and the same Amendment or Amendment Document, as the
case may be.
-5-
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
PLAINS MARKETING, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
---------------------------------
Name: Michael R. Patterson
Title: Senior Vice President and
General Counsel
PLAINS ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
---------------------------------
Name: Michael R. Patterson
Title: Senior Vice President and
General Counsel
ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
---------------------------------
Name: Michael R. Patterson
Title: Senior Vice President and
General Counsel
-6-
<PAGE>
BANKBOSTON, N.A.,
Administrative Agent, LC Issuer and Lender
By: /s/ Terrence Ronan
---------------------------------
Terrence Ronan, Director
BANCBOSTON ROBERTSON STEPHENS INC.,
Syndication Agent
By: /s/ Richard J. Makin
---------------------------------
Richard J. Makin, Managing Director
-7-
<PAGE>
ING BARING FURMAN SELZ LLC,
Documentation Agent
By:
---------------------------------
Name:
Title:
ING (U.S.) CAPITAL LLC, Lender
By: /s/ Peter Y. Clinton
---------------------------------
Name: Peter Y. Clinton
Title: Senior Vice President
-8-
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, Lender
By: /s/ Irene C. Rummel
---------------------------------
Name: Irene C. Rummel
Title: Vice President
-9-
<PAGE>
BANK OF SCOTLAND, Lender
By: /s/ Annie Chin Tat
---------------------------------
Name: Annie Chin Tat
Title: Senior Vice President
-10-
<PAGE>
COMERICA BANK-TEXAS, Lender
By: /s/ Daniel G. Steele
---------------------------------
Name: Daniel G. Steele
Title: Senior Vice President
-11-
<PAGE>
DEN NORSKE BANK ASA, Lender
By: /s/ J. Morten Kreutz
---------------------------------
Name: J. Morten Kreutz
Title: Vice President
By: /s/ William V. Moyer
---------------------------------
Name: William V. Moyer
Title: Senior Vice President
-12-
<PAGE>
FIRST UNION NATIONAL BANK, Lender
By: /s/ Robert R. Wetteroff
---------------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
-13-
<PAGE>
HIBERNIA NATIONAL BANK, Lender
By: /s/ Tammy Angelety
---------------------------------
Name: Tammy Angelety
Title: Assistant Vice President
-14-
<PAGE>
MEESPIERSON CAPITAL CORP., Lender
By: /s/ Deirdre M. Sanborn
---------------------------------
Name: Deirdre M. Sanborn
Title: Assistant Vice President
By: /s/ D. Thomas Abbott
---------------------------------
Name: D. Thomas Abbott
Title: Chairman
-15-
<PAGE>
U.S. BANK, NATIONAL ASSOCIATION, Lender
By: /s/ Charles S. Searle
---------------------------------
Name: Charles S. Searle
Title: Senior Vice President
-16-
<PAGE>
UNION BANK OF CALIFORNIA, N.A., Lender
By: /s/ Dustin Gaspari
---------------------------------
Name: Dustin Gaspari
Title: Assistant Vice President
By: /s/ Carl Stutzman
---------------------------------
Name: Carl Stutzman
Title: Senior Vice President and Manager
-17-
<PAGE>
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, Lender
By: /s/ Ann M. Rhoads
---------------------------------
Name: Ann M. Rhoads
Title: Vice President
-18-
<PAGE>
EXHIBIT 10.16
AGREEMENT FOR PURCHASE AND SALE
OF MEMBERSHIP INTEREST IN
SCURLOCK PERMIAN LLC
BETWEEN
MARATHON ASHLAND PETROLEUM LLC
AND
PLAINS MARKETING, L.P.
MARCH 17, 1999
<PAGE>
TABLE OF CONTENTS
RECITALS.................................................................... 1
AGREEMENT................................................................... 1
ARTICLE I DEFINITIONS....................................................... 1
1.1 Accrued Taxes........................................................ 1
1.2 Adjustment Statement................................................. 1
1.3 Affiliate............................................................ 1
1.4 Annual Financial Statements.......................................... 2
1.7 Closing.............................................................. 2
1.8 Closing Date......................................................... 2
1.9 Confidentiality Agreement............................................ 2
1.10 Corrective Action.................................................... 2
1.11 Current Assets....................................................... 2
1.12 Current Liabilities.................................................. 2
1.13 Effective Time....................................................... 2
1.14 Effective Time Working Capital Statement............................. 3
1.15 Environmental Laws................................................... 3
1.16 Environmental Liabilities............................................ 3
1.17 GAAP................................................................. 3
1.18 Government Authority................................................. 3
1.19 Hazardous Materials.................................................. 3
1.20 Interim Period....................................................... 4
1.21 Inventory Above Minimum.............................................. 4
1.22 License.............................................................. 4
1.23 MAP.................................................................. 4
1.24 Major Pipelines and Terminals........................................ 4
1.25 Material Adverse Effect.............................................. 4
1.25 Materiality.......................................................... 4
1.26 Membership Interest.................................................. 5
1.27 Net Working Capital.................................................. 5
1.28 Permitted Encumbrances............................................... 5
1.29 Person............................................................... 5
1.30 Plains............................................................... 5
1.31 Prior Period Adjustments............................................. 5
1.32 Purchase Price....................................................... 5
1.33 Promissory Note...................................................... 5
1.34 Return or Returns.................................................... 5
1.35 Rights of Way........................................................ 6
1.36 SP................................................................... 6
1.37 SP Group............................................................. 6
1.38 Sub-sublease Agreements.............................................. 6
1.39 TAP.................................................................. 6
1.40 Tax or Taxes......................................................... 6
1.41 Tax Authority and Taxing Authority................................... 6
1.42 Transition Agreement................................................. 6
1.43 Unadjusted Purchase Price............................................ 6
1.44 Units................................................................ 6
ARTICLE II SALE AND PURCHASE OF MEMBERSHIP INTEREST......................... 7
2.1 Sale and Purchase of Membership Interests............................ 7
2.2 Purchase Price....................................................... 7
<PAGE>
TABLE OF CONTENTS
2.3 Closing Adjustments.................................................. 7
2.4 Net Working Capital Adjustment....................................... 9
2.5 Excluded Assets...................................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MAP 10
3.1 Due Organization and Qualification................................... 10
3.2 Financial Statements................................................. 10
3.3 No Material Adverse Change........................................... 10
3.4 Membership Interest.................................................. 11
3.5 Liabilities.......................................................... 11
3.6 Environmental Conditions and Liabilities............................. 11
3.7 Taxes................................................................ 12
3.8 Litigation........................................................... 12
3.9 Equipment, Inventory, and Other Personal Property.................... 13
3.10 Real Property........................................................ 13
3.11 Scurlock Permian Pipe Line LLC; La Grange Oil Terminal Company....... 14
3.12 Licenses............................................................. 14
3.13 Patents, Trademarks and Copyrights................................... 14
3.14 Bank Accounts, Safe Deposit Boxes and Banking Arrangements........... 15
3.15 Contracts............................................................ 15
3.16 Performance of Agreement............................................. 15
3.17 Compliance with Laws................................................. 16
3.18 Common Carrier Obligations........................................... 16
3.19 Consents............................................................. 16
3.20 No Bankruptcy........................................................ 16
3.21 Agent's Fees......................................................... 16
3.22 Third Party Inventory................................................ 17
3.23 Year 2000 Compliance................................................. 17
3.24 River Crossings...................................................... 17
3.25 DOT Pipelines........................................................ 17
3.26 Capital Leases....................................................... 17
3.27 General Provisions Regarding Representations and Warranties.......... 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PLAINS......................... 18
4.1 Due Organization and Qualification................................... 18
4.2 Performance of Agreement............................................. 18
4.3 Agents' Fees......................................................... 18
4.4 Financial Ability.................................................... 18
4.5 No Bankruptcy........................................................ 19
4.6 Units................................................................ 19
4.7 General Provisions Regarding Representations and Warranties.......... 19
ARTICLE V EMPLOYEE MATTERS.................................................. 19
5.1 Benefit Plans and Employment Practices............................... 19
5.2 Severance Arrangements............................................... 20
5.3 Worker Adjustment Retraining Notification Act........................ 21
5.4 Assumption of Permian Corporation Retirement and Savings Plans....... 21
5.5 Workers Compensation................................................. 22
5.6 Representations and Warranties Regarding Employees and Employee
Benefit Plans...................................................... 22
5.7 No Third Party Beneficiaries......................................... 23
ARTICLE VI TAX MATTERS...................................................... 23
6.1 SP Disregarded as Separate Entity for Income Tax Purposes............ 23
6.2 Allocation of Taxable Income to Periods Before and After Effective
Time............................................................... 23
6.3 Sale of SP Treated as Asset Sale for Income Tax Purposes............. 24
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TABLE OF CONTENTS
6.4 Internal Revenue Code 1031 Exchanges................................ 24
6.5 Transfer Taxes...................................................... 24
6.6 Cooperation and Preservation of Books and Records................... 24
ARTICLE VII OBLIGATIONS OF PARTIES PRIOR TO CLOSING........................ 25
7.1 General............................................................. 25
7.2 Access to Records and Properties of SP Group........................ 25
7.3 Conduct of Business of the SP Group Until the Closing............... 26
7.4 Obligations of Plains Until the Closing............................. 27
7.5 Obligations of MAP Regarding Financial Statements................... 28
7.6 Casualty Loss or Condemnation....................................... 28
7.7 Surety Bonds and Guarantees......................................... 28
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF MAP..................... 29
8.1 Absence of Litigation............................................... 29
8.2 Performance and Obligations of Plains............................... 29
8.3 HSR Approval........................................................ 29
8.4 Waiver.............................................................. 29
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF PLAINS.................... 30
9.1 Absence of Litigation............................................... 30
9.2 Performance and Obligations of MAP.................................. 30
9.3 Tender of Resignations.............................................. 30
9.4 HSR Approval........................................................ 30
9.5 Marathon Ashland Pipe Line LLC Transactions......................... 30
9.6 Illinois Basin Gathering Assets..................................... 31
9.7 Waiver.............................................................. 33
ARTICLE X CLOSING........................................................... 33
10.1 Place of Closing and Closing Date................................... 33
10.2 Closing Deliveries by Plains........................................ 34
10.3 Closing Deliveries by MAP........................................... 34
ARTICLE XI TERMINATION...................................................... 35
11.1 Termination......................................................... 35
11.2 Consequences of Termination......................................... 36
ARTICLE XII OBLIGATIONS OF PARTIES AFTER CLOSING............................ 36
12.1 Taxes............................................................... 36
12.2 Indemnification..................................................... 37
12.3 Environmental Indemnification....................................... 38
12.5 Survival of Indemnification Obligations............................. 40
12.6 Indemnification Bucket.............................................. 41
12.7 Procedures for Asserting Indemnity Claims........................... 41
12.8 EXPRESS NEGLIGENCE.................................................. 43
12.9 Prior Period Adjustments............................................ 43
12.10 Accounts Receivable................................................. 43
12.11 Damages............................................................. 43
12.11 People v. Amerada Hess.............................................. 44
12.12 Noncompetition...................................................... 44
12.13 Texas University Lands.............................................. 44
12.14 SPCC PLANS.......................................................... 44
12.15 Unit Restrictions................................................... 45
12.16 Permian Plans....................................................... 45
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TABLE OF CONTENTS
12.17 Nettleton to Tyler Pipeline......................................... 45
ARTICLE XIII MISCELLANEOUS.................................................. 45
13.1 Binding Agreement................................................... 45
13.2 Notices............................................................. 45
13.3 Entire Agreement.................................................... 46
13.4 Waivers............................................................. 46
13.5 Time Period Calculation............................................. 46
13.6 Counterparts........................................................ 46
13.7 Headings............................................................ 46
13.8 Applicable Law...................................................... 47
13.9 Construction of Agreement........................................... 47
13.10 Publicity........................................................... 47
13.11 No Third Party Beneficiaries........................................ 47
13.12 Severability........................................................ 47
13.13 Further Assurances.................................................. 47
13.14 Expenses............................................................ 47
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
OF MEMBERSHIP INTEREST IN
SCURLOCK PERMIAN LLC
THIS AGREEMENT FOR PURCHASE AND SALE 0F MEMBERSHIP INTEREST ("Agreement") in
Scurlock Permian LLC ("SP") has been executed this 17th day of March, 1999, by
Marathon Ashland Petroleum LLC ("MAP"), a Delaware limited liability company,
and Plains Marketing, L.P., a Delaware limited partnership ("Plains").
RECITALS
1. SP is a Delaware limited liability company with a single membership interest
which is owned by MAP. Scurlock Permian Pipe Line LLC is a Delaware limited
liability company and is a wholly owned subsidiary of SP. La Grange Oil
Terminal Company is a Texas general partnership which is owned 50% by SP.
2. MAP desires to sell, and Plains desires to acquire, all of the membership
interest in SP pursuant to this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, agreements and mutual
covenants herein contained, MAP and Plains agree as follows:
ARTICLE I DEFINITIONS
Unless otherwise specifically stated in the text of this Agreement, the
following terms shall have the following meanings:
1.1 "Accrued Taxes" shall mean all amounts that have been accrued or are
payable for Taxes in accordance with GAAP.
1.2 "Adjustment Statement" shall mean the statement described in
Section 2.4.
1.3 "Affiliate" shall mean, as to the Person specified, any other Person
controlling, controlled by or under common control with such specified Person.
The concept of control, controlling or controlled as used in the aforesaid
context means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of another, whether through
the ownership of voting securities, by
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contract or otherwise. Solely for purposes of Sections 6.6, and 7.3(m), Ashland
Inc. and its Affiliates shall be deemed Affiliates of MAP.
1.4 "Annual Financial Statements" shall mean the financial statements of
SP described in Section 3.2.
1.5 "Arbitrator" shall mean a mutually agreed, national public accounting
firm not employed by either party or any of their Affiliates.
1.6 "Assets" shall mean (a) all of the assets and properties of the SP
Group, tangible and intangible, real, personal and mixed, excluding (i) the
assets described in Section 2.5 and (ii) such other assets and properties, if
any, which are disposed of as permitted or required under this Agreement, and
(b) all assets and properties acquired by the SP Group from and after the date
of this Agreement through the Closing Date as permitted or required under this
Agreement. Without limiting the generality of the foregoing, the Assets include
the Major Pipelines and Terminals.
1.7 "Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Article X hereof.
1.8 "Closing Date" shall mean the date for Closing set forth in Section
10.1.
1.9 "Confidentiality Agreement" shall mean that certain Confidentiality
Agreement between MAP and Plains All American Inc. dated February 4, 1999.
1.10 "Corrective Action" shall mean any remedial, removal, response,
construction, closure, disposal, or other corrective action.
1.11 "Current Assets" shall be determined in accordance with GAAP and shall
include SP Group's accounts for current assets as shown on Exhibit 1.11, which
for crude oil shall include only Inventory Above Minimum.
1.12 "Current Liabilities" shall be determined in accordance with GAAP and
shall include SP Group's accounts for current liabilities shown on Exhibit 1.12,
and shall include accruals for vacation earned but not used, for vacation to be
taken after the Effective Time.
1.13 "Effective Time" shall mean 7:00 am CST on April 1, 1999.
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1.14 "Effective Time Working Capital Statement" shall mean a statement
setting forth the Current Assets and Current Liabilities of SP Group as of the
Effective Time in the form of Exhibit 1.14.
1.15 "Environmental Laws" shall mean any and all laws, statutes, ordinances,
rules, regulations, orders, or determinations of any Government Authority,
heretofore or currently in effect in any and all jurisdictions in which the SP
Group is conducting or at any time has conducted business, or where any of its
assets are located, or where any Hazardous Materials or hazardous substances
generated by or disposed of by the SP Group are located, pertaining to (a) the
control of any potential pollutant including, without limitation, liquid
hydrocarbons, petroleum or petroleum products, or the protection of the air,
water or land; (b) the generation, handling, treatment, remediation, storage,
disposal or transportation of solid, gaseous or liquid waste; or (c) exposure to
hazardous, toxic or other substances alleged to be harmful.
1.16 "Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative or monitoring costs and any other
related costs and expenses), other causes of action recognized now or at any
later time, damages, settlements, expenses, charges, assessments, liens,
penalties, fines, pre-judgment and post-judgment interest, attorney, consultant,
and expert fees incurred or imposed (a) pursuant to any agreement, order, notice
or directive embodied in Environmental Laws or relating to environmental
matters, injunction, judgment or similar documents (including settlements)
relating to environmental matters or (b) pursuant to any claim by a Government
Authority or other Person for damage to natural resources, remediation, or
similar costs or expenses incurred by such Government Authority or Person
pursuant to common law or statute.
1.17 "GAAP" shall mean generally accepted accounting principles used in the
United States of America.
1.18 "Government Authority" shall mean (i) the United States of America,
(ii) any state county, municipality or other governmental subdivision within the
United States of America, and (iii) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America or of any state, county, municipality, or other governmental
subdivision within the United States of America.
1.19 "Hazardous Materials" shall mean any explosives, radioactive materials,
asbestos material, urea formaldehyde, hydrocarbon contaminants, underground
tanks, pollutants, contaminants, hazardous, corrosive or toxic substances,
special waste or waste of any kind, including compounds known as
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chlorobiophenyls and any material or substance the storage, manufacture,
disposal, treatment, generation, use, transport, mediation or release into the
environment of which is prohibited, controlled, regulated or licensed under
Environmental Laws, including, but not limited to, (a) all "hazardous
substances" as that term is defined in Section 101 (14) of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and (b)
petroleum and petroleum products.
1.20 "Interim Period" shall mean the period from the Effective Time to the
Closing Date.
1.21 "Inventory Above Minimum" shall mean liquid hydrocarbon inventory owned
by the SP Group; provided that Inventory Above Minimum does not include the
minimum operating requirements for tank bottoms and line fill in the SP Group
pipelines and tanks, and in third party pipeline systems. Such minimum operating
requirement is agreed, solely for the purposes of this Agreement, to be
1,000,000 barrels. Inventory Above Minimum for barrels which are sold in April,
1999 as part of SP's contango inventory strategy, shall be valued at the sales
price for such barrels. Inventory Above Minimum for all other barrels shall be
valued at the market price. The market price shall be defined as Scurlock
Permian's WTI average posting over the four day period from March 29, 1999
through April 1, 1999, plus the average of the daily high and low quotes for WTI
P-Plus in Platt's Crude Oil Market Wire "America's Crude Oil Assessments" for
the same time period, less $0.50 per barrel. The amount of Inventory Above
Minimum shall be measured as of the Effective Time and shall be reflected in
Exhibit 1.11, and shall be adjusted for the ratio of measured BS&W in the total
liquid hydrocarbon inventory to the total liquid hydrocarbon inventory.
1.22 "License" shall mean a permit, license or other authorization issued by
a Government Authority allowing or permitting the operation of assets of the SP
Group or the conducting of all or part of its business.
1.23 "MAP" shall mean Marathon Ashland Petroleum LLC, a Delaware limited
liability company.
1.24 "Major Pipelines and Terminals" shall mean the pipe, tanks, docks,
pumps, motors, engines, valves, meters, fittings, appurtenances and other
equipment comprising the pipeline systems, terminals and other facilities
described on Exhibit 1.24.
1.25 "Material Adverse Effect" shall mean a material adverse effect or
effects, either individually or in the aggregate, on (a) the business, financial
condition, results of operation or assets of the SP Group taken as a whole or
(b) the validity or enforceability of this Agreement.
1.25 "Materiality" (and the meaning of such terms as "material" or
"materially") in connection with MAP, Plains, and the SP Group shall have the
meanings specifically assigned to those terms for specific provisions in this
Agreement. In those cases in which no meaning is specifically assigned, the
terms
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"material" or "materially" shall have the meaning determined in the context of
the financial condition, business, properties and assets of the SP Group
considered as a whole or as to MAP or Plains as the case may be.
1.26 "Membership Interest" shall mean all of the limited liability company
membership interest in SP.
1.27 "Net Working Capital" shall mean Current Assets less Current
Liabilities.
1.28 "Permitted Encumbrances" shall mean (a) liens for current taxes,
assessments, governmental charges or levies not yet due; (b) workers' or
unemployment compensation liens arising in the ordinary course of business; (c)
mechanic's, materialman's, supplier's, vendor's, or similar liens arising in the
ordinary course of business for obligations that are not delinquent; (d)
security interests, pledges, liens or other charges or encumbrances as may have
arisen in the ordinary course of business, none of which individually or in the
aggregate are material to the ownership, use, or operation of the Assets; (e)
any state of facts which an accurate on-the-ground survey would show which
individually and in the aggregate does not materially detract from the value of
or materially interfere with the use and operation of the Assets; (f) any liens,
easements, rights of way, restrictions, rights, leases and other encumbrances
affecting title, whether recorded or not, which do not materially detract from
the value of or materially interfere with the use and operation of the Assets;
and (g) legal highways, zoning and building laws, ordinances and regulations.
1.29 "Person" shall mean any Government Authority or any individual, firm,
partnership, corporation, limited liability company, joint venture, trust,
unincorporated organization or other entity or organization.
1.30 "Plains" shall mean Plains Marketing, L.P., a Delaware limited
partnership.
1.31 "Prior Period Adjustments" shall mean any sums paid or received by the
SP Group for transactions, events, liabilities or income, other than the receipt
of Current Assets or the payment of Current Liabilities in the ordinary course
of business and included in the Effective Time Working Capital Statement,
attributable to periods prior to the Effective Time.
1.32 "Purchase Price" shall have the meaning set forth in Section 2.2.
1.33 "Promissory Note" shall have the meaning set forth in Section 2.3(d).
1.34 "Return" or "Returns" shall mean all returns, declarations, reports,
claims for refund or information returns or statements relating to Taxes,
including any schedule or attachment thereto, and
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including any amendment thereof filed or to be filed with any Tax Authority in
connection with the determination, assessment or collection of Taxes.
1.35 "Rights of Way" shall mean the rights of way, permits, licenses,
easements and other authorizations and rights in real property comprising the
land rights under which the SP Group operates the Major Pipelines and Terminals
and the agreements creating such rights, but does not mean the land rights
associated with those segments of the Major Pipelines and Terminals designated
as inactive on Exhibit 1.24.
1.36 "SP" shall mean Scurlock Permian LLC, a Delaware limited liability
company.
1.37 "SP Group" shall mean SP, Scurlock Permian Pipe Line LLC and La Grange
Oil Terminal Company.
1.38 "Sub-sublease Agreements" shall mean the sub-sublease agreements between
SP Group and MAP referred to in Section 10.3(f).
1.39 "TAP" shall mean the MAP Termination Allowance Plan.
1.40 "Tax or Taxes" shall mean all federal, state, and local income, profits,
franchise, gross receipts, payroll, sales, employment, employee withholding,
unemployment insurance, workers' compensation, use, property, real estate,
excise value added, estimated, stamp, alternative or add-on minimum,
environmental tax, withholding, occupation, severance and any other taxes,
duties or assessments with respect to activities or property of the SP Group,
together with all interest, penalties and additions imposed with respect to such
amounts, but excluding any such amounts imposed directly on MAP or the owners of
MAP as the result of Treasury Regulation (S)301.7701-3 or similar state and
local tax provisions.
1.41 "Tax Authority" and "Taxing Authority" shall mean any domestic, federal,
national, state, county or municipal or other local government, any subdivision,
agency, commission or authority thereof, or any quasi-governmental body
exercising any taxing authority or any other authority exercising tax regulatory
authority.
1.42 "Transition Agreement" shall mean the agreement by and between MAP, and
Plains All American Inc., substantially in the form of Exhibit 1.42.
1.43 "Unadjusted Purchase Price" shall mean $135,000,000.
1.44 "Units" shall mean 175,000 common units of Plains All American Pipeline,
L.P.
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ARTICLE II SALE AND PURCHASE OF MEMBERSHIP INTEREST
2.1 Sale and Purchase of Membership Interests. At the Closing, subject to
all of the conditions precedent stated in Articles VIII and IX being satisfied
or waived, the sale and purchase of the Membership Interest shall occur and
become effective in accordance with the provisions of this Agreement.
2.2 Purchase Price. At the Closing, Plains shall (a) pay the Unadjusted
Purchase Price, as adjusted pursuant to Section 2.3; and (b) either transfer the
Units to MAP, or pay additional consideration in the amount of $3,000,000 (the
Unadjusted Purchase Price and such additional consideration or the Units, at
Plains' option, together shall mean the "Purchase Price"). The Purchase Price
shall be payable as follows:
(x) a wire transfer of immediately available funds (federal) to MAP at
such account as MAP shall designate in writing not less than five (5) business
days prior to the Closing Date, in the amount of the Unadjusted Purchase Price,
as adjusted pursuant to Section 2.3; and
(y) a simultaneous wire transfer of the the additional consideration,
or an assignment of the Units, in accordance with Plains' election under Section
2.2(b).
2.3 Closing Adjustments. The Unadjusted Purchase Price shall be adjusted at
Closing by each of the following:
(a) If the Net Working Capital, as evidenced by the Effective Time
Working Capital Statement, is less than zero, the Unadjusted Purchase Price
shall be decreased by the amount by which the Net Working Capital is less than
zero. If the Net Working Capital as evidenced by the Effective Time Working
Capital Statement is greater than zero, the Unadjusted Purchase Price shall be
increased by the amount by which the Net Working Capital is greater than zero.
(b) If the net amount of the Prior Period Adjustments received or paid
during the Interim Period is a positive number, the Unadjusted Purchase Price
shall be increased by such amount. If the net amount of the Prior Period
Adjustments is a negative number, the Unadjusted Purchase Price shall be reduced
by such amount.
(c) If, during the Interim Period, the SP Group shall terminate any
employee(s) without cause pursuant to the request of Plains, the salary, or
hourly wage, plus payroll burden and taxes for such employee(s) through the
effective time of the termination will be part of the ordinary operating
expenses for the SP Group. The Unadjusted Purchase Price shall only be reduced
by the amount of any TAP benefits paid to such employee(s).
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(d) If, during the Interim Period, the SP Group has a need to borrow
funds to meet its daily obligations for payment of current liabilities in the
ordinary course of business, then MAP will advance to SP such funds. Such
loaned amounts will be evidenced by a Promissory Note in the form attached as
Exhibit 2.3(d). On the Closing Date, the outstanding principal amount of each
advance and its accrued interest under the Promissory Note, if any, shall be due
and payable in full as an addition to the Unadjusted Purchase Price; such upward
addition to be offset, however, by the amount of available cash or borrowed
funds, including interest accrued thereon, utilized to satisfy MAP's obligations
not otherwise provided for in this Agreement, or to satisfy liabilities of SP
which are or would have become on the Closing Date the indemnification
obligations of MAP.
(e) If any of the assets described in and to be excluded from this
transaction under Section 2.5 are owned by a member of the SP Group on or after
the Effective Time, the Unadjusted Purchase Price shall be increased by the
amount that such assets result in revenues to the SP Group and shall be
decreased by the amount that such assets result in costs and expenses to the SP
Group.
(f) The Unadjusted Purchase Price shall be increased by an amount equal
to the federal, and state partnership taxes incurred by or with respect to MAP,
and decreased by an amount equal to any such tax benefit received by or with
respect to MAP, attributable to the income, gain, loss, deduction and credit
with respect to the activities of SP and Scurlock Permian Pipe Line LLC during
the Interim Period included in the MAP federal partnership tax return and its
state tax returns for those states that follow the federal rules. Such income
taxes shall be deemed to equal 39% of the net amount of income, gain, loss and
deduction for the Interim Period included in the MAP federal partnership tax
return. For the purpose of this section, the Unadjusted Purchase Price shall be
increased by $400,000 to reflect the estimated income taxes for the Interim
Period. Such amount shall be adjusted at the time the net amount of income,
gain, loss, and deduction for the Interim Period to be included in the MAP
federal income tax return is determined, but in no event later than ninety (90)
days after the Closing Date.
(g) The Unadjusted Purchase Price shall be decreased by any amount
expended to meet the obligations of MAP under this Agreement. To the extent
that sums are expended that would be subject to the $25,000 threshold or the
$25,000 deductible contained in Section 12.6, such threshold and deductible
shall not apply.
(h) No adjustment made under this Section shall be duplicated.
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2.4 Net Working Capital Adjustment. Within sixty (60) days following the
Closing Date, Plains may elect to prepare and deliver to MAP a statement
("Adjustment Statement") detailing, by item, any instances in which Plains
believes that the Effective Time Working Capital Statement was not prepared in
accordance with the definitions of Current Assets and Current Liabilities set
forth in this Agreement, and the proposed resultant adjustments to Net Working
Capital. Plains shall make available to MAP all information reasonably required
to verify whether proposed adjustments detailed on the Adjustment Statement are
correct. Within thirty (30) calendar days following the receipt of the
Adjustment Statement, MAP may elect to dispute the Adjustment Statement by
giving written notice to Plains detailing each item disputed by MAP and setting
forth the reasons for such dispute. If MAP shall not have given a timely dispute
notice to Plains disagreeing with the Adjustment Statement, it shall be deemed
to have agreed with the Adjustment Statement. If MAP shall give a timely dispute
notice, MAP and Plains shall work in good faith to resolve any disputed items.
If they shall not so agree within thirty (30) calendar days following the date
the dispute notice is received, then either MAP or Plains may cause the matter
to be referred to the Arbitrator, by giving written notice to the other party
and to the Arbitrator. The fees and expenses of the Arbitrator shall be borne
50% by Plains and 50% by MAP. The Arbitrator shall, within ninety (90) calendar
days following the date such matter is referred to it, determine whether any
adjustment proposed on the Adjustment Statement that is the subject of
disagreement among the parties should be made; provided, however, that any
adjustments shall be in accordance with the definitions contained in this
Agreement. Such determination by the Arbitrator shall be final and binding on
the parties for the purposes of computing any payment to be made under this
Section 2.4, and may be enforced by appropriate judicial or other proceedings.
Such payments, in either case, shall be made within fifteen (15) calendar days
following the final determination (whether by agreement of the parties or
determination by the Arbitrator). If Plains elects not to furnish MAP an
Adjustment Statement within sixty (60) calendar days following the Closing Date,
then Plains shall have no further right to seek payment for adjustments to Net
Working Capital.
2.5 Excluded Assets. The following will not be assets owned by the SP Group
on the Closing Date:
(a) The SP corporate aircraft;
(b) The common stock of Marathon Ashland Petroleum Canada, Ltd.; and
(c) Any liquid hydrocarbons in SP Group's custody and owned by third
party shippers which liquid hydrocarbons will remain in the custody
of the SP Group.
In the event that any of the foregoing assets are owned by the SP Group on the
date of this Agreement, MAP shall cause title to such assets to be transferred
from the SP Group prior to the Closing, in accordance with applicable law.
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF MAP
MAP represents and warrants to Plains that:
3.1 Due Organization and Qualification. SP is a limited liability company
duly organized and validly existing under Delaware law and has all requisite
power to carry on its business as now being conducted and to own and operate the
assets now owned and being operated. SP is qualified to do business in every
other jurisdiction in which its failure to so qualify would have or constitute a
Material Adverse Effect, or would materially and adversely affect the ability of
SP to perform the transactions contemplated by this Agreement. Scurlock Permian
Pipe Line LLC is a limited liability company duly organized and validly existing
under Delaware law and has all requisite power to carry on its business as now
being conducted and to own and operate the assets now owned and being operated
by it. Scurlock Permian Pipe Line LLC is qualified to do business in every other
jurisdiction in which its failure to so qualify would have a Material Adverse
Effect. La Grange Oil Terminal Company is a Texas general partnership duly
organized and validly existing under Texas law and has all requisite power to
carry on its business as now being conducted and to own and operate the assets
now owned and being operated by it, and has no assets and conducts no business
in any state other than Texas.
3.2 Financial Statements. Exhibit 3.2 contains the Annual Financial
Statements which have been furnished to Plains for calendar years ending in
1996, 1997 and 1998 for the SP Group. Each of such Annual Financial Statements
consists of a balance sheet at year end and the related statement of income as
of that certain date and accompanying notes, if any. These are unaudited reports
representing the financial condition of the SP Group and the results of its
operations for the periods indicated. The financial condition of the SP Group
and the results of its operations represented in the audited financial
statements to be provided by MAP to Plains under Section 7.5 will not vary
materially from the financial condition and results of operations represented in
the Annual Financial Statements set forth in Exhibit 3.2, except with respect to
noncash writedowns, normal and customary adjustments required to account for the
SP Group as an unaffiliated entity as a result of the consummation of the
transactions contemplated by this Agreement, and the change from a fiscal year
to a calendar year for accounting purposes. Footnotes contained in such audited
financials shall not contain any disclosure of material contingent or other
liabilities or conditions, and that were not fully disclosed to Plains in
writing prior to the execution of this Agreement.
3.3 No Material Adverse Change. Except as set forth in Section 2.5, and
except for matters approved by Plains in accordance with this Agreement, and
except for the execution and delivery of this
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Agreement, since December 31, 1998, SP has (a) had no change in its condition,
financial or otherwise, operations, business, assets or liabilities, other than
changes in the ordinary course of business, none of which has had a Material
Adverse Effect; (b) suffered no damage, destruction or loss of physical property
that has had a Material Adverse Effect; (c) suffered no substantial loss or
waived, released or compromised any substantial right; (d) not made or permitted
any material amendment or termination of any material contract, agreement or
license to which it is a party other than in the ordinary course of business and
none of which has had a Material Adverse Effect; (e) not made any change in its
accounting methods or practices with respect to its condition, operations,
business, properties, assets or liabilities, except to the extent required to
account for the SP Group as an unaffiliated entity as a result of the
consummation of the transactions contemplated by this Agreement, and (f) not
entered into any material transaction not in the ordinary course of business.
3.4 Membership Interest. (a) The Membership Interest constitutes the only
issued and outstanding Membership Interest in SP.
(b) There are no options, warrants, contracts or commitments for the
issuance or sale by SP of, or any securities of SP convertible into or
exchangeable for, any additional Membership Interest.
(c) MAP has and, at Closing, will have good and merchantable title to
the Membership Interest free and clear of any liens, encumbrances, restrictions
(other than those set forth in SP's Second Amended and First Restated Limited
Liability Company Agreement dated effective February 4, 1998) and preferential
purchase rights.
3.5 Liabilities. Except to the extent reflected in the financial statements
referred to in the first sentence of Section 3.2, or in Sections 3.6, 3.7, 3.8,
or in Exhibit 3.5, SP has incurred no liabilities of any nature, whether
accrued, absolute, contingent or otherwise, which would have or would constitute
a Material Adverse Effect.
3.6 Environmental Conditions and Liabilities. (a) Exhibit 3.6(a) describes
all known material Environmental Liabilities of the SP Group. Except as set
forth in Exhibits 3.6(a) and 3.8, none of the SP Group is the subject of an
enforcement proceeding under any Environmental Law. Except as listed in Exhibits
3.6(a) and 3.8, and to the best of the knowledge of MAP or the SP Group: (i) the
SP Group has made all required disclosures under the applicable Environmental
Laws; and (ii) except for such files, documents, and records which cannot be
made available to Plains without waiving any attorney client privilege
pertaining thereto, MAP and the SP Group have made available to Plains all
material files, documents and records in their possession or in the possession
of its consultants related to the environmental condition of the Assets.
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(b) Exhibit 3.6(b) describes SP Group locations, issues or events which
have been identified by parties other than MAP or SP as presenting circumstances
potentially warranting further investigation of environmental conditions. Some
of the locations described on Exhibit 3.6(b) are no longer owned by SP. Except
as set forth in this Section 3.6(b), neither MAP nor the SP Group makes any
warranty or representation with respect to Environmental Liabilities of the SP
Group arising from or relating to the locations, issues or events listed on
Exhibit 3.6(b); provided, however, that to the extent that the environmental
conditions specified in Exhibit 3.6(b) exist, MAP shall defend and indemnify
the Buyer Indemnified Parties against any and all Environmental Liabilities
pursuant to Section 12.3 and claims related to locations, issues, and events
listed on Exhibit 3.6(b) are deemed asserted under Section 12.7.
3.7 Taxes. Any and all Returns required to be filed for any period on or
before the date of this Agreement have been or will be duly prepared and timely
filed by the SP Group and all Taxes shown as due and payable on such Returns
have been timely paid or are included in Accrued Taxes.
Effective January 1, 1998, for federal partnership tax purposes, and
for state income tax purposes in those states which follow the federal rules, SP
and Scurlock Permian Pipe Line LLC are disregarded as entities separate from MAP
pursuant to Treasury Regulation (S)301.7701-3.
SP is the successor to Scurlock Permian Corporation, a Kentucky
corporation, which was a wholly owned subsidiary of Ashland Inc. Scurlock
Permian Corporation was merged into SP immediately after the close of business
on December 31, 1997. On January 1, 1998, Ashland Inc. transferred its interest
in SP to MAP. Scurlock Permian Pipe Line LLC is the successor to Scurlock
Permian Pipe Line Corporation, a Kentucky corporation, which was a wholly owned
subsidiary of Scurlock Permian Corporation. Scurlock Permian Pipe Line
Corporation was merged into Scurlock Permian Pipe Line LLC immediately after the
close of business on December 31, 1997. For periods prior to January 1, 1998,
both Scurlock Permian Corporation and Scurlock Permian Pipe Line Corporation
were included in the federal income tax return for the Ashland Inc. consolidated
group.
3.8 Litigation. Except as set forth in the documentation described in
Section 3.5, in Exhibits 3.6(a), 3.6(b) and 3.8, there are no actions, suits,
proceedings, outstanding judgments, or, to the knowledge of MAP and the SP
Group, investigations against the SP Group involving any Person of any kind now
pending or threatened. Except as set forth in Exhibit 3.8, to the best of the
knowledge of MAP and the SP Group, neither the SP Group, nor any of its
respective properties or assets, is subject to any judicial or administrative
judgment, order, decree or restraint. Except to the extent covered in Section
12.11, none of
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the litigation set out in Exhibits 3.6(a) and 3.8 seeks injunctive relief or
will have a material effect on the operation or practices of the SP Group.
3.9 Equipment, Inventory, and Other Personal Property. (a) Exhibit 3.9(a)
decribes all the items of equipment, inventory, and other personal property
owned by the SP Group that had an original cost to the SP Group equal to or in
excess of $10,000, and all of the motor vehicles owned by the SP Group. Such
items together with the Major Pipelines and Terminals as are currently used in
the SP Group's business are in serviceable and working condition for their
intended use.
(b) The vehicles listed on Exhibit 3.9(b) are leased or subleased by
MAP and constitute all of the vehicles to be sub-subleased to SP pursuant to the
Sub-sublease Agreements or otherwise transferred to SP. Such vehicles are in
serviceable and working condition for their intended use. The subleases, as
amended, and set out in Exhibit 10.3(f), are all of the subleases, are valid and
in effect in accordance with their terms, and shall survive this Agreement and
shall remain in full force and effect in accordance with its terms.
(c) The applications, system documentation and source code for the
crude oil systems and any other proprietary source codes and related documents
used by the SP Group, and the hardware, and necessary rights to use the
software, comprising the SP Group's SCADA system, will be owned or leased by SP
Group at Closing.
(d) The Major Pipelines and Terminals are in serviceable and working
condition for their intended use.
3.10 Real Property. (a) Exhibit 3.10(a) sets forth all lands owned in fee by
the SP Group, with the legal descriptions or recordation information as
maintained in the SP Group's databases. The SP Group has and, at Closing, will
have good and marketable record title in fee to all lands listed on Exhibit
3.10(a), free and clear of any and all mortgages, liens and encumbrances created
by any Person. This Section does not apply to leased property or rights of way
for pipelines owned by the SP Group, as to the title of which Sections 3.10(b)
and (c) below provides the sole and exclusive representation and warranty by MAP
under this Agreement.
(b) All material lease agreements for the portions of the Major
Pipelines and Terminals that are leased by the SP Group are listed on Exhibit
3.10(b) and are in full force and effect in all material respects and constitute
the legal, valid and binding obligation of the parties thereto, enforceable
against the
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parties in accordance with their respective terms, subject to Permitted
Encumbrances. The Major Pipelines and Terminals are within leasehold boundaries
and there are no outstanding requests to relocate or remove any part thereof.
The lessee under such agreements has no notice that it is in default under any
material term or condition thereof.
(c) The SP Group has and, at Closing will have, good and defensible title
to the Rights of Way, subject only to Permitted Encumbrances, and excluding
Rights of Way underlying pipelines that are inactive or abandoned on the Closing
Date. The pipeline systems included within the Major Pipelines and Terminals
are located within the Rights of Way, except with respect to those instances in
which the failure of such systems to lie within the Rights of Way would not have
or constitute a Material Adverse Effect. The Rights of Way constitute
continuous land rights along the pipeline systems included within the Major
Pipelines and Terminals, except with respect to gaps which would not have or
constitute a Material Adverse Effect and there are no outstanding demands to
remove or relocate pipelines, tanks or related facilities.
3.11 Scurlock Permian Pipe Line LLC; La Grange Oil Terminal Company. SP owns
and, at Closing will have, good and merchantable title to 100% of the sole
membership interest in Scurlock Permian Pipe Line LLC, and 50% of the entire
partnership interests in La Grange Oil Terminal Company, free and clear of any
encumbrance, security agreement, restriction, preferential right, lien or charge
of any kind or character; except that the partnership interest in La Grange Oil
Terminal Company is subject to the terms, conditions and restrictions of that
certain Partnership Agreement dated June 17, 1992 between Scurlock Permian
Corporation and Union Pacific Fuels, Inc. Copies of the limited liability
company agreements of SP and Scurlock Permian Pipe Line LLC, and a copy of the
La Grange Oil Terminal Company partnership agreement have been provided to
Plains. There are no amendments of these agreements. Each such agreement is the
valid and binding legal obligation of MAP, SP, Scurlock Permian Pipe Line LLC,
or La Grange Oil Terminal Company, as the case may be, enforceable against MAP,
SP, Scurlock Permian Pipe Line LLC or La Grange Oil Terminal Company in
accordance with the respective terms of each agreement.
3.12 Licenses. The SP Group holds those Licenses that are reasonably
necessary for the purposes of conducting the SP Group's business. Except as set
forth in Exhibit 3.12, the SP Group has not received any notice by any
Government Authority of any intent not to renew any such License, nor any notice
of violation of any License existing, nor is any License not in full force and
effect, which would have or constitute a Material Adverse Effect.
3.13 Patents, Trademarks and Copyrights. The SP Group does not own any
patents, or applications therefor. Exhibit 3.13 contains a listing of all
trademarks owned by the SP Group and such are duly registered or for which an
application for registration has been made.
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3.14 Bank Accounts, Safe Deposit Boxes and Banking Arrangements. Exhibit
3.14 describes all bank accounts maintained by the SP Group and all commodity
brokers with whom a member of the SP Group maintains an account. Exhibit 3.14
also states the location of any safe deposit boxes maintained by the SP Group.
3.15 Contracts. (a) Except with respect to real property interests which are
governed exclusively by Section 3.10, and except with respect to those
agreements described in Section 9.5, Exhibit 3.15(a) lists all material
contracts, agreements, leases, licenses, or commitments to which any member of
the SP Group is a party. Neither any member of the SP Group nor any contracting
party is in material default under any contract, agreement, lease license, or
commitment listed on Exhibit 3.15(a). For the purposes of this Section, a
"material" contract means, with respect to crude oil transactions, any agreement
for the purchase, sale, trade, or exchange of at least 5,000 barrels per day, or
any agreement having a term of 90 days or more for the purchase, sale, trade or
exchange of greater than 1,000 barrels per day but less than 5,000 barrels per
day; otherwise, "material" contract means (a) any agreement having a term of 90
days or more and providing for the receipt by any member of the SP Group of
revenues in excess of $250,000 or requiring future expenditures or payments by
any member of the SP Group in excess of $250,000 or (b) any agreement between
any member of the SP Group and any Affiliate of MAP other than another member of
the SP Group.
(b) Except as described in Exhibit 3.15(b), as of March 12, 1999, there
are no contracts for futures trading positions, over-the-counter options, fixed
term nonhedge sales, lease hedge sales, or grade trade positions marked to
market, on or after the Effective Time to which a member of the SP Group is a
party. Except as set out in Exhibit 3.15(b), no member of the SP Group is not a
party as of March 12, 1999 to any swap or other derivative contract or
agreement.
(c) Except as set out in Exhibit 3.15(c), no member of the SP Group is
subject to any contractual obligations that would restrict its right to engage
in any type of business or compete in any geographic area.
3.16 Performance of Agreement. (a) Neither the execution and delivery of
this Agreement by MAP nor the consummation of the transactions and the
performance by MAP of the terms and conditions contemplated hereby will result
in the breach of any term or provision of, or constitute a default or result in
the acceleration of any obligation under, the limited liability company
agreement or partnership agreement, as applicable, of any member of the SP Group
or any instrument, decree, order, stipulation or consent to which any member of
the SP Group is a party or by which it is bound or will result in the
termination of or
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the right to terminate any instrument, decree, order, stipulation, or consent to
which any member of the SP Group is bound.
(b) MAP has all necessary power and authority to enter into and carry
out the transactions contemplated by this Agreement.
(c) MAP's execution, delivery and performance of this Agreement have
been duly and validly authorized and approved by all necessary company action on
the part of MAP.
(d) Except for the laws governing bankruptcy and similar protections,
this Agreement is the valid and binding agreement of MAP, enforceable against
MAP in accordance with its terms.
3.17 Compliance with Laws. Except as stated in Sections 3.5, and in Exhibits
3.6(a) and 3.8, the SP Group is in substantial compliance with all federal,
state, local and foreign statutes, laws, ordinances, regulations, rules,
judgments, orders or decrees, including but not limited to Environmental Laws,
applicable to it and its assets, businesses and operations.
3.18 Common Carrier Obligations. The SP Group is in substantial compliance
with all federal and state laws, rules and regulations governing tariff rates,
rules and regulations, and transportation practices of common carrier pipelines
including, but not limited to, the regulations of the Federal Energy Regulatory
Commission, and of the Texas Railroad Commission and counterpart regulatory
agencies of other states in which the Major Pipelines and Terminals are located.
3.19 Consents. Except as set forth in Exhibit 3.19, neither the execution
and delivery of, nor performance under this Agreement on the part of MAP is
prohibited by or requires any prior notice or payment to any Person or consent,
approval or authorization by any Person under (a) any agreement, license, lease
or right of way agreement related to the SP Group's business to which MAP or any
member of the SP Group is a party, or by which MAP or any member of the SP Group
is bound, or (b) applicable law and with respect to which the failure to make
such payment, give such notice, or obtain such consent, approval or
authorization would have a Material Adverse Effect.
3.20 No Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings against, being contemplated by, or, to the knowledge of MAP and the
SP Group, threatened against MAP or any member of the SP Group or any of their
Affiliates.
3.21 Agent's Fees. No agent, broker, investment banker, or other Person
acting on behalf of MAP
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or under its authority is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly from Plains in
connection with any of the transactions contemplated hereby.
3.22 Third Party Inventory. The quality and quantity of liquid hydrocarbons
that the SP Group holds in custody for third parties conform in all material
respects to shipper linefill and inventory accounts of the SP Group.
3.23 Year 2000 Compliance. The SP Group has provided Plains with its Year
2000 Compliance Plans and Budget, and to the best of the knowledge of MAP and
the SP Group, the SP Group has disclosed to Plains all material Year 2000
compliance issues, and is continuing to implement such Plans.
3.24 River Crossings. The SP Group's pipelines underlying the Mississippi
River are inactive and purged of crude oil.
3.25 DOT Pipelines. To the best of MAP and the SP Group's knowledge and
based upon current SP Group operations, the East Texas line and the Nettleton
to-Tyler line are the only pipelines owned by the SP Group that will, under
regulations in effect on the date of this Agreement, have to be hydrostatically
tested prior to December 31, 1999 in order to meet U.S. Department of
Transportation requirements.
3.26 Capital Leases. No member of the SP Group is a party to a capital lease
or similar arrangement.
3.27 General Provisions Regarding Representations and Warranties. Excepting
only portions of the foregoing representations and warranties which speak only
to a condition as of a specific date, each of the foregoing representations and
warranties shall be true in all material respects on the Closing Date. EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES OF MAP EXPRESSLY SET FORTH HEREIN, MAP
DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
PLAINS WILL ACQUIRE THE MEMBERSHIP INTEREST WITHOUT ANY REPRESENTATIONS,
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY, CONDITION OR FITNESS
OF THE ASSETS FOR A PARTICULAR PURPOSE OR THEIR COMPLIANCE WITH GOVERNMENTAL
REQUIREMENTS OTHER THAN THOSE REPRESENTATIONS OR WARRANTIES SPECIFICALLY SET
FORTH IN THIS AGREEMENT. PLAINS HAS MADE ITS OWN INVESTIGATION AND DETERMINATION
REGARDING THE ASSETS AND THEIR NATURE AND CONDITION AND THE PURCHASE THEREOF AND
HAS NOT RELIED ON ANY REPRESENTATIONS, STATEMENTS OR WARRANTIES OF MAP, ITS
AGENTS OR EMPLOYEES WITH RESPECT TO THE ASSETS, EXCEPT AS SPECIFICALLY SET FORTH
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HEREIN. PLAINS ACKNOWLEDGES THAT NO SUCH REPRESENTATIONS, STATEMENTS OR
WARRANTIES HAVE BEEN MADE, EXCEPT AS SPECIFICALLY SET FORTH HEREIN.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PLAINS
Plains represents and warrants to MAP that:
4.1 Due Organization and Qualification. Plains is a limited partnership
duly organized and validly existing under Delaware law and has all requisite
power to carry on its business as now being conducted. Plains is qualified to do
business in each other jurisdiction in which its failure to so qualify would
materially and adversely affect Plains or its financial condition or business or
ability to perform the transactions contemplated by this Agreement.
4.2 Performance of Agreement. (a) The execution and delivery of this
Agreement by Plains will not result in the breach of any term or provision of,
or constitute a default under, the Second Amended and Restated Agreement of
Limited Partnership of Plains or any contract, agreement, decree, order,
stipulation, or consent to which Plains is a party or by which it is bound.
(b) Plains has all necessary power and authority to enter into and
carry out the transactions contemplated by this Agreement including, without
limitation, the approval or vote, if required, of its limited partnership unit
holders to enter into this Agreement or perform the transactions contemplated
hereunder.
(c) Plains' execution, delivery and performance of this Agreement have
been duly and validly authorized and approved by all necessary partnership
action on the part of Plains and each affiliate of Plains whose authorization
and approval is required.
(d) Excepting for the laws governing bankruptcy and similar
protections, this Agreement is the valid and binding Agreement of Plains,
enforceable against Plains in accordance with its terms.
4.3 Agents' Fees. No agent, broker, investment banker or other Person
acting on behalf of Plains or under its authority is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly from MAP in connection with any of the transactions contemplated
hereby.
4.4 Financial Ability. Plains has, and on the Closing Date will have, the
financial ability to perform its obligations under this Agreement.
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4.5 No Bankruptcy. There are no bankruptcy, reorganization, or arrangement
proceedings against, being contemplated by or, to the knowledge of Plains,
threatened against Plains or any of its Affiliates.
4.6 Units. Should Plains elect to deliver Units pursuant to Section 2.2,
Plains, at Closing, will have good and merchantable title to the Units, free and
clear of any liens, encumbrances, restrictions and preferential purchase rights
other than those set forth in Plains' Second Amended and Restated Partnership
Agreement dated November 17, 1998, and no sale by MAP or distributions to MAP
for one year.
4.7 General Provisions Regarding Representations and Warranties. Excepting
only portions of the foregoing representations and warranties which speak only
to a condition as of a specific date, each of the foregoing representations is
continuing and shall be true with the same force and effect as if made on the
Closing Date. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF PLAINS EXPRESSLY
SET FORTH HEREIN, PLAINS DOES NOT MAKE ANY REPRESENTATION OR WARRANTY WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
ARTICLE V EMPLOYEE MATTERS
5.1 Benefit Plans and Employment Practices. (a) Unless otherwise
specifically provided in this Agreement, coverage under any employee benefit
plan sponsored by MAP as that term is defined under Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") or employment policy sponsored
by MAP shall cease for all SP employees effective at Closing, except for those
transferred to MAP. Except for the Frozen Permian Plans described in Section
5.4, SP is not the sponsor of any employee benefit Plan as that term is defined
under Section 3(3) of ERISA.
(b) Effective as of the Closing Date, Plains shall offer SP employees
its benefit plans based on the terms and conditions of such plans and SP
employees will be covered by Plains' employment practices. For each SP employee
who is employed immediately after Closing, Plains will recognize each such
employee's prior service for eligibility and vesting purposes only under its
qualified and welfare plans and employment practices with the exception of its
vacation plan or policy. Plains will cause SP to observe the existing MAP
Vacation Plan for the balance of 1999 for employees employed by SP immediately
after Closing.
(c) Prior to Closing, MAP shall be responsible for any required
continuation of coverage notification under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and Sections 601 through 608 of ERISA
("COBRA") to any of SP's employees who have a qualifying COBRA event. Prior to
Closing MAP shall be responsible for issuing any required Certificates of
Creditable Coverage under the Health
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Insurance Portability and Accountability Act of 1996 ("HIPAA") to SP's
employees. MAP's responsibility under COBRA and HIPAA shall cease at Closing.
(d) Subsequent to Closing, Plains agrees to provide MAP reasonable
access to all employment records required by MAP for legal or tax purposes.
5.2 Severance Arrangements. (a) Employees terminated by SP Group prior to
Closing shall be paid severance from the TAP to the extent they meet that
benefit plan's eligibility requirements.
(b) At least ten (10) business days prior to the Closing Date, Plains
will designate which individuals it does not wish to have as employees for any
purpose following the Closing. MAP will cause those individuals to be
terminated by SP Group prior to Closing.
(c) At least ten (10) business days prior to the Closing Date, Plains
will designate which SP employees, and MAP ITS employees assigned to SP, Plains
wishes to have as Loaned Employees. "Loaned Employees" for purposes of this
Section shall have the meaning set forth in the Transition Agreement. The terms
of such loan will be governed by the Transition Agreement. MAP will cause the
Loaned Employees to be reassigned from SP to become employees of MAP prior to
Closing. From and after the date of this Agreement until ten days prior to
Closing, Plains may extend an offer of employment to any MAP ITS employee
assigned to the SP Group. Such offer of employment and acceptance thereof by a
MAP ITS employee shall be contingent upon the Closing of the transaction
contemplated herein. No employee who accepts an offer of assignment with Plains
prior to Closing will suffer any loss of compensation, benefit, or position as a
result of a contingent acceptance of employment with Plains. If for any reason,
the transactions contemplated by this Agreement does not close, all MAP ITS
employees that made a contingent acceptance of an offer of employment will
retain their position as MAP employees at will and will retain all benefits and
current level of compensation. Plains may designate any employee who has
declined employment with the SP Group as a Loaned Employee under Section 5.2(c).
During the period from the date of this Agreement through the Closing Date, (i)
MAP will not make a pre-emptive specific relocation or reassignment offer to a
MAP ITS employees without the prior written consent of Plains; (ii) only after
Plains makes a formal employment offer will MAP advise a MAP ITS employee of
whether the possibility of continued employment exists after the end of the term
of the Transition Agreement, it being understood that such discussions may
include the general nature of the MAP ITS employee's anticipated future
assignment and location and will include normal pay treatment for relocations,
and that MAP's relocation package may be discussed where appropriate; and (iii)
MAP ITS employees who have not accepted Plains employment offers may bid on
positions normally listed on MAP's company-wide job posting system; provided,
however, that no MAP ITS employee will be specifically solicited for these
positions; provided, further, that once a MAP ITS employee
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has requested consideration for a posted position, the MAP ITS employee may be
given the same consideration as MAP's other employees. Upon notice to MAP of a
MAP ITS employee's contingent acceptance of an offer, MAP shall not solicit,
offer employment to, or otherwise attempt the retain the employment of such
employee.
(d) Plains may designate SP employees as "Transitional Employees" by
written notice to MAP. Transitional Employees terminated without cause by SP
Group or its successor for up to twelve (12) months after Closing shall be paid
severance, to the extent they meet eligibility requirements, from a plan either
sponsored by Plains or one of its subsidiaries (including SP). However, for any
individual paid severance pursuant to this Section 5.2(d), Plains or its
subsidiaries shall be reimbursed by MAP for an amount equal to what the employee
would have received under the TAP had they remained eligible for a benefit under
TAP. As part of any severance payment, Plains shall obtain a release from any
employees terminated pursuant to this section which releases MAP and that is
substantially similar to the release used by the TAP, a copy of which is
attached hereto as Exhibit 5.2(d).
(e) The total of the employees terminated by SP under Sections 5.2(b),
(c) other than Loaned Employees providing IT services to SP, and (d) for which
MAP shall be obligated to reimburse Plains shall not exceed seventy-five (75).
Plains agrees not to terminate or cause termination of more than seventy-five
(75) SP employees until after the ninety-first (91st) day following the Closing
Date.
5.3 Worker Adjustment Retraining Notification Act. (a) Prior to the Closing
Date MAP shall have the sole responsibility and liability for making any and all
necessary employee notifications under the Worker Adjustment Retraining
Notification Act ("WARN") and comparable state laws. This includes any employees
which Plains anticipates terminating within sixty (60) days after Closing,
provided that Plains provides the names of the employees it anticipates
terminating to MAP at least seventy (70) days prior to the anticipated
termination of employment date.
(b) After the Closing Date, Plains will have sole responsibility and
liability for making any and all necessary employee notifications under WARN and
comparable state laws except for those employees whose names were provided to
MAP pursuant to Section 5.3(a). MAP shall provide to Plains, not less than ten
(10) business days prior to Closing and updated at Closing, a list of SP
employees, full and part-time, who have terminated their employment with SP in
the ninety (90) day period prior to Closing.
5.4 Assumption of Permian Corporation Retirement and Savings Plans Prior to
Closing SP shall assume from MAP, as the new plan sponsor and administrator, the
responsibilities of the operation and administration of the Frozen Permian
Corporation Retirement Plan and the Frozen Permian Corporation
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Savings Plan (the "Permian Plans"). In connection with such assumption, MAP
represents and warrants that the Permian Plans are tax qualified under Internal
Revenue Code (S) 401(a), all contributions have been made as required by the
Permian Plans, and are and have been operating in substantial compliance with
all applicable requirements of the Code and ERISA through the date on which SP
assumes the duties of plan sponsor and administrator thereof. MAP agrees, from
and after the Closing Date, to indemnify, defend, protect and hold harmless the
Buyer Indemnified Parties (as defined in Article XII) from and against, any and
all claims, actions, causes of action, arbitrations, proceedings, losses,
damages, liabilities, judgments, and expenses (including, without limitation,
reasonable attorneys' fees and court costs) incurred by the Buyer Indemnified
Parties as a result of any breach of the representations and warranties made by
or on behalf of MAP in this Section or in Section 12.16. Any claim for
indemnification under this provision shall not be subject to any limitation
under Article XII but shall be subject to the procedures for asserting indemnity
claims set forth in Section 12.7.
5.5 Workers Compensation. MAP shall maintain workers compensation coverage
for SP Group employees until the date of Closing. Plains shall be responsible
for providing workers compensation coverage after Closing.
5.6 Representations and Warranties Regarding Employees and Employee Benefit
Plans.
(a) At no time has SP been required to contribute to any "multi-
employer pension plan" as defined in (S) 3(37) of ERISA or incurred any
withdrawal liability with the meaning of (S) 4201 of ERISA.
(b) No employees are represented by any union or subject to any
collective bargaining agreement. SP has not suffered any work stoppage, nor, to
MAP or SP's knowledge is any work stoppage threatened at any SP location. To
MAP and SP's knowledge, no union organizing or election activities involving any
nonunion employees of SP are in progress or threatened.
(c) Except as provided in Exhibit 5.6(c) SP has not entered into any
contract or promise of employment with any person which cannot be terminated at
or prior to the Closing without cost to Plains, or which applies to any time
period after Closing. Except as set forth on Exhibit 3.8, no employee has filed
any complaint which is currently pending with any regulatory or administrative
body, asserted any claim or demand, or filed any suit relating to the employment
relationship with SP which is currently pending. MAP shall reimburse Plains for
any retention payment or other similar bonus or payment made by or on behalf of
Plains to SP employees that exists at Closing but are due and payable on or
after Closing under the provisions of the contracts listed in Exhibit 5.6 (c).
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(d) The transactions contemplated by this Agreement will not accelerate
the time of payment or vesting, or increase the amount of regular compensation
due any director, officer, or employee (or former director, officer, or
employee, including any beneficiary) of the SP Group.
(e) Prior to Closing, the SP Group shall not amend or adopt or agree to
adopt any benefit plan or employment practice without the consent of Plains.
(f) If, during the Interim Period, SP pays its employees pursuant to SP
Group's "Success Through People" incentive program, MAP shall reimburse SP in
the amount of such payment.
(g) Effective no later than Closing, SP shall terminate its
participation in all employee benefit plans sponsored by MAP or its Affiliates
in which the SP Group participates.
5.7 No Third Party Beneficiaries. Nothing expressed or implied in this
Agreement is intended to confer upon or deny any employee any rights or remedies
including, but not limited to, any rights of employment for any specified period
of time.
5.8 Obligations of Plains All American Inc. For purposes of Article V,
references to the responsibilities, obligations and undertakings of an employer
shall be deemed to apply to Plains All American, Inc. Plains shall cause Plains
All American Inc. to perform all such responsibilities, obligations and
undertakings.
ARTICLE VI TAX MATTERS
6.1 SP Disregarded as Separate Entity for Income Tax Purposes. For federal
income tax purposes, and for state income tax purposes in those states which
follow the federal rules, SP and Scurlock Permian Pipe Line LLC are disregarded
as entities separate from MAP pursuant to Treasury Regulation (S)301.7701-3.
6.2 Allocation of Taxable Income to Periods Before and After Effective
Time. MAP shall include in its federal partnership tax return, and in its state
tax returns for those states that follow the federal rules, income, gain, loss,
deduction and credit with respect to (i) activities of SP and Scurlock Permian
Pipe Line LLC prior to the Closing Date, and (ii) the net amount of any Prior
Period Adjustments treated as an adjustment to the Unadjusted Purchase Price
pursuant to Section 2.3(b). Plains shall include the income, gain, loss,
deduction and credit with respect to activities of SP and Scurlock Permian Pipe
Line LLC on and after the Closing Date, less any amounts attributable to Prior
Period Adjustments included by MAP, in either (i) its own federal income tax
return, and in its own state income tax returns for those states that follow the
federal rules or (ii) in federal and state income tax returns filed by an
affiliate or affiliates of Plains, including
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SP and Scurlock Permian Pipe Line LLC. MAP shall pay any penalties and interest
assessed, and Plains shall hold MAP harmless from and reimburse MAP for income
tax due and unpaid, resulting from Plains' reporting of SP's income, gains,
losses and deductions, and credits for the Interim Period.
6.3 Sale of SP Treated as Asset Sale for Income Tax Purposes. The sale of
the Membership Interest shall be treated for federal income tax purposes, and
for state income tax purposes in those states that follow the federal rules, as
a sale of the underlying assets of SP and Scurlock Permian Pipe Line LLC in
exchange for the Purchase Price and the assumption of the liabilities of SP and
Scurlock Permian Pipe Line LLC at the Closing Date. MAP and Plains agree to
timely file Internal Revenue Service Form 8594, "Asset Acquisition Statement."
The aggregate fair market value and the allocation of sales price shown on the
Form 8594 shall be determined and agreed to by MAP and Plains in reasonable,
good faith negotiations.
6.4 Internal Revenue Code 1031 Exchanges. MAP and Plains acknowledge and
agree that MAP may engage in a deferred exchange of like-kind property utilizing
a qualified intermediary pursuant to Section 1031 of the Internal Revenue Code
of 1986, as amended. Notwithstanding any provision herein to the contrary, in
the event MAP elects to engage in a deferred like-kind exchange, Plains agrees
to consent to the assignment of MAP's rights under this Agreement to a qualified
intermediary in order to facilitate the deferred like-kind exchange. MAP and
Plains agree to execute any and all documents necessary to consummate the
purposes of this section; provided, however, any costs incurred by Plains
including legal fees and all incidental and related expenses shall be reimbursed
by MAP.
6.5 Transfer Taxes. All transfer, documentary, sales, use, registration and
other such similar Taxes (including all applicable real estate transfer taxes)
and related fees (including any penalties, interest and additions to Tax, if
any) incurred in connection with this agreement and the transactions
contemplated hereby shall be paid by Plains, and MAP and Plains shall cooperate
in timely making all Returns as may be required to comply with the provisions of
such Tax laws.
In the opinion of Buyer and Seller this purchase and sale constitutes an
isolated or occasional sale and is not subject to sales or use tax with any of
the taxing authorities having jurisdiction over this transaction, and no sales
tax need be collected by MAP from Plains at Closing. MAP agrees to cooperate
with Plains in demonstrating the requirements for an isolated or occasional sale
or other sales tax exemption have been met.
6.6 Cooperation and Preservation of Books and Records. MAP and Plains shall
provide such assistance to each other (and their Affiliates) as the other party
may reasonably request in connection with the preparation of any Return required
to be filed in respect of the SP group, any audit or other examination
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by any Tax Authority, any judicial or administrative proceeding relating to
liability for Taxes, or any claim for refund in respect of such Taxes, and MAP
and Plains will retain, and upon request provide, any records or information
which may be relevant to such Return, audit, examination, proceeding or claim.
Such assistance shall include (i) making employees or counsel available at and
for reasonable times to provide additional information and explanation of any
material to be provided hereunder and (ii) furnishing access to, and permitting
the copying of any records, returns, schedules, documents, work papers or other
relevant materials which might reasonably be expected to be of use in connection
with such Return, audit, examination, proceeding or claim.
MAP and Plains recognize that they (or an Affiliate) may need access, from
time to time, after the Closing Date, to certain accounting and Tax records and
information held by the other party or the SP Group; therefore, MAP and Plains
agree (i) to use their best efforts to properly retain and maintain such records
until such time as the parties agree that such retention and maintenance is no
longer necessary and (ii) to allow the requesting party and its respective
agents and other representatives (and agents or other representatives of any of
their respective affiliates), at times and dates mutually acceptable to the
parties, to inspect, review, and make copies of such records as the requesting
party may deem necessary or appropriate from time to time, such activities to be
conducted during normal business hours and at the requesting party's expense.
ARTICLE VII OBLIGATIONS OF PARTIES PRIOR TO CLOSING
7.1 General. From and after the date of this Agreement, up to and including
the Closing Date, neither party will take any action which would cause any of
its representations and warranties herein not to be true and correct in all
material respects as of the Closing Date except by written authorization of the
other party. Each party shall use reasonable best efforts to carry out and
comply with the provisions of this Agreement, to satisfy the conditions
applicable to such party and to consummate the sale and purchase in accordance
with this Agreement. Plains and MAP agree to file their Hart-Scott-Rodino Act
Pre-Merger Notifications prior to or within three (3) business days after the
execution of this Agreement.
7.2 Access to Records and Properties of SP Group. Subject to requirements
of confidentiality imposed by contract or by law, MAP will cause the SP Group to
make available to Plains and its accountants, counsel and other representatives
access for copying and inspecting, during normal business hours and such other
reasonable times to which the parties may agree, to the properties, books and
records of the SP Group and allow the SP Group's officers and representatives to
be available to Plains for consultation. In exercising the right of access,
Plains may conduct environmental tests and sampling, the scope of which shall
require the consent of MAP, which consent shall not be unreasonably withheld,
and such other testing and inspection
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of the SP Group Assets as it shall reasonably deem necessary; provided, always,
that Plains will give such advance notice of such activities as will give MAP's
desired representatives sufficient time to be present for witnessing; and
provided, further, that Plains in exercising rights under this Section will not
unreasonably interfere with the conduct of the business or make disclosure of
this Agreement or its terms except as provided for under the Confidentiality
Agreement or as required by law or applicable stock exchange rules.
7.3 Conduct of Business of the SP Group Until the Closing. During the
period from the date of execution of this Agreement to the Closing Date, unless
Plains consents in writing to contrary action, MAP will cause the SP Group to:
(a) Not cause or receive any distributions, cash or otherwise, in
respect of, nor issue or sell, or purchase or otherwise reacquire, the
Membership Interest or SP's interests in the other members of the SP Group, or
grant or commit to grant any options, warrants, or other rights to subscribe
for, or purchase, or otherwise acquire, any shares of the Membership Interest or
SP's interests in the other members of the SP Group, or issue or commit to issue
any securities convertible into or exchangeable for shares of the Membership
Interest or SP's interests in the other members of the SP Group;
(b) Not change or amend its limited liability company agreement or the
limited liability company agreement or partnership agreement (as the case may
be) of the other members of the SP Group;
(c) Maintain its books, records and accounts in accordance with GAAP
and in the usual and regular manner consistent with current practice, except to
the extent required to account for the SP Group as an unaffiliated entity
pursuant to this Agreement.
(d) Not borrow or agree to borrow any money or guarantee, or agree to
guarantee the obligations of others, except the SP Group may borrow from MAP and
cause the issuance of guarantees and letters of credit in the ordinary course of
business.
(e) Not make, without prior written consent of Plains, any material
contracts or amend any existing material contracts. For purposes of this
Section, the term "material" shall have the meaning ascribed to that term in
Section 3.15.
(f) Not create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance on any of its assets except for Permitted Encumbrances.
(g) Not sell, assign, lease or otherwise dispose of, without prior
notice to Plains, any of the
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Assets having an original cost to the SP Group in excess of $50,000 other
than in connection with the replacement of obsolete or worn-out items or
pursuant to Section 2.5.
(h) Continue to diligently pursue implementation of its current "Year
2000" compliance program, a complete copy of which has been furnished to Plains.
(i) Except as otherwise expressly provided herein, operate its business
and maintain its assets in the ordinary course consistent with prudent operation
and accepted industry standards. Except for capital expenditures committed, not
to exceed $500,000, by the SP Group on the date of this Agreement, the SP Group
shall not make, and shall have no obligation to make, any capital expenditure
without the prior written consent of Plains.
(j) Not solicit or accept any other bids for the purchase and sale of
the Membership Interest or SP's interests in the other members of the SP Group.
(k) Take all necessary company and other action and use reasonable best
efforts to obtain such third party consents, approvals and amendments of
agreements, if any, as may be necessary for it to carry out the transactions
contemplated in this Agreement.
(l) Update Exhibit 3.10 (a) prior to Closing to the extent that
inaccuracies are found in the legal descriptions or recordation information, and
update the Right-of-Way and lease records to the extent required to satisfy the
record requirements of any mortgagee of Plains. Any third party costs to
satisfy mortgagee requirements shall be at Plains' expense.
(m) obtain conveyances from its Affiliates to SP or Scurlock Permian
Pipe Line LLC, as appropriate, any permits, rights of way and leases in the name
of such Affiliates, including rights of way or leases in the Homochitto National
Forest.
(n) cause SP to draw upon the Promissory Note to cover its cash needs
during the Interim Period in lieu of outside credit facilities.
Should Plains not object to any issue for which Plains receives written
notice under this Section, within three (3) business days after such notice is
received by Plains, Plains shall be deemed to have approved such issue.
7.4 Obligations of Plains Until the Closing. During the period from the
date of this Agreement to the Closing, Plains will:
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(a) Take all necessary partnership and other action and use reasonable
best efforts to obtain such third party consents, approvals and amendments of
agreements, if any, as may be necessary for it to carry out the transactions
contemplated in this Agreement; and
(b) Treat, and cause its employees, agents and representatives to
treat, all information obtained regarding the SP Group, which is not otherwise
lawfully known to or already in the public domain, as proprietary and
confidential, and to observe strictly the terms of any confidentiality
agreements to which the SP Group is a party or is bound, provided copies of such
agreements have first been provided to Plains.
7.5 Obligations of MAP Regarding Financial Statements. MAP, at its cost,
shall furnish Plains with an Effective Time Working Capital Statement no later
than May 1, 1999. MAP, at its cost, shall furnish to Plains, no later than May
1, 1999, annual SP income statements, balance sheets and cash flow statements,
including accompanying footnotes, sufficient for preparation of Plains' Form 8K
report, for calendar years 1996, 1997 and 1998 audited by
PricewaterhouseCoopers. MAP shall provide to Plains unaudited SP Group financial
statements for the first quarter ended March 31, 1999 no later than May 1, 1999.
7.6 Casualty Loss or Condemnation. Except as otherwise provided in this
Agreement, from and after the Effective Time through the Closing Date, MAP shall
bear the risk of loss due to damage or destruction of the Assets by fire or
other casualty, except that the risk of the first $100,000 per occurrence of any
such loss shall be borne by Plains. Except as set forth on Exhibit 3.8, neither
MAP nor any member of the SP Group has received any notice, and neither has any
knowledge of, any proceedings for the taking, by eminent domain or condemnation,
of all or any portion of any of the Assets.
7.7 Surety Bonds and Guarantees. (a) Exhibit 7.7(a) lists all of the surety
bonds issued on behalf of the SP Group as may be required by a Government
Authority. To the extent permitted by their terms, MAP will cause those bonds to
be cancelled at or immediately prior to Closing. Plains agrees to replace those
bonds that are not cancelable at will, no later than thirty (30) days following
the Closing.
(b) Exhibit 7.7(b) lists all of the guarantees issued on behalf of any
member of the SP Group by MAP or Ashland, Inc. for the benefit of various SP
crude oil trading partners. MAP will cause these guarantees to be terminated on
the first to occur of (i) the date of termination stated therein; or (ii) such
other date on or after the Closing Date to which the respective guaranty
beneficiaries may agree. Plains agrees thereafter to provide credit support, if
any, required by third parties.
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(c) Election to Deliver Units. If Plains elects to deliver Units
pursuant to Section 2.2, Plains and MAP shall agree to such additional
representations and warranties and shall execute such additional instruments and
agreements as are customary and reasonably necessary to effect the transfer of
Units pursuant to this Agreement.
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF MAP
The obligations of MAP hereunder are subject to satisfaction of the
conditions set out in this Article VIII at or before the Closing Date.
8.1 Absence of Litigation. Excluding actions or proceedings initiated by
MAP or any of its Affiliates, no action or proceeding shall have been instituted
or threatened before any Government Authority to enjoin, restrain or prohibit,
or to obtain substantial damages from MAP in respect of, this Agreement or the
consummation of the transactions contemplated hereby.
8.2 Performance and Obligations of Plains. (a) All of the terms and
conditions of this Agreement to be complied with and performed by Plains at or
before the Closing Date shall have been complied with and performed in all
material respects, and the representations and warranties made by Plains in this
Agreement shall be correct in all material respects with the same force and
effect as though such representations and warranties had been made at and as of
the Closing Date.
(b) MAP shall have received from Plains an officer's certificate in a
form reasonably satisfactory to MAP to the effect that to such officer's
knowledge, the conditions set forth in Section 8.2(a) have been satisfied.
(c) MAP shall have received from Plains a written opinion of counsel,
dated as of the Closing Date, covering the matters set forth in Section 4.1, 4.2
and, if applicable, 7.8, which opinion shall be in a form reasonably
satisfactory to MAP.
8.3 HSR Approval. All necessary governmental approvals shall have been
obtained.
8.4 Waiver. At the Closing, MAP may waive in writing the failure of Plains
to satisfy any of the foregoing conditions precedent.
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ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF PLAINS
The obligations of Plains hereunder are subject to satisfaction of the
conditions set out in this Article IX at or before Closing Date.
9.1 Absence of Litigation. Excluding actions or proceedings initiated by
Plains or any of its Affiliates, no action or proceeding shall have been
instituted or threatened before any Government Authority to enjoin, restrain or
prohibit, or to obtain substantial damages from Plains in respect of, this
Agreement or the consummation of the transactions contemplated hereby.
9.2 Performance and Obligations of MAP. (a) All of the terms and conditions
of this Agreement to be complied with and performed by MAP at or before the
Closing Date shall have been complied with and performed in all material
respects, and the representations and warranties made by MAP in this Agreement
shall be correct in all material respects with the same force and effect as
though such representations and warranties had been made as of the Closing Date.
(b) Plains shall have received from MAP an officer's certificate in a
form reasonably satisfactory to Plains to the effect that to such officer's
knowledge, the conditions set forth in Section 9.2(a) have been satisfied.
(c) Plains shall have received from MAP a written opinion of counsel,
dated as of the Closing Date, covering the matters set forth in Sections 3.1 and
3.16 (a), (b), and (c), which opinion shall be in a form reasonably satisfactory
to Plains.
9.3 Tender of Resignations. Each MAP-appointed member representative and
officer of the SP Group shall have tendered in writing his or her resignation as
such effective upon Closing and copies of such written resignations shall have
been furnished to Plains.
9.4 HSR Approval. All necessary governmental approvals shall have been
obtained.
9.5 Marathon Ashland Pipe Line LLC Transactions. Agreements evidencing the
following transactions between SP Group and Marathon Ashland Pipe Line LLC
("MAPL"), or SP, MAP and MAPL, as the case may be, shall be mutually approved
and shall have been fully executed by all necessary parties by the Effective
Time:
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(a) First Amendment to Lease Agreement (Venice, Louisiana Terminal), to
include a three (3) year term provided MAPL is the operator - SP
and MAP
(b) Conveyance (Indiana and Illinois truck unloading facilities) - MAPL
to SP
(c) Conveyance (Indiana and Kentucky truck unloading facilities) - MAP
to SP
(d) Operating Agreements (truck unloading facilities described in (b)
and (c)) - SP and MAP
(e) Lease Agreements (Slick Creek, Wyoming; Smith Mill, Kentucky; Stoy,
Illinois; Martinsville, Illinois; Sandoval, Illinois; Noble,
Illinois; Enfield, Illinois; Bridgeport, Illinois; Owensboro,
Kentucky; Oregon Basin, Wyoming truck unloading facilities) - MAP,
MAPL, and SP.
9.6 Illinois Basin Gathering Assets. (a) On or before the Closing Date, the
crude oil gathering systems, including all pipe, pumps, valves, fittings,
appurtenances and other personal property comprising such systems, described in
Exhibit 9.6(a); all land rights necessary to the ownership or operation of such
gathering systems; all contracts material to the operation of such pipelines
including, but not limited, all necessary contract rights for the operation of
such gathering systems through the SP Group's SCADA system; shall have been
transferred by MAPL to a member of the SP Group as may be designated by Plains,
and all material approvals of Government Authorities required to be obtained
before Closing as a result of such transfer shall have been obtained.
(b) MAP hereby represents and warrants that as to the Basin Assets:
1. The financial performance of such assets conforms in all material
respects to the Exhibit 9.6(b) and that there are no material
changes in the financial condition, of the business conducted
through the Basin Assets.
2. There are no environmental conditions or liabilities that would
have a Material Adverse Effect with respect to the Basin Assets.
3. There is no litigation, proceedings, enforcement actions or other
legal proceedings pending or to the knowledge of MAP, threatened,
relating to the assets or business conducted through the Basin
Assets that would have a Material Adverse Effect.
4. The equipment, inventory, pumps, meters, motors, tanks, pipe, and
all other facilities, personal property and vehicles currently used
to operate the Basin Assets are in working order and serviceable
condition for their intended use.
5. Title to the real property, rights of way, leases, easements and
licenses contained in the
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active portion of Basin Assets is good and defensible, in full
force and effect. The active portion of the Basin Assets are
located within the right of way, leases or real property
boundaries, all rights of way are contiguous and there are no
outstanding requests to relocate or remove any part of the action
portion of the Basin Assets.
6. All licenses, permits, contracts and other authorizations and
incidental rights reasonably necessary to the current operation of
the Basin Assets are valid, enforceable in accordance with their
terms and conditions and are transferable.
7. The Basin Assets have been operated in substantial compliance with
all laws, statutes, rules and regulations, including without
limitation all Environmental Laws, laws and regulations concerning
common carrier obligations and responsibilities.
8. Other than approvals that may be required by the Illinois Commerce
Commission, there are no third party consents required to transfer
the Basin Assets to a member of the SP Group.
(c) MAP hereby covenant that as to the Basin Assets, MAP shall:
1. Cause all real property, leases, licenses and other interests in
real property upon which the Basin Assets are located to be
conveyed to such member of the SP Group as may be designated by
Plains, with full warranty of title or right, free and clear of any
liens or encumbrances, except Permitted Encumbrances in a form
approved by Plains.
2. Cause all equipment, parts, inventory, vehicles and personal
property to be conveyed with warranty of title, warranty of
serviceability and working order for its intended condition, free
and clear of all liens and encumbrances, except for Permitted
Encumbrances.
3. Cause the transfer of such member of the SP Group as may be
designated by Plains, of all the Licenses and contracts, after
first obtaining all material consents and approvals.
4. Cause all the transfer of the Basin Assets to be in compliance with
all laws, rules and regulations and contractual commitments.
5. Cause a shipper's balance to be issued at closing to Plains
reflecting the quantity and quality of crude oil held for the
account of each shipper.
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(d) Plains shall have received an officer's certificate from MAP, in a
form reasonably satisfactory to Plains, to the effect that to such officer's
knowledge, the representations and warranties made by MAP in Section 9.6(b)
above is true in all material respects. Such representations and warranties
shall be correct in all material respects with the same force and effect as
though such representations and warranties had been made as of the Closing Date.
(e) MAP shall cause MAPL to enter into an operating agreement in a
mutually agreeable form with a member of the SP Group under which MAPL shall
operate the assets described in Exhibit 9.6(a) for a period of six months from
and after Closing, providing such services as are necessary to facilitate
transition to operations by Plains.
(f) In the event that the parties are required to obtain the
approval of the Illinois Commerce Commission in order to consummate the
transactions contemplated under this Section, and such approval has not been
obtained on or before the Closing Date then title to the Assets shall be
retained by MAPL subject to the following. MAPL shall continue to operate the
Basin Assets under the Operating Agreement, but the economic results from
operations pending such approval shall be for the account of Plains; it being
understood that neither party shall have the right to terminate this Agreement
under Article 11 as a result of the failure to obtain necessary Illinois
Commerce Commission approvals on or before Closing. The Basin Assets shall be
conveyed to the member of the SP Group so designated by Plains, as provided
above, within ten (10) business days following the date on which MAPL obtains
such approval; provided, however, if such approval is not received within ten
(10) years following the Closing Date then the Basin Assets shall not be
conveyed by MAPL to such member of the SP Group and shall cease to be subject to
this Agreement.
9.7 Waiver. At the Closing, Plains may waive in writing any of the
foregoing conditions precedent.
ARTICLE X CLOSING
10.1 Place of Closing and Closing Date. The Closing shall take place at the
offices of Marathon Oil Company, 5555 San Felipe, Houston, Texas, subject to the
satisfaction of the conditions precedent stated in Articles VIII and IX on the
later to occur of (a) May 18, 1999, or such other date as may be mutually
agreed, or (b), if such approvals have not been obtained by such date provided
in clause (a) above, the 10th calendar day following the date upon which all
material governmental approvals have been obtained; it being understood and
agreed that if Closing is delayed beyond June 18, 1999 due to the inability of a
party to secure a material approval of any Government Authority having
jurisdiction over the parties or the Assets of, but not limited to the approval
of the Federal Trade Commission in connection with its antitrust review
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of the subject transaction, then MAP shall be entitled to interest on the
Purchase Price at a rate equal to the London Inter Bank Offered Rate as
published in the June 15, 1999 edition of the Wall Street Journal, plus 1% for
the period from June 18, 1999 through the date on which Closing occurs which
shall be payable if and when Closing occurs.
10.2 Closing Deliveries by Plains. At the Closing, Plains shall deliver to
MAP the following:
(a) the Purchase Price in accordance with Article II which, should
Plains elect to transfer the Units pursuant to Section 2.2, shall include, if
applicable, an assignment instrument executed by an authorized officer of Plains
evidencing Plains' transfer to MAP of and warranting title to the Units as set
forth in this Agreement, in a form reasonably satisfactory to MAP and Plains ;
(b) the certificate executed by an authorized officer of Plains, and
the opinion of counsel, described in Sections 8.2(b) and (c);
(c) a certificate executed by the Secretary (or Assistant Secretary),
of Plains or its general partner dated as of the Closing Date, evidencing that
Plains has authorized the execution of this Agreement and the performance of the
transaction hereunder, and presenting the incumbency and representative
signatures of the officers executing this Agreement on behalf of Plains or its
general partner;
(d) a certificate of good standing for Plains issued by the Secretary
of State of Delaware and dated as of a date no more than ten (10) days prior to
the Closing Date; and
(e) the Transition Agreement executed by an authorized officer of
Plains.
10.3 Closing Deliveries by MAP. At the Closing, MAP shall deliver to Plains
the following:
(a) An assignment instrument executed by an authorized officer of MAP
evidencing MAP's transfer to Plains of and warranting title to the Membership
Interest as set forth in this Agreement substantially in the form attached as
Exhibit 10.3(a);
(b) A certificate of good standing for SP and Scurlock Permian Pipe
Line LLC issued by the Delaware Secretary of State, and from the counterpart
agency of each other state in which SP and Scurlock Permian Pipe Line LLC are
qualified to do business, and dated as of a date as close to the Closing Date as
is possible through reasonable efforts;
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(c) The certificates executed by an authorized officer of MAP described
in Sections 9.2(b) and 9.6(b), and the opinion of counsel described in Section
9.2 (c);
(d) A certificate executed by the Secretary (or Assistant Secretary),
of MAP dated as of the Closing Date, providing the resolutions authorizing the
sale under this Agreement adopted by the Board of Managers of MAP and the
continued effectiveness of such resolutions, and presenting the incumbency and
representative signatures of the officers executing this Agreement on behalf of
MAP;
(e) Each of the resignations in accordance with the provisions of
Section 9.3;
(f) The Sub-sublease Agreements executed by an authorized officer of
MAP whereby MAP will sublease to SP the vehicles described in Section 3.9(b)
substantially in the forms attached as Exhibit 10.3(f); and
(g) The Transition Agreement executed by an authorized officer of MAP.
(h) A schedule of third party shipper volumes by location and grade as
of the Effective Time.
ARTICLE XI TERMINATION
11.1 Termination. This Agreement may be terminated:
(a) At any time prior to the Closing Date with the mutual written
consent of MAP and Plains; or
(b) By MAP, if any condition provided in Article VIII shall not have
been satisfied, complied with or performed in any material respect on the
Closing Date, and MAP shall not have waived in writing such non-satisfaction,
noncompliance or nonperformance on or before the Closing Date, provided the
failure of such condition did not result from the failure of MAP to perform any
of its obligations that is required to be performed under this Agreement on or
prior to Closing; or
(c) By Plains, if any condition provided in Article IX shall not have
been satisfied, complied with or performed in any material respect on the
Closing Date and Plains shall not have waived in writing such non-satisfaction,
noncompliance or nonperformance on or before the Closing Date, provided the
failure of such condition did not result from the failure of Plains to perform
any of its obligations that is required to be performed under this Agreement on
or prior to Closing.
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(d) By either MAP or Plains, if the other shall have failed to perform
any obligation that it is required to perform under this Agreement on or prior
to the Closing Date.
(e) By either MAP or Plains, if Closing is delayed beyond June 30,
1999, pursuant to Section 10.1(b).
11.2 Consequences of Termination.
(a) Except with respect to a party's termination under Section 11.1(d),
no party will be otherwise liable for damages to the other party as a result of
termination pursuant to this Article XI. In the event of termination of this
Agreement, each party shall return to the provider all documents and papers
furnished in the course of the negotiation or carrying out of this Agreement and
each party shall treat as proprietary and confidential any and all information
obtained from any other party in accordance with the Confidentiality Agreement.
(b) A party terminating this Agreement pursuant to Section11.1(d) shall
be entitled to liquidated damages from the defaulting party in the amount of
$7,500,000, which amount the parties agree represents a reasonable estimate of
the amount by which the terminating party will actually be damaged by such
default, in view of the difficulty of arriving at a meaningful formula or
measure of actual damages and the uncertainty thereof. The provisions of this
Section 11.2(b) shall survive termination of this Agreement pursuant to Section
11.1(d).
ARTICLE XII OBLIGATIONS OF PARTIES AFTER CLOSING
12.1 Taxes. (a) MAP will cause all Returns due on or before the Closing Date
to be filed and all Taxes due on or before the Closing Date to be paid. In
addition, MAP will cause the Returns due after the Closing Date listed in
Exhibit 12.1 to be properly and timely filed, but the Taxes due on such Returns
shall be the responsibility of Plains except to the extent attributable to a
period ending on or before the Closing Date.
(b) Except as provided otherwise in Section 6.5 or this Section12.1,
Plains will timely pay all Taxes due after the Closing Date and will cause all
Returns due after the Closing Date to be prepared and filed on a timely and
proper basis. MAP shall pay to Plains within fifteen days after the date on
which Taxes are paid with respect to such Returns an amount equal to the portion
of such Taxes attributable to periods
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ending on or before the Closing Date. For purposes of this Section 12.1, such
Taxes for a period including the Closing Date shall be allocated to the period
prior to the Closing Date in the following manner: (i) if the Tax is measured on
or by net income, sales, receipts, expenditures, expenses, compensation,
purchases or a similar base, based on the amount of Tax determined as if the
books were closed and the taxable period ended on the Closing Date; and (ii) in
all other cases, a pro-rata portion of such Tax based on a ratio of the number
of days in the taxable period ending on the Closing Date to the number of days
in the taxable period. Any credits relating to a taxable period that begins
before and ends after the Closing Date shall be taken into account as though the
relevant taxable period ended on the day before the Closing Date.
(c) Plains shall defend, indemnify, and hold MAP harmless from and against
any and all claims, demands, liabilities, costs, judgements, expenses and
reasonable attorneys' fees and court costs, damages (together with any interest,
penalties or additional amounts) and losses of whatsoever nature as a result of
a Tax due after the Closing Date not being timely paid, or a Return due after
the Closing Date not being properly prepared or timely filed. To the extent
permitted by law, MAP, from and after the Closing Date, shall defend, indemnify
and hold Plains harmless from any and all unpaid Taxes, if any, attributable to
periods ending on or before the Closing Date, as the result of any liability not
expressly assumed by Plains pursuant to this Section 12.1.
(d) MAP's liability and/or indemnity for unpaid Taxes under this Section
12.1 shall be reduced by the amount of such unpaid Tax included in Accrued Taxes
at the Effective Time.
(e) To the extent Plains or SP receive any refund of Taxes with respect to
any period ending on or before the Closing Date, such refund shall be promptly
paid to MAP except to the extent such refund has been included in Net Working
Capital at the Effective Time.
12.2 Indemnification. (a) Except with respect to Environmental Liabilities
for which indemnification under this Agreement is governed by Section 12.3
below, Plains covenants and agrees, from and after the Closing Date, to defend,
protect, indemnify and hold harmless MAP, its owners, Marathon Oil Company and
Ashland Inc., and USX Corporation, and their respective officers, directors,
employees, partnerships, and Affiliates (the "Seller Indemnified Parties"), from
and against any and all penalties, claims, demands, fines, assessments, damages,
dimunitions in value, liabilities, suits, costs, judgments, settlements,
expenses (including, without limitation, court costs and reasonable attorneys',
expert and consultant fees), and losses of whatsoever kind or nature, resulting
from (i) breach of any representation or warranty of Plains set forth in this
Agreement; or (ii) any act or omission attributable to the SP Group's business
or the ownership or operation of the SP Group or the Assets occurring from and
after the Closing Date.
37
<PAGE>
(b) Except with respect to Environmental Liabilities for which
indemnification under this Agreement is governed by Section 12.3 below, MAP
covenants and agrees, from and after the Closing Date, to defend, protect,
indemnify and hold harmless Plains Resources, Inc., Plains, the SP Group and
their respective partners, officers, directors, employees, partnerships,
Affiliates, successors and assigns (the "Buyer Indemnified Parties"), from and
against any and all penalties, claims, demands, fines, assessments, damages,
dimunitions in value, liabilities, suits, costs, judgments, settlements,
expenses (including, without limitation, court costs and reasonable attorneys',
expert and consultant fees), and losses of whatsoever kind or nature, resulting
from (i) breach of any representation or warranty of MAP set forth in this
Agreement; (ii) any act or omission attributable to the SP Group's business or
the ownership or operation of SP or the Assets occurring prior to the Closing
Date (including without limitation, the matters described in Exhibit 3.8); (iii)
the disposition of the assets described in Section 2.5; or (iv) royalty suspense
account claims for royalties or interest not reflected on SP's balance sheet as
of the Effective Time, as to which the $25,000 threshold contained in Section
12.6 will not in any case apply.
12.3 Environmental Indemnification. (a) Plains covenants and agrees, from
and after the Closing Date, to defend, protect, indemnify and hold harmless the
Seller Indemnified Parties from and against any and all Environmental
Liabilities arising from any act or omission attributable to the SP Group's
business or the ownership or operation of SP or the Assets occurring from and
after the Closing Date.
(b) MAP covenants and agrees, from and after the Closing Date, to
defend, protect, indemnify and hold harmless the Buyer Indemnified Parties from
and against any and all Environmental Liabilities (i) arising from any act or
omission attributable to the business of the SP Group or the ownership or
operation of SP or the Assets occurring prior to the Closing Date (including,
without limitation, the matters described in Exhibits 3.6 (a) and 3.6 (b), and
(ii) other than the matters described in Exhibits 3.6 (a) and 3.6 (b), for which
no claim need be asserted, that are asserted by any of the Buyer Indemnified
Parties against MAP on or before May 15, 2003. It is understood and agreed that
MAP's obligations under this subparagraph (b) (other than with respect to those
matters described in Exhibits 3.6 (a) and (b)), do not extend to or cover any
Environmental Liabilities relating to SP or the Assets that are not asserted by
a Buyer Indemnified Party against MAP within the time specified above.
(c) MAP shall have (i) the right of access to the Assets in connection
with, and (ii) the right to conduct the defense of any claims pursuant to
Section 12.7, and to respond to and conduct the remediation of any Environmental
Liabilities for which MAP assumes an obligation of indemnity under this
Agreement. Such rights of MAP shall survive Closing and shall be subject to the
following terms and conditions:
(A) Prior to commencing any Corrective Actions or related
activities on or with respect to
38
<PAGE>
the Assets, MAP shall propose to Plains a plan for such work ("Plan"). Prior to
the implementation of any Plan or Plans, MAP shall provide Plains with a
comprehensive schedule showing in reasonable detail the Corrective Action to be
taken by MAP to comply with such Plans and a budget showing the estimated timing
and estimated amount of expenditures required to implement the Plans. At the
request of Plains from time to time, MAP shall meet and consult with Plains
fully with respect to each such Plan, schedule and budget. Once each calendar
quarter (commencing with the first full calendar quarter after commencement of
such Corrective Action), MAP shall provide Plains with a report showing in
reasonable detail the current status of all Corrective Actions undertaken by MAP
since commencement of such Corrective Actions, including expenditures to date.
To the extent that similar quarterly reports are filed by MAP with Government
Authorities, provision of copies of such reports to Plains shall satisfy this
requirement. MAP shall be required to obtain Plains' prior written approval
(which shall not be unreasonably withheld or delayed) for each Plan and the
budget and schedule therefor prior to proceeding with any Plan or filing any
Plan with any applicable Government Authorities (except that, in the event of an
emergency posing an imminent threat of harm to the safety of persons or
property, MAP may take such immediate action as may be necessary under the
circumstances to protect the safety of persons or property, without obtaining
the prior approval of Plains, provided that MAP shall notify Plains in writing
of such action as soon thereafter as practicable). Plains shall be deemed to
have approved such Plan, budget and schedule unless Plains shall have objected
thereto by notice to MAP within thirty (30) days following Plains' receipt
thereof setting forth in reasonable detail the basis for Plains' objections. If
Plains objects to such proposed Plan and MAP and Plains do not reach agreement
on such objections, then MAP shall provide Plains with an alternative Plan as
soon as reasonably practicable in light of the circumstances following MAP's
receipt of a request therefor from Plains. Upon request from Plains from time to
time, MAP shall provide Plains with copies of invoices and such other supporting
data regarding the amounts of expenditures referred to in reports provided by
MAP to Plains under this Section.
(B) MAP shall conduct all Corrective Actions and related activities on or
with respect to the Assets in accordance with all applicable laws, rules and
regulations of Government Authorities having jurisdiction and in such manner as
shall not unreasonably interfere with the operation of the Assets and the SP
Group's business. Promptly upon completion of such activities, MAP shall notify
Plains in writing of such completion.
(C) MAP shall defend, protect, indemnify and hold harmless the Buyer
Indemnified Parties from and against any and all penalties, claims, demands,
fines, assessments, damages, diminution in value, liabilities, suits, costs,
judgments, settlements, expenses (including, without limitation, court costs and
reasonable attorneys', expert and consultant fees) and losses of whatsoever kind
or nature, for personal injury or property damage that are incurred by or
asserted against any Buyer Indemnified Party by any third Person to the extent
same are caused by the acts or omissions of MAP or MAP's agents, employees or
consultants
39
<PAGE>
in conducting or performing any Corrective Actions or related activities on or
with respect to the Assets. For purposes of this Agreement, MAP's' obligations
with respect to any such third-party claim shall be subject to the terms and
provisions of Section 12.7.
(D) If, within thirty (30) days after MAP's receipt of the Buyer
Indemnified Party's notice of an Environmental Liability for which the Buyer
Indemnified Party believes MAP is obligated to indemnify the Buyer Indemnified
Parties under Section 12.3(b), MAP does not notify Plains that MAP elects to
respond to and conduct the remediation of such Environmental Liability in
accordance with the provisions of this Section 12.3(c), or gives such notice of
election and thereafter fails to respond to and conduct the remediation of such
Environmental Liability diligently and in good faith, then MAP's right to
respond to and conduct such remediation shall terminate and the Buyer
Indemnified Parties shall have the sole right to proceed with such activities
but shall not thereby waive any right to indemnity therefor pursuant to this
Agreement.
(E) Such rights of MAP under this Section 12.3(c) shall in no event
preclude the Buyer Indemnified Parties at any time or times from conducting such
immediate Corrective Actions or related activities that, in case of any
emergency posing an imminent threat of harm to the safety of persons or
property, may be necessary under the circumstances to protect the safety of
persons or property.
(F) Survival of Representations and Warranties and Covenants. (a) The
representations and warranties of MAP and Plains hereunder and in the Exhibits
hereto, the Sub-sublease Agreements and any certificate furnished in connection
with this Agreement shall survive the Closing only until the date which is three
(3) years after the Closing Date, notwithstanding any investigation at any time
made by or on behalf of MAP or Plains, as the case may be; provided that the
representations of MAP under Sections 3.1, 3.4, 3.7, 3.10(a), 3.11, and 3.16(b),
(c) and (d), and the representations of Plains under Sections 4.1, 4.2, and, if
applicable, 7.8, shall survive the Closing for ninety (90) days following the
expiration of the relevant statute of limitations (including all periods of
extension, whether automatic or progressive. Any claim with respect to any
breach of representations and warranties described in this Section must be made
within the time periods specified herein and, if timely asserted, the
representations and warranties that are the subject thereof shall survive until
such claims are fully and finally resolved in accordance with the provisions of
this Agreement.
(b) The obligations of the parties under Articles V, VI and VII shall
survive Closing and not terminate.
12.5 Survival of Indemnification Obligations. The indemnification
obligations of MAP under Section 12.3(b) shall survive the Closing only with
respect to indemnification claims that are asserted by a Buyer Indemnified Party
against MAP on or before May 15, 2003, except that the indemnification
obligations of
40
<PAGE>
MAP under Section 12.3(b) with respect to matters described in Exhibits 3.6(a)
and 3.6(b) shall survive the Closing and not terminate. The indemnity
obligations of MAP under Section 12.2(b), and the indemnification obligations of
Plains under Section 12.2(a) and 12.3(a) shall survive the Closing and not
terminate. Indemnification provisions contained in other Sections of this
Agreement shall survive the Closing to the extent provided in those Sections.
12.6 Indemnification Bucket. (a) Notwithstanding any term or provision of
this Agreement to the contrary, except with respect to the matters described in
Exhibits 3.5, 3.6(a), 3.6(b), 3.8, and 5.6(c) and Section 5.4 (for which Plains
shall be entitled fully to rights of indemnification under Sections 12.2(b) and
12.3(b), as applicable), the Buyer Indemnified Parties shall not be entitled to
rights of indemnification under Section 12.2(b) and 12.3(b) until the aggregate
of all claims covered thereunder exceeds $1,000,000; it being understood that
the following claims shall not be included in the aggregation: (i) under Section
12.2(b), the litigation and claims listed on Exhibit 3.8 (for which Plains shall
be entitled fully to rights of indemnification under Sections 12.2(b)), and the
first $25,000 of any other individual claim (for which there shall be no rights
of indemnification); and (ii) under Section 12.3(b), individual claims of less
than $25,000 (for which there shall be no rights of indemnification), and the
Environmental Liabilities listed on Exhibits 3.6(a) and (b) (for which Plains
shall be entitled fully to rights of indemnification). For purposes of the
preceding sentence, all losses arising from the same event, condition, or set of
circumstances at a single facility shall be considered an individual loss. For
purposes of the first sentence of this Section 12.6, in determining whether
there has occurred a breach of a representation or warranty of MAP contained in
or made pursuant to Article III, (a) the provisions of Article III that are
qualified by materiality (including, without limitation, a Material Adverse
Effect) shall be read and interpreted as if such qualification was not included
therein and (b) the provisions of Article III that are qualified by knowledge
shall be read and interpreted as if such qualification was not included therein.
12.7 Procedures for Asserting Indemnity Claims. (a) A party seeking to
assert a claim for indemnity under this Agreement with respect to any claim,
suit, action or proceeding (the "Indemnified Party"), shall give prompt and
timely notice to the other party (the "Indemnifying Party") of such assertion or
commencement, as soon as is practicable following the receipt, by the manager
responsible for the operation of the facility involved in such claim, of oral or
written notice of the claim or action. Such notice shall describe in reasonable
detail the nature of the claim or action, an estimate of the amount of damages
attributable to the claim, and the basis for the Indemnified Party's request for
indemnification under this Agreement. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party copies of all notices and documents (including
court papers) received by the Indemnified Party relating to the claim. Failure
by the Indemnified Party to provide such notice to the Indemnifying Party
promptly shall not affect the right of the Indemnified Party to indemnification
hereunder except to the extent the Indemnifying Party is prejudiced thereby.
41
<PAGE>
(b) The Indemnifying Party shall promptly assume the defense of any
such claim, suit, action or proceeding; provided, however, that (i) the
Indemnifying Party shall cooperate and communicate with the Indemnified Party as
to significant developments in the matters being defended or handled, shall seek
the advice and opinions of the Indemnified Party, and shall give due regard to
such advice and opinions as to aspects of the matters being handled or defended
which relate to settlements thereof or are reasonably expected to require the
expenditure of substantial sums of money; (ii) the Indemnified Party shall at
all times have the right, at its option and expense, to participate fully in the
defense of any such claim, suit, action, or proceeding; (iii) the Indemnifying
Party shall not settle any claim involving relief other than monetary relief
that may affect the Indemnified Party without the prior written consent of the
Indemnified Party; and (iv) if, within thirty (30) days after the receipt of the
Indemnified Party's notice of a claim of indemnity hereunder, the Indemnifying
Party does not notify the Indemnified Party that it elects, at the Indemnifying
Party's cost and expense, to undertake the defense thereof and assume full
responsibility for all losses, liabilities and other amounts with respect
thereto, or gives such notice and thereafter fails to contest such claim
diligently and in good faith, the Indemnified Party shall have the right to
contest, settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement.
(c) The parties shall cooperate in defending any such claim, suit,
action or proceeding and each party shall have reasonable access to the books
and records, and personnel in the possession or control of the other party which
are pertinent to the defense. Any party shall have the right to join another in
any action, claim or proceeding brought by a third party, as to which any right
of indemnity created by this Agreement would or might apply, for the purpose of
enforcing its right of indemnity granted hereunder.
(d) In furtherance of the foregoing procedures, as soon as a party
becomes aware of circumstances that reasonably could be expected to lead to an
Environmental Liability for which the other party owes and indemnification
obligation hereunder, the party shall:
(i) define the nature and extent of the Environmental Liability in
writing, including copies of all reports to Government Authorities filed as
of this date, using a degree of detail reasonably necessary to inform the
Indemnifying Party of the nature and scope of, and the justification for,
any claim based on the Environmental Liability; and
(ii) to the extent that the assessment involves discussions or
meetings with Government Authorities, the party seeking indemnification
shall use reasonable best efforts to provide the other party with timely
notice of and opportunity to participate in all such discussions or
meetings.
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<PAGE>
12.8 EXPRESS NEGLIGENCE. TO THE EXTENT PERMITTED BY LAW, THE
INDEMNIFICATION PROVIDED HEREUNDER SHALL APPLY NOTWITHSTANDING SUCH MATTER FOR
WHICH INDEMNIFICATION IS TO BE PROVIDED MAY RESULT FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OR GROSS NEGLIGENCE OR VIOLATION OF LAW BY A PARTY TO BE INDEMNIFIED,
AND FOR LIABILITIES BASED ON THEORIES OF STRICT LIABILITY, AND SHALL BE
APPLICABLE WHETHER OR NOT NEGLIGENCE OF SUCH PARTY IS ALLEGED OR PROVEN, IT
BEING THE INTENTION OF THE PARTIES TO INDEMNIFY EACH OTHER FROM AND AGAINST
THEIR SOLE AND CONTRIBUTORY NEGLIGENCE AND GROSS NEGLIGENCE AS WELL AS
LIABILITIES BASED ON THEORIES OF STRICT LIABILITY TO THE EXTENT PROVIDED IN THIS
AGREEMENT.
12.9 Prior Period Adjustments. After Closing, both MAP and Plains shall
have the continuing obligation to remit to the other any Prior Period
Adjustments to which the other is entitled.
12.10 Accounts Receivable. (a) MAP will compile lists of accounts receivable
and accounts payable of the SP Group as of the Effective Time. Plains shall have
a claim against MAP for the undiscounted balance of any and all such accounts
receivable that, as of the one hundred eightieth (180th) day after the Effective
Time, have not been collected. MAP shall have a claim against Plains for the
undiscounted balance of any and all such accounts payable that, as of the one
hundred eightieth (180th) day after the Effective Time, have not been paid.
(b) Plains shall cause SP to determine the amounts of claims due and owing
under this Section and, on or before the two hundred tenth (210th) day following
the Effective Time, and to advise Plains and MAP of the net overdue receivables
or payables balance, as the case may be. Provided that the party owing the net
balance shall have had a reasonable opportunity to verify the result reported by
SP, such party shall remit the full amount thereof within thirty days (30) days
following receipt of advices from SP.
(c) Plains shall cause SP to (i) pay and collect its accounts in the
ordinary course of business during the one hundred eighty day period following
the Effective Time; and (ii) remit to MAP the full amount of receivables listed
under Section 12.10(a) above that are collected, in whole or in part, after the
payment under 12.10(b) is made, until the amount paid by MAP under Section
12.10(b), if any, has been repaid in full. MAP shall pay SP for any such
accounts payable that SP subsequently is required to pay.
12.11 Damages. NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY
OTHER PROVISION OF THIS AGREEMENT, MAP AND PLAINS AGREE THAT, EXCEPT FOR THE
LIQUIDATED DAMAGES SPECIFICALLY PROVIDED FOR IN SECTION 11.2 (b), THE RECOVERY
BY
43
<PAGE>
EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT AS A RESULT OF ANY
BREACH BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR
OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED
OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE
BREACHING PARTY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER AND
IN NO EVENT SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY FOR
ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES SUFFERED OR INCURRED
BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING PARTY OR
ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER. For purposes of
the foregoing, actual damages may, however, include indirect, consequential,
special, exemplary or punitive damages to the extent (i) the injuries or losses
resulting in or giving rise to such damages are incurred or suffered by a Person
which is not a Seller Indemnified Party, a Buyer Indemnified Party or an
Affiliate of any of the foregoing and (ii) such damages are recovered against an
Indemnified Party by a Person which is not a Seller Indemnified Party, a Buyer
Indemnified Party or an affiliate of any of the foregoing.
12.11 People v. Amerada Hess. MAP shall obtain the written consent and
approval of Plains to any terms of settlement in the People v. Amerada Hess
royalty litigation which limit or establish crude oil pricing formulas or
methods, practices, or procedures that impact the conduct of the SP Group's
business or operations from and after the Closing Date. Plains shall not
unreasonably withhold its consent and approval to any such settlement.
12.12 Noncompetition. For a period of one year from and after the Closing
Date, and provided that Plains' crude oil prices remain competitive, MAP agrees
and covenants not to acquire, and shall cause its Affiliates not to acquire,
first purchase rights to crude oil produced under leases for which any member of
the SP Group holds first purchase rights on the date of this Agreement.
12.13 Texas University Lands. In the event that dismantling and removal of
the SP Group's abandoned pipelines from lands owned by the Texas University
system lands is required after Closing, Plains shall have the obligation to
satisfy the requirement.
12.14 SPCC PLANS. Plains will undertake to prepare Spill Prevention Control
and Countermeasures Plans for crude oil stations for which such plans are not in
place on the Closing Date, at its own cost and expense; provided, however, that
in no event shall Plains assume any responsibility for the failure to have such
Plans in place prior to the Closing Date.
44
<PAGE>
12.15 Unit Restrictions. The Units shall be subject to the restrictions
that MAP shall not be entitled to receive any distributions in respect thereof
for a period of one year from and after the Closing Date; and further, that MAP
shall not sell, assign, transfer, convey or dispose of the Units for a period of
one year from and after the Closing Date. The limited partnership unit
certificates representing the Units may reflect such restrictions.
12.16 Permian Plans. After Closing, MAP shall provide all required notices
to Plan Participants and shall provide Plains with an updated list of all Plan
Participants, their current mailing addresses and beneficiary designations.
12.17 Nettleton to Tyler Pipeline. After Closing, the Nettleton to Tyler
pipeline system is scheduled for hydrostatic testing. The budget for such test
is presently $800,000. MAP agrees that in the event that the costs of such test
exceed $800,000, MAP will reimburse Plains for up to $200,000 of such additional
cost, upon receipt from Plains of verification of such excess expenditures.
Plains shall conduct the hydrostatic test in accordance with accepted pipeline
industry practices and standards and shall use reasonable best efforts in
keeping MAP informed of the costs and progress of the test.
ARTICLE XIII MISCELLANEOUS
13.1 Binding Agreement. All the provisions, covenants, representations,
warranties and conditions of this Agreement shall be binding upon, and inure to
the benefit of and be enforceable by, the parties hereto and their respective
legal representatives, successors and assigns. Neither party hereto may assign
its rights under this Agreement without the prior written consent of all other
parties, except that Plains shall have the right to assign its rights under this
Agreement to any of its Affiliates of which Plains Marketing, L.P. is a limited
partner and Plains All American Inc. is the general partner, provided that, in
such event, such Affiliate shall expressly assume in writing the obligations of
Plains under this Agreement.
13.2 Notices. All notices, requests, waivers and other communications
required or permitted to be given pursuant to this Agreement, including changing
of the designated recipients of such notices, shall be in writing and shall be
deemed to have been duly given upon receipt by first-class mail, documented
overnight delivery service or by telecopier:
45
<PAGE>
If to MAP, to:
Marathon Ashland Petroleum LLC
539 S. Main St.
Findlay, OH 45840
Attention: Senior Vice President, Business Development
Telecopier: (419) 421-3509
With copies to: Marathon Ashland Petroleum LLC
539 South Main Street
Findlay, Ohio 45840
Attention: Group Counsel, Marketing & Commercial Services
If to Plains, to:
Plains All American Inc.
500 Dallas, Suite 700
Houston, TX 77002
Attention: President
Telecopier: (713) 652-2730
With copies to:
Plains All American Inc.
500 Dallas, Suite 700
Houston, TX 77002
Attention: General Counsel
Telecopier: (713) 652-2730
13.3 Entire Agreement. This Agreement is the entire agreement, and
supersedes all prior agreements and understandings, written and oral, among the
parties hereto or between any thereof with respect to the subject matter hereof.
13.4 Waivers. The failure of any party at any time to require performance
of any provision hereof shall not affect its right later to require such
performance. No waiver in any one or more instances shall (except as otherwise
stated therein) be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any condition or breach of
any other term, covenant, representation or warranty.
13.5 Time Period Calculation. Except as otherwise expressly provided
herein, all time periods hereunder shall be calculated on the basis of calendar
days.
13.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13.7 Headings. The headings preceding the text of articles and sections of
this Agreement are for convenience only and not part of this Agreement.
46
<PAGE>
13.8 Applicable Law. This Agreement is governed by and shall be construed
and enforced in accordance with the internal laws of Texas.
13.9 Construction of Agreement. This Agreement constitutes a negotiated
agreement among the parties and the fact that one party or the other shall have
drafted a particular provision or provisions shall not be material in the
construction of any provision. All Exhibits referred to in the Agreement are
attached to and made a part of the Agreement.
13.10 Publicity. None of the parties hereto will, without the written
consent of the other party, make any disclosure with respect to this Agreement
to the news media, except to the extent disclosures may be required by any
applicable securities laws or stock exchange rules.
13.11 No Third Party Beneficiaries. Except as specified in the
indemnification provisions of Article 12, which are also intended to benefit and
to be enforceable by any of the Seller Indemnified Parties or Buyer Indemnified
Parties, as the case may be, nothing in this Agreement, whether express or
implied, is intended to confer any right or remedy under or by reason of this
Agreement on any Person other than the parties, their respective successors and
assigns.
13.12 Severability. If any term or other provision of this Agreement is held
invalid, illegal or incapable of being enforced under any rule of law, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in a materially adverse manner with respect
to either party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
13.13 Further Assurances. Subject to the terms and conditions set forth in
this Agreement, and in addition to other provisions in this Agreement, from time
to time subsequent to the Closing Date, each party at the request of the other
party shall use reasonable efforts to promptly execute and deliver such
additional documents and take such other actions including centralization of
SP's records and SP facilities, as may be reasonably required to carry out the
intent of this Agreement and the transactions contemplated by it.
13.14 Expenses. Except as otherwise expressly provided in this Agreement,
all costs and expenses
47
<PAGE>
incurred by each party hereto in connection with all things required to be done
by it hereunder, including attorneys' fees, accountants' fees and other
expenses, shall be borne by the party incurring same.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
Marathon Ashland Petroleum LLC
By: /s/ G. R. Heminger
-----------------------------------------
G.R. Heminger
Title: Senior Vice President, Business Development
Plains Marketing, L.P.
By: Plains All American, Inc., its General Partner
By: /s/ Harry N. Pefanis
-----------------------------------------
Harry N. Pefanis
Title: President
48
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAINS ALL
AMERICAN PIPELINE, L.P. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998, AND
CONSOLIDATED STATEMENT OF INCOME FOR THE PERIOD FROM NOVEMBER 23, 1998 TO
DECEMBER 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> NOV-23-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,503
<SECURITIES> 0
<RECEIVABLES> 119,514
<ALLOWANCES> 0
<INVENTORY> 37,711
<CURRENT-ASSETS> 166,851
<PP&E> 378,835
<DEPRECIATION> 799
<TOTAL-ASSETS> 610,208
<CURRENT-LIABILITIES> 157,520
<BONDS> 175,000
0
0
<COMMON> 277,643
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 610,208
<SALES> 176,445
<TOTAL-REVENUES> 176,457
<CGS> 168,946
<TOTAL-COSTS> 170,138
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,371
<INCOME-PRETAX> 4,177
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,177
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAINS ALL
AMERICAN PIPELINE, L.P. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998, AND,
(PREDECESSOR), CONSOLIDATED STATEMENT OF INCOME FOR THE PERIOD FROM JANUARY 1,
1998 TO NOVEMBER 22, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> NOV-22-1998
<CASH> 5,503
<SECURITIES> 0
<RECEIVABLES> 119,514
<ALLOWANCES> 0
<INVENTORY> 37,711
<CURRENT-ASSETS> 166,851
<PP&E> 378,835
<DEPRECIATION> 799
<TOTAL-ASSETS> 610,208
<CURRENT-LIABILITIES> 157,520
<BONDS> 175,000
0
0
<COMMON> 277,643
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 610,208
<SALES> 953,244
<TOTAL-REVENUES> 953,816
<CGS> 922,263
<TOTAL-COSTS> 926,442
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,260
<INCOME-PRETAX> 11,588
<INCOME-TAX> 4,563
<INCOME-CONTINUING> 7,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,025
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
