<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
[ ] 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 No.)
500 DALLAS STREET
HOUSTON, TEXAS 77002
(Address of principal executive offices)
(Zip Code)
(713) 654-1414
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
At May 12, 1999, there were outstanding 20,059,239 Common Units and 10,029,619
Subordinated Units.
Page 1 of 17
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Balance Sheets:
March 31, 1999 and December 31, 1998.............................. 3
Consolidated and Combined Statements of Income:
For the three months ended March 31, 1999 and 1998 (Predecessor).. 4
Consolidated and Combined Statements of Cash Flows:
For the three months ended March 31, 1999 and 1998 (Predecessor).. 5
Notes to Consolidated and Combined Financial Statements............. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS................................... 9
PART II. OTHER INFORMATION............................................ 16
</TABLE>
Page 2 of 17
<PAGE>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- -----------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 683 $ 5,503
Accounts receivable 156,159 119,514
Due from affiliates 4,757 3,022
Inventory 24,564 37,711
Prepaid expenses and other 852 1,101
-------- --------
Total current assets 187,015 166,851
-------- --------
PROPERTY AND EQUIPMENT
Crude oil pipeline, gathering and terminal assets 380,956 378,254
Other property and equipment 671 581
-------- --------
381,627 378,835
Less allowance for depreciation and amortization (3,177) (799)
-------- --------
378,450 378,036
-------- --------
OTHER ASSETS
Pipeline linefill 57,001 54,511
Other 10,846 10,810
-------- --------
$633,312 $610,208
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable and other current liabilities $151,385 $135,713
Interest payable 1,356 1,267
Due to affiliates 12,285 10,790
Notes payable 4,100 9,750
-------- --------
Total current liabilities 169,126 157,520
LONG-TERM LIABILITIES
Bank debt 181,000 175,000
Other 155 45
-------- --------
Total liabilities 350,281 332,565
-------- --------
PARTNERS' CAPITAL
Common unitholders (20,059,239 units outstanding) 260,518 256,997
Subordinated unitholders (10,029,619 units outstanding) 21,214 19,454
General partner 1,299 1,192
-------- --------
283,031 277,643
-------- --------
$633,312 $610,208
======== ========
</TABLE>
See notes to consolidated and combined financial statements.
Page 3 of 17
<PAGE>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(unaudited) (in thousands, except per unit data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1999 1998
------------ --------------
(Predecessor)
<S> <C> <C>
REVENUES $ 455,760 $ 167,461
COST OF SALES AND OPERATIONS 435,932 163,457
----------- -----------
Gross Margin 19,828 4,004
----------- -----------
EXPENSES
General and administrative 2,178 986
Depreciation and amortization 2,831 303
----------- -----------
Total expenses 5,009 1,289
----------- -----------
Operating income 14,819 2,715
Interest expense 3,193 149
Related party interest expense - 750
Other expense 410 -
Interest and other income (97) (177)
----------- -----------
Net income before provision
in lieu of income taxes 11,313 1,993
Provision in lieu of income taxes - 753
----------- -----------
NET INCOME 11,313 1,240
=========== ===========
BASIC AND DILUTED NET INCOME
PER LIMITED PARTNER UNIT $ 0.37 $ 0.07
=========== ===========
WEIGHTED AVERAGE NUMBER
OF UNITS OUTSTANDING 30,088,858 17,003,858
=========== ===========
</TABLE>
See notes to consolidated and combined financial statements.
Page 4 of 17
<PAGE>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 1998
------------- --------------
(Predecessor)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 11,313 $ 1,240
Items not affecting cash flows
from operating activities:
Depreciation and amortization 2,831 303
Change in payable in lieu of deferred taxes - 651
Other non cash items 110 -
Change in assets and liabilities:
Accounts receivable (36,645) 27,605
Inventory 13,147 501
Prepaid expenses and other 249 36
Accounts payable and other current liabilities 15,672 (19,136)
Interest payable 89 (48)
Pipeline linefill (2,490) -
-------- --------
Net cash provided by operating activities 4,276 11,152
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (2,791) (157)
Disposals of property and equipment - 9
Additions to other assets (647) -
-------- --------
Net cash used in investing activities (3,438) (148)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (payments to) affiliates (82) 6,396
Proceeds from long-term debt 14,100 -
Proceeds from short-term debt 4,250 750
Principal payments of long-term debt (8,100) -
Principal payments of short-term debt (9,900) (18,000)
Capital contribution from parent - 28,700
Distribution to unitholders (5,926) -
-------- --------
Net cash (used in) provided by financing activities (5,658) 17,846
-------- --------
Net increase (decrease) in cash and cash equivalents (4,820) 28,850
Cash and cash equivalents, beginning of period 5,503 2
-------- --------
Cash and cash equivalents, end of period $ 683 $ 28,852
======== =========
</TABLE>
See notes to consolidated and combined financial statements.
Page 5 of 17
<PAGE>
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
NOTE 1 -- ORGANIZATION AND ACCOUNTING POLICIES
Plains All American Pipeline, L.P. (the "Partnership") is a Delaware limited
partnership 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"). On November 23, 1998, the Partnership
completed the initial public offering ("IPO") and the transactions whereby the
Partnership became the successor to the business of the Predecessor. The
operations of the Partnership are conducted through Plains Marketing, L.P. and
All American Pipeline, L.P. Plains All American Inc., a wholly owned subsidiary
of Plains Resources, is the general partner ("General Partner") of 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 primarily
conducted in California, Texas, Oklahoma, Louisiana and the Gulf of Mexico.
The accompanying financial statements and related notes present the consolidated
financial position as of March 31, 1999, of the Partnership and the results of
its operations and cash flows for the three months ended March 31, 1999. The
combined financial statements of the Predecessor include the accounts of the
Plains Midstream Subsidiaries. All significant intercompany transactions have
been eliminated.
The accompanying unaudited financial statements have been prepared in accordance
with the instructions for interim financial reporting as prescribed by the
Securities and Exchange Commission ("SEC"). For further information, refer to
the consolidated and combined financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the year ended December 31,
1998, filed with the SEC. All material adjustments consisting only of normal
recurring adjustments which, in the opinion of management, were necessary for a
fair statement of the results for the interim periods, have been reflected.
Certain reclassifications have been made to the prior year statements to conform
with the current year presentation.
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 effect that the adoption of SFAS 133 will
have on its financial position or results of operations.
NOTE 2 -- ACQUISITIONS
On May 12, 1999, Plains Scurlock Permian, L.P. ("Plains Scurlock"), a newly
formed limited partnership of which Plains All American Inc. is general partner
and Plains Marketing, L.P. is the limited partner, completed the acquisition of
Scurlock Permian LLC and certain other pipeline assets from Marathon Ashland
Petroleum LLC (the "Scurlock Acquisition"). Including working capital
adjustments and associated closing and financing costs, the cash purchase price
paid at closing was approximately $146 million.
Page 6 of 17
<PAGE>
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, Martin, Midland, Regan and Upton Counties,
Texas. The assets acquired also include approximately 2.4 million barrels of
crude oil used for working inventory.
Financing for the Scurlock Acquisition was provided through (i) Plains
Scurlock's limited recourse bank facility with BankBoston, N.A. (the "Plains
Scurlock Credit Facility"), (ii) the sale to the General Partner of 1.3 million
Class B Common Units of the Partnership at $19.125 per unit, the price equal to
the market value of the Partnership's common units and (ii) a $25 million draw
under its existing revolving credit agreement. The Plains Scurlock Credit
Facility consists of (i) a five year $130 million term loan and (ii) a three
year $35 million revolving credit facility.
The Plains Scurlock Credit Facility is nonrecourse to the Partnership, Plains
Marketing, L.P. and All American Pipeline, L.P. and is secured by the assets
acquired. Borrowings under the term loan bear interest at LIBOR plus 3% and
under the revolving credit facility at LIBOR plus 2.75%. A commitment fee equal
to one-half of one percent per year is charged on the unused portion of the
revolving credit facility. The term loan matures in May 2004 and the revolving
credit facility matures in May 2002. No principal payment is scheduled for
amortization prior to maturity.
In April 1999, the Partnership signed a definitive agreement to acquire a West
Texas crude oil pipeline and gathering system from Chevron Pipe Line Company for
approximately $40 million (the "Chevron Asset Acquisition"). Principal assets to
be acquired include approximately 400 miles of crude oil transmission lines,
associated gathering and lateral lines and three million barrels of crude oil
storage and terminalling capacity in Crane, Ector, Midland, Upton, Ward and
Winkler Counties, Texas. 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 early in the third quarter of 1999. It is anticipated that the Chevron
Asset Acquisition will be made by Plains Scurlock, with financing provided by
the Plains Scurlock Credit Facility.
Chevron will continue transporting crude oil through the pipeline under a
contractual arrangement. The Partnership will also enter into a five-year
contractual arrangement to sell up to 30,000 barrels of crude oil per day at
market prices to another Chevron entity. Such arrangement may be extended by
Chevron for up to five additional years. The system is currently moving an
aggregate of approximately 98,000 barrels of crude oil per day under various
gathering and transportation arrangements.
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 Predecessor's pro forma revenues and net income had the
acquisition been consummated on January 1, 1998.
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
------------------
(in thousands)
<S> <C>
Revenues $359,389
========
Net income $ 6,565
========
Basic and diluted net income
per limited partner unit $ 0.38
========
</TABLE>
NOTE 3 -- OPERATING SEGMENTS
The Partnership's operations consist of two operating segments: (1) Pipeline
Operations engages in 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
Page 7 of 17
<PAGE>
Predecessor had only marketing, gathering, terminalling and storage operations.
The Partnership evaluates segment performance based on gross margin, gross
profit and income before income taxes and extraordinary items.
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>
THREE MONTHS ENDED MARCH 31, 1999
Revenues:
External Customers $154,487 $301,273 $455,760
Intersegment (a) 15,305 55 15,360
Other 66 31 97
-------- -------- --------
Total revenues of reportable segments $169,858 $301,359 $471,217
======== ======== ========
Segment gross margin (b) $ 12,019 $ 7,809 $ 19,828
Segment gross profit (c) $ 11,224 $ 6,426 $ 17,650
Income before income taxes and
extraordinary items $ 5,474 $ 5,839 $ 11,313
- --------------------------------------------------------------------------------
</TABLE>
(a) Intersegment sales were conducted on an arm's-length basis.
(b) Gross margin is calculated as revenues less cost of sales and operations.
(c) Gross profit is calculated as revenues less cost of sales and operations
and general and administrative expenses.
Page 8 of 17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Partnership is a limited partnership 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 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 conducted primarily 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 Predecessor 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"). Prior to the
Acquisition, the Predecessor had only terminalling and storage and gathering and
marketing activities. The Partnership also owns and operates a three million
barrel, above-ground crude oil terminalling and storage facility in Cushing,
Oklahoma, (the "Cushing Terminal").
RESULTS OF OPERATIONS
The following table sets forth certain financial and operating information of
the Partnership and the Predecessor for the periods presented (unaudited) (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------------
1999 1998 1998
------------ ------------ ------------
(pro forma) (Predecessor)
<S> <C> <C> <C>
Operating Results:
Revenues $455,760 $359,835 $167,461
======== ======== ========
Gross margin:
Pipeline $ 12,019 $ 17,758 $ -
Terminalling and storage
and gathering and marketing 7,809 4,450 4,004
--------- ------- --------
Total 19,828 22,208 4,004
General and administrative expense (2,178) (1,521) (986)
--------- ------- --------
Gross profit $17,650 $20,687 $3,018
======== ======== ========
Net Income $11,313 $14,881 $1,240
======== ======== ========
Average Daily Volumes (barrels):
Pipeline tariff activities 126 146 -
Pipeline margin activities 47 50 -
--------- ------- --------
Total 173 196 -
======== ======== ========
Lease gathering 121 106 81
Bulk purchases 94 95 95
Terminal throughput 75 66 66
</TABLE>
Historical Results of Operations for the Three Months Ended March 31, 1999
(Partnership) and the Three Months Ended March 31, 1998 (Predecessor)
On November 23, 1998, the Partnership completed the initial public offering
("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 three months ended March 31, 1999, and the combined financial statements
of the Predecessor for the three months ended March 31, 1998. The results of
operations of the Predecessor for the three months ended March 31, 1998, do not
include the results of operations of the All American Pipeline and the SJV
Gathering System which were acquired from Goodyear in July 1998.
Page 9 of 17
<PAGE>
Pro Forma Results of Operations for the Three Months Ended March 31, 1998
The pro forma results of operations discussed below are derived from the
historical financial statements of Wingfoot (which reflect the historical
operating results of the All American Pipeline and the SJV Gathering System) and
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, 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 IPO; (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 additional 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.
Three month periods ended March 31, 1999 and 1998
For the three months ended March 31, 1999, the Partnership reported net income
of $11.3 million on total revenue of $455.8 million. This compares to pro forma
net income of $14.9 million on total revenues of $359.8 million and Predecessor
net income of $1.2 million on total revenues of $167.5 million for the 1998
first quarter.
Pipeline Operations. Gross margin from pipeline activities was $12.0 million for
the first quarter of 1999, compared to $17.8 million for the comparative period
of 1998 on a pro forma basis. Tariff revenues were $13.1 million for the three
months ended March 31, 1999, a 28% decline from the $17.4 million reported for
the same period of 1998 on a pro forma basis. The decrease in tariff revenues
resulted primarily from a 14% decrease in tariff transport volumes from 146,000
barrels per day for the three months ended March 31, 1998, to 126,000 barrels
per day for the same period in 1999 due to a decline in average daily production
from the Santa Ynez field and the Point Arguello field. Volumes related to
margin activities decreased 6% to an average of approximately 47,000 barrels per
day. The margin between revenue and direct cost of crude purchased decreased
from $7.4 million for the three months ended March 31, 1998, to $5.0 million for
the same period of 1999 as a result of a decline in margins between prices paid
in California and prices received in West Texas. Operations and maintenance
expenses were $3.0 million for the first quarter of 1999 compared to $3.5
million for the same period of 1998. As noted above, the Predecessor results for
the first quarter of 1998 do not include the results of operations of the All
American Pipeline and the SJV Gathering System which were acquired effective
July 30, 1998.
The following table sets forth the All American Pipeline average deliveries per
day within and outside California.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------
1999 1998 1998
------------ ------------- --------------
(pro forma) (Predecessor)
(in thousands)
<S> <C> <C> <C>
DELIVERIES:
AVERAGE DAILY VOLUMES (BARRELS):
Within California 112 122 -
Outside California 61 74 -
--- --- ---
Total 173 196 -
=== === ===
</TABLE>
Terminalling and Storage Activities and Gathering and Marketing Activities.
Gross margin from terminalling and storage and gathering and marketing
activities was $7.8 million for the quarter ended March 31, 1999, reflecting a
75% increase over the $4.5 million reported for the 1998 period on a pro forma
basis and an approximate 95% increase over the $4.0 million reported by the
Predecessor for the first quarter of 1998. Net of interest expense associated
with contango inventory transactions, gross margin for the first quarter of 1999
was $7.6 million, representing an increase of approximately 78% over the 1998
first quarter pro forma amount, likewise net of contango interest. 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.
Page 10 of 17
<PAGE>
General and administrative expenses were $2.2 million for the three months ended
March 31, 1999, compared to $1.5 million and $1.0 million for the first quarter
of 1998 on a pro forma basis and for the Predecessor, respectively. The increase
in 1999 as compared to the 1998 pro forma amount is due to expenses related to
the operation of the Partnership as a public entity (approximately $300,000) and
to increased personnel as a result of the continued expansion of the
Partnership's terminalling and storage activities and gathering and marketing
activities. These increases, in addition to G&A associated with the acquisition
of the All American Pipeline and the SJV Gathering System account for the
increase in G&A from 1998 first quarter Predecessor amount.
Depreciation and amortization was $2.8 million for the three months ended March
31, 1999, and the three months ended March 31, 1998, on a pro forma basis.
Depreciation and amortization was $0.3 million in the first quarter of 1998 for
the Predecessor. The increase in depreciation and amortization from the
Predecessor amount is due to the acquisition of the All American Pipeline and
the SJV Gathering System in July 1998.
In March 1999, the Partnership adopted a plan to reduce staff in its pipeline
operations and to relocate certain functions. The Partnership incurred a charge
to first quarter earnings of approximately $410,000 in connection with such
plan. Such amount is reflected as other expense in the accompanying consolidated
income statement for the quarter ended March 31, 1999.
Interest expense was $3.2 million for the first quarter of 1999 and the first
quarter of 1998 on a pro forma basis. The Predecessor reported interest expense
of approximately $0.9 million for the first quarter of 1998. The increase in
interest expense from the Predecessor level is due to interest associated with
the debt incurred for the acquisition of the All American Pipeline and the SJV
Gathering System. During the first quarter of 1999, the Partnership capitalized
interest of approximately $63,000 related to the expansion of the Cushing
Terminal. Interest expense related to contango market inventory transactions was
$164,000 and $149,000 for the first quarter of 1999 and 1998 (pro forma and
historical for the Predecessor), respectively.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
Acquisitions
On May 12, 1999, Plains Scurlock Permian, L.P. ("Plains Scurlock"), a newly
formed limited partnership of which Plains All American Inc. is general partner
and Plains Marketing, L.P. is the limited partner, completed the acquisition of
Scurlock Permian LLC and certain other pipeline assets from Marathon Ashland
Petroleum LLC (the "Scurlock Acquisition"). Including working capital
adjustments and associated closing and financing costs, the cash purchase price
paid at closing was approximately $146 million.
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, Martin, Midland, Regan and Upton Counties,
Texas. The assets acquired also include approximately 2.4 million barrels of
crude oil used for working inventory.
Financing for the Scurlock Acquisition was provided through (i) Plains
Scurlock's limited recourse bank facility with BankBoston, N.A. (the "Plains
Scurlock Credit Facility"), (ii) the sale to the General Partner of 1.3 million
Class B Common Units of the Partnership at $19.125 per unit, the price equal to
the market value of the Partnership's common units and (ii) a $25 million draw
under its existing revolving credit agreement. The Plains Scurlock Credit
Facility consists of (i) a five year $130 million term loan and (ii) a three
year $35 million revolving credit facility.
The Plains Scurlock Credit Facility is nonrecourse to the Partnership, Plains
Marketing, L.P. and All American Pipeline, L.P. and is secured by the assets
acquired. Borrowings under the term loan bear interest at LIBOR plus 3% and
under the revolving credit facility at LIBOR plus 2.75%. A commitment fee equal
to one-half of one percent per year is charged on the unused portion of the
revolving credit facility. The term loan matures in May 2004 and the revolving
credit facility matures in May 2002. No principal payment is scheduled for
amortization prior to maturity.
In April 1999, the Partnership signed a definitive agreement to acquire a West
Texas crude oil pipeline and gathering system from Chevron Pipe Line Company for
approximately $40 million (the "Chevron Asset Acquisition"). Principal assets to
be acquired include approximately 400 miles of crude oil transmission lines,
associated gathering and lateral lines and three million barrels of crude oil
storage and terminalling capacity in Crane, Ector, Midland, Upton, Ward and
Winkler Counties,
Page 11 of 17
<PAGE>
Texas. 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
early in the third quarter of 1999. It is anticipated that the Chevron Asset
Acquisition will be made by Plains Scurlock, with financing provided by the
Plains Scurlock Credit Facility.
Chevron will continue transporting crude oil through the pipeline under a
contractual arrangement. The Partnership will also enter into a five-year
contractual arrangement to sell up to 30,000 barrels of crude oil per day at
market prices to another Chevron entity. Such arrangement may be extended by
Chevron for up to five additional years. The system is currently moving an
aggregate of approximately 98,000 barrels of crude oil per day under various
gathering and transportation arrangements.
Credit Agreements
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 March 31, 1999, the Partnership had $175 million outstanding under
the Term Loan Facility, representing indebtedness assumed from the General
Partner and $6 million outstanding under the Revolving Credit Facility. 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 November 2000.
The Partnership has a $175 million letter of credit and borrowing facility (the
"Letter of Credit Facility"), the purpose of which 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. 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 March 31, 1999, the borrowing base under the Letter of
Credit Facility was $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.
At March 31, 1999, there were letters of credit of approximately $73 million and
borrowings of $4.1 million outstanding under the Letter of Credit Facility.
Partnership Distributions
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.
Page 12 of 17
<PAGE>
On April 19, 1999, the Partnership declared a cash distribution of $0.45 per
unit on its outstanding Common Units and Subordinated Units. This distribution
is the first full quarterly distribution since the Partnership was formed. The
distribution is payable on May 14, 1999, to holders of record of Common Units
and Subordinated Units at the close of business on May 3, 1999.
Investing and Financing Activities
Net cash flows used in investing activities were $3.4 million and $0.1 million
for the three months ended March 31, 1999 and 1998, respectively. Investing
activities include payments for expansion capital of $2.6 million and
maintenance capital of $0.2 million for the three months ended March 31, 1999.
Approximately $2.4 million related to the expansion of the Cushing Terminal is
included in 1999 payments. Payments for maintenance capital were $0.2 million
for the three months ended March 31, 1998. 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 capacity, whether through
construction or acquisition, are not considered maintenance capital
expenditures. Repair and maintenance expenditures associated with existing
assets that do not extend the useful life or expand the operating capacity are
charged to expense as incurred.
Net cash flows used in financing activities were $5.7 million for the three
months ended March 31, 1999. Net cash provided by financing activities amounted
to $17.8 million for the three months ended March 31, 1998. Financing activities
include approximately $4.3 million and $0.8 million in short-term borrowings for
the three months ended March 31, 1999 and 1998, respectively, and approximately
$9.9 million and $18 million of repayments for the respective periods, related
to contango crude oil inventory transactions at the Cushing Terminal. Proceeds
and repayments under the Revolving Credit Facility were $14.1 million and $8.1
million, respectively, for the three months ended March 31, 1999.
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 effect that the adoption of SFAS 133 will
have on its financial position or results of operations.
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
Page 13 of 17
<PAGE>
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 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 substantially complete. 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 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 within 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 March 31, 1999, the
Partnership has borne approximately $320,000 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.
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.
Page 14 of 17
<PAGE>
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:
<TABLE>
<CAPTION>
Change in Fair
Fair Value from 10%
At March 31, 1999 Value Adverse Price Change
- ----------------------- ----------------- -----------------------
(in millions)
<S> <C> <C>
Crude oil futures contracts $(2.6) $(4.9)
</TABLE>
At March 31, 1999, the Partnership's interest rate risk has not changed
materially from that presented in the Partnership's 1998 Form 10-K.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
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.
Page 15 of 17
<PAGE>
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Material Modification of Rights of Registrant's Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 Exhibits and Reports on Form 8-K
A. Exhibits
3.7 Agreement of Limited Partnership of Plains Scurlock Permian, L.P.
dated as of April 29, 1999.
10.17 Asset Sales Agreement between Chevron Pipe Line Company and Plains
Marketing, L.P. dated April 16, 1999.
10.18 Credit Agreement dated as of May 12, 1999, between Plains Scurlock
Permian, L.P., BankBoston, N.A. and certain financial institutions.
27. Financial Data Schedule
B. Report on Form 8-K
None
Page 16 of 17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
PLAINS ALL AMERICAN PIPELINE, L.P..
By: PLAINS ALL AMERICAN INC.,
Its General Partner
Date: May 14, 1999 By: /s/ Cynthia A. Feeback
--------------------------------------
Cynthia A. Feeback, Treasurer
(Principal Accounting Officer) of the
General Partner
Page 17 of 17
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
PLAINS SCURLOCK PERMIAN, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.................................................... 2
SECTION 1.2 Construction...................................................12
ARTICLE II
ORGANIZATION
SECTION 2.1 Formation......................................................12
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...........................................................15
SECTION 2.8 Title to Partnership Assets....................................16
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 Limitation of Liability........................................16
SECTION 3.2 Management of Business.........................................16
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.............18
SECTION 4.3 Transfer of a Limited Partner's Partnership Interest...........18
SECTION 4.4 Restrictions on Transfers......................................19
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
-i-
<PAGE>
SECTION 5.1 Initial Contributions..........................................19
SECTION 5.2 Additional Capital Contributions...............................20
SECTION 5.3 Interest and Withdrawal........................................20
SECTION 5.4 Capital Accounts...............................................20
SECTION 5.5 Loans from Partners............................................23
SECTION 5.6 Limited Preemptive Rights......................................23
SECTION 5.7 Fully Paid and Non-Assessable Nature of Partnership Interests..24
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 Allocations for Capital Account Purposes.......................24
SECTION 6.2 Allocations for Tax Purposes...................................28
SECTION 6.3 Distributions..................................................30
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 Management.....................................................31
SECTION 7.2 Certificate of Limited Partnership.............................33
SECTION 7.3 Restrictions on General Partner's Authority....................33
SECTION 7.4 Reimbursement of the General Partner...........................34
SECTION 7.5 Outside Activities.............................................35
SECTION 7.6 Loans from the General Partner; Loans or Contributions from
the Partnership; Contracts with Affiliates; Certain
Restrictions on the General Partner..........................36
SECTION 7.7 Indemnification................................................38
SECTION 7.8 Liability of Indemnitees.......................................39
SECTION 7.9 Resolution of Conflicts of Interest............................40
SECTION 7.10 Other Matters Concerning the General Partner...................42
SECTION 7.11 Reliance by Third Parties......................................43
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 Records and Accounting.........................................43
SECTION 8.2 Fiscal Year....................................................43
ARTICLE IX
TAX MATTERS
SECTION 9.1 Tax Returns and Information....................................44
-ii-
<PAGE>
SECTION 9.2 Tax Elections..................................................44
SECTION 9.3 Tax Controversies..............................................44
SECTION 9.4 Withholding....................................................44
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 Admission of Partners..........................................45
SECTION 10.2 Admission of Substituted Limited Partner.......................45
SECTION 10.3 Admission of Additional Limited Partners.......................46
SECTION 10.4 Admission of Successor or Transferee General Partner...........46
SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership..46
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 Withdrawal of the General Partner..............................47
SECTION 11.2 Removal of the General Partner.................................48
SECTION 11.3 Interest of Departing Partner..................................49
SECTION 11.4 Withdrawal of a Limited Partner................................49
ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 Dissolution....................................................49
SECTION 12.2 Continuation of the Business of the Partnership After
Dissolution..................................................50
SECTION 12.3 Liquidator.....................................................51
SECTION 12.4 Liquidation....................................................51
SECTION 12.5 Cancellation of Certificate of Limited Partnership.............52
SECTION 12.6 Return of Contributions........................................53
SECTION 12.7 Waiver of Partition............................................53
SECTION 12.8 Capital Account Restoration....................................53
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
SECTION 13.1 Amendment to be Adopted Solely by the General Partner..........53
SECTION 13.2 Amendment Procedures...........................................55
ARTICLE XIV
MERGER
SECTION 14.1 Authority......................................................55
-iii-
<PAGE>
SECTION 14.2 Procedure for Merger or Consolidation..........................55
SECTION 14.3 Approval by Limited Partners of Merger or Consolidation........56
SECTION 14.4 Certificate of Merger..........................................57
SECTION 14.5 Effect of Merger...............................................57
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 Addresses and Notices..........................................58
SECTION 15.2 Further Action.................................................58
SECTION 15.3 Binding Effect.................................................58
SECTION 15.4 Integration....................................................58
SECTION 15.5 Creditors......................................................58
SECTION 15.6 Waiver.........................................................59
SECTION 15.7 Counterparts...................................................59
SECTION 15.8 Applicable Law.................................................59
SECTION 15.9 Invalidity of Provisions.......................................59
SECTION 15.10 Consent of Partners............................................59
-iv-
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
PLAINS SCURLOCK PERMIAN, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP of PLAINS SCURLOCK PERMIAN, L.P.,
dated as of April 29, 1999 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:
WHEREAS, Plains All American Inc. and Plains Marketing, L.P. formed the
Partnership pursuant to a Certificate of Limited Partnership filed with the
Secretary of State of the State of Delaware on April 29, 1999; and
WHEREAS, Plains Marketing, L.P. has contributed $999.99 to the Partnership
in return for a 99.999% limited partner interest and Plains All American Inc.
has contributed $0.01 to the Partnership in return for a 0.001% general partner
interest; and
WHEREAS, Plains Marketing, L.P. has (i) entered into an Agreement for
Purchase and Sale of Membership Interest in Scurlock Permian LLC with Marathon
Ashland Petroleum LLC (the "Scurlock Agreement") and (ii) entered into an Asset
Sale Agreement for the West Texas Pipeline System with Chevron Pipe Line Company
(the "Chevron Agreement," and collectively with the Permian Agreement, the
"Purchase Agreements"); and
WHEREAS, Plains Marketing, L.P. will assign its interest in the Purchase
Agreements to the Partnership or an Affiliate of the Partnership; and
WHEREAS, Plains Marketing, L.P. and Plains All American Inc. will
contribute an aggregate of $50 million to the Partnership in accordance with
their respective Percentage Interests.
NOW, THEREFORE, 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.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.
<PAGE>
"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
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 5.4(d)(i) or 5.4(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 5.4(d)(i) or 5.4(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,
-2-
<PAGE>
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 Agreement of Limited Partnership of Plains Scurlock
Permian, L.P., as it may be amended, supplemented or restated from time to time.
"Assets" means the assets being assigned to the Partnership pursuant to the
Purchase Agreements.
"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 assignment of the Assets
pursuant to the Purchase Agreements.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the Partnership on
hand at the end of such Quarter, and (ii) all additional cash and cash
equivalents of the Partnership on hand on the date of determination of Available
Cash with respect to such Quarter resulting from Working Capital Borrowings made
subsequent to the end of such Quarter, less
-3-
<PAGE>
(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 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
5.4 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 5.4. 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.
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"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.
"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 5.4(d)(i) and 5.4(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
Delaware as referenced in Section 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"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 5.4(d), such property shall
no longer constitute a Contributed Property, but shall be deemed an Adjusted
Property.
"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.
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"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).
"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.
"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 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.
"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 5.4(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
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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 5.4(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 5.4(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 5.4(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 5.4(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).
"OLP Subsidiary" means a Subsidiary of the Partnership.
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"Omnibus Agreement" means that Omnibus Agreement, as amended, among Plains
Resources, Inc., the General Partner, the MLP, Plains Marketing, L.P., 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 Scurlock Permian, 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).
"Percentage Interest" means the percentage interest in the Partnership held
by each Partner upon completion of the transactions in Section 5.3 and shall
mean, (a) as to the General Partner, an aggregate 0.001% and (b) as to Plains
Marketing, 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.
"Plains Marketing" means Plains Marketing, L.P., a Delaware limited
partnership.
"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.
"Purchase Agreements" means collectively, (i) the Agreement for Purchase
and Sale of Membership Interest in Scurlock Permian LLC between Marathon Ashland
Petroleum LLC and Plains Marketing, L.P., dated March 17, 1998 and (ii) the
Asset Sale Agreement for the West Texas Pipeline System between Chevron Pipe
Line Company and Plains Marketing, L.P., dated April 16, 1999.
"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.
"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.
"Scurlock Crude Oil Sales Contract" means the crude oil sales contract
between Plains Marketing and Scurlock Permian L.L.C.
"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
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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).
"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 5.4(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.4(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 5.4(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.4(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
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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. 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 Scurlock Permian, 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.
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
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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) 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 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 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.
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:
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(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, 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
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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, 2089 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.
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.
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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.
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;
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(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 5.1, 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 5.1, 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 5.1 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.
(a) 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 $0.01 in exchange for an interest in the Partnership and was
admitted as General Partner and as a Limited Partner, and the Plains Marketing
made an initial Capital Contribution to the Partnership in the amount of $999.99
in exchange for an interest in the Partnership and was admitted as a Limited
Partner.
(b) Following the foregoing Capital Contributions, the General Partner
holds a 0.001% Partnership Interest as General Partner and the Plains Marketing
holds a 99.999% Partnership Interest as a Limited Partner.
(c) Subsequent to the formation of the Partnership, Plains Marketing and
the General Partner will make additional Capital Contributions to the
Partnership in an aggregate of $50 million, in accordance with their respective
Percentage Interests.
SECTION 5.2 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 Section 5.1, the General Partner shall
be obligated to make an additional Capital Contribution to the Partnership in an
amount equal to 0.001 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 5.3 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
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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 5.4 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 5.4(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 5.4(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 5.4, 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 5.4(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 5.5 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 5.6 Limited Preemptive Rights.
Except as provided in Section 5.2, 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 5.7 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 5.4(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 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 5.4(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 5.4(d)(i) or 5.4(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 June 30, 1999, 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 Omnibus Agreement, the Scurlock Crude Oil Sales Contract and the Purchase
Agreements; (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 (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 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
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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 5.6, 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) 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 (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
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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 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 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
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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) any transaction
approved by Special Approval, (ii) 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 (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), 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.
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 (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 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.
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(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 Assignees or any other Persons who have acquired interests
in the Units or other Partnership
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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 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 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 0.001%
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
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.
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
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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.
SECTION 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending
December 31.
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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 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.
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
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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 transactions described in Section 5.1, 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
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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 date of execution of this Agreement 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
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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.
(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
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.
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
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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 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
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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 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
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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.
SECTION 15.7 Counterparts.
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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 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 10.17
APRIL 16, 1999
ASSET SALE AGREEMENT
for the
West Texas Pipeline System
Midland, Crane, Winkler, Ector, Upton and Ward Counties, Texas
BETWEEN
CHEVRON PIPE LINE COMPANY
(As Seller)
and
PLAINS MARKETING, L.P.
(As Buyer)
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS................................................. 1
2. PURCHASE AND SALE OF ASSETS................................. 7
3. PURCHASE PRICE AND DEPOSIT.................................. 8
4. CLOSING..................................................... 9
5. TITLE....................................................... 11
6. RIGHT-OF-WAY INTERESTS...................................... 11
7. FEE PROPERTY................................................ 12
8. TERMINATION FOR MATERIAL DEFECT............................. 12
9. DAMAGE OR CONDEMNATION PRIOR TO CLOSING..................... 14
10. SELLER'S REPRESENTATIONS AND WARRANTIES..................... 14
11. SELLER'S ADDITIONAL REPRESENTATIONS AND LIMITED WARRANTY.... 15
12. BUYER'S REPRESENTATIONS AND WARRANTIES...................... 18
13. BUYER'S INVESTIGATION AND RIGHT TO CANCEL................... 19
14. SELLER'S INVESTIGATION AND RIGHT TO CANCEL.................. 22
15. BUYER'S RIGHT OF ENTRY...................................... 22
16. LIQUIDATED DAMAGES.......................................... 23
17. INDEMNITY AND ASSUMPTION OF OBLIGATIONS..................... 25
18. INDEMNITY AND ASSUMPTION OF ENVIRONMENTAL RISKS............. 26
19. PROCEDURES FOR ASSERTING INDEMNITY CLAIMS................... 30
20. CONFLICTS OF INTEREST....................................... 32
21. CLOSING COSTS, TAXES AND COMMISSIONS........................ 32
22. OPERATION OF THE PIPELINE INTERESTS PRIOR TO CLOSING........ 33
23. EMPLOYEES AND BENEFITS...................................... 34
24. F.E.R.C. TARIFFS, T.R.C. TARIFFS, AND T.R.C. T-4 PERMIT..... 40
25. GOVERNMENT CONSENTS......................................... 41
26. TAX-DEFERRED EXCHANGE....................................... 41
27. FORCE MAJEURE............................................... 42
28. FURTHER ASSURANCES.......................................... 42
29. REMOVAL OF SIGNS AND MARKERS................................ 42
<PAGE>
30. SURVIVAL OF AGREEMENTS ..................................... 43
31. CONDITIONS PRECEDENT TO CLOSING ............................ 43
32. MISCELLANEOUS .............................................. 43
33. DAMAGES .................................................... 47
34. NONDISCLOSURE .............................................. 48
35. SURVIVAL OF REPRESENTATIONS AND WARRANTIES ................. 48
EXHIBITS
EXHIBIT "A" DESCRIPTION OF PIPELINE INTERESTS
EXHIBIT "B" DESCRIPTION OF RIGHT-OF-WAY INTERESTS
EXHIBIT "C" DESCRIPTION OF FEE PROPERTY
EXHIBIT "D" BILL OF SALE
EXHIBIT "E" PIPELINE DEED AND ASSIGNMENT OF RIGHT-OF-WAY INTERESTS
EXHIBIT "F" CORPORATION GRANT DEED
EXHIBIT "G" EASEMENT
EXHIBIT "H" DESCRIPTION OF CONTRACTS
EXHIBIT "I" ASSIGNMENT OF CONTRACTS
EXHIBIT "J" NONE
EXHIBIT "K" DISCLOSURE ITEMS
EXHIBIT "L" LIST OF CONTRACTS CPL IS PROHIBITED FROM TRANSFERRING
EXHIBIT "M" LIST OF RECORDS CPL IS PROHIBITED FROM TRANSFERRING
EXHIBIT "N" Y2K TESTING SUMMARY
EXHIBIT "O" SCADA LEASE TERMS
EXHIBIT "P" LIST OF RECORDS
<PAGE>
ASSET SALE AGREEMENT
West Texas Pipeline System
This ASSET SALE AGREEMENT ("Agreement") is entered into this 16th day of April,
1999 ("Execution Date"), by and between CHEVRON PIPE LINE COMPANY, a Delaware
corporation ("Seller") with offices at 1400 Woodloch Forest Drive, The
Woodlands, Texas 77380, and PLAINS MARKETING, L.P. a Delaware limited
partnership ("Buyer") having its principal place of business at 500 Dallas
Street, Ste 700, Houston, Texas 77002.
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, on the terms set forth herein, assets comprised of Seller's West Texas
Pipeline System and associated facilities and equipment, as more particularly
described in Exhibit "A" attached hereto and made a part hereof;
NOW, THEREFORE, in consideration of the premises and the terms and conditions
set forth herein, the parties agree as follows:
1. DEFINITIONS
Unless otherwise specifically stated in the text of this Agreement, the
following terms shall have the meaning indicated: (such meanings to be,
when appropriate, equally applicable to both the singular and plural forms
of the terms defined)
a) "Affected Employee" shall have that meaning set out in Section 23 (a)
(iii).
b) "Buyer Indemnitee" shall have that meaning set forth Section 17 (a).
c) "Buyer Liquidated Damages" shall have that meaning set forth in
Section 16(b).
d). "Closing" shall have the meaning set forth in Section 4.
e). "Closing Date" shall mean the date for Closing set forth in
Section 4(a).
f) "Corrective Action" shall mean any remedial, removal, response,
construction, closure, disposal or other corrective action.
g) "Curative Action" shall mean (i) obtaining the consent of the grantor
of a Right-of-Way Interest if such consent is required by the
agreement creating the Right-of-Way Interest; (ii) obtaining a new or
amended agreement for a Right-of-Way Interest if a new or amended
agreement is required to remedy a spatial gap in the Right-of-Way
Interest, secure approval for any part of the Pipeline Interest
located outside of a Right-of-Way Interest boundary to remain outside
the boundary or otherwise remedy a lack of compliance with the terms
and conditions of an
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agreement creating a Right-of-Way Interest; or (iii) any other
corrective action resulting in Buyer receiving good and defensible
title or right to the Real Property Interests that underlay the
Pipeline Interests and are necessary to the operations and maintenance
of the Pipeline Interests.
h) "Deposit" shall mean the amount of Six Million and no/100 dollars
($6,000,000.00)
i) "Easement" shall mean that easement to operate and maintain the
Pipeline Interests on certain fee property owned by Seller or its
affiliates not included in the sale in the form attached hereto as
Exhibit "G".
j) "Effective Date" shall mean the date upon which the Closing occurs.
k) "Effective Time" shall mean 7:00am Central Day Light Savings Time on
the Effective Date.
l) "Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules regulations, orders or determinations of any
governmental authority heretofore or currently in effect in any
jurisdiction in which any of the Property is located pertaining to (i)
the control of certain hazardous substances and pollutants including,
without limitation, liquid hydrocarbons, petroleum or petroleum
products, or the protection of the air, water or land; (ii) 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.
m) "Environmental Liability" shall mean any and all liabilities,
responsibilities, claims, suits, losses and costs (including
remediation, removal, response, abatement, clean up, investigation or
monitoring costs and any other related cost and expense), causes of
action, damages, settlements, expenses, charges, assessments, liens,
penalties, pre-judgement and post-judgement interest, attorney,
consulting and expert fees incurred or imposed and related to the Real
Property or the operation or maintenance of the Pipeline Interests (i)
pursuant to any agreement, order, notice, directive, injunction,
judgment or similar documents (including settlements) or due to
actions taken by Buyer which arise out of or are related to Seller's
noncompliance with Environmental Laws, or (ii) pursuant to a claim by
any
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governmental authority or other person, not a party to this Agreement
for damage to natural resources, remediation, or similar costs and
expenses incurred by such governmental authority or person pursuant to
common law or statute.
n) "Execution Date" shall mean the date first stated on which the parties
entered into this Agreement.
o) "Fee" shall mean the real property described in Exhibit C.
p) "Interest" shall mean interest applied at the Interest Rate calculated
on the actual number of days elapsed from the day the Deposit was
wired to Seller's account to the first to occur of (i) the Closing
Date, or (ii) the date this Agreement is terminated; or as otherwise
set forth with specificity in this Agreement, whichever is applicable.
q) "Interest Rate"shall mean the lesser of the interest rate announced
from time to time by the principal San Francisco, California office of
Bank of America N.T.&S.A. as its prime rate or reference rate or the
highest rate permitted by applicable law.
r) "Knowledge of Buyer" shall mean to the actual knowledge of Mark
Shires, Troy Valenzuela and Joan Demond.
s) "Knowledge of Seller" shall mean to the actual knowledge of B. Butler,
W. J. Jasper, and D. T. Schlattman.
t) "Line Fill" shall mean all of the Shipper-owned crude oil in the
custody of CPL and held within the Pipeline Interests at the Effective
Time.
u) "Material Defect" shall have the meaning set forth in Section 8(b).
v) "Mesa Midland Header Lease Agreement" shall mean an agreement mutually
acceptable to Seller and Buyer which shall include the following terms
and conditions:
(i) Seller will lease to Buyer up to 115,000 barrels per day
capacity in Seller's undivided interest in the main header at
the Mesa Midland Station in order to accommodate Buyer's
deliveries from Buyer's tankage and leased tank working capacity
at Mesa Midland Station to connecting carriers;
(ii) The lease will have a twenty (20) year term with the option to
extend on a year to year basis if both parties mutually so
agree, and shall contain a Seller non-compete provision for the
Mesa Midland pump-over service during the term of the lease;
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(iii) There will be a $10.00 per year fee for the lease.
w) "Permitted Encumbrances" shall mean any of the following:
(i) liens for taxes or assessments not yet due or delinquent or, if
delinquent, that are being contested in good faith in the normal
course of business;
(ii) all rights to consent by, required notices to, filings with, or
other actions by governmental entities in connection with the
sale or conveyance of oil pipelines or interests therein, if the
same are customarily obtained subsequent to such sale or
conveyance, Seller has no reason to believe they cannot be
obtained and failure to obtain will not interfere with or limit
the operation or use of the Pipeline Interests by Buyer;
(iii) easements, road-use agreements, rights-of-way, servitudes,
permits, surface leases and other rights in respect of surface
operations, that do not materially interfere with Buyer's
operation or use of the Property;
(iv) zoning, planning and environmental laws to the extent valid and
applicable to the Property;
(v) liens of carriers, warehousemen, mechanics, workers, material
suppliers or other providers of materials or services arising by
operation of law in the ordinary course of business or incident
to the construction or improvement of any property in respect of
obligations which are not yet due.
x) "Pipeline Interests" shall mean that portion of Seller's West Texas
Pipeline System, as well as associated pumps, meters, valves,
controls, cathodic protection equipment, tanks, and other fixtures,
vehicles, equipment and tangible personal property used in or
incidental to the operation and maintenance of the West Texas Pipeline
System as more particularly described in Exhibit A attached hereto and
made a part hereof.
y) "Property" shall mean the Pipeline Interests, Right-of-Way Interests,
Fee, Records, Transferable Contracts and Software License.
z) "Prospective Employees" shall have that meaning set forth in Section
23(a)(i).
aa) "Purchase Price" shall have that meaning set forth in Section 3 (a).
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<PAGE>
bb) "Real Property Interests" shall mean the Fee, the Right-of-Way
Interests, and all other rights and interests in real property
including, but not limited to the below-ground and above-ground
Pipeline Interests which are classified as real property under Texas
law.
cc) "Records" shall mean all of Seller's files, records, information and
materials relating to the ownership, operation or maintenance of the
Pipeline Interests, Right-of-Way Interests, and Fee that are necessary
for the current operation and maintenance of the Pipeline Interests
and which Seller is not prohibited from transferring to Buyer by law
or existing contractual relationship as more specifically set out in
Exhibit "P".
dd) "Remaining Employees" shall mean the Prospective Employees who do not
become Affected Employees.
ee) "Repair Liability" shall mean a defect in the Pipeline Interests which
without repair would result in (i) the immediate inability to operate
all or a part of the Pipeline Interests due to mechanical malfunction
or lack of pipeline integrity, or (ii) the requirement to lower
operating pressure unless and until a repair is affected, or (iii) the
obligation to make a physical repair or modification to the system to
achieve compliance with laws, rules or regulations and accepted
industry standards governing oil pipeline and storage facilities.
ff) "Right-of-Way Interests" shall mean all of those certain right-of-way
interests in real property underlying the Pipeline Interests which
interests are created by agreements, including but not limited to
permits, franchises, easements, leases, licenses and other agreements,
as more particularly described in Exhibit B attached hereto and made a
part hereof.
gg) "SCADA Lease" shall mean that six month lease under which Seller shall
remotely operate the West Texas Pipeline System for Buyer which
operation shall include but not be limited to coordination with
Buyer's scheduling and oil movements personnel to implement scheduled
and unscheduled receipts, deliveries, storage and use of the Pipeline
Interests, the major responsibilities of which are set out in Exhibit
"O" attached hereto.
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<PAGE>
hh) "Seller Indemnitee" shall have that meaning set forth in Section 15
(b).
ii) "Seller Liquidated Damages" shall have the meaning set forth in
Section 16(a).
jj) "Settlement Statement Accounting" shall mean a financial statement
done as soon as reasonably practical but within one hundred twenty
(120) days of Closing for the purpose of making a post closing
adjustment to the Purchase Price for the following:
i). a decrease in the Purchase Price to the extent that the value of
the Linefill is less than the value shown in the shipper
accounts due to discrepancies in quality or quantity resulting
in a net loss to a shipper or shippers on the West Texas
Pipeline System as more particularly set out in Section 2(b);
ii). An increase in the Purchase Price if actual transfer taxes or
other charges specified in Section 3(e)(i) are greater than the
amount estimated or a decrease if less than the amount
estimated;
iii). An increase or a decrease to the Purchase Price for any tariff
revenues collected by one party but attributable to the account
of the other party; and
iv). An increase or a decrease to the Purchase Price for any
adjustments required by Section 32(a).
kk) "Software License" shall mean a non-exclusive license to Buyer to use
Seller's software nomination program and its archived and historical
database for a period of 120 days from the Effective Date, at no cost
to Buyer.
ll) "Tank Capacity Lease Agreement" shall mean an agreement mutually
acceptable to Seller and Buyer which shall include the following
terms and conditions:
(i) Seller will lease to Buyer up to 200,000 barrels of tank working
capacity at the Mesa Midland Station. The tank working capacity
leased to Buyer will be limited to 100,000 barrels each of
common stream WTI and WTS;
(ii) The volumes delivered to the Mesa Midland Station for storage
shall be delivered out in the same calendar month as it was
received;
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<PAGE>
(iii) The lease will have a five (5) year term;
(iv) The fee for this lease shall be $10.00 per year.
mm) "Transferable Contracts" shall mean all of Seller's licenses,
permits, authorizations, contracts and agreements related to and
necessary for the operation and maintenance of the Pipeline Interests
which Seller is not prohibited from transferring to Buyer by law or
existing contractual relationship, as more particularly set out in
Exhibit H.
2. PURCHASE AND SALE OF ASSETS
a) Seller shall sell, assign, transfer, and convey to Buyer at Closing
(as defined in Section 4, CLOSING) all of Seller's right, title, and
interest in the following assets:
i) The Pipeline Interests;
ii) The Right of Way Interests;
iii) The Fee;
iv) The Easement;
v) The Records, but not the files, records, information and materials
relating to the Pipeline Interests that Seller is prohibited from
transferring which are described in Exhibit "M" hereto;
vi) The Transferable Contracts but not the contracts and agreements
that are related to the operation and maintenance of the Pipeline
Interests which Seller is prohibited by law or existing
contractual relationship from transferring which are set out in
Exhibit "L" hereto, or those Transferable Contracts identified by
Buyer pursuant to written notice to Seller no later than ten (10)
business days prior to Closing for which Buyer does not wish to
receive an assignment.
vii) The Software License.
viii) The SCADA Lease.
b) Seller shall transfer to Buyer at Closing custody of the Line Fill,
along with all related Line Fill and Shipper accounting records. In
the event the transferred crude oil does not conform in quantity and
quality to Seller's shipper accounting records a post Closing
adjustment shall be made to the Purchase Price and reflected in the
Settlement Statement Accounting to be provided pursuant to Section
32(a)(ii). Notwithstanding the foregoing, no Purchase Price adjustment
shall be made for the
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<PAGE>
West Coast Heavy Crude diverted in February, 1999 by Plains All
American Pipeline, L.P.. to Seller's Tank Nos. 1644 and 1645 located
at the Wink East Station resulting in the contamination of West Texas
Sour ("WTS") in Seller's custody, for which Buyer shall assume all
liability to the affected shippers. The Line Fill shall be measured
and valued as follows: (i) Meter tickets will be pulled and tank
volumes will be determined at the Effective Time; (ii) volumes will be
corrected to a temperature of sixty degrees (60) Fahrenheit, less
deductions for impurities, in accordance with the latest API/ASTM
measurement standards, and at equilibrium vapor pressure; (iii) meter
tickets reflecting all oil delivered out of the system through the
first full month of operation shall be retained by Buyer. Any
discrepancies that exist between the Line Fill transferred to Buyer's
custody and that shown in shipper Line Fill accounts, except as
specifically excepted above, that result in a net loss to a shipper or
shippers will be valued at Platt's average spot prices for WTS or West
Texas Intermediate ("WTI") if such loss is crude oil of WTS or WTI
quality, and at a mutually agreed delivery price for West Coast Sour
if such crude oil is of West Coast Sour quality, on the Effective
Date.
3. PURCHASE PRICE AND DEPOSIT
a) Subject to Closing and post-Closing adjustments, the purchase price
for the Property shall be Forty Million Five Hundred Thousand and
No/100 Dollars ($40,500,000.00) (the "Purchase Price").
b) Buyer shall deliver the Deposit to Seller's qualified exchange
intermediary, Salix Equity Exchange, Inc. on the next business day
following execution of this Agreement. The Deposit shall be paid in
United States dollars in immediately available funds by wire transfer
to the following wire instructions:
Union Bank of California, San Francisco, California
ABA # 1220-0049-6
Attn: Domestic Custody
Further Credit to Salix Equity Exchange, Inc., Ref. #1
Client Account No. 250027150-01
Attn: Sue Kambara or Moon Lee (415) 296-6763
c) Seller need not segregate the Deposit in a separate account, and shall
not hold the Deposit in trust. If the Closing occurs, the principal
amount of the Deposit together with Interest on the Deposit, shall be
credited against the Purchase Price, as a Purchase Price adjustment.
d) In the event that Closing does not occur and Seller is required to
return the Deposit as provided for in this Agreement, Seller shall wire
transfer the Deposit plus Interest (adjusted for Liquidated Damages if
applicable) to Buyer no later than five (5) business days of demand by
Buyer. The refunded amount shall be paid in United States dollars in
immediately available funds by wire transfer to the credit of
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<PAGE>
Buyer, Account No. 560-96260 at BankBoston, N.A., Boston,
Massachusetts, A.B.A. # 011000390.
e) On the Closing Date, Buyer shall pay to Seller, according to Seller's
wire instructions to be provided to Buyer at least five (5) business
days prior to Closing, the balance of the Purchase Price, Thirty-four
Million Five Hundred Thousand and No/100 Dollars ($34,500,000.00), plus
(i) an increase in the Purchase Price equal to the estimated
costs for any transfer taxes, sales and gross receipt taxes
on the tangible personal property, and such other charges
necessary to transfer the Property, if any, paid by Seller,
plus
(ii) a decrease for the amount of Interest accrued on the Deposit,
plus
(iii) a decrease for any loss of less than Five Hundred Thousand
dollars ($500,000.00), in the aggregate, due to casualty or
condemnation to the extent that Buyer does not receive proceeds
from insurance or condemnation;
4. CLOSING
a) The closing of the transaction contemplated hereby ("Closing") shall
occur when the Purchase Price is paid to Seller and the conveyancing
instruments referred to in Section c) below are delivered to Buyer.
Closing shall take place no later than 90 days from the Execution Date
of this Agreement or the next business day following ten (10) days
after Buyer and Seller have satisfied all of the conditions and
received the governmental approvals contemplated by Section 25 herein,
whichever is later (the "Closing Date"), unless mutually extended by
both parties, and shall take place at 1400 Woodloch Forest Drive, The
Woodlands, Texas 77380 or other location and date mutually agreed upon
between the parties.
b) If the Closing does not take place within one hundred twenty (120)
days from the Execution Date for any reason then this Agreement shall
terminate and neither party shall have any further obligation to the
other party, except for the return of Buyer's Deposit with Interest
and the payment of Liquidated Damages, if applicable.
c) On the Closing Date, Seller shall take all such action and execute and
deliver to Buyer the following:
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<PAGE>
i) A Bill of Sale for conveyance of the Pipeline Interests which are
tangible personal property and Records in its possession
including Linefill and shipper accounting records in the form
attached hereto as Exhibit D;
ii) A Pipeline Deed And Assignment Of Right-of-Way Interests for
conveyance of the real property Pipeline Interests and the Right-
of-Way Interests in the form attached hereto as Exhibit E. Within
said Pipeline Deed And Assignment Of Right-of-Way Interests
Seller shall retain a non-exclusive license to enter upon any and
all Real Property Interests conveyed to Buyer by the Pipeline
Deed And Assignment Of Right-of-Way Interests for the purpose of
performing its obligations under this Agreement;
iii) A Corporation Grant Deed for the Fee in the form attached
hereto as Exhibit F. Within said Corporation Grant Deed Seller
shall retain a non-exclusive license to enter upon any and all
Real Property Interests conveyed to Buyer by the Corporation
Grant Deed for the purpose of performing its obligations under
this Agreement;
iv) An Easement to operate and maintain the Pipeline Interests on
certain fee property that will not be included in the sale in the
form attached hereto as Exhibit G; and
v) An Assignment of the Transferred Contracts in the form attached
hereto as Exhibit H.
vi) A statement of estimated closing charges and accounting of funds
received from Buyer, a copy of which shall be provided to Buyer
ten (10) days prior to Closing.
vii) A non-exclusive Software License.
viii) A title insurance policy covering the Fee, issued by a title
company acceptable to both Seller and Buyer, in the face amount
of the appraised value of the Fee and containing reasonable and
customary exceptions to title, at Seller's sole cost and expense,
or, at Seller's option, a General Warranty of Title from Seller
which General Warranty shall be incorporated into the Corporation
Grant Deed.
ix) The Mesa Midland Header Lease Agreement.
x) The Tank Capacity Lease Agreement.
xi) An officer's certificate of Seller in a form reasonably
satisfactory to Buyer to the effect that, to such officer's
actual knowledge the representations,
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<PAGE>
warranties and limited warranties contained in Section 10 and
Section 11 are true and correct in all material respects on the
Closing Date.
d) On the Closing Date Buyer shall execute and deliver to Seller an
officer's certificate of Seller in a form reasonably satisfactory to
Seller to the effect that, to such officer's actual knowledge the
representations and warranties contained in Section 12 are true and
correct in all material respects on the Closing Date.
e) Buyer and Seller shall take all such action and execute and deliver
such other documents as may be necessary to effectuate the transfer
and assignment of the Property.
f) Buyer shall be entitled to possession of the Property upon the Closing
Date following payment of the Purchase Price as set forth in Section 3
(PURCHASE PRICE AND DEPOSIT) and Closing of the transaction.
5. TITLE
a) Other than as may be set forth in the Corporation Grant Deed, Seller
makes no general warranties of title to the Real Property Interests it
sells and agrees to sell only such interest or interests, if any, as
it may own in the Real Property Interests. Buyer shall, at its own
expense, conduct such examination of title as it deems appropriate and
shall either accept title and proceed with the purchase or notify
Seller of its intent to terminate this Agreement based on a Material
Defect in title, pursuant to Section 8.
b) The property files shall be made available as soon as practical and
Buyer shall have sixty (60) days from the date that the property files
which contain legal descriptions of the Real Property Interests listed
on Exhibits "B" and "C" are made available to Buyer to conduct such
title examination as it may desire and within which to confirm in
writing its desire to terminate this Agreement based upon a Material
Defect in title pursuant to Section 8. If no Material Defects exist
but Curative Actions are required, Buyer shall provide Seller with
written notice of the Real Property Interests requiring Curative
Actions and upon Seller's request, Buyer shall also provide Seller
with the results of any such examination of title including any title
reports.
6. RIGHT-OF-WAY INTERESTS
a) Seller is the owner of certain Right-of-Way Interests in real property
underlying the Pipeline Interests, but said Right-of-Way Interests may
not underlie all of the Pipeline Interests. Seller shall grant to
Buyer assignments of the Right-of-Way Interests subject to the
aforementioned possible gaps.
b) The Right-of-Way Interests being transferred to Buyer herein are more
particularly described in Exhibit B hereto.
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<PAGE>
c) Buyer acknowledges that it is receiving from Seller only the interest
that Seller has in said Right-of-Way Interests and that Seller has not
represented or warranted that it has an interest in the entire length
of the real property underlying the Pipeline Interests, provided
however, Seller shall take commercially reasonable and diligent steps,
as more particularly set out in Section 6(e) and Section 8, to remedy
spatial gaps where it has no property rights or undertake Curative
Actions where Seller is not otherwise in compliance with the
agreements creating the Right-of-Way Interests underlying the Pipeline
Interests.
d) Buyer and Seller acknowledge that the Right of Way Interests shown in
Exhibit B may require consent of the landowner prior to assignment,
and that Seller shall use commercially reasonable and diligent efforts
to obtain all of said consents. Closing is contingent upon Seller
either (i) obtaining the grantor's written consent to Seller's
assignment of the right-of-way agreements set forth in Exhibit B, or
(ii) Seller completing all required Curative Actions for the Right of
Way Interests or (iii) Seller's and Buyer's agreement to proceed to
Closing and the pursuit of Curative Actions after Closing, pursuant to
Section 8.
e) Seller shall use commercially reasonable and diligent efforts to
obtain said consents or new or amended right-of-way agreements within
60 days from the day the property files specified in Section 5 (b) are
tendered to Buyer. Any payment obligation imposed by any grantor, in
order to gain consent, effect an assignment of the Right-of-Way
Interests, to replace or amend an existing right-of-way agreement or
related to other Curative Actions, will be paid by Seller at the time
said payment obligations become due to each applicable grantor,
subject, however, to the limitations set forth in Section 8(b).
7. FEE PROPERTY
In addition to the Right-of-Way Interests specified in Section 6 (RIGHT-OF-
WAY INTERESTS), Seller or its affiliate is the owner of real property
underlying the Pipeline Interests, some of which is not included in this
sale. All the Fee property to be included in the sale is described on
Exhibit "C." Seller shall grant or cause to be granted to Buyer, its
successors and assigns, at no additional cost to Buyer an Easement for that
portion of the Pipeline Interests that traverses property owned by Seller
or affiliates of Seller which is excluded from the sale. The Easement
shall be in the form as shown on Exhibit "G" to this Agreement.
8. TERMINATION FOR MATERIAL DEFECT
a) In the event that, thirty (30) days prior to Closing, the sum of the
actual and good faith estimated cost to complete all Curative Actions
undertaken by Seller or requested by Buyer is, in the aggregate, less
than Five Hundred Thousand dollars ($500,000.00), Buyer and Seller
shall be obligated to proceed to Closing and Seller
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<PAGE>
shall be obligated, at Seller's expense, to complete all Curative
Actions prior to Closing or as soon thereafter as is reasonably
practical.
b) In the event that the sum of the estimated and actual cost for
Curative Actions undertaken by Seller or requested by Buyer, exceeds,
in the aggregate, Five Hundred Thousand dollars ($500,000.00) such
amount constituting a material defect ("Material Defect"), Seller or
Buyer may elect to terminate this Agreement by notifying the other
party in writing of its intent to terminate due to said Material
Defect. If Seller elects to terminate this Agreement based upon such
Material Defect, Buyer may, at its sole option, agree to be obligated
for any and all further Curative Actions and Seller shall be obligated
to proceed to Closing under the terms of this Agreement. If Seller and
Buyer do not elect to terminate this Agreement based upon such
Material Defect, Buyer shall be obligated to proceed with the purchase
under the terms of this Agreement and Seller shall complete all
Curative Action, at Seller's cost and expense, prior to Closing or as
soon as practical thereafter or Seller may elect by written notice to
Buyer to defer any and all Curative Actions in return for providing
Buyer with indemnity for damages arising as a result of Seller's
failure to complete the deferred Curative Actions. If Buyer elects to
terminate this Agreement, or if Seller elects to terminate this
Agreement and Buyer does not elect to be obligated for any and all
further Curative Actions, this Agreement shall terminate. If this
Agreement is terminated pursuant hereto the Deposit, with Interest,
shall be returned to Buyer and neither party shall have any further
obligation to the other party.
c) For a period of five years from and after the Closing Date, should
Buyer identify the need for Curative Action regarding the Right-of-Way
Interests and said Curative Action would have been required to provide
Buyer with good and defensible title on the Closing Date, Buyer shall
notify Seller in writing of the nature and location of the condition
requiring Curative Action. Seller, at Seller's sole cost and expense,
shall diligently undertake the Curative Action as necessary to remedy
such condition, or Seller shall provide Buyer with written notice of
Seller's election to defer the Curative Action in return for Seller
providing Buyer with indemnity for any and all damages, including
punitive damages asserted by third parties, not a party to this
Agreement, arising as a result of Seller's failure to complete the
deferred Curative Actions. At the expiration of five years, except for
those conditions for which Seller has received written notice from
Buyer or for which Seller has undertaken to indemnify Buyer within the
five year time period, Seller shall have no further obligation, duty
or responsibility to perform Curative Actions or to indemnify Buyer.
d) Buyer agrees to cooperate with Seller in furtherance of Seller's
efforts to perform Curative Actions, including but not limited to,
Buyer filing and pursuing condemnation actions when reasonably
requested by Seller and at Seller's cost. Subject to the limitations
set forth above in Section 8(c), Seller shall hold Buyer harmless from
and against any and all costs, expenses, demands, damages or causes of
action resulting from or related to (i) Seller's failure to have
Right-of-Way
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<PAGE>
Interests underlying the Pipeline Interests, (ii) the presence of
spatial gaps in the Right-of-Way Interests, (iii) Seller's failure to
comply with the agreements creating the Right-of-Way Interests, or
(iv) Seller's Curative Actions.
e) Seller may not defer Curative Actions under Section 8(b) and 8(c) if
such deferral would result in loss of the right to utilize the
Pipeline Interest on the property for which Curative Actions have been
requested.
9. DAMAGE OR CONDEMNATION PRIOR TO CLOSING
Seller shall promptly notify Buyer of any casualty to the Property or any
condemnation proceeding commenced prior to the Closing. If any such damage
or proceeding relates to or may result in the loss of any material portion
of the Property ("material" shall mean in excess of Five Hundred Thousand
Dollars [$500,000.00] in value), Buyer may, at its option, elect to (a)
terminate this Agreement, in which event Seller shall refund the Deposit
with Interest, and neither party shall have any further rights or
obligations hereunder, or (b) with regard to condemnation, continue the
Agreement in effect, in which event upon the Closing, Buyer shall be
entitled to any compensation, awards, or other payments or relief resulting
from such condemnation proceeding whether payment is made before or after
Closing or (c) with regard to casualty, Buyer shall be entitled to either
the insurance proceeds or other payment resulting from such casualty or a
reduction in the Purchase Price by the amount required to restore the
property to the condition that existed prior to the casualty loss. To the
extent that the parties cannot agree to the cost to restore the property,
the parties shall mutually agree to a third party appraiser who shall
render an appraisal of the cost to restore the property which appraisal
shall be conclusive and binding for all purposes. If Buyer elects to
terminate this Agreement based upon such loss, Seller may at its option
repair or replace such Property to substantially the same condition as
existed prior to such loss within thirty (30) days after receipt of Buyer's
election to terminate, and if such cures are effected, Buyer shall be
obligated to proceed with the purchase under the terms of this Agreement
without a right to compensation or payment and without a Purchase Price
adjustment. If Seller does not elect to cure or, elects to cure but such
cure cannot be affected within thirty (30) days, and Buyer does not elect
to proceed with the purchase of the Property due to the damage to or loss
of the Property through casualty or condemnation proceedings, this
Agreement shall terminate. In the event of casualty or condemnation that
does not result in a material loss of Property, Seller shall not be
obligated to repair or replace the Property and Buyer shall not have the
right to terminate, provided however, Seller shall compensate Buyer to the
extent that it receives insurance proceeds or a condemnation award, or, if
not compensated or not fully compensated, such damage or loss shall be a
Purchase Price Adjustment.
10. SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer as follows:
a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power to carry on its business as it is now being conducted.
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<PAGE>
b) Seller has the corporate power and authority to make and carry out this
Agreement and to be bound by any and all terms and conditions hereof.
All necessary corporate action on the part of Seller required for the
authorization, the execution and delivery of this Agreement and the
consummation of the transactions provided for herein has been duly
taken.
c) Seller is not a "foreign person" as such term is used in Section 1445
of the Internal Revenue Code ("IRC 1445").
d) Seller is qualified to do business and is in good standing in the State
of Texas.
e) Except as disclosed to Buyer in the attached Exhibit "K", as it may be
amended from time to time up to the Closing Date, there are no
threatened or pending claims, demands, suits or other legal proceedings
including governmental and administrative actions related to the
ownership, design, use, operation or maintenance of the Property or the
transactions contemplated by this Agreement.
11. SELLER'S ADDITIONAL REPRESENTATIONS AND LIMITED WARRANTY
Seller represents and warrants to Buyer to the extent, but only to the
extent set forth below in Section 11(m), as follows:
a) Except as disclosed to Buyer in the attached Exhibit "K", as it may be
amended from time to time up to the Closing Date, the agreements
creating the Right-of-Way Interests are in full force and effect, there
are no material defaults by Seller or events that with notice or the
lapse of time, or both, would constitute a material default of said
agreements by Seller; and Seller has not received any notice to either
remove or relocate any part of the Pipeline Interest or that any party
to any of the agreements creating the Right-of-Way Interests intends to
terminate such agreement.
b) Except as disclosed to Buyer in the attached Exhibit "K", as it may be
amended from time to time up to the Closing Date, the Transferable
Contracts are transferable and in full force and effect. There are no
material defaults by Seller under the Transferable Contracts, or events
that with notice or the lapse of time, or both, would constitute a
material default of the Transferable Contracts by Seller; and Seller
has not received any notice that any party to any of the Transferable
Contracts intends to terminate such agreement.
c) Except as disclosed to Buyer in the attached Exhibit "K", as it may be
amended from time to time up to the Closing Date, Seller has good and
defensible title to the Real Property Interests; Seller has not
conveyed any right, title or interest in the Property to any third
party; the Property owned by Seller is free and clear of
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<PAGE>
mortgages, mechanics' liens and other forms of security interests
securing the financial obligations of Seller, or that are Permitted
Encumbrances; or, if such liens exist, they have been bonded or secured
against.
d) Except as disclosed to Buyer in the Attached Exhibit "K", as it may be
amended from time to time up to the Closing Date, on the Closing Date
the Property is not considered a "wetland" or located in a "flood
zone", to the Knowledge of Seller, does not contain naturally occurring
Radioactive Material ("NORM") as defined in Section 13(d).
e) Except as disclosed to Buyer in the Attached Exhibit "K", as it may be
amended from time to time up to the Closing Date, the assets that are
currently utilized in the operation of the Pipeline Interests, all of
which are included in Exhibit "A", are in working order and serviceable
condition on the Closing Date.
f) As of the Execution Date of this Agreement Seller has conducted Year
2000 compliance tests for Programmable Logic Control's ("PLC's") and
Human/Machine Interfaces ("HMI's") as listed in Exhibit "N". As a
result of said compliance tests the following equipment was found to be
non-compliant: (1) Wonderware HMI at Keystone Station (Serial Number
73279), (2) Wonderware HMI at Monahans Station (Serial Number 71264),
(3) RTMS HMI for the Crane Crude System. Seller will replace or modify
the aforementioned non-compliant equipment prior to the Closing Date of
this Agreement. To the Knowledge of Seller, Seller has disclosed to
Buyer all known material Year 2000 issues related to the Property.
g) Except as disclosed to Buyer in the Attached Exhibit "K", as it may be
amended from time to time up to the Closing Date, none of the records
or contracts which Seller is prohibited from transferring and which are
more particularly set out in Exhibits "L" and "M" are reasonably
necessary for the operation or maintenance of the Property.
h) As of the Closing Date the Pipeline Interests have only been utilized
for oil gathering and oil transportation services with the exception of
the following :
i) A portion of the Keystone to Wink pipeline was previously used to
transport butane to a gas plant in Kermit;
ii) A portion of the Wickett gathering system was previously in natural
gas service.
i) Except as disclosed to Buyer in Exhibit "K", as it may be amended from
time to time up to the Closing Date, Seller's operation of the Property
is in substantial compliance with all federal, state and local
statutes, laws, ordinances, regulations, rules, judgements, orders and
decrees.
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<PAGE>
j) Except as disclosed to Buyer in Exhibit "K", as it may be amended from
time to time up to the Closing Date, Seller is in substantial
compliance with all permits, licenses and other authorizations
reasonably necessary to the operation of the Pipeline Interests and
that such permits, licenses and authorizations are transferable to
Buyer.
k) Except as disclosed to Buyer in Exhibit "K", as it may be amended from
time to time up to the Closing Date, Seller is in substantial
compliance with all Environmental Laws and all health and safety laws,
rules and regulations regarding the Property; Seller is not subject to
any pending or threatened enforcement action or investigations
regarding the Property; there are to the Knowledge of Seller no
material Environmental Liabilities on or related to the Property; and,
with the exception of attorney work product or documents subject to
attorney client privilege (but not the underlying factual information
and data), Seller has made available to Buyer all of the files, records
and documents in its possession regarding the environmental condition
of the Property.
l) Except as specifically set forth in this Agreement, Seller makes no
representation or warranty whatsoever as to operative or proposed
governmental laws and regulations (including, but not limited to,
zoning, environmental, and land use laws and regulations) to which the
Property may be subject. Buyer acknowledges that Buyer has entered into
this Agreement on the basis of Buyer's own review and investigation of
the applicability and effect of such laws and regulations and except
for the representations and warranties of Seller set forth in this
Agreement, that Buyer assumes the risk that adverse matters may not
have been revealed by Buyer's investigation.
m) IF SUBSEQUENT TO THE CLOSING DATE, BUT PRIOR TO FIVE (5) YEARS AFTER
THE CLOSING DATE, BUYER BECOMES AWARE OF FACTS THAT CONTRADICT THE
SELLER'S REPRESENTATIONS AND LIMITED WARRANTIES AS SET FORTH ABOVE IN
THIS SECTION 11, SUCH THAT SELLER'S REPRESENTATION OR LIMITED WARRANTY
IS NO LONGER TRUE OR CORRECT IN ALL MATERIAL RESPECTS CONSTITUTING A
MISREPRESENTATION, SELLER SHALL REIMBURSE TO BUYER THE ACTUAL COSTS OR
DAMAGES INCURRED BY BUYER TO CORRECT THE FACTORS UNDERLYING THE
MISREPRESENTATION BY SELLER WHICH EXCEED IN THE AGGREGATE TWO HUNDRED
AND FIFTY THOUSAND DOLLARS ($250,000.00) (THE AGGREGATE OF COSTS AND
DAMAGES UP TO $250,000.00 SHALL BE BUYER'S RESPONSIBILITY) AND UP TO,
BUT NOT TO EXCEED, A TOTAL AGGREGATE COST TO SELLER OF FIVE MILLION
DOLLARS ($5,000,000.00). ANY COSTS AND DAMAGES INCURRED BY BUYER WHICH
EXCEED FIVE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($5,250,000.00)
SHALL BE THE RESPONSIBILITY OF BUYER. THE FOREGOING PAYMENTS TO
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BE MADE BY SELLER TO BUYER SHALL CONSTITUTE BUYER'S SOLE REMEDY AS
AGAINST SELLER FOR MISREPRESENTATIONS, WHETHER MATERIAL OR IMMATERIAL,
MADE BY SELLER PURSUANT TO THIS SECTION 11. NOTWITHSTANDING THE
FOREGOING, THIS PROVISION DOES NOT APPLY TO THE BREACH OF SECTIONS
11(i) OR 11(j) TO THE EXTENT THAT NONCOMPLIANCE CREATES AN
ENVIRONMENTAL LIABILITY, OR SECTION 11(k), THE REMEDIES FOR ALL WHICH
ARE GOVERNED BY SECTION 18(a), OR TO BREACHES UNDER SECTIONS 11(a) AND
(c) WHICH ARE GOVERNED BY SECTION 8.
12. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller the following:
a) Buyer is a partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
powers to carry on its business as it is now being conducted.
b) Buyer has the power and authority to make and carry out this Agreement
and to be bound by any and all terms and conditions hereof. All
necessary partnership action on the part of Buyer required for the
authorization of the transaction provided for herein has been duly
taken.
c) Buyer is qualified to do business in the State of Texas.
d) Buyer is not a "foreign person" as such term is used in Section 1445 of
the Internal Revenue Code ("IRC 1445").
e) Buyer or the affiliate of Buyer to whom this Agreement is assigned
under Section 32(b), whichever closes the transaction contemplated by
this Agreement, has sufficient financial resources to pay the Purchase
Price that are not contingent and to fulfill its obligations as
specified in this Agreement.
f) Buyer is and has been since its inception engaged primarily in the
business of transporting oil and owning interests in and operating oil
pipelines.
g) Buyer is an experienced and knowledgeable investor in the oil and gas
business. Prior to entering into this Agreement Buyer was advised by
its own legal, tax and other professional counsel concerning this
Agreement, the Property and the value thereof. Buyer is aware of the
risks and uncertainties of an investment in oil pipelines. Nothing
contained in the foregoing provisions of this paragraph however shall
change the substance of or the effect of the representations,
warranties and limited warranties of Seller set forth in this
Agreement.
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<PAGE>
h) Buyer has disclosed to Seller in writing any and all material matters,
discovered by Buyer prior to Closing Date, or of which Buyer has
otherwise acquired knowledge prior to Closing, which should have been
disclosed as an amendment to Exhibit "K", but has not been so
disclosed, at least ten (10) days prior to the Closing Date or
immediately upon Knowledge of Buyer of such matter if it becomes known
or discovered by Buyer subsequent to the ten (10) days before the
Closing Date.
13. BUYER'S INVESTIGATION AND RIGHT TO CANCEL
a) Subject to the provisions of Section 15 (BUYER'S RIGHT OF ENTRY) of
this Agreement, Buyer may, at its option, conduct physical inspections
and health, environmental and safety evaluations of the Property (the
"HES Evaluation"), solely for the purpose of Buyer's verification of
the operational and physical integrity, health, environmental and
safety condition of the Property. If the HES Evaluation discloses
conditions that are likely to result in Repair Liabilities or
Environmental Liabilities which are of a nature that requires repair or
cleanup and are of such a substantial magnitude as to warrant a cost of
repair or cleanup in the aggregate in excess of One Million Dollars
($1,000,000.00), then Buyer may elect to cancel this Agreement by
providing Seller with a copy of the HES Evaluation together with
written notice of such election no later than the later of ten (10)
days after Seller is presented the internal inspection results in
Section 15 (a) or ninety (90) days after the Execution Date of this
Agreement. In no case shall Buyer be entitled to avail itself of an
option to cancel this Agreement under the provisions of this Section 13
if Buyer is indemnified for the costs of the repair or cleanup or
otherwise not obligated to incur the costs. Should Buyer terminate this
Agreement pursuant to this Section, Seller shall refund the Deposit
with Interest, as well as the reasonable costs associated with Buyer's
discovery of the Repair Liability or the Environmental Liability, and
neither party shall have any further rights or obligations hereunder.
b) Any Repair Liability or Environmental Liability not known to Seller
which Buyer discovers during its investigation under this Section,
shall be disclosed in writing to Seller prior to Closing. If such
Repair Liability or Environmental Liability discovered by Buyer are of
a nature that requires repair or cleanup and are of such a substantial
magnitude as to warrant a cost of repair or cleanup in the aggregate in
excess of One Million Dollars ($1,000,000.00), Seller, in its sole
discretion, may elect to terminate this Agreement, prior to Closing and
within twenty (20) days of receipt of the above disclosure from Buyer.
In no case shall Seller be entitled to avail itself of an option to
cancel this Agreement under the provisions of this Section 13 if the
Repair Liability or Environmental Liability were known to Seller on or
before the Execution Date of this Agreement, if Seller is indemnified
for such costs or otherwise not obligated to incur the costs, or if
Buyer has agreed to assume responsibility for the repair or cleanup.
Should Seller terminate this Agreement pursuant to this Section, Seller
shall immediately refund Buyer's Deposit with Interest and the
reasonable costs associated with Buyer's discovery of the Repair
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<PAGE>
Liability or Environmental Liability, and neither party shall have any
further rights or obligations hereunder.
c) Buyer acknowledges that (i) Buyer at Closing will acquire the Property
on the basis of it's own investigation of the physical condition of the
Property and assumes the risk that adverse conditions outside the scope
of Seller's representations, warranties, limited warranties and
indemnities set forth in this Agreement may not be revealed by Buyer's
own investigation, (ii) EXCEPT FOR AND TO THE EXTENT THAT MATTERS ARE
ADDRESSED IN SELLER'S REPRESENTATIONS, WARRANTIES, LIMITED WARRANTIES,
AND INDEMNITIES, BUYER IS ACQUIRING THE PROPERTY "AS IS WHERE IS,"
"WITH ALL FAULTS" AND WITHOUT WARRANTY OF FITNESS FOR ANY PARTICULAR
PURPOSE AND WITHOUT ANY WARRANTIES EXPRESS OR IMPLIED WHICH EXTEND
BEYOND THE FACE OF THIS AGREEMENT, AND (iii) EACH PARTY'S REMEDIES
AGAINST THE OTHER AND LIABILITIES TO THE OTHER FOR CONDITIONS
ASSOCIATED WITH THE TRANSFERRED PROPERTY ARE LIMITED TO THOSE PROVIDED
IN THIS AGREEMENT.
d) Buyer acknowledges that Seller has informed Buyer that the Property:
(i) could contain asbestos or other hazardous material as established
by the Environmental Protection Agency, Department of Environmental
Quality, or other governmental agencies; (ii) might contain petroleum
products; (iii) might contain Naturally Occurring Radioactive Material
("NORM"); (iv) might be considered as a "Wetland" as defined in the
"Federal Manual for Determining Jurisdictional Wetland" or by some
other governmental rules or regulations; (v) may be located in a "Flood
Zone" as defined by the U.S. FEMA Mapping System or other governmental
agencies; and therefore, Buyer waives any present or future claim or
cause of action against Seller arising from the conditions discussed
herein, other than as may be provided in Section 11(m) or Section 17
and Section 18. This provision shall survive the Closing.
e) On the Closing Date, Buyer shall assume all risk that the Property may
contain wastes or contaminants and that adverse physical conditions,
including the presence of wastes or contaminants, may not have been
revealed by Buyer's investigation other than as may be provided in
Section 11(m) or Section 17 and Section 18. This provision shall
survive the Closing.
f) On the Closing Date, all responsibility and liability related to
disposal, spills, leaks, waste, or contamination on and below the
Property shall be transferred from Seller to Buyer subject to Section
17 and Section 18. This provision shall survive the Closing.
g) Except as disclosed to Buyer in Section 11 (f) herein, Buyer expressly
acknowledges and agrees that: (1) Seller either has not assessed, or,
if it has
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<PAGE>
assessed, has not (or may not have or not fully have) modified,
replaced or otherwise remediated the Property being sold, including any
components thereof or systems related thereto or embedded therein, to
determine whether they are Year 2000 or Date Compliant, as defined
herein. (2) IF ANY PORTION OF THE PROPERTY IS NOT YEAR 2000 OR DATE
COMPLIANT, ITS ABILITY TO FUNCTION OR OPERATE MAY BE AFFECTED, WITH A
RESULTING ADVERSE EFFECT ON BUYER'S BUSINESS. (3) As between Buyer and
Seller only, Buyer assumes and releases Seller from any costs, expenses
or losses incurred by Buyer arising from the Year 2000 or Date
Compliance status of the Property or any portion thereof other than
that for which a disclosure was made or for which a disclosure should
have been made in Section 11(f) and Seller shall have no liability
whatsoever for any costs, expenses, losses, damages, or problems Buyer
may incur or encounter arising from or associated in any way with the
Year 2000 or Date Compliance status of the Property or any portion
thereof. Buyer shall not release and indemnify Seller from costs,
expenses claims, damages or liabilities asserted by parties other than
the Buyer or Seller except to the extent that such costs, expenses,
claims, damages or liabilities are caused by the negligence of Buyer.
(4) Any disclosures other than contained in Section 11 (f) made by
Seller as to Year 2000 or Date Compliance (including but not limited to
disclosures as to Seller's or a manufacturer's/supplier's assessments,
inventories, testing, modification, replacement, etc.), whether made
orally or in writing, and whether made before or after execution of
this Agreement, are Year 2000 Readiness Disclosures, are for
informational purposes only and SUCH DISCLOSURES DO NOT AND SHALL NOT
CREATE, AND SHALL NOT BE CONSTRUED TO CREATE, ANY EXPRESS OR IMPLIED
WARRANTIES ON THE PART OF SELLER, AND SELLER EXPRESSLY DISCLAIMS ANY
SUCH EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. (5) "Year 2000 or Date Compliant" means the Property and its
component parts would: (i) Correctly process date information before,
on and after January 1, 2000 and in connection with the transition from
the year 1999 to the year 2000. This would include accepting date
input, providing date output, and performing calculations and
comparisons on dates or portions of dates. Date interpretation would be
correct for all valid date values within the applicable domain; (ii)
function accurately and without interruption before and after January
1, 2000 through January 1, 2005 without any change in operations
associated with the advent of the new century; (iii) respond to two-
digit input in a way that would resolve the ambiguity as to the century
in a disclosed, defined, and predetermined manner and interfacing
software would make the same century assumptions when processing the
two-digit years; (iv) process the Year 2000 as a leap year; (v)
correctly handle date fields containing non-date information and
correctly handle a date held in a non-date field; and (vi) correctly
process any date with a year specified as "99" and "00", regardless of
other subjective meanings attached to these values.
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<PAGE>
14. SELLER'S INVESTIGATION AND RIGHT TO CANCEL
Seller may, at its option, conduct an environmental, health and safety
evaluation of the Property solely for Seller's use and information, to be
completed no later than twenty (20) days before Closing. If, in Seller's
good faith opinion, the evaluation results are unacceptable to Seller, then
Seller may elect to cancel this Agreement by providing Buyer with written
notice of such election no later than ten (10) days before Closing. Seller
shall provide Buyer with access to the results of any evaluation. Within
ten (10) business days of receipt of said written notice Buyer may elect to
have Seller proceed to Closing provided Buyer has agreed in writing to be
responsible for remediation of the Environmental Liabilities which were
unacceptable to Seller. If Buyer does not elect to proceed to Closing as
set forth above and Seller elects to terminate this Agreement pursuant to
this Section, Seller shall refund the Deposit with Interest and shall
reimburse Buyer for its reasonable cost for due diligence activity from the
Execution Date until termination and neither party shall have any further
rights or obligations hereunder.
15. BUYER'S RIGHT OF ENTRY
a) Seller hereby grants to Buyer, its agents, representatives, engineers
and surveyors, immediately upon execution of this Agreement by the
parties and upon reasonable notice to Seller, the right at Buyer's sole
risk to enter onto the Real Property Interests from time to time for
the purposes of inspection of the Property, including but not limited
to both internal and external inspection, evaluation and appraisal of
the Pipeline Interests. Such persons shall have the right to make
surveys, soils tests and such other tests as Buyer shall deem
desirable. If Buyer plans to perform any excavation, take soil samples
or conduct other activities on the Real Property Interests which may
affect Seller's pipeline operations, or impact Seller's rights-of-way,
Buyer shall provide Seller with written notification of such plans and
shall obtain Seller's written approval, which approval shall not be
unreasonably withheld or delayed, and shall secure all necessary
regulatory approvals prior to conducting any such activities. Buyer
shall restore the Property to its condition existing prior to Buyer's
operations or activities upon the Property pursuant hereto, including
repairs or maintenance as such are required as a result of Buyer's
operations or activities. If Buyer elects to perform internal pipe
inspections, such inspections shall be undertaken as soon as reasonably
practical after Buyer obtains the consent of Seller. Buyer shall
provide Seller with the results of the internal pipe inspections and
both Buyer and Seller shall have at least ten (10) business days to
review such results prior to Closing. If Seller fails to grant approval
of Buyer activities that are accepted practices in the pipeline
industry to assess pipe and tank integrity, equipment functionality
other potential Repair Liability and potential Environmental Liability
related to the Property within a reasonable period of time after
Seller's receipt of Buyer's notification as set forth above, Buyer may
terminate this Agreement and Seller shall immediately refund Buyer's
Deposit with Interest.
b) BUYER WAIVES AND RELEASES ALL CLAIMS AGAINST SELLER, CHEVRON
CORPORATION, ITS AND THEIR SUBSIDIARIES AND
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AFFILIATES, INCLUDING BUT NOT LIMITED TO ITS AND THEIR DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS (THE "SELLER INDEMNITEES") FOR INJURY TO
OR DEATH OF ANY PERSONS OR DAMAGE TO PROPERTY ARISING IN ANY WAY FROM
THE EXERCISE OF RIGHTS GRANTED TO BUYER BY THIS SECTION OR THE
ACTIVITIES PERFORMED PURSUANT TO THIS SECTION BY BUYER OR ITS EMPLOYEES
OR AGENTS ON THE PROPERTY.
c) BUYER SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD SELLER INDEMNITEES
HARMLESS FROM AND AGAINST ANY AND ALL LOSS, COST, DAMAGE, EXPENSE OR
LIABILITY, INCLUDING REASONABLE ATTORNEYS' FEES, WHATSOEVER ARISING OUT
OF (I) ANY AND ALL STATUTORY OR COMMON LAW LIENS OR OTHER ENCUMBRANCES
FOR LABOR OR MATERIALS FURNISHED IN CONNECTION WITH SUCH RIGHTS GRANTED
HEREUNDER, INCLUDING BUT NOT LIMITED TO SAMPLINGS, STUDIES OR SURVEYS
THAT BUYER MAY CONDUCT WITH RESPECT TO THE PROPERTY PURSUANT TO THIS
SECTION, OR (II) ANY INJURY TO OR DEATH OF PERSONS OR DAMAGE TO
PROPERTY OCCURRING IN, ON OR ABOUT THE PROPERTY AS A RESULT OF SUCH
EXERCISE OF THE RIGHTS GRANTED HEREUNDER OR ACTIVITIES CONDUCTED
PURSUANT TO THIS SECTION. SUCH INDEMNITY SHALL APPLY WHETHER OR NOT A
SELLER INDEMNITEE WAS OR IS CLAIMED TO BE PASSIVELY, CONCURRENTLY, OR
ACTIVELY NEGLIGENT, AND REGARDLESS OF WHETHER LIABILITY WITHOUT FAULT
IS IMPOSED OR SOUGHT TO BE IMPOSED ON ONE OR MORE OF THE SELLER
INDEMNITEES. THIS INDEMNITY SHALL NOT APPLY TO THE EXTENT THAT IT IS
VOID OR OTHERWISE UNENFORCEABLE UNDER APPLICABLE LAW IN EFFECT ON OR
VALIDLY RETROACTIVE TO THE EXECUTION DATE OF THIS AGREEMENT AND SHALL
NOT APPLY WHERE SUCH LOSS, COST, DAMAGE, INJURY, LIABILITY OR CLAIM IS
THE RESULT OF THE SOLE NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY SELLER
INDEMNITEES. THE FOREGOING OBLIGATION OF INDEMNITY SHALL SURVIVE
CLOSING OF THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY TERMINATION OF
THIS AGREEMENT PRIOR TO THE CLOSING.
16. LIQUIDATED DAMAGES
a) IF THE PURCHASE AND SALE OF THE PROPERTY IS NOT CLOSED AS CONTEMPLATED
HEREIN BY REASON OF ANY BREACH OR DEFAULT OR FAILURE TO PROCEED BY
BUYER, EXCEPT AS SPECIFICALLY PROVIDED IN SECTIONS 5 (TITLE), 6 (RIGHT-
OF-WAY INTERESTS), 8 (TERMINATION FOR MATERIAL DEFECT), 9 (DAMAGE OR
CONDEMNATION PRIOR TO CLOSING), 13 (BUYER'S
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<PAGE>
INVESTIGATION AND RIGHT TO CANCEL), 14(SELLER'S INVESTIGATION AND RIGHT
TO CANCEL), 15 (BUYER'S RIGHT OF ENTRY), 25 (GOVERNMENT CONSENTS), 27
(FORCE MAJEURE), 31 (CONDITIONS PRECEDENT TO CLOSING), OR BREACH,
DEFAULT OR FAILURE TO PROCEED ON THE PART OF SELLER, THEN SELLER SHALL
RETAIN ONE MILLION DOLLARS ($1,000,000.00) OF THE DEPOSIT WITH INTEREST
THEREON AS LIQUIDATED DAMAGES IN LIEU OF ALL OTHER DAMAGES (AND AS
SELLER'S SOLE REMEDY IN SUCH EVENT) ("SELLER LIQUIDATED DAMAGES").
ADDITIONALLY. SELLER SHALL RETURN TO BUYER THE REMAINDER OF THE DEPOSIT
AND THE REMAINING INTEREST THEREON.
b) IF THE PURCHASE AND SALE OF THE PROPERTY IS NOT CLOSED AS CONTEMPLATED
HEREIN BY REASON OF ANY BREACH OR DEFAULT OR FAILURE TO PROCEED BY
SELLER, EXCEPT AS SPECIFICALLY PROVIDED IN SECTIONS 6 (RIGHT-OF-WAY
INTERESTS), 8 (TERMINATION FOR MATERIAL DEFECT), 9 (DAMAGE OR
CONDEMNATION PRIOR TO CLOSING), 13 (BUYER'S INVESTIGATION AND RIGHT TO
CANCEL), 14 (SELLER'S INVESTIGATION AND RIGHT TO CANCEL), 25
(GOVERNMENT CONSENTS), 27 (FORCE MAJEURE), 31 (CONDITIONS PRECEDENT TO
CLOSING), OR BREACH, DEFAULT OR FAILURE TO PROCEED ON THE PART OF
BUYER, THEN IN ADDITION TO THE RETURN OF BUYER'S DEPOSIT WITH INTEREST,
SELLER SHALL PAY TO BUYER ONE MILLION DOLLARS ($1,000,000.00) WITH
INTEREST FROM THE EXECUTION DATE AS LIQUIDATED DAMAGES IN LIEU OF ALL
OTHER DAMAGES (AND AS BUYER'S SOLE REMEDY IN SUCH EVENT) ("BUYER
LIQUIDATED DAMAGES").
c) The parties agree that Seller will be entitled to the Seller Liquidated
Damages defined above in consideration of Seller holding the Property
off the market and the resulting inability of Seller to seek other
buyers during that period and that Buyer shall be entitled to the Buyer
Liquidated Damages defined above in consideration of Buyer forgoing
other business opportunities during that period. In addition, Buyer and
Seller acknowledge that they have made good faith reasonable efforts to
determine what damages would be in the event of a default by either and
they have been unable to arrive at any meaningful formula or measure of
damages for default. The parties hereby acknowledge that the extent of
damages to either party occasioned by such breach or default or failure
to proceed by the other would be impossible or extremely impracticable
to ascertain and that the amount of the Seller and Buyer Liquidated
Damages are a fair and reasonable estimate of such damages under the
circumstances.
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<PAGE>
d) By initialing or signing where indicated below, the parties
specifically approve these liquidated damages provisions.
________________ __________________
SELLER BUYER
Chevron Pipe Line Company Plains Marketing, L.P.
By its General Partner
Plains All American Inc.
17. INDEMNITY AND ASSUMPTION OF OBLIGATIONS
a) BUYER SHALL ASSUME FULL RESPONSIBILITY FOR THE PROPERTY AS OF THE
EFFECTIVE DATE INCLUDING, BUT NOT LIMITED TO, ALL PIPELINE OPERATIONS,
RIGHT-OF-WAY PAYMENTS AND ALL ACCOUNTING AND REPORTING THEREOF AND
SHALL INDEMNIFY, HOLD HARMLESS AND DEFEND SELLER INDEMNITEES FROM AND
AGAINST ANY AND ALL LOSS, COST, DAMAGE AND EXPENSE, (INCLUDING
ATTORNEYS' FEES AND EXPENSES) AND CAUSES OF ACTION ARISING WITH RESPECT
TO THE PROPERTY RELATED TO EVENTS OR CONDITIONS OCCURRING ON OR
SUBSEQUENT TO THE EFFECTIVE DATE. EXCEPT AS OTHERWISE PROVIDED IN
SECTION 15(C) AND SECTION 18 (A) OR AS OTHERWISE AGREED TO BY THE
PARTIES PURSUANT TO SECTION 8 (B), SECTION 9, SECTION 13 (B), OR
SECTION 14, SELLER SHALL RETAIN FULL RESPONSIBILITY FOR THE PROPERTY
PRIOR TO THE EFFECTIVE DATE INCLUDING, BUT NOT LIMITED TO, ALL PIPELINE
OPERATIONS, RIGHT-OF-WAY PAYMENTS AND ALL ACCOUNTING AND REPORTING
THEREOF AND SHALL INDEMNIFY, HOLD HARMLESS AND DEFEND BUYER ITS PARENT,
PARTNERS, SUBSIDIARIES, AFFILIATED COMPANIES AND THEIR OFFICERS,
DIRECTORS, PARTNERS, EMPLOYEES AND AGENTS ("BUYER INDEMNITEES") FROM
AND AGAINST ANY AND ALL LOSS, COST, DAMAGE AND EXPENSE, (INCLUDING
ATTORNEY'S FEE AND EXPENSES) AND CAUSES OF ACTION ARISING WITH RESPECT
TO THE PROPERTY RELATED TO EVENTS OR CONDITIONS OCCURRING BEFORE THE
EFFECTIVE DATE HEREIN.
b) BUYER SHALL RELEASE, DEFEND, INDEMNIFY, AND HOLD SELLER HARMLESS FROM
AND AGAINST ANY AND ALL LOSS, COST, DAMAGE AND EXPENSE, INCLUDING
REASONABLE ATTORNEYS' FEES, ASSERTED AGAINST SELLER BY ANY PERSON OTHER
THAN SELLER INDEMINITEES FOR (I) PERSONAL INJURY OR DEATH, OR FOR LOSS
OF OR DAMAGE TO PROPERTY, ARISING FROM EVENTS OR CONDITIONS OCCURRING
ON OR CONNECTED WITH THE PROPERTY, ON OR SUBSEQUENT TO THE EFFECTIVE
DATE
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<PAGE>
HEREIN, OR (ii) BREACH OF ANY REPRESENTATION OR WARRANTY OF BUYER SET
FORTH IN SECTION 12. EXCEPT AS OTHERWISE PROVIDED IN SECTION 15(C) AND
SECTION 18 (A) OR AS OTHERWISE AGREED TO BY THE PARTIES PURSUANT TO
SECTION 8 (B), SECTION 9, SECTION 13 (B) OR SECTION 14, SELLER SHALL
RELEASE, DEFEND, INDEMNIFY AND HOLD BUYER HARMLESS FROM AND AGAINST ANY
AND ALL LOSS, COST, DAMAGE AND EXPENSE, INCLUDING REASONABLE ATTORNEY'S
FEES, ASSERTED AGAINST BUYER BY ANY PERSON OTHER THAN BUYER
INDEMINITEES FOR (i) PERSONAL INJURY OR DEATH, OR FOR LOSS OF OR DAMAGE
TO PROPERTY ARISING FROM EVENTS OR CONDITIONS OCCURRING ON OR CONNECTED
WITH THE PROPERTY PRIOR TO THE EFFECTIVE DATE HEREIN, OR, (ii) BREACH
OF ANY REPRESENTATION OR WARRANTY OF SELLER SET FORTH IN SECTION 10.
c) THE INDEMNITIES CONTAINED IN THIS SECTION 17 SHALL NOT APPLY TO THE
EXTENT THAT THEY ARE VOID OR OTHERWISE UNENFORCEABLE UNDER APPLICABLE
LAW IN EFFECT ON OR VALIDLY RETROACTIVE TO THE EXECUTION DATE OF THIS
AGREEMENT, AND SHALL NOT APPLY WHERE SUCH LOSS, DAMAGE, INJURY,
LIABILITY OR CLAIM IS THE RESULT OF THE NEGLIGENCE OR WILLFUL
MISCONDUCT OF AN INDEMNITEE AFTER CLOSING.
d) THESE OBLIGATIONS TO INDEMNIFY SHALL SURVIVE THE CLOSING AND THE
DELIVERY OF THE DEED AND ASSIGNMENT, PURSUANT TO THIS AGREEMENT, AND
SHALL REMAIN ENFORCEABLE THEREAFTER.
18. INDEMNITY AND ASSUMPTION OF ENVIRONMENTAL RISKS
a) BUYER SHALL RELEASE, DEFEND, INDEMNIFY, AND HOLD SELLER INDEMNITEES
HARMLESS FROM AND AGAINST ANY AND ALL LOSS, COST, DAMAGE AND EXPENSE,
INCLUDING REASONABLE ATTORNEYS' FEES, FOR CLAIMS ASSERTED AGAINST
SELLER FOR ANY ENVIRONMENTAL LIABILITIES WHICH ARISE OR ARE FIRST
ASSERTED ON OR AFTER THE EFFECTIVE DATE BUT ARE ATTRIBUTABLE TO EVENTS
THAT OCCURRED OR CONDITIONS THAT EXISTED PRIOR TO THE EFFECTIVE DATE,
REGARDLESS OF PAST CONTRIBUTION OR GENERATION BY SELLER. SUCH INDEMNITY
SHALL APPLY WHETHER OR NOT SELLER WAS OR IS CLAIMED TO BE PASSIVELY,
CONCURRENTLY, OR ACTIVELY NEGLIGENT, AND REGARDLESS OF WHETHER
LIABILITY WITHOUT FAULT IS IMPOSED OR SOUGHT TO BE IMPOSED ON SELLER.
THIS INDEMNITY SHALL NOT APPLY TO THE EXTENT
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<PAGE>
THAT IT IS VOID OR OTHERWISE UNENFORCEABLE UNDER APPLICABLE LAW IN
EFFECT ON OR VALIDLY RETROACTIVE TO THE EFFECTIVE DATE OF THIS
AGREEMENT, AND SHALL NOT APPLY WHERE SUCH LOSS, DAMAGE, INJURY,
LIABILITY OR CLAIM IS THE RESULT OF THE WILLFUL MISCONDUCT OF SELLER OR
WHERE THE ENVIRONMENTAL LIABILITY WAS KNOWN TO SELLER PRIOR TO THE
EFFECTIVE DATE. PROVIDED HOWEVER, FOR A PERIOD OF THREE YEARS FROM THE
EFFECTIVE DATE, FOR ENVIRONMENTAL LIABILITIES DISCOVERED OR ARISING
AFTER THE EFFECTIVE DATE BUT ATTRIBUTABLE TO EVENTS THAT OCCURRED OR
CONDITIONS THAT EXISTED PRIOR TO THE EFFECTIVE DATE, BUYER SHALL BE
RESPONSIBLE FOR AND SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS
SELLER FROM AND AGAINST THE FIRST ONE MILLION DOLLARS ($1,000,000.00)
OF ENVIRONMENTAL LIABILITY, IN THE AGGREGATE. SELLER SHALL BE
RESPONSIBLE FOR AND SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS
BUYER FROM AND AGAINST ALL ENVIRONMENTAL LIABILITY DISCOVERED OR
ARISING AFTER THE EFFECTIVE DATE BUT ATTRIBUTABLE TO EVENTS THAT
OCCURRED OR CONDITIONS THAT EXISTED PRIOR TO THE EFFECTIVE DATE, BUT
ONLY TO THE EXTENT THAT THE ENVIRONMENTAL LIABILITY EXCEEDS ONE MILLION
DOLLARS ($1,000,000.00) IN THE AGGREGATE. SELLER SHALL REMAIN
RESPONSIBLE AND INDEMNIFY BUYER HEREUNDER FOR SUCH ENVIRONMENTAL
LIABILITY REGARDLESS OF WHETHER LOSSES, COSTS AND EXPENSES CONTINUE TO
BE INCURRED BEYOND THE THREE YEAR PERIOD. SELLER SHALL BE RESPONSIBLE
AND INDEMNIFY BUYER HEREUNDER FOR ALL ENVIRONMENTAL LIABILITY EXISTING
AND KNOWN TO SELLER PRIOR TO CLOSING AND NEITHER THE ONE MILLION DOLLAR
($1,000,000) NOR THE THREE YEAR TIME LIMITATION SHALL APPLY. ANY
ENVIRONMENTAL LIABILITY OF SELLER DISCOVERED OR ARISING MORE THAN THREE
YEARS FROM THE EFFECTIVE DATE BUT ATTRIBUTABLE TO EVENTS THAT OCCURRED
OR CONDITIONS THAT EXISTED PRIOR TO THE EFFECTIVE DATE, SHALL BE THE
FULL RESPONSIBILITY OF BUYER AND BUYER SHALL INDEMNIFY SELLER
INDEMNITEES PURSUANT TO THIS INDEMNITY PROVISION.
b) EXCEPT AS LIMITED BY SECTION 11(m), SECTION 17, AND SECTION 18 (a) OR
OTHER SECTION OF THIS AGREEMENT IN WHICH BUYER IS EXPRESSLY INDEMNIFIED
BY SELLER, BUYER WAIVES ITS RIGHT TO RECOVER FROM SELLER AND ITS
PREDECESSORS IN INTEREST, AND THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS, ANY AND ALL DAMAGES, LOSSES,
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<PAGE>
LIABILITIES, COSTS OR EXPENSES WHATSOEVER (INCLUDING ATTORNEYS' FEES
AND COSTS), AND CLAIMS THEREOF, WHETHER DIRECT OR INDIRECT, KNOWN OR
UNKNOWN, FORESEEN OR UNFORESEEN, WHICH MAY ARISE ON ACCOUNT OF OR IN
ANY WAY GROWING OUT OF OR CONNECTED WITH THE PHYSICAL AND/OR
ENVIRONMENTAL CONDITION OF THE PROPERTY OR ANY LAW OR REGULATION
APPLICABLE THERETO, INCLUDING THE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED (42 U.S.C.
(S)(S)9601 ET SEQ.), THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976
(42 U.S.C. (S)(S)6901 ET SEQ.), THE CLEAN WATER ACT (33 U.S.C.
(S)(S)1401-1450), THE HAZARDOUS MATERIALS TRANSPORTATION ACT (49 U.S.C.
(S)(S)1801 ET SEQ.), THE TOXIC SUBSTANCE CONTROL ACT (15 U.S.C.
(S)(S)2601-2629).
c) THESE OBLIGATIONS TO INDEMNIFY SHALL SURVIVE THE CLOSING AND THE
DELIVERY OF THE DEED AND ASSIGNMENT, PURSUANT TO THIS AGREEMENT, AND
SHALL REMAIN FULLY ENFORCEABLE THEREAFTER.
d) BUYER WAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES-
CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS &
COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF BUYER'S OWN
SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
IN ORDER TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, BUYER HEREBY
REPRESENTS AND WARRANTS TO SELLER THAT BUYER (I) IS IN THE BUSINESS OF
SEEKING OR ACQUIRING, BY PURCHASE OR LEASE, GOODS OR SERVICES FOR
COMMERCIAL OR BUSINESS USE, (II) HAS KNOWLEDGE AND EXPERIENCE IN
FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS
AND RISKS OF THE TRANSACTION CONTEMPLATED HEREBY AND (III) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION.
e) AFTER THE EFFECTIVE DATE, EACH PARTY AGREES TO COOPERATE FULLY WITH THE
OTHER IN THE DEFENSE OF ANY CLAIM AND MAKE AVAILABLE UPON REASONABLE
REQUEST ITS PERSONNEL, AGENTS, INFORMATION AND RECORDS PERTAINING TO
ANY CLAIMS OR CAUSE OF ACTION.
f) IN THOSE INSTANCES WHERE SELLER ASSUMES RESPONSIBILITY FOR ALL OF AN
ENVIRONMENTAL LIABILITY SELLER SHALL
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HAVE THE RIGHT, BUT NOT THE OBLIGATION, TO HIRE INDEPENDENT COUNSEL TO
DEFEND SELLER AND CONDUCT THE DEFENSE, AND THE RIGHT TO CONDUCT ALL OF
THE REMEDIATION OF ENVIRONMENTAL DAMAGE RELATED THERETO, INCLUDING THE
FIRST ONE MILLION DOLLARS OF REMEDIATION THAT IS THE RESPONSIBILITY OF
BUYER.
g) Seller shall have the right of access to the Real Property Interests in
connection with (i) the right to respond to and conduct the remediation
of any Environmental Liabilities and (ii) the right to conduct the
defense of any claims for which Seller assumes an obligation of
indemnity under this Agreement. Such rights of Seller shall survive
Closing and shall be subject to the following terms and conditions:
i) Prior to commencing any Corrective Actions or related activities on
or with respect to the Property, Seller shall propose to Buyer a
plan for such work ("Plan"). Prior to the implementation of any
Plan or Plans, Seller shall provide Buyer with a comprehensive
schedule showing in reasonable detail the Corrective Action to be
taken by Seller to comply with such Plans and a budget showing the
estimated timing and, if requested by Buyer to address landowner or
governmental concerns, the estimated amount of expenditures
required to implement the Plans. At the request of Buyer from time
to time, Seller shall meet and consult fully with Buyer 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), Seller shall provide Buyer
with a report showing in reasonable detail the current status of
all Corrective Actions undertaken by Seller since commencement of
such Corrective Actions, including expenditures to date. To the
extent that similar quarterly reports are filed by Seller with any
governmental agency, copies of such reports as provided to Buyer
shall satisfy this requirement. Seller shall be required to obtain
Buyer's prior written approval (which shall not be unreasonably
withheld or delayed) for each Plan prior to proceeding with any
Plan or filing any Plan with any applicable governmental authority
(except that, in the event of an emergency posing an imminent
threat of harm to the safety of persons or property, Seller 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 Buyer, provided that Seller shall
notify Buyer in writing of such action as soon thereafter as
practicable). Buyer shall be deemed to have approved such Plan
unless Buyer shall have objected thereto by notice to Seller within
thirty (30) days following Buyer's receipt thereof setting forth in
reasonable detail the basis for Buyer's objections. If Buyer
objects to such proposed Plan and Seller and Buyer do not reach
agreement on such objections, then Seller shall provide Buyer with
an alternative Plan as soon as reasonably practicable in light of
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the circumstances following Seller's receipt of a request therefor
from Buyer.
ii) Seller shall conduct all Corrective Actions and related activities
on or with respect to the Property 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 Property and the Buyer's
business. Promptly upon completion of such activities, Seller shall
notify Buyer in writing of such completion.
iii) Seller shall defend, protect, indemnify and hold harmless the Buyer
Indemnitees from and against any and all penalties, claims,
demands, fines, assessments, damages, diminution in value, 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 Indemnitee by any third party to the extent same
are caused by the acts or omissions of Seller or Seller's agents,
employees or consultants in conducting or performing any Corrective
Actions or related activities on or with respect to the Property.
For purposes of this Agreement, Seller's obligations with respect
to any such third-party claim shall be subject to the terms and
provisions of Section 19.
iv) If, within thirty (30) days after Seller's receipt of notice from a
Buyer Indemnitee of an Environmental Liability for which the Buyer
Indemnitee believes Seller is obligated to indemnify the Buyer
Indemnitee under Section 18, Seller does not notify Buyer that
Seller elects to respond to and conduct the remediation of such
Environmental Liability in accordance with the provisions of this
Section 18 (g), 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 Seller's
right to respond to and conduct such remediation shall terminate
and the Buyer shall have the sole right to proceed with such
activities but shall not thereby waive any right to indemnity
therefore pursuant to this Agreement.
v) Such rights of Seller under this Section 18(g) shall in no event
preclude the Buyer Indemnitees 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.
19. 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
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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.
b) The Indemnifying Party shall promptly assume the defense of any such
claim, suit, action or proceeding for which indemnity is required;
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 assume the defense of and indemnity
for 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 a
claim based upon
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Environmental Liabilities for which the other party owes an
indemnification obligation, the party shall:
(i) define the nature and extent of the claim for indemnity in
writing and, if based on Environmental Liabilities, include
copies of all reports to government agencies filed as of that
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
Liabilities; and
(ii) To the extent that the assessment involves discussions or
meetings with governmental authorities, the party seeking
indemnification shall provide the other party with timely notice
of and opportunity to participate in all such discussions or
meetings.
20. CONFLICTS OF INTEREST
Conflicts of interest relating to this Agreement are strictly prohibited.
Except as otherwise expressly provided herein, neither Buyer nor Seller,
nor any director, employee or agent of Buyer or Seller, shall give to or
receive from any director, employee or agent of Buyer or Seller any gift,
entertainment or other favor of significant value, or any commission, fee
or rebate. Likewise, neither Buyer nor Seller, nor any director, employee
or agent of Buyer or Seller shall enter into any business relationship with
any director, employee or agent of Buyer or Seller or of any affiliate of
Buyer or Seller, unless such person is acting for and on behalf of Buyer or
Seller, without prior written notification thereof to Seller or Buyer. Any
representative(s) authorized by Buyer or Seller may audit any and all
records of Buyer or Seller for the sole purpose of determining whether
there has been compliance with this Section.
21. CLOSING COSTS, TAXES AND COMMISSIONS
a) CLOSING COSTS
Seller shall pay the cost of a standard policy of title insurance from
a mutually agreed to title company containing reasonable and customary
exceptions to title if Seller elects to furnish a title policy under
Section 4(c) (viii). Each party shall pay its own attorneys' fees, if
any. In addition, Buyer shall pay all filing fees and costs of
recording. Each party shall pay its own attorneys' fees, if any,
related to the preparation and execution of this Agreement.
b) TAXES AND FEES
Ad valorem, real and personal property taxes, if any, imposed on the
Property and assessments of record shall be prorated between Seller and
Buyer as of the Closing Date of this transaction. Any other fees or
taxes imposed on the conveyance of the Property by any governmental
body shall be paid in accordance with the law or
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ordinance levying such tax or fee or, in the absence of a controlling
law or ordinance, shall be divided equally between Seller and Buyer.
c) Sales Tax and Use Taxes
i) Buyer shall be responsible for, and shall remit to the appropriate
taxing authority, all sales, use, transfer and similar taxes
arising out of the sale of the Property. Buyer shall hold harmless
and shall indemnify Seller for any sales or use taxes assessed
against Seller by any taxing authority in respect of this sale,
including the amounts of any penalties, interest and attorneys'
fees, unless such penalties, interest or attorneys' fees accrue
through the fault or negligence of Seller, in which case Buyer
shall not be obligated to hold harmless and indemnify Seller for
that portion of such penalties, interest or attorneys' fees that
are attributable to Seller's fault or negligence. Any legal
expenses incurred by Seller to reduce or avoid any of the
aforementioned taxes shall be paid or reimbursed by Buyer.
ii) The purchase and sale of the assets covered by this Agreement is
believed by the parties to constitute an isolated or occasional
sale as defined in Texas Tax Code Ann. Sec. 151.304. If the
transaction is subsequently deemed to be a taxable transaction, the
Buyer will hold Seller harmless and shall indemnify Seller for any
sales taxes assessed against Seller by any taxing authority in
respect of this sale, including the amounts of any penalties,
interest and attorney's fees.
d) COMMISSIONS
Buyer represents and warrants to Seller that it has not engaged,
utilized or dealt with any broker or finder in connection with this
Agreement or the transactions contemplated hereby. Seller represents
and warrants to Buyer that it has not engaged, utilized or dealt with
any broker or finder in connection with this Agreement or the
transactions contemplated hereby. Both Buyer and Seller shall indemnify
and hold the other harmless from and against all brokerage commissions
or finders' fees, and claims thereof, payable in connection with the
sale of the Property.
22. OPERATION OF THE PIPELINE INTERESTS PRIOR TO CLOSING
a) During the period subsequent to the execution of this Agreement and
prior to the Effective Date, Seller shall not be obligated to make
expenditures for purposes other than as required to operate and
maintain the Property in the ordinary course, consistent with prudent
operation and accepted industry standards and as necessary to respond
to emergencies.
b) Unless Buyer and Seller agree, Seller shall not materially alter the
Property (other than the use of supplies and consumables), with the
exception of individual assets (i)
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involving a fair market value of less than One Hundred Thousand Dollars
($100,000.00) and (ii) disposed of or consumed in the ordinary course
of business. Provided however, any assets that are disposed of which
have more than a Ten Thousand Dollar ($10,000.00) value shall be
credited against the Purchase Price at Closing. If Seller, because of
legally binding agreements which existed prior to the Execution Date
which agreements are set forth in Exhibit "H", acquires assets related
to the Pipeline Interests or otherwise improves the Property after the
Execution Date but prior to the Effective Date, and Buyer agrees that
such assets or improvements shall be included in the Property, the
Purchase Price shall be increased by an amount equal to the
consideration to be paid by Seller for such acquisition or improvement,
and the acquired asset or improvement shall be transferred hereunder.
Seller shall promptly notify Buyer of any material matter affecting the
Property known to Seller which arises from the Execution Date to the
Effective Date.
c) Seller shall not create or permit to exist any mortgage, pledge, lien
or encumbrance on the Property, other than Permitted Encumbrances.
d) Seller shall not, without the prior written consent of Buyer, make any
material contract or amend any existing contract or license that is to
be transferred hereunder.
e) Seller shall not file, alter, amend or withdraw any tariff rate, rule,
regulation or condition of service other than as may be required
pursuant to FERC Order 561 which adopted an indexing rate methodology
for petroleum pipelines.
f) Seller shall not solicit or accept any other bids or proposals for the
purchase and sale of the Property, unless and until this Agreement is
terminated.
g) To the extent that Seller is unable to transfer certain contracts that
are reasonably necessary to operate and maintain the Property, Seller
shall make commercially reasonable and diligent efforts to assist Buyer
in securing substantially similar benefits for Buyer. With respect to
contracts relating to electric power service, Seller shall arrange to
provide Buyer metered electric power at existing facilities where
Seller does not currently own or control such facilities. Buyer shall
be obligated to expend Forty Thousand dollars ($40,000.00), and all
other costs shall be for the account of Seller. In the event that
Seller provides electric power by arranging for the conveyance or
assignment of an undivided interest in existing facilities, such
conveyance shall be for a consideration of Ten dollars ($10.00) and
shall be subject to Buyer's obligation to reassign to the assignor upon
cessation of Buyer's need for power.
23. EMPLOYEES AND BENEFITS
a) OFFERS OF EMPLOYMENT.
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i) At least four (4) weeks before the Closing Date, Buyer in its sole
discretion and as it may determine shall select from and offer
employment with Buyer beginning on the Closing Date to those
employees of Seller currently assigned to operate the Pipeline
Interests, who are identified on a list Seller will provide Buyer
within five (5) working days after the Execution Date (the
"Prospective Employees"). Such list shall include all employees
whose work activity is wholly dedicated to operating and
maintaining the Property and shall also include the employee's
salary, job description, job location and hire date. Each such
employment offer shall be at a location that is 50 miles or less
from the Prospective Employee's current job location (provided
however, a Prospective Employee may be required to report to
Buyer's management in Wink, or Midland, Texas and may be required
to perform work at any location in which the Property is located)
and shall include salary or wages (including, as applicable, shift
differentials, incentives and premiums but excluding payments under
the Chevron Success Sharing program) at least equal to that
provided by Seller to the employee as shown on the list of
Prospective Employees. Buyer's offers of employment to the selected
Prospective Employees shall be made in writing, and a copy shall be
provided to Seller. Such offers may impose a deadline for response
not earlier than three (3) weeks prior to Closing. Buyer may
require that each Prospective Employee submit a formal application
for employment.
ii) Buyer shall have no obligation under this Agreement to employ any
Prospective Employee who has accepted its employment offer but is
not actively at work with Seller as of the Closing Date, unless (i)
such Employee is on vacation, scheduled time off, or other similar
Seller approved absence and commences active work with Buyer upon
the termination of such approved absence; or (ii) such Employee is
absent from work due to illness or injury and reports for active
work with Buyer within 30 days after the Closing Date. Any
Prospective Employee selected by Buyer who has accepted its
employment offer but is on vacation, scheduled time off, or on
other Seller-approved absence on the Closing Date shall become the
employee of Buyer upon reporting for active duty. Any Prospective
Employee selected by Buyer who is absent from work due to illness
or injury and who reports for active work with Buyer within 30 days
after the Closing Date shall become the employee of Buyer on the
date he or she reports for active work with Buyer. From and after
the date the Prospective Employee selected by Buyer returns to
active work, Buyer shall assume the employment reinstatement
obligations of Seller and its Affiliates under Seller's Family and
Medical Leave Act Policy with respect to any Prospective Employees
who are selected by Buyer but who are on leave under such policy on
the Closing Date.
iii) Those employees of Seller who accept Buyer's employment offers and
become employees of Buyer as of the Closing Date (or, in the case
of Employees described in (ii) above, within 30 days after the
Closing Date),
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are the "Affected Employees." The Prospective Employees who do not
become Affected Employees are the "Remaining Employees."
iv) Nothing in this Agreement shall affect Buyer's right to terminate
the employment of any Affected Employee on or after the date he or
she becomes an employee of Buyer, with or without cause, provided
that Buyer shall comply with the terms of the severance plan
described in Section 23 (c) below if the termination occurs without
cause as defined in such severance plan and within 12 months of the
Closing Date.
v) Buyer shall control and be responsible for the process of selecting
from the Prospective Employees those Prospective Employees to whom
it makes an offer of employment. Buyer may interview any
Prospective Employee during normal working hours (including
interviews on site) consistent with the operating requirements of
Seller or its Affiliates, and with the written permission of the
Prospective Employee, may review and retain copies of such
Prospective Employee's training, attendance and safety records (if
any) maintained by Seller or its Affiliates. All of the original
personnel records maintained by Seller or its Affiliates relating
to the Prospective Employees shall remain with Seller or its
Affiliates after the Closing Date and shall not be turned over to
Buyer. Buyer shall, however, have access to, use of and the right
to copy such records as may be required in connection with the
assumption of obligations pursuant to this Section 23 or the
prosecution or defense of any administrative or court claim, and
neither Seller nor its Affiliates shall destroy any such records
prior to the time such records are scheduled for destruction
pursuant to Seller's records retention policy applicable to records
of this type.
vi) Buyer and its Affiliates shall indemnify, defend, and hold Seller
and its Affiliates harmless from and against all claims, expenses
(including reasonable attorneys' fees), loss and liability arising
with respect to (A) the Affected Employees' employment with Buyer
and its Affiliates on or after the Closing Date (except for
Seller's continuing obligations described in Section 23(c)(i), (B)
Buyer's employee selection and offer process and actions taken by
Buyer or its Affiliates relating to Prospective and Affected
Employees and (C) Buyer's use of the Affected Employees' employment
records or other records maintained by Seller or its Affiliates
that have been provided to Buyer, but not claims and expenses
related to the content of Seller's records or Seller's preparation
thereof.
vii) Seller and its Affiliates shall indemnify, defend and hold Buyer
and its Affiliates harmless from and against all claims, expenses
(including reasonable attorneys' fees), loss and liability arising
with respect to (A) the Affected Employees' (or any other
employees') employment with Seller or its Affiliates before the
date any such employee becomes an employee of Buyer, (B) the
Remaining Employees' employment with Seller or its Affiliates and
any
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subsequent termination from Seller or its Affiliates, (C) the
application of Seller's employee benefit plans to Affected
Employees and Remaining Employees, and (D) claims and expenses
related to the content of Seller's employment records or Seller's
preparation thereof.
b) QUALIFIED DEFINED CONTRIBUTION PLANS.
i) The Chevron Corporation Profit Sharing/Savings Plan and the Chevron
Corporation Savings Plus Plan (together the "Seller's Defined
Contribution Plans") shall fully vest each Affected Employee who
has one or more years of service as of the date he or she becomes
an employee of Buyer and shall provide for the distribution to or
on behalf of the Affected Employees of their vested account
balances in accordance with such Plans' distribution rules for
employees whose employment with Seller and its Affiliates has
terminated.
ii) The Buyer's Defined Contribution Plan shall accept the direct
rollover of eligible rollover distributions of electing Affected
Employees' benefits in cash.
c) SEVERANCE PLANS.
i) Seller and its Affiliates presently maintain the Chevron
Corporation's 1999 S.I.T.E. Program for involuntary termination and
for demotion or transfer (the "Chevron Severance Plan") for the
benefit of eligible employees of Seller and its Affiliates. Seller
has provided Buyer with a summary of the Chevron Severance Plan
coincident with the execution of this Agreement. Seller shall apply
the Chevron Severance Plan to the Prospective Employees who are
eligible employees under the terms of those Plans.
ii) If, within 12 months after the Closing Date, any Affected Employee
is terminated by Buyer for reasons other than cause, or is required
to transfer to a job location that reports to other than Wink,
Midland or Judkins or to take a reduction in base rate of pay, but
refuses such transfer or reduction and terminates his or her
employment with Buyer, then Buyer shall provide a severance benefit
which is the financial equivalent to the benefit referenced in the
summary of the Chevron Severance Plan provided to Buyer pursuant to
Section 23(c)(i), including the continuation of Buyer's active
employee medical coverage for six months after termination of
employment with the same employee contribution amounts that apply
to Buyer's similarly situated active employees. Provided, however,
Buyer shall only be obligated to make a payment directly to such
Affected Employee and shall have no obligation to provide such
benefit on a pre-tax basis or as a contribution to a qualified
plan. Service used for this purpose shall be the sum of the service
recognized by Seller and the service with Buyer from the Closing
Date until termination of employment.
d) VACATION PAY.
Seller shall be responsible for all liabilities and claims with regard
to vacation pay for any periods prior to the Closing. After the
Closing, the Affected Employee
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shall transfer to Buyer's vacation plan under which the Affected
Employee's past service with the Seller shall be recognized and the
vacation days used by the Affected Employees in 1999 shall be deducted
from allowable vacation.
e) HEALTH CARE PLANS.
Each Affected Employee shall be eligible to enroll in the health care
plans of Buyer as of the date he or she becomes an employee of Buyer.
If such Affected Employee was enrolled in the corresponding plan of
Seller or its Affiliates immediately before the date he or she becomes
an employee of Buyer, Buyer shall cause Buyer's health care plans to:
(i) to the extent required by the Health Insurance Portability And
Accountability Act ("HIPAA"), or otherwise required by law, waive any
pre-existing condition limitations with respect to the Affected
Employee and his or her covered dependents, to the extent the covered
individuals had satisfied any pre-existing condition limitations under
the medical, mental health, substance abuse and dental plans of Seller
or its Affiliates before the date the Affected Employee becomes an
employee of Buyer; and (ii) to recognize each such Affected Employee's
(and his or her covered dependents') expenditures under the
corresponding Seller medical, mental health, substance abuse and dental
plans, if any are maintained by Seller, for the calendar year in which
the Affected Employee becomes an employee of Buyer toward any
applicable deductible and annual out-of-pocket limit for such calendar
year. With respect to the medical, mental health, substance abuse and
dental plans of Seller and its Affiliates, Seller shall cause the plans
of Seller and its Affiliates to be liable for the following covered
expenses of the Affected Employees and their dependents:
i) With respect to the medical, mental health, substance abuse and
dental plans of Seller and its Affiliates, covered expenses
incurred before the date the Affected Employee becomes an employee
of Buyer; and
ii) With respect to the medical and mental health and substance abuse
plans of Seller and its Affiliates, covered expenses incurred
within six months after the Closing Date relating to a condition
that caused the employee or covered dependent to be totally
disabled as of the Closing Date as determined under the terms of
the applicable Seller's plan.
f) POST-RETIREMENT WELFARE BENEFITS.
Seller and its Affiliates shall be responsible for all post-retirement
medical, mental health, substance abuse, dental and life insurance
coverage for any of its eligible employees or eligible former employees
who do not become Affected Employees. Seller or its Affiliates also
shall make available its post-retirement medical, mental health,
substance abuse, dental and life insurance benefit coverage to any
Affected Employee who as of the date he or she becomes an employee of
Buyer is eligible to receive such post--retirement welfare benefit
coverage of Seller or its Affiliates (the "Eligible Affected
Employees"). The Eligible Affected Employees shall be treated in the
same manner as other similarly situated employees of Seller or its
Affiliates
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who retired as of the Closing Date (and shall be subject to the rights
of Seller and its Affiliates to amend or terminate such coverage with
respect to such employees).
g) BUYER SICK PAY PLAN.
Each Affected Employee shall be credited under the Buyer's sick pay
plan with a bank of sick pay hours (for both occupational and non-
occupational disabilities, if distinct) based on service with Seller
and its Affiliates as of the date the Affected Employee becomes an
employee of Buyer. Provided however, Affected Employees shall not be
permitted to exceed the maximum allowable sick pay hours available to
Buyer's employees.
h) BUYER LIFE INSURANCE COVERAGE.
Buyer agrees that as of the date an Affected Employee becomes an
employee of Buyer, the Affected Employee shall be eligible to enroll in
Buyer's life insurance plan, including any supplemental life insurance
coverage on his or her life which is provided by Buyer, on the same
terms and conditions as such plans are available to Buyer's employees.
i) BUYER'S OTHER EMPLOYEE BENEFITS
Except as otherwise specifically provided in this Section 23, Buyer
agrees that as of the date an Affected Employee becomes an employee of
Buyer, he or she will be eligible to participate in employee benefit
plans and programs of Buyer which are generally applicable to employees
of Buyer under Buyer's employee benefit plans and programs, whether in
effect on the Closing Date or subsequently established by Buyer.
j) WARN ACT INDEMNIFICATION.
Buyer shall indemnify Seller and its Affiliates against all liabilities
arising out of the notification or other requirements of the Worker
Adjustment and Retraining Notification Act of 1988, as amended ("WARN
Act"), with respect to the Affected Employees in connection with
actions taken by Buyer on or after the Closing Date. Seller shall
indemnify Buyer against all liabilities under the WARN Act with respect
to the Prospective Employees and actions taken by Seller prior to the
Closing Date, and with regard to Remaining Employees, actions taken by
Seller before, on or after the Closing Date.
k) GENERAL EMPLOYEE PROVISIONS.
i) Seller and Buyer shall give any notices required by law and take
whatever other actions with respect to the plans, programs and
policies described in this Section 23 as may be reasonably
necessary to carry out the arrangements described in this Section
23.
ii) Seller and Buyer shall provide each other with such plan documents
and descriptions, employee data or other information as may be
reasonably required to carry out the arrangements described in this
Section 23.
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iii) If any of the arrangements described in this Section 23 are
determined by the Internal Revenue Service or other applicable
governmental authority, or by a court of competent jurisdiction, to
be prohibited by law, Seller and Buyer shall modify such
arrangements to as closely as possible retain the intent and
economic benefits and burdens of the parties as reflected herein in
a manner which is not prohibited by law.
iv) As soon as reasonably practicable after selection of Affected
Employees but at least 10 business days before Closing, Seller will
provide to Buyer a list of all Affected Employees' service used
under any of the employee benefit plans or policies of Seller or
their Affiliates as well as out of pocket expenditures under health
plans and accumulated sick days.
v) At least thirty (30) days prior to Closing, Seller will deliver to
Buyer true, accurate, and complete copies of all agreements or
plans concerning retirement, pension, medical, health, life and
other insurance, bonus, profit sharing and similar employee benefit
plans covering the Affected Employees.
vi) In the event that Buyer hires any Remaining Employee within six
months after Closing and such remaining employee has received a
Chevron Severance Plan benefit from Seller, Buyer will notify
Seller of such event and shall reimburse Seller for any severance
pay paid by Seller to such Remaining Employee as soon as possible
after the hire date.
vii) At Closing, Seller will provide Buyer a list of Affected Employees
who have accepted employment with Buyer but who have taken leave
under Seller's Family and Medical Leave Policy within 12 months
prior to Closing, including the type and length of any such leave.
viii) Seller and Buyer do not intend to create any third party
beneficiary rights respecting any Affected Employee or Remaining
Employee as a result of the provisions herein and specifically
hereby negate any such intention.
24. F.E.R.C. TARIFFS, T.R.C. TARIFFS, AND T.R.C. T-4 PERMIT
a) The Pipeline Interests being conveyed hereunder are operated as a
common carrier pipeline system subject to Federal Energy Regulatory
Commission ("F.E.R.C.") Tariff No. 546 ("FERC Tariff") and Texas
Railroad Commission ("T.R.C.") Tariff T.R.S. 149 ("TRC Tariff"). Buyer
shall adopt, as soon as reasonably practical after the Closing Date,
Seller's FERC Tariff and TRC Tariff that are in effect on the Closing
Date.
b) Prior to the Closing Date Buyer shall apply for and obtain a T-4 Permit
from the T. R. C. covering the Pipeline Interests being conveyed to
Buyer pursuant to this Agreement, said permit to be effective on the
Closing Date of this transaction. Seller shall withdraw its T-4 Permit
on the Closing Date.
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<PAGE>
c) The parties agree that each will provide the shippers of the other
party transfer of crude oil, without cost or fee, between Wink East
Station, to be owned by Buyer, and Wink West Station, owned by Seller,
to the extent that the existing facilities can accommodate such
transfers. Each party shall provide the other party with access to its
facilities in the event that modifications are required to provide this
service. However, in no event shall a party be obligated to incur costs
to install new facilities.
25. GOVERNMENT CONSENTS
The consummation of the transaction contemplated by this Agreement may be
subject to the pre-merger notification requirements of Section 7A of the
Clayton Act (15 U.S.C. (S)18a) as enacted by Title II of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). Seller and
Buyer shall cooperate and promptly undertake all filings under the HSR and
shall promptly take other actions as may be required to comply with such
requirements. The Closing of this transaction is subject to the parties
obtaining appropriate approvals under the HSR Act. The HSR filing fees
shall be shared equally between Seller and Buyer.
26. TAX-DEFERRED EXCHANGE
a) BUYER'S EXCHANGE. In the event Buyer so elects, Seller agrees to
cooperate with Buyer in effecting a tax-deferred exchange of the
Property under Internal Revenue Code (S) 1031. Buyer shall have the
right to elect a tax-deferred exchange by giving Seller written notice
of such election prior to Closing. If Buyer so elects to effect a tax-
deferred exchange, Seller agrees to execute such escrow instructions,
documents, agreements or instruments to effect an exchange as Buyer may
reasonably request, it being understood that Seller shall not be
required to incur any additional costs, expenses, fees or liabilities,
not reimbursed or indemnified by Buyer, as a result of or connected
with an exchange. In no event shall Seller be required to acquire title
to other property as a consequence of Buyer's election to effect such
exchange. Buyer may assign its rights and delegate its duties under
this Agreement in whole or in part to a third party in order to effect
such an exchange; provided that Buyer shall remain responsible to
Seller for the full and prompt performance of any delegated duties.
Buyer shall indemnify and hold Seller and its affiliates harmless from
and against all claims, expenses (including reasonable attorneys'
fees), loss and liability resulting from Seller's participation in any
exchange undertaken pursuant to this Section 26(a).
b) SELLER'S EXCHANGE. In the event Seller so elects, Buyer agrees to
cooperate with Seller in effecting a tax-deferred exchange of the
Property under Internal Revenue Code (S) 1031. Seller shall have the
right to elect a tax-deferred exchange by giving Buyer written notice
of such election prior to Closing. If Seller so elects to effect a tax-
deferred exchange, Buyer agrees to execute such escrow instructions,
documents, agreements or instruments to effect an exchange as Seller
may reasonably request, it being understood that Buyer shall not be
required to incur any
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<PAGE>
additional costs, expenses, fees or liabilities, not reimbursed or
indemnified by Seller, as a result of or connected with an exchange. In
no event shall Buyer be required to acquire title to other property as
a consequence of Seller's election to effect such exchange. Seller may
assign its rights and delegate its duties under this Agreement in whole
or in part to a third party in order to effect such an exchange;
provided that Seller shall remain responsible to Buyer for the full and
prompt performance of any delegated duties. Seller shall indemnify and
hold Buyer and its affiliates harmless from and against all claims,
expenses (including reasonable attorneys' fees), loss and liability
resulting from Buyer's participation in any exchange undertaken
pursuant to this Section 26(b).
27. FORCE MAJEURE
In the event that the performance required under the terms of this
Agreement by Buyer or Seller is delayed or prevented by fire; explosion;
act of God; breakdown of machinery or equipment; riots; strikes; labor
disputes; any order, regulation, request, or recommendation by any
governmental authority; or any similar cause which is reasonably outside
the control of the party or parties, such required performance shall be
excused for that period of time that the force majeure prevents
performance. In the event any delay due to force majeure occurs or is
anticipated, the affected party shall promptly notify the other party of
such delay and the cause and estimated duration of such delay. The
affected party shall exercise due diligence to shorten, avoid and mitigate
the effects of the delay and shall keep the other party advised as to the
affected party's efforts and its estimate of the continuance of the delay.
In no event shall either party be entitled to any damages of any kind
including without limitation, direct, consequential or otherwise, whether
based in contract, tort, (including negligence and strict liability) or
otherwise, or to any adjustment to the Purchase Price payable hereunder
because of any delay due to force majeure. Provided however, if the force
majeure occurs prior to Closing and continues for more than 120 days,
either party may terminate this Agreement without further liability or
obligation except for the return of the Deposit, with Interest to Buyer.
28. FURTHER ASSURANCES
On and after the Closing Date, Seller and Buyer will cause to be executed
and delivered from time to time at the request of the other all such
further instruments of conveyance, assignments and further assurances as
reasonably may be required to transfer and assign the Seller's title in
such Property to Buyer and to carry out the intent of this Agreement and
the transaction contemplated herein.
29. REMOVAL OF SIGNS AND MARKERS
Buyer shall, at its own expense and in a timely manner after the Closing
Date, remove or cause to be removed all pipeline signs and placards which
indicate Seller's prior ownership in the Property and erect or install
signs and placards as may be required by state or other governmental
agencies indicating Buyer or its designated operator, whichever is
applicable, as the owner-operator of the Property.
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30. SURVIVAL OF AGREEMENTS
Except as otherwise specifically provided in this Agreement, all covenants,
agreements, representations, guaranties, indemnities, and warranties shall
survive the Execution Date of this Agreement, Closing, and the delivery and
recordation of deeds, assignments or bills of sale which convey the
Property to Buyer.
31. CONDITIONS PRECEDENT TO CLOSING
Each party's obligation to consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver by the other party of
the following conditions:
a) All requirements set forth in this Agreement shall be complied with at
or prior to Closing, unless otherwise specifically set forth that the
requirement may be complied with subsequent to the Closing Date.
b) All government approvals, if any, required for the consummation of the
transactions contemplated herein have been obtained.
c) No action or proceeding by or before any governmental authority shall
have been instituted or threatened (and not subsequently dismissed,
settled or otherwise terminated) which might restrain, prohibit or
invalidate any of the transactions contemplated by this Agreement,
other than an action or proceeding instituted or threatened by a party
or any of its affiliates.
d) The representations and warranties contained in Section 10(SELLER'S
REPRESENTATIONS AND WARRANTIES), Section 11(SELLER'S ADDITIONAL
REPRESENTATIONS AND LIMITED WARRANTIES) and Section 12 (BUYER'S
REPRESENTATIONS AND WARRANTIES) shall be true and correct in all
material respects on the Closing Date as though made on and as of the
Closing Date.
e) No amendment to Exhibit K has resulted in a material adverse effect the
result of which has not been addressed by Section 8 (TERMINATION FOR
MATERIAL DEFECT); Section 9 (DAMAGE OR CONDEMNATION PRIOR TO CLOSING;
or Section 13 (BUYER'S INVESTIGATION AND RIGHT TO CANCEL), either
individually or in the aggregate, on the Property, the operation or
maintenance of the Pipeline Interests or the financial performance of
the Property.
32. MISCELLANEOUS
a) DISPOSITION OF ACCOUNTS RECEIVABLE AND OTHER REVENUE
i) Accounts receivable or other revenue obligations associated with the
Property, to the extent that such accounts receivable and revenue
obligations are attributable to the performance of transactions
prior to the Effective Date, shall not be part of the sale but shall
remain the property of Seller. Accounts
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receivable or other revenue obligations associated with the
Property, to the extent that such accounts receivable or revenue
obligations are attributable to the performance of transactions on
or after the Effective Date, shall be part of the sale and the
property of Buyer. If the Effective Date is other than the first day
of the month, that month's business shall be equitably prorated
based on the number of days in the month that each party owned the
Property with deliveries deemed to be ratable.
ii) In accordance with generally accepted accounting principles, Seller
shall complete a Settlement Statement Accounting as promptly as
possible but no later than one hundred twenty (120) days after
Closing.
b) ASSIGNABILITY
Neither Seller nor Buyer shall assign any right granted it under this
Agreement or at any time attempt to delegate any duty to be performed
by it hereunder without the express written consent of the other, which
consent shall not be unreasonably withheld. Except that Buyer may
assign this Agreement to an affiliate partnership of which Plains
Marketing, L.P. is a limited partner and Plains All American Inc. is
the general partner provided that such affiliate assumes in writing all
of the obligations and duties of Buyer under this Agreement, and
provided Buyer agrees in writing that it shall remain secondarily
liable as to the indemnities provided to Seller under the terms of this
Agreement. Subject to the foregoing, all rights and duties of each
party hereunder shall inure to the benefit of and be binding upon its
successors and assigns. All covenants and conditions of this Agreement
shall survive the delivery of any document of transfer pursuant hereto
and inure to the benefit of, be binding upon and be enforceable
directly by and against every successor in ownership of the Property.
c) NOTICES.
All notices and other communications required or permitted to be given
or delivered hereunder shall be in writing and shall be delivered
personally or be sent by certified mail, postage prepaid and return
receipt requested, directed to the party intended at the address set
forth below, or at such other address as may be designated by such
party by notice given to the other party in the manner aforesaid, and
shall be effective upon receipt:
SELLER: BUYER:
Chevron Pipe Line Company Plains Marketing, L.P.
2811 Hayes Road c/o Plains All American, Inc.
Houston, Texas 77082 500 Dallas Street, Suite 700
Houston, Texas 77002
Attn: Eastern Profit Center Manager Attn: President
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<PAGE>
d) TIME
Time is of the essence of this Agreement; provided, however, that if
the date on which any action is required to be taken hereunder shall
fall on a day on which the party to perform is not open for business,
such action shall be taken on the next business day on which it is
open for business.
e) GOVERNING LAW AND DISPUTE RESOLUTION.
i) The interpretation and enforcement of this Agreement, and any
mediation pursuant to subparagraph (iii) below, shall be governed by
the substantive law of the State of Texas, without the application of
its conflict of law rules.
ii) Prior to any party hereto instituting a court proceeding to
enforce any provision hereof or for damages by reason of the breach,
default or liability of the other party arising out of any provision of
this Agreement or otherwise, the parties agree that such disputes,
controversies or claims arising out of or relating to this Agreement
(collectively "Disputes") shall be submitted to non-binding mediation
to be conducted in accordance with the following procedures:
A) The parties shall use all commercially reasonable efforts
to resolve Disputes through direct discussions. The
management of each party commits itself to respond promptly
to any communications concerning Disputes.
B) Within thirty (30) days of written notice that there is a
Dispute, representatives of the parties with authority to
settle the matter shall meet at a mutually acceptable time
and place in Houston, Texas or such other location as may be
agreed, and as often thereafter as they deem reasonably
necessary in an effort to reach an amicable resolution. If a
negotiator intends to be accompanied at a meeting by an
attorney, the other negotiator shall be given at least three
(3) business days' notice of such intention and may also be
accompanied by an attorney.
C) If no amicable resolution is reached as a result of the
procedure in subparagraph (b) hereof,
(1) Within sixty (60) days of the written notice referenced
in subparagraph (b), the parties shall exchange written
statements of their positions concerning the Dispute,
and thereafter shall participate in a final meeting for
the purpose of attempting to settle such Dispute. Each
party's written statement of position shall state
whether the party desires to present live witnesses
(and, if so, who) at the next meeting to resolve the
Dispute (described hereinafter);
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<PAGE>
(2) Within three (3) weeks of the exchange of written
statements, the parties represented by the respective
presidents or vice presidents of Sellers and Buyers and
with the assistance of such counsel, experts and others
as may be appropriate, shall meet and again attempt to
reach an amicable resolution or settlement of the
Dispute.
D) If no amicable resolution or settlement is reached as a
result of the procedures in subparagraphs (a), (b) or (c)
herein, the Dispute shall be submitted for non-binding
mediation which shall be conducted expeditiously before a
mediator mutually agreed to by the parties. Unless the
parties and the mediator agree to an alternative process,
the mediator shall be provided with the written statements
and witness presentations, and the party representatives
described in subparagraph (c), or other representatives
with full settlement authority, shall be participate. The
parties shall endeavor to complete the mediation process
within ninety (90) days of the conclusion of the procedures
set forth in subparagraph (c) hereof.
iii) All negotiations, discussions and documents pursuant to or in
furtherance of dispute resolution under this provision are
confidential and shall be treated as compromise and settlement
negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
iv) Each party is required to continue to perform its obligations under
this Agreement pending final resolution of any Dispute.
v) The parties desire to attempt to settle any dispute through mediation
and, in furtherance thereof, agree, if necessary, to enter into a
tolling agreement to prevent the loss or compromise of any right due
to the expiration of any applicable period of limitations. Should such
tolling agreement not be entered into in a timely basis, either party
hereto may file pleadings and pursue its claim or cause of action in
any court of competent jurisdiction consistent with Section 32 (e)
(vi).
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<PAGE>
vi) Any judicial proceedings permitted to be brought with respect to
this Agreement shall be brought in any state or federal court of
competent jurisdiction in the State of Texas, and the parties
generally and unconditionally accept the exclusive jurisdiction of
such courts. The parties waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have
to the bringing of any such action or proceeding in such
jurisdiction.
f) NO RIGHTS IN THIRD PARTIES
This Agreement is not intended to, nor shall it be construed to create
in or give to any person other than the parties hereto and their
respective successors and permitted assignees, any claim, cause of
action, remedy or right of any kind.
g) ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and may not be amended or
modified in any respect whatsoever except by an instrument in writing
signed by the parties hereto. If any provision hereof shall be held
invalid, such invalidity shall not affect any other provision of this
Agreement. This Agreement and the rights and obligations of the parties
hereunder shall survive the Closing of the purchase and sale of the
Property.
h) HEADINGS
The captions in this Agreement have been inserted for convenience of
reference only and shall not define or limit any of the terms and
provisions hereof.
i) ATTACHMENTS INCORPORATED
All schedules, exhibits, and attachments hereto are deemed a part of
this Agreement and are incorporated herein and made a part hereof.
Provided, however, that if a conflict exists between the terms and
conditions of this Agreement and the Exhibits attached hereto, this
Agreement shall prevail.
j) COUNTERPARTS
If this Agreement is executed in duplicate, each duplicate original
shall be considered an original for all purposes.
33. DAMAGES
THE PARTIES AGREE THAT, EXCEPT FOR THE LIQUIDATED DAMAGES SPECIFICALLY
PROVIDED FOR IN SECTION 16, THE RECOVERY BY 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 LIMITED WARRANTIES OR
OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO 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
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<PAGE>
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 OR FOR ACTUAL DAMAGES WHICH EXCEED THE LIMITATIONS SPECIFICALLY
SET FORTH IN OTHER PROVISIONS OF THIS AGREEMENT. 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 that is not a Seller Indemnitee, a Buyer Indemnitee or an
affiliate of any of the foregoing and (ii) such damages are recovered
against an Indemnified Party by a person that is not a Seller Indemnitee, a
Buyer Indemnitee or an affiliate of any of the foregoing.
34. NONDISCLOSURE
Both parties to this Agreement especially acknowledge and agree that
neither they, nor any of their respective agents, servants, employees or
related affiliates and their respective agents, servants or employees shall
disclose to any third party, this Agreement or the terms of the purchase
and sale contemplated by this Agreement until a time subsequent to the
Execution Date. Notwithstanding the agreement of confidentiality and non-
disclosure, Seller expressly reserves the right to contact any property
owner upon which the pipeline may be situated in order to obtain the
consent or permission to the assignment of the right-of-way in accordance
with Section 6 (RIGHT-OF-WAY INTERESTS) and as contemplated by this
Agreement.
35. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
THE REPRESENTATIONS, WARRANTIES, LIMITED WARRANTIES AND COVENANTS SHALL
SURVIVE THE CLOSING FOR A PERIOD OF FIVE YEARS AFTER THE CLOSING DATE
EXCEPT THAT THOSE REPRESENTATIONS OF SELLER UNDER SECTION 10 (A), 10 (B)
AND 10 (C) AND THOSE REPRESENTATIONS OF BUYER UNDER SECTIONS 11 (A), 11 (B)
AND 11 (C) SHALL SURVIVE THE CLOSING UNTIL 90 DAYS FOLLOWING THE EXPIRATION
OF THE RELEVANT STATUTE OF LIMITATIONS (INCLUDING ALL EXTENSIONS THEREOF).
ANY CLAIM FOR BREACH OF REPRESENTATION, WARRANTY OR AGREEMENT SHALL SURVIVE
UNTIL SUCH CLAIMS ARE FULLY AND FINALLY RESOLVED UNDER THE PROVISIONS OF
THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Execution Date first written hereinabove.
SELLER: BUYER:
CHEVRON PIPE LINE COMPANY PLAINS MARKETING, L.P.
a Delaware corporation BY ITS GENERAL PARTNER
PLAINS ALL AMERICAN INC.
By: /s/ J. S. Bindra By: /s/ Harry N. Pefanis
- ----------------------- -----------------------
Title: President Title: President
Date: 4/16/99 Date: 4/16/99
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Exhibit 10.18
CREDIT AGREEMENT
____________________________
PLAINS SCURLOCK PERMIAN, L.P.
as Borrower,
BANKBOSTON, N.A.
as Administrative Agent,
BANCBOSTON ROBERTSON STEPHENS INC.,
as Syndication Agent, Lead Arranger and Book Manager,
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
____________________________
$35,000,000 Revolving Credit Facility
$130,000,000 Term Loan
May 12, 1999
<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 18
Section 1.3. Amendment of Defined Instruments 18
Section 1.4. References and Titles 18
Section 1.5. Calculations and Determinations 18
ARTICLE II - The Loans 19
Section 2.1. Commitments to Lend; Notes 19
Section 2.2. Requests for Revolver Loans 20
Section 2.3. Continuations and Conversions of Existing Loans 21
Section 2.4. Use of Proceeds 22
Section 2.5. Interest Rates and Fees 22
Section 2.6. Optional Prepayments 23
Section 2.7. Mandatory Prepayments. 24
Section 2.8. Letters of Credit 25
Section 2.9. Requesting Letters of Credit 26
Section 2.10. Reimbursement and Participations 26
Section 2.11. Letter of Credit Fees 27
Section 2.12. No Duty to Inquire 28
Section 2.13. LC Collateral 29
ARTICLE III - Payments to Lenders 30
Section 3.1. General Procedures 30
Section 3.2. Capital Reimbursement 31
Section 3.3. Increased Cost of LIBOR Loans or Letters of Credit 31
Section 3.4. Notice; Change of Applicable Lending Office 32
Section 3.5. Availability 32
Section 3.6. Funding Losses 33
Section 3.7. Reimbursable Taxes 33
ARTICLE IV - Conditions Precedent to Lending 36
Section 4.1. Documents to be Delivered 36
Section 4.2. Additional Conditions to Initial Credit 37
Section 4.3. Conditions Precedent with respect to the Chevron Advance 38
Section 4.4. 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 41
i
<PAGE>
Section 5.4. No Conflicts or Consents 41
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 42
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 45
Section 5.16. Title to Properties; Licenses 45
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. 46
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 49
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. Interest Rate Hedging Agreements 54
Section 6.19. Compliance with Agreements 54
Section 6.20. Year 2000 54
Section 6.21. Rents 55
Section 6.22. Post-Closing Actions 55
ARTICLE VII - Negative Covenants 56
Section 7.1. Indebtedness 56
Section 7.2. Limitation on Liens 57
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Section 7.3. Hedging Contracts 58
Section 7.4. Limitation on Mergers, Issuances of Securities 59
Section 7.5. Limitation on Sales of Property 60
Section 7.6. Limitation on Dividends, Distributions, and Redemptions 60
Section 7.7. Limitation on Investments and New Businesses 61
Section 7.8. Limitation on Credit Extensions 61
Section 7.9. Transactions with Affiliates 62
Section 7.10. Prohibited Contracts 62
Section 7.11. Debt Coverage Ratio 62
Section 7.12. Interest Coverage Ratio 63
Section 7.13. Capital Expenditures 63
Section 7.14. Cash and Carry; Open Position 63
ARTICLE VIII - Events of Default and Remedies 63
Section 8.1. Events of Default 63
Section 8.2. Remedies 66
ARTICLE IX - Administrative Agent 66
Section 9.1. Appointment and Authority 66
Section 9.2. Exculpation, Administrative Agent's Reliance, Etc. 67
Section 9.3. Credit Decisions 68
Section 9.4. Indemnification 68
Section 9.5. Rights as Lender 69
Section 9.6. Sharing of Set-Offs and Other Payments 69
Section 9.7. Investments 69
Section 9.8. Benefit of Article IX 70
Section 9.9. Resignation 70
Section 9.10. Syndication Agent 70
ARTICLE X - Miscellaneous 70
Section 10.1. Waivers and Amendments; Acknowledgments 70
Section 10.2. Survival of Agreements; Cumulative Nature 72
Section 10.3. Notices 72
Section 10.4. Payment of Expenses; Indemnity 73
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments 74
Section 10.6. Confidentiality 77
Section 10.7. Governing Law; Submission to Process 77
Section 10.8. Limitation on Interest 78
Section 10.9. Termination; Limited Survival 79
Section 10.10. Severability 79
Section 10.11. Counterparts 80
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc. 80
iii
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Schedules and Exhibits:
Schedule 1 - Lender Schedule
Schedule 2 - Disclosure Schedule
Schedule 3 - Security Schedule
Schedule 4 - Insurance Schedule
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 F - Environmental Compliance Certificate
Exhibit G - Letter of Credit Application and Agreement
Exhibit H - Assignment and Acceptance Agreement
Exhibit I - Marketing Agreement
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of May 12, 1999, by and among Plains
Scurlock Permian, L.P., a Delaware limited partnership ("Borrower"), BANKBOSTON,
N.A., as administrative agent (in such capacity, "Administrative Agent"),
BANCBOSTON ROBERTSON STEPHENS INC., as syndication agent (in such capacity,
"Syndication 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:
"Acquisition Documents" means the Scurlock Permian Acquisition Documents
and the Chevron Acquisition Documents.
"Acquisitions" means the Scurlock Permian Acquisition and Chevron
Acquisition.
"Adjusted LIBOR Rate" means, with respect to each particular LIBOR 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 LIBOR Rate for such LIBOR Loan for
such Interest Period by (ii) 1 minus the Reserve Requirement for such LIBOR Loan
for such Interest Period. The Adjusted LIBOR Rate for any LIBOR 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.
"Agreement" means this Credit Agreement.
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"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 LIBOR Lending Office in the case of LIBOR Loans.
"Available Cash" means, with respect to any Fiscal Quarter, (a) all cash
and Cash Equivalents of Restricted Persons on hand on the date of determination
with respect to such Fiscal Quarter minus (b) the amount of any cash reserves
that is necessary or appropriate in the reasonable discretion of General Partner
to (i) provide for the proper conduct of the business of Restricted Persons
(including reserves for future capital expenditures and for anticipated future
credit needs of Restricted Persons) subsequent to such Fiscal Quarter and (ii)
comply with any applicable Law or the covenants and other requirements of this
Agreement.
"Base Rate" means, for any day, the higher of (a) the annual rate of
interest announced from time to time by Administrative Agent as 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
LIBOR Rate.
"Borrower" means Plains Scurlock Permian, L.P., a Delaware 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 LIBOR 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 Boston, Massachusetts.
Any Business Day in any way relating to LIBOR 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.
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"Cash and Carry Advance" means an advance of Revolver Loans to fund a Cash
and Carry Purchase where the amount of the advance is equal to the product of
the volume of crude oil associated with such Cash and Carry Purchase times the
actual cost per barrel of such Cash and Carry Purchase, provided that such Cash
and Carry Purchase Advance has been repaid on or prior to the time the payment
is received in respect of such crude oil associated with such Cash and Carry
Purchase.
"Cash and Carry Purchases" means purchases of crude oil for physical
storage at a storage facility owned and operated by a Restricted Person which
has been hedged on the New York Mercantile Exchange arranged through brokers
approved by Administrative Agent or otherwise hedged in a manner satisfactory to
Majority Lenders.
"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, 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 or a branch
organized under the Laws of the United States of America or any state therein of
a foreign bank, in either case which (i) 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 or (ii) is a Lender;
(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 any 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
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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, (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, (v)
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 Marketing, Plains MLP
or any Restricted Person that is a partnership, (vi) any Person or Group of
Persons other than Resources or any Subsidiary of Resources shall be the legal
and beneficial owner (as defined above) of 50% or more of the combined voting
power of the then total partnership interests (including all securities which
are convertible into partnership interests) of Plains MLP, (vii) Plains MLP or
Marketing shall cease to be the sole legal and beneficial owner (as defined
above) of all of the limited partner interests of Marketing and Borrower,
respectively (including all securities which are convertible into limited
partner interests), or (viii) 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.
"Chevron Acquisition" means the acquisition by Borrower of the Chevron
System pursuant to the Chevron Acquisition Documents.
"Chevron Acquisition Documents" means (i) that certain Asset Sale Agreement
for the West Texas Pipeline System between Chevron Pipe Line Company and
Marketing dated as of April 16, 1999 and (ii) all other agreements executed and
delivered by Marketing or any Restricted Person pursuant thereto.
"Chevron Advance" has the meaning given such term in Section 2.1(b).
"Chevron Pro Forma Financial Statements" means the pro forma financial
statements as of December 31, 1998 reflecting the assets and businesses to be
acquired by Borrower in the Chevron Acquisition delivered to Administrative
Agent prior to the date of this Agreement.
"Chevron System" means the pipeline interests, right of way interests, and
related property and property rights located in Midland, Crane, Winkler, Ector,
Upton, and Ward Counties, Texas acquired by a Restricted Person pursuant to the
Chevron Acquisition Documents.
"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
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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 Borrower 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.
For the Fiscal Quarters ending on December 31, 1999 and March 31, 2000,
Consolidated EBITDA will be calculated by annualizing the Fiscal Quarters which
have elapsed after June 30, 1999.
"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 Borrower 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 Borrower 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 Borrower 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, Borrower'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
Borrower'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 Borrower's 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.
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"Consolidated Net Worth" means the remainder of all Consolidated assets, as
determined in accordance with GAAP, of Borrower and its Subsidiaries minus the
sum of (a) Borrower'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 Borrower's
Subsidiaries (exclusive of the general partner interests held by General Partner
or any 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 Borrower or a Wholly Owned Subsidiary of Borrower.
"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 LIBOR Loan as a LIBOR Loan from one Interest
Period to the next Interest Period.
"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.
"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) two percent (2.00%) per
annum plus the Revolver LIBOR Rate Margin or Term Loan LIBOR Rate Margin, as the
case may be, plus the Adjusted LIBOR Rate then in effect for any LIBOR Loan (up
to the end of the applicable Interest Period) or (ii) two percent (2%) per annum
plus the Revolver Base Rate Margin or the Term Loan Base Rate Margin, as the
case may be, 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 any 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
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<PAGE>
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.
"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.
"Event of Default" has the meaning given to such term in Section 8.1.
"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.
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"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.
"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 Borrower 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 Borrower or with respect to
Borrower 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 Borrower or of Borrower and its Consolidated Subsidiaries.
"General Partner" means Plains All American Inc., a Delaware corporation.
"Guarantors" means any 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 Borrower 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.
"Indebtedness" of any Person means its Liabilities (without duplication) in
any of the following categories:
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(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, 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.
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"Initial Financial Statements" means (a) from the date of this Agreement
until but not including the date of the Chevron Advance: (i) the audited
Consolidated financial statements of Scurlock Permian as of December 31, 1998,
(ii) the unaudited Consolidated financial statements of Scurlock Permian as of
March 31, 1999, and (iii) the pro forma Consolidated and consolidating balance
sheets of Borrower as of March 31, 1999 and the pro forma Consolidated and
consolidating balance sheets and income statements of Borrower as of December
31, 1998 and March 31, 1999 reflecting (1) the Scurlock Permian Acquisition, and
(2) all adjustments giving effect to the Scurlock Permian Acquisition and the
transactions contemplated by the Loan Documents after giving effect to the
Scurlock Permian Advance, as would be appropriate for reporting pro forma
financial statements under GAAP and regulations of the Securities and Exchange
Commission and as may be acceptable to Administrative Agent; and (b) on and
after the date of the Chevron Advance: (i) the audited Consolidated financial
statements of Scurlock Permian as of December 31, 1998, (ii) the unaudited
Consolidated financial statements of Scurlock Permian as of March 31, 1999, and
(iii) the pro forma Consolidated and consolidating balance sheets of Borrower as
of March 31, 1999 and the pro forma Consolidated and consolidating balance
sheets and income statements of Borrower as of December 31, 1998 and March 31,
1999 reflecting (1) the Scurlock Permian Acquisition on a stand-alone basis, (2)
the Scurlock Acquisition and the Chevron Acquisition, and (3) in either case,
all adjustments giving effect to the Scurlock Permian Acquisition, the Chevron
Acquisition, and the transactions contemplated by the Loan Documents, as would
be appropriate for reporting pro forma financial statements under GAAP and
regulations of the Securities and Exchange Commission and as may be acceptable
to Administrative Agent.
"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 Borrower and its Subsidiaries and all other items required
to be eliminated in the course of the preparation of Consolidated financial
statements of Borrower and its Subsidiaries in accordance with GAAP): (a) all
interest and commitment fees in respect of Indebtedness of Borrower 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 Borrower 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 LIBOR Loan, the last day of the Interest Period that is applicable thereto
and, if such Interest Period is six months in length, the dates specified by
Administrative Agent which are approximately three and six 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 LIBOR 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
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Continuation/Conversion Notice (which must be a Business Day), and ending one,
two, three, or six 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 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.
"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 Borrower or any
Subsidiary of Borrower 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
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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, Lead
Arranger and Book Manager, LC Issuer, and all Lenders.
"Lender Schedule" means Schedule 1 hereto, as revised from time to time by
Administrative Agent pursuant to Section 10.5.
"Lenders" means each signatory hereto (other than Borrower), including
BankBoston, N.A. in its capacity as a Lender hereunder rather than as
Administrative Agent, 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.
"Letter of Credit Fee Rate" means, on any day, two and three-quarters
percent (2.75%) per annum.
"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.
"LIBOR Lending Office" means, with respect to any Lender, the office of
such Lender specified as its "LIBOR 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.
"LIBOR Loan" means a Loan that bears interest at a rate based upon the
Adjusted LIBOR Rate.
"LIBOR Rate" means, for any LIBOR 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 "LIBOR Rate" shall mean, for any
LIBOR 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%).
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"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%).
"Marketing" means Plains Marketing, L.P., a Delaware limited partnership.
"Marketing Agreement" means that certain Crude Oil Sales Agreement between
one or more Restricted Persons and Marketing in the form attached hereto as
Exhibit I pursuant to which such Restricted Person agrees to sell and Marketing
agrees to purchase crude oil.
"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) Borrower's Consolidated financial
condition, (b) Borrower'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.
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"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.
"Open Position" means the aggregate volume of crude oil on which Restricted
Persons have commodity price risk (excluding crude oil owned by Restricted
Persons carried in Restricted Persons' gathering lines and pipelines), 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" 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.
"Partnership Agreement" means the Agreement of Limited Partnership of
Borrower dated as of April 29, 1999, as referenced in 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 (whether in a single
transaction or in a series of related transactions), 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; (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; (iv) the total purchase price of any such acquisition does
not exceed $5,000,000, and (v) the aggregate of the total purchase prices for
all such acquisitions from the date hereof through the Term Loan Maturity Date
does not exceed $10,000,000.
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"Permitted Inventory Lien" means any Lien, and the amount of 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 Borrower or any of its
Subsidiaries in any Wholly Owned Subsidiary of Borrower 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.
"Pipeline" means All American Pipeline, L.P., a Delaware limited
partnership.
"Plains MLP" means Plains All American Pipeline, L.P., a Delaware limited
partnership.
"Prepayment Premium" has the meaning given such term in Section 2.6(b).
"Rating Agency" means either S&P or Moody's.
"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 LIBOR Rate is to be
determined, or (b) any category of extensions of credit or other assets which
include LIBOR Loans.
"Resources" means Plains Resources Inc., a Delaware corporation.
"Restricted Person" means any of Borrower and each Subsidiary of Borrower.
"Revolver Base Rate Margin" means, on each day, one percent (1.00%) per
annum.
"Revolver Commitment" means $35,000,000. 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
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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 LIBOR Rate Margin" means, on each day, two and three-quarters
percent (2.75%) per annum.
"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 May 12, 2002.
"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.
"Scurlock Permian" means Scurlock Permian LLC, a Delaware limited liability
company.
"Scurlock Permian Acquisition" means the acquisition by Borrower of all of
the membership interests of Scurlock Permian pursuant to the Scurlock Permian
Acquisition Documents.
"Scurlock Permian Acquisition Documents" means (i) that certain Agreement
for Purchase and Sale of Membership Interest in Scurlock Permian LLC between
Marathon Ashland Petroleum LLC and Marketing dated as of March 17, 1999 and (ii)
all other agreements executed and delivered by any Affiliate of Borrower
pursuant thereto.
"Scurlock Permian Advance" has the meaning given such term in Section
2.1(b).
"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
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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, one and one-quarter
percent (1.25%) per annum.
"Term Loan LIBOR Rate Margin" means, on each day, three percent (3.00%) per
annum.
"Term Loan Maturity Date" means May 12, 2004.
"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.
"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 LIBOR 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.
"Y2K Plan" has the meaning given such term in Section 5.21(a).
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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 term
"Partnership Agreement" shall be deemed to be references to that agreement in
the form approved by Administrative Agent, and as such agreement is executed and
delivered by the parties thereto on the date of this Agreement.
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 LIBOR 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 LIBOR Rate, Adjusted LIBOR 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.
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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 $500,000 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 2.1(a). Borrower may have no more than five Borrowings of LIBOR
Loans outstanding at any time.
(b) Term Loans. Subject to the terms and conditions hereof, each Term
Lender agrees to make two (2) advances to Borrower (herein called such Lender's
"Term Loans") upon Borrower's request on or before July 15, 1999, provided that
(a) such Term Loans by a Term Lender do 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 $130,000,000. The aggregate amount of one such advance of
Term Loans from all Term Lenders not to exceed the aggregate amount of
$90,000,000 shall be used to partially finance the Scurlock Permian Acquisition
(the "Scurlock Permian Advance") and the aggregate amount of one such advance of
Term Loans from all Term Lenders not to exceed the aggregate amount of
$40,000,000 shall be used to partially finance the Chevron Acquisition (the
"Chevron Advance"). Portions of each Lender's Term Loan may from time to time
be designated as a Base Rate Loan or LIBOR 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
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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 LIBOR Loans, the
date on which such LIBOR 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 LIBOR 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 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 Boston, Massachusetts
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
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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 LIBOR
Loans, to Convert, in whole or in part, LIBOR Loans to Base Rate Loans on the
last day of the Interest Period applicable thereto, and to Continue, in whole or
in part, LIBOR 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 five Borrowings of LIBOR 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 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 LIBOR 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 LIBOR 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 LIBOR
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 LIBOR Loans or Continue existing Loans
as LIBOR 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 LIBOR
Loans at least three days prior to the end of the Interest Period applicable
thereto, such LIBOR 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) the Scurlock
Permian Advance to partially finance the Scurlock Permian Acquisition and the
Chevron Advance to partially finance the Chevron Acquisition and (ii) Revolver
Loans (a) for Cash and Carry Advances up to the full amount of the Revolver
Commitment, and (b) for other than Cash and Carry Advances in an amount which
does not exceed $20,000,000 in the aggregate at any one time outstanding, for
the purposes of paying reimbursement obligations of Letters of Credit, providing
working capital for operations of any Restricted Person, and for other general
business purposes of any Restricted Person, including Permitted Investments, but
not to pay distributions to partners of Restricted Persons except as provided in
Section 7.6, provided that the Facility Usage shall not exceed the Revolver
Commitment. 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 plus the Revolver Base
Rate Margin in effect on such day, and (B) each LIBOR Loan shall bear interest
on each day during the related Interest Period at the related Adjusted LIBOR
Rate plus the Revolver LIBOR 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 or the Adjusted LIBOR Rate
changes. In no event shall the interest rate on any Revolver Loan exceed the
Highest Lawful Rate.
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(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 LIBOR Loan shall bear
interest on each day during the related Interest Period at the related Adjusted
LIBOR Rate plus the Term Loan LIBOR 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 or Adjusted LIBOR Rate 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 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 two (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 all fees as
described in a letter agreement dated March 17, 1999, between Syndication Agent
and Marketing.
Section 2.6. Optional Prepayments.
(a) Revolver Loans. Borrower may, upon two 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 $500,000 or any
higher integral multiple of $250,000, and, if the Term Loans have been paid in
full, 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.
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(b) Term Loans. Borrower may, upon five Business Days' notice to each Term
Lender from time to time and without premium (except as provided below) 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. Notwithstanding the
foregoing sentence, if Borrower shall prepay, in whole or in part, the Term
Loans before the first anniversary of the initial advance of the Term Loans,
voluntarily as provided in this Section 2.6(b) or as a result of an event
specified in Section 2.7(a) or (b), Borrower shall pay to Administrative Agent
for the account of each Term Lender a prepayment premium (the "Prepayment
Premium") in an amount equal to one-half percent (.50%) of the amount of any
such prepayment.
(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 cash 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
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. Any prepayment on
the Term Loans made pursuant to this Section 2.7(a) before the first anniversary
of the initial advance of the Term Loans shall be subject to the payment of the
Prepayment Premium specified in Section 2.6(b).
(b) Without limiting the foregoing Section 2.7(a), the cash proceeds (net
of underwriters' or purchasers' discounts and commissions, legal, accountancy,
registration, or
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printing fees and expenses and other fees and expenses incurred in connection
with such offering to be paid or reimbursed by the issuer and net of any taxes,
if any, paid or payable as a result thereof) of any debt or equity offering (not
including any revolving credit facility or the initial issuance of Class B
Common Units issued by Plains MLP prior to the Scurlock Permian Advance) of (i)
any Restricted Person or (ii) Plains MLP or any Subsidiary of Plains MLP that is
not a Restricted Person (subject to the required consent, if any, under a credit
or similar agreement to which such Person is a party), shall be applied pro rata
to the reduction of the outstanding principal balance of the Term Loans at the
time of such offering. Any prepayment on the Term Loans made pursuant to this
Section 2.7(b) before the first anniversary of the initial advance of the Term
Loans shall be subject to the payment of the Prepayment Premium specified in
Section 2.6(b).
(c) 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 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;
(c) 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;
(d) 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;
(e) the form and terms of such Letter of Credit are acceptable to LC
Issuer in its sole and absolute discretion; and
(f) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
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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., 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
2.8 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
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 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
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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.
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 and such other fees and charges customarily
charged by the LC Issuer in respect of any issuance, amendment or negotiation of
any Letter of Credit in
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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 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.
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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 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
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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, 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, 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);
(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
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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 LIBOR 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 LIBOR Loan
or Letter of Credit or otherwise due under this Agreement in respect of any
LIBOR 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 LIBOR
Loan or any Letter of Credit (excluding those for which such Lender Party
is fully compensated pursuant to adjustments made in the definition of
LIBOR 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 LIBOR Loan or Letter of
Credit, the result of which is to increase the cost to any Lender Party of
funding or maintaining any LIBOR
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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 LIBOR 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
LIBOR 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 LIBOR 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 LIBOR Loan are not available to it, or (c) any Lender Party
determines that the formula for calculating the LIBOR 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 LIBOR 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
LIBOR 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.
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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 LIBOR Loans), as a result of (a) any payment or
prepayment (whether or not authorized or required hereunder) of all or a portion
of a LIBOR 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 LIBOR Loan into a
Base Rate Loan or into a different LIBOR 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 LIBOR 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
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.
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(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any LIBOR 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 LIBOR 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 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.
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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;
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 (including but not limited to the Scurlock Permian Advance),
and LC Issuer has no obligation to issue the first Letter of Credit unless
Administrative Agent shall have received all of
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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
executive vice 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 certificate of
limited partnership of Borrower and all amendments thereto, certified
by the appropriate official of Borrower's state of organization, and
(3) a copy of the agreement of limited partnership of Borrower; and
(ii) A certificate of the president and of the chief financial
officer of General Partner, regarding satisfaction of Section 4.2 and,
without duplication, Section 4.4.
(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) of this
section with respect to each other Restricted Person and the execution by
it of each Loan Document to which it is a party.
(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 counsel to Restricted Persons,
substantially in the form set forth in Exhibit E-2, and local counsel for
Administrative Agent for the states of Louisiana, Mississippi, and Illinois
satisfactory to Administrative Agent.
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(h) The Initial Financial Statements (including for purposes of this
Section 4.1 the additional financial statements described in part (b) of
the definition of Initial Financial Statements other than the financial
statements in respect of the Chevron Acquisition dated as of March 31,
1999) and such other documents as Administrative Agent may require in its
sole and absolute discretion with respect to (i) assumptions made in the
Initial Financial Statements and (ii) deviations contained in the Initial
Financial Statements as compared to audited financial statements for the
last three Fiscal Years of Scurlock Permian.
(i) Copies of such permits and approvals regarding the property and
business of Restricted Persons as Administrative Agent may request.
(j) Certificates or binders evidencing Restricted Persons' insurance
in effect on the date hereof and a certificate signed by the chief
executive officer or president of General Partner in form and detail
acceptable to Administrative Agent confirming that such insurance is
customary for the businesses conducted by Restricted Persons and is in
compliance with the requirements of this Agreement.
(k) 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.
Section 4.2. Additional Conditions to Initial Credit. No Lender has any
obligation to make its first Loan (including but not limited to the Scurlock
Permian Advance), 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) Borrower shall have received an aggregate capital contribution of
cash from Marketing equal to or greater than $50,000,000.
(b) Administrative Agent shall have received copies of all
environmental evaluations, reports or reviews related to the properties of
the Restricted Persons conducted in connection with the Scurlock Permian
Acquisition, together with a favorable report of Pilko & Associates, Inc.
regarding their evaluation of the scope and conclusions of such
evaluations, reports or reviews.
(c) The Scurlock Permian Acquisition and all of the transactions
contemplated under the Scurlock Permian Acquisition Documents shall have
been consummated, in compliance with the terms and conditions thereof and
all representations and warranties made by any party to the Scurlock
Permian Acquisition Documents shall be true and correct.
(d) After giving effect to each of the transactions under the Scurlock
Permian Acquisition Documents, all representations and warranties made by
any Restricted Person in any Loan Document shall be true on and as of the
date of the Scurlock Permian Advance as if such representations and
warranties had been made as of the date thereof.
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Section 4.3. Conditions Precedent with respect to the Chevron Advance.
No Lender has any obligation to make the Chevron Advance unless, prior to or
contemporaneously with the Chevron Advance, the following conditions precedent
have been satisfied:
(a) Administrative Agent shall have received, duly executed and
delivered and in form, substance and date satisfactory to Administrative
Agent:
(i) Certain certificates including (A) an "Omnibus Certificate"
of the secretary and of the executive vice 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
certificate of limited partnership of Borrower and all amendments
thereto, certified by the appropriate official of Borrower's state of
organization (or confirmation that no amendments thereto have been
made since the date of the Scurlock Permian advance), and (3) a copy
of the agreement of limited partnership of Borrower (or confirmation
that no amendments thereto have been made since the date of the
Scurlock Permian advance); and (B) a certificate of the president and
of the chief financial officer of General Partner, regarding
satisfaction of Section 4.2 and, without duplication, Section 4.4.
(ii) Documents similar to those specified in subsections (a)(i)
of this section with respect to each other Restricted Person and the
execution by it of each Loan Document to which it is a party.
(iii) A favorable opinion of Michael Patterson, Esq., General
Counsel for Restricted Persons, Fulbright & Jaworski L.L.P., special
counsel to Restricted Persons, and local counsel satisfactory to
Administrative Agent.
(iv) copies of such permits and approvals regarding the property
and business of Restricted Persons as Administrative Agent may
request.
(v) certificates or binders evidencing Restricted Persons'
insurance in effect on the date thereof and a certificate signed by
the chief executive officer or president of General Partner in form
and detail acceptable to Administrative Agent confirming that such
insurance is customary for the businesses conducted by Restricted
Persons and is in compliance with the requirements of this Agreement.
(vi) copies of all environmental evaluations, reports or reviews
related to the properties of the Restricted Persons conducted in
connection with the Chevron Acquisition, together with a favorable
report of Pilko & Associates, Inc.
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regarding their evaluation of the scope and conclusions of such
evaluations, reports or reviews.
(vii) all documents of the type described in Section 6.14 and
6.15 encumbering the assets conveyed pursuant to the Chevron
Acquisition Documents in form and substance satisfactory to
Administrative Agent.
(viii) a certificate of the president and of the chief
financial officer of General Partner, regarding satisfaction of this
Section 4.3.
(ix) all other documents relating to the Chevron Acquisition as
Administrative Agent may require in its sole and absolute discretion.
(b) The Chevron Acquisition and all of the transactions contemplated
under the Chevron Acquisition Documents shall have been consummated, in
compliance with the terms and conditions thereof pursuant to which Borrower
shall own all assets to be acquired pursuant thereto, and all
representations and warranties made by any party to the Chevron Acquisition
Documents shall be true and correct.
(c) After giving effect to each of the transactions under the Chevron
Acquisition Documents, all representations and warranties made by any
Restricted Person in any Loan Document shall be true on and as of the date
of the Chevron Advance as if such representations and warranties had been
made as of the date thereof.
(d) Lenders shall have received and approved (i) the unaudited
financial statements with respect to the assets and operations to be
acquired by Borrower pursuant to the Chevron Acquisition in form and
substance and as of a recent date satisfactory to Majority Lenders
("Updated Chevron Financial Statements") to the extent not delivered on or
prior to the date of the Chevron Advance.
(e) No Material Adverse Change shall have occurred from the financial
condition and results of operation reflected in the Chevron Pro Forma
Financial Statements to either (i) the financial condition and results of
operation reflected in the Updated Chevron Financial Statements or (ii) the
financial condition and results of operation as of the date of the Chevron
Advance with respect to assets and operations to be acquired pursuant to
the Chevron Acquisition.
(f) No Material Adverse Change shall have occurred to Borrower's
Consolidated financial condition or result of operations as of the date of
the Chevron Advance from the pro forma Consolidated financial statements of
Borrower (including the Scurlock Acquisition and the Chevron Acquisition)
as of December 31, 1998.
(g) Each condition precedent set forth in Section 4.4 has been
satisfied as of the date thereof and after giving effect thereto.
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Section 4.4. 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, 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 (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
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Agreement and to extend credit hereunder, Borrower represents and warrants 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.
Section 5.4. No Conflicts or Consents. The execution and delivery by the
various Restricted Persons of the Loan Documents and Acquisition Documents to
which each is a party, the performance by each of its obligations under such
Loan Documents and Acquisition Documents, and the consummation of the
transactions contemplated by the various Loan Documents and various Acquisition
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 Acquisition 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 Acquisition
Document or to consummate any transactions contemplated by the Loan Documents
and the Acquisition Documents.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents and the Acquisition 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
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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. Borrower has heretofore
delivered to each Lender true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements other than pro forma
financial statements fairly present Borrower's Consolidated financial position
at the date thereof and the Consolidated results of Borrower's operations and
Consolidated cash flows for the period thereof. The pro forma Initial Financial
Statements fairly present Borrower's pro forma Consolidated financial position
at the date thereof and the pro forma Consolidated results of Borrower'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 Disclosure Schedule. All Initial Financial
Statements other than pro forma financial statements were prepared in accordance
with GAAP. All Initial Financial Statements that are pro forma financial
statements were prepared in accordance with GAAP with such adjustments as would
be appropriate for reporting pro forma financial statements under GAAP and
regulations of the Securities and Exchange Commission and as have been accepted
by Administrative Agent.
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 Borrower or material with respect to Borrower'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 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
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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 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
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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.
(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
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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 on the
signature page hereto. 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, limited liability
company, 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,
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.
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Section 5.17. Government Regulation. No Restricted Person 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. No 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 each Restricted Person, and the
consummation of the transactions contemplated hereby (i) each Restricted Person
will be solvent (as such term is used in applicable bankruptcy, liquidation,
receivership, insolvency or similar Laws), and the sum of each Restricted
Person's absolute and contingent liabilities, including the Obligations or
guarantees thereof, shall not exceed the fair market value of such Restricted
Person's assets, and (ii) each Restricted Person's capital shall be adequate for
the businesses in which such Restricted Person is engaged and intends to be
engaged. No Restricted Person has incurred (whether under the Loan Documents or
otherwise), nor does any Restricted Person intend to incur or believe that it
will incur, debts which will be beyond its ability to pay as such debts mature.
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) analyzed the operations of Restricted
Persons and their Subsidiaries and 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 September 9, 1999 and December 31, 1999) and (ii)
developed a plan for becoming Year 2000 compliant in a timely manner (the "Y2K
Plan"), the implementation of which is on schedule in all material respects.
Each Restricted
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Person 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) Each Restricted Person reasonably believes 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, Borrower covenants and agrees 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. Borrower 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 one hundred twenty
(120) days after the end of each Fiscal Year (i) complete Consolidated
financial statements of Borrower 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; provided, however, that such
financial statements for the Fiscal Year ending December 31, 1999 need not
be furnished to Lenders until June 30, 2000. 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, at the time of delivery of such
financial statements Borrower 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
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requirements of Sections 7.11 through 7.13, 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 fifty (50) days
after the end of each of the first three Fiscal Quarters of each Fiscal
Year, (i) Borrower's Consolidated balance sheet as of the end of such
Fiscal Quarter and Consolidated statements of Borrower'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, 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 fifty (50)
days after the end of the last Fiscal Quarter of each Fiscal Year,
Borrower'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 Borrower 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 7.13, 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 Borrower (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 Borrower, and thereafter yearly financial projections and
budgets for the next four Fiscal Years.
(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 Borrower and its Subsidiaries.
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(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 2000, 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.
Without limitation of the foregoing, if requested by Administrative Agent within
ninety (90) days after the end of each Fiscal Year, Borrower shall permit
commercial financial examiners who are employees of Administrative Agent to
conduct a commercial finance examination of the business and assets of
Restricted Persons and in connection with such examination to have full access
to and the right to examine, audit, make abstracts and copies from, and inspect
Restricted Persons' records, files, books of account and all other documents,
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instruments and agreements to which a Restricted Person is a party. Borrower
shall pay all reasonable costs and expenses of Administrative Agent associated
with any such examination. 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
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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.
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
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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 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
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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 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 Borrower
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
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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
Borrower existing on the date hereof shall duly execute and deliver such a
guaranty prior to the making of any Loan hereunder. Borrower 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 Subsidiary has taken all corporate, limited
liability company, 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 12 months following such time, (b) in
combined notional amounts not less than seventy-five percent (75%) 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 shall at all times implement the Y2K Plan in all
material respects, in a timely manner, and in accordance with the schedule of
the Y2K Plan. Contemporaneously with the delivery of each compliance certificate
under Section 6.2 (a) or (b), Borrower shall certify that it reasonably believes
that Restricted Persons and their Affiliates will become Year 2000 compliant (as
defined in Section 5.21(a)) 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) Borrower shall certify that it reasonably believes
any suppliers and vendors that are material to the operations of Borrower or its
Subsidiaries and Affiliates will be Year 2000 compliant (as defined in Section
5.21(a)) 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 and ratified, and free and clear of such Liens,
use the proceeds of the Rents, and (ii) the
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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. Post-Closing Actions.
(a) Borrower will and will cause each other Restricted Person to: (i)
deliver to Administrative Agent copies of each notice, document or other
information or communication delivered between the parties under or in
connection with the Acquisition Documents which relates to any matter which
could materially and adversely affect the Collateral or the rights of any Lender
Party under the Loan Documents, including without limitation, any notice or
request relating to a corrective action regarding rights-of-way or other
property interests or relating to any indemnities; and (ii) in the event of any
post-closing action pursuant to the Acquisition Documents which may affect the
completeness or accuracy of any Security Document or affect the Collateral
(specifically including but not limited to any modification or supplement with
respect to the Illinois pipeline system rights-of-way conveyed to any Restricted
Person pursuant to the Scurlock Permian Acquisition Documents), concurrently
with any such post-closing action, deliver to Administrative Agent any and all
amendments to the Security Documents and other documents or instruments duly
executed and in form and substance acceptable to Administrative Agent which
Administrative Agent may require in connection with such post-closing action.
(b) In connection with any post-closing action pursuant to the Acquisition
Documents referred to subsection (a) of this Section, upon receipt by
Administrative Agent of evidence satisfactory to Administrative Agent that a
Restricted Person is required pursuant to the Scurlock Permian Acquisition
Documents or that it is otherwise desirable for a Restricted Person pursuant to
the Scurlock Permian Acquisition Documents to reconvey to Marathon Ashland
Petroleum LLC or any of its Affiliates any rights-of-way or other interests
which were incorrectly conveyed to such Restricted Person, Administrative Agent
shall execute and deliver to such Restricted Person such releases as may be
reasonably required by such Restricted Person in order to permit such a
reconveyance in compliance with the Scurlock Permian Acquisition Documents.
Each Lender Party hereby consents to such releases of Collateral from time to
time by Administrative Agent pursuant to this subsection.
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(c) Borrower will and will cause each other Restricted Person to use its
reasonable best efforts to prepare and deliver to Administrative Agent right-of-
way alignment maps reflecting the main line segments of the pipelines
constituting "Major Pipelines and Terminals" (as such term is defined in the
Scurlock Permian Acquisition Documents) and identifying the specific easements
or right-of-way documents covering each portion of such pipeline location (the
"Alignment Maps"), such Alignment Maps to be prepared and delivered under a
procedure and schedule acceptable to Administrative Agent in its reasonable
discretion, provided that Borrower and each other Restricted Person will use its
best efforts to cause all such Alignment Maps to be prepared and delivered to
Administrative Agent on or before May 30, 2000.
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, Borrower covenants and agrees 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) guaranties by any Restricted Person of trade payables of any other
Restricted Person incurred and paid in the ordinary course of business on
ordinary trade terms; and
(f) other Indebtedness not to exceed in the aggregate in respect of all
Restricted Persons the principal amount of $5,000,000 at any one time
outstanding, of which amount not more than $3,000,000 may represent Liabilities
for borrowed money or Liabilities constituting principal under Capital Leases.
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 (such Liens, to the extent
permitted by this Section, herein called "Permitted Liens"):
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(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;
(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 Restricted Persons 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;
(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(f) hereof; and any extension, renewal,
refinancing, refunding or replacement (or successive extensions, renewals,
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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;
(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; and
(n) statutory Liens securing obligations for the purchase of crude oil in
the ordinary course of business at the wellhead.
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.
(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 involving all of the following: (A) Cash and Carry
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Purchases, (B) a sales contract resulting solely in "Approved Receivables", (C)
a term of not more than thirty-six (36) months, and (D) in the aggregate with
all other such time trades an amount not in excess of the Time Trade Limit, (ii)
the aggregate amount of such crude oil so hedged at any one time does not exceed
the aggregate Open Position at such time, (iii) 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 (iv) 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 Receivables." As
used herein, "Time Trade Limit" shall mean (i) from the date hereof until and
including the date of the Chevron Advance, 600,000 barrels, and (ii) on and
after the date of the Chevron Advance, 1,500,000 barrels, and "Approved
Receivables" shall mean a receivable from a Person, or guaranteed by a Person,
having a senior unsecured debt rating of at least Baa by Moody's or BBB- by S&P.
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 Subsidiary of
Borrower may, however, be merged into or consolidated with (i) another
Subsidiary of Borrower, so long as a Guarantor is the surviving business entity,
or (ii) Borrower, so long as Borrower is the surviving business entity.
Borrower will not issue any securities other than (i) general or limited
partnership interests and any options or warrants giving the holders thereof
only the right to acquire such interests issued to General Partner or Marketing,
respectively, and (ii) debt securities permitted by Section 7.1(f). No
Subsidiary of Borrower 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 Borrower, or to General Partner so long as such Subsidiary is a
Wholly Owned Subsidiary of Borrower after giving effect thereto. No Subsidiary
of Borrower which is a partnership or a limited liability company 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:
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(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 or, in the case of sales to
Marketing, on terms set forth in the Marketing Agreement;
(c) in other property which is sold for fair consideration not in the
aggregate in excess of $5,000,000 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 Subsidiary
of Borrower to Borrower or to a Wholly Owned Subsidiary of Borrower that is a
Guarantor.
Except as contemplated by the Marketing Agreement, no Restricted Person shall
extend trade credit in connection with the sale or exchange of inventory other
than in a manner consistent with prudent industry practices and the credit
practices of Marketing as carried on as of the date of this Agreement. No
Restricted Person will sell, transfer or otherwise dispose of capital stock of
or interest in any of its Subsidiaries except to Borrower or a Wholly Owned
Subsidiary of Borrower. 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, Distributions, and Redemptions.
(a) 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, limited liability company, 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 or limited liability company 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 or the Commitment is outstanding; provided,
however (but subject to Section 7.5), (i) Subsidiaries of Borrower or of any
Guarantor shall not be restricted, directly or indirectly, from declaring and
paying dividends or making any other distributions to 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) Borrower shall not be restricted from
distributing Available Cash as permitted below. From and after the date of the
Chevron Advance (or the expiration of the commitment hereunder to make the
Chevron Advance), so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, Borrower may distribute 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 if prior
to and after making such distributions (i) the aggregate outstanding principal
balance of all Revolver Loans (exclusive of the face amount of outstanding and
undrawn Letters of Credit) is
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less than $5,000,000 and (ii) Consolidated current liabilities of Borrower
(excluding current maturities of the Loans) do not exceed the sum of (1)
Consolidated current assets of Borrower plus (2) the remainder of (if positive)
(A) $5,000,000 minus (B) the outstanding balance of the Revolver Loans plus (3)
$10,000,000. Notwithstanding anything to the contrary herein beginning on or
after June 30, 2002, Borrower shall not declare or pay any dividend or make any
other distribution in respect of any partnership interest in it, including but
not limited to distributions of Available Cash, if, prior to, or after giving
effect to, the payment of such dividend or the making of such distribution, the
ratio of (i) Consolidated Funded Indebtedness to (ii) Consolidated EBITDA for
the Four Fiscal Quarter period most recently ended prior to the date of such
dividend or distribution minus the cumulative amount all such dividends or
distributions made after June 30, 2002, is, or shall be, greater than 3.5 to
1.0.
(b) Notwithstanding anything to the contrary in this Section 7.6, if at any
time any Restricted Person that is a partnership or a limited liability company
shall cease to be treated as a partnership for federal income tax purposes, such
Restricted Person shall thereafter not declare, pay, or make any distribution in
respect of any partnership or limited liability company interest in it that is
not permitted under clause (iii) of Section 7.6(a), nor shall any Restricted
Person directly or indirectly make any capital contribution to or purchase,
redeem, acquire or retire any partnership or limited liability company interests
in any such Restricted Person (whether such interests are now or hereafter
issued, outstanding or created), until such time as Borrower and Majority
Lenders have agreed to the terms and conditions under which any such Restricted
Person may be permitted to declare, pay, and make such distributions.
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 all or a portion (exclusive of assets
acquired pursuant to and permitted by Section 7.13) of the business, assets or
operations of a Person, make any acquisitions of any capital stock or other
equity interest in a Person, or make capital contributions to, or other
Investments in, any Person, other than Permitted Investments. All transactions
permitted under the foregoing subsections (a) through (c), 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 Borrower and Wholly Owned Subsidiaries of Borrower, subject
to the other provisions of this Agreement, (b) sales of crude oil gathered by
Restricted Persons under the Marketing Agreement; provided, however, that the
aggregate accounts receivables due from Marketing and sales to Marketing shall
never
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exceed an amount satisfactory to Majority Lenders which, unless Majority Lenders
determine that a material adverse change has occurred in the business, credit
worthiness, or financial condition of Marketing, shall be the lesser of (i) 50%
of Restricted Persons aggregate accounts receivable or (ii) sales per month of
$50,000,000, (c) transactions with the General Partner pursuant to the
Partnership Agreement, (d) distributions by Borrower to its partners permitted
by Section 7.6 and (e) 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. No Restricted
Person will be obligated to pay management fees or other fees in respect of
general or administration services or functions to any Affiliate (other than
reimbursements to General Partner pursuant to the Partnership Agreement).
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 such
Restricted Person to: (a) pay dividends or make other distributions to any
Restricted Person, (b) redeem equity interests held in it by any Restricted
Person, (c) repay loans and other indebtedness owing by it to any Restricted
Person, or (d) transfer any of its assets to any Restricted Person. 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. Borrower will not amend or permit any amendment to the Partnership
Agreement or the Marketing Agreement, and 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. 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 (i) 6.0 to 1.0 for each such period ending during the period from October
1, 1999 until and including June 30, 2000, (ii) 5.0 to 1.0 for each such period
ending during the period from July 1, 2000 until and including June 30, 2001,
and (iii) 4.0 to 1.0 for each such period ending at any time thereafter.
Section 7.12. 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 (i) 2.0 to
1.0 for each such period ending during the period from October 1, 1999 until and
including June 30, 2000, and (ii) 2.5 to 1.0 for each such period ending at any
time thereafter.
Section 7.13. Capital Expenditures. Restricted Persons shall not incur
capital expenditures (other than expenditures for repair or maintenance of
existing capital assets) during (i) the period from the date of this Agreement
until and including December 31, 1999 in excess of $2,500,000 or (ii) any Fiscal
Year, commencing with the Fiscal Year beginning on January 1,
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2000, in an aggregate amount in excess of (a) $2,500,000, if the ratio of
Consolidated Funded Indebtedness on the last day of the preceding Fiscal Year to
Consolidated EBITDA for such preceding Fiscal Year was equal to or greater than
5.0 to 1.0 or (b) $5,000,000, if the ratio of Consolidated Funded Indebtedness
on the last day of the preceding Fiscal Year to Consolidated EBITDA for such
preceding Fiscal Year was less than 5.0 to 1.0. In addition to the capital
expenditures permitted by the immediately preceding sentence, Restricted Persons
shall be permitted to incur capital expenditures (which are anticipated to
include, but are not limited to, the exercise of options to purchase in
connection with capital leases and the repair of storage facilities), net of any
trade-in value or other amounts received (if any) in connection with the
purchase and sale of similar capital assets, during the period from the date of
this Agreement until and including the first anniversary of this Agreement of up
to $5,000,000.
Section 7.14. Cash and Carry; Open Position. Restricted Persons shall
not (i) purchase crude oil for physical storage except at storage facilities
owned and operated by a Restricted Person, or (ii) at any time have an aggregate
Open Position other than in connection with linefill in third party pipelines
that does not in the aggregate at any one time exceed 750,000 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;
(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;
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(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, Plains MLP, Marketing, Pipeline, 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 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
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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, Plains MLP, Marketing, or Pipeline 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 of Control occurs;
(l) Any partner of any Restricted Person that is a partnership, any member
of any Restricted Person that is a limited liability company, or any shareholder
of any Restricted Person that is a corporation shall grant a Lien on, or
otherwise encumber, any partnership interest of, limited liability company
membership interest of, shares or stock of any class issued by, or other
ownership interest in, any Restricted Person except as provided in any Loan
Document;
(m) Any partner of any Restricted Person that is a partnership, any member
of any Restricted Person that is a limited liability company, or any shareholder
of any Restricted Person that is a corporation shall sell, transfer or otherwise
dispose of any partnership interest of, limited liability company membership
interest of, shares of stock of any class issued by, or other ownership interest
in, any Restricted Person or permit any dilution in the control thereof except
as provided in any Loan Document; or
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(n) Any Restricted Person is dissolved or otherwise ceases to exist except
as provided herein.
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, 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 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
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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 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.
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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 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.
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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
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.
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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 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. Syndication Agent. The Syndication Agent, in such
capacity, shall not 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
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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 4.4), (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 substantial
part of the 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
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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.
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
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<PAGE>
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 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
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<PAGE>
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 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.
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<PAGE>
(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) 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).
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<PAGE>
(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 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.
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<PAGE>
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 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
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<PAGE>
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 create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be contracted for,
charged, or received 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 contracted for,
charged, or received 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. Lender
Parties expressly disavow any intention to contract for, charge, or receive
excessive unearned interest or finance charges in the event the maturity of any
Obligation is accelerated. If (a) the maturity of any Obligation is accelerated
for any reason, (b) any Obligation is prepaid and as a result any amounts held
to constitute interest are determined to be in excess of the legal maximum, or
(c) any Lender or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be contracted for, charged, or received by
applicable Law then in effect, then all sums determined to constitute interest
in excess of such legal limit shall, without penalty, be promptly applied to
reduce the then outstanding principal of the related Obligations or, at such
Lender's or holder's option, promptly
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<PAGE>
returned to Borrower or other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable Law, Lender
Parties and Restricted Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable Law, (i) characterize any non-
principal payment as an expense, fee or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable Law in order to
lawfully charge the maximum amount of interest permitted under applicable Law.
In the event applicable Law provides for an interest ceiling under Chapter 303
of the Texas Finance Code (the "Texas Finance Code") as amended, to the extent
that the Texas Finance Code is mandatorily applicable to any Lender, for that
day, the ceiling shall be the "weekly ceiling" as defined in the Texas Finance
Code, provided that if any applicable Law permits greater interest, the Law
permitting the greatest interest shall apply.
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 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
79
<PAGE>
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.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
PLAINS SCURLOCK PERMIAN, L.P.
By: PLAINS ALL AMERICAN INC., its general partner
By: /s/ Phil Kramer
------------------
Phil Kramer
Executive Vice President
Address:
500 Dallas Street
Suite 700
Houston, Texas 77002
Attention: Phil Kramer
Telephone: (713) 654-1414
Fax: (713) 654-1523
81
<PAGE>
BANKBOSTON, N.A.
Administrative Agent, LC Issuer and Lender
By: /s/ Terrence Ronan
---------------------
Terrence Ronan
Director
Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Terrence Ronan
Mail Code: 01-08-04
Telephone: (617) 434-5472
Fax: (617) 434-3652
BANCBOSTON ROBERTSON STEPHENS, INC.,
Syndication Agent, Lead Arranger and Bank Manager
By: /s/ Richard J. Makin
------------------------
Richard J. Makin
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
82
<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 MARCH 31, 1999, AND
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 683
<SECURITIES> 0
<RECEIVABLES> 156,159
<ALLOWANCES> 0
<INVENTORY> 24,564
<CURRENT-ASSETS> 187,015
<PP&E> 381,627
<DEPRECIATION> 3,177
<TOTAL-ASSETS> 633,312
<CURRENT-LIABILITIES> 169,126
<BONDS> 181,000
0
21,214
<COMMON> 260,518
<OTHER-SE> 1,299
<TOTAL-LIABILITY-AND-EQUITY> 633,312
<SALES> 455,760
<TOTAL-REVENUES> 455,857
<CGS> 435,932
<TOTAL-COSTS> 438,763
<OTHER-EXPENSES> 410
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,193
<INCOME-PRETAX> 11,313
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,313
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
