<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 23, 1998
PLAINS RESOURCES INC.
(Exact name of registrant as specified in charter)
DELAWARE 0-9808 13-2898764
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
500 DALLAS STREET, SUITE 700
HOUSTON, TEXAS 77002 77002
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 654-1414
================================================================================
<PAGE>
ITEM 2. DISPOSITION OF ASSETS
On November 23, 1998, (the "Closing Date"), Plains Resources Inc. ("Plains
Resources"), and certain of its subsidiaries (the "Plains Midstream
Subsidiaries") entered into a Contribution, Conveyance and Assumption Agreement
(the "Agreement") with Plains All American Pipeline, L.P. (the "Partnership"),
Plains Marketing, L.P. and All American Pipeline L.P. (collectively referred to
as the "Operating Partnerships"). Plains All American Inc., a wholly-owned
subsidiary of Plains Resources is the general partner ("General Partner") of the
Partnership and the Operating Partnerships. Pursuant to the Agreement, Plains
Resources transferred certain assets and liabilities to the Operating
Partnerships.
On the Closing Date, the Partnership closed its initial public offering
(the "Offering") of common units representing limited partner interests. The
Offering of 13,085,000 common units represents 42.6% of the Partnership's
equity, and was priced at $20.00 per unit. Total proceeds, net of selling
commissions and the underwriters' management and underwriting fees, were
approximately $244.7 million. Concurrently with the closing of the Offering,
certain of the Plains Midstream Subsidiaries were merged into Plains Resources,
which pursuant to the Agreement, sold the assets of these subsidiaries to Plains
Marketing, L.P. in exchange for $93.7 million in cash and the assumption of
related indebtedness. At the same time, the General Partner conveyed all of its
interest in the All American Pipeline System and SJV Gathering System, which it
acquired in July 1998 for approximately $400 million, to the Operating
Partnerships in exchange for (i) 6,974,239 common units, 10,020,619 subordinated
units and an aggregate 2% general partner interest in the Partnership and the
Operating Partnerships; (ii) the right to receive incentive distributions; and
(iii) the assumption by the Operating Partnerships of $175 million of
indebtedness incurred by the General Partner in connection with the acquisition
of the All American Pipeline System and SJV Gathering System.
In addition to the $93.7 million paid to Plains Resources, the Partnership
distributed approximately $148.0 million to the General Partner and paid
approximately $3 million in expenses incurred in connection with the Offering.
The General Partner used $110 million of the cash distributed to it to retire
the remaining indebtedness incurred in connection with the acquisition of the
All American Pipeline System and the SJV Gathering System, approximately $9.0
million to pay expenses incurred in connection with the formation of the
Partnership, primarily related to debt and interest rate swap restructuring, and
the balance, approximately $29.0 million, was distributed to Plains Resources
which used the cash to repay indebtedness and for other general corporate
purposes.
On the Closing Date, Plains Resources entered into various agreements with
the Partnership, including (i) the Omnibus Agreement, providing for the
resolution of certain conflicts arising from the conduct of the Partnership and
Plains Resources of related businesses and for the General Partner's
indemnification of the Partnership for certain matters and (ii) the Crude Oil
Marketing Agreement which provides for the marketing by Plains Marketing, L.P.
of Plains Resources' crude oil production.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Not applicable.
<TABLE>
<CAPTION>
<S> <C>
(b) Pro Forma Financial Information (unaudited)
PLAINS RESOURCES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
Introduction........................................................................... F-1
Pro Forma Consolidated Balance Sheet as of September 30, 1998......................... F-3
Pro Forma Consolidated Income Statement for the nine months ended September 30, 1998... F-4
Pro Forma Consolidated Income Statement for the year ended December 31, 1997........... F-5
Notes to Pro Forma Consolidated Financial Statements................................... F-6
</TABLE>
(c) Exhibits
10(bb) Contribution, Conveyance and Assumption Agreement among Plains All
American Pipeline System, and certain other parties.
1
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10(cc) Crude Oil Marketing Agreement between Plains Resources Inc., Plains
Illinois Inc., Stocker Resources, L.P., Calumet Florida, Inc.
and Plains Marketing, L.P.
10(dd) Omnibus Agreement among Plains Resources Inc., Plains All American
Pipeline, L.P., Plains Marketing, L.P., All American Pipeline, L.P.
and Plains All American Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dates: December 7, 1998
PLAINS RESOURCES INC.
By: /s/ Phillip D. Kramer
-------------------------------
Name: Phillip D. Kramer
Title: Executive Vice President and
Chief Financial Officer
2
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF
PLAINS RESOURCES INC. AND SUBSIDIARIES
The following pro forma consolidated financial statements are based upon the
historical consolidated financial statements of Plains Resources Inc. and
subsidiaries ("Plains Resources"), and Wingfoot Ventures Seven, Inc.
("Wingfoot"), a wholly owned subsidiary of The Goodyear Tire and Rubber Company
("Goodyear"). The September 30, 1998, consolidated financial statements of
Plains Resources reflect the July 30, 1998, acquisition (the "Acquisition") by
Plains All American Inc. ("PAAI"), a wholly owned subsidiary of Plains
Resources, of all of the outstanding capital stock of the All American Pipeline
Company, Celeron Gathering Corporation and Celeron Trading & Transportation
Company (collectively, the "Celeron Companies," which comprise substantially all
of Wingfoot) from Wingfoot for approximately $400 million in cash, which was
financed in part through a borrowing of $300 million under PAAI's $325 million
limited recourse bank facility (the "PAAI Credit Facility") (a portion of which
funded initial working capital) and a capital contribution of $114 million from
Plains Resources, $85 million of which represents the proceeds from the issuance
of Plains Resources Series E Preferred Stock. The principal assets of the
entities acquired include the All American Pipeline System, a 1,233-mile crude
oil pipeline extending from California to Texas, and the SJV Gathering System, a
45-mile crude oil gathering system in the San Joaquin Valley of California, as
well as other assets related to such operations. The Acquisition was accounted
for by Plains Resources using the purchase method of accounting.
On November 23, 1998, (the "Closing Date"), Plains Resources, and certain of
its subsidiaries (the "Plains Midstream Subsidiaries") entered into a
Contribution, Conveyance and Assumption Agreement (the "Agreement") with Plains
All American Pipeline, L.P. (the "Partnership"), Plains Marketing, L.P. and All
American Pipeline L.P. (collectively referred to as the "Operating
Partnerships"). PAAI is the general partner ("General Partner") of the
Partnership and the Operating Partnerships. Pursuant to the Agreement, Plains
Resources transferred certain assets and liabilities to the Operating
Partnerships.
On the Closing Date, the Partnership closed its initial public offering
(the "Offering") of common units representing limited partner interests. The
Offering of 13,085,000 common units represents 42.6% of the Partnership's
equity, and was priced at $20.00 per unit. Total proceeds, net of selling
commissions and the underwriters' management and underwriting fees, were
approximately $244.7 million. Concurrently with the closing of the Offering,
certain of the Plains Midstream Subsidiaries were merged into Plains Resources,
which pursuant to the Agreement, sold the assets of these subsidiaries to Plains
Marketing, L.P. in exchange for $93.7 million in cash and the assumption of
related indebtedness. At the same time, the General Partner conveyed all of its
interest in the All American Pipeline System and SJV Gathering System to the
Operating Partnerships in exchange for (i) 6,974,239 common units, 10,020,619
subordinated units and an aggregate 2% general partner interest in the
Partnership and the Operating Partnerships; (ii) the right to receive incentive
distributions; and (iii) the assumption by the Operating Partnerships of $175
million of indebtedness incurred by the General Partner in connection with the
Acquisition. In the aggregate, Plains Resources interests in the Partnership
represent an effective 57.4% ownership of the Partnership's equity, and the
Partnership is consolidated in the pro forma consolidated financial statements
of Plains Resources.
In addition to the $93.7 million paid to Plains Resources, the Partnership
distributed approximately $148.0 million to the General Partner and paid
approximately $3 million in expenses incurred in connection with the Offering.
The General Partner used $110 million of the cash distributed to it to retire
the remaining indebtedness incurred in connection with the acquisition of the
All American Pipeline System and the SJV Gathering System, approximately $9.0
million to pay expenses incurred in connection with the formation of the
Partnership, primarily related to debt and interest rate swap restructuring, and
the balance, approximately $29.0 million, was distributed to Plains Resources
which used the cash to repay indebtedness and for other general corporate
purposes.
The pro forma consolidated financial statements reflect the Acquisition and
Offering and related transactions described above. The pro forma and Offering
adjustments are based upon currently available information and certain estimates
and assumptions, and therefore, the actual adjustments may differ from the
unaudited pro forma and Offering adjustments. However, management believes that
the assumptions provide a reasonable basis for presenting the significant
effects of the transactions as contemplated and that the unaudited pro forma and
Offering adjustments give appropriate effect to those assumptions and are
properly applied in the unaudited pro forma consolidated financial statements.
The pro forma consolidated financial statements do not purport to present the
financial position or results of operations of Plains Resources had the
transactions to be effected at the closing of the Offering actually been
completed as of the dates indicated. In addition, the pro forma consolidated
financial statements are not necessarily
F-1
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indicative of the results of the future operations of Plains Resources and
reference should be made to the historical financial statements of Plains
Resources included in Form 10-K for the year ended December 31, 1997, and
included in Form 10-Q for the nine months ended September 30, 1998, filed with
the Securities and Exchange Commission.
The following pro forma and Offering adjustments have been prepared as if the
Acquisition and Offering had taken place on September 30, 1998, in the case of
the Pro Forma Consolidated Balance Sheet or as of January 1, 1997, in the case
of the Pro Forma Consolidated Income Statements for the nine months ended
September 30, 1998, and the year ended December 31, 1997.
F-2
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
PLAINS PRO FORMA OFFERING AS
RESOURCES ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
---------- ----------- --------- ----------- ---------
ASSETS
------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 7,887 $ $ 7,887 $ 241,690 K $ 7,887
(226,678)K
(15,012)L
Accounts receivable 113,828 113,828 113,828
Inventory 29,020 29,020 29,020
Prepaids and other 506 506 506
---------- ------- ---------- --------- ----------
Total current assets 151,241 -- 151,241 -- 151,241
---------- ------- ---------- --------- ----------
PROPERTY AND EQUIPMENT
Oil and natural gas properties--full cost method:
Subject to amortization 562,575 562,575 562,575
Not subject to amortization 55,979 55,979 55,979
Crude oil pipeline, gathering and terminal assets 379,983 (6,060)H 373,923 373,923
Other property and equipment 8,813 8,813 8,813
---------- ------- ---------- --------- ----------
1,007,350 (6,060) 1,001,290 -- 1,001,290
Less allowance for depreciation, depletion and
amortization (201,139) 6,060 H (195,079) (195,079)
---------- ------- ---------- --------- ----------
806,211 -- 806,211 -- 806,211
---------- ------- ---------- --------- ----------
OTHER ASSETS
Pipeline linefill 52,479 52,479 52,479
Other 22,185 22,185 22,185
---------- ------- ---------- --------- ----------
$1,032,116 $ -- $1,032,116 $ -- $1,032,116
========== ======= ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 134,675 $ $ 134,675 $ $ 134,675
Interest payable 6,569 6,569 6,569
Royalties payable 3,922 3,922 3,922
Notes payable and other current obligations 12,011 12,011 12,011
---------- ------- ---------- --------- ----------
Total current liabilities 157,177 -- 157,177 -- 157,177
BANK DEBT 439,500 439,500 (226,678)K 212,822
SUBORDINATED DEBT 202,488 202,488 202,488
OTHER LONG-TERM DEBT 2,556 2,556 2,556
OTHER LONG-TERM LIABILITIES 5,652 5,652 21,460 L 27,112
---------- ------- ---------- --------- ----------
807,373 -- 807,373 (205,218) 602,155
---------- ------- ---------- --------- ----------
MINORITY INTEREST -- -- 241,690 K 171,653
(70,037)L
---------- ------- ---------- --------- ----------
SERIES E CUMULATIVE CONVERTIBLE
PREFERRED STOCK, STATED AT
LIQUIDATION PREFERENCE 85,000 85,000 85,000
---------- ------- ---------- --------- ----------
NON-REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND OTHER
STOCKHOLDERS' EQUTY
Preferred stock 21,620 21,620 21,620
Common stock 1,685 1,685 1,685
Additional paid in capital 124,360 124,360 124,360
Retained earnings (deficit) (7,922) (7,922) 33,565 L 25,643
---------- ------- ---------- --------- ----------
139,743 -- 139,743 33,565 173,308
---------- ------- ---------- --------- ----------
$1,032,116 $ -- $1,032,116 $ -- $1,032,116
========== ======= ========== ========= ==========
</TABLE>
See notes to pro forma consolidated financial statements.
F-3
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
PLAINS RESOURCES WINGFOOT
------------------- -----------
NINE MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 30, JUNE 30, PRO FORMA
1998 1998 ADJUSTMENTS PRO FORMA
------------------- ----------- ----------- -------------------
REVENUE
<S> <C> <C> <C> <C>
Oil and natural gas sales $ 77,719 $ -- $ -- $ 77,719
Marketing, transportation, storage and 698,274 374,654 62,995 A 1,135,923
terminalling revenues
Interest and other income 739 -- 5 A 744
----------- ---------- ---------- ------------
776,732 374,654 63,000 1,214,386
----------- ---------- ---------- ------------
EXPENSES
Production expenses 38,604 -- 38,604
Marketing, transportation, storage and
terminalling expenses 675,160 344,538 59,962 A 1,078,683
(977)F
General and administrative 7,696 1,053 151 A 8,900
Depreciation, depletion and amortization 21,945 6,808 1,025 A 27,107
(7,833)B
5,162 C
Interest expense 24,385 21,929 (21,929)D 33,553
9,168 J
Minority interest in net income
of consolidated subsidiary -- -- -- --
----------- ---------- ---------- ------------
767,790 374,328 44,729 1,186,847
----------- ---------- ---------- ------------
INCOME BEFORE INCOME TAXES 8,942 326 18,271 27,539
Income tax expense 2,468 84 419 A 9,721
6,750 I
----------- ---------- ---------- ------------
NET INCOME 6,474 242 11,102 17,818
Less: cumulative preferred stock dividends 2,361 -- 4,644 G 7,005
----------- ---------- ---------- ------------
NET INCOME AVAILABLE TO
COMMMON STOCKHOLDERS $ 4,113 $ 242 $ 6,458 $ 10,813
=========== ========== ========== ============
Earnings per share:
Basic $ 0.24
===========
Diluted $ 0.22
===========
Weighted Average Number of Common
and Common Equivalent Shares:
Basic 16,792
===========
Diluted 18,440
===========
</TABLE>
<TABLE>
<CAPTION>
OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
----------- -----------
REVENUE
<S> <C> <C>
Oil and natural gas sales $ $ 77,719
Marketing, transportation, storage and
terminalling revenues 1,135,923
Interest and other income 744
--------- ------------
-- 1,214,386
--------- ------------
EXPENSES
Production expenses 38,604
Marketing, transportation, storage and
terminalling expenses 1,078,683
General and administrative 8,900
Depreciation, depletion and amortization 495 P 27,602
Interest expense (9,728)M 23,825
Minority interest in net income
of consolidated subsidiary 15,032 N 15,032
--------- ------------
5,799 1,192,646
--------- ------------
INCOME BEFORE INCOME TAXES (5,799) 21,740
Income tax expense (2,261)O 7,460
--------- ------------
NET INCOME (3,538) 14,280
Less: cumulative preferred stock dividends 7,005
--------- ------------
NET INCOME AVAILABLE TO
COMMMON STOCKHOLDERS $ (3,538) $ 7,275
========= ============
Earnings per share:
Basic $ 0.43
============
Diluted $ 0.39
============
Weighted Average Number of Common
and Common Equivalent Shares:
Basic 16,792
============
Diluted 18,440
============
</TABLE>
See notes to pro forma consolidated financial statements.
F-4
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
PLAINS PRO FORMA
RESOURCES WINGFOOT ADJUSTMENTS PRO FORMA
----------------- ------------- --------------- -------------------
<S> <C> <C> <C> <C>
REVENUE
Oil and natural gas sales $ 109,403 $ -- $ $ 109,403
Marketing, transportation, storage and
terminalling revenues 752,522 992,318 1,744,840
Interest and other income 319 -- 319
------------ ------------ ---------- ------------
862,244 992,318 -- 1,854,562
------------ ------------ ---------- ------------
EXPENSES
Production expenses 45,486 -- 45,486
Marketing, transportation, storage and
terminalling expenses 740,042 923,152 391 E 1,662,282
(1,303)F
General and administrative 8,340 2,767 (114)E 10,993
Depreciation, depletion and amortization 23,778 16,290 (16,290)B 32,729
8,951 C
Impairment of pipeline assets and linefill -- 64,173 64,173
Interest expense 22,012 52,745 (52,745)D 34,236
12,224 J
Minority interest in net loss of
consolidated subsidiary -- -- --
------------ ------------ ---------- ------------
839,658 1,059,127 (48,886) 1,849,899
------------ ------------ ---------- ------------
INCOME BEFORE INCOME TAXES 22,586 (66,809) 48,886 4,663
Income tax expense (benefit) 8,327 276 (6,784)I 1,819
------------ ------------ ---------- ------------
NET INCOME 14,259 (67,085) 55,670 2,844
Less: cumulative preferred stock dividends 163 -- 8,075 G 8,238
------------ ------------ ---------- ------------
NET INCOME AVAILABLE
TO COMMMON STOCKHOLDERS $ 14,096 $ (67,085) $ 47,595 $ (5,394)
============ ============ ========== ============
Earnings per share:
Basic $ 0.85
============
Diluted $ 0.77
============
Weighted Average Number of Common
and Common Equivalent Shares:
Basic 16,603
============
Diluted 18,204
============
</TABLE>
<TABLE>
<CAPTION>
OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
----------- -----------
<S> <C> <C>
REVENUE
Oil and natural gas sales $ $ 109,403
Marketing, transportation, storage and
terminalling revenues 1,744,840
Interest and other income 319
---------- ------------
-- 1,854,562
---------- ------------
EXPENSES
Production expenses 45,486
Marketing, transportation, storage and
terminalling expenses 1,662,282
General and administrative 10,993
Depreciation, depletion and amortization 659 P 33,388
Impairment of pipeline assets and linefill 64,173
Interest expense (6,310)M 27,926
Minority interest in net loss of
consolidated subsidiary (4,811)N (4,811)
---------- ------------
(10,462) 1,839,437
---------- ------------
INCOME BEFORE INCOME TAXES 10,462 15,125
Income tax expense (benefit) 4,080 O 5,899
---------- ------------
NET INCOME 6,382 9,226
Less: cumulative preferred stock dividends 8,238
---------- ------------
NET INCOME AVAILABLE
TO COMMMON STOCKHOLDERS $ 6,382 $ 988
========== ============
Earnings per share:
Basic $ 0.06
============
Diluted $ 0.05
============
Weighted Average Number of Common
and Common Equivalent Shares:
Basic 16,603
============
Diluted 18,204
============
</TABLE>
See notes to pro forma consolidated financial statements.
F-5
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Adjustments
Introduction
In addition to the Acquisition, Formation and Offering adjustments below,
Plains Resources estimates that incremental expenses will be incurred due to the
Acquisition. Such amounts include estimated expenses associated with the
operation of the Partnership as a separate public entity (e.g., costs of tax
return preparation, audit fees, annual and quarterly reports to Unitholders,
investor relations, and registrar and transfer agent fees), estimated expenses
for issuance of letters of credit in excess of such amounts incurred by Plains
Resources and Wingfoot due primarily to the elimination of Goodyear as a
guarantor of Wingfoot's crude oil purchase obligations and additional estimated
amounts included for insurance expenses related to the assets and operations of
Wingfoot. The additional insurance expense reflects Goodyear's past practice of
self insuring the assets and operations of Wingfoot. The pro forma and Offering
adjustments do not give effect to these incremental expenses. Additionally, the
pro forma consolidated income statement for the year ended December 31, 1997,
does not include a pro forma adjustment to eliminate a non-cash impairment
charge of $64.2 million related to the writedown of pipeline assets and linefill
by Wingfoot in connection with the sale of Wingfoot by Goodyear to Plains
Resources. However, based on Plains Resources' purchase price allocation of
property and equipment, Plains Resources would not have incurred an impairment
charge during 1997 had it actually acquired Wingfoot as of January 1, 1997.
Acquisition
A. The acquisition of the Celeron Companies was completed on July 30, 1998.
As a result, the historical financial information of Plains Resources for the
nine months ended September 30, 1998, includes the results of operations of the
Celeron Companies from July 30, 1998, through September 30, 1998. The amounts
below reflect the results of operations for periods not otherwise included in
the historical financial information of Plains Resources or Wingfoot.
PERIOD FROM
JULY 1, 1998
TO
JULY 30, 1998
(DATE OF
ACQUISITION)
---------------
Revenues........................... $62,995
Cost of Sales and Operations....... 59,962
-------
Gross Margin....................... 3,033
General and administrative......... 151
Depreciation and amortization...... 1,025
-------
Operating income................... 1,857
Interest and other income.......... 5
-------
Net income before taxes............ 1,862
Provision in lieu of income taxes.. 419
-------
Net income......................... $ 1,443
=======
B. Reflects the elimination of historical Wingfoot depreciation and
amortization expense.
C. Reflects pro forma depreciation and amortization expense based on the
purchase price of the Wingfoot assets by Plains Resources.
D. Reflects the elimination of interest expense on loans from Goodyear to
Wingfoot. In connection with the Acquisition, Goodyear made a capital
contribution of $866.1 million to Wingfoot. Concurrently, the related party debt
and accrued interest of approximately $865.2 million was repaid in full to
Goodyear on June 15, 1998.
F-6
<PAGE>
E. Reflects the elimination of expenses and credits associated with
Wingfoot's post retirement pension, health and benefit plans in which Wingfoot's
employees are no longer entitled to participate so that cost of sales and
operations and general and administrative expense reflect the ongoing cost of
employee benefits to Plains Resources. The credit reflected in 1997 relates to
amounts earned by Wingfoot on its prepaid pension assets.
F. Reflects the reduction in compensation and benefits expense due to
the recent termination of personnel. Such amounts are based on historical
expenses incurred by Wingfoot. The terminations occurred in August 1998 and
Plains Resources has no plans to replace these personnel. The reduction in
personnel is not expected to adversely impact Plains Resources' revenues or
costs.
G. Reflects dividends on the Series E Preferred Stock.
Formation
H. Reflects the transactions by which the Partnership obtains
ownership of certain assets and liabilities of Plains Resources at net book
value in exchange for 6,974,239 common units, 10,020,619 subordinated units and
an aggregate 2% general partner interest in the Partnership and the Operating
Partnerships resulting in Plains Resources having an aggregate 57.4% ownership
in the Partnership and the Operating Partnerships. Accumulated depreciation in
the amount of $6.1 million has been credited against the Property and Equipment
balance to reflect the Partnership's bases in the assets.
I. Reflects income tax expense on pro forma pre-tax income based on an
effective tax rate of 39% which is the estimated tax rate of Plains Resources.
For the nine months ended September 30, 1998, Plains Resources tax provision
includes an approximate $1.0 million tax benefit due to a reduction in the
valuation allowance reserved against its deferred tax asset, resulting in a
reduction in the overall effective tax rate for such period.
J. Reflects pro forma interest expense on borrowings of $175 million
assumed from PAAI. PAAI used $110 million of the cash distributed to it in
connection with the Offering to retire the remaining indebtedness incurred by
PAAI in connection with the Acquisition. The Partnership has entered into a
series of 10-year interest rate swaps which fix the LIBOR portion of the
interest rate at a weighted average rate of 5.24% (6.99% after giving effect to
the weighted average interest rate margin under the Partnership's Bank Credit
Agreement).
Offering
K. Reflects (i) the net proceeds to the Partnership of $241.7 million
from the issuance and sale of 13.1 million Common Units at an initial public
offering price of $20.00 per Common Unit in the Offering, net of underwriters'
discounts and commissions of approximately $17.0 million and Offering expenses
of approximately $3.0 million (ii) the payment of formation and transaction
expenses by Plains Resources in the amount of approximately $15.0 million and
(iii) the subsequent paydown of debt which reduced interest expense for the
periods.
L. Reflects the economic gain of $70.0 million recognized by Plains
Resources upon formation of the Partnership. Such gain is reduced by
approximately $15.0 million in formation related expenses incurred by Plains
Resources and approximately $21.5 million of deferred income tax expense,
resulting in a net gain of approximately $33.6 million. Immediately upon
formation of the Partnership, in the event of liquidation, all common unit
holders participate equally in distributions, resulting in immediate dilution to
the public common unit holders and an offsetting increase in the distributable
capital to Plains Resources. The amount of gain recognized by Plains Resources
represents the realized economic gain due to the dilution of the public unit
holders. The formation related expenses incurred by Plains Resources consist
primarily of amounts paid to settle interest rate swaps, debt prepayment penalty
and associated legal fees and amounts due to certain key employees in connection
with the successful formation of the Partnership. The income tax expense was
based on an effective tax rate of 39% which is the estimated tax rate of Plains
Resources. The gain on formation is not included in the pro forma consolidated
income statements for the nine months ended September 30, 1998, and for the year
ended December 31, 1997.
M. Reflects the interest reduction resulting from the repayment of
debt with proceeds from the Offering.
N. Reflects the minority interest in the pro forma net income (loss)
of the Partnership.
F-7
<PAGE>
O. Reflects income tax expense on pro forma as adjusted pre-tax income
based on an effective tax rate of 39% which is the estimated tax rate of Plains
Resources.
P. Reflects amortization expense on debt issue costs incurred in
connection with the assumption by the Partnership of $175 million of
indebtedness of PAAI.
F-8
<PAGE>
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
THIS CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT, dated as of
November 23, 1998, is entered into by and among PLAINS RESOURCES INC., a
Delaware corporation ("Plains Resources"), PLAINS ALL AMERICAN INC., a Delaware
corporation ("PAAI"), PLAINS ALL AMERICAN PIPELINE, L.P., a Delaware limited
partnership (the "Partnership"), PLAINS MARKETING, L.P., a Delaware limited
partnership ("Plains Marketing"), ALL AMERICAN PIPELINE, L.P., a Texas limited
partnership ("All American L.P."), PAAI LLC, a Delaware limited liability
company ("PAAI LLC"), and GATHERING LLC, a Delaware limited liability company
("Gathering LLC").
RECITALS
WHEREAS, PAAI and Plains Resources have formed the Partnership
pursuant to the Delaware Revised Uniform Limited Partnership Act (the "Delaware
Act") for the purpose of serving as the sole limited partner of Plains
Marketing;
WHEREAS, PAAI contributed $990.00 to the capital of the Partnership
and received a 1% general partner interest and a 49% limited partner interest
therein; and Plains Resources contributed $990.00 to the capital of the
Partnership and received a 50% limited partner interest therein;
WHEREAS, Plains Resources sold its 50% limited partner interest in the
Partnership to Michael Patterson (the "Organizational Limited Partner");
WHEREAS, PAAI and the Partnership have heretofore formed Plains
Marketing pursuant to the Delaware Act for the purpose of acquiring, owning and
operating the midstream
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crude oil business and assets of Plains Resources and its subsidiaries,
including, without limitation, the business of crude oil marketing, gathering,
transportation, storage, terminaling and pipeline operation and the assets
(other than the Plains Excluded Assets) of Plains Transportation, Plains
Terminal, PLX Crude and PLX Ingleside (as defined herein) (the "Business");
WHEREAS, PAAI contributed $500 to the capital of Plains Marketing and
received a 1% general partner interest and a 49% limited partner interest
therein; and the Partnership contributed $500 to the capital of Plains Marketing
and received a 50% limited partner interest therein;
WHEREAS, All American Pipeline Company, a Texas corporation ("All
American"), has previously formed Gathering LLC as a wholly owned subsidiary of
All American and has caused its subsidiary Celeron Gathering Corporation, a
Delaware corporation ("CGC"), to merge into Gathering LLC;
WHEREAS, PAAI has previously formed PAAI LLC as a wholly-owned
subsidiary of PAAI to hold one share of All American stock;
WHEREAS, All American has previously adopted articles of conversion
and converted to All American L.P. in which PAAI holds a .001% general partner
interest and a 98.999% limited partner interest (such limited partner interest,
the "All American LP Interest"), and PAAI LLC holds a 1% limited partner
interest;
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, All American L.P. will assume $175 million of PAAI's
outstanding debt and will distribute its ownership interest in Gathering LLC
(the "Gathering LLC Interest") to PAAI;
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WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, each of Plains Marketing & Transportation Inc., a Delaware
corporation ("Plains Transportation"), Plains Terminal & Transfer Corporation, a
Delaware corporation ("Plains Terminal"), PLX Crude Lines Inc., a Delaware
corporation ("PLX Crude"), and PLX Ingleside, Inc., a Delaware corporation ("PLX
Ingleside"), will be merged with and into Plains Resources;
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby Celeron Trading & Transportation Company, a Delaware
corporation ("CT&T"), shall be merged with and into PAAI;
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, PAAI and the Partnership have entered into that certain
Amended and Restated Agreement of Limited Partnership of Plains Marketing (the
"Operating Partnership Agreement");
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, PAAI and the Organizational Limited Partner have entered
into that certain Second Amended and Restated Agreement of Limited Partnership
of the Partnership (the "Partnership Agreement");
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the parties to this Agreement undertake and agree as
follows:
ARTICLE I
DEFINITIONS; CONCURRENT TRANSACTIONS
1.1 Definitions. The following capitalized terms shall have the meanings
given below.
"Agreement" means this Contribution, Conveyance and Assumption
Agreement.
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"All American" has the meaning assigned to such term in the Recitals
to this Agreement.
"Additional All American L.P. Interest" has the meaning assigned to
such term in Section 2.3.
"All American L.P." has the meaning assigned to such term in the
opening paragraph of this Agreement.
"All American LP Interest" has the meaning assigned to such term in
the Recitals to this Agreement.
"Assets" means the Plains Assets and the PAAI Assets.
"Business" has the meaning assigned to such term in the Recitals to
this Agreement.
"CGC" has the meaning assigned to such term in the Recitals to this
Agreement.
"Common Units" means common limited partner interests in the
Partnership.
"Conveyance, Assignment and Bill of Sale" means a Conveyance,
Assignment and Bill of Sale in recordable form from each of Plains Resources and
PAAI, as the case may be, to Plains Marketing, the form of which is attached
hereto as Exhibit A.
"CT&T" has the meaning assigned to such term in the Recitals to this
Agreement.
"CT&T Assets" means all of the assets owned, leased or held by CT&T,
as of the Effective Time, of every kind and description, whether tangible or
intangible, whether real, personal or mixed, and wherever located, including,
without limitation, all of the crude oil inventory (line fill) owned by CT&T and
located in the crude oil pipeline system owned by All American L.P.
"Cushing Terminal" means the crude oil terminal and storage facility
located in Payne and Lincoln Counties, Oklahoma, including, without limitation,
the real property and other property
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interests described in that certain Conveyance, Assignment and Bill of Sale
(Cushing) of even date herewith from Plains Resources to Plains Marketing (a
copy of the form of which is attached hereto as Exhibit A) along with the Plains
Midstream Subsidiaries' Assets described below that are a part of or are used
exclusively in connection with the crude oil terminal and storage facility:
(i) storage tanks, stations, substations, terminal facilities and
related properties and assets, along with all crude oil inventory located
in such facilities;
(ii) all motor vehicles, tractors, trailers, tanks, railcars, other
vehicles, machinery and related equipment, whether owned or leased;
(iii) every contract, agreement, arrangement, grant, gift, trust or
other arrangement or understanding of any kind;
(iv) any and all rights, claims and causes of action under
warranties, insurance policies, contracts and related rights;
(v) communication equipment, computer equipment and software and
leasehold interests therein;
(vi) all know-how, every trade secret, every customer list and all
other confidential information of every kind;
(vii) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
(viii) every other proprietary right of any kind;
(ix) all governmental licenses, permits, approvals, franchises,
registrations and authorizations of every kind;
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(x) copies of all of the books, records, papers and instruments,
including without limitation, accounting and financial records;
(xi) any and all monies, rents, revenues, accounts receivable or
other proceeds receivable;
(xii) all deposits, prepayments and prepaid expenses;
(xiii) all unbilled receivables;
(xiv) all trade names, trademarks, service marks, logos, marks and
symbols of any kind, together with all goodwill associated therewith and
all other trade names, trademarks and service marks;
(xv) all rights, benefits, privileges and appurtenances pertaining
to any of the foregoing;
excluding, however, any of such assets that constitute Plains Excluded
Assets.
"Delaware Act" has the meaning assigned to such term in the Recitals
to this Agreement.
"Effective Time" means 12:01 a.m. Eastern Standard Time on November
23, 1998.
"Existing Indebtedness" means indebtedness, liabilities and
obligations of PAAI under that certain $325 million Senior Secured Credit
Facility dated July 30, 1998 with ING (U.S.) Capital Corporation, as
Administrative Agent, executed in connection with the acquisition of all of the
capital stock of CT&T and All American by PAAI.
"Gathering LLC" has the meaning assigned to such term in the opening
paragraph of this Agreement.
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"Gathering LLC Interest" has the meaning assigned to such term in the
Recitals to this Agreement.
"Ingleside Terminal" means the crude oil terminal and storage facility
located in San Patricio County, Texas, including, without limitation, the real
property and other property interests described in that certain Conveyance,
Assignment and Bill of Sale (Ingleside) of even date herewith from Plains
Resources to Plains Marketing (a copy of the form of which is attached hereto as
Exhibit A) along with the Plains Midstream Subsidiaries' Assets described below
that are a part of or are used exclusively in connection with the crude oil
terminal and storage facility:
(i) storage tanks, stations, substations, terminal facilities and
related properties and assets, along with all crude oil inventory located
in such facilities;
(ii) all motor vehicles, tractors, trailers, tanks, railcars, other
vehicles, machinery and related equipment, whether owned or leased;
(iii) every contract, agreement, arrangement, grant, gift, trust or
other arrangement or understanding of any kind;
(iv) any and all rights, claims and causes of action under
warranties, insurance policies, contracts and related rights;
(v) communication equipment, computer equipment and software and
leasehold interests therein;
(vi) all know-how, every trade secret, every customer list and all
other confidential information of every kind;
(vii) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
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(viii) every other proprietary right of any kind;
(ix) all governmental licenses, permits, approvals, franchises,
registrations and authorizations of every kind;
(x) copies of all of the books, records, papers and instruments,
including without limitation, accounting and financial records;
(xi) any and all monies, rents, revenues, accounts receivable or
other proceeds receivable;
(xii) all deposits, prepayments and prepaid expenses;
(xiii) all unbilled receivables;
(xiv) all trade names, trademarks, service marks, logos, marks and
symbols of any kind, together with all goodwill associated therewith and
all other trade names, trademarks and service marks;
(xv) all rights, benefits, privileges and appurtenances pertaining
to any of the foregoing;
excluding, however, any of such assets that constitute Plains Excluded
Assets.
"Laws" means any and all laws, statutes, ordinances, rules or
regulations promulgated by a governmental authority, orders of a governmental
authority, judicial decisions, decisions of arbitrators or determinations of any
governmental authority or court.
"Operating Partnership Agreement" has the meaning assigned to such
term in the Recitals to this Agreement.
"Organizational Limited Partner" has the meaning assigned to such term
in the Recitals to this Agreement.
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"PAAI" has the meaning assigned to such term in the opening paragraph
of this Agreement.
"PAAI Assets" means the CT&T Assets and the Gathering LLC Interest of
PAAI.
"PAAI Assumed Liabilities" means all of PAAI's liabilities arising
from or relating to the PAAI Assets or the Business, as of the Effective Time,
of every kind, character and description, whether known or unknown, accrued or
contingent, and whether or not reflected on the books and records of PAAI as of
the Effective Time, excluding, however, any of such liabilities that constitute
PAAI Excluded Liabilities.
"PAAI Excluded Liabilities" means (i) all of the liabilities and
obligations of CT&T and CGC for the Existing Indebtedness, (ii) all federal,
state and local income tax liabilities attributable to operation of the PAAI
Assets prior to the Effective Time, including any such income tax liabilities
that may result from the consummation of the transactions contemplated by this
Agreement and (iii) all of the liabilities that arise pursuant to the
indemnification obligation of PAAI under the Omnibus Agreement dated of even
date with this Agreement among Plains Resources, PAAI, the Partnership, Plains
Marketing and All American L.P.
"PAAI LLC" has the meaning assigned to such term in the Recitals to
this Agreement.
"PAAI OLP Interest" has the meaning assigned to such term in Section
2.1.
"Partnership" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Partnership Agreement" has the meaning assigned to such term in the
Recitals to this Agreement.
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"Plains Assets" means (a) the Cushing Terminal and the Ingleside
Terminal and (b) the Plains Midstream Subsidiaries' Assets described below, to
the extent the following comprise a part of or are used exclusively in
connection with the operation of the Business, and without duplication of the
Cushing Terminal and the Ingleside Terminal:
(i) the real property and other property interests described in
that certain Conveyance, Assignment and Bill of Sale (Other Assets) of even
date herewith from Plains Resources to Plains Marketing;
(ii) storage tanks, stations, substations, terminal facilities and
related properties and assets, along with all crude oil inventory located
in such facilities;
(iii) all motor vehicles, tractors, trailers, tanks, railcars, other
vehicles, machinery and related equipment, whether owned or leased;
(iv) every contract, agreement, arrangement, grant, gift, trust or
other arrangement or understanding of any kind;
(v) any and all rights, claims and causes of action under
warranties, insurance policies, contracts or related rights;
(vi) communication equipment, computer equipment and software and
leasehold interests therein;
(vii) all know-how, every trade secret, every customer list and all
other confidential information of every kind;
(viii) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
(ix) every other proprietary right of any kind;
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(x) all governmental licenses, permits, approvals, franchises,
registrations and authorizations of every kind;
(xi) copies of all of the books, records, papers and instruments,
including without limitation, accounting and financial records;
(xii) any and all monies, rents, revenues, accounts receivable or
other proceeds receivable;
(xiii) all deposits, prepayments and prepaid expenses;
(xiv) all unbilled receivables;
(xv) all trade names, trademarks, service marks, logos, marks and
symbols of any kind, together with all goodwill associated therewith and
all other trade names, trademarks and service marks;
(xvi) all rights, benefits, privileges and appurtenances pertaining
to any of the foregoing;
excluding, however, any of such assets that constitute Plains Excluded
Assets.
"Plains Assumed Liabilities" means all of Plains Resources'
liabilities arising from or relating to the Plains Assets or the Business, as of
the Effective Time, of every kind, character and description, whether known or
unknown, accrued or contingent, and whether or not reflected on the books and
records of Plains Resources as of the Effective Time, specifically including the
indebtedness, obligations and liabilities under that certain Credit Agreement
dated July 30, 1998 among Plains Transportation, BankBoston, N.A., as
Administrative Agent and certain other Agents and Lenders party thereto
providing for loans and letters of credit up to the amount of $175 million,
excluding, however, any of such liabilities that constitute Plains Excluded
Liabilities.
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"Plains Excluded Assets" means the Employment Agreement between Plains
Resources and Harry Pefanis.
"Plains Excluded Liabilities" means (i) all of the liabilities that
arise pursuant to the indemnification obligations of Plains Resources under the
Omnibus Agreement dated of even date with this Agreement among Plains Resources,
PAAI, the Partnership, Plains Marketing and All American L.P., (ii) the
Subsidiary Debt and (iii) all federal, state and local income tax liabilities
attributable to operation of the Plains Assets prior to the Effective Time,
including any such income tax liabilities that may result from the consummation
of the transactions contemplated by this Agreement.
"Plains Grantors" means Plains Resources and PAAI.
"Plains Marketing" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Plains Midstream Subsidiaries" means, collectively, Plains
Transportation, Plains Terminal, PLX Crude and PLX Ingleside.
"Plains Midstream Subsidiaries' Assets" means, collectively, all of
the assets, properties, titles, interests, benefits and rights owned by each of
the Plains Midstream Subsidiaries at the time of its merger into Plains
Resources, which, as a result of such merger, became the assets, properties,
titles, interests, benefits and rights of Plains Resources.
"Plains Resources" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Plains Terminal" has the meaning assigned to such term in the
Recitals to this Agreement.
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"Plains Transportation" has the meaning assigned to such term in the
Recitals to this Agreement.
"PLX Crude" has the meaning assigned to such term in the Recitals to
this Agreement.
"PLX Ingleside" has the meaning assigned to such term in the Recitals
to this Agreement.
"Restriction" has the meaning assigned to such term in Section 9.2.
"Restriction-Asset" has the meaning assigned to such term in Section
9.2.
"Specific Conveyances" has the meaning assigned to such term in
Section 2.9.
"Subordinated Units" means subordinated limited partner interests in
the Partnership.
"Subsidiary Debt" shall mean (i) all indebtedness of the Plains
Midstream Subsidiaries owed to Plains Resources that was extinguished in the
merger of the Plains Midstream Subsidiaries into Plains Resources and (ii) all
indebtedness owed by the Plains Midstream Subsidiaries to affiliates of Plains
Resources, other than the Plains Midstream Subsidiaries.
1.2 Concurrent Transactions.
(a) All American L.P. hereby assumes and agrees to pay $175 million of
Existing Indebtedness.
(b) All American L.P. hereby distributes 100% of its ownership
interest in Gathering LLC to PAAI.
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ARTICLE II
CONTRIBUTIONS AND SALE OF ASSETS
2.1 Contribution of Assets by PAAI to Plains Marketing. PAAI hereby
grants, contributes, transfers and conveys to Plains Marketing, its successors
and assigns, for its and their own use forever, all right, title and interest in
and to the PAAI Assets in exchange for (i) the continuation of a 1.0101% general
partner interest and a limited partner interest (such limited partner interest,
the "PAAI OLP Interest") in Plains Marketing and (ii) other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
Plains Marketing hereby accepts the PAAI Assets, as a contribution to the
capital of Plains Marketing.
TO HAVE AND TO HOLD the PAAI Assets unto Plains Marketing, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in any wise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.
2.2 Contribution by PAAI to the Partnership. PAAI hereby grants,
contributes, transfers and conveys to the Partnership, its successors and
assigns, for its and their own use forever, all right, title and interest of
PAAI in and to the PAAI OLP Interest and the All American LP Interest in
exchange for (i) a 1% general partner interest in the Partnership, (ii)
9,859,581 Subordinated Units and 6,974,239 Common Units and (iii) other good and
valuable consideration, the sufficiency of which is hereby acknowledged, and the
Partnership hereby accepts the PAAI OLP Interest and the All American LP
Interest, as a contribution to the capital of the Partnership.
TO HAVE AND TO HOLD the PAAI OLP Interest and the All American L.P.
Interest unto the Partnership, its successors and assigns, together with all and
singular the rights and
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appurtenances thereto in anywise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.
2.3 Contribution by PAAI LLC to the Partnership. PAAI LLC hereby grants,
contributes, transfers and conveys to the Partnership, its successors and
assigns, for its and their own use forever, all right, title and interest of
PAAI LLC in and to its 1% limited partner interest (the "Additional All American
L.P. Interest") in All American L.P. in exchange for 170,038 Subordinated Units
and other good and valuable consideration, the sufficiency of which is hereby
acknowledged, and the Partnership hereby accepts the 1% limited partner interest
in All American L.P., as a contribution to the capital of the Partnership.
TO HAVE AND TO HOLD the Additional All American L.P. Interest unto the
Partnership, its successors and assigns, together with all and singular the
rights and appurtenances thereto in anywise belonging, subject, however, to the
terms and conditions stated in this Agreement, forever.
2.4 Public Cash Contribution. The parties to this Agreement acknowledge a
cash contribution of $244,689,500 from the public in exchange for Common Units.
2.5 Partnership Cash Distribution and Contribution. PAAI acknowledges
that the Partnership has distributed cash in the amount of $147,989,500 to PAAI
as a reimbursement for certain capital expenditures and Plains Marketing
acknowledges that the Partnership has contributed (i) cash in the amount of
$96,700,000 to Plains Marketing and (ii) all of the syndication costs incurred
by the Partnership in connection with the public offering of the Common Units.
2.6 Sale of Assets by Plains Resources. Plains Resources hereby
sells and conveys to Plains Marketing, its successors and assigns, for its and
their own use forever, all right, title and
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interest in and to the Plains Assets in exchange for (i) the payment of $93.7
million in cash, (ii) the assumption of certain liabilities by Plains Marketing
as provided in Section 4.1 and (iii) other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged.
TO HAVE AND TO HOLD the Plains Assets unto Plains Marketing, its
successors and assigns, together with all and singular, the rights and
appurtenances thereto in any wise belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.
2.7 PAAI Use of Proceeds. The parties to this Agreement acknowledge that
PAAI has used a portion of the cash received from the Partnership in Section 2.5
above to discharge approximately $110 million of the Existing Indebtedness plus
all accrued and unpaid interest, prepayment premiums, fees and expenses in
connection with the Existing Indebtedness and has distributed the balance of
cash to Plains Resources.
2.8 Contribution by the Partnership to Plains Marketing. The Partnership
hereby grants, contributes, transfers and conveys to Plains Marketing, its
successors and assigns, for its and their own use forever, all right, title and
interest of the Partnership in and to the All American LP Interest and the
Additional All American L.P. Interest, as a contribution to the capital of
Plains Marketing, and Plains Marketing hereby accepts the All American LP
Interest and the Additional All American L.P. Interest, as a contribution to the
capital of Plains Marketing.
TO HAVE AND TO HOLD the All American LP Interest and the Additional
All American L.P. Interest, unto Plains Marketing, its successors and assigns,
together with all and singular the rights and appurtenances thereto in anywise
belonging, subject, however, to the terms and conditions stated in this
Agreement, forever.
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2.9 Specific Conveyances. To further evidence the asset conveyances
recited in this Article II and more fully and effectively convey record title
with respect to the real property included in the Assets, Plains Resources has
executed and delivered to Plains Marketing certain Conveyance, Assignment and
Bill of Sale instruments (the "Specific Conveyances"). The Specific Conveyances
shall evidence and perfect the sale and contribution made by this Agreement and
shall not constitute a second conveyance of the Plains Assets or interests
therein and shall be subject to the terms of this Agreement. The Specific
Conveyances are not intended to modify, and shall not modify, any of the terms,
covenants and conditions herein set forth and are not intended to create, and
shall not create, any additional covenants or warranties of or by Plains
Resources.
ARTICLE III
ADDITIONAL TRANSACTIONS
3.1 Merger of Gathering LLC and Plains Marketing. The parties to this
Agreement acknowledge that, concurrent with the transactions referred to in
Article II of this Agreement, Gathering LLC has been merged with and into Plains
Marketing.
3.2 PAAI Contribution to PAAI LLC. PAAI hereby grants, contributes,
transfers and conveys to PAAI LLC, its successors and assigns, for its and their
own use forever, all right, title and interest of PAAI in and to all of the
Subordinated Units and Common Units held by PAAI as a contribution to the
capital of PAAI LLC, and PAAI LLC hereby accepts all of such Subordinated Units
and Common Units, as a contribution to the capital of PAAI LLC.
TO HAVE AND TO HOLD such Subordinated Units and Common Units unto PAAI
LLC, its successors and assigns, together with all and singular the rights and
appurtenances thereto
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in anywise belonging, subject, however, to the terms and conditions stated in
this Agreement, forever.
3.3 All American L.P. Refinancing. The parties to this Agreement
acknowledge that All American L.P. shall refinance the portion of Existing
Indebtedness assumed in Section 1.2(a) above.
ARTICLE IV
ASSUMPTION OF CERTAIN LIABILITIES
4.1. Assumption of Certain Plains Liabilities by Plains Marketing. In
connection with the sale and transfer of the Plains Assets to Plains Marketing
by Plains Resources, Plains Marketing hereby assumes and agrees to duly and
timely pay, perform and discharge the Plains Assumed Liabilities, to the full
extent that Plains Resources has been heretofore or would have been in the
future, were it not for the execution and delivery of this Agreement, obligated
to pay, perform and discharge the Plains Assumed Liabilities; provided, however,
that said assumption and agreement to duly and timely pay, perform and discharge
the Plains Assumed Liabilities shall not (i) increase the obligation of Plains
Marketing with respect to the Plains Assumed Liabilities beyond that of Plains
Resources, (ii) waive any valid defense that was available to Plains Resources
with respect to the Plains Assumed Liabilities or (iii) enlarge any rights or
remedies of any third party under any of the Plains Assumed Liabilities.
4.2. Assumption of Certain PAAI Liabilities by Plains Marketing. In
connection with the contribution and transfer of the PAAI Assets to Plains
Marketing by PAAI, Plains Marketing hereby assumes and agrees to duly and timely
pay, perform and discharge the PAAI Assumed Liabilities, to the full extent that
PAAI has been heretofore or would have been in the future, were it not for the
execution and delivery of this Agreement, obligated to pay, perform and
discharge the PAAI
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Assumed Liabilities; provided, however, that said assumption and agreement to
duly and timely pay, perform and discharge the PAAI Assumed Liabilities shall
not (i) increase the obligation of Plains Marketing with respect to the PAAI
Assumed Liabilities beyond that of PAAI, (ii) waive any valid defense that was
available to PAAI with respect to the PAAI Assumed Liabilities or (iii) enlarge
any rights or remedies of any third party under any of the PAAI Assumed
Liabilities.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification With Respect to Plains Excluded Liabilities. Plains
Resources shall indemnify, defend and hold harmless the Partnership, Plains
Marketing, their respective officers and directors and their respective
successors and assigns from and against any and all claims, demands, costs,
liabilities (including, without limitation, liabilities arising by way of active
or passive negligence) and expenses (including court costs and reasonable
attorneys' fees) of every kind, character and description, whether known or
unknown, accrued or contingent, and whether or not reflected on the books and
records of Plains Resources as of the Effective Time, arising from or relating
to (i) the Plains Excluded Liabilities or (ii) any failure of Plains Resources
to comply with any applicable bulk sales law of any jurisdiction in connection
with the transfer of the Plains Assets to Plains Marketing.
5.2. Indemnification With Respect to PAAI Excluded Liabilities. PAAI shall
indemnify, defend and hold harmless the Partnership, Plains Marketing, their
respective officers and directors and their respective successors and assigns
from and against any and all claims, demands, costs, liabilities (including,
without limitation, liabilities arising by way of active or passive negligence)
and expenses (including court costs and reasonable attorneys' fees) of every
kind, character and
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description, whether known or unknown, accrued or contingent, and whether or not
reflected on the books and records of PAAI as of the Effective Time, arising
from or relating to (i) the PAAI Excluded Liabilities or (ii) any failure of
PAAI to comply with any applicable bulk sales law of any jurisdiction in
connection with the transfer of the PAAI Assets to Plains Marketing.
5.3. Indemnification With Respect to Plains Assumed Liabilities. Plains
Marketing shall indemnify, defend and hold harmless Plains Resources, its
officers and directors, its successors and assigns from and against any and all
claims, demands, costs, liabilities (including, without limitation, liabilities
arising by way of active or passive negligence) and expenses (including court
costs and reasonable attorneys' fees) of every kind, character and description,
whether known or unknown, accrued or contingent, and whether or not reflected on
the books and records of Plains Resources as of the Effective Time, arising from
or relating to the Plains Assumed Liabilities.
5.4. Indemnification With Respect to PAAI Assumed Liabilities. Plains
Marketing shall indemnify, defend and hold harmless PAAI, its officers and
directors, its successors and assigns from and against any and all claims,
demands, costs, liabilities (including, without limitation, liabilities arising
by way of active or passive negligence) and expenses (including court costs and
reasonable attorneys' fees) of every kind, character and description, whether
known or unknown, accrued or contingent, and whether or not reflected on the
books and records of PAAI as of the Effective Time, arising from or relating to
the PAAI Assumed Liabilities.
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ARTICLE VI
TITLE MATTERS
6.1. Encumbrances. The contribution and sale of the Assets made under
this Agreement are made expressly subject to (a) all recorded and unrecorded
liens, encumbrances, agreements, defects, restrictions, adverse claims and all
laws, rules, regulations, ordinances, judgments and orders of governmental
authorities or tribunals having or asserting jurisdiction over the Assets or the
Business and operations conducted thereon or therewith, in each case to the
extent the same are valid and enforceable and affect the Assets, including,
without limitation, all matters that a current on the ground survey or visual
inspection of the Assets would reflect, (b) the Plains Assumed Liabilities, (c)
the PAAI Assumed Liabilities and (d) all matters contained in the Specific
Conveyances.
6.2. Disclaimer of Warranties; Subrogation; Waiver of Bulk Sales Laws.
(a) THE PLAINS GRANTORS ARE CONVEYING THE ASSETS "AS IS" WITHOUT
REPRESENTATION OR WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY (ALL OF
WHICH THE PLAINS GRANTORS HEREBY DISCLAIM), AS TO (i) TITLE, (ii) FITNESS
FOR ANY PARTICULAR PURPOSE OR MERCHANTABILITY OR DESIGN OR QUALITY, OR
(iii) ANY OTHER MATTER WHATSOEVER. THE PROVISIONS OF THIS SECTION 6.2 HAVE
BEEN NEGOTIATED BY PLAINS MARKETING AND THE PLAINS GRANTORS AFTER DUE
CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF
ANY REPRESENTATIONS OR WARRANTIES OF THE PLAINS GRANTORS, WHETHER EXPRESS,
IMPLIED OR STATUTORY, WITH RESPECT TO
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<PAGE>
THE ASSETS THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT,
OR OTHERWISE, EXCEPT AS EXPRESSLY SET FORTH HEREIN.
(b) The contribution of the Assets made under this Agreement is made
with full rights of substitution and subrogation of Plains Marketing, and
all persons claiming by, through and under Plains Marketing, to the extent
assignable, in and to all covenants and warranties by the predecessors-in-
title of the Plains Grantors, and with full subrogation of all rights
accruing under applicable statutes of limitation and all rights of action
of warranty against all former owners of the Assets.
(c) The Plains Grantors and Plains Marketing agree that the
disclaimers contained in this Section 6.2 are "conspicuous" disclaimers.
Any covenants implied by statute or law by the use of the words "grant,"
"convey," "bargain," "sell," "assign," "transfer," "deliver," or "set over"
or any of them or any other words used in this Agreement are hereby
expressly disclaimed, waived and negated.
(d) Each of the parties hereto hereby waives compliance with any
applicable bulk sales law or any similar law in any applicable jurisdiction
in respect of the transactions contemplated by this Agreement.
ARTICLE VII
FURTHER ASSURANCES
7.1. Further Assurances. From time to time after the date hereof, and
without any further consideration, Plains Resources or PAAI, as the case may be,
shall execute, acknowledge and deliver all such additional deeds, assignments,
bills of sale, conveyances, instruments, notices, releases, acquittances and
other documents, and will do all such other acts and things, all in accordance
with
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<PAGE>
applicable law, as may be necessary or appropriate (i) more fully to assure
Plains Marketing, its successors and assigns, all of the properties, rights,
titles, interests, estates, remedies, powers and privileges by this Agreement
granted to Plains Marketing or intended so to be and (ii) more fully and
effectively to vest in the Partnership and its successors and assigns beneficial
and record title to the interests hereby contributed and assigned to the
Partnership or intended so to be and to more fully and effectively carry out the
purposes and intent of this Agreement.
7.2. Partnership and Operating Partnership Assurances. From time to time
after the date hereof, and without any further consideration, the Partnership
and Plains Marketing shall execute, acknowledge and deliver all such additional
instruments, notices and other documents, and will do all such other acts and
things, all in accordance with applicable law, as may be necessary or
appropriate to more fully and effectively carry out the purposes and intent of
this Agreement.
7.3. Post-Closing Adjustment. On or before December 31, 1998, PAAI shall
prepare balance sheets as of the Effective Time for All American L.P. and Plains
Marketing and determine the aggregate excess net working capital of All American
L.P. and Plains Marketing. In the event such aggregate excess net working
capital of All American L.P. and Plains Marketing does not equal $8 million,
PAAI shall either (i) if the aggregate excess net working capital is less than
$8 million, contribute cash sufficient to cause such aggregate excess net
working capital to equal $8 million, or (ii) if the aggregate excess net working
capital is more than $8 million, be distributed cash in an amount equal to the
excess over $8 million.
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<PAGE>
ARTICLE VIII
POWER OF ATTORNEY
The Plains Grantors hereby constitute and appoint Plains Marketing, its
successors and assigns, their true and lawful attorney-in-fact with full power
of substitution for it and in its name, place and stead or otherwise on behalf
of the Plains Grantors, their successors and assigns, and for the benefit of
Plains Marketing, its successors and assigns, to demand and receive from time to
time the Assets and to execute in the name of the Plains Grantors and their
successors and assigns instruments of conveyance, instruments of further
assurance and to give receipts and releases in respect of the same, and from
time to time to institute and prosecute in the name of Plains Marketing or the
Plains Grantors for the benefit of Plains Marketing, as may be appropriate, any
and all proceedings at law, in equity or otherwise which Plains Marketing, its
successors and assigns may deem proper in order to collect, assert or enforce
any claims, rights or titles of any kind in and to the Assets, and to defend and
compromise any and all actions, suits or proceedings in respect of any of the
Assets and to do any and all such acts and things in furtherance of this
Agreement as Plains Marketing, its successors or assigns shall deem advisable.
The Plains Grantors hereby declare that the appointment hereby made and the
powers hereby granted are coupled with an interest and are and shall be
irrevocable and perpetual and shall not be terminated by any act of the Plains
Grantors, their successors or assigns or by operation of law.
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<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1. Order of Completion of Transactions; Effective Time.
(a) The transactions provided for in Articles I, II, III and IV of
this Agreement shall be completed on the date of this Agreement in the
following order:
First, the transactions provided for in Article I shall be completed;
Second, the transactions provided for in Article II shall be
completed;
Third, the transactions provided for in Article III shall be
completed; and
Fourth, the transactions provided for in Article IV shall be
completed.
(b) The sale of the Assets to Plains Marketing shall be effective for
all purposes as of the Effective Time.
9.2. Consents; Restriction on Assignment. If there are prohibitions
against or conditions to the conveyance of one or more portions of the Assets
without the prior written consent of third parties, including, without
limitation, governmental agencies (other than consents of a ministerial nature
which are normally granted in the ordinary course of business), which if not
satisfied would result in a breach of such prohibitions or conditions or would
give an outside party the right to terminate Plains Marketing's rights with
respect to such portion of the Assets (herein called a "Restriction"), then any
provision contained in this Agreement to the contrary notwithstanding, the
transfer of title to or interest in each such portion of the Assets (herein
called the "Restriction-Asset") pursuant to this Agreement shall not become
effective unless and until such Restriction is satisfied, waived or no longer
applies. When and if such a Restriction is so satisfied, waived or no longer
applies, to the extent permitted by applicable law and any applicable
contractual provisions,
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<PAGE>
the assignment of the Restriction-Asset subject thereto shall become effective
automatically as of the Effective Time, without further action on the part of
Plains Marketing or either of the Plains Grantors. The Plains Grantors and
Plains Marketing agree to use their reasonable best efforts to obtain
satisfaction of any Restriction on a timely basis. The description of any
portion of the Assets as a "Restriction-Asset" shall not be construed as an
admission that any Restriction exists with respect to the transfer of such
portion of the Assets. In the event that any Restriction-Asset exists, the
Plains Grantors agree to hold such Restriction-Asset in trust for the exclusive
benefit of Plains Marketing and to otherwise use their reasonable best efforts
to provide Plains Marketing with the benefits thereof, and the Plains Grantors
will enter into other agreements, or take such other action as they deem
necessary, in order to help ensure that Plains Marketing has the assets and
concomitant rights necessary to enable it to operate the Assets contributed to
Plains Marketing in all material respects as they were operated prior to the
Effective Time.
9.3. Costs. Plains Marketing shall pay all sales, use and similar taxes
arising out of the contributions, conveyances and deliveries to be made
hereunder, and shall pay all documentary, filing, recording, transfer, deed, and
conveyance taxes and fees required in connection therewith. In addition, Plains
Marketing shall be responsible for all costs, liabilities and expenses
(including court costs and reasonable attorneys' fees) incurred in connection
with the satisfaction or waiver of any Restriction pursuant to Section 9.2.
9.4. Headings: References: Interpretation. All Article and Section
headings in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any of the provisions hereof.
The words "hereof," "herein" and "hereunder" and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole,
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<PAGE>
including, without limitation, all Schedules and Exhibits attached hereto, and
not to any particular provision of this Agreement. All references herein to
Articles, Sections, Schedules and Exhibits shall, unless the context requires a
different construction, be deemed to be references to the Articles and Sections
of this Agreement and the Schedules and Exhibits attached hereto, and all such
Schedules and Exhibits attached hereto are hereby incorporated herein and made a
part hereof for all purposes. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders, and the singular shall include the plural and vice versa. The use
herein of the word "including" following any general statement, term or matter
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not non-limiting language (such as "without limitation,"
"but not limited to," or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of such general
statement, term or matter.
9.5. Successors and Assigns. The Agreement shall be binding upon and
inure to the benefit of the parties signatory hereto and their respective
successors and assigns.
9.6. No Third Party Rights. The provisions of this Agreement are
intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is intended to
be a third party beneficiary of any of the provisions of this Agreement.
9.7. Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
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<PAGE>
9.8. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas applicable to contracts made
and to be performed wholly within such state without giving effect to conflict
of law principles thereof, except to the extent that it is mandatory that the
law of some other jurisdiction, wherein the Assets are located, shall apply.
9.9. Severability. If any of the provisions of this Agreement are held
by any court of competent jurisdiction to contravene, or to be invalid under,
the laws of any political body having jurisdiction over the subject matter
hereof, such contravention or invalidity shall not invalidate the entire
Agreement. Instead, this Agreement shall be construed as if it did not contain
the particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provision added so as to give effect to
the intention of the parties as expressed in this Agreement at the time of
execution of this Agreement.
9.10. Deed; Bill of Sale; Assignment. To the extent required by
applicable law, this Agreement shall also constitute a "deed," "bill of sale" or
"assignment" of the Assets.
9.11. Amendment or Modification. This Agreement may be amended or
modified from time to time only by the written agreement of all the parties
hereto.
9.12 Integration. This Agreement supersedes all previous understandings
or agreements between the parties, whether oral or written, with respect to its
subject matter. This document is an integrated agreement which contains the
entire understanding of the parties. No understanding, representation, promise
or agreement, whether oral or written, is intended to be or shall be included in
or form part of this Agreement unless it is contained in a written amendment
hereto executed by the parties hereto after the date of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
PLAINS RESOURCES INC., a Delaware corporation
By: /s/ Phillip D. Kramer
-------------------------------------------
Phillip D. Kramer, Executive Vice President
and Chief Financial Officer
PLAINS MARKETING, L.P., a Delaware limited
partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Phillip D. Kramer
---------------------------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
PLAINS ALL AMERICAN PIPELINE, L.P., a
Delaware limited partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Phillip D. Kramer
----------------------------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
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<PAGE>
ALL AMERICAN PIPELINE, L.P., a Texas limited
partnership
By: Plains All American Inc., a Delaware
corporation, as general partner
By: /s/ Phillip D. Kramer
-----------------------------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
PLAINS ALL AMERICAN INC., a Delaware corporation
By: /s/ Phillip D. Kramer
--------------------------------------------
Phillip D. Kramer, Executive Vice President
and Chief Financial Officer
PAAI LLC, a Delaware limited liability company
By: Plains All American Inc., a Delaware
corporation, its sole member
By: /s/ Phillip D. Kramer
----------------------------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
GATHERING LLC, a Delaware limited liability
company
By: Plains All American Inc., a Delaware
corporation, its sole member
By: /s/ Phillip D. Kramer
---------------------------------------
Phillip D. Kramer, Executive Vice
President and Chief Financial Officer
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<PAGE>
================================================================================
CRUDE OIL MARKETING AGREEMENT
among
PLAINS RESOURCES INC.
PLAINS ILLINOIS INC.
STOCKER RESOURCES, L.P.
CALUMET FLORIDA, INC.
and
PLAINS MARKETING, L.P.
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS -5-
1.1 Definitions -5-
ARTICLE II
PURCHASE AND SALE -3-
2.1 Purchase and Sale -3-
2.2 Addition or Release of Properties or Sellers -4-
2.3 Delivery -5-
2.4 Price -5-
2.5 Payment -5-
2.6 General Provisions -6-
2.7 No Restrictions -6-
ARTICLE III
RENEGOTIATION -6-
ARTICLE IV
ADDITIONAL SERVICES -7-
4.1 Additional Services -7-
4.2 Sellers Indemnity -7-
ARTICLE V
TERM -8-
ARTICLE VI
REPRESENTATIONS AND WARRANTIES -8-
6.1 Representations and Warranties of Sellers -8-
6.2 Representations and Warranties of Buyer -9-
ARTICLE VII
CREDIT REQUIREMENTS -9-
ARTICLE VIII
SPECIFIED EVENTS -10-
8.1 Buyer Specified Events -10-
8.2 Seller Specified Events -11-
8.3 Early Termination -12-
8.4 Specified Damages -12-
<PAGE>
ARTICLE IX
FORCE MAJEURE -12-
9.1 Excuse for Nonperformance -12-
9.2 Definition -12-
9.3 Notice and Cure -13-
ARTICLE X
GENERAL PROVISIONS -13-
10.1 No Survival of Representations and Warranties -13-
10.2 Headings -13-
10.3 Rights and Remedies Cumulative -13-
10.4 Entire Agreement; Supersedure -13-
10.5 Severability -13-
10.6 Choice of Law; Submission to Jurisdiction -13-
10.7 Binding Agreement -14-
10.8 No Agency -14-
10.9 Notice -14-
10.10 Effect of Waiver or Consent -14-
10.11 Assignment -14-
10.12 Counterparts -14-
10.13 Amendment or Modification -15-
10.14 Further Assurances -15-
10.15 Withholding or Granting of Consent -15-
10.16 U.S. Currency -15-
10.17 Laws and Regulations -15-
10.18 Construction of Agreement -15-
<PAGE>
CRUDE OIL MARKETING AGREEMENT
This CRUDE OIL MARKETING AGREEMENT (this "Agreement"), dated November ___,
1998, is by and between PLAINS RESOURCES INC., a Delaware corporation ("Plains
Resources"), PLAINS ILLINOIS INC., a Delaware corporation ("Plains Illinois"),
STOCKER RESOURCES, L.P., a California limited partnership ("Stocker"), CALUMET
FLORIDA, INC., a Delaware corporation ("Calumet"), and PLAINS MARKETING, L.P., a
Delaware limited partnership ("Buyer"). Plains Resources, Plains Illinois,
Stocker, and Calumet are sometimes referred to herein individually as a "Seller"
and collectively as the "Sellers." Sellers and Buyer are sometimes referred to
herein individually as a "Party" and collectively as the "Parties."
R E C I T A L S:
- - - - - - - -
A. Sellers own and produce crude oil from properties located within the
lower 48 states of the United States.
B. Sellers desire to sell and Buyer desires to purchase all of the crude
oil which is produced and owned by Sellers from such properties.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Agreement" means this Agreement and all exhibits, schedules, amendments,
modifications, and supplements to this Agreement.
"Anniversary Date" has the meaning assigned in Article III.
"Barrel" means forty-two (42) United States gallons of Crude Oil measured
in accordance with the General Provisions.
<PAGE>
"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.
"Buyer Specified Event" has the meaning assigned in Section 8.1.
"Change of Control" has the meaning assigned in that certain Omnibus
Agreement, dated as of the Closing Date (as defined therein), among Plains
Resources, Buyer, General Partner, Plains All American Pipeline, L.P., a
Delaware limited partnership, and All American, L.P., a Texas limited
partnership.
"Conflicts Committee" means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors who are neither
securityholders, officers nor employees of the General Partner nor officers,
directors or employees of any Affiliate of the General Partner.
"Corporate Governance Documents" means, with respect to any Person, the
Certificate or Articles of Incorporation, or Partnership Agreement (or their
equivalents), the by-laws (or their equivalents), and the other corporate
governance documents of such Person.
"Crude Oil" means crude oil meeting the specifications set forth in the
General Provisions.
"Defaulting Party" means (a) in the case of a Buyer Specified Event,
Buyer, and (b) in the case of a Seller Specified Event, any Seller affected by
such Seller Specified Event.
"Delivery Point" has the meaning assigned in Section 2.3.
"Effective Date" means the date of execution of this Agreement.
"Existing Contract" has the meaning assigned in Section 2.2(g).
"Force Majeure" has the meaning assigned in Article IX.
"General Partner" means Plains All American Inc., a Delaware corporation,
and its predecessors, successors and permitted assigns as general partner of the
Buyer.
"General Provisions" has the meaning assigned in Section 2.6.
"Governmental Requirements" means all judgments, orders, writs,
injunctions, decrees, awards, laws, ordinances, statutes, regulations, rules,
franchises, permits, certificates, licenses, authorizations, and the like of any
government, or any commission, board, court, agency, instrumentality, or
political subdivision thereof.
"Marketing and Administrative Fee" has the meaning assigned in Section
2.4.
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<PAGE>
"Marketing Area" means the lower 48 states of the United States.
"Non-defaulting Party" means (i) in the case of a Buyer Specified Event,
any Seller which is affected by such Buyer Specified Event, and (ii) in the case
of a Seller Specified Event, Buyer.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Platt's P+ Average" means the arithmetic average of the Platt's Prices
for P-Plus WTI during a Trading Cycle.
"Platt's Difference" means the arithmetic average for a Trading Cycle of
the difference between the Platt's Prices of the applicable grade of crude to be
exchanged (i.e. WTS, LLS, HLS, Eugene Island, Bonito, etc.) and the prompt month
WTI.
"Platt's Prices" means the average of the price range of a particular
grade of crude oil as published in the Crude Price Assessments table of Platt's
Oilgram Price Report.
"Purchase Price" has the meaning assigned in Section 2.4.
"Sales Price" has the meaning assigned in Section 2.4.
"Seller Specified Event" has the meaning assigned in Section 8.2.
"Specified Event" means a Buyer Specified Event or a Seller Specified
Event, as the case may be.
"Trading Cycle" means for a particular month of delivery, a cycle
beginning on the 26/th/ day of the second month preceding such month of delivery
through the 25/th/ day of the month preceding such month of delivery.
"Trade Location" has the meaning assigned in Section 2.4(b).
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. Buyer hereby agrees to purchase and receive and
Sellers hereby agree to sell and deliver all of the Crude Oil produced and owned
by Sellers from properties located within the Marketing Area. Currently, such
properties are set forth on Exhibit A attached hereto and incorporated herein.
Exhibit A shall be promptly updated to add or delete, as the case may be, Crude
Oil production dedicated to this Agreement.
-3-
<PAGE>
2.2 Addition or Release of Properties or Sellers. Crude Oil producing
properties and Sellers shall be added or released from the terms and provisions
of this Agreement upon the occurrence of the following events:
(a) If a Person who owns Crude Oil producing properties within the
Marketing Area becomes an Affiliate of Plains Resources, Plains Resources shall
cause such Affiliate to become a Seller hereunder by executing and delivering a
ratification of this Agreement to Buyer as soon as practicable after the date
such Person became an Affiliate of Plains Resources.
(b) If a Seller acquires additional Crude Oil properties within the
Marketing Area, such additional properties and the Crude Oil owned and produced
therefrom by such Seller shall become subject to this Agreement as soon as
practicable after the date of acquisition of such properties.
(c) If a Seller, other than Plains Resources, ceases to be an Affiliate of
Plains Resources, this Agreement shall terminate with respect to such Seller,
its properties, and the Crude Oil produced therefrom, with such termination to
be effective as soon as practicable following the date such Seller gives written
notice to Buyer that it has ceased to be an Affiliate of Plains Resources.
(d) If a Seller sells, transfers or otherwise disposes of any of its
properties or the interests therein which are within the Marketing Area, such
properties or interests shall cease to be subject to this Agreement as soon as
practicable following the date of such sale, transfer or disposition; but in no
event shall such properties or interests cease to be subject to this Agreement
prior to the termination of any agreement Buyer has previously entered into for
the sale of Crude Oil attributable to production from such properties or
interests.
(e) If a Seller and Buyer determine that it is impracticable for Buyer to
purchase Crude Oil from any property owned by such Seller within the Marketing
Area, such Seller and Buyer may, by mutual written agreement with the
concurrence of the Conflicts Committee, terminate this Agreement with respect to
such properties. Thereafter, neither such Seller nor Buyer shall have any
further obligations under this Agreement with respect to such properties.
(f) Upon the occurrence of any of the foregoing events under subparagraphs
(a), (b), (c), (d) or (e) above, the affected Seller shall give written notice
to Buyer as soon as practicable and Exhibit A shall be revised to reflect the
effect of such event. Upon request by any Party affected by such event, all
Parties hereto shall execute and deliver to the requesting Party such documents
and instruments as may be reasonably necessary to evidence additions or releases
of Parties or properties to this Agreement.
(g) Notwithstanding the provisions of subparagraphs (a) and (b) above, the
addition of any Seller or properties to this Agreement shall be subject to any
crude oil sales contract to which such Seller or properties are bound at the
time such Seller or properties would otherwise become subject to this Agreement
(an "Existing Contract"). Accordingly, no Crude Oil shall be sold
-4-
<PAGE>
hereunder in contravention of an Existing Contract by such Seller or from such
properties until the Existing Contract has expired or been terminated.
2.3 Delivery. Delivery shall be made from the lease tankage on the
properties, or such other point as is mutually agreed to and reflected on
Exhibit A (a "Delivery Point"), into transportation facilities designated by
Buyer.
2.4 Price. The price to be paid by Buyer for Crude Oil sold hereunder
(the "Purchase Price") shall be equal to the Sales Price for each Barrel as
determined in this Section 2.4, less the sum of (i) a marketing and
administrative fee of $.20 for each Barrel sold (the "Marketing and
Administrative Fee") and (ii) with respect to Crude Oil which is not sold by
Buyer at a Delivery Point, the reasonable out-of-pocket expenses (if any)
incurred by Buyer to transport or exchange each Barrel of such Crude Oil.
(a) For Crude Oil which Buyer resells at a Delivery Point, the Sales Price
shall be the price received by Buyer for each Barrel sold at the Delivery Point.
(b) For Crude Oil which Buyer either (i) transports to a location other
than a Delivery Point (a "Trade Location") or (ii) exchanges for other Crude Oil
at a Trade Location, the Sales Price shall be determined as follows:
(x) if such Crude Oil is not aggregated with other Crude Oil owned by
Buyer, the Sales Price shall be equal to the price received by Buyer
for each Barrel sold at the Trade Location; or
(y) if such Crude Oil is aggregated with other Crude Oil owned by
Buyer, the Sales Price shall be equal to the sum of (i) the posted
price received by Buyer for each Barrel sold at the Trade Location and
(ii) a premium equal to the Platt's P+ Average and plus or minus, as
applicable, the Platt's Difference at the Trade Location. If the
Platt's P+ Average or the Platt's Difference is not published, then
the price shall be the weighted average for each Barrel of Buyer's
sales at such Trade Location.
2.5 Payment. Payments by Buyer for Crude Oil purchased hereunder shall
be based on the applicable Purchase Price, the volumes delivered by Sellers, and
100% of the interest shown on Exhibit A attached hereto, less state taxes which
are withheld by Buyer. All payments shall be wired to Plains Resources for the
account of the Sellers in accordance with written instructions from Plains
Resources. Such wire transfers shall be made on the twentieth day of the month
following the month of actual receipt of Crude Oil; provided that, if the
twentieth day of the month falls on a Sunday or a banking holiday, payment will
be made on the following Business Day, or if the twentieth day of the month
falls on a Saturday, payment will be made on the preceding Business Day.
-5-
<PAGE>
2.6 General Provisions. Plains Marketing, L.P.'s General Provisions
dated November 1, 1998, is attached hereto as Exhibit B and is incorporated by
reference and made a part of this Agreement. If any conflict should arise
between the General Provisions and the information stated herein, this Agreement
shall apply.
2.7 No Restrictions. No provision contained in this Agreement shall in
any way be interpreted as being a restriction on the ability of any Seller to
convey or transfer Crude Oil to any other Seller, or to any of their
subsidiaries. However, all such Crude Oil conveyed or transferred to a Seller
or subsidiary is and shall remain subject to this Agreement including the
obligations contained in this Article II.
ARTICLE III
RENEGOTIATION
Prior to the third anniversary of this Agreement, and the end of each
successive three-year period thereafter (an "Anniversary Date"), either the
Sellers or Buyer may request, in writing, to renegotiate the Marketing and
Administrative Fee. Any such renegotiation request must be accompanied with
documentation supporting the request to either increase or decrease the
Marketing and Administrative Fee, and shall be in accordance with the following
procedures:
(a) At least 120 days prior to the applicable Anniversary Date, either the
Sellers or Buyer may request, in writing, to renegotiate the Marketing and
Administrative Fee.
(b) Sellers and Buyer shall renegotiate the Marketing and Administrative
Fee in good faith. If a revised Marketing and Administrative Fee has not been
agreed upon at least 75 days prior to the applicable Anniversary Date, then
Sellers may enter into negotiations for the sale of their Crude Oil with any
Person who is not an Affiliate of Sellers. If Sellers do not reach an agreement
with such non-affiliated Person at least 30 days prior to applicable
Anniversary Date, then this Agreement shall continue and the Marketing and
Administrative Fee shall be revised, effective the first day after the
applicable Anniversary Date, to equal the Marketing and Administrative Fee last
offered by Buyer.
(c) If Sellers are successful in reaching agreement with such non-
affiliated Person which provides for (i) a term of not less than one year nor
more than three years; (ii) a Marketing and Administrative Fee which is less
than the Marketing and Administrative Fee last offered by Buyer; and (iii)
additional services substantially similar to those provided for in Article IV
below, this Agreement shall terminate. Such termination shall be effective on
the next Anniversary Date and, thereafter, Sellers may sell their Crude Oil to
such non-affiliated Person during the term of their agreement with such Person.
Within 120 days prior to the end of the term of such other agreement, either the
Sellers or Buyer may request negotiations to resume this Agreement and to
negotiate a revised Marketing and Administrative Fee in accordance with the
procedures set forth above.
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(d) Sellers' and Buyer's right to request a renegotiation of the Marketing
and Administrative Fee in order to resume this Agreement shall continue until
such time that this Agreement terminates pursuant to Article V, or until such
time that Sellers have sold their Crude Oil production to a Person who is not an
Affiliate of Sellers for a period of five (5) consecutive years.
ARTICLE IV
ADDITIONAL SERVICES
4.1 Additional Services. Upon request, Buyer agrees to provide Sellers
with the following services which shall be provided at no additional cost to
Sellers except for reimbursement of all reasonable out-of-pocket costs incurred
by Buyer to provide such services:
(a) Provide Sellers with (i) historical information related to crude oil
and natural gas prices in the possession of, or accessible to, Buyer,
and (ii) Buyer's assessment of crude oil and natural gas prices to
assist Sellers in their hedging strategies and decisions.
(b) Execute hedges on behalf of, or for the benefit of, Sellers' crude oil
and natural gas production.
(c) Assist Sellers in their evaluation of potential acquisitions of oil
and gas properties.
(d) Assist Sellers in preparing information relating to their potential
disposition of any of their crude oil and natural gas properties.
(e) Market the production of their natural gas and natural gas liquids
produced in association with Sellers' crude oil production.
(f) Negotiate natural gas purchase agreements required for the operation
of Sellers' properties.
(g) Provide royalty distribution services.
4.2 SELLERS INDEMNITY. SELLERS AGREE TO RELEASE, PROTECT, DEFEND,
INDEMNIFY AND HOLD BUYER, THE GENERAL PARTNER, AND THEIR PARENTS, SUBSIDIARIES,
AFFILIATES, SUCCESSORS AND ASSIGNS, AND THEIR AGENTS, OFFICERS, DIRECTORS,
EMPLOYEES, REPRESENTATIVES AND CONTRACTORS (HEREINAFTER COLLECTIVELY REFERRED TO
AS THE "BUYER GROUP") HARMLESS FROM AND AGAINST ALL CLAIMS, LOSSES, COSTS,
DEMANDS, DAMAGES, SUITS, JUDGMENTS, PENALTIES, LIABILITIES, DEBTS, EXPENSES AND
CAUSES OF ACTION OF WHATSOEVER NATURE OR CHARACTER, INCLUDING BUT NOT LIMITED TO
REASONABLE ATTORNEY'S FEES AND OTHER COSTS AND EXPENSES, WHICH IN ANY WAY ARISE
OUT OF OR ARE RELATED TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, (I) THE
PERFORMANCE OR SUBJECT MATTER OF THIS AGREEMENT, (II) THE PERFORMANCE OF THE
SERVICES IN SECTION 4.1, (III) THE BREACH BY SELLERS OF ANY TERMS OF THIS
AGREEMENT, OR (IV) THE INGRESS, EGRESS OR PRESENCE ON ANY PREMISES, WHETHER
LAND, BUILDINGS, OR OTHERWISE, IN CONJUNCTION WITH THIS AGREEMENT (COLLECTIVELY,
THE "CLAIMS"), INCLUDING CLAIMS DUE TO PERSONAL INJURY, DEATH, OR LOSS OR DAMAGE
OF PROPERTY, WHETHER OR NOT CAUSED BY THE SOLE, JOINT AND/OR CONCURRENT
NEGLIGENCE, FAULT OR STRICT LIABILITY OF ANY MEMBER
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OF THE BUYER GROUP, BUT IN NO EVENT DOES THIS INDEMNITY INCLUDE CLAIMS CAUSED BY
THE BUYER GROUP'S OWN GROSS NEGLIGENCE OR WILFUL MISCONDUCT.
ARTICLE V
TERM
The term of this Agreement shall commence on the date of this Agreement,
and unless sooner terminated as provided herein, shall continue in effect until
the earlier to occur of: (i) the time at which any Affiliate of Plains Resources
ceases to be the general partner of Buyer, or (ii) a Change of Control of Plains
Resources.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Sellers. Each Seller represents
and warrants to Buyer as of the date hereof that:
(a) Each Seller is a corporation or limited partnership duly organized,
validly existing, and in good standing under the laws of the state of their
respective formation, and has all requisite corporate or partnership power and
authority to execute, deliver, and perform this Agreement.
(b) The execution, delivery, and performance by each Seller of this
Agreement, and the consummation of the transactions contemplated herein, are
within its corporate or partnership power and authority and have been duly
authorized by all necessary corporate or partnership action.
(c) No authorization, consent, or approval of, or other action by, or
notice to, or filing with, any governmental authority, regulatory body, or any
other Person is required for the due authorization, execution, delivery, or
performance by any Seller of this Agreement, or the consummation of the
transactions contemplated herein, except those authorizations, consents, and
approvals which have been obtained and remain in full force and effect, and
those notices and filings which have been made and remain in full force and
effect.
(d) This Agreement has been duly executed and delivered by each Seller, and
is the legal, valid, and binding obligation of each Seller enforceable against
it in accordance with its terms, except that enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the rights of creditors generally, and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
(e) Neither the execution, delivery, or performance by any Seller of this
Agreement, nor the consummation of the transactions contemplated herein, will
violate any provision of any Seller's Corporate Governance Documents, or any
agreement, indenture, or instrument to which any Seller
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is a party or by which any of its property or assets are bound, or any provision
of any existing Governmental Requirement.
6.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers as of the date hereof that:
(a) Buyer is a limited partnership duly organized, validly existing, and in
good standing under the laws of the state of Delaware, and has all requisite
power and authority to execute, deliver, and perform this Agreement.
(b) The execution, delivery, and performance by Buyer of this Agreement,
and the consummation of the transactions contemplated herein, are within Buyer's
partnership power and authority and have been duly authorized by all necessary
partnership action.
(c) No authorization, consent, or approval of, or other action by, or
notice to, or filing with, any governmental authority, regulatory body, or any
other Person is required for the due authorization, execution, delivery, or
performance by Buyer of this Agreement, or the consummation of the transactions
contemplated by this Agreement, except those authorizations, consents, and
approvals which have been obtained and remain in full force and effect, and
those notices and filings which have been made and remain in full force and
effect.
(d) This Agreement has been duly executed and delivered by Buyer, and is
the legal, valid, and binding obligation of Buyer enforceable against Buyer in
accordance with its terms, except that enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the rights of creditors generally, and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
(e) Neither the execution, delivery, or performance by Buyer of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any provision of Buyer's Corporate Governance Documents, or any
agreement, indenture, or instrument to which Buyer is a party or by which any of
its property or assets are bound, or any provision of any existing Governmental
Requirement.
ARTICLE VII
CREDIT REQUIREMENTS
Purchases made by Buyer hereunder shall be on open account provided that:
(a) Buyer or its Affiliates are not in default in the payment when due of
any of its indebtedness in excess of $2,500,000 in the aggregate; and
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(b) Buyer's sales of Crude Oil hereunder are in accordance with the credit
policies set forth by Plains Resources' chief financial officer.
ARTICLE VIII
SPECIFIED EVENTS
8.1 Buyer Specified Events. Each of the following shall constitute a
Buyer Specified Event for all purposes of this Agreement:
(a) Any amount due hereunder for the purchase of Crude Oil shall not be
paid in full when due and Buyer does not cause the cure of such failure on or
before the fifteenth (15th) Business Day after notice from a Seller of such
failure is received by Buyer;
(b) Buyer fails to receive and purchase Crude Oil production dedicated to
this Agreement for reasons other than Force Majeure or any action or inaction of
a Seller, and such failure is not remedied on or before the earlier of the
thirtieth (30th) day after (i) any officer of the General Partner becomes aware
of such failure or (ii) a Seller has given written notice of such failure to
Buyer;
(c) any representation and warranty made in Section 6.2 shall prove to have
been incorrect in any material respect when made, and (i) such default or breach
shall continue unremedied for a period of thirty (30) days after the earlier of
(x) any officer of the General Partner becomes aware of such default or (y) a
Seller has given written notice of such default to Buyer, and (ii) a Seller
reasonably determines that the continuation of such default or breach may
materially and adversely affect Buyer's ability to satisfy its obligations
hereunder;
(d) Buyer and Sellers fail to agree upon a revised Marketing and
Administrative Fee as provided in Article III;
(e) Buyer (i) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or
fails or admits in writing its inability generally to pay its debts as they
become due; (iii) makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (iv) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment or insolvency or
bankruptcy or the entry of an order for relief or the making of an order for its
winding-up or liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within thirty (30) days of the institution or
presentation thereof, (v) has a resolution passed for its winding-up or
liquidation (other than pursuant to a consolidation, amalgamation or merger);
(vi) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar
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official for it, or for all or substantially all its assets; (vii) has a secured
party take possession of all or substantially all of its assets or has an
execution, attachment, sequestration or other legal process levied, enforced or
sued on or against all or substantially all of its assets and such secured party
maintains possession or any such process is not dismissed, discharged, stayed or
restrained in each case within thirty (30) days thereafter; (viii) causes or is
subject to any event with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified in clauses
(i) to (vii) (inclusive); or (ix) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the foregoing
acts.
8.2 Seller Specified Events. Each of the following shall constitute a
Seller Specified Event for all purposes of this Agreement:
(a) A Seller shall fail to deliver Crude Oil production subject to this
Agreement and such failure is not remedied by such Seller on or before the
fifteenth (15th) Business Day after notice from Buyer of such failure is
received by the Seller;
(b) Any representation and warranty made in Section 6.1 shall prove to have
been incorrect in any material respect when made, and (i) such default or breach
shall continue unremedied for a period of thirty (30) days after the earlier of
(x) any officer of a Seller becomes aware of such default or (y) Buyer has given
written notice of such default to a Seller, and (ii) Buyer reasonably determines
that the continuation of such default or breach may materially adversely affect
Seller's ability to satisfy its obligations hereunder;
(c) A Seller (i) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or
fails or admits in writing its inability generally to pay its debts as they
become due; (iii) makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (iv) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment or insolvency or
bankruptcy or the entry of an order for relief or the making of an order for its
winding-up or liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within thirty (30) days of the institution or
presentation thereof, (v) has a resolution passed for its winding-up or
liquidation (other than pursuant to a consolidation, amalgamation or merger);
(vi) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets; (vii) has a
secured party take possession of all or substantially all of its assets or has
an execution, attachment, sequestration or other legal process levied, enforced
or sued on or against all or substantially all its assets and such secured party
maintains possession, or any such process is not dismissed, discharged, stayed
or restrained, in each case within thirty (30) days thereafter; (viii) causes or
is subject to any event with respect to it which, under the applicable laws of
any jurisdiction, had an analogous effect to any of the events specified
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in clauses (i) to (vii) (inclusive); or (ix) takes any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the
foregoing acts;
(d) Sellers and Buyer fail to agree upon a revised Marketing and
Administrative Fee as provided in Article III.
8.3 Early Termination. If any Specified Event shall have occurred and be
continuing, then the Non-defaulting Party may by notice to the Defaulting Party
designate a date (which date shall not be earlier than 60 days after receipt of
such notice) on which this Agreement shall terminate as between the Non-
defaulting Party and the Defaulting Party, and this Agreement shall terminate as
between the Non-defaulting Party and the Defaulting Party on such designated
date whether or not such Specified Event is then continuing; provided that the
provisions of Section 8.4 shall survive such termination.
8.4 Specified Damages. The Defaulting Party shall pay all damages and
expenses incurred by the Non-defaulting Party as a result of the termination of
this Agreement under Section 8.3 arising out of or in connection with any
collection, bankruptcy, insolvency, or other enforcement proceedings resulting
from the occurrence of the Specified Event giving rise to such termination.
Payment of such damages and expenses shall be the Defaulting Party's only
liability, and the Non-defaulting Party's sole remedy and exclusive claim, as a
result of the Specified Event and the resulting termination of this Agreement
under Section 8.3 as between the Non-defaulting Party and the Defaulting Party.
ARTICLE IX
FORCE MAJEURE
9.1 Excuse for Nonperformance. Subject to the other provisions of this
Agreement, the obligations of a Party under this Agreement (including the
obligation of Sellers to deliver Crude Oil), except the obligation to pay money
to the other Party, may be suspended for a reasonable period as a result of an
event of Force Majeure, to the extent that nonperformance is caused by Force
Majeure, and the affected Party shall be relieved of liability for failing to
perform from the inception of such event and during the continuance thereof and
the time of any such suspension of obligations shall be added to the term of
this Agreement.
9.2 Definition. An event of "Force Majeure" means war, riots,
insurrections, fire, explosions, sabotage, strikes, and other labor or
industrial disturbances, acts of God or the elements, Governmental Requirements,
disruption or breakdown of production or transportation facilities, delays of
pipeline carrier in receiving and delivering crude oil tendered, or any other
cause, whether similar or not, reasonably beyond the control of the affected
Party.
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9.3 Notice and Cure. A Party affected by Force Majeure shall, as a
condition to invoking Force Majeure as an excuse for nonperformance under this
Agreement, promptly give notice of the occurrence of Force Majeure to the other
Party, with reasonably detailed information about the event of Force Majeure and
the effect it has had, and is anticipated to have, on the performance of the
invoking Party, and shall confirm such notice of Force Majeure and its
consequences in writing no later than two (2) Business Days after the occurrence
of such event of Force Majeure. The invoking Party shall exercise due diligence
in good faith to remedy the Force Majeure and resume full performance under this
Agreement as soon as reasonably practicable.
ARTICLE X
GENERAL PROVISIONS
10.1 No Survival of Representations and Warranties. Notwithstanding
anything to the contrary herein, all representations and warranties provided by
Sellers and Buyer in Article VI shall not survive the termination of this
Agreement.
10.2 Headings. The headings, captions, and arrangements contained in this
Agreement have been inserted for convenience only and shall not be deemed in any
manner to modify, explain, enlarge, or restrict any of the provisions hereof.
10.3 Rights and Remedies Cumulative. Except as provided in Section 8.4,
the rights and remedies of each of the Parties under this Agreement shall be
cumulative and non-exclusive of any other rights or remedies which each Party
may have under any other agreement or instrument, by operation of law, or
otherwise.
10.4 Entire Agreement; Supersedure. This Agreement constitutes the entire
agreement of the parties relating to the matters contained herein, superseding
all prior contracts or agreements, whether oral or written, relating to the
matters contained herein.
10.5 Severability. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
10.6 Choice of Law; Submission to Jurisdiction. This Agreement shall be
subject to and governed by the laws of the State of Texas, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state. Each party
hereby submits to the jurisdiction of the state and federal courts in the State
of Texas and to venue in Houston, Harris County, Texas.
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10.7 Binding Agreement. This Agreement is entered into for the benefit of
the Parties and their permitted successors and assigns. It shall be binding upon
and shall inure to the benefit of such Parties and their successors and assigns.
10.8 No Agency. Except as otherwise provided in this Agreement, nothing
herein shall serve to create any agency, employment, master and servant
relationship, partnership, or joint venture between Sellers and Buyer, their
Affiliates, or any officer, director, employee or agent thereof.
10.9 Notice. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the United States mail, addressed to the Person to
be notified, postpaid, and registered or certified with return receipt requested
or by delivering such notice in person or by telecopier or telegram to such
party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices to be sent to a party
pursuant to this Agreement shall be sent to or made at the address set forth
below, or at such other address as such party may stipulate to the other parties
in the manner provided in this Section 10.9.
If to Buyer: If to Sellers:
Plains Marketing, L.P. Plains Resources Inc.
500 Dallas, Suite 700 500 Dallas, Suite 700
Houston, Texas 77002 Houston, Texas 77002
Attention: President of Attention: President
Plains All American Inc.
10.10 Effect of Waiver or Consent. No waiver or consent, express or
implied, by any party to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such Person of the same or any other obligations of such Person
hereunder. Failure on the part of a party to complain of any act of any Person
or to declare any Person in default, irrespective of how long such failure
continues, shall not constitute a waiver by such party of its rights hereunder
until the applicable statute of limitations period has run.
10.11 Assignment. No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto.
10.12 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall
constitute one and the same instrument.
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10.13 Amendment or Modification. This Agreement may be amended or modified
from time to time only by the written agreement of all the parties hereto. Each
such instrument shall be reduced to writing and shall be designated on its face
an "Amendment" or an "Addendum" to this Agreement.
10.14 Further Assurances. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.
10.15 Withholding or Granting of Consent. Each party may, with respect to
any consent or approval that it is entitled to grant pursuant to this Agreement,
grant or withhold such consent or approval in its sole and uncontrolled
discretion, with or without cause, and subject to such conditions as it shall
deem appropriate.
10.16 U.S. Currency. All sums and amounts payable to or to be payable
pursuant to the provisions of this Agreement shall be payable in coin or
currency of the United States of America that, at the time of payment, is legal
tender for the payment of public and private debts in the United States of
America.
10.17 Laws and Regulations. Notwithstanding any provision of this
Agreement to the contrary, no party hereto shall be required to take any act, or
fail to take any act, under this Agreement if the effect thereof would be to
cause such party to be in violation of any applicable law, statute, rule or
regulation.
10.18 Construction of Agreement. In construing this Agreement:
(a) no consideration shall be given to the fact or presumption that one
Party had a greater or lesser hand in drafting this Agreement;
(b) examples shall not be construed to limit, expressly or by implication,
the matter they illustrate;
(c) the word "includes" and its derivatives means "includes, but is not
limited to" and corresponding derivative expressions;
(d) a defined term has its defined meaning throughout this Agreement,
regardless of whether it appears before or after the place where it is defined;
(e) the plural shall be deemed to include the singular, and vice versa;
(f) each gender shall be deemed to include the other genders;
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(g) each reference to an article, section, or subsection refers to an
article, section, or subsection of this Agreement unless expressly otherwise
provided; and
(h) all references to a party shall include all successors and permitted
assigns of such party.
[The next page is the signature page]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
and year first above written.
BUYER:
PLAINS MARKETING, L.P.
By: Plains All American Inc.,
its General Partner
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
SELLERS:
PLAINS RESOURCES INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
PLAINS ILLINOIS INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
STOCKER RESOURCES, L.P.
By: Stocker Resources, Inc., its General Partner
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
CALUMET FLORIDA INC.
By: /s/ Michael R. Patterson
--- ------------------------
Name: Michael R. Patterson
Title: Senior Vice President
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EXHIBIT A
SELLERS' CRUDE OIL PRODUCING PROPERTIES
WITHIN MARKETING AREA
<TABLE>
<CAPTION>
Delivery
Seller Field State Point
- ----------------------------- ----------- ---------- ---------
<S> <C> <C> <C>
Stocker Resources, L.P. Inglewood California Lease Tankage
(including
San Vicente
and Packard
drillsites)
Montebello California Lease Tankage
Arroyo Grande California Lease Tankage
Plains Illinois, Inc. Elnora Indiana Lease Tankage
Lawrence Illinois Lease Tankage
St. James Illinois Lease Tankage
West Kenner Illinois Lease Tankage
Calumet Florida, Inc. Racoon Point Florida Coastal Fuels
Sunniland Florida Terminal at
Bear Island Florida Point Everglades
South Bear Florida (all fields)
Sunoco Florida
West Felda Florida
</TABLE>
<PAGE>
EXHIBIT B
PLAINS MARKETING, L.P.
GENERAL PROVISIONS
NOVEMBER 1, 1998
SPECIFIC TERMS: The General Provisions set forth herein are incorporated by
reference and made a part of that certain Crude Oil Marketing Agreement dated
November __, 1998, by and among Buyer and Sellers (the "Agreement"). In the
event there is any inconsistency between these General Provisions and the
Agreement, the Agreement shall prevail. All capitalized terms not otherwise
defined in this Exhibit B shall have the meaning set forth for them in the
Agreement.
WARRANTY/INDEMNIFICATION: The Sellers warrant good title to or the right to
sell all Crude Oil delivered pursuant to the Agreement and warrant that such
shall be free from all royalties, liens, encumbrances, and all applicable
foreign, federal, state and local taxes that are imposed upon the production
and/or removal of Crude Oil from the premises through the Delivery Point.
Sellers also warrant that such Crude Oil has been produced, handled and
transported to the Delivery Point in accordance with all applicable laws, rules
and regulations of all local, state and federal authorities. Sellers further
warrant that all Crude Oil will be merchantable. Sellers further agree to
indemnify, defend and hold harmless Buyer, the General Partner, and their
parents, subsidiaries, Affiliates, successors and assigns, and their agents,
officers, directors, employees, representatives and contractors from and against
all loss, costs, damages or expenses of any nature by or on account of Buyer,
the General Partner, or their parents, subsidiaries, Affiliates, successors and
assigns, and their agents, officers, directors, employees, representatives or
contractors having made (i) 100% payment to Sellers or (ii) payment to interest
owners on behalf of Sellers based on information provided by Sellers.
TAXES: Sellers shall be responsible for all production, severance and other
related taxes incurred prior to delivery, provided that Buyer is hereby
authorized to withhold such taxes from payments to Sellers and remit such taxes
to the proper regulatory authority. Buyer shall be responsible for the payment
of any and all taxes now in effect or hereafter imposed on the Crude Oil after
the Delivery Point.
TITLE AND RISK OF LOSS: Title to, possession of and risk of loss of Crude Oil
shall pass to the Buyer as the Crude Oil passes from equipment owned or
controlled by the Sellers, or owned or controlled by a party designated to make
delivery on behalf of the Sellers, into equipment owned or controlled by Buyer,
or owned or controlled by a party designated to take delivery on behalf of
Buyer. Provided, however, that in cases of in line transfers, title to,
possession of and risk of loss of Crude Oil shall pass to Buyer as the Crude Oil
is deemed transferred. Such shall be deemed transferred to Buyer upon
completion of each in line transfer with quantity determined, when available, in
accordance with the transfer statement or other receipt issued by the carrier or
storage facility.
EQUAL DELIVERIES: For purposes of determining price, Crude Oil delivered during
any given month hereunder shall be deemed to have been delivered in equal daily
quantities during such month
<PAGE>
except as follows: Deliveries of Crude Oil at lease locations based on meter
tickets shall be deemed to have been delivered in equal daily quantities during
the period covered by the meter ticket and deliveries of Crude Oil at lease
locations based on run tickets, shall be deemed to have been delivered on the
date recorded on each run ticket issued by the designated carrier.
MEASUREMENTS AND TESTS: All measurements hereunder shall represent one hundred
percent (100%) volume with such volume and gravity adjusted to sixty degrees
(60) Fahrenheit temperature. Procedures for measuring and testing, except for
deliveries through positive displacement-type liquid meters, shall be according
to latest ASTM published methods then in effect. Procedures for such metered-
type delivery shall be according to the latest ASME-API published methods then
in effect. The Crude Oil delivered hereunder shall be merchantable and
acceptable to the carriers involved and full deduction shall be made for all
BS&W content according to the latest ASTM standard method then in effect. Any
Party shall have the right to have a representative present to witness all
gauges, tests and measurements; however, should any Party hereto fail to have a
representative present during such measuring and testing, the measurements and
tests of the other Party will be accepted.
CONFIRMATION OF DELIVERY: Confirmation of delivery shall be based on run
tickets evidencing such delivery or allocation statements issued by the carriers
involved.
DIVISION ORDERS: In the event any Party signs a division order in favor of the
other Party pertaining to the object of the Agreement, terms of the Agreement
shall supersede the terms of such division order to the extent that there may be
a conflict between the two.
DISPUTE-WITHHOLDING OF FUNDS: If a suit is filed that affects the interest of a
Seller, written notice shall be given to Buyer by such Seller together with a
copy of the complaint or petition filed. In the event of a claim or dispute
that affects title to the division interest credited to such Seller, Buyer is
authorized to withhold payments accruing to such interest, without interest
unless otherwise required by applicable statute, until the claim of dispute is
settled.
NOTICES: Sellers agree to notify Buyer in writing of any change of Payee,
including changes of interest contingent on payment of money or expiration of
time. No change is binding on Buyer until the recorded copy of the instrument
of change or documents satisfactorily evidencing such change are furnished to
Buyer at the time the change occurs. Any change shall be made effective on the
first day of the month following receipt of such notice by Buyer.
SET-OFF: In the event any Party shall fail to make timely delivery of any Crude
Oil, or other applicable products due and owing to the other Party, or in the
event any Party shall fail to make timely payment of any monies due and owing to
the other Party, the other Party may offset any deliveries or payments due under
this or any other agreement between the parties.
AUDIT: Any Party and their duly authorized representatives shall have access to
the accounting records and other documents maintained by the other Party which
relate to the Agreement, and shall have the right to audit such records at any
reasonable time or times within twenty-four (24) months of the date a statement
is rendered.
<PAGE>
================================================================================
OMNIBUS AGREEMENT
among
PLAINS RESOURCES INC.
PLAINS ALL AMERICAN PIPELINE, L.P.
PLAINS MARKETING, L.P.
ALL AMERICAN PIPELINE, L.P.
and
PLAINS ALL AMERICAN INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions.............................................................. 1
1.1 Definitions..................................................... 1
ARTICLE II
Business Opportunities................................................... 4
2.1 Restricted Businesses........................................... 4
2.2 Permitted Exceptions............................................ 4
2.3 Procedures...................................................... 4
2.4 Termination..................................................... 6
2.5 Scope of Restricted Business Prohibition........................ 6
2.6 Enforcement..................................................... 6
ARTICLE III
Indemnification.......................................................... 7
3.1 Wingfoot Indemnification........................................ 7
3.2 Plains Resources Indemnification................................ 7
3.3 Limitations Regarding Indemnification........................... 8
3.4 Indemnification Procedures...................................... 8
ARTICLE IV
Miscellaneous............................................................ 9
4.1 Choice of Law; Submission to Jurisdiction....................... 9
4.2 Notice.......................................................... 9
4.3 Entire Agreement; Supersedure................................... 9
4.4 Effect of Waiver or Consent..................................... 9
4.5 Amendment or Modification....................................... 9
4.6 Assignment......................................................10
4.7 Counterparts....................................................10
4.8 Severability....................................................10
4.9 Gender, Parts, Articles and Sections............................10
4.10 Further Assurances..............................................10
4.11 Withholding or Granting of Consent..............................10
4.12 U.S. Currency...................................................10
4.13 Laws and Regulations............................................10
4.14 Negotiation of Rights of Limited Partners, Assignees,
and Third Parties..............................................10
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OMNIBUS AGREEMENT
THIS OMNIBUS AGREEMENT is entered into on, and effective as of, the Closing
Date among Plains Resources Inc., a Delaware corporation ("Plains Resources"),
Plains All American Pipeline, L.P., a Delaware limited partnership (the "MLP"),
Plains All American Inc., a Delaware corporation ("PAAI"), Plains Marketing,
L.P., a Delaware limited partnership ("Operating OLP"), and All American
Pipeline, L.P., a Delaware limited partnership ("All American OLP" and, together
with Operating OLP, the "OLPs").
R E C I T A L S:
1. Plains Resources, the MLP, the OLPs and PAAI, in its capacity as the
general partner of the MLP and the OLPs, desire by their execution of this
Agreement to evidence their understanding, as more fully set forth in Article II
of this Agreement, with respect to (a) those business opportunities that Plains
Resources will not avail itself of during the Applicable Period unless each of
the MLP and the OLPs has declined to engage in such business opportunity for its
own account and (b) the procedures whereby such business opportunities are to be
offered to the MLP and the OLPs and accepted or declined.
2. Plains Resources, PAAI, the MLP and the OLPs desire by their execution
of this Agreement to evidence their understanding, as more fully set forth in
Article III of this Agreement, with respect to certain indemnification
obligations of Plains Resources and PAAI in favor of the MLP and the OLPs.
In consideration of the premises and the covenants, conditions, and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. (a) Capitalized terms used herein but not defined
shall have the meanings given them in the MLP Agreement.
(b) As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Affiliate" shall have the meaning attributed to such term in the
MLP Agreement.
"Agreement" shall mean this Omnibus Agreement, as it may be
amended, modified, or supplemented from time to time.
<PAGE>
"Applicable Period" shall mean the period commencing on the
Closing Date and terminating on the date on which PAAI (or any Affiliate of
Plains Resources) ceases to be the general partner of the MLP and the OLPs.
"Change of Control" shall have the meaning attributed to such term
in Section 2.4.
"Closing Date" shall mean the date of the closing of the initial
public offering of common units representing limited partner interests in
the MLP.
"Conflicts Committee" shall have the meaning attributed to such
term in the MLP Agreement.
"Conveyance and Contribution Agreement" shall have the meaning
attributed to such term in the MLP Agreement.
"Environmental Laws" shall mean any federal, state or local law,
rule, regulation, or enforceable order, as in effect as of the date of this
Agreement, that regulates or imposes liability with respect to the health,
environment, ecology, or work place.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"General Partner" shall mean PAAI and its successors as general
partner of the MLP and the OLPs, unless the context otherwise requires.
"Hazardous Materials" shall mean those materials in any way
regulated by any Environmental Law.
"Losses" shall have the meaning attributed to such term in
Section 2.3.
"Marketing Agreement" shall mean that Crude Oil Marketing
Agreement dated as of the date hereof among Plains Resources, Plains
Illinois Inc., Stocker Resources, L.P., Calumet Florida, Inc. and Operating
OLP.
"MLP Agreement" shall mean the Amended and Restated Agreement of
Limited Partnership of the MLP, dated as of the Closing Date, as such
agreement is in effect on the Closing Date, to which reference is hereby
made for all purposes of this Agreement. No amendment or modification to
the MLP Agreement subsequent to the Closing Date shall be given effect for
the purposes of this Agreement unless consented to by each of the parties
to this Agreement.
"NonAffiliate Purchaser" shall have the meaning attributed to such
term in Section 2.3.
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<PAGE>
"Offer" shall have the meaning attributed to such term in
Section 2.3.
"Partnership Entities" shall mean the General Partner, the MLP,
the OLPs and any Affiliate controlled by the General Partner, the MLP or
the OLPs.
"Partnership Group" shall mean the MLP, the OLPs and any
subsidiary of any such entities.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, limited liability company, unincorporated organization or
any other entity.
"Plains Entities" shall mean Plains Resources and any of its
Affiliates, other than the Partnership Entities.
"Plains Facility" shall mean any storage or terminalling facility
or gathering line or system constituting part of the Plains Real Property.
"Plains Leased Property" shall mean all of the real and personal
properties leased by Plains Resources or the Plains Midstream Subsidiaries,
including rights-of-way, which leases were conveyed or assigned to the OLPs
by the Conveyance and Contribution Agreement.
"Plains Midstream Subsidiaries" shall mean Plains Marketing &
Transportation Inc., a Delaware corporation, Plains Terminal & Transfer
Corporation, a Delaware corporation, PLX Crude Lines Inc., a Delaware
corporation, and PLX Ingleside Inc., a Delaware corporation, each a wholly-
owned subsidiary of Plains Resources prior to their merger into Plains
Resources as of the date hereof.
"Plains Real Property" shall mean all of the real properties,
including the land, improvements and buildings located thereon, owned in
fee simple by Plains Resources or the Plains Midstream Subsidiaries, which
properties were conveyed to the OLPs by the Conveyance and Contribution
Agreement.
"Restricted Business" shall have the meaning attributed to such
term in Section 2.1.
"Second Offer" shall have the meaning attributed to such term in
Section 2.3.
"Voting Stock" means securities of any class of Plains Resources
entitling the holders thereof to vote on a regular basis in the election of
members of the board of directors of Plains Resources.
"Wingfoot" shall have the meaning attributed to such term in
Section 3.1.
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<PAGE>
"Wingfoot Agreement" shall have the meaning attributed to such
term in Section 3.1.
ARTICLE II
BUSINESS OPPORTUNITIES
2.1 RESTRICTED BUSINESSES. During the Applicable Period, each of the
Plains Entities shall be prohibited from engaging in or acquiring any business
engaged in the following activities (a "Restricted Business"): (a) crude oil
storage, terminalling and gathering activities in any state in the United
States, except for Alaska and Hawaii, for any Person other than a Plains Entity
or Partnership Entity, (b) crude oil marketing activities, and (c)
transportation of crude oil by pipeline in any state in the United States,
except for Alaska and Hawaii, for any Person other than a Plains Entity. A
Restricted Business shall not include any activities required to be performed by
a Plains Entity as the operator pursuant to any operating agreement entered into
by such Plains Entity with respect to oil and gas properties owned jointly with
other Persons.
2.2 PERMITTED EXCEPTIONS. Notwithstanding any provision of Section 2.1
to the contrary, a Plains Entity may engage in a Restricted Business under the
following circumstances:
(a) The Restricted Business was engaged in by the Plains Entity on
the date of this Agreement.
(b) The Restricted Business is conducted pursuant to and in
accordance with the terms of the Marketing Agreement or any other arrangement
entered into with the MLP or either of the OLPs with the concurrence of the
Conflicts Committee.
(c) The value of the assets acquired in a transaction that
comprise a Restricted Business does not exceed $10 million, as determined by the
Board of Directors of Plains Resources.
(d) (i) The value of the assets acquired in a transaction that
comprise a Restricted Business exceed $10 million, as determined by the Board of
Directors of Plains Resources and (ii) the General Partner (with the approval of
the Conflicts Committee) has elected not to cause a member of the Partnership
Group to pursue such opportunity in accordance with the procedures set forth in
Section 2.3.
2.3 PROCEDURES. In the event that a Plains Entity acquires a
Restricted Business comprised of assets valued in excess of $10 million, as
determined by the Board of Directors of Plains Resources, then not later than 30
days after the consummation of the acquisition by such Plains Entity of the
Restricted Business, such Plains Entity shall notify the General Partner of such
purchase and offer the Partnership the opportunity to purchase such Restricted
Business. As soon as practicable, but in any event, within 30 days after receipt
of such notification, the General Partner shall notify the Plains Entity that
either (i) the General Partner has elected, with the approval of the Conflicts
Committee, not to cause a member of the Partnership Group to purchase such
Restricted
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<PAGE>
Business, in which event the Plains Entity shall be free to continue to engage
in such Restricted Business, or (ii) the General Partner has elected to cause a
member of the Partnership Group to purchase such Restricted Business, in which
event the following procedures shall be followed:
(a) The Plains Entity shall submit a good faith offer to the
General Partner to sell the Restricted Business (the "Offer") to any member of
the Partnership Group on the terms and for the consideration stated in the
Offer.
(b) The Plains Entity and the General Partner shall negotiate in
good faith, for 60 days after receipt of such Offer by the General Partner, the
terms on which the Restricted Business will be sold to a member of the
Partnership Group. The Plains Entity shall provide all information concerning
the business, operations and finances of such Restricted Business as may be
reasonably requested by the General Partner.
(i) If the Plains Entity and the General Partner agree on such
terms within 60 days after receipt by the General Partner of the Offer, a
member of the Partnership Group shall purchase the Restricted Business on
such terms as soon as commercially practicable after such agreement has
been reached.
(ii) If the Plains Entity and the General Partner are unable to
agree on the terms of a sale during such 60-day period, the Plains Entity
shall attempt to sell the Restricted Business to a Person that is not an
Affiliate of the Plains Entity (a "NonAffiliate Purchaser") within nine
months of the termination of such 60-day period. Any such sale to a
NonAffiliate Purchaser must be for a purchase price, as determined by the
Board of Directors of Plains Resources, not less than 95% of the purchase
price last offered by a member of the Partnership Group.
(c) If, after the expiration of such nine-month period, the
Plains Entity has not sold the Restricted Business to a NonAffiliate Purchaser,
it shall submit another Offer (the "Second Offer") to the General Partner within
seven days after the expiration of such nine-month period. The Plains Entity
shall provide all information concerning the business, operations and finances
of such Restricted Business as may be reasonably requested by the General
Partner.
(i) If the General Partner, with the concurrence of the
Conflicts Committee, elects not to cause a member of the Partnership Group
to pursue the Second Offer, the Plains Entity shall be free to continue to
engage in such Restricted Business.
(ii) If the General Partner shall elect to cause a member of the
Partnership Group to purchase such Restricted Business, then the General
Partner and the Plains Entity shall negotiate the terms of such purchase
for 60 days. If the Plains Entity and the General Partner agree on such
terms within 60 days after receipt by the General Partner of the Second
Offer, a member of the Partnership Group shall purchase the Restricted
Business on such terms as soon as commercially practicable after such
agreement has been reached.
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<PAGE>
(iii) If during such 60-day period, no agreement has been reached
between the Plains Entity and the General Partner or a member of the
Partnership, the Plains Entity and the General Partner will engage an
independent investment banking firm with a national reputation to determine
the value of the Restricted Business. Such investment banking firm will
determine the value of the Restricted Business within 30 days and furnish
the Plains Entity and the General Partner its opinion of such value. The
Plains Entity will pay the fees and expenses of such investment banking
firm. Upon receipt of such opinion, the General Partner will have the
option, subject to the approval of the Conflicts Committee, to (A) cause a
member of the Partnership Group to purchase the Restricted Business for an
amount equal to the value determined by such investment banking firm or (B)
decline to purchase such Restricted Business, in which event the Plains
Entity will be free to continue to engage in such Restricted Business.
2.4 TERMINATION. The provisions of this Article II may be terminated
by Plains Resources upon a "Change of Control" of Plains Resources. A Change of
Control of Plains Resources shall be deemed to have occurred upon the occurrence
of one or more of the following events: (i) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Plains Entities to any Person and its
Affiliates unless immediately following such sale, lease, exchange or other
transfer such assets are owned, directly or indirectly, by the Plains Entities;
(ii) the consolidation or merger of Plains Resources with or into another Person
pursuant to a transaction in which the outstanding Voting Stock of Plains
Resources is changed into or exchanged for cash, securities or other property,
other than any such transaction where (a) the outstanding Voting Stock of Plains
Resources is changed into or exchanged for Voting Stock of the surviving
corporation or its parent and (b) the holders of the Voting Stock of Plains
Resources immediately prior to such transaction own, directly or indirectly, not
less than a majority of the Voting Stock of the surviving corporation or its
parent immediately after such transaction; and (iii) a "person" or "group"
(within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act) being or
becoming the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) of more than 50% of all Voting Stock of Plains Resources, then
outstanding, except in a merger or consolidation which would not constitute a
Change of Control under clause (ii) above.
2.5 SCOPE OF RESTRICTED BUSINESS PROHIBITION. Except as provided in
this Article II and the Partnership Agreement, each Plains Entity shall be free
to engage in any business activity whatsoever, including those that may be in
direct competition with any Partnership Entity.
2.6 ENFORCEMENT. The Plains Entities agree and acknowledge that the
Partnership Group does not have an adequate remedy at law for the breach by the
Plains Entities of the covenants and agreements set forth in this Article II,
and that any breach by the Plains Entities of the covenants and agreements set
forth in Article II would result in irreparable injury to the Partnership Group.
The Plains Entities further agree and acknowledge that any member of the
Partnership Group may, in addition to the other remedies which may be available
to the Partnership Group, file a suit in equity to enjoin the Plains Entities
from such breach, and consent to the issuance of injunctive relief hereunder.
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<PAGE>
ARTICLE III
INDEMNIFICATION
3.1 WINGFOOT INDEMNIFICATION. PAAI shall indemnify, defend and hold
harmless the MLP and the OLPs from and against Losses (as hereinafter defined)
to the extent that PAAI is entitled to and receives indemnification from
Wingfoot Ventures Seven, Inc., a Delaware corporation ("Wingfoot"), pursuant to
Article VIII of the Stock Purchase Agreement, dated as of March 15, 1998, among
Plains Resources, PAAI and Wingfoot, as amended and in effect from time to time
(the "Wingfoot Agreement"). "Losses" shall have the meaning set forth in the
Wingfoot Agreement.
3.2 PLAINS RESOURCES INDEMNIFICATION. Plains Resources shall
indemnify, defend and hold harmless the General Partner, the MLP and the OLPs
from and against Losses that are caused by, arise out of or are attributable to:
(a) Any enforcement proceeding under any federal, state or local
Environmental Law to the extent arising out of any action or omission to act by
Plains Resources or any of the Plains Midstream Subsidiaries prior to the date
of this Agreement with respect to any Plains Real Property, Plains Leased
Property, or Plains Facility, whether such proceeding arises before or after the
date of this Agreement.
(b) Any disposal, release, spill or leakage of Hazardous
Materials to the soil or surface or ground water to the extent that it has
occurred prior to the date of this Agreement (i) on any Plains Real Property
during the period owned by Plains Resources or any of the Plains Midstream
Subsidiaries and (ii) on any Plains Leased Property during the period Plains
Resources or any of the Plains Midstream Subsidiaries has been in possession of
such Plains Leased Property.
(c) Any release, spill, leakage or migration of Hazardous
Materials onto, under or upon the property of any Person (other than property
owned, leased or used by Plains Resources or any of the Plains Midstream
Subsidiaries) to the extent that it has occurred prior to the date of this
Agreement as a result of the operations of Plains Resources or any of the Plains
Midstream Subsidiaries.
(d) Hazardous Materials to the extent that they are demonstrated
to have been present on any Plains Real Property or Plains Leased Property on
the date of this Agreement.
(e) Hazardous Materials to the extent transported prior to the
date of this Agreement by Plains Resources or any of the Plains Midstream
Subsidiaries to any waste treatment, storage, disposal, reclaiming, or recycling
site other than (i) any site located on any Plains Real Property or any Plains
Leased Property, (ii) any site located on any property owned, leased or used by
any Partnership Entity, or (iii) any site used (whether before or after the date
of this Agreement) by any Partnership Entity, or (iv) any site used by Plains
Resources or any of the Plains Midstream Subsidiaries after the date of this
Agreement.
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<PAGE>
3.3 LIMITATIONS REGARDING INDEMNIFICATION. Plains Resources shall have
no indemnification obligation under Section 3.2 for claims made after the third
anniversary of the date of this Agreement. The aggregate liability of Plains
Resources in respect of all Losses under Section 3.2 shall not exceed $3 million
(including up to $500,000 of reserves included in the MLP's working capital upon
closing of the MLP's initial public offering).
3.4 INDEMNIFICATION PROCEDURES.
(a) The Partnership Entities agree that within a reasonable
period of time after they become aware of facts giving rise to a claim for
indemnification pursuant to Section 3.2, they will provide notice thereof in
writing to Plains Resources specifying the nature of and specific basis for such
claim.
(b) Plains Resources shall have the right to control all aspects
of the defense of (and any counterclaims with respect to) any claims brought
against the Partnership Entities that are covered by the indemnification set
forth in Section 3.2, including, without limitation, the selection of counsel,
determination of whether to appeal any decision of any court and the settling of
any such matter or any issues relating thereto; provided, however, that no such
settlement shall be entered into without the consent of the Partnership Entities
unless it includes a full release of the Partnership Entities from such matter
or issues, as the case may be.
(c) The Partnership Entities agree, at their own cost and
expense, to cooperate fully with Plains Resources with respect to all aspects of
the defense of any claims covered by the indemnification set forth in Section
3.2, including, without limitation, the prompt furnishing to Plains of any
correspondence or other notice relating thereto that the General Partner or the
Partnership Entities may receive, permitting the names of the General Partner
and the Partnership Entities to be utilized in connection with such defense, the
making available to Plains Resources of any files, records or other information
of the General Partner or the Partnership Entities that Plains Resources
considers relevant to such defense and the making available to Plains Resources
of any employees of the Partnership Entities or the General Partner; provided,
however, that in connection therewith Plains Resources agrees to use reasonable
efforts to minimize the impact thereof on the operations of such Partnership
Entities. In no event shall the obligation of the Partnership Entities to
cooperate with Plains Resources as set forth in the immediately preceding
sentence be construed as imposing upon the Partnership Entities an obligation to
hire and pay for counsel in connection with the defense of any claims covered by
the indemnification set forth in this Article III; provided, however, that the
Partnership Entities may, at their own option, cost and expense, hire and pay
for counsel in connection with any such defense. Plains Resources agrees to keep
any such counsel hired by the Partnership Entities reasonably informed as to the
status of any such defense, but Plains Resources shall have the right to retain
sole control over such defense.
(d) In determining the amount of any loss, liability or expense
for which any of the Partnership Entities are entitled to indemnification under
this Agreement, the gross amount thereof will be reduced by any insurance
proceeds realized or to be realized by the Partnership
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<PAGE>
Entities, and such correlative insurance benefit shall be net of any insurance
premium that becomes due as a result of such claim.
ARTICLE IV
MISCELLANEOUS
4.1 CHOICE OF LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
subject to and governed by the laws of the State of Texas, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state. Each party
hereby submits to the jurisdiction of the state and federal courts in the State
of Texas and to venue in Houston, Harris County, Texas.
4.2 NOTICE. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the United States mail, addressed to the Person to
be notified, postpaid, and registered or certified with return receipt requested
or by delivering such notice in person or by telecopier or telegram to such
party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices to be sent to a party
pursuant to this Agreement shall be sent to or made at the address set forth
below such party's signature to this Agreement, or at such other address as such
party may stipulate to the other parties in the manner provided in this Section
4.2.
4.3 ENTIRE AGREEMENT; SUPERSEDURE. This Agreement constitutes the
entire agreement of the parties relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written, relating
to the matters contained herein.
4.4 EFFECT OF WAIVER OR CONSENT. No waiver or consent, express or
implied, by any party to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such Person of the same or any other obligations of such Person
hereunder. Failure on the part of a party to complain of any act of any Person
or to declare any Person in default, irrespective of how long such failure
continues, shall not constitute a waiver by such party of its rights hereunder
until the applicable statute of limitations period has run.
4.5 AMENDMENT OR MODIFICATION. This Agreement may be amended or
modified from time to time only by the written agreement of all the parties
hereto; provided, however, that the MLP and the OLPs may not, without the prior
approval of the Conflicts Committee, agree to any amendment or modification of
this Agreement that, in the reasonable discretion of the General Partner, will
adversely affect the holders of Common Units. Each such instrument shall be
reduced to writing and shall be designated on its face an "Amendment" or an
"Addendum" to this Agreement.
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4.6 ASSIGNMENT. No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto.
4.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall
constitute one and the same instrument.
4.8 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
4.9 GENDER, PARTS, ARTICLES AND SECTIONS. Whenever the context
requires, the gender of all words used in this Agreement shall include the
masculine, feminine and neuter, and the number of all words shall include the
singular and plural. All references to Article numbers and Section numbers
refer to Parts, Articles and Sections of this Agreement.
4.10 FURTHER ASSURANCES. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.
4.11 WITHHOLDING OR GRANTING OF CONSENT. Each party may, with respect
to any consent or approval that it is entitled to grant pursuant to this
Agreement, grant or withhold such consent or approval in its sole and
uncontrolled discretion, with or without cause, and subject to such conditions
as it shall deem appropriate.
4.12 U.S. CURRENCY. All sums and amounts payable to or to be payable
pursuant to the provisions of this Agreement shall be payable in coin or
currency of the United States of America that, at the time of payment, is legal
tender for the payment of public and private debts in the United States of
America.
4.13 LAWS AND REGULATIONS. Notwithstanding any provision of this
Agreement to the contrary, no party hereto shall be required to take any act, or
fail to take any act, under this Agreement if the effect thereof would be to
cause such party to be in violation of any applicable law, statute, rule or
regulation.
4.14 NEGOTIATION OF RIGHTS OF LIMITED PARTNERS, ASSIGNEES, AND THIRD
PARTIES. The provisions of this Agreement are enforceable solely by the parties
to this Agreement, and no Limited Partner, Assignee or other Person shall have
the right, separate and apart from the MLP or the OLP, to enforce any provision
of this Agreement or to compel any party to this Agreement to comply with the
terms of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on, and
effective as of, the Closing Date.
PLAINS RESOURCES INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 654-1523
PLAINS ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC., its sole
general partner
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 652-2730
PLAINS MARKETING, L.P.
By: PLAINS ALL AMERICAN INC., its sole
general partner
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
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Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 652-2730
ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC., its sole
general partner
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 652-2730
PLAINS ALL AMERICAN INC.
By: /s/ Michael R. Patterson
------------------------
Name: Michael R. Patterson
Title: Senior Vice President
Address for Notice:
500 Dallas, Suite 700
Houston, Texas 77002
Telecopy Number: (713) 652-2730
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