EXHIBIT 10.5
EXECUTION COPY
VALUE ASSURANCE AGREEMENT
This Value Assurance Agreement is made as of June 8, 2001, by and among
Plains Resources Inc., a Delaware corporation ("Rodeo"), and Sable Holdings,
L.P. (the "Initial Holder").
RECITALS:
WHEREAS, the Initial Holder and Rodeo are parties to that certain Unit
Transfer and Contribution Agreement dated as of May 8, 2001 (the "Transfer
Agreement") whereby, among other things, PAAI LLC, a wholly owned, indirect
subsidiary of Rodeo has agreed to sell to the Initial Holder and the Initial
Holder has agreed to purchase from PAAI LLC, 1,905,627 subordinated units of
limited partner interests (the "Subordinated Units") of Plains All American
Pipeline, L.P. (the "Company").
WHEREAS, it is the intent of the parties that during the term of this
Agreement the Unit Holders shall receive quarterly distributions per
Subordinated Unit in an amount equal to at least the Minimum Distribution (as
hereinafter defined).
WHEREAS, Rodeo has agreed to pay to the Unit Holders (as hereinafter
defined), on the terms and conditions hereinafter set forth as an adjustment to
the purchase price of the Subordinated Units, such amounts per Subordinated Unit
as are necessary to assure that the Minimum Distributions are realized.
WHEREAS, as a condition precedent to the consummation of the transactions
contemplated by the Transfer Agreement, Rodeo is required to execute and deliver
this Agreement.
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the parties hereby agree as follows:
AGREEMENT
Section 1. Certain Definitions. As used herein the following terms shall
have the following meanings:
"Actual Distributions" means, for any Quarter, the amount of Available Cash
distributed by the Company per Subordinated Unit pursuant to Article VI of the
Partnership Agreement.
"Agreement" means this Value Assurance Agreement, as it may be amended from
time to time in accordance with its terms.
"Available Cash" has the meaning given such term in the Partnership
Agreement.
"Common Unit" has the meaning given such term in the Partnership Agreement.
"Minimum Distribution" means $0.4625 per Subordinated Unit per Quarter,
subject to proportional adjustment in the event of any distribution, combination
or subdivision (whether effected by a distribution payable in Units or
otherwise) of Units or other Partnership Securities in accordance with Section
5.10 of the Partnership Agreement.
"Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of the Company dated as of November 23, 1998, as amended,
modified, supplemented or restated from time to time.
"Partnership Securities" has the meaning given such term in the Partnership
Agreement.
"Quarter" has the meaning given such term in the Partnership Agreement.
"Shortfall Payment" means an amount equal to the product of (A) the Minimum
Distribution less the Actual Distribution, times (B) the number of Subordinated
Units held of record by a particular Unit Holder.
"Subordinated Units" has the meaning given such term in the Recitals
hereof.
"Transfer Agreement" has the meaning given such term in the Recitals
hereof.
"Unit" has the meaning given such term in the Partnership Agreement.
"Unit Holders" means initially the Initial Holder as owner of the
Subordinated Units and shall include any subsequent permitted transferee in
accordance with Section 6 hereof that is the record holder of Subordinated
Units.
Section 2. Assurance of Minimum Distributions. In the event the Actual
Distribution is less than the Minimum Distribution, Rodeo shall pay to each Unit
Holder their respective Shortfall Payment within 50 days after the end of such
Quarter; provided, however, that no Unit Holder shall be entitled to any
Shortfall Payment if the aggregate amount of Actual Distributions and Shortfall
Payments made to date for that fiscal year (the "Aggregate Payment Amount") is
greater than $1.85 (an "Excess Payment"); provided, further, that if any payment
of any Shortfall Payment would result in an Excess Payment, such Shortfall
Payment shall be reduced so that the Aggregate Payment Amount through and
including the date of such Shortfall Payment equals $1.85 (the "Guaranteed
Amount"). If Rodeo shall fail to timely make any Shortfall Payment as
contemplated by this Section 2, Rodeo agrees to pay interest in respect of any
delinquent amount under this Agreement at the rate per annum that Citibank, N.A.
or any successor entity thereto, announces from time to time as its prime
lending rate. All Shortfall Payments, and other payments hereunder, shall be
made in immediately available funds to the account of each of the Unit Holders,
or their respective successors and permitted assignees, as appropriate without
offset, deduction or counterclaim of any kind (except as provided for in Section
3 below). A Unit Holder shall not be entitled to receive any Shortfall Payment
with respect to any Subordinated Unit that has been converted into a Common Unit
other than with respect to any distributions of Available Cash declared but not
paid prior to such Conversion.
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Section 3. True-Up. In the event that the Aggregate Payment Amount for
any fiscal year is greater than the Guaranteed Amount, each Unit Holder shall
reimburse Rodeo in an amount equal to the product of (x) the lesser of (A) the
aggregate amount of Shortfall Payments per Subordinated Unit made during that
year and (B) the difference between the Aggregate Payment Amount and the
Guaranteed Amount in respect of such fiscal year (such lesser amount, the "True-
Up Amount") and (y) the number of Subordinated Units held of record by that Unit
Holder. Such reimbursement shall be made in cash within 50 days after the end of
the fiscal year. If any Unit Holder shall fail to timely make any reimbursement
contemplated by this Section 3, such Unit Holder shall pay interest in respect
of any delinquent amount at the rate per annum that Citibank, N.A. or any
successor entity thereto, announces from time to time as its prime lending rate,
and if not paid prior to the date on which any subsequent Shortfall Payment is
to be made, the True-Up Amount shall be set off against such Shortfall Payment.
In the event a Unit Holder has transferred Subordinated Units during such fiscal
year, transferor and transferee shall each be responsible for proportional
payment of the True-Up Amount based upon the Shortfall Payments made to each of
them.
Section 4. Absolute Obligation. Rodeo hereby agrees that this Agreement
constitutes an irrevocable and unconditional obligation to pay and perform all
obligations due hereunder on demand. Rodeo agrees to make payment and to
perform strictly in accordance with terms hereof regardless of any law,
regulation or equitable principle now or hereafter in effect which would modify
or restrict either the obligations of Rodeo or the rights of the Unit Holders
with respect to this Agreement, and Rodeo waives defenses to the payment or
performance by Rodeo hereunder. Rodeo and the Unit Holders, with respect to
Section 3 hereof, each hereby agree to the prompt, complete, and full payment of
all expenses and fees (including, without limitation, reasonable attorneys'
fees) incurred in the enforcement of this Agreement.
Section 5. Representations and Warranties. Rodeo hereby represents and
warrants to the Unit Holders as of the date hereof as follows:
Section 5.1. Organization and Good Standing. Rodeo is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Rodeo has the power and authority to conduct its business as it is presently
being conducted and to own or use its properties and assets.
Section 5.2. Power, Authority and Enforceability. Rodeo has all requisite
power and authority to execute, deliver and perform this Agreement. This
Agreement has been duly and validly authorized and executed by persons with
authority to bind Rodeo and constitutes the legal, valid and binding obligation
of the Rodeo, enforceable against Rodeo in accordance with its terms.
Section 5.3. No Conflicts; Consents. The execution, delivery and
performance by Rodeo of this Agreement does not and will not conflict with,
contravene, violate or result in a breach of or default under any laws
applicable to Rodeo or any order, decree or judgment of any court or
governmental authority binding on Rodeo or any agreement or instrument to which
Rodeo is a party or by which it or any of its assets are bound, and will not
result in or require the creation or imposition of any lien, charge or
encumbrance upon any assets of Rodeo. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or other
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regulatory body or third party is required for the due execution, delivery and
performance by Rodeo of this Agreement.
Section 5.4. Legal Proceedings. There is no action, suit or proceeding
pending or, to the knowledge of Rodeo, threatened against or otherwise affecting
Rodeo before any court, arbitrator or governmental department, commission,
board, bureau, agency or instrumentality that would reasonably be expected to
materially and adversely affect Rodeo's financial condition, properties or
operations or ability to perform its obligations hereunder.
Section 5.5. Solvency. Rodeo is solvent and able to pay its debts as they
become due. Rodeo's capital is adequate for the businesses in which it is
engaged and intends to be engaged. Rodeo has not incurred, nor does Rodeo
intend to incur or believe that it will incur, debts which will be beyond its
ability to pay as such debts mature.
Section 6. Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assignees.
Rodeo shall not be allowed to assign or otherwise transfer this Agreement and
its rights or obligations hereunder except by operation of law. A Unit Holder
may assign, grant a participation in, or otherwise transfer any of its rights or
interests hereunder without the consent of the other parties (i) to any third
party in connection with the transfer of Subordinated Units that is permitted
by, and in accordance with, the Transfer Agreement, whereupon such transferee
shall then be a "Unit Holder" for all purposes under this Agreement, and (ii) to
any lender to secure indebtedness of the Unit Holder, or in the event of a
default in any indebtedness of the Unit Holder.
Section 7. Termination. This Agreement shall terminate with respect to any
Subordinated Unit at the conversion of such Subordinated Unit into a Common
Unit. This Agreement shall terminate upon the first to occur of the following:
(i) the date on which all of the Subordinated Units shall have converted into
Common Units or (ii) the fifth anniversary of the date of this Agreement. A
termination of this Agreement shall have no effect on nor diminish, alter, nor
affect (i) any rights or obligations of the parties hereto which accrued or
arose on or before the date of such termination and (ii) any right or cause of
action and related remedies arising out of a party's breach of this Agreement.
Section 8. General.
Section 8.1. Choice of Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Texas other than the
conflict of laws rules thereof. The parties agree to submit all disputes
arising under or relating to this Agreement to the exclusive jurisdiction of the
state courts and/or United States federal courts located in Xxxxxx County in the
State of Texas and consent to the jurisdiction of such courts.
Section 8.2. Entire Agreement and Amendments. This Agreements constitute
the entire agreement between the parties and supersedes all agreements,
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter
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hereof. This Agreement may not be amended, supplemented or otherwise modified
except by a written agreement executed by all parties hereto.
Section 8.3. Severability. If any provision of this Agreement is held to
be unenforceable or invalid by a court of competent jurisdiction, such
unenforceability or invalidity shall not render this Agreement unenforceable or
invalid as a whole. Rather, such provision shall be stricken from the Agreement
and the remaining provisions shall be fully enforceable.
Section 8.4. Notices. All notices under this Agreement shall be in
writing and shall be deemed to have been received (a) when personally delivered
or sent by telecopy, (b) one day following delivery by overnight delivery
courier, with all delivery charges pre-paid, or (c) on the third business day
following the date on which it was sent by United States mail, postage prepaid,
to a party at the address or fax number, as the case may be, of such party as
set forth on the signature page of this Agreement or such other address as a
party may specify in writing.
Section 8.5. Headings. The headings used herein are for purposes of
convenience only and shall not be used in construing the provisions hereof.
Section 8.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.7. Treatment of Payments. Any Shortfall Payment made hereunder
shall be treated for all purposes as an adjustment to the purchase price paid by
the Unit Holder for the Subordinated Units to PAAI LLC.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PLAINS RESOURCES INC.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
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Title: Chairman and CEO
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Address: 000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
SABLE HOLDINGS, L.P.
By: Sable Holdings, LLC
its general partner
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
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Title: Sole Member
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Address: X.X. Xxx 0000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
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SCHEDULE TO VALUE ASSURANCE AGREEMENT,
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DATED AS OF JUNE 8, 2001, BY AND AMONG
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PLAINS RESOURCES INC. AND SABLE HOLDINGS, L.P.*
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Value Assurance Agreement, dated as of June 8, 2001, by and among Plains
Resources Inc. and KAFU Holdings, LP.*
Value Assurance Agreement, dated as of June 8, 2001, by and among Plains
Resources Inc. and E-Holdings III, L.P.*
Value Assurance Agreement, dated as of June 8, 2001, by and among Plains
Resources Inc. and Xxxxxx Hedgecap Fund, L.P.*
Value Assurance Agreement, dated as of June 8, 2001, by and among Plains
Resources Inc. and Xxxx X. Xxxxxx.*
Value Assurance Agreement, dated as of June 8, 2001, by and among Plains
Resources Inc. and Xxxx X. Xxxxxxx.*
*These agreements are substantially identical in all material respects except as
to the parties thereto.
