EXHIBIT 10.34
VALUE ASSURANCE AGREEMENT
This Value Assurance Agreement is made as of August 17, 2001, by and among
Plains Resources Inc., a Delaware corporation ("Rodeo"), and First Union
Investors, Inc., a North Carolina corporation ("First Union").
RECITALS:
WHEREAS, Kafu Holdings, LLC ("Holdings LLC") 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 Holdings LLC and Holdings LLC
has agreed to purchase from PAAI LLC, 1,985,865 subordinated units of limited
partner interests (the "Subordinated Units") of Plains All American Pipeline,
L.P. (the "Company").
WHEREAS, Holdings LLC has assigned all its rights and interests under the
Transfer Agreement to KAFU Holdings, LP.
WHEREAS, KAFU Holdings, LP has assigned its rights and interests with
respect to 328,668 of the Subordinated Units to First Union.
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 First Union 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 Unitholder 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.
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 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) June 8, 2006. 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
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 8.5. 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 8.6. Headings. The headings used herein are for purposes of
convenience only and shall not be used in construing the provisions hereof.
Section 8.7. 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 8.8. 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]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PLAINS RESOURCES INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
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Title: Executive Vice President and General
Counsel
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Address: 000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
FIRST UNION INVESTORS, INC.
By: /s/ Xxx Xxxxx
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Name: Xxx Xxxxx
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Title: Vice President
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Address: 000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
