OPTION AGREEMENT
This Option Agreement ("AGREEMENT") is made and entered into as of the 6th
day of November, 1996 by and among Dauphin Island Gathering Company, L.P., a
Texas limited partnership ("DIGC"), OEDC Processing, L.P., a Texas limited
partnership ("OEDCP"), MCNIC Mobile Bay Processing Company, a Michigan
corporation ("MMBPC"), and PanEnergy Mobile Bay Processing Company, a Delaware
corporation ("PMBPC"). All capitalized terms that are defined in the General
Partnership Agreement for Mobile Bay Processing Partners dated as of November 6,
1996 between OEDCP, MMBPC and PMBPC (the "PARTNERSHIP AGREEMENT") and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Partnership Agreement.
1. INTRODUCTION. OEDCP has a 1% general partnership interest in Mobile Bay
Processing Partners (the "PARTNERSHIP"). PMBPC and MMBPC hold the remaining
general partnership interests in equal shares. PMBPC and MMBPC desire to grant
to OEDCP, and OEDCP desires to acquire from MMBPC and PMBPC, an option to
purchase an additional 321/3% interest in the Partnership, subject to reduction
as hereinafter provided (the additional interest in the Partnership, as it may
be reduced pursuant to this Agreement, is referred to herein as the "ADDITIONAL
PARTNERSHIP INTEREST"). The purpose of this Agreement is to set forth the terms
and conditions of the option.
2. GRANT OF OPTION. Each of PMBPC and MMBPC hereby grants to OEDCP an
option (the "Option") to purchase one-half of the Additional Partnership
Interest under the terms and conditions of this Agreement. The Option shall
terminate on (i) the giving of a Withdrawal Notice by OEDCP, (ii) the failure of
OEDCP to exercise the Option in accordance with the terms of this Agreement or
(iii) as provided in Section 8.3.
3. CONSIDERATION.
3.1 In consideration of PMBPC and MMBPC granting to OEDCP the
Option, OEDCP is paying $100,000 to each of PMBPC and MMBPC contemporaneously
with the execution of this Agreement. If the Option is exercised, the $100,000
paid to each of MMBPC and PMBPC shall be applied to the purchase price to be
paid to each of MMBPC and PMBPC by OEDCP for the Additional Partnership
Interest.
3.2 If the Option is not exercised, PMBPC and MMBPC shall each
retain the $100,000 paid to it and OEDCP shall cause its affiliate, DIGC, and
DIGC hereby agrees, as additional consideration for the granting of the Option,
to assign to (i) PanEnergy Dauphin Island Company, an affiliate of PMBPC
("PDI"), a one percent interest in Dauphin Island Gathering Partners ("DIGP"),
to be conveyed out of the interest in DIGP to be received by DIGC on the
occurrence of "PDI Payout" (as such term is defined in the Fourth Amended and
Restated General Partnership Agreement for Dauphin Island Gathering Partners
(the "DIGP PARTNERSHIP AGREEMENT")) and (ii) MCNIC Mobile Bay Gathering Company,
an affiliate of MMBPC ("MMBGC"), a one
1
percent interest in DIGP, to be conveyed out of the interest in DIGP to be
received by DIGC on the occurrence of "MMBGC Payout" (as such term is defined in
the DIGP Partnership Agreement). OEDCP shall not be required to cause DIGC to
assign to PDI or MMBGC an interest in DIGP as a result of the termination of the
Option on the giving of a Withdrawal Notice by OEDCP.
3.3 Contemporaneously with the execution of this Agreement, DIGC,
PDI and MMBGC, are negotiating for an amendment of the DIGP Partnership
Agreement. The drafts of the amendment to the DIGP Partnership Agreement that
have been circulated to the relevant parties contemplate the admission of
additional partners and a reduction of the interest of DIGC in DIGP both before
and after "payout." If additional partners are admitted to DIGP, whether
pursuant to an amendment to the DIGP Partnership Agreement substantially similar
to the current drafts of such amendment or otherwise, any interest in DIGP that
may be assigned to each of PDI and MMBGC pursuant to Section 3.2 of this
Agreement (i) with respect to PDI, shall be assigned only (A) out of the
increased interest in DIGP that DIGC receives after "payout" with respect to PDI
and (B) after "payout" has occurred with respect to all DIGP partners other than
MMBGC; (ii) with respect to MMBGC, shall be assigned only (X) out of the
increased interest in DIGP that DIGC receives after "payout" with respect to
MMBGC and (Y) after "payout" has occurred with respect to all DIGP partners
other than PDI; and (iii) shall be reduced in the same proportion that the 14%
interest in DIGP that DIGC will receive after "payout" has occurred with respect
to all DIGP partners is reduced.
4. DILUTION OF INTEREST.
4.1 From time to time during the term of this Agreement, additional
Partners may be admitted to the Partnership. For the purposes of this Agreement,
such Partners shall be known as either Individual Assignees or Joint Assignees.
4.2 An "INDIVIDUAL ASSIGNEE" shall be a new Partner in the
Partnership that is either (i) an assignee of an interest from one or more, but
not all, of the Partners in the Partnership at the time such assignment occurs
or (ii) is admitted to the Partnership and each of the Partner's interest in the
Partnership is reduced disproportionately.
4.3 A "JOINT ASSIGNEE" shall be a new Partner in the Partnership
that is either (i) an assignee of a proportionate interest from all of the
Partners in the Partnership at the time such assignment occurs or (ii) admitted
to the Partnership and each of the Partner's interest in the Partnership is
reduced proportionately.
4.4 If an Individual Assignee is admitted to the Partnership then
the Individual Assignee shall be required to assume a proportionate share of the
obligations under this Agreement,
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and the Additional Partnership Interest shall not be reduced due to any such
sale. If one or more Joint Assignees are admitted to the Partnership, then (i)
such Joint Assignee shall not be required to assume any obligations under this
Agreement, (ii) such Joint Assignee's interest in the Partnership shall not be
subject to the terms of this Agreement and (iii) the Additional Partnership
Interest shall be reduced proportionately by the interest assigned to such Joint
Assignee.
5. INDIVIDUAL ASSIGNEES. OEDCP shall not have any obligations to any
Individual Assignees and PMBPC and MMBPC, as applicable, shall be responsible
for (i) delivering copies of the Exercise Notice and any other notices received
from OEDCP pursuant to this Agreement to any of their respective Individual
Assignees, and (ii) causing the Individual Assignees to deliver the bills of
sale required to be delivered by them to OEDCP.
6. EXERCISE. OEDCP may exercise the Option at any time until the third
anniversary of the Commercial Operations Date for the Processing Facility (the
"OPTION PERIOD"). The "Commercial Operations Date" shall be deemed to be the
first day of the month immediately following the date on which the Management
Committee determines is the date that the initial Processing Facility shall have
been placed in commercial operation. The Option shall expire unless exercised on
or prior to the end of the Option Period. To exercise the Option, PMBPC and
MMBPC must receive from OEDCP, on or before the end of the Option Period, a
written notice of OEDCP's intent to exercise the Option ("EXERCISE NOTICE"). The
Exercise Notice shall be deemed to have been received by PMBPC and MMBPC on the
date that the last of PMBPC and MMBPC shall have actually received the Exercise
Notice.
7. PRICE. The price to be paid by OEDCP for the Additional Partnership
Interest (the "PURCHASE PRICE") shall be calculated by multiplying (a) the
product of (i) Processing Facilities Value and (ii) 322/3% of the aggregate
interest of PMBPC, MMBPC and any Individual Assignees on the date of the
Exercise Notice by (b) the payment factor attributable to the three calendar
month period during which the Exercise Notice is deemed to have been received by
PMBPC and MMBPC, and then subtracting $200,000 from the resultant amount. As
used in this Agreement, "Processing Facilities Value" shall mean (1) with
respect to any Processing Facility completed as of the closing date of the
Option exercise, the depreciated book value as of such date, as determined in
accordance with generally accepted accounting principles (utilizing 25-year
straight line depreciation), of such Processing Facility and (2) with respect to
any Processing Facility not completed as of such date, the allowance for funds
used during construction for such Processing Facility as of the effective date
of the closing of the Option, as determined in accordance with generally
accepted accounting practices.
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PAYMENT FACTORS
The payment factors set forth below are divided into three calendar month
periods beginning on the Commercial Operations Date.
3 CALENDAR MONTH
YEAR PERIOD PAYMENT FACTOR
---- ---------------- --------------
1 1st 103%
1 2nd 106%
1 3rd 109%
1 4th 112%
2 1st 115%
2 2nd 118%
2 3rd 121%
2 4th 124%
3 1st 127%
3 2nd 130%
3 3rd 133%
3 4th 136%
8. THE CLOSING.
8.1 The closing and transfer of the Additional Partnership Interest
shall occur on the first business day following the fourteenth calendar day
after both MMBPC and PMBPC shall have received the Exercise Notice.
8.2 OEDCP may elect to extend the closing until the first business
day following the twenty-ninth calendar day after MMBPC and PMBPC shall have
received the Exercise Notice by providing written notice to PMBPC and MMBPC on
or before the date that would have been the closing date had OEDCP not elected
to extend the closing. If OEDCP shall have elected to extend the closing and the
extended closing date falls in the three calendar month period following the
three calendar month period during which OEDCP shall have delivered the Exercise
Notice (as shown above), OEDCP shall pay interest on the Purchase Price to
MMBPC, PMBPC and the Individual Assignees at a rate equal to 12% per annum from
the original closing date to the actual closing date.
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8.3 At the closing, OEDCP shall pay to each of MMBPC, PMBPC and the
Individual Assignees its proportionate share of the Purchase Price, and PMBPC,
MMBPC and the Individual Assignees shall each deliver to OEDCP a xxxx of sale in
the form of Exhibit A hereto. The Effective Date of the closing and transfer of
the Additional Partnership Interest shall be the first day of the first calendar
month following the closing. If OEDCP fails to close within the time periods
allotted after providing the Exercise Notice, then OEDCP shall be deemed not to
have exercised the Option and the Option shall terminate.
9. CAPITAL ACCOUNTS. The capital account of OEDCP in the Partnership after
the acquisition of the Additional Partnership Interest shall be OEDCP's capital
account in the Partnership prior to the acquisition of the Additional
Partnership Interest plus 322/3% of the capital account of each of PMBPC, MMBPC
and the Individual Assignees prior to the acquisition of the Additional
Partnership Interest.
10. ASSIGNMENT. This Agreement may not be assigned or transferred by OEDCP
without the prior written consent of the other parties hereto; provided,
however, that (i) this Agreement may be assigned to Affiliates of OEDCP to which
OEDCP also assigns its one percent interest in the Partnership without such
prior written approval, and (ii) this limitation shall not limit the ability of
OEDCP to mortgage, pledge or grant a security interest in its interest under
this Agreement.
11. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas without giving effect to any
principles of conflicts of laws.
12. EXPENSES AND FEES. Whether or not the transactions contemplated by
this Agreement are consummated, each of the parties hereto shall pay the fees
and expenses of their respective counsel, accountants and other experts incident
to the negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby.
13. NOTICES. The notice provisions in the Partnership Agreement shall also
apply to this Agreement. Notice to DIGC shall be given in the same manner that
notices are given to OEDCP.
14. INTEGRATION. This Agreement sets forth the entire agreement and
understanding of the parties in respect of the transactions contemplated hereby
and supersedes the applicable portion(s) of all prior agreements, prior
arrangements and prior understandings relating to the subject matter hereof.
This Agreement may not be amended, supplemented or waived unless such amendment,
supplement or waiver is in writing and signed by all the parties hereto or their
assignees.
15. MULTIPLE COUNTERPARTS. This Agreement may be executed in a number of
identical counterparts, each of which for all purposes is to be deemed an
original, and all of which constitute,
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collectively, one agreement; but in making proof of this Agreement, it shall not
be necessary to produce or account for more than one such counterpart.
16. SEVERAL LIABILITY. The liability of MMBPC and PMBPC under or in
connection with this Agreement shall be several and not joint or collective.
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EXECUTED as of the date first set forth above.
OEDC PROCESSING, L.P.
By: OEDC, Inc., its general partner
By: /s/ X. XXXXX ANDESRON
Name: R. Xxxxx Xxxxxxxx
Title: Vice President
DAUPHIN ISLAND GATHERING COMPANY, L.P.
By: OEDC, Inc., its general partner
By: /s/ R. XXXXX XXXXXXXX
Name: R. Xxxxx Xxxxxxxx
Title: Vice President
MCNIC MOBILE BAY PROCESSING COMPANY
By: /s/ XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
PANENERGY MOBILE BAY PROCESSING
COMPANY
By: /s/ X. X. XXXXX
Name: X. X. Xxxxx
Title: Vice President
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EXHIBIT A
XXXX OF SALE
This Xxxx of Sale ("XXXX OF SALE") is executed and delivered by _______________
("ASSIGNOR"), to OEDC Processing, L.P., a Texas limited partnership
("ASSIGNEE").
Assignor, for valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, does by these presents GRANT, BARGAIN, SELL, CONVEY,
ASSIGN, TRANSFER, SET OVER and DELIVER unto Assignee, effective as of
_______________1 (the "Effective Date"), the following (collectively, the
"ASSIGNED INTEREST"):
(i) a ___%2 interest in Mobile Bay Processing Partners (the "PARTNERSHIP")
formed pursuant to the General Partnership Agreement for Mobile Bay
Processing Partners dated November 6, 1996, among Assignee, MCNIC Mobile
Bay Processing Company, a Michigan corporation, and PanEnergy Mobile Bay
Processing Company, a Delaware corporation (the "PARTNERSHIP AGREEMENT");
and
(ii) all rights of Assignor as a general partner in the Partnership,
whether arising under the Partnership Agreement, by operation of law or
otherwise, with respect to the interest in the Partnership described in
clause (i) above.
TO HAVE AND TO HOLD all and singular the Assigned Interest, together with all
rights, titles, interests, estates, remedies, powers and privileges thereunto
appertaining unto Assignee and their respective successors, legal
representatives and assigns forever. Assignor hereby binds itself, its
successors, legal representatives and assigns, to warrant and forever defend the
Assigned Interest unto Assignee, their respective successors, legal
representatives and assigns, against every person whomsoever lawfully claiming
or to claim the same or any part thereof, by, through or under Assignor, but not
otherwise.
Assignor hereby represents as follows:
-------------
(1) Insert here the first day of the month following Closing.
(2) Insert here 32 2/3% of the Assignor's interest.
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1. ORGANIZATION. Assignor is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.
Assignor is qualified to do business in and in good standing under the laws of
each state where such qualification is required of Assignor.
2. AUTHORIZATION AND AUTHORITY. The execution and delivery of this Xxxx of
Sale have been and the performance of this Xxxx of Sale and the transactions
contemplated hereby shall be at the time required to be performed hereunder,
duly and validly authorized by all requisite corporate action on the part of
Assignor. Assignor has full corporate power and authority to carry on its
business as presently conducted and to enter into this Xxxx of Sale.
3. ENFORCEABILITY. This Xxxx of Sale has been duly executed and delivered
on behalf of Assignor, and constitutes a legal, valid and binding obligation of
Assignor enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, reorganization or moratorium statutes, or
other similar laws affecting the rights of creditors generally or equitable
principles (collectively, "EQUITABLE LIMITATIONS"). All documents required
hereunder to be executed and delivered by Assignor shall be duly executed and
delivered and shall constitute legal, valid and binding obligations of Assignor
enforceable in accordance with their terms, except as enforceability may be
limited by Equitable Limitations.
4. CONFLICTS. The execution and delivery of this Xxxx of Sale by Assignor
does not, and the consummation of the transactions contemplated by this Xxxx of
Sale shall not, (a) violate or be in conflict with, or require the consent of
any person or entity under, any provision of Assignor's Certificate of
Incorporation, bylaws or other governing documents, (b) conflict with, result in
a breach of, constitute a default (or an event that with the lapse of time or
notice, or both, would constitute a default) under any agreement or instrument
to which Assignor is a party or is bound, or (c) violate any provision of or
require any consent, authorization or approval under any judgment, decree,
judicial or administrative order, award, writ, injunction, statute, rule or
regulation applicable to Assignor.
Assignee hereby represents as follows:
1. ORGANIZATION. Assignee is a limited partnership duly organized and in
good standing under the laws of the State of Texas. Assignee is qualified to do
business in and is in good standing under the laws of each state where such
qualification is required of Assignee. The sole general partner of Assignee is
OEDC, Inc. ("OEDC"). OEDC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas. OEDC is qualified to do
business in and is in good standing under the laws of each state where such
qualification is required of OEDC.
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2. AUTHORIZATION AND AUTHORITY. The execution and delivery of this Xxxx of
Sale have been and the performance of this Xxxx of Sale and the transactions
contemplated hereby shall be at the time required to be performed hereunder,
duly and validly authorized by all requisite partnership action on the part of
Assignee and by all requisite corporate action on the part of OEDC. Assignee has
full partnership power and authority to carry on its business as presently
conducted and to enter into this Xxxx of Sale.
3. ENFORCEABILITY. This Xxxx of Sale has been duly executed and delivered
on behalf of Assignee, and constitutes a legal, valid and binding obligation of
Assignee enforceable in accordance with its terms, except as enforceability may
be limited by Equitable Limitations. All documents required hereunder to be
executed and delivered by Assignee shall be duly executed and delivered and
shall constitute legal, valid and binding obligations of Assignee enforceable in
accordance with their terms, except as enforceability may be limited by
Equitable Limitations.
4. CONFLICTS. The execution and delivery of this Xxxx of Sale by Assignee
does not, and the consummation of the transactions contemplated by this Xxxx of
Sale shall not, (a) violate or be in conflict with, or require the consent of
any person or entity under the governing documents of Assignee or OEDC, (b)
conflict with, result in a breach of, constitute a default (or an event that
with the lapse of time or notice, or both, would constitute a default) under any
agreement or instrument to which Assignee is a party or is bound, or (c) violate
any provision of or require any consent, authorization or approval under any
judgment, decree, judicial or administrative order, award, writ, injunction,
statute, rule or regulation applicable to Assignee.
All capitalized terms used in this Xxxx of Sale but not defined herein shall
have the meanings ascribed to such terms in the Partnership Agreement.
If there is any conflict between the terms of this Xxxx of Sale and the terms of
the Partnership Agreement, the terms of the Partnership Agreement shall govern
and control.
This Xxxx of Sale may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same Xxxx of Sale.
EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF ASSIGNOR CONTAINED IN
THIS XXXX OF SALE OR THE PARTNERSHIP AGREEMENT, ASSIGNOR EXPRESSLY DISCLAIMS AND
NEGATES, AND ASSIGNEE HEREBY WAIVES, (I) ANY WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, AS TO THE QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, CONFORMITY TO
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SAMPLES, OR CONDITION OF THE ASSIGNED INTEREST OR ANY OF
THE ASSETS OF MOBILE BAY PROCESSING PARTNERS OR ANY PART THEREOF; AND (II) ALL
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, OTHER THAN THE
EXPRESS REPRESENTATIONS CONTAINED IN THIS XXXX OF SALE OR THE PARTNERSHIP
AGREEMENT.
EXCEPT FOR THE EXPRESS REPRESENTATIONS OF ASSIGNOR CONTAINED IN THIS XXXX OF
SALE AND THE PARTNERSHIP AGREEMENT, THE ASSIGNED INTEREST IS SOLD, AND ASSIGNEE
ACCEPTS THE ASSIGNED INTEREST "AS IS, WITH ALL FAULTS."
Assignor shall be responsible for, shall pay on a current basis, and shall
indemnify, save, hold harmless, discharge and release Assignee, all of its
affiliates to which certain duties under the Partnership Agreement have been
delegated, successors and permitted assignees, and all of their respective
stockholders, directors, officers, employees, agents and representatives
(collectively, "ASSIGNEE INDEMNIFIED PARTIES") from and against any and all
damage, loss, cost, expense, obligation, claim or liability, including
reasonable counsel fees and reasonable expenses of investigating, defending and
prosecuting litigation, suffered by any of the Assignee Indemnified Parties or
the Partnership and arising from, based upon, related to or associated with any
act, omission, event, condition or circumstance occurring or existing before the
Effective Date relating to the Assigned Interest; provided that the liability of
Assignor under this indemnity shall not exceed 322/3% of the sum of any cash
distributions prior to the Effective Date from the Partnership to Assignor and
tax benefits allocated or allocable with respect to periods prior to the
Effective Date by the Partnership to Assignor.
Subject to the above indemnity by Assignor, Assignee shall assume and be
responsible for, shall pay on a current basis, and shall indemnify, save, hold
harmless, discharge and release Assignor, all of its affiliates, successors and
permitted assignees, and all of their respective stockholders, directors,
officers, employees, agents and representatives from and against any and all
obligations under the Partnership Agreement attributable to the Assigned
Interest from the inception of the Partnership.
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IN WITNESS WHEREOF, the parties hereto have caused this Xxxx of Sale to be duly
executed on this the ____ day of _____________, 1996.
ASSIGNOR:
By:
Name:
Title:
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