EXHIBIT 10.5
TECHNICAL SERVICES AGREEMENT
by and between
PLAINS RESOURCES INC.,
CALUMET FLORIDA, L.L.C.
and
PLAINS EXPLORATION & PRODUCTION COMPANY, L.P.
Dated as of
July 3, 2002
TECHNICAL SERVICES AGREEMENT
TABLE OF CONTENTS
RECITALS...............................................................1
ARTICLE I DEFINITIONS..................................................1
ARTICLE II SERVICES....................................................2
2.1 Services......................................................2
2.2 Charges and Payment...........................................3
2.3 General Obligations; Standard of Care.........................3
2.4 Certain Limitations...........................................5
2.5 Confidentiality...............................................5
2.6 Term; Early Termination.......................................5
2.7 Disclaimer, Limitation of Liability and Indemnification.......6
2.8 Representatives...............................................7
ARTICLE III MISCELLANEOUS..............................................8
3.1 Entire Agreement..............................................8
3.2 Governing Law.................................................8
3.3 Notices.......................................................8
3.4 Counterparts..................................................8
3.5 Binding Effect; Assignment....................................8
3.6 Severability..................................................8
3.7 Failure or Indulgence not Waiver; Remedies Cumulative.........8
3.8 Waivers, Modifications, Amendment.............................9
3.9 Headings......................................................9
3.10 Relationship of Parties.......................................9
3.11 Provisions Unaffected.........................................9
3.12 No Third-Party Beneficiaries..................................9
3.13 Rights of the Parties.........................................9
3.14 Records.......................................................9
3.15 Dispute Resolution............................................9
3.16 Taxes.........................................................9
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TECHNICAL SERVICES AGREEMENT
THIS TECHNICAL SERVICES AGREEMENT (this "Agreement"), dated as of July __,
2002 (the "Effective Date"), is between Plains Resources Inc., a Delaware
corporation ("Plains"), Calumet Florida, L.L.C., a Delaware limited liability
company and wholly-owned Subsidiary of Plains ("Calumet" and, along with Plains
and Spinco, the "Parties"), and Plains Exploration & Production Company, L.P., a
California limited partnership ("Plains Exploration"). Undefined capitalized
terms herein are defined in the Separation Agreement (as defined below).
RECITALS
WHEREAS, on the date hereof, ▇▇▇▇▇▇▇ Inc. owns a 2.5% general partner
interest in Plains Exploration and Plains owns a 97.5% limited partner interest
in Plains Exploration; and
WHEREAS, Plains and ▇▇▇▇▇▇▇ Inc. currently contemplate that Plains
Exploration will (collectively, the "Conversion") (1) convert from a California
limited partnership to a Delaware limited partnership, and immediately
thereafter (2) convert from a Delaware limited partnership to a Delaware
corporation (such corporation, the "Converted Corporation"); and
WHEREAS, the Board of Directors of Plains has determined that it is in the
best interests of Plains to separate Plains' existing businesses into two
independent business groups;
WHEREAS, to effectuate the foregoing, Plains and Spinco have entered into a
Master Separation Agreement, dated as of the date hereof (the "Separation
Agreement"), pursuant to which, among other things, Plains will transfer certain
assets to Spinco (which will not include Plains' interests in Calumet) and
Spinco will assume certain Liabilities of Plains; and
WHEREAS, the Separation Agreement provides, among other things, for Plains
and Spinco to enter into this Agreement to set forth the terms on which Spinco
will provide to Calumet the Services described herein; and
WHEREAS, this Agreement is being entered into on an arms-length basis for
the consideration described herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the Parties, intending to be legally bound,
agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall have the
following meanings:
"Additional Services" is defined in Section 2.1(b).
"Agreement" is defined in the preamble to this Agreement.
"Calumet" is defined in the preamble to this Agreement.
"Conversion" is defined in the recitals to this Agreement.
"Converted Corporation" is defined in the recitals to this Agreement.
"Effective Date" means the date of this Agreement.
"Impracticable" (and words of similar import) is defined in Section 2.4(b).
"Parties" is defined in the preamble to this Agreement.
"Plains" is defined in the preamble to this Agreement.
"Plains Exploration" is defined in the preamble to this Agreement.
"Representative" of any Party means a managerial level employee appointed
by such Party to have the responsibilities and authority set forth in Section
2.8.
"Separation Agreement" is defined in the recitals to this Agreement.
"Service" is defined in Section 2.1(b).
"Spinco" means, as the case may be, Plains Exploration or the Converted
Corporation.
ARTICLE II
SERVICES
2.1 Services.
(a) Initial Services. Except as otherwise provided herein, during the
applicable term determined pursuant to Section 2.6 hereof the following
"Initial Services" shall be provided by Spinco to Calumet:
(i) Technical services consisting of engineering and technical
support services required to support operation and maintenance of the
oil and gas properties owned by Calumet, including: (A) providing
geological, geophysical, surveying, drilling and operations oversight
and/or services; (B) providing environmental, regulatory and safety
compliance and reporting oversight; providing other government or
regulatory compliance related to oil and gas activities; and (C) other
oil and gas engineering services as requested from time to time by
Calumet.
(ii) Accounting services consisting of those services typically
provided by operators of oil and gas properties, including accounting
for the operating costs
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and revenue distributions to royalty owners, maintaining and
supporting accounting records of the oil and gas properties owned by
Calumet and such other accounting services related to the properties
as requested.
(b) Additional Services. From time to time after the Effective Date,
the Parties may, by mutual agreement, identify additional services that
Spinco will provide to Calumet in accordance with the terms of this
Agreement (the "Additional Services" and, together with the Initial
Services, the "Services"). In such case, the Parties shall create an
Exhibit for each Additional Service setting forth a description of the
Service, the time period during which the Service will be provided and any
other terms applicable thereto.
(c) Services Performed by Others. At its option, Spinco may cause any
Service it is required to provide hereunder to be provided by another
member of the Spinco Group or by any other Person that is providing, or may
from time to time provide, the same or similar services for members of the
Spinco Group, Plains or Calumet. Spinco shall remain responsible, in
accordance with the terms of this Agreement, for performance of any Service
it causes to be so provided by others.
2.2 Charges and Payment.
(a) Charges for Services. Subject to Section 2.2(b), Spinco will
charge Plains, and Plains will pay Spinco, for the costs incurred in
providing the Services, including (A) allocable salary and wages,
incentives, paid absences, payroll taxes, payroll additives (insurance
premiums, social security, health care and retirement benefits and the
like) and similar expenses and (B) reimbursement of out-of-pocket third
party costs and expenses.
(b) Payment Terms. Spinco shall ▇▇▇▇ Plains monthly for all charges
pursuant to this Agreement and Plains shall pay Spinco for all Services
within 30 days after receipt of an invoice therefor. Late payments shall
bear interest at an annual rate of the prime rate as reported in the Wall
Street Journal on the date such payment is due plus two percent (2%) per
annum.
2.3 General Obligations; Standard of Care.
(a) Performance Metrics: Spinco. Spinco shall maintain sufficient
resources to perform its obligations hereunder and shall perform such
obligations in a commercially reasonable manner. Specific performance
metrics for Spinco may be set forth in Exhibits referred to herein. Where
none is set forth, Spinco shall provide Services in accordance with the
policies, procedures and practices in effect for the provision of similar
services in support of the operation and maintenance of the properties
owned by Calumet before the date of this Agreement and shall exercise the
same care and skill as it exercises in performing similar services
hereafter for operations conducted by members of the Spinco Group and shall
not, in situations in which common personnel, equipment or facilities are
used in performing Services hereunder and such similar Services for members
of the Spinco Group, favor either Plains or a member of the Spinco Group.
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(b) Performance Metrics: Plains. Specific performance metrics for
Calumet may be set forth in Exhibits referred to herein. Where none is set
forth, Calumet shall, in connection with receiving Services, follow the
policies, procedures and practices in effect before the date of this
Agreement including providing information and documentation sufficient for
Spinco to perform the Services as they were performed before the date of
this Agreement and making available, as reasonably requested by Spinco,
sufficient resources and timely decisions, approvals and acceptances so
that Spinco may accomplish its obligations hereunder in a timely manner.
(c) Transitional Nature of Services; Changes. The Parties acknowledge
the transitional nature of the Services and that Spinco may make changes
from time to time in the manner of performing the Services if Spinco is
making similar changes in performing similar services for members of the
Spinco Group and if Spinco furnishes to Calumet substantially the same
notice Spinco shall provide members of the Spinco Group respecting such
changes.
(d) Responsibility for Errors; Delays. Spinco's sole responsibility to
Calumet:
(i) for errors or omissions in Services, shall be to furnish
correct information and/or adjustment in the Services, at no
additional cost or expense to Calumet; provided, Calumet must promptly
advise Spinco of any such error or omission of which it becomes aware
after having used Reasonable Efforts to detect any such errors or
omissions in accordance with the standard of care set forth in Section
2.3(b); and provided, further, that the responsibility to furnish
correct information or an adjustment of services at no additional cost
or expense to Calumet shall not be construed to require Spinco to make
any payment or incur any Liability for which it is not responsible, or
with respect to which it is provided indemnity, under Section 2.7; and
(ii) for failure to deliver any Service because of
Impracticability, shall be to use Reasonable Efforts, subject to
Section 2.4(b), to make the Services available and/or to resume
performing the Services as promptly as reasonably practicable.
(e) Good Faith Cooperation; Consents. The Parties will use good faith
efforts to cooperate with each other in all matters relating to the
provision and receipt of Services. Such cooperation shall include
exchanging information, providing electronic access to systems used in
connection with Services to the extent the systems in use are designed and
configured to permit such access, performing true-ups and adjustments and
obtaining all consents, licenses, sublicenses or approvals necessary to
permit each Party to perform its obligations hereunder. The Parties will
cooperate with each other in making such information available as needed in
the event of a tax audit or Regulatory Proceeding, whether in the United
States or any other country.
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2.4 Certain Limitations.
(a) Service Boundaries and Scope. The Services will be available only
for purposes of supporting the oil and gas operations of Calumet
substantially in the manner conducted prior to the Effective Date.
(b) Impracticability. Spinco shall not be required to provide any
Service to the extent the performance of such Service becomes
"Impracticable" as a result of a cause or causes outside the reasonable
control of Spinco, including armed conflict or economic dislocation
resulting therefrom; embargoes; shortages of labor, production facilities
or transportation; labor difficulties; civil disorders of any kind; action
of any civil or military authorities; fires; floods; and accidents or to
the extent the performance of such Services would require Spinco to violate
any laws, rules or regulations or would result in the breach of any
contract.
(c) Sale, Transfer, Assignment. Calumet may not sell, transfer, assign
or otherwise use the Services provided hereunder, in whole or in part, for
the benefit of any Person.
2.5 Confidentiality.
(a) Information Subject to Other Obligations. The Parties agree that
all Information regarding the Services, including, price, costs and methods
of operation, shall be maintained in confidence and shall be subject to
Section 9.9 of the Separation Agreement.
(b) Internal Use; Title, Copies, Return. Plains and Calumet agree
that:
(i) all systems, procedures and related materials provided to
Plains and Calumet by Spinco in connection with the Services are for
Plains' and Calumet's internal use only and only as related to the
Services or any of the underlying systems used to provide the
Services;
(ii) title to all systems used in performing the Services
provided hereunder shall remain in Spinco or its third party vendors;
and
(iii) upon the termination of any of the Services, Plains and
Calumet shall return to Spinco, as soon as practicable, any equipment
or other property of Spinco relating to the Services that are owned or
leased by it and are or were in Plains' and Calumet's possession or
control.
(c) Survival. The Parties' obligations under this Section 2.5 shall
survive the termination of this Agreement.
2.6 Term; Early Termination.
(a) Term. The term of this Agreement shall commence on the date hereof
and shall remain in effect through the earlier of (i) the date Calumet is
no longer a Subsidiary
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of Plains, (ii) the date Calumet transfers all or substantially all of its
assets to a Person that is not a Subsidiary of Plains, and (iii) the third
anniversary of the Effective Date or until such earlier time as all
Services are terminated as provided in this Section. This Agreement shall
automatically renew at the end of the initial term for successive one-year
terms unless either Party sets forth in writing its desire to terminate
this Agreement at least 30 days in advance of such termination.
(b) Termination by Plains. Calumet may terminate this Agreement either
with respect to all, or with respect to any one or more, of the Services
provided hereunder at any time and from time to time, for any reason or no
reason, by giving written notice to Spinco at least 90 days in advance of
the effective date of the termination.
(c) Termination of Less Than all Services. In the event of any
termination with respect to one or more, but less than all, Services, this
Agreement shall continue in full force and effect with respect to any
Services not terminated hereby.
2.7 Disclaimer, Limitation of Liability and Indemnification.
(a) Disclaimer. Spinco shall provide the Services with substantially
the same degree of care as it employs in making the same services available
for its own operations; provided, however, that Spinco shall not be liable
to Plains, Calumet or any other Person for any loss, damage or expense that
may result therefrom or from any change in the manner in which Spinco
renders such services, so long as Spinco deems such change necessary or
desirable in the conduct of its own operations. SPINCO DISCLAIMS ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH
RESPECT TO THE SERVICES. SPINCO MAKES NO REPRESENTATIONS OR WARRANTIES AS
TO THE QUALITY, SUITABILITY OR ADEQUACY OF THE SERVICES FOR ANY PURPOSE OR
USE.
(b) Indemnification of Plains. Spinco and its Subsidiaries shall have
no Liability to Plains and Calumet with respect to their furnishing any of
the Services hereunder except for Liabilities arising out of or resulting
from the gross negligence or willful misconduct occurring after the
Effective Date of Spinco or any member of the Spinco Group. Spinco will
indemnify, defend and hold harmless Plains and Calumet in respect of all
such Liabilities arising out of or resulting from such gross negligence or
willful misconduct. Such indemnification obligation shall be a Liability of
Spinco for purposes of the Separation Agreement and the provisions of
Article III of the Separation Agreement with respect to indemnification
shall govern with respect thereto.
(c) Indemnification of Spinco. Plains and the other members of the
Plains Group shall indemnify and hold harmless Spinco and its Subsidiaries
in respect of all Liabilities arising out of or resulting from Spinco's
furnishing or failing to furnish the Services to Plains provided for in
this Agreement, other than Liabilities arising out of or resulting from the
gross negligence or willful misconduct of Spinco or any other member of the
Spinco Group. The provisions of this indemnity shall apply only to Losses
that relate directly to the provision of Services. Such indemnification
obligation shall be a
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Liability of Plains and Calumet (and a Spinco Excluded Liabilities) for
purposes of the Separation Agreement and the provisions of Article III of
the Separation Agreement with respect to indemnification shall govern with
respect thereto.
(d) Third Party Claims. Any third party claims resulting from or
arising out of or in connection with this Agreement or the performance of
or failure to perform the Services will be resolved according to the
procedures set forth in the Separation Agreement.
(e) Limitation of Liability. IN NO EVENT SHALL PLAINS OR SPINCO, OR
ANY MEMBER OF THE PLAINS GROUP OR THE SPINCO GROUP OR THEIR RESPECTIVE
DIRECTORS, OFFICERS AND EMPLOYEES BE LIABLE TO PLAINS OR SPINCO, OR ANY
OTHER MEMBER OF THE PLAINS GROUP OR THE SPINCO GROUP FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS,
HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE)
ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT
THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION
OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THE SEPARATION
AGREEMENT OR ANY ANCILLARY AGREEMENT. THE INDEMNIFICATION PROVIDED IN THIS
ARTICLE II WILL BE APPLICABLE WHETHER OR NOT THE SOLE, JOINT OR
CONTRIBUTING NEGLIGENCE OF THE INDEMNITEE IS ALLEGED OR PROVEN. THE PARTIES
AGREE THE PRECEDING SENTENCE IS COMMERCIALLY CONSPICUOUS.
(f) Subrogation of Rights vis-a-vis Third Party Contractors. If any
Liability arises from the performance of Services hereunder by a third
party contractor, Plains and Calumet shall be subrogated to such rights, if
any, as Spinco may have against such third party contractor with respect to
the Services provided by such third party contractor to or on behalf of
Plains or Calumet. Subrogation under this Section 2.7(f) shall not affect
the obligation of Spinco to perform Services under this Agreement.
(g) Survival. The Parties' obligations under this Section 2.7 shall
survive the termination of this Agreement.
2.8 Representatives. Each Party shall by notice to the other appoint one or
more Representatives to facilitate communications and performance under this
Agreement. Each Party may treat an act of a Representative of the other Party as
being authorized by the other Party without inquiring behind such act or
ascertaining whether such Representative had authority to so act. Each Party may
at any time and from time to time to replace any of its Representatives by
giving notice in writing to the other Party setting forth the name of (i) each
Representative to be replaced and (ii) the replacement, and certifying that the
replacement Representative is authorized to act for the Party giving the notice
in all matters relating to this Agreement (or matters relating to one category
of Services as aforesaid).
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ARTICLE III
MISCELLANEOUS
3.1 Entire Agreement. This Agreement, the Separation Agreement, the other
Ancillary Agreements and the Exhibits and Schedules referenced or attached
hereto and thereto, constitute the entire agreement between the Parties with
respect to the subject matter hereof and shall supersede all prior written and
oral and all contemporaneous oral agreements and understandings with respect to
the subject matter hereof.
3.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to its principles
of conflicts of law.
3.3 Notices. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent or (iv) if
sent by facsimile, on the date confirmation of transmission is received
(provided that a copy of any notice delivered pursuant to this clause (iv) shall
also be sent pursuant to clause (ii) or (iii)), addressed to the attention of
the addressee's Chief Executive Officer at the address of its principal
executive office or to such other address or facsimile number for a party as it
shall have specified by like notice.
3.4 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
3.5 Binding Effect; Assignment. This Agreement shall inure to the benefit
of and be binding upon the Parties and their respective legal representatives
and successors and nothing in this Agreement, express or implied, is intended to
confer upon any other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. Except as contemplated by Section 2.1(c),
this Agreement may not be assigned by any Party without the prior written
consent of the other Party, which may be withheld for any or no reason.
3.6 Severability. The provisions of this Agreement will be deemed severable
and the invalidity or unenforceability of any provision will not affect the
validity or enforceability of the other provisions hereof; provided that if any
provision of this Agreement, as applied to any Party or to any circumstance, is
adjudged by a Governmental Authority, arbitrator, or mediator not to be
enforceable in accordance with its terms, the Parties agree that the
Governmental Authority, arbitrator or mediator making such determination will
have the power to modify the provision in a manner consistent with its
objectives such that it is enforceable, and/or to delete specific words or
phrases, and in its reduced form, such provision will then be enforceable and
will be enforced.
3.7 Failure or Indulgence not Waiver; Remedies Cumulative. No failure or
delay on the part of either Party in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or
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agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
3.8 Waivers, Modifications, Amendment. No provision of this Agreement may
be amended, modified or waived, except in the manner set forth in the Separation
Agreement.
3.9 Headings. The heading references herein are for convenience purposes
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
3.10 Relationship of Parties. Nothing in this Agreement shall be deemed or
construed by the Parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the Parties, and no
provision contained herein, and no act of the Parties, shall be deemed to create
any relationship between the Parties other than the relationship of independent
contractor nor be deemed to vest any rights, interest or claims in any third
parties.
3.11 Provisions Unaffected. Nothing contained in this Agreement shall
affect the rights and obligations of Plains, Calumet or Spinco under the
Separation Agreement.
3.12 No Third-Party Beneficiaries. This Agreement is solely for the benefit
of the Parties and should not be deemed to Confer upon third parties any remedy,
claim, Liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
3.13 Rights of the Parties. Nothing expressed or implied in this Agreement
is intended or will be construed to confer upon or give any Person, other than
the Parties and to the extent provided herein their respective Subsidiaries, any
rights or remedies under or by reason of this Agreement or any transaction
contemplated thereby.
3.14 Records. Each Party shall create and maintain full and accurate books
and records in connection with the provision of Services, and all other records
relevant to this Agreement, and upon reasonable notice from the other Party
shall make available for inspection and copy by such other Party's agents such
records during reasonable business hours.
3.15 Dispute Resolution. If a Dispute results from or arises out of or in
connection with this Agreement or the performance of, or failure to perform, the
Services, the Parties will use the procedures set forth in Article VIII of the
Separation Agreement, in lieu of other available remedies, to resolve the same.
3.16 Taxes.
(a) General. Plains and Calumet shall bear all taxes, duties and other
similar charges (and any related interest and penalties), imposed as a
result of its receipt of Services under this Agreement, including any tax
that Plains or Calumet is required to withhold or deduct from payments to
Spinco, except any net income tax imposed upon
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Spinco by the country of its incorporation or any governmental entity
within its country of incorporation.
(b) Sales Tax Liability and Payment. Notwithstanding Section 3.1(a),
Plains and Calumet are liable for and will indemnify and hold harmless
Spinco from all sales, use and similar taxes (plus any penalties, fines or
interest thereon) (collectively, "Sales Taxes") assessed, levied or imposed
by any governmental or taxing authority on the providing of Services by
Spinco to Calumet. Spinco shall collect from Plains or Calumet any Sales
Tax that is due on the Service it provides to Calumet and shall pay such
Sales Tax so collected to the appropriate governmental or taxing authority.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Technical Services
Agreement as of the date first above written.
PLAINS RESOURCES INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Vice President and Treasurer
CALUMET FLORIDA, L.L.C.
By: Plains Resources Inc., its sole member
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Vice President and Treasurer
PLAINS EXPLORATION & PRODUCTION COMPANY, L.P.
By: ▇▇▇▇▇▇▇ Resources, Inc., its general partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Vice President and Treasurer
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