EXHIBIT 10.5
MASTER SEPARATION AGREEMENT
BY AND BETWEEN
PLAINS RESOURCES INC.
AND
PLAINS EXPLORATION & PRODUCTION COMPANY, L.P.
Dated as of
July 3, 2002
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS................................................................2
ARTICLE II. SEPARATION................................................................9
2.1. Reorganization...............................................................9
2.2. Closing Deliveries for the Separation.......................................10
2.3. Future Reorganization.......................................................11
2.4. Spinco Future Assets and Liabilities........................................11
2.5. No Representations..........................................................13
2.6. Further Assurances..........................................................13
2.7. Methods of Transfer and Assumption..........................................13
2.8. Nonassignable Assets and Assumed Liabilities................................14
2.9. Costs of Transfer...........................................................15
ARTICLE III. MUTUAL RELEASES; INDEMNIFICATION........................................15
3.1. Release of Pre-Closing Claims...............................................15
3.2. Indemnification by Spinco...................................................17
3.3. Indemnification by Plains...................................................18
3.4. Indemnification Obligations Net of Insurance Proceeds and Other Amounts.....19
3.5. Procedures for Indemnification of Third Party Claims........................19
3.6. Additional Matters..........................................................21
3.7. Remedies Cumulative.........................................................21
3.8. Indemnification of Directors and Officers...................................21
3.9. Contribution................................................................22
3.10. ▇▇▇▇▇▇▇ Inc................................................................22
ARTICLE IV. THE EXCHANGE OFFER.......................................................22
4.1. Exchange Offer..............................................................22
ARTICLE V. THE IPO AND ACTIONS PENDING THE IPO.......................................22
5.1. Transactions Prior to the IPO...............................................22
5.2. Cooperation.................................................................23
5.3. Conditions Precedent to Consummation of the IPO.............................23
5.4. Registration Rights Agreement...............................................24
ARTICLE VI. CORPORATE GOVERNANCE AND CERTAIN FINANCIAL REPORTING AND OTHER MATTERS...24
6.1. Spinco Board Representation.................................................24
6.2. Issuance of Stock...........................................................25
6.3. Spinco Officers.............................................................26
ARTICLE VII. THE DISTRIBUTION........................................................26
7.1. The Distribution............................................................26
7.2. Actions Prior to the Distribution...........................................26
7.3. Sole Discretion of Plains...................................................27
7.4. Conditions to the Distribution..............................................27
7.5. Fractional Shares...........................................................28
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ARTICLE VIII. ARBITRATION; DISPUTE RESOLUTION........................................28
8.1. Agreement to Arbitrate......................................................28
8.2. Escalation..................................................................28
8.3. Demand for Arbitration......................................................29
8.4. Arbitrators.................................................................30
8.5. Hearings....................................................................31
8.6. Discovery and Certain Other Matters.........................................31
8.7. Certain Additional Matters..................................................32
8.8. Continuity of Service and Performance.......................................33
8.9. Law Governing Arbitration Procedures........................................33
ARTICLE IX. COVENANTS AND OTHER MATTERS..............................................33
9.1. Other Agreements............................................................33
9.2. Further Instruments.........................................................33
9.3. Agreement for Exchange of Information.......................................34
9.4. Auditors and Audits, Annual and Quarterly Statements and Accounting.........35
9.5. Preservation of Legal Privileges............................................37
9.6. Payment of Expenses.........................................................38
9.7. Governmental Approvals......................................................38
9.8. Compliance with Covenants...................................................38
9.9. Confidentiality.............................................................38
9.10.Operation of ▇▇▇▇▇▇▇ Inc....................................................40
ARTICLE X. NON-COMPETITION...........................................................40
10.1. Restricted Business of Plains..............................................40
10.2. Restricted Business of Spinco..............................................40
10.3. Scope of Restricted Business...............................................40
10.4. Enforcement................................................................40
ARTICLE XI. MISCELLANEOUS............................................................41
11.1. Limitation of Liability....................................................41
11.2. Entire Agreement...........................................................41
11.3. Governing Law..............................................................41
11.4. Termination................................................................41
11.5. Notices....................................................................41
11.6. Counterparts...............................................................42
11.7. Binding Effect; Assignment.................................................42
11.8. Severability...............................................................42
11.9. Failure or Indulgence not Waiver; Remedies Cumulative......................42
11.10. Amendment.................................................................42
11.11. Authority.................................................................42
11.12. Interpretation............................................................42
11.13. Conflicting Agreements....................................................43
11.14. Electronic Signatures.....................................................43
11.15. Service Agreement.........................................................43
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Exhibits:
Exhibit A - Employee Matters Agreement
Exhibit B - Intellectual Property Agreement
Exhibit C - Plains Transition Services Agreement
Exhibit D - Spinco Transition Services Agreement
Exhibit E - Tax Allocation Agreement
Exhibit F - Technical Services Agreement
Schedules:
Schedule A-1 - Spinco Assets
Schedule A-2 - Spinco Future Assets
Schedule B-1 - Spinco Liabilities
Schedule B-2 - Spinco Future Liabilities
Schedule C - Plains Group Subsidiaries
Schedule D - Spinco Group Subsidiaries
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MASTER SEPARATION AGREEMENT
THIS MASTER SEPARATION AGREEMENT (this "Agreement") is entered into as of
July __, 2002, by and between Plains Resources Inc., a Delaware corporation
("Plains" and, along with Spinco, the "Parties"), and Plains Exploration &
Production Company, L.P., a California limited partnership ("Plains
Exploration").
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, the Board of Directors of Plains has determined that it would be
appropriate and desirable for Plains to separate the Spinco Group from the
Plains Group, and in connection therewith, for Spinco or its Subsidiaries to
acquire certain entities currently associated with the Spinco Business and
certain other assets from Plains or the other members of the Plains Group and to
assume related liabilities; and
WHEREAS, ▇▇▇▇▇▇▇ Inc., the general partner of Spinco, has also approved
such transactions on behalf of Spinco; and
WHEREAS, on the date hereof, Calumet Florida, Inc. has converted into a
Delaware limited liability company; and
WHEREAS, on the date hereof Spinco and Plains E&P have consummated an
offering (the "Bond Offering") of senior subordinated notes (the "Rule 144A
Notes") in a transaction exempt from registration pursuant to Rule 144A of the
Securities Act of 1933, as amended (the "Securities Act"); and
WHEREAS, the Parties currently contemplate that after the date hereof,
Spinco and Plains E&P will conduct an offering to holders of the Rule 144A Notes
to exchange (the "Exchange Offer") new senior subordinated notes of Spinco and
Plains E&P (the "Exchange Notes") for Rule 144A Notes pursuant to a registration
statement on Form S-4 filed pursuant to the Securities Act; and
WHEREAS, the Parties 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 Parties currently contemplate that Spinco will make an initial
public offering ("IPO") of an amount of its common stock pursuant to a
registration statement on Form S-1 filed pursuant to the Securities Act that
will reduce Plains' ownership of Spinco by less than 20%; and
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WHEREAS, the Parties currently contemplate that ▇▇▇▇▇▇▇ Inc. will merge
(the "Merger") with and into Plains; and
WHEREAS, Plains currently contemplates that, following the IPO, Plains will
distribute to the holders of its capital stock, by means of a pro rata
distribution, all of the shares of Spinco common stock it then owns (the
"Distribution"); and
WHEREAS, on May 22, 2002, Plains received a favorable private letter ruling
from the Internal Revenue Service (the "Service") to the effect that, for United
States federal income tax purposes, a distribution by Plains of 100% of the
shares of Spinco common stock will qualify under Section 355 of the Code as a
tax-free distribution (the "Tax Ruling"); and
WHEREAS, Plains intends to file a supplemental private letter ruling
request with the Service to confirm that, for United States federal income tax
purposes, a distribution by Plains of at least 80% of the shares of Spinco
common stock following the IPO would not affect the tax treatment set forth in
the Tax Ruling (such supplemental private letter ruling from the Service, the
"Supplemental Tax Ruling"); and
WHEREAS, the Parties intend that the Distribution will qualify as a
tax-free distribution under Section 355 of the Code, and that this Agreement is
intended to be, and is hereby adopted as, a plan of reorganization under Section
368 of the Code; and
WHEREAS, the Parties intend in this Agreement, including the Exhibits and
Schedules hereto, to set forth the principal arrangements between them regarding
the Separation, the Exchange Offer, the IPO and the Distribution.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the Parties agree as follows:
ARTICLE I.
DEFINITIONS
"AAA" is defined in Section 8.5.
"Action" means any demand, hearing, proceeding, action, suit, countersuit,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
An "Affiliate" of any Person means another Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such first Person. For this purpose "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the Person controlled, whether
through ownership of voting securities, by contract or otherwise.
Notwithstanding anything herein to the contrary, no member of the Spinco Group
shall be deemed an Affiliate of any member of the Plains Group and no member of
the Plains Group shall be deemed an Affiliate of any member of the Spinco Group.
"Agreement" is defined in the Preamble.
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"Ancillary Agreements" means the Spinco Transition Services Agreement, the
Plains Transition Services Agreement, the Employee Matters Agreement, the Tax
Allocation Agreement, the Technical Services Agreement and the Intellectual
Property Agreement.
"Applicable Deadline" is defined in Section 8.3(b).
"Appropriate Member of the Plains Group" is defined in Section 3.3.
"Appropriate Member of the Spinco Group" is defined in Section 3.2.
"Arbitration Demand Date" is defined in Section 8.3(a).
"Arbitration Demand Notice" is defined in Section 8.3(a).
"▇▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇▇ Inc., a Delaware corporation.
"Bond Offering" is defined in the Recitals.
"Bond Offering OM" means the offering memorandum used in connection with
the Bond Offering, including any preliminary offering memorandum, final offering
memorandum or any supplement or amendment to any of the foregoing.
"Business Day" means a day other than a Saturday, a Sunday or a day on
which banking institutions in the State of Texas are authorized or obligated by
law or executive order to close.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commission" means the Securities and Exchange Commission.
"Confidential Information" is defined in Section 9.9.
"Conversion" is defined in the Recitals.
"Converted Corporation" is defined in the Recitals.
"Disputes" is defined in Section 8.1.
"Distribution" is defined in the Recitals.
"Distribution Agent" is defined in Section 7.1(a).
"Distribution Date" is defined in Section 7.1(a).
"Employee Matters Agreement" means the Employee Matters Agreement by and
between Plains and Spinco, substantially in the form of Exhibit A.
"Escalation Notice" is defined in Section 8.2(a).
"Excess Director Number" is defined in Section 6.1(d).
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" is defined in the Recitals.
"Exchange Offer" is defined in the Recitals.
"Exchange Offer Prospectus" means the prospectus included in the Exchange
Offer Registration Statement, including any preliminary prospectus, final
prospectus or any supplement to or amendment of any of the foregoing.
"Exchange Offer Registration Rights Agreement" means the registration
rights agreement entered into by Spinco in connection with the Exchange Offer
pursuant to the terms of the purchase agreement entered into in connection with
the Bond Offering.
"Exchange Offer Registration Statement" means the Registration Statement on
Form S-4 of Spinco to be filed with the Commission pursuant to the Securities
Act registering the Exchange Notes to be issued in the Exchange Offer, together
with all amendments thereto.
"Existing Authority" is defined in Section 9.7.
"Final Order," "Order," "Injunction," "Decree," "Legal Restraint,"
"Prohibition," "Writ" or other words of similar import mean final adjudication
by a court or regulatory agency that is no longer subject to rehearing or
appeal.
"Governmental Approvals" means any notices, reports or other filings to be
made, or any consents, registrations, approvals, permits or authorizations to be
obtained from, any Governmental Authority.
"Governmental Authority" means any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority.
"Group" means either of the Plains Group or the Spinco Group, as the
context requires.
"Hedging Agreements" means the Plains ISDA agreements described in Schedule
A-1.
"Indebtedness" of any Person means, (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services, (f)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, or other encumbrance on property owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, (g) all guarantees by such Person of Indebtedness of others, (h) all
capital lease obligations of such Person, and (i) all securities or other
similar instruments convertible or exchangeable into any of the foregoing.
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"Indemnifying Party" is defined in Section 3.4(a).
"Indemnitee" is defined in Section 3.4(a).
"Information" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
"Insurance Proceeds" means those monies: (a) received by an insured from an
insurance carrier; or (b) paid by an insurance carrier on behalf of the insured;
in any such case net of any applicable premium adjustments (including reserves
and retrospectively rated premium adjustments) and net of any costs or expenses
incurred in the collection thereof.
"Intellectual Property Agreement" means the Intellectual Property
Agreement, by and among Plains and the members of the Spinco Group,
substantially in the form of Exhibit B.
"Intended Transferee" is defined in Section 2.8.
"Intended Transferor" is defined in Section 2.8.
"Intercompany Debt" means the amount of Indebtedness due as of the date
hereof to Plains from Spinco, Plains Illinois, Plains International and PMCT, as
more fully described on Schedule A-1.
"IPO" is defined in the Recitals.
"IPO Closing Date" means the first date on which Spinco receives the
proceeds of any sale of Spinco Common Stock in the IPO.
"IPO Prospectus" means the prospectus included in the IPO Registration
Statement, including any prospectus subject to completion, final prospectus or
any supplement to or amendment of any of the foregoing.
"IPO Registration Statement" means the Registration Statement on Form S-1
of Spinco to be filed with the Commission pursuant to the Securities Act of
1933, as amended, registering the shares of Spinco Common Stock to be issued in
the IPO, together with all amendments thereto.
"Lease Agreement" means the Office Lease at One ▇▇▇▇▇ Center, dated October
1997, between Trizec ▇▇▇▇▇ Center Limited Partnership and Plains, as amended or
restated from time to time.
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"Liabilities" means any and all Indebtedness, liabilities and obligations,
whether accrued, fixed or contingent, mature or inchoate, known or unknown,
reflected on a balance sheet or otherwise, including those arising under any
law, rule, regulation, Action or order of any Governmental Authority or any
judgment of any court of any kind or any award of any arbitrator of any kind,
and those arising under any contract, commitment or undertaking.
"Losses" means any and all damages, losses, deficiencies, obligations,
penalties, judgments, settlements, claims, payments, fines, interest costs and
expenses (including the costs and expenses of any and all Actions and demands,
assessments, judgments, settlements and compromises relating thereto and the
costs and expenses of attorneys', accountants', consultants' and other
professionals' fees and expenses incurred in the investigation or defense
thereof or the enforcement of rights hereunder), including direct and
consequential damages, but excluding punitive damages (other than punitive
damages awarded to any third party against an Indemnified Party).
"Merger" is defined in the Recitals.
"NYSE" means the New York Stock Exchange.
"PAA" means Plains All American Pipeline, L.P.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a Governmental Authority.
"Plains" is defined in the Preamble.
"Plains Auditors" means Plains' independent certified public accountants.
"Plains Business" means any business of Plains and its Subsidiaries,
including Plains' midstream business or interest therein, other than the Spinco
Business.
"Plains Designees" is defined in Section 6.1(b).
"Plains E&P" means Plains E&P Company, a Delaware corporation.
"Plains Exploration" is defined in the Preamble.
"Plains Group" means Plains, each Subsidiary of Plains (other than any
member of the Spinco Group) immediately after the date hereof, including the
Subsidiaries set forth in Schedule C, and each Person that becomes a Subsidiary
of Plains after the date hereof.
"Plains Illinois" means Plains Illinois Inc., a Delaware corporation.
"Plains Indemnitees" is defined in Section 3.2.
"Plains International" means Plains Resources International Inc., a
Delaware corporation.
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"Plains Transition Services Agreement" means the Transition Services
Agreement, by and between Plains and Spinco, substantially in the form of
Exhibit D.
"PMCT" means PMCT, Inc., a Delaware corporation.
"Privilege" is defined in Section 9.5.
"Reasonable Efforts" means efforts that are designed to enable a Party,
directly or indirectly, to satisfy a condition to, or otherwise assist in the
consummation of, the transactions contemplated by this Agreement and that do not
require the performing Party to expend any funds or assume Liabilities other
than expenditures and Liabilities that are customary and reasonable in nature
and amount in the context of the transactions contemplated by this Agreement.
"Record Date" means the close of business on the date to be determined by
the Board of Directors of Plains as the record date for determining the
stockholders entitled to receive shares of Spinco Common Stock in the
Distribution.
"Regulatory Proceedings" means filings, notices, adjudicatory proceedings,
rulemakings, enforcement actions before a Governmental Authority relative to
regulatory activity, and any other proceedings at or before any regulatory or
administrative agency. The term shall also refer to appellate activities
relative to any of the foregoing, including actions seeking injunctions, writs
of mandamus and appeals.
"Required Transfer Consent" is defined in Section 2.8.
"Rule 144A Notes" is defined in the Recitals.
"Securities Act" is defined in the Recitals.
"Separation" means the transfer of the Spinco Assets to Spinco and the
assumption by Spinco and its Subsidiaries of the Spinco Liabilities, all as more
fully described in this Agreement and the Ancillary Agreements.
"Service" is defined in the Recitals.
"Spinco" means, as the case may be, Plains Exploration or the Converted
Corporation.
"Spinco Assets" means the assets identified or described in Schedule A-1.
"Spinco Auditors" means Spinco's independent certified public accountants.
"Spinco Balance Sheet" means the combined balance sheet of Spinco and its
Subsidiaries as of March 31, 2002.
"Spinco Board" means the Board of Directors of Spinco.
"Spinco Business" means (a) the business and operations conducted by Spinco
and its Subsidiaries after giving effect to the transactions described in
Article II, including the
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"upstream" activities of acquiring, exploiting, developing, exploring for and
producing crude oil and natural gas conducted by Plains and its Subsidiaries in
onshore and offshore California, Illinois, Louisiana, Kansas, Kentucky and
Indiana (but not Florida), and (b) except as otherwise specifically provided
herein, any terminated, divested or discontinued business or operations that at
the time of termination, divestiture or discontinuation related primarily to the
Spinco Business as then conducted.
"Spinco Common Stock" means the common stock, par value $.01 per share, of
Spinco.
"Spinco Debt Obligations" means all Indebtedness of Spinco or any other
member of the Spinco Group, excluding all Indebtedness of any member of the
Plains Group to the extent it constitutes Indebtedness of Spinco or any other
member of the Spinco Group only under clause (f) or clause (g) of the definition
of Indebtedness.
"Spinco Excluded Liabilities" means (i) any and all Liabilities that are
expressly contemplated by this Agreement or any Ancillary Agreement as
Liabilities to be retained or assumed by Plains or any other member of the
Plains Group; (ii) all agreements and obligations of any member of the Plains
Group under this Agreement or any of the Ancillary Agreements; and (iii) all
Liabilities primarily relating to, arising out of or resulting from: (A) the
operation of the Plains Business, (B) the operation of any business conducted at
any time after the date hereof by any member of the Plains Group, or (C) federal
or state securities laws or regulations, or the regulations of any self
regulatory authority or similar body, based upon or resulting from acts or
omissions, or alleged acts or omissions, by Plains or any of its Subsidiaries or
Affiliates on or before the date hereof (except as provided in Section 3.2(d)),
and in any case whether arising before, on or after the date hereof.
"Spinco Future Assets" means the assets identified or described on Schedule
A-2.
"Spinco Future Liabilities" means the Liabilities listed or described on
Schedule B-2 and all Liabilities (other than Taxes) primarily relating to,
arising out of or resulting from any Spinco Future Assets.
"Spinco Group" means Spinco, each Subsidiary of Spinco immediately after
the date hereof, including the Subsidiaries set forth in Schedule D, and each
Person that becomes a Subsidiary of Spinco after the date hereof.
"Spinco Indemnitees" is defined in Section 3.3.
"Spinco Liabilities" means (without duplication): (i) any and all
Liabilities that are expressly contemplated by this Agreement or any Ancillary
Agreement to be assumed by Spinco or any member of the Spinco Group, including
the Liabilities listed or described on Schedule B-1; (ii) all agreements and
Liabilities of any member of the Spinco Group under this Agreement or any of the
Ancillary Agreements; (iii) all Liabilities (other than Taxes) primarily
relating to, arising out of or resulting from: (A) the ownership or operation of
the Spinco Business, as conducted at any time prior to, on or after the date
hereof, (B) the ownership or operation of any business conducted at any time
after the date hereof by any member of the Spinco Group, (C) the ownership or
operation of any Spinco Assets, or (D) the Spinco Debt Obligations, and in any
case whether arising before, on or after the date hereof; and (iv) all
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Liabilities of Spinco reflected as such in the Spinco Balance Sheet, subject to
any discharge of such Liabilities subsequent to the date of the Spinco Balance
Sheet. Notwithstanding the foregoing, (x) the Spinco Liabilities shall exclude
the Spinco Excluded Liabilities and (y) the Spinco Future Liabilities shall
become Spinco Liabilities on the date assumed by Spinco under Section 2.4.
"Spinco Transition Services Agreement" means the Plains Exploration &
Production Company, L.P. Transition Services Agreement, by and between Plains
and Spinco, substantially in the form of Exhibit D.
"▇▇▇▇▇▇▇ Inc." means ▇▇▇▇▇▇▇ Resources, Inc., a California corporation.
A "Subsidiary" of any Person means any corporation or other organization
whether incorporated or unincorporated of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries.
"Supplemental Tax Ruling" is defined in the Recitals.
"Taxes" is defined in the Tax Allocation Agreement.
"Tax Allocation Agreement" means the Tax Allocation Agreement, by and
between Plains and Spinco, substantially in the form of Exhibit E.
"Tax Ruling" is defined in the Recitals.
"Technical Services Agreement" means the Technical Services Agreement, by
and between Plains, Calumet Florida, L.L.C. and Spinco, substantially in the
form of Exhibit F.
"Third Party Claim" is defined in Section 3.5(a).
"Transfer Obstacle" is defined in Section 2.8.
"Underwriters" means the underwriters named in the Underwriting Agreement.
"Underwriting Agreement" is defined in Section 5.1(b).
ARTICLE II.
SEPARATION
2.1. Reorganization. To effect the Separation, as of the date hereof:
(a) Spinco Assets. Plains or such other member of the Plains Group
hereby assigns and transfers to Spinco all of its right, title and interest
in and to the Spinco Assets. For federal income tax purposes, the transfer
of the Spinco Assets held directly
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by ▇▇▇▇▇▇▇ Inc. will be deemed a liquidating distribution to Plains and a
subsequent contribution from Plains to Spinco.
(b) Spinco Liabilities. Spinco hereby assumes and agrees to pay and
fully perform when due the Spinco Liabilities. Spinco shall not assume or
have any Liability for (i) the Spinco Excluded Liabilities and (ii) the
Spinco Future Liabilities except as provided in Section 2.4. For federal
income tax purposes, the assumption of the Spinco Liabilities held directly
by ▇▇▇▇▇▇▇ Inc. will be deemed a liquidating distribution to Plains and a
subsequent contribution from Plains to Spinco.
(c) Agreements. Plains, other members of the Plains Group, Spinco and
other members of the Spinco Group, as the case may be, have entered or,
when requested, will enter into the Ancillary Agreements.
2.2. Closing Deliveries for the Separation.
(a) On or prior to the date hereof, Plains has delivered the following
to Spinco:
(i) stock certificates, accompanied by executed stock powers,
representing all of the capital stock of ▇▇▇▇▇▇▇▇, Plains
Illinois, Plains International and PMCT;
(ii) instruments, if any, representing the Intercompany Debt;
(iii) the following agreements executed by Plains and other
members of the Plains Group, as the case may be:
(1) the Spinco Transition Services Agreement;
(2) the Plains Transition Services Agreement;
(3) the Employee Matters Agreement;
(4) the Tax Allocation Agreement;
(5) the Technical Services Agreement; and
(6) the Intellectual Property Agreement;
(iv) required written waivers and consents of all of the bank
counterparties to all of the Hedging Agreements to the
transactions contemplated hereby and by the Bond Offering, in
form and substance satisfactory to Spinco;
(v) consent of Chevron U.S.A. Inc. and Chevron Pipe Line Company
to the transactions contemplated hereby, in form and substance
satisfactory to Spinco; and
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(vi) such other agreements, documents or instruments related to
the consummation of the Separation or the Bond Offering that
Spinco reasonably requests.
(b) On the date hereof, Spinco shall deliver the following to Plains:
(i) the following agreements executed by Spinco and other members
of the Spinco Group, as the case may be:
(1) the Spinco Transition Services Agreement;
(2) the Plains Transition Services Agreement;
(3) the Employee Matters Agreement;
(4) the Tax Allocation Agreement;
(5) the Technical Services Agreement; and
(6) the Intellectual Property Agreement;
(ii) such other agreements, documents or instruments related to
the consummation of the Separation or the Bond Offering that
Plains reasonably requests.
2.3. Future Reorganization.
(a) On or before the IPO Closing Date, on a date to be mutually agreed
upon by the Parties:
(i) Conversion. The Parties will take all actions necessary or
advisable to consummate the Conversion under the applicable laws
of the States of California and Delaware.
(b) On or before the Distribution Date, on a date to be mutually
agreed upon by the Parties:
(i) Merger. The Parties will take all actions necessary or
advisable to consummate the Merger under applicable laws of the
States of California and Delaware.
2.4. Spinco Future Assets and Liabilities.
(a) On or before the Distribution Date, on a date to be mutually
agreed upon by the Parties:
(i) Spinco Future Assets. Plains or such other member of the
Plains Group will assign and transfer to Spinco or such other
member of the
11
Spinco Group as designated by Spinco all of Plains' right, title
and interest in and to the Spinco Future Assets.
(ii) Spinco Future Liabilities. Spinco will assume and agree to
pay and fully perform when due the Spinco Future Liabilities.
Spinco shall not assume or have any Liability for the Spinco
Excluded Liabilities.
(iii) Office Lease. Plains will sublease a portion of its office
space to Spinco and will enter into a sublease agreement with
Spinco providing for (i) a pro rata allocation of the lease
payments under the Lease Agreement based on office space occupied
by Plains and Spinco, (ii) a sublease term equal to the remaining
term of the Lease Agreement, and (iii) other ordinary and
customary provisions and terms in a subleasing arrangement
governing office space in Houston, Texas, all in accordance with
the Lease Agreement.
(iv) Plains All American Pipeline, L.P. Plains and Spinco agree
to negotiate with PAA and use their Reasonable Efforts to, on or
before the Distribution Date, (a) amend the Omnibus Agreement by
and between Plains, certain Subsidiaries of Plains, PAA and
certain Subsidiaries of PAA dated November 23, 1998 to terminate
the non-compete provisions, and (b) terminate the existing Crude
Oil Marketing Agreement by and between Plains, certain
Subsidiaries of Plains and Plains Marketing, L.P., a Subsidiary
of PAA, and enter into a new Crude Oil Marketing Agreement by and
between Spinco, certain Subsidiaries of Spinco and Plains
Marketing, L.P., a Subsidiary of PAA.
(b) The Parties agree that (i) transfers of the Spinco Future Assets
shall be effected by delivery by Plains or such other member of the Plains
Group to Spinco or such other member of the Spinco Group as designated by
Spinco, of (1) with respect to those assets that constitute stock,
certificates endorsed in blank or evidenced or accompanied by stock powers
or other instruments of transfer endorsed in blank, against receipt, (2)
with respect to any real property interest or any improvements thereon, a
general warranty deed with general warranty of limited application limiting
recourse and remedies to title insurance and warranties by predecessors in
title to Plains, and (3) with respect to all other Spinco Future Assets,
such good and sufficient instruments of contribution, conveyance,
assignment and transfer, in form and substance reasonably satisfactory to
the Parties, as shall be necessary to vest in Spinco or such other member
of the Spinco Group as designated by Spinco, all of the title and ownership
interest of Plains in and to any such Spinco Future Assets, and (ii) to the
extent necessary, the assumption of the Spinco Future Liabilities
contemplated pursuant to Section 2.4 shall be effected by delivery by
Spinco or such other member of the Spinco Group as designated by Spinco to
Plains and reasonably acceptable to Plains of such good and sufficient
instruments of assumption, in form and substance reasonably satisfactory to
the Parties, as shall be necessary for the assumption of such Spinco Future
Liabilities. Each Party also agrees to deliver to the other Party such
other documents, instruments and writings as may be
12
reasonably requested by such other Party in connection with the
transactions contemplated hereby.
2.5. No Representations. Notwithstanding any other provisions of this
Agreement to the contrary, (a) THE TRANSFERS AND ASSUMPTIONS REFERRED TO IN THIS
Article II WILL BE MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY NATURE (i)
AS TO THE VALUE OR FREEDOM FROM ENCUMBRANCE OF ANY ASSETS, (ii) AS TO ANY
WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OF,
OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR (iii) AS TO THE LEGAL SUFFICIENCY
TO CONVEY TITLE TO ANY ASSETS, and (b) the instruments of transfer or assumption
referred to in Section 2.4(b) shall not include any representations and
warranties other than as specifically provided herein. The Parties hereby
acknowledge and agree that ALL ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS."
2.6. Further Assurances. From time to time after the date hereof, Plains
and any other member of the Plains Group shall execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, such other instruments of
conveyance, assignment, transfer and delivery and will take or cause to be taken
such other actions as Spinco may reasonably request in order more effectively to
sell, convey, assign, transfer, and deliver to Spinco or such other member of
the Spinco Group as designated by Spinco any of the Spinco Assets or Spinco
Future Assets, or to enable Spinco to protect, exercise and enjoy all rights and
benefits of Plains or such other member of the Plains Group with respect
thereto, and as otherwise may be appropriate to carry out the transactions
herein contemplated.
2.7. Methods of Transfer and Assumption.
(a) To the extent that the transfer of any Spinco Asset or Spinco
Future Asset or the assumption of any Spinco Liability or Spinco Future
Liability is expressly provided for by the terms of any Ancillary
Agreement, the terms of such Ancillary Agreement shall determine the manner
of the transfer or assumption.
(b) The Parties intend to complete the assignment and transfer of all
Spinco Future Assets and the transfer and assumption of all Spinco Future
Liabilities effective on or prior to the Distribution Date. If any Spinco
Future Asset cannot be assigned or transferred by Plains, or any Spinco
Future Liability cannot be transferred by Plains or assumed by Spinco on or
prior to the Distribution Date for a reason set forth in Section 2.8, such
Section 2.8 shall govern the Parties' rights and obligations with respect
to such Spinco Future Asset or such Spinco Future Liability. In addition to
those transfers and assumptions that the Parties are unable to effect prior
to the Distribution Date, there may exist (i) assets (including Spinco
Assets and Spinco Future Assets) that the Parties discover were, contrary
to the agreements between them, by mistake or omission retained by Plains
or (ii) Liabilities (including Spinco Liabilities and Spinco Future
Liabilities) that the Parties discover were, contrary to the agreements
between them, by mistake or omission not assumed by Spinco. The Parties
shall cooperate in good faith to effect the transfer or retransfer of such
assets, and/or the assumption or reassumption of such Liabilities, in any
case as soon as reasonably practicable, to or by
13
Plains or Spinco or such other member of the Spinco Group as designated by
Spinco, as the case may be.
2.8. Nonassignable Assets and Assumed Liabilities. Notwithstanding any
other provisions of this Agreement to the contrary, this Agreement shall not
constitute an agreement to assign or transfer any Spinco Asset or Spinco Future
Asset, or to transfer and assume any Spinco Liability or Spinco Future
Liability, if an assignment or attempted assignment or transfer or attempted
transfer and assumption of the same without the consent of another Person would
constitute a breach of any contract or agreement or violate any applicable law,
rule or regulation. If any such consent (a "Required Transfer Consent") is not
obtained and/or if for any other reason (a "Transfer Obstacle") an attempted
assignment or attempted transfer and assumption would otherwise be ineffective
or would materially impair the rights of the Party attempting to make such
assignment or transfer (the "Intended Transferor") under any such contract or
agreement so that the Party entitled to the benefits and responsibilities of
such attempted assignment or attempted transfer and assumption (the "Intended
Transferee") would not receive all such rights and responsibilities, then:
(a) The Intended Transferor shall use Reasonable Efforts to obtain the
Required Transfer Consent and/or eliminate the Transfer Obstacle.
(b) Until the Required Transfer Consent is obtained and/or the
Transfer Obstacle is eliminated in accordance with subsection (a) above and
the assignment and transfer of the applicable Spinco Asset or Spinco Future
Asset or the transfer and assumption of the Spinco Liability or Spinco
Future Liability has been effected in accordance with subsection (c) below
and the other provisions of this Agreement:
(i) the Intended Transferor shall use Reasonable Efforts to
provide or cause to be provided to the Intended Transferee, to
the extent permitted by law, the benefits of any such Spinco
Asset or Spinco Future Asset and the Intended Transferor shall
promptly pay or cause to be paid to the Intended Transferee when
received all moneys received by the Intended Transferor with
respect to any such asset,
(ii) in consideration thereof the Intended Transferee shall pay,
perform and discharge on behalf of the Intended Transferor all of
the Intended Transferor's Liabilities with respect to the Spinco
Liabilities or Spinco Future Liabilities, as the case may be, in
a timely manner and in accordance with the terms thereof that it
may do without breach of the related agreement, contract or
permits,
(iii) the Intended Transferor shall take such other actions as
may reasonably be requested by the Intended Transferee to place
the Intended Transferee, insofar as reasonably possible, in the
same position as if such Spinco Asset or Spinco Future Asset had
been assigned as contemplated hereby, and
14
(iv) the Intended Transferee shall take such other actions as may
reasonably be requested by the Intended Transferor to be placed,
insofar as reasonably possible, in the same position as if such
Spinco Liability or Spinco Future Liability had been transferred
and assumed as contemplated hereby.
(c) If and when any Required Transfer Consent is obtained or any
Transfer Obstacle is eliminated, the assignment of the applicable Spinco
Asset or Spinco Future Asset or the transfer and assumption of the Spinco
Liability or Spinco Future Liability shall be effected as soon as
practicable in accordance with the terms of this Agreement.
2.9. Costs of Transfer. Spinco shall bear the out-of-pocket costs of the
transfer of the Spinco Assets and Spinco Future Assets from Plains to Spinco and
the assumption by Spinco of all Spinco Liabilities and Spinco Future
Liabilities, including any and all (i) expenses incurred in connection with any
notices to Persons regarding such transfer or such assumption, (ii) fees
incurred in connection with the transfer of any licenses, permits or franchises
from Plains to Spinco or the obtaining of any new (or the re-issuance of any
existing) licenses, permits or franchises in the name of Spinco, (iii) fees and
expenses incurred in connection with the assignment or transfer of any contracts
or agreements from Plains to Spinco; and (iv) any recording or other fees,
taxes, charges or assessments incurred in connection with the transfer of any
real property from Plains to Spinco. Spinco hereby agrees to reimburse Plains
promptly upon request, for any out-of-pocket cost, including any of the
foregoing costs (including any applicable taxes, fees and penalties assessed in
connection with any of the foregoing), incurred by Plains in connection with the
transfer of Spinco Assets and Spinco Future Assets from Plains to Spinco or the
assumption by Spinco of any Spinco Liabilities or Spinco Future Liabilities.
ARTICLE III.
MUTUAL RELEASES; INDEMNIFICATION
3.1. Release of Pre-Closing Claims.
(a) Except as provided in Section 3.1(c), effective as of the date
hereof, Spinco does hereby, for itself and each other member of the Spinco
Group, their respective Affiliates (other than any member of the Plains
Group and PAA and its Subsidiaries), successors and assigns, and all
Persons who at any time prior to the date hereof have been stockholders,
directors, officers, agents or employees of any member of the Spinco Group
(in each case, in their respective capacities as such), remise, release and
forever discharge Plains, each member of the Plains Group and their
respective Affiliates (other than any member of the Spinco Group and PAA
and its Subsidiaries), successors and assigns, and all Persons who at any
time prior to the date hereof have been stockholders, directors, officers,
agents or employees of any member of the Plains Group (in each case, in
their respective capacities as such), and their respective heirs,
executors, administrators, successors and assigns, from any and all
Liabilities whatsoever to Spinco and each other member of the Spinco Group,
whether at law or in equity (including any right of contribution), whether
arising under any contract or agreement, by operation of law or otherwise,
existing or arising from any acts or events occurring or failing to occur,
or alleged to have occurred or to have failed to occur, or any conditions
existing or
15
alleged to have existed on or before the date hereof, including in
connection with the transactions and all other activities to implement any
of the Separation, the Bond Offering, the Exchange Offer, the IPO and the
Distribution.
(b) Except as provided in Section 3.1(c), effective as of the date
hereof, Plains does hereby, for itself and each other member of the Plains
Group, their respective Affiliates (other than any member of the Spinco
Group and PAA and its Subsidiaries), successors and assigns, and all
Persons who at any time prior to the date hereof have been stockholders,
directors, officers, agents or employees of any member of the Plains Group
(in each case, in their respective capacities as such), remise, release and
forever discharge Spinco, each member of the Spinco Group, and their
respective Affiliates (other than any member of the Plains Group and PAA
and its Subsidiaries), successors and assigns, and all Persons who at any
time prior to the date hereof have been stockholders, directors, officers,
agents or employees of any member of the Spinco Group (in each case, in
their respective capacities as such), and their respective heirs,
executors, administrators, successors and assigns, from any and all
Liabilities whatsoever to Plains and each other member of the Plains Group,
whether at law or in equity (including any right of contribution), whether
arising under any contract or agreement, by operation of law or otherwise,
existing or arising from any acts or events occurring or failing to occur,
or alleged to have occurred or to have failed to occur, or any conditions
existing or alleged to have existed on or before the date hereof, including
in connection with the transactions and all other activities to implement
any of the Separation, the Bond Offering, the Exchange Offer, the IPO and
the Distribution.
(c) Nothing contained in Section 3.1(a) or 3.1(b) shall impair any
right of any Person to enforce this Agreement, any Ancillary Agreement or
any agreements, arrangements, commitments or understandings that are
specified in this Agreement or in any Ancillary Agreement. Nothing
contained in Section 3.1(a) or 3.1(b) shall release any Person from:
(i) any Liability retained or assumed by, or transferred,
assigned or allocated to, the Group of which such Person is a
member in accordance with this Agreement or any Ancillary
Agreement;
(ii) any Liability for the sale, lease, construction or receipt
of goods, property or services purchased, obtained or used by a
member of one Group from a member of any other Group;
(iii) any Liability that the Parties may have with respect to
indemnification or contribution pursuant to this Agreement for
claims brought against the Parties, any other member of such
Party's respective Group and their respective Affiliates (except
for any member of such other Party's Group) by third Persons,
which Liability shall be governed by the provisions of this
Article III and, if applicable, the appropriate provisions of the
Ancillary Agreements; or
16
(iv) any Liability the release of which would result in the
release of any Person other than a Person released pursuant to
this Section 3.1; provided that the Parties agree not to bring
suit or permit any members of their respective Groups to bring
suit against any Party, any other member of such Party's
respective Group and their respective Affiliates (except for any
member of such other Party's Group and PAA and its Subsidiaries)
with respect to any Liability to the extent that such Person
would be released with respect to such Liability by this Section
3.1 but for the provisions of this clause (iv).
(d) Spinco shall not make, and shall not permit any member of the
Spinco Group to make, any claim or demand, or commence any Action asserting
any claim or demand, including any claim of contribution or any
indemnification, against Plains or any member of the Plains Group, or any
other Person released pursuant to Section 3.1(a), with respect to any
Liabilities released pursuant to Section 3.1(a). Plains shall not make, and
shall not permit any member of the Plains Group to make, any claim or
demand, or commence any Action asserting any claim or demand, including any
claim of contribution or any indemnification, against Spinco or any member
of the Spinco Group, or any other Person released pursuant to Section
3.1(b), with respect to any Liabilities released pursuant to Section
3.1(b).
(e) Each Party intends through this Section 3.1 to provide for a full
and complete release and discharge of all Liabilities existing or arising
from all acts and events occurring or failing to occur, or alleged to have
occurred or to have failed to occur, and all conditions existing or alleged
to have existed on or before the date hereof, between or among Spinco or
any member of the Spinco Group, on the one hand, and Plains or any member
of the Plains Group, on the other hand (including any contractual
agreements or arrangements existing or alleged to exist between or among
any such members on or before the date hereof), except as expressly set
forth in Section 3.1(c). At the reasonable request of any other Party, each
Party shall cause each member of its respective Group to execute and
deliver releases reflecting the provisions hereof.
3.2. Indemnification by Spinco. Except as provided in Section 3.4, Spinco
shall, and in the case of Sections 3.2(a), 3.2(b), and 3.2(c) shall in addition
cause the Appropriate Member of the Spinco Group (as defined below) to,
indemnify, defend and hold harmless Plains, each member of the Plains Group and
each of their respective directors, officers and employees, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Plains Indemnitees"), from and against any and all Losses of the Plains
Indemnitees relating to, arising out of or resulting from any of the following
(without duplication):
(a) the failure of Spinco or any other member of the Spinco Group or
any other Person to pay, perform or otherwise promptly discharge any Spinco
Liabilities or Spinco Future Liabilities (on and after the date Spinco
assumes such Future Liabilities in accordance with Section 2.4) in
accordance with their respective terms, whether prior to or after the date
hereof or thereof;
17
(b) the ownership or operation of the Spinco Business or any Spinco
Liability or Spinco Future Liability (on and after the date Spinco assumes
such Future Liabilities in accordance with Section 2.4);
(c) any breach by Spinco or any member of the Spinco Group of this
Agreement or any Ancillary Agreement; and
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, with respect to all information contained in the the Bond
Offering OM, the Exchange Offer Registration Statement, any Exchange Offer
Prospectus, the IPO Registration Statement, any IPO Prospectus or any
filing with the Commission in connection with the Distribution (other than
information regarding Plains provided by Plains to Spinco for inclusion in
the Bond Offering OM, the Exchange Offer Registration Statement, any
Exchange Offer Prospectus, the IPO Registration Statement, any IPO
Prospectus or any filing with the Commission in connection with the
Distribution).
As used in this Section 3.2, "Appropriate Member of the Spinco Group" means
the member or members of the Spinco Group, if any, whose acts, conduct or
omissions or failures to act caused, gave rise to or resulted in the Loss from
and against which indemnity is provided.
3.3. Indemnification by Plains. Except as provided in Section 3.4, Plains
shall, and in the case of Sections 3.3(a), 3.3(b) and 3.3(c) shall in addition
cause the Appropriate Member of the Plains Group (as defined below) to,
indemnify, defend and hold harmless Spinco, each member of the Spinco Group and
each of their respective directors, officers and employees, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Spinco Indemnitees"), from and against any and all Losses of the Spinco
Indemnitees relating to, arising out of or resulting from any of the following
(without duplication):
(a) the failure of Plains or any other member of the Plains Group or
any other Person to pay, perform or otherwise promptly discharge any
Liabilities of any member of the Plains Group other than the Spinco
Liabilities and the Spinco Future Liabilities (on and after the date Spinco
assumes such Future Liabilities in accordance with Section 2.4), in
accordance with their respective terms, whether prior to or after the date
hereof or thereof;
(b) ownership or operation of the Plains Business or any Liability of
any member of the Plains Group other than the Spinco Liabilities and the
Spinco Future Liabilities (on and after the date Spinco assumes such Future
Liabilities in accordance with Section 2.4);
(c) any breach by Plains or any member of the Plains Group of this
Agreement or any of the Ancillary Agreements; and
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, with respect to information
18
regarding Plains provided by Plains to Spinco for inclusion in the Bond
Offering OM, the Exchange Offer Registration Statement, any Exchange Offer
Prospectus, the IPO Registration Statement, any IPO Prospectus or any
filing with the Commission in connection with the Distribution.
As used in this Section 3.3, "Appropriate Member of the Plains Group" means
the member or members of the Plains Group, if any, whose acts, conduct or
omissions or failures to act caused, gave rise to or resulted in the Loss from
and against which indemnity is provided.
3.4. Indemnification Obligations Net of Insurance Proceeds and Other
Amounts.
(a) Any Loss subject to indemnification or reimbursement under this
Article III will be net of Insurance Proceeds that actually reduce the
amount of the Loss. Accordingly, the amount which any Party (an
"Indemnifying Party") is required to pay to any Person entitled to
indemnification hereunder (an "Indemnitee") will be reduced by any
Insurance Proceeds theretofore actually recovered by or on behalf of the
Indemnitee in reduction of the related Loss. If an Indemnitee receives a
payment (an "Indemnity Payment") required by this Agreement from an
Indemnifying Party in respect of any Loss and subsequently receives
Insurance Proceeds, then the Indemnitee will pay to the Indemnifying Party
an amount equal to the excess of the Indemnity Payment received over the
amount of the Indemnity Payment that would have been due if the Insurance
Proceeds recovery had been received, realized or recovered before the
Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any claims
shall not be relieved of the responsibility with respect thereto or, solely
by virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed that
no insurer or any other third party shall be entitled to a "windfall"
(i.e., a benefit they would not be entitled to receive in the absence of
the indemnification provisions) by virtue of the indemnification provisions
hereof. Nothing contained in this Agreement or any Ancillary Agreement
shall obligate any member of any Group to seek to collect or recover any
Insurance Proceeds.
3.5. Procedures for Indemnification of Third Party Claims.
(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a Person who is not a member of the Plains Group or the Spinco
Group of any claims or of the commencement by any such Person of any Action
(collectively, a "Third Party Claim") with respect to which an Indemnifying
Party may be obligated to provide indemnification to such Indemnitee
pursuant to Section 3.2 or 3.3, or any other section of this Agreement or
any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party
written notice thereof within 20 days after becoming aware of such Third
Party Claim. Any such notice shall describe the Third Party Claim in
reasonable detail. Notwithstanding the foregoing, the failure of any
Indemnitee or other Person to give notice as provided in this Section
3.5(a) shall not relieve the Indemnifying Party of its obligations under
this Article III, except to the extent that such Indemnifying Party is
materially prejudiced by such failure to give notice.
19
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days
after the receipt of notice from an Indemnitee in accordance with Section
3.5(a) (or sooner, if the nature of such Third Party Claim so requires),
the Indemnifying Party shall notify the Indemnitee of its election whether
the Indemnifying Party will assume responsibility for defending such Third
Party Claim, which election shall specify any reservations or exceptions.
After notice from an Indemnifying Party to an Indemnitee of its election to
assume the defense of a Third Party Claim, such Indemnitee shall have the
right to employ separate counsel and to participate in (but not control)
the defense, compromise, or settlement thereof, but the fees and expenses
of such counsel shall be the expense of such Indemnitee except as set forth
in the next two sentences. If the Indemnifying Party has elected to assume
the defense of the Third Party Claim but has specified, and continues to
assert, any reservations or exceptions in such notice, then, in any such
case, the reasonable fees and expenses of one separate counsel for all
Indemnitees shall be borne by the Indemnifying Party. If the Indemnifying
Party and the Indemnitee are named parties to any Third Party Claim and the
Indemnifying Party and such Indemnitee have been advised in writing by
counsel that there may be one or more legal defenses available to the
Indemnitee that are different from or additional to those available to the
Indemnifying Party, then the Indemnitee shall have the right to employ
separate counsel for the defense thereof, but the reasonable fees and
expenses of such counsel shall be the expense of the Indemnifying Party.
(c) If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to defend a Third Party Claim after
assuming the defense thereof, or fails to notify an Indemnitee of its
election as provided in Section 3.5(b), such Indemnitee may defend such
Third Party Claim at the cost and expense of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the defense of,
or fails to defend, the Third Party Claim in accordance with the terms of
this Agreement, no Indemnitee may settle or compromise any Third Party
Claim without the consent of the Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement of the Third Party Claim without the consent of
an Indemnitee if the effect thereof is to permit any injunction,
declaratory judgment, other order or other nonmonetary relief to be
entered, directly or indirectly, against such Indemnitee, and if solely for
damages, only if the full amount thereof is paid concurrently with such
entry of judgment or settlement.
(f) The provisions of Section 3.2 through 3.5 shall not apply to Taxes
(which are covered by the Tax Allocation Agreement).
20
3.6. Additional Matters.
(a) Any claim on account of a Loss that does not result from a Third
Party Claim shall be asserted by written notice given by the Indemnitee to
the related Indemnifying Party. Such Indemnifying Party shall have 30 days
after the receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30-day period, such
Indemnifying Party shall be deemed to have refused to accept responsibility
to make payment. If such Indemnifying Party does not respond within such
30-day period or rejects such claim in whole or in part, such Indemnitee
shall be free to pursue such remedies as may be available to such Party as
contemplated by this Agreement and the Ancillary Agreements.
(b) If payment is made by or on behalf of any Indemnifying Party to
any Indemnitee in connection with any Third Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such
Indemnitee may have any right, defense or claim relating to such Third
Party Claim against any claimant or plaintiff asserting such Third Party
Claim or against any other Person. Such Indemnitee shall cooperate with
such Indemnifying Party in a reasonable manner, and at the cost and expense
of such Indemnifying Party, in prosecuting any subrogated right, defense or
claim.
(c) If an Action in which the Indemnifying Party is not a named
defendant, if either the Indemnitee or Indemnifying Party shall so request,
the Parties shall endeavor to substitute the Indemnifying Party for the
named defendant, if at all practicable. If such substitution or addition
cannot be achieved for any reason or is not requested, the named defendant
shall allow the Indemnifying Party to manage the Action as set forth in
Section 3.5 or this Section 3.6 and the Indemnifying Party shall fully
indemnify the named defendant against all costs of defending the Action
(including court costs, sanctions imposed by a court, attorneys' fees,
experts' fees and all other external expenses, the costs of any judgment or
settlement, and the cost of any interest or penalties relating to any
judgment or settlement).
(d) THE PARTIES UNDERSTAND AND AGREE THAT THE INDEMNIFICATION
OBLIGATIONS HEREUNDER AND UNDER THE ANCILLARY AGREEMENTS MAY INCLUDE
INDEMNIFICATION FOR LOSSES RESULTING FROM, OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, AN INDEMNIFIED PARTY'S OWN NEGLIGENCE OR STRICT LIABILITY.
3.7. Remedies Cumulative. The remedies provided in this Article III shall
be cumulative and, subject to the provisions of Article VIII, shall not preclude
assertion by any Indemnitee of any other rights or the seeking of any and all
other remedies against any Indemnifying Party.
3.8. Indemnification of Directors and Officers. For purpose of Sections 3.2
through 3.7, inclusive, and notwithstanding anything to the contrary contained
herein, Persons who serve on both the Board of Directors of Spinco and the Board
of Directors of Plains and persons who
21
serve as officers of both Spinco and Plains shall be deemed both Spinco
Indemnitees and Plains Indemnitees.
3.9. Contribution. If for any reason the indemnity provided for in this
Article III is unavailable to, or is insufficient to hold harmless, an
Indemnitee, then the Indemnifying Party will contribute to the amount paid or
payable by the Indemnitee as a result of such Losses, claims, damages,
Liabilities or expenses in such proportion as is appropriate to reflect not only
the relative benefits received by the Indemnifying Party on the one hand and the
Indemnitee on the other but also the relative fault of the Indemnifying Party
and the Indemnitee as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnitees will be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such Indemnifying Party or Indemnitees; and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the Losses,
claims, damages, Liabilities and expenses referred to above will be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. The Parties agree that it would
not be just and equitable if contribution pursuant to this Section 3.9 was
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to above. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the ▇▇▇▇ ▇▇▇) will be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
3.10. ▇▇▇▇▇▇▇ Inc. For purposes of Section 3.1 only, ▇▇▇▇▇▇▇ Inc. shall be
deemed a member of the Plains Group at the time of the Merger and thereafter.
For purposes of Sections 3.2 and 3.3, at the time of the Merger, (a) Spinco
shall assume the Liabilities and indemnification obligations hereunder of
▇▇▇▇▇▇▇ Inc. as they exist immediately before the Merger and (b) ▇▇▇▇▇▇▇ Inc.
shall be deemed a member of the Plains Group.
ARTICLE IV.
THE EXCHANGE OFFER
4.1. Exchange Offer. Plains shall cause Spinco and Plains E&P to, and
Spinco and Plains E&P shall, use their Reasonable Efforts to consummate the
Exchange Offer in accordance with the terms of the Exchange Offer Registration
Rights Agreement and the Exchange Offer Registration Statement.
ARTICLE V.
THE IPO AND ACTIONS PENDING THE IPO
5.1. Transactions Prior to the IPO. Subject to the conditions specified in
Section 5.3, as soon as practicable after the date hereof, Plains and Spinco
shall use their Reasonable Efforts to consummate the IPO. Such efforts shall
include those specified in this Section 5.1.
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(a) On a date mutually agreed upon by Plains and Spinco, Spinco shall
file the IPO Registration Statement, and shall use its Reasonable Efforts
to cause such IPO Registration Statement to become effective, including by
filing such amendments thereto as may be necessary or appropriate,
responding promptly to any comments of the Commission and taking such other
action in connection therewith as may be reasonably requested by Plains.
Plains and Spinco shall also cooperate in preparing, filing with the
Commission and causing to become effective a registration statement
registering the Spinco Common Stock under the Exchange Act, and any
registration statements or amendments thereof that are required to reflect
the establishment of, or amendments to, any employee benefit and other
plans necessary or appropriate in connection with the IPO.
(b) Spinco shall enter into an underwriting agreement with the
Underwriters (the "Underwriting Agreement"), in form and substance
reasonably satisfactory to Plains and Spinco, and shall comply with its
obligations thereunder.
(c) Plains and Spinco shall consult with each other and the
Underwriters regarding the timing, pricing and other material matters with
respect to the IPO.
(d) Spinco shall use its Reasonable Efforts to take all such action as
may be necessary or appropriate under state securities and blue sky laws of
the United States (and any comparable laws under any foreign jurisdictions)
in connection with the IPO.
(e) Spinco shall prepare, file and use its Reasonable Efforts to seek
to make effective, an application for listing of the Spinco Common Stock
issued in the IPO on the NYSE, subject to official notice of issuance.
5.2. Cooperation. Spinco shall consult with, and cooperate in all respects
with, Plains in connection with the pricing of the Spinco Common Stock to be
offered in the IPO and shall, at Plains' direction, promptly take any and all
actions necessary or desirable to consummate the IPO as contemplated by the IPO
Registration Statement and the Underwriting Agreement.
5.3. Conditions Precedent to Consummation of the IPO. As soon as
practicable after the date hereof, the Parties hereto shall use their Reasonable
Efforts to satisfy the conditions listed below to the consummation of the IPO.
The obligations of the Parties to use their Reasonable Efforts to consummate the
IPO shall be conditioned on the satisfaction, or waiver by Plains, of the
following conditions:
(a) The IPO Registration Statement shall have been filed and declared
effective by the Commission, and there shall be no stop order in effect
with respect thereto.
(b) The actions and filings with regard to state securities and blue
sky laws of the United States (and any comparable laws under any foreign
jurisdictions) described in Section 5.1(d) shall have been taken and, where
applicable, have become effective or been accepted.
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(c) The Spinco Common Stock to be issued in the IPO shall have been
accepted for listing on the NYSE, on official notice of issuance.
(d) Spinco shall have entered into the Underwriting Agreement and all
conditions to the obligations of Spinco and the Underwriters shall have
been satisfied or waived.
(e) Plains shall be satisfied in its sole discretion that (1) it will
own more than 80% of the outstanding Spinco Common Stock following the IPO,
(2) it will control Spinco within the meaning of Section 368(c) of the
Code, and (3) it will satisfy the stock ownership requirements of Section
1504(a)(2) of the Code with respect to the stock of Spinco. All other
conditions to permit the Distribution to qualify as a tax-free distribution
to Plains, Spinco and Plains' stockholders shall, to the extent applicable
as of the time of the IPO, be satisfied, and there shall be no event or
condition that is likely to cause any of such conditions not to be
satisfied as of the time of the Distribution or thereafter.
(f) No Order issued by any Governmental Authority or other legal
restraint or prohibition preventing the consummation of the IPO or any of
the other transactions contemplated by this Agreement or any Ancillary
Agreement shall be in effect.
(g) No Ancillary Agreement shall have been terminated.
5.4. Registration Rights Agreement. The Parties agree to negotiate, execute
and deliver, at either Party's request, a registration rights agreement that
will provide (a) that Plains shall be entitled to no less than five demand
registration rights, (b) that Plains shall be entitled to piggyback registration
rights, (c) that Spinco will bear the costs of such registrations (except for
underwriters' discounts and commissions related to Plains' shares sold
thereunder), and (d) for other ordinary and customary terms in registration
rights agreements generally including "blackout" and "lockup" provisions.
ARTICLE VI.
CORPORATE GOVERNANCE AND CERTAIN FINANCIAL REPORTING AND
OTHER MATTERS
6.1. Spinco Board Representation.
(a) Beginning on the IPO Closing Date, and for so long as Plains
"beneficially owns" (as defined under Rule 13d-3 of the Exchange Act)
shares representing at least a majority of the shares of outstanding Spinco
Common Stock, Plains shall have the right to designate for nomination by
the Spinco Board (or any nominating committee thereof) to the Spinco Board
a majority of the members of the Spinco Board. For so long as Plains
beneficially owns shares representing less than a majority but at least 20%
of the shares of outstanding Spinco Common Stock, Plains shall have the
right to designate for nomination by the Spinco Board (or any nominating
committee thereof) to the Spinco Board a proportionate number of members of
the Spinco Board, as calculated in accordance with Section 6.1(d).
Notwithstanding anything to the contrary set forth herein, Spinco's
obligations with respect to the election or appointment of Spinco's
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designated members shall be limited to the obligations set forth under
Sections 6.1(b) and 6.1(c).
(b) Spinco shall exercise all authority under applicable law and shall
use its best efforts to cause to be elected to the Spinco Board such number
of persons designated by Plains (the "Plains Designees") to be elected to
the Spinco Board under Section 6.1(a).
(c) Spinco shall exercise all authority under applicable law and use
its best efforts to cause all Plains Designees to be nominated as Spinco
Board members by the nominating committee of the Spinco Board (if there is
such a committee) or the Spinco Board. Spinco shall cause each Plains
Designee for election to the Spinco Board to be included in the slate of
designees recommended by the Spinco Board to holders of Spinco Common Stock
(including at any special meeting of stockholders held for the election of
directors) and shall use its best efforts to cause the election of each
such Plains Designee, including soliciting proxies in favor of the election
of such persons. If any Plains Designee elected to the Spinco Board shall
cease to serve as a director for any reason, the vacancy resulting
therefrom shall be filled by the Spinco Board with a substitute Plains
Designee. If as a result of any increase in the size of the Spinco Board,
Plains is entitled to have one or more additional Plains Designees elected
to the Spinco Board pursuant to Section 6.1(a), Plains shall designate the
appropriate number of such additional Plains Designees.
(d) If at any time that Plains Designees are serving on the Spinco
Board Plains beneficially owns shares representing less than a majority but
at least 20% of the shares of outstanding Spinco Common Stock, the number
of persons Plains shall be entitled to designate for nomination by the
Spinco Board (or any nominating committee thereof) for election to the
Spinco Board shall be equal to the number of directors computed using the
following formula (rounded to the nearest whole number): the product of (1)
the percentage of shares of outstanding Spinco Common Stock beneficially
owned by Plains to the then total number of outstanding shares of Spinco
Common Stock times (2) the number of directors then on the Spinco Board
(assuming no vacancies exist). If the actual number of Plains Designees
serving on the Spinco Board exceeds the number determined pursuant to the
foregoing sentence of this Section 6.1(d) (such difference being herein
called the "Excess Director Number"), then Plains in its sole discretion
may instruct a number of Plains Designees (the number of which designees
shall be equal to the Excess Director Number) to promptly resign from the
Spinco Board, and, to the extent such persons do not so resign, Plains
shall assist Spinco in increasing the size of the Spinco Board, so that
after giving effect to such increase, the number of Plains Designees on the
Spinco Board is in accordance with the provisions of this Section 6.1(d).
6.2. Issuance of Stock. Following the IPO Closing Date and prior to the
Distribution Date, without the prior written consent of Plains, Spinco shall not
issue any capital stock of Spinco or any securities, options, warrants or rights
convertible into or exercisable or exchangeable for capital stock of Spinco if
in Plains sole judgment the issuance would cause Plains to fail to (a) control
Spinco within the meaning of Section 368(c) of the Code or (b) fail to
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satisfy the stock ownership requirements of Section 1504(a)(2) of the Code with
respect to the stock of Spinco.
6.3. Spinco Officers. On or before the IPO Closing Date, Spinco may (a)
appoint such persons as executive officers of Spinco as its Board of Directors
should desire and (b) at the discretion of Spinco, enter into employment
agreements with such persons with such terms as are reasonable and customary for
companies in the "upstream business" and of comparable size in terms of assets,
revenues and property values as Spinco.
ARTICLE VII.
THE DISTRIBUTION
7.1. The Distribution.
(a) Delivery of Shares for Distribution. Subject to Sections 7.3 and
7.4, on or prior to the date the Distribution is made (the "Distribution
Date"), Plains will deliver to the distribution agent to be appointed by
Plains, or if no distribution agent is appointed, then Plains (the
"Distribution Agent"), to distribute to the stockholders of Plains its
shares of Spinco Common Stock pursuant to the Distribution for the benefit
of holders of record of common stock of Plains on the Record Date, a single
stock certificate, endorsed by Plains in blank, representing all of the
outstanding shares of Spinco Common Stock then owned by Plains, and shall
cause the transfer agent for the shares of common stock of Plains to
instruct the Distribution Agent to distribute on the Distribution Date the
appropriate number of such shares of Spinco Common Stock to each such
holder or designated transferee or transferees of such holder.
(b) Shares Received. Subject to Sections 7.3 and 7.4, each holder of
common stock of Plains on the Record Date (or such holder's designated
transferee or transferees) will be entitled to receive in the Distribution
its pro rata share of the total shares of Spinco Common Stock Plains holds
equal to a fraction the numerator of which is the number of shares of
common stock of Plains held by such holder on the Record Date and the
denominator of which is the number or shares of Plains common stock
outstanding on the Record Date. At any time before the IPO Closing Date,
the Plains Board of Directors may change these ratios in its sole
discretion and without the approval of Spinco.
(c) Obligation to Provide Information. Spinco and Plains, as the case
may be, will provide to the Distribution Agent all share certificates and
any information required to complete the Distribution on the basis
specified above.
7.2. Actions Prior to the Distribution.
(a) The Parties shall prepare and mail, prior to the Distribution
Date, to the holders of common stock of Plains such information concerning
Spinco and the Distribution and such other matters as Plains shall
reasonably determine are necessary and as may be required by law. The
Parties will prepare, and Spinco will, to the extent required under
applicable law, file with the Commission any such documentation that the
Parties determine is necessary or desirable to effectuate the Distribution,
and the Parties
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shall each use their Reasonable Efforts to obtain all necessary approvals
from the Commission with respect thereto as soon as practicable.
(b) The Parties shall take all such actions as may be necessary or
appropriate under the securities or blue sky laws of the United States (and
any comparable laws under any foreign jurisdiction) in connection with the
Distribution.
(c) Spinco shall prepare and file, and shall use its Reasonable
Efforts to have approved, an application for the listing of the Spinco
Common Stock to be distributed in the Distribution on the NYSE, subject to
official notice of distribution.
7.3. Sole Discretion of Plains. Plains currently intends to complete the
Distribution after the IPO Closing Date. Plains shall, in its sole and absolute
discretion, determine the date of the consummation of the Distribution and all
terms of the Distribution, including the form, structure and terms of any
transaction(s) and/or offering(s) to effect the Distribution and the timing of
and conditions to the consummation of the Distribution. In addition, Plains may
at any time and from time to time until the completion of the Distribution
decide to abandon the Distribution or modify or change the terms of the
Distribution, including by accelerating or delaying the timing of the
consummation of all or part of the Distribution. Spinco shall cooperate with
Plains in all respects to accomplish the Distribution and shall, at Plains'
direction, promptly take any and all actions necessary or desirable to effect
the Distribution, including the registration under the Securities Act of the
Spinco Common Stock on an appropriate registration form or forms to be
designated by Plains (if necessary) and the drafting and filing of an
information statement with the Commission. Plains shall select any investment
banker(s) and manager(s) in connection with the Distribution, as well as any
financial printer, solicitation and/or exchange agent and outside counsel for
Plains; provided, however, that nothing herein shall prohibit Spinco from
engaging (at its own expense) its own financial, legal, accounting and other
advisors in connection with the Distribution.
7.4. Conditions to the Distribution. The following are conditions to the
consummation of the Distribution. The conditions are for the sole benefit of
Plains and shall not give rise to or create any duty on the part of Plains or
its Board of Directors to waive or not waive any such condition.
(a) Tax Ruling. The Tax Ruling shall remain in effect up to and
including the Distribution Date;
(b) Supplemental Tax Ruling. Plains shall have received the
Supplemental Tax Ruling, and it shall remain in effect up to and including
the Distribution Date;
(c) Approvals. Any material Governmental Approvals and material
approvals of any other Person necessary to consummate the Distribution
shall have been obtained and be in full force and effect;
(d) No Legal Restraints. No order, injunction or decree issued by any
Governmental Authority or other legal restraint or prohibition preventing
the consummation of the Distribution shall be in effect and no other event
outside the control
27
of Plains shall have occurred or failed to occur that would prohibit the
consummation of the Distribution; and
(e) No Material Adverse Effect. No other events or developments shall
have occurred subsequent to the date hereof that, in the judgment of
Plains, would result in the Distribution having a material adverse effect
on Plains or its stockholders.
7.5. Fractional Shares. As soon as practicable after the Distribution Date,
Plains shall direct the Distribution Agent to determine the number of whole
shares and fractional shares of Spinco Common Stock allocable to each holder of
record or beneficial owner of common stock of Plains as of the Record Date, to
aggregate all such fractional shares and sell the whole shares obtained thereby
at the direction of Plains, in open market transactions, at then prevailing
trading prices, and to cause to be distributed to each such holder or for the
benefit of each such beneficial owner to which a fractional share shall be
allocable such holder's or owner's ratable share of the proceeds of such sale,
after making appropriate deductions of the amount required to be withheld for
federal income tax purposes and after deducting an amount equal to all brokerage
charges, commissions and transfer taxes attributed to such sale. Plains and the
Distribution Agent shall use their Reasonable Efforts to aggregate the shares of
common stock of Plains that may be held by any beneficial owner thereof through
more than one account in determining the fractional share allocable to such
beneficial owner.
ARTICLE VIII.
ARBITRATION; DISPUTE RESOLUTION
8.1. Agreement to Arbitrate. Except as otherwise specifically provided in
any Ancillary Agreement, the procedures for discussion, negotiation, resolution
and arbitration set forth in this Article VIII shall apply to any and all
disputes, controversies or claims (whether sounding in contract, tort or
otherwise) that may rise out of or relate to, or arise under or in connection
with, this Agreement or any Ancillary Agreement, or the transactions
contemplated hereby or thereby (including all actions taken in furtherance of
the transactions contemplated hereby or thereby on or prior to the date hereof),
or for ten years after the date hereof of the commercial or economic
relationship of the parties relating hereto or thereto, between or among any
member of the Plains Group and the Spinco Group ("Disputes"). Each party agrees
on behalf of itself and each member of its respective Group that the procedures
set forth in this Article VIII shall be the sole and exclusive remedy in
connection with any Dispute relating to any of the foregoing matters and
irrevocably waives any right to commence any Action in or before any
Governmental Authority, except as expressly provided in Article VIII and except
for the review, confirmation, acceptance, vacator or other consideration by a
court of any arbital award made pursuant to or under this Article VIII. Each
party on behalf of itself and each member of its respective Group irrevocably
waives any right to any trial by jury with respect to any one or more of the
Disputes set forth in this Section 8.1.
8.2. Escalation.
(a) The parties will use their respective Reasonable Efforts to
resolve expeditiously any Dispute between or among them with respect to the
matters covered hereby that may arise from time to time on a mutually
acceptable negotiated basis. In
28
furtherance of the foregoing, any party involved in a Dispute may deliver a
notice (an "Escalation Notice") demanding an in-person meeting involving
representatives of the parties at a senior level of management of the
parties (or if the parties agree, of the appropriate strategic business
unit or division within such entity). A copy of any such Escalation Notice
shall be given to the General Counsel, or like officer or official, of each
party involved in the Dispute (which copy shall state that it is an
Escalation Notice under this Agreement). An agenda, location or procedures
for such discussions or negotiations between the parties may be established
by the parties from time to time; provided, however, that the parties shall
use their Reasonable Efforts to meet within 30 days of the Escalation
Notice.
(b) The parties may, by mutual consent, retain a mediator to aid them
in their discussions and negotiations by informally providing advice to
parties. Any opinion expressed by the mediator shall be strictly advisory
and shall not be binding on the parties, nor shall any opinion expressed by
the mediator be admissible in any arbitration proceedings. The mediator may
be chosen from a list of mediators previously selected by the parties or by
other agreement of the parties. Costs of the mediation shall be borne
equally by the parties involved in the matter, except that each party shall
be responsible for its own expenses. Mediation is not a prerequisite to a
demand for arbitration under Section 8.3.
8.3. Demand for Arbitration.
(a) At any time after the first to occur of (i) the date of the
meeting actually held pursuant to the applicable Escalation Notice or (ii)
45 days after the delivery of an Escalation Notice (as applicable, the
"Arbitration Demand Date"), any party involved in the Dispute (regardless
of whether such party delivered the Escalation Notice) may deliver a notice
demanding arbitration of such Dispute (the "Arbitration Demand Notice"). If
any party delivers an Arbitration Demand Notice to the other party, the
other party may itself deliver an Arbitration Demand Notice to the first
party with respect to any related Dispute with respect to which the
Applicable Deadline has not passed without the requirement of delivering an
Escalation Notice. No party may assert that the failure to resolve any
matter during any discussions or negotiations, the course of conduct during
the discussions or negotiations, or the failure to agree on a mutually
acceptable time, agenda, location or procedures for the meeting, in each
case, as contemplated by Section 8.2, is a prerequisite to a demand for
arbitration under Section 8.3. If any party delivers an Arbitration Demand
Notice with respect to any Dispute that is the subject of any then pending
arbitration proceeding or of a previously delivered Arbitration Demand
Notice, all such disputes, controversies and claims shall be resolved in
the arbitration proceeding for which an Arbitration Demand Notice was first
delivered unless the arbitrator in his or her sole discretion determines
that it is impracticable or otherwise inadvisable to do so.
(b) Except as may be expressly provided in any Ancillary Agreement,
any Arbitration Demand Notice may be given until the second anniversary
after the later of the occurrence of the act or event giving rise to the
underlying claim or the date on which such act or event was, or should have
been, in the exercise of reasonable due diligence,
29
discovered by the party asserting the claim (as applicable and as it may in
a particular case be specifically extended by the parties in writing, the
"Applicable Deadline"). Any discussions, negotiations or mediations between
the parties pursuant to this Agreement or otherwise will not toll the
Applicable Deadline unless expressly agreed in writing by the parties. Each
party agrees on behalf of itself and each member of its Group that if an
Arbitration Demand Notice with respect to a claim by a party is not given
prior to the expiration of the Applicable Deadline, as between or among the
parties and the members of their Groups, such claim by that party will be
barred. Subject to Section 8.7(d), upon delivery of an Arbitration Demand
Notice pursuant to Section 8.3(a) prior to the Applicable Deadline, any
and/or all Disputes shall be decided by a sole arbitrator in accordance
with the rules set forth in this Article VIII.
8.4. Arbitrators.
(a) Within 30 days after a valid Arbitration Demand Notice is given,
the parties involved in the Dispute referenced therein shall attempt to
select a sole arbitrator satisfactory to all such parties.
(b) If such parties are not able jointly to select a sole arbitrator
within such 30-day period, such parties shall each appoint an arbitrator
(who need not be disinterested as to the parties or the matter) within 45
days after delivery of the Arbitration Demand Notice. If one party appoints
an arbitrator within such time period and the other party or parties fail
to appoint an arbitrator within such time period, the arbitrator appointed
by the one party shall be the sole arbitrator of the matter.
(c) If a sole arbitrator is not selected pursuant to paragraph (a)
above, the two arbitrators will, within 30 days after the appointment of
the later of them to be appointed, select an additional arbitrator who
shall act as the sole arbitrator of the dispute. After selection of such
sole arbitrator, the initial arbitrators shall have no further role with
respect to the dispute. If the arbitrators so appointed do not, within 30
days after the appointment of the later of them to be appointed, agree on
the selection of the sole arbitrator, any party involved in such dispute
may apply to the U.S. District Court for the Southern District of Texas to
select the sole arbitrator. Any arbitrator selected pursuant to this
paragraph (c) shall be disinterested with respect to each of the parties.
(d) The sole arbitrator selected pursuant to paragraph (a), (b) or (c)
above will set a time for the hearing of the matter which will commence no
later than 90 days after the date of appointment of the sole arbitrator
pursuant to paragraph (a), (b) or (c) above and which hearing will be no
longer than 20 consecutive days (unless in the judgment of the arbitrator
the matter is unusually complex and sophisticated and thereby requires a
longer time, in which event such hearing shall be no longer than 60
consecutive days). The final decision of such arbitrator will be rendered
in writing to the parties not later than 40 days after the last hearing
date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be Houston, Texas,
unless otherwise agreed by the parties.
30
8.5. Hearings. Within the time period specified in Section 8.4(d), the
matter shall be presented to the arbitrator at a hearing by means of written
submissions of memoranda and verified witness statements, filed simultaneously,
and responses, if necessary in the judgment of the arbitrator or both the
parties. If the arbitrator deems it to be essential to a fair resolution of the
dispute, live cross-examination or direct examination may be permitted, but is
not generally contemplated to be necessary. The arbitrator shall actively manage
the arbitration with a view to achieving a just, speedy and cost-effective
resolution of the dispute, claim or controversy. The arbitrator may, in his or
her discretion, set time and other limits on the presentation of each party's
case, its memoranda or other submissions, and refuse to receive any proffered
evidence, which the arbitrator, in his or her discretion, finds to be
cumulative, unnecessary, irrelevant or of low probative nature. Except as
otherwise set forth herein, any arbitration hereunder will be conducted in
accordance with the procedures of the American Arbitration Association (the
"AAA"). The decision of the arbitrator will be final and binding on the parties,
and judgment thereon may be had and will be enforceable in any court having
jurisdiction over the parties. Arbitration awards will bear interest at an
annual rate of the prime rate as reported in the Wall Street Journal on the date
the arbitrator's decision is rendered plus 2% per annum, subject to any maximum
amount permitted by applicable law. To the extent that the provisions of this
Agreement and the prevailing rules of the AAA conflict, the provisions of this
Agreement shall govern.
8.6. Discovery and Certain Other Matters.
(a) Any party involved in a dispute subject to this Article VIII may
request limited document production from the other party or parties of
specific and expressly relevant documents, with the reasonable expenses of
the producing party incurred in such production paid by the requesting
party. Any such discovery (which right to documents shall be substantially
less than document discovery rights prevailing under the Federal Rules of
Civil Procedure) shall be conducted expeditiously and shall not cause the
hearing provided for in Section 8.5 to be adjourned except upon consent of
all parties involved in the applicable dispute or upon an extraordinary
showing of cause demonstrating that such adjournment is necessary to permit
discovery essential to a party to the proceeding. Depositions,
interrogatories or other forms of discovery (other than the document
production set forth above) shall not occur except by consent of the
parties involved in the applicable dispute. Disputes concerning the scope
of document production and enforcement of the document production requests
will be determined by written agreement of the parties involved in the
applicable dispute or, failing such agreement, will be referred to the
arbitrator for resolution. All discovery requests will be subject to the
parties' rights to claim any applicable privilege. The arbitrator will
adopt procedures to protect the proprietary rights of the parties and to
maintain the confidential treatment of the arbitration proceedings (except
as may be required by law). Subject to the foregoing, the arbitrator shall
have the power to issue subpoenas to compel the production of documents
relevant to the dispute, controversy or claim.
(b) The arbitrator shall have full power and authority to determine
issues of arbitrability but shall otherwise be limited to interpreting or
construing the applicable provisions of this Agreement or any Ancillary
Agreement, and will have no authority or power to limit, expand, alter,
amend, modify, revoke or suspend any condition or
31
provision of this Agreement or any Ancillary Agreement; it being
understood, however, that the arbitrator will have full authority to
implement the provisions of this Agreement or any Ancillary Agreement, and
to fashion appropriate remedies for breaches of this Agreement (including
interim or permanent injunctive relief); provided that the arbitrator shall
not have (i) any authority in excess of the authority a court having
jurisdiction over the parties and the controversy or dispute would have
absent these arbitration provisions or (ii) any right or power to award
punitive or treble damages. It is the intention of the parties that in
rendering a decision the arbitrator give effect to the applicable
provisions of this Agreement and the Ancillary Agreements and follow
applicable law (it being understood and agreed that this sentence shall not
give rise to a right of judicial review of the arbitrator's award).
(c) If a party fails or refuses to appear at and participate in an
arbitration hearing after due notice, the arbitrator may hear and determine
the controversy upon evidence produced by the appearing party.
(d) Arbitration costs will be borne equally by each party involved in
the matter, except that each party will be responsible for its own
attorney's fees and other costs and expenses, including the costs of
witnesses selected by such party.
(e) The arbitrator will be bound by the arbitration provisions of this
Agreement.
8.7. Certain Additional Matters.
(a) Any arbitration award shall be an award limited to a holding for
or against a party and shall be without findings as to facts, issues or
conclusions of law (including with respect to any matters relating to the
validity or infringement of patents or patent applications) and shall be
without a statement of the reasoning on which the award rests, but must be
in adequate form so that a judgment of a court may be entered thereupon.
Judgment upon any arbitration award hereunder may be entered in any court
having jurisdiction thereof.
(b) Prior to the time at which an arbitrator is appointed pursuant to
Section 8.4, any party may seek one or more temporary restraining orders in
a court of competent jurisdiction if necessary to preserve and protect the
status quo. Neither the request for, or grant or denial of, any such
temporary restraining order shall be deemed a waiver of the obligation to
arbitrate as set forth herein and the arbitrator may dissolve, continue or
modify any such order. Any such temporary restraining order shall remain in
effect until the first to occur of the expiration of the order in
accordance with its terms or the dissolution thereof by the arbitrator.
(c) Except as required by law or stock exchange rule, the parties
shall hold, and shall cause their respective officers, directors,
employees, agents and other representatives to hold, the existence, content
and result of mediation or arbitration in confidence in accordance with the
provisions of Article IX and except as may be required
32
to enforce any award. Each of the parties shall request that any mediator
or arbitrator comply with such confidentiality requirement.
(d) If at any time the sole arbitrator shall fail to serve as an
arbitrator for any reason, the parties shall select a new arbitrator who
shall be disinterested as to the parties and the matter in accordance with
the procedures set forth herein for the selection of the initial
arbitrator. The extent, if any, to which testimony previously given shall
be repeated or as to which the replacement arbitrator elects to rely on the
stenographic record (if there is one) of such testimony shall be determined
by the replacement arbitrator.
8.8. Continuity of Service and Performance. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article VIII with
respect to all matters not subject to such Dispute.
8.9. Law Governing Arbitration Procedures. The interpretation of the
provisions of this Article VIII, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed as set forth in Section 11.3.
ARTICLE IX.
COVENANTS AND OTHER MATTERS
9.1. Other Agreements. In addition to the specific agreements, documents
and instruments annexed to this Agreement, Plains and Spinco agree to execute or
cause to be executed by the appropriate parties and deliver, as appropriate,
such other agreements, instruments and other documents as may be necessary or
desirable to effect the purposes of this Agreement and the Ancillary Agreements.
9.2. Further Instruments. At the request of Spinco and without further
consideration, Plains will execute and deliver, and will cause the other members
of the Plains Group to execute and deliver, to Spinco and its Subsidiaries such
other instruments of transfer, conveyance, assignment, substitution and
confirmation and take such action as Spinco may reasonably deem necessary or
desirable in order more effectively to transfer, convey and assign to Spinco and
its Subsidiaries and confirm Spinco's and its Subsidiaries' title to all of the
assets, rights and other things of value contemplated to be transferred to
Spinco and its Subsidiaries pursuant to this Agreement, the Ancillary
Agreements, and any documents referred to therein, to put Spinco and its
Subsidiaries in actual possession and operating control thereof and to permit
Spinco and its Subsidiaries to exercise all rights with respect thereto
(including rights under contracts and other arrangements as to which the consent
of any third party to the transfer thereof shall not have previously been
obtained). At the request of Plains and without further consideration, Spinco
will execute and deliver, and will cause its applicable Subsidiaries to execute
and deliver, to Plains and the other members of the Plains Group all
instruments, assumptions, novations, undertakings, substitutions or other
documents and take such other action as Plains may reasonably deem necessary or
desirable to have Spinco fully and
33
unconditionally assume and discharge the Liabilities contemplated to be assumed
by Spinco under this Agreement, any Ancillary Agreement or any document in
connection herewith and to relieve the Plains Group of any Liability with
respect thereto and evidence the same to third parties. Neither Plains nor
Spinco shall be obligated, in connection with the foregoing, to expend money
other than reasonable out-of-pocket expenses, attorneys' fees and recording or
similar fees. Furthermore, each Party, at the request of the other Party, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
9.3. Agreement for Exchange of Information. Each Party agrees to provide,
or cause to be provided, to each other as soon as reasonably practicable after
written request therefor, any Information in the possession or under the control
of such Party that the requesting Party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the requesting
Party (including under applicable securities laws) by a Governmental Authority
having jurisdiction over the requesting Party, (ii) for use in any Regulatory
Proceeding, judicial proceeding or other proceeding or to satisfy audit,
accounting claims, regulatory, litigation or other similar requirements, (iii)
to comply with its obligations under this Agreement or any Ancillary Agreement
or (iv) in connection with the ongoing businesses of a Party as it relates to
the conduct of such businesses prior to the Distribution Date, as the case may
be; provided, however, if any Party determines that any such provision of
Information could be commercially detrimental, violate any law or agreement, or
waive any attorney-client privilege, the Parties shall take all reasonable
measures to permit the compliance with such obligations in a manner that avoids
any such harm or consequence.
(a) After the Distribution Date, (i) unless the Parties agree
otherwise in writing, each Party shall maintain in effect at its own cost
and expense adequate systems and controls for its business to the extent
necessary to enable the other Party to satisfy its reporting, accounting,
audit and other obligations, and (ii) each Party shall provide, or cause to
be provided, to the other Party and its Subsidiaries in such form as such
requesting Party shall request, at no charge to the requesting Party, all
financial and other data and information as the requesting Party determines
necessary or advisable to prepare its financial statements and reports or
filings with any Governmental Authority.
(b) Any Information owned by a Party that is provided to a requesting
Party pursuant to this Section 9.3 shall be deemed to remain the property
of the providing Party. Unless specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring
rights of license or otherwise in any such Information.
(c) To facilitate the possible exchange of Information pursuant to
this Section 9.3 and other provisions of this Agreement after the
Distribution Date, each Party agrees to use its Reasonable Efforts to
retain all Information in its respective possession or control on the
Distribution Date substantially in accordance with its record retention
policies as in effect on the date hereof. Spinco shall not amend its or its
Subsidiaries' record retention policies prior to the Distribution Date
without the consent of Plains. However, except as set forth in the Tax
Sharing and Allocation Agreement, at any time after the Distribution Date,
each Party may amend their respective record retention policies at such
Party's discretion; provided, however, that if a Party desires to effect
the
34
amendment within three years after the Distribution Date, the amending
Party must give 30 days' prior written notice of such change in the policy
to the other Party. No Party will destroy, or permit any of its
Subsidiaries to destroy, any Information that exists on the date hereof
(other than Information that is permitted to be destroyed under the current
record retention policy of such Party) without first using its Reasonable
Efforts to notify the other Party of the proposed destruction and giving
the other Party the opportunity to take possession of such Information
prior to such destruction at its own expense.
(d) No Party shall have any Liability to any other Party if any
Information exchanged or provided pursuant to this Section 9.3 is found to
be inaccurate, in the absence of willful misconduct by the Party providing
such Information. No Party shall have any liability to any other party if
any Information is destroyed or lost after Reasonable Efforts by such Party
to comply with the provisions of Section 9.3(c).
(e) The rights and obligations granted under this Section 9.3 are
subject to any specific limitations, qualifications or additional
provisions on the sharing, exchange or confidential treatment of
Information set forth in this Agreement and any Ancillary Agreement.
(f) Each Party shall, except in the case of a dispute subject to
Article VIII brought by one Party against another party (which shall be
governed by such discovery rules as may be applicable under Article VIII or
otherwise), use its Reasonable Efforts to make available to each other
party, upon written request, the former, current and future directors,
officers, employees, other personnel and agents of such party as witnesses
and any books, records or other documents within its control or which it
otherwise has the ability to make available, to the extent that any such
person (giving consideration to business demands of such directors,
officers, employees, other personnel and agents) or books, records or other
documents may reasonably be required in connection with any Regulatory
Proceeding, judicial proceeding or other proceeding in which the requesting
party may from time to time be involved, regardless of whether such
Regulatory Proceeding, judicial proceeding or other proceeding is a matter
with respect to which indemnification may be sought hereunder. The
requesting Party shall bear all costs and expenses in connection therewith.
9.4. Auditors and Audits, Annual and Quarterly Statements and Accounting.
(a) So long as Spinco remains a Subsidiary of Plains, and with respect
to any financial reporting period during which Spinco was a Subsidiary of
Plains:
(i) Spinco shall not select a different accounting firm than the
firm selected by Plains to audit its financial statements and to
serve as its independent certified public accountants (the
"Plains Auditors") for purposes of providing an opinion on its
financial statements without Plains' prior written consent (which
shall not be unreasonably withheld).
(ii) Spinco shall use its Reasonable Efforts to enable the
accounting firm that audits its financial statements (the "Spinco
Auditors") to
35
complete their audit such that they will date their opinion on
Spinco's audited annual financial statements on the same date
that the Plains Auditors date their opinion on Plains' audited
annual financial statements, and to enable Plains to meet its
timetable for the printing, filing and public dissemination of
Plains' annual financial statements. Spinco shall use its
Reasonable Efforts to enable the Spinco Auditors to complete
their quarterly review procedures such that they will provide
clearance on Spinco's quarterly financial statements on the same
date that the Plains Auditors provide clearance on Plains'
quarterly financial statements.
(iii) Spinco shall provide to Plains on a timely basis all
Information that Plains reasonably requires to meet its schedule
for the preparation, printing, filing, and public dissemination
of Plains' annual and quarterly financial statements. Without
limiting the generality of the foregoing, Spinco will provide all
required financial information with respect to Spinco and its
Subsidiaries to the Spinco Auditors in a sufficient and
reasonable time and in sufficient detail to permit the Spinco
Auditors to take all steps and perform all reviews necessary to
provide sufficient assistance to the Plains Auditors with respect
to Information to be included or contained in Plains' annual and
quarterly financial statements. Similarly, Plains shall provide
to Spinco on a timely basis all Information that Spinco
reasonably requires to meet its schedule for the preparation,
printing, filing, and public dissemination of Spinco's annual and
quarterly financial statements. Without limiting the generality
of the foregoing, Plains will provide all required financial
Information with respect to Plains and its Subsidiaries to the
Plains Auditors in a sufficient and reasonable time and in
sufficient detail to permit the Plains Auditors to take all steps
and perform all reviews necessary to provide sufficient
assistance to the Spinco Auditors with respect to Information to
be included or contained in Spinco's annual and quarterly
financial statements.
(iv) Spinco shall authorize the Spinco Auditors to make available
to the Plains Auditors both the personnel who performed or are
performing the annual audits and quarterly reviews of Spinco and
work papers related to the annual audits and quarterly reviews of
Spinco, in all cases within a reasonable time prior to the Spinco
Auditors' opinion date, so that the Plains Auditors are able to
perform the procedures they consider necessary to take
responsibility for the work of the Spinco Auditors as it relates
to the Plains Auditors' report on Plains' financial statements,
all within sufficient time to enable Plains to meet its timetable
for the printing, filing and public dissemination of Plains'
annual and quarterly statements. Similarly, Plains shall
authorize the Plains Auditors to make available to the Spinco
Auditors both the personnel who performed or are performing the
annual audits and quarterly reviews of Plains and work papers
related to the annual audits and quarterly reviews of Plains, in
all cases within a reasonable time prior to the Plains Auditors'
opinion date, so that the Spinco Auditors are able to perform the
procedures they consider
36
necessary to take responsibility for the work of the Plains
Auditors as it relates to the Spinco Auditors' report on Spinco's
financial statements, all within sufficient time to enable Spinco
to meet its timetable for the printing, filing and public
dissemination of Spinco's annual and quarterly financial
statements.
(v) Spinco may not change its accounting principles or practices
if a change in such accounting principle or practice would be
required to be disclosed in Spinco's financial statements as
filed with the Commission or otherwise publicly disclosed therein
without the prior written consent of Plains, except for changes
that are required by United States generally accepted accounting
principles or Commission guidelines and as to which there is no
discretion on the part of Spinco, as concurred in by Spinco
Auditors prior to its implementation. Spinco shall give Plains as
much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting
estimates or, subject as aforesaid, accounting principles from
those in effect on the date hereof. Spinco will consult with
Plains and, if requested by Plains, Spinco will consult with the
Plains Auditors with respect thereto. Plains shall give Spinco as
much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting
estimates or accounting principles from those in effect on the
date hereof.
(vi) Nothing in Sections 9.3 and 9.4 shall require Spinco to
violate any agreement with any third parties regarding the
confidentiality of confidential and proprietary information
relating to that third party or its business; provided, however,
that if Spinco is required under Sections 9.3 and 9.4 to disclose
any such information, Spinco shall use all commercially
reasonable efforts to seek to obtain such third party's consent
to the disclosure of such information. Similarly, nothing in
Sections 9.3 and 9.4 shall require Plains to violate any
agreement with any third parties regarding the confidentiality of
confidential and proprietary information relating to that third
party or its business; provided, however, that if Plains is
required under Sections 9.3 and 9.4 to disclose any such
information, Plains shall use all Reasonable Efforts to seek to
obtain such third party's consent to the disclosure of such
information.
(b) For so long as Plains beneficially owns shares representing 20% or
more of the outstanding shares of Spinco Common Stock (i) Spinco shall
furnish to Plains such financial information or documents in the possession
of Spinco and any of its Subsidiaries as Plains may reasonably request, and
(ii) Spinco shall furnish to Plains on a monthly basis such management and
other periodic reports related to financial information in the form and
substance consistent with the practice of Spinco as of the date of this
Agreement.
9.5. Preservation of Legal Privileges. The Parties recognize that the
members of their respective Groups possess and will possess information and
advice that has been previously
37
developed but is legally protected from disclosure under legal privileges, such
as the attorney-client privilege or work product exemption and other concepts of
legal protection ("Privilege"). Each Party recognizes that they shall be jointly
entitled to the Privilege with respect to such privileged information and that
each shall be entitled to maintain and use for its own benefit all such
information and advice, but both Parties shall ensure that such information is
maintained so as to protect the Privileges with respect to the other Party's
interest. To that end neither Party will knowingly waive or compromise any
Privilege associated with such information and advice without the consent of the
other Party. If privileged information is required to be disclosed to any
arbitrator or mediator in connection with a dispute between the Parties, such
disclosure shall not be deemed a waiver of Privilege with respect to such
information, and any Party receiving it in connection with a proceeding shall be
informed of its nature and shall be required to safeguard and protect it.
9.6. Payment of Expenses. Spinco shall pay all underwriting fees, discounts
and commissions and other direct costs incurred in connection with the Bond
Offering and the IPO. Except as otherwise provided in this Agreement, the
Ancillary Agreements or any other agreement between the Parties relating to the
Separation, the Bond Offering, the Exchange Offer, the IPO or the Distribution,
all other out-of-pocket costs and expenses of the Parties in connection with the
preparation of this Agreement and the Ancillary Agreements, the Separation, the
Bond Offering, the Exchange Offer, the IPO and the Distribution shall be paid by
Spinco.
9.7. Governmental Approvals. The Parties acknowledge that certain of the
transactions contemplated by this Agreement and the Ancillary Agreements are
subject to certain conditions established by applicable government regulations,
orders, and approvals ("Existing Authority"). The Parties intend to implement
this Agreement, the Ancillary Agreements and the transactions contemplated
thereby consistent with and to the extent permitted by Existing Authority and to
cooperate toward obtaining and maintaining in effect such Governmental Approvals
as may be required to implement this Agreement and each of the Ancillary
Agreements as fully as possible in accordance with their respective terms. To
the extent that any of the transactions contemplated by this Agreement or any
Ancillary Agreement require any Governmental Approvals, the Parties will use
their Reasonable Efforts to obtain any such Governmental Approvals.
9.8. Compliance with Covenants. To the extent covenants and agreements
contained in any loan or credit agreement or other financing document in effect
on the date of this Agreement to which any member of the Plains Group is a party
requires, or requires such party to cause, any member of the Spinco Group to
take or refrain from taking any action, or provides for a default or event of
default if any member of the Spinco Group takes or refrains from taking any
action, such member of the Spinco Group shall at all times prior to the
termination of such agreement or financing document, take or refrain from taking
any such action as would result in a breach or violation of, or a default under,
such agreement or financing document.
9.9. Confidentiality.
(a) The Parties shall hold, and shall cause the members of their
respective Group to hold, and shall each cause their respective officers,
employees, agents, consultants and advisors to hold, in strict confidence
and not to disclose or release
38
without the prior written consent of the other Party, any and all
Confidential Information (as defined herein); provided, that the Parties
and such Group members may disclose, or may permit disclosure of,
Confidential Information (i) to their respective auditors, attorneys,
financial advisors, bankers and other appropriate consultants and advisors
who have a need to know such information or (ii) to the extent any member
of the Plains Group or the Spinco Group is compelled to disclose any such
Confidential Information by judicial or administrative process or, in the
opinion of legal counsel, by other requirements of law. Notwithstanding the
foregoing, if any demand or request for disclosure of Confidential
Information is made pursuant to clause (ii) above, Plains or Spinco, as the
case may be, shall promptly notify the other of the existence of such
request or demand and shall provide the other a reasonable opportunity to
seek an appropriate protective order or other remedy, which both Parties
will cooperate in seeking to obtain. If such appropriate protective order
or other remedy is not obtained, the Party whose Confidential Information
is required to be disclosed shall furnish, or shall cause the other Party
to furnish, or cause to be furnished, only that portion of the Confidential
Information that is legally required to be disclosed. As used in this
Section 9.9, "Confidential Information" means all proprietary, technical or
operational information, data or material of one Party that, prior to or
following the IPO Closing Date, has been disclosed by Plains or members of
the Plains Group, on the one hand, or Spinco or members of the Spinco
Group, on the other hand, in written, oral (including by recording),
electronic, or visual form to, or otherwise has come into the possession
of, the other, including pursuant to the access provisions of Section 9.3
or any other provision of this Agreement (except to the extent that such
Information can be shown to have been (a) in the public domain through no
fault of such Party (or, in the case of Plains, any other member of the
Plains Group or, in the case of Spinco, any other member of the Spinco
Group) or (b) later lawfully acquired from other sources by the Party (or,
in the case of Plains, such member of the Plains Group or, in the case of
Spinco, such member of the Spinco Group) to which it was furnished;
provided, however, in the case of (b) that, to the knowledge of such Party,
such sources did not provide such Information in breach of any
confidentiality obligations).
(b) Notwithstanding anything to the contrary set forth herein, (i)
Plains and the other members of the Plains Group, on the one hand, and
Spinco and the other members of the Spinco Group, on the other hand, shall
be deemed to have satisfied their obligations hereunder with respect to
Confidential Information if they exercise the same degree of care (but no
less than a reasonable degree of care) as they take to preserve
confidentiality for their own similar Information and (ii) confidentiality
obligations provided for in any agreement between Plains or any other
member of the Plains Group, or Spinco or any other members of the Spinco
Group, on the one hand, and any employee of Plains or any other member of
the Plains Group, or Spinco or any other members of the Spinco Group, on
the other hand, shall remain in full force and effect. Confidential
Information of Plains or any other member of the Plains Group, on the one
hand, or Spinco or any other member of the Spinco Group, on the other hand,
in the possession of and used by the other as of the IPO Closing Date may
continue to be used by such Person in possession of the Confidential
Information in and only in the operation of the Plains Business or the
Spinco Business, as the case may be, and may be used only so long as the
Confidential Information is maintained in confidence and not disclosed in
violation of
39
Section 9.9(b). Such continued right to use may not be transferred to any
third party unless the third party purchases all or substantially all of
the business and assets in which the relevant Confidential Information is
used or employed in one transaction or in a series or related transactions.
If such right to use is transferred in accordance with the preceding
sentence, the transferring party shall not disclose the source of the
relevant Confidential Information.
9.10. Operation of ▇▇▇▇▇▇▇ Inc. Plains will cause ▇▇▇▇▇▇▇ Inc. to engage in
no activities other than owning an interest in Spinco, acting as its general
partner and taking other actions necessary or convenient to consummating the
transactions contemplated hereby.
ARTICLE X.
NON-COMPETITION
10.1. Restricted Business of Plains. Until the third anniversary of the
date hereof, unless otherwise agreed upon in writing by the Parties, Plains and
each other member of the Plains Group shall be prohibited from engaging in or
acquiring any business engaged in any of the "upstream" activities of acquiring,
exploiting, developing, exploring for and producing crude oil and natural gas in
any state in the United States (except Florida).
10.2. Restricted Business of Spinco. Until the third anniversary of the
date hereof, unless otherwise agreed upon in writing by the Parties, Spinco and
each member of the Spinco Group shall be prohibited from engaging in or
acquiring any business engaged in any of the "midstream" activities of
marketing, gathering, transporting, terminalling or storing crude oil and
natural gas (except to the extent any such activities are ancillary to, or in
support of, the upstream activities of Spinco or any other member of the Spinco
Group).
10.3. Scope of Restricted Business. Except as provided in this Article X,
Plains and each member of the Plains Group and Spinco and each member of the
Spinco Group shall be free to engage in any business activity whatsoever,
including those that may be in direct competition with such other Party.
10.4. Enforcement.
(a) Plains and each member of the Plains Group agree and acknowledge
that Spinco and the Spinco Group do not have an adequate remedy at law for
the breach by Plains or any member of the Plains Group of the covenants and
agreements set forth in this Article X, and that any breach by Plains or
any member of the Plains Group of the covenants and agreements set forth in
this Article X would result in irreparable injury to Spinco and the Spinco
Group. Plains and each member of the Plains Group further agree and
acknowledge that Spinco or any member of the Spinco Group may, in addition
to the other remedies that may be available to them, file a suit in equity
in accordance with the terms of Article VIII to enjoin Plains or any member
of the Plains Group from such breach, and consent to the injunctive relief
hereunder.
(b) Spinco and each member of the Spinco Group agree and acknowledge
that Plains and the Plains Group do not have an adequate remedy at law for
the breach by Spinco or any member of the Spinco Group of the covenants and
agreements set forth in this Article X, and that any breach by Spinco or
any member of the Spinco Group of the covenants and agreements set forth in
40
this Article X would result in irreparable injury to Plains and the Plains
Group. Spinco and each member of the Spinco Group further agree and
acknowledge that Plains or any member of the Plains Group may, in addition
to the other remedies that may be available to them, file a suit in equity
in accordance with the terms of Article VIII to enjoin Spinco or any member
of the Spinco Group from such breach, and consent to the injunctive relief
hereunder.
ARTICLE XI.
MISCELLANEOUS
11.1. Limitation of Liability. EXCEPT TO THE EXTENT SPECIFICALLY PROVIDED
IN ANY ANCILLARY AGREEMENT, IN NO EVENT SHALL ANY MEMBER OF THE PLAINS GROUP OR
THE SPINCO GROUP OR THEIR RESPECTIVE DIRECTORS, OFFICERS AND EMPLOYEES BE LIABLE
TO 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 THIS AGREEMENT OR ANY ANCILLARY AGREEMENT.
11.2. Entire Agreement. This Agreement, the other Ancillary Agreements and
the Exhibits and Schedules referenced or attached hereto and thereto,
constitutes 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.
11.3. Governing Law. This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of Texas without the
principles of conflicts of laws.
11.4. Termination. This Agreement and the Ancillary Agreements may be
terminated at any time by mutual consent of the Parties. If termination occurs
pursuant to this Section 11.4, neither Party shall have any liability of any
kind to the other.
11.5. 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,
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.
41
11.6. Counterparts. This Agreement, including the Schedules and Exhibits
hereto and the other documents referred to herein, 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.
11.7. 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. This Agreement may not be assigned by any
Party.
11.8. 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.
11.9. 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 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 or
the Schedules or Exhibits attached hereto are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
11.10. Amendment. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each Party.
11.11. Authority. Each Party represents to the other that (a) it has the
corporate or other requisite power and authority to execute, deliver and perform
this Agreement and the Ancillary Agreements, (b) the execution, delivery and
performance of this Agreement and the Ancillary Agreements by it have been duly
authorized by all necessary corporate or other actions, (c) it has duly and
validly executed and delivered this Agreement and the Ancillary Agreements to be
executed and delivered on or prior to the date hereof, and (d) this Agreement
and such Ancillary Agreements are legal, valid and binding obligations,
enforceable against it in accordance with their respective terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and general equity principles.
11.12. Interpretation. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the Parties and no presumption or burden of proof will arise favoring
or disfavoring any Party because of the authorship of any provision of this
Agreement. Any reference to any federal, state, local, or foreign law will be
deemed also to refer to law as amended and all rules and regulations promulgated
thereunder, unless the context requires otherwise. The words "include,"
"includes," and "including" will be deemed to be
42
followed by "without limitation." Pronouns in masculine, feminine, and neuter
genders will be construed to include any other gender, and words in the singular
form will be construed to include the plural and vice versa, unless the context
otherwise requires. The words "this Agreement," "herein," "hereof," "hereby,"
"hereunder," and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited.
11.13. Conflicting Agreements. If there is a conflict between this
Agreement and any Ancillary Agreement or other agreement executed in connection
herewith, the provisions of such Ancillary Agreement or other agreement shall
prevail.
11.14. Electronic Signatures.
(a) Notwithstanding the Electronic Signatures in Global and National
Commerce Act (15 U.S.C. Sec. 7001 et.seq.), the Uniform Electronic
Transactions Act, or any other law relating to or enabling the creation,
execution, delivery or recordation of any contract or signature by
electronic means, and notwithstanding any course of conduct engaged in by
the Parties, no Party will be deemed to have executed this Agreement, any
Ancillary Agreement or other document contemplated hereby or thereby
(including any amendment or other change thereto) unless and until such
Party shall have executed this Agreement or Ancillary Agreement or other
document on paper by a handwritten original signature or any other symbol
executed or adopted by a Party with current intention to authenticate such
agreement or document.
(b) Delivery of a copy of this Agreement, any Ancillary Agreement or
such other document bearing an original signature by facsimile transmission
(whether directly from one facsimile device to another by means of a
dial-up connection or whether mediated by the worldwide web), by electronic
mail in "portable document format" (".pdf") form, or by any other
electronic means intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as physical delivery of
the paper document bearaing the original signature, provided a copy bearing
an original signature on paper is subsequently physically delivered.
"Originally signed" or "original signature" means or refers to a signature
that has not been mechanically or electronically reproduced.
11.15. Service Agreement. The Parties hereby terminate the Services
Agreement, dated as of December 30, 1994, between Plains and its Subsidiaries
and waive all notice requirements associated with this termination.
[Signature Page Follows]
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WHEREFORE, the Parties have signed this Master Separation Agreement
effective as of the date first set forth above.
PLAINS RESOURCES INC.
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
44