Exhibit
3.1
PLAINS AAP, L.P.
A Delaware Limited Partnership
FOURTH AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
December 28, 2007
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS
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1
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ARTICLE II ORGANIZATION
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10
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2.1 Formation of Limited Partnership
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10
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2.2 Name of Partnership
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10
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2.3 Principal Office; Registered Office
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10
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2.4 Term of Partnership
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10
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2.5 Purpose of Partnership
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11
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2.6 Actions by Partnership
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11
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2.7 Reliance by Third Parties
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11
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ARTICLE III CAPITAL
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11
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3.1 Capital Contributions
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11
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3.2 Additional Capital Contributions
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11
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3.3 Loans
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12
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3.4 Maintenance of Capital Accounts
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12
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3.5 Capital Withdrawal Rights, Interest and Priority
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13
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3.6 Class B Partners Profits Interests
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13
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ARTICLE IV DISTRIBUTIONS
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13
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4.1 Distributions of Available Cash
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13
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4.2 Intentionally Omitted
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15
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4.3 Persons Entitled to Distributions
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15
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4.4 Limitations on Distributions
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15
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ARTICLE V ALLOCATIONS
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15
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5.1 Profits
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15
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5.2 Losses
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15
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5.3 Special
Allocation to Class B Partners
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16
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5.4 Regulatory Allocations
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16
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5.5 Tax Allocations: Code Section 704(c)
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17
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5.6 Change in Partnership Interest
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17
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5.7 Withholding
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18
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ARTICLE VI MANAGEMENT
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18
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6.1 Duties and Powers of the General Partner
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18
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6.2 No Liability to Limited Partners
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19
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6.3 Indemnification of General Partner
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19
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6.4 Rights of Limited Partners
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19
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6.5 Class B Partners
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19
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6.6 Contributed Units
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19
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ARTICLE VII TRANSFERS OF PARTNERSHIP INTERESTS
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20
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7.1 Transfer of Limited Partnership Interests
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20
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Page
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7.2 Permitted Transferees
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20
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7.3 Substitute Limited Partners
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22
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7.4 Effect of Admission as a Substitute Limited Partner
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22
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7.5 Consent
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22
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7.6 No Dissolution
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22
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7.7 Additional Limited Partners
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22
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7.8 Right of First Refusal
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23
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ARTICLE VIII DISSOLUTION AND LIQUIDATION
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24
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8.1 Dissolution of Partnership
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24
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8.2 Final Accounting
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24
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8.3 Distributions Following Dissolution and Termination
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25
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8.4 Termination of the Partnership
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26
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8.5 No Action for Dissolution
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27
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ARTICLE IX ACCOUNTING; BOOKS AND RECORDS
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27
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9.1 Fiscal Year and Accounting Method
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27
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9.2 Books and Records
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27
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9.3 Delivery to Partners; Inspection
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27
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9.4 Financial Statements
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28
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9.5 Filings
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28
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9.6 Non-Disclosure
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28
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ARTICLE X NON-COMPETITION
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29
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10.1 Non-Competition
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29
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10.2 Damages
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29
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10.3 Limitations
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29
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ARTICLE XI GENERAL PROVISIONS
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30
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11.1 Waiver of Default
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30
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11.2 Amendment of Partnership Agreement
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30
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11.3 No Third Party Rights
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30
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11.4 Severability
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30
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11.5 Nature of Interest in the Partnership
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30
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11.6 Binding Agreement
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31
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11.7 Headings
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31
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11.8 Word Meanings
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31
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11.9 Counterparts
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31
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11.10 Entire Agreement
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31
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11.11 Partition
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31
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11.12 Governing Law; Consent to Jurisdiction and Venue
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31
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- ii -
FOURTH AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT
OF
PLAINS AAP, L.P.
THIS FOURTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this
Agreement
) of Plains
AAP, L.P., a Delaware limited partnership (the
Partnership
), is made and entered into as of this
28th day of December, 2007 by Plains All American GP LLC, a Delaware limited liability company, as
the general partner, and, pursuant to Section 11.2(d) of the Third Amended and Restated Limited
Partnership Agreement dated as of August 29, 2007, by and among the General Partner and the Limited
Partners (the
Third A&R Limited Partnership Agreement
), is binding on the Persons listed as
Limited Partners in
Schedule I
hereto, as such schedule may be amended or supplemented from
time to time in accordance herewith.
This Agreement amends and restates in its entirety the Third A&R Limited Partnership
Agreement.
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
Acceptance Notice
shall have the meaning set forth in
Section 7.8(b)
.
Act
means the Delaware Revised Uniform Limited Partnership Act, as amended from time to
time.
Adjusted Capital Account Deficit
means, with respect to a Partner, the deficit balance, if
any, in such Partners Capital Account as of the end of the relevant Taxable Year, after giving
effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is obligated to
restore pursuant to any provision of this Agreement or is deemed to be obligated to restore
pursuant to Regulation Sections 1.704-1(b)(2)(ii)(
c
), 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Regulation Sections
1.704-1(b)(2)(ii)(
d
)(
4
), 1.704-1(b)(2)(ii)(
d
)(
5
), and 1.704-1(b)(2)(ii)(
d
)(
6
).
Affiliate
means, with respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with, such specified Person.
Agreement
means this Fourth Amended and Restated Limited Partnership Agreement, as amended
from time to time in accordance with its terms.
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Available Cash
means, with respect to a fiscal quarter, all cash and cash equivalents of the
Partnership at the end of such quarter (other than Net Capital Transaction Proceeds and Contributed
Unit Proceeds) less the amount of cash reserves that is necessary or appropriate in the reasonable
discretion of the General Partner to (a) provide for the proper conduct of the business of the
Partnership (including reserves for future capital expenditures and for anticipated future credit
needs of the Partnership) subsequent to such quarter or (b) comply with applicable law or any loan
agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which
the Partnership is a party or by which it is bound or its assets or Property is subject; provided,
however, that disbursements made by the Master Limited Partnership to the Partnership or cash
reserves established, increased or reduced after the expiration of such quarter (including receipt
of any Distribution Loan Proceeds) but on or before the date of determination of Available Cash
with respect to such quarter shall be deemed to have been made, established, increased or reduced,
for purposes of determining Available Cash, during such quarter if the General Partner so
determines in its reasonable discretion. For the avoidance of doubt, loan proceeds other than
Distribution Loan Proceeds will not be included in Available Cash.
Business
means all Hydrocarbon gathering, transportation, terminalling, storage, and
marketing and all operations related thereto, including, without limitation, (a) the acquisition,
construction, installation, maintenance or remediation and operation of pipelines, gathering lines,
compressors, facilities, storage facilities and equipment, and (b) the gathering of Hydrocarbons
from fields, interstate and intrastate transportation by pipeline, trucks or barges, tank storage
of Hydrocarbons, transferring Hydrocarbons from pipelines and storage tanks to trucks, barges or
other pipelines, acquisition of Hydrocarbons at the well or bulk purchase at pipeline and terminal
facilities and subsequent resale thereof.
Business Day
means any day that is not a Saturday, a Sunday or other day on which banks are
required or authorized by law to be closed in the City of New York.
Capital Account
means, with respect to any Partner, a separate account established by the
Partnership and maintained for each Partner in accordance with
Section 3.4
hereof.
Capital Contribution
means, with respect to any Partner, the amount of money, if any, and
the initial Gross Asset Value of any Property (other than money), if any, contributed to the
Partnership with respect to the interests purchased by such Partner pursuant to the terms of this
Agreement, in return for which the Partner contributing such capital shall receive a Partnership
Interest.
Certificate
means the Certificate of Limited Partnership of the Partnership filed with the
Secretary of State of Delaware, as amended or restated from time to time.
Class A Partner
means a Limited Partner all or any portion of whose Limited Partnership
Interest is evidenced by Class A Units.
Class A Unit
means a Partnership Interest representing a fractional part of the Partnership
Interests of all Limited Partners, and having the rights and obligations specified with respect to
Class A Units in this Agreement.
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Class B Partner
means a Limited Partner all or any portion of whose Limited Partnership
Interest is evidenced by Class B Units.
Class B Restricted Unit Agreement
means an agreement, substantially in the form of Exhibit A
hereto, between the Partnership and any Limited Partner that is issued Class B Units, as any such
agreement shall be amended or modified from time to time by the parties thereto.
Class B Unit
means a Partnership Interest representing a fractional part of the Partnership
Interests of all Limited Partners, and having the rights and obligations specified with respect to
Class B Units in this Agreement and the Class B Restricted Unit Agreement pursuant to which it was
issued.
Code
means the United States Internal Revenue Code of 1986, as amended.
Contributed Unit Proceeds
means (i) distributions attributable to the ownership by the
Partnership of Contributed Units and (ii) proceeds of any Special Disposition or other disposition
of Contributed Units.
Contributed Units
means the subordinated units in the Master Limited Partnership contributed
to the Partnership in 2001, which subordinated units converted into common units in the Master
Limited Partnership in accordance with the provisions of the Master Limited Partnership Agreement.
Contribution Percentage
means in respect of a Capital Contribution required to be made
pursuant to Section 2.1(b), (i) in the case of the General Partner, 1%, (ii) in the case of a Class
A Partner, 99% times a fraction, the numerator of which is the number of such Class A Partners
Class A Units at such time, and the denominator of which is the sum of (x) the number of
outstanding Class A Units at such time and (y) the product of the Conversion Factor and the
aggregate number of Earned Units and Vested Units outstanding at such time, and (iii) in the case
of a Class B Partner, 99% times a fraction, the numerator of which is the product of the Conversion
Factor and the number of such Class B Partners Earned Units and Vested Units at such time, and the
denominator of which is the sum of (x) the number of outstanding Class A Units at such time and (y)
the product of the Conversion Factor and the aggregate number Earned Units and Vested Units
outstanding at such time.
Conversion Factor
means, as of a particular time, a fraction, the numerator of which is the
regular quarterly cash distribution, if any, paid with respect to an Earned Unit or Vested Unit for
the most recent quarter, and the denominator of which is the regular quarterly cash distribution
(excluding, for this purpose, any distribution pursuant to Section 4.1(a) paid with respect to a
Class A Unit for such quarter).
Depreciation
means, for each Taxable Year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with respect to an asset for
such Taxable Year, except that if the Gross Asset Value of an asset differs from its adjusted basis
for federal income tax purposes at the beginning of such Taxable Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such Taxable Year bears to such
beginning adjusted tax basis; provided, however, that if the adjusted basis for federal
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income tax purposes of an asset at the beginning of such Taxable Year is zero, Depreciation
shall be determined with reference to such beginning Gross Asset Value using any reasonable method
selected by the General Partner.
Distribution Loan
means a loan to the Partnership, the proceeds of which are intended for
inclusion in Available Cash; provided, that if any proceeds of a loan are used for any purposes
other than a distribution to the Class A Members pursuant to
Section 4.1(a)
, only the
portion of such loan distributed to the Class A Members shall be deemed to be a Distribution
Loan.
Distribution Loan Proceeds
means the proceeds of a Distribution Loan.
Earned Unit
means a Class B Unit that constitutes an Earned Unit under the Class B
Restricted Unit Agreement pursuant to which such Class B Unit was issued.
E-Holdings
means E-Holdings, III L.P., a Texas limited partnership.
EnCap
shall have the meaning set forth in
Section 10.1
.
Encumbrance
means any security interest, pledge, mortgage, lien (including, without
limitation, environmental and tax liens), charge, encumbrance, adverse claim, any defect or
imperfection in title, preferential arrangement or restriction, right to purchase, right of first
refusal or other burden or encumbrance of any kind, other than those imposed by this Agreement.
First Refusal Notice
shall have the meaning set forth in
Section 7.8(a)
.
General Partner
means Plains All American GP LLC, a Delaware limited liability company, any
successor thereto, and any Persons hereafter admitted as additional general partners, each in its
capacity as a general partner of the Partnership.
Gross Asset Value
means with respect to any asset, the assets adjusted basis for federal
income tax purposes, except as follows and as otherwise provided in
Section 3.2(b)
:
(a) The initial Gross Asset Value of any asset contributed by a Partner to the
Partnership shall be the gross fair market value of such asset, as reasonably determined by
the General Partner; provided, however, that the initial Gross Asset Values of the assets
contributed to the Partnership pursuant to
Section 3.1
hereof shall be as set forth
in such section or the schedule referred to therein;
(b) The Gross Asset Values of all Partnership assets shall be adjusted to equal their
respective gross fair market values (taking Code Section 7701(g) into account), as
reasonably determined by the General Partner as of the following times: (i) the acquisition
of an additional interest in the Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution; (ii) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property as consideration for an
interest in the Partnership; (iii) the issuance by the Partnership of
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Class B Units; and (iv) the liquidation of the Partnership within the meaning of
Regulation Section 1.704-1(b)(2)(ii)(g); and
(c) The Gross Asset Value of any item of Partnership assets distributed to any Partner
shall be adjusted to equal the gross fair market value (taking Code Section 7701(g) into
account) of such asset on the date of distribution as reasonably determined by the General
Partner.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph
(b), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset, for purposes of computing Profits and Losses.
Hydrocarbons
means crude oil, natural gas, casinghead gas, condensate, sulphur, natural gas
liquids, plant products, liquefied petroleum gas and other liquid or gaseous hydrocarbons produced
in association therewith, including, without limitation, coalbed methane and gas and
CO
2
.
Initial Class A Holders
means the Persons listed as such on Schedule I hereto.
Initial Grant Date Partnership Capital
means, with respect to the Class B Partners, the
amount set forth in Schedule I, which amount is equal to the aggregate Capital Account balances of
the General Partner and the Class A Partners. Initial Grant Date Partnership Capital shall be
reduced by the amount of any Distribution Loan Proceeds distributed under
Section 4.1(a)
and then increased by the principal amount of any Distribution Loan assumed or paid by any entity
that directly or indirectly owns the Class A Units.
Kafu
means KAFU Holdings LP, a Delaware limited partnership.
Kayne Anderson
shall have the meaning set forth in
Section 10.1
.
Limited Partner
means, unless the context otherwise requires, each Initial Class A Holder
and each additional Person that becomes a Class A Partner or a Class B Partner pursuant to the
terms of this Agreement and that is shown as such on the books and records of the Partnership, in
each case, in such Persons capacity as a limited partner of the Partnership.
Limited Partnership Interest
means the ownership interest of a Limited Partner in the
Partnership, which may be evidenced by Class A Units, Class B Units or any other Partnership
Security or a combination thereof or interest therein, and includes any and all benefits to which
such Limited Partner is entitled as provided in this Agreement, together with all obligations of
such Limited Partner to comply with the terms and provisions of this Agreement.
Liquidating Trustee
has the meaning set forth in
Section 8.3(a)
.
LLC Agreement
means the Second Amended and Restated Agreement Limited Liability Company
Agreement of the General Partner, dated as of September 12, 2005, by and among the members in the
General Partner and any other Persons who become members in the General Partner as provided
therein, as amended from time to time in accordance with the terms thereof.
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Losses
has the meaning set forth in the definition of Profits and Losses.
Management Entity
shall mean PAA Management, L.P.
Management Sale
shall have the meaning set forth in
Section 7.9
.
Master Limited Partnership
means Plains All American Pipeline, L.P., and any successor
thereto.
Master Limited Partnership Agreement
means the Third Amended and Restated Agreement of
Limited Partnership of the Master Limited Partnership, dated as of June 27, 2001, as amended on
April 15, 2004 and November 15, 2006, and as may be further amended, modified, supplemented or
restated from time to time in accordance with the terms thereof.
Member
means a record holder of a Membership Interest.
Membership Interest
means, with respect to a Partner, such Partners limited liability
company interest, if any, in the General Partner, which refers to all of such Partners rights and
interests in the General Partner in such Partners capacity as a member thereof, all as provided in
the LLC Agreement and the Delaware Limited Liability Company Act.
Membership Transfer
shall have the meaning set forth in
Section 7.1(b)
.
Net Capital Transaction Proceeds
means the cash, notes, equity interests and any other
consideration derived from the sale or other disposition of all or a portion of the Partnerships
assets.
Non-Purchasing Partner
shall have the meaning set forth in
Section 7.8(d)
.
Non-Selling Partner
shall have the meaning set forth in
Section 7.8(b)
.
Notice
means a writing, containing the information required by this Agreement to be
communicated to a party, and shall be deemed to have been received (a) when personally delivered or
sent by telecopy, (b) one day following delivery by overnight delivery courier, with all delivery
charges pre-paid, or (c) on the third Business Day following the date on which it was sent by
United States mail, postage prepaid, to such party at the address or fax number, as the case may
be, of such party as shown on the records of the Partnership.
Offer
shall have the meaning set forth in
Section 7.8(a)
.
Offeror
shall have the meaning set forth in
Section 7.8(a)
.
Option
means an option to purchase Contributed Units granted pursuant to the Option Plan, as
amended.
Option Plan
means the Plains All American 2001 Performance Option Plan, as amended, and any
successor employee incentive plan funded with Contributed Units.
Optioned Interest
shall have the meaning set forth in
Section 7.8(a)
.
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Partner
means the General Partner or any of the Limited Partners, and Partners means the
General Partner and all of the Limited Partners.
Partnership
shall have the meaning set forth in the preamble hereof.
Partnership Interest
means a Partners limited partnership or general partnership interest
in the Partnership which refers to all of a Partners rights and interests in the Partnership in
such Partners capacity as a Partner, all as provided in this Agreement and the Act.
Partnership Security
means any class or series of equity interest in the Partnership (but
excluding any options, rights, warrants and appreciation rights relating to an equity interest in
the Partnership), including without limitation, Class A Units and Class B Units.
Permitted Transfer
shall mean:
(a) with respect to Class A Units, a Transfer of any or all of the Partnership Interest
by any Partner who is a natural person to (i) such Partners spouse, children (including
legally adopted children and stepchildren), spouses of children or grandchildren or spouses
of grandchildren; (ii) a trust for the benefit of the Partner and/or any of the Persons
described in clause (i); or (iii) a limited partnership or limited liability company whose
sole partners or members, as the case may be, are the Partner and/or any of the Persons
described in clause (i) or clause (ii);
provided
, that in any of clauses (i), (ii) or (iii),
the Partner transferring such Partnership Interest, or portion thereof, retains exclusive
power to exercise all rights under this Agreement;
(b) a Transfer of any or all of the Partnership Interest by any Partner to the
Partnership;
(c) with respect to Class A Units, a Transfer of any or all of the Partnership Interest
by a Partner to any Affiliate of such Partner;
provided, however
, that such transfer shall
be a Permitted Transfer only so long as such Partnership Interest, or portion thereof, is
held by such Affiliate or is otherwise transferred in another Permitted Transfer; and
(d) with respect to Class B Units, a Transfer permitted under the applicable Class B
Restricted Unit Agreement and any Transfer of Vested Units in accordance with applicable
securities laws.
Provided, however
, that no Permitted Transfer shall be effective unless and until the
transferee of the Partnership Interest, or portion thereof, so transferred complies with
Sections 7.1(b)
. Except in the case of a Permitted Transfer pursuant to clause (b) above,
from and after the date on which a Permitted Transfer becomes effective, the Permitted Transferee
of the Partnership Interest, or portion thereof, so transferred shall have the same rights, and
shall be bound by the same obligations, under this Agreement as the transferor of such Partnership
Interest, or portion thereof, and shall be deemed for all purposes hereunder a Partner and such
Permitted Transferee shall, as a condition to such Transfer, agree in writing to be bound by the
terms of this Agreement. No Permitted Transfer shall conflict with or result in any violation of
any judgment, order, decree, statute, law, ordinance, rule or regulation or require the Company,
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if not currently subject, to become subject, or if currently subject, to become subject to a
greater extent, to any statute, law, ordinance, rule or regulation, excluding matters of a
ministerial nature that are not materially burdensome to the Company.
Permitted Transferee
shall mean any Person who shall have acquired and who shall hold a
Partnership Interest, or portion thereof, pursuant to a Permitted Transfer.
Person
means any individual, partnership, corporation, limited liability company, trust,
incorporated or unincorporated organization or other legal entity of any kind.
Profits
and
Losses
means, for each Taxable Year, an amount equal to the Partnerships net
taxable income or loss for a taxable year, determined in accordance with Section 703(a) of the Code
(for this purpose, all items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in computing such taxable income or
loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses shall be added to such taxable
income or loss;
(b) Any expenditures of the Partnership described in Section 705(a)(2)(B) of the Code
or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses,
shall be subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to
subparagraphs (b) or (c) of the definition of Gross Asset Value, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset
Value of the asset) or an item of loss (if the adjustment decreases the Gross Asset Value of
the asset) from the disposition of such asset and shall be taken into account for purposes
of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Property with respect to which gain
or loss is recognized for federal income tax purposes shall be computed by reference to the
Gross Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis
of such Property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery deductions taken
into account in computing such taxable income or loss, there shall be taken into account
Depreciation for such Taxable Year, computed in accordance with the definition of
Depreciation;
(f) To the extent an adjustment to the adjusted tax basis of any Partnership asset
pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulation
Sections 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as
a result of a distribution other than in liquidation of a Partners interest in the
Partnership, the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
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decreases such basis) from the disposition of such asset and shall be taken into
account for purposes of computing Profits or Losses; and
(g) Profits and Losses shall not include any items specially allocated pursuant to
Section 5.3 or 5.4.
Property
means all assets, real or intangible, that the Partnership may own or otherwise
have an interest in from time to time.
Regulations
means the regulations, including temporary regulations, promulgated by the
United States Department of Treasury with respect to the Code, as such regulations are amended from
time to time, or corresponding provisions of future regulations.
Regulatory Allocations
shall have the meaning set forth in
Section 5.4(c)
.
Selling Partner
shall have the meaning set forth in
Section 7.8(a)
.
Special Disposition
means (i) the delivery of Contributed Units upon the exercise of an
Option when the exercise price is paid in cash, (ii) the sale of Contributed Units in a cashless
exercise of an Option, but only to the extent the proceeds of such sale satisfy the exercise price,
(iii) in the case of the exercise of an Option in which the exercise price is satisfied by
netting the units delivered to the optionee, the sale of Contributed Units equal in number to the
netted units, (iv) the sale of Contributed Units with a value substantially equivalent to the
deemed aggregate exercise price for any Options cancelled and paid in cash, and (iv) any other
disposition of Contributed Units reasonably attributable to the payment of the exercise price of an
Option.
Strome
means Mark E. Strome.
Strome Hedgecap
means Strome Hedgecap Fund, L.P.
Subsequent Grant Date
means any date on which any Class B Units are granted following the
date of the initial grant of Class B Units (as set forth on
Schedule
I).
Subsequent Grant Date Partnership Capital
means, with respect to any Subsequent Grant Date,
an amount equal to the aggregate Capital Account balances as of such date of the General Partner,
the Class A Partners and the then-existing Class B Partners, which amount shall be set forth in an
amendment to
Schedule I
approved by the General Partner in good faith. Each Subsequent
Grant Date Partnership Capital shall be reduced by the amount of any Distribution Loan Proceeds
distributed under
Section 4.1(a)
after the date of the such Subsequent Grant Date and
increased by the principal amount of any Distribution Loan assumed or paid by any entity that
directly or indirectly owns the Class A Units after the date of such Subsequent Grant Date.
Taxable Year
shall mean the calendar year.
Third A&R Limited Partnership Agreement
shall have the meaning set forth in the recitals
hereto.
- 9 -
Transfer
or
Transferred
means to give, sell, exchange, assign, transfer, pledge,
hypothecate, bequeath, devise or otherwise dispose of or encumber, voluntarily or involuntarily, by
operation of law or otherwise. When referring to a Partnership Interest, Transfer shall mean the
Transfer of such Partnership Interest whether of record, beneficially, by participation or
otherwise.
Unit Percentages
means the Unit Percentages set forth on Schedule I.
Vested Unit
means a Class B Unit that constitutes a Vested Unit under the Class B
Restricted Unit Agreement pursuant to which such Class B Unit was issued.
Wachovia
means Wachovia Investors, Inc.
ARTICLE II
ORGANIZATION
2.1 Formation of Limited Partnership
The General Partner has previously formed the Partnership as a limited partnership pursuant to
the provisions of the Act and the parties hereto hereby agree to amend and restate the Third A&R
Limited Partnership Agreement of the Partnership in its entirety. The parties hereto acknowledge
that they intend that the Partnership be taxed as a partnership and not as an association taxable
as a corporation for federal income tax purposes. No election may be made to treat the Partnership
as other than a partnership for federal income tax purposes.
2.2 Name of Partnership
The name of the Partnership is Plains AAP, L.P. or such other name as the General Partner may
hereafter adopt from time to time. The General Partner shall execute and file in the proper
offices such certificates as may be required by any assumed name act or similar law in effect in
the jurisdictions in which the Partnership may elect to conduct business.
2.3 Principal Office; Registered Office
The principal office address of the Partnership is located at 333 Clay Street, 16th Floor,
Houston, Texas 77002, or such other place as the General Partner designates from time to time.
The registered office address and the name of the registered agent of the Partnership for service
of process on the Partnership in the State of Delaware is as stated in the Certificate or as
designated from time to time by the General Partner.
2.4 Term of Partnership
The term of the Partnership commenced on May 21, 2001 and shall continue until dissolved
pursuant to
Section 8.1
hereof. The legal existence of the Partnership as a separate legal
entity continues until the cancellation of the Certificate.
- 10 -
2.5 Purpose of Partnership
The Partnership is formed for the object and purpose of, and the nature of the business to be
conducted and promoted by the Partnership is, (a) acting as the sole member of the limited
liability company that acts as the general partner, of the Master Limited Partnership pursuant to
the Master Limited Partnership Agreement, (b) holding any or all of the Contributed Units and the
Incentive Distribution Rights (as such terms are defined in the Transfer Agreement) and
(c) engaging in any and all activities necessary or incidental to the foregoing.
2.6 Actions by Partnership
The Partnership may execute, deliver and perform all contracts, agreements and other
undertakings and engage in all activities and transactions as may in the opinion of the General
Partner be necessary or advisable to carry out its objects.
2.7 Reliance by Third Parties
Persons dealing with the Partnership are entitled to rely conclusively upon the power and
authority of the General Partner as herein set forth.
ARTICLE III
CAPITAL
3.1 Capital Contributions
(a) As of the date hereof, there are 2,300,000 Class A Units authorized and outstanding, and
200,000 Class B Units authorized. Schedule I sets forth the ownership of outstanding Class A Units
and Unit Percentages and the number of outstanding Class B Units, and may be amended from time to
time by the Partnership to reflect the issuance of additional Class A Units or Class B Units.
(b) Each Partner agrees to make Capital Contributions in proportion to such Partners
then-applicable Contribution Percentage for equity issuances by the Master Limited Partnership
pursuant to Section 5.2(b) of the Master Limited Partnership Agreement approved by the Members
pursuant to the LLC Agreement.
3.2 Additional Capital Contributions
(a) No Partner shall be required to make any additional Capital Contribution other than as
required under
Section 3.1
.
(b) Subject to the restrictions contained in Section 3.5 of the Class B Restricted Unit
Agreement, the Partnership may offer additional Partnership Interests to any Person with the
approval of the General Partner. The names, addresses and Capital Contributions of the Partners
shall be reflected in the books and records of the Partnership.
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3.3 Loans
(a) No Partner shall be obligated to loan funds to the Partnership. Loans by a Partner to the
Partnership shall not be considered Capital Contributions. The amount of any such loan shall be a
debt of the Partnership owed to such Partner in accordance with the terms and conditions upon which
such loan is made.
(b) A Partner may (but shall not be obligated to) guarantee a loan made to the Partnership.
If a Partner guarantees a loan made to the Partnership and is required to make payment pursuant to
such guarantee to the maker of the loan, then the amounts so paid to the maker of the loan shall be
treated as a loan by such Partner to the Partnership and not as an additional Capital Contribution.
3.4 Maintenance of Capital Accounts
(a) The Partnership shall maintain for each Partner a separate Capital Account with respect to
the Partnership Interest owned by such Partner in accordance with the following provisions:
(i) To each Partners Capital Account there shall be credited (A) such Partners Capital
Contributions, (B) such Partners share of Profits and items of income and gain allocated to such
Partner pursuant to Sections 5.3 or 5.4, and (C) the amount of any Partnership liabilities assumed
by such Partner or which are secured by any Property distributed to such Partner. The principal
amount of a promissory note which is not readily traded on an established securities market and
which is contributed to the Partnership by the maker of the note (or a Partner related to the maker
of the note within the meaning of Regulation Section 1.704-1(b)(2)(ii)(c)) shall not be included in
the Capital Account of any Partner until the Partnership makes a taxable disposition of the note or
until (and only to the extent) principal payments are made on the note, all in accordance with
Regulation Section 1.704-1(b)(2)(iv)(d)(2);
(ii) To each Partners Capital Account there shall be debited (A) the amount of money and the
Gross Asset Value of any Property distributed or treated as an advance
distribution to such Partner
pursuant to any provision of this Agreement (including without limitation any distributions
pursuant to
Section 4.1)
, (B) such Partners share of Losses and items of loss and
deduction allocated to such Partner pursuant to Section 5.4, and (C) the amount of any liabilities
of such Partner assumed by the Partnership or which are secured by any Property contributed by such
Partner to the Partnership;
(iii) In the event Partnership Interests are Transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent such
Capital Account relates to the Transferred Partnership Interests; and
(iv) In determining the amount of any liability for purposes of
Sections 3.4(a)(i) and
(ii)
there shall be taken into account Code Section 752(c) and any other applicable provisions
of the Code and Regulations.
(b) The foregoing
Section 3.4(a)
and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with Regulation Section 1.704-1(b)
- 12 -
and, to the greatest extent practicable, shall be interpreted and applied in a manner
consistent with such Regulation. The General Partner in its discretion and to the extent otherwise
consistent with the terms of this Agreement shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners and the amount of
capital reflected on the Partnerships balance sheet, as computed for book purposes, in accordance
with Regulation Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the
event unanticipated events might otherwise cause this Agreement not to comply with Regulation
Section 1.704-1(b).
3.5 Capital Withdrawal Rights, Interest and Priority
Except as expressly provided in this Agreement, no Partner shall be entitled to (a) withdraw
or reduce such Partners Capital Contribution or to receive any distributions from the Partnership,
or (b) receive or be credited with any interest on the balance of such Partners Capital
Contribution at any time.
3.6 Class B Partners Profits Interests
The Class B Units have been, and may in the future be, issued for zero consideration in order
to provide additional incentives for the Class B Partners to build value for the Partnership and
achieve its business goals. Each Class B Unit represents an interest in the Partnership of the
nature commonly referred to as a
profits interest
(as described in Revenue Procedure 93-27,
1993-2 C.B. 343 and Revenue Procedure 2001-43, 2001-2 C.B. 191), and represents an interest in
future Partnership profits and losses from operations, current distributions from operations, and
an interest in future appreciation or depreciation in the Partnership asset values as set forth in
this Agreement, but which does not represent an interest in Initial Grant Date Partnership Capital
or Subsequent Grant Date Partnership Capital (as applicable) as determined on the date such Class B
Unit is or was issued.
ARTICLE IV
DISTRIBUTIONS
4.1 Distributions of Available Cash
An amount equal to 100% of Available Cash with respect to each fiscal quarter of the
Partnership shall be distributed to the Partners within forty-five days after the end of such
quarter as follows:
(a) first, 1% to the General Partner and 99% to the Class A Partners, pro rata for the number
of Class A Units held, in an amount equal to any Distribution Loan Proceeds included in Available
Cash for such quarter (which amount may be distributed separately from and prior to distribution of
other Available Cash);
(b) second, 1% to the General Partner and 99% to the Class A Partners, pro rata based on the
number of Class A Units held, until the aggregate amount of distributions paid pursuant to this
Section 4.1(b)
in respect of such quarter equals the Distribution Threshold Amount for such
quarter;
- 13 -
(c) thereafter, 1% to the General Partner and 99% to the Class A Partners and the Class B
Partners, pro rata based on the number of Class A Units, Earned Units and/or Vested Units held; and
(d) notwithstanding any other provision of this Agreement, all distributions of Contributed
Units Proceeds shall be made to the Partners in proportion to their relative Unit Percentages
within forty-five days after the end of each quarter.
For the purposes of this Section 4.1, the following terms shall have the meanings set forth
below:
Applicable Carryover Amount
means, with respect to a particular fiscal quarter, an amount of
the Cumulative Carryover Amount equal to the lesser of (i) the Unapplied Cumulative Carryover
Amount for such quarter and (ii) the amount, if any, by which $11 million exceeds the Applicable
Debt Service Amount for such quarter.
Applicable Debt Service Amount
means, with respect to any fiscal quarter, the aggregate
amount, if any, of principal, interest, fees and related expenses in respect of any Distribution
Loan or Distribution Loans (i) paid by the Partnership or any of its Subsidiaries during such
quarter for which no reserve had previously been established or (ii) for which a reserve is
established by the Partnership during such quarter that reduces Available Cash for such quarter;
provided, however, that (x) notwithstanding the foregoing, the Applicable Debt Service Amount
shall not include that portion of any such payment that is funded with the proceeds of indebtedness
incurred by the Partnership or any of its Subsidiaries (it being understood that any such
indebtedness shall constitute a Distribution Loan) and (y) for the avoidance of doubt, any payment
of principal, interest, fees or related expenses in respect of any Distribution Loan that is made
by any Person other than the Partnership or any of its Subsidiaries shall not constitute
Applicable Debt Service Amount.
Carryover Amount
means, for any particular fiscal quarter, the aggregate amount by which the
Applicable Debt Service Amount for such quarter exceeds $11.0 million.
Distribution Threshold Amount
means, with respect to any fiscal quarter, the amount by which
(a) $11.0 million exceeds (b) the sum of (i) the Applicable Debt Service Amount for such quarter
plus (ii) the Applicable Carryover Amount for such quarter.
Cumulative Carryover Amount
means, as of any particular fiscal quarter, an amount equal to
the aggregate Carryover Amounts, if any, for all preceding fiscal quarters.
Unapplied Cumulative Carryover Amount
means, as of any particular fiscal quarter, that
portion of the Cumulative Carryover Amount, if any, not previously included in the calculation of
the Distribution Threshold Amount for any prior quarter. For the avoidance of doubt, with respect
to any fiscal quarter, the aggregate amount of the Cumulative Carryover Amount that has been
included in the calculation of the Distribution Threshold Amount for all preceding fiscal quarters
shall equal the aggregate Applicable Carryover Amounts for all such fiscal quarters.
- 14 -
4.2 Intentionally Omitted
4.3 Persons Entitled to Distributions
All distributions of Available Cash to Partners for a fiscal quarter pursuant to
Section 4.1
shall be made to the Partners shown on the records of the Partnership to be
entitled thereto as of the last day of such quarter, unless the transferor and transferee of any
Partnership Interest otherwise agree in writing to a different distribution and such distribution
is consented to in writing by the General Partner. For the avoidance of doubt, no distribution
shall be paid with respect to any outstanding Class B Unit that is not either an Earned Unit or a
Vested Unit.
4.4 Limitations on Distributions
(a) Notwithstanding any provision of this Agreement to the contrary, no distributions shall be
made except pursuant to
Article IV
or
Article VIII.
(b) Notwithstanding any provision of this Agreement to the contrary, no distribution hereunder
shall be permitted if such distribution would violate Section 17-607 of the Act or other applicable
law.
ARTICLE V
ALLOCATIONS
5.1 Profits
Subject to Section 8.3, Profits for any Taxable Year shall be allocated:
(a) first, to the General Partner to which Losses have previously been allocated pursuant to
Section 5.2(d)
so as to bring the General Partners Capital Account to zero;
(b) second, to the Partners in the amount of and in proportion to the Losses which have
previously been allocated pursuant to Section 5.2(c) to such Partners;
(c) third, to the Partners in the amount and in proportion to the Losses which have previously
been allocated pursuant to Section 5.2(b) to such Partners; and
(d) fourth, any remaining Profits shall be allocated 1% to the General Partner and 99% to the
Class A Partners pro rata based on the number of Class A Units held.
5.2 Losses
Subject to Section 8.3, Losses for any Taxable Year shall be allocated:
(a) first, to the General Partner and the Class A Partners in proportion to and to the extent
of the Profits which have previously been allocated pursuant to
Section 5.1(d)
to such
Partners;
- 15 -
(b) second, 1% to the General Partner and 99% to the Class A Partners pro rata based on the
number of Class A Units held,
provided; however
, that no Partner shall be allocated any
loss pursuant to this Section 5.2(b) which would result in a negative Capital Account balance for
such Partner;
(c) third, to Partners in proportion to and to the extent of their positive Capital Account
balances until such Capital Account balances have been reduced to zero; and
(d) fourth, any remaining Losses shall be allocated to the General Partner.
5.3 Special Allocation to Class B Partners
For any Taxable Year, gross income in an amount equal to any distributions of Available Cash
made to the Class B Partners pursuant to Section 4.1(c) shall be allocated to the Class B Partners,
pro rata based on the number of Class B Units held by such Class B Partners.
5.4 Regulatory Allocations
(a)
Gross Income Allocation
. In the event any Partner has an Adjusted Capital Account
Deficit at the end of any Taxable Year, such Partner shall be specially allocated items of
Partnership income and gain in the amount of such deficit balance as quickly as possible;
provided
,
that
, an allocation pursuant to this
Section 5.4(a)
shall be made
only if and to the extent that such Partner would have an Adjusted Capital Account Deficit balance
after all other allocations provided for in this
Article V
have been made.
(b)
Qualified Income Offset
. In the event any Partner unexpectedly receives any
adjustments, allocations or distributions described in Regulation Sections 1.704-1(b)(2)(ii)(
d
)(
4
),
1.704-1(b)(2)(ii)(
d
)(
5
) or 1.704-1(b)(2)(ii)(
d
)(
6
), items of Partnership income and gain shall be
specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of such Partner as quickly as
possible,
provided
,
that
, an allocation pursuant to this
Section 5.4(b)
shall be made only if and to the extent that such Partner would have an Adjusted Capital Account
Deficit after all other allocations provided for in this
Article V
have been made.
(c)
Curative Allocations
. The allocations set forth in
Sections 5.4(a) and
(b)
hereof (the
Regulatory Allocations
) are intended to comply with certain requirements of
the Regulations. It is the intent of the Partners that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss or deduction pursuant to this
Section 5.4(c)
.
Therefore, notwithstanding any other provision of this
Article V
(other than the
Regulatory Allocations), the General Partner shall make such offsetting special allocations of
income, gain, loss or deduction in whatever manner it determines appropriate so that, after such
offsetting allocations are made, each Partners Capital Account balance is, to the extent possible,
equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were
not part of this Agreement and all such items were allocated pursuant to
Sections 5.1, 5.2 and
5.3
without regard to the Regulatory Allocations.
- 16 -
(d)
Contributed Units Special Allocations
. Notwithstanding any other provision of
this Agreement, but subject to Section 5.5, all income, gain, loss and deduction related to the
Contributed Units shall be allocated to the Partners in proportion to their relative Unit
Percentages.
5.5 Tax Allocations: Code Section 704(c)
(a) Except as otherwise provided herein, for federal income tax purposes, (i) each item of
income, gain, loss and deduction shall be allocated among the Partners in the same manner as its
correlative item of book income, gain, loss or deduction is allocated pursuant to Sections 5.1
and 5.2, and (ii) each tax credit shall be allocated to the Partners in the same manner as the
receipt or expenditure giving rise to such credit is allocated pursuant to Section 5.1 or 5.2.
(b) In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss
and deduction with respect to any Property contributed to the capital of the Partnership shall,
solely for tax purposes, be allocated among the Partners so as to take account of any variation
between the adjusted basis of such Property to the Partnership for federal income tax purposes and
its initial Gross Asset Value (computed in accordance with the definition herein of Gross Asset
Value).
(c) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to
subparagraph (b) of the definition herein of Gross Asset Value, subsequent allocations of income,
gain, loss and deduction with respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
(d) Any elections or other decisions relating to such allocations shall be made by the General
Partner in any manner that reasonably reflects the purpose and intention of this Agreement;
provided, that the Partnership, in the discretion of the General Partner, may make, or not make,
curative or remedial allocations (within the meaning of the Regulations under Code Section
704(c)) including, but not limited to, curative allocations which offset the effect of the
ceiling rule for a prior Taxable Year (within the meaning of Regulation Section
1.704-3(c)(3)(ii)) and curative allocations from disposition of contributed property (within the
meaning of Regulation Section 1.704-3(c)(3)(iii)(B)). Allocations pursuant to this
Section
5.5
are solely for purposes of federal, state, and local taxes and shall not affect, or in any
way be taken into account in computing, any Partners Capital Account or share of Profits, Losses,
other items, or distributions pursuant to any provision of this Agreement.
5.6 Change in Partnership Interest
In the event that the Partners interests in the Partnership change during a Taxable Year,
allocations shall be made taking into account the Partners varying interests for such Taxable
Year, determined on a daily, monthly or other basis as determined by the General Partner, using any
permissible method under Code Section 706 and the Regulations thereunder.
- 17 -
5.7 Withholding
Each Partner hereby authorizes the Partnership to withhold from income or distributions
allocable to such Partner and to pay over any taxes payable by the Partnership or any of its
Affiliates as a result of such Partners participation in the Partnership; if and to the extent
that the Partnership shall be required to withhold any such taxes, such Partner shall be deemed for
all purposes of this Agreement to have received a distribution from the Partnership as of the time
such withholding is required to be paid, which distribution shall be deemed to be a distribution to
such Partner to the extent that the Partner is then entitled to receive a distribution. To the
extent that the aggregate of such distributions in respect of a Partner for any period exceeds the
distributions to which such Partner is entitled for such period, the amount of such excess shall be
considered a demand loan from the Partnership to such Partner, with interest at the rate of
interest per annum that Citibank, N.A., or any successor entity thereto, announces from time to
time as its prime lending rate, which interest shall be treated as an item of Partnership income,
until discharged by such Partner by repayment, which may be made in the sole discretion of the
General Partner out of distributions to which such Partner would otherwise be subsequently
entitled. The withholdings referred to in this
Section 5.7
shall be made at the maximum
applicable statutory rate under applicable tax law unless the General Partner shall have received
an opinion of counsel or other evidence, satisfactory to the General Partner, to the effect that a
lower rate is applicable, or that no withholding is applicable.
ARTICLE VI
MANAGEMENT
6.1 Duties and Powers of the General Partner
(a) The business and affairs of the Partnership shall be managed by the General Partner.
Except for situations in which the approval of the Limited Partners is expressly required by this
Agreement or by nonwaivable provisions of applicable law, the General Partner shall have full and
complete authority, power and discretion to manage and control the business, affairs and property
of the Partnership, to make all decisions regarding those matters and to perform any and all other
acts or activities customary or incident to the management of the Partnerships business. Without
limiting the generality of the foregoing, the General Partner has full power and authority to
execute, deliver and perform such contracts, agreements and other undertakings on behalf of the
Partnership, without the consent or approval of any other Partner, and to engage in all activities
and transactions, as it may deem necessary or advisable for, or as may be incidental to, the
conduct of the business and affairs of the Partnership.
(b) Each Limited Partner agrees to cooperate with the General Partner and to execute and
deliver such documents, agreements and instruments, and do all such further acts, as deemed
necessary or advisable by the General Partner to give effect to the exercise of the General
Partners powers under this
Section 6.1
. Without limiting the foregoing, each Limited
Partner hereby irrevocably appoints the General Partner as its proxy and attorney-in-fact (with
full power of substitution and resubstitution) to vote or act by written consent with respect to
its Partnership Interest as a Limited Partner as determined by the General Partner on all matters
requiring the
vote, approval or consent of the Limited Partners. The Partners acknowledge that such proxy
is coupled with an interest and is irrevocable.
- 18 -
(c) The General Partner is the tax matters partner for purposes of Section 6231 of the Code
and analogous provisions of state law. The tax matters partner has the exclusive authority and
discretion to make any elections required or permitted to be made by the Partnership under any
provisions of the Code or any other applicable laws.
6.2 No Liability to Limited Partners
Except in case of gross negligence or willful malfeasance of the person (the General Partner
or any of the Members, managers, directors, officers, agents or employees of the General Partner)
who is sought to be held liable, neither the General Partner nor the Members, managers, directors,
officers, agents or employees of the General Partner will be liable to any Limited Partner or the
Partnership (i) for any action taken with respect to the Partnership which is not in violation of
the provisions of this Agreement, or (ii) for any action taken by any Member, manager, director,
officer, agent or employee of the General Partner.
6.3 Indemnification of General Partner
The Partnership shall indemnify the General Partner, the members, managers, directors,
officers, agents and employees of the General Partner against any losses, liabilities, damages and
expenses to which any of such persons may become subject, including attorneys fees, judgments and
amounts paid in settlement, actually and reasonably incurred by them, and advance all expenses to
them, in connection with any threatened, pending or completed action, suit or proceeding to which
any of them was or is a party or is threatened to be made a party by reason of the direct or
indirect association by them with the Partnership to the maximum extent permitted by applicable
law.
6.4 Rights of Limited Partners
The Limited Partners will not be personally liable for any obligations of the Partnership nor
will they have any obligation to make contributions to the Partnership in excess of their
respective Capital Contributions required under
Section 3.1
or have any liability for the
repayment or discharge of the debts and obligations of the Partnership except to the extent
provided herein or as required by law. The Limited Partners in their capacities as such shall take
no part in the management, control or operation of the Partnerships business and shall have no
power to bind the Partnership and no right or authority to act for the Partnership or to vote on
matters other than the matters set forth in this Agreement or as required by applicable law.
6.5 Class B Partners
Except as expressly provided in this Agreement, the Class B Partners, in their capacities as
such, shall have no voting rights or rights to participate in the management of the Partnership.
6.6 Contributed Units
The General Partner may in its discretion dispose of any or all of the Contributed Units in
connection with the administration of the Option Plan, including without limitation any exercise of
cancellation of an Option or any termination of the Plan. Proceeds of any Special Disposition
- 19 -
shall be distributed in accordance with Section 4.1(d). Proceeds of any other disposition of
Contributed Units may be disbursed at the discretion of the General Partner.
ARTICLE VII
TRANSFERS OF PARTNERSHIP INTERESTS
7.1 Transfer of Limited Partnership Interests
(a) No Limited Partner may Transfer all or any part of such Partners Partnership Interest to
any Person except (i) to a Permitted Transferee pursuant to
Section 7.2
, or (ii) pursuant
to the terms of
Section 7.8
; provided, however, any such Transfer under (i) or (ii) above
shall comply with the terms of
Section 7.1(b)
. Any purported Transfer of a Partnership
Interest or a portion thereof in violation of the terms of this Agreement shall be null and void
and of no force and effect. Except upon a Transfer of all of a Limited Partners Partnership
Interest in accordance with
Section 7.1
, no Limited Partner shall have the right to
withdraw as a Partner of the Partnership.
(b) As a condition to a Transfer by a Class A Partner of all or any part of such Partners
Partnership Interest to a transferee as permitted under
Section 7.1(a)(i) or (ii)
(a
Partnership Transfer
), such Partner shall simultaneously Transfer (the
Membership Transfer
) to
such transferee an amount of such Partners Membership Interest equal to: (i) such Partners
Membership Interest, multiplied by (ii) a percentage equal to (1) the portion of such Partners
Partnership Interest (as evidenced by Class A Units) to be Transferred to such transferee, divided
by (2) such Partners Partnership Interest (as evidenced by Class A Units) immediately before such
Transfer. Similarly, in connection with any Partnership Transfer, such Partner shall
simultaneously transfer (the
Unit Percentage Transfer
) a proportionate share of such Partners
Unit Percentage. If for any reason the Membership Transfer and Unit Percentage Transfer does not
occur simultaneously with the Partnership Transfer, then the Partnership Transfer shall be null and
void and of no force and effect.
(c) Notwithstanding any other provision of this Agreement, no Limited Partner may pledge,
mortgage or otherwise subject its Limited Partnership Interest to any Encumbrance.
7.2 Permitted Transferees
(a) Notwithstanding the provisions of
Section 7.8
, each Limited Partner shall, subject
to
Section 7.1(b)
, have the right to Transfer (but not to substitute the transferee as a
substitute Partner in such Partners place, except in accordance with
Section 7.3
), by a
written instrument, all or any part of a Limited Partners Partnership Interest to a Permitted
Transferee. Notwithstanding the previous sentence, if the Permitted Transferee is such because it
was an Affiliate of the transferring Limited Partner at the time of such Transfer or the Transfer
was a Permitted Transfer under clause (a) of the definition herein of Permitted Transfer and, at
any
time after such Transfer, such Permitted Transferee ceases to be an Affiliate of such Limited
Partner or such Transfer or such Permitted Transferee ceases to qualify under such clause (a) (a
Non-Qualifying Transferee
), such Transfer shall be deemed to not be a Permitted Transfer and
shall be subject to
Section 7.8
. Pursuant to
Section 7.8
, such transferring
Limited Partner or such transferring Limited Partners legal representative shall deliver the First
Refusal Notice
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promptly after the time when such transferee ceases to be an Affiliate of such
transferring Limited Partner or such Transfer or such Permitted Transferee ceases to qualify under
clause (a) of the definition herein of Permitted Transfer, and such transferring Limited Partner
shall otherwise comply with the terms of
Section 7.8
with respect to such Transfer;
provided, that the purchase price for such Transfer for purposes of
Section 7.8
shall be an
amount agreed upon by such transferring Limited Partner and the General Partner or, if such Limited
Partner and the General Partner cannot agree on a price within five (5) Business Days after
delivery of the First Refusal Notice, such price shall be the fair market value of the Partnership
Interest transferred pursuant to the Transfer as of the date the transferee ceased to be an
Affiliate of such transferring Limited Partner or such Transfer or such Permitted Transferee ceases
to qualify under clause (a) of the definition herein of Permitted Transfer (such date, the
Non-Qualifying Date
), as determined at the Partnerships expense by a nationally recognized
investment banking firm mutually selected by such transferring Limited Partner and the General
Partner. If such transferring Limited Partner and the General Partner are unable, within ten (10)
days after the expiration of such five (5) Business Day period, to mutually agree upon an
investment banking firm, then each of such transferring Limited Partner and the General Partner
shall choose a nationally recognized investment banking firm and the two investment banking firms
so chosen shall choose a third nationally recognized investment banking firm which shall determine
the fair market value of the Partnership Interest transferred pursuant to such Transfer at the
Partnerships expense. The determination of fair market value shall be based on the value that a
willing buyer with knowledge of all relevant facts would pay a willing seller for all the
outstanding equity securities of the Partnership in connection with an auction for the Partnership
as a going concern and shall not take into account any acquisitions made by the Partnership or its
Affiliates or any other events subsequent to the Non-Qualifying Date and shall not be subject to
any discount for a sale of a minority interest. If such transferring Limited Partner fails to
comply with all the terms of
Section 7.8
, such Transfer shall be null and void and of no
force and effect. No Non-Qualifying Transferee shall be entitled to receive any distributions from
the Partnership on or after the Non-Qualifying Date and any distributions made in respect of the
Partnership Interests on or after the Non-Qualifying Date and held by such Non-Qualifying
Transferee shall be paid to the Limited Partner who transferred such Partnership Interests or
otherwise to the rightful owner thereof as reasonably, determined by the General Partner.
(b) Unless and until admitted as a substitute Limited Partner pursuant to
Section 7.3
,
a transferee of a Limited Partners Partnership Interest, in whole or in part, shall be an assignee
with respect to such Transferred Partnership Interest and shall not be entitled to become, or to
exercise the rights of, a Limited Partner, including the right to vote, the right to require any
information or accounting of the Partnerships business, or the right to inspect the Partnerships
books and records. Such transferee shall only be entitled to receive, to the extent of the
Partnership Interest Transferred to such transferee, the share of distributions and profits,
including distributions representing the return of Capital Contributions, to which the transferor
would otherwise be entitled with respect to the Transferred Partnership Interest. Subject to the
provisions of
Section 6.1(b)
, the transferor shall have the right to vote such
Transferred Partnership Interest until the transferee is admitted to the Partnership as a
substitute Limited Partner with respect to the Transferred Partnership Interest.
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7.3 Substitute Limited Partners
No transferee of all or part of a Limited Partners Partnership Interest shall become a
substitute Limited Partner in place of the transferor unless and until:
(a) such Transfer is in compliance with the terms of
Section 7.1
;
(b) the transferee has executed an instrument in form and substance reasonably satisfactory to
the General Partner accepting and adopting, and agreeing to be bound by, the terms and provisions
of the Certificate and this Agreement; and
(c) the transferee has caused to be paid all reasonable expenses of the Partnership in
connection with the admission of the transferee as a substitute Limited Partner.
Upon satisfaction of all the foregoing conditions with respect to a particular transferee, the
General Partner shall cause the books and records of the Partnership to reflect the admission of
the transferee as a substitute Limited Partner to the extent of the Transferred Partnership
Interest held by such transferee.
7.4 Effect of Admission as a Substitute Limited Partner
A transferee who has become a substitute Limited Partner has, to the extent of the Transferred
Partnership Interest, all the rights, powers and benefits of, and is subject to the obligations,
restrictions and liabilities of a Partner under, the Certificate, this Agreement and the Act. Upon
admission of a transferee as a substitute Limited Partner, the transferor of the Partnership
Interest so held by the substitute Limited Partner shall cease to be a Partner of the Partnership
to the extent of such Transferred Partnership Interest.
7.5 Consent
Each Partner hereby agrees that upon satisfaction of the terms and conditions of this
Article VII
with respect to any proposed Transfer, the transferee may be admitted as a
Partner without any further action by a Partner hereunder.
7.6 No Dissolution
If a Limited Partner Transfers all of its Partnership Interest pursuant to this
Article
VII
and the transferee of such Partnership Interest is admitted as a Limited Partner pursuant
to
Section 7.3
, such Person shall be admitted to the Partnership as a Partner effective on
the effective date of the Transfer and the Partnership shall not dissolve pursuant to
Section
8.1
.
7.7 Additional Limited Partners
Subject to
Section 3.2
, any Person acceptable to the General Partner may become an
additional Limited Partner of the Partnership for such consideration as the General Partner shall
determine, provided that such additional Limited Partner complies with all the requirements of a
transferee under
Section 7.3(b)
and
(c)
.
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7.8 Right of First Refusal
The Class A Partners shall have the following right of first refusal:
(a) If at any time any of the Class A Partners (a
Selling Partner
) has received and wishes
to accept a
bona fide
offer (the
Offer
) for cash from a third party (the
Offeror
) for all or
part of such Selling Partners Partnership Interest (and a proportionate amount of such Selling
Partners Membership Interest and Unit Percentage in accordance with
Section 7.1(b)
), such
Selling Partner shall give Notice thereof (the
First Refusal Notice
) to each of the other
Partners, other than any Non-Purchasing Partners (as hereinafter defined) and any Class B Partners,
and the Partnership. The First Refusal Notice shall state the portion of the Selling Partners
Partnership Interest and Membership Interest that the Selling Partner wishes to sell (the
Optioned
Interest
), the price and all other material terms of the Offer, the name of the Offeror, and
certification from the Selling Partner affirming that the Offer is
bona fide
and that the
description thereof is true and correct, and that the Offeror has stated that it will purchase the
Optioned Interest if the rights of first refusal herein described are not exercised.
(b) Each of the Class A Partners other than the Selling Partner, any Non-Purchasing Partner
(the
Non-Selling Partners
) shall have the right exercisable by Notice (an
Acceptance Notice
)
given to the Selling Partner and the Partnership within twenty (20) days after receipt of the First
Refusal Notice, to agree that it will purchase up to 100% of the Optioned Interest on the terms set
forth in the First Refusal Notice; provided, however, if the Non-Selling Partners in the aggregate
desire to purchase more than 100% of the Optioned Interest, each such Non-Selling Partners right
to purchase the Optioned Interest shall be reduced (pro rata based on the percentage of the
Optioned Interest for which such Non-Selling Partner has exercised its right to purchase hereunder
compared to all other Non-Selling Partners, but not below such Non-Selling Partners pro rata share
(based on the number of Class A Units held by such Non-Selling Partner and the aggregate number of
Class A Units held by all Non-Selling Partners who have exercised their right to purchase) so that
such Non-Selling Partners purchase no more than 100% of the Optioned Interest. If a Non-Selling
Partner does not submit an Acceptance Notice within the twenty (20) day period set forth in this
Section 7.8(b)
, such Non-Selling Partner shall be deemed to have rejected the offer to
purchase any portion of the Optioned Interest.
(c) If the Non-Selling Partners do not in the aggregate exercise the right to purchase all of
the Optioned Interest by the expiration of the twenty (20) day period set forth in
Section
7.8(b)
, then any Acceptance Notice shall be void and of no effect, and the Selling Partner
shall be entitled to complete the proposed sale at any time in the thirty (30) day period
commencing on the date of the First Refusal Notice, but only upon the terms set forth in the First
Refusal
Notice. If no such sale is completed in such thirty (30) day period, the provisions hereof
shall apply again to any proposed sale of the Optioned Interest.
(d) If any Non-Selling Partner exercises the right to purchase the Optioned Interest as
provided herein and such Non-Selling Partner(s) have elected to purchase all of the Optioned
Interest, the purchase of such Optioned Interest shall be completed within the thirty (30) day
period commencing on the date of delivery of the First Refusal Notice on the terms set forth in the
First Refusal Notice. If such Non-Selling Partner does not consummate the Purchase of such
Optioned Interest, (x) the Selling Partner shall be entitled to all expenses of collection and
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(y) such Non-Selling Partner shall be deemed a
Non-Purchasing Partner
for the duration of this
Agreement.
(e) Notwithstanding anything in this Agreement to the contrary, no Class B Partner in its
capacity as such shall have any right to Transfer any Class B Units or to purchase any Class A
Units pursuant to this Section 7.8.
ARTICLE VIII
DISSOLUTION AND LIQUIDATION
8.1 Dissolution of Partnership
(a) The Partnership shall be dissolved and its affairs wound up upon the first to occur of the
following events:
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(i)
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the written election of the General Partner, in its sole
discretion, to dissolve the Partnership;
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(ii)
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the occurrence of any event that results in the General Partner
ceasing to be the general partner of the Partnership under the Act, provided
that the Partnership will not be dissolved and required to be wound up in
connection with any such event if (A) at the time of the occurrence of such
event there is at least one remaining general partner of the Partnership who is
hereby authorized to and does carry on the business of the Partnership, or
(B) within 90 days after the occurrence of such event, all of the Class A
Partners agree in writing to continue the business of the Partnership and to
the appointment, effective as of the date of such event, if required, of one or
more additional general partners of the Partnership;
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(iii)
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the Transfer of all or substantially all of the assets of the
Partnership and the receipt and distribution of all the proceeds therefrom;
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(iv)
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at any time that there are no limited partners of the
Partnership, unless the business of the Partnership is continued in accordance
with the Act; and
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(v)
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the entry of a decree of judicial dissolution under
Section 17-802 of the Act.
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(b) The withdrawal, death, dissolution, retirement, resignation, expulsion, liquidation or
bankruptcy of a Partner, the admission to the Partnership of a new General Partner or Limited
Partner, the withdrawal of a Partner from the Partnership, or the transfer by a Partner of its
Partnership Interest to a third party shall not, in and of itself, cause the Partnership to
dissolve.
8.2 Final Accounting
Upon dissolution and winding up of the Partnership, an accounting will be made of the accounts
of the Partnership and each Partner and of the Partnerships assets, liabilities and operations
from the date of the last previous accounting to the date of such dissolution.
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8.3 Distributions Following Dissolution and Termination
(a)
Liquidating Trustee
. Upon the dissolution of the Partnership, such party as is
designated by the General Partner will act as liquidating trustee of the Partnership (the
Liquidating Trustee
) and proceed to wind up the business and affairs of the Partnership in
accordance with the terms of this Agreement and applicable law. The Liquidating Trustee will use
its reasonable best efforts to sell all Partnership assets (except cash) in the exercise of its
best judgment under the circumstances then presented, that it deems in the best interest of the
Partners. The Liquidating Trustee will attempt to convert all assets of the Partnership to cash so
long as it can do so consistently with prudent business practice. The Partners and their
respective designees will have the right to purchase any Partnership property to be sold on
liquidation, provided that the terms on which such sale is made are no less favorable than would
otherwise be available from third parties. The gains and losses from the sale of the Partnership
assets, together with all other revenue, income, gain, deduction, expense, loss and credit during
the period, will be allocated in accordance with
Article V
. A reasonable amount of time
shall be allowed for the period of winding up in light of prevailing market conditions and so as to
avoid undue loss in connection with any sale of Partnership assets. This Agreement shall remain in
full force and effect during the period of winding up. In addition, upon request of the General
Partner and if the Liquidating Trustee determines that it would be imprudent to dispose of any
non-cash assets of the Partnership, such assets may be distributed in kind to the Partners in lieu
of cash, proportionately to their right to receive cash distributions hereunder.
(b)
Accounting
. The Liquidating Trustee will then cause proper accounting to be made
of the Capital Account of each Partner, including recognition of any unrealized gain or loss on any
asset to be distributed in kind as if such asset had been sold for consideration equal to the fair
market value of the asset at the time of the distribution.
(c)
Liquidating Distributions
. In settling accounts after dissolution of the
Partnership, the assets of the Partnership shall be paid to creditors of the Partnership and
distributed to the Partners in the following order:
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(i)
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to creditors of the Partnership (including Partners) in the order
of priority as provided by law whether by payment or the making of reasonable
provision for payment thereof, and in connection therewith there shall be
withheld such reasonable reserves for contingent, conditioned or unconditioned
liabilities as
the Liquidating Trustee in its reasonable discretion deems adequate, such
reserves (or balances thereof) to be held and distributed in such manner and at
such times as the Liquidating Trustee, in its discretion, deems reasonably
advisable; provided, however, that such amounts be maintained in a separate
bank account and that any amounts in such bank account remaining after three
years be distributed to the Partners or their successors and assigns as if such
amount had been available for distribution under
Section 8.3(c)(ii)
;
and then
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(ii)
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(A) First, an amount equal to Initial Grant Date Partnership
Capital, 1% to the General Partner and 99% to the Class A Partners pro rata based
on the number of Class A Units held; and
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(B)
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Second, with respect to each Subsequent Grant Date
(determined in order of Subsequent Grant Date), an amount equal to the
difference, if any, between the Subsequent Grant Date Partnership Capital
for such Subsequent Grant Date and the Subsequent Grant Date Capital for
the immediately preceding Subsequent Grant Date or, if there is no
previous Subsequent Grant Date, the Initial Grant Date Partnership
Capital, 1% to the General Partner and 99% to the Class A Partners and the
Class B Partners, pro rata, based on the number of Class A Units held and
the number of Earned Units and/or Vested Units held (to the extent of
Class B Units held prior to the Subsequent Grant Date for which such
determination is being made); and
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(C)
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Third, any remaining amounts, 1% to the General
Partner and 99% to the Class A Partners and the Class B Partners, pro
rata, based on the number of Class A Units, Earned Units and/or Vested
Units held.
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(iii)
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Any distribution to the Partners in liquidation of the Partnership
shall be made by the later of the end of the taxable year in which the
liquidation occurs or 90 days after the date of such liquidation. For purposes
of the preceding sentence, the term liquidation shall have the same meaning as
set forth in Regulation Section 1.704-2(b)(2)(ii) as in effect at such time and
liquidating distributions shall be further deemed to be made pursuant to this
Agreement upon the event of a liquidation as defined in such Regulation for which
no actual liquidation occurs with a deemed recontribution by the Partners of such
deemed liquidating distributions to the continuing Partnership pursuant to this
Agreement.
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(d) Profits and Losses arising from the dissolution and termination of the Partnership shall
be allocated among the Partners so that after such allocations and the other allocations under this
Agreement, to the maximum extent possible, the final Capital Account balances of the Member are at
levels which would permit liquidating distributions, if made in accordance with such final Capital
Account balances, to be equal to the distributions to be made under Section 8.3(c)(ii).
(e)
No Third Party Benefit
. The provisions of this Agreement, including, without
limitation, this
Section 8.3
, are intended solely to benefit the Partners and, to the
fullest extent permitted by law, shall not be construed as conferring any benefit upon any creditor
of the Partnership, and no such creditor of the Partnership shall be a third-party beneficiary of
this Agreement, and no Partner shall have any duty or obligation to any creditor of the Partnership
to issue any call for capital pursuant to this Agreement.
8.4 Termination of the Partnership
The Partnership shall terminate when all assets of the Partnership, after payment or due
provision for all debts, liabilities and obligations of the Partnership, shall have been
distributed to the Partners in the manner provided for in this
Article VIII
, and the
Certificate shall have been canceled in the manner required by the Act.
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8.5 No Action for Dissolution
The Limited Partners acknowledge that irreparable damage would be done to the goodwill and
reputation of the Partnership if any Limited Partner should bring an action in court to dissolve
the Partnership under circumstances where dissolution is not required by
Section 8.1
.
Accordingly, except where the General Partner has failed to cause the liquidation of the
Partnership as required by
Section 8.1
and except as specifically provided in Section
17-802, each Limited Partner hereby to the fullest extent permitted by law waives and renounces his
right to initiate legal action to seek dissolution of the Partnership or to seek the appointment of
a receiver or trustee to wind up the affairs of the Partnership, except in the cases of fraud,
violation of law, bad faith, gross negligence, willful misconduct or willful violation of this
Agreement.
ARTICLE IX
ACCOUNTING; BOOKS AND RECORDS
9.1 Fiscal Year and Accounting Method
The fiscal year and taxable year of the Partnership shall be the calendar year. The
Partnership shall use an accrual method of accounting.
9.2 Books and Records
The Partnership shall maintain at its principal office, or such other office as may be
determined by the General Partner, all the following:
(a) A current list of the full name and last known business or residence address of each
Partner, together with information regarding the amount of cash and a description and statement of
the agreed value of any other property or services contributed by each Partner and which each
Partner has agreed to contribute in the future, and the date on which each Partner became a Partner
of the Partnership;
(b) A copy of the Certificate and this Agreement, including any and all amendments to either
thereof, together with executed copies of any powers of attorney pursuant to which the Certificate,
this Agreement, or any amendments have been executed;
(c) Copies of the Partnerships Federal, state, and local income tax or information returns
and reports, if any, which shall be retained for at least six fiscal years;
(d) The financial statements of the Partnership; and
(e) The Partnerships books and records.
9.3 Delivery to Partners; Inspection
Upon the request of any Class A Partner, for any purpose reasonably related to such Partners
interest as a partner of the Partnership, the General Partner shall cause to be made available to
the requesting Partner the information required to be maintained by clauses (a)
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through (e) of
Section 9.2
and such other information regarding the business and affairs and financial
condition of the Partnership as any Class A Partner may reasonably request.
9.4 Financial Statements
The General Partner shall cause to be prepared for the Partners at least annually, at the
Partnerships expense, financial statements of the Partnership, and its subsidiaries, prepared in
accordance with generally accepted accounting principles and audited by a nationally recognized
accounting firm. The financial statements so furnished shall include a balance sheet, statement of
income or loss, statement of cash flows, and statement of Partners equity. In addition, the
General Partner shall provide on a timely basis to the Partners monthly and quarterly financials,
statements of cash flow, any available internal budgets or forecast or other available financial
reports, as well as any reports or notices as are provided by the Partnership, or any of its
Subsidiaries to any financial institution. The requirements of Section 9.2(d) and this Section 9.4
shall be deemed satisfied so long as (i) the Master Limited Partnership files annual reports on
Form 10-K and quarterly reports on Form 10-Q, (ii) the Master Limited Partnership files or
furnishes guidance 8-Ks on a quarterly basis and (iii) the Master Limited Partnership annually
files an 8-K attaching a balance sheet of the Partnership.
9.5 Filings
At the Partnerships expense, the General Partner shall cause the income tax returns for the
Partnership to be prepared and timely filed with the appropriate authorities and to have prepared
and to furnish to each Partner such information with respect to the Partnership as is necessary (or
as may be reasonably requested by a Partner) to enable the Partners to prepare their Federal, state
and local income tax returns. The General Partner, at the Partnerships expense, shall also cause
to be prepared and timely filed, with appropriate Federal, state and local regulatory and
administrative bodies, all reports required to be filed by the Partnership with those entities
under then current applicable laws, rules, and regulations. The reports shall be prepared on the
accounting or reporting basis required by the regulatory bodies.
9.6 Non-Disclosure
Each Class A Partner agrees that, except as otherwise consented to by the General Partner in
writing, all non-public and confidential information furnished to it pursuant to this Agreement
will be kept confidential and will not be disclosed by such Partner, or by any of its agents,
representatives, or employees, in any manner whatsoever, in whole or in part, except that (a) each
Partner shall be permitted to disclose such information to those of its agents, representatives,
and employees who need to be familiar with such information in connection with such Partners
investment in the Partnership (collectively,
Representatives
) and are apprised of the
confidential nature of such information, (b) each Partner shall be permitted to disclose
information to the extent required by law, legal process or regulatory requirements, so long as
such Partner shall have used its reasonable efforts to first afford the Partnership with a
reasonable opportunity to contest the necessity of disclosing such information, (c) each Partner
shall be permitted to disclose such information to possible purchasers of all or a portion of the
Partners Partnership Interest, provided that such prospective purchaser shall execute a suitable
confidentiality agreement in a form approved by the General Partner and containing terms not
- 28 -
less
restrictive than the terms set forth herein, and (d) each Partner shall be permitted to disclose
information to the extent necessary for the enforcement of any right of such Partner arising under
this Agreement. Each Partner shall be responsible for any breach of this Section 9.6 by any of its
Representatives.
ARTICLE X
NON-COMPETITION
10.1 Non-Competition
Each of the Class A Partners hereby acknowledges that the Partnership and the Master Limited
Partnership operate in a competitive business and compete with other Persons operating in the
midstream segment of the oil and gas industry for acquisition opportunities. Each of the Limited
Partners agrees that during the period that it is a Limited Partner, it shall not, directly or
indirectly, use any of the confidential information it receives as a Limited Partner to compete, or
to engage in or become interested financially in as a principal, employee, partner, shareholder,
agent, manager, owner, advisor, lender, guarantor of any Person that competes in North America with
the business conducted by the General Partner, the Partnership and the Master Limited Partnership
Each of the Limited Partners also acknowledges that EnCap Investments L.L.C. and Persons that it
controls (
EnCap
), Kayne Anderson Capital Advisors L.P. and its Affiliates (
Kayne Anderson
) and
Wachovia and its affiliates make and manage investments in the energy industry in the ordinary
course of business (such investments Institutional Investments). The Limited Partners agree that
EnCap, Kayne Anderson and Wachovia and its affiliates may make Institutional Investments, even if
such Institutional Investments are competitive with the Partnerships and its Subsidiaries
business, so long as such Institutional Investments are not in violation of the provisions of
Section 9.6
or the second sentence of this
Section 10.1
or obligations owed to the
Partnership under applicable law with respect to usurption of an opportunity legally belonging to
the Partnership or its Subsidiaries. Each of the Limited Partners confirms that the restrictions
in this Section 10.1 are reasonable and valid and all defenses to the strict enforcement thereof
are hereby waived by each of the Limited Partners.
10.2 Damages
Each of the Limited Partners acknowledges that damages may not be an adequate compensation for
the losses which may be suffered by the Partnership as a result of the breach by such Limited
Partner of the covenants contained in this
Article X
and that the Partnership shall be
entitled to seek injunctive relief with respect to any such breach in lieu of or in addition to any
recourse in damages without the posting of a bond or other security.
10.3 Limitations
In the event that a court of competent jurisdiction decides that the limitations set forth in
Section 10.1
hereof are too broad, such limitations shall be reduced to those limitations
that such court deems reasonable.
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ARTICLE XI
GENERAL PROVISIONS
11.1 Waiver of Default
No consent or waiver, express or implied, by the Partnership or a Partner with respect to any
breach or default by the Partnership or a Partner hereunder shall be deemed or construed to be a
consent or waiver with respect to any other breach or default by any party of the same provision or
any other provision of this Agreement. Failure on the part of the Partnership or a Partner to
complain of any act or failure to act of the Partnership or a Partner or to declare such party in
default shall not be deemed or constitute a waiver by the Partnership or the Partner of any rights
hereunder.
11.2 Amendment of Partnership Agreement
(a) Except as otherwise expressly provided elsewhere in this Agreement, this Agreement shall
not be altered, modified or changed except by an amendment approved by the General Partner.
Without limiting the generality of the foregoing, this Agreement may be amended without the consent
or approval of any Limited Partner, including any Class B Partner.
(b) In addition to any amendments otherwise authorized herein, the General Partner may make
any amendments to any of the Schedules to this Agreement from time to time to reflect transfers of
Partnership Interests and issuances of additional Partnership Interests. Copies of such amendments
shall be delivered to the Partners promptly upon execution thereof.
(c) The General Partner shall cause to be prepared and filed any amendment to the Certificate
that may be required to be filed under the Act as a consequence of any amendment to this Agreement.
(d) Any modification or amendment to this Agreement or the Certificate made in accordance with
this
Section 11.2
shall be binding on all Partners.
11.3 No Third Party Rights
Except as provided in
Section 6.2
and
Section 6.3
, none of the provisions
contained in this Agreement shall be for the benefit of or enforceable by any third parties,
including creditors of the Partnership.
11.4 Severability
In the event any provision of this Agreement is held to be illegal, invalid or unenforceable
to any extent, the legality, validity and enforceability of the remainder of this Agreement shall
not be affected thereby and shall remain in full force and effect and shall be enforced to the
greatest extent permitted by law.
11.5 Nature of Interest in the Partnership
A Partners Partnership Interest shall be personal property for all purposes.
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11.6 Binding Agreement
Subject to the restrictions on the disposition of Partnership Interests herein contained, the
provisions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective heirs, personal representatives, successors and permitted assigns.
11.7 Headings
The headings of the sections of this Agreement are for convenience only and shall not be
considered in construing or interpreting any of the terms or provisions hereof.
11.8 Word Meanings
The words herein, hereinafter, hereof, and hereunder refer to this Agreement as a
whole and not merely to a subdivision in which such words appear unless the context otherwise
requires. The singular shall include the plural, and vice versa, unless the context otherwise
requires. Whenever the words include, includes or including are used in this Agreement, they
shall be deemed to be followed by the words without limitation. When verbs are used as nouns,
the nouns correspond to such verbs and vice-versa.
11.9 Counterparts
This Agreement may be executed in several counterparts, all of which together shall constitute
one agreement binding on all parties hereto, notwithstanding that all the parties have not signed
the same counterpart.
11.10 Entire Agreement
This Agreement contains the entire agreement between the parties hereto and thereto and
supersedes all prior writings or agreements with respect to the subject matter hereof.
11.11 Partition
The Partners agree that the Property is not and will not be suitable for partition.
Accordingly, each of the Partners hereby irrevocably waives any and all right such Partner may have
to maintain any action for partition of any of the Property. No Partner shall have any right to
any specific assets of the Partnership upon the liquidation of, or any distribution from, the
Partnership.
11.12 Governing Law; Consent to Jurisdiction and Venue
This Agreement shall be construed according to and governed by the laws of the State of
Delaware without regard to principles of conflict of laws. The parties hereby submit to the
exclusive jurisdiction and venue of the state courts of Harris County, Texas or to the Court of
Chancery of the State of Delaware and the United States District Court for the Southern District of
Texas and of the United States District Court for the District of Delaware, as the case may be, and
agree that the Partnership or Partners may, at their option, enforce their rights hereunder in such
courts.
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SIGNATURE PAGE
IN WITNESS WHEREOF, the General Partner has executed this Agreement as of the day and year
first above written.
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GENERAL PARTNER:
PLAINS ALL AMERICAN GP LLC
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By:
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/s/ Tim Moore
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Name:
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Tim Moore
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Title:
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Vice President
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Exhibit 3.2
THIRD AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
PLAINS ALL AMERICAN GP LLC
dated as of December 28, 2007
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
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4
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ARTICLE 2 GENERAL
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11
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2.1 Formation
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11
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2.2 Principal Office
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11
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2.3 Registered Office and Registered Agent
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12
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2.4 Purpose of the Company
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12
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2.5 Date of Dissolution
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12
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2.6 Qualification
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12
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2.7 Members
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12
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2.8 Reliance by Third Parties
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13
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ARTICLE 3 CAPITALIZATION OF THE COMPANY
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13
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3.1 Initial Capital Contributions
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13
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3.2 Additional Capital Contributions
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13
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3.3 Loans
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14
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3.4 Maintenance of Capital Accounts
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14
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3.5 Capital Withdrawal Rights, Interest and Priority
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15
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ARTICLE 4 DISTRIBUTIONS
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15
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4.1 Distributions of Available Cash
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15
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4.2 Persons Entitled to Distributions
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15
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4.3 Limitations on Distributions
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15
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ARTICLE 5 ALLOCATIONS
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15
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5.1 Profits
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15
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5.2 Losses
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16
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5.3 Regulatory Allocations
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16
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5.4 Tax Allocations: Code Section 704(c)
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16
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5.5 Change in Percentage Interests
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17
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5.6 Withholding
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17
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ARTICLE 6 MEMBERS MEETINGS
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18
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6.1 Meetings of Members; Place of Meetings
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18
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6.2 Quorum; Voting Requirement
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18
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6.3 Proxies
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18
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6.4 Action Without Meeting
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18
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6.5 Notice
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19
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6.6 Waiver of Notice
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19
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ARTICLE 7 MANAGEMENT AND CONTROL
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19
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7.1 Board of Directors
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19
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7.2 Meetings of the Board
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20
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i
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7.3 Quorum and Acts of the Board
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21
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7.4 Electronic Communications
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21
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7.5 Committees of Directors
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21
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7.6 Compensation of Directors
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21
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7.7 Directors as Agents
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21
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7.8 Officers; Agents
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21
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7.9 Matters Requiring Member Approval
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22
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ARTICLE 8 LIABILITY AND INDEMNIFICATION
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24
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8.1 Limitation on Liability of Members, Directors and Officers
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24
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8.2 Indemnification
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24
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ARTICLE 9 TRANSFERS OF MEMBERSHIP INTERESTS
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25
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9.1 General Restrictions
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25
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9.2 Permitted Transferees
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26
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9.3 Substitute Members
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27
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9.4 Effect of Admission as a Substitute Member
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27
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9.5 Consent
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28
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9.6 No Dissolution
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28
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9.7 Additional Members
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28
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9.8 Right of First Refusal
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28
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ARTICLE 10 DISSOLUTION AND TERMINATION
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29
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10.1 Events Causing Dissolution
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29
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10.2 Final Accounting
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29
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10.3 Distributions Following Dissolution and Termination
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29
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10.4 Termination of the Company
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31
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10.5 No Action for Dissolution
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31
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ARTICLE 11 TAX MATTERS
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31
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11.1 Tax Matters Member
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31
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11.2 Certain Authorizations
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31
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11.3 Indemnity of Tax Matters Member
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32
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11.4 Information Furnished
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32
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11.5 Notice of Proceedings, etc.
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32
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11.6 Notices to Tax Matters Member
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33
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11.7 Preparation of Tax Returns
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33
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11.8 Tax Elections
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33
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11.9 Taxation as a Partnership
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33
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ARTICLE 12 ACCOUNTING AND BANK ACCOUNTS
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33
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12.1 Fiscal Year and Accounting Method
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33
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12.2 Books and Records
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33
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12.3 Delivery to Members; Inspection
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34
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12.4 Financial Statements
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34
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12.5 Filings
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34
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ii
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12.6 Non-Disclosure
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34
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ARTICLE 13 NON-COMPETITION AND NON-SOLICITATION
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35
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13.1 Non-Competition
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35
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13.2 Non-Solicitation
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35
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13.3 Damages
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36
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13.4 Limitations
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36
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ARTICLE 14 MISCELLANEOUS
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36
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14.1 Waiver of Default
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36
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14.2 Amendment
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36
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14.3 No Third Party Rights
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37
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14.4 Severability
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37
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14.5 Nature of Interest in the Company
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37
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14.6 Binding Agreement
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37
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14.7 Headings
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37
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14.8 Word Meanings
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37
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14.9 Counterparts
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37
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14.10 Entire Agreement
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37
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14.11 Partition
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37
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14.12 Governing Law; Consent to Jurisdiction and Venue
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37
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iii
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THIRD AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
PLAINS ALL AMERICAN GP LLC
THIS THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
Agreement
) of
Plains All American GP LLC, a Delaware limited liability company (the
Company
), is made and
entered into as of the 28th day of December 2007, by and among the Persons executing this Agreement
on the signature pages hereto as a member (together with such other Persons that may hereafter
become members as provided herein, referred to collectively as the
Members
or, individually, as a
Member
).
WHEREAS, Members owning the requisite Membership Interests have approved the amendment and
restatement of the limited liability company agreement of the Company in its entirety with the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein,
the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings, unless the context
otherwise requires:
Acceptance Notice
shall have the meaning set forth in
Section 9.8(b)
.
Act
means the Delaware Limited Liability Company Act, 6
Del. C.
Section 18-101,
et seq.
, as amended from time to time.
Adjusted Capital Account Deficit
means, with respect to a Member, the deficit balance, if
any, in such Members Capital Account as of the end of the relevant Taxable Year, after giving
effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Member is obligated to
restore pursuant to any provision of this Agreement or is deemed to be obligated to restore
pursuant to Regulation Sections 1.704-1(b)(2)(ii)(
c
), 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Regulation Sections
1.704-1(b)(2)(ii)(
d
)(
4
), 1.704-1(b)(2)(ii)(
d
)(
5
), and 1.704-1(b)(2)(ii)(
d
)(
6
).
Affiliate
means, with respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with, such specified Person.
4
Agreement
shall have the meaning set forth in the preamble hereof, as the same may be
amended from time to time in accordance with the terms hereof.
Authorized Representative
shall have the meaning set forth in
Section 6.1
.
Available Cash
means, with respect to a fiscal quarter, all cash and cash equivalents of the
Company at the end of such quarter less the amount of cash reserves that is necessary or
appropriate in the reasonable discretion of the Board to (a) provide for the proper conduct of the
business of the Company (including reserves for future capital expenditures and for anticipated
future credit needs of the Company) subsequent to such quarter or (b) comply with applicable law or
any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation
to which the Company is a party or by which it is bound or its assets or Property is subject;
provided, however
, that disbursements made by Plains AAP or PAA GP to the Company or cash reserves
established, increased or reduced after the expiration of such quarter but on or before the date of
determination of Available Cash with respect to such quarter shall be deemed to have been made,
established, increased or reduced, for purposes of determining Available Cash, during such quarter
if the Board so determines in its reasonable discretion.
Board
means the Board of Directors of the Company.
Business Day
means any day that is not a Saturday, a Sunday or other day on which banks are
required or authorized by law to be closed in the City of New York.
Capital Account
means, with respect to any Member, a separate account established by the
Company and maintained for each Member in accordance with
Section 3.4
hereof.
Capital Contribution
means, with respect to any Member, the amount of money and the initial
Gross Asset Value of any Property (other than money) contributed to the Company with respect to the
interests purchased by such Member pursuant to the terms of this Agreement, in return for which the
Member contributing such capital shall have received a Membership Interest.
Certificates
means the Certificates of Formation of the Company and PAA GP and the
Certificate of Limited Partnership of Plains AAP filed with the Secretary of State of Delaware, as
amended or restated from time to time.
Code
means the United States Internal Revenue Code of 1986, as amended.
Company
shall have the meaning set forth in the preamble hereof.
Company Affiliate
shall have the meaning set forth in
Section 8.2
.
Credit Agreements
shall have the meaning set forth in the Transfer Agreements, as such
credit agreements may be or may have been amended, modified or supplemented from time to time,
including, without limitation, amendments, modifications, supplements and restatements thereof
giving effect to increases, renewals, extensions, refundings, deferrals, restructurings,
replacements or refinancings of, or additions to, the arrangements provided in such credit
agreements.
5
Depreciation
means, for each Taxable Year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with respect to an asset for
such Taxable Year, except that if the Gross Asset Value of an asset differs from its adjusted basis
for federal income tax purposes at the beginning of such Taxable Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such Taxable Year bears to such
beginning adjusted tax basis;
provided, however
, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such Taxable Year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any reasonable method selected
by the Board.
Directors
shall have the meaning set forth in
Section 7.1(a)
.
E-Holdings
means E-Holdings III, L.P., a Texas limited partnership.
Employees
shall have the meaning set forth in
Section 13.2
.
EnCap
shall have the meaning set forth in
Section 13.1
.
Encumbrance
means any security interest, pledge, mortgage, lien (including, without
limitation, environmental and tax liens), charge, encumbrance, adverse claim, any defect or
imperfection in title, preferential arrangement or restriction, right to purchase, right of first
refusal or other burden or encumbrance of any kind, other than those imposed by this Agreement.
First Refusal Notice
shall have the meaning set forth in
Section 9.8(a)
.
Flores Employment Agreement
means the Employment Agreement dated May 8, 2001 between James
C. Flores and Plains Resources, Inc.
General Partners Percentage
means the Percentage Interest as to the General Partner
(with respect to its General Partner Interest) as such terms are defined in the Rodeo L.P.
Partnership Agreement.
Gross Asset Value
means with respect to any asset, the assets adjusted basis for federal
income tax purposes, except as follows and as otherwise provided in
Section 3.2(b)
:
(a) The initial Gross Asset Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as reasonably determined by the Board;
provided, however
, that the initial Gross Asset Values of the assets contributed to the
Company pursuant to
Section 3.1
hereof shall be as set forth in such section or the
schedule referred to therein;
(b) The Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values (taking Code Section 7701(g) into account), as
reasonably determined by the Board as of the following times: (i) the acquisition of an
additional interest in the Company by any new or existing Member in exchange for more than a
de minimis Capital Contribution; (ii) the distribution by the Company to a Member
6
of more than a de minimis amount of Company property as consideration for an interest
in the Company; and (iii) the liquidation of the Company within the meaning of Regulation
Section 1.704-1(b)(2)(ii)(g); and
(c) The Gross Asset Value of any item of Company assets distributed to any Member shall
be adjusted to equal the gross fair market value (taking Code Section 7701(g) into account)
of such asset on the date of distribution as reasonably determined by the Board.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (b),
such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset, for purposes of computing Profits and Losses.
Independent Director
means a Director who is eligible to serve on the Conflicts Committee
(as defined, and provided for, in the MLP Partnership Agreement) and is otherwise independent as
defined in Sections 303.01(B)(2)(a) and (3) or any successor provisions of the listing standards of
the New York Stock Exchange.
Initial Designating Members
means Vulcan, E-Holdings, Kafu and Sable (which is no longer a
Member, bringing into operation the provisions of
Section 7.1(a)(iv)
).
Institutional Investments
shall have the meaning set forth in
Section 13.1
.
Kafu
means KAFU Holdings, LP, a Delaware limited partnership.
Kayne Anderson
shall have the meaning set forth in
Section 13.1
.
Limited Partnership Interest
means, with respect to a Member, such Members limited
partnership interest in Plains AAP, which refers to all of such Members rights and interests in
Plains AAP in such Members capacity as a limited partner thereof, all as provided in the Plains
AAP Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act.
Liquidating Trustee
shall have the meaning set forth in
Section 10.3
.
Losses
shall have the meaning set forth in the definition of Profits and Losses.
Majority in Interest
means, with respect to the Members or to any specified group or class
of Members, Members owning more than fifty percent (50%) of the total Percentage Interests held by
all Members or such specified group or class of Members, as applicable.
Member
or
Members
shall have the meaning set forth in the preamble hereof.
Membership Interest
means a Members limited liability company interest in the Company which
refers to all of a Members rights and interests in the Company in such Members capacity as a
Member, all as provided in this Agreement and the Act.
Membership Transfer
shall have the meaning set forth in
Section 9.1(b)
.
7
MLP
means Plains All American Pipeline, L.P., a Delaware limited partnership.
MLP Partnership Agreement
means the Third Amended and Restated Agreement of Limited
Partnership of the MLP, as amended from time to time.
Non-Selling Members
shall have the meaning set forth in
Section 9.8(b)
.
Notice
means a writing, containing the information required by this Agreement to be
communicated to a party, and shall be deemed to have been received (a) when personally delivered or
sent by telecopy, (b) one day following delivery by overnight delivery courier, with all delivery
charges pre-paid, or (c) on the third Business Day following the date on which it was sent by
United States mail, postage prepaid, to such party at the address or fax number, as the case may
be, of such party as shown on the records of the Company.
Offer
shall have the meaning set forth in
Section 9.8(a)
.
Offeror
shall have the meaning set forth in
Section 9.8(a)
.
Officer
shall have the meaning set forth in
Section 7.8
.
Optioned Interest
shall have the meaning set forth in
Section 9.8(a)
.
PAA GP
means PAA GP LLC, a Delaware limited liability company.
PAA GP Agreement
means the limited liability company agreement of PAA GP, as amended from
time to time in accordance with the terms thereof.
Percentage Interest
of a Member means the aggregate percentage of Membership Interests of
such Member set forth on
Schedule 1
hereto, as the same may be modified from time to time
as provided herein.
Permitted Transfer
shall mean:
(a) a Transfer of any or all of the Membership Interest by any Member who is a natural
person to (i) such Members spouse, children (including legally adopted children and
stepchildren), spouses of children or grandchildren or spouses of grandchildren; (ii) a
trust for the benefit of the Member and/or any of the Persons described in clause (i); or
(iii) a limited partnership or limited liability company whose sole partners or members, as
the case may be, are the Member and/or any of the Persons described in clause (i) or clause
(ii);
provided
, that in any of clauses (i), (ii) or (iii), the Member transferring such
Membership Interest, or portion thereof, retains exclusive power to exercise all rights
under this Agreement;
(b) a Transfer of any or all of the Membership Interest by any Member to the Company;
or
(c) a Transfer of any or all of the Membership Interest by a Member to any Affiliate of
such Member;
provided, however
, that such transfer shall be a Permitted
8
Transfer only so long as such Membership Interest, or portion thereof, is held by such
Affiliate or is otherwise transferred in another Permitted Transfer.
Provided, however
, that no Permitted Transfer shall be effective unless and until the
transferee of the Membership Interest, or portion thereof, so transferred complies with
Section 9.1(b)
. Except in the case of a Permitted Transfer pursuant to clause (b) above,
from and after the date on which a Permitted Transfer becomes effective, the Permitted Transferee
of the Membership Interest, or portion thereof, so transferred shall have the same rights, and
shall be bound by the same obligations, under this Agreement as the transferor of such Membership
Interest, or portion thereof, and shall be deemed for all purposes hereunder a Member and such
Permitted Transferee shall, as a condition to such Transfer, agree in writing to be bound by the
terms of this Agreement. No Permitted Transfer shall conflict with or result in any violation of
any judgment, order, decree, statute, law, ordinance, rule or regulation or require the Company, if
not currently subject, to become subject, or if currently subject, to become subject to a greater
extent, to any statute, law, ordinance, rule or regulation, excluding matters of a ministerial
nature that are not materially burdensome to the Company.
Permitted Transferee
shall mean any Person who shall have acquired and who shall hold a
Membership Interest, or portion thereof, pursuant to a Permitted Transfer.
Person
means any individual, partnership, corporation, limited liability company, trust,
incorporated or unincorporated organization or other legal entity of any kind.
Plains AAP
means Plains AAP, L.P., a Delaware limited partnership.
Plains AAP Partnership Agreement
means the Fourth Amended and Restated Agreement of Limited
Partnership of Plains AAP, dated as of the date hereof, by and among the Company, as the general
partner, certain limited partners and any other Persons who become partners in Plains AAP as
provided therein, as amended from time to time in accordance with the terms thereof.
Plains AAP Transfer
shall have the meaning set forth in
Section 9.1(b)
.
Profits
and
Losses
means, for each Taxable Year, an amount equal to the Companys net
taxable income or loss for a taxable year, determined in accordance with Section 703(a) of the Code
(for this purpose, all items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in computing such taxable income or
loss), with the following adjustments:
(a) Any income of the Company that is exempt from federal income tax and not otherwise
taken into account in computing Profits or Losses shall be added to such taxable income or
loss;
(b) Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses,
shall be subtracted from such taxable income or loss;
9
(c) In the event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraphs (b) or (c) of the definition of Gross Asset Value, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset
Value of the asset) or an item of loss (if the adjustment decreases the Gross Asset Value of
the asset) from the disposition of such asset and shall be taken into account for purposes
of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Property with respect to which gain
or loss is recognized for federal income tax purposes shall be computed by reference to the
Gross Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis
of such Property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery deductions taken
into account in computing such taxable income or loss, there shall be taken into account
Depreciation for such Taxable Year, computed in accordance with the definition of
Depreciation; and
(f) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant
to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulation Sections
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result
of a distribution other than in liquidation of a Members interest in the Company, the
amount of such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such basis) from the
disposition of such asset and shall be taken into account for purposes of computing Profits
or Losses.
Property
means all assets, real or intangible, that the Company may own or otherwise have an
interest in from time to time.
Regulations
means the regulations, including temporary regulations, promulgated by the
United States Department of Treasury with respect to the Code, as such regulations are amended from
time to time, or corresponding provisions of future regulations.
Regulatory Allocations
shall have the meaning set forth in
Section 5.3(c)
.
Sable
means Sable Investments, L.P.
Selling Member
shall have the meaning set forth in
Section 9.8(a)
.
Significant Subsidiary
shall have the meaning set forth in
Section 7.9(a)
.
Strome
means Mark E. Strome.
Strome Hedgecap
means Strome Hedgecap Fund, L.P.
Subsidiary
means, with respect to a Person, any corporation, partnership, association or
other business entity of which (i) if a corporation, a majority of the total voting power of shares
of stock entitled (irrespective of whether, at the time, stock of any other class or classes of
such
10
corporation shall have or might have voting power by reason of the happening of any
contingency) to vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, association or
other business entity, a majority of either (x) the partnership or other similar ownership interest
thereof or (y) the stock or equity interest of such partnership, association or other business
entitys general partner, managing member or other similar controlling Person, is at the time owned
or controlled, directly or indirectly, by such Person or one or more Subsidiaries of that Person or
a combination thereof. For purposes of this Agreement, with respect to the Company, each of Plains
AAP, PAA GP and the MLP, and each of their respective Subsidiaries, shall be a Subsidiary of the
Company.
Super Majority in Interest
means Members owning Membership Interests with Percentage
Interests aggregating at least
66
2
/
3
%.
Tax Matters Member
shall have the meaning set forth in
Article 11
.
Taxable Year
shall mean the calendar year.
Transfer
or
Transferred
means to give, sell, exchange, assign, transfer, pledge,
hypothecate, bequeath, devise or otherwise dispose of or encumber, voluntarily or involuntarily, by
operation of law or otherwise. When referring to a Membership Interest, Transfer shall mean the
Transfer of such Membership Interest whether of record, beneficially, by participation or
otherwise.
Transfer Agreements
means those certain Unit Transfer and Contribution Agreements, dated as
of May8, 2001, by and among PAAI LLC, Plains All American, Inc., Plains Resources, Inc. and each of
(i) Sable, Sable Holdings, L.P. and James C. Flores; (ii) E Holdings; (iii) Kafu Holdings, LLC;
(iv) Strome; (v) Strome Hedgecap; and (vi) John T. Raymond
Vulcan
means Vulcan Energy GP Holdings Inc., a Delaware corporation.
Wachovia
means Wachovia Investors, Inc.
ARTICLE 2
GENERAL
2.1
Formation
. The name of the Company is Plains All American GP LLC. The rights and
liabilities of the Members shall be as provided in the Act for Members except as provided herein.
To the extent that the rights or obligations of any Member are different by reason of any provision
of this Agreement than they would be in the absence of such provision, to the extent permitted by
the Act, this Agreement shall control.
2.2
Principal Office
. The principal office of the Company shall be located at 333 Clay Street, 16th Floor, Houston,
Texas 77002 or at such other place(s) as the Board may determine from time to time.
11
2.3
Registered Office and Registered Agent
. The location of the registered office and the
name of the registered agent of the Company in the State of Delaware shall be as stated in the
Certificate or as determined from time to time by the Board.
2.4
Purpose of the Company
. The Companys purposes, and the nature of the business to be
conducted and promoted by the Company, are (a) to act as the general partner of Plains AAP in
accordance with the terms of Plains AAP Partnership Agreement and (b) to engage in any and all
activities necessary, advisable, convenient or incidental to the foregoing.
2.5
Date of Dissolution
. The Company shall have perpetual existence unless the Company is
dissolved pursuant to
Article 10
hereof. The existence of the Company as a separate legal
entity shall continue until cancellation of the Certificate of Formation of the Company in the
manner required by the Act.
2.6
Qualification
. The President and Chief Executive Officer, any Vice President, the
Secretary and any Assistant Secretary of the Company is hereby authorized to qualify the Company to
do business as a foreign limited liability company in any jurisdiction in which the Company may
wish to conduct business and each is hereby designated as an authorized person, within the meaning
of the Act (or as a manager for such limited purposes only, if signature of a manager is required
under relevant state regulations), to execute, deliver and file any amendments or restatements of
the Certificate of Formation of the Company and any other certificates and any amendments or
restatements thereof necessary for the Company to so qualify to do business in any such state or
territory.
2.7
Members
.
(a)
Powers of Members
. The Members shall have the power to exercise any and all
rights or powers granted to the Members pursuant to the express terms of this Agreement. Except as
expressly provided herein, the Members shall have no power to bind the Company and no authority to
act on behalf of the Company.
(b)
Partition
. Each Member waives any and all rights that it may have to maintain an
action for partition of the Companys Property.
(c)
Resignation
. Except upon a Transfer of all of its Membership Interests in
accordance with this Agreement, a Member may not resign from the Company prior to the dissolution
and winding up of the Company. A Member ceases to be a Member only upon: (i) a Permitted Transfer
of all of such Members Membership Interest and the transferees admission
as a substitute Member, all in accordance with the terms of this Agreement, or (ii) completion
of dissolution and winding up of the Company pursuant to
Article 10
.
(d)
Ownership
. Each Member shall be entitled to receive a Membership Interest in
exchange for a Capital Contribution. Each Membership Interest shall correspond to a limited
liability company interest as is provided in the Act. The Company shall be the owner of the
Property. No Member shall have any ownership interest or right in the Property, including Property
conveyed by a Member to the Company, except indirectly by virtue of a Members ownership of a
Membership Interest.
12
2.8
Reliance by Third Parties
. Except with respect to certain tax matters, Persons dealing
with the Company shall be entitled to rely conclusively upon the power and authority of an Officer.
ARTICLE 3
CAPITALIZATION OF THE COMPANY
3.1
Initial Capital Contributions
. The Percentage Interest of each Member as of the date
hereof is as set forth on
Schedule 1
hereto, which shall be amended from time to time in
accordance with the terms hereof (including, but not limited to, upon the making of additional
Capital Contributions pursuant to
Section 3.2(b)
) to reflect appropriate adjustments to
such Percentage Interests.
3.2
Additional Capital Contributions
.
(a) Except for Capital Contributions from each Member in proportion to such Members then
outstanding Percentage Interest in respect of the General Partners Percentage for equity issuances
by the MLP, and for equity issuances approved pursuant to
Section 7.9(b)(ii)
, no Member
shall be required to make any additional Capital Contribution.
(b) Subject to the approval of a Majority in Interest pursuant to
Section 7.9
, the
Company may offer additional Membership Interests to any Person with the approval of the Board.
Such approval of the Majority in Interest shall also include their approval of any related
valuations of Gross Asset Value by the Board and, if such Majority in Interest approves such
issuance without approving such valuation, Gross Asset Value shall be determined by a third Person
familiar with the valuation of such transactions selected by the Majority in Interest not later
than ten (10) days after their approval of such issuance or, if the Majority in Interest fails to
so select a third Person, then such third Person will be selected in accordance with the rules and
procedures of the American Arbitration Association in Houston, Texas. If any additional Capital
Contributions are made by Members but not in proportion to their respective Percentage Interests,
the Percentage Interest of each Member shall be adjusted such that each Members revised Percentage
Interest determined immediately following each such additional Capital Contribution shall be equal
to a fraction (i) the numerator of which is the sum of (A) the positive Capital Account balance of
the Member determined immediately preceding the date such additional Capital Contribution is made
(such Capital Account to be computed by adjusting the book value for Capital Account purposes of
each Company asset to equal its Gross Asset Value
as of such date, as provided in subparagraph (b) of the definition herein of Gross Asset
Value), and (B) such additional Capital Contribution, if any, made by such Member, and (ii) the
denominator of which is the sum of the positive Capital Account balances immediately preceding the
date such additional Capital Contribution is made plus additional Capital Contributions of all
Members on the date of such additional Capital Contribution, including Capital Contributions of any
new Members (in each case calculated as provided in (i) above). The names, addresses and Capital
Contributions of the Members shall be reflected in the books and records of the Company.
13
3.3
Loans
.
(a) No Member shall be obligated to loan funds to the Company. Loans by a Member to the
Company shall not be considered Capital Contributions. The amount of any such loan shall be a debt
of the Company owed to such Member in accordance with the terms and conditions upon which such loan
is made.
(b) A Member may (but shall not be obligated to) guarantee a loan made to the Company. If a
Member guarantees a loan made to the Company and is required to make payment pursuant to such
guarantee to the maker of the loan, then the amounts so paid to the maker of the loan shall be
treated as a loan by such Member to the Company and not as an additional Capital Contribution.
3.4
Maintenance of Capital Accounts
.
(a) The Company shall maintain for each Member a separate Capital Account with respect to the
Membership Interest owned by such Member in accordance with the following provisions:
(i) To each Members Capital Account there shall be credited (A) such Members Capital
Contributions, (B) such Members share of Profits and (C) the amount of any Company
liabilities assumed by such Member or which are secured by any Property distributed to such
Member. The principal amount of a promissory note which is not readily traded on an
established securities market and which is contributed to the Company by the maker of the
note (or a Member related to the maker of the note within the meaning of Regulation Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of any Member until the
Company makes a taxable disposition of the note or until (and only to the extent) principal
payments are made on the note, all in accordance with Regulation Section
1.704-1(b)(2)(iv)(d)(2);
(ii) To each Members Capital Account there shall be debited (A) the amount of money
and the Gross Asset Value of any Property distributed or treated as an advance distribution
to such Member pursuant to any provision of this Agreement (including without limitation any
distributions pursuant to
Section 4.1
), (B) such Members share of Losses and (C)
the amount of any liabilities of such Member assumed by the Company or which are secured by
any Property contributed by such Member to the Company;
(iii) In the event Membership Interests are Transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent such Capital Account relates to the Transferred Membership
Interests; and
(iv) In determining the amount of any liability for purposes of
Sections 3.4(a)(i)
and
(ii)
there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
(b) The foregoing
Section 3.4(a)
and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with Regulation
14
Section 1.704-1(b)
and, to the greatest extent practicable, shall be interpreted and applied in a manner consistent
with such Regulation. The Board in its discretion and to the extent otherwise consistent with the
terms of this Agreement shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Members and the amount of capital reflected
on the Companys balance sheet, as computed for book purposes, in accordance with Regulation
Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with Regulation Section
1.704-1(b).
3.5
Capital Withdrawal Rights, Interest and Priority
. Except as expressly provided in this
Agreement, no Member shall be entitled to (a) withdraw or reduce such Members Capital Contribution
or to receive any distributions from the Company, or (b) receive or be credited with any interest
on the balance of such Members Capital Contribution at any time.
ARTICLE 4
DISTRIBUTIONS
4.1
Distributions of Available Cash
. An amount equal to 100% of Available Cash with
respect to each fiscal quarter shall be distributed to the Members in proportion to their relative
Percentage Interests within forty-five days after the end of such quarter.
4.2
Persons Entitled to Distributions
. All distributions of Available Cash to Members for
a fiscal quarter pursuant to
Section 4.1
or approved pursuant to
Section 7.9(b)
shall be made to the Members shown on the records of the Company to be entitled thereto as of the
last day of such quarter, unless the transferor and transferee of any Membership Interest otherwise
agree in writing to a different distribution and such distribution is consented to in writing by
the Board.
4.3
Limitations on Distributions
.
(a) Notwithstanding any provision of this Agreement to the contrary, no distributions shall be
made except pursuant to this
Article 4
or
Article 10
or as approved pursuant to
Section 7.9(b)
.
(b) Notwithstanding any provision of this Agreement to the contrary, no distribution hereunder
shall be permitted if such distribution would violate Section 18-607 of the Act or other applicable
law.
ARTICLE 5
ALLOCATIONS
5.1
Profits
. Profits for any Taxable Year shall be allocated:
(a) first, to those Members to which Losses have previously been allocated pursuant to
Section 5.2(c)
hereof so as to bring each such Members Capital Account to zero, pro rata
in accordance with the sum of each such Members Losses; and
(b) second, any remaining Profits shall be allocated among the Members in proportion to their
respective Percentage Interests.
15
5.2
Losses
. Losses for any Taxable Year shall be allocated:
(a) first, to the Members to which Profits have previously been allocated pursuant to
Section 5.1(b)
to the extent of such Profits;
(b) second, to Members in proportion to their positive Capital Account balances until such
Capital Account balances have been reduced to zero; and
(c) third, any remaining Losses shall be allocated among the Members in proportion to their
respective Percentage Interests.
5.3
Regulatory Allocations
.
(a)
Gross Income Allocation
. In the event any Member has an Adjusted Capital Account
Deficit at the end of any Taxable Year, such Member shall be specially allocated items of Company
income and gain in the amount of such deficit balance as quickly as possible;
provided
, that an
allocation pursuant to this
Section 5.3(a)
shall be made only if and to the extent that
such Member would have an Adjusted Capital Account Deficit balance after all other allocations
provided for in this
Article 5
have been made.
(b)
Qualified Income Offset
. In the event any Member unexpectedly receives any
adjustments, allocations, or distributions described in Regulation Sections
1.704-1(b)(2)(ii)(
d
)(
4
), 1.704-1(b)(2)(ii)(
d
)(
5
) or 1.704-1(b)(2)(ii)(
d
)(
6
), items of Company
income and gain shall be specially allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such
Member as quickly as possible,
provided
, that an allocation pursuant to this
Section 5.3(b)
shall be made only if and to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this
Article 5
have been made.
(c)
Curative Allocations
. The allocations set forth in
Sections 5.3(a)
and
(b)
hereof (the
Regulatory Allocations
) are intended to comply with certain requirements
of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with special allocations of
other items of Company income, gain, loss or deduction pursuant to this
Section 5.3(c)
.
Therefore, notwithstanding any other provision of this
Article 5
(other than the Regulatory
Allocations), the Board shall make such offsetting special allocations of income, gain, loss or
deduction in whatever manner it determines appropriate so that, after such offsetting allocations
are made, each Members Capital Account balance is, to the extent possible, equal to the Capital
Account balance such Member would have had if the Regulatory Allocations were not part of this
Agreement and all such items were allocated pursuant to
Sections 5.1
and
5.2
without regard to the Regulatory Allocations.
5.4
Tax Allocations: Code Section 704(c)
.
(a) Except as otherwise provided herein, for federal income tax purposes, (i) each item of
income, gain, loss and deduction shall be allocated among the Members in the same manner as its
correlative item of book income, gain, loss or deduction is allocated pursuant to
Sections
5.1
and
5.2
, and (ii) each tax credit shall be allocated to the Members in the same
16
manner as the receipt or expenditure giving rise to such credit is allocated pursuant to
Section 5.1
and
5.2
.
(b) In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss
and deduction with respect to any Property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any variation between the
adjusted basis of such Property to the Company for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with the definition herein of Gross Asset Value).
(c) In the event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraph (b) of the definition herein of Gross Asset Value, subsequent allocations of income,
gain, loss and deduction with respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
(d) Any elections or other decisions relating to such allocations shall be made by the Board
in any manner that reasonably reflects the purpose and intention of this Agreement;
provided
, that
the Company, in the discretion of the Board, may make, or not make, curative or remedial
allocations (within the meaning of the Regulations under Code Section 704(c)) including, but not
limited to, curative allocations which offset the effect of the ceiling rule for a prior
Taxable Year (within the meaning of Regulation Section 1.704-3(c)(3)(ii)) and curative
allocations from disposition of contributed property (within the meaning of Regulation Section
1.704-3(c)(3)(iii)(B)). Allocations pursuant to this
Section 5.4
are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be taken into
account in computing, any Members Capital Account or share of Profits, Losses, other items,
or distributions pursuant to any provision of this Agreement.
5.5
Change in Percentage Interests
. In the event that the Members Percentage Interests
change during a Taxable Year, Profits and Losses shall be allocated taking into account the
Members varying Percentage Interests for such Taxable Year, determined on a daily, monthly or
other basis as determined by the Board, using any permissible method under Code Section 706 and the
Regulations thereunder.
5.6
Withholding
. Each Member hereby authorizes the Company to withhold from income or
distributions allocable to such Member and to pay over any taxes payable by the Company or any of
its Affiliates as a result of such Members participation in the Company; if and to the extent that
the Company shall be required to withhold any such taxes, such Member shall be deemed for all
purposes of this Agreement to have received a distribution from the Company as of the time such
withholding is required to be paid, which distribution shall be deemed to be a distribution to such
Member to the extent that the Member is then entitled to receive a distribution. To the extent
that the aggregate of such distributions in respect of a Member for any period exceeds the
distributions to which such Member is entitled for such period, the amount of such excess shall be
considered a demand loan from the Company to such Member, with interest at the rate of interest per
annum that Citibank, N.A., or any successor entity thereto, announces from time to time as its
prime lending rate, which interest shall be treated as an item of Company income, until discharged
by such Member by repayment, which
17
may be made in the sole discretion of the Board out of
distributions to which such Member would otherwise be subsequently entitled. The withholdings
referred to in this
Section 5.6
shall be made at the maximum applicable statutory rate
under applicable tax law unless the Board shall have received an opinion of counsel or other
evidence, satisfactory to the Board, to the effect that a lower rate is applicable, or that no
withholding is applicable.
ARTICLE 6
MEMBERS MEETINGS
6.1
Meetings of Members; Place of Meetings
. Regular meetings of the Members shall be held
on an annual basis or more frequently as determined by a Majority in Interest. All meetings of the
Members shall be held at a location either within or outside the State of Delaware as designated
from time to time by the Board and stated in the Notice of the meeting or in a duly executed waiver
of the Notice thereof. Special meetings of the Members may be held for any purpose or purposes,
unless otherwise prohibited by law, and may be called by the Board or by a Majority in Interest. A
Member expecting to be absent from a meeting shall be entitled to designate in writing (or orally;
provided
, that such oral designation is later confirmed in writing) a proxy (an
Authorized
Representative
) to act on behalf of such Member with respect to such meeting (to the same extent
and with the same force and effect as the Member who has designated such Authorized
Representative). Such Authorized Representative shall have full power and authority to act and
take actions or refrain
from taking actions as the Member by whom such Authorized Representative has been designated.
Members and Authorized Representatives may participate in a meeting of the Members by means of
conference telephone or other similar communication equipment whereby all Members or Authorized
Representatives participating in the meeting can hear each other. Participation in a meeting in
this manner shall constitute presence in person at the meeting, except when a Member or Authorized
Representative participates for the express purpose of objecting to the transaction of any business
on the ground that the meeting was not lawfully called or convened.
6.2
Quorum; Voting Requirement
. The presence, in person or by proxy, of a Majority in
Interest of the Members shall constitute a quorum for the transaction of business by the Members.
The affirmative vote of a Majority in Interest shall constitute a valid decision of the Members,
except where a different vote is required by the Act or this Agreement.
6.3
Proxies
. At any meeting of the Members, every Member having the right to vote thereat
shall be entitled to vote in person or by proxy appointed by an instrument in writing signed by
such Member and bearing a date not more than one year prior to the date of such meeting.
6.4
Action Without Meeting
. Any action required or permitted to be taken at any meeting of
Members of the Company may be taken without a meeting, without prior Notice and without a vote if a
consent in writing setting forth the action so taken is signed by Members having not less than the
minimum Percentage Interest that would be necessary to authorize or take such action at a meeting
of the Members. Prompt Notice of the taking of any action taken pursuant to this
Section 6.4
by less than the unanimous written consent of the Members shall be given to
those Members who have not consented in writing.
18
6.5
Notice
. Notice stating the place, day and hour of the meeting of Members and the
purpose for which the meeting is called shall be delivered personally or sent by mail or by
telecopier not less than two Business Days nor more than sixty days before the date of the meeting
by or at the direction of the Board or other Persons calling the meeting, to each Member entitled
to vote at such meeting.
6.6
Waiver of Notice
. When any Notice is required to be given to any Member hereunder, a
waiver thereof in writing signed by the Member, whether before, at or after the time stated
therein, shall be equivalent to the giving of such Notice.
ARTICLE 7
MANAGEMENT AND CONTROL
7.1
Board of Directors
.
(a)
(i) Except as otherwise provided hereunder, the business and affairs of the Company shall
be managed by or under the direction of the Board, which shall, subject to
Section 7.1(a)(iv)
, consist of eight (8) individuals designated as directors of the Company
(the
Directors
) as follows: (A) subject to
Section 7.1(a)(iv)
, each Initial Designating
Member shall be entitled to designate one (1) Director, (B) a Majority in Interest shall elect
three (3) Directors, each of whom shall be Independent Directors, and (C) the Chief Executive
Officer of the Company shall be a Director.
(ii) At each annual meeting of the Members and at each special meeting of the Members
called for the purpose of electing Directors (subject to the third to last sentence of this
Section 7.1(a)(ii)
), each Member shall be entitled to designate the number of
Directors as set forth in
Section 7.1(a)(i)
. Each Member shall cooperate with
respect to calling and attending meetings of Members and electing the Directors designated
by the Members, including voting in favor of Directors designated pursuant to
Section 7.1(a)(i)
and any replacement Directors pursuant to
Section 7.1(a)(iii);
provided
, that the failure to hold any such meetings shall not
limit or eliminate a Members right to designate Directors pursuant to
Section
7.1(a)(i)
. Directors shall be elected to serve annual terms expiring on the date of the
annual meeting of Members following such election. Each Director shall hold office until
his or her successor is elected pursuant to this
Section 7.1(a)
or until his or her
earlier death, resignation or removal. The provisions of
Section 7.1(a)(i)
,
(ii)
and
(iii)
are subject to the limitations contained in
Section 7.1(a)(iv)
.
(iii) Any individual designated by a Member as a Director (other than Independent
Directors and the Chief Executive Officer of the Company) may be removed at any time, with
or without cause, only by such designating Member and the Members shall cooperate with
respect to such removal, including voting in favor of such removal. Persons elected as an
Independent Director may be removed at any time, with or without cause, by a vote of a
Majority in Interest. Subject to
Section 7.1(a)(iv)
, in the event of the death,
resignation or removal of a Director (other than an Independent Director, the Chief
Executive Officer of the Company), the Member that designated such Director may designate a
replacement Director. In the event of the death, resignation or removal of an
19
Independent Director, a Majority in Interest may designate a replacement Director. In
the event the individual serving as Chief Executive Officer of the Company no longer holds
such office for any reason, such individual shall be automatically removed as a Director and
the successor to such individual as Chief Executive Officer of the Company shall, by virtue
of such appointment, be designated to replace such individual as a Director.
(iv) Each Initial Designating Member shall have the right to designate a Director
pursuant to
Section 7.1(a)(i)(A)
so long as such Members Percentage Interest is
greater than 10% of all Membership Interests or, in the case of E-Holdings, 9% of all
Membership Interests. In the event a Member ceases to have the right to designate a
Director pursuant to
Section 7.1(a)(i)(A)
, such individual designated by such Member
shall be automatically removed as a Director and any Member with a Percentage Interest of
greater than 25% and not otherwise entitled to designate a Director shall designate a
replacement Director, or, if there is no such Member, a Majority in Interest shall elect a
replacement Director and in either case such Director shall serve a term expiring on the
date of the annual meeting of Members following such election and shall hold office until
his or her successor is elected;
provided
,
however
, in the event that there is more than one
Member with a Percentage Interest greater than 25% and not otherwise entitled to designate a
Director, the Member who first accumulated a Percentage Interest of 25% or greater shall be
entitled to designate the replacement Director. At such time as no Member has the right to
designate Directors pursuant to
Section 7.1(a)(i)(A)
or this
Section
7.1(a)(iv)
, then the provisions of
Sections 7.1(a)(i)
,
(ii)
and
(iii)
and the second sentence of this
Section 7.1(a)(iv)
shall terminate and
the number of Directors comprising the Board shall be eight (8) and shall consist of at
least three (3) Independent Directors and the Chief Executive Officer of the Company. All
such Directors shall be elected by a Majority in Interest and shall serve annual terms
expiring on the date of the annual meeting of Members following such election. Each such
Director shall hold office until his or her successor is elected pursuant to this
Section 7.1(a)(iv)
or until his or her earlier death, resignation or removal. Any
Director elected pursuant to this
Section 7.1(a)(iv)
may be removed, with or without
cause, by a Majority in Interest. In the event of the death, resignation or removal of a
Director, the remaining Directors may appoint a replacement Director. Notwithstanding any
other provision of this Agreement, in no event shall both a Member and its Permitted
Transferee be entitled to designate a Director pursuant to
Section 7.1(a)(i)(A)
.
(b) Except as otherwise expressly provided herein, the power and authority granted to the
Board hereunder shall include all those necessary or convenient for the furtherance of the purposes
of the Company and shall include the power to make or delegate to Officers all decisions with
regard to the management, operations, assets, financing and capitalization of the Company.
7.2
Meetings of the Board
. The Board may hold meetings, both regular and special, within or
outside the State of Delaware. Regular meetings of the Board may be called by the Chief Executive
Officer or two or more of the Directors upon delivery of written Notice at least ten days prior to
the date of such meeting. Special meetings of the Board may be called at the request of the Chief
Executive Officer or any two or more of the Directors upon delivery of
written Notice sent to each other Director by the means most likely to reach such Director as
20
may
be determined by the Secretary in his best judgment so as to be received at least twenty-four hours
prior to the time of such meeting. Notwithstanding anything contained herein to the contrary, such
Notice may be telephonic if no other reasonable means are available. Such Notices shall be
accompanied by a proposed agenda or statement of purpose.
7.3
Quorum and Acts of the Board
. A majority of the Directors shall constitute a quorum for
the transaction of business at all meetings of the Board, and, except as otherwise provided in this
Agreement, the act of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board. If a quorum shall not be present at any meeting of the Board, the
Directors present thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if
all members of the Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or committee.
7.4
Electronic Communications
. Members of the Board, or any committee designated by the Board,
may participate in a meeting of the Board or any committee thereof by means of conference telephone
or similar communications equipment through which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in person at the meeting.
7.5
Committees of Directors
. The Board, by unanimous resolution of all Directors present and
voting at a duly constituted meeting of the Board or by unanimous written consent, may designate
one or more committees, each committee to consist of one (1) or more of the Directors. In the
event of the disqualification, resignation or removal of a committee member, the Board may appoint
another member of the Board to fill such vacancy. Any such committee, to the extent provided in
the Boards resolution, shall have and may exercise all the powers and authority of the Board in
the management of the Companys business and affairs subject to any limitations contained herein or
in the Act. Such committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its
meetings and report the same to the Board when required.
7.6
Compensation of Directors
. Each Director shall be entitled to reimbursement from the
Company for all reasonable direct out-of-pocket expenses incurred by such Director in connection
with attending Board meetings and such compensation as may be approved by a Majority in Interest.
7.7
Directors as Agents
. The Board, acting as a body pursuant to this Agreement, shall
constitute a manager for purposes of the Act. No Director, in such capacity, acting singly or
with any other Director, shall have any authority or right to act on behalf of or bind the Company
other than by exercising the Directors voting power as a member of the Board, unless specifically
authorized by the Board in each instance.
7.8
Officers; Agents
. The Board shall have the power to appoint any Person or Persons as the
Companys officers (the
Officers
) to act for the Company and to delegate to
21
such Officers such of
the powers as are granted to the Board hereunder. Any decision or act of an Officer within the
scope of the Officers designated or delegated authority shall control and shall bind the Company
(and any business entity for which the Company exercises direct or indirect executory authority).
The Officers may have such titles as the Board shall deem appropriate, which may include (but need
not be limited to) Chairman of the Board, President, Chief Executive Officer, Executive Vice
President, Vice President, Chief Operating Officer, Chief Financial Officer, Treasurer, Controller
or Secretary. A Director may be an Officer. The Officers of the Company as of the date hereof
shall continue in office subject to terms hereof. Unless the authority of an Officer is limited by
the Board, any Officer so appointed shall have the same authority to act for the Company as a
corresponding officer of a Delaware corporation would have to act for a Delaware corporation in the
absence of a specific delegation of authority. The Officers shall hold office until their
respective successors are chosen and qualify or until their earlier death, resignation or removal.
Any Officer elected or appointed by the Board may be removed at any time by the affirmative vote of
a majority of the Board. Any vacancy occurring in any office of the Company shall be filled by a
majority of the Board.
7.9
Matters Requiring Member Approval
. (a) Without the prior written consent of a Super
Majority in Interest, the Company shall not, and shall not permit any of its Subsidiaries to effect
any:
(i) merger, consolidation or share exchange into or with any other Person, or any other
similar business combination transaction (other than any such transaction entered into
solely between the Company and any of its Subsidiaries or among any of them) involving the
Company or any of its Significant Subsidiaries (as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Securities and Exchange Commission, as amended and which shall be deemed
to include the MLP) or financial restructuring of the Company, Plains AAP or PAA GP;
provided
,
however
, that in the event not all Members receive identical consideration,
whether in their capacity as a Member or as a limited partner of Plains AAP, both in form
and amount (in proportion to their Membership Interests or Limited Partner Interests, as the
case may be) in such transaction, such transaction shall require the prior written consent
of any Member receiving consideration that differs from the consideration to be received by
a Majority in Interest;
(ii) voluntary filing for bankruptcy, liquidation, dissolution or winding up of the
Company or any of its Subsidiaries or any event that would cause a dissolution or winding up
of the Company or any of its Subsidiaries or any consent by the Company or any of its
Subsidiaries to any action brought by any other Person relating to any of the foregoing;
(iii) amendment or repeal of the Certificates, the Plains AAP Partnership Agreement or
the PAA GP Agreement;
provided
,
however
, that if any amendment to the Plains AAP Partnership
Agreement that would, if proposed with respect to this Agreement, require the prior written
consent of a particular Member, then such amendment shall require the prior written consent
of such Member in its capacity as a limited partner of Plains AAP;
22
(iv) sale, lease, transfer, pledge or other disposition of all or substantially all of
the properties or assets of the Company or the Company and any of its Subsidiaries taken as
a whole, other than sales, leases, transfers, pledges or other dispositions of assets in the
ordinary course of business or refinancing of the Credit Agreements;
(b) Without the prior written consent of a Majority in Interest, the Company shall not, and
shall not permit Plains AAP or PAA GP to, effect any:
(i) except for distributions of Available Cash pursuant to
Section 4.1
and
distributions pursuant to
Section 10.3
, and distributions required pursuant to the
Plains AAP Partnership Agreement or the PAA GP Agreement (in each case, as amended from time
to time in accordance with the terms thereof), declaration or payment of any dividends or
other distributions on the Membership Interests, partnership interests or other debt or
equity securities by the Company, Plains AAP or PAA GP, including, without limitation, any
dividend or other distribution by means of a redemption or repurchase of such securities;
(ii) other than equity securities issued upon exercise of convertible or exchangeable
securities authorized or outstanding on the date hereof (including 200,000 Class B Units of
Plains AAP) or subsequently approved pursuant to this
Section 7.9
, authorization,
sale and/or issuance by the Company, Plains AAP or PAA GP of any of their respective
Membership Interests, partnership interests or other equity securities, whether in a private
or public offering, including an initial public offering, or the grant, sale or issuance of
other securities (including rights, warrants and options) convertible into, exchangeable for
or exercisable for any of their respective Membership Interests, partnership interests or
other equity securities, whether or not presently convertible, exchangeable or exercisable;
(iii) (a) incurrence of any indebtedness by the Company, Plains AAP or PAA GP, (b) the
assumption, incurrence, or undertaking by the Company, Plains AAP or PAA GP of, or the grant
by the Company, Plains AAP or PAA GP of any security (other than a pledge of substantially
all of the properties or assets of the Company or the Company and any of its Subsidiaries
taken as a whole) for, any financial commitment of any type whatsoever, including without
limitation, any purchase, sale, lease, loan, contract, borrowing or expenditure, or (c) the
lending of money by the Company, Plains AAP or PAA GP to, or the guarantee by the Company,
Plains AAP or PAA GP of the debts of, any other Person;
(iv) capital expenditures, or commitment to make capital expenditures, in excess of
fifteen percent (15%) of the amount budgeted for capital expenditures in any fiscal year by
the Company, Plains AAP or PAA GP; or
(v) any repurchase or redemption by the Company of any of its Membership Interests, or
other debt or equity securities.
23
ARTICLE 8
LIABILITY AND INDEMNIFICATION
8.1
Limitation on Liability of Members, Directors and Officers
. No Member (when not acting in
violation of this Agreement or applicable law), Director or Officer shall have any liability to the
Company or the Members for any losses sustained or liabilities incurred as a result of any act or
omission of such Member, Director or Officer in connection with the conduct of the business of the
Company if, in the case of an Officer, the Officer acted in a manner he or she reasonably believed
to be in, or not opposed to, the interests of the Company or applicable law and to be within the
scope of his or her authority and, in the case of a Member (when not acting in violation of this
Agreement or applicable law), Director or Officer, the conduct did not constitute bad faith, fraud,
gross negligence or willful misconduct. To the fullest extent permitted by Section 18-1101(c) of
the Act, a Director (other than Independent Directors), in performing his or her obligations under
this Agreement, shall be entitled to act or omit to act at the direction of the Member who
designated such Director, considering only such factors, including the separate interests of the
designating Member, as such Director or the designating Member chooses to consider, and any action
of a Director or failure to act, taken or omitted in good faith reliance on the foregoing
provisions of this
Section 8.1
shall not constitute a breach of any duty including any
fiduciary duty on the part of the Director or designating Member to the Company or any other Member
or Director. Except as required by the Act, the Companys debts, obligations, and liabilities,
whether arising in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Officer, Member or Director shall be personally responsible for
any such debt, obligation or liability of the Company solely by reason of being an Officer, Member
or Director. No Member shall be responsible for any debts, obligations or liabilities, whether
arising in contract, tort or otherwise, of any other Member.
8.2
Indemnification
.
(a) The Company shall indemnify and hold harmless the Members (when not acting in violation of
this Agreement or applicable law), Directors and Officers (each, a
Company Affiliate
) from and
against any and all losses, claims, demands, costs, damages, liabilities, expenses of any nature
(including reasonable attorneys fees and disbursements), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, in which a Company Affiliate may be involved, or threatened to be
involved, as a party or otherwise, by reason of his, her or its status as a Company Affiliate,
regardless of whether a Company Affiliate continues to be a Company Affiliate at the time any such
liability or expense is paid or incurred, if such Company Affiliate acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the interests of the Company and
with respect to any criminal proceeding, had no reason to believe his, her or its conduct was
unlawful.
(b) Expenses incurred by a Company Affiliate in defending any claim, demand, action, suit or
proceeding subject to
Section 8.2(a)
shall, from time to time, be advanced by the Company
prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by
the Company of an undertaking by or on behalf of the Company Affiliate to repay such amounts if it
is ultimately determined that the Company Affiliate is not entitled to be indemnified as authorized
in this
Section 8.2
.
24
(c) The indemnification provided by this
Section 8.2
shall be in addition to any other
rights to which a Company Affiliate may be entitled pursuant to any approval of a Majority in
Interest, as a matter of law or equity, or otherwise, and shall continue as to a Company Affiliate
who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors,
assigns, and administrators of such Company Affiliate;
provided, however
, that in the event such
Company Affiliate is also an Affiliate of a Member, such Members Percentage Interest shall be
disregarded for purposes of determining a Majority in Interest for purposes of this
Section
8.2(c)
. The Company shall not be required to indemnify any Member in connection with any
losses, claims, demands, actions, disputes, suits or proceedings, of any Member against any other
Member.
(d) The Company may purchase and maintain directors and officers insurance or similar coverage
for its Directors and Officers in such amounts and with such deductibles or self-insured retentions
as determined in the sole discretion of the Board.
(e) Any indemnification hereunder shall be satisfied only out of the assets of the Company,
and the Members shall not be subject to personal liability by reason of the indemnification
provisions under this
Section 8.2
.
(f) A Company Affiliate shall not be denied indemnification in whole or in part under this
Section 8.2
because the Company Affiliate had an interest in the transaction with respect
to which the indemnification applies if the transaction was otherwise permitted by the terms of
this Agreement and all material facts relating to such indemnitees interest were adequately
disclosed to the Board at the time the transaction was consummated.
(g) Subject to
Section 8.2(c)
, the provisions of this
Section 8.2
are for the
benefit of the Company Affiliates and the heirs, successors, assigns and administrators of the
Company Affiliates and shall not be deemed to create any rights for the benefit of any other
Persons.
(h) Any repeal or amendment of any provisions of this
Section 8.2
shall be prospective
only and shall not adversely affect any Company Affiliates rights existing at the time of such
repeal or amendment.
ARTICLE 9
TRANSFERS OF MEMBERSHIP INTERESTS
9.1
General Restrictions
.
(a) No Member may Transfer all or any part of such Members Membership Interest to any Person
except (i) to a Permitted Transferee pursuant to
Section 9.2
or (ii) pursuant to the terms
of
Section 9.8
;
provided, however
, any such Transfer under (i) or (ii) above shall comply
with the terms of
Section 9.1(b)
. Any purported Transfer of a Membership Interest or a
portion thereof in violation of the terms of this Agreement shall be null and void and of no force
and effect. Except upon a Transfer of all of a Members Membership Interest in accordance with
this
Section 9.1
, no Member shall have the right to withdraw as a Member of the Company.
(b) As a condition to a Transfer by a Member of all or any part of such Members Membership
Interest to a transferee as permitted under
Section 9.1(a)(i)
or
(ii)
, (a
Membership
25
Transfer
), such Member shall simultaneously Transfer (the
Plains AAP Transfer
) to such
transferee an amount of such Members Limited Partnership Interest equal to: (i) such Members
Limited Partnership Interest, multiplied by (ii) a percentage equal to (1) the Percentage Interest
of such Member to be Transferred to such transferee, divided by (2) such Members Percentage
Interest immediately before such Transfer. If for any reason Plains AAP Transfer does not occur
simultaneously with the Membership Transfer, then the Membership Transfer and Plains AAP Transfer
shall be null and void and of no force and effect.
(c) Notwithstanding any other provision of this Agreement, no Member may pledge, mortgage or
otherwise subject its Member Interest to any Encumbrance.
9.2
Permitted Transferees
.
(a) Notwithstanding the provisions of
Section 9.8
, each Member shall, subject to
Section 9.1(b)
, have the right to Transfer (but not to substitute the transferee as a
substitute Member in such Members place, except in accordance with
Section 9.3
), by a
written instrument, all or any part of a Members Membership Interest to a Permitted Transferee.
Notwithstanding the previous sentence, if the Permitted Transferee is such because it was an
Affiliate of the transferring Member at the time of such Transfer or the Transfer was a Permitted
Transfer under clause (a) of the definition of Permitted Transfer and, at any time after such
Transfer, such Permitted Transferee ceases to be an Affiliate of such Member or such Transfer or
such Permitted Transferee ceases to qualify under such clause (a) (a
Non-Qualifying Transferee
),
such Transfer shall be deemed to not be a Permitted Transfer and shall be subject to
Section
9.8
. Pursuant to
Section 9.8
, such transferring Member, or such transferring Members
legal representative, shall deliver the First Refusal Notice promptly after the time when such
transferee ceases to be an Affiliate of such transferring Member, or such Transfer or such
Permitted Transferee ceases to qualify under clause (a) of the definition of Permitted Transfer,
and such transferring Member shall otherwise comply with the terms of
Section 9.8
with
respect to such Transfer;
provided
, that the purchase price for such Transfer for purposes of
Section 9.8
shall be an amount agreed upon by such transferring Member and a Majority in
Interest (excluding such transferring Members Percentage Interest) or, if such Member and such
Majority in Interest cannot agree on a price within five (5) Business Days after delivery of the
First Refusal Notice, such price shall be the fair market value of the Membership Interest
transferred pursuant to the Transfer as of the date the transferee ceased to be an Affiliate of
such transferring Member or such Transfer or such Permitted Transferee ceases to qualify under
clause (a) of the definition of Permitted Transfer (such date, the
Non-Qualifying Date
), as
determined at the Companys expense by a nationally recognized investment banking firm mutually
selected by such transferring Member and a Majority in Interest (excluding such transferring
Members Percentage Interest). If such transferring Member and such Majority in Interest are
unable, within ten (10) days after the expiration of such five (5) Business Day period, to mutually
agree upon an investment banking firm, then each of such transferring Member and such Majority in
Interest shall choose a nationally recognized investment banking firm and the two investment
banking firms so chosen shall choose a third nationally recognized investment banking firm which
shall determine the fair market value of the Membership Interest transferred pursuant to such
Transfer at the Companys expense. The determination of fair market value shall be based on the
value that a willing buyer with knowledge of all relevant facts would pay a willing seller for all
the outstanding equity securities of the Company in connection with an
26
auction for the Company as a going concern and shall not take into account any acquisitions
made by the Company or its Affiliates or any other events subsequent to the Non-Qualifying Date and
shall not be subject to any discount for a sale of a minority interest. If such transferring
Member fails to comply with all the terms of
Section 9.8
, such Transfer shall be null and
void and of no force and effect. No Non-Qualifying Transferee shall be entitled to receive any
distributions from the Company on or after the Non-Qualifying Date and any distributions made in
respect of the Membership Interests on or after the Non-Qualifying Date and held by such
Non-Qualifying Members shall be paid to the Member who transferred such Membership Interest or
otherwise to the rightful owner thereof as reasonably determined by the Board.
(b) Unless and until admitted as a substitute Member pursuant to
Section 9.3
, a
transferee of a Members Membership Interest in whole or in part shall be an assignee with respect
to such Transferred Membership Interest and shall not be entitled to participate in the management
of the business and affairs of the Company or to become, or to exercise the rights of, a Member,
including the right to appoint Directors, the right to vote, the right to require any information
or accounting of the Companys business, or the right to inspect the Companys books and records.
Such transferee shall only be entitled to receive, to the extent of the Membership Interest
Transferred to such transferee, the share of distributions and profits, including distributions
representing the return of Capital Contributions, to which the transferor would otherwise be
entitled with respect to the Transferred Membership Interest. The transferor shall have the right
to vote such Transferred Membership Interest until the transferee is admitted to the Company as a
substitute Member with respect to the Transferred Membership Interest.
9.3
Substitute Members
. No transferee of all or part of a Members Membership Interest shall
become a substitute Member in place of the transferor unless and until:
(a) Such Transfer is in compliance with the terms of
Section 9.1
;
(b) the transferee has executed an instrument in form and substance reasonably satisfactory to
the Board accepting and adopting, and agreeing to be bound by, the terms and provisions of the
Certificate of Formation of the Company and this Agreement; and
(c) the transferee has caused to be paid all reasonable expenses of the Company in connection
with the admission of the transferee as a substitute Member.
Upon satisfaction of all the foregoing conditions with respect to a particular transferee, the
books and records of the Company shall be adjusted to reflect the admission of the transferee as a
substitute Member to the extent of the Transferred Membership Interest held by such transferee.
9.4
Effect of Admission as a Substitute Member
. A transferee who has become a substitute
Member has, to the extent of the Transferred Membership Interest, all the rights, powers and
benefits of, and is subject to the obligations, restrictions and liabilities of a Member under, the
Certificate of Formation of the Company, this Agreement and the Act. Upon admission of a
transferee as a substitute Member, the transferor of the Membership Interest so held by the
substitute Member shall cease to be a Member of the Company to the extent of such Transferred
Membership Interest.
27
9.5
Consent
. Each Member hereby agrees that upon satisfaction of the terms and conditions of
this
Article 9
with respect to any proposed Transfer, the transferee may be admitted as a
Member without any further action by a Member hereunder.
9.6
No Dissolution
. If a Member Transfers all of its Membership Interest pursuant to this
Article 9
and the transferee of such Membership Interest is admitted as a Member pursuant
to
Section 9.3
, such Person shall be admitted to the Company as a Member effective on the
effective date of the Transfer and the Company shall not dissolve pursuant to
Section 10.1
.
9.7
Additional Members
. Subject to
Section 3.2
and
Section 7.9
, any Person
acceptable to the Board may become an additional Member of the Company for such consideration as
the Board shall determine,
provided
that such additional Member complies with all the requirements
of a transferee under
Section 9.3(b)
and
(c)
.
9.8
Right of First Refusal
. The Members shall have the following right of first refusal:
(a) If at any time any of the Members (a
Selling Member
) has received and wishes to accept a
bona fide
offer (the
Offer
) for cash from a third party (the
Offeror
) for all or part of such
Selling Members Membership Interest (and a proportionate amount of such Selling Members Limited
Partnership Interest in accordance with
Section 9.1(b)
), such Selling Member shall give
Notice thereof (the
First Refusal Notice
) to each of the other Members, other than any
Non-Purchasing Members (as hereinafter defined), and the Company. The First Refusal Notice shall
state the portion of the Selling Members Membership Interest and Limited Partnership Interest that
the Selling Member wishes to sell (the
Optioned Interest
), the price and all other material terms
of the Offer, the name of the Offeror, and certification from the Selling Member affirming that the
Offer is
bona fide
and that the description thereof is true and correct, and that the Offeror has
stated that it will purchase the Optioned Interest if the rights of first refusal herein described
are not exercised.
(b) Each of the Members other than the Selling Member and any Non-Purchasing Member (the
Non-Selling Members
) shall have the right exercisable by Notice (an
Acceptance Notice
) given to
the Selling Member and the Company within twenty (20) days after receipt of the First Refusal
Notice, to agree that it will purchase up to 100% of the Optioned Interest on the terms set forth
in the First Refusal Notice;
provided, however
, if the Non-Selling Members in the aggregate desire
to purchase more than 100% of the Optioned Interest, each such Non-Selling Members right to
purchase the Optioned Interest shall be reduced (pro rata based on the percentage of Optioned
Interest for which such Non-Selling Member has exercised its right to purchase hereunder compared
to all other Non-Selling Members, but not below such Non-Selling Members Membership Interest as a
percentage of the aggregate Membership Interests of all Non-Selling Members who have exercised
their right to purchase) so that such Non-Selling Members purchase no more than 100% of the
Optioned Interest. If a Non-Selling Member does not submit an Acceptance Notice within the twenty
(20) day period set forth in this
Section 9.8(b)
, such Non-Selling Member shall be deemed
to have rejected the offer to purchase any portion of the Optioned Interest.
28
(c) If the Non-Selling Members do not in the aggregate exercise the right to purchase all of
the Optioned Interest by the expiration of the twenty (20) day period set forth in
Section
9.8(b)
, then any Acceptance Notice shall be void and of no effect, and the Selling
Member shall be entitled to complete the proposed sale at any time in the thirty (30) day period
commencing on the date of the First Refusal Notice, but only upon the terms set forth in the First
Refusal Notice. If no such sale is completed in such thirty (30) day period, the provisions hereof
shall apply again to any proposed sale of the Optioned Interest.
(d) If any Non-Selling Member exercises the right to purchase the Optioned Interest as
provided herein and such Non-Selling Member(s) have elected to purchase all of the Optioned
Interest, the purchase of such Optioned Interest shall be completed within the thirty (30) day
period commencing on the date of delivery of the First Refusal Notice. If such Non-Selling Member
does not consummate the Purchase of such Optioned Interest, (x) the Selling Member shall be
entitled to all expenses of collection and (y) such Non-Selling Member shall be deemed a
Non-Purchasing Member
for the duration of this Agreement.
ARTICLE 10
DISSOLUTION AND TERMINATION
10.1
Events Causing Dissolution
.
(a) The Company shall be dissolved and its affairs wound up upon the first to occur of the
following events:
(i) The affirmative vote of a Super Majority in Interest to dissolve;
(ii) The Transfer of all or substantially all of the assets of the Company and the
receipt and distribution of all the proceeds therefrom; or
(iii) The entry of a decree of judicial dissolution pursuant to Section 18-802 of the
Act.
(b) The withdrawal, death, retirement, resignation, expulsion, bankruptcy or dissolution of
any Member or the occurrence of any other event that terminates the continued membership of any
Member in the Company shall not, in and of itself, cause the Companys dissolution.
10.2
Final Accounting
. Upon dissolution and winding up of the Company, an accounting will be
made of the accounts of the Company and each Member and of the Companys assets, liabilities and
operations from the date of the last previous accounting to the date of such dissolution.
10.3
Distributions Following Dissolution and Termination
.
(a)
Liquidating Trustee
. Upon the dissolution of the Company, such party as is
designated by a Majority in Interest will act as liquidating trustee of the Company (the
Liquidating Trustee
) and proceed to wind up the business and affairs of the Company in accordance
with the terms of this Agreement and applicable law. The Liquidating Trustee will
29
use its
reasonable best efforts to sell all Company assets (except cash) in the exercise of its best
judgment under the circumstances then presented, that it deems in the best interest of the
Members. The Liquidating Trustee will attempt to convert all assets of the Company to cash so
long as it can do so consistently with prudent business practice. The Members and their respective
designees will have the right to purchase any Company property to be sold on liquidation, provided
that the terms on which such sale is made are no less favorable than would otherwise be available
from third parties. The gains and losses from the sale of the Company assets, together with all
other revenue, income, gain, deduction, expense, loss and credit during the period, will be
allocated in accordance with
Article 5
. A reasonable amount of time shall be allowed for
the period of winding up in light of prevailing market conditions and so as to avoid undue loss in
connection with any sale of Company assets. This Agreement shall remain in full force and effect
during the period of winding up. In addition, upon request of the Board and if the Liquidating
Trustee determines that it would be imprudent to dispose of any non-cash assets of the Company,
such assets may be distributed in kind to the Members in lieu of cash, proportionately to their
right to receive cash distributions hereunder.
(b)
Accounting
. The Liquidating Trustee will then cause proper accounting to be made
of the Capital Account of each Member, including recognition of gain or loss on any asset to be
distributed in kind as if such asset had been sold for consideration equal to the fair market value
of the asset at the time of the distribution. The Members intend that the allocations provided
herein shall result in Capital Account balances in proportion to the Percentage Interests of the
Members.
(c)
Liquidating Distributions
. In settling accounts after dissolution of the Company,
the assets of the Company shall be paid to creditors of the Company and to the Members in the
following order:
(i) to creditors of the Company (including Members) in the order of priority as
provided by law whether by payment or the making of reasonable provision for payment
thereof, and in connection therewith there shall be withheld such reasonable reserves for
contingent, conditioned or unconditioned liabilities as the Liquidating Trustee in its
reasonable discretion deems adequate, such reserves (or balances thereof) to be held and
distributed in such manner and at such times as the Liquidating Trustee, in its discretion,
deems reasonably advisable;
provided, however
, that such amounts be maintained in a separate
bank account and that any amounts in such bank account remaining after three years be
distributed to the Members or their successors and assigns as if such amount had been
available for distribution under
Section 10.3(c)(ii);
and then
(ii) to the Members in proportion to the positive balances of their Capital Accounts,
as fully adjusted pursuant to
Section 3.4,
including adjustment for all gains and
losses actually or deemed realized upon disposition or distribution of assets in connection
with the liquidation and winding up of the Company.
(iii) Any distribution to the Members in liquidation of the Company shall be made by
the later of the end of the taxable year in which the liquidation occurs or 90 days after
the date of such liquidation. For purposes of the preceding sentence, the term
liquidation shall have the same meaning as set forth in Regulation Section
1.704-
30
1(b)(2)(ii) as in effect at such time and liquidating distributions shall be further
deemed to be made pursuant to this Agreement upon the event of a liquidation as defined in
such
Regulation for which no actual liquidation occurs with a deemed recontribution by the
Members of such deemed liquidating distributions to the continuing Company pursuant to this
Agreement.
(d) The provisions of this Agreement, including, without limitation, this
Section
10.3
, are intended solely to benefit the Members and, to the fullest extent permitted by law,
shall not be construed as conferring any benefit upon any creditor of the Company, and no such
creditor of the Company shall be a third-party beneficiary of this Agreement, and no Member or
Director shall have any duty or obligation to any creditor of the Company to issue any call for
capital pursuant to this Agreement.
10.4
Termination of the Company
. The Company shall terminate when all assets of the Company,
after payment or due provision for all debts, liabilities and obligations of the Company, shall
have been distributed to the Members in the manner provided for in this
Article 10
, and the
Certificate of Formation of the Company shall have been canceled in the manner required by the Act.
10.5
No Action for Dissolution
. The Members acknowledge that irreparable damage would be done
to the goodwill and reputation of the Company if any Member should bring an action in court to
dissolve the Company under circumstances where dissolution is not required by
Section 10.1
.
Accordingly, except where the Board has failed to cause the liquidation of the Company as required
by
Section 10.1
and except as specifically provided in Section 18-802, each Member hereby
to the fullest extent permitted by law waives and renounces his right to initiate legal action to
seek dissolution of the Company or to seek the appointment of a receiver or trustee to wind up the
affairs of the Company, except in the cases of fraud, violation of law, bad faith, gross
negligence, willful misconduct or willful violation of this Agreement.
ARTICLE 11
TAX MATTERS
11.1
Tax Matters Member
. Vulcan shall be the Tax Matters Member of the Company as provided in
the Regulations under Section 6231 of the Code and analogous provisions of state law. The Board
shall have the authority to remove or replace the Tax Matters Member of the Company and designate
its successor.
11.2
Certain Authorizations
. The Tax Matters Member shall represent the Company, at the
Companys expense, in connection with all examinations of the Companys affairs by tax authorities
including any resulting administrative or judicial proceedings. Without limiting the generality of
the foregoing, and subject to the restrictions set forth herein, the Tax Matters Member, but only
with the consent of a Majority in Interest, is hereby authorized:
(a) to enter into any settlement agreement with respect to any tax audit or judicial review,
in which agreement the Tax Matters Member may expressly state that such agreement shall bind the
other Members except that such settlement agreement shall not bind any Member that has not approved
such settlement agreement in writing;
31
(b) if a notice of a final administrative adjustment at the Company level of any item required
to be taken into account by a Member for tax purposes is mailed to the Tax Matters
Member, to seek judicial review of such final adjustment, including the filing of a petition
for readjustment with the Tax Court, the District Court of the United States for the district in
which the Companys principal place of business is located, or elsewhere as allowed by law, or the
United States Claims Court;
(c) to intervene in any action brought by any other Member for judicial review of a final
adjustment;
(d) to file a request for an administrative adjustment at any time and, if any part of such
request is not allowed, to file a petition for judicial review with respect to such request;
(e) to enter into an agreement with the Internal Revenue Service to extend the period for
assessing any tax that is attributable to any item required to be taken into account by a Member
for tax purposes, or an item affected by such item; and
(f) to take any other action on behalf of the Members (with respect to the Company) or the
Company in connection with any administrative or judicial tax proceeding to the extent permitted by
applicable law or the Regulations.
Each Member shall have the right to participate in any such actions and proceedings to the
extent provided for under the Code and Regulations.
11.3
Indemnity of Tax Matters Member
. To the maximum extent permitted by applicable law and
without limiting
Article 8
, the Company shall indemnify and reimburse the Tax Matters
Member for all expenses (including reasonable legal and accounting fees) incurred as Tax Matters
Member pursuant to this
Article 11
in connection with any administrative or judicial
proceeding with respect to the tax liability of the Members as long as the Tax Matters Member has
determined in good faith that the Tax Matters Members course of conduct was in, or not opposed to,
the best interest of the Company. The taking of any action and the incurring of any expense by the
Tax Matters Member in connection with any such proceeding, except to the extent provided herein or
required by law, is a matter in the sole discretion of the Tax Matters Member.
11.4
Information Furnished
. To the extent and in the manner provided by applicable law and
Regulations, the Tax Matters Member shall furnish the name, address, profits and loss interest, and
taxpayer identification number of each Member to the Internal Revenue Service.
11.5
Notice of Proceedings, etc.
The Tax Matters Member shall use its reasonable best efforts
to keep each Member informed of any administrative and judicial proceedings for the adjustment at
the Company level of any item required to be taken into account by a Member for income tax purposes
or any extension of the period of limitations for making assessments of any tax against a Member
with respect to any Company item, or of any agreement with the Internal Revenue Service that would
result in any material change either in Profits or Losses as previously reported.
32
11.6
Notices to Tax Matters Member
. Any Member that receives a notice of an administrative
proceeding under Section 6233 of the Code relating to the Company shall promptly provide Notice to
the Tax Matters Member of the treatment of any Company item on such Members
Federal income tax return that is or may be inconsistent with the treatment of that item on the
Companys return. Any Member that enters into a settlement agreement with the Internal Revenue
Service or any other government agency or official with respect to any Company item shall provide
Notice to the Tax Matters Member of such agreement and its terms within sixty (60) days after the
date of such agreement.
11.7
Preparation of Tax Returns
. The Tax Matters Member shall arrange for the preparation and
timely filing of all returns of Company income, gains, deductions, losses and other items necessary
for Federal, state and local income tax purposes and shall use all reasonable efforts to furnish to
the Members within ninety (90) days of the close of the taxable year a Schedule K-1 and such other
tax information reasonably required for Federal, state and local income tax reporting purposes.
The classification, realization and recognition of income, gain, losses and deductions and other
items shall be on the cash or accrual method of accounting for Federal income tax purposes, as the
Board shall determine in its sole discretion in accordance with applicable law.
11.8
Tax Elections
. Subject to
Section 11.9
, a Majority in Interest shall, in its sole
discretion, determine whether to make any available election.
11.9
Taxation as a Partnership
. No election shall be made by the Company or any Member for the
Company to be excluded from the application of any of the provisions of Subchapter K, Chapter I of
Subtitle A of the Code or from any similar provisions of any state tax laws or to be treated as a
corporation for federal tax purposes.
ARTICLE 12
ACCOUNTING AND BANK ACCOUNTS
12.1
Fiscal Year and Accounting Method
. The fiscal year and taxable year of the Company shall
be the calendar year. The Company shall use an accrual method of accounting.
12.2
Books and Records
. The Company shall maintain at its principal office, or such other
office as may be determined by the Board, all the following:
(a) A current list of the full name and last known business or residence address of each
Member, and of each member of the Board, together with information regarding the amount of cash and
a description and statement of the agreed value of any other property or services contributed by
each Member and which each Member has agreed to contribute in the future, and the date on which
each Member became a Member of the Company;
(b) A copy of the Certificate of Formation of the Company and this Agreement, including any
and all amendments to either thereof, together with executed copies of any powers of attorney
pursuant to which the Certificate of Formation of the Company, this Agreement, or any amendments
have been executed;
33
(c) Copies of the Companys Federal, state, and local income tax or information returns and
reports, if any, which shall be retained for at least six fiscal years;
(d) The financial statements of the Company; and
(e) The Companys books and records.
12.3
Delivery to Members; Inspection
. Upon the request of any Member, for any purpose
reasonably related to such Members interest as a member of the Company, the Board shall cause to
be made available to the requesting Member the information required to be maintained by clauses (a)
through (e) of
Section 12.2
and such other information regarding the business and affairs
and financial condition of the Company as any Member may reasonably request.
12.4
Financial Statements
. The Board shall cause to be prepared for the Members at least
annually, at the Companys expense, financial statements of the Company, and its subsidiaries,
prepared in accordance with generally accepted accounting principles and audited by a nationally
recognized accounting firm. The financial statements so furnished shall include a balance sheet,
statement of income or loss, statement of cash flows, and statement of Members equity. In
addition, the Board shall provide on a timely basis to the Members monthly and quarterly
financials, statements of cash flow, any available internal budgets or forecast or other available
financial reports, as well as any reports or notices as are provided by the Company, or any of its
Subsidiaries to any financial institution. The requirements of
Section 12.2(d)
and this
Section 12.4
shall be deemed satisfied so long as (i) the MLP files annual reports on Form
10-K and quarterly reports on Form 10-Q, (ii) the MLP files or furnishes guidance 8-Ks on a
quarterly basis and (iii) the MLP annually files an 8-K attaching a balance sheet of PAA GP.
12.5
Filings
. At the Companys expense, the Board shall cause the income tax returns for the
Company to be prepared and timely filed with the appropriate authorities and to have prepared and
to furnish to each Member such information with respect to the Company as is necessary (or as may
be reasonably requested by a Member) to enable the Members to prepare their Federal, state and
local income tax returns. The Board, at the Companys expense, shall also cause to be prepared and
timely filed, with appropriate Federal, state and local regulatory and administrative bodies, all
reports required to be filed by the Company with those entities under then current applicable laws,
rules, and regulations. The reports shall be prepared on the accounting or reporting basis
required by the regulatory bodies.
12.6
Non-Disclosure
. Each Member agrees that, except as otherwise consented to by the Board in
writing, all non-public and confidential information furnished to it pursuant to this Agreement
will be kept confidential and will not be disclosed by such Member, or by any of its agents,
representatives, or employees, in any manner whatsoever, in whole or in part, except that (a) each
Member shall be permitted to disclose such information to those of its agents, representatives, and
employees who need to be familiar with such information in connection with such Members investment
in the Company (collectively,
Representatives
) and are apprised of the confidential nature of
such information, (b) each Member shall be permitted to disclose information to the extent required
by law, legal process or regulatory requirements, so long as such Member shall have used its
reasonable efforts to first afford the Company with a reasonable
34
opportunity to contest the
necessity of disclosing such information, (c) each Member shall be permitted to disclose such
information to possible purchasers of all or a portion of the Members Membership Interest,
provided that such prospective purchaser shall execute a suitable confidentiality agreement in a
form approved by the Company containing terms not less restrictive than the terms set forth herein,
and (d) each Member shall be permitted to disclose information to the extent necessary for the
enforcement of any right of such Member arising
under this Agreement. Each Member shall be responsible for any breach of this
Section 12.6
by its Representatives.
ARTICLE 13
NON-COMPETITION AND NON-SOLICITATION
13.1
Non-Competition
. Each of the Members hereby acknowledges that the Company and Rodeo L.P.
operate in a competitive business and compete with other Persons operating in the midstream segment
of the oil and gas industry for acquisition opportunities. Each of the Members agrees that during
the period that it is a Member, it shall not, directly or indirectly, use any of the confidential
information it receives as a Member or which its designee receives as a Director of the Company to
compete, or to engage in or become interested financially in as a principal, employee, partner,
shareholder, agent, manager, owner, advisor, lender, guarantor of any Person that competes in North
America with the business conducted by the Company, Plains AAP, PAA GP and the MLP. Each of the
Members also acknowledge that EnCap Investments L.L.C. and Persons that it controls (
EnCap
),
Kayne Anderson Capital Advisors L.P. and its Affiliates (
Kayne Anderson
) and Wachovia and its
affiliates may make and manage investments in the energy industry in the ordinary course of
business (such investments
Institutional Investments
). The Members agree that EnCap, Kayne
Anderson and Wachovia and its affiliates may make Institutional Investments, even if such
Institutional Investments are competitive with the Companys and its Subsidiaries business, so
long as such Institutional Investments are not in violation of the provisions of
Section
12.6
or the second sentence of this
Section 13.1
or obligations owed to the Company
under applicable law with respect to usurption of an opportunity legally belonging to the Company
or its Subsidiaries. Each of the Members confirms that the restrictions in this
Section
13.1
are reasonable and valid and all defenses to the strict enforcement thereof are hereby
waived by each of the Members. The restrictions contained in this Section 13.1 shall in no way
impair the rights granted (i) to James C. Flores pursuant to the Flores Employment Agreement or
(ii) to John T. Raymond pursuant to any employment agreement between Raymond and Plains Resources,
Inc.
13.2
Non-Solicitation
. Each of the Members undertakes toward the Company and is obligated,
without the prior written consent of the Company, during the period that it is a Member and for a
period of one year thereafter, not to solicit or hire, directly or indirectly, in any manner
whatsoever (except in response to a general solicitation or a non-directed executive search), in
the capacity of employee, consultant or in any other capacity whatsoever, one or more of the
employees, directors or officers or other Persons (hereinafter collectively referred to as
"
Employees
) who at the time of solicitation or hire, or in the 90-day period prior thereto, are
working full-time or part-time for the Company or any of its Affiliates and not to endeavor,
directly or indirectly, in any manner whatsoever, to encourage any of said Employees to leave his
or her job with the Company or any of its Affiliates and not to endeavor, directly or indirectly,
and in any manner whatsoever, to incite or induce any client of the Company or any
35
of its
Affiliates to terminate, in whole or in part, its business relations with the Company or any of its
Affiliates.
13.3
Damages
. Each of the Members acknowledges that damages may not be an adequate compensation
for the losses which may be suffered by the Company as a result of the breach by such Member of the
covenants contained in this
Article 13
and that the Company shall be
entitled to seek injunctive relief with respect to any such breach in lieu of or in addition to any
recourse in damages without the posting of a bond or other security.
13.4
Limitations
. In the event that a court of competent jurisdiction decides that the
limitations set forth in
Section 13.1
hereof are too broad, such limitations shall be
reduced to those limitations that such court deems reasonable.
ARTICLE 14
MISCELLANEOUS
14.1
Waiver of Default
. No consent or waiver, express or implied, by the Company or a Member
with respect to any breach or default by the Company or a Member hereunder shall be deemed or
construed to be a consent or waiver with respect to any other breach or default by any party of the
same provision or any other provision of this Agreement. Failure on the part of the Company or a
Member to complain of any act or failure to act of the Company or a Member or to declare such party
in default shall not be deemed or constitute a waiver by the Company or the Member of any rights
hereunder.
14.2
Amendment
.
(a) Except as otherwise expressly provided elsewhere in this Agreement, this Agreement shall
not be altered, modified or changed except by an amendment approved by a Super Majority in
Interest;
provided, however
, that no modification of the terms of this Agreement that (i) increases
or extends any financial obligation or liability of a Member, (ii) alters the method of division of
profits and losses or a method of distributions made to a Member, (iii) adversely affects a
Members ability to designate Directors or (iv) otherwise adversely affects the obligations or
rights of a Member (as a Member under this Agreement) in a manner different than a Majority in
Interest shall be effective without the prior written consent of such Member;
provided
,
further
,
that no amendment of
Section 7.3
,
7.9(a)(iii)
,
13.1
or this
Section
14.2
that adversely affects the obligations or rights of a Member shall be effective as to any
Member without the prior written consent of that Member.
(b) In addition to any amendments otherwise authorized herein, the Board may make any
amendments to any of the Schedules to this Agreement from time to time to reflect transfers of
Membership Interests and issuances of additional Membership Interests. Copies of such amendments
shall be delivered to the Members upon execution thereof.
(c) The Board shall cause to be prepared and filed any amendment to the Certificate that may
be required to be filed under the Act as a consequence of any amendment to this Agreement.
36
(d) Any modification or amendment to this Agreement or the Certificate of Formation of the
Company made in accordance with this
Section 14.2
shall be binding on all Members and the
Board.
14.3
No Third Party Rights
. Except as provided in
Article 8
, none of the provisions
contained in this Agreement shall be for the benefit of or enforceable by any third parties,
including creditors of the Company.
14.4
Severability
. In the event any provision of this Agreement is held to be illegal, invalid
or unenforceable to any extent, the legality, validity and enforceability of the remainder of this
Agreement shall not be affected thereby and shall remain in full force and effect and shall be
enforced to the greatest extent permitted by law.
14.5
Nature of Interest in the Company
. A Members Membership Interest shall be personal
property for all purposes.
14.6
Binding Agreement
. Subject to the restrictions on the disposition of Membership Interests
herein contained, the provisions of this Agreement shall be binding upon, and inure to the benefit
of, the parties hereto and their respective heirs, personal representatives, successors and
permitted assigns.
14.7
Headings
. The headings of the sections of this Agreement are for convenience only and
shall not be considered in construing or interpreting any of the terms or provisions hereof.
14.8
Word Meanings
. The words herein, hereinafter, hereof, and hereunder refer to this
Agreement as a whole and not merely to a subdivision in which such words appear unless the context
otherwise requires. The singular shall include the plural, and vice versa, unless the context
otherwise requires. Whenever the words include, includes or including are used in this
Agreement, they shall be deemed to be followed by the words without limitation. When verbs are
used as nouns, the nouns correspond to such verbs and vice versa.
14.9
Counterparts
. This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto, notwithstanding that all the
parties have not signed the same counterpart.
14.10
Entire Agreement
. This Agreement contains the entire agreement between the parties hereto
and thereto and supersedes all prior writings or agreements with respect to the subject matter
hereof.
14.11
Partition
. The Members agree that the Property is not and will not be suitable for
partition. Accordingly, each of the Members hereby irrevocably waives any and all right such
Member may have to maintain any action for partition of any of the Property. No Member shall have
any right to any specific assets of the Company upon the liquidation of, or any distribution from,
the Company.
14.12
Governing Law; Consent to Jurisdiction and Venue
. This Agreement shall be construed
according to and governed by the laws of the State of Delaware without regard to
37
principles of
conflict of laws. The parties hereby submit to the exclusive jurisdiction and venue of the state
courts of Harris County, Texas or to the Court of Chancery of the State of Delaware and the United
States District Court for the Southern District of Texas and of the United States District Court
for the District of Delaware, as the case may be, and agree that the Company or Members may, at
their option, enforce their rights hereunder in such courts.
Approved and Authorized by a
Supermajority in Interest
December 28, 2007
38
Exhibit 10.1
PLAINS AAP, L.P. CLASS B
RESTRICTED UNITS AGREEMENT
This
PLAINS AAP, L.P. CLASS B RESTRICTED UNITS AGREEMENT
(this
Agreement
) is entered into as
of August 29, 2007 (the
Grant Date
)
*
by and between
PLAINS AAP, L.P.
, a Delaware
limited partnership (the
Partnership
), and
(
Executive
).
RECITALS:
WHEREAS
, to provide an incentive to Executive to enhance the profitability and growth of the
Partnership and its Affiliates and to encourage Executive to remain employed by the Partnership or
its Affiliates, the Partnership desires to grant to Executive
Class B Units (the
Granted Units
) on the Grant Date, which Granted Units shall have such rights, designations and
preferences as are set forth in this Agreement and the Partnership Agreement;
WHEREAS
, as of the date hereof, the Partnership has 2,300,000 Class A Units outstanding and
200,000 Class B Units authorized for issuance (including the Class B Units being issued under this
Agreement);
WHEREAS
, the Partnership and Executive desire to enter into this Agreement to evidence certain
terms and conditions that relate to the grant, ownership and transfer of the Granted Units; and
NOW, THEREFORE
, in consideration of the mutual agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Partnership and Executive agree as follows:
ARTICLE 1
DEFINITIONS AND CONSTRUCTION
1.1
Construction
. Unless the context requires otherwise: (a) the gender (or lack of gender) of
all words used in this Agreement includes the masculine, feminine, and neuter; (b) references to
Sections refer to sections of this Agreement; (c) references to Exhibits refer to the Exhibits
attached to this Agreement, each of which is made a part hereof for all purposes; (d) references to
money refer to legal currency of the United States of America; and (e) the word including means
including without limitation.
1.2
Definitions
. Capitalized terms used in this Agreement (including Exhibit A attached hereto)
that are not defined in this Section 1.2 or in the body of this Agreement shall have the meanings
given to them in the Partnership Agreement.
Affiliate
of a person means any person controlling, controlled by, or under common control
with such person. As used herein, the terms controlling, controlled by and under
|
|
|
*
|
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As modified December 28, 2007
|
common control with mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of securities or any partnership or
other ownership interest, by contract or otherwise) of a person. For the purposes of the preceding
sentence, control shall be deemed to exist when a person possesses, directly or indirectly, through
one or more intermediaries (a) in the case of a corporation, more than 50% of the outstanding
voting securities thereof; (b) in the case of a limited liability company, partnership, limited
partnership or venture, the right to more than 50% of the voting membership, general partner or
equivalent interest therein; or (c) in the case of any other person, more than 50% of the economic
or beneficial interest therein.
Applicable Class B Units
means at a particular time, collectively, the Vested Units and the
Earned Units then outstanding, and the Earned Units and Vested Units then outstanding under all
Other Class B Restricted Unit Agreements.
Board
means the Board of Directors or governing board or committee of the Company.
Call Event
means, with respect to an Earned Unit, the termination of Executives employment
with the Company and its Affiliates for any reason (including death or disability) prior to January
1, 2016, other than (i) a termination of employment by Executive for a Good Reason or (ii) a
termination of Executives employment by the Company and its Affiliates other than for Cause.
Call Option
means the Partnerships option to repurchase Earned Units upon or following a
Call Event, as provided in Exhibit A.
Call Value
of an Earned Unit means:
(a) if neither the Class A Units or the IPO Entity Class A Units are publicly traded on
the date of the Call Event, the product of (1) the value (in U.S. dollars) of a Class A Unit
on the date of such Call Event that would reasonably be expected to be realized in an open
market sale on arms length terms to a person who is not an Affiliate of the seller or the
buyer, having regard to all relevant factors, but without regard to (x) the availability or
lack of availability of a market for such Class A Units or (y) any minority discount that
would otherwise be applicable to such Class A Units (the Class A Unit Value), and (2) the
Conversion Factor.
For purposes of the foregoing, the Class A Unit Value shall be determined as follows:
(i) During the ten-day period following the date on which a Call Event occurs,
upon the request of the Partnership, Executive and the Partnership shall each submit
to the other such partys respective written proposal as to the Class A Unit Value.
If the higher proposal is not more than 10% higher than the lower proposal, then the
Class A Unit Value shall be equal to the average of such proposals.
-2-
(ii) In the event that one of the proposals submitted under clause (i) above is
more than 10% higher than the other proposal, then within ten business days after
the submission of such proposals, the Partnership and Executive shall jointly select
and retain a managing director in an independent nationally recognized investment
bank (the Appraiser). In the event that such parties fail to jointly select the
Appraiser within such time period, then at the request of the Partnership or
Executive, the American Arbitration Association shall provide them with a list of at
least five Appraiser candidates and each of the Partnership and Executive shall be
allowed to strike not more than two names from the list and rank the remaining
Appraiser candidates in order of acceptance within three business days of receipt of
the list. The highest ranking Appraiser candidate who remains on the list shall
serve as the Appraiser. The Appraiser shall be requested to make his determination
within a period of 30 days after the deadline for submissions to be made by the
Partnership and Executive pursuant to clause (i) above, or as soon as practicable
thereafter.
(iii) Within five business days of the appointment of the Appraiser, each of
the Partnership and Executive shall submit to the Appraiser (A) his or its proposed
determination of the Class A Unit Value provided to the other party pursuant to
clause (i) above, (B) a list of factors that he or it believes to be relevant in the
determination of the Class A Unit Value, and (C) the reasons for that proposed
value. In addition, each of the Partnership and Executive shall at the same time
deliver to the other a copy of any submission or information supplied by the
Partnership and Executive to the Appraiser.
(iv) The Appraiser shall then make his own determination (having requested such
further information from the Partnership, Executive and/or the Company as it shall
require) of the Class A Unit Value.
(v) The Appraiser shall certify to each of the Partnership, Executive and the
Company (A) that, having considered the respective submissions of the Partnership
and Executive, he has made his own determination of the Class A Unit Value according
to the principles of the definition of Class A Unit Value in this Agreement and (B)
the proposed value of either the Partnership or Executive that he has determined to
be closer to the Class A Unit Value as determined by the Appraiser (the Closest
Value). The Closest Value, whether proposed by the Partnership and Executive, as
so certified by the Appraiser shall thereupon be deemed to be the Class A Unit Value
for purposes of this Agreement, unless the Floor Value, as determined below in item
(vii), is higher, in which event the Floor Value shall be the Class A Unit Value for
purposes of this Agreement. Notwithstanding anything to the contrary set forth
herein, at any time prior to the Appraisers certification of the Closest Value
pursuant to this clause (v), either the Executive or the Partnership may deliver
written notice to the other party accepting such partys written proposal as to the
Class A Unit Value, and the value of such partys proposal shall thereupon be deemed
to be the Class A Unit Value for purposes of this Agreement.
-3-
(vi) The fees and expenses of the Appraiser shall be paid by the Partnership.
The Appraiser shall act as an expert and not as an arbitrator and his determination
shall be final and binding upon the Partnership and Executive in the absence of
manifest error. The Appraiser shall have no liability to any of the Partnership,
Executive, the Company in respect of his determination.
(vii) The Floor Value shall be equal to the product of (1) multiplied by (2)
where:
(1) is the average of the trading multiples of the five most
comparable publicly traded general partner units (the five most comparable
publicly traded general partners units shall be determined in good faith by
the Board). A trading multiple shall be calculated by dividing (i) the
closing sales price per unit on the Call Event date by (ii) the product of
four and the amount of the most recent quarterly cash distributions made on
a per unit basis on or prior to the Call Event Date; and
(2) is the most recent quarterly distribution paid with respect to a
Class A Unit (excluding for this purpose any distribution paid only with
respect to a Class A Unit (and, if applicable, the General Partner) that is
funded by indebtedness) on or prior to the Call Event date, multiplied by
four.
(b) if either the Class A Units or the IPO Entity Class A Units are publicly traded on
the date of the Call Event, the product of (1) the Conversion Factor, and (2) the closing
sales price of a publicly traded Class A Unit (or IPO Entity Class A Unit, as the case may
be) on the Call Event date.
Capital Call
means the occurrence of an event that requires the partners to make a cash
contribution to the Partnership pursuant to Section 3.1(b) of the Partnership Agreement.
Capital Call Amount
means, with respect to a particular Capital Call, the aggregate amount
of the cash contributions required to be made to the Partnership by its partners in connection
therewith.
Cause
means the termination of Executives employment with the Partnership and its
Affiliates by the Board upon (i) a finding by the Board that Executive has substantially failed to
perform the duties and responsibilities of his position at an acceptable level and after written
notice specifying such failure in detail and after a reasonable period under the circumstances
(determined by the Board in good faith) such failure has continued without full correction by
Executive, (ii) Executives conviction of or guilty plea to the committing of an act or acts
constituting a felony under the laws of the United States or any state thereof or any misdemeanor
involving moral turpitude or (iii) any action by Executive involving personal dishonesty, theft or
fraud in connection with Executives duties as an employee of the Company or any of its Affiliates.
-4-
Change in Control
means the determination by the Board that one of the following events has
occurred:
(a) prior to a GP IPO:
(i) the Company ceases to retain direct or indirect control over the Partnership;
(ii) the Persons who own member interests in the Company on the Grant Date and the
respective Affiliates of such Persons (such owners and Affiliates being referred to as the
Owner Affiliates) cease to own directly or indirectly at least 50% of the member interest
of the Company;
(iii) a person or group (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) becomes after the Grant Date the beneficial owner (as defined in Rules
13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 50% of the
member interest of the Company; or
(iv) a transfer, sale, exchange or other disposition in a single transaction or series
of transactions (whether by merger or otherwise) of all or substantially all of the assets
of the Partnership or the MLP to one or more persons who are not Affiliates of the
Partnership, other than a transaction in which the Owner Affiliates become the beneficial
owners, directly or indirectly, of more than 50% of the voting power of such person or
persons immediately following such transaction;
provided, however,
that no Change of Control shall be deemed to have occurred in connection
with a restructuring or reorganization related to a GP IPO if the Owner Affiliates retain
direct or indirect control over the IPO Entity and the Company; and
(b) from and after the consummation of a GP IPO:
(i) the Owner Affiliates cease to retain direct or indirect control over the IPO
Entity or the Partnership;
(ii) (x) a person or group other than the Owner Affiliates becomes the beneficial
owner directly or indirectly of 25% or more of the member interest in the general partner
of the IPO Entity,
and
(y) the member interest beneficially owned by such person
or group exceeds the aggregate member interest in the general partner of the IPO Entity
beneficially owned, directly or indirectly, by the Owner Affiliates; or
(iii) a direct or indirect transfer, sale, exchange or other disposition in a single
transaction or series of transactions (whether by merger or otherwise) of all or
substantially all of the assets of the IPO Entity or the MLP to one or more persons who are
not Affiliates of the IPO Entity (third party or parties), other than a transaction in
which the Owner Affiliates continue to beneficially own, directly or indirectly, more than
50% of the voting power of such third party or parties immediately following such
transaction.
-5-
Class A Unit
means a Class A common unit of the Partnership.
Class B Unit
means a Class B common unit of the Partnership.
Company
means Plains All American GP LLC, a Delaware limited liability company and the
general partner of the Partnership.
Conversion Factor
means, as of a particular time, a fraction, (a) the numerator of which is
the most recent regular quarterly cash distribution paid with respect to an Earned Unit or Vested
Unit, and (b) the denominator of which is the most recent regular quarterly cash distribution paid
with respect to a Class A Unit (excluding, for this purpose, any cash distribution paid only with
respect to a Class A Unit (and, if applicable, the General Partner) and that is funded by
indebtedness) or, following a GP IPO, an IPO Entity Class A Unit; (excluding for this purpose any
special or extraordinary cash distribution paid with respect to an IPO Entity Class A Unit that is
funded by indebtedness).
Earned Unit
means, as of any date, a Granted Unit that has become earned, as provided in
Section 2.2(b), subject to the proviso to Section 2.2(a).
Exchange Act
means the Securities Exchange Act of 1934, as amended.
Forfeiture Event
means, with respect to a Restricted Unit, the termination of Executives
employment with the Company and its Affiliates for any reason (including death or disability).
Good Reason
means any one of the following acts or omissions by the Partnership or the
Company (or any successor thereto):
(a) any material breach by the Partnership of this Agreement;
(b) any requirement by the Company that Executive relocate outside of a radius of 25
miles from the Partnerships principal executive offices as of the date hereof;
(c) the failure of any successor to the Partnership to assume this Agreement;
(d) any material overall reduction in Executives authority, responsibilities, or
duties (taking into account additional authority, responsibilities or duties associated with
the overall growth of the Partnership or MLP or associated with a promotion or lateral
transfer accepted by Executive); or
(e) the assignment to Executive of any duties materially inconsistent with his then
current position, other than in connection with a promotion or lateral transfer accepted by
Executive.
Unless Executive gives written notice to the Board that an act or omission constitutes Good Reason
within 30 days of the date Executive becomes aware of such act or omission, or reasonably should
have become aware of such act or omission, such act or omission shall not constitute Good Reason.
-6-
GP IPO
means an initial registered public offering of equity interests in an entity that
owns directly or indirectly at least 75% of the incentive distribution rights issued by the MLP.
IPO Entity
means, with respect to a GP IPO, the entity that is registering its equity
interests under the Securities Act of 1933 in connection with such GP IPO.
IPO Entity Class A Unit
means, with respect to a GP IPO, the equity interests of the IPO
Entity that are sold in such GP IPO.
MLP
means Plains All American Pipeline, LP, a Delaware limited partnership.
MLP Quarterly Distribution
means the amount of the quarterly cash distribution made with
respect to a common unit of the MLP on the relevant quarterly distribution date for the MLP.
Other Class B Restricted Unit Agreement
means any Class B Restricted Unit Agreement (other
than this Agreement) entered into between the Partnership and any person on terms that are
substantially similar to those set forth in this Agreement (other than as to (i) the number of
Granted Units granted thereunder, which may differ from the number of Granted Units hereunder,
(ii) any date set forth in such agreement, which may differ from the corresponding date set forth
in this Agreement and (iii) the schedule set forth in Section 2.2(b), which may differ as to MLP
Quarterly Distribution per MLP Common Unit and/or Percentage of Initially Granted Units that
Become Earned Units), as such agreement may be amended or restated from time to time.
Partial Participation GP IPO
means a GP IPO where less than 100% of the Class A Units are
converted into or exchanged for similar equity interests in the IPO Entity.
Partnership Agreement
means that certain Third Amended and Restated Agreement of Limited
Partnership of Plains AAP, L.P. dated as of August 29, 2007, as such agreement may be amended or
restated from time to time.
Partnership Distribution
means, with respect to a particular fiscal quarter, the product of
(i) that portion, of the Partnerships quarterly cash distributions, if any, during such Quarter in
excess of the Distribution Threshold Amount (as defined in Schedule I) for such quarter, multiplied
by (ii) 100% less the percentage (if any) of any such quarterly distributions payable to GP LLC in
accordance with the Partnership Agreement; provided, that for purposes of this definition, the
amount of a quarterly cash distribution shall exclude any cash distribution paid only with respect
to a Class A Unit (and, if applicable, the General Partner) that is funded by indebtedness.
Profits Percentage
means Executives share of Partnership Distributions calculated, at the
time of the Partnership Distribution, as the percentage obtained by dividing (i) the total number
of Executives Earned Units and Vested Units at such time by (ii) the sum of (A) the number of
Class A Units outstanding at such time and (B) the total number of Applicable Class B Units at such
time.
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Restricted Unit
means, as of any date, a Granted Unit that is not an Earned Unit or a Vested
Unit.
Surrender Obligation
means the obligation to surrender and transfer to the Partnership (i)
Restricted Units upon a Forfeiture Event and (ii) Earned Units upon the exercise of a Call Option
by the Partnership.
Transfer
means any direct or indirect transfer, assignment, sale, gift, pledge,
hypothecation or other encumbrance, or any other disposition (whether voluntary, involuntary or by
operation of law other than to the estate of Executive in the event of death), of Restricted Units,
Earned Units or Vested Units, including derivative or similar transactions or arrangements whereby
a portion or all of the economic interest in, risk of loss or opportunity for gain with respect to,
or voting or other rights, of such units are transferred or shifted to another person.
Vested Unit
means (i) an Earned Unit that is no longer subject to the Partnerships Call
Option or (ii) an Earned Unit or a Restricted Unit that becomes a Vested Unit pursuant to Section
2.2(c), subject to the proviso to Section 2.2(a).
ARTICLE 2
GRANT; FORFEITURE OF RESTRICTED UNITS AND EARNED UNITS;
DISTRIBUTIONS
2.1
Grant
. The Partnership hereby grants to Executive the Granted Units effective as of the
Grant Date. Unless Class A Units are uncertificated, the Partnership shall issue Executive a
certificate representing the Granted Units, and such certificate shall bear such legends as
provided for in the Partnership Agreement and such additional legends as may be determined by the
Board to reflect the Surrender Obligation, the Call Option, and the other terms and conditions of
this Agreement and to comply with applicable securities laws. To insure the availability for
delivery of Executives Restricted Units upon a Forfeiture Event, Executive hereby appoints the
Secretary of the Company, or any other person designated by the Partnership as escrow agent, as
Executives attorney-in-fact to sell, assign and transfer unto the Partnership such Restricted
Units or Earned Units, if any, and upon execution of this Agreement, Executive delivers and
deposits with the Secretary of the Company, or such other person designated by the Partnership, the
certificates representing the Granted Units, together with the unit assignment duly endorsed in
blank, attached hereto as Exhibit B. The Granted Units and unit assignment shall be held by the
Secretary (or any other person designated by the Partnership as escrow agent) in escrow, pursuant
to the Joint Escrow Instructions of the Partnership and Executive attached as Exhibit C hereto,
until such time as the Surrender Obligation has lapsed with respect to the Granted Units. Upon the
lapse of the Surrender Obligation, Earned Units shall become Vested Units. Once the Surrender
Obligation has lapsed with respect to any Granted Unit, unless Class A Units are uncertificated,
the Partnership shall issue and deliver to Executive a new certificate or certificates evidencing
the ownership of the Vested Units. Upon issuance of the new certificate evidencing the ownership
of the Vested Units, the certificate deposited with the escrow agent shall be marked Exchanged and
Cancelled and returned to the partnership unit transfer book of the Partnership and the
Partnership shall deliver a replacement certificate to the escrow agent to reflect any remaining
Restricted Units and Earned Units. Any new certificate issued to evidence the ownership of Vested
Units shall bear such legends as may be determined by the Board to
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reflect the terms and conditions of this Agreement (other than the Surrender Obligation) and
the Partnership Agreement and to comply with applicable securities laws.
2.2
Forfeitures and Calls of Restricted Units and Earned Units
.
(a)
Forfeiture of Restricted Units
. If a Forfeiture Event occurs, then Executive shall, for
no consideration, automatically forfeit to the Partnership as of the date such event occurs all
then Restricted Units of Executive on such date, and neither the Executive nor any of his
successors, heirs, assigns, or personal representatives shall thereafter have any further rights or
interests in such Restricted Units or the certificates representing such Restricted Units;
provided
,
however
, if such Forfeiture Event is termination of Executives
employment by the Company or any of its Affiliates without Cause, or by Executive for Good Reason,
then for all purposes of this Agreement, such Forfeiture Event shall be suspended and shall not be
deemed to occur until the 180th day after the date of such termination unless, during such 180-day
period, (x) Executive shall breach in any material respect any confidentiality obligation to the
Company or any of its Affiliates or (y) any of the events described in clause (ii) or (iii) of the
definition of Cause shall occur, in which case (1) for all purposes of this Agreement, such
Forfeiture Event shall be deemed to have occurred on the date of such termination (but after giving
effect to any Earned Units becoming Vested Units as a result of such termination) and (2) any
Granted Unit which otherwise would have become an Earned Unit or a Vested Unit during such
suspension period shall be deemed to be a Restricted Unit for all purposes under this Agreement
and, for the avoidance of doubt, shall (together with all other Restricted Units) be forfeited to
the Partnership, for no consideration, effective as of such date of termination.
(b)
Earned Units
. A percentage of Granted Units shall become Earned Units in accordance with
the following schedule:
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MLP Quarterly Distribution
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Percentage of Initially Granted
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per MLP Common Unit
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Units that Become Earned Units
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Less than $.875
|
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0
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%
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$.875, but less than $.9375
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|
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25
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%
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$.9375, but less than $1.00
|
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50
|
%
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$1.00, but less than $1.125
|
|
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75
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%
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$1.125 or greater
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100
|
%
|
Once a Granted Unit has become an Earned Unit pursuant to the above schedule, the Earned Unit shall
remain an Earned Unit thereafter until it either becomes a Vested Unit or is purchased by the
Partnership pursuant to the exercise of its Call Option.
(c)
Change in Control
. All Earned Units automatically shall become Vested Units upon a Change
in Control. If prior to the Change in Control 0% of the Granted Units have become Earned Units,
then 25% of the Granted Units automatically shall become Vested Units upon the Change in Control.
If prior to the Change in Control only 25% of the Granted Units have become Earned Units, then an
additional 25% of the Granted Units automatically shall become Vested Units upon the Change in
Control. If prior to the Change in Control only 50% of the Granted Units have become Earned Units,
then an additional 25% of the Granted Units automatically shall become Vested Units upon the Change
in Control. If prior to the Change in
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Control 75% of the Granted Units have become Earned Units, then all remaining Granted Units
automatically shall become Vested Units upon the Change in Control. Unless and except to the
extent specifically provided otherwise by the Partnership upon or in connection with such Change in
Control, Executive shall, for no consideration, automatically forfeit to the Partnership as of the
date such Change in Control occurs all Restricted Units of Executive that do not vest upon such
Change in Control as provided herein, and neither Executive nor any of his successors, heirs,
assigns, or personal representatives shall thereafter have any further rights or interests in such
Restricted Units or the certificates representing such Restricted Units.
(d)
Purchase of Earned Units
. The Partnership shall have a Call Option with respect to Earned
Units as provided in Section 2 of Exhibit A.
2.3
Partnership Distributions
. Executive shall not be entitled to, and shall not receive, any
Partnership Distributions with respect to Restricted Units. Executive shall be entitled to receive
his Profits Percentage of any Partnership Distributions made as of the relevant distribution date.
Partnership Distributions, to the extent payable to Executive with respect to an Earned Unit or
Vested Unit, shall be paid to Executive at the same time that such Partnership Distributions are
paid to holders of Class A Units.
2.4
Capital Calls
. In the event of a Capital Call, Executive shall be required to pay to the
Partnership his or her allocable share of the associated Capital Call Amount, which allocable share
shall be determined in accordance with Section 3.1(b) of the Partnership Agreement.
ARTICLE 3
ACKNOWLEDGEMENT; RESTRICTIONS; ELECTIONS;
ANTI-DILUTION PROVISIONS
3.1
Acknowledgment; Conflicts
.
Executive agrees that the Granted Units shall be subject to
the Partnership Agreement. Executive (a) hereby accepts and adopts, and agrees to be bound by, the
terms and provisions of the Certificate of Limited Partnership of the Partnership filed with the
Secretary of State of Delaware, as amended or restated, and the Partnership Agreement to the same
extent as if Executive had executed the Partnership Agreement and (b) agrees that the Granted Units
shall be bound by the terms and conditions of such agreement, including, but not limited to, the
transfer restrictions, if any, set forth therein,
provided however
, that in the event of any
conflict between the provisions of such agreement and the provisions of this Agreement, the
provisions of this Agreement shall govern.
3.2
Company Acts
. Subject to the anti-dilution provisions set forth in Section 3.5, the
existence of the Restricted Units, Earned Units or Vested Units shall not affect in any way the
right or power of the Board or the holders of Class A Units to make or authorize any adjustment,
recapitalization, reorganization or other change in the Partnerships capital structure or its
business, any merger, consolidation, equity exchange or other business combination of the
Partnership with or into any other entity (and, where necessary or appropriate (as determined by
the Board in good faith), the conversion or exchange of Class A Units and Class B Units into other
securities or interests in the Partnership or any other entity in connection therewith, provided
that the relative economic rights and preferences of the Class A Units and the Class B Units are
affected proportionately, taking into account their current terms), any issue of debt or
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equity securities, the dissolution or liquidation of the Partnership or any sale, lease,
exchange or other disposition of all or any part of its assets or business or any other act or
proceeding.
3.3
Transfer Restrictions; Call Options
. The Restricted Units and Earned Units shall be
subject to the Transfer restrictions, Call Options and other terms and conditions set forth or
described in Exhibit A attached hereto, as applicable. Vested Units shall be subject only to the
provisions of Sections 1, 3 and 4 of Exhibit A. Executive agrees that Executive will, at any time
and from time to time as requested by the Partnership, execute and deliver to the Partnership such
other documents and instruments, if any, as the Board, in its discretion, may require to evidence
Executives agreement to be bound by the terms of Exhibit A. The terms and conditions of Exhibit A
shall survive the termination of this Agreement. The restrictions set forth in Exhibit A shall not
apply to the transfer of Restricted Units or Earned Units pursuant to a plan of reorganization of
the Partnership, but the Class A Units, securities or other property received in exchange therefor
shall also become subject to the Transfer restrictions, Call Options and Surrender Obligation to
the same extent as the Restricted Units, Earned Units and Vested Units exchanged therefor and the
certificates, if any, representing such Class A Units, securities or other property shall be
legended to show such restrictions.
3.4
Tax Withholding; §
83(b)
Election
.
(a) To the extent that the receipt of the Restricted Units, Earned Units, Vested Units, the
lapse of the Surrender Obligations, or any other event pursuant to this Agreement results in
compensation income or wages to Executive for federal, state or local tax purposes, Executive shall
deliver to the Partnership at the time of such receipt, lapse or event, as the case may be, such
amount of money as the Partnership may require to meet its minimum withholding obligation under
applicable tax laws, and if Executive fails to do so, the Partnership is authorized to withhold
from any cash or other remuneration (including withholding and cancelling any Restricted Units,
Earned Units or Vested Units distributable to Executive under this Agreement) then or thereafter
payable to Executive any tax required to be withheld by reason of such resulting compensation
income or wages.
(b) Within 30 days after the date of issuance of the Restricted Units, Executive shall make an
election authorized by section 83(b) of the Code with respect to such Restricted Units and
Executive shall submit to the Partnership a copy of the statement filed by Executive to make such
election. The form of such election shall be in such form as approved by the Partnership and
delivered to the Executive following the issuance of the Restricted Units.
(c) Executive acknowledges and agrees that he is not relying upon any written or oral
statement or representation of the Partnership, its Affiliates, or any of their respective
Executives, directors, officers, attorneys or agents regarding the tax effects associated with the
Restricted Units, Earned Units, Vested Units or the execution of this Agreement. Executive
acknowledges and agrees that in deciding to enter into this Agreement, Executive is relying on his
own judgment and the judgment of the professionals of his choice with whom he has consulted.
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3.5
Anti-Dilution Provisions
.
(a) If after the date of this Agreement, the Class A Units shall be changed or proposed to be
changed into a different number or class of units by reason of the occurrence of any
reclassification, recapitalization, split-up, combination, exchange of shares or similar
readjustment, or a unit dividend thereon shall be paid, appropriate proportional adjustments shall
be made to the Class B Units, as determined by the Board in good faith. Notwithstanding the
foregoing, no repurchase of Class A Units for fair value (as determined by the Board in good faith)
shall require any adjustment under this Section 3.5(a).
(b) If the Partnership issues any additional Class A Units for less than fair value (other
than in a transaction or arrangement described in Section 3.5(a), as to which this Section 3.5(b)
shall not apply), then if the holders of at least 75% of the Applicable Class B Units outstanding
at the time of such issuance object in writing to such issuance within five business days after
written notice of such issuance is given to the holders of the Applicable Class B Units,
appropriate proportional adjustments shall made to the Class B Units, as determined by the Board in
good faith. For purposes of the preceding sentence, the fair value of any Class A Units being
issued shall be determined by the Board in good faith; provided, however, that in connection with
any transaction in which all of the Class A Units are being issued to members of the Company (or
Affiliates thereof), if the holders of at least 75% of the Applicable Class B Units outstanding at
the time of such issuance object in writing to the Boards determination of fair value within five
business days after written notice of such issuance is given to the holders of the Applicable Class
B Units, the fair value of such Class A Units shall be determined in the same manner as the Class
A Unit Value, except that for these purposes all references to Executive in the definition
thereof shall be deemed to be references to the holders of the Applicable Class B Units (as a
group), acting at the direction of the holders of at least a majority of the Applicable Class B
Units outstanding at such time. The fair value of any property contributed to the Partnership in
respect of the issuance of any Class A Units shall be as determined by the Board in good faith;
provided, however, that in the event that the Partnership shall issue any additional Class A Units
in respect of the contribution to the Partnership of any MLP Common Units, the value of such MLP
Common Units shall be deemed to equal the closing price of such MLP Common Units on the date of
such contribution. No dispute or determination of fair value under this Section 3.5(b) shall delay
the issuance of any additional Class A Units, it being agreed that the adjustment, if any,
necessitated by the resolution of such dispute or determination of fair value shall be made
retroactive to the date of issuance of such additional Class A Units. Notwithstanding anything in
this Agreement to the contrary, this Section 3.5(b) shall not apply from and after consummation of
a GP IPO.
(c) Prior to consummation of a GP IPO, if the Partnership proposes to issue any partnership
interests or other equity securities other than (i) additional Class B Units (up to an aggregate
number of outstanding Class B Units (including the Class B Units issued pursuant to this Agreement)
that does not exceed the number of Class B Units authorized in the Partnership Agreement as in
effect on the date hereof; provided that the foregoing limitation shall not apply to additional
Class B Units issued pursuant to Section 3.5(a)), (ii) additional Class A Units issued in
accordance with Section 3.5(b) or (iii) partnership interests or other equity securities with such
rights, powers and preferences as shall be determined by the Board to be issued in connection
-12-
with a GP IPO; provided that in the case of this clause (iii) the Class A Units and Class B
Units are diluted proportionately (based on relative distributions) by such additional partnership
interests or other equity securities, it shall first give written notice of such proposed issuance
to the holders of the Applicable Class B Units then outstanding. If the holders of at least 75% of
such Applicable Class B Units object in writing to such issuance within five business days after
such notice is given, then the Partnership shall not issue such partnership interests or equity
securities unless a substantially contemporaneous pro-rata increase in the Restricted Units, Earned
Units and Vested Units, if any, is made (as determined in good faith by the Board). In the absence
of such objection, no such increase shall be required. Notwithstanding anything in this Agreement
to the contrary, this Section 3.5(c) shall not apply from and after consummation of a GP IPO.
3.6
Drag-Along Provisions
.
(a) Prior to a GP IPO, in the event of a sale of all or substantially all of the assets or
equity of the Partnership in a bona fide arms length transaction, then the Board shall have the
right to require Executive to transfer all of his Earned Units and Vested Units (including any
Granted Units that vest pursuant to Section 2.2(c) hereof) in such transaction in exchange for
consideration per transferred Class B Unit that is equal to the Conversion Factor times the
consideration to be received per Class A Unit in such transaction.
(b) Following a GP IPO, in the event of a sale of all or substantially all of the assets or
equity of the IPO Entity, then the Board shall have the right to require Executive to transfer all
of his Vested Units (including any Granted Units that vest pursuant to Section 2.2(c) hereof) in
such transaction in exchange for consideration per transferred Class B Unit that is equal to the
Conversion Factor times the consideration to be received per IPO Entity Class A Unit in such
transaction.
(c) In connection with any transfer required pursuant to this Section 3.6, Executive shall
deliver the certificates representing his Class B Units duly endorsed or accompanied by written
instruments of transfer, in form and substance reasonably satisfactory to the Board, free and clear
of any liens, together with any other documents reasonably required to be executed in connection
with such transaction, as directed by the Board.
(d) Class B Units subject to this Section 3.6 will be included in a proposed sale pursuant
hereto and be subject to any agreement with the purchaser in such transaction relating thereto, on
the same terms and subject to the same conditions applicable to the Class A Units or IPO Entity
Class A Units, as the case may be. Such terms and conditions shall be determined in the sole
discretion of the Board, and shall include (i) the consideration to be paid (including without
limitation the form and the aggregate amount thereof) and (ii) the provision of information,
representations, warranties, covenants and requisite indemnifications;
provided
,
however
, that
Executive shall not be required to make any representations and warranties, other than those
relating specifically to Executives execution and delivery of any transaction agreement (including
absence of conflicts), and title to the Class B Units, and any indemnification provided by
Executive shall be on a several, not joint, basis and shall be based on (and shall not exceed)
Executives pro rata share of the aggregate consideration paid in such
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transaction. For purposes of this Section 3.6 Executive includes any Permitted Transferee
(as defined in the Partnership Agreement).
ARTICLE 4
GENERAL PROVISIONS
4.1
Notices
. For purposes of this Agreement, notices and all other communications provided
for herein shall be given in the same manner as indicated in the Partnership Agreement.
4.2
Employment Relationship
. For purposes of this Agreement (including Exhibit A attached
hereto), Executive shall be considered to be in the employment of the Partnership as long as
Executive remains an employee of an Affiliate of the Partnership. Without limiting the scope of
the preceding sentence, it is expressly provided that Executive shall be considered to have
terminated employment with the Partnership at the time the entity or other organization that
employs Executive is no longer an Affiliate of the Partnership. Any question as to whether and
when there has been a termination of such employment or association, and the cause of such
termination, shall be determined by the Board and its determination shall be final.
4.3
Entire Agreement; Amendment
. This Agreement and the Partnership Agreement constitute the
entire agreement, and supersede all previous agreements and discussions relating to the same or
similar subject matters between Executive and the Partnership or any Affiliate and constitute the
entire agreement between Executive and the Partnership and any Affiliate with respect to the
subject matter of this Agreement. Without limiting the scope of the preceding sentence, except for
this Agreement and the Partnership Agreement, all prior and contemporaneous understandings and
agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null
and void and of no further force and effect. Except as provided below, any modification of this
Agreement shall be effective only if it is in writing and signed by both Executive and the
Partnership as authorized by the Board. Notwithstanding the foregoing, the Partnership may
unilaterally amend this Agreement in any manner that the Board determines in good faith is
necessary or advisable to facilitate the consummation of a GP IPO, such amendment to become
effective on the fifth business day after the day on which notice thereof is given to the holders
of the Applicable Class B Units then outstanding, unless prior to such fifth business day, the
holders of at least 75% of such Applicable Class B Units object in writing to such amendment, in
which case such proposed amendment shall not become effective; provided, however, that the holders
of the Applicable Class B Units shall not be entitled to object to any such amendment (and such
amendment shall automatically become effective regardless of any purported objection by the holders
of the Applicable Class B Units) if (i) all Other Class B Restricted Unit Agreements are amended in
substantially the same way, (ii) the Class A Units and Class B Units are diluted proportionately
(based on relative distributions) by any partnership interests or other equity securities issued to
Persons (other than members of the Company (or Affiliates thereof)) in connection therewith and
(iii) immediately after giving effect to the GP IPO, the economic interest in the Partnership or
its successor or assign or (or the entity the securities or equity interests of which the Class B
Units are converted into or exchanged for) represented by the Class B Units (and/or any securities
or equity interests into which such Class B Units are converted or exchanged) is not diluted by any
partnership interests or other equity securities issued to members of the Company (or any Affiliate
thereof) in connection therewith.
-14-
For the avoidance of doubt, notwithstanding anything in this Agreement to the contrary, in the
event of a GP IPO, the Board shall be entitled (but not required) to make such adjustments as the
Board shall determine in good faith to be equitable, including without limitation causing all or a
portion of the Class B Units not to be converted into or exchanged for similar equity interests in
the IPO Entity, and to remain outstanding as Class B Units of the Partnership. Notwithstanding
anything in this Agreement to the contrary, if the Board determines that (i) the provisions of
section 409A of the Code apply to this Agreement or the Class B Units and that the terms of this
Agreement or such units do not, in whole or in part, satisfy the requirements of such section, or
(ii) any provision of this Agreement or the effect or operation thereof would produce material
adverse tax consequences to Executive, then the Partnership, in the sole discretion of the Board,
may unilaterally modify this Agreement in such manner as the Board deems appropriate to comply with
such section 409A and any regulations or guidance issued thereunder or to mitigate or avoid such
adverse tax consequences..
4.4
Binding Effect
. This Agreement shall be binding upon and inure to the benefit of any
successors to the Partnership and all permitted transferees of any Transfer made in compliance with
Exhibit A and other persons lawfully claiming under Executive.
4.5
Governing Law
. This Agreement is governed by and shall be construed in accordance with
the laws of the State of Delaware, excluding any conflict-of-laws rule or principle that might
refer the governance or the construction of this Agreement to the laws of another jurisdiction. If
any provision of this Agreement or the application thereof to any person or circumstance is held
invalid or unenforceable to any extent, the remainder of this Agreement and the application of that
provision to other persons or circumstances is not affected thereby and that provision shall be
enforced to the greatest extent permitted by law.
4.6
Injunctive Relief
. Executive acknowledges that a remedy at law for any breach or
attempted breach of this Agreement will be inadequate, agrees that the Partnership may be entitled
to specific performance and injunctive and other equitable relief to be implemented by a court of
competent jurisdiction in case of any such breach or attempted breach, and further agrees to waive
any requirement for the securing or purchasing of any bond in connection with the obtaining of any
such injunctive or any other equitable relief. Executive agrees that the Partnerships right to
injunctive relief will be in addition to any other rights the Partnership may have.
IN WITNESS WHEREOF
, the undersigned have executed this Agreement effective for all purposes as
of the Grant Date.
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PLAINS AAP, L.P., by its general partner,
PLAINS ALL AMERICAN GP LLC
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By:
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Name: Tim Moore
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Title: Vice President
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EXECUTIVE
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-15-
EXHIBIT A TO
RESTRICTED UNITS AGREEMENT
-16-
PROVISIONS RELATING TO TRANSFERS;
CALL OPTIONS; AND CONVERSIONS
Capitalized terms used in this Exhibit that are not defined in this Exhibit shall have the
meaning assigned to such terms in the Restricted Units Agreement to which this Exhibit is attached
(the
Agreement
). Unless the context requires otherwise, all references in this Exhibit to
Sections refer to the Sections of this Exhibit.
1.
No Transfers
. Executive may not Transfer all or any portion of the Restricted
Units or any Earned Units, and any attempted Transfer shall be, and is hereby declared, null and
void for all purposes; provided, however that Executive shall be entitled to Transfer any Earned
Units to a Permitted Transferee (as defined in the Partnership Agreement), by will or the laws of
descent and distribution, provided that any such permitted Transfer shall be made in accordance
with, and subject to, Section 7.3 of the Partnership Agreement. In addition to the other
restrictions set forth herein, each Restricted Unit, Earned Unit and Vested Unit shall be subject
to the restrictions on Transfer (as defined in the Partnership Agreement) set forth in the
Partnership Agreement.
2.
Partnership Call Option
. Upon the occurrence of a Call Event, the Partnership, at
its option (exercisable at any time during the 60-day period following the date of such Call Event
or, if later, five business days after receipt of certification of the Closest Value from the
Appraiser under clause (v) of the definition of Call Value), may (but the Partnership shall have
no obligation to) purchase all (or any portion elected by the Partnership in its sole discretion)
of the Earned Units held by Executive (or by Executives estate), for a purchase price per Earned
Unit equal to (i) 50% of the Call Value, if the Call Event occurs before January 1, 2013, and (ii)
75% of such Call Value if the Call Event occurs after December 31, 2012 and before January 1, 2016.
If the Partnership wishes to exercise the Call Option granted herein, it must provide written
notice within such 60-day period (or, if later, such five business day period) to Executive (or his
estate) specifying the number of such Earned Units it elects to purchase. Within 10 days after the
exercise of the Call Option by the Partnership or, if later, within five business days after
receipt of certification of the Closest Value from the Appraiser under clause (v) of the definition
of Call Value, the Executive (or estate) shall deliver the certificates, if any, representing the
applicable Earned Units to the Partnership, duly endorsed and together with appropriate assignment
and transfer instruments, free and clear of all adverse charges, liens, claims and encumbrances, in
consideration for the purchase price specified above paid in the form of a single, lump sum cash
payment from the Partnership. Delivery of the Earned Units and related transfer and assignment
instruments by the holder shall constitute a representation to the Partnership that such Earned
Units are free and clear of all adverse charges, liens, claims and encumbrances. If the
Partnership does not timely exercise its Call Option, the Earned Units shall become Vested Units at
the end of the period for exercising the
Call Option (and, in any event, no later than 120 days after the Call Event so long as, in the
event that the Class A Unit Value is to be determined by an Appraiser pursuant to the definition of
Call Value, the Executive has not failed to meet any of the deadlines applicable to the Executive
as part of such determination process) and shall cease to be subject to this Call Option.
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3.
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Executive Elective Exchange of Vested Units for IPO Entity Class A
Units
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If at any time
after December 31, 2015 the IPO Entity Class A Units are publicly-traded, the
Executive may, upon written notice to the Company, request to exchange his Vested Units for IPO
Entity Class A Units. The Company will use commercially reasonable efforts to cause such exchange
to occur. The number of IPO Entity Class A Units the Executive shall receive upon such exchange
shall be determined by the Board in good faith based on the Conversion Factor as applied to the
number of Vested Units being exchanged, with any fractional IPO Entity Class A Unit resulting being
rounded down.
(a) In addition to any other legend that may be required by law, each certificate, if any, for
Restricted Units and Earned Units shall bear a legend in substantially the following form:
THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED OR SOLD UNLESS THEY HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE (AND IN SUCH CASE, AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE PARTNERSHIP SHALL HAVE BEEN DELIVERED TO THE PARTNERSHIP TO
THE EFFECT THAT SUCH OFFER OR SALE IS NOT REQUIRED TO BE REGISTERED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS). THE UNITS REPRESENTED BY
THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE RESTRICTED UNITS AGREEMENT DATED AS OF AUGUST 29, 2007, AS AMENDED OR
RESTATED FROM TIME TO TIME, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE
PARTNERSHIP. THE UNITS REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT
UNDER CERTAIN CIRCUMSTANCES TO MANDATORY TRANSFER AS SET FORTH IN THE RESTRICTED
UNITS AGREEMENT DATED AS OF AUGUST 29, 2007, AS AMENDED OR RESTATED FROM TIME TO
TIME, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE PARTNERSHIP.
(b) In addition to any other legend that may be required by law, each certificate, if any, for
Vested Units shall bear a legend in substantially the following form:
THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE SECURITIES ACT), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED OR SOLD UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE (AND IN SUCH
CASE, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE PARTNERSHIP SHALL HAVE BEEN
DELIVERED TO THE PARTNERSHIP TO THE EFFECT THAT SUCH OFFER OR SALE IS NOT REQUIRED TO BE
REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS). THE UNITS
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT UNDER CERTAIN CIRCUMSTANCES TO MANDATORY
TRANSFER AS SET FORTH IN THE RESTRICTED UNITS AGREEMENT DATED AS OF AUGUST 29, 2007, AS
AMENDED OR RESTATED FROM TIME TO TIME, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM
THE PARTNERSHIP.