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Exhibit 10.21
"Pages where confidential treatment has been requested are marked 'Confidential
Treatment Requested.' The redacted material has been separately filed with the
Commission, and the appropriate section has been marked at the appropriate place
and in the margin with a star (*)."
LIMITED PARTNERSHIP AGREEMENT
of
CEDAR BAYOU FRACTIONATORS, L.P.
A Delaware Limited Partnership
Effective January 1, 1998
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LIMITED PARTNERSHIP AGREEMENT
OF
CEDAR BAYOU FRACTIONATORS, L.P.
TABLE OF CONTENTS
<Table>
1. PARTNERSHIP FORMATION ...............................................................1
1.1. Formation ....................................................................1
1.2. Filings and Further Action ...................................................1
1.3. Name .........................................................................2
1.4. Place of Business; Registered Agent ..........................................2
1.5. Purpose ......................................................................2
1.6. Term .........................................................................3
1.7. Waiver of Right of Partition .................................................3
2. DEFINED TERMS .......................................................................3
3. INITIAL CAPITAL CONTRIBUTIONS ......................................................10
3.1. Warren ......................................................................10
3.2. DEVCO .......................................................................10
3.3. Amoco .......................................................................10
3.4. Default in Making of Initial Capital Contributions ..........................11
3.5. Other Remedies ..............................................................11
3.6. Increase in Amoco Interest ..................................................11
3.7. Withdrawal of Capital .......................................................12
3.8. Interest on Capital .........................................................12
3.9. Construction Costs ..........................................................12
3.10. Capital Accounts ............................................................13
4. REPRESENTATION AND WARRANTIES ......................................................14
4.1. All Partners ................................................................14
4.2. Representations of DEVCO and Warren Regarding the Fractionation Facilities...15
4.3. Inspection and Condition of Fractionator Facility ...........................16
4.4. Partners' Knowledge and Expertise ...........................................16
4.5. Environmental Laws ..........................................................17
4.6. Disclaimer of Representations and Warranties ................................17
4.7. Partnership's Assumption of Obligations .....................................17
4.8. Cross Indemnifications and Defense Costs ....................................17
4.9. Exclusive Remedy ............................................................20
4.10. Survival of and Scope of Indemnities ........................................20
5. OTHER AGREEMENTS ...................................................................20
5.1. Partner Fractionation Agreements ............................................20
5.2. Conveyancing Documents ......................................................20
5.2. Amoco Parent Guaranty .......................................................21
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5.3. Assignment of Other Agreements ................................................21
5.4. Operating Agreement ...........................................................21
6. DISTRIBUTIONS ......................................................................21
6.1. Monthly Distributions .........................................................21
6.2. Distributions on Termination ..................................................21
7. ALLOCATIONS TO PARTNERS ............................................................22
7.1. In General ....................................................................22
7.2. Other Tax Allocations .........................................................22
7.3. Special Allocations ...........................................................22
7.4. Curative Allocations ..........................................................23
8. MANAGEMENT OF THE PARTNERSHIP ......................................................24
8.1. Management Committee .........................................................24
8.2. Meeting Notice ...............................................................24
8.3. Voting Procedures ............................................................24
8.4. Vote Required ................................................................24
8.5. Minutes ......................................................................24
8.6. Matters Requiring Unanimous Approval .........................................25
8.7. Authority to Bind the Partnership ............................................27
8.8. Duties of Managing General Partner ...........................................27
8.9. Change of Managing General Partner ...........................................27
8.10. Duties of General Partners and Others Controlling General Partners ...........28
9. OPERATION OF THE FACILITY ..........................................................28
10.10. Change of Operator ..........................................................29
10.11. Resignation of Operator .....................................................29
10.12. Removal of Operator .........................................................29
10.13. Successor Operator ..........................................................29
10.14. Transactions With Affiliates ................................................30
10. INDEMNITIES AND INSURANCE ..........................................................30
10.1. Definitions ..................................................................30
10.2. Obligations of Partner .......................................................31
10.3. Indemnity to Managing General Partner ........................................31
10.4. Insurance ....................................................................32
10.5. Policy Requirements ..........................................................32
10.6. Third Parties ................................................................33
10.7. Notice .......................................................................33
11. TRANSFERABILITY OF PERCENTAGE INTERESTS ............................................33
11.1. Transfer to Affiliates .......................................................33
11.2. Transfers to Parties Other Than Affiliates ...................................33
11.3. Right of First Refusal .......................................................33
11.4. Changes in Control ...........................................................34
11.5. General Conditions of Transfers ..............................................34
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12. WINDING UP AND TERMINATION OF THE PARTNERSHIP ......................................35
12.1. Events Requiring Winding Up .................................................35
12.2. Partner's Purchase of Property ..............................................35
12.3. Time of Liquidation .........................................................35
12.4. No Liability for Return of Capital ..........................................35
12.5. Liquidation Procedure .......................................................36
12.6 Negative Capital Account Balances ...........................................36
13. ALTERNATIVE DISPUTE RESOLUTION .....................................................36
14. GENERAL PROVISIONS .................................................................39
14.1. Notices .....................................................................39
14.2. Survival of Rights ..........................................................41
14.3. Amendment and Waiver ........................................................41
14.4. Agreement in Counterparts ...................................................41
14.5. Governing Law ...............................................................41
14.6. Additional Documents ........................................................41
14.7. Severability ................................................................41
14.8. Sections, Exhibits and Schedules ............................................42
14.9. Attorneys' Fees .............................................................42
14.10. Power of Attorney ...........................................................42
14.11. Principles of Construction and Interpretation ...............................43
14.12. Setoffs and Counterclaim ....................................................43
</Table>
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EXHIBITS
A. Accounting Procedures
B. Income Tax Matters
C. Warren/DEVCO Contributed Assets
Part I - Surface Lease Area
Part II - Fractionator
Part III - Related Facilities
Part IV - Permits
Part V - Contracts
Part VI - Surface Lease Area Excluded Assets
D. Lease Agreement (Surface Lease Area and Water Rights Areas)
E. Partner Fractionation Agreements
F. Form of Assignment and Bill of Sale
G. Disclosure Schedule
H. Amoco Oil Company Guaranty
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LIMITED PARTNERSHIP AGREEMENT
OF
CEDAR BAYOU FRACTIONATORS, L.P.
THIS LIMITED PARTNERSHIP AGREEMENT ("Agreement") is entered into this 1st
day of January, 1998, to be effective that same date, by and between Downstream
Energy Ventures Co., L.L.C., a Delaware limited liability company, as a General
Partner ("DEVCO"), Warren Petroleum Company, Limited Partnership, a Delaware
limited partnership, as a Limited Partner ("Warren") and Amoco MB Fractionation
Company, a Delaware corporation, as a Limited Partner ("Amoco"), sometimes
referred to individually as "Party" and collectively as "Parties".
PREMISES
A. Warren currently owns and operates the Fractionation Facility for the
purpose of fractionation of natural gas liquids delivered by various third
parties to the Mont Belvieu, Texas, area;
B. On the Effective Date of this Agreement, DEVCO has acquired an
undivided two percent (2%) ownership interest in and to the Fractionation
Facility; and
C. DEVCO, Warren and Amoco wish to form a business combination for the
purpose and of jointly owning and operating the Fractionation Facility; and
In consideration of the foregoing premises and the mutual covenants and
agreements contained in this Agreement, the Parties agree as follows:
1. PARTNERSHIP FORMATION.
1.1. FORMATION. Subject to the provisions of this Agreement, the Parties
do hereby form a limited partnership (the "Partnership") pursuant to the
provisions of the Delaware Revised Uniform Limited Partnership Act, Sections
1701 et seq. of Title Six of the Delaware Code (such Act, as amended from time
to time, or any successor statute or statutes thereto, being called the "Act").
1.2. FILINGS AND FURTHER ACTION. Upon the request of the Managing General
Partner, the other General Partners and the Limited Partners shall promptly
execute and deliver all such certificates and other instruments conforming
hereto as shall be necessary for the Managing General Partner to accomplish all
filing, recording, publishing and other acts appropriate to comply with all
requirements for the formation and operation of limited partnership under the
laws of the State of Delaware and for the qualification and operation of a
limited partnership in all other jurisdictions where the Partnership shall
propose to conduct business. This Agreement shall constitute the Agreement of
Partnership. The Partners also agree to make all necessary filings in the State
of Texas and execute all other documents necessary to comply with the laws of
the State of Texas regarding
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the qualification of the Partnership to engage in business therein. In
addition, to the extent the Partners agree to engage in business in other
states, the Partners shall execute such further documents and take such
further actions as shall be appropriate to comply with the requirements of
the laws for the formation and operation of a partnership in each such state.
1.3. NAME. The name of the Partnership is Cedar Bayou Fractionators, L.P.
1.4. PLACE OF BUSINESS; REGISTERED AGENT.
1.4.1. The principal place of business of the Partnership shall be
1000 Louisiana, Suite 5800, Houston, Texas 77002. The Managing
General Partner, at any time and from time to time, may change the
location of the Partnership's principal office as the Managing
General Partner shall determine to be necessary or desirable.
1.4.2. The registered office of the Partnership in the State of
Delaware shall be 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801, and the registered agent for service of process on
the Partnership at such registered office shall be The Corporation
Trust Company. The registered office of the Partnership in the State
of Texas shall be 811 Dallas Avenue, Houston, Texas 77002 and the
registered agent for service of process on the Partnership at such
registered office shall be CT Corporation System. The Management
Committee, at any time and from time to time, may direct the
Managing General Partner to change the Partnership's registered
offices or registered agents or both by complying with the
applicable provisions of the Act, and may establish, appoint and
change additional registered offices and registered agents of the
Partnership in such other states as the Management Committee shall
determine to be necessary or advisable.
1.5. PURPOSE. The purposes of the Partnership and the business to be
carried on by it, subject to the limitations contained elsewhere in this
Agreement, are to engage in the business of providing natural gas liquids
fractionation services for natural gas liquids being delivered by third
parties into the Mont Belvieu Area as same is defined below. The Partnership
will accomplish these purposes through the ownership and operation of the
Fractionation Facility and entering into agreements with the Partners, their
affiliates, and third parties for the fractionation of their owned and
controlled natural gas liquids delivered to Fractionation Facility.
Additionally, the Partnership may carry on any other activities necessary to,
in connection with, or incidental to the accomplishment of the foregoing
purposes. The Partners acknowledge that an Affiliate of Warren, Warren NGL,
Inc. ("Warren NGL") has a prior existing commitment pursuant to a
partnership agreement governing Gulf Coast Fractionators, a Texas general
partnership, ("GCF") as a general partner therein, to advise GCF of
fractionation opportunities in the Mont Belvieu Area regarding fractionation
of natural gas liquids for third parties and the Partners hereto agree that
actions taken by Warren NGL or by Warren in assisting Warren NGL pursuant to
its obligations to GCF shall not be in violation of any duties of
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Warren hereunder.
1.6. TERM. The Partnership commenced, on December 4, 1997 but as among the
Partners will be treated as formed, on the Effective Date and shall continue
until December 31, 2022, (the "Primary Term") and year to year thereafter (each
said year being and "Extended Term") unless and until any Partner or a group of
Partners holding collectively more than eighty-eight percent (88%) of the
Percentage Interests terminates this Agreement as of the end of either the
Primary Term or any successive Extended Term by giving written notice to all of
the other Partners at least nine (9) months prior to such termination date; and
the Partnership shall terminate as of the date of any such a termination of this
Agreement unless terminated or dissolved earlier in accordance with this
Agreement, or by law. The Primary Term and the Extended Terms, if any, will be
collectively referred to as the "Term" of this Agreement.
1.7. WAIVER OF RIGHT OF PARTITION. All Property shall be owned by the
Partnership and no Partner shall have an ownership in the Property or any
portion thereof. Each Partner, to the extent permitted by applicable law, hereby
waives its right to partition of the Property and, to that end, agrees that it
will not seek or be entitled to partition of any Property, whether by physical
partition, judicial sale or otherwise, until the termination of this Agreement.
2. DEFINED TERMS.
As used in this Agreement, the following terms have the meanings set forth
below, unless the context requires otherwise.
"ACT" has the meaning set forth in Section 1.1.
"ACCOUNTING PROCEDURES" shall mean the Accounting Procedures for the
Partnership set forth in Exhibit A and incorporated herein by reference.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end
of the relevant calendar year, after giving effect to the following
adjustments: (i) 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 the
penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and
1.704-2(i)(5); and (ii) debit to such Capital Account the items described
in Treasury Regulations Section 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). This definition is
intended to comply with the provisions of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"AFFILIATE" means, when used with respect to a specified Partner, any
Person that directly,
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or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the specified Partner. For
purposes of this definition: "CONTROL" shall mean ownership of fifty
percent (50%) or more of either the outstanding voting stock of the
controlled Person, as to corporations, or other ownership interests which
carry with them the right to direct the policies and management of the
subject entity, as to non-corporate entities.
"AGREEMENT" means this Limited Partnership Agreement.
"CAPITAL CONTRIBUTION" means any amounts of cash or fair market value of
property committed to the Partnership by a Partner pursuant to any
portions of Section 3 hereof.
"CAPITAL ACCOUNT" means the account to be maintained by the Partnership
for each Partner in accordance with Section 3.10
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"CONSTRUCTION COST" means the cost of constructing any facility or
equipment used or useful in the Partnership's' operations, or any
expansion thereof; including, without limitation, materials, labor,
equipment, permits, consulting fees, accounting and legal fees, insurance
costs, contractors' fees, land and easement costs, administrative overhead
charges allowed pursuant to Section 3.10(a) of the Accounting Procedures,
and all other costs necessary or incidental thereto, excluding only any
costs incurred by the Partners which comprise any portion of their Initial
Investment and any interest, amortization or overhead costs incurred by a
Partner.
"CONVEYANCING DOCUMENTS" means those documents described in Section 5.2.
"DAY" or "DAILY" shall mean a twenty-four (24) hour period commencing 7:00
a.m. Central Standard or Daylight Savings time, as applicable, and
extending until 7:00 a.m. Central Standard or Daylight Savings time, as
applicable, on the following Day.
"DISCLOSURE SCHEDULE" means Exhibit G to this Agreement.
"DISTRIBUTABLE CASH" shall mean with respect to any period all cash
revenues of the Partnership including, without limitation, those amounts
received from the Operator pursuant to the Operating Agreement (not
including (i) Capital Contributions, (ii) funds received by the
Partnership in respect of indebtedness incurred by the Partnership, (iii)
interest or other income earned on temporary investment of Partnership
funds pending utilization, and (iv) proceeds from the sale of assets in
partial or complete liquidation of the Partnership) less the sum of the
following: (x) all amounts expended by the Partnership pursuant to this
Agreement in such period; and (y) such working capital or reserves or
other amounts as the
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Managing General Partner reasonably determines to be necessary or
appropriate for the proper operation of the Partnership business and/or
its winding up and liquidation.
"DISTRIBUTION" means a distribution of cash or property made by the
Partnership to a Partner under the terms of this Agreement.
"EFFECTIVE DATE" means the date designated as such in the first Section of
this Agreement. As among the Partners, the Partnership will be treated as
formed on the Effective Date.
"ENVIRONMENTAL CONDITION" as used herein means any condition which exists
that affects the quality of the air, water, surface or subsurface of the
ground in such a manner that the existence of such condition is unlawful
under any Environmental Law, including Warren's failure to acquire or
maintain any necessary air or water permits.
"ENVIRONMENTAL CONTAMINANT" shall mean Hazardous Substances, Hazardous
Waste or Hazardous Materials.
"ENVIRONMENTAL LAWS" shall mean any and all laws, regulations, rules,
orders, ordinances, requirements or determinations of any governmental
authority, with jurisdiction, (including court rulings establishing common
law liability) pertaining to the Release of Environmental Contaminants,
and any other applicable regulations, rules, ordinances, codes, licenses,
or orders by any governmental agencies in effect which govern the quality
of the air, water, surface or subsurface of the ground, including, without
limitation, the presence of any underground storage tanks or drums; and
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), as amended by Superfund
Amendments and Reauthorization Act (SARA), 42 U.S.C. 9 Sections 6901 et
seq.; Resource Conservation and Recovery Act (RCRA), as amended by the
Solid Waste Disposal Act (SWDA), 42 U.S.C. Sections 6901 et seq.; Federal
Water Pollution Control Act (FWPCA), as amended by the Clean Water Act
(CWA), 33 U.S.C. Sections 1251 et seq.; Clean Air Act (CAA), 42 U.S.C.,
Sections 7401 et seq.; Toxic Substances Control Act (TOSCA), 15 U.S.C.
Sections 2601 et seq, and any similar state enactments.
"FRACTIONATION FACILITY" or "FACILITY" shall mean the following property,
facilities and related assets which are to be contributed by DEVCO and
Warren to the Partnership pursuant to the terms hereof:
(1) SURFACE LEASE AREA, WATER RIGHTS AND EASEMENT. A real property
surface lease (the "LEASE AGREEMENT") in the form attached hereto as
Exhibit D for a term coterminous with this Agreement granting the
Partnership use of the surface property described in Part I of
Exhibit C (the "SURFACE LEASE AREA"), which comprises the areas on
which the Fractionator (as defined immediately below) is situated
and the use
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of certain water wells located on the "WATER RIGHTS AREAS"
described on Exhibit A to the Lease Agreement, and the right to
extract water therefrom; and an easement for the term hereof to
allow the continued presence of, and Partnership access to, all
Related Facilities, as defined below.
(2) FRACTIONATION FACILITY. All of Warren's and DEVCO's right, title and
interest in and to all the equipment, personal property and
facilities comprising that certain natural gas liquids fractionation
facility, and other facilities appurtenant thereto and necessary for
the operation of said fractionation facility, all as same are
located in the Surface Lease Area (as defined immediately above), as
such fractionator facility is generally described in Part II of
Exhibit C (THE "FRACTIONATOR"), less and except those assets
described as "Excluded Assets" in Part IV of Exhibit C.
(3) RELATED FACILITIES. All of Warren's and DEVCO's right, title and
interest in and to those facilities and equipment outside of the
Surface Lease Area related to the Fractionator and which are
described in Part III of Exhibit C, and excluding any items not
expressly described therein (the "RELATED FACILITIES").
(4) PERMITS. All of Warren's right, title and interest in and to all of
the environmental and other governmental permits, licenses, orders,
franchises and related instruments or rights necessary to the
ownership or operation of any portions of the Fractionator as
described in Exhibit C, and which in accordance with the applicable
law or the terms of such instruments are not to be maintained in the
name of the Operator of the Fractionator and that, by their terms,
may be assigned ("PERMITS"), as described in Part IV of said
Exhibit C.
(5) CONTRACTS. All of Warren's and DEVCO's right, title and interest in
and to those certain contracts and agreements relating solely to the
Fractionator that, by their terms, may be assigned including but not
limited to fractionation services agreements, gas supply, electrical
and other utilities purchase agreements, maintenance and services
agreements and intellectual property licensing and confidentiality
agreements, as same are listed in Part V of Exhibit C ("CONTRACTS").
(6) RECORDS. All of Warren's and DEVCO's right, title and interest in
and to all files, records and other data in the actual possession of
Warren or DEVCO, necessary for the Partnership's operation of the
Fractionator (except to the extent same relate to any retained
properties still owned by Warren and DEVCO); including, but not
limited to, all operational records, technical records, processing
records, measurement, pipeline balancing and connection agreements,
United States Department of Transportation and other governmental
agency-required files, contract files, copies of accounting files,
and copies of computer spreadsheets used for accounting and
allocations, but
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excluding tax records and accounting records which relate
exclusively to accounting periods prior to the date of contribution
of the Fractionator to the Partnership. ("RECORDS").
(7) EXCLUDED ASSETS. "FRACTIONATOR FACILITY" is understood to expressly
exclude: (i) any of the equipment, facilities, or assets located
within the Surface Lease Area and which are described in Part VI of
Exhibit C ("SURFACE LEASE AREA EXCLUDED ASSETS"); and (ii) any and
all assets, facilities or properties outside of the Surface Lease
Area which are not expressly defined above as being Related
Facilities; (all of same being collectively referred to herein as
the "EXCLUDED ASSETS").
"GENERAL PARTNER" means DEVCO and any other Person who becomes an
additional or successor general partner of the Partnership pursuant to the
provisions of this Agreement.
"HAZARDOUS MATERIAL" shall mean any substance that is defined or listed as
a hazardous or toxic substance under any Environmental Laws (as same are
in effect as of the Effective Date) or that is otherwise regulated or
prohibited or subject to investigation or remediation under any
Environmental Laws.
"HAZARDOUS SUBSTANCE" and "RELEASE" shall have the meaning specified in
CERCLA, or any successor statute, unless such terms have been given
broader meaning by laws, regulations, rules, orders, ordinances,
requirements or determinations of any governmental authority of the State
of Texas having jurisdiction (including courts establishing common law
liability), in which case such broader meaning shall apply.
"HAZARDOUS WASTE" and "DISPOSE" shall have the meanings specified in RCRA,
or any successor statute, unless such terms have been given broader
meaning by laws, regulations, rules, orders, ordinances, requirements or
determinations of any governmental authority of the State of Texas having
jurisdiction (including courts establishing common law liability), in
which case such broader meaning shall apply.
"INITIAL INVESTMENT" means, the fair market value agreed and stipulated to
by the Partners of the property and other initial Capital Contributions
which each Partner is obligated to contribute to the Partnership pursuant
to Sections 3.1, 3.2 and 3.3 of this Agreement; but excluding any
amortization, interest or depreciation costs incurred by or on behalf of
either Partner.
"KNOWLEDGE" means, with respect to a Party to this Agreement, the actual
knowledge of any officer or manager directly reporting to an officer of
such Party in charge of a discrete business area or a subsidiary having
responsibility for the matter in question and does not include such
knowledge as could have been obtained by such Persons from employees or
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records of that Party after doing an investigation into the subject matter
in question.
"LIMITED PARTNER" shall mean any Person executing this Agreement below in
the capacity of a limited partner of the Partnership and includes any
Person admitted as an additional limited partner or the Partnership
pursuant to the provisions of this Agreement, or who receives an
assignment, made in compliance with the transfer restrictions in this
Agreement, of any limited partnership interest in the Partnership unless
such assignee elects to convert same to a general partnership interest.
"Limited Partners" means two or more Persons holding limited partnership
interests in the Partnership when acting in such capacity.
"MANAGEMENT COMMITTEE" has the meaning set out in Section 8.1.
"MANAGING GENERAL PARTNER" shall mean DEVCO or such other General Partner
as is named to be the Managing General Partner pursuant to the provisions
of Section 9.10 of this Agreement.
"MONT BELVIEU AREA" shall mean the geographical area surrounding the Mont
Belvieu area, including the following counties: Brazoria, Chambers, Fort
Bend, Galveston, Harris, Jefferson, Liberty and Montgomery.
"MONTH" or "MONTHLY" shall mean a period commencing at 7:00 a.m. Central
time on the first Day of a calendar month and ending at 7:00 a.m. Central
time on the first Day of the next succeeding calendar month.
"NET OPERATING REVENUE OR LOSSES" means Operating Revenues less Operating
and Maintenance Expenses or Reduced Operating Expenses whichever is
applicable.
"OPERATING AGREEMENT" means the Operating Agreement dated as of the
Effective Date between the Managing General Partner on behalf of the
Partnership and the Operator of the Facilities, as the same may be
amended, modified or supplemented from time to time in accordance with the
terms thereof and hereof.
"OPERATING AND MAINTENANCE EXPENSES" means expenditures made and costs
incurred by the Operator in connection with the operation of the
Fractionator and as more fully defined and set forth in this Agreement
"OPERATING REVENUES" means revenues of the Partnership in respect of its
business.
"OPERATOR" shall mean the party with whom the Partnership contracts to
serve as operator of the Facility and the day to day business affairs of
the Partnership. The Operator shall be supervised by the Managing General
Partner but is not required to be a Partner. A Limited
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Partner may serve as Operator only pursuant to a written operating
agreement and in such case is understood to be acting solely in its
capacity as an independent contractor and not in its capacity as a
Partner.
"PARTNERS" means all of the General Partners and Limited Partners under
the terms of this Agreement.
"PARTNERS FRACTIONATION AGREEMENTS" shall mean those agreements shown in
Exhibit E to be executed by Warren and Amoco, or their designated
Affiliates.
"PARTNERSHIP" has the meaning set forth in Section 1.1.
"PERCENTAGE INTERESTS" shall mean the Partner's respective percentage of
ownership in the Partnership, subject to changes pursuant to Section 3.6
and Article 11, it being hereby specified that the Partners' initial
Percentage Interest shall be as follows:
GENERAL PARTNERSHIP INTERESTS
GENERAL PARTNER PERCENTAGE INTEREST
DEVCO 2%
LIMITED PARTNERSHIP INTERESTS
LIMITED PARTNER PERCENTAGE INTEREST
Warren 86.24%
Amoco 11.76%
Total Percentage Interests 100%
Any subsequent parties who become Partners hereunder in compliance with
the provisions of this Agreement governing transfers of Partnership
interests shall hold such Percentage Interests as are designated in the
transfers to them.
"PERSON" shall mean any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability
company, limited liability partnership, or other legal entity or
organization.
"PROPERTY" means all assets owned by the Partnership or any single asset
owned by the
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'Confidential Treatment Requested'
Partnership.
"RAW PRODUCT" means the mixed stream of demethanized natural gas liquids
produced by natural gas processing plants prior to such liquids being
fractionated into final, Specification Products.
"REDUCED OPERATING EXPENSES" means the net reduction in Operating and
Maintenance Expenses due to any Construction Costs.
"SPECIFICATION PRODUCTS" means all the final product produced at the
Fractionator by fractionation of natural gas liquids received at the
Fractionator including, but not limited to, ethane, propane, isobutane,
normal butane and natural gasoline.
"TERM" has the meaning set out in Section 1.6.
"THIRD PARTY FRACTIONATION AGREEMENTS" means any agreement to provide
fractionation and processing services to a third party entered into by the
Partnership on or after the Effective Date.
"TRANSFERRING PARTNER" is defined in Section 11.3.
"TREASURY REGULATION" means the regulations (including temporary
regulations) promulgated by the United States Department of the Treasury
pursuant to and in respect of provisions of the Code. All references to
sections of the Treasury Regulations shall include any corresponding
provision or provisions of succeeding, similar or substitute, temporary or
final Treasury Regulations.
3. INITIAL CAPITAL CONTRIBUTIONS. The initial Capital Contributions of the
Partners shall be as follows and shall be made by each of them on or before
December 31, 1997:
3.1. WARREN. Warren shall convey, as of the Effective Date of this
Agreement, a ninety eight percent (98%) undivided ownership interest in and
to the Fractionation Facility to the Partnership, as its Initial Investment,
by execution and delivery of an Assignment and Bill of Sale substantially in
the form attached to hereto as Exhibit F.
3.2. DEVCO. DEVCO shall, as of the Effective Date of this Agreement, a two
percent (2%) undivided ownership interest in and to the Fractionation
Facility by execution and delivery of Assignment and Bill of Sale
substantially in the form of Exhibit F, and pay a cash Capital Contribution
* in the amount of [REDACTED] to the Partnership, as its Initial Investment.
3.3. AMOCO. Amoco shall contribute to the Partnership, as of the
Effective Date of this
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'Confidential Treatment Requested'
* Agreement, a cash Capital Contribution in the amount of [REDACTED] as its
Initial Investment.
3.4. DEFAULT IN MAKING OF CAPITAL CONTRIBUTIONS. In the event any Partner
shall fail to pay or deliver when due its Initial Investment or any other
Capital Contribution and/or fail to honor any other obligation as required
by this Agreement, and shall fail to cure such default within fifteen (15)
Days after notice thereof is given to such Partner, then, unless cure is
prevented by an event of force majeure:
3.4.1. Any Distribution otherwise payable pursuant to Section 6
hereof in respect of the defaulting Partner's Percentage Interest
shall be paid instead, ratably, to the other Partners but only until
the aggregate amount of Distributions thus reallocated equals two
times the amount or market value of the default;
3.4.2. To the extent that the non-defaulting Partners or the
Partnership suffer any loss or damage as a result of such default
and any resulting dissolution or termination of this Agreement,
including, without limitation, lost revenues or adverse tax
consequences, the defaulting Partner shall be fully and solely
liable therefor, and
3.4.3. To the extent the defaulting Partner has been assigned
specific duties or authority under Section 9 hereof as Operator, the
non-defaulting Partners may designate another Partner or contract
with a non-Partner to perform such duties or assume such authority
without the consent or agreement of the defaulting Partner.
3.5. OTHER REMEDIES. The above Section 3.4 shall be in addition to, and
not in lieu of, any other rights and remedies as may be available to the
non-defaulting Partner(s), all of which shall remain available.
3.6. INCREASE IN AMOCO INTEREST. Between July 1, 1998, and December 31,
2002, Amoco shall have the right to increase its Limited Partnership
Percentage Interest in the Partnership up to a total of 24.5% through one of
the following methods:
3.6.1. If agreed to by Warren, a purchase of a portion of Warren's
Percentage Interest in the Partnership in exchange for cash or
assets acceptable to Warren, in which case the amount of increase in
* Amoco's Partnership Interest would be equal to the [REDACTED]
* divided by the sum of: 1) [REDACTED] and 2) [REDACTED]
3.6.2. At Amoco's sole election and option, by making additional
cash Capital Contributions to the Partnership; in which case Amoco's
total resulting Percentage
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'Confidential Treatment Requested'
* Interest would be equal to the sum of (a) [REDACTED] and (b)
* [REDACTED], divided by the sum of the three following amounts: 1)
* [REDACTED], 2) [REDACTED], and 3) [REDACTED]
3.7. WITHDRAWAL OF CAPITAL. No Partner shall have any right to withdraw or
make a demand for withdrawal or return of any of its Capital Contributions
capital without the consent of all Partners or as provided for in this
Agreement. An unrepaid Capital Contribution is not a liability of the
Partnership or of any Partner. A Partner is not required to contribute or to
lend cash or property to the Partnership to enable the Partnership to return any
Partner's Capital Contribution.
3.8. INTEREST ON CAPITAL. Except to the extent that interest income to the
Partnership is allocated to them, no interest shall be paid to Partners by the
Partnership on any Capital Contribution.
3.9. CONSTRUCTION COSTS.
3.9.1. Any Construction Costs incurred by the Partnership in a
manner authorized hereunder shall be allocated under this Agreement
to the Partners herein according to their respective Percentage
Interests. Any net revenue attributable to additional facilities or
modifications to existing facilities for which the Construction
Costs were shared by the Partners in amounts proportionate to their
Percentage Interests under this Section shall be allocated among
them in that same proportion.
3.9.2. In the event a Partner does not desire to contribute its
proportionate share of any additional Construction Costs after
receipt of all material information in the possession of or
available to the other Partners (a "Non-Participating Partner"),
including without limitation, opportunities or commitments to use
or otherwise exploit the additional facilities, revenue projections
attributable to the additional facilities and any other material
information, then the other Partners who do wish to participate
(the "Participating Partners") shall have the right to direct the
Operator to complete such a project and contribute amounts equal
to the costs for the construction of the additional facilities. In
such an instance, the Participating Partners shall be fully
responsible for contributing to the Partnership additional capital
equal to such costs. The net revenue attributable to any
additional facilities shall be determined by agreement of the
Partners and should they fail to agree to same, such allocation
shall be resolved through the dispute resolution procedures set
forth in Article 13 below. Additionally, the Participating Partners
shall receive, as a
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Distribution from the Partnership, in compensation for their costs
and risks one hundred percent (100%) of the Partnership's
incremental Net Operating Revenue attributable to the new
facilities, which shall be distributed to the Participating Partners
on a Monthly basis, until the Participating Partner has received an
amount equal to 200% of that Participating Partner's investment in
the Construction Costs associated with the new facilities. If said
200% is not received within five (5) years following commencement of
operations of the new facilities then, commencing in the sixth year
following such commencement of operations and for each year
thereafter continuing through the fifteenth year following same,
that percentage shall be increased by ten percent (10%) each year,
but never to exceed, however, 300%. After the Participating Partners
have received such Distributions of the Net Operating Revenue
attributable to the new facilities equal to the stated percentage of
each of the Partners' shares of the Construction Costs, then all
future Distributions attributable to the new facilities shall be
made to each Partner according to its Percentage Interest in the
Partnership.
3.9.3. Section 3.9.2 notwithstanding, no Partner may decline or
refuse to contribute any cash Capital Contribution of which the
Managing General/Partner gives notice when same is required to
complete any work necessary to comply with any laws or regulations
applicable to the Facility and its continued operation. Provided,
however, the Management Committee may direct the Managing General
Partner to cancel any such a cash Capital Contribution notice, if
it determines that it is in the best interest of the Partnership to
either cease the operations which give rise to the applicable legal
requirements in question on the modify operations in such a manner
that compliance with such laws and regulations can be achieved with
cash then available in the Partnership's bank accounts in excess of
the "Required Working Capital" (as defined in the Operating
Agreement) which Operator is entitled to retain pursuant to the
Operating Agreement.
3.10. CAPITAL ACCOUNTS. A Capital Account shall be established and
maintained for each Partner. Each Partner's Capital Account shall be increased
by (a) the amount of money contributed by that Partner to the Partnership, (b)
the fair market value of property contributed by that Partner to the Partnership
(net of liabilities secured by such contributed property that the Partnership is
considered to assume or take subject to under Section 752 of the Code), and (c)
allocations to that Partner of Partnership income and gain (or items thereof),
including income and gain exempt from tax and income and gain described in
Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding income and
gain described in Treasury Regulations Section 1.704-1(b)(4)(i), and shall be
decreased by (d) the amount of money distributed to that Partner by the
Partnership, (e) the fair market value of property distributed to that Partner
by the Partnership (net of liabilities secured by such distributed property that
such Partner is considered to assume or take subject to under Section 752 of the
Code), (f) allocations to that Partner of expenditures of the Partnership
described (or treated as described)
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in Section 705(a)(2)(B) of the Code, and (g) allocations of Partnership loss and
deduction (or items thereof), including loss and deduction described in Treasury
Regulation Section 1.704-1(b)(2)(iv)(g), but excluding items described in (f)
above and loss or deduction described in Treasury Regulation Sections
1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). The Partners' Capital Accounts shall
also be maintained and adjusted as permitted by the provisions of Treasury
Regulation Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions
of Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including
adjustments to reflect the allocations to the Partners of depreciation,
depletion, amortization, and gain or loss as computed for book purposes rather
than the allocation of the corresponding items as computed for tax purposes, as
required by Treasury Regulation Section 1.704-1(b)(2)(iv)(g). Thus, the
Partners' Capital Accounts shall be increased or decreased to reflect a
revaluation of the Partnership's property on its books based on the fair market
value of the Partnership's property on the date of adjustment immediately prior
to (A) the contribution of money or other property to the Partnership by a new
or existing Partner as consideration for a Percentage Interest or an increased
Percentage Interest (B) the distribution of money or other property by the
Partnership to a Partner as consideration for a Percentage Interest, or (C) the
liquidation of the Partnership. Upon the Disposition of all or a portion of a
Percentage Interest, the Capital Account of the Transferring Partner that is
attributable to such Percentage Interest shall carry over to the transferee in
accordance with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(l).
4. REPRESENTATIONS AND WARRANTIES.
4.1. ALL PARTNERS. Each Partner, upon becoming a Party to this Agreement,
represents, warrants and agrees that:
4.1.1. It is either a corporation, limited liability company or
limited partnership duly organized, validly existing and in good
standing under the laws of the state where it was organized or
incorporated, as the case may be, and has the power and authority to
own (or lease) and use its properties and carry on its business as
presently conducted;
4.1.2. It has all requisite power and authority to execute, deliver
and perform this Agreement and any other agreements required herein
and to consummate the transactions contemplated by all the
aforesaid;
4.1.3. The execution, delivery and performance by it of this
Agreement and any other agreements required herein and the
consummation by it of the transactions contemplated by all of the
aforesaid have been duly authorized by all necessary action on the
part of such Partner;
4.1.4. This Agreement and any other agreements required herein have
been or will
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be duly and validly executed and delivered by it, and each such
agreement constitutes the legal, valid and binding obligation of it
enforceable in accordance with its terms, subject to bankruptcy,
reorganization, insolvency, and similar laws of general application
relating to or affecting the rights of creditors;
4.1.5. The execution, delivery and performance of this Agreement
and any other agreements required herein and the consummation by it
of the transactions contemplated by all the aforesaid will not, (i)
violate any applicable law, (ii) violate any order applicable to it
or the assets contributed to the Partnership by it, or (iii)
conflict with, or result in any material breach or default under its
organization documents, or (iv) conflict with, or result in any
material breach or default under any legally binding commitment,
restriction or obligation to which it is bound or subject to, or
result in the creation of any lien on the property of the
Partnership or otherwise adversely affect the property of the
Partnership or the Partnership; and
4.1.6. It will not voluntarily cause a dissolution or termination of
the Partnership, technical or otherwise, by failure to maintain its
corporate existence or by any other act or omission to act.
4.2. REPRESENTATIONS OF DEVCO AND WARREN REGARDING THE FRACTIONATION
FACILITIES.
4.2.1. TITLE. DEVCO and Warren have conveyed to the Partnership, as
of the Effective Date, all of their right, title and interest in and
to the Fractionation Facilities to the Partnership but shall not,
and do not hereby, warrant title in any manner other than as
follows: DEVCO and Warren do warrant and agree to defend any claims
by third parties claiming title or ownership by, through or under
DEVCO or Warren, but not otherwise, with regard to the use of the
Surface Lease Area, Water Rights Areas and the title to the
Fractionator and the Related Facilities and DEVCO's and Warren's
right to enter into the Lease Agreement or convey the Fractionator
and the Related Facilities; and, additionally, that Warren has no
Knowledge of any parties asserting any claims contrary to Warren's
possession, use and title to the Fractionation Facility.
4.2.2. COMPLIANCE WITH LAWS. Warren, to the best of its Knowledge
and except as to any matters described in the Disclosure Schedule,
is in compliance with all permits, contracts and agreements relating
to the Fractionator Facility, and is in compliance with all laws,
including Environmental Laws, rules and regulations of federal,
state or local entities which have jurisdiction over Warren or the
Fractionator Facility.
4.2.3. LEGAL ACTIONS. Except as shown in the Disclosure Schedule,
there are no lawsuits, orders, decrees, injunctions or
administrative, arbitration or other
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proceedings, pending or, to the Knowledge of Warren, threatened
against the Fractionator Facility or which could require a change in
the manner of operations of the Fractionator or use of the
Fractionator Facility.
4.2.4. INTELLECTUAL PROPERTY
(1) ASSETS. To Warren's Knowledge, the Disclosure Schedule
contains a true and complete list of all agreements and assets
governing intellectual property assets which are reasonably
necessary for lawful operation of the Fractionation Facility,
including but not limited to license agreements, patents and
technical information.
(2) LICENSE OBLIGATIONS. To Warren's Knowledge, all licenses
agreements granting Warren the right to use and possession of the
intellectual property assets listed in the Disclosure Schedule are
in full force and effect, all fees and payments that are accrued
under the terms of same have either been paid in full or are not yet
due, and Warren has received no notice of default from the parties
licensing same nor to Warren's Knowledge are there any material
breaches or defaults.
(3) NON-INFRINGEMENT. Warren has no Knowledge of any unexpired
U.S. patents, other than those subject to the agreements listed in
the Disclosure Schedule or within the scope of a license agreement
listed in the Disclosure Schedule, that are reasonably likely to be
infringed by the manufacture or processing of any Raw Product or
Specification Product which are manufactured or processed by the
Partnership or are proposed to be manufactured or processed by the
Partnership and Warren has received no summons, complaint or other
information suggesting any possible infringement of any unexpired
patents.
4.3. INSPECTION AND CONDITION OF FRACTIONATOR FACILITY. Amoco acknowledges
that, prior to its execution of this Agreement, (i) it has been afforded access
to and the opportunity to inspect the Fractionator Facility, (ii) it has
inspected the Fractionator Facility to the extent it deems necessary or
advisable, and (iii) it is relying upon its own inspections and investigation in
order to satisfy itself as to the condition and suitability of the Fractionator
Facility. Therefore, the Partners agree that the Partnership is receiving and
accepting the conveyance of the Fractionator Facility, and the tangible assets
comprising same, on an "AS IS" and "WHERE IS" basis and agrees to assume all
risks with respect to the Fractionator Facility, whether or not revealed by any
of the Partners' investigation, as of the Effective Date.
4.4. PARTNERS' KNOWLEDGE AND EXPERTISE. The Partners' are engaged in the
business of producing Raw Products and of transporting, fractionating and
selling Raw Products and Specifications Products and related oil and gas
businesses, and are familiar with all federal, state and
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local statutes, laws, ordinances, rules and regulations applicable to the
Fractionator Facility and any associated business the Partnership intends to
conduct in connection with the Fractionator Facility after the execution hereof,
and has the expertise necessary to independently evaluate Warren's and DEVCO's
title to, and the condition, operation, suitability, performance and prospects
of, the Fractionator Facility.
4.5. ENVIRONMENTAL LAWS. Amoco acknowledge that, prior to their execution
of this Agreement, they have independently conducted such environmental
inspections and investigations or obtained such environmental reports, audits,
studies, assessments and inspections as they deemed necessary or advisable and
that they are relying upon their own inspections and investigation in order to
satisfy themselves as to environmental matters pertaining to the Fractionator
Facility.
4.6. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. EXCEPT AS TO MATTERS
EXPRESSLY INDEMNIFIED AGAINST IN THIS AGREEMENT, (A) PARTNERSHIP AND THE
PARTNERS ACCEPT THE ASSETS COMPRISING THE FRACTIONATOR FACILITY "AS IS" AND
"WHERE IS" AND WITH ALL FAULTS AND DEFECTS, WHETHER PATENT OR LATENT, (B)
NEITHER WARREN OR DEVCO MAKE ANY REPRESENTATION OR WARRANTIES OF ANY KIND,
WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO ALL OR ANY OF SAID ASSETS,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OR MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR ANY REPRESENTATION WITH RESPECT TO THE
DESIGN, QUALITY, DURABILITY OR SUITABILITY OF THE FRACTIONATOR FACILITY, OR
ANY PORTIONS THEREOF, FOR A PARTICULAR PURPOSE, AND (C) NEITHER WARREN NOR
DEVCO MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER EXPRESS OR
IMPLIED, IN CONNECTION WITH THE VALUE, CONDITION, FITNESS OR USE OF SAID
ASSETS OR THE PRESENCE, ABSENCE OR CONDITION OF ANY ENVIRONMENTAL CONTAMINANT
OR THE PRESENCE OR EXISTENCE OF ANY ENVIRONMENTAL CONDITION, EXCEPT FOR THOSE
ENVIRONMENTAL MATTERS DISCLOSED IN THE DISCLOSURE SCHEDULE.
4.7. PARTNERSHIP'S ASSUMPTION OF OBLIGATIONS. From and after the Effective
Date the Partnership hereby assumes and shall be solely responsible for, and
shall perform and discharge all obligations, claims, liabilities, and taxes to
the extent same arise out of or relate to the ownership of the Fractionator
Facility or operation thereof from; including; without limitation, any
obligations under any Environmental Laws applicable from and after the Effective
Date to the extent same arise from or relate to conditions at or the operations
of the Fractionator Facility from and after the Effective Date, subject to the
Partnership's rights of indemnity under the express indemnities given in this
Agreement.
4.8. CROSS INDEMNIFICATIONS AND DEFENSE COSTS. The following cross
indemnifications between the Partners and the Partnership with regard to the
Fractionator Facility shall be applicable to all claims, damages, costs,
demands, causes of action, fines, penalties, and losses (hereinafter referred to
as "Claims").
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4.8.1. Warren hereby agrees to indemnify, hold harmless and defend
the Partnership and its individual Partners, their respective
directors, officers, employees, partners, representatives,
successors and assigns from and against all Claims (including
reasonable attorney's fees), excluding Claims between the
Partnership and its Affiliates regarding the Fractionator Facility,
which are asserted at any time against the Partnership or any of the
Partners, and which arise out of, and are directly related to, or
are in any manner connected with Warren's operation of any portion
of the Fractionator Facility or ownership of an interest in any
portion of the Fractionator Facility, or any portion thereof, prior
to the Effective Time, including, but not limited to, all Claims
related to breaches or defaults of the Contracts, Claims for injury
or death to persons, Claims for damage to property and Claim
relating to violations of applicable laws, including Environmental
Laws, rules, orders, regulations or codes. This indemnity in this
Section includes indemnity against all Claims, costs of removal and
disposal, and any liabilities arising from the presence at the
facility, of certain volumes of naturally occurring radioactive
material waste ("NORM") that results from the fractionation of Raw
Product received at the Facility. Such NORM is predominantly Pb 210
NORM waste and concentrates in particulate removed in the Facility's
amine treating system filters and in sludge present in various
vessels in the Facility, including sumps which capture water that is
drained from various vessels. No disposal facility is currently
available in the State of Texas for such NORM wastes and same will
continue to be generated and stored at the Facility after the
Effective Date until cost effective disposal services can be
obtained by the Operator. The presence, and location, of such NORM
wastes at the Facility is disclosed in the Disclosure Schedule and
Warren agrees to clearly identify, mark and segregate NORM wastes
generated prior to the Effective Date from those generated
thereafter. PROVIDED, HOWEVER, THE INDEMNITY GIVEN BY WARREN IN THIS
SECTION SHALL NOT EXTEND TO: (a) ANY CLAIMS WHICH ARE FOUNDED UPON
ANY ALLEGED VIOLATION OF ENVIRONMENTAL LAWS TO THE EXTENT SAME ARE
BASED ON LAWS OR REGULATIONS, OR AMENDMENTS THERETO, WHICH WERE NOT
IN EFFECT ON THE EFFECTIVE DATE; OR (b) ANY CLAIMS WHICH ARE
ASSERTED BY ANY THIRD PERSONS FROM AND AFTER THE EFFECTIVE DATE AND
WHICH ARE FOUNDED UPON WARREN'S INTERPRETATION OR ADMINISTRATION OF
ANY OF THE CONTRACTS PRIOR TO THE EFFECTIVE DATE TO THE EXTENT SUCH
CLAIMS RELATE TO MONIES CLAIMED TO BE OWED, OR CONTRACTUAL DAMAGES
ASSERTED, AND WHICH MONIES OR DAMAGES ARE ATTRIBUTABLE TO ANY
ACCOUNTING PERIODS FROM AND AFTER THE EFFECTIVE DATE, AND THE
PARTNERS EXPRESSLY ACKNOWLEDGES THAT THEY HAVE HAD AN ADEQUATE
OPPORTUNITY TO REVIEW WARREN'S RECORDS REGARDING THE CONTRACTS AND
WARREN'S ADMINISTRATION THEREOF AND THE PARTNERSHIP ASSUMES THE RISK
OF ANY SUCH CONTRACTUAL CLAIMS AS TO CLAIMS FOR DAMAGES OR AMOUNTS
OWED WHICH ARE ATTRIBUTABLE TO ACCOUNTING PERIODS FROM AND AFTER THE
EFFECTIVE DATE.
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4.8.2. Warren and DEVCO also hereby agree to indemnify, hold
harmless and defend the other Partners and the Partnership, their
respective directors, officers, employees, partners,
representatives, successors and assigns from and against all Claims
(including reasonable attorney's fees) resulting from any inaccuracy
in or breach of Warren's and DEVCO's representations and warranties
under this Agreement.
4.8.3. The Partners hereby agree that they and the Partnership shall
indemnify, hold harmless and defend Warren and DEVCO, their
respective directors, officers, employees, partners,
representatives, successors and assigns from and against all Claim
(including reasonable attorney's fees), which are asserted at any
time against Warren and DEVCO, and which arise out of, and are
directly related to, or are in any manner connected with the
Partnership's operation of the Fractionator Facility or ownership of
an interest in the Fractionator Facility, or any portion thereof on
or after the Effective Date, including, but not limited to:
obligations assumed by the Partnership under Section 4.7 above; all
Claims related to breaches or defaults of contracts or agreements;
Claims for injury or death to persons; Claims for damage to
property and Claims relating to violations of applicable laws,
rules, orders, regulations or codes; and any Claims: (a) which arise
in any way in connection with any Environmental Conditions EXCLUDING
Claims arising in connection with Environmental Conditions which
relate to operation of the Fractionator Facility, or any portions
thereof, prior to the Effective Date; or (b) which are asserted by
any third persons from and after the Effective Date and which are
founded upon Warren's interpretation or administration of any of the
Contracts prior to the Effective Date to the extent such Claims
relate to monies claimed to be owed, or contractual damages
asserted, and which are attributable to any accounting periods from
and after the Effective Date.
4.8.4. The Partners agree also hereby agree that they shall
indemnify, hold harmless and defend Warren and DEVCO, their
respective directors, officers, employees, partners,
representatives, successors and assigns from and against all Claims
(including reasonable attorney's fees) resulting from any inaccuracy
in or breach of their respective representations and warranties
under this Agreement.
4.8.5. With respect to all indemnifications contained in this
Agreement, the indemnifying Party shall have the full authority to
handle the defense of, and to negotiate, settle or in any other
manner compromise any Claim for which it is indemnifying the other
Party; and, so long as the indemnifying Party is conducting that
defense in a reasonable manner, the indemnitee shall not be entitled
to claim any legal expenses or costs of defense from the
indemnifying Party. Provided, however, any settlement or release
entered into or accepted by the indemnifying Party shall include a
full release of the indemnified Parties hereunder. It is provided,
however, that the
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indemnitee shall have the right to participate in the defense of any
Claim(s) in which the indemnitee is named, and be represented by
counsel chosen by the indemnitee, provided that the costs, fees and
expenses of that participation shall remain the responsibility of
and shall be borne by the indemnitee. The indemnitee shall only be
entitled to compensation of costs of defense, including reasonable
attorneys fees, in the event that the indemnifying Party has failed
to conduct a reasonable defense of the Claim(s).
4.9. EXCLUSIVE REMEDY. The remedies set forth in this Article 4 shall
be the Partnership's and the individual Partners' exclusive remedies for any
and all liabilities, costs or expenses, including any violation of any laws,
occurring at or in connection with the Fractionator Facility prior to the
Effective Date and the Closing Date, regardless of when discovered by the
Partnership, either pursuant to this Agreement or pursuant to any other
rights, including (without limitation) any common law rights or any rights
created by or implied from any state or federal statute or regulation.
4.10. SURVIVAL OF AND SCOPE OF INDEMNITIES. The indemnity provisions of
this Agreement shall survive for a period of four (4) years from the Effective
Date; excluding, however, the Partnership's indemnity given in Section 4.8.3.
above, which shall not expire. Further, the Partnership and the Parties agree
that the indemnities given herein shall not extend to or include to
consequential damages incurred by the indemnified Parties or to punitive damages
which are imposed as a result of the conduct of the indemnitee seeking to
recover such amounts under an indemnity.
5. OTHER AGREEMENTS.
5.1. PARTNER FRACTIONATION AGREEMENTS. As of the Effective Date, Warren
and Amoco and an affiliate of Amoco, Amoco Oil Company, have also executed
Fractionation Agreements with the Partnership in the forms attached hereto as
Exhibit E.
5.2. CONVEYANCING DOCUMENTS. After the execution of this Agreement but on
or before the Effective Date of this Agreement, Warren and DEVCO will have
executed and delivered the Conveyancing Documents; consisting of the following:
5.2.1. The Lease Agreement, in the form attached as Exhibit D;
5.2.2. Three Assignments and Bills of Sale (all in the form set
forth in Exhibit F); one from Warren to DEVCO of a two percent (2%)
undivided interest in and to the Fractionation Facility, one from
DEVCO to the Partnership of that same 2% interest, and one from
Warren to the Partnership of a ninety-eight percent (98%) undivided
interest in and to the Fractionation Facility;
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5.2.3. One easement, in a form to be agreed to between the Partners,
Warren and DEVCO, to be for the same term as the term of this
Agreement, for the purpose of allowing the continued presence of,
and Partnership access to, all Related Facilities, with terms no
more burdensome than those set forth for surface use in the Lease
Agreement.
5.3. AMOCO PARENT GUARANTY. On or before the Effective Date of this
Agreement, Amoco shall have obtained an original executed guaranty of its
obligations hereunder by its parent company, Amoco Oil Company, substantially in
the form attached hereto as Exhibit H, and delivered same to Warren and DEVCO,
and Warren and DEVCO shall not be obligated to execute their respective
Conveyancing Documents to convey title to the Fractionation Facility into the
Partnership until receipt of same.
5.4. ASSIGNMENT OF OTHER AGREEMENTS. To the extent that any of the
Contracts can not, by their terms or because of the objection of a party to such
Contract be assigned to the Partnership, Warren will deliver all Raw Product
which it receives pursuant to such Contracts and will fractionate same at the
Fractionation Facility, and will provide the Partnership the beneficial rights,
including without limitation any fee payments to which it might be entitled
under fractionation service agreements, to the Partnership, and the Partnership
agrees to perform and bear the responsibility for all obligations of Warren
under such Contracts.
5.5. OPERATING AGREEMENT. On the Effective Date, DEVCO, for and on behalf
of the Partnership and in its capacity as the Managing General Partner, and the
Partners, for the limited purposes stated therein, shall execute with Warren the
Operating Agreement.
6. DISTRIBUTIONS.
6.1. MONTHLY DISTRIBUTIONS. By the thirtieth (3Oth) day following the end
of each Month, the Managing General Partner shall distribute to the Partners and
the Partners shall receive any Distributable Cash based on their respective
Percentage Interests, and subject to any Distributions then in effect pursuant
to Section 3.9.2. Distributions of $50,000 or more shall be made by wire
transfer and payments of less than $50,000 shall be made by check, all to each
Partner in accordance with the individual payment instructions provided by each
Partner to the Managing General Partner.
6.2. DISTRIBUTIONS ON TERMINATION. Upon termination of the Partnership,
the Partners shall take account of all of the Partnership's Property and
liabilities. Notwithstanding the foregoing provisions of this Section 6, the
proceeds of liquidation of the Property, or Property distributed in kind,
shall be applied and distributed in the following order:
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6.2.1. PAYMENT OF DEBTS AND ESTABLISHMENT OF RESERVES. To the extent
permitted by law, the proceeds of the liquidation sales shall be
paid or distributed as follows:
(1) First, to the expenses of liquidation:
(2) Second, to the repayment of the debts of the Partnership
other than debts owing to the Partners;
(3) Third, to the establishment of reasonable reserves for
obligations and contingent liabilities of the Partnership; and
(4) Fourth, to the repayment of such debts as are owing to the
Partners.
6.2.2. DISTRIBUTIONS TO PARTNERS. All remaining available proceeds
from dissolution and winding up of the Partnership, shall be
distributed to all of the Partners in amounts equal to the Partners'
positive Capital Account balances after adjusting such Capital
Accounts for all distributions made pursuant to Section 6.1 above
and all allocations under Article 7 below.
7. ALLOCATIONS TO PARTNERS.
7.1. IN GENERAL. For purposes of maintaining the Capital Accounts pursuant
to Section 3.10 and for income tax purposes, except as provided in Section 7.2,
7.3 and 7.4, each item of income, gain, loss, deduction and credit of the
Partnership shall be allocated to the Members in accordance with their
Percentage Interests.
7.2. OTHER TAX ALLOCATIONS. For income tax purposes, income, gain, loss,
and deduction with respect to property contributed to the Partnership by a
Partner or revalued pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f)
shall be allocated among the Partners in a manner that takes into account the
variation between the adjusted tax basis of such property and its book value, as
required by Section 704(c) of the Code and Treasury Regulation Section 1.704-1
(b)(4)(i), using the remedial allocation method permitted by Treasury Regulation
Section 1.704-3(d).
7.3. SPECIAL ALLOCATIONS. The following special allocations shall be made
in the following order:
7.3.1. QUALIFIED INCOME OFFSET. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions
described in Section 1.704-1(b)(2)(ii)(d)(4), Section
1.704-1(b)(2)(ii)(d)(5), or Section 1.704-1(b)(2)(ii)(d)(6) of the
Treasury Regulations, items of Partnership income and gain shall be
specially allocated to each such Partner in an amount and manner
sufficient to
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eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of such Person as quickly as
possible, provided that an allocation pursuant to this
Section 7.3.1. shall be made only if and to the extent that such
Person would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article 7 have been
tentatively made as if this Section 7.3.1. were not in this
Agreement.
7.3.2. GROSS INCOME ALLOCATION. In the event any Partner has an
Adjusted Capital Account Deficit at the end of any calendar year
which is in excess of the sum of (i) the amount such Partner is
obligated to restore pursuant to any provision of this Agreement,
and (ii) the amount such Partner is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5), each such
Partner shall be specially allocated items of Partnership income and
gain in the amount of such excess as quickly as provided that an
allocation pursuant to this Section 7.3.2. shall be made possible
only if and to the extent that such Person would have an Adjusted
Capital Account Deficit in excess of such sum after all other
allocations provided for in this Article 7 have been made as if
Section 7.3.1. hereof and this Section 7.3.2. were not in this
Agreement.
7.3.3. SECTION 754 ADJUSTMENT. 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 Treasury
Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a
Partner in complete liquidation of its interest in the Partnership,
the amount of such adjustment to the Capital Accounts 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) and such
gain or loss shall be specially allocated to the Partners in
accordance with their Percentage Interests in the event Treasury
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the
Partners to whom such distribution was made in the event Treasury
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
7.3.4. If a cash Distribution under Section 3.9.2 is made, then
income will be allocated to the Participating Partners in an amount
equal to the Distribution.
7.4. CURATIVE ALLOCATIONS. The allocations set forth in Section 7.3.1.,
7.3.2., and 7.3.3. (the "Regulatory Allocations") are intended to comply with
certain requirements of Treasury Regulations Section 1.704-1(b). Notwithstanding
any other provision of this Article 7
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(other than the Regulatory Allocations), the Regulatory Allocations shall be
taken into account in allocating items of income, gains and loss deduction
among the Partners so that, to the extent possible, the net amount of such
allocations of items of income, gains, and loss deduction and the Regulatory
Allocations to the Partners shall be equal to the net amount that would have
been allocated to them if the Regulatory Allocations had not occurred.
Allocations made pursuant to this Section 7.4 are hereby authorized by the
Management Committee and shall be for the purpose of minimizing the economic
distortions that might otherwise result from the application of the
Regulatory Allocations.
8. MANAGEMENT OF THE PARTNERSHIP.
8.1. MANAGEMENT COMMITTEE. The business of the Partnership shall be
managed by the Managing General Partner, subject to review and approval of
certain matters by the Management Committee. The Management Committee shall
be comprised of principal representatives appointed by each of the Partners.
For purposes of representation on the Management Committee, each Partner
shall have one representative on the Management Committee. The Management
Committee shall meet at least once during the calendar year and such meetings
will be held to inform the members of the activities of the Partnership and
to act on any matters which require action by the Management Committee
including review and approval of the budgets prepared by the Operator under
the supervision of the Managing General Partner. Each Partner shall bear its
own costs incurred in connection with its representative traveling to and
attending any Management Committee meeting and same shall not be considered a
Partnership expense for which the Partner is entitled to reimbursement from
the Partnership's funds.
8.2. MEETING NOTICE. The Management Committee shall meet upon five (5)
business Days notice at the call of any Partner to all other Partners. However,
the Managing General Partner shall give all Partners 30 Days minimum advance
notice of the time and place of the annual meeting.
8.3. VOTING PROCEDURES. The Management Committee may act by vote at a
meeting or without a meeting by written vote. Members of the Management
Committee may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all individuals participating
in the meeting shall constitute presence in person at such meeting. Each
Management Committee representative shall be entitled to a number of votes equal
to its Partner's Percentage Interest at the time of any vote.
8.4. VOTE REQUIRED. Except as otherwise provided in this Agreement,
approval of any matter by the Management Committee shall require a vote of more
than eighty-eight percent (88%) of the total Percentage Interest of all Partners
entitled to vote.
8.5. MINUTES. The Management Committee will appoint a secretary who will
be present at and record the minutes of all meetings and promptly provide each
member with copies thereof
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following each meeting. The original of the minutes as approved by each Partner
shall be maintained at the principal office of the Managing General Partner.
8.6. MATTERS REQUIRING UNANIMOUS APPROVAL. The following items shall
require approval of all members of the Management Committee:
(1) Authorize any short term or long term borrowing or other
debt on behalf of the Partnership, except for trade credit incurred
by the Operator or the Managing General Partner in the ordinary
course of business and within their expenditure authorities set
forth in this Agreement or in the Operating Agreement;
(2) Sell, lease, mortgage, pledge, transfer, assign, or
otherwise encumber or dispose of all or substantially all of the
Property or merger or combination of the Partnership with or into
any other Person in one or a series of transactions;
(3) Lend money to, or guarantee the obligation of any Person
on behalf of the Partnership;
(4) Make, execute or delivery for the Partnership any
mortgage, deed of trust or security agreement conveying a security
interest in any of the Property;
(5) Release, compromise or settle any claim against the
Partnership or in its favor (except upon full satisfaction of claims
in its favor) in excess of $500,000 or any insurance claim in excess
of $250,000;
(6) Any decision to rebuild or repair any portions of the
facilities of the Partnership after the occurrence of a casualty
loss or damage to such facilities if the cost of rebuilding or
repair equals or exceeds $5,000,000;
(7) Require Partners to make any Capital Contributions to the
Partnership other than their Initial Investments;
(8) Cause the Partnership to make any tax elections, decisions
or allocations other than as necessary to carry into effect the
express provisions of this Agreement;
(9) Institute any judicial or administrative proceedings on
behalf of any Partners individually or institute any judicial or
administrative proceedings on behalf of the Partnership where the
amount in controversy is in excess of $500,000, except to the extent
expressly authorized under the Operating Agreement;
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(10) Terminate the business or dissolve the Partnership or
appoint a liquidating trustee other than as provided in Article 12;
(11) Change the provisions of Exhibit B (Income Tax Matters);
(12) Amend this Agreement, the Operating Agreement, the
Conveyancing Documents or the Partners Fractionation Agreements;
(13) Create or dispose of any subsidiary of the Partnership or
any interest therein;
(14) Enter into any material contract or arrangement having a
term in excess of two (2) years (excluding material master services
agreements) other than the than Third Party Fractionation
Agreements, the Conveyancing Documents, Operating Agreement, the
Partners Fractionation Agreements or any other agreements
specifically contemplated by this Agreement and intended to be
effective as of the Effective Date;
(15) Enter into any Third Party Fractionation Agreement having
a term in excess of five (5) years;
(16) Except as otherwise provided herein, do or permit or
suffer to be done any act or thing whereby the Partnership may be
wound up, liquidated or dissolved (whether voluntarily or
compulsorily);
(17) Change the nature or scope of the Partnership's business
or commence any new business outside of the scope activities related
or incidental to the purposes of the Partnership set forth in
Section 1.5 or outside of the Mont Belvieu Area;
(18) Do any act which would make it impossible to accomplish
the purposes of the Partnership;
(19) Change the definition of fiscal year in Section 9.2.
(20) Admit any additional partner to the Partnership except
pursuant to Section 11;
(21) Remove or change the Managing General Partner, except as
provided in Section 8.9;
(22) Place or permit any liens to exist on the Property if
consent for such
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liens is required under any debt instruments of any Partner or an
Affiliate of any Partner; and
(23) Purchase any insurance for the Partnership or any
Partner(s) beyond that required by law or that required to be
maintained by the Operator pursuant to the terms of the Operating
Agreement.
8.7. AUTHORITY TO BIND THE PARTNERSHIP. Except as provided in this
Agreement or as expressly authorized by the Management Committee consistent
with this Agreement, no Partner shall have any power or authority to act on
behalf of the Partnership in any manner affecting the Partnership, or to bind
the Partnership, or to represent that it has such power or authority.
8.8. DUTIES OF MANAGING GENERAL PARTNER. The Managing General Partner
shall supervise and monitor the Operator's performance of its duties pursuant to
the terms of the Operating Agreement and Article 9 below and shall serve as the
Tax Matters Partner and perform generally all managerial duties related to
conducting the ordinary business of the Partnership to the extent same have not
been delegated to the Operator, including filing of any tax returns,
governmental filings, and reports. Certain portions of Article 9 below also
govern the Managing General Partner's performance and authority hereunder to the
extent same expressly so state.
8.9. CHANGE OF MANAGING GENERAL PARTNER
8.9.1. RESIGNATION OF MANAGING GENERAL PARTNER. The Managing
General Partner or any successor may resign effective 180 Days after
written notice to the Management Committee. A vote of 100% approval
of all the Partners will be required to select a new Managing
General Partner. Upon the date the resignation is effective, the
Managing General Partner shall be relieved of its obligations except
as otherwise provided in this Agreement.
8.9.2. REMOVAL OF MANAGING GENERAL PARTNER. The Managing General
Partner may be removed by the vote of more than eight-eight percent
(88%) of the Percentage Interest of the Partners if; (1) such
Managing General Partner breaches any material provision of this
Agreement and fails or refuses to cure such breach within a
reasonable time after written notice from the Management Committee
to do so; or (2) Managing General Partner is placed in bankruptcy or
receivership or executes an assignment for the benefit of creditors.
Managing General Partner has the right to demand an arbitration of
the fairness and reasonableness of any such removal pursuant to the
dispute resolution provisions of this Agreement. The Partners may,
by unanimous vote of the Management Committee, elect a successor
Managing General Partner.
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8.9.3. SUCCESSOR MANAGING GENERAL PARTNER. Upon the resignation or
removal of the Managing General Partner, as provided for above, the
following shall govern:
(1) Management Committee shall promptly select a successor in
accordance with the procedures set forth in such sections. Any
Partner may submit a bid to the Management Committee to become
Managing General Partner. Upon notice of resignation or removal of
any Managing General Partner, said managing General Partner shall
forthwith deliver to its successor, originals of all books, records,
accounts, and audits and all other data and information in its and
its Affiliates' possession relative to this Agreement.
(2) In the event of resignation or removal of Managing General
Partner, such Managing General Partner shall be reimbursed for
charges, expenditures and liabilities incurred by it for services
rendered hereunder in accordance with this Agreement, except for
such charges, expenditures or liabilities which are in dispute, and
said dispute will be resolved in accordance with the dispute
provisions of Section 13.
(3) Any Party hereto becoming a successor Managing General
Partner shall thereupon succeed to all duties, powers, obligations,
rights and authorities conferred upon the Managing General Partner
herein.
8.9.4. COMPENSATION TO PARTNERS. Except as otherwise provided in
this Agreement, all agreements regarding services for which the
Partners or any Affiliate is to receive compensation from the
Partnership or with respect to partnership activities shall be
embodied in written contracts which precisely describe the services
to be rendered and all compensation to be paid and which are
approved by the Management Committee.
8.10. DUTIES OF GENERAL PARTNERS AND OTHERS CONTROLLING GENERAL PARTNERS.
To the extent that, at law or in equity, any Partner, or any employee, agent or
representative of same, has duties (including fiduciary duties) and liabilities
relating thereto to the Partnership or to the Partners, the General Partners and
any other Person acting in connection with the Partnership's business or
affairs, they shall not be liable to the Partnership or to any Partner for their
good faith reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they restrict the duties and liabilities of any
such Person otherwise existing at law or in equity, are agreed by the Partners
to replace such other duties and liabilities of such Persons
9. OPERATION OF THE FACILITY.
9.1. GENERAL. Subject to the provisions of the Operating Agreement,
Operator shall
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have the exclusive right to operate the Facility, supervise construction of all
modifications to the Facility and negotiate agreements with third parties
related to the operation of the Partnership business; including, without
limitation, for the provision of processing or fractionating services, all
strictly in the manner set forth in the Operating Agreement. The Operating
Agreement shall also govern removal and resignation of the Operator.
9.2. Fiscal Year. The fiscal year of the Partnership shall be the calendar
year.
9.3. CHANGE OF OPERATOR. The Partners may, by unanimous vote of the
Management Committee, direct the Managing General Partner to select a successor
Operator and direct the Managing General Partner to terminate the Operating
Agreement with the then current Operator, provided same is a termination allowed
under the terms of the Operating Agreement. Once a successor Operator is
selected by the Managing General Partner, such successor Operator and the new
Operating Agreement proposed to be executed with such successor shall be
submitted by the Managing General Partner to the Management Committee for
approval.
9.4. RESIGNATION OF OPERATOR. Operator or any successor may resign
effective 180 Days after written notice to the Management Committee. A vote of
100% approval of all the Partners will be required to select a new Operator.
Upon the date the resignation is effective, the Operator shall be relieved of
its obligations except as otherwise provided in the Operating Agreement.
9.5. REMOVAL OF OPERATOR . Operator may be removed by a vote of more than
fifty percent (50%) (based an Percentage Interests held) of the Management
Committee representatives other than those to whom the Operator is an Affiliate
if; the Operator is then in breach of the terms of the Operating Agreement and
the Partnership has the right to terminate same pursuant to Section 9.3 of the
Operating Agreement.
9.6. SUCCESSOR OPERATOR. Upon the resignation or removal of the Operator,
as provided for in any of the above Sections 9.3, 9.4 and 9.5, the following
shall govern:
(i) Management Committee shall promptly select a
successor in accordance with the procedures set forth in such
sections. Any Partner may submit a bid from it or one of its
Affiliates to the Management Committee to operate the
Facility. Upon notice of resignation or removal of any
Operator, said Operator shall forthwith deliver to its
successor, originals of all books, records, accounts, and
audits and all other data and information in its and its
Affiliates' possession relative to the Operating Agreement.
(ii) In the event of resignation or removal of Operator,
such Operator shall be reimbursed for charges, expenditures
and liabilities
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incurred by it for services rendered hereunder in accordance
with the Operating Agreement, except for such charges,
expenditures or liabilities which are in dispute, and said
dispute will be settled in a timely manner.
(iii) Any party hereto becoming a successor Operator
shall thereupon succeed to all duties, powers, obligations,
rights and authorities conferred upon the Operator in the
newly executed Operating Agreement and herein with regard to
the operation of the Facility.
9.7. TRANSACTIONS WITH AFFILIATES. Notwithstanding any other provisions of
this Agreement, the following provisions and restrictions shall govern with
respect to any transactions between the Partnership and the Partners or their
Affiliates:
9.7.1. ACQUIRING ASSETS. The Partnership shall not acquire any
property or assets from a Partner or any Affiliate of a Partner,
except as to the Operator to the extent allowed pursuant to the
terms of Exhibit A (Accounting Procedure), unless the terms of the
transaction are approved by a majority of all the other Partners.
9.7.2. TRANSFERRING ASSETS. The Partnership shall not transfer any
asset to a Partner or any Affiliate of a Partner except pursuant to
Section 9 herein or Exhibit A.
9.7.3. CONTRACTS WITH AFFILIATES. The Partnership shall be entitled
to engage in any transaction related to its business with the
Partners or Affiliates of the Partners, provided that Partners
owning a majority of all Percentage Interests held by disinterested
Partners (i.e., those who are not directly or through any of their
Affiliates a party to the transaction being reviewed) shall approve
the terms, conditions and fees for such services or transactions.
9.7.4. COMPENSATION TO PARTNERS. Except as otherwise provided in
this Agreement, all agreements regarding services for which the
Partners or any Affiliate is to receive compensation from the
Partnership or with respect to partnership activities shall be
embodied in written contracts which precisely describe the services
to be rendered and all compensation to be paid.
10. INDEMNITIES AND INSURANCE.
10.1. DEFINITIONS. For the purposes of this Section 10, "Partner",
"Partnership", "Operator" and "Affiliate" will be deemed to include their
respective officers, directors, agents and employees.
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10.2. OBLIGATIONS OF PARTNER. No Partner shall be held individually
responsible or liable for damage arising out of:
10.2.1. Breach of this Agreement by another Partner;
10.2.2. Misrepresentation by another Partner;
10.2.3. Anything done or omitted to be done through the gross
negligence or willful misconduct of another Partner.
10.2.4. Any activity engaged in by another Partner outside the
ordinary course of the business of the Partnership.
To the extent that a Partner's conduct falls within the list herein enumerated,
that Partner agrees to indemnify and hold harmless and defend each of the other
Partners and their Affiliates and the Partnership from and against all claims,
loss, damage, demand, liability, obligations, or rights of actions on account
thereof.
10.3. INDEMNITY TO MANAGING GENERAL PARTNER NOTWITHSTANDING ANYTHING IN
THIS AGREEMENT TO THE CONTRARY, THE PARTNERSHIP AND EACH PARTNER, AS TO ITS
PERCENTAGE INTEREST IN THE PARTNERSHIP, HEREBY SPECIFICALLY AGREES THAT MANAGING
GENERAL PARTNER SHALL NOT BE LIABLE FOR, AND RELEASES MANAGING GENERAL PARTNER
FROM AND AGREES TO INDEMNIFY AND HOLD HARMLESS MANAGING GENERAL PARTNER FROM
AND AGAINST ANY AND ALL CLAIMS, WHETHER FINANCIAL OR OTHERWISE, IN ANY WAY
ARISING OUT OF, IN CONNECTION WITH, OR INCIDENT TO THE OPERATION OF THE
FACILITY, INCLUDING, BUT NOT LIMITED TO, (I) ANY VIOLATION OR ALLEGED VIOLATION
OF ANY APPLICABLE LAWS, INCLUDING ENVIRONMENTAL LAWS; (II) ANY INJURY TO OR
DEATH OF ANY PERSONS OR LOSS OF ANY PROPERTY; AND (III) ALL CLAIMS ARISING OUT
OF ANY CONTRACTS OR AGREEMENTS, INCLUDING BUT NOT LIMITED TO INDEMNITY
OBLIGATIONS ASSUMED BY THE MANAGING GENERAL PARTNER. IN ALL CASES DESCRIBED
ABOVE, THE PARTNERSHIP'S AND EACH PARTNER'S OBLIGATION TO INDEMNIFY AND HOLD THE
MANAGING GENERAL PARTNER HARMLESS SHALL APPLY WHETHER OR NOT ANY SUCH CLAIMS
SHALL ARISE IN WHOLE OR IN PART FROM ANY SOLE, JOINT OR CONCURRENT FAULT OR
NEGLIGENCE OF THE MANAGING GENERAL PARTNER, OR ANY OF ITS CONTRACTORS, PROVIDED,
HOWEVER, THAT THE PARTNERSHIP AND EACH PARTNER SHALL NOT BE REQUIRED TO RELEASE,
INDEMNIFY OR HOLD HARMLESS THE MANAGING GENERAL PARTNER FROM ANY CLAIMS ARISING
OUT OF, ATTRIBUTABLE TO, IN CONNECTION WITH OR INCIDENT TO ANY GROSS
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NEGLIGENCE, FRAUD OR WILLFUL MISCONDUCT OF THE MANAGING GENERAL PARTNER, THE
OPERATOR OR THEIR RESPECTIVE CONTRACTORS. THE FOREGOING RELEASE AND INDEMNITY
APPLIES TO ACTS OR OMISSIONS OF THE MANAGING GENERAL PARTNER WITH RESPECT TO
BUSINESS DECISIONS PERTAINING TO THE FACILITY.
10.4. INSURANCE. Each Partner shall maintain its own insurance against its
portion of the risks attendant to the ownership and operation of the Property.
Each Partner shall maintain, at such Partner's expense, at all times during the
term of this Agreement the insurance coverage set forth below with companies
satisfactory to the Management Committee with full policy limits applying, but
not less than, as stated. The minimum insurance coverage shall be as follows:
(a) Auto Liability, including employer's non-owned coverage, with
minimum limits of $1,000,000:
(b) General Liability coverage with minimum limits of $1,000,000
bodily injury and property damage each and in the aggregate to
include broad form property damage coverage;
(c) Umbrella Liability coverage with limits of at least
$5,000,000; and
(d) Property loss coverage in an amount equal to a percentage of
the replacement value of the Property equal to such Partner's
Percentage Interest.
Each policy shall be endorsed to provide waiver of subrogation rights in favor
of the Partnership and each Partner. Each Partner agrees to contribute to the
Partnership proceeds of its insurance to pay any losses of the Partnership that
would have been covered had the Partnership maintained its own policies of that
same type and coverage. Each Partner may self-insure as to the risks that would
otherwise be covered by the above types of coverage, but shall be obligated to
pay and contribute to the Partnership amounts that would have been payable under
industry standard form policies for such coverages up to the amounts set forth
above. Provided, however, no Partner shall be obligated to pay insurance
proceeds or contribute to the Partnership any amounts as to casualty losses
within the scope of Section 8.6.6 above unless and until the Management
Committee approves the rebuilding or repair of the effected portions of the
facilities.
10.5. POLICY REQUIREMENTS. With respect to the insurance obtained by the
Partners as provided in Section 10.4 above, such insurance shall include the
following:
(a) A requirement that the insurer provide the Partnership with
thirty (30) days written notice prior to the effective date of
any cancellation of or material change to any such insurance;
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(b) Each such insurance policy shall name the Partnership and each
Partner as additional insureds with respect to the operation
of the Facility and shall be primary to and not in excess of
or contributory with any other insurance available to the
Partnership or each Partner.
10.6. THIRD PARTIES. It is not the intention of the Partners to release
from liability any third party with whom the Managing General Partner
contracts for the performance of the carrying out of its obligations in terms
of this Agreement. The provisions of this Article 10 are not made for the
benefit of any person or entity other than the Partnership, the Partners and
their Affiliates.
10.7. Notice. The indemnified Party shall promptly give notice to the
indemnifying Party of any CLAIMS loss, damage, demands, liabilities, obligations
or rights of action for which such Party seeks indemnity.
11. TRANSFERABILITY OF PERCENTAGE INTERESTS.
11.1. TRANSFERS TO AFFILIATES. A Partner may, at any time upon written
notice to the Partnership, transfer all or any part of its Percentage Interest
to any Affiliate or Affiliates. After complying with the requirements of Section
11.5, any Affiliate transferee shall automatically become a Partner in
accordance with the provisions of this Agreement without any requirement of an
affirmative vote by the other Partners.
11.2. TRANSFERS TO PARTIES OTHER THAN AFFILIATES. Subject to the Partners'
Right of First Refusal contained in Section 11.3, a Partner may transfer all or
any part of its total Percentage Interest to one or more parties other than
Affiliates upon receiving the written consent to that transfer from all of the
other Partners. The other Partners agree that they will not unreasonably
withhold written consent to any such transfer. After complying with the
requirements of Section 11.5, each transferee shall thereafter be a Partner for
all purposes of this Agreement.
11.3. RIGHT OF FIRST REFUSAL. If a Partner desires to dispose of all or
some of its Percentage Interest in the Partnership ("Transferring Partner") to a
non-Affiliate, then it may do so after first offering the interest to the other
Partners who hold Partnership interests of the same class as the one to be
transferred ("Qualified Partners"), and such Qualified Partners shall have a
preferential right to purchase such interest on the same terms offered by a bona
fide purchaser ready and able to purchase. The Transferring Partner shall give
written notice to the Qualified Partners, at least 45 Days prior to the
effective date of such disposition, specifying the interest, the price and terms
of sale, the identity of the proposed purchaser and attaching a good faith
letter of intent between the Transferring Partner and the proposed purchaser
containing the material terms and conditions of the sale. Each of the Qualified
Partners shall have a period of 60 Days after the receipt of the notice to
exercise its option to purchase the interest on the terms and conditions set
forth in the letter of intent or similar
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document. If any of the Qualified Partners wishes to exercise its option under
this Section it shall do so by giving written notice to the Transferring Partner
and each of the other Partners within the 60-Day period. If more than one of the
Qualified Partners exercises their options under this Section, the Percentage
Interest being transferred shall be divided and sold to each of the exercising
Qualified Partners in shares proportional to each such Qualified Partner's
Percentage Interest. If the Transferring Partner has not completed said sale
within 120 Days following the expiration of the 60 Day period, then the
preferential rights of the Qualified Partners shall be considered as revived and
the interest shall have to be re-offered to the Qualified Partners by the
Transferring Partner in accordance with this Section. The rights granted to
Partners under this Section shall apply to each and every transfer of all or any
portion of any Percentage Interests other than to Affiliates of a Partner, and
such rights shall apply regardless of whether prior conveyances of that same or
other Percentage Interests have occurred without any Partners exercising their
preferential rights hereunder and these rights shall not be deemed waived as to
Percentage Interests held by new Partners or transferees of any of the original
Partners due to the other Partner or Partners failing to exercise same as to any
prior transfers, including the transfer to such new Partner or transferee.
11.4. CHANGES IN CONTROL. A change in the ultimate parent company of a
Partner, or the merger or sale thereof to a previously unrelated third party,
shall not be considered a transfer of the Percentage Interest by the affected
Partner and the other Partner's rights under Section 11.3 above shall not be
considered to be activated or applicable.
11.5. GENERAL CONDITIONS OF TRANSFERS. Every transfer, assignment or other
disposition of all or any part of a Partner's Percentage Interest under any
provision of this Agreement shall be conditioned upon its being effective only
when the party receiving that Percentage Interest agrees in writing to be bound
by this Agreement and to assume all obligations, liabilities and duties with
respect to that Percentage Interest to which the prior holder was bound and that
the transfer, assignment or other disposition shall be conditioned in the case
of a transfer to an Affiliate that the transferor shall remain responsible, as a
guarantor, for compliance by the transferee with the requirements of this
Agreement.
11.6. Notwithstanding anything to the contrary herein contained, no
Partner shall be permitted to transfer all or any portion of his interests
(except involuntary to his personal representative by operation of law) if in
the opinion of the tax advisors normally employed by the Partnership, it is more
likely than not that such transfer will terminate the Partnership for federal
income tax purposes under Code Section 708(b)(1)(B). Any Partner proposing to
make a transfer otherwise permitted under this Agreement of all or any portion
of its Percentage Interest shall give notice of the proposed transfer to the
Partnership at least forty-five (45) business days prior to the time of the
proposed transfer. If, within such period, the Partnership does not obtain and
deliver such an opinion to the Partner proposing to make such transfer, the
proposed transfer may be consummated in the manner described in the
aforementioned notice to the Partnership. Any attempted transfer in violation of
the conditions set forth herein shall be null and void AB INITIO and
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the Partner making or attempting to make such a prohibited transfer shall
indemnify and hold the Partnership and each other Partner wholly and
completely harmless from any cost, liability, or damage (including any
increase in their respective federal and state tax liabilities) resulting
therefrom.
12. WINDING UP AND TERMINATION OF THE PARTNERSHIP.
12.1. EVENTS REQUIRING WINDING UP. The Partnership shall be wound up and
terminated upon the earliest of the following events:
12.1.1. The expiration of the Term pursuant to the terms of Section
1.6; or
12.1.2. The written demand of one or more Partners controlling
ninety percent (90%) or more of the Percentage Interests;
12.1.3. Upon the removal, withdrawal, bankruptcy, insolvency, or
dissolution of a Partner unless, at the time, there are at least two
other Partners; or
12.1.4. Sale or other disposition of all or substantially all of the
Property;
12.1.5. Entry of an order of judicial dissolution under the Act;
12.1.6. Failure of any Partner to deliver or cause to be delivered
its Initial Investment within fifteen (15) days after the Effective
Date.
12.2. PARTNER'S PURCHASE OF PROPERTY. The Partners or any Affiliate may
bid in any open bidding process held by a liquidator and, if its bid is
determined to be the best, it may purchase any of the Property upon
dissolution. The liquidator shall notify each Partner in writing of any
offers it receives to purchase any of the Property. Each Partner shall have
the right to purchase any Partnership Property for the same price and on the
same terms and conditions offered in writing by any third party and which are
acceptable to the liquidator in preference to such third party. The
preferential purchase rights available to the Partners shall be exercised by
written election delivered to the liquidator within thirty (30) business days
after such Partner has received notice of the offer and the failure to
respond to a notice of a third party offer shall be deemed a waiver of the
rights under this Section 12.2.
12.3. TIME OF LIQUIDATION. A reasonable time shall be allowed for the
orderly liquidation of the Property and the discharge of liabilities to
creditors so as to enable the Partners to minimize the normal losses
attendant upon a liquidation.
12.4. NO LIABILITY FOR RETURN OF CAPITAL. No Partner shall be personally
liable for the return of all or any part of the contributions of any other
Partner to the Partnership. Any such
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return shall be made solely from the Partnership Property.
12.5. LIQUIDATION PROCEDURE.
12.5.1. Liquidation, winding up and termination of the Partnership
will commence upon dissolution and be conducted and supervised by
the Managing General Partner, unless dissolution is brought about by
an event referred to in Section 12.1.3 where the Partner involved is
the Managing General Partner, in which case liquidation, winding up
and termination shall be conducted and supervised by a liquidating
trustee approved by all the remaining Partners, or by a liquidating
trustee selected by the all of the members of the Management
Committee. It is expressly recognized that the General Partner, in
conducting a liquidation, winding-up and termination of the
Partnership under this Section, shall be entitled to sell all or any
part of the Property to itself or to a Limited Partner in accordance
with Section 12.2, except to the extent all the Partners agree to
distribute some or all of the Property to one or more Limited
Partners. The General Partner or other liquidating trustee in
exercising is obligations under this Section will have all rights
and powers with respect to the Property and liabilities of the
Partnership, including the right to transfer such Property and
settle liabilities and will proceed with reasonable promptness to
liquidate the Partnership.
12.5.2. Dissolution of the Partnership shall be effective on the Day
on which the event occurs giving rise to the dissolution, but the
Partnership shall not terminate until the Certificate of Limited
Partnership filed under the Act shall have been canceled and the
Property shall have been distributed as provided in this Section.
Notwithstanding the dissolution of the Partnership prior to the
termination of the Partnership, the business of the Partnership, as
such, shall continue to be governed by this Agreement. Upon
dissolution, the Managing General Partner or, if there is none, the
liquidating trustee approved by all of the members of the Management
Committee shall liquidate the Property through one or more sales by
or on behalf of the Partnership under this Section, apply and
distribute the proceeds from such sales and distribute the Property
as provided in Section 12.6, and cause the cancellation of the
Partnerships Certificate of Limited Partnership.
12.6. NEGATIVE CAPITAL ACCOUNT BALANCES. No Partner shall have any
obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership.
13. ALTERNATIVE DISPUTE RESOLUTION
(a) COVERED DISPUTES - Any dispute, controversy or claim (whether
sounding in contract, tort or otherwise) arising out of or relating to this
Agreement, including, without limitation, the meaning of its provisions, or
the proper performance of any of its terms by either Party, its breach,
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termination or invalidity ("Dispute") will be resolved in accordance with the
procedures specified in this Section, which will be the sole and exclusive
procedure for the resolution of any such Dispute, except that a Party,
without prejudice to the following procedures, may file a complaint to seek
preliminary injunctive or other provisional judicial relief, if in its sole
judgment, that action is necessary to avoid irreparable damage or to preserve
the status quo. Despite the filing of any such injunctive or other
provisional judicial relief, the Parties will continue, subject to Subsection
(j) below, to participate in the applicable procedures specified in this
Section. The obligation to participate in such applicable procedures shall
not require either Party to participate in the negotiation between executives
procedures set forth in Subsection (c) below or the mediation procedures set
forth in Subsection (d) below if either Party determines, in its sole
discretion, that such procedures would be futile.
(b) INITIATION OF PROCEDURES. Either Party desiring to initiate the
dispute resolution procedures set forth in this Section with respect to a
Dispute not resolved in the ordinary course of business (the "Initiating
Party") must give written notice of the Dispute (the "Dispute Notice") to
the other Party (the "Non-Initiating Party"). The Dispute Notice shall
include (i) a statement of that Party's position and a summary of arguments
supporting that position, and (ii) the name and title of the executive who
will represent that Party, and of any other person who will accompany the
executive, in the negotiations under Subsection (c) below.
(c) NEGOTIATION BETWEEN EXECUTIVES - If one Party has given a Dispute
Notice under Subsection (b) above, the Parties may attempt in good faith to
resolve the Dispute within forty-five (45) days following receipt of the
Dispute Notice by the Non-Initiating Party by negotiation between executives
who have authority to settle the Dispute and who are at a higher level of
management than the persons with direct responsibility for administration of
this Agreement or the matter in Dispute. Within fifteen (15) days after
receipt of the Dispute Notice, the Non-Initiating Party may submit to the
other a written response. If given, the response will include (i) a statement
of that Party's position and a summary of arguments supporting that position,
and (ii) the name and title of the executive who will represent that Party
and of any other person who will accompany the executive. If such a response
is given by the Non-Initiating Party, within forty-five (45) days following
receipt of the Dispute Notice by the Non-Initiating Party, the executives of
both Parties will meet at a mutually acceptable time and place, and
thereafter, as often as they reasonably deem necessary, to attempt to resolve
the Dispute.
(d) MEDIATION - If the Dispute has not been resolved by negotiation under
the Subsection (c) above within forty-five (45) days following receipt of the
Dispute Notice by the Non-Initiating Party or if the Non-Initiating Party fails
to respond within the required fifteen (15) day period, either Party may
initiate the mediation procedure of this Subsection by giving written notice to
the other Party ("Mediation Notice"). The Parties will endeavor to settle the
Dispute by mediation within sixty (60) days of the Mediation Notice under the
then current Center for Public Resources ("CPR") Model Mediation Procedure for
Business Disputes. If the Parties have not agreed upon a mediator within
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seven (7) days after the Mediation Notice, either Party may request CPR
assistance in the selection of a mediator under its guidelines. Unless
otherwise agreed to by the Parties, no discovery shall be allowed during the
sixty (60) day mediation period. If both Parties elect to participate in the
mediation procedures set forth herein, the cost of the mediator will be
shared equally between the Parties, unless otherwise agreed to in writing by
the Parties. If one Party elects not to participate in the mediation
procedures, neither Party shall bear any cost associated with such procedure,
other than costs that each Party may have incurred in connection therewith
which shall be borne by the Party that incurred such costs.
(e) ARBITRATION. If the Dispute has not been resolved by mediation
under the Subsection (d) above within the required sixty (60) day period or
if either Party fails and/or refuses to participate in such mediation
procedures, either Party may request that the matter be resolved through
arbitration by submitting a written notice (the "Arbitration Notice") to the
other. Any arbitration that is conducted hereunder shall be governed by the
Federal Arbitration Act, 9 U.S.C. Section 1 ET SEQ., as amended, and will not
be governed by the arbitration acts, statutes, or rules of any other
jurisdiction.
(f) ARBITRATION PROCEDURE. The Arbitration Notice shall name the
noticing Party's arbitrator and shall contain a statement of the issue(s)
presented for arbitration. Within fifteen (15) Days of receipt of an
Arbitration Notice, the other Party shall name its arbitrator by written
notice to the other and may designate any additional issue(s) for
arbitration. The two named arbitrators shall select the third arbitrator
within fifteen (15) Days after the date on which the second arbitrator was
named. Should the two arbitrators fail to agree on the selection of the third
arbitrator, either Party shall be entitled to request the Senior Judge of the
United States District Court for the Southern District of Texas to select the
third arbitrator. Should either Party fail and/or refuse to name its
arbitrator within the required fifteen (15) day period, the other Party shall
be entitled to request the Senior Judge of the United States District Court
for the Southern District of Texas to select the arbitrator for such Party.
All arbitrators shall be qualified by education or experience within the
natural gas liquids portion of the energy industry to decide the issues
presented for arbitration. No arbitrator shall be: a current or former
director, officer, or employee of either Party or its Affiliates; an attorney
(or member of a law firm) who has rendered legal services to either Party or
its Affiliates within the preceding three Years; or an owner of any of the
common stock of either Party, or its Affiliates.
(g) ARBITRATION HEARING. The three arbitrators shall commence the
arbitration proceedings within twenty-five (25) Days following the
appointment of the third arbitrator. The arbitration proceedings shall be
held at a mutually acceptable site and if the Parties are unable to agree on
a site, the arbitrators shall select the site. The arbitrators shall have the
authority to establish rules and procedures governing the arbitration
proceedings, including, without limitation, rules concerning discovery. Each
Party shall have the opportunity to present its evidence at the hearing. The
arbitrators may call for the submission of pre-hearing statements of position
and legal authority, but no post-hearing briefs shall be submitted. The
arbitration panel shall not have the authority to award
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incidental, consequential, special, punitive or exemplary damages. In
addition, if an issue under consideration is limited to a determination of an
amount of money owed by one Party to the other, each Party shall submit to
the arbitration panel a final offer of its proposed resolution of the
dispute. The arbitration panel shall be charged to select from the two
proposals the one which the panel finds to be the most reasonable and
consistent with the terms and conditions of this Agreement, and the
arbitration panel shall not average the Parties' proposals or otherwise craft
its own remedy. All evidence submitted in an arbitration proceeding,
transcripts of such proceedings, and all documents submitted by the Parties
in an arbitration proceeding shall be kept confidential and shall not be
disclosed to any third Party by either Party hereto.
(h) ARBITRATION DECISION AND COSTS. The decision of the arbitrators or
a majority of them, shall be in writing and shall be final and binding upon
the Parties as to the issue(s) submitted. The cost of the hearing shall be
shared equally by the Parties, and each Party shall be responsible for its
own expenses and those of its counsel or other representatives. Each Party
hereby irrevocably waives, to the fullest extent permitted by law, any
objection it may have to the arbitrability of any such disputes,
controversies or claims and further agrees that a final determination in any
such arbitration proceeding shall be conclusive and binding upon each Party.
(i) ENFORCEMENT OF AWARD. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. The prevailing
Party shall be entitled to reasonable attorneys' fees in any contested court
proceeding brought to enforce or collect any award of judgment rendered by
the arbitrators.
(j) TOLLING AND PERFORMANCE. Except as otherwise provided in this
Article 13, all applicable statutes of limitation and defenses based upon the
passage of time and all contractual limitation periods specified in this
Agreement, if any, will be tolled while the procedures specified in this
Article 13 are pending. The Parties will take all actions to effectuate
necessary to effectuate the tolling of any applicable statute of limitation
or contractual limitation periods. All deadlines specified herein may be
extended by mutual written agreement of the Parties. Each Party is required
to continue to perform its obligations under this Agreement pending final
resolution of any Dispute, unless to do so would be impossible or
impracticable under the circumstances. Notwithstanding the foregoing, the
statute of limitations of the State of Texas applicable to the commencement
of a lawsuit will apply to the commencement of an arbitration under this
Agreement, except that no defenses will be available based upon the passage
of time during any negotiation or mediation called for by the preceding
Subsections of this Section.
14. GENERAL PROVISIONS.
14.1. NOTICES. Except as otherwise provided herein, any notice, offer,
request, instruction, correspondence or other communication which shall be
given to any Partner in connection with the business of this Partnership
shall be duly given if and when reduced to writing and delivered
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personally or mailed by registered or certified mail, postage prepaid and
return receipt requested, or facsimile to the Partner's address indicated
below:
FOR GENERAL PARTNER:
To: DOWNSTREAM ENERGY VENTURES CO., L.L.C.
Attention: Vice President, Asset Marketing and Services
At: 1000 Louisiana, Suite 5800
Houston, Texas 77002
Phone: (713) 507-3843
Facsimile: (713) 767-8286
FOR AMOCO LIMITED PARTNER:
To: Amoco MB Fractionation Company
Attention: Manager, NGL Planning and Optimization
Mail Code 1102
At: 200 East Randolph Drive
Chicago, Illinois 60601
or: P.0. Box 87707
Chicago, Illinois 60681-0707
Phone: (312) 856-6730
FAX: (312) 616-0624
FOR WARREN LIMITED PARTNER:
To: WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
Attention: Vice President, Asset Marketing and Services
At: 1000 Louisiana, Suite 5800
Houston, Texas 77002
Phone: (713) 507-3843
Facsimile: (713) 767-8286
or at such other address as a Partner shall designate by written notice to
the others. A notice sent by facsimile shall be deemed to have been receive
by the close of the first Business Day following the Day on which it was
transmitted and confirmed by transmission report or such earlier time as
confirmed orally or in writing by the receiving Party. Notice by U. S. Mail,
whether by U. S. Express Mail, registered mail or certified mail, or by
overnight courier shall
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be deemed to have been received by the close of the second Business Day
after the Day upon which its was sent, or such earlier time as is
confirmed orally or in writing by the receiving Party. Any Partner may
change its address or facsimile number by giving notice of such change in
accordance with this provision.
14.2. SURVIVAL OF RIGHTS. This Agreement shall be binding upon and
inure to the benefit of the Partners and their authorized successors and
assigns.
14.3. AMENDMENT AND WAIVER. This Agreement may be amended only by a
written agreement executed by all of the Partners. No waiver by either Party
of any default under this Agreement shall be deemed to be a waiver of any
future default, whether of a like or a different character. No waiver shall
be effective unless made in writing and signed by the Party to be charged
with such wavier.
14.4. AGREEMENT IN COUNTERPARTS. This Agreement, or any amendment
thereto, may be executed in multiple counterparts, each of which shall be
deemed an original Agreement.
14.5. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED, CONSTRUED AND
ENFORCED 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 LAW OF ANOTHER JURISDICTION.
14.6. ADDITIONAL DOCUMENTS. Each Partner, upon the request of the other
Partners, agrees to perform any further acts and execute and deliver any
documents which may be reasonably necessary to carry out the provisions of
this Agreement.
14.7. SEVERABILITY. This Agreement and the operations hereunder shall
be subject to the valid and applicable federal and state laws and the valid
and applicable orders, laws, local ordinances, rules, and regulations of any
local, state or federal authority having jurisdiction, but nothing contained
herein shall be construed as a waiver of any right to question or contest any
such order, laws, rules, or regulations in any forum having jurisdiction in
the premises. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under the present or future laws effective during
the term of this Agreement, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement, and
(iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of
such illegal, invalid, or unenforceable provision, there will be
added automatically as a part of this Agreement a provision similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and
as may be legal, valid, and enforceable. If a
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provision of this Agreement is or becomes illegal, invalid, or unenforceable
in any jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement
nor the validity or enforceability in other jurisdictions of that or any
other provision of this Agreement.
14.8. SECTIONS, EXHIBITS AND SCHEDULES. All exhibits and schedules or
descriptions referred to in this Agreement are expressly incorporated herein
by reference as if set forth in full, whether or not attached hereto. All
references to "Articles," "Sections" and "Exhibits" in this Agreement shall
be construed to be references to the Sections, Article, and Exhibits
comprising this Agreement or which are attached hereto, unless otherwise
specifically stated to the contrary.
14.9. ATTORNEYS' FEES. In the event litigation is commenced to enforce
any of the provisions of this Agreement, to recover damages for breach of any
of the provisions of this Agreement, or to obtain declaratory relief in
connection with any of the provisions of this Agreement, the prevailing Party
shall be entitled to recover reasonable attorneys' fees and costs if such
action proceeds to judgment. Under no circumstances, however, shall any
Partner or its Affiliates be liable for consequential or punitive damages
arising for a breach of this Agreement.
14.10. POWER OF ATTORNEY.
14.10.1. MANAGING GENERAL PARTNER. Each Limited Partner hereby
constitutes and appoints the Managing General Partner as its true
and lawful agent and attorney-in-fact, with full power of
substitution, to make, execute, sign, acknowledge and file in its
name, place and stead;
(1) Any certificate or instrument that may be required or
appropriate to be filed by the Partnership in order to qualify the
Partnership to do business as a Partnership in any other state;
(2) Any and all amendments or modifications of the instruments
described in (1) immediately above; and
(3) All documents or instruments that may be required or
appropriate to effectuate the continuation of the Partnership
(including tax returns and reports, subject to the provisions of
Section 8) or the dissolution and termination of the Partnership, as
from time to time amended, all in accordance with the terms of this
Agreement.
14.10.2. OPERATOR. Each Limited Partner hereby expressly agrees that
in accordance with its appointment of the Managing General Partner
as its attorney-in-fact under the terms of Section 14.10, with full
power of substitution, that the
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Managing General Partner may in turn appoint the Operator as its
substitute to make, execute, and sign any contracts or agreements
for and on behalf of the Partnership that the Operator is authorized
to make and enter into under the terms of this Agreement and the
Operating Agreement.
14.10.3. DURATION. The foregoing power of attorney of each Limited
Partner shall be irrevocable, and it shall survive and shall not be
affected by the subsequent dissolution, bankruptcy or termination of
any Limited Partner, and it shall extend to such Limited Partner's
permitted successors and assigns. Each Limited Partner hereby waives
any and all defenses that may be available to contest, negate or
disaffirm the actions taken by the General Partner as its
attorney-in-fact, or the Operator as the General Partner's
substitute in that capacity, under this power in accordance with
this Agreement.
14.10.4. RELIANCE. Any Person other than a Partner may relay on the
power of attorney granted in this Section without inquiry into this
Agreement or compliance with it, regardless of whether the use of
such power is in accordance with this Agreement; provided, that the
General Partner or Operator shall be liable to the Partnership and
severally to each Limited Partner for any grossly negligent or
willful misuse of such power not in accordance with the other terms
of this Agreement.
14.11. PRINCIPLES OF CONSTRUCTION AND INTERPRETATION. In construing
this Agreement, the following principles shall be followed:
(A) no consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this Agreement:
(B) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate:
(C) the word "includes" and its syntactical variants mean "includes,
but is not limited to" and corresponding syntactical variant expressions:
and
(D) the plural shall be deemed to include the singular and vice
versa, as applicable.
14.12. SETOFFS AND COUNTERCLAIMS. Except as otherwise provided herein,
each Party reserves to itself all rights, set-offs, counterclaims, and other
remedies and/or defenses which that Party is or may be entitled to arising
from or out of this Agreement or as otherwise provided by law.
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IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
Effective Date.
DOWNSTREAM ENERGY VENTURES CO.,
L.L.C,
By: /s/ William E. Puckett
------------------------------------
William E. Puckett, Vice President
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: /s/ Stephen A. Furbacher
------------------------------------
Stephen A. Furbacher, President
AMOCO MB FRACTIONATION COMPANY
By: /s/ A. Boyd Anderson
------------------------------------
A. Boyd Anderson, President
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EXHIBIT A
TO LIMITED PARTNERSHIP AGREEMENT FOR
CEDAR BAYOU FRACTIONATORS, L.P.
ACCOUNTING PROCEDURE
I. GENERAL PROVISIONS
1. As used in this Accounting Procedure, the following terms have the
meaning set forth below:
"Technical Employees" shall mean those employees of Operator having
special and specific engineering or technical skills, including but not
limited to process, project, design and environmental engineers, and
whose primary function is the handling of specific operating conditions
and problems.
"Personal Expenses" shall mean Travel Expenses and other reasonable
reimbursable expenses.
"Travel Expenses" shall mean air fare, lodging, meals, laundry,
business related telephone calls, taxis, car rental, tolls, parking and
any other reasonable and necessary travel-related expenses.
"Controllable Material" shall mean Material which at the time is so
classified in the Material Classification Manual as most recently
recommended by the Council of Petroleum Accountants Societies.
2. CONFLICT WITH AGREEMENT
In the event of a conflict between the provisions of this Accounting
Procedure and the provisions of the Agreement to which this Accounting
Procedure is attached, the provisions of the Agreement shall control.
3. APPROVAL BY MANAGEMENT COMMITTEE
When an approval or other agreement of the Parties is expressly
required under this Accounting Procedure and if the Agreement to which
this Accounting Procedure is attached contains no contrary provision in
regard thereto, Operator shall notify and obtain the approval of the
Management Committee.
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II. DIRECT CHARGES
Operator shall charge the Account for the following items:
1. LABOR
A. (1) Salaries and wages of Operator's employees directly employed
at the Facility (even if such employees are also
contemporaneously employed at other facilities of Operator in
the Mont Belvieu area, including Operator's Warrengas Terminal
and Operator's Mont Belvieu Terminal) in the conduct of the
Operations.
(2) Salaries and wages of Operator's Technical Employees while
performing work related to a potential Capital Project
directly pertaining to the Facility, while working either in
Operator's Houston headquarters office or at the Facility,
subject to the limitations set forth in Article 3.2(f) of the
Agreement.
B. Operator's cost of holiday, vacation, sickness and disability
benefits and other customary allowances paid to employees whose
salaries and wages are chargeable to the Account under Paragraph
1.A(1) of this Section II. Such costs under this Paragraph 1.B may
be charged on a "when and as paid basis" or by "percentage
assessment" on the amount of salaries and wages chargeable to
the Account under Paragraph 1.A(1) of this Section II. If
percentage assessment is used, the rate shall be based on the
Operator's cost experience.
C. Expenditures or contributions made pursuant to assessments
imposed by Governmental Authority which are applicable to
Operator's costs chargeable to the Account under Paragraphs 1.A(1)
and 1.B of this Section II.
D. Personal Expenses of those employees whose salaries and wages
are chargeable to the Account under Paragraph 1.A(1) and 1.A(2)
of this Section II.
E. Training for those employees whose salaries and wages are
chargeable to the Account under Paragraph 1.A(1) of this
Section II.
2. EMPLOYEE BENEFITS
Operator's actual costs of established plans for employees' group
life insurance, hospitalization,
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pension, retirement, stock purchase, thrifts, bonus, and other
benefit plans of a like nature, applicable to Operator's labor cost
chargeable to the Account under Paragraph 1.A(1) of the this
Section II.
3. MATERIAL
Materials purchased or furnished by Operator for the Facility as
provided under Section IV of this Accounting Procedure.
4. TRANSPORTATION
Transportation of Material, but subject to the following limitations:
A. If Material is moved to the Facility from Operator's warehouse
or other properties, no charge shall be made to the Account
for a distance greater than the distance from the nearest
reliable supply store where like Material is normally
available, or railway receiving point nearest the facility,
unless agreed to by the Parties.
B. If surplus Material is moved to Operator's warehouse or other
storage point, no charge shall be made to the Account for a
distance greater than the distance to the nearest reliable
supply store where like Material is normally available, or
railway receiving point nearest the Facility, unless agreed to
by the Parties. No charge shall be made to the Account for
moving Material to other properties belonging to Operator,
unless agreed to by the Parties.
C. In the application of Paragraphs A and B above, the option to
equalize or charge actual trucking cost is available when the
actual charge is $400 or less excluding accessorial charges.
The $400 will be adjusted to the amount most recently
recommended by the Council of Petroleum Accountants Societies.
5. CONTRACT SERVICES
The cost of contract services of any kind, including those for
technical services, consulting services, maintenance and equipment.
6. EQUIPMENT FURNISHED BY OPERATOR
A. Operator shall charge the Account for use of Operator-owned
equipment, including, but not limited to, cars, trucks, cranes
or "cherry pickers", laboratory instruments, machine,
electrical and/or meter shop tools or instruments, and fire
fighting equipment
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and training facilities, as may be used for the benefit of the
Facility from time to time, at rates commensurate with
Operator's actual costs of ownership and operation, not to
exceed the average commercial rates currently prevailing in
the immediate area of the Facility. Such rates may include
labor, maintenance, repairs, other operating expense,
insurance, taxes, depreciation and interest on gross investment
(less accumulated depreciation) not to exceed the prime rate
charged by Wells Fargo Bank, San Francisco per annum and an
element of the estimated cost to dismantle and abandon the
equipment.
B. In lieu of charges in Paragraph 6A above, Operator may elect
to use average commercial rates prevailing in the immediate
area of the Facility. For automotive equipment, Operator may
elect to use rates published by the Petroleum Motor Transport
Association.
7. DAMAGES AND LOSSES TO FACILITY
All costs or expenses necessary for the repair or replacement of all
or any portion of the Facility made necessary because of damages or
losses incurred by fire, flood, storm, theft, accident, or other
causes. Operator shall furnish the Partnership with written notice
of damages or losses incurred as soon as practicable after a report
thereof has been received by Operator.
8. LEGAL EXPENSES, SETTLEMENTS AND JUDGMENTS
Expense of handling, investigating and settling Claims, discharging
liens, payment of judgments, and amounts paid for settlement of
Claims, including but not limited to amounts paid to third persons
for personal injury, death or property damage, and fines levied by
a Governmental Authority. No charge for services of Operator's legal
staff or fees or expense of outside attorneys shall be made unless
previously agreed to by the Partnership.
9. TAXES
All taxes of every kind and nature assessed or levied upon or in
connection with the Facility which have been paid by the Operator
for the benefit of the Partnership.
10. INSURANCE
Net premiums paid by Operator for insurance, as provided for in
Article VI of the Agreement. In the event Operator acts as
self-insurer for Workers' Compensation and Employers' Liability,
Operator may include the risk under its self-insurance program in
providing coverage under State and Federal laws and charge the
Account at Operator's cost not to exceed manual rates.
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Operator shall also charge the Account for insurance deductibles.
11. COMMUNICATIONS
Costs of acquiring, leasing, installing, operating, repairing and
maintaining communication systems including radio and microwave
facilities serving the Facility. In the event communication facilities
systems serving the Facility are Operator-owned, charges to the Account
shall be made as provided in Paragraph 6 of this Article II.
12. OFFICE SUPPLIES
Cost of stationery and office supplies, and cleaning, repairing and
maintaining office equipment located at the Facility.
13. DATA PROCESSING
Costs of data processing expenses, computer rental and other
computer supplies used at the Facility.
14. TRAVEL EXPENSES
Travel Expenses of Operator's Houston-based headquarters personnel
traveling to, from and working at the Facility.
15. COMPLIANCE COSTS
All direct costs and expenses related to compliance with Applicable
Laws, including Environmental and Safety Laws, affecting the
Facility including costs of pollution prevention, environmental
permitting, environmental audits and surveys, and remediation
programs.
16. ABANDONMENT AND RECLAMATION
Costs incurred for abandonment of the Facility, including
dismantling, removal and restoration costs and costs required by
Governmental Authority.
17. PERMITS AND RIGHTS-OF-WAY
Costs incurred in obtaining and maintaining permits, licenses,
leases, rights-of-way and easements.
49
<Page>
'Confidential Treatment Requested'
18. AFFILIATE CHARGES
Charges for any services or Materials provided by an Affiliate of
Operator; provided, however, that such charges shall not exceed the
average prevailing commercial rate for such services or Materials.
19. UTILITIES
Costs for electrical power, water, gas and any services provided by
a utility company.
20. OTHER EXPENDITURES
Any other expenditure not covered or dealt with in the foregoing
provision of this Section II and which is incurred by Operator and
is of direct benefit to the Facility.
III. OVERHEAD
As compensation for administrative services, supervision and warehousing
costs, Operator shall receive the Overhead Fees provided for in this Section
III (the "Overhead Fees"). Such Overhead Fees shall be in lieu of the office
expenses of Operator's headquarters office currently located in Houston,
Texas (but shall not be in lieu of the office expenses of Operator's field
offices) and salaries or wages plus applicable burdens and expenses of all
personnel of Operator, except those costs, expenses and salaries directly
chargeable under Section II.
1. OPERATING OVERHEAD
Operator, in addition to the actual costs and expenses provided in
Section II, shall receive, as compensation for its administrative
overhead expense in supervising the operation and maintenance of the
Facility, which compensation shall begin upon the Effective Date, a
sum equal to twelve percent (12%) of the costs and expense provided
for in Section II of this Accounting Procedure, with the exception
of fuel and electric power obtained from an outside source. The
* maximum administrative overhead fee for 1998 shall be [REDACTED]. This
sum shall be subject to adjustment on the first Day of each calendar
year beginning in 1999, such adjustment to be computed by multiplying
the rate currently in use by percentage increase or decrease in the
average weekly earnings of Crude Petroleum and Gas Production Workers
for the last calendar year compared to the preceding year as shown by
"The Index of Average Weekly Earnings of Crude Petroleum and Gas
Production Workers" as published by the United States Department of
Labor, Bureau of Labor Statistics. Except for the employees whose
salary, wages and expenses will be direct charges in accordance with
Section II., Paragraph 1.A, the Overhead Fee,
50
<Page>
'Confidential Treatment Requested'
adjusted as aforesaid, shall be in lieu of all salaries and expenses
of all personnel employed at all offices of Operator.
2. OVERHEAD - CAPITAL PROJECTS
To compensate Operator for overhead costs incurred in connection
with a Capital Project, Operator at its sole discretion, shall
either negotiate a rate prior to the beginning of such Project, or
shall receive an Overhead Fee based on the following rates:
A. If the Operator absorbs its internal engineering, design and
drafting costs related to the project:
(1) For Capital Projects actually costing less than
* [REDACTED] of the Capital Expenditures incurred;
* (2) For Capital Projects actually costing [REDACTED] or
more, and where the Approved AFE is less than or
* equal to [REDACTED] plus [REDACTED] of that portion
* of the Approved AFE over [REDACTED]; and
* (3) For Capital Projects actually costing [REDACTED] or
* more, and where the Approved AFE is over [REDACTED]
* plus [REDACTED] of that portion of the Approved AFE
* amount over [REDACTED].
B. If the Operator is reimbursed by the Partnership for internal
engineering, design and drafting costs related to the
project:
(1) For Capital Projects actually costing less than
* [REDACTED] of the Capital Expenditures incurred;
* (2) For Capital Projects actually costing [REDACTED] or
more, and where the Approved AFE is less than or
* equal to [REDACTED] plus [REDACTED] portion of the
* Approved AFE over [REDACTED]; and
* (3) For Capital Projects actually costing [REDACTED] or
* more, and where the Approved AFE is over [REDACTED]
* plus [REDACTED] of that portion of the Approved AFE
* amount over [REDACTED].
Total cost shall mean the gross costs of any one Capital Project.
For the purpose of this paragraph, the component parts of a single
Capital Project shall not be treated separately.
On each Capital Project, Operator shall advise the Partnership in
advance which of the above options shall apply.
Expenditures subject to overhead will not be reduced by insurance
recoveries, and no other
51
<Page>
'Confidential Treatment Requested'
overhead provisions of this Section III shall apply.
IV. PRICING OF ACCOUNT MATERIAL PURCHASES,
TRANSFERS AND DISPOSITIONS
Operator is responsible for supplying Material and shall make proper
and timely charges and credits for all Material movements. Operator
shall make timely disposition of surplus Material, subject to the
approval of the Management Committee as provided for in
Article 2.3(q) of the Agreement, such disposal being made either
through sale to Operator or sale to outsiders.
1. PURCHASES
Material purchased shall be charged to the Account at the price paid
by Operator (including transportation) after deduction of all
discounts received. In case of Material found to be defective or
returned to vendor for any other reasons, credit shall be made to
the Account when adjustment has been received by the Operator.
2. TRANSFERS AND DISPOSITIONS
Material furnished to the Facility from Operator's stock and
Material transferred from the Facility or disposed of by the
Operator, unless otherwise agreed to by the Parties, shall be priced
on the following basis exclusive of cash discounts. Operator may
also charge the Account with the cost of transporting such Material.
A. New Material (Condition A)
* New Material shall be priced at [REDACTED]
B. Good Used Material (Condition B)
Material in sound and serviceable condition and suitable for
reuse without reconditioning:
(1) Material used on and moved from the Facility
* (a) At [REDACTED], as determined by Paragraph A,
if Material was originally charged to the
Account as new
52
<Page>
'Confidential Treatment Requested'
Material or
* (b) At [REDACTED], as determined by Paragraph A,
if Material was originally charged to the
Account as Condition B Material.
(2) Material not used on and moved from the Facility
* (a) At [REDACTED], as determined by Paragraph A.
(b) The cost of reconditioning, if any, shall
be absorbed by the property to which the
Material is transferred.
C. Other Used Material
(1) Condition C
Material which is not in sound and serviceable
condition and not suitable for its original function
until after reconditioning shall be priced at
* [REDACTED] as determined by Paragraph A. The cost of
reconditioning shall be charged to the Facility (if
the Material is being transferred to the Facility),
provided Condition C value plus cost of
reconditioning does not exceed Condition B value.
(2) Condition D
Material, excluding junk, no longer for its original
purpose, but usable for some other purpose shall be
priced on a basis commensurate with its use. Operator
may dispose of Condition D Material under procedures
normally used by Operator without prior approval of
the Partnership.
(3) Condition E
Junk shall be priced at prevailing prices. Operator
may dispose of Condition E Material under procedures
normally utilized by Operator without prior approval
of the Partnership.
D. Obsolete Material
Material which is serviceable and useable for its original
function but condition and/or value of such Material is not
equivalent to that which would justify a price as provided
above may be specially priced as agreed to by the Parties.
Such price should result in the Account being charged with
the value of the service rendered by such Material.
53
<Page>
'Confidential Treatment Requested'
E. Pricing Conditions
(1) Loading or unloading costs may be charged to the
* Account at the rate of [REDACTED] per hundred weight
on all tubular goods movements, in lieu of actual
loading or unloading costs sustained at the stocking
point. The above rate shall be adjusted as of the
first Day of each year following the Effective Date
by the same percentage increase or decrease used to
adjust the Overhead Fee cap in Section III. Each
year, the rated calculated shall be rounded to the
nearest cent and shall be the rate in effect until
the first Day of the next year. Such rate shall be
published each year by the Council of Petroleum
Accountants Societies.
(2) Material involving erection costs shall be charged
at applicable percentage of the current knocked-down
price of new Material.
3. PREMIUM PRICES
Whenever Material is not readily obtainable at published or listed
prices because of national emergencies, strikes or other unusual
causes over which the Operator has no control, the Operator may
charge the Account for the required Material at the Operator's
actual cost incurred in providing such Material, in making it
suitable for use, and in moving it to the Facility; provided notice
in writing is furnished to the Partnership of the proposed charge
prior to charging the Account for such Material.
4. WARRANTY OF MATERIAL FURNISHED BY OPERATOR
Operator does not warrant the Material furnished. In case of
defective Material, credit shall not be passed to the Account until
adjustment has been received by Operator from the manufacturers or
their agents.
V. INVENTORIES
The Operator shall maintain detailed records of Controllable Material.
1. PERIODIC INVENTORIES, NOTICE AND REPRESENTATION
At reasonable intervals, inventories shall be taken by Operator of
the Account Controllable Material. Written notice of intention to
take inventory shall be given by Operator to the Management
Committee at least thirty (30) days before any inventory is to begin
so that
54
<Page>
the Management Committee may be represented when any inventory is
taken. Failure of the Management Committee to be represented at an
inventory shall bind the Management Committee to accept the
inventory taken by Operator.
2. RECONCILIATION AND ADJUSTMENT OF INVENTORIES
Adjustments to the Account resulting from the reconciliation of a
physical inventory shall be made within six months following the
taking of the inventory. Inventory adjustments shall be made by
Operator to the Account for overages and shortages, but, Operator
shall be held accountable only for shortages due to lack of
reasonable diligence.
3. SPECIAL INVENTORIES
Special inventories may be taken whenever there is any sale, change
of interest, or change of Operator. It shall be the duty of the
Party selling to notify the other Party as quickly as possible after
the transfer of interest takes place. In such cases, both the seller
and the purchaser shall be governed by such inventory. In cases
involving a change of Operator, all Parties shall be governed by
such inventory.
4. EXPENSE OF CONDUCTING INVENTORIES
A. The expense of conducting periodic inventories shall be
charged to the Account.
B. The expense of conducting special inventories shall be
charged to the Party requesting such inventories, except
inventories required due to change of Operator shall be
charged to the Account.
55
<Page>
EXHIBIT B
TO THE LIMITED PARTNERSHIP AGREEMENT
OF
CEDAR BAYOU FRACTIONATORS, L.P.
INCOME TAX MATTERS
1. TAX RETURNS, PROCEEDINGS AND ELECTIONS. Tax returns, proceedings,
and elections shall be governed by the provisions of this Exhibit B as it may
be amended from time to time by a vote of the Management Committee.
(a) Downstream Energy Ventures, L.L.C., the Managing
General Partner, is designated the tax matters partner ("TMP") as defined in
Section 6231(a)(7) of the Code. The designation of TMP shall be effective
only for operations conducted by the Partners pursuant to this Agreement.
(b) The TMP shall cause to be prepared all necessary
federal, state, and local partnership income, excise, and property tax
returns and furnish a copy of the proposed federal and state income tax
returns to the Partners for their review not later than one month prior to
the due date, including extensions, for filing such returns. The TMP shall
timely file such returns and, upon the written request of a Partner, shall
provide the Partners with schedules which are consistent with the treatment
of all items on those returns. The TMP agrees to use reasonable efforts in
the preparation and filing of such tax returns but, in doing so, shall incur
no liability to any Partner with respect to such returns or any elections
relating thereto. In addition, the TMP shall furnish, within sixty (60) Days
of the close of each calendar year, estimates of the tax information required
by the Partners for federal and state income tax reporting requirements.
(c) The Partner(s) shall furnish the TMP with such information
as it may reasonably request to aid in the preparation of the applicable returns
and which will permit it to provide the Internal Revenue Service with sufficient
information so that proper notice can be mailed-to such Partner(s) as provided
in Section 6223 of the Code.
(d) To the extent and in the manner provided by applicable
treasury regulations, the TMP shall keep each Partner and Management
Committee representative informed of all administrative and judicial
proceedings for the adjustment of Partnership items (as defined in Section
6231(a)(3) of the Code) at the Partnership level.
(e) If an administrative proceeding contemplated under Section
6223 of the Code has begun, the Partner(s) shall notify the TMP of their
treatment of any Item on their federal income tax return in a manner which is or
may be inconsistent with the treatment of that item on the
56
<Page>
Partnership's return.
(f) The TMP shall not enter into any extension of the period
of limitations as provided under Section 6229 of the Code without the prior
written consent of the Partner(s) and each Management Committee member.
(g) Any Partner who enters into a settlement agreement with
the Secretary of the Treasury with respect to Partnership Items shall promptly
notify the other Partner(s), if any, and each Management Committee member of
such settlement agreement.
(h) The TMP shall not bind other Partner(s) to a settlement
agreement without obtaining the written concurrence of the Partner(s) who
will be bound by such agreement.
(i) The TMP shall notify all Partner(s) and each Management
Committee member of any intention to file a petition with a court for a
readjustment of any Partnership Items. Such notice shall be given within a
reasonable time so that the Partner(s) and each Management Committee member
may participate in choosing the forum for the filing of any petition. This
provision shall not apply to any Partner who does not have an interest in the
outcome of such matter. Whether a Partner has an interest in the outcome will
be determined using the standard in Section 6226(d) of the Code. Further, the
TMP or Partner who brought the action under Section 6226 of the Code, shall
provide the other Partners and each Management Committee member with notice
of any intention to seek review of a determination by any court under that
Section.
(j) No Partner may file a request for an administrative
adjustment of Partnership Items for any taxable year pursuant to Section 6227
of the Code without first notifying all other Partners and each Management
Committee member. If the other Partner(s) agree with the requested
adjustment, the TMP shall file the request for administrative adjustment on
behalf of the Partnership.
(k) If any part of an administrative adjustment request filed
by a Partner is not allowed by the Internal Revenue Service, the Partner filing
such request shall seek the concurrence of other Partner(s) and each Management
Committee member with regard to the filing of a petition with a court and with
regard to seeking review of the determination by any court in the same manner as
provided in Section 1 (i) of this Exhibit.
(l) The TMP and the Partners shall use all reasonable efforts
to comply with the responsibilities as outlined herein and in Sections 6222
through 6233 of the Code, but shall incur no liability to any Partner for
failure to fulfill such responsibilities.
(m) The provisions of this Exhibit B shall survive the
termination of the Partnership or the termination of any Partner's interest in
the Partnership and shall remain binding on the Partner(s) for a period of time
necessary to resolve with the Internal Revenue Service or the
57
<Page>
Department of the Treasury any and all matters regarding the federal income
taxation of the Partnership and any applicable state income tax matters.
2. ELECTIONS. The Parties agree that the TMP is directed to make the
following elections on behalf of the Partnership in the appropriate returns
of the Partnership prepared pursuant to Section 1 above:
(a) To adopt the accrual method of accounting;
(b) To compute the allowance for depreciation or cost recovery
using the shortest permissible life and most rapid recovery method permitted
under the Code;
(c) To elect the calendar year as the fiscal year of the
Partnership;
(d) To elect in a timely manner pursuant to Section 266 of
the Code and the Treasury Regulations thereunder to charge to the capital
account with respect to the property acquired or constructed by the
Partner(s) under this Agreement all taxes and carrying charges including
interest on indebtedness, which may be capitalized thereunder;
(e) To elect to amortize all organization costs of the
Partnership under Section 709 of the Code; and
(f) To make such other elections as the Management Committee
may direct.
3. SECTION 754 ELECTION. Upon the transfer of an interest in the
Partnership and upon the written request of the transferee, the Partnership
shall make an election at the written request of the transferee Partner
pursuant to Section 754 of the Code to adjust the basis of Partnership
Property. Any Partner or successor in interest, whose basis in Partnership
Property is adjusted pursuant to Section 743(b) of the Code, shall assume
sole compliance responsibility to reflect the adjustment to basis of its
Partnership Property under Section 743(b) of the Code, to prepare and attach
a statement to its income tax return showing the computation of the
adjustment and the Partnership properties to which the adjustment has been
allocated.
58
<Page>
EXHIBIT C - PART I
SURFACE LEASE AREA
The Surface Lease Area is that area within the "Surface Lease Boundary" as
indicated on Warren Drawing Number CBF-1001, "Fractionator Shared Services &
Property Boundaries Plot Plan" (the "Plot Plan"), as copy of which is
attached hereto and incorporated herein; and as more fully described in full
in the metes and bounds description attached hereto and certified by Robert
L. Hall, Registered Professional Land Surveyor No. 1610, dated December 12,
1997, which is incorporated herein by reference.
<Page>
STATE OF TEXAS)
COUNTY OF CHAMBERS)
FIELD NOTES of a 53.880 acre tract of land situated in the William Bloodgood
League, Abstract Number 4, Chambers County, the Henry Griffith League,
Abstract Number 12, Chambers County, the William Bloodgood Augmentation
Survey, Abstract Number 5, Chambers County, and being out of and a part of a
242.5057 acre tract of land called Tract 9 and conveyed to Midstream
Combination Corp. by Chevron U.S.A. Inc., in deed dated August 20, 1996, and
recorded in volume 308 at Page 85 of the Official Public Records of Chambers
County. This 53.880 acre tract of land is more particularly described by
metes and bounds as follows, to-wit:
NOTE: ALL BEARINGS ARE LAMBERT GRID BEARINGS AND ALL COORDINATES REFER TO THE
STATE PLANE COORDINATE SYSTEM, SOUTH CENTRAL ZONE, AS DEFINED BY ARTICLE 21.071
OF THE NATURAL RESOURCES CODE OF THE STATE OF TEXAS, 1927 DATUM. ALL DISTANCES
ARE ACTUAL DISTANCES. REFERENCE IS MADE TO PLAT OF EVEN DATE ACCOMPANYING THIS
METES AND BOUNDS DESCRIPTION.
BEGINNING at a brass cap set in concrete for the Northeast corner of this
tract of land, having a State Plane Coordinate Value of Y = 752,799.30 and X
= 3,299,929.27. From this BEGINNING corner a 1 1/4 inch iron pipe found for
the Northeast corner of said Bloodgood League, an interior corner of the
Henry Griffith League, Abstract Number 12, Chambers County, an angle point in
the North line of said 242.5057 acres, and an angle point in the South line
of a tract of land conveyed to Texas Eastern Transmission Corporation by 0.
Z. Smith, et ux, in deed dated January 3, 1959, and recorded in Volume 227 at
Page 201 of the Deed Records of Chambers County bears North 15 DEG. 06' 33"
West a distance of 1245.27 feet.
THENCE in a Southerly direction with the East line of this tract of land the
following courses to brass caps set in concrete:
South 15 DEG. 19' 31" East 495.89 feet;
North 79 DEG. 11' 30" East 39.03 feet;
South 13 DEG. 05' 10" East 72.16 feet;
South 74 DEG. 48' 00" West 36.40 feet;
South 15 DEG. 20' 53" East 1099.45 feet to a brass cap set in
concrete for the Southeast corner of this tract of land.
THENCE South 76 DEG. 53' 10" West with the South line of this tract of land a
distance of 1149.43 feet to a brass cap set in concrete for the Southwest corner
of this tract of land, in the West line of said 242.5057 acres, and in the East
line of a 25.28 acre tract of land called First Tract and conveyed to Exxon
Pipeline Corporation in Partition Deed dated July 22, 1971, and recorded in
Volume 326 at Page 646 of the Deed Records of Chambers County.
<Page>
PAGE NO. 2 - 53.880 ACRES
THENCE North 11 DEG. 44' 58" West with the West line of this tract of land,
the West line of said 242.5057 acres, and the East line of said 25.28 acres a
distance of 626.28 feet to a brass cap set in concrete for an interior corner
of this tract of land, an interior corner of said 242.5057 acres, and the
Northeast corner of said 25.28 acres.
THENCE SOUTH 76 DEG. 49' 25" West with the a South line of this tract of
land, a South line of said 242.5057 acres, and the North line of said 25.28
acres a distance of 152.77 feet to a brass cap set in concrete for the most
Northerly Southwest corner of this tract of land.
THENCE in a Westerly and Northerly direction with the West line of this tract
of land the following courses to brass caps set in concrete:
North 19 DEG. 42' 27" East 81.08 feet;
North 13 DEG. 03' 18" West 228.62 feet;
South 76 DEG. 56' 42" West 278.41 feet;
South 13 DEG. 03' 18" East 77.07 feet;
South 76 DEG. 56' 42" West 133.07 feet;
North 13 DEG. 03' 18" West 314.52 feet;
South 76 DEG. 56' 42" West 171.52 feet;
North 13 DEG. 03' 18" West 350.11 feet to a brass cap set in
concrete for the Northwest corner of this tract of land, in a non-tangent curve
to the right.
THENCE in a Northeasterly direction with the North line of this tract of land
and said non-tangent curve to the right, concave Southeast, having a central
angle of 180 DEG. 331' 33", a radius of 1185.34 feet, an arc length of 383.95
feet, and a chord bearing and distance of North 53 DEG. 10' 11" East 382.28
feet to a brass cap set in concrete for a corner of this tract of land and
the end of said curve.
THENCE in an Easterly direction with the North line of this tract of land the
following courses to brass caps set in concrete:
North 72 DEG. 12' 42" East 106.35 feet;
North 74 DEG. 27' 33" East 93.65 feet;
North 77 DEG. 15' 59" East 1211.38 feet to the PLACE OF BEGINNING,
containing within said boundaries 53.880 acres of land.
SURVEYED: December 8, 1997.
<Page>
PAGE NO. 2 - 53.880 ACRES
SURVEYOR'S CERTIFICATE
I, Robert L. Hall, Jr., Reg Professional Land Surveyor No. 1610, do hereby
certify that the foregoing field notes were prepared from an actual survey made
on the ground on the date shown and that all lines, boundaries and landmarks are
accurately described therein.
WITNESS my hand and seal at Baytown, Texas, this the 12th., day of December,
A.D., 1997.
/s/ Robert L. Hall, Jr.
REG. PROFESSIONAL LAND SURVEYOR
NO. 1610
97-1388H. FDN
[SEAL]
<Page>
EXHIBIT C - PART II
FRACTIONATOR
The Fractionator includes vessels and equipment for raw product treating,
fractionation and natural gasoline treating as shown and described on the
drawing attached hereto "Fractionator Plant - Vessel, Equipment & Building
Legend" (labeled "CADD File: CBF-1002) attached hereto and incorporated
herein; including, without limitation, the following:
Raw product treating for the inlet stream into the Facility consists of three
contactors (presently utilizing monoethanol amine), two caustic contactors
utilizing the UOP extractive Merox process and the associated equipment to
circulate, regenerate and operate these systems.
Fractionation towers designated T-1 through T-12 consist of two deethanizers
(T-1, T-5), three depropanizers ( T-2, T-7, T-9 ), two debutanizers ( T-4A,
T-10) and three deisobutanizers ( T-6, T-8, T-12). Towers T-3 and T-11 are
not in use at the present time and T-4 is utilized as a feed drum.
Natural gasoline treating provides a "Doctor" sweet product.
Injection pumps transfer all finished products to the underground storage
terminal with metering of all finished products (metering to be completed).
Utilities to support fractionation include cooling towers #1, #2, #3, #4 and
#6, steam boilers #1, #2, #3, #4, #8, plant air/instrument air, hot oil
furnace A and hot oil furnace B which provide heat to reboil towers T-8, T-9,
T-10, aerial coolers, propane refrigeration systems for the deethanizers, and
various buildings including a central control room with all controls for the
fractionation process, offices, storage buildings and their contents.
<Page>
EXHIBIT C - PART III
RELATED FACILITIES
The Related Facilities are the following assets, which are further reflected
on and marked as the "Off Site Fractionator Assets" on Warren Drawing Number
CBF-1001, "Fractionator Shared Services & Property Boundaries Plot Plan" (the
"Plot Plan"), as copy of which is attached hereto and incorporated herein:
o three water wells located west and southwest of the Facility including the
pumps and piping to transport the water to the Facility
o the fire water pumps located north northwest of the Facility at the fresh
water canal
o the flare tank pump out line
o the "Outfall" which is used for the NPDES permit for the Facility located
west of the Facility on the drainage canal, as marked on the Plot Plan
o the piping to bring nitrogen into the Facility from the Air Liquide meter
station located west of the Facility
o the electrical power line bringing electricity from the H L & P substation
to number 6 cooling tower which is located on the east and north side of
the Facility
o the imports to manifold area LPG pipelines located on the east side of the
Facility
o the finished product metering to be located east of the Facility
o the potable water lines for Mont Belvieu City water
o the sewer lines to the City of Mont Belvieu
o the telephone and LAN fiber optics lines
o the telephone system
o the entire fire water system including all piping inside and adjacent to
the Facility.
These assets are depicted on the Plot Plan thereon.
<Page>
EXHIBIT C - PART IV
PERMITS
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------
PERMIT AGENCY PERMIT REQUIREMENTS AND DATE OF ISSUE/
SPECIAL CONDITIONS EXPIRATION DATE
- ----------------------------------------------------------------------------------------------------
TXD980625974 EPA Hazardous Waste Notification I.D.
- ----------------------------------------------------------------------------------------------------
TX0002887 EPA NPDES Permit Issued: Sept. 28, 1988
- ----------------------------------------------------------------------------------------------------
GLP-001 TRRC Texas Water Dishcharge Permit. Issued: Oct. 20, 1987
Expires: March 1, 2001
- ----------------------------------------------------------------------------------------------------
P009174 TRRC Gas Plant Evaporation/Retention Pit Issued July 29, 1988
(Amine sump) No Experiation
- ----------------------------------------------------------------------------------------------------
P009175 TRRC Gas Plant Evaporation/Retention Pit Issued July 29, 1988
(158 A Classifier sump) No Expiration
- ----------------------------------------------------------------------------------------------------
P009176 TRRC Gas Plant Evaporation/Retention Pit Issued July 29, 1988
(158 Classifier sump) No Expiration
- ----------------------------------------------------------------------------------------------------
P009177 TRRC Gas Plant Evaporation / Retention Pit Issued July 29, 1988
(Truck dock sump) No Expiration
- ----------------------------------------------------------------------------------------------------
Pending TRRC Gas Plant Evaporation / Retention Pit Pending Approval -
(Truck dock sump) Applied for lst. Quarter
1997
- ----------------------------------------------------------------------------------------------------
5452 TNRCC Texas Air Operating Permit (New Source Issued: August 30, 1993
Review Permit) Expires: August 30, 2003
- ----------------------------------------------------------------------------------------------------
O-00612 TNRCC Texas Federal Operating Permit Pending Approval -
Application Account Number - CI-0022-A Application submitted -
4th Quarter 1997
- ----------------------------------------------------------------------------------------------------
</Table>
<Page>
EXHIBIT C
PART V
CONTRACTS
<Table>
<Caption>
WARREN CONTRACT
FILE NO. CONTRACT PARTY TYPE OF CONTRACT DATE
- -------- -------------- ---------------- --------
10003 Basis Petroleum Fractionation 02/25/97
10004 Arco Oil & Gas Company Fractionation 02/24/93
10007 Amerada Hess Corporation Fractionation 01/08/96
10035 Valero Marketing, L.P. Fractionation 10/19/95
10039 Unocal Corporation Fractionation 04/15/96
10043 Marathon Oil Company Fractionation 07/05/94
10044 Marathon Oil Company Fractionation 12/01/92
10067 Mobil Oil Corporation Fractionation 04/01/97
10076 Conoco Inc. Fractionation 07/01/97
10078 Amerada Hess Corporation Fractionation 09/28/93
10080 El Paso Field Services Co. Fractionation 08/01/97
10082 Mapco Natural Gas Liquids Inc. Fractionation 05/15/97
97-11-00468 Natural Gas Clearinghouse Gas Sales 01/01/98
(None) The Light Company Electrical Supply 09/27/96
(None) David Baker Manley 10/16/95
(None) Pritchard 1995
</Table>
<Page>
EXHIBIT C - PART VI
SURFACE LEASE AREA EXCLUDED ASSETS
The Surface Lease Area Excluded Assets are the following assets, which are
further reflected on and marked as "Excluded & Retained by Warren" on Warren
Drawing Number CBF-1001, "Fractionator Shared Services & Property Boundaries
Plot Plan" (the "Plot Plan") attached hereto and incorporated herein:
o the butane isomerization Facility (labeled "ISONM')
o the 10 inch pipeline dedicated to delivering feed to the butane
isomerization Facility
o the nitrogen line delivering nitrogen to the terminal
o the natural gas line delivering fuel gas to the terminal
o the electrical feeder line from the H L & P substation delivering
electricity to the butane isomerization Facility
o the flare line from the terminal
o the Chevron Pipeline (CPL) propane line
o the butane isomerization Facility flare, flare line and flare knock out
tank
o the hydrogen metering station and piping to the butane isomerization
Facility
o the pipelines for instrument air, hydrogen, fuel gas, nitrogen, steam and
RO water, brine water, hot oil fill from storage, the Cedar Bayou fuel gas
line and the fiber optics line all associated with the butane
isomerization Facility
o the phone, DCS, and LAN lines in the butane isomerization Facility
o the potable water line to the butane isomerization Facility
o the Chevron Pipeline corridor running east and west through the Facility
<Page>
EXHIBIT D
TO
LIMITED PARTNERSHIP AGREEMENT
LEASE AGREEMENT
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
AND.
CEDAR BAYOU FRACTIONATORS, L.P.
<Page>
TABLE OF CONTENTS
<Table>
1. RENTAL ............................................................................1
2. TERM ..............................................................................1
3. OPERATIONS AND MAINTENANCE ........................................................1
4. LIABILITY .........................................................................2
5. REMEDY FOR BREACH .................................................................2
6. CONSTRUCTION BY LESSEE ............................................................3
7. ENCUMBRANCE OF LEASEHOLD ESTATE ...................................................4
8. WARANTIES AND LIMITATIONS AND DISCLAIMERS .........................................4
9. MECHANICS' LIENS ..................................................................5
10. CONDEMNATION ......................................................................5
11. NOTICES ...........................................................................6
12. FORCE MAJEURE......................................................................7
13. ALTERNATIVE DISPUTE RESOLUTION ....................................................8
14. RESTRICTION ON ASSIGNMENT ........................................................12
15. NO COMMISSIONS, FEES OR REBATES .................................................12
16. SEVERABILITY .....................................................................12
17. GOVERNING LAW ....................................................................13
18. ENTIRE AGREEMENT, AMENDMENT AND WAIVER ...........................................13
19. SETOFFS AND COUNTERCLAIMS ........................................................13
20. NO PARTNERSHIP, ASSOCIATION, ETC. ................................................13
21. EXHIBITS .........................................................................13
22. DTPA WAIVER.......................................................................13
23. PRINCIPLES OF CONSTRUCTION AND INTERPRETATION.....................................14
24. FURTHER DOCUMENTS.................................................................14
25. HEADINGS AND PARAGRAPHS...........................................................14
26. NO THIRD PARTY BENEFICIARY........................................................14
27. RIGHT OF FIRST REFUSAL............................................................14
</Table>
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EXHIBITS
Exhibit A ..........................The Property
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'Confidential Treatment Requested'
LEASE AGREEMENT
In consideration for the mutual covenants herein, effective
January 1, 1998, WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP ("Lessor")
does hereby lease, let and demise the property described on Exhibit A
attached hereto (the "Property") to CEDAR BAYOU FRACTIONATORS, L.P.
("Lessee") for the purposes of owning, operating, modifying and constructing
modifications to, repairing and maintaining a natural gas liquids
fractionation facility in accordance with the following terms and
conditions. Lessor and Lessee are sometimes referred to herein as "Party"
or, collectively, "Parties."
1. RENTAL. This agreement (the "Lease") is given in consideration of
* [REDACTED] paid by Lessee to Lessor, receipt of which is hereby acknowledged,
said amount shall cover the rental hereunder for the period of January 1,
1998 to December 31, 2022. In addition, Lessee shall reimburse Lessor for
all property taxes, ad valorem taxes and similar obligations (property
taxes) assessed during the term hereof with respect to the Property and all
improvements thereon owned by the Lessee which are paid by Lessor, within
thirty (30) days of Lessee's receipt of Lessor's invoice itemizing such
taxes, subject to Lessee's right to contest, in good faith, any such
assessment or revaluation made by the governmental authority assessing such
tax. If Lessee elects to contest any such assessment, then Lessee shall
indemnify and hold harmless Lessor for all fines, penalties, interest,
liens and other claims which may arise as the result of any delay in making
payments or Lessee's challenge of the assessments, as well as for any
increase in taxes to Lessor on its adjoining property should the challenge
proceeding result in a reassessment of same. All payments due Lessor
hereunder shall be remitted by Lessee to Lessor either in the form of a
check at the address identified in Paragraph 11 or by wire transfer or
other electronic means in accordance with the wire transfer or electronic
payment instructions provided by Lessor in writing from time to time.
2. TERM. This Lease shall be commence and be effective as of January 1,
1998 (the "Effective Date"), and shall continue until December 31, 2022,
(the "Primary Term") and year to year thereafter (each said year being and
"Extended Term") unless and until either Party terminates this Agreement as
of the end of either the Primary Term or any successive Extended Term by
giving written notice to the other Party at least nine (9) months prior to
such termination date. The Primary Term and the Extended Terms, if any, will
be collectively referred to as the "Term" of this Lease. If Lessee exercises
* its option to extend the Lease, rental in the amount of [REDACTED] for each
Extended Term shall be paid on or before the expiration of the Primary Term
or the prior Extended Term, as applicable. Any notice or payment due under
this Paragraph shall be sent to Lessor at the address in Paragraph 11.
3. OPERATIONS AND MAINTENANCE. (a) Lessee shall maintain the Property
in accordance with the requirements, standards and procedures of all
applicable local, state and federal laws governing safety, toxic, hazardous
or deleterious substances and environmental protection, and regulations
promulgated thereunder. Lessee shall use the Property for the purposes of
operating, repairing, modifying and constructing modifications to, and
maintaining a natural gas liquids
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fractionation facility, and associated gas and liquids pipelines and
appurtenant surface equipment, or any combination thereof. Should Lessee make
any use of the Property other than those uses described, it shall not be
considered to be in breach hereunder unless and until written notice and
demand for cessation of such use has been delivered by Lessor to Lessee
pursuant to Paragraph 5 below and Lessee shall have the time allowed for in
said Paragraph 5 to cease such use or otherwise cure such default.
(b) Lessee assumes all responsibility for and agrees to bear and pay
all costs and expenses and other obligations associated with the maintenance
and use of the Property on and after the Effective Date. Lessee shall be
entitled to remove any and all improvements and fixtures affixed to the
Property and any personal property for a period of one (1) year from and
after the date of termination, but shall be obligated only to remove personal
property. Thereafter, any such improvements and fixtures still remaining
shall become part of the Property and shall be owned by Lessor and title to
any remaining personal property shall pass to Lessor and Lessor shall be
entitled to dispose of same in any manner without making an accounting
thereof to Lessee.
(c) Lessee shall have the rights of ingress and egress across Lessor's
surrounding and/or adjacent properties by use of existing roadways. Lessee
shall limit said access to routes approved in advance by Lessor and shall
create no thorough-fares or roadways without the express written consent of
Lessor. Lessor shall have the rights of ingress and egress across the Lease
premises for the operation of equipment and facilities contained thereon
and/or surrounding properties. Lessee and Lessor shall share in the
maintenance of all jointly used roadways proportionate to each Parties'
respective use thereof.
(d) Lessee retains the right to grant new and/or additional rights of
way, easements or any other surface use rights to any third parties provided
such grants do not materially interfere with Lessee's quiet use and enjoyment
of the Property.
4. LIABILITY. Lessee shall protect, indemnify and hold harmless Lessor,
its officers, agents, employees and Affiliates against all claims by third
parties for damage to property, personal injury (including death), fines,
penalties and any other losses (including reasonable and actual attorney's
fees and costs of litigation) arising out of or in any way connected with
Lessee's use, maintenance and operation of the Property during the term of
this Lease, excluding only those matters arising out of Lessor's occupation
or use of, or presence on, the Property; provided, however, that nothing in
this Lease, including any indemnities given herein, shall be construed so as
to lessen or modify in any way any of Lessee's or its constituent partners'
indemnity rights and limitations of liability granted by Lessor, with regard
to Lessor's prior ownership and operation of the facilities located on the
Property and the Excluded Assets as same are provided for that certain
Limited Partnership Agreement for Cedar Bayou Fractionators, L.P. with an
effective date of January 1, 1998.
5. REMEDY FOR BREACH. In the event that Lessor considers that Lessee
has at any time (i) violated any of its obligations under this Lease, (ii)
failed to make any payment within thirty (30) days of Lessor's written
demand, (iii) terminated its operations; (iv) otherwise liquidated or
dissolved
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itself upon the filing of a bankruptcy, receivership, or respite petition by
or against Lessee, and the failure to dismiss same within sixty (60) days, or
(v) upon Lessee's suspension, failure or insolvency, Lessor shall notify
Lessee in writing setting out the specific facts upon which such claim is
based. Upon receipt of such notice, Lessee shall have thirty (30) days to
cure any breach or other deficiency. If an obligation of which Lessee is
considered by Lessor to be in default is one other than payment of monies and
is not reasonably capable of being performed within said thirty (30) days,
Lessee shall be obligated to commence within that thirty (30) days such
actions as are necessary to cure the default and to continue such actions
with reasonable diligence until that performance is completed. Should Lessee
fail to commence the cure of the alleged breach or deficiency within the time
allowed, Lessor, without putting Lessee in default may, at its option, cancel
this Lease. Any such termination shall be an additional remedy and shall not
prejudice the right of Lessor to collect any amounts due it hereunder for any
damage or loss suffered by it and shall not waive any other remedy to which
Lessor may be entitled for breach of this Lease.
6. CONSTRUCTION BY LESSEE
(a) GENERAL CONDITIONS. Lessee may, at any time and from time to
time during the term of this Lease, erect, maintain, alter, remodel,
reconstruct, rebuild, replace, and remove buildings and other improvements on
the Property, and correct and change the contour of the Property, subject to the
following:
(i) Lessee bears the cost of any such work; and
(ii) The Property must at all times be kept free of mechanics' and
materialmen's liens.
(b) EASEMENTS AND DEDICATIONS. Lessor must cooperate with Lessee
concerning easements and dedications of the Property as follows:
(i) Granting. To provide for the more orderly development of the
Property, it may be necessary, desirable, or required that
pipeline, drainage, gas supply, power lines, public use, and
other easements and dedications and similar rights be granted
or dedicated over or within portions of the Property. Lessor
must, on Lessee's request, join with Lessee in executing and
delivering the documents, from time to time, and throughout
the Lease term, as may be appropriate, necessary, or required
by applicable governmental agencies, public utilities, and
private entities for the purpose of granting such easements
and dedications; provided, however, Lessor may not be
compelled to do so with regard to any easements, dedications
or similar rights which, when exercised by the grantee of
same, would result in construction of facilities or activities
by third parties which materially interfere with Lessor's
operations on the adjacent properties.
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<Page>
(ii) Expenses. Lessee exclusively bears the cost and expense of any
action required of Lessor under Subparagraph (i) above.
7. ENCUMBRANCE OF LEASEHOLD ESTATE.
(a) LESSEE'S RIGHT TO ENCUMBER. Lessee may, at any time and from
time to time, encumber the leasehold interest, by deed of trust, mortgage, or
other security instrument, without obtaining Lessor's consent, but no such
encumbrance shall constitute a lien on Lessor's fee title to the Property. The
indebtedness secured by the encumbrance will at all times be and remain
inferior and subordinate to all the conditions, covenants, and obligations of
this Lease and to all of Lessor's rights under this Lease. References in this
Lease to "Lender" refer to any person or entity to whom Lessee has encumbered
its leasehold interest.
(b) NOTICES TO LENDER. At any time after execution and
recordation in Chambers County, Texas, of any mortgage or deed of trust
encumbering Lessee's leasehold interest, Lender must notify Lessor in writing
that the mortgage or deed of trust has been given and executed by Lessee and
furnish Lessor with the address to which it wants copies of notices to be
mailed, or designate some person or corporation as its agent and
representative for the purpose of receiving copies of notices. Lessor must
mail to Lender and to any agent or representative designated by Lender, at
the addresses given, duplicate copies of all written notices that Lessor
gives or serves on Lessee under the terms of this Lease after receiving such
a notice from Lender.
(c) LENDER'S CONSENT REQUIRED FOR MODIFICATION. At any time after a
notice has been delivered to Lessor pursuant to Subparagraph (b) above, Lessor
and Lessee will neither modify nor terminate this Lease by mutual consent
without Lender's written consent.
(d) LENDER'S RIGHT TO PREVENT FORFEITURE. Lender may do any act
required of Lessee to prevent forfeiture of Lessee's leasehold interest; all
such acts are as effective to prevent a forfeiture of Lessee's rights under this
Lease as if done by Lessee.
8. WARRANTIES AND LIMITATIONS AND DISCLAIMERS.
(a) WARRANTIES. Lessor warrants that (i) Lessor has authority to
enter into this Lease and (ii) Lessee may peaceably enjoy the use of the
Property free of claims by any other Party claiming by, through or under
Lessor. Lessor hereby warrants and agrees to defend title to the Property
against the claims of all persons claiming by through or under Lessor, but
not otherwise. Lessor covenants that the Property is not subject to any liens,
claims or other encumbrances other than rights of way and easements of record
as of the date hereof and that it has no knowledge nor has it received any
notice that it is in default under the terms thereof.
(b) LIMITATIONS AND DISCLAIMERS. EXCEPT AS SET FORTH IN THIS
PARAGRAPH, LESSOR MAKES NO WARRANTY OF ANY OTHER KIND WHATEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PROPERTY, AND ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS
4
<Page>
FOR A PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY LESSOR AND EXCLUDED FROM
THIS LEASE. ADDITIONALLY, LESSOR DISCLAIMS ANY WARRANTY OF SUITABILITY THAT
MAY OTHERWISE HAVE ARISEN BY OPERATION OF LAW. LESSOR DOES NOT WARRANT THAT
THERE ARE NO LATENT DEFECTS IN THE PROPERTY OR ANY FACILITIES LOCATED THEREON
THAT ARE VITAL TO LESSEE'S USING THE PROPERTY FOR ITS INTENDED COMMERCIAL
PURPOSE OR THAT THESE ESSENTIAL FACILITIES WILL REMAIN IN A SUITABLE
CONDITION. LESSEE LEASES THE PROPERTY "AS IS" - WHETHER SUITABLE OR NOT - AND
WAIVES THE IMPLIED WARRANTY OF SUITABILITY.
9. MECHANICS' LIENS. Lessee will not cause or permit any mechanics'
liens or other liens to be filed against the fee of the Property or against
Lessee's leasehold interest in the land or any buildings or improvements on
the Property by reason of any work, labor, services, or materials supplied or
claimed to have been supplied to Lessee or anyone holding the Property or any
part of it through or under Lessee. If such a mechanic's lien or
materialman's lien is recorded against the Property or any buildings or
improvements thereon, Lessee must either cause it to be removed or, if Lessee
in good faith wishes to contest the lien, take timely action to do so, at
Lessee's sole expense. If Lessee contests the lien, Lessee will indemnify
Lessor and hold it harmless from all liability for damages occasioned by the
lien or the lien contest and will, in the event of a judgment of foreclosure on
the lien, cause the lien to be discharged and removed before the judgment is
executed.
10. CONDEMNATION.
(a) PARTIES' INTERESTS. If the Property or any part thereof is
taken for public or quasi-public purposes by condemnation as a result of any
action or proceeding in eminent domain, or is transferred in lieu of
condemnation to any authority entitled to exercise the power of eminent
domain, this Paragraph 10 governs Lessor's and Lessee's interests in the
award or consideration for the transfer and the effect of the taking or
transfer on this Lease.
(b) TOTAL TAKING - TERMINATION. If the Property is taken in its
entirety or so transferred as described in Subparagraph (a) above, this Lease
and all of the rights, title, and interest under it will cease on the date
that title to the Property or part thereof vests in the condemning authority,
and the proceeds of the condemnation will be divided between Lessor and
Lessee based on the ratio of the fair market value of all Lessee-owned
fixtures and improvements located on the Property to a total value of the
Property and all fixtures and improvements thereon. If the parties cannot
agree on such fair market values, they shall mutually agree on qualified
third party appraisers; one to establish the value of the Property alone and
one experienced in valuing natural gas liquids industry assets to establish
the value of the Lessee-owned fixtures and improvements.
(c) PARTIAL TAKING - TERMINATION. If only part of the Property is
taken or transferred as described in Subparagraph (a) above, this Lease will
terminate if, in Lessee's opinion, the remainder of the Property is in such a
location - or is in such form, shape, or reduced size - that Lessee's
facilities cannot be effectively and practicably operated on the remaining
Property. In that event, this Lease and all rights, title, and interest under
it will cease on the date that title to the portion of the Property taken or
transferred vests in the condemning authority. The proceeds of the
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<Page>
condemnation will be divided in the same manner as provided for above;
provided, however, that Lessor's share shall be reduced by the fair market
value of any of the Property retained.
(d) CONTINUATION WITH RENT ABATEMENT. If part of the Property is
taken or transferred as described in Subparagraph (a) above and, in Lessee's
opinion, the remainder of the Property is in such a location and in such
form, shape, or size that Lessee's business can be effectively and
practicably operated on the remaining portions of the Property, this Lease
will terminate with respect to the portion of the Property taken or
transferred as of the date title to such portion vests in the condemning
authority but will continue in full force with respect to the portion of the
Property not taken or transferred. There shall be no refund or abatement of
rent, in such instance and any proceeds of condemnation shall be shared
between the parties in a manner to be agreed to at that time.
(e) VOLUNTARY CONVEYANCE. Lessor shall not voluntarily convey all
or part of the Property to a public utility, agency, or authority under
threat of a taking under the power of eminent domain without Lessee's prior
written consent. Any such voluntary conveyance will be treated as a taking
within the meaning of this Paragraph 10.
11. NOTICES. Any notice or other communication provided for in this
Lease or any notice which either Party may desire to give to the other shall
be in writing and shall be deemed to have been properly given if and when
sent by facsimile transmission, delivered by hand, or if sent by mail, upon
deposit in the United States mail, either U.S. Express Mail, registered mail
or certified mail, with all postage fully prepaid, or if sent by courier, by
delivery to a bonded courier with charges paid in accordance with the
customary arrangements established by such courier, in each case addressed to
the Parties at the following addresses:
LESSOR: Warren Petroleum Company, Limited Partnership
1000 Louisiana, Suite 5800
Houston, Texas 77002-5050
ATTN: Vice President, Asset Marketing and Services
Telephone: 713-507-3843
Telecopier: 713-507-6846
LESSEE: Cedar Bayou Fractionators, Limited Partnership
c/o Warren Petroleum Company, Limited Partnership
1000 Louisiana, Suite 5800
Houston, TX 77002-5050
ATTN: General Counsel
Telephone: 713-507-6400
Telecopier: 713-507-6987
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<Page>
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received
by the close of the business day following the day on which it was
transmitted and confirmed by transmission report or such earlier time as
confirmed orally or in writing by the receiving Party. Notice by U.S. Mail,
whether by U.S. Express Mail, registered mail or certified mail, or by
overnight courier shall be deemed to have been received by the close of the
second business day after the day upon which it was sent, or such earlier
time as is confirmed orally or in writing by the receiving Party. Any Party
may change its address or facsimile number by giving notice of such change in
accordance herewith.
12. FORCE MAJEURE.
(a) In the event either Party hereto is rendered unable, wholly or in
part, by reason of Force Majeure to carry out its obligations under
this Lease, upon such Party's giving notice and reasonably full
particulars of such Force Majeure in writing to the other Party
after the occurrence of the cause relied on, then the obligations of
such Party, other than the obligation to pay money due hereunder,
insofar and only insofar as they are affected by such Force
Majeure, shall be suspended during the continuance of any inability
so caused, but for no longer period; and such cause shall, so far
as reasonably possible, be remedied with all reasonable dispatch.
(b) The term "Force Majeure" shall mean acts of God, strikes, lockouts
or other industrial disputes or disturbances, acts of the public
enemy, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, tornadoes, hurricanes, storms, and
warnings for any of the foregoing which may necessitate either Party
to either act or refrain from acting in a manner that might
otherwise constitute a breach hereunder, floods, washouts, arrests
and restraints of governments (either federal, state, civil or
military), civil disturbances, explosions, sabotage, breakage or
accidents to equipment, machinery, plants, or any portion thereof,
or lines of pipe, the making of repairs or alterations to any of the
foregoing, inability to secure labor or materials, freezing of
equipment, machinery, plants, or any portion thereof, or lines of
pipe, partial or entire failure of wells or gas supply, electric
power shortages, necessity for compliance with any court order, or
any law, statute, ordinance, rule, regulation or order promulgated
by a governmental authority having or asserting jurisdiction,
inclement weather that necessitates extraordinary measures and
expense to construct facilities and/or maintain operations, or any
other causes, whether of the kind enumerated herein or otherwise,
which are not within the reasonable control of the Party claiming
suspension and which by the exercise of due diligence such Party is
unable to prevent or overcome. Such term shall likewise include, in
those instances where either Party hereto is required to obtain
servitudes, rights-of-way, grants, permits or licenses to enable
such Party to fulfill its obligations hereunder, the inability of
such Party to acquire, or delays on the part of such Party in
acquiring,, at reasonable cost and after the exercise of reasonable
diligence, such servitudes, rights-of-way grants, permits or
licenses, and in those instances where either Party hereto
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is required to furnish materials and supplies for the purpose of
constructing or maintaining facilities to enable such Party to
fulfill its obligations hereunder, the inability of such Party to
acquire, or delays on the part of such Party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such
materials and supplies. The term "Force Majeure" shall also include
any event of force majeure occurring with respect to the facilities
or services of either Party's suppliers or customers providing a
service or providing any equipment, goods, supplies or other items
necessary to the performance of such Party's obligations, and shall
also include curtailment or interruption of deliveries or services
by third-party suppliers or customers as a result of an event
defined as Force Majeure hereunder.
(c) Notwithstanding Subparagraph 12(a) above, it is understood and
agreed that the settlement of strikes or lockouts shall be entirely
within the discretion of the Party having the difficulty, and that
the above requirement that any Force Majeure shall be remedied with
all reasonable dispatch shall not require the settlement of strikes
or lockouts by acceding to the demands of the opposing party when
such course is inadvisable in the discretion of the Party having the
difficulty.
13. ALTERNATIVE DISPUTE RESOLUTION.
(a) COVERED DISPUTES- Any dispute, controversy or claim (whether
sounding in contract, tort or otherwise) arising out of or
relating to this Lease, including, without limitation, the
meaning of its provisions, or the proper performance of any of
its terms by either Party, its breach, termination or invalidity
("Dispute") will be resolved in accordance with the procedures
specified in this Paragraph, which will be the sole and exclusive
procedure for the resolution of any such Dispute, except that a
Party, without prejudice to the following procedures, may file a
complaint to seek preliminary injunctive or other provisional
judicial relief, if in its sole judgment, that action is
necessary to avoid irreparable damage or to preserve the status
quo. Despite the filing of any such injunctive or other
provisional judicial relief, the Parties will continue, subject to
Subparagraph (j) below, to participate in the applicable
procedures specified in this Paragraph. The obligation to
participate in such applicable procedures shall not require
either Party to participate in the negotiation between executives
procedures set forth in Subparagraph (c) below or the mediation
procedures set forth in Subparagraph (d) below if either Party
determines, in its sole discretion, that such procedures would be
futile.
(b) INITIATION OF PROCEDURES. Either Party desiring to initiate the
dispute resolution procedures set forth in this Paragraph with
respect to a Dispute not resolved in the ordinary course of business
(the "Initiating Party") must give written notice of the Dispute
(the "Dispute Notice") to the other Party (the "Non-Initiating
Party"). The Dispute Notice shall include (i) a statement of that
Party's position and a summary of
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arguments supporting that position, and (ii) the name and title of
the executive who will represent that Party, and of any other person
who will accompany the executive, in the negotiations under
Subparagraph (c) below.
(c) NEGOTIATION BETWEEN EXECUTIVES - If one Party has given a Dispute
Notice under Subparagraph (b) above, the Parties may attempt in
good faith to resolve the Dispute within forty-five (45) days
following receipt of the Dispute Notice by the Non-Initiating
Party by negotiation between executives who have authority to
settle the Dispute and who are at a higher level of management
than the persons with direct responsibility for administration of
this Lease or the matter in Dispute. Within fifteen (15) days
after receipt of the Dispute Notice, the Non-Initiating Party may
submit to the other a written response. If given, the response
will include (i) a statement of that Party's position and a
summary of arguments supporting that position, and (ii) the name
and title of the executive who will represent that Party and of
any other person who will accompany the executive. If such a
response is given by the Non-Initiating Party, within forty-five
(45) days following receipt of the Dispute Notice by the
Non-Initiating Party, the executives of both Parties will meet at
a mutually acceptable time and place, and thereafter, as often as
they reasonably deem necessary, to attempt to resolve the Dispute.
(d) MEDIATION - If the Dispute has not been resolved by negotiation
under the Subparagraph (c) above within forty-five (45) days
following receipt of the Dispute Notice by the Non-Initiating Party
or if the Non-Initiating Party fails to respond within the required
fifteen (15) day period, either Party may initiate the mediation
procedure of this Subparagraph by giving written notice to the other
Party ("Mediation Notice). The Parties will endeavor to settle the
Dispute by mediation within sixty (60) days of the Mediation Notice
under the then current Center for Public Resources ("CPR") Model
Mediation Procedure for Business Disputes. If the Parties have not
agreed upon a mediator within seven (7) days after the Mediation
Notice, either Party may request CPR assistance in the selection of
a mediator under its guidelines. Unless otherwise agreed to by the
Parties, no discovery shall be allowed during the sixty (60) day
mediation period. If both Parties elect to participate in the
mediation procedures set forth herein, the cost of the mediator will
be shared equally between the Parties, unless otherwise agreed to in
writing by the Parties. If one Party elects not to participate in
the mediation procedures, neither Party shall bear any cost
associated with such procedure, other than costs that each Party may
have incurred in connection therewith which shall be borne by the
Party that incurred such costs.
(e) ARBITRATION. If the Dispute has not been resolved by mediation under
the Subparagraph (d) above within the required sixty (60) day period
or if either Party fails and/or refuses to participate in such
mediation procedures, either Party may request that the matter be
resolved through arbitration by submitting a written notice
9
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(the "Arbitration Notice") to the other. Any arbitration that is
conducted hereunder shall be governed by the Federal Arbitration
Act, 9 U.S.C. Section 1 ET SEQ., as amended, and will not be
governed by the arbitration acts, statutes, or rules of any other
jurisdiction.
(f) ARBITRATION PROCEDURE. The Arbitration Notice shall name the
noticing Party's arbitrator and shall contain a statement of the
issue(s) presented for arbitration. Within fifteen (15) Days of
receipt of an Arbitration Notice, the other Party shall name its
arbitrator by written notice to the other and may designate any
additional issue(s) for arbitration. The two named arbitrators
shall select the third arbitrator within fifteen (15) Days after
the date on which the second arbitrator was named. Should the two
arbitrators fail to agree on the selection of the third
arbitrator, either Party shall be entitled to request the Senior
Judge of the United States District Court for the Southern
District of Texas to select the third arbitrator. Should either
Party fail and/or refuse to name its arbitrator within the
required fifteen (15) day period, the other Party shall be
entitled to request the Senior Judge of the United States
District Court for the Southern District of Texas to select the
arbitrator for such Party. All arbitrators shall be qualified by
education or experience within the natural gas liquids portion of
the energy industry to decide the issues presented for
arbitration. No arbitrator shall be: a current or former
director, officer, or employee of either Party or its Affiliates;
an attorney (or member of a law firm) who has rendered legal
services to either Party or its Affiliates within the preceding
three Years; or an owner of any of the common stock of either
party, or its Affiliates.
10
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(g) ARBITRATION HEARING. The three arbitrators shall commence the
arbitration proceedings within twenty-five (25) Days following the
appointment of the third arbitrator. The arbitration proceedings
shall be held at a mutually acceptable site and if the Parties are
unable to agree on a site, the arbitrators shall select the site.
The arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings, including, without
limitation, rules concerning discovery. Each Party shall have the
opportunity to present its evidence at the hearing. The arbitrators
may call for the submission of pre-hearing statements of position
and legal authority, but no posthearing briefs shall be submitted.
The arbitration panel shall not have the authority to award
incidental, consequential, special, punitive or exemplary damages.
In addition, if an issue under consideration is limited to a
determination of an amount of money owed by one Party to the other,
each Party shall submit to the arbitration panel a final offer of
its proposed resolution of the dispute. The arbitration panel shall
be charged to select from the two proposals the one which the panel
finds to be the most reasonable and consistent with the terms and
conditions of this Lease, and the arbitration panel shall not
average the Parties' proposals or otherwise craft its own remedy.
All evidence submitted in an arbitration proceeding, transcripts of
such proceedings, and all documents submitted by the Parties in an
arbitration proceeding shall be kept confidential and shall not be
disclosed to any third Party by either Party hereto.
(h) ARBITRATION DECISION AND COSTS. The decision of the arbitrators or a
majority of them, shall be in writing and shall be final and binding
upon the Parties as to the issue(s) submitted. The cost of the
hearing shall be shared equally by the Parties, and each Party shall
be responsible for its own expenses and those of its counsel or
other representatives. Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection it may have to the
arbitrability of any such disputes, controversies or claims and
further agrees that a final determination in any such arbitration
proceeding shall be conclusive and binding upon each Party.
(i) ENFORCEMENT OF AWARD. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. The
prevailing Party shall be entitled to reasonable attorneys' fees in
any contested court proceeding brought to enforce or collect any
award of judgment rendered by the arbitrators.
(j) TOLLING AND PERFORMANCE. Except as otherwise provided in this
Paragraph 13, all applicable statutes of limitation and defenses
based upon the passage of time and all contractual limitation
periods specified in this Lease, if any, will be tolled while the
procedures specified in this Paragraph 13 are pending. The Parties
will take all actions to effectuate necessary to effectuate the
tolling of any applicable statute of limitation of contractual
limitation periods. All deadlines specified herein may be extended
by mutual written agreement of the Parties. Each Party is required
to continue to perform its obligations under this Lease pending
final resolution of any
11
<Page>
Dispute, unless to do so would be impossible or impracticable under
the circumstances. Notwithstanding the foregoing, the statute of
limitations of the State of Texas applicable to the commencement of
a lawsuit will apply to the commencement of an arbitration under
this Lease, except that no defenses will be available based upon the
passage of time during any negotiation or mediation called for by
the preceding Subparagraphs of this Paragraph.
14. RESTRICTION ON ASSIGNMENT. This Lease or rights therein may not be
pledged, mortgaged, transferred, sublet or assigned in whole or in part by
Lessee without the prior written consent of Lessor, which consent shall not
be unreasonably withheld; except as to the following assignments, which shall
not require Lessor's consent: (i) assignments to a party or parties acquiring
all or substantially all of the assets of Lessee; (ii) assignments or
subletting to Affiliates of Lessee; (iii) encumbrances of the leasehold
estate created hereby to a Lender pursuant to the provisions of Paragraph 7
of this Lease; and (iv) licenses or permits for terms of two (2) years or
less to third parties in connection with Lessee's operations on the Property.
Any attempt to assign this Lease in a manner contrary to the terms of this
Paragraph without Lessor's consent shall be void.
15. NO COMMISSIONS, FEES OR REBATES. Except as expressly provided in
this Lease, no director, employee or agent of either Party shall give or
receive any commission, fee, rebate gift or entertainment of significant cost
or value in connection with this Lease. Any representative or
representative(s) authorized by either Party may audit the applicable records
of the other Party for the purpose of determining whether there has been
compliance with this Paragraph.
16. SEVERABILITY. This Lease and the operations hereunder shall be
subject to the valid and applicable federal and state laws and the valid and
applicable orders, laws, local ordinances, rules, and regulations of any
local, state or federal authority having jurisdiction, but nothing contained
herein shall be construed as a waiver of any right to question or contest any
such order, laws, rules, or regulations in any forum having jurisdiction in
the premises. If any provision of this Lease is held to be illegal, invalid,
or unenforceable under the present or future laws effective during the term
of this Lease, (i) such provision will be fully severable, (ii) this Lease
will be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of this Lease, and (iii) the remaining
provisions of this Lease will remain in full force and effect and will not be
affected by the illegal, invalid, or unenforceable provision or by its
severance from this Lease. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there will be added automatically as a part of this
Lease a provision similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and as may be legal, valid, and enforceable. If
a provision of this Lease is or becomes illegal, invalid, or unenforceable in
any jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Lease nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Lease.
17. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND
PERFORMED IN ACCORDANCE WITH THE LAWS OF
12
<Page>
THE STATE OF TEXAS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
TEXAS.
18. ENTIRE AGREEMENT AMENDMENT AND WAIVER. This Lease, including
without limitation, all exhibits hereto, integrates the entire understanding
between the Parties with respect to the subject matter covered and supersedes
all prior understandings, drafts, discussions, or statements, whether oral or
in writing, expressed or implied, dealing with the same subject matter. This
Lease may not be amended or modified in any manner except by a written
document signed by both Parties that expressly amends this Lease. No waiver
by either Party hereto of any of the provisions of this Lease shall be deemed
or shall constitute a waiver of any other provision hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver unless
expressly provided. No waiver shall be effective unless made in writing and
signed by the Party to be charged with such wavier.
19. SETOFFS AND COUNTERCLAIMS. Except as otherwise provided herein,
each Party reserves to itself all rights, set-offs, counterclaims, and other
remedies and/or defenses which such Party is or may be entitled to arising
from or out of this Lease or as otherwise provided by law.
20. NO PARTNERSHIP, ASSOCIATION, ETC. Nothing contained in this Lease
shall be construed to create an association, trust, partnership, or joint
venture or impose a trust or partnership duty, obligation, or liability on or
with regard to either Party.
21. EXHIBITS. All Exhibits attached hereto are incorporated herein by
reference as fully as though contained in the body hereof. If any provision of
any Exhibit conflicts with the terms and provisions hereof, the provisions of
this Lease shall prevail.
22. DTPA WAIVER. EACH PARTY EXECUTING THIS AGREEMENT HEREBY WAIVES ITS
RESPECTIVE RIGHTS, IF ANY, UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, A LAW
THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH
AN ATTORNEY OF ITS OWN SELECTION, EACH PARTY EXECUTING THIS AGREEMENT
VOLUNTARILY CONSENTS TO THIS WAIVER. IN ADDITION, EACH PARTY EXECUTING THIS
AGREEMENT HEREBY REPRESENTS AND WARRANTS TO THE OTHER PARTY THAT (i) SUCH
PARTY'S LEGAL COUNSEL WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED,
OR SELECTED BY THE OTHER PARTY OR BY AN AGENT OF SUCH OTHER PARTY, AND (ii)
NEITHER PARTY EXECUTING THIS AGREEMENT IS IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION.
23. PRINCIPLES OF CONSTRUCTION AND INTERPRETATION. In construing this
Lease, the following principles shall be followed:
<Page>
(a) no consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this Lease;
(b) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean "includes,
but is not limited to" and corresponding syntactical variant
expressions; and
(d) the plural shall be deemed to include the singular and vice
versa, as applicable.
24. FURTHER DOCUMENTS. Each Party hereto, upon the request of the other
Party, agrees to perform any further acts and execute and deliver any
documents which may be reasonably necessary to carry out the provisions of
this Lease. Lessor will from time to time and at any reasonable time execute
and deliver to Lessee, when Lessee reasonably requests, other instruments and
assurances approving, ratifying, and confirming this Lease and the leasehold
estate created by it and certifying that the Lease is in full force and that
no default under the Lease on Lessee's part exists. But, if any default on
Lessee's part does exist, Lessor must specify in any such instrument each
such default of which it then has knowledge.
25. HEADINGS AND PARAGRAPHS. All references to "Paragraphs" and
"Subparagraphs" herein pertain to Paragraphs and Subparagraphs of this
Agreement, unless expressly stated otherwise. Headings are for purposes of
reference only and shall not be used to construe the meaning of this Lease.
26. NO THIRD PARTY BENEFICIARY. This Lease is for the sole benefit of
the Parties and their respective successors and permitted assigns, and shall
not inure to the benefit of any other person whomsoever, it being the
intention of the Parties that no third person shall be deemed a third Party
beneficiary of this Lease.
27. RIGHT OF FIRST REFUSAL. In the event Lessor receives an offer to
purchase any of the Property or the Retained Property (the two being
collectively referred to as the "Option Property") and such offer is
acceptable to Lessor, then Lessor shall notify Lessee in writing of the terms
and conditions offered by such third party and shall offer to sell that
portion of the Option Property covered by the offer to Lessee for the same
consideration and on the same terms and conditions as offered by the third
party. Lessee shall have ten (10) business days after its receipt of Lessor's
notice to accept Lessor's offer and if Lessee rejects or otherwise fails to
accept the offer within such time, then Lessor shall be entitled to sell the
property to such third party in accordance with the offer; provided, however,
that if such sale is not consummated within ninety (90) days after the end of
Lessee's period for accepting Lessor's offer under this Paragraph or if the
terms and conditions of the sale to such third party are materially altered
after the expiration of Lessee's period for accepting Lessor's offer, then
Lessee's rights of first refusal hereunder shall be reinstated and Lessor
shall be required to again notify Lessee of the terms and conditions offered
14
<Page>
by that same or any other third party for the purchase of all or any portion
of the Option Property. Lessee's above stated right of first refusal option
under this Paragraph shall not apply to any sale by Lessor to any of its
Affiliates, nor to a sale of all of the assets of Lessor. However, the right
of first refusal option granted hereunder shall be a vested and continuing
right of Lessee that shall survive any transfer of title to all or any
portion of the Option Property (including transfers to any of Lessor's
Affiliates) and both the initial and any subsequent transferee or grantee of
Lessor's title therein shall be required to comply with the provisions of this
Paragraph as to any subsequent transfers of title to any portion of the
Option Property.
IN WITNESS WHEREOF, the parties hereto have executed this agreement in
multiple originals to be effective as of the date set forth in Paragraph 2.
ATTEST: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
____________________________ BY: _______________________________________
Name: _____________________________________
Title: ____________________________________
CEDAR BAYOU FRACTIONATORS, L.P.
BY: Downstream Energy Ventures Co., L.L.C.,
Managing General Partner
By: ___________________________________
Name: _________________________________
Title:
15
<Page>
ACKNOWLEDGMENTS
STATE OF TEXAS
COUNTY OF HARRIS
On this day of , 1997, before me appeared to
me personally known, being by me duly sworn, did say that he is the
of WARREN PETROLEUM G.P. INC., general partner of WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP, and that said instrument was signed on behalf of said
corporation by authority of its Board of Directors, and he acknowledged said
instrument to be the free act and deed of said corporation and said
partnership.
SWORN TO AND SUBSCRIBED before me, , 1997.
-----------------------------
My Commission expires: Notary Public
- ----------------------------------
STATE OF TEXAS
COUNTY OF HARRIS
On this day of , 1997, before me appeared , to
me personally known, being by me duly sworn, did say that he is the
of DOWNSTREAM ENERGY VENTURES, L.L.C., managing general partner of CEDAR
BAYOU FRACTIONATORS, L.P., a Delaware limited partnership, and that said
instrument was signed on behalf of said corporation by authority of its Board
of Directors, and he acknowledged said instrument to be the free act and deed
of said corporation and said partnership.
SWORN TO AND SUBSCRIBED before me, , 1997.
-----------------------------
My Commission expires: Notary Public
- ----------------------------------
16
<Page>
EXHIBIT A
THE PROPERTY
SURFACE LEASE AREA:
THE USE OF THE SURFACE ONLY AS TO THE FOLLOWING AREA: That area described in
the metes and bounds description attached hereto and certified by Robert L.
Hall, Registered Professional Land Surveyor No. 1610, dated December 12,
1997, which is incorporated herein by reference.
WATER RIGHTS AREA:
LESSEE IS GRANTED THE RIGHT TO WITHDRAW ANY WATER REQUIRED FOR ITS OPERATIONS
ON THE ABOVE SURFACE LEASE AREA ONLY, AND IN ACCORDANCE WITH ALL APPLICABLE
LAWS AND REGULATIONS, FROM AND THROUGH THE THREE EXISTING WATER WELLS OWNED
BY LESSOR ON THE FOLLOWING DESCRIBED TRACTS, AND SHALL MAINTAIN AND OPERATE
SAID WELLS DURING THE TERM HEREOF, AND SHALL HAVE USE OF SO MUCH OF THE
SURFACE OF THE BELOW TRACTS AS IS REASONABLY NECESSARY TO OPERATE AND
MAINTAIN SAID WATER WELLS, TOGETHER WILL FULL RIGHT OF INGRESS AND EGRESS
THERETO OVER AND ACROSS ALL EXISTING ROADWAYS AND PATHS LEADING TO SAID WATER
WELLS IN THE SAME MANNER AS SET FORTH IN PARAGRAPH 3(c) IN THE LEASE:
WATER WELLS #1 AND #2
That certain tract of land containing 6.97 acres, more or less, located in
Chambers County, Texas identified as Tract 16 on that certain plat prepared
by BUSCH, HUTCHISON & ASSOCIATES, INC. and recorded in the Map Records of
Chambers County, Texas in Volume B, Page 127; said tract being conveyed from
NGC CORPORATION, formerly known as Midstream Combination Corp. to Warren
Petroleum Company, Limited Partnership in that DEED, ASSIGNMENT AND
CONVEYANCE recorded in Volume 308 at Page 623 of the Official Public Records
of Chambers County, Texas.
WATER WELL #3
That certain tract of land containing 3.318 acres, more or less, located in
Chambers County, Texas identified as Tract 1 on that certain plat prepared by
BUSCH, HUTCHISON & ASSOCIATES, INC. and recorded in the Map Records of
Chambers County, Texas in Volume B, Page 126; said tract being conveyed from
NGC CORPORATION, formerly known as Midstream Combination Corp. to Warren
Petroleum Company, Limited Partnership in that DEED, ASSIGNMENT AND
CONVEYANCE recorded in Volume 308 at Page 623 of the Official Public Records
of Chambers County, Texas.
17
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STATE OF TEXAS)
COUNTY OF CHAMBERS)
FIELD NOTES of a 53.880 acre tract of land situated in the William Bloodgood
League, Abstract Number 4, Chambers County, the Henry Griffith League,
Abstract Number 12, Chambers County, the William Bloodgood Augmentation
Survey, Abstract Number 5, Chambers County, and being out of and a part of a
242.5057 acre tract of land called Tract 9 and conveyed to Midstream
Combination Corp. by Chevron U.S.A. Inc., in deed dated August 20, 1996, and
recorded in Volume 308 at Page 85 of the Official Public Records of Chambers
County. This 53.880 acre tract of land is more particularly described by
metes and bounds as follows, to-wit:
NOTE: ALL BEARINGS ARE LAMBERT GRID BEARINGS AND ALL COORDINATES REFER TO THE
STATE PLANE COORDINATE SYSTEM, SOUTH CENTRAL ZONE, AS DEFINED BY ARTICLE
21.071 OF THE NATURAL RESOURCES CODE OF THE STATE OF TEXAS, 1927 DATUM. ALL
DISTANCES ARE ACTUAL DISTANCES. REFERENCE IS MADE TO PLAT OF EVEN DATE
ACCOMPANYING THIS METES AND BOUNDS DESCRIPTION.
BEGINNING at a brass cap set in concrete for the Northeast corner of this
tract of land, having a State Plane Coordinate Value of Y = 752,799.30 and X
= 3,299,929.27. From this beginning corner a 1 1/4 inch iron pipe found for
the Northeast corner of said Bloodgood League, an interior corner of the
Henry Griffith League, Abstract Number 12, Chambers County, an angle point in
the North line of said 242.5057 acres, and an angle point in the South line
of a tract of land conveyed to Texas Eastern Transmission Corporation by
0. Z. Smith, et ux, in deed dated January 3, 1959, and recorded in Volume 227
at Page 201 of the Deed Records of Chambers County bears North 15 DEG. 06' 33"
West a distance of 1245.27 feet.
THENCE in a Southerly direction with the East line of this tract of land the
following courses to brass caps set in concrete:
South 15 DEG. 19' 31" East 495.89 feet;
North 79 DEG. 11' 30" East 39.03 feet;
South 13 DEG. 05' 10" East 72.16 feet;
South 74 DEG. 48' 00" West 36.40 feet;
South 15 DEG. 20' 53" East 1099.45 feet to a brass cap set
in concrete for the Southeast corner of this tract of land.
THENCE South 76 DEG. 53' 10" West with the South line of this tract of land a
distance of 1149.43 feet to a brass cap set in concrete for the Southwest
corner of this tract of land, in the West line of said 242.5057 acres, and
in the East line of a 25.28 acre tract of land called First Tract and
conveyed to Exxon Pipeline Corporation in Partition Deed dated July 22, 1971,
and recorded in Volume 326 at Page 646 of the Deed Records of Chambers County.
<Page>
PAGE NO. 2 - 53.880 ACRES
THENCE North 11 DEG. 44' 58" West with the West line of this tract of land,
the West line of said 242.5057 acres, and the East line of said 25.28 acres a
distance of 626.28 feet to a brass cap set in concrete for an interior corner
of this tract of land, an interior corner of said 242.5057 acres, and the
Northeast corner of said 25.28 acres.
THENCE South 76 DEG. 49' 25" West with the a South line of this tract of
land, a South line of said 242.5057 acres, and the North line of said 25.28
acres a distance of 152.77 feet to a brass cap set in concrete for the most
Northerly Southwest corner of this tract of land.
THENCE in a Westerly and Northerly direction with the West line of this tract
of land the following courses to brass caps set in concrete:
North 19 DEG. 42' 27" East 81.08 feet;
North 13 DEG. 03' 18" West 228.62 feet;
South 76 DEG. 56' 42" West 278.41 feet;
South 13 DEG. 03' 18" East 77.07 feet;
South 76 DEG. 56' 42" West 133.07 feet;
North 13 DEG. 03' 18" West 314.52 feet;
South 76 DEG. 56' 42" West 171.52 feet;
North 13 DEG. 03' 18" West 350.11 feet to a brass
cap set in concrete for the Northwest corner of this tract of land, in a
non-tangent curve to the right.
THENCE in a Northeasterly direction with the North line of this tract of land
and said non-tangent curve to the right, concave Southeast, having a central
angle of 18 DEG. 33' 33", a radius of 1185.34 feet, an arc length of 383.95
feet, and a chord bearing and distance of North 53 DEG. 10' 11" East 382.28
feet to a brass cap set in concrete for a corner of this tract of land and
the end of said curve.
THENCE in an Easterly direction with the North line of this tract of land the
following courses to brass caps set in concrete:
North 72 DEG. 12' 42" East 106.35 feet;
North 74 DEG. 27' 33" East 93.65 feet;
North 77 DEG. 15' 59" East 1211.38 feet to the PLACE OF
BEGINNING, containing within said boundaries 53.880 acres of land.
SURVEYED: December 8, 1997.
<Page>
PAGE NO. 2 - 53.880 ACRES
SURVEYOR'S CERTIFICATE
I, Robert L. Hall. Jr., Reg Professional Land Surveyor No. 1610, do hereby
certify that the foregoing field notes were prepared from an actual survey
made on the ground on the date shown and that all lines, boundaries and
landmarks are accurately described therein.
WITNESS my hand and seal at Baytown, Texas, this the 12th., day of December,
A.D., 1997.
/s/ Robert L. Hall, Jr.
REG. PROFESSIONAL LAND SURVEYOR
NO. 1610
97-1388H.FDN
[SEAL]
<Page>
EXHIBIT E
TO
LIMITED PARTNERSHIP AGREEMENT
PARTNER FRACTIONATION AGREEMENTS
<Page>
FRACTIONATION AGREEMENT
by and between
CEDAR BAYOU FRACTIONATORS, L.P.
and
AMOCO OIL COMPANY.
EFFECTIVE JANUARY 1, 1998
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
Page
----
ARTICLE I: DEFINITIONS ................................................... 1
ARTICLE II: TERM ......................................................... 4
ARTICLE III: AMOCO'S PERFORMANCE ......................................... 4
ARTICLE IV: CBF'S PERFORMANCE ............................................ 5
ARTICLE V: TRANSFER OF CUSTODY ........................................... 7
ARTICLE VI: MEASUREMENT .................................................. 7
ARTICLE VII: COMPENSATION TO CBF ......................................... 7
ARTICLE VIII: TAXES AND OTHER PAYMENTS ................................... 9
ARTICLE IX: ACCOUNTING AND AUDIT PROCEDURES .............................. 9
ARTICLE X: BILLING AND PAYMENT ........................................... 10
ARTICLE XI: FORCE MAJEURE ................................................ 11
ARTICLE XII: INDEMNIFICATION AND LIMITATION OF LIABILITY ................. 12
ARTICLE XIII: DISPUTE RESOLUTION ......................................... 13
ARTICLE XIV: MISCELLANEOUS ............................................... 16
EXHIBIT "A" - AMOCO'S DEDICATED PLANTS
EXHIBIT "B" - SPECIFICATION PRODUCTS SPECIFICATIONS
</Table>
<Page>
FRACTIONATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 1st
Day of January, 1998, by and between, Cedar Bayou Fractionators, L.P., a
Delaware limited partnership (hereinafter referred to as "CBF"), and Amoco
Oil Company, a Delaware corporation (hereinafter referred to as "Amoco"),
sometimes also referred to individually as "Party" and collectively as
"Parties."
WITNESSETH:
WHEREAS, Amoco owns, controls or has rights to certain volumes of
natural gas liquids recovered by various natural gas processing facilities
available for fractionation; and
WHEREAS, CBF owns a Fractionation Facility, hereinafter defined,
situated in Mont Belvieu, Chambers County, Texas; and
WHEREAS, Amoco has arranged for the transportation and delivery of such
Raw Product, hereinafter defined, and/or Butane-Gasoline Mix, hereinafter
defined, to Mont Belvieu, Texas; and
WHEREAS, CBF has arranged for the receipt of such Raw Product and/or
Butane-Gasoline Mix from Amoco, as well as Raw Product and/or Butane-Gasoline
Mix owned by third parties, at the Delivery Point, hereinafter defined; and
WHEREAS, it is the mutual desire of CBF and Amoco that CBF receive
Amoco's Raw Product at the Delivery Point and redeliver to Amoco, or its
designee, Specification Products, hereinafter defined, at the Storage
Facility, hereinafter defined, or at other mutually agreeable locations.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
ARTICLE I: DEFINITIONS
When the following terms or expressions are used in this Agreement, they
shall have the meanings defined below:
"AFFILIATE" shall mean a Person that directly or indirectly through one or
more intermediates, controls, or is controlled by or is under common
control with the Person specified. The term "control" (including the terms
"controlled by" or "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership, by
contract, or otherwise. Any Person shall be deemed to be an Affiliate of
1
<Page>
any specified Person if such Person owns 50% or more of the voting
securities of the specified Person, if the specified Person owns fifty
percent (50%) or more of the voting securities of the specified Person, if
the specified Person owns fifty percent (50%) or more of the voting
securities of such Person, or if fifty percent (50%) or more of the voting
securities of the specified Person and such Person are under common
control.
"BACK-END MIX" shall mean any mixture of Components which will be
fractionated by the Fractionation Facility without requiring the use of the
Fractionator's de-ethanizer.
"BACK-END FEE" shall have the meaning as ascribed to it in Article VII.
"BARREL" shall mean 42 Gallons.
"BASE RATE" shall have the meaning as ascribed to in it Article X.
"BUSINESS DAY" shall mean a Day on which Federal Reserve member banks in
New York City are open for business.
"CLAIMS" shall have the meaning as ascribed to in Section 12.1 hereinafter.
"COMPONENT" shall mean the individual hydrocarbon constituents of Raw
Product, including but not limited to: methane, ethane, propane, isobutane,
normal butane, isopentane, normal pentane, hexanes and heavier, as well as
other non-hydrocarbon Components allowed by Pipeline.
"DAY" OR "DAILY" shall mean a twenty-four (24) hour period commencing 7:00
a.m. Central Standard or Daylight Savings time, as applicable, and
extending until 7:00 a.m. Central Standard or Daylight Savings time, as
applicable, on the following Day.
"DELIVERY POINT" shall mean the point of interconnection between the
Pipelines and Storage Facility at which point Amoco's Raw Product is
delivered to CBF through the Storage Facility.
"FEE RE-DETERMINATION ARBITRATION" shall have the meaning set forth in
Section 13.5.
"FINAL OFFERS" shall mean final offers made by the Parties prior to
submission of a monetary dispute to an arbitrator, in the manner specified
in Section 13.7.
"FORCE MAJEURE" shall have the meaning as ascribed to it in Article XI.
"FRACTIONATION FACILITY" OR "FRACTIONATOR" shall mean the fractionation
unit owned by CBF situated in the vicinity of Mont Belvieu, Chambers
County, Texas, which is operated by Warren which fractionation unit is used
for the purpose of fractionating Raw Product streams into Specification
Products.
2
<Page>
"GALLON" shall mean the unit of volume used for the purpose of measurement
of liquid. One U. S. liquid Gallon contains 231 cubic inches when the
liquid is at a temperature of 60 degrees Fahrenheit and at the vapor
pressure of the liquid being measured.
"KOCH COMMITMENT" shall mean that volume of Raw Product committed by Amoco
to Koch Hydrocarbons Company ("Koch") under an agreement effective July 1,
1997.
"MONT BELVIEU AREA" shall mean the geographical area surrounding Mont
Belvieu, Texas including the following Texas counties:
Brazoria Harris
Chambers Jefferson
Fort Bend Liberty
Galveston Montgomery
However, the following facilities shall be excluded from the Mont Belvieu
Area:
Amoco's refinery and chemical plant in the vicinity of Texas City, Texas
Amoco's chemical plant in the vicinity of Alvin, Texas
Amoco's chemical plant in the vicinity of Pasadena, Texas
Amoco's chemical plant in the vicinity of Mont Belvieu, Texas
"MONTH" OR "MONTHS" OR "MONTHLY" shall mean the period commencing on the
first Day of a Month and ending on the first Day of the next succeeding
Month.
"PIPELINE(S)" shall mean any pipeline which delivers Amoco's Raw Product to
the Storage Facility. Currently, the four (4) pipelines capable of
delivering such Raw Product are the Seminole Pipeline, the Chaparral
Pipeline, the West Texas Pipeline, and Black Lake Pipeline. During 1998,
CBF desires to connect to the Dean Pipeline which is owned and operated by
Duke Energy.
"PRIMARY TERM" shall have the meaning as ascribed to it in Article II.
"RAW PRODUCT" shall mean that mixture of liquid hydrocarbons delivered by
Pipelines to the Storage Facility in accordance with the terms of any
connection agreements or pipeline tariffs in effect from time to time.
"REDELIVERY POINT" shall mean the Storage Facility owned and operated by
Warren.
"SPECIFICATION PRODUCT(S)" shall mean the liquid hydrocarbons meeting the
specifications provided for in Exhibit "B", attached hereto, fractionated
from the Raw Product.
"STORAGE FACILITY" shall mean the underground storage facilities owned and
operated by
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'Confidential Treatment Requested'
Warren at or near Mont Belvieu, Chambers County, Texas, including, but not
limited to, all storage caverns, related surface and subsurface equipment,
and loading and unloading terminals.
"WARREN" shall mean Warren Petroleum Company, Limited Partnership.
"YEAR" OR "YEARLY" shall mean a period of 365 consecutive Days; provided,
however that any Year which contains the date of February 29 shall consist
of 366 consecutive Days.
"Y-GRADE" shall mean any Raw Product which will be fractionated by CBF's
fractionation facility other than Back-End Mixes.
"Y-GRADE FEE" shall have the meaning as ascribed to it in Article VII.
ARTICLE II: TERM
This Agreement shall have a primary term commencing on January 1, 1998 and
* ending [REDACTED] (the "Primary Term") and shall continue in effect from Year
to Year thereafter; provided that either Party shall have the right to
terminate this Agreement effective at the end of the Primary Term or any
Yearly anniversary thereafter by giving the other Party at least twelve
Months prior written notice.
ARTICLE III: AMOCO'S PERFORMANCE
3.1 Except as set-forth in Section 3.2, Amoco shall deliver or cause to be
delivered to the Delivery Point for fractionation under the terms of the
Agreement, the Raw Product which it owns and/or controls and which are
produced from the dedicated plants listed in Exhibit "A", and which are
delivered to the Mont Belvieu Area. Such Raw Product shall include both
Y-Grade and Back-End Mixes. Volumes of Raw Product from the dedicated
plants listed in Exhibit "A" but which are currently subject to the Koch
Commitment will be delivered to CBF following the termination of that
commitment. Amoco further agrees that for any volumes of Y-Grade or
Back-end Mixes that Amoco may now or in the future have available from
plants that are not listed in Exhibit "A" and that are delivered to the
Mont Belvieu Area and that can economically be delivered and fractionated
at CBF versus alternative opportunities, that Amoco will offer such volumes
to become dedicated to CBF and that if CBF accepts same, then such volumes
shall become dedicated under the terms of this Agreement.
3.2 The following volumes shall be excepted from the dedication set-forth in
Section 3.1 above.
(1) Amoco volumes which are dedicated under the Koch Commitment shall not
be
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'Confidential Treatment Requested'
dedicated to CBF until July 1, 1998.
(2) Amoco volumes which are delivered to the Mont Belvieu Area via Duke
Energy's pipeline, which moves Raw Product from the Matagorda County,
Texas to Mont Belvieu, Texas (formerly referred to as the Dean
Pipeline) shall not be dedicated until the following conditions are
met.
(a) A pipeline connection is operational that will allow deliveries
from the Duke Energy pipeline to CBF's fractionation facility.
(b) The Amoco volume on said pipeline is not dedicated under any
third-party agreement that is in existence at the time that item
(a) occurs.
(3) Volumes from Amoco's Old Ocean Plant located in Brazoria Country,
Texas.
(4) Volumes from Apache's Hastings Plant located in Brazoria Country,
Texas.
(5) Volumes from Exxon's Katy Plant located in Waller County, Texas.
(6) Any Amoco volumes which CBF does not commit to accept under the
provisions of Article IV of this Agreement.
3.3 Amoco shall direct Pipeline to prepare, during each Month, an allocation of
ownership of the Pipeline's commingled Raw Product, by Components actually
delivered to CBF. Amoco and CBF are to accept and rely on such allocation.
3.4 Prior to the beginning of each Month, CBF will estimate the volumes of
Specification Products for which disposition instructions will be required
from Amoco. Such estimates will be established by utilizing the actual
volumes of Raw Product delivered to the Fractionation Facility during the
most recent Month for which actual volumes are available and adjusting for
anticipated variances as may be advised by Amoco from time to time. As set
forth in Article IX of this Agreement, Amoco and CBF shall exchange and
reconcile Monthly statements detailing Amoco's product movement no later
than the last Day of each succeeding Month following the Month in question.
3.5 Amoco is procuring the fractionation services under this Agreement for the
purpose of fractionating Raw Product and not for the purpose of reselling
such services and agrees not to so resell said services.
ARTICLE IV: CBF'S PERFORMANCE
4.1 CBF shall accept delivery of and provide fractionation for a maximum of
* [REDACTED] Barrels per Day of Amoco's Y-Grade and [REDACTED] Barrels per
Day of Back-End Mixes as determined on a Monthly average basis. Volumes
above these amounts will be accepted by CBF for fractionation on a space
available basis.
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4.2 CBF shall deliver Specification Products to Amoco or its designee at the
Storage Facility or at other mutually agreed upon locations. CBF will
redeliver Specification Products during the same Month in which the Raw
Product containing such Components is delivered to CBF, so long as Pipeline
deliveries allow for fractionation of said Raw Product at a rate
approximating the Daily average Pipeline delivery rate for said Month.
4.3 CBF shall not routinely hold back Specification Products from Amoco as a
minimum inventory requirement. However, CBF shall have the right to
withhold distribution of Amoco's Specification Products, on a CBF ownership
percentage basis, to the extent that CBF has insufficient volumes of
Specification Products to meet its obligations to its fractionation
customers. To determine Amoco's ownership percentage in CBF, the combined
ownership percentage of both Amoco MB Fractionation Company (a partner in
CBF) and Amoco MBF Company (a partner in DEVCO) shall be considered.
4.4 The quantity of the five Specification Products due Amoco will be as
follows, based on the Pipelines' reported volumes of each Component which
have been delivered for Amoco's account:
(1) EP MIX (80/20): the volume will be equal to (a) 100% of the ethane
Component plus methane Component up to 1.5 liquid volume percent of
the ethane Component, (b) plus propane Component equal to 25% of the
volume in (a) above.
(2) PROPANE: the volume will be equal to 100% of the propane Component
minus the propane use for the EP Mix.
(3) ISOBUTANE: the volume will be equal to 100% of the isobutane
Component.
(4) NORMAL BUTANE: the volume will be equal to 100% of the normal butane
Component.
(5) NATURAL GASOLINE: the volume will be equal to 100% of the isopentane
and heavier Components.
4.5 In the event CBF actually produces purity ethane utilizing its existing
facilities (as of January 1, 1998), then Amoco reserves the right to
receive a prorated share of its ethane as purity ethane. The maximum
Monthly volume of purity ethane that Amoco may elect to receive would be
calculated as follows:
AE = [AEY/TEY] x E
Where:
AE = Amoco's prorated share of purity ethane
AEY = the ethane Component of Amoco's delivered Y-Grade during the
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'Confidential Treatment Requested'
calendar Month
TEY = the total amount of ethane Component in Y-Grade delivered to the
Fractionator for fractionation services during the Calendar Month
E = the volume of purity ethane produced by CBF during the calendar Month
ARTICLE V: TRANSFER OF CUSTODY
Amoco warrants that it has the right to cause the Raw Product to be
fractionated. Custody of the Raw Product shall transfer to CBF at the Delivery
Points, subject to Amoco's right, pursuant to Section 4.2 above, to receive
allocated Gallons of Specification Products at the Storage Facility. Custody of
Specification Products shall be delivered to Amoco or its designee. CBF shall at
no time take title to the Raw Product or the resulting Specification Products
while such products are in the custody of CBF.
ARTICLE VI: MEASUREMENT
6.1 Volumes of Raw Product, shall be measured and calculated in accordance with
the then current Pipeline tariff or CBF's Pipeline connection agreements.
CBF shall furnish Amoco with current copies of all Pipeline connection
agreements and any future modifications to such agreements.
6.2 Volumes of Specification Products delivered by CBF in accordance with
Article IV, shall be measured and calculated in accordance with CBF's
standard measurement procedures at Mont Belvieu and shall conform to good
measurement practices in the industry and the then current API Manual of
Petroleum Measurement Standards. CBF shall furnish Amoco with the current
copies of all standard measurement procedures for Mont Belvieu and any
future modifications to such procedures.
ARTICLE VII: COMPENSATION TO CBF
7.1 Subject to Article VIII, as full consideration for the fractionation
services provided hereunder, Amoco shall pay to CBF a fractionation fee for
each Gallon of Y-Grade ("Y-Grade Fee") or Back-End Mixes ("Back-End Fee")
delivered by, or on behalf of, Amoco to CBF each Month. Such fees shall be
determined on a calendar quarter basis by the following formulas:
* Y-Grade Fee = [REDACTED]
and
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'Confidential Treatment Requested'
* Back-End-Fee = [REDACTED]
Where:
FUEL = The fuel cost (in $/MMBtu) equivalent to the Houston Ship
Channel Index of INSIDE FERC'S GAS MARKET REPORT, for natural
gas (large packages) for the preceding calendar quarter
* plus [REDACTED] per MMBTU.
ELEC = The combined average cost of purchased electricity (in
CENTS/KWH) at the Fractionator for the preceding calendar
quarter.
CPIU = The combined average Consumer Price Index, as published by
the United States Department of Labor, for the preceding
calendar quarter.
7.2 The above fee formulas shall remain in effect during the first five Years
of the Primary Term unless CBF implements a significant energy reduction
project similar to that contemplated by Warren and Amoco in December of
1997. If such project is implemented and significant energy consumption
efficiencies are realized due to same, then CBF and Amoco will mutually
agree upon a new formula to become effective with the start of the first
Month that follows the start-up of said project by 60 Days. Such new
formula should initially reflect the same resulting fees as the above
formulas, but will utilize new factors as are appropriate to be changed to
reflect the change in energy consumption patterns at the Fractionator,
provided that the definition of "FUEL," "ELEC" and "CPIU" above shall not
change.
7.3 Either Party shall have the right to initiate a renegotiation of either or
both of the above fees and fee formulas to be effective on any or each of
* the [REDACTED] of the Effective Date (the "Price Change Dates") by giving
the other Party at least ninety (90) Days and no more than one hundred
fifty (150) Days notice prior to any of the Price Change Dates. Such
negotiations shall commence immediately upon the date of receipt of such
notice by the other Party and continue for at least sixty (60) Days
thereafter (the "Negotiation Period"). During the Negotiation Period, each
Party shall submit to the other Party one or more written offers for the
new fee or fees. If CBF and Amoco are unable to agree to the new fee or
fees by the end of the Negotiation Period, either CBF or Amoco shall have
the right to have the new fee or fees re-determined by initiating Fee
Re-Determination Arbitration pursuant to Sections 13.5 through 13.10,
provided that in arbitrating such fee re-determinations, the arbitrator's
choice shall be based on a determination of which of the Parties' Final
Offers most closely approximates the then current fair market rate for the
fractionation and other services provided by CBF hereunder, based on a
five Year term for volumes and composition of Raw Product similar
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to that then being tendered hereunder by Amoco, and with the market area
for comparison being the Mont Belvieu Area.
ARTICLE VIII: TAXES AND OTHER PAYMENTS
Amoco shall be responsible for the payment of any royalties, overriding
royalties, and other payments due or to become due on the Raw Products or the
Specification Products which are subject to this Agreement. Any tax applicable
to the Raw Products or the Specification Products or the services provided by
CBF hereunder, including but not limited to any tax applicable to stored volumes
of Specification Products, shall be borne and paid by Amoco unless such tax is
by law imposed upon CBF, in which event, such tax shall be paid by CBF and
charged to Amoco and reimbursed by Amoco. Amoco shall indemnify and hold CBF and
their respective Affiliate's directors, officers, agents and employees harmless
from and against any and all claims, demands or causes of action of any kind,
together with all loss, damage and expense (including court costs and attorney's
fees) arising with respect to the payment of any taxes, royalties, overriding
royalties and other payments due or to become due on the services, Raw Products
or Specification Products which are subject to this Agreement.
ARTICLE IX: ACCOUNTING AND AUDIT PROCEDURES
9.1 Amoco or its designee shall furnish the following reports to CBF: (i)
Amoco's share of Components in the Raw Product delivered each Month for the
Month in question by the tenth Day of the next succeeding Month; (ii)
instructions for delivery of Specification Products for the Month in
question during the Month in question, as set forth in Section 3.4; and
(iii) twelve (12) Month forecast of Raw Product projected to be delivered
under this Agreement, as requested by CBF from time to time.
9.2 CBF shall furnish each Month for the preceding Month, the following reports
to Amoco: (i) volumes of Amoco's Specification Products attributable to the
Raw Product delivered to CBF each Month, in accordance with the
reconciliation described in Section 3.4; (ii) Specification Products
volumes delivered to Amoco or its designee each Month in accordance with
the reconciliation described in Section 3.4; and (iii) Amoco's inventories
of Specification Product(s) each Month, in accordance with the
reconciliation described in Section 3.4. CBF shall furnish initial reports
of these items by the twentieth Day of the Month succeeding the Month and
shall fully complete volume and money reconciliations as described in
Section 9.3 below.
9.3 Volume and money reconciliation shall be prepared by Amoco and by CBF on a
Monthly basis. Amoco and CBF shall cooperate to identify and reconcile
volume balances and amounts owed. As each Party completes each Month's
reconciliation, a copy of the reconciliation shall be sent to the other
Party but no later than the last Day of the Month succeeding the Month in
question.
9.4 All invoices or statements issued by CBF and any volume and money
reconciliation reports, or balancing reports, during any calendar Year
shall conclusively be presumed to be true
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and correct after twenty-four (24) Months following the end of any such
calendar Year, unless within the said twenty-four (24) Month period the
other Party takes written exception thereto and makes claim on the Party
issuing the invoice, statement or report for adjustment.
9.5 Amoco, upon at least thirty (30) Days prior notice in writing to CBF, shall
have the right to audit the CBF's records pertaining to performance under
this Agreement, for any calendar Year within the twenty-four (24) Month
period following the end of such calendar Year; provided, however, the
making of ail audit shall not extend the time for the taking of written
exception to and the adjustments provided for in Section 9.4. Amoco shall
make every reasonable effort to conduct an audit in a manner which will
result in a minimum of inconvenience to CBF. CBF shall bear no portion of
the Amoco's audit cost. An audit shall not be conducted more than once each
Year. CBF shall reply in writing to an audit report within 180 Days after
receipt of such report. Should Amoco and CBF fail or be unable to resolve
any audit disputes, the matter shall be resolved using the dispute
resolution procedures set forth in Article 13 of this Agreement.
9.6 CBF shall retain all financial and volume records for a minimum of
forty-eight (48) Months following the end of any calendar Year.
ARTICLE X: BILLING AND PAYMENT
After receiving allocation information from Pipeline each Month, CBF shall
furnish Monthly to Amoco an invoice reflecting all applicable fees and charges
due and Amoco shall pay to CBF the amounts due no later than (i) ten (10) Days
after Amoco's receipt of invoice therefor, if the amount of same is fifty
thousand dollars ($50,000) or more or (ii) fifteen (15) Days after receipt of
invoice therefor, if the amount of same is less than fifty thousand dollars
($50,000). If the Day on which any payment is due is not a Business Day, then
the relevant payment shall be due upon the immediately preceding Business Day,
except if such payment due date is a Sunday or Monday, then the relevant payment
shall be due upon the immediately succeeding Business Day. Any amounts which
remain due and owing after the due date shall bear interest thereon at the lower
of the United States Treasury 90-Day T-Bill interest rate, as published in the
Wall Street Journal on the first Day such rate is quoted at the beginning of
each calendar quarter, plus thirteen (13%), or the maximum lawful rate of
interest (the "Base Rate"). If a good faith dispute arises as to the amount
payable in any statement, the amount not in dispute shall be paid. if Amoco
elects to withhold any payment otherwise due as a consequence of a good faith
dispute, Amoco shall provide CBF with written notice of its reasons for
withholding payment, and, if the amount of such invoice is equal to or greater
than five thousand dollars ($5,000) or the total aggregate amount of all
invoices in which Amoco has withheld payment and is outstanding at any time is
greater than or equal to twenty five thousand dollars ($25,000), Amoco shall
simultaneously place the disputed amount into an escrow account at a mutually
acceptable commercial bank, pending resolution of the dispute. Amoco's election
to withhold payment from CBF and escrow same as provided herein shall be
exercised within thirty (30) Days from Amoco's
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receipt of the invoice giving rise to such good faith dispute. After the thirty
(30) Day period, Amoco shall be required to pay CBF the full amount of the
invoice whether or not there is a good faith dispute as to the amount payable.
If it is subsequently determined, whether by mutual agreement of the Parties or
otherwise, that (i) Amoco is required to pay all or any portion of the disputed
amounts to CBF or (ii) Amoco is entitled to reimbursement for an invoice it
paid, in addition to paying such amounts, the Party making such payment also
shall pay interest accrued on such amounts at the Base Rate from (1) the
original due date until paid in full, if Amoco is required to pay, or (2) the
date Amoco paid the disputed invoice until paid in full, if CBF is required to
pay.
ARTICLE XI: FORCE MAJEURE
11.1 In the event either Party hereto is rendered unable, wholly or in part, by
reason of Force Majeure to carry out its obligations under this Agreement,
upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the
cause relied on, then the obligations of such Party, other than the
obligation to pay money due hereunder, insofar and only insofar as they are
affected by such Force Majeure, shall be suspended during the continuance
of any inability so caused, but for no longer period; and such cause shall,
so far as reasonably possible, be remedied with all reasonable dispatch.
11.2 The term "Force Majeure" shall mean acts of God, strikes, lockouts or other
industrial disputes or disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, storms, and warnings for any of
the foregoing which may necessitate the precautionary shut-down of wells,
plants, pipelines, gathering systems, loading facilities, terminals, the
Fractionator or any portion thereof, or other related facilities, floods,
washouts, arrests and restraints of governments (either federal, state,
civil or military), civil disturbances, explosions, sabotage, breakage or
accidents to equipment, machinery, plants, the Fractionator or any portion
thereof, or lines of pipe, the lack or failure of brine or brine handling
capacity, the making of repairs or alterations to any of the foregoing,
inability to secure labor or materials, freezing of equipment, machinery,
plants, the Fractionator or any portion thereof, or lines of pipe, partial
or entire failure of wells or gas supply, electric power shortages,
necessity for compliance with any court order, or any law, statute,
ordinance, rule, regulation or order promulgated by a governmental
authority having or asserting jurisdiction, inclement weather that
necessitates extraordinary measures and expense to construct facilities
and/or maintain operations, or any other causes, whether of the kind
enumerated herein or otherwise, which are not within the control of the
Party claiming suspension and which by the exercise of due diligence such
Party is unable to prevent or overcome. Such term shall likewise include,
in those instances where either Party hereto is required to obtain
servitudes, rights-of-way, grants, permits or licenses to enable such Party
to fulfill its obligations hereunder, the inability of such Party to
acquire, or delays on the part of such Party in acquiring, at reasonable
cost and after the exercise of reasonable diligence, such servitudes,
rights-of-way grants, permits or licenses, and in those instances where
either Party hereto is required to furnish materials and supplies for the
purpose of
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constructing or maintaining facilities to enable such Party to fulfill its
obligations hereunder, the inability of such Party to acquire, or delays on
the part of such Party in acquiring, at reasonable cost and after the
exercise of reasonable diligence, such materials and supplies. The term
"Force Majeure" shall also include any event of force majeure occurring
with respect to the facilities or services of either Party's suppliers or
customers providing a service or providing any equipment, goods, supplies
or other items necessary to the performance of such Party's obligations,
and shall also include curtailment or interruption of deliveries or
services by such third-party suppliers or customers as a result of an event
defined as Force Majeure hereunder.
11.3 Notwithstanding Section 11.1 above, it is understood and agreed that the
settlement of strikes or lockouts shall be entirely within the discretion
of the Party having the difficulty, and that the above requirement that any
Force Majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes or lockouts by acceding to the demands of
the opposing Party when such course is inadvisable in the discretion of the
Party having the difficulty.
ARTICLE XII: INDEMNIFICATION AND LIMITATION OF LIABILITY
12.1. AMOCO'S INDEMNITIES: REGARDLESS OF THE PRESENCE OR ABSENCE OF ANY
INSURANCE COVERAGE MAINTAINED BY EITHER PARTY HERETO, AMOCO HEREBY
RELEASES, AND AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS, CBF,
ITS OPERATOR, PARTNERS AND ITS PARTNERS' AFFILIATES AND THOSE ENTITIES'
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES
("AMOCO INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS,
CAUSES OF ACTION, LIABILITY, LOSS, DAMAGE, PENALTIES, FINES, COST AND
EXPENSE, INCLUDING COURT COSTS AND ATTORNEY'S FEES IN CONNECTION THEREWITH
("CLAIMS"), ARISING OUT OF OR RELATED TO:
(1) DESTRUCTION, LOSS OR CONTAMINATION OF AMOCO'S RAW PRODUCT AND
SPECIFICATION PRODUCTS, EVEN WHERE LIABILITY WITHOUT FAULT WOULD
OTHERWISE BE IMPOSED ON CBF AND REGARDLESS OF THE CAUSE OF SUCH LOSS,
INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OF ANY OF THE AMOCO
INDEMNIFIED PARTIES, IT BEING UNDERSTOOD AND AGREED THAT AMOCO SHALL
RETAIN ALL RISK OF LOSS WITH REGARD TO AMOCO'S RAW PRODUCT AND
ATTRIBUTABLE SPECIFICATION PRODUCTS, EVEN WHEN SAME IS IN CBF'S
POSSESSION DURING THE PROVIDING OF SERVICES HEREUNDER; and
(2) Except as to Claims within the scope of Sections 12.1.(1) above, any
Claims arising from injuries or damages to the persons or properties
arising from damages
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to the tangible physical property in connection with Amoco's, or its
contractors, handling and possession of Amoco's Raw Product or
Specifications Products prior to delivery of same to CBF and after
delivery of same from CBF back to Amoco or its designated
representative to the extent of Amoco's or its contractor's negligence
or legal fault for same.
12.2 CBF INDEMNITIES: Regardless of the presence or absence of any insurance
coverage maintained by either party hereto, CBF hereby releases, and agrees
to defend, protect, indemnify and hold harmless, Amoco, and its affiliates,
and agents and those entities' respective directors, officers, employees,
agents and representatives ("CBF Indemnified Parties") from and against any
and all claims, demands, causes of action, liability, loss, damage,
penalties, fines, cost and expense, including court costs and attorney's
fees in connection therewith ("Claims"), arising from injuries or damages
to the persons or properties arising from damages to the tangible physical
property in connection with CBF's, or its contractors, handling and
possession of Amoco's Raw Product or Specifications Products while same are
in CBF's possession and prior to delivery of same to Amoco at the Storage
Facility to the extent of CBF's or its contractor's negligence or legal
fault for same.
12.3 LIMITATION OF LIABILITY: NEITHER CBF, CBF'S OPERATOR OR AMOCO SHALL BE
RESPONSIBLE OR LIABLE TO THE OTHERS, OR TO THEIR AGENTS, FOR ANY SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT
OR ANY BREACH HEREOF, REGARDLESS OF THE CAUSES OF SAME, INCLUDING WHERE
CAUSED, BY THE NEGLIGENCE OR FAULT OF THE PARTY WHOSE LIABILITY IS LIMITED
HEREBY.
ARTICLE XIII: DISPUTE RESOLUTION
13.1 COVERED DISPUTES - Any dispute, controversy or claim (whether sounding in
contract, tort or otherwise) arising out of or relating to this Agreement,
including, without limitation, the meaning of its provisions, or the proper
performance of any of its terms by either Party, its breach, termination or
invalidity ("Dispute") will be resolved in accordance with the procedures
specified in this Section, which will be the sole and exclusive procedure
for the resolution of any such Dispute, except that a Party, without
prejudice to the following procedures, may file a complaint to seek
preliminary injunctive or other provisional judicial relief, if in its sole
judgment, that action is necessary to avoid irreparable damage or to
preserve the status quo. Despite the filing of any such injunctive or other
provisional judicial relief, the Parties will continue, subject to
Subsection 13.10 below, to participate in the applicable procedures
specified in this Section. The obligation to participate in such applicable
procedures shall not require either Party to participate in the negotiation
between executives procedures set forth in Subsection 13.3 below or the
mediation procedures set forth in Subsection 13.4 below if either Party
determines, in its sole discretion, that such procedures would be futile.
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13.2 INITIATION OF PROCEDURES. Either Party desiring to initiate the dispute
resolution procedures set forth in this Section with respect to a Dispute
not resolved in the ordinary course of business (the "Initiating Party")
must give written notice of the Dispute (the "Dispute Notice") to the other
Party (the "Non-Initiating Party"). The Dispute Notice shall include (i) a
statement of that Party's position and a summary of arguments supporting
that position, and (ii) the name and title of the executive who will
represent that Party, and of any other person who will accompany the
executive, in the negotiations under Subsection 13.3 below.
13.3 NEGOTIATION BETWEEN EXECUTIVES - If one Party has given a Dispute Notice
under Subsection 13.2 above, the Parties may attempt in good faith to
resolve the Dispute within forty-five (45) Days following receipt of the
Dispute Notice by the Non-Initiating Party by negotiation between
executives who have authority to settle the Dispute and who are at a higher
level of management than the persons with direct responsibility for
administration of this Agreement or the matter in Dispute. Within fifteen
(15) Days after receipt of the Dispute Notice, the Non-Initiating Party may
submit to the other a written response. If given, the response will include
(i) a statement of that Party's position and a summary of arguments
supporting that position, and (ii) the name and title of the executive who
will represent that Party and of any other person who will accompany the
executive. If such a response is given by the Non-Initiating Party, within
forty-five (45) Days following receipt of the Dispute Notice by the
Non-Initiating Party, the executives of both Parties will meet at a
mutually acceptable time and place, and thereafter, as often as they
reasonably deem necessary, to attempt to resolve the Dispute.
13.4 MEDIATION - If the Dispute has not been resolved by negotiation under the
Subsection 13.3 above within forty-five (45) Days following receipt of the
Dispute Notice by the Non-Initiating Party or if the Non-Initiating Party
fails to respond within the required fifteen (15) Day period, either Party
may initiate the mediation procedure of this Subsection by giving written
notice to the other Party ("Mediation Notice"). The Parties will endeavor
to settle the Dispute by mediation within sixty (60) Days of the Mediation
Notice under the then current Center for Public Resources ("CPR") Model
Mediation Procedure for Business Disputes. If the Parties have not agreed
upon a mediator within seven (7) Days after the Mediation Notice, either
Party may request CPR assistance in the selection of a mediator under its
guidelines. Unless otherwise agreed to by the Parties, no discovery shall
be allowed during the sixty (60) Day mediation period. If both Parties
elect to participate in the mediation procedures set forth herein, the cost
of the mediator will be shared equally between the Parties, unless
otherwise agreed to in writing by the Parties. If one Party elects not to
participate in the mediation procedures, neither Party shall bear any cost
associated with such procedure, other than costs that each Party may have
incurred in connection therewith which shall be borne by the Party that
incurred such costs.
13.5 ARBITRATION. If the Dispute has not been resolved by mediation under the
Subsection 13.4 above within the required sixty (60) Day period or if
either Party fails and/or refuses to participate in such mediation
procedures, either Party may request that the matter be resolved through
arbitration by submitting a written notice (the "Arbitration Notice") to
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the other. Additionally, if the Parties have been unable to agree on a fee
re-determination initiated by either Party pursuant to Section 7.3 during
the Negotiation Period, as set forth in said section, either Party may then
initiate arbitration to by submitting an Arbitration Notice to the other
and such fee re-determination shall not be submitted to the procedures set
forth in Sections 13.2 through 13.4 but shall be arbitrated pursuant to
this Section 13.5 and the following Subsections 13.6 through 13.10, as
applicable ("Fee Re-Determination Arbitration"). Any arbitration that is
conducted hereunder shall be governed by the Federal Arbitration Act, 9
U.S.C. Section 1 ET SEQ., as amended, and will not be governed by the
arbitration acts, statutes, or rules of any other jurisdiction.
13.6 ARBITRATION PROCEDURE. The Arbitration Notice shall name the noticing
Party's arbitrator and shall contain a statement of the issue(s) presented
for arbitration. Within fifteen (15) Days of receipt of an Arbitration
Notice, the other Party shall name its arbitrator by written notice to the
other and may designate any additional issue(s) for arbitration. The two
named arbitrators shall select the third arbitrator within fifteen (15)
Days after the date on which the second arbitrator was named. Should the
two arbitrators fail to agree on the selection of the third arbitrator,
either Party shall be entitled to request the Senior Judge of the United
States District Court for the Southern District of Texas to select the
third arbitrator. Should either Party fail and/or refuse to name its
arbitrator within the required fifteen (15) Day period, the other Party
shall be entitled to request the Senior Judge of the United States District
Court for the Southern District of Texas to select the arbitrator for such
Party. Notwithstanding the foregoing, in the case of a Fee Re-Determination
Arbitration, the Parties shall mutually select a single arbitrator within
thirty (30) Days after receipt of the Arbitration Notice and if they should
fail to agree on the arbitrator within that time period, either Party shall
be entitled to request the Senior Judge of the United States District Court
for the Southern District of Texas to select the arbitrator. The cost of
the arbitrator shall be shared equally between the Parties. All arbitrators
shall be qualified by education or experience within the natural gas
liquids portion of the energy industry to decide the issues presented for
arbitration. No arbitrator shall be: a current or former director, officer,
or employee of either Party or its Affiliates; an attorney (or member of a
law firm) who has rendered legal services to either Party or its Affiliates
within the preceding three Years; or an owner of any of the common stock of
either Party, or its Affiliates.
13.7 ARBITRATION HEARING. The three arbitrators or in the case of Fee
Re-Determination Arbitration, the single arbitrator shall commence the
arbitration proceedings within twenty-five (25) Days following the
appointment of the third arbitrator or the single arbitrator, as
appropriate. The arbitration proceedings shall be held at a mutually
acceptable site and if the Parties are unable to agree on a site, the
arbitrators shall select the site. The arbitrators shall have the authority
to establish rules and procedures governing the arbitration proceedings,
including, without limitation, rules concerning discovery. Each Party shall
have the opportunity to present its evidence at the hearing. The
arbitrators may call for the submission of pre-hearing statements of
position and legal authority, but no post-hearing briefs shall be
submitted. The arbitration panel shall not have the authority to award
incidental, consequential, special, punitive or exemplary
15
<Page>
damages. In addition, if an issue under consideration is limited to a
determination of an amount of money owed by one Party to the other, or Fee
Re-Determination Arbitration, each Party shall submit to the single
arbitrator a final offer of its proposed resolution of the dispute ("Final
Offers"). The arbitrator shall be charged to select from the two Final
Offers the one which the panel finds to be the most reasonable and
consistent with the terms and conditions of this Agreement, and the
arbitrator shall not average the Parties' proposals or otherwise craft its
own remedy. With regard to Fee Re-Determination Arbitration, the basis for
the arbitrator's decision shall be based on the factors set forth is said
Section 7.3 All evidence submitted in an arbitration proceeding,
transcripts of such proceedings, and all documents submitted by the Parties
in an arbitration proceeding shall be kept confidential and shall not be
disclosed to any third Party by either Party hereto.
13.8 ARBITRATION DECISION AND COSTS. The decision of the arbitrators or a
majority of them, shall be in writing and shall be final and binding upon
the Parties as to the issue(s) submitted. The cost of the hearing shall be
shared equally by the Parties, and, except as provided in Section 13.6,
each Party shall be responsible for its own expenses and those of its
counsel or other representatives. Each Party hereby irrevocably waives, to
the fullest extent permitted by law, any objection it may have to the
arbitrability of any such disputes, controversies or claims and further
agrees that a final determination in any such arbitration proceeding shall
be conclusive and binding upon each Party.
13.9 ENFORCEMENT OF AWARD. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. The prevailing Party shall
be entitled to reasonable attorneys' fees in any contested court proceeding
brought to enforce or collect any award of judgment rendered by the
arbitrators.
13.10 TOLLING AND PERFORMANCE. Except as otherwise provided in this Article
XIII, all applicable statutes of limitation and defenses based upon the
passage of time and all contractual limitation periods specified in this
Agreement, if any, will be tolled while the procedures specified in this
Article XIII are pending. The Parties will take all actions to effectuate
necessary to effectuate the tolling of any applicable statute of limitation
or contractual limitation periods. All deadlines specified herein may be
extended by mutual written agreement of the Parties. Each Party is required
to continue to perform its obligations under this Agreement pending final
resolution of any Dispute, unless to do so would be impossible or
impracticable under the circumstances. Notwithstanding the foregoing, the
statute of limitations of the State of Texas applicable to the commencement
of a lawsuit will apply to the commencement of an arbitration under this
Agreement, except that no defenses will be available based upon the passage
of time during any negotiation or mediation called for by the preceding
Subsections of this Section.
ARTICLE XIV: MISCELLANEOUS
14.1 EXISTING LAWS AND REGULATIONS. This Agreement and the operations hereunder
shall be subject to the applicable federal and state laws and the
applicable orders, laws, rules
16
<Page>
and regulations of any state or federal authority having or asserting
jurisdiction, but nothing contained herein shall be construed as a waiver
of any right to question or contest any such order, law, rule or
regulation. The parties shall be entitled to regard all such laws, rules,
regulations and orders as valid and may act in accordance therewith until
such time as the same may be invalidated by final judgment in a court of
competent jurisdiction.
14.2 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED
AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE
SAME MAY BE AMENDED FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
14.3. WAIVER. No waiver by either Party of any default under this Agreement or
any of the provisions of this Agreement shall be deemed to be a waiver of
any future default or any other provision hereof, whether of a like or a
different character. No waiver shall be effective unless made in writing
and signed by the Party to be charged with such wavier, nor shall such
waiver constitute a continuing waiver unless expressly provided by the
Party to be charged with such wavier.
14.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and
assigns. Notwithstanding the foregoing, neither Party may assign this
Agreement, nor any interest herein, without the prior written consent of
the other Party, which consent shall not be unreasonably withheld;
provided, however, that a Party may from time to time designate an
Affiliate to perform this Agreement, either in whole or in part, such
performance being considered that of the Party hereto. It is understood,
however, that by such designation, said Party hereto does not thereby avoid
obligations imposed by the terms and provisions hereof. Amoco further
specifically agrees that it will not assign its interest in the volumes of
Raw Product dedicated to this Agreement without the prior written consent
of CBF, which consent shall not be unreasonably withheld; provided such
assignment is made subject to this Agreement and any Assignee ratifies and
adopts this Agreement in writing.
14.5 EXHIBITS. Unless specifically otherwise provided, if any term or condition
expressed or implied in any Exhibit to this Agreement conflicts or is at
variance with any term or condition of this Agreement, this Agreement shall
prevail. All Exhibits as referenced herein are attached hereto and made a
part hereof.
14.6 DTPA WAIVER. THE PARTIES CERTIFY THAT THEY ARE NOT "CONSUMERS" WITHIN THE
MEANING OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SUBCHAPTER E OF CHAPTER 17, SECTIONS 17.42, ET SEQ., OF THE TEXAS BUSINESS
AND COMMERCE CODE, AS AMENDED ("DTPA"). THE PARTIES COVENANT, FOR
THEMSELVES AND FOR AND ON BEHALF OF ANY SUCCESSOR OR ASSIGNEE, THAT, IF THE
DTPA IS APPLICABLE, (a) THE PARTIES ARE "BUSINESS CONSUMERS" AS THAT TERM
IS DEFINED IN THE DTPA, (b) OTHER THAN SECTION 17.555 OF THE TEXAS BUSINESS
AND COMMERCE CODE, EACH PARTY HEREBY
17
<Page>
WAIVES AND RELEASES ALL OF ITS RIGHTS AND REMEDIES UNDER THE DTPA AS
APPLICABLE TO THE OTHER PARTY AND ITS SUCCESSORS AND ASSIGNS, AND (c) EACH
PARTY SHALL DEFEND AND INDEMNIFY THE OTHER FROM AND AGAINST ANY AND ALL
CLAIMS OF OR BY THAT PARTY OR ANY OF ITS SUCCESSOR AND ASSIGNS OR ANY OF
ITS OR THEIR AFFILIATES BASED IN WHOLE OR IN PARTY OF THE DTPA, ARISING UT
OF OR IN CONNECTION WITH THE TRANSACTION SET FORTH IN THIS AGREEMENT.
14.7 HEADINGS, ARTICLES AND SECTIONS. All references to Articles" and "Sections"
herein pertain to Articles and Sections of this Agreement, unless expressly
stated otherwise. Headings are for purposes of reference only and shall not
be used to construe the meaning of this Agreement.
14.8 PRINCIPLES OF CONSTRUCTION AND INTERPRETATION. In construing this
Agreement, the following principles shall be followed:
(i) no consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this Agreement:
(ii) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate:
(iii) the word "includes" and its syntactical variants mean "includes,
but is not limited to" and corresponding syntactical variant
expressions: and
(iv) the plural shall be deemed to include the singular and vice
versa, as applicable.
14.9 NOTICES. Any notice, request, instruction, correspondence, or other
documentation to be given hereunder by either Party to the other shall be
in writing and delivered personally or mailed by registered or certified
mail, postage prepaid and return receipt requested, or facsimile as
follows:
FOR CBF:
To: Cedar Bayou Fractionators, L.P.
c/o Warren Petroleum Company, Limited Partnership
Attention: Vice President, Asset Marketing and Services
At: 1000 Louisiana, Suite 5800
Houston, TX 77002-5050
Phone: (713) 507-3843
FAX: (713) 767-8286
18
<Page>
With a copy to: General Counsel
Warren Petroleum Company,
Limited Partnership
1000 Louisiana, Suite 5800
Houston, TX 77002-5050
Phone: 713-507-6400
Fax: 713-507-6987
FOR AMOCO (EXCEPT ACCOUNTING MATTERS):
To: Amoco Oil Company
Attention: Manager, NGL Planning and Optimization
Mail Code 1102
At: 200 East Randolph Drive
Chicago, Illinois 60601
or: P. 0. Box 87707
Chicago, Illinois 60681-0707
Phone: (312) 856-6730
FAX: (312) 616-0624
FOR AMOCO ACCOUNTING MATTERS:
To: Amoco Business Services
Attention: NGL Accounting - 14th Floor
At: P.O. Box 200, Station M
Calgary, Alberta T2P 2H8
Phone: (403) 233-1179
FAX: (403) 233-1052
or at such other address as either Party shall designate by written notice
to the other. A notice sent by facsimile shall be deemed to have been
receive by the close of the first Business Day following the Day on which
it was transmitted and confirmed by transmission report or such earlier
time as confirmed orally or in writing by the receiving Party. Notice by
U. S. Mail, whether by U. S. Express Mail, registered mail or certified
mail, or by overnight courier shall be deemed to have been received by the
close of the second Business Day after the Day upon which its was sent, or
such earlier time as is confirmed orally or in writing by the receiving
Party. Any Party may change its address or facsimile number by giving
notice of such change in accordance with herewith.
14.10 NO THIRD PARTY BENEFICIARY. This Agreement is for the sole benefit of the
Parties and their respective successors and permitted assigns, and shall
not inure to the benefit of any other person whomsoever, it being the
intention of the Parties that no third person shall be deemed a third
party beneficiary of this Agreement.
19
<Page>
14.11 SEVERABILITY. This Agreement and the operations hereunder shall be subject
to the valid and applicable federal and state laws and the valid and
applicable orders, laws, local ordinances, rules, and regulations of any
local, state or federal authority having jurisdiction, but nothing
contained herein shall be construed as a waiver of any right to question
or contest any such order, laws, rules, or regulations in any forum having
jurisdiction in the premises. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under the present or future laws
effective during the term of this Agreement, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if
such illegal, invalid, or unenforceable provision had never comprised a
part of this Agreement, and (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected
by the illegal, invalid, or unenforceable provision or by its severance
from this Agreement. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there will be added automatically as a part of
this Agreement a provision similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and as may be legal, valid, and
enforceable. If a provision of this Agreement is or becomes illegal,
invalid, or unenforceable in any jurisdiction, the foregoing event shall
not affect the validity or enforceability in that jurisdiction of any
other provision of this Agreement nor the validity or enforceability in
other jurisdictions of that or any other provision of this Agreement.
14.12 ENTIRE AGREEMENT AND AMENDMENT. This Agreement, including, without
limitation, all exhibits hereto, integrates the entire understanding
between the Parties with respect to the subject matter covered and
supersedes all prior understandings, drafts, discussions, or statements,
whether oral or in writing, expressed or implied, dealing with the same
subject matter. This Agreement may not be amended or modified in any
manner except by a written document signed by both parties that expressly
amends this Agreement.
14.13 SETOFFS AND COUNTERCLAIMS. Except as otherwise provided herein, each Party
reserves to itself all rights, set-offs, counterclaims, and other remedies
and/or defenses which that Party is or may be entitled to arising from or
out of this Agreement or as otherwise provided by law.
14.14 NO PARTNERSHIP OR ASSOCIATION. Nothing contained in this Agreement shall
be construed to create an association, trust, partnership, or joint
venture or impose a trust or partnership duty, obligation, or liability on
or with regard to either Party.
14.15 NO COMMISSIONS, FEES OR REBATES. Except as expressly authorized by this
Agreement, no director, employee or agent of either Party shall give or
receive any commission, fee, rebate gift or entertainment of significant
cost or value in connection with this Agreement. Any representative or
representative(s) authorized by either Party may audit the applicable
records of the other Party for the purpose of determining whether there
has been compliance with this Section.
20
<Page>
'Confidential Treatment Requested'
14.16 NO PARTNERSHIP, ASSOCIATION, ETC. Nothing contained in this Agreement
shall be construed to create an association, trust, partnership, or
joint venture or impose a trust or partnership duty, obligation, or
liability on or with regard to either Party.
ARTICLE XV: FUEL SUPPLY OPTION
By giving sixty (60) Days written notice to CBF prior to the beginning
of any calendar year, Amoco may elect to sell fuel gas to CBF at a
* price equal to [REDACTED] of the then estimated fuel gas consumption of
the Fractionator, which estimate shall be established Monthly by CBF in
its sole discretion. Amoco will be solely responsible for all costs
associated with arranging for the delivery of such fuel gas to the
Fractionator.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Day and Year first above written.
Cedar Bayou Fractionators, L.P.
By: Downstream Energy Ventures Co., L.L.C.
Title: Managing General Partner
By: /s/ William E. Puckett
----------------------------
William E. Puckett
Title: Vice President
-------------------------
AMOCO OIL COMPANY
By: /s/ A. B. ANDERSON
----------------------------
Title: MANAGER, NGL SUPPLY & LOGISTICS
-------------------------
21
<Page>
EXHIBIT "A"
to
Fractionation Agreement
by and between
Cedar Bayou Fractionators, L. P.
and
Amoco Oil Company
AMOCO'S DEDICATED PLANTS
<Table>
<Caption>
Plant Location
- ----- --------
Anschutz Uinta Co., Wyoming
Denver City Plant Yoakum Co., Texas
Echo Springs Carbon Co., Wyoming
Goldsmith Plant Ector Co., Texas
Headleee Devonian Plant Ector Co., Texas
Ignacio La Plata Co., Colorado
Kutz Rio Arriba, Co., New Mexico
Lybrook Rio Arriba Co., New Mexico
Opal Lincoln Co., Wyoming
Painter Uinta Co., Wyoming
San Juan San Juan Co., New Mexico
Walton Plant Winkler Co., Texas
Wamsutter Carbon Co., Wyoming
Wasson C02 Plant Yoakum Co., Texas
West Seminole Plant Gaines Co., Texas
Whitney Canyon Uinta Co., Wyoming
Willard Plant Yoakum Co., Texas
</Table>
22
<Page>
EXHIBIT B
ETHANE-PROPANE
80-20 MIXTURE
SPECIFICATION
Product characteristics with test methods are herein specified for
ethane-propane 80-20 mixtures received by Warren Petroleum Company, Limited
Partnership.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- ------- ---------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Methane (Percent of Ethane) 2.0 GPA 2177
Ethylene (Percent of Ethane) 1.0
Methane, Ethane & Ethylene 78.0 82.0
Propane, Propylene, & Butanes 18.0 22.0 ASTM D-2163
Propylene 1.0
Butanes 0.8
2. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor
is used.)
Corrosion Additive or Inhibitor,
PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
4. DRYNESS No Free Water Visual
5. CARBON DIOXIDE
PPM by Weight in Liquid 1,000 GPA 2177
</Table>
PRODUCT ACCOUNTING
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon Components above the specification limits shall
not be accounted for.
1
<Page>
EXHIBIT B
PROPANE SPECIFICATION
Product characteristics with test methods are herein specified for propane
received by Warren Petroleum Company, Limited Partnership. This product meets
the requirement of the GPA HD-5 propane specification.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- ------- ---------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume Ethane As limited by other
Components & vapor
pressure.
Propane 90.0 100
Propylene 5.0 ASTM D-2163
Butanes & Heavier 2.5
2. VAPOR PRESSURE
Psig @ 100 DEG. F 208 ASTM D-1267
3. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor is
used.)
Corrosion Additive or Inhibitor, PPM
by Weight. 1 Applicable Industry Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
5. HYDROGEN SULFIDE
PPM by Weight in Liquid 1 Field - Length of Stain Tube
(Lab test required if field test is Lab Chromatography with Flame
positive.) Photometric Detector
6. CARBONYL SULFIDE
PPM by Weight in Liquid 2 Field - Length of Stain Tube
(Field test invalid if C(4) + exceeds 1.0
LV%) (Lab test required if field test Lab - UOP 212 or UOP 791
is positive.) Lab - Gas Chromatography with
Flame Photometric Detector
7. NON-VOLATILE RESIDUE
a) Milliliters @ 100 DEG. F 0.05 ASTM D-2158
b) Oil Stain Pass
THE FOLLOWING TESTS ARE OPTIONAL, DEPENDING
UPON THE PRODUCT SOURCE:
8. DRYNESS
Freeze Valve, Seconds 60 (Note 2) ASTM D-2713
9. VOLATILE RESIDUE
95% Evaporated - Temperature, DEG. F -37 ASTM D-1837
10. AMMONIA
PPM by Weight in Liquid 1 Field - Length of Stain Tube
Lab - UOP 430
11. FLUORIDES
PPM by Weight in Liquid as 5 Field - Length of Stain Tube
Monatomic Fluorine
12. OTHER DELETERIOUS SUBSTANCES (PPM BY
WEIGHT IN LIQUID)
Includes but not limited to 1 Gas chromatography with flame
(Isoprene, Butadiene, Vinyl ionization or electron capture
Chloride, glycol, amine, caustic) detection or other
</Table>
NOTES: (1) The test methods for items 2 and 7 are not necessary if a
compositional analysis is available which indicates compliance with these
requirements.
(2) The addition of methanol in the distribution system should be on a
spot basis and must not exceed a rate of 5 Gallons per 10,000 Gallons of
product.
2
<Page>
EXHIBIT B
NORMAL BUTANE SPECIFICATION
Product characteristics with test methods are herein specified for normal butane
received by Warren Petroleum Company, Limited Partnership.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- ------- ---------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Isobutane and Lighter 5.0 ASTM D-2163
Butylane (Percent of N. Butane) 1.0
N. Butane & Butylene 95.0 100 GPA 2165
Pentanes & Heavier 2.0
2. VAPOR PRESSURE
Psig @ 100 DEG. F 50 ASTM D-1267
3. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor is
used.)
Corrosion Additive or Inhibitor, PPM
by Weight 1 Applicable Industry Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated - Temperature, DEG. F +36 ASTM D-1837
6. DRYNESS No Free Water Visual
</Table>
NOTE: The test methods for Items 2 and 5 are not necessary if a compositional
analysis indicates compliance with these requirements.
3
<Page>
EXHIBIT B
ISOBUTANE SPECIFICATION
Product characteristics with test methods are herein specified for isobutane
received by Warren Petroleum Company, Limited Partnership.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- ------- ---------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Propane, Propylene and Lighter 3.0 ASTM D-2163
Isobutane 96.0 100
Butylene, Normal Butane & Heavier 4.0
2. VAPOR PRESSURE
Psig @ 100 DEG. F 62 ASTM D-1267
3. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor is
used.)
Corrosion Additive or Inhibitor, PPM
by Weight 1 Applicable Industry Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated - Temperature DEG. F +16 ASTM D-1837
6. DRYNESS No Free Water Visual
</Table>
NOTE: The test methods for Items 2 and 5 are not necessary if an adequate
compositional analysis is available which indicates compliance with these
requirements.
4
<Page>
EXHIBIT B
NATURAL GASOLINE SPECIFICATION
Product characteristics with test methods are herein specified for natural
gasoline received by Warren Petroleum Company, Limited Partnership.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- ------- ---------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Butanes & Lighter 3.0 GPA 2165
Pentanes & Heavier 97 100
2. VAPOR PRESSURE
Psi @ 100 DEG. F, Reid 14 ASTM D-323
3. CORROSION
Copper Strip @ 104 DEG. F 1-b ASTM D-130
(Invalid if additive or inhibitor is
used.)
Corrosion Additive or Inhibitor, PPM
by Weight. 1 Applicable Industry Practices
4. DOCTOR TEST Negative GPA 1138
5. DRYNESS No Free Water Visual
6. COLOR +25 No Color Field White Cup Method
Lab - ASTM D-156
7. DISTILLATION
End Point, DEG. F 375 ASTM D-216
</Table>
NOTE: The test methods for Items 2 and 7 are not necessary if an adequate
compositional analysis is available which indicates compliance with these
requirements.
5
<Page>
FRACTIONATION AGREEMENT
by and between
CEDAR BAYOU FRACTIONATORS, L.P.
and
WARREN GAS LIQUIDS, INC..
EFFECTIVE JANUARY 1, 1998
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
Page
----
ARTICLE I: DEFINITIONS ......................................................................1
ARTICLE II: TERM ............................................................................4
ARTICLE III: WARREN'S PERFORMANCE ...........................................................4
ARTICLE IV: CBF'S PERFORMANCE ...............................................................5
ARTICLE V: TRANSFER OF CUSTODY ..............................................................6
ARTICLE VI: MEASUREMENT .....................................................................7
ARTICLE VII: COMPENSATION TO CBF ............................................................7
ARTICLE VIII: TAXES AND OTHER PAYMENTS ......................................................8
ARTICLE IX: ACCOUNTING AND AUDIT PROCEDURES .................................................9
ARTICLE X: BILLING AND PAYMENT ..............................................................10
ARTICLE XI: FORCE MAJEURE ...................................................................10
ARTICLE XII: INDEMNIFICATION AND LIMITATION OF LIABILITY ....................................12
ARTICLE XIII: DISPUTE RESOLUTION ............................................................13
ARTICLE XIV: MISCELLANEOUS ..................................................................16
EXHIBIT "A" -- WARREN'S DEDICATED PLANTS
EXHIBIT "B" -- SPECIFICATION PRODUCTS SPECIFICATIONS
</Table>
<Page>
FRACTIONATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 1st
Day of January, 1998, by and between, Cedar Bayou Fractionators, L.P., a
Delaware limited partnership (hereinafter referred to as "CBF"), and Warren
Gas Liquids, Inc., a Delaware corporation (hereinafter referred to as
"Warren"), sometimes also referred to individually as "Party" and
collectively as "Parties."
WITNESSETH:
WHEREAS, Warren owns, controls or has rights to certain volumes of
natural gas liquids recovered by various natural gas processing facilities
available for fractionation; and
WHEREAS, CBF owns a Fractionation Facility, hereinafter defined,
situated in Mont Belvieu, Chambers County, Texas; and
WHEREAS, Warren has arranged for the transportation and delivery of
such Raw Product, hereinafter defined, and/or Butane-Gasoline Mix,
hereinafter defined, to Mont Belvieu, Texas; and
WHEREAS, CBF has arranged for the receipt of such Raw Product and/or
Butane-Gasoline Mix from Warren, as well as Raw Product and/or
Butane-Gasoline Mix owned by third parties, at the Delivery Point,
hereinafter defined; and
WHEREAS, it is the mutual desire of CBF and Warren that CBF receive
Warren's Raw Product at the Delivery Point and redeliver to Warren, or its
designee, Specification Products, hereinafter defined, at the Storage
Facility, hereinafter defined, or at other mutually agreeable locations.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I: DEFINITIONS
When the following terms or expressions are used in this Agreement, they
shall have the meanings defined below:
"AFFILIATE" shall mean a Person that directly or indirectly through one or
more intermediates, controls, or is controlled by or is under common
control with the Person specified. The term "control" (including the terms
"controlled by" or "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership, by
contract, or otherwise. Any Person shall be deemed to be an Affiliate of
any specified Person if such Person owns 50% or more of the voting
securities of the
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specified Person, if the specified Person owns fifty percent (50%) or more
of the voting securities of the specified Person, if the specified Person
owns fifty percent (50%) or more of the voting securities of such Person,
or if fifty percent (50%) or more of the voting securities of the
specified Person and such Person are under common control.
"BACK-END MIX" shall mean any mixture of Components which will be
fractionated by the Fractionation Facility without requiring the use of
the Fractionator's de-ethanizer.
"BACK-END FEE" shall have the meaning as ascribed to it in Article VII.
"BARREL" shall mean 42 Gallons.
"BASE RATE" shall have the meaning as ascribed to it in Article X.
"BUSINESS DAY" shall mean a Day on which Federal Reserve member banks in
New York City are open for business.
"CLAIMS" shall have the meaning as ascribed to in Section 12.1
hereinafter.
"COMPONENT" shall mean the individual hydrocarbon constituents of Raw
Product, including but not limited to: methane, ethane, propane,
isobutane, normal butane, isopentane, normal pentane, hexanes and heavier,
as well as other non-hydrocarbon Components allowed by Pipeline.
"DAY" OR "DAILY" shall mean a twenty-four (24) hour period commencing 7:00
a.m. Central Standard or Daylight Savings time, as applicable, and
extending until 7:00 a.m. Central Standard or Daylight Savings time, as
applicable, on the following Day.
"DELIVERY POINT" shall mean the point of interconnection between the
Pipelines and Storage Facility at which point Warren's Raw Product is
delivered to CBF through the Storage Facility.
"FEE RE-DETERMINATION ARBITRATION" shall have the meaning set forth in
Section 13.5.
"FINAL OFFERS" shall mean final offers made by the Parties prior to
submission of a monetary dispute to an arbitrator, in the manner specified
in Section 13.7.
"FORCE MAJEURE" shall have the meaning as ascribed to it in Article XI.
"FRACTIONATION FACILITY" OR "FRACTIONATOR" shall mean the fractionation
unit owned by CBF situated in the vicinity of Mont Belvieu, Chambers
County, Texas, which is operated by Warren which fractionation unit is
used for the purpose of fractionating Raw Product streams into
Specification Products.
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"GALLON" shall mean the unit of volume used for the purpose of measurement
of liquid. One U.S. liquid Gallon contains 231 cubic inches when the
liquid is at a temperature of 60 degrees Fahrenheit and at the vapor
pressure of the liquid being measured.
"MONT BELVIEU AREA" shall mean the geographical area surrounding Mont
Belvieu, Texas including the following Texas counties:
Brazoria Harris
Chambers Jefferson
Fort Bend Liberty
Galveston Montgomery
"MONTH" OR "MONTHS" OR "MONTHLY" shall mean the period commencing on the
first Day of a Month and ending on the first Day of the next succeeding
Month.
"PIPELINE(S)" shall mean any pipeline which delivers Warren's Raw Product
to the Storage Facility. Currently, the four (4) pipelines capable of
delivering such Raw Product are the Seminole Pipeline, the Chaparral
Pipeline, the West Texas Pipeline, and Black Lake Pipeline. During 1998,
CBF desires to connect to the Dean Pipeline which is owned and operated by
Duke Energy.
"PRIMARY TERM" shall have the meaning as ascribed to it in Article II.
"RAW PRODUCT" shall mean that mixture of liquid hydrocarbons delivered by
Pipelines to the Storage Facility in accordance with the terms of any
connection agreements or pipeline tariffs in effect from time to time.
"REDELIVERY POINT" shall mean the Storage Facility owned and operated by
Warren.
"SPECIFICATION PRODUCT(S)" shall mean the liquid hydrocarbons meeting the
specifications provided for in Exhibit "B", attached hereto, fractionated
from the Raw Product.
"STORAGE FACILITY" shall mean the underground storage facilities owned and
operated by Warren at or near Mont Belvieu, Chambers County, Texas,
including, but not limited to, all storage caverns, related surface and
subsurface equipment, and loading and unloading terminals.
"WARREN" shall mean Warren Petroleum Company, Limited Partnership.
"YEAR" OR "YEARLY" shall mean a period of 365 consecutive Days; provided,
however that any Year which contains the date of February 29 shall consist
of 366 consecutive Days.
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"Y-GRADE" shall mean any Raw Product which will be fractionated by CBF's
fractionation facility other than Back-End Mixes.
"Y-GRADE FEE" shall have the meaning as ascribed to it in Article VII.
ARTICLE II: TERM
This Agreement shall have a primary term commencing on January 1, 1998 and
ending December 31, 2012 (the "Primary Term") and shall continue in effect
from Year to Year thereafter; provided that either Party shall have the
right to terminate this Agreement effective at the end of the Primary
Term or any Yearly anniversary thereafter by giving the other Party at
least twelve Months prior written notice.
ARTICLE III: WARREN'S PERFORMANCE
3.1 Except as set-forth in Section 3.2, Warren shall deliver or cause to be
delivered to the Delivery Point for fractionation under the terms of the
Agreement, the Raw Product which it owns and/or controls and which are
produced from the dedicated plants listed in Exhibit "A", and which are
delivered to the Mont Belvieu Area. Such Raw Product shall include both
Y-Grade and Back-End Mixes. Warren further agrees that for any volumes of
Y-Grade or Back-end Mixes that Warren may now or in the future have
available from plants that are not listed in Exhibit "A" and that are
delivered to the Mont Belvieu Area and that can economically be delivered
and fractionated at CBF versus alternative opportunities, that Warren will
offer such volumes to become dedicated to CBF and that if CBF accepts
same, then such volumes shall become dedicated under the terms of this
Agreement.
3.2 Any volumes which CBF does not commit to accept under the provisions of
Article IV of this Agreement shall be excepted from the dedication
set-forth in Section 3.1 above.
3.3 In addition to the volume commitments set-forth in Sections 3.1 and 3.2,
Warren shall also deliver or cause to be delivered to the Delivery Point
the Raw Product which Warren owns or controls from the following
agreements.
(1) All fractionation agreements with Enserch Processing, Inc. dated in
May or June of 1994.
(2) Raw Product Purchase Agreement with Western Gas Resources, Inc.
effective September 1, 1997.
(3) Raw Product Purchase Agreement with Westar Gas Company effective
January 1, 1997.
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'Confidential Treatment Requested'
(4) Raw Product Purchase Agreement with KN Gas Gathering, Inc. dated
December 1, 1987.
3.4 Warren shall direct Pipeline to prepare, during each Month, an allocation
of ownership of the Pipeline's commingled Raw Product, by Components
actually delivered to CBF. Warren and CBF are to accept and rely on such
allocation.
3.5 Prior to the beginning of each Month, CBF will estimate the volumes of
Specification Products for which disposition instructions will be required
from Warren. Such estimates will be established by utilizing the actual
volumes of Raw Product delivered to the Fractionation Facility during the
most recent Month for which actual volumes are available and adjusting for
anticipated variances as may be advised by Warren from time to time. As
set forth in Article IX of this Agreement, Warren and CBF shall exchange
and reconcile Monthly statements detailing Warren's product movement no
later than the last Day of each succeeding Month following the Month in
question.
3.6 Warren is procuring the fractionation services under this Agreement for
the purpose of fractionating Raw Product and not for the purpose of
reselling such services and agrees not to so resell said services.
ARTICLE IV: CBF'S PERFORMANCE
4.1 CBF shall accept delivery of and provide fractionation for a maximum of
* [REDACTED] Barrels per Day of Warren's Y-Grade and [REDACTED] Barrels per
Day of Back-End Mixes as determined on a Monthly average basis. Volumes
above these amounts will be accepted by CBF for fractionation on a space
available basis.
4.2 CBF shall also accept delivery of and provide fractionation for all
volumes delivered by Warren in accordance with Section 3.3 and for all
volumes delivered by Warren from extensions of the agreements set forth in
Section 3.3.
4.3 CBF shall deliver Specification Products to Warren or its designee at the
Storage Facility or at other mutually agreed upon locations. CBF will
redeliver Specification Products during the same Month in which the Raw
Product containing such Components is delivered to CBF, so long as
Pipeline deliveries allow for fractionation of said Raw Product at a rate
approximating the Daily average Pipeline delivery rate for said Month.
4.4 CBF shall not routinely hold back Specification Products from Warren as a
minimum inventory requirement. However, CBF shall have the right to
withhold distribution of Warren's Specification Products, on a CBF
ownership percentage basis, to the extent that CBF has insufficient
volumes of Specification Products to meet its obligations to its
fractionation customers. To determine Warren's ownership percentage in
CBF, Warren's ownership percentage in both DEVCO and CBF shall be
considered.
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4.5 The quantity of the five Specification Products due Warren will be as
follows, based on the Pipelines' reported volumes of each Component which
have been delivered for Warren's account:
(1) EP MIX (80/20): the volume will be equal to (a) 100% of the ethane
Component plus methane Component up to 1.5 liquid volume percent of
the ethane Component, (b) plus propane Component equal to 25% of
the volume in (a) above.
(2) PROPANE: the volume will be equal to 100% of the propane Component
minus the propane use for the EP Mix.
(3) ISOBUTANE: the volume will be equal to 100% of the isobutane
Component.
(4) NORMAL BUTANE: the volume will be equal to 100% of the normal butane
Component.
(5) NATURAL GASOLINE: the volume will be equal to 100% of the isopentane
and heavier Components.
4.5 In the event CBF actually produces purity ethane utilizing its existing
facilities (as of January 1, 1998), then Warren reserves the right to
receive a prorated share of its ethane as purity ethane. The maximum
Monthly volume of purity ethane that Warren may elect to receive would be
calculated as follows:
AE = [ AEY / TEY ] x E
Where:
AE = Warren's prorated share of purity ethane
AEY = the ethane Component of Warren's delivered Y-Grade during the
calendar Month
TEY = the total amount of ethane Component in Y-Grade delivered to the
Fractionator for fractionation services during the calendar
Month
E = the volume of purity ethane produced by CBF during the calendar Month
ARTICLE V: TRANSFER OF CUSTODY
Warren warrants that it has the right to cause the Raw Product to be
fractionated. Custody of the Raw Product shall transfer to CBF at the Delivery
Points, subject to Warren's right, pursuant to Section 4.2 above, to receive
allocated Gallons of Specification Products at the Storage Facility. Custody of
Specification Products shall be delivered to Warren or its designee. CBF shall
at no time take title to the Raw Product or the resulting Specification Products
while such products are in the custody of CBF.
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'Confidential Treatment Requested'
ARTICLE VI: MEASUREMENT
6.1 Volumes of Raw Product, shall be measured and calculated in accordance
with the then-current Pipeline tariff or CBF's Pipeline connection
agreements. CBF shall furnish Warren with current copies of all Pipeline
connection agreements and any future modifications to such agreements.
6.2 Volumes of Specification Products delivered by CBF in accordance with
Article IV, shall be measured and calculated in accordance with CBF's
standard measurement procedures at Mont Belvieu and shall conform to
good measurement practices in the industry and the then current API
Manual of Petroleum Measurement Standards. CBF shall furnish Warren
with the current copies of all standard measurement procedures for Mont
Belvieu and any future modifications to such procedures.
ARTICLE VII: COMPENSATION TO CBF
7.1 Except at provided in Section 7.4, as full consideration for the
fractionation services provided hereunder, Warren shall pay to CBF a
fractionation fee for each Gallon of Y-Grade ("Y-Grade Fee") or Back-End
Mixes ("Back-End Fee") delivered by, or on behalf of, Warren to CBF each
Month. Such fees shall be determined on a calendar quarter basis by the
following formulas:
* Y-Grade Fee = [REDACTED]
and
* Back-End-Fee = [REDACTED]
Where:
FUEL = The fuel cost (in $/MMBtu) equivalent to the Houston Ship
Channel Index of INSIDE FERC'S GAS MARKET REPORT, for natural
gas (large packages) for the preceding calendar quarter plus
* [REDACTED] per MMBTU.
ELEC = The combined average cost of purchased electricity (in
CENTS/KWH) at the Fractionator for the preceding calendar
quarter.
CPIU = The combined average Consumer Price Index, as published by the
United States Department of Labor, for the preceding calendar
quarter.
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'Confidential Treatment Requested'
7.2 The above fee formulas shall remain in effect during the first five Years
of the Primary Term unless CBF implements a significant energy reduction
project similar to that contemplated by Warren and Warren in December of
1997. If such project is implemented and significant energy consumption
efficiencies are realized due to same, then CBF and Warren will mutually
agree upon a new formula to become effective with the start of the first
Month that follows the start-up of said project by 60 Days. Such new
formula should initially reflect the same resulting fees as the above
formulas, but will utilize new factors as are appropriate to be changed to
reflect the change in energy consumption patterns at the Fractionator,
provided that the definition of "FUEL," "ELEC" and "CPIU" above shall not
change.
7.3 Either Party shall have the right to initiate a renegotiation of either or
both of the above fees and fee formulas to be effective on any or each of
* the [REDACTED] (the "Price Change Dates") by giving the other Party at
least ninety (90) Days and no more than one hundred fifty (150) Days
notice prior to any of the Price Change Dates. Such negotiations shall
commence immediately upon the date of receipt of such notice by the other
Party and continue for at least sixty (60) Days thereafter (the
"Negotiation Period"). During the Negotiation Period, each Party shall
submit to the other Party one or more written offers for the new fee or
fees. If CBF and Warren are unable to agree to the new fee or fees by the
end of the Negotiation Period, either CBF or Warren shall have the right
to have the new fee or fees re-determined by initiating Fee
Re-Determination Arbitration pursuant to Sections 13.5 through 13.10,
provided that in arbitrating such fee re-determinations, the arbitrator's
choice shall be based on a determination of which of the Parties' Final
Offers most closely approximates the then current fair market rate for
the fractionation and other services provided by CBF hereunder, based on
a five Year term for volumes and composition of Raw Product similar to
that then being tendered hereunder by Warren, and with the market area
for comparison being the Mont Belvieu Area.
7.4 The fractionation fees for all volumes delivered by Warren under
provisions of Section 3.3 shall be the same as the fractionation fees
provided for in the agreements set forth in Section 3.3.
VIII: TAXES AND OTHER PAYMENTS
Warren shall be responsible for the payment of any royalties,
overriding royalties, and other payments due or to become due on the Raw
Products or the Specification Products which are subject to this Agreement,
Any tax applicable to the Raw Products or the Specification Products or the
services provided by CBF hereunder, including but not limited to any tax
applicable to stored volumes of Specification Products, shall be borne and
paid by Warren unless such tax is by law imposed upon CBF, in which event,
such tax shall be paid by CBF and charged to Warren and reimbursed by Warren.
Warren shall indemnify and hold CBF and their respective Affiliate's
directors, officers, agents and employees harmless from and against any and
all claims, demands or causes of action of any kind, together with all loss,
damage and expense (including
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court costs and attorney's fees) arising with respect to the payment of any
taxes, royalties, overriding royalties and other payments due or to become due
on the services, Raw Products or Specification Products which are subject to
this Agreement.
ARTICLE IX: ACCOUNTING AND AUDIT PROCEDURES
9.1 Warren or its designee shall furnish the following reports to CBF: (i)
Warren's share of Components in the Raw Product delivered each Month for
the Month in question by the tenth Day of the next succeeding Month; (ii)
instructions for delivery of Specification Products for the Month in
question during the Month in question, as set forth in Section 3.4; and
(iii) twelve (12) Month forecast of Raw Product projected to be delivered
under this Agreement, as requested by CBF from time to time.
9.2 CBF shall furnish each Month for the preceding Month, the following
reports to Warren: (i) volumes of Warren's Specification Products
attributable to the Raw Product delivered to CBF each Month, in accordance
with the reconciliation described in Section 3.4; (ii) Specification
Products volumes delivered to Warren or its designee each Month in
accordance with the reconciliation described in Section 3.4; and (iii)
Warren's inventories of Specification Product(s) each Month, in accordance
with the reconciliation described in Section 3.4. CBF shall furnish
initial reports of these items by the twentieth Day of the Month
succeeding the Month and shall fully complete volume and money
reconciliations as described in Section 9.3 below.
9.3 Volume and money reconciliation shall be prepared by Warren and by CBF on
a Monthly basis. Warren and CBF shall cooperate to identify and reconcile
volume balances and amounts owed. As each Party completes each Month's
reconciliation, a copy of the reconciliation shall be sent to the other
Party but no later than the last Day of the Month succeeding the Month in
question.
9.4 All invoices or statements issued by CBF and any volume and money
reconciliation reports, or balancing reports, during any calendar Year
shall conclusively be presumed to be true and correct after twenty-four
(24) Months following the end of any such calendar Year, unless within the
said twenty-four (24) Month period the other Party takes written exception
thereto and makes claim on the Party issuing the invoice, statement or
report for adjustment.
9.5 Warren, upon at least thirty (30) Days prior notice in writing to CBF,
shall have the right to audit the CBF's records pertaining to performance
under this Agreement, for any calendar Year within the twenty-four (24)
Month period following the end of such calendar Year; provided, however,
the making of an audit shall not extend the time for the taking of written
exception to and the adjustments provided for in Section 9.4. Warren
shall make every reasonable effort to conduct an audit in a manner which
will result in a minimum of inconvenience to CBF. CBF shall bear no
portion of the Warren's audit cost. An audit shall not be conducted more
than once each Year. CBF shall reply in writing to an audit report within
180 Days after receipt of such report. Should Warren and CBF fail or be
unable to resolve any audit disputes, the matter shall be
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resolved using the dispute resolution procedures set forth in Article 13
of this Agreement.
9.6 CBF shall retain all financial and volume records for a minimum of
forty-eight (48) Months following the end of any calendar Year.
ARTICLE X. BILLING AND PAYMENT
After receiving allocation information from Pipeline each Month, CBF shall
furnish Monthly to Warren an invoice reflecting all applicable fees and charges
due and Warren shall pay to CBF the amounts due no later than (i) ten (10) Days
after Warren's receipt of invoice therefor, if the amount of same is fifty
thousand dollars ($50,000) or more or (ii) fifteen (15) Days after receipt of
invoice therefor, if the amount of same is less than fifty thousand dollars
($50,000). If the Day on which any payment is due is not a Business Day, then
the relevant payment shall be due upon the immediately preceding Business Day,
except if such payment due date is a Sunday or Monday, then the relevant payment
shall be due upon the immediately succeeding Business Day. Any amounts which
remain due and owing after the due date shall bear interest thereon at the lower
of the United States Treasury 90-Day T-Bill interest rate, as published in the
Wall Street Journal on the first Day such rate is quoted at the beginning of
each calendar quarter, plus thirteen (13%), or the maximum lawful rate of
interest (the "Base Rate"). If a good faith dispute arises as to the amount
payable in any statement, the amount not in dispute shall be paid. If Warren
elects to withhold any payment otherwise due as a consequence of a good faith
dispute, Warren shall provide CBF with written notice of its reasons for
withholding payment, and, if the amount of such invoice is equal to or greater
than five thousand dollars ($5,000) or the total aggregate amount of all
invoices in which Warren has withheld payment and is outstanding at any time is
greater than or equal to twenty five thousand dollars ($25,000), Warren shall
simultaneously place the disputed amount into an escrow account at a mutually
acceptable commercial bank, pending resolution of the dispute. Warren's election
to withhold payment from CBF and escrow same as provided herein shall be
exercised within thirty (30) Days from Warren's receipt of the invoice giving
rise to such good faith dispute. After the thirty (30) Day period, Warren shall
be required to pay CBF the full amount of the invoice whether or not there is a
good faith dispute as to the amount payable. If it is subsequently determined,
whether by mutual agreement of the Parties or otherwise, that (i) Warren is
required to pay all or any portion of the disputed amounts to CBF or (ii) Warren
is entitled to reimbursement for an invoice it paid, in addition to paying such
amounts, the Party making such payment also shall pay interest accrued on such
amounts at the Base Rate from (1) the original due date until paid in full, if
Warren is required to pay, or (2) the date Warren paid the disputed invoice
until paid in full, if CBF is required to pay.
ARTICLE XI: FORCE MAJEURE
11.1 In the event either Party hereto is rendered unable, wholly or in part, by
reason of Force Majeure to carry out its obligations under this Agreement,
upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the
cause relied on, then the obligations of such Party, other than the
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obligation to pay money due hereunder, insofar and only insofar as they
are affected by such Force Majeure, shall be suspended during the
continuance of any inability so caused, but for no longer period; and such
cause shall, so far as reasonably possible, be remedied with all
reasonable dispatch.
11.2 The term "Force Majeure" shall mean acts of God, strikes, lockouts or
other industrial disputes or disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, storms, and warnings for any
of the foregoing which may necessitate the precautionary shut-down of
wells, plants, pipelines, gathering systems, loading facilities,
terminals, the Fractionator or any portion thereof, or other related
facilities, floods, washouts, arrests and restraints of governments
(either federal, state, civil or military), civil disturbances,
explosions, sabotage, breakage or accidents to equipment, machinery,
plants, the Fractionator or any portion thereof, or lines of pipe, the
lack or failure of brine or brine handling capacity, the making of repairs
or alterations to any of the foregoing, inability to secure labor or
materials, freezing of equipment, machinery, plants, the Fractionator or
any portion thereof, or lines of pipe, partial or entire failure of wells
or gas supply, electric power shortages, necessity for compliance with any
court order, or any law, statute, ordinance, rule, regulation or order
promulgated by a governmental authority having or asserting jurisdiction,
inclement weather that necessitates extraordinary measures and expense to
construct facilities and/or maintain operations, or any other causes,
whether of the kind enumerated herein or otherwise, which are not
within the control of the Party claiming suspension and which by the
exercise of due diligence such Party is unable to prevent or overcome.
Such term shall likewise include, in those instances where either Party
hereto is required to obtain servitudes, rights-of-way, grants, permits
or licenses to enable such Party to fulfill its obligations hereunder,
the inability of such Party to acquire, or delays on the part of such
Party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such servitudes, rights-of-way grants, permits or
licenses, and in those instances where either Party hereto is required
to furnish materials and supplies for the purpose of constructing or
maintaining facilities to enable such Party to fulfill its obligations
hereunder, the inability of such Party to acquire, or delays on the
part of such Party in acquiring, at reasonable cost and after the
exercise of reasonable diligence, such materials and supplies. The term
"Force Majeure" shall also include any event of force majeure occurring
with respect to the facilities or services of either Party's suppliers
or customers providing a service or providing any equipment, goods,
supplies or other items necessary to the performance of such Party's
obligations, and shall also include curtailment or interruption of
deliveries or services by such third-party suppliers or customers as a
result of an event defined as Force Majeure hereunder.
11.3 Notwithstanding Section 11. 1 above, it is understood and agreed that the
settlement of strikes or lockouts shall be entirely within the discretion
of the Party having the difficulty, and that the above requirement that
any Force Majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes or lockouts by acceding to the demands
of the opposing Party when such course is inadvisable in the discretion of
the Party having the difficulty.
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ARTICLE XII: INDEMNIFICATION AND LIMITATION OF LIABILITY
12.1. WARREN'S INDEMNITIES: REGARDLESS OF THE PRESENCE OR ABSENCE OF ANY
INSURANCE COVERAGE MAINTAINED BY EITHER PARTY HERETO, WARREN HEREBY
RELEASES, AND AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS, CBF,
ITS OPERATOR, PARTNERS AND ITS PARTNERS' AFFILIATES AND THOSE ENTITIES'
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES
("WARREN INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, CAUSES OF ACTION, LIABILITY, LOSS, DAMAGE, PENALTIES, FINES, COST
AND EXPENSE, INCLUDING COURT COSTS AND ATTORNEY'S FEES IN CONNECTION
THEREWITH ("CLAIMS"), ARISING OUT OF OR RELATED TO:
(1) DESTRUCTION, LOSS OR CONTAMINATION OF WARREN'S RAW PRODUCT AND
SPECIFICATION PRODUCTS, EVEN WHERE LIABILITY WITHOUT FAULT WOULD
OTHERWISE BE IMPOSED ON CBF AND REGARDLESS OF THE CAUSE OF SUCH
LOSS, INCLUDING, WITHOUT LIMITATION THE NEGLIGENCE OF ANY OF THE
WARREN INDEMNIFIED PARTIES, IT BEING UNDERSTOOD AND AGREED THAT
WARREN SHALL RETAIN ALL RISK OF LOSS WITH REGARD TO WARREN'S RAW
PRODUCT AND ATTRIBUTABLE SPECIFICATION PRODUCTS, EVEN WHEN SAME IS
IN CBF`S POSSESSION DURING THE PROVIDING OF SERVICES HEREUNDER; and
(2) Except as to Claims within the scope of Sections 12.1.(1) above, any
Claims arising from injuries or damages to the persons or properties
arising from damages to the tangible physical property in connection
with Warren's, or its contractors, handling and possession of
Warren's Raw Product or Specifications Products prior to delivery of
same to CBF and after delivery of same from CBF back to Warren or
its designated representative to the extent of Warren's or its
contractor's negligence or legal fault for same.
12.2 CBF INDEMNITIES: Regardless of the presence or absence of any insurance
coverage maintained by either party hereto, CBF hereby releases, and
agrees to defend, protect, indemnify and hold harmless, Warren, and its
affiliates, and agents and those entities' respective directors, officers,
employees, agents and representatives ("CBF Indemnified Parties") from and
against any and all claims, demands, causes of action, liability, loss,
damage, penalties, fines, cost and expense, including court costs and
attorney's fees in connection therewith ("Claims"), arising from injuries
or damages to the persons or properties arising from damages to the
tangible physical property in connection with CBF's, or its contractors,
handling and possession of Warren's Raw Product or Specifications Products
while same are in CBF's possession and prior to delivery of same to Warren
at the Storage Facility to the extent of CBF's or its contractor's
negligence or legal fault for same.
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12.3 LIMITATION OF LIABILITY: NEITHER CBF, CBF'S OPERATOR OR WARREN SHALL BE
RESPONSIBLE OR LIABLE TO THE OTHERS, OR TO THEIR AGENTS, FOR ANY SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF THIS
AGREEMENT OR ANY BREACH HEREOF, REGARDLESS OF THE CAUSES OF SAME,
INCLUDING WHERE CAUSED BY THE NEGLIGENCE OR FAULT OF THE PARTY WHOSE
LIABILITY IS LIMITED HEREBY.
ARTICLE XIII: DISPUTE RESOLUTION
13.1 COVERED DISPUTES - Any dispute, controversy or claim (whether sounding in
contract, tort or otherwise) arising out of or relating to this Agreement,
including, without limitation, the meaning of its provisions, or the
proper performance of any of its terms by either Party, its breach,
termination or invalidity ("Dispute") will be resolved in accordance with
the procedures specified in this Section, which will be the sole and
exclusive procedure for the resolution of any such Dispute, except that a
Party, without prejudice to the following procedures, may file a complaint
to seek preliminary injunctive or other provisional judicial relief, if in
its sole judgment, that action is necessary to avoid irreparable damage or
to preserve the status quo. Despite the filing of any such injunctive or
other provisional judicial relief, the Parties will continue, subject to
Subsection 13.10 below, to participate in the applicable procedures
specified in this Section. The obligation to participate in such
applicable procedures shall not require either Party to participate in the
negotiation between executives procedures set forth in Subsection 13.3
below or the mediation procedures set forth in Subsection 13.4 below if
either Party determines, in its sole discretion, that such procedures
would be futile.
13.2 INITIATION OF PROCEDURES. Either Party desiring to initiate the dispute
resolution procedures set forth in this Section with respect to a Dispute
not resolved in the ordinary course of business (the "Initiating Party")
must give written notice of the Dispute (the "Dispute Notice") to the
other Party (the "Non-Initiating Party"). The Dispute Notice shall include
(i) a statement of that Party's position and a summary of arguments
supporting that position, and (ii) the name and title of the executive who
will represent that Party, and of any other person who will accompany the
executive, in the negotiations under Subsection 13.3 below.
13.3 NEGOTIATION BETWEEN EXECUTIVES - If one Party has given a Dispute Notice
under Subsection 13.2 above, the Parties may attempt in good faith to
resolve the Dispute within forty-five (45) Days following receipt of the
Dispute Notice by the Non-Initiating Party by negotiation between
executives who have authority to settle the Dispute and who are at a
higher level of management than the persons with direct responsibility for
administration of this Agreement or the matter in Dispute. Within fifteen
(15) Days after receipt of the Dispute Notice, the Non-Initiating Party
may submit to the other a written response. If given, the response will
include (i) a statement of that Party's position and a summary of
arguments supporting that position, and (ii) the name and title of the
executive who will represent that Party and of any other person who will
accompany the executive. If such a response is given by the Non-Initiating
Party, within forty-five (45) Days following receipt
13
<Page>
of the Dispute Notice by the Non-Initiating Party, the executives of both
Parties will meet at a mutually acceptable time and place, and thereafter,
as often as they reasonably deem necessary, to attempt to resolve the
Dispute.
13.4 MEDIATION - If the Dispute has not been resolved by negotiation under the
Subsection 13.3 above within forty-five (45) Days following receipt of the
Dispute Notice by the Non-Initiating Party or if the Non-Initiating Party
fails to respond within the required fifteen (15) Day period, either Party
may initiate the mediation procedure of this Subsection by giving written
notice to the other Party ("Mediation Notice"). The Parties will endeavor
to settle the Dispute by mediation within sixty (60) Days of the Mediation
Notice under the then current Center for Public Resources ("CPR") Model
Mediation Procedure for Business Disputes. If the Parties have not agreed
upon a mediator within seven (7) Days after the Mediation Notice, either
Party may request CPR assistance in the selection of a mediator under its
guidelines. Unless otherwise agreed to by the Parties, no discovery shall
be allowed during the sixty (60) Day mediation period. If both Parties
elect to participate in the mediation procedures set forth herein, the
cost of the mediator will be shared equally between the Parties, unless
otherwise agreed to in writing by the Parties. If one Party elects not to
participate in the mediation procedures, neither Party shall bear any cost
associated with such procedure, other than costs that each Party may have
incurred in connection therewith which shall be borne by the Party that
incurred such costs.
13.5 ARBITRATION. If the Dispute has not been resolved by mediation under the
Subsection 13.4 above within the required sixty (60) Day period or if
either Party fails and/or refuses to participate in such mediation
procedures, either Party may request that the matter be resolved through
arbitration by submitting a written notice (the "Arbitration Notice") to
the other. Additionally, if the Parties have been unable to agree on a fee
re-determination initiated by either Party pursuant to Section 7.3 during
the Negotiation Period, as set forth in said section, either Party may
then initiate arbitration to by submitting an Arbitration Notice to the
other and such fee re-determination shall not be submitted to the
procedures set forth in Sections 13.2 through 13.4 but shall be arbitrated
pursuant to this Section 13.5 and the following Subsections 13.6 through
13.10, as applicable ("Fee Re-Determination Arbitration"). Any arbitration
that is conducted hereunder shall be governed by the Federal Arbitration
Act, 9 U.S.C. Section 1 ET SEQ., as amended, and will not be governed by
the arbitration acts, statutes, or rules of any other jurisdiction.
13.6 ARBITRATION PROCEDURE. The Arbitration Notice shall name the noticing
Party's arbitrator and shall contain a statement of the issue(s) presented
for arbitration. Within fifteen (15) Days of receipt of an Arbitration
Notice, the other Party shall name its arbitrator by written notice to the
other and may designate any additional issue(s) for arbitration. The two
named arbitrators shall select the third arbitrator within fifteen (15)
Days after the date on which the second arbitrator was named. Should the
two arbitrators fail to agree on the selection of the third arbitrator,
either Party shall be entitled to request the Senior Judge of the United
States District Court for the Southern District of Texas to select the
third arbitrator. Should either Party fail and/or refuse to name its
arbitrator within the required fifteen (15) Day period, the other Party
shall be entitled to request the Senior Judge of the United States
District Court for the Southern District of Texas to select the
14
<Page>
arbitrator for such Party. Notwithstanding the foregoing, in the case of a
Fee Re-Determination Arbitration, the Parties shall mutually select a
single arbitrator within thirty (30) Days after receipt of the Arbitration
Notice and if they should fail to agree on the arbitrator within that time
period, either Party shall be entitled to request the Senior Judge of the
United States District Court for the Southern District of Texas to select
the arbitrator. The cost of the arbitrator shall be shared equally between
the Parties. All arbitrators shall be qualified by education or experience
within the natural gas liquids portion of the energy industry to decide
the issues presented for arbitration. No arbitrator shall be: a current or
former director, officer, or employee of either Party or its Affiliates;
an attorney (or member of a law firm) who has rendered legal services to
either Party or its Affiliates within the preceding three Years; or an
owner of any of the common stock of either Party, or its Affiliates.
13.7 ARBITRATION HEARING. The three arbitrators or in the case of
Fee Re-Determination Arbitration, the single arbitrator shall
commence the arbitration proceedings within twenty-five (25) Days
following the appointment of the third arbitrator or the single
arbitrator, as appropriate. The arbitration proceedings shall be
held at a mutually acceptable site and if the Parties are unable to
agree on a site, the arbitrators shall select the site. The
arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings, including, without
limitation, rules concerning discovery. Each Party shall have the
opportunity to present its evidence at the hearing. The arbitrators
may call for the submission of pre-hearing statements of position
and legal authority, but no post-hearing briefs shall be submitted.
The arbitration panel shall not have the authority to award
incidental, consequential, special, punitive or exemplary damages.
In addition, if an issue under consideration is limited to a
determination of an amount of money owed by one Party to the other,
or Fee Re-Determination Arbitration, each Party shall submit to the
single arbitrator a final offer of its proposed resolution of the
dispute ("Final Offers"). The arbitrator shall be charged to select
from the two Final Offers the one which the panel finds to be the
most reasonable and consistent with the terms and conditions of this
Agreement, and the arbitrator shall not average the Parties'
proposals or otherwise craft its own remedy. With regard to Fee
Re-Determination Arbitration, the basis for the arbitrator's
decision shall be based on the factors set forth is said Section 7.3
All evidence submitted in an arbitration proceeding, transcripts of
such proceedings, and all documents submitted by the Parties in an
arbitration proceeding shall be kept confidential and shall not be
disclosed to any third Party by either Party hereto.
13.8 ARBITRATION DECISION AND COSTS. The decision of the arbitrators or a
majority of them, shall be in writing and shall be final and binding upon
the Parties as to the issue(s) submitted. The cost of the hearing shall be
shared equally by the Parties, and, except as provided in Section 13.6,
each Party shall be responsible for its own expenses and those of its
counsel or other representatives. Each Party hereby irrevocably waives, to
the fullest extent permitted by law, any objection it may have to the
arbitrability of any such disputes, controversies or claims and further
agrees that a final determination in any such arbitration proceeding shall
be conclusive and binding upon each Party.
15
<Page>
13.9 ENFORCEMENT OF AWARD. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. The prevailing Party
shall be entitled to reasonable attorneys' fees in any contested court
proceeding brought to enforce or collect any award of judgment rendered by
the arbitrators.
13.10 TOLLING AND PERFORMANCE. Except as otherwise provided in this Article
XIII, all applicable statutes of limitation and defenses based upon the
passage of time and all contractual limitation periods specified in this
Agreement, if any, will be tolled while the procedures specified in this
Article XIII are pending. The Parties will take all actions to effectuate
necessary to effectuate the tolling of any applicable statute of
limitation or contractual limitation periods. All deadlines specified
herein may be extended by mutual written agreement of the Parties. Each
Party is required to continue to perform its obligations under this
Agreement pending final resolution of any Dispute, unless to do so would
be impossible or impracticable under the circumstances. Notwithstanding
the foregoing, the statute of limitations of the State of Texas applicable
to the commencement of a lawsuit will apply to the commencement of an
arbitration under this Agreement, except that no defenses will be
available based upon the passage of time during any negotiation or
mediation called for by the preceding Subsections of this Section.
ARTICLE XIV: MISCELLANEOUS
14.1 EXISTING LAWS AND REGULATIONS. This Agreement and the operations hereunder
shall be subject to the applicable federal and state laws and the
applicable orders, laws, rules and regulations of any state or federal
authority having or asserting jurisdiction, but nothing contained herein
shall be construed as a waiver of any right to question or contest any
such order, law, rule or regulation. The parties shall be entitled to
regard all such laws, rules, regulations and orders as valid and may act
in accordance therewith until such time as the same may be invalidated by
final judgment in a court of competent jurisdiction.
14.2 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED
AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE
SAME MAY BE AMENDED FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
14.3. WAIVER. No waiver by either Party of any default under this Agreement or
any of the provisions of this Agreement shall be deemed to be a waiver of
any future default or any other provision hereof, whether of a like or a
different character. No waiver shall be effective unless made in writing
and signed by the Party to be charged with such wavier, nor shall such
waiver constitute a continuing waiver unless expressly provided by the
Party to be charged with such wavier.
14.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns. Notwithstanding the
16
<Page>
foregoing, neither Party may assign this Agreement, nor any interest
herein, without the prior written consent of the other Party, which
consent shall not be unreasonably withheld; provided, however, that a
Party may from time to time designate an Affiliate to perform this
Agreement, either in whole or in part, such performance being considered
that of the Party hereto. It is understood, however, that by such
designation, said Party hereto does not thereby avoid obligations imposed
by the terms and provisions hereof. Warren further specifically agrees
that it will not assign its interest in the volumes of Raw Product
dedicated to this Agreement without the prior written consent of CBF,
which consent shall not be unreasonably withheld; provided such assignment
is made subject to this Agreement and any Assignee ratifies and adopts
this Agreement in writing.
14.5 EXHIBITS. Unless specifically otherwise provided, if any term or condition
expressed or implied in any Exhibit to this Agreement conflicts or is at
variance with any term or condition of this Agreement, this Agreement
shall prevail. All Exhibits as referenced herein are attached hereto and
made a part hereof.
14.6 DTPA WAIVER. THE PARTIES CERTIFY THAT THEY ARE NOT "CONSUMERS" WITHIN THE
MEANING OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SUBCHAPTER E OF CHAPTER 17, SECTIONS 17.42, ET SEQ., OF THE TEXAS BUSINESS
AND COMMERCE CODE, AS AMENDED ("DTPA"). THE PARTIES COVENANT, FOR
THEMSELVES AND FOR AND ON BEHALF OF ANY SUCCESSOR OR ASSIGNEE, THAT, IF
THE DTPA IS APPLICABLE, (a) THE PARTIES ARE "BUSINESS CONSUMERS" AS THAT
TERM IS DEFINED IN THE DTPA, (b) OTHER THAN SECTION 17.555 OF THE TEXAS
BUSINESS AND COMMERCE CODE, EACH PARTY HEREBY WAIVES AND RELEASES ALL OF
ITS RIGHTS AND REMEDIES UNDER THE DTPA AS APPLICABLE TO THE OTHER PARTY
AND ITS SUCCESSORS AND ASSIGNS, AND (c) EACH PARTY SHALL DEFEND AND
INDEMNIFY THE OTHER FROM AND AGAINST ANY AND ALL CLAIMS OF OR BY THAT
PARTY OR ANY OF ITS SUCCESSOR AND ASSIGNS OR ANY OF ITS OR THEIR
AFFILIATES BASED IN WHOLE OR IN PARTY OF THE DTPA, ARISING UT OF OR IN
CONNECTION WITH THE TRANSACTION SET FORTH IN THIS AGREEMENT.
14.7 HEADINGS, ARTICLES AND SECTIONS. All references to "Articles" and
"Sections" herein pertain to Articles and Sections of this Agreement,
unless expressly stated otherwise. Headings are for purposes of reference
only and shall not be used to construe the meaning of this Agreement.
14.8 PRINCIPLES OF CONSTRUCTION AND INTERPRETATION. In construing this
Agreement, the following principles shall be followed:
(i) no consideration shall be given to the fact or presumption that one
Party had a greater or lesser hand in drafting this Agreement:
(ii) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate:
(iii) the word "includes" and its syntactical variants mean "includes,
but is not limited
17
<Page>
to" and corresponding syntactical variant expressions: and
(iv) the plural shall be deemed to include the singular and vice versa, as
applicable.
14.9 NOTICES. Any notice, request, instruction, correspondence, or other
documentation to be given hereunder by either Party to the other shall be
in writing and delivered personally or mailed by registered or certified
mail, postage prepaid and return receipt requested, or facsimile as
follows:
FOR CBF:
To: Cedar Bayou Fractionators, L.P.
c/o Warren Petroleum Company, Limited Partnership
Attention: Vice President, Asset Marketing and Services
At: 1000 Louisiana, Suite 5800
Houston, TX 77002-5050
Phone: (713) 507-3843
FAX: (713) 767-8286
With a copy to: General Counsel
Warren Petroleum Company, Limited Partnership
1000 Louisiana, Suite 5800
Houston, TX 77002-5050
Phone: 713-507-6400
Fax: 713-507-6987
FOR WARREN GAS LIQUIDS, INC.:
To: Warren Gas Liquids, Inc.
Attention: Vice President, Asset Marketing Services
1000 Louisiana, Suite 5800
Houston, Texas 77002
Phone: (713) 507-3843
FAX: (713) 767-8286
or at such other address as either Party shall designate by written notice
to the other. A notice sent by facsimile shall be deemed to have been
receive by the close of the first Business Day following the Day on which
it was transmitted and confirmed by transmission report or such earlier
time as confirmed orally or in writing by the receiving Party. Notice by
U. S. Mail, whether by U. S. Express Mail, registered mail or certified
mail, or by overnight courier shall be deemed to have been received by the
close of the second Business Day after the Day upon which its was sent, or
such earlier time as is confirmed orally or in writing by the receiving
Party. Any Party may change its address or
18
<Page>
facsimile number by giving notice of such change in accordance with
herewith.
14.10 NO THIRD PARTY BENEFICIARY. This Agreement is for the sole benefit of the
Parties and their respective successors and permitted assigns, and shall
not inure to the benefit of any other person whomsoever, it being the
intention of the Parties that no third person shall be deemed a third
party beneficiary of this Agreement.
14.11 SEVERABILITY. This Agreement and the operations hereunder shall be subject
to the valid and applicable federal and state laws and the valid and
applicable orders, laws, local ordinances, rules, and regulations of any
local, state or federal authority having jurisdiction, but nothing
contained herein shall be construed as a waiver of any right to question
or contest any such order, laws, rules, or regulations in any forum having
jurisdiction in the premises. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under the present or future laws
effective during the term of this Agreement, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if
such illegal, invalid, or unenforceable provision had never comprised a
part of this Agreement, and (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by
the illegal, invalid, or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there will be added automatically as a part of
this Agreement a provision similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and as may be legal, valid, and
enforceable. If a provision of this Agreement is or becomes illegal,
invalid, or unenforceable in any jurisdiction, the foregoing event shall
not affect the validity or enforceability in that jurisdiction of any
other provision of this Agreement nor the validity or enforceability in
other jurisdictions of that or any other provision of this Agreement.
14.12 ENTIRE AGREEMENT AND AMENDMENT. This Agreement, including, without
limitation, all exhibits hereto, integrates the entire understanding
between the Parties with respect to the subject matter covered and
supersedes all prior understandings, drafts, discussions, or statements,
whether oral or in writing, expressed or implied, dealing with the same
subject matter. This Agreement may not be amended or modified in any
manner except by a written document signed by both parties that expressly
amends this Agreement.
14.13 SETOFFS AND COUNTERCLAIMS. Except as otherwise provided herein, each Party
reserves to itself all rights, set-offs, counterclaims, and other remedies
and/or defenses which that Party is or may be entitled to arising from or
out of this Agreement or as otherwise provided by law.
14.14 NO PARTNERSHIP OR ASSOCIATION. Nothing contained in this Agreement shall
be construed to create an association, trust, partnership, or joint
venture or impose a trust or partnership duty, obligation, or liability on
or with regard to either Party.
14.15 NO COMMISSIONS, FEES OR REBATES. Except as expressly authorized by this
Agreement, no director, employee or agent of either Party shall give
or receive any commission, fee, rebate gift or entertainment of
significant cost or value in connection with this Agreement.
19
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Any representative or representative(s) authorized by either Party may
audit the applicable records of the other Party for the purpose of
determining whether there has been compliance with this Section.
14.16 NO PARTNERSHIP, ASSOCIATION, ETC. Nothing contained in this Agreement
shall be construed to create an association, trust, partnership, or joint
venture or impose a trust or partnership duty, obligation, or liability on
or with regard to either Party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Day and Year first above written.
CEDAR BAYOU FRACTIONATORS, L.P.
By:______________________________
Title:___________________________
WARREN GAS LIQUIDS, INC.
By:______________________________
Title:___________________________
20
<Page>
EXHIBIT "A"
TO
FRACTIONATION AGREEMENT
BY AND BETWEEN
CEDAR BAYOU FRACTIONATORS, L.P.
AND
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
WARREN'S DEDICATED PLANTS AND TRUCK INJECTION POINTS
<Table>
<Caption>
PLANTS COUNTY/STATE
- ------ ------------
Anschutz East Uinta Co., Wyoming
Breckridge Stephens Co., Texas
Bridger Lake Summit Co., Texas
Carter Creek Uinta Co., Wyoming
Eunice Lea Co., New Mexico
Goldsmith Ector Co., Texas
Headlee Ector Co., Texas
Indian Basin Eddy Co., New Mexico
Monohans Ward Co., Texas
Monument Lea Co., New Mexico
Moores Orchard Fort Bend Co., Texas
New Hope Franklin Co., Texas
Painter (Amoco) Uinta Co., Wyoming
Rangley Rio Blanco Co., Colorado
Sandhills/Pakenham Crane Co., Texas
Sandhills Crane Co., Texas
Saunders Lea Co., New Mexico
Shackelford Shackelford Co., Texas
Sherman Hansford Co., Texas
Snyder Scurry Co., Texas
Whitney Canyon Uinta Co., Wyoming
Pascagoula Refinery* Pascagoula, Mississippi
TRUCK INJECTION POINTS COUNTY/STATE
- ---------------------- ------------
Abilene Taylor Co., Texas
Bridgeport Wise Co., Texas
Gladewater Gregg Co., Texas
</Table>
*Provided the product is fractionated
21
<Page>
EXHIBIT B
ETHANE-PROPANE
80-20 MIXTURE
SPECIFICATION
Product characteristics with test methods are herein specified for
ethane-propane 80-20 mixtures received by Warren Petroleum Company, Limited
Partnership.
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- --------- ---------- -----------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Methane (Percent of Ethane) 2.0 GPA 2177
Ethylene (Percent of Ethane) 1.0
Methane, Ethane & Ethylene 78.0 82.0
Propane, Propylene, & Butanes 18.0 22.0 ASTM D-2163
Propylene 1.0
Butanes 0.8
2. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor
is used.)
Corrosion Additive or Inhibitor,
PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
4. DRYNESS No Free Water Visual
5. CARBON DIOXIDE
PPM by Weight in Liquid 1,000 GPA 2177
PRODUCT ACCOUNTING
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon Components above the specification limits
shall not be accounted for.
22
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EXHIBIT B
PROPANE SPECIFICATION
Product characteristics with test methods are herein specified for propane
received by Warren Petroleum Company, Limited Partnership. This product meets
the requirement of the GPA HD-5 propane specification.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- --------------------- -------------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume Ethane As limited by other
Components & vapor
pressure.
Propane 90.0 100
Propylene 5.0 ASTM D-2163
Butanes & Heavier 2.5
2. VAPOR PRESSURE
Psig @ 100 DEG. F 208 ASTM D-1267
3. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor is
used.)
Corrosion Additive or Inhibitor, PPM
by Weight 1 Applicable Industry Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
5. HYDROGEN SULFIDE
PPM by Weight in Liquid 1 Field - Length of Stain Tube
(Lab test required if field test is Lab Chromatography with Flame
positive.) Photometric Detector
6. CARBONYL SULFIDE
PPM by Weight in Liquid 2 Field - Length of Stain Tube
(Field test invalid if C(4)+ exceeds 1.0
LV%) (Lab test required if field test Lab - UOP 212 or UOP 791
is positive.) Lab - Gas Chromatography with
Flame Photometric Detector
7. NON-VOLATILE RESIDUE
a) Milliliters @ 100 DEG. F 0.05 ASTM D-2158
b) Oil Stain Pass
THE FOLLOWING TESTS ARE OPTIONAL, DEPENDING UPON THE PRODUCT SOURCE:
8. DRYNESS
Freeze Valve, Seconds 60 (Note 2) ASTM D-2713
9. VOLATILE RESIDUE
95% Evaporated - Temperature, DEG. F -37 ASTM D-1837
10. AMMONIA
PPM by Weight in Liquid 1 Field - Length of Stain Tube
Lab - UOP 430
11. FLUORIDES
PPM by Weight in Liquid as 5 Field - Length of Stain Tube
Monatomic Fluorine
12. OTHER DELETERIOUS SUBSTANCES (PPM BY WEIGHT IN LIQUID)
Includes but not limited to 1 Gas chromatography with flame
(Isoprene, Butadiene, Vinyl ionizaton or electron capture
Chloride, glycol, amine, caustic) detection or other
</Table>
NOTES:
- -------------------
(1) The test methods for items 2 and 7 are not necessary if a compositional
analysis is available which indicates compliance with these requirements.
(2) The addition of methanol in the distribution system should be on a spot
basis and must not exceed a rate of 5 Gallons per 10,000 Gallons of
product.
23
<Page>
EXHIBIT B
NORMAL BUTANE SPECIFICATION
Product characteristics with test methods are herein specified for normal
butane received by Warren Petroleum Company, Limited Partnership.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- ------- ---------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Isobutane and Lighter 5.0 ASTM D-2163
Butylene (Percent of N. Butane) 1.0
N. Butane & Butylene 95.0 100 GPA 2165
Pentanes & Heavier 2.0
2. VAPOR PRESSURE
Psig @ 100 DEG. F 50 ASTM D-1267
3. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor is
used.)
Corrosion Additive or Inhibitor, PPM
by Weight 1 Applicable Industry Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated - Temperature, DEG. F +36 ASTM D-1837
6. DRYNESS No Free Water Visual
</Table>
NOTE:
- -------------------
The test methods for Items 2 and 5 are not necessary
if a compositional analysis indicates compliance with these requirements.
24
<Page>
EXHIBIT B
ISOBUTANE SPECIFICATION
Product characteristics with test methods are herein specified for isobutane
received by Warren Petroleum Company, Limited Partnership.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- --------- --------------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Propane, Propylene and Lighter 3.0 ASTM D-2163
Isobutane 96.0 100
Butylene, Normal Butane & Heavier 4.0
2. VAPOR PRESSURE
Psig @ 100 DEG. F 62 ASTM D-1267
3. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor is
used.)
Corrosion Additive or Inhibitor, PPM
by Weight 1 Applicable Industry Practices
4. TOTAL SULFUR
PPM by Weight in Liquid 140 ASTM D-3246
5. VOLATILE RESIDUE
95% Evaporated - Temperature DEG. F +16 ASTM D-1937
6. DRYNESS No Free Water Visual
</Table>
NOTE:
- -------------------
The test methods for Items 2 and 5 are not necessary if an adequate
compositional analysis is available which indicates compliance with these
requirements.
25
<Page>
EXHIBIT B
NATURAL GASOLINE SPECIFICATION
Product characteristics with test methods are herein specified for natural
gasoline received by Warren Petroleum Company, Limited Partnership.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- ------- ------------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Butanes & Lighter 3.0 GPA 2165
Pentanes & Heavier 97 100
2. VAPOR PRESSURE
Psi @ 100 DEG. F, Reid 14 ASTM D-323
3. CORROSION
Copper Strip @ 104 DEG. F 1-b ASTM D-130
(Invalid if additive or inhibitor is
used.)
Corrosion Additive or Inhibitor, PPM
by Weight 1 Applicable Industry Practices
4. DOCTOR TEST Negative GPA 1138
5. DRYNESS No Free Water Visual
6. COLOR +25 No Color Field White Cup Method
Lab - ASTM D-156
7. DISTILLATION
End Point, DEG. F 375 ASTM D-216
</Table>
NOTE:
- -------------------
The test methods for Items 2 and 7 are not necessary if an adequate
compositional analysis is available which indicates compliance with these
requirements.
26
<Page>
EXHIBIT F
ASSIGNMENT AND CONVEYANCE
FROM
[GRANTOR]
TO
[CEDAR BAYOU FRACTIONATORS, L.P.
OR DOWNSTREAM ENERGY VENTURESCO., L.L.C.]
WITNESSETH THAT, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and with reference to that
certain Limited Partnership Agreement with an Effective Date of January 1,
1998, between Downstream Energy Ventures Co., L.L.C., Warren Petroleum
Company, Limited Partnership, and Amoco MB Fractionation Company (the
"Limited Partnership Agreement"), with the capitalized terms used herein
without definition having the respective meanings ascribed thereto in the
Limited Partnership Agreement), the undersigned Grantor hereby GRANTS,
BARGAINS, SELLS, CONVEYS, ASSIGNS, TRANSFERS AND DELIVERS unto Grantee and
its successors and assigns, forever, subject to those encumbrances listed on
Exhibit A attached hereto, which Exhibit A is hereby incorporated herein by
this reference thereto and made a part hereof for all purposes, an undivided
[ ( %)] interest in the following described assets, properties, rights
and interests (collectively, the "CONVEYED INTEREST"):
(1) FRACTIONATION FACILITY. All the equipment, personal property and
facilities comprising that certain natural gas liquids
fractionation facility, and other facilities appurtenant thereto
and necessary for the operation of said fractionation facility,
all as same are located in the Surface Lease Area (as defined
immediately above), as such fractionator facility is generally
described in Part II of Exhibit A (the "FRACTIONATOR"), less and
except those assets described as "Excluded Assets" in Part IV of
Exhibit A.
(2) RELATED FACILITIES. All those facilities and equipment outside of
the Surface Lease Area related to the Fractionator and which are
described in Part III of Exhibit A, and excluding any items not
expressly described therein (the "RELATED FACILITIES").
(3) PERMITS. All environmental and other governmental permits,
licenses, orders, franchises and related instruments or rights
necessary to the ownership or operation of any portions of the
Fractionator as described in Exhibit A, and which, in accordance
with the applicable law or the terms of such instruments are not
to
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be maintained in the name as the operator of the Fractionator and
that, by their terms, may be assigned ("PERMITS"), as described in
Part IV of said Exhibit A.
(4) CONTRACTS. All of Warren's and DEVCO's right, title and interest
in and to those certain contracts and agreements relating solely
to the Fractionator that, by their terms, may be assigned
including but not limited to fractionation services agreements,
gas supply, electrical and other utilities purchase agreements,
maintenance and services agreements and intellectual property
licensing and confidentiality agreements, as same are listed in
Part V of Exhibit A ("CONTRACTS").
(5) RECORDS. All files, records and other data in the actual
possession of Warren or DEVCO, necessary for the Partnership's
operation of the Fractionator (except to the extent same relate
to any retained properties still owned by Warren and DEVCO);
including, but not limited to, all operational records, technical
records, processing records, measurement, pipeline balancing and
connection agreements, United States Department of Transportation
and other governmental agency-required files, contract files,
copies of accounting files, and copies of computer spreadsheets used
for accounting and allocations, but excluding tax records and
accounting records which relate exclusively to accounting periods
prior to the date of contribution of the Fractionator to the
Partnership. ("RECORDS").
(6) EXCLUDED ASSETS. "FRACTIONATOR FACILITY" is understood to
expressly exclude: (i) any of the equipment, facilities, or
assets located within the Surface Lease Area and which are
described in Part VI of Exhibit A ("SURFACE LEASE AREA EXCLUDED
ASSETS"); and (ii) any and all assets, facilities or properties
outside of the Surface Lease Area which are not expressly defined
above as being Related Facilities; (all of same being
collectively referred to herein as the "EXCLUDED ASSETS").
(Collectively, the "Assets")
TO HAVE AND TO HOLD the Conveyed Interest in and to the Assets,
together with such rights, titles, interests, remedies, powers and privileges
appertaining thereto, unto Grantee, its successors and assigns, forever.
AND from and after the date hereof, at the request of Grantee, Grantor
will, at its expense, execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered, such other or additional instruments of
conveyance or transfer as Grantee may reasonably request in order to more
effectively carry out the intent hereof and to better vest in Grantee the
Conveyed Interest intended to be transferred hereunder, as contemplated by
the Limited Partnership Agreement.
GRANTOR shall not, and does not hereby, warrant title to the Conveyed
Interest in any manner other than as follows: Grantor does warrant and agree
to defend any claims by third parties claiming title or ownership by,
through or under Grantor, but not otherwise warrants title
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to the Conveyed Interest in the Assets and does grants hereby any and all
interest therein which it currently holds;
NOTWITHSTANDING any other provision hereof to the contrary, nothing
contained herein shall in any way supersede, modify, replace, amend, change,
rescind, waive, exceed, expand, enlarge or in any way affect any of the
provisions, including without limitation any of the representations,
warranties, covenants, indemnities, limitations, rights or remedies contained
in the Limited Partnership Agreement, and this instrument is intended solely
to effect the transfer of the Conveyed Interest sold and purchased as
contemplated by the Limited Partnership Agreement.
THIS ASSIGNMENT AND CONVEYANCE shall not constitute an assignment of
any contract, operating license or other permit or agreement which, by its
terms or as a matter of law, is not assignable without the consent of a third
party, unless and until such third party shall have consented to such
assignment.
IN WITNESS WHEREOF, Grantor has caused this instrument to be duly
executed and delivered by one or more of its officers thereunto duly
authorized, on , 1997, but same to be effective as of January 1, 1998, at
7:00 a.m., Central Standard Time.
[GRANTOR ENTITY NAME]
By: -------------------------------
Title: -----------------------------
STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
BEFORE ME, the undersigned authority, a Notary Public, on this day personally
appeared , known to me to be the person and of
[GRANTOR ENTITY], whose name is subscribed to the foregoing instrument and
acknowledged to me that he/she executed the same as the act of such
corporation for the purposes and consideration therein expressed in the
capacity therein stated.
Given under my hand and seal of office this day of , 1997.
- -----------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
- -----------------------------
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EXHIBIT G
TO
LIMITED PARTNERSHIP AGREEMENT
DISCLOSURE SCHEDULE
1. Legal Proceedings: Warren's activity in the fractionation business in
the Mont Belvieu, Texas, area, including any future activities through
the Partnership, is subject to certain restrictions pursuant to that
certain Agreement Containing Consent Order between the Federal Trade
Commission the Warren's ultimate parent company, NGC Corporation, a
copy of which has been provided to the Partners and the Partners have
had an adequate opportunity to review same. As an indirect, majority
owned, subsidiary of NGC Corporation, the Partnership shall also be
subject to said Agreement Containing Consent Order.
2. Intellectual Property Assets:
o Merox(R) Process License Agreement between Warren and UOP, dated
September 6, 1996, concerning the use of the Merox(R) patented
process in two units in the Fractionation Facility, as well as one
unit located at another Warren facility
o Datastream Software License Agreement for Datastream Systems, Inc.
proprietary MP2 computerized maintenance management system in use
at the Fractionation Facility.
o ABB Simcon, Inc. "Software Sub-licensing Agreement for Digital
Software Program Binaries" dated October 1, 1991, as supplemented
by ABB Simcon, Inc. letter of December 1, 1992, for the licensing
of various PC-Based and Digital VAX/VMS compatible software
(applications, operating systems and system utilities) in
connection with the Fractionation Facility's control systems used
to operate the Facility's process systems.
o Saros Corporation "License Agreement with Premium Maintenance Plan"
with Chevron Information Technology Company, a division of Chevron
U.S.A. Inc.; pursuant to which Chevron acquired on behalf of Warren
licensing rights to certain Saros Corporation document and image
management software, as more fully described therein.
3. Environmental Disclosures: Due to the unavailability of commercial
disposal facilities for naturally occurring radioactive materials waste
("NORM"), Warren has had to store and retain certain volumes of NORM on site
and the Facility. These NORM wastes result from the fractionation of Raw
Product received at the Facility. Such NORM waste is predominately Pb 210
NORM waste and concentrates in particulate
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removed in the Facility's amine treating system filters and in sludge present
in various vessels in the Facility, including sumps which capture water that
is drained from various vessels. No disposal facility is currently available
in the State of Texas for such NORM waste and same will continue to be
generated and stored at the Facility after the Effective Date until cost
effective disposal services can be obtained by the Operator. Such wastes are
currently stored in approximately seventy five 55 gallon drums and various
containers located at the Facility, the exact location of which was disclosed
to Amoco representatives, but which is secured.
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EXHIBIT H
GUARANTY
This Guaranty Agreement (the "Guaranty") is made effective January 1,
1998 (the "Effective Date") by Amoco Oil Company, a Maryland Corporation
("Guarantor") in favor of Warren Petroleum Company, Limited Partnership and
its subsidiaries and affiliates ("Beneficiary") in consideration of the
Beneficiary entering into various agreements with Amoco Fractionation Company
and Amoco MBF Company (the "Obligors"), both Delaware corporations, relating
to the Cedar Bayou Fractionators, L.P., a Delaware limited partnership.
The Beneficiary and Obligors are anticipating entering into the
following agreements with regard to the formation of the Partnership (the
"Partnership Agreements") whereby the Obligors will assume certain
obligations and make certain warranties and indemnities as more fully described
in those agreements (the "Obligations"):
A. Limited Partnership Agreement of Cedar Bayou Fractionators, L.P.;
B. Limited Liability Company Agreement of Downstream Energy Ventures
Co., L.L.C.; and
C. Operating Agreement between the Partnership and Warren.
The Obligors are wholly-owned subsidiaries of Amoco Oil Holding Company, a
wholly-owned subsidiary of Guarantor. The Beneficiary will be entering into
the Partnership
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Agreements with the Obligors, and the Guarantor wishes to provide this
Guaranty to the Beneficiary to induce the Beneficiary to enter into those
Partnership Agreements.
This Guaranty by Guarantor shall remain in full force and effect during
the terms of the Partnership Agreements and any extensions or renewals
thereof and thereafter until Obligors have fully performed all of their
respective obligations under the Partnership Agreements.
The Guarantor waives notice of acceptance hereof and of all defaults or
disputes with the Obligors, notice of demand, presentment, protest or
non-payment and of the settlement or adjustment of such defaults or disputes
and all benefits of discussion and division. The Guarantor, without affecting
its liability hereunder in any respect, consents to and waives notice of any
and all modifications and changes to the terms and provisions of the
Partnership Agreements or any other changes in the Obligors' Obligations.
The obligation of the Guarantor as set forth in this Guaranty is a
primary and an unconditional obligation and covers all Obligations of the
Obligors to Beneficiary which arise under the Partnership Agreements and all
costs, expenses and attorneys' fees which Beneficiary may incur in
collecting, or endeavoring to collect, all or any part of the Obligations and
enforcing this Guaranty. Guarantor's obligation shall be enforceable before
or after proceeding against Obligors and shall be effective regardless of the
solvency or insolvency of Obligors at any time, the extension or
modification of the Obligations by operation of law or the subsequent
incorporation, reorganization, merger or consolidation of the Obligors or any
other change in the composition, nature, personnel or location of the
Obligors.
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In executing this Guaranty, the Guarantor represents and warrants to
Beneficiary that:
A. The Guarantor is a corporation duly organized and validly existing,
is in good standing and has full power and authority to make and deliver
this Guaranty to and in favor of Beneficiary;
B. The execution, delivery and performance of the Guaranty by the
Guarantor has been dully authorized by all necessary action of its principals
and does not and will not violate the provisions of, or constitute a default
under, any presently applicable law or its organizational instruments or any
agreement presently binding on it; and
C. This Guaranty has been executed and delivered by a duly authorized
officer of the Guarantor and constitutes a lawful and binding obligation
legally enforceable against Guarantor in accordance with its terms.
This Guaranty shall be governed by and construed, enforced and
performed in accordance with the laws of the State of Texas as the same may
be amended from time to time, without regard to any choice or conflict of
law, provision or rule that would cause the application of the laws of any
jurisdiction other than the State of Texas. Beneficiary and Guarantor, by
accepting this Guaranty, each submit to the non-exclusive jurisdiction of the
courts of the State of Texas and to the federal courts located in Houston,
Texas, in connection with this Guaranty, but not otherwise.
Guarantor and Beneficiary agree that the Alternative Dispute Resolution
procedures set forth in Article 13 of the Limited Partnership Agreement of
Cedar Bayou Fractionators, L.P. shall apply to any and all disputes,
controversies or claims (whether sounding in contract, tort or otherwise)
arising out of or relating to this Guaranty,
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including, without limitation, the meaning of its provisions, or the proper
performance of any of its terms, its breach, termination or invalidity, and
the enforcement of same, as though copied herein in its entirety but with the
substitution of Guarantor in the place of Amoco Fractionation Company and
Amoco MBF Company.
This Guaranty has been duly executed effective as of the Effective Date.
GUARANTOR:
AMOCO OIL COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
BENEFICIARY:
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: Warren Petroleum G. P., Inc.
its General Partner
By: ____________________________________
Name: Stephen A. Furbacher
Title: President
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