Exhibit 10.5

 

Execution Copy

 

ADOPTION AGREEMENT

BETWEEN

BREITBURN ENERGY COMPANY L.P.

AND

BREITBURN MANAGEMENT COMPANY, LLC

 

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TABLE OF CONTENTS

ARTICLE I

 

 

 

DEFINITIONS

 

 

 

 

Section 1.1

Definitions

1

Section 1.2

Construction

3

 

 

 

ARTICLE II

 

 

 

ADOPTION OF INCENTIVE COMPENSATION PLANS AND AGREEMENTS

 

 

 

Section 2.1

Adoption of Existing BreitBurn Management Plans

3

Section 2.2

Employment Agreements

3

 

 

 

ARTICLE III

 

 

 

 

AMENDMENTS TO ADOPTED PLANS AND OUTSTANDING AWARDS

 

 

 

 

Section 3.1

Adoption by BreitBurn Management

4

Section 3.2

Amendments to Phantom Options under the Phantom Option Plan

4

Section 3.3

Amendments to Founders Options under the Founders Plan

4

Section 3.4

Amendments to LTIP and Jackson PTUs

5

Section 3.5

UAR Plan

5

 

 

 

ARTICLE IV

 

 

 

IRC § 409A COMPLIANCE

 

 

 

ARTICLE V

 

 

 

GENERAL PROVISIONS

 

 

 

 

Section 5.1

General Provisions

6

Section 5.2

Further Action

6

Section 5.3

Binding Effect

6

Section 5.4

Integration

6

Section 5.5

Creditors

7

Section 5.6

Waiver

7

Section 5.7

Counterparts

7

Section 5.8

Applicable Law

7

Section 5.9

Invalidity of Provisions

7

Section 5.10

Amendment or Restatement

7

 

ADOPTION AGREEMENT

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ADOPTION AGREEMENT

THIS ADOPTION AGREEMENT is entered into on, and effective as of October 10, 2006
(the “Effective Date”), between BreitBurn Energy Company L.P., a Delaware
limited partnership (the “BreitBurn Energy”), and BreitBurn Management Company,
LLC, a Delaware limited liability company (“BreitBurn Management,” and
collectively with BreitBurn Energy, the “Parties” and each, a “Party”).

RECITALS

A.            BreitBurn Energy currently employs certain individuals who operate
its business;

B.            BreitBurn Management has been organized to provide certain
services to BreitBurn Energy and the newly created BreitBurn Energy Partners
L.P. (the “Partnership”) and to operate the businesses of both BreitBurn Energy
and the Partnership and to fulfill other general and administrative functions
relating to such businesses;

C.            BreitBurn Management will employ the former employees of BreitBurn
Energy and assume the obligations of BreitBurn Energy to such employees; and

D.            BreitBurn Energy has certain employee benefit plans that will be
assumed by BreitBurn Management.

NOW, THEREFORE, BreitBurn Energy and BreitBurn Management agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1             DEFINITIONS.  THE FOLLOWING DEFINITIONS SHALL BE FOR ALL
PURPOSES, UNLESS OTHERWISE CLEARLY INDICATED TO THE CONTRARY, APPLIED TO THE
TERMS USED IN THIS AGREEMENT.

“Adopted Plans” means the LTIP, the UAR Plan and the Founders Plan.

“Agreement” means this Adoption Agreement, as it may be amended, supplemented or
restated from time to time.

“Base Price” shall have the meaning set forth in the Founders Plan.

“BreitBurn Energy” is defined in the introductory paragraph.

“BreitBurn Management” is defined in the introductory paragraph.

“Breitenbach Agreement” is defined in Section 2.2.

“Co-CEO  Employment Agreements” is defined in Section 2.2.

“Distributions” shall have the meaning set forth in the Founders Plan.

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“Effective Date” is defined in the introductory paragraph.

“Employment Agreements” is defined in Section 2.2.

“Exercise Date” shall have the meaning set forth in the Founders Plan.

“Founders Options” is defined in Section 3.3.

“Founders Plan” is defined in Section 2.1.

“IPO Date” means the date on which the initial offering and sale of common units
in the Partnership to the public is completed.

“Jackson Agreement”  is defined in Section 2.2.

“LTIP” is defined in Section 2.1.

“Original Jackson Agreement” is defined in Section 2.2.

“Parties” is defined in the introductory paragraph.

“Partnership” is defined in the introductory paragraph.

“Partnership Interest” shall have the meaning set forth in the Founders Plan.

“Partnership Valuation” shall have the meaning set forth in Section 6.6.1 of the
Limited Partnership Agreement of BreitBurn Energy.

“Person” means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.

“Phantom Option Plan” is defined in Section 2.2.

“Phantom Options” is defined in Section 3.2.

“PTUs” is defined in Section 3.4.

“Retained Business” is defined in Section 3.3.

“RTUs” is defined in Section 3.4.

“Transferred Business” is defined in Section 3.3.

“UAR Plan” is defined in Section 2.1.

“Washburn Agreement” is defined in Section 2.2.

Other terms defined herein have the meanings so given them.

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Section 1.2             Construction.  Unless the context requires otherwise:
(a) any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns, pronouns
and verbs shall include the plural and vice versa; (b) references to Articles
and Sections refer to Articles and Sections of this Agreement; (c) references to
Exhibits refer to the Exhibits attached to this Agreement, each of which is made
a part hereof for all purposes; (d) the terms “include”, “includes”, “including”
and words of like import shall be deemed to be followed by the words “without
limitation;” (e) the terms “hereof,” “herein” and “hereunder” refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
(f) references to money refer to legal currency of the United States of
America.  The table of contents and headings contained in this Agreement are for
reference purposes only, and shall not affect in any way the meaning or
interpretation of this Agreement.

ARTICLE II

ADOPTION OF INCENTIVE COMPENSATION PLANS AND AGREEMENTS

SECTION 2.1             ADOPTION OF EXISTING BREITBURN MANAGEMENT PLANS. 
EFFECTIVE ON THE IPO DATE, BREITBURN ENERGY HEREBY ASSIGNS TO BREITBURN
MANAGEMENT, AND BREITBURN MANAGEMENT HEREBY ASSUMES THE OBLIGATIONS OF BREITBURN
ENERGY UNDER:

(A)           THE BREITBURN ENERGY COMPANY L.P. UNIT APPRECIATION PLAN FOR
OFFICERS AND KEY INDIVIDUALS (“FOUNDERS PLAN”);

(B)           THE BREITBURN ENERGY COMPANY L.P. LONG TERM INCENTIVE PLAN
(“LTIP”); AND

(C)           THE BREITBURN ENERGY COMPANY L.P. UNIT APPRECIATION PLAN FOR
EMPLOYEES AND CONSULTANTS (“UAR PLAN”).

SECTION 2.2             EMPLOYMENT AGREEMENTS.

(A)           EFFECTIVE ON THE IPO DATE, BREITBURN ENERGY HEREBY ASSIGNS TO
BREITBURN MANAGEMENT, AND BREITBURN MANAGEMENT HEREBY ASSUMES THE OBLIGATIONS OF
BREITBURN ENERGY UNDER, THE EMPLOYMENT AGREEMENT WITH JAMES G. JACKSON AND
BREITBURN ENERGY DATED JULY 7, 2006 (THE “ORIGINAL JACKSON AGREEMENT”).

(B)           EFFECTIVE ON THE IPO DATE, BREITBURN MANAGEMENT WILL ENTER INTO
AND BECOME A PARTY TO THE FOLLOWING AGREEMENTS:

(I)            AMENDED AND RESTATED EMPLOYMENT AGREEMENT WITH RANDALL
BREITENBACH AND CERTAIN OTHER PARTIES DATED OCTOBER 10, 2006 (THE “BREITENBACH
AGREEMENT”);

(II)           AMENDED AND RESTATED EMPLOYMENT AGREEMENT WITH HALBERT WASHBURN
AND CERTAIN OTHER PARTIES DATED OCTOBER 10, 2006 (THE “WASHBURN AGREEMENT”, AND
COLLECTIVELY WITH THE BREITENBACH AGREEMENT, THE “CO-CEO EMPLOYMENT
AGREEMENTS”); AND

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(III)          AMENDMENT DATED OCTOBER 10, 2006 TO THE ORIGINAL JACKSON
AGREEMENT (TOGETHER WITH THE ORIGINAL JACKSON AGREEMENT, THE “JACKSON
AGREEMENT”, AND COLLECTIVELY WITH THE CO-CEO EMPLOYMENT AGREEMENTS, THE
“EMPLOYMENT AGREEMENTS”).

Certain phantom options have been granted and will be granted pursuant to the
Co-CEO Employment Agreements and are referred to herein collectively as the
“Phantom Option Plan.”

ARTICLE III

AMENDMENTS TO ADOPTED PLANS AND OUTSTANDING AWARDS

SECTION 3.1             ADOPTION BY BREITBURN MANAGEMENT.  EFFECTIVE ON THE IPO
DATE, BREITBURN MANAGEMENT SHALL BE SUBSTITUTED FOR BREITBURN ENERGY IN ALL
APPROPRIATE PLACES IN THE ADOPTED PLANS AND REFERENCES TO THE “BOARD OF
DIRECTORS” IN SUCH ADOPTED PLANS SHALL ALSO MEAN, WHERE APPLICABLE, THE BOARD OF
DIRECTORS OF BREITBURN MANAGEMENT.  NOTWITHSTANDING THE FOREGOING SENTENCE,
BREITBURN ENERGY SHALL REMAIN LIABLE FOR THE FULL AND COMPLETE PERFORMANCE OF
ITS DUTIES AND OBLIGATIONS UNDER THE ADOPTED PLANS.

SECTION 3.2             AMENDMENTS TO PHANTOM OPTIONS UNDER THE PHANTOM OPTION
PLAN.  THE PHANTOM OPTIONS PREVIOUSLY GRANTED PURSUANT TO THE PHANTOM OPTION
PLAN AND OUTSTANDING ON THE IPO DATE (THE “PHANTOM OPTIONS”) SHALL AUTOMATICALLY
AND WITHOUT ANY OTHER ACTION REQUIRED TO BE TAKEN ON THE PART OF ANY OF THE
PARTIES OR ANY OTHER PERSON BE CONVERTED, EFFECTIVE ON THE IPO DATE, INTO THREE
SEPARATE AWARDS PURSUANT TO THE TERMS OF THE PHANTOM OPTION PLAN SET FORTH IN
THE CO-CEO EMPLOYMENT AGREEMENTS.

SECTION 3.3             AMENDMENTS TO FOUNDERS OPTIONS UNDER THE FOUNDERS PLAN. 
THE OPTIONS GRANTED PURSUANT TO THE FOUNDERS PLAN AND OUTSTANDING ON THE IPO
DATE (THE “FOUNDERS OPTIONS”) SHALL AUTOMATICALLY AND WITHOUT ANY OTHER ACTION
REQUIRED TO BE TAKEN ON THE PART OF ANY OF THE PARTIES OR ANY OTHER PERSON BE
CONVERTED, EFFECTIVE ON THE IPO DATE, INTO THE FOLLOWING THREE SEPARATE AWARDS,
WHICH SHALL BE SETTLED IN CASH:

(A)           A PHANTOM UNIT BASED ON THE DIFFERENCE BETWEEN (I) THE VALUE OF A
PORTION OF THE BASE PRICE ALLOCABLE TO THE OPERATIONS ATTRIBUTABLE TO PROPERTIES
OF BREITBURN ENERGY NOT TRANSFERRED TO THE PARTNERSHIP (THE “RETAINED BUSINESS”)
AND (II) THE VALUE OF A PORTION OF ONE PARTNERSHIP INTEREST PLUS DISTRIBUTIONS
ALLOCABLE TO THE RETAINED BUSINESS, AS DETERMINED ON THE BASIS OF THE MOST
RECENTLY COMPLETED PARTNERSHIP VALUATION AT THE EXERCISE DATE,

(B)           A PHANTOM UNIT BASED ON THE DIFFERENCE BETWEEN (I) THE VALUE OF A
PORTION OF THE BASE PRICE ALLOCABLE TO THE OPERATIONS ATTRIBUTABLE TO THE
PROPERTIES OF BREITBURN ENERGY TRANSFERRED TO THE PARTNERSHIP (THE “TRANSFERRED
BUSINESS”) AND (II) THE IPO OFFERING PRICE FOR A COMMON UNIT OF THE PARTNERSHIP
PLUS DISTRIBUTIONS ALLOCABLE TO THE TRANSFERRED BUSINESS UP TO THE IPO DATE, AND

(C)           A PHANTOM UNIT BASED ON THE DIFFERENCE IN (I) THE IPO OFFERING
PRICE FOR A COMMON UNIT OF THE PARTNERSHIP AND (II) THE CLOSING SALES PRICE FOR
A COMMON UNIT OF THE PARTNERSHIP ON THE EXERCISE DATE AS REPORTED BY SUCH
REPORTING SERVICE AS THE BOARD OF DIRECTORS

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OF BREITBURN MANAGEMENT MAY CHOOSE, PLUS DISTRIBUTIONS ON A COMMON UNIT FROM THE
IPO DATE TO THE EXERCISE DATE.

The general terms of the awards set forth in paragraphs (a), (b) and (c) above
shall remain unchanged from the Founders Options, except as necessary or helpful
to effectuate the conversion of such options as provided above. No new grants
shall be made under the Founders Option Plan.

SECTION 3.4             AMENDMENTS TO LTIP AND JACKSON PTUS.

(A)           EXCEPT AS PROVIDED IN SECTION 3.4(C) BELOW, NO CHANGE SHALL BE
MADE IN THE GRANTS UNDER THE LTIP OUTSTANDING ON THE IPO DATE.

(B)           THE PERFORMANCE TRUST UNITS COVERING INCENTIVE UNITS (“PTUS”)
GRANTED UNDER THE LTIP AFTER THE IPO DATE SHALL BE AS FOLLOWS:

(I)            A PORTION OF THE GRANT SHALL BE IN RESTRICTED PHANTOM UNITS IN
THE PARTNERSHIP WITH THE SAME ECONOMIC AND OTHER TERMS AS THE EXISTING PTU
AWARDS, BUT WHICH MAY BE SETTLED AT VESTING AT THE OPTION OF THE EMPLOYEE IN
CASH OR COMMON UNITS OF THE PARTNERSHIP (NET OF ANY TAX WITHHOLDING), AND

(II)           THE REMAINING PORTION OF THE GRANT, AT THE EMPLOYEE’S ELECTION,
SHALL BE PROVIDED (A) IN PTUS WITH RESPECT TO PROVIDENT ENERGY TRUST WITH THE
SAME ECONOMIC AND OTHER TERMS AS UNDER THE EXISTING PLAN OR (B) IN RESTRICTED
PHANTOM INTERESTS IN BREITBURN ENERGY WITH THE SAME ECONOMIC AND OTHER TERMS AS
UNDER EXISTING PTUS (BUT WITHOUT A MULTIPLIER), BUT WHICH UPON VESTING MAY BE
SETTLED IN CASH OR VESTED PHANTOM UNITS IN BREITBURN ENERGY AT THE EMPLOYEE’S
OPTION.

(C)           THE PTUS GRANTED UNDER THE LTIP PURSUANT TO THE JACKSON AGREEMENT
SHALL AUTOMATICALLY BE CONVERTED ON THE IPO DATE INTO TWO SEPARATE AND EQUAL
AWARDS, WHICH TOGETHER SHALL HAVE THE SAME VALUE AS THE PTUS PRIOR TO SUCH
CONVERSION ON THE IPO DATE, AS SET FORTH IN SECTION 3.4(B)(I) AND SECTION
3.4(B)(II)(B) ABOVE.

(D)           WITH RESPECT TO RESTRICTED TRUST UNITS (“RTUS”) GRANTED AFTER THE
IPO DATE, EMPLOYEES WILL RECEIVE RESTRICTED PHANTOM UNITS IN BREITBURN ENERGY
AND IN THE PARTNERSHIP WITH THE SAME GENERAL TERMS AS THE EXISTING RTUS.

SECTION 3.5             UAR PLAN.  NO AMENDMENTS ARE MADE TO THE UAR PLAN OTHER
THAN AS PROVIDED IN SECTION 3.1 ABOVE AND NO NEW GRANTS SHALL BE MADE UNDER THE
UAR PLAN.

ARTICLE IV

IRC § 409A COMPLIANCE

Notwithstanding anything in the Adopted Plans or the Phantom Option Plan or the
terms of any awards granted thereunder to the contrary, BreitBurn Management
shall have the power to

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modify the Adopted Plans and the Phantom Option Plan and such awards as
necessary for such plans and awards to comply with Section 409A of the Internal
Revenue Code.

ARTICLE V

GENERAL PROVISIONS

SECTION 5.1             GENERAL PROVISIONS.  ALL NOTICES OR OTHER COMMUNICATIONS
REQUIRED OR PERMITTED UNDER, OR OTHERWISE IN CONNECTION WITH, THIS AGREEMENT
MUST BE IN WRITING AND MUST BE GIVEN BY DEPOSITING SAME IN THE MAIL, ADDRESSED
TO THE PERSON TO BE NOTIFIED, POSTPAID AND REGISTERED OR CERTIFIED WITH RETURN
RECEIPT REQUESTED OR BY TRANSMITTING BY NATIONAL OVERNIGHT COURIER OR BY
TRANSMITTING BY NATIONAL OVERNIGHT COURIER OR BY DELIVERING SUCH NOTICE IN
PERSON OR BY FACSIMILE TO SUCH PARTY.  NOTICE GIVEN BY MAIL, NATIONAL OVERNIGHT
COURIER OR PERSONAL DELIVERY SHALL BE EFFECTIVE UPON ACTUAL RECEIPT.  NOTICE
GIVEN BY FACSIMILE SHALL BE EFFECTIVE UPON CONFIRMATION OF RECEIPT WHEN
TRANSMITTED BY FACSIMILE IF TRANSMITTED DURING THE RECIPIENT’S NORMAL BUSINESS
HOURS OR AT THE BEGINNING OF THE RECIPIENT’S NEXT BUSINESS DAY AFTER RECEIPT IF
NOT TRANSMITTED DURING THE RECIPIENT’S NORMAL BUSINESS HOURS.  ALL NOTICES TO BE
SENT TO A PARTY PURSUANT TO THIS AGREEMENT SHALL BE SENT TO OR MADE AT THE
ADDRESS, IN EACH CASE AS FOLLOWS:

if to the BreitBurn Energy:

BreitBurn Energy Company L.P.
515 South Flower  Street, Suite 4800
Los Angeles, CA 90071
Attention:  Randall H. Breitenbach
                  Halbert S. Washburn
Fax:  (213) 225-5917

if to BreitBurn Management:

BreitBurn Management Company, LLC
515 South Flower  Street, Suite 4800
Los Angeles, CA 90071
Attention:  Randall J. Findlay
Fax:  (213) 225-5917

SECTION 5.2             FURTHER ACTION.  THE PARTIES SHALL EXECUTE AND DELIVER
ALL DOCUMENTS, PROVIDE ALL INFORMATION AND TAKE OR REFRAIN FROM TAKING ACTION AS
MAY BE NECESSARY OR APPROPRIATE TO ACHIEVE THE PURPOSES OF THIS AGREEMENT.

SECTION 5.3             BINDING EFFECT.  THIS AGREEMENT SHALL BE BINDING UPON
AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR HEIRS, EXECUTORS,
ADMINISTRATORS, SUCCESSORS, LEGAL REPRESENTATIVES AND PERMITTED ASSIGNS.

SECTION 5.4             INTEGRATION.  THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT AMONG THE PARTIES HERETO PERTAINING TO THE SUBJECT MATTER HEREOF AND
SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS PERTAINING THERETO.

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SECTION 5.5             CREDITORS.  NONE OF THE PROVISIONS OF THIS AGREEMENT
SHALL BE FOR THE BENEFIT OF, OR SHALL BE ENFORCEABLE BY, ANY CREDITOR OF THE
PARTNERSHIP.

SECTION 5.6             WAIVER.  NO FAILURE BY ANY PARTY TO INSIST UPON THE
STRICT PERFORMANCE OF ANY COVENANT, DUTY, AGREEMENT OR CONDITION OF THIS
AGREEMENT OR TO EXERCISE ANY RIGHT OR REMEDY CONSEQUENT UPON A BREACH THEREOF
SHALL CONSTITUTE WAIVER OF ANY SUCH BREACH OF ANY OTHER COVENANT, DUTY,
AGREEMENT OR CONDITION.

SECTION 5.7             COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN
COUNTERPARTS, ALL OF WHICH TOGETHER SHALL CONSTITUTE AN AGREEMENT BINDING ON ALL
THE PARTIES HERETO, NOTWITHSTANDING THAT ALL SUCH PARTIES ARE NOT SIGNATORIES TO
THE ORIGINAL OR THE SAME COUNTERPART.  EACH PARTY SHALL BECOME BOUND BY THIS
AGREEMENT IMMEDIATELY UPON AFFIXING ITS SIGNATURE HERETO.

SECTION 5.8             APPLICABLE LAW.  THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.

SECTION 5.9             INVALIDITY OF PROVISIONS.  IF ANY PROVISION OF THIS
AGREEMENT IS OR BECOMES INVALID, ILLEGAL OR UNENFORCEABLE IN ANY RESPECT, THE
VALIDITY, LEGALITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS CONTAINED
HEREIN SHALL NOT BE AFFECTED THEREBY.

SECTION 5.10           AMENDMENT OR RESTATEMENT.  THIS AGREEMENT MAY BE AMENDED
OR RESTATED ONLY BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THE PARTIES.

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IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON, AND EFFECTIVE
AS OF, THE EFFECTIVE DATE.

BREITBURN ENERGY COMPANY L.P.

 

 

 

By:

Pro GP Corp., its General Partner

 

 

 

 

 

 

 

 

By:

/s/ Randall J. Findlay

 

 

 

Name:

Randall J. Findlay

 

 

 

Title:

President

 

 

 

 

 

 

BREITBURN MANAGEMENT COMPANY, LLC

 

 

 

By:

/s/ Halbert S. Washburn

 

 

Name:

Halbert S. Washburn

 

 

Title:

Co-Chief Executive Officer

 

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