Exhibit 10.3

 

Vulcan Energy GP Holdings Inc.

505 Fifth Avenue South

Suite 900

Seattle, Washington 98104

 

 

August 12, 2005

 

 

Plains All American GP LLC

333 Clay Street, Suite 1600

Houston, Texas 77002

 

 

Gentlemen:

 

                                Reference is made to the Amended and Restated
Limited Liability Company Agreement of Plains All American GP LLC, dated as of
June 8, 2001, as amended (the “LLC Agreement”).  The undersigned has become the
beneficial owner of more than 49.9% (a “Majority Holder”) of the Membership
Interests (as defined in the LLC Agreement) of Plains All American GP LLC, a
Delaware limited liability company (the “Company”).  Capitalized terms that are
not otherwise defined herein shall have the meanings set forth in the LLC
Agreement.

 

                                The undersigned hereby acknowledges its
understanding that, pursuant to the terms of certain employment and incentive
agreements between the Company and its employees, absent the execution and
delivery of this letter agreement by the undersigned, the fact that the
undersigned has become a Majority Holder would constitute a “change in control”
for purposes of those employment and incentive agreements.

 

1.             Subject to the terms and conditions of this letter agreement,
during the term of this letter agreement, at each annual meeting of the Members,
at each special meeting of the Members called for the purpose of electing
Independent Directors, and in respect of any action by written consent to elect
Independent Directors, the undersigned shall vote or cause to be voted the
Excess Interests held by it and its affiliates in favor of the election of each
nominee for Independent Director in the same proportion as all Membership
Interests (other than those beneficially owned by the undersigned and its
affiliates, including the Excess Interests) are voted with respect to such
election.  For the avoidance of doubt, for purposes of this letter agreement the
term “Independent Director” shall not include any replacement Director who is to
be elected by a Majority in Interest pursuant to the second sentence of Section
7.1(a)(iv) of the LLC Agreement.  “Excess Interests” means, with respect to a
particular election or removal of Independent Directors, an amount of Membership
Interests equal to the amount, if any, by which the total Membership Interests
beneficially owned by the undersigned and its affiliates and entitled to vote
with respect to such election or removal of Independent Directors exceeds 49.9%
of the outstanding Membership Interests that are entitled to vote with respect
to such election or removal of Independent Directors.

 

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2.             Subject to the terms and conditions of this letter agreement,
during the term of this letter agreement, at each special meeting of the Members
called for the purpose of removing any Independent Director without Good Cause,
and in connection with any action by the Members to remove any Independent
Director without Good Cause, including without limitation pursuant to Section
7.1(a)(iii) of the LLC Agreement, the undersigned shall vote or cause to be
voted the Excess Interests held by it and its affiliates in favor of or against
the removal of such Independent Director in the same proportion as all
Membership Interests (other than those beneficially owned by the undersigned and
its affiliates, including the Excess Interests) are voted with respect to such
removal.  For the purposes of this letter agreement, the Members shall have
“Good Cause” to remove or fail to reelect any Independent Director only upon
such Independent Director’s (i) engaging in gross misconduct, including without
limitation any breach of his fiduciary duties, (ii) violation of the Company’s
Code of Business Conduct (unless waived in accordance with the terms thereof),
(iii) engaging in conduct which is demonstrably and materially injurious to the
Company or to Rodeo, L.P. and its subsidiaries, taken as a whole, (iv)
indictment for, or conviction of, a felony involving moral turpitude.

 

3.             The undersigned agrees that it will not provide or promise any
economic incentive or other consideration (including any concession or
forbearance) directly or indirectly to any other member of the Company that has
the intent or effect of terminating, obviating or circumventing this letter
agreement; provided that for the avoidance of doubt, this paragraph 3 shall not
be deemed to include routine conversations with other members of the Company
regarding the Independent Directors or other matters where the undersigned
attempts to persuade such other members to vote in a specified manner as long as
the undersigned’s solicitations do not involve the direct or indirect provision
or promise of any economic incentives or other consideration

 

4.             The term of this letter agreement shall commence on the date of
this letter agreement and shall continue thereafter unless terminated by the
undersigned pursuant to this Section 4.  The undersigned shall be entitled to
terminate this letter agreement at any time upon giving at least the applicable
Minimum Required Notice (as defined below) in writing of such termination to the
Company.  Notwithstanding the foregoing, the undersigned shall be entitled to
terminate this letter agreement at any time by giving written notice to the
Company (which notice shall be effective immediately) upon and after the
occurrence of any of the following circumstances:  (a) the undersigned, as a
result of an arm’s length transaction with an unrelated third party, is no
longer a Majority Holder, (b) both KAFU Holdings, L.P. and E-Holdings III, L.P.,
or any affiliate of any of the foregoing shall cease to be a Member, (c) any
other Member shall be in breach of the LLC Agreement in any manner materially
adverse to the undersigned, (d) the Persons who own the equity interests in the
undersigned, or if the undersigned is controlled directly or indirectly by any
other entity, the ultimate parent of the undersigned, as the case may be, on the
date hereof cease to beneficially own, directly or indirectly, more than 50% of
the equity interest in the undersigned or the ultimate parent entity, as the
case may be, (e) Greg L. Armstrong shall cease to be the Chief Executive Officer
of the Company, or (f) Harry N. Pefanis shall cease to be the President and
Chief Operating Officer of the Company; provided, that (x) in the case of clause
(b) above, to be effective such written notice must be given within 90 days of
such Member ceasing to be a Member, and (y) in

 

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the case of either clause (e) or (f) above, to be effective such written notice
must be given within 90 days of such officer ceasing to hold such position.

 

A “Distribution Shortfall” shall occur with respect to any Quarter if the
aggregate amount of cash distributed by Rodeo, L.P. in respect of each Common
Unit (as defined in the Rodeo L.P. Partnership Agreement) with respect to such
Quarter (as defined in the Rodeo L.P. Partnership Agreement) is less than the
aggregate amount of cash distributed by Rodeo, L.P. in respect of each Common
Unit with respect to the immediately preceding Quarter.

 

“Minimum Required Notice” means, with respect to a particular termination
notice, one year prior written notice; provided, however, that if there shall
occur a Distribution Shortfall during any Quarter when the Minimum Required
Notice period is one year (the “Triggering Quarter”), then the “Minimum Required
Notice” with respect to a termination notice given in any subsequent Quarter
shall be (i) 180 days prior written notice if such termination notice is given
during the first such subsequent Quarter (the “First Adjusted Quarter”), (ii) 
90 days prior written notice if such termination notice is given during the
second Quarter immediately following the Triggering Quarter (the “Second
Adjusted Quarter”); and (iii) 30 days prior written notice if such termination
notice is given during the third Quarter immediately following the Triggering
Quarter (the “Third Adjusted Quarter”) or any subsequent Quarter, except that

 

(1) if there shall have been no Distribution Shortfall during the First Adjusted
Quarter, the “Minimum Required Notice” period shall be 180 days with respect to
any termination notice given during the Second Adjusted Quarter,

 

(2) if there shall have been no Distribution Shortfall during either the First
Adjusted Quarter or the Second Adjusted Quarter, the “Minimum Required Notice”
period shall be one year with respect to any Quarter following the Second
Adjusted Quarter (subject to the application of this proviso to any subsequent
Quarter in the event of a subsequent Distribution Shortfall),

 

(3) if there shall have been a Distribution Shortfall in the First Adjusted
Quarter and (x) no Distribution Shortfall during the Second Adjusted Quarter,
the “Minimum Required Notice” period shall be 90 days with respect to any
termination notice given during the Third Adjusted Quarter, (y) no Distribution
Shortfall during the Second Adjusted Quarter or the Third Adjusted Quarter, the
“Minimum Required Notice” period shall be 90 days with respect to any
termination notice given during the Quarter immediately following the Third
Adjusted Quarter (the “Fourth Adjusted Quarter”), and (z) no Distribution
Shortfall during the Second Adjusted Quarter, the Third Adjusted Quarter or the
Fourth Adjusted Quarter, the “Minimum Required Notice” period shall be one year
with respect to any Quarter following the Fourth Adjusted Quarter (subject to
the application of

 

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this proviso to any subsequent Quarter in the event of a subsequent Distribution
Shortfall), and

 

(4) thereafter, if there shall have been four consecutive Quarters without a
Distribution Shortfall, the “Minimum Required Notice” period shall be one year
with respect to any Quarter following the fourth of such consecutive Quarters
(subject to the application of this proviso to any subsequent Quarter in the
event of a subsequent Distribution Shortfall).

 

5.             Except to the extent specifically set forth above, nothing
contained herein shall be deemed to modify, supersede or in any manner limit any
rights of the undersigned under the LLC Agreement, including without limitation,
any rights of the undersigned to designate a Director pursuant to Section
7.1(a)(ii) of the LLC Agreement, or to remove any such designated Director
pursuant to Section 7.1(a)(iii) of the LLC Agreement.  Nothing contained herein
shall be deemed to modify, supersede or in any manner limit any rights of the
undersigned under the Partnership Agreement or the Rodeo, L.P. Partnership
Agreement.

 

6.             This letter agreement is to be governed by the laws of the State
of Delaware, without giving effect to the principles of conflicts of laws
thereof.  If any provision hereof is deemed unenforceable, the enforceability of
the other provisions hereof shall not be affected.

 

7.             The undersigned signs solely in his, her or its individual
capacity with respect to his, her or its beneficial ownership of Membership
Interests and makes no agreement or understanding herein in any other capacity,
including his, her or its capacity as a director of the Company.

 

8.             This letter agreement may be executed in two or more
counterparts, each of which shall be considered an original but all of which
together shall constitute the same instrument.

 

9.             This letter agreement (including the documents and instruments
referred to herein) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among the
undersigned and the Company, or any of them, with respect to the subject matter
hereof.

 

10.           This letter agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by each of the undersigned and the Company.

 

11.           This letter agreement shall not be assigned by the Company by
operation of law or otherwise without the prior written consent of the
undersigned.

 

12.           This letter agreement shall be binding upon and inure solely to
the benefit of each party to this letter agreement and their permitted
assignees, and nothing in this letter agreement, express or implied, is intended
to or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this

 

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letter agreement.  Without limiting the foregoing, no direct or indirect holder
of any equity interests or securities of any party to this letter agreement
(whether such holder is a limited or general partner, member, stockholder or
otherwise), nor any Affiliate of any party to this letter agreement, nor any
director, officer, employee, representative, agent or other controlling Person
of each of the parties to this letter agreement and their respective Affiliates
shall have any liability or obligation arising under this letter agreement.

 

13.           The undersigned acknowledges and agrees that the Company could not
be made whole by monetary damages in the event of any default by the undersigned
of the terms and conditions set forth in this letter agreement.  It is
accordingly agreed and understood that the Company, in addition to any other
remedy that it may have at law or in equity, shall be entitled to an injunction
or injunctions to prevent breaches of this letter agreement and specifically to
enforce the terms and provisions hereof in any action instituted in any court of
the United States or in any state having appropriate jurisdiction.

 

 

Very truly yours,

 

 

 

 

 

VULCAN ENERGY GP HOLDINGS INC.

 

 

 

 

 

 

 

 

By:

/s/ David N. Capobianco

 

 

 

Name: David N. Capobianco

 

 

 

Title: President

 

 

 

Agreed and accepted as of

this 12th day of August, 2005:

 

PLAINS ALL AMERICAN GP LLC

 

 

By:

/s/ Tim Moore

 

 

Name: Tim Moore

 

 

Title: Vice President

 

 

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