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Exhibit 10.1
EARNOUT AGREEMENT
This
Earnout Agreement (this "Agreement") is entered into effective as
of
April 4, 2006 (the "Effective Date") by and between The Magna Carta
Group,
L.L.C., a Louisiana limited liability company (hereinafter
"Seller"), and
Genesis Crude Oil, L.P., a Delaware limited partnership
(hereinafter "Buyer").
Seller and Buyer are sometimes individually referred to herein as a
"Party" and
collectively as "Parties."
RECITALS
WHEREAS, Seller has this date sold to Buyer a fifty percent
(50%)
membership interest (the "Ownership Interest Purchased") in
Sandhill Group,
L.L.C. (the "Company"), pursuant to the terms of that certain
Purchase and Sale
Agreement for Membership Interest in Sandhill Group, L.L.C. between
The Magna
Carta Group, L.L.C. and Genesis Crude Oil, L.P. dated March 24,
2006 (the
"PSA");
WHEREAS, the PSA provides that a portion of the purchase price is
to be
calculated and paid by Buyer to Seller as an earnout based upon (i)
the amount
of the Distributable Cash before Reserves (hereinafter defined)
achieved by the
Company over the Term (hereinafter defined), and (ii) the amount
of
Distributions (hereinafter defined) declared and paid by the
Company to its
Members over the Term; and
WHEREAS, Seller and Buyer have agreed that determination and
payment of the
earnout contemplated by the PSA is to be in accordance with the
terms of this
Agreement.
NOW,
THEREFORE, in consideration of the premises and of the
respective
covenants and provisions herein contained, Seller and Buyer agree
as follows:
ARTICLE I.
DEFINITIONS
For
purposes of this Agreement, the following terms shall have the
meanings
set forth below.
1.1 "Distributable Cash" means, with respect to any Fiscal Year,
Net Cash
Provided by Operating Activities as set forth in the Statement of
Cash Flows to
the Audited Financial Statements for the period, excluding
adjustments for
changes to working capital accounts and excluding adjustments for
Reserves, and
less the Investing and Financing Payments Related to the
Pre-Closing Business.
1.2 "Distributions" means the aggregate amount of distributions
declared and
paid by the Company to its Members during any Fiscal Year.
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1.3 "Fiscal Year" means, with respect to the Company, the period
beginning
January 1 and ending December 31 of each year. For the Fiscal Year
ending
December 31, 2006, the Fiscal Year shall include Distributable Cash
and
Distributions computed for the entire twelve (12) months ending
December 31,
2006, notwithstanding that the Term begins on the Effective Date.
The Fiscal
Year shall not refer to any period prior to January 1, 2006.
1.4 "Investing and Financing Payments Related to the Pre-Closing
Business" means
principal payments on long term debt and capital leases and
payments for capital
expenditures, in each case, to sustain the business of the Company
as it existed
prior to January 1, 2006, rather than for growth from and after
January 1, 2006.
Such payments shall include both payments made during the Fiscal
Year and any
amounts due and payable at the Fiscal Year end, but shall not
include payments
made during the Fiscal Year that were due and payable at year end
for the
preceding Fiscal Year.
1.5 "Reserves" means the amount set aside from Distributable Cash
that is
necessary and appropriate in the reasonable discretion of the
Management
Committee to (i) provide for the proper conduct of the business of
the Company
(including reserves for future capital expenditures and for
anticipated future
credit needs of the business of the Company) subsequent to such
quarter, (ii)
comply with applicable law or any loan agreement, security
agreement, mortgage,
debt instrument or other agreement or obligation to which the
Company is a party
or by which it is bound or its assets subject, or (iii) provide
funds for
distributions in respect of any one or more of the next four
quarters.
1.4 Term. The period commencing on the Effective Date and
continuing until
December 31, 2012.
ARTICLE II.
EARNOUT PAYMENT
2.1 Nature of Earnout Payments.
(a) Buyer shall pay to Seller one million dollars ($1,000,000.00)
(the "First
Earnout Payment"), if each of the following conditions are met:
(i)
If, for any Fiscal
Year(s) during the Term,
(ii)
average annual Distributable Cash before Reserves for the
preceding
Fiscal Year(s) back to and including the Fiscal Year ended
December
31, 2006, exceeds $1,500,000, and
(iii) average annual Distributions for the same period exceeds
$1,200,0000.
(b) Buyer shall pay to Seller one million dollars ($1,000,000.00)
(the "Second
Earnout Payment", and collectively with the First Earnout Payment,
the "Earnout
Payments"), if each of the following conditions are met:
(i)
If, for any Fiscal
Year(s) during the Term,
2
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(ii)
average annual Distributable Cash before Reserves for the
preceding
Fiscal Year(s) back to and including the Fiscal Year ended
December
31, 2006, exceeds $2,000,000, and
(iii) average annual Distributions for the same period exceeds
$1,600,0000.
(c) The calculation of Distributable Cash would be adjusted to
exclude the
effect of renegotiating the terms of principal payments under the
long term
indebtedness of the Company as of the Effective Date of this
Agreement, to the
extent such modification results in the deferral of principal
payments. In
effect, deferring principal payments shall not result in improved
Distributable
Cash before Reserves for purposes of these calculations.
(d) The maximum number of Earnout Payments due from Buyer is
limited to two (2)
payments totaling two million dollars ($2,000
