Exhibit 99.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CHEVRON PHILLIPS CHEMICAL COMPANY LLC
DATED: JULY 1, 2000
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TABLE OF CONTENTS
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ARTICLE 1 Definitions........................................................2
ARTICLE 2 Offices and Statutory Agent........................................9
2.1 Registered Office and Statutory Agent...............................9
2.2 Principal Executive Office.........................................10
2.3 Business...........................................................10
ARTICLE 3 Members; Classes; Voting Rights; Meetings of Members..............10
3.1 Members............................................................10
3.2 Classes of Members.................................................10
3.3 Duties of Members..................................................10
3.4 Voting Rights......................................................10
3.5 Place of Meetings..................................................11
3.6 Meetings of Members; Notice of Meetings............................11
3.7 Quorum.............................................................11
3.8 Waiver of Notice...................................................11
3.9 Action by Members Without a Meeting................................11
ARTICLE 4 Board of Directors................................................12
4.1 General............................................................12
4.2 Number and Classes of Directors....................................13
4.3 Election and Removal of Directors..................................13
4.4 Vacancies; Resignations, Replacements..............................13
4.5 Initial Directors..................................................14
4.6 Compensation of Directors..........................................14
4.7 Fiduciary Duties of Directors......................................14
4.8 Limitation of Liability............................................14
ARTICLE 5 Meetings of Board of Directors....................................14
5.1 Place of Meetings..................................................14
5.2 Meetings of Directors..............................................14
5.3 Quorum; Alternates; Participation in Meetings By Conference
Telephone Permitted; Vote Required for Action......................15
5.4 Waiver of Notice; Consent to Meeting...............................15
5.5 Action by Board of Directors Without a Meeting.....................15
5.6 Committees and Subcommittees.......................................16
ARTICLE 6 Officers..........................................................16
6.1 General............................................................16
6.2 Appointment and Removal............................................16
6.3 Chief Executive Officer and President..............................16
6.4 Vice Presidents....................................................16
6.5 Secretary..........................................................17
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6.6 Chief Financial Officer............................................17
6.7 Initial Officers...................................................17
ARTICLE 7 Operational Matters...............................................17
7.1 Board of Director Approval.........................................17
7.2 Strategic and Business Plans; Reports..............................19
ARTICLE 8 Capital Contributions and Percentage Interests....................20
8.1 Capital Contributions and Percentage Interests.....................20
8.2 Additional Capital Contributions...................................22
8.3 Withdrawal or Reduction of Capital Contributions...................22
8.4 No Interest on Capital Contributions...............................22
8.5 Capital Accounts...................................................22
8.6 Loans by Members to the Company....................................23
8.7 Treatment of Certain Indemnity Payments............................23
8.8 Treatment of Certain Deferred Capital Contributions................23
8.9 Special Rule.......................................................24
8.10 Application of the Basket, Tax Basket Amount and Cap...............24
ARTICLE 9 Allocation of Profits and Losses; Distributions; Tax and
Accounting Matters................................................24
9.1 Allocations........................................................24
9.2 Distributions......................................................27
9.3 Accounting Matters.................................................29
9.4 Tax Status and Returns.............................................30
9.5 754 Election and Other Tax Elections...............................30
9.6 Tax Matters Partner................................................30
ARTICLE 10 Restrictions on Transfer.........................................31
10.1 Transfer of Interests..............................................31
10.2 Conditions of Transfer.............................................31
10.3 Admission of Substitute Member.....................................31
10.4 Effect of Transfer without Approval................................32
10.5 Liability for Breach...............................................32
10.6 Permitted Transfers Subject to Right of First Refusal..............32
10.7 Permitted Transfers Among Wholly-Owned Affiliates..................33
10.8 Transfers of Equity Interests in a Member..........................33
ARTICLE 11 Competition......................................................34
11.1 General............................................................34
11.2 Resolution of Competitive Conflicts................................34
ARTICLE 12 Term and Dissolution.............................................35
12.1 Term...............................................................35
12.2 Dissolution........................................................35
12.3 Liquidation........................................................35
12.4 Liabilities........................................................36
12.5 Settling of Accounts...............................................36
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12.6 Distribution of Proceeds...........................................36
12.7 Certificate of Cancellation........................................37
ARTICLE 13 Indemnification..................................................37
13.1 Indemnification: Proceeding Other Than by Company.................37
13.2 Indemnification: Proceeding by Company............................37
13.3 Mandatory Advancement of Expenses..................................38
13.4 Effect and Continuation............................................38
13.5 Insurance and Other Financial Arrangements.........................38
13.6 Notice of Indemnification and Advancement..........................39
13.7 Repeal or Modification.............................................39
ARTICLE 14 Inspection of Company Records; Annual and Other Reports..........39
14.1 Records to be Kept.................................................39
14.2 Access to Company Information......................................40
14.3 Annual and Quarterly Reports.......................................40
ARTICLE 15 Defaults and Remedies............................................40
15.1 Defaults...........................................................40
15.2 Remedies...........................................................41
15.3 No Waiver..........................................................41
ARTICLE 16 Miscellaneous....................................................41
16.1 Amendments.........................................................41
16.2 Representation of Shares of Companies or Interests in Other
Entities...........................................................41
16.3 Seal...............................................................41
16.4 Actions by Class P Members and Class C Members.....................41
16.5 Entire Agreement...................................................42
16.6 Third Parties......................................................42
16.7 Governing Law; Jurisdiction and Forum; Waiver of Jury Trial........42
16.8 Counterparts.......................................................42
16.9 Titles and Subtitles; Form of Pronouns; Construction and
Definitions........................................................43
16.10 Delaware Limited Liability Company Act Prevails....................43
16.11 Severability.......................................................43
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CHEVRON PHILLIPS CHEMICAL COMPANY LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"Agreement") is made and entered into as of the 1st day of July, 2000 by and
between Chevron Corporation, a Delaware corporation ("Chevron"), Phillips
Petroleum Company, a Delaware corporation ("Phillips," or the "Initial Phillips
Member"), Chevron U.S.A. Inc., a Pennsylvania corporation ("CUSA," or the
"Initial Chevron Member"), Chevron Pipe Line Company, a Delaware corporation
("CPL"), Chevron Overseas Petroleum Inc., a Delaware corporation ("COPI"),
Drilling Specialties Co., a Delaware corporation ("Drilling Specialties"),
WesTTex 66 Pipeline Co., a Delaware corporation ("WesTTex 66"), and Phillips
Petroleum International Corporation, a Delaware corporation ("PPIC").
W I T N E S S E T H:
WHEREAS, on May 23, 2000, a Certificate of Formation (the "Certificate")
for Chevron Phillips Chemical Company LLC (the "Company"), a limited liability
company organized under the laws of the State of Delaware, was filed with the
Secretary of State of the State of Delaware; and
WHEREAS, the Initial Chevron Member and the Initial Phillips Member
entered into the original Limited Liability Company Agreement of the Company
(the "Original LLC Agreement") on May 23, 2000; and
WHEREAS, the purpose of the Company is to hold and manage its interests in
entities which in aggregate will combine the existing chemicals businesses of
Chevron and certain of its affiliates with the existing chemicals businesses of
Phillips and certain of its affiliates and thereafter to conduct the combined
businesses; and
WHEREAS, Chevron and Phillips envision that the Company (together with its
Subsidiaries and Affiliates) will be a competitive, growing chemical venture
meeting or exceeding the financial return expectations of the owners on their
investment in petrochemicals, plastics, and selected specialties; and
WHEREAS, Chevron and Phillips intend that the Company will be a
self-financing entity, premised on an investment grade credit rating, without
the benefit of corporate guarantees; and
WHEREAS, the Members (as defined herein), including the Initial Chevron
Member and the Initial Phillips Member, now desire to amend and restate the
limited liability company
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agreement of the Company in its entirety to reflect the consummation of the
transactions contemplated by the Contribution Agreement (as defined herein) and
to more particularly provide for their respective rights, powers, duties and
obligations as Members, and the management, operations and activities of the
Company; and
WHEREAS, Chevron and Phillips desire to agree to the undertaking set forth
in Section 10.8 of this Agreement:
NOW, THEREFORE, the Members by this Agreement set forth the limited
liability company agreement for the Company under the Delaware Limited Liability
Company Act (6 Del.C. ss. 18-101 et seq., the "Act") upon the following terms
and conditions:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement without other definition shall,
unless expressly stated otherwise, have the meanings specified in this Article
1.
"Adjusted Capital Account Balance" means each Member's Capital Account,
increased by the amount of such Member's share of "minimum gain" and "partner
nonrecourse debt minimum gain" as such terms are defined in Treasury Regulation
1.704-2 and such other amounts as such Member is unconditionally obligated to
contribute hereunder.
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit such Capital Account by any amounts which such Member is
obligated to restore pursuant to this Agreement (including any note
obligations) or is deemed to be obligated to restore pursuant to the
penultimate sentence of each of sections 1.704-2(i)(5) and 1.704-2(g)(1)
of the Income Tax Regulations; and
(b) Debit such Capital Account by the items described in sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Income Tax Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of section 1.704-1(b)(2)(ii)(d) of the Income Tax
Regulations and shall be interpreted consistently therewith.
"Adjusted Class C Financial Statement Net Contribution" has the meaning
set forth in Section 8.1(c)(ii).
"Adjusted Class P Financial Statement Net Contribution" has the meaning
set forth in Section 8.1(c)(ii).
"Adjusted Taxable Income" means, for a Fiscal Year, Fiscal Quarter or
other period, the federal taxable income allocated by the Company to the Member
for such Fiscal Year, Fiscal
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Quarter or other period; PROVIDED, that such taxable income shall be computed by
taking into account any special basis adjustment with respect to such Member
resulting from an election by the Company under Code Section 754.
"Affiliate" has the meaning set forth in Rule 405 under the Securities Act
of 1933, as amended.
"Agreement" means this Amended and Restated Limited Liability Company
Agreement, as originally executed and as amended, modified or supplemented from
time to time. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," when used with reference to this Agreement, refer to
this Agreement as a whole, unless the context otherwise requires.
"Basket" has the meaning set forth in Article I of the Contribution
Agreement.
"Board of Directors" has the meaning set forth in Section 4.1.
"Cap" has the meaning set forth in Article I of the Contribution
Agreement.
"Capital Account" has the meaning set forth in Section 8.5.
"Capital Contributions" means the contributions made by the Members to the
Company pursuant to Section 8.1 or 8.2 hereof and, in the case of all the
Members, the aggregate of all such Capital Contributions.
"Carrying Value" means, with respect to any Company asset, such asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The fair market value as agreed by the Members, when
contributed, of an asset contributed to the Company by any Member. The
aggregate Carrying Value effective as of the Closing of the assets
initially contributed by each Member to the Company pursuant to Section
8.1(a), shall be the amount determined in accordance with Section 8.1(c),
which amount shall be set forth opposite such Member's name on Schedule 3
hereto.
(b) The Carrying Values of all Company assets shall be adjusted to
equal their respective fair market values as agreed to by the Board of
Directors, and the resulting unrecognized gain or loss allocated to the
Capital Accounts of the Members as though such assets had been sold for
their respective fair market values as of the following times: (i)
immediately before the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more than a de
minimis capital contribution; (ii) upon the distribution by the Company to
a Member of more than a de minimis amount of Company assets, unless all
Members receive simultaneous distributions of either undivided interests
in the distributed property or identical Company assets in proportion to
their interests in the Company; (iii) the date the Company is liquidated
within the meaning of section 1.704-1(b)(2)(ii)(g) of the Income Tax
Regulations; and (iv) the termination of the Company pursuant to the
provisions of this Agreement.
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(c) The Carrying Value of the Company assets shall be increased or
decreased to the extent required under section 1.704-1(b)(2)(iv)(m) of the
Income Tax Regulations in the event that the adjusted tax basis of Company
assets are adjusted pursuant to section 732, 734 or 743 of the Code,
PROVIDED, HOWEVER, that the Carrying Value shall not be adjusted pursuant
to this subparagraph (c) to the extent that an adjustment pursuant to
subparagraph (b) is required in connection with a transaction that would
otherwise result in an adjustment pursuant to this subparagraph (c).
(d) The Carrying Value of a Company asset that is distributed
(whether in liquidation of the Company or otherwise) to one or more
Members shall be adjusted to equal its fair market value at the time of
such distribution as determined by the Board of Directors, and the
resulting unrecognized gain or loss shall be allocated to the Capital
Accounts of the Members as though such asset had been sold for such fair
market value.
(e) The Carrying Value of a Company asset shall be adjusted by the
Depreciation attributable to such asset.
"Chemicals Business" means the lines of business comprising P Chem and C
Chem (as defined in the Contribution Agreement), other petrochemicals businesses
and related businesses; PROVIDED, HOWEVER, that Chemicals Business shall not
include any specific businesses comprising Chevron Excluded Assets or Phillips
Excluded Assets (as defined in the Contribution Agreement).
"Chevron Pipe Line Contribution" shall have the meaning set forth in
Exhibit A-2 of the Contribution Agreement.
"Class C Financial Statement Net Contribution" has the meaning set forth
in Section 8.1(c)(i).
"Class C Member" includes CUSA, CPL and COPI, and any other Member to whom
a Class C Member Transfers a Membership Interest in accordance with this
Agreement; PROVIDED, HOWEVER, that a Class C Member shall cease to be a Class C
Member upon the Transfer of all of such Person's Membership Interest in
accordance with this Agreement.
"Class C Members Aggregate Allocable Share" means, for each Fiscal Year,
Fiscal Quarter or other period of the Company, the sum of the Adjusted Taxable
Income of the Company allocated to all Class C Members for such Fiscal Year,
Fiscal Quarter or other period.
"Class P Financial Statement Net Contribution" has the meaning set forth
in Section 8.1(c)(i).
"Class P Member" includes Phillips, Drilling Specialties, WesTTex 66 and
PPIC, and any other Member to whom a Class P Member Transfers a Membership
Interest in accordance with this Agreement; PROVIDED, HOWEVER, that a Class P
Member shall cease to be a Class P
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Member upon the Transfer of all of such Person's Membership Interest in
accordance with this Agreement.
"Class P Members Aggregate Allocable Share" means, for each Fiscal Year,
Fiscal Quarter or other period of the Company, the sum of the Adjusted Taxable
Income of the Company allocated to all Class P Members for such Fiscal Year,
Fiscal Quarter or other period.
"Class Membership Interest" means the aggregate Membership Interest of all
of the Class C Members or all of the Class P Members, as the case may be.
"Closing" has the meaning provided for in the Contribution Agreement.
"Closing Date" means the date of the Closing.
"Code" means the United States Internal Revenue Code of 1986, as amended,
or any corresponding provision or provisions of any succeeding law.
"Company Indemnifiable Payment" has the meaning set forth in Section 8.7.
"Company Minimum Gain" has the meaning set forth in sections 1.704-2(b)(2)
and 1.704-2(d) of the Income Tax Regulations for the phrase "partnership minimum
gain."
"Contribution Agreement" means that certain Contribution Agreement, dated
as of May 23, 2000, by and among Chevron Corporation, Phillips Petroleum Company
and the Company.
"Costs" means the sum of all cash expenditures made by the Company in
connection with the ownership of the Company's assets and the operation of the
Company's business, including, without limitation, the cost of all materials
purchased, goods returned, services provided and other similar fees, costs and
expenses; all real estate and sales taxes; all insurance premiums; all payments
of principal and interest on Company indebtedness; any distributions to Members,
and other similar expenditures.
"Depreciation" means, for a Fiscal Year or other period, an amount equal
to the federal income tax depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such Fiscal Year or other
period, except that if the Carrying Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such Fiscal Year or
other period, Depreciation shall be an amount that bears the same ratio to such
beginning Carrying Value as the federal income tax depreciation, amortization or
other cost recovery deduction for such Fiscal Year or other period bears to such
beginning adjusted tax basis; PROVIDED, HOWEVER, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such Fiscal Year
or other period is zero, then Depreciation shall be determined with reference to
such beginning Carrying Value using any reasonable method selected by the Board
of Directors.
"Director" means a Person who is elected as a Director of the Company
pursuant to Section 4.3 or 4.4 of this Agreement.
"Fiscal Quarter" means the three (3) month period beginning on the first
day of the Company's Fiscal Year, and each subsequent (3) month period within
the Company's Fiscal Year.
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"Fiscal Year" means the Company's tax year for U.S. federal income tax
purposes specified in Section 9.3.
"Income Tax Regulations" means the regulations issued with respect to the
Code.
"Indemnified Party" and "Indemnifying Party" shall have the meanings set
forth in Article I of the Contribution Agreement.
"K-Resin Accident" means the fire and explosion on March 27, 2000 that
took place at the Phillips K-Resin plant located in Pasadena, Texas.
"Leverage Ratio Deficit" means, as of any relevant date, the amount, if
any, by which the book value of the indebtedness for money borrowed would need
to increase, without the Company's receiving and holding an asset of
corresponding value, to cause the Company's Total Debt to Total Capitalization
Ratio, as of such date, to increase to 20%.
"Member" has the meaning set forth in Section 3.1.
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect to
each Member, equal to the Company Minimum Gain that would result if all such
Member's Member Nonrecourse Debt were treated as a Nonrecourse Liability, as
determined in accordance with section 1.704-2(i)(3) of the Income Tax
Regulations.
"Member Nonrecourse Debt" has the meaning set forth in section
1.704-2(b)(4) of the Income Tax Regulations for the phrase "partner nonrecourse
debt."
"Member Nonrecourse Deduction" has the meaning set forth in section
1.704-2(i)(2) of the Income Tax Regulations for the phrase "partner nonrecourse
deduction."
"Member's Proportionate Tax Share" means (i) with respect to a Class C
Member, the product of (X) the Tax Distribution for the Fiscal Year, Fiscal
Quarter or other period, as applicable, and (Y) a fraction, the numerator of
which is the Percentage Interest of such Class C Member for such Fiscal Year,
Fiscal Quarter or other period and the denominator is the sum of the Percentage
Interests for all Class C Members for such Fiscal Year, Fiscal Quarter or other
period and (ii) with respect to a Class P Member, the product of (X) the Tax
Distribution for the Fiscal Year, Fiscal Quarter or other period, as applicable,
and (Y) a fraction, the numerator of which is the Percentage Interest of such
Class P Member for such Fiscal Year, Fiscal Quarter or other period and the
denominator is the sum of the Percentage Interests for all Class P Members for
such Fiscal Year, Fiscal Quarter or other period. In the event that the
Percentage Interest of a Member changes during any Fiscal Year, Fiscal Quarter
or other period, the Member's Proportionate Tax Share of such Member and the
other Class P Members or Class C Members, as the case may be, for such Fiscal
Year, Fiscal Quarter or other period shall be appropriately adjusted to take
into account the Class P Members' or Class C Members', as the case may be,
varying interests. In no event shall the application of the foregoing formula
result in the Class C Members in the aggregate or the Class P Members in the
aggregate receiving an amount in excess of the Tax Calculation Share applicable
to such Fiscal Year, Fiscal Quarter or other period.
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"Membership Interest" means the ownership interest of a Member in the
Company, including a Member's right to share in the Company's items of income,
gain, loss, deduction, credits and similar items, and the right to receive
distributions from the Company, as well as a Member's rights to vote and
otherwise participate in the operation or affairs of the Company as provided for
herein and under the Act.
"Minimum Leverage Distribution" means the lesser of (x) five (5) times the
amount of the Leverage Ratio Deficit or (y) the Net Cash Available for
Distribution.
"Net Cash Available for Distribution" means (i) the excess, for each
semi-annual period ending on the last day of the second and fourth Fiscal
Quarter of each Fiscal Year, of Revenues for such period over Costs for such
period; plus (ii) cash and cash equivalent securities on hand at the beginning
of such period; minus (iii) adequate reserves for working capital, approved
future expenditures and known liabilities.
"Net Profit" or "Net Loss" means for each Fiscal Year or other period, an
amount equal to the Company's taxable income or loss for such Fiscal Year or
period determined in accordance with section 703(a) of the Code (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(a) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profit or Net Loss
pursuant to this definition shall be added to such taxable income or loss;
(b) Any expenditure of the Company described in section 705(a)(2)(B)
of the Code or treated as such expenditure pursuant to section
1.704-1(b)(2)(iv)(i) of the Income Tax Regulations, and not otherwise
taken into account in computing Net Profit or Net Loss, shall be
subtracted from such taxable income or loss;
(c) Gain or loss resulting from any disposition of Company assets
where such gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Carrying Value of the Company assets
disposed of, notwithstanding that the adjusted tax basis of such Company
assets differs from its Carrying Value;
(d) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year;
(e) To the extent an adjustment to the adjusted tax basis of any
asset included in Company assets pursuant to section 734(b) of the Code or
section 743(b) is required pursuant to section 1.704-1(b)(2)(iv)(m)(4) of
the Income Tax Regulations to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of a
Member's Membership Interest, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the
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asset) from the disposition of the asset and shall be taken into account
for the purposes of computing Net Profit and Net Loss;
(f) If the Carrying Value of any Company asset is adjusted in
accordance with either of clauses (b) or (d) of the definition of
"Carrying Value," the amount of such adjustment shall be taken into
account in the Fiscal Year of such adjustment as gain or loss from the
disposition of such asset for purposes of computing Net Profit or Net
Loss; and
(g) Notwithstanding any other provision of this definition, any
items that are specially allocated pursuant to Section 9.1(b) shall not be
taken into account in computing Net Profit or Net Loss.
"Nonrecourse Deductions" has the meaning set forth in section 1.704-2(c)
of the Income Tax Regulations.
"Nonrecourse Liability" has the meaning set forth in section 1.704-2(b)(3)
of the Income Tax Regulations.
"Parent" means, when used with respect to any Person, any corporation,
partnership, limited liability company, or other organization, whether
incorporated or unincorporated, which owns or controls, directly or indirectly,
50% or more of the outstanding voting securities (or equivalent voting
interests) of such Person.
"Percentage Interest" means a Member's percentage interest in the Company
determined in the manner set forth in Section 8.1 (a), provided, however, that
the aggregate percentage interests of the Class C Members shall be 50% and the
aggregate percentage interests of the Class P Members shall be 50%. After the
Percentage Interests of each Member has been determined in accordance with
Section 8.1(a), each such Member's Percentage Interest shall be set forth
opposite such Members name on Schedule 3 hereto.
"Person" means any general partnership, limited partnership, joint
venture, association, corporation, limited liability company, trust or other
entity and, where the contexts so permits or requires, a natural person.
"Pre-Adjustment Excess" has the meaning set forth in Section 8.1(b).
"Quarterly Tax Distribution" means, for each Member for each of the first
three Fiscal Quarters of the Company during the term of the Company, such
Member's Proportionate Tax Share for such Fiscal Quarter.
"Revenues" means revenues and receipts of every kind and nature (from both
cash and credit transactions), including sales proceeds, rental, license, lease
or other income, net proceeds from issuance of indebtedness, proceeds from
insurance and all other similar items, but excluding (i) payments received as an
advance or deposit, until actually applied by the Company; and (ii) except as
otherwise expressly agreed by the Members, the amount of any Capital
Contributions.
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"Subsidiary" means, when used with respect to any Person, any corporation,
partnership, limited liability company, or other organization, whether
incorporated or unincorporated, of which such Person owns or controls, directly
or indirectly, 50% or more of the outstanding voting securities (or equivalent
voting interests).
"Tax Basket Amount" shall have the meaning set forth in Section 1.11 of
Annex B to the Contribution Agreement.
"Tax Calculation Share" means, for each Fiscal Year, Fiscal Quarter or
other period, the greater of (i) the Class P Members Aggregate Allocable Share
for such Fiscal Year, Fiscal Quarter or other period and (ii) the Class C
Members Aggregate Allocable Share for such Fiscal Year, Fiscal Quarter or other
period.
"Tax Distribution" means, for each Fiscal Year, Fiscal Quarter or other
period of the Company during the term of the Company, the product of (i) the Tax
Calculation Share for such Fiscal Year, Fiscal Quarter or other period and (ii)
the Tax Rate for such Fiscal Year, Fiscal Quarter or other period.
"Tax Rate" means the marginal blended tax rate determined by assuming that
(i) such Person is a corporation subject to the highest marginal corporate
United States federal income tax rate applicable for the applicable period, (ii)
such Person is subject to franchise and other income taxes at a combined rate
initially determined to be 5% (which rate may be periodically changed to such
rate as shall be agreed upon by the Class C Member(s) and Class P Member(s)),
and (iii) the franchise and other income taxes described in the preceding clause
(ii) are deductible for United States federal income tax purposes.
"Total Debt to Total Capitalization Ratio" means the ratio, the numerator
of which is the sum of the Company's long-term debt plus current maturities,
commercial paper and other short-term borrowings, and the denominator of which
is the sum of the Company's long-term debt plus current maturities, commercial
paper and other short-term borrowings plus members' equity plus minority
interest, if any.
"Ultimate Parent" means, with respect to any Person, a Parent who is not a
Subsidiary of any other Person.
"Wholly-Owned Affiliate" means a wholly-owned Subsidiary of the Ultimate
Parent of a Member.
ARTICLE 2
OFFICES AND STATUTORY AGENT
2.1 Registered Office and Statutory Agent. The registered office and
statutory agent in Delaware required by the Act shall be as set forth in the
Certificate until such time as the registered office or statutory agent is
changed in accordance with the Act.
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2.2 Principal Executive Office. The location of the principal executive
office for the transaction of the business of the Company shall be Houston,
Texas, or such other location as determined by the Board of Directors from time
to time.
2.3 Business. The Company may carry on any lawful business, purpose or
activity which is permitted to be carried on by a limited liability company
under the Act. The actual business of the Company shall be determined by the
Board of Directors.
ARTICLE 3
MEMBERS; CLASSES; VOTING RIGHTS; MEETINGS OF MEMBERS
3.1 Members. Each party to this Agreement, except for Chevron, and each
person admitted as a Member pursuant to this Agreement shall be a member of the
Company until they cease to be a member in accordance with the provisions of the
Act, the Certificate or this Agreement (the "Members"). The names of the Members
shall be set forth on Schedule 1 hereto.
3.2 Classes of Members. The Membership Interests in the Company shall be
divided into two (2) classes of members, such classes being designated as Class
C Members and Class P Members.
3.3 Duties of Members. Members shall not owe duties, fiduciary or
otherwise, or obligations to the Company or other Members, except as expressly
set forth herein.
3.4 Voting Rights
(a) Except as may otherwise be provided by this Agreement or the Act or
the Certificate, the unanimous vote of the Members on a matter shall constitute
the act of the Members.
(b) The Members shall have the right to elect Directors in accordance with
Sections 4.3 and 4.4 of this Agreement.
(c) Only Persons whose names are listed as Members on the records of the
Company at the close of business on the business day immediately preceding the
day on which notice of the meeting is given or, if such notice is waived, at the
close of business on the business day immediately preceding the day on which the
meeting of Members is held (except that the record date for Members entitled to
give consent to action without a meeting shall be determined in accordance with
Section 3.9) shall be entitled to receive notice of and to vote at such meeting,
and such day shall be the record date for such meeting. Any Member entitled to
vote on any matter shall be entitled to cast that number of votes equal to such
Member's Percentage Interest and may cast part of the votes in favor of the
proposal and refrain from exercising the remaining votes or vote against the
proposal (other than elections of a Director), but if the Member fails to
specify the number of votes such Member is exercising affirmatively, it will be
conclusively presumed that the Member's approving vote is with respect to all
votes such Member is entitled to cast. Such vote may be viva voce or by ballot;
provided, however, that all elections for Directors must be by ballot upon
demand made by a Member at any election and before the voting begins.
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3.5 Place of Meetings. All meetings of the Members shall be held at any
place within or without the State of Delaware which may be designated either by
the Board of Directors or by the written consent of all Members entitled to vote
thereat given either before or after the meeting and filed with the secretary.
In the event of any inconsistency in the places designated by the Board of
Directors or the Members as herein provided, or in the absence of any such
designation, Members' meetings shall be held at the principal executive office
of the Company.
3.6 Meetings of Members; Notice of Meetings. Meetings of the Members for
the purpose of taking any action permitted to be taken by the Members may be
called by a majority of the Directors or by Members holding a majority of the
Percentage Interests. Upon request in writing that a meeting of Members be
called for any proper purpose, the Secretary forthwith shall cause notice to be
given to the Members entitled to vote that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than
thirty-five (35) nor more than sixty (60) days after receipt of the request.
Except in special cases where other express provision is made by statute, notice
of such meetings shall be given personally, in writing, via electronic means or
via facsimile to each Member entitled to vote not less than thirty-five (35) nor
more than sixty (60) days before the meeting. Such notices shall state:
(a) The place, date and hour of the meeting;
(b) Those matters which the Directors, at the time of the mailing of the
notice, intend to present for action by the Members; and
(c) The names of the Directors intended at the time of the notice to be
presented for election.
3.7 Quorum. The presence at any meeting in person or by proxy of Members
holding one-hundred percent (100%) of the aggregate Percentage Interests
entitled to vote at such meeting shall constitute a quorum for the transaction
of business.
3.8 Waiver of Notice. The actions of any meeting of Members, however
called and noticed, and wherever held, shall be as valid as if taken at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, not present in person or by proxy, signs a written waiver of
notice or a consent to a holding of the meeting, or an approval of the minutes
thereof. The waiver of notice, consent or approval need not specify either the
business to be transacted or the purpose of any regular or special meeting of
Members. All such waivers, consents or approvals shall be filed with the Company
records and made a part of the minutes of the meeting.
Attendance of a Member at a meeting shall also constitute a waiver of
notice of and presence at such meeting, except when the Member objects, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened, and except that attendance at a meeting is
not a waiver of any right to object to the consideration of matters required to
be included in the notice but not so included, if such objection is expressly
made at the meeting.
3.9 Action by Members Without a Meeting. Directors may be elected or
removed without a meeting by a consent in writing, setting forth the action so
taken, signed by Members
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entitled to elect or remove Directors in accordance with Section 4.3; in
addition, a Director may be elected at any time to fill a vacancy by a written
consent signed by Members entitled to elect or remove Directors in accordance
with Section 4.3. Notice of such election shall be promptly given to
nonconsenting Members.
Any other action which, under any provision of the Act or the Certificate
or this Agreement, may be taken at a meeting of the Members, may be taken
without a meeting, and without notice except as hereinafter set forth, if a
consent in writing, setting forth the action so taken, is signed by Members
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all Members entitled to vote
thereon were present and voted. All such consents shall be filed with the
secretary of the Company and shall be maintained in the Company's records.
Unless the consents of all Members entitled to vote have been solicited in
writing, prompt notice shall be given of the taking of any action approved by
Members without a meeting by less than unanimous written consent to those
Members entitled to vote who have not consented in writing.
Unless the Board of Directors sets a record date for the determination of
Members entitled to notice of and to give such written consent, the record date
for such determination shall be the day on which the first written consent is
given.
Any Member giving a written consent, or the Member's proxyholders, or a
personal representative of the Member or their respective proxyholders, may
revoke the consent by a writing received by the secretary prior to the time that
written consents of the number of votes required to authorize the proposed
action have been filed with the secretary, but may not do so thereafter. Such
revocation is effective upon its receipt by the secretary or, if there shall be
no person then holding such office, upon its receipt by any other officer or
Director of the Company.
ARTICLE 4
BOARD OF DIRECTORS
4.1 General. Subject to the provisions of the Act and any limitations in
the Certificate and this Agreement as to action required to be authorized or
approved by the Members, the business and affairs of the Company shall be
managed and all its powers shall be exercised by the Members, who have in turn
delegated their authority to manage the business and affairs of the Company and
to exercise all of the Company's powers to the board of directors of the Company
(the "Board of Directors"), who have in turn delegated to the Officers (as
defined herein) such portions of the authority of the Board of Directors as set
forth herein (and as may be set forth in resolutions of the Board of Directors),
provided that any delegation of authority to the Officers set forth herein or
otherwise is subject to the discretion of the Board of Directors. Without
prejudice to such general powers, but subject to the same limitations, it is
hereby expressly declared that the Board of Directors shall have the following
powers:
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(a) To conduct, manage and control the business and affairs of the
Company, including, to the extent determined by the Board of Directors, managing
any Subsidiary limited liability company and to make such rules and regulations
therefor not inconsistent with law or with the Certificate or with this
Agreement, as the Board of Directors shall deem to be in the best interests of
the Company;
(b) To appoint and remove at pleasure the officers, agents and employees
of the Company, prescribe their duties and fix their compensation;
(c) To borrow money and incur indebtedness for the purposes of the Company
and to cause to be executed and delivered therefor, in the Company's name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidences of debt and securities therefor;
(d) To designate an executive and other committees, each consisting of two
or more Directors, to serve at the pleasure of the Board of Directors, and to
prescribe the manner in which proceedings of such committees shall be conducted;
and
(e) To acquire real and personal property, arrange financing, enter into
contracts and complete all other arrangements needed to effectuate the business
of the Company.
4.2 Number and Classes of Directors. The Board of Directors shall consist
of four (4) voting Directors (the "Voting Directors") and two (2) non-voting
Directors (the "Non-Voting Directors").
4.3 Election and Removal of Directors. The Directors shall be elected as
follows:
(a) The Class C Member(s) shall elect two (2) Voting Directors
(individually, a "Class C Director", and together, the "Class C Directors").
(b) The Class P Member(s) shall elect two (2) Voting Directors
(individually, a "Class P Director", and together, the "Class P Directors").
(c) The Class C Member(s) may remove, at any time, either or both of the
Class C Directors, with or without cause. The Class P Member(s) may remove, at
any time, either or both of the Class P Directors, with or without cause.
(d) The chief executive officer and the chief financial officer of the
Company shall be ex officio the two Non-Voting Directors. The Non-Voting
Directors may be removed at any time by the Board of Directors. If either the
office of chief executive officer or the office of chief financial officer is
vacant, the Non-Voting Director position associated with such office shall also
be vacant.
4.4 Vacancies; Resignations, Replacements.
(a) Upon the death, resignation or removal of any Voting Director, the
Member(s) that elected such Voting Director is authorized to fill the vacancy
and shall have power to elect a successor to take office when the resignation,
removal or deemed vacancy becomes effective.
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(b) Any Voting Director may resign effective upon giving thirty (30) days
written notice to each Member of the Company, unless the notice specifies a
later time for the effectiveness of such resignation.
4.5 Initial Directors. The names and addresses of the initial Class C
Directors and Class P Directors are set forth in Schedule 2. The initial Class C
Directors and Class P Directors shall hold office from and after the date of
this Agreement until their removal pursuant to this Agreement or until their
respective successors are elected and qualified pursuant to this Agreement.
4.6 Compensation of Directors. Directors of the Company, as such, shall
not be entitled to compensation, unless otherwise unanimously approved by the
Members.
4.7 Fiduciary Duties of Directors. The Class C Directors shall owe
fiduciary duties exclusively to the Class C Member(s), and the Class P Directors
shall owe fiduciary duties exclusively to the Class P Member(s). No person shall
be authorized to institute an action against a Voting Director for breach of
fiduciary duty other than a Member to whom a fiduciary duty is owed pursuant to
the previous sentence.
4.8 Limitation of Liability. The Voting Directors shall not be liable to
the Company or its Members for actions taken in good faith.
ARTICLE 5
MEETINGS OF BOARD OF DIRECTORS
5.1 Place of Meetings. Meetings of the Board of Directors shall be held at
any place within or without the State of Delaware that has been designated from
time to time by the Board of Directors. In the absence of such designation,
meetings of the Board of Directors shall be held at the principal executive
office of the Company, except as provided in Section 5.2.
5.2 Meetings of Directors. The Board of Directors shall meet at least
eight (8) times per year, pursuant to a schedule established by the Board of
Directors as early as practicable each year. In addition, meetings of the Board
of Directors for any purpose or purposes may be called at any time by any
Director. Notice of the time and place of meetings shall be delivered personally
or by telephone to each Director, or sent by first-class mail or by telex,
telegram, electronic mail or facsimile transmission, charges prepaid, addressed
to him or her at his or her address as it appears upon the records of the
Company or, if it is not so shown on the records and is not readily
ascertainable, at the place at which the meetings of the Board of Directors are
regularly held. In case such notice is mailed, it shall be deposited in the
United States mail at least four (4) days prior to the time of the holding of
the meeting. In case such notice is telegraphed or sent by telex, electronic
mail or facsimile transmission, it shall be delivered to a common carrier for
transmission to the Director or actually transmitted by the person giving the
notice by electronic means to the Director at least forty-eight (48) hours prior
to the time of the holding of the meeting. In case such notice is delivered
personally or by telephone as above provided, it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of the meeting. Any
notice given personally or by telephone shall be communicated directly to
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the Director. Such deposit in the mail, delivery to a common carrier,
transmission by electronic means or delivery, personally or by telephone, as
above provided, shall be due, legal and personal notice to such Directors. The
notice need not specify the purpose of the meeting.
5.3 Quorum; Alternates; Participation in Meetings By Conference Telephone
Permitted; Vote Required for Action.
(a) The presence of at least one Class C Director and at least one Class P
Director constitutes a quorum for the transaction of business. If the meeting is
adjourned for more than twenty-four (24) hours, notice of any adjournment to
another time or place (other than adjournments until the time fixed for the next
regular meeting of the Board of Directors, as to which no notice is required)
shall be given prior to the time of the adjourned meeting to the Directors who
were not present at the time of the adjournment.
(b) Each Voting Director may, by written notice given to the chief
executive officer, appoint an alternate to attend and vote at meetings, or at
any particular meeting, if the Voting Director is unable to attend. The presence
of an alternate at any meeting shall be deemed to be presence of the Director at
such meeting for all purposes, and the vote of such alternate shall be deemed to
be the vote of the relevant Director. No Director may retract the vote of any
duly appointed alternate on behalf of such Director after the close of the
meeting at which such vote is made. In the event that the Director who appointed
an alternate attends a meeting, the appointment of such alternate shall be
ineffective for such meeting, and the alternate shall have no right to be
present or to participate in that meeting.
(c) Directors may participate in a meeting through use of conference
telephone or similar communications equipment, so long as all Directors
participating in such meeting can communicate with and hear one another.
(d) Every act or decision done or made the Board of Directors shall
require the unanimous consent of all Voting Directors present at a meeting duly
held at which a quorum is present.
5.4 Waiver of Notice; Consent to Meeting. Notice of a meeting need not be
given to any Director who signs a waiver of notice or a consent to holding the
meeting or an approval of the minutes thereof, whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such Director. All such waivers, consents
and approvals shall be filed with the Company's records and made a part of the
minutes of the meeting.
5.5 Action by Board of Directors Without a Meeting. Any action required or
permitted to be taken by the Board of Directors may be taken without a meeting
if at least one Class C Director and at least one Class P Director (or their
alternates who have been appointed pursuant to Section 5.3(b) above) shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board of Directors. Such action by written consent shall have the same force and
effect as a unanimous vote of the Board of Directors.
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5.6 Committees and Subcommittees. The provisions of this Article 5 shall
also apply, with necessary changes in points of detail, to committees and
subcommittees of the Board of Directors, if any, and to actions by such
committees or subcommittees (except for the first sentence of Section 5.2, which
shall not apply, and except that special meetings of a committee or subcommittee
may also be called at any time by any two members of the committee or
subcommittee), unless otherwise provided by this Agreement or by the resolution
of the Board of Directors designating such committee or subcommittee. For such
purpose, references to the Directors collectively shall be deemed to refer to
each such committee or subcommittee, and references to "Directors" shall be
deemed to refer to members of the committee or subcommittee. In addition, the
Members intend that the Board of Directors appoint a separate committee
responsible for taxes and that such committee at least be given the authority to
make routine and/or recurring decisions with respect to taxes.
ARTICLE 6
OFFICERS
6.1 General. Subject to the provisions of the Act, the Certificate and
this Agreement, the Board of Directors shall from time to time to appoint one or
more individuals who shall be termed officers of the Company (the "Officers").
Subject to the decision and control of the Board of Directors, the Officers of
the Company shall manage the day-to-day activities and affairs and will have
discretion with regard to all matters not otherwise reserved to the Board of
Directors of the Company. Each Officer shall hold his or her respective office
at the pleasure of the Board of Directors. Except as otherwise specifically
provided for below, an Officer need not be a Member or Director of the Company,
and any number of offices may be held by the same person. The Officers of the
Company shall include a president and chief executive officer, a chief financial
officer, and a secretary. The Company may also have, at the discretion of the
Board of Directors, one or more vice presidents, and such other Officers as may
be designated from time to time by the Board of Directors.
6.2 Appointment and Removal. Officers shall be appointed by the Board of
Directors. Each Officer, including an Officer elected to fill a vacancy, shall
hold office until his or her successor is elected, except as otherwise provided
by the Act or the Certificate, unless earlier removed pursuant to this Section
6.2. Any Officer may be removed, with or without cause, at any time by the Board
of Directors.
6.3 Chief Executive Officer and President. The chief executive officer and
president shall, subject to the oversight and control of the Board of Directors,
have general supervision, direction and control of the business and affairs of
the Company. Subject to Section 7.1 hereof, the chief executive officer and
president shall have all of the powers which are ordinarily inherent in the
office of the chief executive officer and president of a corporation, and he
shall have such further powers and shall perform such further duties, as may be
prescribed for him by the Board of Directors.
6.4 Vice Presidents. In the absence or disability of the president, the
vice presidents in order of their rank as fixed by the chief executive officer,
or, if not ranked, the vice president designated by the chief executive officer,
shall perform all of the duties of the chief executive
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officer and when so acting shall have all the powers of and be subject to all
the restrictions upon the chief executive officer. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them, respectively, by president or by this Agreement or by the
Board of Directors.
6.5 Secretary. The secretary shall keep or cause to be kept at the
principal executive office of the Company, or such other place as the president
may order, a book of minutes of all proceedings of the Members and of the Board
of Directors, with the time and place of holding, whether regular or special,
and if special how authorized, the notice thereof given, the names of those
present and the number of votes present or represented at Members' or Board of
Directors meetings. The secretary or an assistant secretary, or, if they are
absent or unable or refuse to act, any other officer of the Company, shall give
or cause to be given notice of all the meetings of the Members required by the
Agreement or by law to be given, and he shall keep the seal of the Company, if
any, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the president or by this Agreement or by the
Board of Directors.
6.6 Chief Financial Officer. The chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and
records of account of the Company. The chief financial officer shall keep or
cause to be kept at the principal executive office a record of Members in the
form of Schedule 3 hereto showing the names of the Members and their addresses,
their initial and all subsequent Capital Contributions and their respective
Percentage Interests, as they may vary from time to time. The chief financial
officer shall receive and deposit all moneys and other valuables belonging to
the Company in the name and to the credit of the Company and shall disburse the
same only in such manner as the chief executive officer or the appropriate
officers of the Company may from time to time determine, shall render, whenever
requested, an account of all his transactions as chief financial officer and of
the financial condition of the Company, and shall perform such further duties as
the chief executive officer or this Agreement or the Board of Directors may
prescribe.
6.7 Initial Officers. The initial Officers of the Company are set forth in
Schedule 4 hereto. These initial Officers shall be appointed for a term of three
years from the Closing, which term may be renewed by the Board of Directors.
Notwithstanding the foregoing sentence, the initial Officers shall serve at the
pleasure of the Board of Directors and may be removed by the Board of Directors
in its discretion at any time prior to the end of their three year terms
pursuant to Section 6.2 hereof.
ARTICLE 7
OPERATIONAL MATTERS
7.1 Board of Director Approval.
(a) Unless otherwise determined by the Board of Directors pursuant to
subsection (b) below, the Company shall not have the authority to approve or
undertake any of the following matters without the approval of the Board of
Directors (obtained as set forth in Section 5.3(d)):
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(i) The hiring, firing, renewal, compensation, evaluation and planning
for succession of the chief executive officer and president, the chief
financial officer and senior vice presidents and other Officers of similar
rank.
(ii) Compensation policies for Company employees, including specific
compensation and benefit plans and programs.
(iii) Annual strategic and business plans and amendments thereto
(including entering into any unrelated new lines of business) in accordance
with Section 7.2, Company-wide financing plans, and Company-wide risk
management plans (including a program of insurance).
(iv) Any distribution to the Members in excess of, or in an amount
less than, the Minimum Tax Distributions and Minimum Leverage Distributions
(both of which are deemed automatically approved by the Board of
Directors).
(v) The following material transactions:
(A) Projects, long-term contracts (including cancellation
thereof), mergers, consolidations, re-capitalization, acquisitions,
divestitures, joint ventures or alliances involving the commitment
or transfer by the Company of value in excess of $25 million and
shut-downs of material facilities; and
(B) Investments and transactions outside the normal lines of
business in excess of $10 million.
(vi) Capital expenditures in excess of 110% of the approved capital
expenditure budget or overruns on major projects greater than 10%.
(vii) Individual borrowings and leasing arrangements in excess of $25
million, or if the Board of Directors in its discretion sets a debt
ceiling, any borrowing in excess of such debt ceiling.
(viii) Unusual, non-recurring uses of Company credit in support of
operations above a $10 million exposure.
(ix) The settlement of actions or claims against the Company involving
more than $10 million.
(x) Related-party transactions involving the receipt or payment of
more than $5 million in any one transaction or $10 million in any series of
related transactions, irrespective of individual amounts (other than
transactions reflected by the agreements referred to on Schedules 6.11(b)
and 6.11(c) of each of the Phillips Disclosure Schedule to the Contribution
Agreement and the Chevron Disclosure Schedule to the Contribution
Agreement).
(xi) Any amendment to the Certificate or this Agreement.
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(xii) Except as otherwise specifically provided for in Article X, the
admission of an additional Member or other equity holder of the Company.
(xiii) Any redemption of an equity interest in the Company.
(xiv) Any adoption of or change in the Company's form of business or
accounting principles.
(xv) Any material consolidation or relocation of the Company's
research and development facilities, or the exercise or waiver of any right
affecting the term of any leasehold for research and development
facilities.
(xvi) The commencement of voluntary bankruptcy proceedings for the
Company.
(xvii) Any material decision regarding repair, replacement or startup
relating to the K-Resin Accident.
(xviii) The liquidation or dissolution of the Company.
(xix) Any use by the Company of the "Chevron" or "Phillips" name, by
itself.
(b) The Board of Directors shall review periodically the appropriateness
of the list of items contained in Section 7.1(a) (including the related
threshold dollar amounts contained therein) which must be brought before the
Board of Directors, and will implement changes if and when appropriate. Any such
changes shall be set forth in a written resolution, and, to the extent that such
written resolution is inconsistent with Section 7.1(a), the written resolution
will control.
7.2 Strategic and Business Plans; Reports.
(a) The Board of Directors and the Officers will conduct an interactive
strategic planning process on an annual basis. In connection with this process,
the Officers shall prepare and submit to the Board of Directors and the Board of
Directors shall review, consider and adopt:
(i) a strategic plan for the Company; and
(ii) a three (3) year business plan, including capital and operating
budgets.
Such process shall be conducted in accordance with the strategic planning
processes of the Members, as determined by the Board of Directors.
(b) In the event that the Board of Directors fails to timely approve
capital or operating budgets for any period, the Officers will be authorized to
spend such amounts as are necessary or appropriate to meet the Company's prior
commitments and obligations and to conduct and
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maintain the Company's operations and properties in a safe and efficient manner
in accordance with industry practice.
(c) The Officers shall provide the Board of Directors with monthly reports
of the operating results of the Company compared with the strategic and business
plan, including the capital and operating budgets, and annual and periodic
reports of compliance matters (e.g. financial controls, environmental, human
resources, etc.).
ARTICLE 8
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
8.1 Capital Contributions and Percentage Interests.
(a) Effective as of the Closing, each of the Members shall make a Capital
Contribution to the Company as contemplated by Article II of the Contribution
Agreement and the credit balance in the Capital Account of each Member, as a
result of such contribution, shall be determined in accordance with Sections
8.1(b). The Percentage Interest of each Class C Member shall be equal to the
product, expressed as a percentage, of (i) a fraction, the numerator of which is
the credit balance in the Capital Account of such Class C Member determined as
set forth in Section 8.1(b) and the denominator of which is the sum of the
credit balances in the Capital Accounts of all Class C Members determined as set
forth in Section 8.1(b), and (ii) 50. The Percentage Interest of each Class P
Member shall be equal to the product of (i) a fraction, the numerator of which
is the credit balance in the Capital Account of such Class P Member as
determined in accordance with Section 8.1(b) and the denominator of which is the
sum of the credit balances in the Capital Accounts of all Class P Members
determined as set forth in Section 8.1(b), and (ii) 50. It is the agreement of
the parties that (i) the aggregate Percentage Interests of all Class C Members
shall equal 50% and the aggregate Percentage Interests of all Class P Members
shall equal 50%, (ii) such aggregate Percentage Interests shall not change
unless otherwise agreed by the Members and (iii) such aggregate Percentage
Interests shall not be affected by the Chevron Pipe Line Contribution.
(b) As soon as practicable after the Closing, Chevron and Phillips shall
determine the Capital Account balance of each Member as of the Closing Date
which shall be equal to the excess of (x) the Carrying Value of the assets
contributed by such Member as of the Closing Date determined in accordance with
Section 8.1(c) over (y) the liabilities of the Member that are assumed by the
Company in connection with such contribution or to which such assets are
subject.
(c) As soon as practicable after the Closing, (i) Chevron and Phillips
shall determine the Capital Account balance of each Member as of the Closing
Date by determining in accordance with this Section 8.1(c) the Carrying Values
as of the Closing Date of the assets contributed effective as of the Closing
Date to the Company by each Member pursuant to Article II of the Contribution
Agreement and the liabilities of such Member assumed by the Company effective as
of the Closing Date and the liabilities that are secured by assets contributed
effective as of the Closing Date to the Company by such Member pursuant to
Article II of the Contribution Agreement, (ii) Chevron and Phillips shall
determine in accordance with Section 8.1(a) the Percentage Interest as of the
Closing Date of each Member, (iii) Schedule 3 hereto shall be completed so that
it reflects such Capital Account Balances and Percentage Interests of
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each Member, and (iv) Chevron and Phillips shall agree to schedules setting
forth the Carrying Values specified in clause (i) of this sentence. Except to
the extent the Members otherwise unanimously agree, the Carrying Value of the
assets contributed by each Member pursuant to Article II of the Contribution
Agreement shall be determined as follows:
(i) Chevron and Phillips shall compute (x) the excess of the net book
value for financial reporting purposes as of the Closing Date of the assets
contributed pursuant to Article II of the Contribution Agreement by the
Class P Members in the aggregate over the aggregate amount of liabilities
of such Members that are assumed by the Company in connection with such
contribution or to which the such assets are subject ("Class P Financial
Statement Net Contribution") and (y) the excess of the net book value for
financial reporting purposes as of the Closing Date of the assets
contributed pursuant to Article II of the Contribution Agreement by the
Class C members in the aggregate over the amount of liabilities of such
Members that are assumed by the Company in connection with such
contribution or to which such assets are subject ("Class C Financial
Statement Net Contribution").
(ii) If (x) the Class P Financial Statement Net Contribution reduced
by the aggregate amount to be distributed to the Class P Members pursuant
to Section 9.2(f) ("Adjusted Class P Financial Statement Net Contribution")
and (y) the amount of the Class C Financial Statement Net Contribution
reduced by the aggregate amount to be distributed to the Class C Members
pursuant to Section 9.2(f) ("Adjusted Class C Financial Statement Net
Contribution") are not equal, an amount equal to the difference between the
Adjusted Class P Financial Statement Net Contribution and the Adjusted
Class C Financial Statement Net Contribution shall, unless the Members
otherwise unanimously agree, be allocated among the assets included in the
Class P Financial Statement Net Contribution or Class C Financial Statement
Net Contribution, whichever is smaller after reduction of each as provided
above in this Section 8.1(c)(ii) by the amounts to be distributed pursuant
to Section 9.2(f). The allocation of such difference between the Adjusted
Class P Financial Statement Net Contribution and the Adjusted Class C
Financial Statement Net Contribution shall be made among such assets in the
ratio of each such asset's net book value to the aggregate net book values
of all such assets. For purposes of the preceding sentence, the net book
value for each such asset shall be the net book value for such asset used
in computing the Class P Financial Statement Net Contribution or Class C
Financial Statement Net Contribution, as applicable.
(d) Section 8.1(b) and (c) are designed to result in the aggregate credit
balances in the Capital Accounts of the Class C Members being equal to the
aggregate credit balances in the Capital Accounts of the Class P Members after
giving effect to the distributions provided for in Section 9.2(f) which is
consistent with the agreement of the Members that the fair market value of the
net assets being contributed to the Company by the Class C Members and the fair
market value of the net assets being contributed to the Company by the Class P
Members are equal after giving effect to the distributions provided for in
Section 9.2(f), and this result shall not be affected by the Chevron Pipe Line
Contribution.
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8.2 Additional Capital Contributions. No Member may make additional
Capital Contributions other than pursuant to its obligations under the
Contribution Agreement without the consent of the Board of Directors. The Board
of Directors shall approve all material terms of any such Capital Contribution,
including its effect on the Members' relative Capital Accounts and Percentage
Interests.
8.3 Withdrawal or Reduction of Capital Contributions.
(a) Except as expressly provided in this Agreement, no Member shall have
the right to withdraw from the Company all or any part of its Capital
Contribution.
(b) A Member, irrespective of the nature of its Capital Contribution,
shall not have the right to demand and receive a distribution in kind in return
for its Capital Contribution, unless the Members shall have otherwise
unanimously agreed.
8.4 No Interest on Capital Contributions. No interest shall be payable on
or with respect to the Capital Contributions or Capital Accounts of Members.
8.5 Capital Accounts. A single Capital Account shall be maintained for
each Member (regardless of the class of interests owned by such Member and
regardless of the time or manner in which such interests were acquired) in
accordance with the capital accounting rules of section 704(b) of the Code and
the Income Tax Regulations thereunder (including without limitation section
1.704-1(b)(2)(iv) of the Income Tax Regulations) and as further described in
this Section 8.5.
(a) There shall be established for each Member a Capital Account
reflecting the excess (or deficit) of (a) the sum of (i) the Carrying Value of
assets contributed to the Company by such Member and the amount of cash
contributed to the Company or paid pursuant to a note contributed to the Company
by such Member, (ii) such Member's share of Net Profits and any items in the
nature of income or gain that are specifically allocated to such Member and
(iii) the amount of any Company liabilities assumed by such Member or which are
secured by any property distributed to such Member over (b) the sum of (i) such
Member's share of Net Losses and any items in the nature of losses or expenses
that are specifically allocated to such Member, (ii) any distributions to such
Member and (iii) liabilities of such Member assumed by the Company or which are
secured by any property contributed by such Member. In determining the amount of
any liability for purposes of this section, there shall be taken into account
section 752(c) of the Code and any other applicable provisions of the Code and
Income Tax Regulations.
(b) In the event of a transfer of all or any portion of a Member's
interest in the Company pursuant to Article 10 hereof, the Capital Account of
any transferee shall include the appropriate portion of the Capital Account of
the Member from which the transferee's interest in the Company was obtained.
(c) When Company property is distributed in kind (whether in connection
with liquidation and dissolution or otherwise), the Capital Accounts of the
Members shall first be adjusted to reflect the manner in which the unrealized
income, gain, loss and deduction inherent in such property (that has not been
reflected in the Capital Account previously) would be allocated among the
Members if there were a taxable disposition of such property for the fair
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market value of such property (taking into account section 7701(g) of the Code)
on the date of distribution.
(d) The appropriate Officers shall make or cause to be made all necessary
adjustments in each Member's Capital Account as required by the capital
accounting rules of section 704(b) of the Code and the regulations thereunder.
8.6 Loans by Members to the Company. No Member shall be obligated to lend
money to the Company. No Member may lend money to the Company without the
consent of the Board of Directors. The Board of Directors shall approve all
material terms of such a loan, including, without limitation, the interest rate
and term. Any loan by a Member to the Company with the required consent of the
Board of Directors shall be separately entered on the books of the Company as a
loan to the Company and not as a Capital Contribution, and shall be evidenced by
a promissory note duly executed by at least one Class C Director and one Class P
Director on behalf of the Company and delivered to the lending Member.
8.7 Treatment of Certain Indemnity Payments.
(a) If Company makes any payment to a third party that is subject to
indemnification by a Class C Member or a Class P Member (or any Affiliate
thereof) pursuant to the Contribution Agreement or Annex B or C thereto (a
"Company Indemnifiable Payment"), the Members intend such payment to be treated
as preserving the value of the contribution made pursuant to Article II of the
Contribution Agreement by the Member liable for the indemnity payment. Toward
that end, each indemnity obligation arising in respect of a Company
Indemnifiable Payment will be treated as having arisen immediately prior to such
contribution of assets by the Indemnifying Party, the Indemnifying Party will be
treated as if it had originally contributed assets with a Carrying Value
increased by the amount of the Company Indemnifiable Payment, and the Company
will be treated as having assumed an additional liability in the amount of the
Company Indemnifiable Payment. As a result, the amounts credited to the Capital
Accounts of the Class C Members in the aggregate and the Class P Members in the
aggregate will remain equal. The Members also intend that the tax consequences
of such Company Indemnifiable Payment and the indemnification payment itself
shall inure to the Indemnifying Party, but, except as otherwise agreed by the
Members, only to the extent that such tax result can be achieved without causing
the Capital Accounts of the Class C Members in the aggregate and the Capital
Accounts of the Class P Members in the aggregate to fail to be equal.
(b) If a Member makes any payment to a third party that is subject to
indemnification by the Company pursuant to the Contribution Agreement or Annex B
or C thereto (a "Member Indemnifiable Payment"), the Members intend that the tax
consequences of such Member Indemnifiable Payment and the indemnification
payment itself shall inure to the Company and be shared by the Members in
accordance with their respective Percentage Interests, but, except as otherwise
agreed by the Members, only to the extent that such tax results can be achieved
without causing the Capital Accounts of the Class C Members in the aggregate and
the Capital Accounts of the Class P Members in the aggregate to fail to be
equal.
8.8 Treatment of Certain Deferred Capital Contributions. As a result of
the K-Resin Accident, the value of certain assets contributed by the Class P
Members has declined from that
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which existed when the Members were first agreeing on the economic terms of the
arrangement described in this Agreement. The Members cannot agree on the
amount of the decline in value, in part because they are currently unable to
reach an agreement on the likely time and expense involved in repairing the
damage caused by the K-Resin Accident and the degree and permanence of any loss
of customers that the K-Resin Accident may cause. In order to resolve the issue,
one or more of the Class P Members may have to make capital contributions to the
Company after the Closing under the circumstances and in the amounts calculated
under the provisions of the Contribution Agreement. The Members view such
deferred capital contributions as necessary to preserve the pre K-Resin Accident
value of the business and assets contributed by the Class P Members. The Members
agree that any deferred contributions are capital contributions and will not be
reported as income by the Company.
8.9 Special Rule. An Indemnifying Party will indemnify the Indemnified
Party on a Net After-Tax Basis against any income or franchise tax incurred in
the event that any indemnification payment is treated as taxable income to the
Indemnified Party. For purposes of this paragraph, "Net After-Tax Basis" means
after any U.S. federal, state or local income or franchise taxes (computed using
the Tax Rate) incurred as a result of such indemnification (assuming the
deductibility of such state and local income and franchise taxes in calculating
federal income tax), reduced by any tax benefit arising as a result of such
indemnification.
8.10 Application of the Basket, Tax Basket Amount and Cap. No provision of
this Agreement or the Contribution Agreement (including the Annexes thereto)
shall be applied or interpreted in a manner that would cause any indemnification
payment to be made that otherwise would not be payable because of application of
the Basket, Tax Basket Amount or the Cap.
ARTICLE 9
ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS; TAX AND ACCOUNTING MATTERS
9.1 Allocations. Net Profit and Net Loss of the Company shall be
determined and allocated with respect to each Fiscal Year, Fiscal Quarter or
other period of the Company as follows:
(a) General Allocation. Except as otherwise provided in this Article 9,
Net Profit and Net Loss for each Fiscal Year, Fiscal Quarter or other period
shall be allocated to the Members in accordance with their Percentage Interests.
(b) Regulatory Allocations. Notwithstanding the foregoing, the following
special allocations shall be made for each Fiscal Year or other period in the
following order of priority:
(i) If there is a net decrease in Company Minimum Gain during a
Company taxable year, then each Member shall be allocated items of Company
income and gain for such taxable year (and, if necessary, for subsequent
years) in an amount equal to such Member's share of net decrease in Company
Minimum Gain, determined in accordance with section 1.704-2(g)(2) of the
Income Tax Regulations. This subsection (b)(i) is intended to comply with
the minimum gain chargeback
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requirement of section 1.704-2(f) of the Income Tax Regulations and shall
be interpreted consistently therewith.
(ii) If there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt during any Company taxable
year, each Member who has a share of the Member Nonrecourse Debt Minimum
Gain attributable to such Member Nonrecourse Debt, determined in accordance
with section 1.704-2(i)(5) of the Income Tax Regulations, shall be
specially allocated items of Company income and gain for such taxable year
(and, if necessary, subsequent years) in the amount equal to such Member's
share of net decrease in Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in a manner consistent with the
provisions of section 1.704-2(i)(4) of the Income Tax Regulations. This
subsection (b)(ii) is intended to comply with the partner nonrecourse debt
minimum gain chargeback requirement of section 1.704-2(i)(4) of the Income
Tax Regulations and shall be interpreted consistently therewith.
(iii) If any Member unexpectedly receives (or Members unexpectedly
receive) an adjustment, allocation or distribution of the type contemplated
by section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Income Tax
Regulations, items of income and gain shall be allocated to such Member (or
if more than one Member receives such an adjustment, allocation or
distribution, items of income and gain shall be allocated to such Members
in proportion to the amounts of their respective Adjusted Capital Account
Deficits) in an amount (or amounts) and manner sufficient to eliminate the
Adjusted Capital Account Deficit of such Member (or deficits of such
Members) as quickly as possible. It is intended that this subsection
(b)(iii) qualify and be construed as a "qualified income offset" within the
meaning of section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations.
(iv) If the allocation of Net Loss to a Member as provided in Section
9.1(a) would create or increase an Adjusted Capital Account Deficit and one
or more other Members would have a positive Capital Account balance, there
shall be allocated to such Member only that amount of Net Loss as will not
create or increase an Adjusted Capital Account Deficit. The Net Loss that
would, absent the application of the preceding sentence, otherwise be
allocated to such Member shall, subject to the Adjusted Capital Account
Deficit limitations of such sentence, be allocated to those Members having
positive Capital Account balances up to the amount of such positive Capital
Account balances in the ratios that each such Member's positive Capital
Account Balance bears to the sum of such positive Capital Account balances.
To the extent that allocations of Net Losses have been made pursuant to
this subsection (b)(iv), future allocations of Net Profits, notwithstanding
anything to the contrary in this Agreement, shall be made first to restore
such Net Losses.
(v) Member Nonrecourse Deductions for any Fiscal Year or other period
shall be allocated each year to the Member that bears the economic risk of
loss (within the meaning of section 1.752-2 of the Income Tax Regulations)
for the
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Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable.
(vi) Nonrecourse Deductions for any Fiscal Year or other period shall
be allocated to the Members in proportion to their respective Percentage
Interests.
(vii) To the extent an adjustment to the adjusted tax basis of any
Company asset, pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to section 1.704-1(b)(2)(iv)(M)(2) or
1.704-1(b)(2)(iv)(M)(4) of the Income Tax Regulations, to be taken into
account in determining Capital Accounts as the result of a distribution to
a Member in compete liquidation of such Member's interest in the Company,
the amount of such adjustment to 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 Members in accordance with their interests in
the Company in the event section 1.704-1(b)(2)(iv)(M)(2) of the Income Tax
Regulations applies, or to the Member to whom such distribution was made in
the event section 1.704-1(b)(2)(iv)(M)(4) of the Income Tax Regulations
applies
(viii) The allocations set forth in subsections (b)(i) through
(b)(vii) (the "Regulatory Allocations") are intended to comply with certain
requirements of sections 1.704-1(b), 1.704-2(f) and 1.704-2(i) of the
Income Tax Regulations. Notwithstanding the provisions of Section 9.1(a),
the Regulatory Allocations shall be taken into account in allocating other
items of income, gain, loss and deduction among the Members so that, to the
extent possible, the net amount of such allocations of other items and the
Regulatory Allocations to each Member shall be equal to the net amount that
would have been allocated to each Member if the Regulatory Allocations had
not occurred.
(c) Tax Allocations.
(i) Except as provided in subsection (c)(ii), for income tax purposes
under the Code and the Income Tax Regulations, Company taxable income and
loss shall be allocated to each Member in the same manner that Company Net
Profit and Net Loss (and items entering into the determination thereof) are
allocated.
(ii) Section 704(c). In accordance with section 704(c) of the Code and
the Income Tax Regulations thereunder, income, gain, loss and deduction
with respect to any property contributed to the capital of the Company
shall, solely for income tax purposes, be allocated so as to take account
of any variation between the adjusted basis of such property to the Company
for federal income tax purposes and the initial Carrying Value of such
property. If the Carrying Value of any Company property is adjusted as
described in the definition of "Carrying Value", subsequent allocations of
income, gain, loss, and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for
federal income tax purposes and the Carrying Value of such asset in the
manner prescribed under Sections 704(b) and 704(c) of the Code and the
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Income Tax Regulations thereunder. With respect to assets contributed or
required to be contributed by the Members at the Closing pursuant to the
Contribution Agreement, for purposes of applying section 704(c) of the Code
and this Section 9.1(c)(ii), the Company shall use the traditional method
with curative allocations set forth in section 1.704-3(c) of the Income Tax
Regulations. Any elections or other decisions relating to such allocations
shall be made by the Board of Directors.
(d) Depreciation Recapture. Solely for tax purposes, a Member's share of
the Company's depreciation recapture recognized for tax purposes upon the
disposition of Company property shall be computed in the manner provided for in
sections 1.704-3(a)(11), 1.1245-1(e) and 1.1250-1(f) of the Income Tax
Regulations. The provisions of this Section 9.1(d) are intended to affect only
the character of the items of gain allocated by the Company to the Members. This
Section 9.1(d) shall not affect the aggregate amount of gain (including gain
characterized under this Section 9.1(d) as depreciation recapture) otherwise
allocable to a Member pursuant to this Section 9.1.
(e) Change in Percentage Interests. Except as otherwise required by law,
if the Percentage Interests of the Members of the Company are changed during any
taxable year, all items to be allocated to the Members for such entire taxable
year shall be prorated on the basis of the portion of such taxable year which
precedes each such change and the portion of such taxable year on and after each
such change according to the number of days in each such portion, and the items
so allocated for each such portion shall be allocated to the Members in the
manner in which such items are allocated as provided in Section 9.1(a) during
each such portion of the taxable year in question.
(f) Excess Nonrecourse Liabilities. Nonrecourse liabilities of the Company
that constitute "excess nonrecourse liabilities" within the meaning of section
1.752-3(a)(3) of the Income Tax Regulations, shall be allocated among the
Members in proportion to their respective Percentage Interests.
(g) Allocations Relating to Capital Transactions. In connection with the
sale or other disposition of all or substantially all of the assets of the
Company (including upon a liquidation of the Company), items of income, gain,
loss and deduction shall, except as otherwise required by subsections (b)
through (f) above, be allocated to the Members in such amounts as shall cause
their relative Adjusted Capital Account Balances to equal as nearly as possible,
their relative Percentage Interests.
(h) State and Local Items. Items of income, gain, loss, deduction, credit
and tax preference for state and local income tax purposes shall be allocated to
and among the Members in a manner consistent with the allocation of such items
for federal income tax purposes in accordance with the foregoing provisions of
this Section 9.1.
9.2 Distributions.
(a) The Company shall distribute to each Member as promptly as practicable
(and in any event within forty-five (45) days) after the end of each of the
first three (3) Fiscal Quarters of
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each Fiscal Year of the Company an amount equal to such Member's Quarterly
Tax Distribution for such Fiscal Quarter. In addition, the Company shall
distribute to each Member as promptly as practicable (and in any event within
forty-five (45) days) after the end of each Fiscal Year an amount equal to the
excess, if any, of such Member's Proportionate Tax Share for such Fiscal Year
over the aggregate amount of Quarterly Tax Distributions made to such Member
with respect to such Fiscal Year.
(b) At the end of each of the second Fiscal Quarter and the fourth Fiscal
Quarter, the Board of Directors shall determine if a Leverage Ratio Deficit
exists. If a Leverage Ratio Deficit exists, the Board of Directors, as promptly
as practicable after the end of such Fiscal Quarter, shall meet and take such
action as the Directors deem necessary to reduce the Leverage Ratio Deficit to
zero. If the Board of Directors fails to reduce the Leverage Ratio Deficit to
zero within forty-five (45) days following the end of the second or fourth
Fiscal Quarter, the Chief Executive Officer shall cause the Company to
distribute to the Members in proportion to their relative Percentage Interests
an amount equal to the Minimum Leverage Distribution for the applicable
six-month period.
(c) Any distributions by the Company to the Members, other than the Tax
Distribution and the Minimum Leverage Distribution, shall be payable at the
discretion of the Board of Directors.
(d) To the extent the Company is required by law to withhold or to make
tax payments on behalf of or with respect to any Member, the Company may
withhold such amounts and make such tax payments as so required. For purposes of
this Agreement, any such payments or withholdings shall be treated as a
distribution to the Member on behalf of whom the withholding or payment was
made.
(e) Notwithstanding anything to the contrary contained in this Section
9.2, the Company shall not make any distribution to the Members which would
render the Company insolvent or which is otherwise prohibited by applicable law.
(f) Notwithstanding anything to the contrary contained in this Agreement,
in accordance with Section 6.16 of the Contribution Agreement, (i) the Company
shall secure, by the Closing Date or as soon as practicable thereafter, bank
credit facilities or other credit of $1,670,000,000 (or such lesser amount as
would allow the Company to maintain an investment-grade debt rating) on
reasonably available commercial terms agreeable to the Members (the "Initial
Financing"); and (ii) upon the funding of the Initial Financing, the Company
shall distribute the net proceeds of the Initial Financing as follows: an
aggregate of 50% of the net proceeds of the Initial Financing to the Class P
Members (to each Class P Member in the ratio of its Percentage Interest to the
sum of the Percentage Interests of all Class P Members as of the Closing Date)
and an aggregate of 50% of the net proceeds of the Initial Financing to the
Class C Members (to each Class C Member in the ratio of its Percentage Interest
to the sum of the Percentage Interests of all Class C Members as of the Closing
Date); PROVIDED, HOWEVER, that if the Percentage Interests of the Class P
Members and the Class C Members have not been determined as of the date of such
distribution, then the Company shall distribute the net proceeds of the Initial
Financing that are distributable to the Class P Members to the Initial Phillips
Member as agent for such Class P Members and shall distribute the net proceeds
of the Initial
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Financing that are distributable to the Class C Members to the Initial Chevron
Member as agent for such Class C Members, and the Initial Phillips Member will
transfer such proceeds to each such Class P Member in the ratio of its
Percentage Interest to the sum of the Percentage Interests of all Class P
Members and the Initial Chevron Member will transfer such proceeds to each such
Class C Member in the ratio of its Percentage Interest to the sum of the
Percentage Interests of all Class C Members when such Percentage Interests
are fixed; PROVIDED FURTHER, HOWEVER, that the aggregate amount distributed to
the Class P Members shall be reduced by (A) the sum of any indebtedness of P
Chem (as defined in the Contribution Agreement) as of the Closing Date other
than indebtedness of the entities set forth on Schedule 6.16 of the Phillips
Disclosure Schedule to the Contribution Agreement and other than debt incurred
in the ordinary course of business (pursuant to financial arrangements or plans
previously disclosed to Chevron) by such entities and (B) the SOLP adjustment
amount set forth on Schedule 6.16 of the Phillips Disclosure Schedule to the
Contribution Agreement, and the aggregate amount distributed to the Class C
Members shall be reduced by the sum of any indebtedness of C Chem (as defined in
the Contribution Agreement) as of the Closing Date other than indebtedness of
the entities set forth on Schedule 6.16 of the Chevron Disclosure Schedule to
the Contribution Agreement and other than debt incurred in the ordinary course
of business (pursuant to financial arrangements or plans previously disclosed to
Phillips) by such entities. It is the agreement of the parties that after such
distributions, the aggregate Capital Accounts of the Class C Members will be
equal to the aggregate Capital Accounts of the Class P Members. The Company will
take steps to segregate the proceeds of the Initial Financing so that the
distribution thereof to the Members can be easily traced to such proceeds.
(g) The Company will use its best efforts to avoid taking any action that,
or failing to take any action the failure of which to take, is likely to cause
all or part of the distribution of the proceeds of the Initial Financing to be
taxable to one or more of the Members and in connection therewith the Members
shall cooperate with the Company and each other. In addition, in the event that,
within two years of the Closing or the contribution of an asset to the Company,
the Members desire for the Company to make a distribution or payment to any of
the Members or pay all or a portion of any liability, and if such distribution
or payment to a Member or such payment of a liability may give rise to a
disguised sale under section 707(a)(2)(B) of the Code or corresponding provision
of state or local law, the Members shall cooperate to avoid such result without
changing the intended economics of the arrangement.
9.3 Accounting Matters. The Company's tax year shall be the calendar year
unless otherwise required by section 706 of the Code or the Income Tax
Regulations thereunder. The Board of Directors shall cause to be maintained
complete books and records accurately reflecting the accounts, business and
transactions of the Company on a calendar-year basis and using such cash,
accrual, or hybrid method of accounting as in the judgment of the Board of
Directors is most appropriate; provided, however, that books and records with
respect to the Company's Capital Accounts and allocations under this Agreement
of Net Profit and Net Loss (and items entering into the determination thereof)
and income, gain, loss, deduction or credit (or item thereof) shall be kept on
the basis of the Company's Fiscal Year and under United States federal income
tax accounting principles as applied to partnerships.
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9.4 Tax Status and Returns.
(a) Any provision hereof to the contrary notwithstanding, solely for
United States federal income tax purposes, each of the Members hereby recognizes
that the Company will be subject to all provisions of Subchapter K of Chapter 1
of Subtitle A of the Code; PROVIDED, HOWEVER, that the filing of U.S.
Partnership Returns of Income shall not be construed to expand the purposes of
the Company or expand the obligations or liabilities of the Members.
(b) The chief financial officer shall prepare or cause to be prepared all
tax returns and statements, if any, that must be filed on behalf of the Company
with any taxing authority, and shall make timely filing thereof. Within
one-hundred eighty (180) days after the end of each calendar year, the Company
shall cause to be prepared and delivered to each Member a report setting forth
in reasonable detail the information with respect to the Company during such
calendar year reasonably required to enable each Member to prepare its federal,
state and local income tax returns in accordance with applicable law then
prevailing.
9.5 754 Election and Other Tax Elections. In the event of a distribution
of property to a Member, or a transfer of any interest in the Company permitted
under the Act or this Agreement, the Company, upon the written request of the
transferor or transferee, shall file a timely election under section 754 of the
Code and the Income Tax Regulations thereunder to adjust the basis of the
Company's assets under section 734(b) or 743(b) of the Code and a corresponding
election under the applicable provisions of state and local law, and the person
making such request shall pay all costs incurred by the Company in connection
therewith, including reasonable attorneys' and accountants' fees. Other tax
elections and decisions relating to Taxes not specifically governed by any other
express provision of this Agreement shall be made as agreed by the Board of
Directors.
9.6 Tax Matters Partner. (a) The Initial Phillips Member shall be the
Company's "tax matters partner" for purposes of subchapter C of chapter 63 of
subtitle F of the Code (dealing with the tax treatment of partnership items);
PROVIDED, HOWEVER, that the tax matters partner shall not take any action
without the approval of the Board of Directors or its designee; and provided,
further, that the tax matters partner shall receive no compensation for its
services as tax matters partner but shall be reimbursed for any out-of-pocket
expenses incurred in acting in such capacity.
(b) The Company shall indemnify the tax matters partner (including the
officers and directors of a corporate tax matters partner) against judgments,
fines, amounts paid in settlement, and expenses (including attorney fees)
reasonably incurred in any civil, criminal, or investigative proceeding in which
they are involved or threatened to be involved by reason of being the tax
matters partner unless the tax matters partner acted in bad faith or with gross
negligence. The indemnification provided hereunder shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any
applicable statute, agreement, vote of Partners, or otherwise.
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ARTICLE 10
RESTRICTIONS ON TRANSFER
10.1 Transfer of Interests. No Member may sell, assign, transfer or
hypothecate ("Transfer") all or any part of its Membership Interest in the
Company, or any interest therein, except in accordance with the terms and
conditions set forth in this Article 10.
10.2 Conditions of Transfer. No Member may Transfer all or any part of
such Member's Membership Interest, or any interest therein, except in compliance
with Section 10.6, Section 10.7 or Article 11, such compliance to be jointly
determined by the chief executive officer and the chief financial officer and
documented by a certificate evidencing such Transfer. Moreover, no Member may
Transfer all or any part of such Member's Membership Interest, or any interest
therein, unless such Transfer will not (and, upon request of the Board of
Directors, the transferring Member provides an opinion of counsel in form and
substance reasonably satisfactory to the Board of Directors that such Transfer
will not): (A) violate any applicable federal or state securities laws or
regulations, subject the Company to registration as an investment company or
election as a "business development company" under the Investment Company Act of
1940; (B) require any Member or any affiliate of a Member to register as an
investment adviser under the Investment Advisers Act of 1940; (C) violate any
other federal, state or local laws; (D) effect a termination of the Company
under section 708 of the Code; (E) cause the Company to be treated as an
association taxable as a corporation for federal income tax purposes; (F) cause
the Company or any Member to be treated as an ERISA fiduciary; or (G) otherwise
violate this Agreement.
10.3 Admission of Substitute Member. In the event of a Transfer pursuant
to Section 10.6, 10.7 or Article 11, and the requirements of Section 10.2 and
this Section 10.3 are met, then the transferee of the Member's Membership
Interest shall be entitled to be admitted to the Company as a substitute Member,
and this Agreement (and all exhibits hereto) shall be amended to reflect such
admission, provided that the following conditions are complied with:
(a) The transferor and transferee shall have executed and acknowledged
such instruments as the Board of Directors may deem necessary or desirable to
effect the substitution;
(b) The transferee acknowledges all of the terms and provisions of this
Agreement as the same may have been amended and agrees in writing to be bound by
the same;
(c) The transferee reimburses the Company for all reasonable expenses
connected with such admission including, but not limited to, legal fees and
costs;
(d) The filing with the Company, if required by the Board of Directors, of
such proof of the investment intent and financial status of the transferee as
the Board of Directors may request; and
(e) Compliance with all applicable federal and state securities laws.
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10.4 Effect of Transfer without Approval. Any purported Transfer of all or
any part of a Member's Membership Interest, or any interest therein, which is
not in compliance with this Article 10 shall be void and, except as provided for
in Section 10.5, below, shall be of no effect.
10.5 Liability for Breach. Notwithstanding anything to the contrary in
this Article 10, any Member purporting to Transfer its Membership Interest, or
any part thereof, in violation of this Article 10 shall be liable to the Company
and the other Members for all liabilities, obligations, damages, losses, costs
and expenses (including reasonable attorneys' fees and court costs) arising as a
direct or consequential result of such non-complying transfer, attempted
transfer or purported transfer, including specifically, any additional cost or
taxes created by non-compliance with any of the requirements and conditions
provided for in Section 10.2.
10.6 Permitted Transfers Subject to Right of First Refusal.
(a) At any time after the three (3) year anniversary of the Closing Date,
the Class C Member(s) or the Class P Member(s) (a "Transferring Class") may
Transfer not less than all of their respective Class Membership Interest to a
Person for cash, subject to the Right of First Refusal provided for in this
Section 10.6 and the last sentence of Section 10.2.
(b) In the event that any Transferring Class has received a bona fide
written cash offer, which such Transferring Class is willing to accept, for the
Transferring Class to sell not less than all of its respective Class Membership
Interest (the "Transferred Interest") to any Person, the Transferring Class
shall deliver a written notice (the "Transfer Notice") to all of the Members,
other than the Members in the Transferring Class, (the "Non-Transferring Class")
stating the Transferring Class's intent to sell the Transferred Interest
pursuant to a bona fide cash offer. The Transfer Notice shall (i) specify the
purchase price for and other material terms with respect to the sale of the
Transferred Interest, (ii) identify the proposed purchaser of the Transferred
Interest, (iii) specify the date scheduled for the transfer (which date shall
not be earlier than one hundred twenty (120) days from the date the Transfer
Notice is delivered), (iv) contain a statement that the offer has been accepted
pending compliance with the right of first refusal set forth herein and receipt
of required regulatory and other approvals, and (v) shall have attached thereto
a copy of the written offer containing all of the terms and conditions on which
the Transferred Interest is to be sold.
(c) The Non-Transferring Class shall have the exclusive option to purchase
all (but not less than all) of the Transferred Interest on terms and conditions
substantially the same in all material respects as, and at the same price, set
forth in the written offer delivered pursuant to subsection (b) above. The
Non-Transferring Class shall notify the Company and the Transferring Class of
its intention to exercise or not to exercise the right of first refusal
hereunder within forty-five (45) days of receipt by the Non-Transferring Class
of a Transfer Notice.
(d) In the event that the Non-Transferring Class shall have duly elected
to purchase the Transferred Interest (the "Electing Class"), the Electing Class
and the Transferring Class shall diligently pursue obtaining all regulatory
approvals and use best commercially reasonable efforts to consummate the closing
of the purchase of the Transferred Interest as soon as practicable and in any
event within one year from receipt of the Transfer Notice; provided that, if
such closing does not occur within such one-year period due to the failure to
obtain any required
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regulatory approvals, the Electing Class's right to close such sale may be
extended at the option of the Electing Class, until such regulatory approvals
are obtained, but in no event for a period of greater than one additional year.
In the event of a failure of the Non-Transferring Class to elect to purchase all
of the Transferred Interest or a failure of the Electing Class to consummate
such purchase in accordance herewith, the Transferring Class will be free, at
any time within 120 days from the date the Non-Transferring Class elect not to
exercise their purchase rights hereunder or from the date the time periods
specified in this section for such election have expired, subject, in each case,
to extension for up to an additional eight (8) months to the extent necessary to
achieve any required regulatory approvals, to consummate the sale of the
Transferred Interest to the purchaser at a price and upon terms and conditions
no more favorable to the purchaser than those specified in the Transfer Notice;
provided that the purchaser shall assume all of the liabilities and obligations
of the Transferring Class under this Agreement by a binding written instrument
which shall be enforceable by the Company and the Non-Transferring Class.
(e) A Transferring Class shall not be relieved of any of its obligations
arising under this Agreement prior to such Transfer. The Transferring Class and
any transferee shall execute such documents as the Non-Transferring Class shall
reasonably request to evidence the Transfer and the assumption and continuing
obligations under this Agreement.
(f) At the request of a Member, the Company will provide prospective
purchasers of such Member's Class Membership Interest with reasonable access to
financial, operating and other information of the Company, subject to customary
confidentiality agreements which shall include provisions to protect
competitively sensitive information. Each Member shall cooperate with, and shall
not oppose, the closing of any Transfer which is in Compliance with this Section
10.6.
10.7 Permitted Transfers Among Wholly-Owned Affiliates. Notwithstanding
anything contained herein to the contrary, any Member may Transfer all or any
portion of its Membership Interest to a Wholly-Owned Affiliate of such Member,
and such Transfer shall be deemed automatically approved by the Board of
Directors; provided, however, that such Transfer otherwise meets the conditions
and requirements of Sections 10.2 and 10.3.
10.8 Transfers of Equity Interests in a Member. A sale, assignment,
transfer or hypothecation of any direct or indirect equity interest in a Member
by a Parent of such Member shall be deemed to be a Transfer by that Member of
its Membership Interest in the Company for purposes of this Article 10 and shall
not be permitted except in accordance with the terms and conditions set forth in
this Article 10. Chevron and Phillips shall comply with this Section 10.8 and
shall take all necessary action to cause their Affiliates to comply with this
Section 10.8. For the purpose of clarification of this Section 10.8, a change of
control of the Ultimate Parent of any Member shall not be considered a Transfer
of such Member's Membership Interest or a Transfer of the equity interest in
such Member.
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ARTICLE 11
COMPETITION
11.1 General. The Members expect that the Company shall be the primary
vehicle by which each the Members (together with their Affiliates) engage in the
Chemicals Business. If a majority in interest of the Members of one class (the
"Non-Competing Class") concludes in good faith that the Company is no longer the
primary vehicle by which the Members of the other class (together with its
Affiliates) (the "Competing Class") is engaged in the Chemicals Business, then
the Non-Competing Class shall have the right to send written notice of such good
faith conclusion ("Conflict Notice") to the Competing Class. Upon receipt of the
Conflict Notice, the Competing Class shall enter into good faith negotiations
with the Non-Competing Class to resolve any or all substantial conflicts of
interest resulting from the ownership of businesses competing with the
businesses of the Company.
11.2 Resolution of Competitive Conflicts.
(a) In the event that:
(i) A Non-Competing Class exercises its right to require a Competing
Class to engage in good faith negotiations pursuant to Section 11.1;
(ii) The Non-Competing Class and Competing Class are unable to resolve
the conflicts of interest within 150 days of the delivery of the Conflict
Notice; and
(iii) The value (in the opinion of a nationally recognized investment
bank selected by the Board of Directors) of the Competing Class's
(including its Affiliates') interests in businesses competing with the
businesses of the Company exceeds 50% of the enterprise value of the
Company;
then, in such case, the Non-Competing Class shall have the right, within 30 days
from the later of (x) the expiration of the period in (ii) above or (y) the
determination in (iii) above, to state a single cash price at which it is
prepared to purchase the Class Membership Interest of the Competing Class, which
will constitute a binding offer to purchase (the "Initial Offer"). In the event
of an Initial Offer, the Competing Class shall have 60 days to decide either to
accept the Initial Offer or to make a counter-offer by stating a single cash
price, which is at least 5% higher than the Initial Offer, at which it is
prepared to purchase the Class Membership Interest of the Non-Competing Class (a
"Counter-Offer"). In the event of a Counter-Offer, the Non-Competing Class shall
have 30 days to decide either to accept the Counter-Offer or to make another
offer by stating a single cash price, which is at least 5% higher than the
Counter-Offer, at which it is prepared to purchase the Class Membership Interest
of the Competing Class (a "Subsequent Offer"). In the event of a Subsequent
Offer by the Non-Competing Class, the Competing Class shall have 30 days to
decide either to accept the Subsequent Offer or to make another counter-offer by
stating a single cash price, which is at least 5% higher than the Subsequent
Offer, at which it is prepared to purchase the Class Membership Interest of the
Non-Competing Class. The offering process described in this paragraph shall
continue in this manner until a price is
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reached at which either the Competing Class or the Non-Competing Class is
willing to sell its Class Membership Interest to the other class.
Notwithstanding anything to the contrary in the foregoing, a Member may also
sell its Class Membership Interest pursuant to the right of first refusal
provisions set forth in Section 10.6.
(b) In the event that a Non-Competing Class has concluded in good faith
that the Company is no longer the primary vehicle by which a Competing Class is
engaged in the Chemicals Business in accordance with Section 11.1, and:
(i) a sale pursuant to subsection (a) above is not concluded (whether
or not the condition expressed in subsection (a)(iii) above is satisfied);
and
(ii) the Competing Class and Non-Competing Class have not been able to
resolve, pursuant to Section 11.1 above, all substantial conflicts of
interest resulting from the ownership by the Competing Class of a
substantial business competing with the businesses of the Company;
then either the Competing Class or the Non-Competing Class may require the other
class from time to time to enter into good faith negotiations to cause the
Company (and/or the Members) to adopt such reasonable, mutually acceptable
provisions as would mitigate the potential adverse consequences of the conflicts
of interests on the continuing businesses of the Company. Such provisions could
include, for example, restrictions on the dissemination and use of confidential
information, greater delegation of authority to management of the Company, or
modification of minimum distribution requirements or the non-involvement of the
Competing Class in business decisions of the Company potentially affecting such
competing businesses.
ARTICLE 12
TERM AND DISSOLUTION
12.1 Term. Except as provided in Section 12.2 hereof, the existence of the
Company shall be perpetual.
12.2 Dissolution. The Company shall be dissolved and its affairs wound up
upon the first to occur of the following:
(a) The approval of dissolution by the Board of Directors; or
(b) The bankruptcy or dissolution of either all of the Class C Members or
all of the Class P Members.
12.3 Liquidation.
(a) Upon the occurrence of an event of dissolution as defined in the Act
or in Section 12.2 of this Agreement, the Company shall cease to engage in any
further business, except to the extent necessary to perform existing
obligations, and shall wind up its affairs and liquidate its assets. The Board
of Directors, or if there be no Directors then in office the Members, shall
appoint a liquidator (who may, but need not, be a Member) who shall have sole
authority and
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control over the winding up and liquidation of the Company's business and
affairs and shall diligently pursue the winding up and liquidation of the
Company. As soon as practicable after his appointment, the liquidator shall
cause to be filed a statement of intent to dissolve as required by section
18-203 of the Act.
(b) During the course of liquidation, the Members shall continue to share
profits and losses as provided in Section 9.1 of this Agreement, but there shall
be no cash distributions to the Members until the Distribution Date (as defined
in Section 12.4).
(c) A Member shall not have any obligation to contribute any amount to the
Company in the event of a negative balance in its Capital Account.
12.4 Liabilities. Liquidation shall continue until the Company's affairs
are in such condition that there can be a final accounting, showing that all
fixed or liquidated obligations and liabilities of the Company are satisfied or
can be adequately provided for under this Agreement. The assumption or guarantee
in good faith by one or more financially responsible persons shall be deemed to
be an adequate means of providing for such obligations and liabilities. When the
liquidator has determined that there can be a final accounting, the liquidator
shall establish a date (not to be later than the end of the taxable year of the
liquidation, i.e., the time at which the Company ceases to be a going concern as
provided in section 1.704-1(b)(2)(ii)(g) of the Income Tax Regulations, or, if
later, ninety (90) days after the date of such liquidation) for the distribution
of the proceeds of liquidation of the Company (the "Distribution Date"). The net
proceeds of liquidation of the Company shall be distributed to the Members as
provided in Section 12.6 hereof not later than the Distribution Date.
12.5 Settling of Accounts. Subject to section 18-804 of the Act, upon the
dissolution and liquidation of the Company, the proceeds of liquidation shall be
applied as follows: (a) first, to pay all expenses of liquidation and winding
up; (b) second, to pay all debts, obligations and liabilities of the Company, in
the order of priority as provided by law, other than debts owing to the Members
or on account of Members' contributions; (c) third, to pay all debts of the
Company owing to a Member; and (d) to establish reasonable reserves for any
remaining contingent or unforeseen liabilities of the Company not otherwise
provided for, which reserves shall be maintained by the liquidator on behalf of
the Company in a regular interest-bearing trust account for a reasonable period
of time as determined by the liquidator. If any excess funds remain in such
reserves at the end of such reasonable time, then such remaining funds shall be
distributed by the Company to the Members pursuant to Section 12.6 hereof.
12.6 Distribution of Proceeds. Subject to section 18-804 of the Act, upon
final liquidation of the Company but not later than the Distribution Date, the
net proceeds of liquidation remaining following the settling of accounts in
accordance with Section 12.5 hereof shall be distributed to the Members in
proportion to and up to the balance of their respective positive Capital
Accounts as those accounts are determined after all adjustments to such Capital
Accounts for the taxable year of the Company during which the liquidation occurs
as are required by this Agreement and Income Tax Regulations section 1.704-1(b),
such adjustments to be made within the time specified in such Income Tax
Regulations.
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12.7 Certificate of Cancellation. Upon dissolution and liquidation of the
Company, the liquidator shall cause to be executed and filed with the Secretary
of State of the State of Delaware, a certificate of cancellation in accordance
with section 18-203 of the Act.
ARTICLE 13
INDEMNIFICATION
13.1 Indemnification: Proceeding Other Than by Company. The Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or in the
right of the Company, by reason of the fact that he is or was a Director, Member
or officer of the Company (and may similarly indemnify employees or agents of
the Company), or is or was serving at the request of the Company as a manager,
member, director, officer, employee or agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
13.2 Indemnification: Proceeding by Company.
(a) The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he is or was an officer of the Company (and may
similarly indemnify employees or agents of the Company), or is or was serving at
the request of the Company as a manager, member, director, officer, employee or
agent of another limited liability company, corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the Company.
(b) The Company will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he is or was a Director of the Company, or is or was a
Director of the Company serving at the request of the Company as a manager,
member, director, officer, employee or agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him in
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connection with the defense or settlement of the action or suit if he acted in
good faith in accordance with Section 4.8 hereof.
(c) With respect to indemnification pursuant to subsection (a) or (b)
above, such indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the Company or for
amounts paid in settlement to the Company, unless and only to the extent that
the court in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
13.3 Mandatory Advancement of Expenses. The expenses of Directors, Members
and officers incurred in defending a civil or criminal action, suit or
proceeding must be paid by the Company as they are incurred and in advance of
the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the Director, Member or officer to repay the
amount if it is ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by the Company. The provisions of this
Section 13.3 do not affect any rights to advancement of expenses to which
personnel of the Company other than Directors, Members or officers may be
entitled under any contract or otherwise.
13.4 Effect and Continuation. The indemnification and advancement of
expenses authorized in or ordered by a court pursuant to Section 13.1 to Section
13.3, inclusive:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the Certificate
or any limited liability company agreement, vote of Members or disinterested
Directors, if any, or otherwise, for either an action in his official capacity
or an action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to Section 13.2 or for the
advancement of expenses made pursuant to Section 13.3, may not be made to or on
behalf of any Member, Director or officer if a final adjudication establishes
that his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a Member, Director,
officer, employee or agent and inures to the benefit of his heirs, executors and
administrators.
13.5 Insurance and Other Financial Arrangements.
(a) The Board of Directors may cause the Company to purchase and maintain
insurance or make other financial arrangements on behalf of any person who is or
was a Member, Director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a manager, Member, director, officer,
employee or agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise for any liability asserted
against him and liability and expenses incurred by him in his capacity as a
Director, member, director, officer, employee or agent, or arising out of his
status as such, whether or not the Company has the authority to indemnify him
against such liability and expenses.
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(b) The other financial arrangements made by the Company pursuant to
Section 13.5(a) may include:
(i) The creation of a trust fund;
(ii) The establishment of a program of self-insurance;
(iii) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the Company; or
(iv) The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this Section 13.5(b) may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
(c) In the absence of fraud:
(i) The decision of the Company as to the propriety of the terms and
conditions of any insurance or other financial arrangement made pursuant
to this Section 13.5 and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
(ii) The insurance or other financial arrangement:
(A) Is not void or voidable; and
(B) Does not subject any Director or Member approving it to
personal liability for his action,
even if a Director or Member approving the insurance or other financial
arrangement is a beneficiary of the insurance or other financial arrangement.
13.6 Notice of Indemnification and Advancement. Any indemnification of, or
advancement of expenses to, a Director, Member or officer in accordance with
this Article 13, if arising out of a proceeding by or on behalf of the Company,
shall be reported in writing to the Members with or before the notice of the
next Members' meeting.
13.7 Repeal or Modification. Any repeal or modification of this Article 13
by the Members of the Company shall not adversely affect any right of a
Director, Member or officer of the Company existing hereunder at the time of
such repeal or modification.
ARTICLE 14
INSPECTION OF COMPANY RECORDS; ANNUAL AND OTHER REPORTS
14.1 Records to be Kept. The Company shall keep at its registered office:
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(a) A current list of the full name and last known business, residence or
mailing address of each Member and Director separately identifying the Members
in alphabetical order and the Directors, if any, in alphabetical order;
(b) A copy of the filed Certificate and all amendments thereto, together
with executed copies of any powers of attorney pursuant to which any document
has been executed;
(c) Copies of this Agreement, and all amendments hereto;
(d) Copies of the Company's federal income tax returns and reports, if
any, for, at least, the three most recent years; and
(e) Copies of any financial statements of the Company for, at least, the
three most recent years.
14.2 Access to Company Information. The accounting books and records, the
record of Members, and minutes of proceedings of the Members of the Company,
including, without limitation such information necessary to conduct periodic
audits of various kinds (e.g. EHS, financial), shall be open to inspection upon
the reasonable request of any Member at any reasonable time during usual
business hours, for a purpose reasonably related to such Member's interest as a
Member. Such inspection by a Member may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and make
extracts. In addition, the Members shall have reasonable access to the Officers
of the Company in order to discuss the Company's business.
14.3 Annual and Quarterly Reports.
(a) The Board of Directors shall within 45 days after the end of the first
three Fiscal Quarters and within 90 days after the close of a Fiscal Year,
deliver or mail to the Members, the quarterly and annual, respectively,
financial statements of the Company.
(b) The income statements and balance sheets referred to in this Section
14.3 shall be accompanied by the report thereon, if any, of any independent
accountants engaged by the Company or the certificate of an authorized officer
of the Company that such financial statements were prepared without audit from
the books and records of the Company.
(c) The annual financial statements of the Company shall be audited by
independent accountants, and independent accountants shall participate in the
preparation of quarterly financial statements of the Company, in each case
consistent with the rules of the Securities and Exchange Commission relating to
annual and quarterly financial statements of publicly-traded companies.
ARTICLE 15
DEFAULTS AND REMEDIES
15.1 Defaults. If a Member materially defaults in the performance of its
obligations under this Agreement, and such default is not cured within ten (10)
days after notice of such
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default is given by a Director to the defaulting Member for a default that can
be cured by the payment of money, or within thirty (30) days after notice of
such default is given by a Director to the defaulting Member for any other
default, then the non-defaulting Members shall have the rights and remedies
described in Section 15.2 hereunder in respect of the default.
15.2 Remedies. If a Member fails to perform its obligations under this
Agreement, any other Member shall have, in addition to any rights and remedies
provided hereunder, all such rights and remedies as are provided at law or in
equity.
15.3 No Waiver. No consent or waiver, express or implied, by a Member to
or of any breach or default by another Member in the performance by such other
Member of its obligations under this Agreement shall constitute a consent to or
waiver of any similar breach or default by any other Member. Failure by a Member
to complain of any act or omission to act by another Member, or to declare such
other Member in default, irrespective of how long such failure continues, shall
not constitute a waiver by such Member of its rights under this Agreement.
ARTICLE 16
MISCELLANEOUS
16.1 Amendments.
(a) Subject to any contrary provisions of the Act, this Agreement may be
amended only by the affirmative vote of Members owning all of the Class
Membership Interest of both Class C and Class P. Any such amendment shall be in
writing, duly executed by all the Members.
(b) Subject to any contrary provisions of the Act, the Certificate may
only be amended by the affirmative vote of Members owning one hundred percent
(100%) of all of the Percentage Interests entitled to vote. Any such amendment
shall be in writing, and shall be executed and filed in accordance with section
18-202 of the Act.
16.2 Representation of Shares of Companies or Interests in Other Entities.
The chief executive officer, any vice president or the secretary or any
assistant secretary of this Company is authorized to vote, represent and
exercise on behalf of this Company all rights incident to any and all shares of
any other company or companies, or any interests in any other entity, standing
in the name of this Company. The authority herein granted to said officers to
vote or represent on behalf of this Company any and all shares held by this
Company in any other company or companies, or any interests in any other entity,
may be exercised either by such officers in person or by any other person
authorized so to do by proxy or power of attorney duly executed by said
officers.
16.3 Seal. The Members or Board of Directors may adopt a seal of the
Company in such form as the Members or the Board of Directors (as the case may
be) shall decide.
16.4 Actions by Class P Members and Class C Members. Phillips shall ensure
that each of the Class P Members, and Chevron shall ensure that each of the
Class C Members, takes
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all actions necessary to be taken by such Member in order to fulfill the
obligations of such Member, or of Phillips or Chevron, as the case may be, under
this Agreement.
16.5 Entire Agreement. This Agreement, including the exhibits and
schedules hereto, constitutes the entire agreement between the Members with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties.
No party hereto shall be liable or bound to the other in any manner by any
warranties, representations or covenants with respect to the subject matter
hereof except as specifically set forth herein.
16.6 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except that the provisions
of Article 13 are for the benefit of the persons to be indemnified by the
Company.
16.7 Governing Law; Jurisdiction and Forum; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed under the
substantive laws of the State of Delaware, without regard to Delaware choice of
law provisions.
(b) Each party hereto irrevocably submits to the jurisdiction of any
Delaware state court or any federal court sitting in the State of Delaware in
any action arising out of or relating to this Agreement, and hereby irrevocably
agrees that all claims in respect of such action may be heard and determined in
such Delaware state or federal court. Each party hereto hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding. The parties
hereto further agree, to the extent permitted by law, that final and
unappealable judgment against any of them in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified copy of which shall be conclusive evidence of the fact and amount of
such judgment.
(c) To the extent that any party hereto has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, each
party hereto hereby irrevocably waives such immunity in respect of its
obligations with respect to this Agreement.
(d) Each party hereto waives, to the fullest extent permitted by
applicable laws, any right it may have to a trial by jury in respect of any
action, suit or proceeding arising out of or relating to this Agreement. Each
party hereto certifies that it has been induced to enter into this Agreement by,
among other things, the mutual waivers and certifications set forth above in
this Section 16.7.
16.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the
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same instrument, and shall become effective when there exist copies hereof
which, when taken together, bear the authorized signatures of each of the
parties hereto. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
16.9 Titles and Subtitles; Form of Pronouns; Construction and Definitions.
The titles of the sections and paragraphs of this Agreement are for convenience
only and are not to be considered in construing this Agreement. All pronouns
used in this Agreement shall be deemed to include masculine, feminine and neuter
forms, the singular number includes the plural and the plural number includes
the singular. Unless otherwise specified, references to Sections or Articles are
to the Sections or Articles in this Agreement. Unless the context otherwise
requires, the term "including" shall mean "including, without limitation".
16.10 Delaware Limited Liability Company Act Prevails. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the Act and the Delaware General Corporation Law shall
govern the construction of this Agreement; provided, however, that in the event
of any inconsistency between such laws, the provisions of the Act shall prevail.
16.11 Severability. If one or more provisions of this Agreement are held
by a proper court to be unenforceable under applicable law, portions of such
provisions, or such provisions in their entirety, to the extent necessary and
permitted by law, shall be severed herefrom, and the balance of this Agreement
shall be enforceable in accordance with its terms.
-43-
<PAGE>
IN WITNESS WHEREOF, the undersigned hereby execute this Limited Liability
Company Agreement as of the date first set forth above.
CHEVRON U.S.A. INC.
By /s/ H.P. Walker
---------------------------------------
Name H.P. Walker
-------------------------------------
Title Assistant Secretary
------------------------------------
CHEVRON CORPORATION
By /s/ H.P. Walker
---------------------------------------
Name H.P. Walker
-------------------------------------
Title Assistant Secretary
------------------------------------
CHEVRON OVERSEAS PETROLEUM INC.
By /s/ H.P. Walker
---------------------------------------
Name H.P. Walker
-------------------------------------
Title Assistant Secretary
------------------------------------
-44-
<PAGE>
CHEVRON PIPE LINE COMPANY
By /s/ H.P. Walker
---------------------------------------
Name H.P. Walker
-------------------------------------
Title Assistant Secretary
------------------------------------
-45-
<PAGE>
PHILLIPS PETROLEUM COMPANY
By /s/ John E. Lowe
---------------------------------------
Name John E. Lowe
-------------------------------------
Title Sr. Vice President Planning and
------------------------------------
Stratetic Transactions
DRILLING SPECIALTIES CO.
By /s/ M.J. Hagenson
---------------------------------------
Name Mary Jane Hagenson
-------------------------------------
Title Vice President
------------------------------------
WESTTEX 66 PIPELINE CO.
By /s/ M.J. Brenk
---------------------------------------
Name M.J. Brenk
-------------------------------------
Title President
------------------------------------
PHILLIPS PETROLEUM INTERNATIONAL
CORPORATION
By /s/ Rand C. Berney
---------------------------------------
Name Rand C. Berney
-------------------------------------
Title Vice President and Controller
------------------------------------
-46-
<PAGE>
SCHEDULE 1
NAMES AND ADDRESSES OF MEMBERS
S1-1
<PAGE>
SCHEDULE 2
INITIAL DIRECTORS
Name Address
----------------------------------- ------------------------------------------
Class C Directors:
-----------------
Darry W. Callahan
Martin R. Klitten
Class P Directors:
-----------------
James Mulva
John E. Lowe
Non-Voting Directors:
--------------------
James Gallogly
Kent Potter
S2-1
<PAGE>
SCHEDULE 3
NAMES AND ADDRESSES, CLASS OF MEMBERSHIP INTEREST, CAPITAL CONTRIBUTIONS AND
PERCENTAGE INTERESTS OF MEMBERS
Class of
Name and Address of Membership Date of Capital Percentage
Members Interest Contribution Account Interest
Chevron U.S.A. Inc. C Closing $ %
Chevron Overseas C Closing $ %
Petroleum Inc.
Chevron Pipe Line Company C Closing $ %
Phillips Petroleum P Closing $ %
Company
Drilling Specialties Co. P Closing $ %
WesTTex 66 Pipeline Co. P Closing $ %
Phillips Petroleum P Closing $ %
International Corporation
Total Capital Contributions $ 100.0%
--------------------------------------------------------------------------------
S3-1
<PAGE>
SCHEDULE 4
INITIAL OFFICERS
Name Office
-------------------- -------------------------------------------------------
Jim Gallogly President & Chief Executive Officer
Kent Potter Senior Vice President & Chief Financial Officer
Greg Garland Senior Vice President, Planning & Strategic Transactions
Scott Meyer Senior Vice President, Styrenics & Specialty Chemicals
Mike Parker Senior Vice President, Aromatics
Tim Taylor Senior Vice President, Olefins & Polyolefins
Bob Hunt Vice President, Health, Environment & Safety
Sherry Richard Vice President, Human Resources
Mary Jane Hagenson Vice President, Technology
Jeff Taylor Vice President, North Americas Polyethylene
Greg Maxwell Vice President & Controller
Joe McKee Vice President & Treasurer
Larry Frazier Chief Information Officer
Bruce Waits General Tax Counsel
Rick Roberts Manufacturing Vice President
S4-1
