<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 17, 1997.
----------------
LYONDELL PETROCHEMICAL COMPANY
------------------------------
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or Other Jurisdiction of Incorporation)
1-10145 95-4160558
(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1221 MCKINNEY STREET, SUITE 1600, HOUSTON, TEXAS 77010
----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(713) 652-7200
--------------
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
--------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Exhibits
Exhibit Document
------- --------
10.32 First Amendment to Master Transaction Agreement between Lyondell
Petrochemical Company and Millennium Chemicals Inc.
10.33 Limited Partnership Agreement of Equistar Chemicals, LP
10.34 Form of Asset Contribution Agreement between Lyondell
Petrochemical Company, Lyondell Petrochemical L.P. Inc. and
Equistar Chemicals, LP
10.35 Form of Parent Agreement among Lyondell Petrochemical Company,
Millennium Chemicals Inc. and Equistar Chemicals, LP
2
<PAGE>
EXHIBIT INDEX
Exhibit Document
------- --------
10.32 First Amendment to Master Transaction Agreement between Lyondell
Petrochemical Company and Millennium Chemicals Inc.
10.33 Limited Partnership Agreement of Equistar Chemicals, LP
10.34 Form of Asset Contribution Agreement between Lyondell
Petrochemical Company, Lyondell Petrochemical L.P. Inc. and
Equistar Chemicals, LP
10.35 Form of Parent Agreement among Lyondell Petrochemical Company,
Millennium Chemicals Inc. and Equistar Chemicals, LP
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 17, 1997 LYONDELL PETROCHEMICAL COMPANY
By: /s/ JEFFREY R. PENDERGRAFT
-------------------------------
Jeffrey R. Pendergraft
Sr. Vice President, General Counsel and Secretary
4
<PAGE>
EXHIBIT 10.32
FIRST AMENDMENT TO
MASTER TRANSACTION AGREEMENT
BETWEEN
LYONDELL PETROCHEMICAL COMPANY
AND
MILLENNIUM CHEMICALS INC.
________________________________________________________________________________
<PAGE>
FIRST AMENDMENT TO MASTER TRANSACTION AGREEMENT
This First Amendment (this "Amendment"), dated October 10, 1997, to that
certain Master Transaction Agreement dated July 25, 1997 (the "Agreement"), is
entered into by and between Lyondell Petrochemical Company ("Lyondell") and
Millennium Chemicals Inc. ("Millennium" and, together with Lyondell, the
"Parties").
Capitalized terms not otherwise defined herein are defined as provided for
in the Agreement.
WHEREAS, the Agreement contemplates the formation of a joint venture in the
form of a partnership (the "Partnership"), which will acquire the Contributed
Businesses to be contributed or caused to be contributed by Lyondell and by
Millennium Petrochemicals pursuant to respective asset contribution agreements;
WHEREAS, the Agreement sets forth: as Exhibit A thereto, a form of
partnership agreement with respect to the Partnership; as Exhibit B thereto, a
form of asset contribution agreement with respect to the contributions of assets
to the Partnership; and as Exhibit C thereto, a form of parent agreement;
WHEREAS, the Agreement provides that each of Lyondell and Millennium will
or will cause each agreement as to which such exhibits relate, in substantially
such form, to be executed and delivered by them or certain of their respective
Subsidiaries prior to Closing;
WHEREAS, as of the date of this Amendment, the Partnership has not been
formed and no partnership agreement with respect to the Partnership has been
entered into;
WHEREAS, as of the date of this Amendment, no asset contribution agreements
or parent agreement have been entered into;
WHEREAS, Lyondell and Millennium agree that certain changes to the form of
each of the partnership agreement, asset contribution agreement and parent
agreement, each as originally set forth in the Agreement, are desirable and in
each of their best interests;
WHEREAS, Section 1.5 of the Agreement contemplates that the Lyondell
contributing partner will execute and deliver to the Partnership on the Closing
Date a promissory note (the "Lyondell Note") in the principal amount of $345
million, the terms and provisions of which are to be consistent with Appendix C
to the Agreement; and
WHEREAS, Lyondell and Millennium agree that certain changes to the terms of
the Lyondell Note as originally set forth in Appendix C to the Agreement are
desirable and in each of their best interests;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual covenants
of the Parties set forth herein, it is hereby agreed as follows:
1. Revised Form of Agreements. The form of partnership agreement as set
forth in Exhibit A to the Agreement is hereby replaced in its entirety by the
form of Partnership Agreement attached hereto as Exhibit A and made a part of
this Amendment. The form of asset contribution agreement as set forth in Exhibit
B to the Agreement is hereby replaced in its entirety by the form of Asset
Contribution Agreement attached hereto as Exhibit B and made a part of this
Amendment. The form of parent agreement as set forth in Exhibit C to the
Agreement is hereby replaced in its entirety by the form of Parent Agreement
attached hereto as Exhibit C and made a part of this Amendment.
2. Revised Appendix C. Appendix C as set forth in the Agreement is hereby
replaced in its entirety by Appendix C hereto which is made a part of this
Amendment.
3. Effect on Agreement.
(a) All references in the Agreement to "Exhibit A" shall be deemed to
refer to the form of Partnership Agreement attached hereto as Exhibit A;
(b) All references in the Agreement to "Exhibit B" shall be deemed to
refer to the form of Asset Contribution Agreement attached hereto as
Exhibit B;
(c) All references in the Agreement to "Exhibit C" shall be deemed to
refer to the form of Parent Agreement attached hereto as Exhibit C;
(d) All references in the Agreement to "Appendix C" shall be deemed
to refer to Appendix C attached hereto;
(e) All references to the "Agreement" in the Agreement, shall be
deemed to refer to the Agreement, as amended by this Amendment.
(f) All rights and obligations of the Parties under the Agreement
shall remain unchanged except as set forth in this Amendment; and
4. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, and all of which when
taken together shall constitute one and the same original document.
-2-
<PAGE>
IN WITNESS WHEREOF, this First Amendment to that certain Master Transaction
Agreement has been executed on behalf of each of the Parties, by their
respective officers thereunto duly authorized, effective as of the date first
written above.
LYONDELL PETROCHEMICAL COMPANY
By:______________________________________________
Name: Dan F. Smith
Title: President and Chief Executive Officer
MILLENNIUM CHEMICALS INC.
By:______________________________________________
Name: William M. Landuyt
Title: Chairman and Chief Executive Officer
-3-
<PAGE>
APPENDIX C
TO
FIRST AMENDMENT TO MASTER TRANSACTION AGREEMENT
TERMS OF LYONDELL NOTE
------------------------
MAKER: Lyondell subsidiary that is a partner in the Partnership
AMOUNT: $345 million
TERM: Earlier of 3 years from Closing or 30 days after a
financing at Lyondell-CITGO Refining Company Ltd.
("LCR") which results in the repayment of LCR's existing
$450 million 5-year term loan and a distribution to
Lyondell of at least $345 million
RATE: 6 month LIBOR plus market spread for applicable credit
rating (Lyondell)
RIGHT OF In the event of a default under the note, Lyondell Group
OFFSET/SECURITY: waives right to distribution of proceeds and assign
those rights to the Partnership, in which event the
amounts so withheld will be deemed to be payments under
the note
COVENANTS: Standard affirmative covenants comparable to Lyondell
Assumed Debt (e.g., payment of interest, maintenance of
corporate existence)
OTHER: Prepayable, in whole or in part, at any time, without
penalty or premium
Senior note entitled to equal and ratable security with
any holders of secured debt issued by Lyondell or the
maker (subject to customary exceptions)
Cross-default with other Lyondell debt (including
Lyondell Assumed Debt, if such default is caused by an
action or failure to act on the part of Lyondell)
exceeding $25 million
GUARANTOR: Payments of interest and principal shall be fully and
unconditionally guaranteed by Lyondell, such guarantee
to be a senior obligation entitled to equal and ratable
security with any holders of Lyondell secured debt
(subject to customary exceptions)
Appendix C
<PAGE>
EXHIBIT 10.33
EXHIBIT A TO FIRST AMENDMENT TO
MASTER TRANSACTION AGREEMENT
LIMITED PARTNERSHIP
AGREEMENT
OF
EQUISTAR CHEMICALS, LP
--------------------------------------------------------------
ORGANIZED UNDER THE DELAWARE
REVISED UNIFORM LIMITED PARTNERSHIP ACT
--------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
SECTION 1 ORGANIZATION MATTERS................................................. 1
1.1 Formation of Partnership............................................. 1
1.2 Name................................................................. 2
1.3 Business Offices..................................................... 2
1.4 Purpose and Business................................................. 2
1.5 Filings.............................................................. 2
1.6 Power of Attorney.................................................... 2
1.7 Term................................................................. 3
SECTION 2 CAPITAL CONTRIBUTIONS................................................ 3
2.1 Acquisition of Units................................................. 3
2.2 Transaction Costs.................................................... 4
2.3 Property Contributions............................................... 4
2.4 Other Contributions.................................................. 4
2.5 Capital Accounts..................................................... 5
2.6 No Return of or on Capital........................................... 5
2.7 Partner Loans........................................................ 5
2.8 Administration and Investment of Funds............................... 5
SECTION 3 DISTRIBUTIONS........................................................ 5
3.1 Operating Distributions.............................................. 5
3.2 Liquidating Distributions............................................ 6
3.3 Withholding.......................................................... 6
3.4 Offset............................................................... 6
SECTION 4 BOOK AND TAX ALLOCATIONS............................................. 7
4.1 General Book Allocations............................................. 7
4.2 Change in Partner's Units............................................ 7
4.3 Deficit Capital Account and Nonrecourse Debt Rules................... 7
4.4 Federal Tax Allocations.............................................. 8
4.5 Other Tax Allocations................................................ 9
SECTION 5 ACCOUNTING, FINANCIAL REPORTING AND TAX MATTERS...................... 9
5.1 Fiscal Year.......................................................... 9
5.2 Method of Accounting for Financial Reporting Purposes................ 9
5.3 Books and Records; Right of Partners to Audit........................ 9
5.4 Reports and Financial Statements..................................... 10
5.5 Method of Accounting for Book and Tax Purposes....................... 10
5.6 Taxation............................................................. 10
5.7 Delegation........................................................... 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
SECTION 6 MANAGEMENT........................................................... 12
6.1 Partnership Governance Committee..................................... 12
6.2 Limitations on Authority of General Partners......................... 13
6.3 Lack of Authority of Persons Other Than General Partners
and Officers....................................................... 13
6.4 Composition of Partnership Governance Committee...................... 14
6.5 Partnership Governance Committee Meetings............................ 15
6.6 Partnership Governance Committee Quorum and General Voting
Requirement........................................................ 16
6.7 Partnership Governance Committee Unanimous Voting Requirements....... 16
6.8 Control of Interested Partner Issues................................. 19
6.9 Auxiliary Committees................................................. 19
6.10 Certain Limitations on Partner Representatives...................... 20
SECTION 7 OFFICERS AND EMPLOYEES............................................... 20
7.1 Partnership Officers................................................. 20
7.2 Selection and Term of Executive Officers............................. 21
7.3 Removal of Executive Officers........................................ 21
7.4 Duties............................................................... 22
7.5 CEO.................................................................. 22
7.6 Other Officers....................................................... 23
7.7 Secretary............................................................ 23
7.8 Salaries............................................................. 23
7.9 Delegation........................................................... 23
7.10 Employee Hirings.................................................... 23
7.11 General Authority................................................... 24
SECTION 8 STRATEGIC PLANS, ANNUAL BUDGETS AND LOANS............................ 24
8.1 Strategic Plan....................................................... 24
8.2 Annual Budget........................................................ 25
8.3 Funding of Partnership Expenses...................................... 25
8.4 Implementation of Budgets and Discretionary Expenditures by CEO...... 26
8.5 Strategic Plan Deadlock.............................................. 26
8.6 Loans................................................................ 27
SECTION 9 RIGHTS OF PARTNERS................................................... 28
9.1 Delegation and Contracts with Related Parties........................ 28
9.2 General Authority.................................................... 28
9.3 Limitation on Fiduciary Duty; Non-Competition........................ 29
9.4 Limited Partners..................................................... 31
9.5 Partner Covenants.................................................... 31
9.6 Special Purpose Entities............................................. 31
SECTION 10 TRANSFERS AND PLEDGES................................................ 32
10.1 Restrictions on Transfer and Prohibition on Pledge................... 32
10.2 Right of First Option................................................ 32
10.3 Inclusion of General or Limited Partner Units........................ 34
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
10.4 Rights of Transferee................................................. 34
10.5 Effective Date of Transfer........................................... 34
10.6 Transfer to Wholly Owned Affiliate................................... 34
10.7 Invalid Transfer..................................................... 35
SECTION 11 DEFAULT.............................................................. 35
11.1 Default.............................................................. 35
11.2 Remedies for Default................................................. 35
11.3 Purchase of Defaulting Partners' Units............................... 36
11.4 Liquidation.......................................................... 37
11.5 Certain Consequences of Default...................................... 37
SECTION 12 DISSOLUTION, LIQUIDATION AND TERMINATION............................. 37
12.1 Dissolution and Termination.......................................... 37
12.2 Procedures Upon Dissolution.......................................... 38
12.3 Termination of the Partnership....................................... 39
12.4 Asset and Liability Statement........................................ 39
SECTION 13 MISCELLANEOUS........................................................ 39
13.1 Confidentiality and Use of Information............................... 39
13.2 Indemnification...................................................... 41
13.3 Third Party Claim Reimbursement...................................... 43
13.4 Dispute Resolution................................................... 44
13.5 EXTENT OF LIMITATION OF LIABILITY, INDEMNIFICATION, ETC.............. 44
13.6 Further Assurances................................................... 44
13.7 Successors and Assigns............................................... 44
13.8 Benefits of Agreement Restricted to the Parties...................... 44
13.9 Notices.............................................................. 44
13.10 [Reserved].......................................................... 46
13.11 Severability........................................................ 46
13.12 Construction........................................................ 46
13.13 Counterparts........................................................ 46
13.14 Waiver of Right to Partition........................................ 46
13.15 Governing Law....................................................... 46
13.16 Jurisdiction; Consent to Service of Process; Waiver................. 46
13.17 Expenses............................................................ 47
13.18 Waiver of Jury Trial................................................ 47
13.19 Payment Terms and Interest Calculations............................. 47
13.20 Usury Savings Clause................................................ 47
13.21 Other Waivers....................................................... 48
13.22 Special Joinder by Millennium America............................... 48
13.23 Amendment........................................................... 48
</TABLE>
iii
<PAGE>
APPENDICES
APPENDIX A - Defined Terms
APPENDIX B - Partnership Financial Statements and Reports
APPENDIX C - Initial Executive Officers
APPENDIX D - Dispute Resolution Procedures
APPENDIX E - Division of Partnership Business
iv
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
OF
EQUISTAR CHEMICALS, LP
This Limited Partnership Agreement of Equistar Chemicals, LP dated October
__, 1997 is entered into by and among Lyondell Petrochemical G.P. Inc.
("Lyondell GP"), Lyondell Petrochemical L.P. Inc. ("Lyondell LP"), Millennium
Petrochemicals GP LLC ("Millennium GP") and Millennium Petrochemicals LP LLC
("Millennium LP").
The definitions of capitalized terms used in this Agreement, including the
appendices hereto, are set forth in Appendix A hereto.
WHEREAS, as contemplated by the Master Transaction Agreement, Lyondell
Petrochemical Company ("Lyondell"), the ultimate parent entity of each of
Lyondell GP and Lyondell LP, and Millennium Chemicals Inc. ("Millennium"), the
ultimate parent entity of each of Millennium GP and Millennium LP, desire to
establish a joint venture in the form of a limited partnership to engage in the
olefins, polyolefins and related petrochemicals businesses in the United States
and internationally;
WHEREAS, in furtherance of the foregoing, Lyondell GP, Lyondell LP,
Millennium GP and Millennium LP wish to form the Partnership to acquire, own and
operate the Contributed Businesses, Initial Assets and such other assets and
businesses as are consistent with the purposes of the Partnership.
WHEREAS, on the Closing Date, the Related Agreements relating to the
Partnership and the Contributed Businesses also will be entered into, all as set
forth in the Master Transaction Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
of the parties hereto, it is hereby agreed as follows:
SECTION 1
ORGANIZATION MATTERS
1.1 Formation of Partnership. The Certificate of Limited Partnership
of the Partnership has heretofore been or is on the date hereof being filed with
the Secretary of State of the State of Delaware. The Partners desire to enter
into this Agreement which constitutes the limited partnership agreement of the
Partnership as of the date hereof. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. Without the need
for the consent of any other Person, upon their execution of this Agreement, (i)
each of Lyondell GP and Millennium GP is hereby admitted to the Partnership as a
general partner of the Partnership and (ii) each of Lyondell LP and Millennium
LP is hereby admitted to the Partnership as a limited partner of the
Partnership. Subject
<PAGE>
to the restrictions set forth in this Agreement, the Partnership shall have the
power to exercise all the powers and privileges granted by this Agreement and by
the Act, together with any powers incidental thereto, so far as such powers and
privileges are necessary, appropriate, convenient or incidental for the conduct,
promotion or attainment of the purposes of the Partnership.
1.2 Name. The name of the Partnership is "Equistar Chemicals, LP" The
Partnership's business may be conducted under such name or any other name or
names deemed advisable by the Partnership Governance Committee. The General
Partners will comply or cause the Partnership to comply with all applicable laws
and other requirements relating to fictitious or assumed names.
1.3 Business Offices. The principal place of business of the
Partnership shall be 1221 McKinney Street, Houston, Texas 77010, or such other
place as the General Partners may from time to time determine. The registered
agent of the Partnership in the State of Delaware is The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801.
1.4 Purpose and Business. The business of the Partnership shall be to,
directly or indirectly, (i) engage in the Specified Petrochemicals Businesses,
in the United States and internationally, including research and development,
purchasing, processing and disposing of feedstocks, and manufacturing, marketing
and distributing products, (ii) acquire and dispose of properties and assets
used or useful in connection with the foregoing and (iii) do all things
necessary, appropriate, convenient or incidental in connection with the
ownership, operation or financing of such business and activities, or otherwise
in connection with the foregoing, as are permitted under the Act, including the
acquisition and operation of the Contributed Businesses.
1.5 Filings. The General Partners shall, or shall cause the Partnership
to, execute, swear to, acknowledge, deliver, file or record in public offices
and publish all such certificates, notices, statements or other instruments, and
take all such other actions, as may be required by law for the formation,
reformation, qualification, registration, operation or continuation of the
Partnership in any jurisdiction, to maintain the limited liability of the
Limited Partners, to preserve the Partnership's status as a partnership for tax
purposes or otherwise to comply with applicable law. Upon request of the General
Partners, the Limited Partners shall execute all such certificates and other
documents as may be necessary, in the sole judgment of the General Partners, in
order for the General Partners to accomplish all such executions, swearings,
acknowledgments, deliveries, filings, recordings in public offices, publishings
and other acts. Each General Partner hereby agrees and covenants that it will
execute any appropriate amendment to the Certificate of Limited Partnership of
the Partnership pursuant to Section 17-204 of the Act to reflect any admission
of a Substitute General Partner in accordance with this Agreement.
1.6 Power of Attorney. Each Limited Partner hereby irrevocably makes,
constitutes and appoints its Affiliated General Partner and any successor
thereto permitted as provided herein, with full power of substitution and
resubstitution, as the true and lawful agent and attorney-in-fact of such
Limited Partner, with full power and authority in the name, place and stead of
such Limited Partner to execute, swear, acknowledge, deliver, file or record in
public offices and publish: (i) all certificates and other instruments
(including counterparts thereof) which such General Partner deems
2
<PAGE>
appropriate to reflect any amendment, change or modification of or supplement to
this Agreement in accordance with the terms of this Agreement; (ii) all
certificates and other instruments and all amendments thereto which such General
Partner deems appropriate or necessary to form, qualify or continue the
Partnership in any jurisdiction, to maintain the limited liability of such
Limited Partner, to preserve the Partnership's status as a partnership for tax
purposes or otherwise to comply with applicable law; and (iii) all conveyances
and other instruments or documents which such General Partner deems appropriate
or necessary to reflect the transfers or assignments of interests in, to or
under, this Agreement, including the Units, the dissolution, liquidation and
termination of the Partnership, and the distribution of assets of the
Partnership in connection therewith, pursuant to the terms of this Agreement.
Each Limited Partner hereby agrees to execute and deliver to its Affiliated
General Partner within five Business Days after receipt of a written request
therefore such other further statements of interest and holdings, designations,
powers of attorney and other instruments as such General Partner deems
necessary. The power of attorney granted herein is hereby declared irrevocable
and a power coupled with an interest, shall survive the bankruptcy, dissolution
or termination of such Limited Partner and shall extend to and be binding upon
such Limited Partner's successors and permitted assigns. Each Limited Partner
hereby (i) agrees to be bound by any representations made by the agent and
attorney-in-fact acting in good faith pursuant to such power of attorney; and
(ii) waives any and all defenses which may be available to contest, negate, or
disaffirm any action of the agent and attorney-in-fact taken in accordance with
such power of attorney.
1.7 Term. The term for which the Partnership is to exist as a limited
partnership is from the date of first filing of the Partnership's Certificate of
Limited Partnership with the office of the Secretary of State of the State of
Delaware through the dissolution of the Partnership in accordance with the
provisions of Section 12.
SECTION 2
CAPITAL CONTRIBUTIONS
2.1 Acquisition of Units. On the date hereof, each Partner has
contributed cash to the Partnership in exchange for Units as shown below:
<TABLE>
<CAPTION>
Partner Cash Units
<S> <C> <C>
Lyondell GP $ 11,400 114
Millennium GP $ 8,600 86
Lyondell LP $ 558,600 5,586
Millennium LP $ 421,400 4,214
TOTAL $1,000,000 10,000
</TABLE>
3
<PAGE>
The Units shall entitle the holder to the distributions set forth in Section 3
and to the allocation of Profits, Losses and other items as set forth in Section
4. Units shall not be represented by certificates.
2.2 Transaction Costs. If the Partnership is entitled to deductions
with respect to costs described in Section 6.10 of the Master Transaction
Agreement to which a Partner is not entitled to reimbursement, the incurrence of
such costs shall not increase the Capital Account of such a Partner, and such
Partner shall be entitled to any deductions attributable to such costs.
2.3 Property Contributions. On the Closing Date, the Limited Partners
shall make the following additional contributions:
(a) Lyondell LP. Pursuant to its Asset Contribution Agreement, Lyondell LP
will contribute or cause to be contributed to the Partnership, the Initial
Assets contemplated thereby subject to the Assumed Liabilities contemplated
thereby. Thereupon, its Capital Account will be credited with the amount
set forth on Schedule 2.3. In addition, on the Closing Date, Lyondell LP
will execute and deliver to the Partnership the Lyondell Note. Thereafter,
its Capital Account will be increased as and to the extent principal
payments are made on the Lyondell Note.
(b) Millennium LP. Pursuant to its Asset Contribution Agreement, Millennium LP
will contribute or cause to be contributed to the Partnership, the Initial
Assets contemplated thereby subject to the Assumed Liabilities contemplated
thereby. Contemporaneously with such contribution, the Partnership will
borrow $750 million as contemplated by Section 8.6 and use the proceeds of
such borrowing to satisfy the Millennium Debt in full. Thereupon,
Millennium LP's Capital Account will be credited with the amount set forth
on Schedule 2.3.
(c) The Partners intend that the contribution of assets subject to liabilities
provided for in Sections 2.3(a) and (b) will qualify as a tax-free
contribution under Section 721 of the Code in which no Partner will
recognize gain or loss. The Partners agree that the Partnership will so
file its tax return, and each Partner agrees to file its tax return on the
same basis and to maintain such position consistently at all times
thereafter.
2.4 Other Contributions. From time to time and subject to the
limitations of Section 6.7, if applicable, the Partnership Governance Committee
(or the CEO acting pursuant to Section 8.3), on behalf of the Partnership, may
issue a written notice ("Funding Notice") to the Limited Partners calling for an
additional capital contribution to the Partnership. Any Funding Notice will set
forth:
(a) the use of funds therefor;
(b) the aggregate amount of the capital contribution required, which amount
shall be apportioned among the Limited Partners Pro Rata; and
(c) the date by which the capital contribution must be received by the
Partnership, which date will not be earlier than seven Business Days from
the date the Funding Notice is issued.
4
<PAGE>
Each Limited Partner shall timely wire transfer its Pro Rata share of the amount
set forth in the Funding Notice to the Partnership's bank account. Except as
expressly set forth in this Agreement, no Partner shall be permitted or
required to make any additional capital contribution to the Partnership.
2.5 Capital Accounts. Each Partner's Capital Account shall be
determined and maintained in accordance with Regulation (S)1.704-1(b)(2)(iv) as
reasonably interpreted by the Tax Matters Partner. The Tax Matters Partner
shall have the discretion, after consultation with the other General Partner, to
make those determinations, valuations, adjustments and allocations with respect
to each Partner's Capital Account as it deems appropriate so that the
allocations made pursuant to this Agreement will have substantial economic
effect as such term is used in Regulation (S)1.704-1(b). If any Partner
transfers all or a portion of its Units in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent such Capital Account relates to the transferred Units.
2.6 No Return of or on Capital. Except as provided in Sections 3 and 4,
no Partner shall receive any interest or other return on its capital
contributions or on the balance in its Capital Account and no return of its
capital contributions.
2.7 Partner Loans. A Partner or its Affiliates may loan funds to the
Partnership on such terms and conditions as may be approved by the Partnership
Governance Committee, and, subject to other applicable law, have the same rights
and obligations with respect thereto as a Person who is neither a Partner nor an
Affiliate of a Partner. The existence of such a relationship and acting in such
a capacity will not result in a Limited Partner being deemed to be participating
in the control of the business of the Partnership or otherwise affect the
limited liability of a Partner. If a Partner or any Affiliate thereof is a
lender, in exercising its rights as a lender, including making its decision
whether to foreclose on property of the Partnership, such lender will have no
duty to consider (i) its status as a Partner or an Affiliate of a Partner, (ii)
the interests of the Partnership, or (iii) any duty it may have to any other
Partner or the Partnership.
2.8 Administration and Investment of Funds. The administration and
investment of Partnership funds shall be in accordance with the procedures and
guidelines as shall be adopted by the Partnership Governance Committee. The
Partnership may delegate to a third party (which may be an Affiliate of one of
the Partners) the responsibility for administering and investing Partnership
funds pursuant to such guidelines.
SECTION 3
DISTRIBUTIONS
3.1 Operating Distributions. Subject to Section 17-607 of the Act and
other applicable law, Available Net Operating Cash shall be distributed as soon
as practicable following the end of each month to the Partners as follows:
5
<PAGE>
(a) General. On a cumulative basis, (i) distributions are to be made to the
Partners Pro Rata to the extent of cumulative Profits, and (ii) the
remaining distributions are to be made to the Limited Partners Pro Rata.
For simplicity, however, in the absence of extraordinary transactions, the
Partnership may make monthly distributions to the Partners Pro Rata,
subject to subsequent adjustments as provided below in this Section 3.1.
(b) Return of Excess Distributions. Within 90 days after the end of each year,
each General Partner shall return to the Partnership any amount it receives
for such year that is in excess of its share of the sum of the cumulative
undistributed Profits as of the end of the preceding year and the Profits
for such year.
(c) Effect of Operating Losses. For any year in which a General Partner's
share of a Loss is sustained that exceeds its previously undistributed
Profits, no distributions shall be made to such General Partner in any
subsequent year until such excess Loss is recouped, and for subsequent
years only Profits in excess of such recoupment shall be treated as Profit
for purpose of this Section 3.1.
(d) Makeup Distributions. If for any reason the Partnership does not make a
monthly distribution to all Partners Pro Rata, each General Partner shall
be entitled at the end of the year to receive the amount necessary to make
its aggregate distributions for the year equal the amount it was entitled
to receive and keep pursuant to the preceding criteria.
3.2 Liquidating Distributions. Distributions to the Partners of cash or
property arising from a liquidation of the Partnership shall be made in
accordance with the Capital Account balances of the Partners as provided in
Section 12.2(d).
3.3 Withholding. The Partnership is authorized to withhold from
distributions to a Partner and to pay over to a foreign, federal, state or local
government, any amounts required to be withheld pursuant to the Code or any
provisions of any other foreign, federal, state or local law. Any amounts so
withheld shall be treated as distributed to such Partner pursuant to this
Section 3 for all purposes of this Agreement, and shall be offset against any
amounts otherwise distributable to such Partner.
3.4 Offset. Any amount otherwise distributable to a Partner pursuant to
this Section 3 shall, unless otherwise agreed by two Representatives of the
Nonconflicted General Partner pursuant to Section 6.8, be applied by the
Partnership to satisfy any of the following obligations that are owed by such
Partner or its Affiliate to the Partnership and that are not paid when due:
(a) Lyondell Note and Other Notes. In the case of Lyondell LP, the failure to
pay any interest or principal when due on the Lyondell Note or, in the case
of any Partner, the failure to pay any interest or principal when due on
any indebtedness for borrowed money of such Partner or any Affiliate of
such Partner to the Partnership.
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(b) Asset Contribution Agreement. In the case of any Partner, the failure of
such Partner or any Affiliate of such Partner to make any payment pursuant
to Section 6 of its Asset Contribution Agreement that has been Finally
Determined to be due.
(c) Contribution. In the case of any Partner, the failure to make any capital
contribution required pursuant to this Agreement (other than pursuant to
its Asset Contribution Agreement).
SECTION 4
BOOK AND TAX ALLOCATIONS
4.1 General Book Allocations. Except as otherwise provided in Sections
4.2 and 4.3, Profits or Losses each year shall be allocated among the Partners
Pro Rata for book purposes. As used herein, "book" means the allocations used
to determine debits and credits to the Capital Accounts of the Partners and to
determine the amounts distributable to the Partners pursuant to Section 3 and
Section 12.2(d). It does not refer to the method in which books are maintained
for financial reporting purposes pursuant to Section 5.2.
4.2 Change in Partner's Units. If during a year Units are transferred
or new Units issued, allocations among the Partners shall be made in accordance
with their interests in the Partnership from time to time during such year in
accordance with Section 706 of the Code, using the closing-of-the-books method,
except that depreciation and other amortization with respect to each Partnership
asset shall be deemed to accrue ratably on a daily basis over the entire period
during such year that the asset is owned and in service by the Partnership.
4.3 Deficit Capital Account and Nonrecourse Debt Rules. The special
rules in this Section 4.3 apply in the following order to take into account the
possibility of the Partners' having deficit Capital Account balances for which
they are not economically responsible and the effect of the Partnership's
incurring nonrecourse debt, directly or indirectly.
(a) Partnership Minimum Gain Chargeback. If there is a net decrease in
"partnership minimum gain" during any year, determined in accordance with
the tiered partnership rules of Regulation (S)1.704-2(k), each Partner
shall be allocated items of income and gain for such year equal to such
Partner's share of the net decrease in partnership minimum gain within the
meaning of Regulation (S)1.704-2(g)(2), except to the extent not required
by Regulation (S)1.704-2(f). To the extent that this subsection (a) is
inconsistent with Regulation (S)1.704-2(f) or (S)1.704-2(k) or incomplete
with respect to such regulations, the minimum gain chargeback provided for
herein shall be applied and interpreted in accordance with such
regulations.
(b) Partner Minimum Gain Chargeback. If there is a net decrease in "partner
nonrecourse debt minimum gain" during any year, within the meaning of
Regulation (S) 1.704-2(i)(2), each Partner who has a share of such gain,
determined in accordance with Regulation (S) 1.704-2(i)(5), shall be
allocated items of income and gain for such year (and, if necessary,
subsequent years) equal to such Partner's share of the net decrease in
partner nonrecourse debt minimum gain. To the extent that this
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subsection (b) is inconsistent with Regulation (S) 1.704-2(i) or 1.704-2(k)
or incomplete with respect to such regulations, the partner nonrecourse
debt minimum gain chargeback provided for herein shall be applied and
interpreted in accordance with such regulations.
(c) Deficit Account Chargeback and Qualified Income. If any Partner has an
Adjusted Capital Account Deficit at the end of any year, including an
Adjusted Capital Account Deficit for such Partner caused or increased by an
adjustment, allocation or distribution described in Regulation (S)1.704-
1(b)(2)(ii)(d)(4), (5) or (6), such Partner shall be allocated items of
income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain) in an amount and
manner sufficient to eliminate such Adjusted Capital Account Deficit as
quickly as possible. This subsection (c) is intended to constitute a
"qualified income offset" pursuant to Regulation (S)1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
(d) Partner Nonrecourse Deductions. Any partner nonrecourse deductions for any
year or other period shall be allocated to the Partner who bears the
economic risk of loss with respect to the partner nonrecourse debt to which
such partner nonrecourse deductions are attributable in accordance with
Regulation (S)1.704-2(i) or (S)1.704-2(k).
(e) Curative Allocations. The Allocations provided by this Section 4.3 may not
be consistent with the manner in which the Partners intend to divide
Profits, Losses and similar items. Accordingly, Profits, Losses and other
items will be reallocated among the Partners (in the same year and to the
extent necessary, in subsequent years) in a manner consistent with
Regulation (S)1.704-1(b) and 1.704-2 so as to prevent such allocations from
distorting the manner in which Profits, Losses and other items are intended
to be allocated among the Partners pursuant to Sections 4.1 and 4.2.
(f) Nonrecourse Debt Sharing. For purposes of this Agreement, nonrecourse
deductions, within the meaning of Regulation (S)1.704-2, shall be deemed to
be allocated among the Partners Pro Rata. Solely for purposes of
determining a Partner's proportionate share of the "excess nonrecourse
liabilities" of the Partnership within the meaning of Regulation (S)1.752-
3(a)(3), Partnership Profits are allocated to the Partners Pro Rata.
4.4 Federal Tax Allocations.
(a) General Rule. Except as otherwise provided in the following paragraphs of
this Section 4.4, allocations for federal income tax purposes of items of
income, gain, loss and deduction, and credits and basis therefor, shall be
made in the same manner as book allocations are made.
(b) Elimination of Book/Tax Disparities. Taxable income and tax deductions
shall be shared among the Partners so as to take into account the variation
between the Book Value and the adjusted tax basis of each property at the
time it is contributed to the Partnership and at each time it is revalued
when any other cash or property is contributed to the Partnership.
(i) To account for such variation with respect to the Initial Assets , the
Partnership shall elect in accordance with Regulations 1.704-3(b) and (c)
such
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reasonable combination of the traditional method and, to the minimum extent
required, the traditional method with curative allocations that will as
closely as possible, in the opinion of the General Partners, cause the
total depreciation deductions plus curatives with respect to the Initial
Assets to be allocated each year among the Partners Pro Rata. The election
shall be made on the first taxable return filed by the Partnership.
(ii) The choice of allocation methods to be used by the Partnership with respect
to assets other than the Initial Assets shall be made by the General
Partners at the time such assets are contributed to the Partnership or
assets are revalued.
(c) Allocation of Items Among Partners. Each item of income, gain, loss,
deduction and credit and all other items governed by Section 702(a) of the
Code shall be allocated among the Partners in proportion to the allocation
of Profits, Losses and other items to such Partners hereunder, provided
that any gain treated as ordinary income because it is attributable to the
recapture of any depreciation or amortization shall be allocated among the
Partners in accordance with Prop. Treas. Reg. (S)(S) 1.1245-1(e)(2) and
1.1250-1(f), or, upon promulgation of final regulations with respect to the
matters covered therein, such final regulations.
(d) Section 754 Election Allocations. Income and deductions of the Partnership
that are attributable to the Section 754 election shall be allocated to the
Partners entitled thereto.
4.5 Other Tax Allocations. Items of income, gain, loss, deduction,
credit and tax preference for state, local and foreign income tax purposes shall
be allocated among the Partners in a manner consistent with the allocation of
such items for federal income tax purposes in accordance with the foregoing
provisions of this Section.
SECTION 5
ACCOUNTING, FINANCIAL REPORTING AND TAX MATTERS
5.1 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
5.2 Method of Accounting for Financial Reporting Purposes. For
financial reporting purposes, the Partnership shall adopt a standard set of
accounting policies and shall maintain separate books of account, all in
accordance with GAAP. The Partnership's financial reports shall comply with
requirements of the SEC to the extent applicable to the Partnership and any
Partner or any controlling Person of such Partner, to the extent such
information is necessary, in conjunction with the financial reporting
obligations of such Person under applicable SEC requirements.
5.3 Books and Records; Right of Partners to Audit.
(a) Proper and complete records and books of account of the Partnership's
business, including all such transactions and other matters as are usually
entered into records and books of
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account maintained by businesses of like character or as are required by
law, shall be kept by the Partnership at the Partnership's principal place
of business. None of the Partnership's funds shall be commingled with the
funds of any Partner.
(b) Each Partner and its internal and independent auditors, at the expense of
such Partner, shall have full and complete access to the internal and
independent auditors of the Partnership and shall have the right to inspect
such books and records and the physical properties of the Partnership
during normal business hours and, at its own expense, to cause an
independent audit thereof. The Partnership shall make all books and
records of the Partnership available to such Partner and its internal and
independent auditors in connection with such audit and shall cooperate with
such Partner and auditors and to provide any assistance reasonably
necessary in connection with such audit.
5.4 Reports and Financial Statements. The Partnership shall prepare and
deliver to the Partners the Partnership financial statements and reports
described on Appendix B as soon as reasonably practicable and in any event on or
prior to the due date indicated on Appendix B.
5.5 Method of Accounting for Book and Tax Purposes. For purposes of
making allocations and distributions hereunder (including distributions in
liquidation of the Partnership in accordance with Capital Account balances as
required by Section 12.3), Capital Accounts and Profits, Losses and other items
described in Section 4.1 shall be determined in accordance with federal income
tax accounting principles utilizing the accrual method of accounting, with the
adjustments required by Regulation (S)1.704-1(b) to properly maintain Capital
Accounts.
5.6 Taxation.
(a) Status of the Partnership. The Partners acknowledge that the Partnership
is a partnership for federal, foreign and state income tax purposes, and
hereby agree not to elect to be excluded from the application of Subchapter
K of Chapter 1 of Subtitle A of the Code or any similar state statute.
(b) Tax Elections and Reporting.
(i) Generally. The Partnership shall make the following elections under the
Code and the Regulations and any similar state statutes:
(A) Adopt the calendar year as the annual accounting period;
(B) Adopt the accrual method of accounting;
(C) Elect to deduct organization costs ratably over a 60-month
period as provided in Section 709 of the Code;
(D) Adopt the LIFO method of accounting for inventory; and
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(E) Make any other elections available under the Code that the
Partnership Governance Committee determine are appropriate, with the
determination of whether an election is appropriate to be made
pursuant to the principle that each Partner shall be treated equally
(i.e., no Partner will receive preferential tax treatment to the
disadvantage of another Partner).
(ii) Section 754 Election. The Partnership shall, upon the written request of
any Partner benefitted thereby, cause the Partnership to file an election
under Section 754 of the Code and the Regulations thereunder to adjust the
basis of the Partnership assets under Section 734(b) or 743(b) of the Code,
and a corresponding election under the applicable sections of state and
local law.
(c) Tax Returns. The Tax Matters Partner, on behalf of the Partnership, shall
prepare and file the necessary tax and information returns. Each Partner
shall timely provide such information, if any, as may be needed by the
Partnership for purposes of preparing such tax and information returns. At
least 75 days before the due date (as extended) for the Partnership's
federal income tax return, the Tax Matters Partner shall deliver a draft of
such return to each Partner. Each Partner shall have 15 Business Days
after receipt of the draft in which to furnish any objections or comments
on the draft to the Tax Matters Partner. A Partner may not report its
share of any Partnership tax item in a manner inconsistent with the
Partnership's reporting of such item unless the Partner has timely
furnished its objection to the Tax Matters Partner as provided in the
immediately preceding sentence. If a Partner reports its share of any
Partnership tax item in a manner inconsistent with the Partnership's
reporting of such item, such Partner shall promptly notify the Partnership
in writing at least 20 Business Days prior to the filing of any statement
with the IRS in which such inconsistent position is reported. The
Partnership shall promptly deliver to each Partner a copy of the federal
income tax return for the Partnership as filed with the appropriate taxing
authorities and a copy of any material state and local income tax return as
filed.
(d) Tax Audits.
(i) Federal Tax Matters. The Partnership is authorized to make such filings
with the IRS as may be required to designate Lyondell GP as the Tax Matters
Partner. The Tax Matters Partner, as an authorized representative of the
Partnership, shall direct the defense of any claims made by the IRS to the
extent that such claims relate to the adjustment of Partnership items at
the Partnership level. The Tax Matters Partner shall promptly deliver to
each Partner a copy of all notices, communications, reports or writings of
any kind (including, without limitation, any notice of beginning of
administrative proceedings or any report explaining the reasons for a
proposed adjustment) received from the IRS relating to or potentially
resulting in an adjustment of Partnership items, as well as any other
information requested by a Partner that is commercially reasonable to
request. The Tax Matters Partner shall, diligently and in good faith
contest any proposed adjustment of a Partnership item which principally
affects the Partners at the administrative and judicial levels, including,
if appropriate, appealing any adverse judicial decision. The Tax Matters
Partner shall keep each Partner advised of all material developments with
respect to any
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proposed adjustment which comes to its attention. All costs incurred by the
Tax Matters Partner in performing under this subsection (d) shall be paid
by the Partnership. Without first obtaining the written consent of all
Partners, the Tax Matters Partner shall not, with respect to any proposed
adjustment of a Partnership item which materially and adversely affects any
Partner, (i) enter into a settlement agreement which purports to bind
Partners other than the Tax Matters Partner (including, without limitation,
any stipulation consenting to an entry of decision by the Tax Court), or
(ii) enter into an agreement or stipulation extending the statute of
limitations; provided, however, that if any Partner declines to give its
written consent, then the dispute shall be resolved by the Partnership
Governance Committee, which may direct the Tax Matters Partner to enter
into such agreements notwithstanding the objection of an individual
Partner.
(ii) State and Local Tax Matters. The Partnership shall promptly deliver to
each Partner a copy of all notices, communications, reports or writings of
any kind with respect to income or similar taxes received from any state or
local taxing authority relating to the Partnership which might, in the
judgment of the Tax Matters Partner, materially and adversely affect any
Partner, and shall keep each Partner advised of all material developments
with respect to any proposed adjustment of Partnership items which come to
its attention.
(iii) Continuation of Rights. Each Partner shall continue to have the
rights described in this subsection (d) with respect to tax matters relating to
any period during which it was a Partner, whether or not it is a Partner at the
time of the tax audit or contest.
(e) Tax Rulings. No Person other than the Tax Matters Partner shall request an
administrative ruling (or similar administrative procedures) from any
taxing authority with respect to any tax issue relating to the Partnership
or affecting the taxation of any other Partner unless such Person shall
have received written authorization from the Tax Matters Partner and any
such other Partner to make such request.
5.7 Delegation. The Partners agree that all of the tasks to be
performed under this Section (other than serving as Tax Matters Partner) may be
delegated to employees and consultants of the Partnership.
SECTION 6
MANAGEMENT
6.1 Partnership Governance Committee.
(a) The General Partners hereby establish a committee (the "Partnership
Governance Committee") to manage and control the business, property and
affairs of the Partnership, including the determination and implementation
of the Partnership's strategic direction. The Partnership Governance
Committee (on behalf of the Partners) shall have (i) the full authority of
the General
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Partners to exercise all of the powers of the Partnership and
(ii) full control over the business, property and affairs of the
Partnership. Except to the extent set forth in this Agreement, the
Partnership Governance Committee shall have full, exclusive and complete
discretion to manage and control the business, property and affairs of the
Partnership, to make all decisions affecting the business, property and
affairs of the Partnership and to take all such actions as it deems
necessary, appropriate, convenient or incidental to accomplish the purpose
of the Partnership as set forth in Section 1.4 (as such purpose may be
expanded in accordance with Section 6.7(i)).
(b) The Partnership Governance Committee shall act exclusively by means of
Partnership Governance Committee Action. As used in this Agreement,
"Partnership Governance Committee Action" means any action which the
Partnership Governance Committee is authorized and empowered to take in
accordance with this Agreement and the Act and which is taken by the
Partnership Governance Committee either (i) by action taken at a meeting of
the Partnership Governance Committee duly called and held in accordance
with this Agreement or (ii) by a formal written consent complying with the
requirements of Section 6.5(f). In no event shall the Partnership
Governance Committee be authorized to act other than by Partnership
Governance Committee Action, and any action or purported action by the
Partnership Governance Committee (including any authorization, consent,
approval, waiver, decision or vote) not constituting a Partnership
Governance Committee Action shall be null and void and of no force and
effect. Each Partnership Governance Committee Action shall be binding on
the Partnership.
(c) The Partnership Governance Committee shall adopt policies and procedures,
not inconsistent with this Agreement (including Section 6.7) or the Act,
governing financial controls and legal compliance, including delegations of
authority (and limitations thereon) to the officers of the Partnership as
permitted hereby. Such policies and procedures may be revised or revoked
(in a manner consistent with this Agreement and the Act) from time to time
as determined by the Partnership Governance Committee. To the extent any
authority is not delegated to officers of the Partnership in this Agreement
or in accordance with Partnership Governance Committee Action, it shall
remain with the Partnership Governance Committee.
6.2 Limitations on Authority of General Partners. Except as expressly
set forth in this Agreement, each General Partner agrees to exercise its
authority to manage and control the Partnership only through Partnership
Governance Committee Action. No General Partner has the authority (and each
General Partner agrees not to exercise, or purport or attempt to exercise any
authority) (i) to act for or incur, create or assume any obligation, liability
or responsibility on behalf of the Partnership or any other Partner, (ii) to
execute any documents on behalf of, or otherwise bind, or purport or attempt to
bind, the Partnership or (iii) to otherwise transact any business in the
Partnership's name, in each case except pursuant to Partnership Governance
Committee Action.
6.3 Lack of Authority of Persons Other Than General Partners and
Officers. Except as expressly set forth in this Agreement, no Person or Persons
other than (i) the General Partners, acting through the Partnership Governance
Committee, and (ii) the officers of the Partnership appointed in accordance with
this Agreement and acting as agents or employees, as applicable, of the
Partnership in conformity with this Agreement and any applicable Partnership
Governance
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Committee Action, shall be authorized (a) to exercise the powers of
the Partnership, (b) to manage the business, property and affairs of the
Partnership or (c) to contract for, or incur on behalf of, the Partnership any
debts, liabilities or other obligations.
6.4 Composition of Partnership Governance Committee.
(a) The Partnership Governance Committee shall consist of six Representatives
and each General Partner shall designate three Representatives (each a
"Representative"). All the Representatives of both General Partners shall
together constitute the Partnership Governance Committee.
(b) Each General Partner may designate one or more individuals (each an
"Alternate") who (i) shall be authorized, in the event a Representative is
absent from any meeting of the Partnership Governance Committee (and in the
order of succession designated by the General Partner so designating the
Alternates), to attend such meeting in the place of, and as substitute for,
such Representative and (ii) shall be vested with all the powers to take
action on behalf of such General Partner which the absent Representative
could have exercised at such meeting. The term "Representative," when used
herein with reference to any Representative who is absent from a meeting of
the Partnership Governance Committee, shall mean and refer to any Alternate
attending such meeting in place of such absent Representative.
(c) On or before the date hereof, each General Partner shall have delivered to
the other General Partner a written notice (i) designating the three
persons to serve as such General Partner's initial Representatives and (ii)
designating the person or persons, if any, who are to serve as initial
Alternates and their order of succession.
(d) Each General Partner may, in its sole discretion and by written notice
delivered to the other General Partner and the Partnership at any time or
from time to time, remove or replace one or more of its Representatives or
change one or more of its Alternates. If a Representative or Alternate
dies, resigns or becomes disabled or incapacitated, the General Partner
that designated such Representative or Alternate, as the case may be, shall
promptly designate a replacement. Each Representative and each Alternate
shall serve until replaced by the General Partner that designated such
Representative or Alternate, as the case may be.
(e) Copies of all written notices designating Representatives and Alternates
shall be delivered to the Secretary and shall be placed in the Partnership
minute books, but the failure to deliver a copy of any such notice to the
Secretary shall not affect the validity or effectiveness of such notice or
the designation described therein.
(f) Each Representative, in his capacity as such, shall be the agent of the
General Partner that designated such Representative. Accordingly, (i) each
Representative, as such, shall act (or refrain from acting) with respect to
the business, property and affairs of the Partnership solely in accordance
with the wishes of the General Partner that designated such Representative
and (ii) no Representative, as such, shall owe (or be deemed to owe) any
duty (fiduciary or otherwise) to the
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Partnership or to any General Partner other than the General Partner that
designated such Representative; provided, however, that nothing in this
Agreement is intended to or shall relieve or discharge any Representative
or General Partner from liability to the Partnership or the Partners on
account of any fraudulent or intentional misconduct of such Representative.
Nothing in this Section 6.4(f) shall limit the duty owed to the Partnership
by any person acting in his capacity as an officer of the Partnership
(including any such officer who is also a Representative).
(g) Representatives shall not receive from the Partnership any compensation for
their service or any reimbursement of expenses for attendance at meetings
of the Partnership Governance Committee.
6.5 Partnership Governance Committee Meetings.
(a) Regular meetings of the Partnership Governance Committee shall be held at
such times and at such places as shall from time to time be determined in
advance and committed to a written schedule by the Partnership Governance
Committee. The first regular meeting of the Partnership Governance
Committee during January of each fiscal year shall be deemed to be the
"Annual Meeting." The Secretary shall deliver by commercial courier
service or other hand delivery or transmit by facsimile transmission (with
proof of confirmation from the transmitting machine), an agenda for each
regular meeting to the Representatives at least five Business Days prior to
such meeting. Each agenda for a regular meeting shall specify, to a
reasonable degree, the business to be transacted at such meeting. Subject
to Section 6.6, at any regular meeting of the Partnership Governance
Committee at which a quorum is present, any and all business of the
Partnership may be transacted.
(b) Special meetings of the Partnership Governance Committee may be called by
any Representative by delivering by commercial courier service or other
hand delivery or transmitting by facsimile transmission (with proof of
confirmation from the transmitting machine), written notice of a special
meeting to each of the other Representatives at least two Business Days
before such meeting. Each notice of a special meeting shall specify, to a
reasonable degree, the business to be transacted at, or the purpose of,
such meeting. Notice of any special meeting may be waived before or after
the meeting by a written waiver of notice signed by the Representative
entitled to notice. A Representative's attendance at a special meeting
shall constitute a waiver of notice unless the Representative states at the
beginning of the meeting his objection to the transaction of business
because the meeting was not lawfully called or convened. Special meetings
of the Partnership Governance Committee shall be held at the Partnership's
offices (or at such other place or in such other manner as the
Representatives shall agree) at such time as may be stated in the notice of
such meeting.
(c) One Representative of each General Partner shall serve as a co-chair of
each meeting (regular and special) of the Partnership Governance Committee.
Either co-chair may instruct the Secretary to include one or more items on
a meeting agenda and neither co-chair nor the Secretary may delete or
exclude an agenda item proposed by the other.
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(d) Following each meeting of the Partnership Governance Committee, the
Secretary shall promptly draft and distribute minutes of such meeting to
the Representatives for approval at the next meeting, and after such
approval shall retain the minutes in the Partnership minute books.
(e) Representatives, at their discretion, may participate in or hold regular or
special meetings of the Partnership Governance Committee by means of a
telephone conference or any comparable device or technology by which all
individuals participating in the meeting may hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting.
(f) Any action required or permitted to be taken at a meeting of the
Partnership Governance Committee may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by
at least two Representatives of each General Partner, and such consent
shall have the same force and effect as a duly conducted vote of the
Partnership Governance Committee. A counterpart of each such consent to
action shall be delivered promptly to each of the Representatives and to
the Secretary for placement in the minute books of the Partnership, but the
failure to deliver a counterpart of any such consent to action to the
Secretary shall not affect the validity or effectiveness of such consent to
action.
6.6 Partnership Governance Committee Quorum and General Voting
Requirement.
(a) The presence of at least two Representatives (including any duly present
Alternates) of Lyondell GP shall constitute a quorum of the Partnership
Governance Committee for the transaction of business and the taking of
appropriate Partnership Governance Committee Actions at any meeting;
provided, however, that the presence at such meeting of at least two
Representatives (including any duly present Alternates) from each General
Partner shall be necessary for the taking of any action described in
Section 6.7; and provided, further, that no Partnership Governance
Committee Actions can be taken at any meeting with respect to any matter
that was not reflected on an agenda for such meeting that was delivered in
accordance with Section 6.5 unless at least one Representative of each
General Partner is present. No Partnership Governance Committee Action may
be taken at any meeting at which a quorum is not present.
(b) Except as otherwise provided in Section 6.7 or elsewhere in this Agreement,
the approval of two or more Representatives acting for Lyondell GP will be
sufficient for the Partnership Governance Committee to take any Partnership
Governance Committee Action and in such case the Partnership shall be
authorized to take such action without the consent of any other Person.
6.7 Partnership Governance Committee Unanimous Voting Requirements.
Unless and until two or more Representatives of Lyondell GP and two or more
Representatives of Millennium GP have given their approval (in which event a
Partnership Governance Committee Action is hereby authorized without the need
for the consent of any other Person), no Partnership Governance Committee Action
will be deemed for any purpose to have been taken at any Partnership Governance
Committee meeting that would cause or permit the Partnership or any subsidiary
thereof (or any Person acting in the name or on behalf of any of them) directly
or indirectly to take (or commit to take), and neither the Partnership or any
subsidiary thereof nor any person acting in the name or on
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behalf of any of them directly or indirectly may take or commit to take, any of
the actions described below in this subsection (whether in a single transaction
or series of related transactions):
(i) to cause the Partnership, directly or indirectly, to engage, participate or
invest in any business outside the scope of its business as described in
Section 1.4;
(ii) to approve any Strategic Plan, as well as any amendments or updates thereto
(including the annual updates provided for in Section 8.1);
(iii) to authorize any disposition of assets having a fair market value
exceeding $30 million in any one transaction or a series of related
transactions not contemplated in an approved Strategic Plan;
(iv) to authorize any acquisition of assets or any capital expenditure exceeding
$30 million that is not contemplated in an approved Strategic Plan;
(v) to require capital contributions to the Partnership (other than
contributions contemplated by the Asset Contribution Agreements or an
approved Strategic Plan or to achieve or maintain compliance with any HSE
Law) within any fiscal year if the total of such contributions required
from the Partners within that year would exceed $100 million or the total
of such contributions required from the Partners within that year and the
immediately preceding four years would exceed $300 million;
(vi) to authorize the incurrence of debt for borrowed money unless (x) such debt
is contemplated by clause (vii) below, (y) after giving effect to the
incurrence of such debt (and any related transactions) the Partnership
would be expected to have an "investment grade" debt rating by Moody's
Investor Services Inc. and Standard & Poor's Corporation or (z) such debt
is incurred to refinance the public or bank debt assumed or incurred by the
Partnership as contemplated by the Master Transaction Agreement or to
refinance any such refinancing debt, and in the case of each of (y) and
(z), the agreement relating to such debt does not provide that the Transfer
by a Partner of its Units (or a change of control with respect to any
Partner or any of its Affiliates) would constitute a default thereunder,
otherwise accelerate the maturity thereof or give the lender or holder any
"put rights" or similar rights with respect thereto; provided, however,
that notwithstanding the foregoing, the provisions of Section 6.7(xxi), if
applicable, must be satisfied with respect to any refinancing;
(vii) to make borrowings under the Partnership's bank credit facility and/or its
uncommitted lines of credit at any time if the aggregate principal amount
of such borrowings outstanding at such time would exceed $1.25 billion;
(viii) to enter into interest rate protection or other hedging agreements (other
than hydrocarbon hedging agreements in the ordinary course);
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(ix) to enter into any capitalized lease or similar off-balance sheet financing
arrangements involving payments (individually or in the aggregate) by it in
excess of $30 million in any fiscal year;
(x) to cause the Partnership or any subsidiary of the Partnership to issue,
sell, redeem or acquire any Units or other equity securities (or any rights
to acquire, or any securities convertible into or exchangeable for, Units
or other equity securities);
(xi) to make Partnership cash distributions in excess of Available Net Operating
Cash or to make non-cash distributions (except as contemplated by Section
12);
(xii) to appoint or discharge Executive Officers (other than the CEO),
based on the recommendation of the CEO;
(xiii) to approve material compensation and benefit plans and
policies, material employee policies and material collective bargaining
agreements for the Partnership's employees;
(xiv) to initiate or settle any litigation or governmental proceedings if the
effect thereof would be material to the financial condition of the
Partnership;
(xv) to initially select or to change the independent accountants for the
Partnership;
(xvi) to change the Partnership's method of accounting as adopted pursuant to
Section 5.2 or to change the Partnership's method of accounting as
provided in Section 5.5 or to make the elections referred to in Section
5.6(b)(i)(E);
(xvii) to create or change the authority of any Auxiliary Committee;
(xviii) to merge, consolidate or convert the Partnership or any subsidiary
thereof with or into any other entity (other than a Wholly Owned
Subsidiary of the Partnership);
(xix) to file a petition in bankruptcy or seeking any reorganization,
liquidation or similar relief on behalf of the Partnership or any
subsidiary; or to consent to the filing of a petition in bankruptcy
against the Partnership or any subsidiary; or to consent to the
appointment of a receiver, custodian, liquidator or trustee for the
Partnership or any subsidiary or for all or any substantial portion of
their property;
(xx) to exercise any power or right described in Section 6.8(a)(i) or (ii) with
respect to a Conflict Circumstance involving (a) LYONDELL-CITGO Refining
Company Ltd., its successors or assigns, (b) Lyondell Methanol Company,
L.P., its successors or assigns or (c) any other Affiliate of either of
Lyondell GP or Millennium GP if such Affiliate's actions with respect to
such Conflict Circumstance are not controlled by Lyondell or Millennium,
respectively; and
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(xxi) (a) prior to the seventh anniversary of the Closing Date, to
repay any Millennium America Guaranteed Debt, other than through
refinancing or (b) to refinance any Millennium America Guaranteed Debt
prior to the seventh anniversary of the Closing Date if any of the
principal of the debt refinancing such Millennium America Guaranteed Debt
would be due and payable after the seventh anniversary of the Closing Date.
6.8 Control of Interested Partner Issues.
(a) Notwithstanding anything to the contrary contained in this Agreement, with
respect to any Conflict Circumstance (other than a Conflict Circumstance
described in Section 6.7(xx), which shall be governed by Section 6.7), the
Nonconflicted General Partner (through its Representatives) shall, subject
to Section 6.8(b), have the sole and exclusive power and right for and on
behalf, and at the sole expense, of the Partnership (i) to control all
decisions, elections, notifications, actions, exercises or nonexercises and
waivers of all rights, privileges and remedies provided to, or possessed
by, the Partnership with respect to a Conflict Circumstance and (ii) in the
event of any potential, threatened or asserted claim, dispute or action
with respect to a Conflict Circumstance, to retain and direct legal counsel
and to control, assert, enforce, defend, litigate, mediate, arbitrate,
settle, compromise or waive any and all such claims, disputes and actions.
Accordingly, Partnership Governance Committee Action with respect to a
Conflict Circumstance (other than a Conflict Circumstance described in
Section 6.7(xx), which shall be governed by Section 6.7) shall require the
approval of two Representatives of the Nonconflicted General Partner. Each
General Partner shall, and shall cause its Affiliates to, take all such
actions, execute all such documents and enter into all such agreements as
may be necessary or appropriate to facilitate or further assure the
accomplishment of this Section.
(b) The Nonconflicted General Partner, in exercising its control, power and
rights pursuant to this Section, shall act in good faith and in a manner it
believes to be in the best interests of the Partnership. The Nonconflicted
General Partner shall act through its Representatives, and the approval of
two Representatives acting for the Nonconflicted General Partner will be
sufficient for the Nonconflicted General Partner (and therefore the
Partnership Governance Committee on behalf of the Partnership) to take any
action in respect of the relevant Conflict Circumstance. The Conflicted
General Partner (or its Affiliates) shall have the right to deal with the
Partnership and with the Nonconflicted General Partner on an arm's-length
basis and in a manner it believes to be in its own best interests, but in
any event must deal with them in good faith.
6.9 Auxiliary Committees.
(a) From time to time, the Partnership Governance Committee may, by Partnership
Governance Committee Action, designate one or more committees ("Auxiliary
Committees") or disband any Auxiliary Committee. Each Auxiliary Committee
shall (i) operate under the specific authority delegated to it by the
Partnership Governance Committee (consistent with Section 6.7) for the
purpose of assisting the Partnership Governance Committee in managing (on
behalf of the General Partners) the business, property and affairs of the
Partnership and (ii) report to the Partnership Governance Committee.
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(b) Each General Partner shall have the right to appoint an equal number of
members on each Auxiliary Committee. Auxiliary Committee members may (but
need not) be members of the Partnership Governance Committee. No Auxiliary
Committee member shall be compensated or reimbursed by the Partnership for
service as a member of such Auxiliary Committee.
(c) Each Partnership Governance Committee Action designating an Auxiliary
Committee shall be in writing and shall set forth (i) the name of such
Auxiliary Committee, (ii) the number of members and (iii) in such detail as
the Partnership Governance Committee deems appropriate, the purposes,
powers and authorities (consistent with Section 6.7) of such Auxiliary
Committee; provided, however, that in no event shall any Auxiliary
Committee have any powers or authority in reference to amending this
Agreement, adopting an agreement of merger, consolidation or conversion of
the Partnership, authorizing the sale, lease or exchange of all or
substantially all of the property and assets of the Partnership,
authorizing a dissolution of the Partnership or declaring a distribution.
Each Auxiliary Committee shall keep regular minutes of its meetings and
promptly deliver the same to the Partnership Governance Committee.
6.10 Certain Limitations on Partner Representatives. No Representative
or Alternate of a Partner who, as an officer, director or employee of such
Partner or any of its Affiliates, participates in material operational decisions
by such Partner or Affiliate regarding a business or operation of such Partner
or Affiliate that competes with a business or operation of the Partnership or of
the other Partner or its Affiliates, or that competes with a Business
Opportunity offered pursuant to Section 9.3(c) or (d), shall receive or have
access to any competitively sensitive information regarding the competing
business of the Partnership or of the other Partner or its Affiliates or such
Business Opportunity, nor shall such Representative or Affiliate participate in
any decision of the Partnership Governance Committee relating to such business
or operation of the Partnership or the other Partner or its Affiliates or such
Business Opportunity.
SECTION 7
OFFICERS AND EMPLOYEES
7.1 Partnership Officers.
(a) The Partnership Governance Committee may select natural persons who are (or
upon becoming an officer will be) agents or employees of the Partnership to
be designated as officers of the Partnership, with such titles as the
Partnership Governance Committee shall determine.
(b) The executive officers of the Partnership shall consist of a Chief
Executive Officer ("CEO"), and others as determined from time to time by
Partnership Governance Committee (collectively, the "Executive Officers").
(c) The Partnership Governance Committee also shall appoint a Secretary and may
appoint such other officers and assistant officers and agents as may be
deemed necessary or desirable
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and such persons shall perform such duties in the management of the
Partnership as may be provided in this Agreement or as may be determined by
Partnership Governance Committee Action.
(d) The Partnership Governance Committee may leave unfilled any offices except
those of CEO and Secretary. Two or more offices may be held by the same
person except that the same person may not hold the offices of CEO and
Secretary.
7.2 Selection and Term of Executive Officers.
(a) The initial Executive Officers are listed on Appendix C.
(b) The CEO shall hold office for a five-year term, subject to the CEO's
earlier death, resignation or removal. Upon the expiration of such term or
earlier vacancy, Lyondell GP shall designate the CEO, provided that such
person shall be reasonably acceptable to Millennium GP. The CEO shall not
be required to be an employee of the Partnership.
(c) Each Executive Officer (other than the CEO) shall hold office until his or
her death, resignation or removal. Upon the death, resignation or removal
of an Executive Officer, or the creation of a new Executive Officer
position, the CEO may nominate a person to fill the vacancy, which shall be
subject to Partnership Governance Committee approval. Executive Officers
shall not be required to be employees of the Partnership. Any Executive
Officer also may serve as an officer or employee of any Partner or
Affiliate of a Partner.
7.3 Removal of Executive Officers.
(a) The CEO may be removed, at any time, by Partnership Governance
Committee Action taken pursuant to Section 6.6, with or without cause, whenever
in the judgment of the Partnership Governance Committee the best interests of
the Partnership would be served thereby.
(b) Any Executive Officer (other than the CEO), or any other officer or
agent may be removed, at any time, by Partnership Governance Committee Action
taken pursuant to Section 6.7(xii), with or without cause, upon the
recommendation of the CEO, whenever in the judgment of the Partnership
Governance Committee the best interests of the Partnership would be served
thereby.
(c) Notwithstanding anything to the contrary in Sections 7.3(a) and 7.3(b),
either General Partner may, by action of two or more of its Representatives,
remove from office any Executive Officer who takes or causes the Partnership to
take any action described in Section 6.7 that has not been approved by two or
more Representatives of Lyondell GP and two or more Representatives of
Millennium GP as contemplated by Section 6.7. Any such removal shall be
effected by delivery by such Representatives of written notice of such removal
to such Executive Officer and to the Representatives of the other General
Partner; provided that such removal shall not be effective if such action is
rescinded or cured (to the reasonable satisfaction of the General Partner who
has delivered such notice) promptly after such notice is delivered.
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7.4 Duties.
(a) Each officer or employee of the Partnership shall owe to the Partnership,
but not to any Partner, all such duties (fiduciary or otherwise) as are
imposed upon such an officer or employee of a Delaware corporation.
Without limitation of the foregoing, each officer and employee in any
dealings with a Partner shall have a duty to act in good faith and to deal
fairly; provided, that, no officer shall be liable to the Partnership or to
any Partner for his or her good faith reliance on the provisions of this
Agreement. Notwithstanding the foregoing, it is understood that any
officer or employee of the Partnership who is also a Representative of a
General Partner shall, in his capacity as a Representative, owe no duty
(fiduciary or otherwise) to any Person other than such General Partner.
(b) The policies and procedures of the Partnership adopted by the Partnership
Governance Committee may set forth the powers and duties of the officers of
the Partnership to the extent not set forth in or inconsistent with this
Agreement. The officers of the Partnership shall have such powers and
duties, except as modified by the Partnership Governance Committee, as
generally pertain to their respective offices in the case of a publicly
held Delaware corporation, as well as other such powers and duties as from
time to time may be conferred by the Partnership Governance Committee and
by this Agreement. The CEO and the other officers and employees of the
Partnership shall develop and implement management and other policies and
procedures consistent with this Agreement and the general policies and
procedures established by the Partnership Governance Committee.
(c) Notwithstanding any other provision of this Agreement, no Partner,
Representative, officer, employee or agent of the Partnership shall have
the power or authority, without specific authorization from the Partnership
Governance Committee, to undertake any of the following:
(i) to do any act which contravenes (or otherwise is inconsistent
with) this Agreement or which would make it impracticable or
impossible to carry on the Partnership's business;
(ii) to confess a judgment against the Partnership;
(iii) to possess Partnership property other than in the ordinary
conduct of the Partnership's business; or
(iv) to take, or cause to be taken, any of the actions described in
Section 6.7.
7.5 CEO. Subject to the terms of this Agreement, the CEO shall have
general authority and discretion comparable to that of a chief executive officer
of a publicly held Delaware corporation of similar size to direct and control
the business and affairs of the Partnership, including without limitation its
day-to-day operations in a manner consistent with the Annual Budget and the most
recently approved Strategic Plan. The CEO shall take steps to implement all
orders and resolutions of the Partnership Governance Committee or, as
applicable, any Auxiliary Committee. The CEO
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shall be authorized to execute and deliver, in the name and on behalf of the
Partnership, (i) contracts or other instruments authorized by Partnership
Governance Committee Action and (ii) contracts or instruments in the usual and
regular course of business (not otherwise requiring Partnership Governance
Committee Action), except in cases when the execution and delivery thereof shall
be expressly delegated by the Partnership Governance Committee to some other
officer or agent of the Partnership, and, in general, shall perform all duties
incident to the office of CEO as well as such other duties as from time to time
may be assigned to him or her by the Partnership Governance Committee or as are
prescribed by this Agreement.
7.6 Other Officers. The President (if any) and the Vice Presidents shall
perform such duties as may, from time to time, be assigned to them by the
Partnership Governance Committee or by the CEO. In addition, at the request of
the CEO, or in the absence or disability of the CEO, the President (if any) or
any Vice President, in any order determined by the Partnership Governance
Committee, temporarily shall perform all (or if limited through the scope of the
delegation, some of) the duties of the CEO, and, when so acting, shall have all
the powers of, and be subject to all restrictions upon, the CEO.
7.7 Secretary. The Secretary shall keep the minutes of all meetings (and
copies of written records of action taken without a meeting) of the Partnership
Governance Committee in minute books provided for such purpose and shall see
that all notices are duly given in accordance with the provisions of this
Agreement. The Secretary shall be the custodian of the records and of the seal,
if any. The Secretary shall have general charge of books and papers of the
Partnership as the Partnership Governance Committee may direct and, in general,
shall perform all duties and exercise all powers incident to the office of
Secretary and such other duties and powers as the Partnership Governance
Committee or the CEO from time to time may assign to or confer upon the
Secretary.
7.8 Salaries. Salaries or other compensation of the other Executive
Officers of the Partnership shall be established by the CEO consistent with
plans approved by the Partnership Governance Committee. Except as approved by
the Partnership Governance Committee, all fees and compensation of the officers
and employees of the Partnership other than the CEO with respect to their
services as such officers and employees shall be payable solely by the
Partnership and no Partner or its Affiliates shall pay (or offer to pay) any
such fees or compensation to any officer or employee, except to the extent that
the Partnership shall have agreed with a Partner or one of its Affiliates
pursuant to a separate agreement that a portion of the compensation of such
officer or employee shall be paid by such Partner or Affiliate.
7.9 Delegation. The Partnership Governance Committee may delegate
temporarily the powers and duties of any officer of the Partnership, in case of
absence or for any other reason, to any other officer of the Partnership, and
may authorize the delegation by any officer of the Partnership of any of such
officer's powers and duties to any other officer or employee of the Partnership,
subject to the general supervision of such officer.
7.10 Employee Hirings. With the prior approval of the other General
Partner, which approval shall not be unreasonably withheld, a General Partner
(or its Affiliates) shall be entitled to
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hire specific employees of the Partnership and specific individuals who had been
employed by the Partnership within the previous year. With the prior approval of
the relevant General Partner, which approval shall not be unreasonably withheld,
the Partnership shall be entitled to hire specific employees of either General
Partner (or its Affiliates) and specific individuals who had been employed by
either General Partner (or its Affiliates) within the previous year. Without
such approval, (i) the General Partners (and their Affiliates) will not hire
employees of the Partnership or individuals who had been employed by the
Partnership within the previous year and (ii) the Partnership will not hire
employees of either General Partner (or its Affiliates) or individuals who had
been employed by either General Partner (or its Affiliates) within the previous
year.
7.11 General Authority. Persons dealing with the Partnership are entitled
to rely conclusively on the power and authority of each of the officers as set
forth in this Agreement. In no event shall any Person dealing with any officer
with respect to any business or property of the Partnership be obligated to
ascertain that the terms of this Agreement have been complied with, or be
obligated to inquire into the necessity or expedience of any act or action of
the officer; and every contract, agreement, deed, mortgage, security agreement,
promissory note or other instrument or document executed by the officer with
respect to any business or property of the Partnership shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and/or delivery thereof, this Agreement
was in full force and effect, (ii) the instrument or document was duly executed
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership, and (iii) the officer was duly authorized and empowered to
execute and deliver any and every such instrument or document for and on behalf
of the Partnership.
SECTION 8
STRATEGIC PLANS, ANNUAL BUDGETS AND LOANS
8.1 Strategic Plan.
(a) The Partnership shall be managed in accordance with a five-year strategic
business plan (the "Strategic Plan") which shall be updated annually under
the direction of the CEO and presented for approval by the Partnership
Governance Committee pursuant to Section 6.7 no later than 90 days prior to
the start of the first fiscal year covered by the updated plan.
(b) The Strategic Plan shall establish the strategic direction of the
Partnership, including plans relating to capital maintenance and
enhancement, geographic expansion, acquisitions and dispositions, new
product lines, technology, long-term supply and customer arrangements,
internal and external financing, environmental and legal compliance, and
plans, programs and policies relating to compensation and industrial
relations. The Strategic Plan shall include projected income statements,
balance sheets and cash flow statements, including the expected timing and
amounts of capital contributions and cash distributions. The format and
level of detail of each Strategic Plan shall be consistent with that of the
initial Strategic Plan agreed to by the Partners on or prior to the Closing
Date or the Strategic Plan most recently approved pursuant to Section 6.7.
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8.2 Annual Budget.
(a) The Executive Officers of the Partnership shall prepare an Annual Budget
(each, an "Annual Budget") for each fiscal year, including an Operating
Budget and Capital Expenditure Budget; provided that each Annual Budget
shall be consistent with the information for such fiscal year included in
the Strategic Plan most recently approved pursuant to Section 6.7; and
provided, further, that unless provided otherwise in the most recently
approved Strategic Plan, the Annual Budget (including any Annual Budget
prepared under Section 8.2(b)) shall utilize a format and provide a level
of detail consistent with the Partnership's initial Annual Budget. The
Annual Budget for each year shall be submitted to the Partnership
Governance Committee for approval at least 60 days prior to the start of
the fiscal year covered by such budget. Each Annual Budget shall
incorporate (i) a projected income statement, balance sheet and a cash flow
statement, (ii) the amount of any corresponding cash deficiency or surplus
and (iii) the estimated amount, if any, and expected timing for all
required capital contributions. Each proposed Annual Budget shall be
prepared on a basis consistent with the Partnership's financial statements.
(b) If for any fiscal year the Partnership Governance Committee has failed to
approve an updated Strategic Plan, then, subject to Section 8.5, for such
year and each subsequent year prior to approval of an updated Strategic
Plan, the Executive Officers of the Partnership shall prepare (and promptly
furnish to the Partnership Governance Committee) the Annual Budget
consistent with the projections and other information for that year
included in the Strategic Plan most recently approved pursuant to Section
6.7; provided, however, that the CEO, acting in good faith, shall be
entitled to modify any such Annual Budget in order to satisfy current
contractual and compliance obligations and to account for other changes in
circumstances resulting from the passage of time or the occurrence of
events beyond the control of the Partnership; provided, further, that the
CEO shall not be authorized to cause the Partnership to proceed with
capital expenditures to accomplish capital enhancement projects except to
the extent that such expenditures would enable the Partnership to continue
or complete any such capital project reflected in the last Strategic Plan
that was approved by the Partnership Governance Committee pursuant to
Section 6.7.
(c) Each "Operating Budget" shall constitute an estimate for each applicable
period of all operating income, which shall include expenses required to
maintain, repair and restore to good and usable condition the Partnership's
assets.
(d) Each "Capital Expenditure Budget" shall constitute an estimate for the
applicable period of the capital expenditures required to (i) accomplish
capital enhancement projects included in the most recently approved
Strategic Plan, (ii) maintain and preserve the Partnership's assets in good
operating condition and repair and (iii) achieve or maintain compliance
with any HSE Law.
8.3 Funding of Partnership Expenses. All Partnership expenses (both
operating and capital expenses), regardless of whether included in any Strategic
Plan or Annual Budget, shall be funded from operating cash flows or authorized
borrowings under available lines of credit, unless otherwise agreed by the
Partnership Governance Committee. Subject to the limitations of Section 6.7(v),
if applicable, to the extent that the CEO determines at any time that funds are
needed
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to fund Partnership operations, the CEO may issue a Funding Notice to the
Limited Partners calling for an additional capital contribution. The Limited
Partners will take all steps necessary to cause compliance with such Funding
Notice.
8.4 Implementation of Budgets and Discretionary Expenditures by CEO.
(a) After a Strategic Plan and an Annual Budget have been approved by the
Partnership Governance Committee (or an Annual Budget has been developed in
accordance with Section 8.2(b)), the CEO will be authorized, without
further action by the Partnership Governance Committee, to cause the
Partnership to make expenditures consistent with such Strategic Plan and
Annual Budget; provided, however, that all internal control policies and
procedures, including those regarding the required authority for certain
expenditures, shall have been followed.
(b) In any emergency, the CEO or the CEO's designee shall be authorized to take
such actions and to make such expenditures as may be reasonably necessary
to react to the emergency, regardless of whether such expenditures have
been included in an approved Strategic Plan or Annual Budget. Promptly
after learning of an emergency, the CEO or such designee shall notify the
Representatives of the nature of the emergency and the response that has
been made, or is committed or proposed to be made, with respect to the
emergency.
8.5 Strategic Plan Deadlock. If the Partnership Governance Committee has
not agreed upon and approved an updated Strategic Plan, as contemplated by
Sections 6.7 and 8.1, by such date as is 12 months after the beginning of the
first fiscal year that would have been covered by such plan, then the General
Partners shall submit their disagreements to mediation by a Neutral. If the
General Partners are unable to agree upon a mutually acceptable Neutral within
30 days after a nomination of a Neutral is made by one General Partner to the
other, then such Neutral shall upon the application of either General Partner be
appointed within 70 days of such nomination by the Center for Public Resources,
or if such appointment is not so made promptly then promptly thereafter by the
American Arbitration Association in Philadelphia, Pennsylvania, or if such
appointment is not so made promptly then promptly thereafter by the senior
United States District Court judge sitting in Wilmington, Delaware. The fees of
the Neutral shall be paid equally by the General Partners. Within 20 days of
selection of the Neutral, two persons having decision-making authority on behalf
of each General Partner shall meet with the Neutral and agree upon procedures
and a schedule for attempting to resolve the differences between the General
Partners. They shall continue to meet thereafter on a regular basis until (i)
agreement is reached by the General Partners (acting through their
Representatives) on an updated Strategic Plan or (ii) at least 24 months have
elapsed since the beginning of the first fiscal year that was to be covered by
the first updated plan for which agreement was not reached and one General
Partner shall determine and notify the other General Partner and the Neutral in
writing (a "Deadlock Notice") that no agreement resolving the dispute is likely
to be reached.
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8.6 Loans.
(a) Initial Facilities. On or prior to the Closing Date, the Partnership shall
enter into the Bank Credit Agreement providing for (i) loans of an
aggregate principal amount of $1.0 billion and (ii) a working capital
facility in an aggregate principal amount of $250 million, all as more
specifically provided for in the Master Transaction Agreement, and may also
arrange for uncommitted lines of credit in an aggregate principal amount of
up to $250 million; provided, however, that the total amount outstanding
pursuant to such working capital facility and such uncommitted lines of
credit, if any, in the aggregate, shall not at any time exceed $250 million
unless authorized by Partnership Governance Committee Action pursuant to
Section 6.7. On the Closing Date, the Partnership shall borrow an amount
equal to the principal amount of the Millennium Debt pursuant to the loans
referred to in clause (i) above and apply such amount to repay the
Millennium Debt.
(b) Other Loans. The Partnership Governance Committee may by Partnership
Governance Committee Action authorize the CEO to cause the Partnership to
borrow funds from third party lenders. Neither General Partner shall be
required, and the Partnership Governance Committee shall not be authorized
to require any Partner, to guarantee or to provide other credit or
financial support for any loan. Any Partner may, at its sole discretion,
guarantee or provide other credit or financial support for all or any
portion of any debt, including any refinancing of debt contemplated by
Section 8.6(a), for such period of time and on such other terms as the
Partner shall determine.
(c) Millennium Guarantee. On or before the Closing Date, Millennium America,
an Affiliate of Millennium GP and Millennium LP, shall issue a full and
unconditional guarantee (the "Millennium America Guarantee") in respect of
$750 million of principal and interest owed by the Partnership pursuant to
the Bank Credit Agreement in such form and on such terms as may be mutually
agreed by Millennium America, the Partnership and the lenders under the
Bank Credit Agreement. Millennium America (or its successors or assigns)
shall maintain the Millennium America Guarantee in full force and effect in
respect of $750 million of principal and interest under the Bank Credit
Agreement or any refinancings thereof (including, without limitation, any
further refinancings of such refinancings) indefinitely; provided, however,
that Millennium America may terminate the Millennium America Guarantee at
any time on or after the seventh anniversary of the Closing Date if, and
only if: (i) the Partnership's ratio of Total Indebtedness to Total
Capitalization is, as of the end of the most recently completed fiscal
quarter of the Partnership lower than such ratio as of December 31, 1998,
(ii) the Partnership's ratio of EBITDA to Net Interest for the most recent
12 month period is at least 105% of such ratio for the 12 month period
ending December 31, 1998, (iii) the Partnership is not then in default in
the payment of principal of, or interest on, any indebtedness for borrowed
money in excess of $15 million and (iv) the Partnership is not then in
default in respect of any covenants relating to any indebtedness for
borrowed money if the effect of any such default shall be to accelerate, or
to permit the holder or obligee of such indebtedness (or any trustee on
behalf of such holder or obligee) to accelerate (with or without the giving
of notice or lapse of time or both), such indebtedness in an aggregate
amount in excess of $50 million; provided, further, that if Millennium GP
and Millennium LP sell all of their respective interests in
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the Partnership, or if Millennium Petrochemicals Inc. sells all of its
equity interests in both Millennium GP and Millennium LP, in each case to
an unaffiliated third party (or parties) at any time in accordance with the
terms of this Agreement, Millennium America may terminate the Millennium
America Guarantee if, at the time of such sale or at the time of such
termination, (A) the Partnership has an "investment grade" credit rating
issued by Moody's Investor Service Inc. or Standard & Poor's Corporation
(or, if the Partnership has no rated indebtedness outstanding at such time,
Millennium America demonstrates to the reasonable satisfaction of the
Partnership that the Partnership could obtain such an "investment grade"
credit rating), or (B) the fair market value of the Partnership's assets is
at least 140% of the gross amount of its liabilities. For purposes of this
paragraph (c), "EBITDA" means, with respect to any period, operating income
before interest, taxes, depreciation and amortization, as determined in
accordance with GAAP; "Net Interest" means, with respect to any period, (i)
the amount which, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated income
statement of the Partnership and all other Persons with which the
Partnership's financial statements are to be consolidated in accordance
with GAAP for the relevant period ended on such date less (ii) the amount
which, in conformity with GAAP, would be set forth opposite the caption
"interest income" (or any like caption) on such consolidated income
statement; "Total Indebtedness" means at the time of determination all
indebtedness of the Partnership and its subsidiaries on a consolidated
basis, as determined in accordance with GAAP; "Total Capitalization" means,
at the time of determination, the sum of Total Indebtedness plus the
partner's equity reflected on a balance sheet of the Partnership prepared
in accordance with GAAP.
SECTION 9
RIGHTS OF PARTNERS
9.1 Delegation and Contracts with Related Parties.
(a) The Partners acknowledge that the General Partners (acting through the
Partnership Governance Committee) are permitted to delegate responsibility
for day-to-day operations of the Partnership to officers and employees of
the Partnership.
(b) Upon receipt of any required approval by the Partnership Governance
Committee (including, as applicable, any approval required by Section 6.8),
all contracts and transactions between the Partnership and a Partner or its
Affiliates shall be deemed to be entered into on an arm's-length basis and
to be subject to ordinary contract and commercial law, without any other
duties or rights being implied by reason of a Partner being a Partner or by
reason of any provision of this Agreement or the existence of the
Partnership.
9.2 General Authority. Persons dealing with the Partnership are entitled
to rely conclusively on the power and authority of each of the General Partners
as set forth in this Agreement. In no event shall any Person dealing with
either General Partner or such General Partner's representatives with respect to
any business or property of the Partnership be obligated to ascertain that the
terms of this Agreement have been complied with, or be obligated to inquire into
the necessity or expedience of any act or action of the General Partner or the
General Partner's
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representatives; and every contract, agreement, deed, mortgage, security
agreement, promissory note or other instrument or document executed by the
General Partner or the General Partner's representatives with respect to any
business or property of the Partnership shall be conclusive evidence in favor of
any and every Person relying thereon or claiming thereunder that (i) at the time
of the execution and/or delivery thereof, this Agreement was in full force and
effect, (ii) the instrument or document was duly executed in accordance with the
terms and provisions of this Agreement and is binding upon the Partnership, and
(iii) the General Partner or the General Partner's representative was duly
authorized and empowered to execute and deliver any and every such instrument or
document for and on behalf of the Partnership. Nothing in this Section 9.2 shall
be deemed to be a waiver or release of either General Partner's obligations to
the other Partners as set forth elsewhere in this Agreement.
9.3 Limitation on Fiduciary Duty; Non-Competition.
(a) Each Partner (directly or through its Affiliates) is a sophisticated party
possessing extensive knowledge of and experience relating to, and is
actively engaged in, significant businesses in addition to its Contributed
Businesses, has been represented by legal counsel, is capable of evaluating
and has thoroughly considered the merits, risks and consequences of the
provisions of this Section 9.3 and is agreeing to such provision knowingly
and advisedly. The liability of each of the General Partners (including
any liability of its Affiliates or its and their respective officers,
directors, agents and employees) or of any Limited Partner (including any
liability of its Affiliates or its and their respective officers, agents,
directors and employees), either to the Partnership or to any other
Partner, for any act or omission by such Partner in its capacity as a
partner of the Partnership that is imposed by such Partner's status as a
"general partner" or "limited partner" (as such terms are used in the Act)
of a limited partnership is hereby eliminated, waived and limited to the
fullest extent permitted by law; provided, however, that each General
Partner shall at all times owe to the other General Partner a fiduciary
duty in observing the requirement described in Section 6.7 that two or more
Representatives of Lyondell GP and two or more Representatives of
Millennium GP shall be required to give their approval before the
Partnership may undertake any of the actions listed in Section 6.7.
Nothing in this subsection shall relieve any Partner from liability for any
breach of this Agreement and each General Partner shall at all times owe to
the other General Partner a duty to act in good faith with respect to all
matters involving the Partnership.
(b) Except as set forth in Section 9.3(c), each Partner's Affiliates shall be
free to engage in or possess an interest in any other business of any type,
including any business in direct competition with the Partnership, and to
avail itself of any business opportunity available to it without having to
offer the Partnership or any Partner the opportunity to participate in such
business. Except as set forth in Section 9.3(c), it is expressly agreed
that the legal doctrine of "corporate or business opportunities" sometimes
applied to a Person deemed to be subject to fiduciary or other similar
duties so as to prevent such Persons from engaging in or enjoying the
benefits of certain additional business opportunities shall not be applied
in the case of any investment, acquisition, business, activity or operation
of any Partner's Affiliates.
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(c) (i) If a Partner's Affiliate desires to initiate or pursue an opportunity
to undertake, engage in, acquire or invest in a business, activity or
operation within the scope of Section 1.4 ("Related Business") by investing
in or acquiring a Person whose business is a Related Business, acquiring
assets of a Related Business, or otherwise engaging in or undertaking a
Related Business (a "Business Opportunity"), such Partner or its Affiliate
(such Partner, together with its Affiliates, being called the "Proposing
Partner") shall offer the Partnership the Business Opportunity on the terms
set forth in Section 9.3(c)(ii).
(ii) When a Proposing Partner offers a Business Opportunity to the Partnership,
the Partnership shall elect to do one of the following:
(A) acquire or undertake the Business Opportunity for the benefit of
the Partnership as a whole, at the cost, expense and benefit of
the Partnership; provided, however, that, if the Partnership
ceases to actively pursue such opportunity for any reason, then
the Proposing Partner will be entitled to proceed under clause
(B) below; or
(B) permit the Proposing Partner to acquire or undertake the Business
Opportunity for its own benefit and account without any duty to
the Partnership or the other Partners with respect thereto;
provided, however, that if the Business Opportunity is in direct
competition with the then existing business of the Partnership (a
"Competing Opportunity"), then the Proposing Partner and the
Partnership shall, if either so elects, seek to negotiate and
implement an arrangement whereby the Partnership would either (i)
acquire or undertake the Competing Opportunity at the sole cost,
expense and benefit of the Proposing Partner under a mutually
acceptable arrangement whereby the Competing Opportunity is
treated as a separate business within the Partnership with the
costs, expenses and benefits related thereto being borne and
enjoyed solely by the Proposing Partner, or (ii) enter into a
management agreement with the Proposing Partner to manage the
Competing Opportunity on behalf of the Proposing Partner on terms
and conditions mutually acceptable to the Proposing Partner and
the Partnership. If the Partnership and the Proposing Partner do
not reach agreement as to such arrangement, the Proposing Partner
may acquire or undertake the Competing Opportunity for its own
benefit and account without any duty to the Partnership or the
other Partners with respect thereto.
(d) Notwithstanding the provisions of Section 9.3(c)(ii), if the Business
Opportunity constitutes less than 25% (based on annual revenues for the
most recently completed fiscal year) of an acquisition of or investment in
assets, activities, operations or businesses that is not otherwise a
Related Business, then a Proposing Partner may acquire or invest in such
Business Opportunity without first offering it to the Partnership;
provided, that, after completion of the acquisition or investment thereof,
such Proposing Partner must offer the Business Opportunity to the
Partnership pursuant to the terms of Section 9.3(c)(ii). If the
Partnership elects option (A) of Section 9.3(c)(ii)
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with respect thereto, the Business Opportunity shall be acquired by the
Partnership at its Fair Market Value as of the date of such acquisition.
(e) Notwithstanding the provisions of Section 9.3(c), any direct or indirect
expansion by LYONDELL-CITGO Refining Company Ltd. of its aromatics business
shall not be deemed to constitute a Business Opportunity for purposes of
Section 9.3(c).
(f) If (i) the Partnership is presented with an opportunity to acquire or
undertake a Business Opportunity that it determines not to acquire or
undertake and (ii) the Representatives of one General Partner, but not the
other General Partner, desired that the Partnership acquire or undertake
such Business Opportunity, then the Partnership shall permit such first
General Partner and its Affiliates to acquire or undertake such Business
Opportunity and Section 9.3(c)(ii)(B) shall be deemed to be applicable
thereto to the same extent as if such General Partner and its Affiliates
were a Proposing Partner with respect to such Business Opportunity.
9.4 Limited Partners.
(a) No Limited Partner shall take part in the management or control of the
Partnership's business, transact any business in the Partnership's name or
have the power to sign documents for or otherwise to bind the Partnership.
(b) Each Limited Partner shall have the rights with respect to the
Partnership's books and records as set forth in Section 5.3.
9.5 Partner Covenants. Each Partner covenants and agrees with the
Partnership and with the other Partners as follows:
(i) It shall not exercise, or purport or attempt to exercise, its authority to
withdraw, retire, resign, or assert that it has been expelled from the
Partnership;
(ii) It shall not do any act that would make it impossible or impracticable to
carry on the Partnership's business; and
(iii) It shall not act or purport or attempt to act in a manner inconsistent
with any act of a General Partner acting pursuant to the Partnership Governance
Committee or in a manner contrary to the agreements of the Partners set forth in
this Agreement;
provided, that, nothing in this Section 9.5 shall be deemed to waive its rights
under Sections 10, 11 or 12.
9.6 Special Purpose Entities. Each Partner covenants and agrees that (i)
its business shall be restricted solely to the holding of its Units and the
doing of things necessary or incidental in connection therewith (including,
without limitation, the exercise of its rights and powers under this
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Agreement), and (ii) it shall not own any assets, incur any liabilities or
engage, participate or invest in any business outside the scope of such
business; provided, however, that this Section 9.6 shall not be binding upon
(a) Millennium Petrochemicals Inc., a Virginia corporation, or its successors by
operation of law to the extent that any Units shall be Transferred to it in
accordance with Section 10.6 or (b) at its option, any Wholly Owned Affiliate of
any Partner to whom Units shall be Transferred pursuant to Section 10.6 if, at
the date of such Transfer, such Wholly Owned Affiliate shall have a consolidated
net worth, as determined in accordance with GAAP, of at least $50 million.
SECTION 10
TRANSFERS AND PLEDGES
10.1 Restrictions on Transfer and Prohibition on Pledge. Except pursuant
to Section 11 or the procedures described below in this Section, a Partner shall
not, in any transaction or series of transactions, directly or indirectly
Transfer all or any part of its Units. A Partner shall not, in any transaction
or series of transactions, directly or indirectly Pledge all or any part of its
Units or its interest in the Partnership. Neither the term "Transfer" nor the
term "Pledge," however, shall include an assignment by a Partner of such
Partner's right to receive distributions from the Partnership so long as such
assignment does not purport to assign any right of such Partner to participate
in or manage the affairs of the Partnership, to receive any information or
accounting of the affairs of the Partnership, or to inspect the books or records
of the Partnership or any other right of a Partner pursuant to this Agreement or
the Act. Any attempt by a Partner to Transfer or Pledge all or a portion of its
Units in violation of this Agreement shall be void ab initio and shall not be
effective to Transfer or Pledge such Units or any portion thereof. Subject to
any applicable restrictions imposed by the Parent Agreement, nothing in this
Agreement shall prevent the Transfer or Pledge by the owner thereof of any
capital stock, equity ownership interests or other security of a Partner or any
Affiliate of a Partner.
10.2 Right of First Option.
(a) Without the consent of the Partnership Governance Committee, no Partner may
Transfer less than all of its Units. Any Limited Partner and its
Affiliated General Partner desiring to Transfer (pursuant to a cash sale)
all of their Units (together, the "Selling Partners") shall give written
notice (the "Initial Notice") to the Partnership and the other Partners
(the "Offeree Partners") stating that the Selling Partners desire to
Transfer their Units and stating the cash purchase price and all other
terms on which they are willing to sell (the "Offer Terms"). Delivery of
an Initial Notice shall constitute the irrevocable offer of the Selling
Partners to sell their Units to the Offeree Partners hereunder.
(b) The Offeree Partners shall have the option, exercisable by delivering
written notice (the "Acceptance Notice") of such exercise to the Selling
Partners within 45 days of the date of the Initial Notice, to elect to
purchase all of the Units of the Selling Partners on the Offer Terms
described in the Initial Notice. The Acceptance Notice shall set a date
for closing the purchase, such date to be not less than 30 nor more than 90
days after delivery of the Acceptance Notice; provided that such time
period shall be subject to extension as reasonably necessary (up to a
maximum of an additional 120 days after such 90 day period) in order to
comply with any applicable filing and waiting period requirements under the
Hart-Scott-Rodino Antitrust Improvements Act. The closing shall be held at
the Partnership's offices. The purchase price for the Selling Partners'
Units shall be paid in cash delivered at the closing. The purchase shall
be consummated by appropriate and
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customary documentation (including the giving of representations and
warranties substantially similar to those set forth in Sections 2.1 through
2.3 of the Master Transaction Agreement).
(c) If the Offeree Partners do not elect to purchase the Selling Partners'
Units within 45 days after the receipt of the Initial Notice, the Selling
Partners shall have a further 180 days during which they may, subject to
Sections 10.2(d) and (e), consummate the sale of their Units to a third
party purchaser at a purchase price and on such other terms that are no
more favorable to such purchaser than the Offer Terms. If the sale is not
completed within such further 180-day period, the Initial Notice shall be
deemed to have expired and a new notice and offer shall be required before
the Selling Partners may make any Transfer of their Units.
(d) Before the Selling Partners may consummate a Transfer of their Units to a
third party in accordance with this Agreement, the Selling Partners shall
demonstrate to the Partnership that the Person willing to serve as the
proposed purchaser's guarantor under the agreement contemplated by Section
10.2(e)(vi) has outstanding indebtedness that is rated investment grade by
Moody's Investors Service, Inc. and Standard & Poor's Corporation, or if
such Person has no rated indebtedness outstanding, such Person shall
provide an opinion from a nationally recognized investment banking firm
that such Person could be reasonably expected to obtain such ratings.
(e) Notwithstanding the foregoing provisions of this Section 10.2, a Partner
may Transfer its Units (other than pursuant to Section 10.6) only if all of
the following occur:
(i) The Transfer is accomplished in a non-public offering in compliance with,
and exempt from, the registration and qualification requirements of all
federal and state securities laws and regulations.
(ii) The Transfer does not cause a default under any material contract to which
the Partnership is a party or by which the Partnership or any of its
properties is bound.
(iii) The transferee executes an appropriate agreement to be bound by this
Agreement.
(iv) The transferor and/or transferee bears all reasonable costs incurred by the
Partnership in connection with the Transfer.
(v) The business and activities of the transferee comply with Section 9.6.
(vi) The guarantor of the transferee satisfies the criteria set forth in Section
10.2(d) and delivers an agreement to the ultimate parent entity of the
Offeree Partners and to the Partnership, substantially in the form of the
Parent Agreement.
(vii) The proposed transferor is not in default in the timely performance of
any of its material obligations to the Partnership.
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(viii) The provisions of Section 10.3 are satisfied.
10.3 Inclusion of General or Limited Partner Units. No Limited Partner may
Transfer its Units to any Person (other than in accordance with Section 10.6)
unless the General Partner Units of its General Partner Affiliate are
simultaneously transferred to such Person or a Wholly Owned Affiliate of such
Person. No General Partner may transfer its Units to any Person (other than a
Wholly Owned Affiliate of such Partner) unless the Limited Partner Units of the
Affiliated Limited Partner are simultaneously transferred to such Person or a
Wholly Owned Subsidiary of such Person.
10.4 Rights of Transferee. Upon consummation of a Transfer in accordance
with Section 10.2, the transferee or transferees shall immediately, and without
any further action of any Person, become (i) a Substitute Limited Partner if and
to the extent Limited Partner Units are transferred and (ii) a Substitute
General Partner, if and to the extent General Partner Units are transferred.
10.5 Effective Date of Transfer. Each Transfer shall become effective as
of the first day of the calendar month following the calendar month during which
the Partnership Governance Committee approves such Transfer and receives a copy
of the instrument of assignment and all such certificates and documents of the
character described in Section 10.2, which the Partnership Governance Committee
may reasonably request.
10.6 Transfer to Wholly Owned Affiliate. Without the need for the consent
of any Person (subject to the provisions contained in this Section 10.6):
(a) any Partner may Transfer its Units to any Wholly Owned Affiliate of
such Partner (other than the Partner that is its Affiliate), provided the
transferee executes an instrument reasonably satisfactory to the Partnership
Governance Committee accepting the terms and provisions of this Agreement
(except as may be provided in Section 9.6). Upon consummation of a Transfer in
accordance with this Section 10.6(a), the transferee shall immediately, and
without any further action of any Person, become (i) a Substitute Limited
Partner if and to the extent Limited Partner Units are transferred and (ii) a
Substitute General Partner, if and to the extent General Partner Units are
transferred; and
(b) any Limited Partner may, at its option and at any time, Transfer up to
99% of its Limited Partner Units to its Affiliated General Partner, whereupon
such Limited Partner Units shall, without any further action, become General
Partner Units. Promptly following any Transfer of Limited Partner Units in
accordance with this Section 10.6(b), each Partner shall take such actions and
execute such instruments or documents (including, without limitation, amendments
to this Agreement or supplemental agreements hereto) as may be reasonably
necessary to ensure that each Affiliated Partner Group shall, taken as a whole
and following such Transfer, maintain all of its rights under this Agreement as
in effect immediately prior to such Transfer (including, without limitation, the
portion of Available Net Operating Cash distributable to such Affiliated Partner
Group).
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10.7 Invalid Transfer. No Transfer of Units which is in violation of this
Section 10 shall be valid or effective, and the Partnership shall not recognize
the same for the purposes of making any allocation or distribution.
SECTION 11
DEFAULT
11.1 Default.
(a) Each of the following events shall constitute a "Default" and create the
rights provided for in this Section 11 in favor of the Partnership and the
Non-Defaulting Partners against the Defaulting Partners:
(i) the failure by a Partner to make any contribution to the Partnership as
required pursuant to this Agreement (other than pursuant to the Asset
Contribution Agreement), which failure continues for at least five Business
Days from the date that the Partner is notified such contribution is
overdue;
(ii) in the case of each of Lyondell GP and Lyondell LP, the failure to pay
principal, when due, on the Lyondell Note, which failure continues for at
least five Business Days from the date such payment is due; or
(iii) the withdrawal, retirement, resignation or dissolution of a Partner
(other than in connection with a Transfer of all of a Partner's Units in
accordance with this Agreement); or the Bankruptcy of a Partner or its
Guarantor.
(b) The day upon which the Default commences or occurs (or if the Default is
subject to a cure period and is not timely cured, then the day following
the end of the applicable cure period) shall be the "Default Date."
Without prejudice to a Partner's (or any of its Affiliates') rights to seek
temporary or preliminary judicial relief, prior to any such Default Date
all rights and obligations of the Partners under this Agreement shall
remain in full force and effect.
11.2 Remedies for Default. Provided that there shall be no duplication of
remedies, without prejudice to any right to pursue independently and at any
time, including simultaneously, any other remedy it may have under law,
including the right to seek to recover Damages, or equity, the Non-Defaulting
Partners in their sole discretion may elect to pursue the following remedies:
(a) At any time prior to the expiration of 60 days from the Default Date, the
Non-Defaulting Partners may elect to purchase all, but not less than all,
the Units of the Defaulting Partners as described in Section 11.3;
provided, however, that within 10 days after the determination of the Fair
Market Value, the Non-Defaulting Partners may elect not to proceed with a
purchase of the Units of the Defaulting Partners, in which case the Non-
Defaulting Partners shall have an
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additional 30 days from their determination not to proceed to elect an
alternative remedy under Section 11.2(b) below; and
(b) At any time prior to the expiration of 60 days from the Default Date (or if
the Non-Defaulting Partners initially elected to pursue their remedy under
Section 11.2(a) above, then at any time prior to the expiration of the 30-
day extension period), the Non-Defaulting Partners may elect to effect a
liquidation of the Partnership under Section 11.4 and thereby cause the
Partnership to dissolve under Section 12.1(iv).
11.3 Purchase of Defaulting Partners' Units.
(a) Upon any election pursuant to Section 11.2(a), the purchase price that the
Non-Defaulting Partners shall pay to the Defaulting Partners for their
Units shall be an amount equal to (i) the amount that the Defaulting
Partners would receive in a liquidation (assuming that any sale under
Section 12.2 were for an amount equal to the Fair Market Value, without
giving effect to any Damages) reduced by (ii) the unrecovered Damages
attributable to the Default by the Defaulting Partners.
(b) If the Non-Defaulting Partners have a right to purchase the Units of the
Defaulting Partners, they may first seek a determination of Fair Market
Value by delivering notice in writing to the Defaulting Partners. The Non-
Defaulting Partners shall have 10 days from the final determination of Fair
Market Value to elect to purchase the Defaulting Partner Units by
delivering notice of such election in writing, and the purchase shall be
consummated prior to the expiration of 60 days from the date such notice is
delivered; provided that, such time period shall be subject to extension as
reasonably necessary (up to a maximum of an additional 120 days after such
60 day period) in order to comply with any applicable filing and waiting
period requirements under the Hart-Scott-Rodino Antitrust Improvements Act.
(c) The purchase price so determined shall be payable in cash at a closing held
at the Partnership's offices. The purchase shall be consummated by
appropriate and customary documentation (including the giving of
representations and warranties substantially similar to those set forth in
Sections 2.1 through 2.3 of the Master Transaction Agreement) as soon as
practicable and in any event within the applicable time period specified in
subsection (b).
(d) The Non-Defaulting Partners may assign, in whole or in part, their right to
purchase the Units of the Defaulting Partners to one or more third parties.
(e) If Units are transferred in accordance with this Section 11.3, whether to
the Non-Defaulting Partners or a third party (under subsection (d) above),
upon the consummation of such Transfer, each such transferee shall
immediately, and without any further action on the part of any Person,
become (i) a Substitute Limited Partner if and to the extent that Limited
Partner Units were transferred to such Person and (ii) a Substitute General
Partner if and to the extent that General Partner Units were transferred to
such Person.
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11.4 Liquidation. Upon any election pursuant to Section 11.2(b), the Non-
Defaulting Partners shall have the right to elect to dissolve and liquidate the
Partnership pursuant to the procedures in Section 12.1(iv) (such procedures
constituting a "Liquidation"); provided, however, that any amount payable to the
Defaulting Partners in such Liquidation pursuant to Section 12.2 shall be
reduced by, without duplication, any unrecovered Damages incurred by the Non-
Defaulting Partner and the Non-Defaulting Partners' Percentage Interest of any
unrecovered Damages incurred by the Partnership in connection with the Default.
The Non-Defaulting Partners shall deliver notice of such election to dissolve
and liquidate in writing to the Partnership and the Defaulting Partners.
11.5 Certain Consequences of Default. Notwithstanding any other provision
of this Agreement, commencing on the Default Date and (i) prior to the Non-
Defaulting Partners' collection of Damages through the exercise of its legal
remedies or otherwise, or (ii) while the Non-Defaulting Partners are pursuing
their remedies under Section 11.2(a) or (b), the Representatives of the
Defaulting General Partner shall not have any voting or decisional rights with
respect to matters requiring Partnership Governance Committee Action, and such
matters shall be determined solely by the Representatives of the Non-Defaulting
General Partner; provided, however, that the foregoing loss of voting and
decisional rights shall not occur as a result of a Default caused solely by the
Bankruptcy of a Partner or a Guarantor described in Section 11.1(a)(iii); and
provided further, that in the case of a Default under Section 11.1(a)(i) or
(ii), the foregoing loss of voting and decisional rights shall not apply to
those voting and decisional rights contained in Sections 6.7(i), (x), (xvi) or
(xviii) of this Agreement, which rights shall continue in full force and effect
at all times.
SECTION 12
DISSOLUTION, LIQUIDATION AND TERMINATION
12.1 Dissolution and Termination. As long as there is at least one other
General Partner (who is hereby authorized in such event to conduct the business
of the Partnership without dissolution), the withdrawal, retirement,
resignation, dissolution or Bankruptcy of a General Partner shall not dissolve
the Partnership, but rather shall be a Default covered by Section 11. The
Partnership shall be dissolved upon the happening of any one of the following
events:
(i) the written determination of both General Partners to dissolve the
Partnership;
(ii) the entry of a judicial decree of dissolution;
(iii) any other act or event which results in the dissolution of a limited
partnership under the Act (except as provided in the first sentence of this
Section 12.1);
(iv) the election of the Non-Defaulting Partners to effect a dissolution of the
Partnership under Section 11.4; or
(v) after the delivery of a Deadlock Notice by a General Partner
pursuant to Section 8.5, the written determination by either General Partner
to dissolve the Partnership.
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12.2 Procedures Upon Dissolution.
(a) General. If the Partnership dissolves, it shall commence winding up
pursuant to the appropriate provisions of the Act and the procedures set
forth in this Section 12. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership, the business of
the Partnership and the affairs of the Partners, as such, shall continue to
be governed by this Agreement.
(b) Control of Winding Up. The winding up of the Partnership shall be
conducted under the direction of the Partnership Governance Committee;
provided, however, that if the dissolution is caused by entry of a decree
of judicial dissolution, the winding up shall be carried out in accordance
with such decree.
(c) Manner of Winding Up. Unless the provisions of Section 12.2(e) apply, the
Partnership shall attempt to sell all property and apply the proceeds
therefrom in accordance with this Section 12.2(c) and Section 12.2(d)
below. Upon dissolution of the Partnership, the Partnership Governance
Committee shall determine the time, manner and terms of any sale or sales
of Partnership property pursuant to such winding up, consistent with its
duties and having due regard to the activity and condition of the relevant
market and general financial and economic conditions. Except as otherwise
agreed by the Partners, no distributions will be made in kind to any
Partner without the consent of each Partner.
(d) Application of Assets. In the case of a dissolution and winding-up of the
Partnership, the Partnership's assets shall be applied as follows:
(i) First, to satisfaction of the liabilities of the Partnership owing to third
parties and then to Partners (including Affiliates of the Partners),
whether by payment or reasonable provision for payment. Any reserves
created to make any such provision for payment may be paid over by the
Partnership to an independent escrow holder or trustee, to be held in
escrow or trust for the purpose of paying any such contingent, conditional
or unmatured liabilities or obligations, and, at the expiration of such
period as the Partnership Governance Committee may deem advisable, such
reserves shall be distributed to the Partners or their assigns in the
manner set forth in subsection (d)(ii) below.
(ii) Second, after all allocations of Profits or Losses and other items pursuant
to Section 4, to the Partners in accordance with the balances in their
Capital Accounts. Any Partner that then has a deficit in its Capital
Account shall contribute cash in the amount necessary to eliminate such
deficit. Such contributions shall be made within 90 days after the date in
which all undistributed assets of the Partnership have been converted to
cash.
(iii) Notwithstanding the foregoing, if any Partner shall be indebted to the
Partnership, then until payment in full of the principal of and accrued
but unpaid interest on such indebtedness, regardless of the stated
maturity or maturities thereof, the Partnership shall retain such
Partner's distributive share of Partnership property and apply such sums
to
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the liquidation of such indebtedness and the cost of operation of such
Partnership property during the period of such liquidation.
(e) Division of Assets upon Deadlock. If dissolution occurs pursuant to
Section 12.1(v), then the provisions of this Section 12.2(e) shall, if elected
by any Partner, apply in lieu of the provisions of Section 12.2(c), but subject
to the provisions of Section 12.2(d)(ii). In such event, the Partnership
properties shall be divided and distributed in kind to the Partners in
accordance with the provisions of Appendix E.
12.3 Termination of the Partnership. Upon the completion of the
liquidation of the Partnership and the distribution of all Partnership assets,
the Partnership's affairs shall terminate and the Partnership shall cause to be
executed and filed a Certificate of Cancellation of the Partnership's
Certificate of Limited Partnership pursuant to the Act, as well as any and all
other documents required to effectuate the termination of the Partnership.
12.4 Asset and Liability Statement. Within a reasonable time following the
completion of the winding-up and liquidation of the Partnership's business, the
Partnership Governance Committee shall supply to each of the Partners a
statement (which may be unaudited) which shall set forth the assets and the
liabilities of the Partnership as of the date of complete liquidation, and each
Partner's pro rata portion of distributions pursuant to Section 12.2.
SECTION 13
MISCELLANEOUS
13.1 Confidentiality and Use of Information.
(a) Except as provided in subsection (c) or (d) hereof, each Partner shall, and
shall cause each of its Affiliates and its and their respective partners,
shareholders, directors, officers, employees and agents (collectively,
"Related Persons") to, keep secret, retain in strictest confidence, and
not distribute, disseminate or disclose any and all Confidential
Information except to (i) the Partnership and its officers and employees,
(ii) any lender to the Partnership or (iii) any Partner or any of their
respective Affiliates or other Related Persons on a "need to know" basis in
connection with the transactions leading up to and contemplated by this
Agreement and the operation of the Partnership, and such Partner disclosing
Confidential Information pursuant to this Section 13.1(a) shall use, and
shall cause its Affiliates and other Related Persons to use, such
Confidential Information only for the benefit of the Partnership in
conducting the Partnership's business or for any other specific purposes
for which it was disclosed to such party; provided that the disclosure of
financial statements of, or other information relating to the Partnership
shall not be deemed to be the disclosure of Confidential Information (y) to
the extent that any Partner (or its ultimate parent entity) deems it
necessary, appropriate or customary pursuant to law, regulation or stock
exchange rule (in the reasonable good faith judgment of such parent entity)
to disclose such information in or in connection with filings with the SEC,
press releases disseminated to the financial community, presentations to
lenders, presentations to ratings agencies or information disclosed to
similar
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audiences or (z) to the extent that in order to sustain a position
taken for tax purposes, any Partner deems it necessary and appropriate to
disclose such financial statements or other information. All Confidential
Information disclosed in connection with the Partnership or pursuant to
this Agreement shall remain the property of the Person whose property it
was prior to such disclosure unless such property has been transferred to
the Partnership pursuant to an Asset Contribution Agreement.
(b) No Confidential Information regarding the plans or operations of
any Partner or any Affiliate thereof received or acquired by or disclosed to any
unaffiliated Partner or Affiliate thereof in the course of the conduct of
Partnership business, or otherwise as a result of the existence of the
Partnership, may be used by such unaffiliated Partner or Affiliate thereof for
any purpose other than for the benefit of the Partnership in conducting the
Partnership Business. The Partnership and each Partner shall have the
affirmative obligation to take all necessary steps to prevent the disclosure to
any Partner or Affiliate thereof of information regarding the plans or
operations of such Partner and its Affiliates in markets and areas unrelated to
the business of the Partnership in which any other Partner and their respective
Affiliates compete.
(c) In the event that any Partner is legally required (by
interrogatories, discovery requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any Confidential
Information, it is agreed that such Partner prior to disclosure will provide the
Partnership Governance Committee with prompt notice of such request(s) so that
the Partnership Governance Committee may seek an appropriate protective order or
other appropriate remedy and/or waive the Partner's compliance with the
provisions of this Section. In the event that such protective order or other
remedy is not obtained, or that the Partnership Governance Committee grants a
waiver hereunder, such Partner may furnish that portion (and only that portion)
of the Confidential Information which, in the opinion of the Partner's counsel,
the Partner is legally compelled to disclose, and the Partner will exercise its
commercially reasonable best efforts to obtain reliable assurance that
confidential treatment will be accorded any Confidential Information so
furnished.
(d) Any Partner may disclose Confidential Information to a third party
who requires such Confidential Information for the purpose of evaluating a
possible purchase of such Partner's Units in accordance with Section 10;
provided, however, that such third party shall be informed by such Partner of
the confidential nature of the information and the existence of this Section
13.1 and prior to any disclosure shall execute a written confidentiality
agreement with such Partner substantially identical in scope to this Section and
providing that such confidentiality agreement is also made for the benefit of
the Partnership and each of the other Partners.
(e) The Partners and their Affiliates shall consult with each other on
an ongoing basis with respect to disclosures regarding the Partnership and its
business and affairs permitted under Section 13.1(a)(y).
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13.2 Indemnification.
(a) Indemnification by Partnership. The Partnership agrees, to the fullest
extent permitted by applicable law, to indemnify, defend and hold harmless
each Partner, its Affiliates and their respective officers, directors and
employees from, against and in respect of any Liability which such
Indemnified Person may sustain, incur or assume as a result of, or relative
to, a Third Party Claim arising out of or in connection with the business,
property or affairs of the Partnership, except to the extent that it is
Finally Determined that such Third Party Claim arose out of or was related
to actions or omissions of the indemnified Partner, its Affiliates or any
of their respective officers, directors or employees (acting in their
capacities as such) constituting a breach of this Agreement or any Related
Agreement. The Partnership shall periodically reimburse or advance to any
Person entitled to indemnity under this subsection (a) its legal and other
expenses incurred in connection with defending any claim with respect to
such Liability if such Person shall agree to reimburse promptly the
Partnership for such amounts if it is finally determined that such Person
was not entitled to indemnity hereunder. Nothing in this Section 13.2(a)
is intended to, nor shall it, affect or take precedence over the indemnity
provisions contained in any Related Agreement.
(b) Partner's Right of Contribution. Each Partner hereby agrees, to the
fullest extent permitted by law, to indemnify, defend and hold harmless the
other Partners, their Affiliates and their respective officers, directors
and employees from and against the indemnifying Partner's Percentage
Interest (calculated at the time any such Liability was incurred) of any
Liability that such Indemnified Person may sustain, incur or assume as a
result of or relating to any Third Party Claim arising out of or in
connection with the business, property or affairs of the Partnership;
provided, however, that such indemnified Partner, its Affiliates and their
respective officers, directors and employees shall not be entitled to
indemnity under this subsection (b) to the extent that it is Finally
Determined that such Third Party Claim arose out of or was related to
actions or omissions of the indemnified Partner, its Affiliates or any of
their respective officers, directors or employees (acting in their
capacities as such) constituting a breach of this Agreement or any Related
Agreement; provided, further, that such indemnified Partner, its Affiliates
and their respective officers, directors and employees shall not be
entitled to indemnity under this subsection (b) unless (x) the indemnified
Partner shall first make a written demand for indemnification from the
Partnership in accordance with subsection (a) above and subsection (c)
below and the Partnership shall fail to satisfy such demand in a manner
reasonably satisfactory to the indemnified Partner within 60 days of such
notice or (y) the Partnership is insolvent or otherwise unable to satisfy
its obligations. The indemnifying Partner shall periodically reimburse any
Person entitled to indemnity under this subsection (b) for its legal and
other expenses incurred in connection with defending any claim with respect
to such Liability if such Person shall agree to reimburse promptly the
indemnifying Partner for such amounts if it is Finally Determined that such
Person was not entitled to indemnity hereunder.
(c) Procedures. Promptly after receipt by a Person entitled to indemnification
under subsection (a) or (b) (an "Indemnified Party") of notice of any
pending or threatened claim against it (a "Claim"), such Indemnified Party
shall give prompt written notice (including copies of all papers served
with respect to such claim) to the party to whom the Indemnified Party is
entitled to look for indemnification (the "Indemnifying Party") of the
commencement thereof, which notice
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<PAGE>
shall describe in reasonable detail the nature of the Third Party Claim, an
estimate of the amount of damages attributable to the Third Party Claim to
the extent feasible and the basis of the Indemnified Party's request for
indemnification under this Agreement; provided that the failure to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of
any liability that it may have to any Indemnified Party except to the
extent the Indemnifying Party demonstrates that it is prejudiced thereby.
In case any Claim that is subject to indemnification under subsection (a)
shall be brought against an Indemnified Party and it shall give notice to
the Indemnifying Party of the commencement thereof, the Indemnifying Party
may, and at the request of the Indemnified Party shall, participate in and
control the defense of the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party. The Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Party unless (i) the
employment thereof has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party failed to assume the
defense and employ counsel or failed to diligently prosecute or settle the
Third Party Claim or (iii) there shall exist or develop a conflict that
would ethically prohibit counsel to the Indemnifying Party from
representing the Indemnified Party. If requested by the Indemnifying Party,
the Indemnified Party agrees to cooperate with the Indemnifying Party and
its counsel in contesting any Third Party Claim that the Indemnifying Party
elects to contest, including, without limitation, by making any
counterclaim against the Person asserting the Third Party Claim or any
cross-complaint against any Person, in each case only if and to the extent
that any such counterclaim or cross-complaint arises from the same actions
or facts giving rise to the Third Party Claim. The Indemnifying Party shall
be the sole judge of the acceptability of any compromise or settlement of
any claim, litigation or proceeding in respect of which indemnity may be
sought hereunder, provided that the Indemnifying Party will give the
Indemnified Party reasonable prior written notice of any such proposed
settlement or compromise and will not consent to the entry of any judgment
or enter into any settlement with respect to any Third Party Claim without
the prior written consent of the Indemnified Party, which shall not be
unreasonably withheld. The Indemnifying Party (if the Indemnified Party is
entitled to indemnification hereunder) shall reimburse the Indemnified
Party for its reasonable out of pocket costs incurred with respect to such
cooperation.
If the Indemnifying Party fails to assume the defense of a Third Party
Claim within a reasonable period after receipt of written notice pursuant to the
first sentence of this subparagraph (c), or if the Indemnifying Party assumes
the defense of the Indemnified Party pursuant to this subparagraph (c) but fails
diligently to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings; provided that the Indemnified Party shall not
settle such Third Party Claim without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section, and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
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Notwithstanding the other provisions of this Section 13.2, if the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 13.2 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
13.2 or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of the litigation concerning such
dispute. If a dispute over potential liability is resolved in favor of the
Indemnified Party, the Indemnifying Party shall reimburse the Indemnified Party
in full for all costs of the litigation concerning such dispute.
After it has been determined, by acknowledgment, agreement, or ruling
of court of Legal Requirements, that an Indemnifying Party is liable to the
Indemnified Party under this Section 13.2(c), the Indemnifying Party shall pay
or cause to be paid to the Indemnified Party the amount of the Liability within
ten business days of receipt by the Indemnifying Party of a notice reasonably
itemizing the amount of the Liability but only to the extent actually paid or
suffered by the Indemnified Party.
(d) Survival. The indemnities contained in this Section shall survive the
termination and liquidation of the Partnership.
(e) Subrogation. In the event of any payment by or on behalf of an
Indemnifying Party to an Indemnified Party in connection with any
Liability, the Indemnifying Party (or any guarantor who made such payment)
shall be subrogated to and shall stand in the place of the Indemnified
Party as to any events or circumstances in respect of which the Indemnified
Party may have any right or claim against any third party relating to such
event or indemnification. The Indemnified Party shall cooperate with the
Indemnifying Party (or such guarantor) in any reasonable manner in
prosecuting any subrogated claim.
13.3 Third Party Claim Reimbursement.
(a) In the case of a Liability relating to a Third Party Claim and caused by
the Fault of a General Partner, its Affiliates or any of their respective
officers, directors or employees (acting in their capacities as such)
against whom reimbursement is being sought, such General Partner hereby
agrees to reimburse the Partnership for such Liability to the extent that:
(i) the Liability relates to a Third Party Claim that has been finally resolved
and that the Partnership has actually paid (an "Expense");
(ii) the Expense is not covered by insurance carried by the Partnership
(excluding any amounts relating to insured claims to the extent that they
fall within deductibles or self-insured retentions or are above applicable
coverage limits); and
(iii) the Expense is not offset by third party indemnification or otherwise.
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<PAGE>
provided, however, that such General Partner shall reimburse the Partnership for
the Expense only to the extent and in proportion to its Fault.
(b) Any claim by the Partnership for reimbursement under this Section may be
initiated by a General Partner upon written notice to the other General
Partner, and the General Partners shall have a period of 60 days during
which to reach unanimous agreement as to the terms on which any
reimbursement shall be made. If the General Partners are unable to agree
or there are any disputes over Fault and reimbursement under this Section,
such matters shall be resolved pursuant to the Dispute Procedures.
13.4 Dispute Resolution. Except as otherwise provided for herein, all
controversies or disputes arising under this Agreement shall be resolved
pursuant to the provisions set forth on Appendix D (the "Dispute Procedures").
13.5 EXTENT OF LIMITATION OF LIABILITY, INDEMNIFICATION, ETC. TO THE
FULLEST EXTENT PERMITTED BY LAW AND WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE LIMITATION OF LIABILITY, INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS
SET FORTH HEREIN, A PARTY SHALL BE ENTITLED TO INDEMNIFICATION OR RELEASE
HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS
GIVING RISE TO ANY SUCH INDEMNIFICATION OR RELEASE IS THE RESULT OF THE SOLE,
GROSS, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY
OR OTHER FAULT OR VIOLATION OF ANY LAW OF OR BY ANY SUCH PARTY. THE PARTIES
AGREE THAT THIS STATEMENT CONSTITUTES A CONSPICUOUS LEGEND.
13.6 Further Assurances. From time to time, each Partner agrees to execute
and deliver such additional documents, and will provide such additional
information and assistance, as the Partnership may reasonably require to carry
out the terms of this Agreement and to accomplish the Partnership's business.
13.7 Successors and Assigns. Except as may be expressly provided herein,
this Agreement shall be binding upon and inure to the benefit of the successors
of the Partners, but no Partner may assign or delegate any of its rights or
obligations under this Agreement. Except as expressly provided herein, any
purported assignment or delegation shall be void and ineffective.
13.8 Benefits of Agreement Restricted to the Parties. This Agreement is
made solely for the benefit of the Partnership and the Partners, and no other
Person shall have any right, claim or cause of action under or by virtue of this
Agreement.
13.9 Notices. All notices, requests and other communications that are
required or may be given under this Agreement shall, unless otherwise provided
for elsewhere in this Agreement, be in writing and shall be deemed to have been
duly given if and when (i) transmitted by telecopier facsimile with proof of
confirmation from the transmitting machine or (ii) delivered by commercial
courier or other hand delivery, as follows:
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Lyondell Petrochemical Company Millennium Chemicals Inc.
1221 McKinney Street 99 Wood Avenue South
Houston, Texas 77010 Iselin, New Jersey 08830
Attention: Jeffrey R. Pendergraft Attention: George H. Hempstead, III
Telecopy Number: (713) 652-4538 Telecopy Number: (908) 603-6857
45
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13.10 [Reserved]
13.11 Severability. In the event that any provisions of this Agreement
shall be Finally Determined to be unenforceable, such provision shall, so long
as the economic and legal substance of the transactions contemplated hereby is
not affected in any materially adverse manner as to any Partner, be deemed
severed from this Agreement and every other provision of this Agreement shall
remain in full force and effect.
13.12 Construction. In construing this Agreement, the following
principles shall be followed: (i) no consideration shall be given to the
captions of the articles, sections, subsections or clauses, which are inserted
for convenience in locating the provisions of this Agreement and not as an aid
in construction; (ii) no consideration shall be given to the fact or presumption
that any Partner had a greater or lesser hand in drafting this Agreement; (iii)
examples shall not be construed to limit, expressly or by implication, the
matter they illustrate; (iv) the word "includes" and its syntactic variants mean
"includes, but is not limited to" and corresponding syntactic variant
expressions; (v) the plural shall be deemed to include the singular, and vice
versa; (vi) each gender shall be deemed to include the other gender; and (vii)
each appendix, exhibit, attachment and schedule to this Agreement is a part of
this Agreement.
13.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, and all of which when
taken together shall constitute one and the same original document.
13.14 Waiver of Right to Partition. Except as provided in Section
12.2(e), each Person who now or hereafter is a party hereto or who has any right
herein or hereunder irrevocably waives during the term of the Partnership any
right to maintain any action for partition with respect to Partnership property.
13.15 Governing Law. The laws of the State of Delaware shall govern
the construction, interpretation and effect of this Agreement without giving
effect to any conflicts of law principles.
13.16 Jurisdiction; Consent to Service of Process; Waiver. ANY
JUDICIAL PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT OR ANY DISPUTE
UNDER OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER
RELATED HERETO SHALL BE BROUGHT IN THE FEDERAL OR STATE COURTS OF THE STATE OF
DELAWARE, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
TO THIS AGREEMENT ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT (AS FINALLY ADJUDICATED) RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES TO THIS
AGREEMENT SHALL APPOINT THE CORPORATION TRUST COMPANY, THE PRENTICE-HALL
CORPORATION SYSTEM, INC. OR A SIMILAR ENTITY (THE "AGENT") AS AGENT TO RECEIVE
ON ITS BEHALF SERVICE OF PROCESS IN ANY PROCEEDING IN ANY SUCH COURT IN THE
STATE OF DELAWARE. THE FOREGOING CONSENTS TO JURISDICTION
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AND APPOINTMENTS OF AGENT TO RECEIVE SERVICE OF PROCESS SHALL NOT CONSTITUTE
GENERAL CONSENTS TO SERVICE OF PROCESS IN THE STATE OF DELAWARE FOR ANY PURPOSE
EXCEPT AS PROVIDED ABOVE AND SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON
OTHER THAN THE PARTIES HERETO.
13.17 Expenses. Except as otherwise provided herein or in the Master
Transaction Agreement, each party hereto shall be responsible for its own
expenses incurred in connection with this Agreement.
13.18 Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY AND
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
13.19 Payment Terms and Interest Calculations.
(a) If the payment due date for any payment hereunder (including capital
contributions and Damages) falls on a Saturday or a bank or federal holiday,
other than a Monday, the payment shall be due on the past preceding business
day. If the payment due date falls on a Sunday or Monday bank or federal
holiday, the payment shall be due on the following business day.
(b) Interest shall accrue on any unpaid and outstanding amount from the
time such amount is due and payable through the date upon which such amount,
together with accrued interest thereon, is paid in full. Interest shall,
subject to the provisions of Section 13.20, accrue at a per annum rate equal to
the lesser of (i) the Agreed Rate plus 2%, compounded quarterly, to the extent
permitted by law or (ii) the Highest Lawful Rate.
(c) A wire transfer or delivery of a check shall not operate to discharge
any payment under this Agreement and shall be accepted subject to collection.
13.20 Usury Savings Clause. Notwithstanding any other provision of
this Agreement, it is the intention of the parties hereto to conform strictly to
Applicable Usury Laws, in each case to the extent they are applicable to this
Agreement. Accordingly, if any payment made pursuant to this Agreement results
in any Person having paid any interest in excess of the Maximum Amount, or if
any transaction contemplated hereby would otherwise be usurious under any
Applicable Usury Laws, then, in that event, it is agreed as follows: (i) the
provisions of this Section 13.20 shall govern and control; (ii) the aggregate of
all interest under Applicable Usury Laws that is contracted for, charged or
received under this Agreement shall under no circumstances exceed the Maximum
Amount, and any excess shall be promptly refunded to the payor by the recipient
hereof; (iii) no Person shall be obligated to pay the amount of such interest to
the extent that it is in excess of the Maximum Amount; and (iv) the effective
rate of any interest payable under this Agreement shall be ipso facto reduced to
the Highest Lawful Rate, as hereinafter defined, and the provisions of this
Agreement immediately shall be deemed reformed, without the necessity of the
execution of any new document or instrument, so as to comply with all Applicable
Usury Laws. All sums paid, or
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agreed to be paid, to any person pursuant to this Agreement for the use,
forbearance or detention of any indebtedness arising hereunder shall, to the
fullest extent permitted by the Applicable Usury Laws, be amortized, pro rated,
allocated and spread throughout the full term of any such indebtedness so that
the actual rate of interest does not exceed the Highest Lawful Rate in effect at
any particular time during the full term thereof.
13.21 Other Waivers. EACH PARTY HEREBY WAIVES ANY OBJECTION IT MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON-
CONVENIENS.
13.22 Special Joinder by Millennium America. Millennium America is a
party to this Agreement for the sole purpose of evidencing its agreement to be
bound by the provisions set forth in Section 8.6(c) and is not a partner of the
Partnership and shall not have any rights under this Agreement or any other
obligations under this Agreement.
13.23 Amendment. All waivers, modifications, amendments or alterations
of this Agreement shall require the written approval of each of the General
Partners and each of the Limited Partners.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed on behalf of each of
the parties hereto, by their respective officers thereunto duly authorized,
effective as of the date first written above.
GENERAL PARTNERS
LYONDELL PETROCHEMICAL G.P. INC.
By:
Name:
Title:
MILLENNIUM PETROCHEMICALS GP LLC
By:
Name:
Title:
LIMITED PARTNERS
LYONDELL PETROCHEMICAL L.P. INC.
By:
Name:
Title:
MILLENNIUM PETROCHEMICALS LP LLC
By:
Name:
Title:
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SPECIAL JOINDER PURSUANT TO SECTION 13.22
MILLENNIUM AMERICA INC.
By:
Name:
Title:
50
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APPENDIX A
TO LIMITED PARTNERSHIP AGREEMENT
DEFINED TERMS
Acceptance Notice. See Section 10.2(b).
Act. The Delaware Revised Uniform Limited Partnership Act, as amended and
in effect from time to time.
Adjusted Capital Account Deficit. With respect to any Partner, the deficit
balance, if any, in such Partner's Capital Account as of the end of the relevant
fiscal year, after giving effect to the following adjustments:
(i) Such Capital Account shall be deemed to be increased by any
amounts which such Partner is obligated to restore to the Partnership
(pursuant to this Agreement or otherwise) or is deemed to be obligated to
restore pursuant to the second to last sentence of Regulation (S)1.704-
2(g)(1) and (S)1.704-2(i)(5) (relating to allocations attributable to
nonrecourse debt).
(ii) Such Capital Account shall be deemed to be decreased by the items
described in Regulation (S)1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Deficit is intended to comply with
the provisions of Regulation (S)1.704-1(b)(2)(ii)(d) and shall be interpreted
and applied consistently therewith.
Affiliate. As to any specified Person, any other Person that directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with the specified Person; provided, however, that for
purposes of this Agreement such term shall not include (i) the Partnership or
any entities controlled by it, (ii) in the case of each of Lyondell GP and
Lyondell LP, shall not include Atlantic Richfield Company and any entities
controlled by it and (iii) in the case of Millennium GP and Millennium LP shall
not include Suburban Propane Partners, L.P. and any entities controlled by it.
For purposes of this definition the term "control" shall have the meaning set
forth in 17 CFR 230.405, as in effect on the date hereof.
Affiliated General Partner. In the case of Lyondell LP, the "Affiliated
General Partner" shall mean Lyondell GP. In the case of Millennium LP, the
"Affiliated General Partner" shall mean Millennium GP.
Affiliated Limited Partner. In the case of Lyondell GP, the "Affiliated
Limited Partner" shall mean Lyondell LP. In the case of Millennium GP, the
"Affiliated Limited Partner" shall mean Millennium LP.
Affiliated Partner Group. A General Partner and its Affiliated Limited
Partner.
Appendix A-1
<PAGE>
Agreed Rate. The base commercial lending rate announced by Citibank, N.A.
(or its successor) at its principal office, in effect from time to time, such
interest rate to change automatically, effective as of the date of each change
in such base rate.
Agreement. This Limited Partnership Agreement of Equistar Chemicals, LP,
as amended from time to time.
Alternate. See Section 6.4(b).
Annual Budget. See Section 8.2.
Applicable Usury Laws. Laws regarding the use, forbearance or detention of
any indebtedness arising under this Agreement whether such laws are now or
hereafter in effect, including the laws of the United States of America or any
other jurisdiction whose laws are applicable, and including any subsequent
revisions to or judicial interpretations of those laws.
Asset Contribution Agreement. In the case of Lyondell LP and Lyondell GP,
the Asset Contribution Agreement shall mean the Asset Contribution Agreement to
be entered into between the Partnership and Lyondell. In the case of Millennium
LP and Millennium GP, the Asset Contribution Agreement shall mean the Asset
Contribution Agreement to be entered into between the Partnership and Millennium
Petrochemicals.
Asset Fair Market Value. With respect to any asset, as of the date of
determination, the cash price at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts and neither
acting under compulsion, such as in an arm's-length negotiated transaction with
an unaffiliated third party without time constraints.
Assumed Liabilities. In the case of Lyondell LP and Lyondell GP, Assumed
Liabilities means the "Assumed Liabilities" as defined in the Asset Contribution
Agreement of Lyondell. In the case of Millennium LP and Millennium GP, Assumed
Liabilities shall mean the "Assumed Liabilities" as defined in the Asset
Contribution Agreement of Millennium Petrochemicals.
Auxiliary Committee. See Section 6.9.
Available Net Operating Cash. At the time of determination, (a) all cash
and cash equivalents on hand in the Partnership as of the most recent month end,
plus the excess, if any, of the Partnership Target Debt over the Partnership's
actual indebtedness (as determined in accordance with GAAP) as of such month
end, less (b) the Projected Cash Requirements, if any, of the Partnership as of
such month end, as determined by the Executive Officers of the Partnership. For
purposes of this definition, "Projected Cash Requirements" means, for the 12-
month period following any such month end, the excess, if any, of the sum of (a)
forecast capital expenditures, plus (b) forecast cash payments for Taxes, debt
service including principal and interest requirements and other non-cash credits
to income, plus (c) forecast cash reserves for future operations or other
requirements, over the sum of (1) forecast net income of the Partnership, plus
(2) the sum of forecast depreciation, amortization, other non-cash charges to
income, interest expenses, and Tax expenses,
Appendix A-2
<PAGE>
in each case to the extent deducted in determining net income, plus or minus (3)
forecast decreases or increases, respectively, in working capital, plus (4) the
forecast cash proceeds of dispositions of assets (net of expenses) plus (5) an
amount equal to the forecast net proceeds of debt financings, contributions and
payments of the Lyondell Note. For purposes of this definition, "Partnership
Target Debt" means for such month end, the level of indebtedness (as determined
in accordance with GAAP) projected for the Partnership in the most recently
approved Strategic Plan (initially $1.75 billion), except to the extent the
Executive Officers of the Partnership determine that changes in the financial
condition, results of operations, assets, business or prospects of the
Partnership make a change advisable, in which case the Partnership shall advise
the General Partners promptly regarding the basis for the change. Projected Cash
Requirements shall be calculated consistent with the most recently approved
Strategic Plan, except to the extent the Executive Officers of the Partnership
determine that changes in the financial condition, results of operations,
assets, business or prospects of the Partnership make a change advisable, in
which case the Partnership shall advise the General Partners promptly regarding
the basis for the change.
Bank Credit Agreement. The bank credit agreement or agreements to be
entered into by the Partnership on or prior to the Closing Date as provided for
by Section 8.6.
Bankruptcy. The occurrence of any of the following: (i) a Partner or its
Guarantor shall file a voluntary petition in bankruptcy or shall be adjudicated
a bankrupt or insolvent, or shall file any petition or answer or consent seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future applicable
federal, state or other statute or law relating to bankruptcy, insolvency, or
other relief for debtors, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver, conservator or liquidator of such Partner
or its Guarantor or of all or any substantial part of its properties or its
Units (the term "acquiesce," as used in this definition, includes the failure to
file a petition or motion to vacate or discharge any order, judgment or decree
within ten Business Days after entry of such order, judgment or decree); (ii) a
court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed against any Partner or its Guarantor seeking a
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the present or any future federal bankruptcy act, or any
other present or future applicable federal, state or other statute or law
relating to bankruptcy, insolvency, or other relief for debtors, and such
Partner or its Guarantor shall acquiesce in the entry of such order, judgment or
decree or such other order, judgment or decree shall remain unvacated and
unstayed for an aggregate of 60 days (whether or not consecutive) from the date
of entry thereof, or any trustee, receiver, conservator or liquidator of such
Partner or its Guarantor or of all or any substantial part of its property or
its Units shall be appointed without the consent or acquiescence of such Partner
or its Guarantor and such appointment shall remain unvacated and unstayed for an
aggregate of 60 days (whether or not consecutive); (iii) a Partner or its
Guarantor shall admit in writing its inability to pay its debts as they mature;
(iv) a Partner or its Guarantor shall give notice to any governmental body of
insolvency or pending insolvency, or suspension or pending suspension of
operations; or (v) a Partner or its Guarantor shall make an assignment for the
benefit of creditors or take any other similar action for the protection or
benefit of creditors.
Appendix A-3
<PAGE>
Book Value. With respect to any asset of the Partnership, the asset's
adjusted basis as of the relevant date for federal income tax purposes, except
as follows:
(i) The initial aggregate Book Value of all of the assets of the Partnership as
of the Closing Date shall be equal to the sum of (A) the beginning
aggregate Capital Accounts of the Partners immediately after the Closing
Date, and (B) the aggregate amount of all liabilities of the Partnership
for federal income tax purposes immediately after the Closing Date.
(ii) The initial Book Value of any asset contributed by a Partner to the
Partnership after the Closing Date shall be the gross fair market value of
such asset, which shall be equal to the amount credited to such Partner's
Capital Account for such contribution (increased by the amount of any
liabilities which the Partnership assumes or takes subject to).
(iii) The Book Values of all Partnership assets (including intangible assets
such as goodwill) shall be adjusted (at the election of the Partnership
Governance Committee) to equal their respective gross fair market values upon
the occurrence of any of the events described in Regulation (S)1.704-
1(b)(2)(iv)(f)(5).
(iv) The Book Value of any asset distributed by the Partnership to a Partner
shall be equal to the gross fair market value of such asset on the date of
the distribution.
(v) The Book Value of any Partnership asset with respect to which an adjustment
to tax basis has occurred by reason of the application of Section 734(b) or
754(b) of the Code shall be adjusted to the extent such adjustment to tax
basis is taken into account pursuant to Regulation (S)1.704-1(b)(2)(iv)(m).
(vi) If the Book Value of an asset is not equal to its adjusted tax basis for
federal income tax purposes, such Book Value shall be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Profits and Losses and other items allocated pursuant to Section
4.1.
The foregoing definition of Book Value is intended to comply with the provisions
of Regulation (S)1.704-1(b)(2)(iv) and shall be interpreted and applied
consistently therewith. Any determinations of "gross fair market value" in this
definition of Book Value shall be made by the Partnership Governance Committee.
Business Day. Any day other than a Saturday, Sunday or other day on which
banks are closed in New York City, New York.
Business Opportunity. See Section 9.3(c).
Capital Account. The separate capital account established and maintained
by the Partnership for each Partner, as contemplated by Section 2.
Appendix A-4
<PAGE>
Capital Expenditure Budget. See Section 8.2(d).
CEO. See Section 7.1(b).
Claim. See Section 13.2(c).
Closing Date. The Closing Date under the Master Transaction Agreement.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time and any successor thereto.
Competing Opportunity. See Section 9.3(c).
Confidential Information. All confidential documents and information
(including, without limitation, confidential commercial information and
information with respect to customers, trade secrets and proprietary
technologies or processes and the design and development of new products or
services) concerning the Partnership, the Partners or their Affiliates,
furnished to a Partner in connection with the transactions leading up to and
contemplated by this Agreement and the operation of the Partnership, except to
the extent that such information (i) is or becomes generally available to and
known by the public or the petrochemical industry (other than as a result of an
unpermitted disclosure directly or indirectly by the Partnership or a Partner),
(ii) is or becomes available to a Partner on a nonconfidential basis from a
source other than the Partnership or a Partner; provided, however, that such
source is not and was not bound by a confidentiality agreement with, or other
obligation of secrecy to, the Partnership or the other Partner, (iii) has
already been or is hereafter independently acquired or developed by a Partner
without violating any confidentiality agreement with or other obligation of
secrecy to the Partnership or another Partner or (iv) is otherwise generated by
the Partnership with the intention that it not be held as confidential.
Conflict Circumstance. Any transaction or dealing between the Partnership
(or any Wholly Owned Subsidiary) and a General Partner (the "Conflicted General
Partner") or any of its Affiliates pursuant to any agreement (including this
Agreement or any other Related Agreements) or otherwise, including action to be
taken by the Partnership pursuant to Section 9.3(c) or (d); provided, however,
that a Conflict Circumstance shall cease to exist if and when the third party
with which the transaction or dealing exists shall cease to be an Affiliate of a
General Partner.
Conflicted General Partner. As defined in the definition of
"Conflict Circumstance."
Contributed Business. As defined in the Asset Contribution Agreement.
Damages. With respect to a Person in connection with a Default, any and
all obligations (including all obligations to take an affirmative or curative
act), liabilities, damages (including damages arising out of any breach of any
representation or warranty, damages related to investigations, proceedings,
audits, the interruption of the Partnership's business, restrictions upon the
use of, or adverse impact on, the Assets or the Partnership's business, or the
interruption, breach or termination of any Related Agreements or other
agreements, including any lost profits attributable
Appendix A-5
<PAGE>
thereto), fines, penalties, deficiencies, losses, judgments, settlements, costs
and expenses (including costs and expenses incurred in connection with
performing obligations, bonding and appellate costs and attorneys',
accountants', engineers', health, safety, environmental and other consultants'
and investigators' fees and disbursements, liquidating, selling or offering for
sale the Partnership's business and assets or winding up the Partnership's
business, or other payments in respect of such payments) suffered or incurred by
such Person that arise out of or relate to such Default, regardless of whether
any of the foregoing are foreseeable, unforeseeable, matured or unmatured,
existing or contingent as of the date of such Default. "Damages" also shall
include, if and to the extent interest is not already included therein under
applicable law or other provisions hereof and subject to Section 13.20, interest
on amounts actually due until payment thereof is made at a rate per annum equal
to the rate set forth in Section 13.19(b). "Damages" shall not include any
punitive, exemplary, special or other similar damages.
Deadlock Notice. See Section 8.5.
Default. See Section 11.1.
Default Date. See Section 11.1.
Defaulting Partners. Lyondell GP and Lyondell LP, in the case of a Default
by Lyondell GP, Lyondell LP or their Guarantor; and Millennium GP and Millennium
LP, in the case of a Default by Millennium GP, Millennium LP or their Guarantor.
Depreciation. For each fiscal year or part thereof, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable for
federal income tax purposes with respect to an asset for such year or other
period, except that if the Book Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such year,
Depreciation shall be (i) an amount which bears the same ratio to such Book
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year bears to such adjusted tax basis, or, (ii) if
the federal income tax depreciation, amortization or other cost recovery
deduction for such year is equal to zero, an amount determined with reference to
such Book Value using a reasonable method selected by the Tax Matters Partner.
Executive Officers. See Section 7.1(b).
Expense. See Section 13.3(a).
Fair Market Value. "Fair Market Value" with respect to the Partnership
shall mean the Asset Fair Market Value of all of the Partnership's assets
decreased by the fair value of all its liabilities, as of the most recently
ended fiscal quarter. "Fair Market Value" with respect to a Related Business
shall mean the Asset Fair Market Value of all the assets of such Related
Business decreased by the fair value of all its liabilities, as of the most
recently ended fiscal quarter. In either case, the following shall apply to the
determination of Fair Market Value:
Appendix A-6
<PAGE>
(i) The General Partners shall first attempt to agree on such value, which if
agreed to shall be the Fair Market Value.
(ii) If the General Partners are unable to agree within 20 days of the first
written notice from one General Partner to the other proposing an amount to
be the Fair Market Value (the "Notice"), then if requested by either
General Partner, each General Partner shall (at its own cost) cause an
independent, qualified appraiser to deliver a written appraisal of its
determination of the Fair Market Value within 50 days of the Notice. If
the lower appraised value is greater than or equal to 90% of the higher
appraised value, then the average of the two appraised values shall be the
Fair Market Value.
(iii) If the lower appraised value is less than 90% of the higher appraised
value, then the General Partners shall jointly appoint a Neutral within 20 days
of the delivery of both such appraisals. If the General Partners have been
unable to agree upon such appointment within such 20 days, then such Neutral
shall upon the application of either General Partner be appointed within 10 days
of the filing of such application by the Center for Public Resources, or if such
appointment is not so made promptly then promptly thereafter by the American
Arbitration Association in Philadelphia, Pennsylvania, or if such appointment is
not so made promptly then promptly thereafter by the senior United States
District Court judge sitting in Wilmington, Delaware. The fees and expenses of
the Neutral shall be paid equally by the Partners.
(iv) The Neutral shall, within 30 days of the appointment of the Neutral,
determine which of the two appraised values (without in any way modifying
or compromising between the two appraised values) is closest to the fair
market value of the enterprise's assets as determined by the Neutral, and
that appraised value shall be the Fair Market Value.
Fault. Any act or omission of a Partner, its Affiliates or any of their
respective officers, directors or employees (acting in their capacities as such)
that constitutes or results from intentional misconduct, criminal intent or
gross negligence.
Finally Determined. Determined by any final, nonappealable judicial order
or pursuant to a binding alternative dispute resolution procedure.
Funding Notice. See Section 2.4.
GAAP. United States generally accepted accounting principles, as in effect
from time to time.
General Partners. Each Person who executes this Agreement and who is
hereby admitted to the Partnership as a general partner of the Partnership,
unless such General Partner ceases to be a General Partner hereunder or sells,
transfers, forfeits or otherwise disposes of its Units and is replaced by a
Substitute General Partner in accordance with this Agreement and the Act, and
each Person that becomes a Substitute General Partner, if any, of the
Partnership as provided herein, in such Person's capacity as a general partner
of the Partnership.
Appendix A-7
<PAGE>
Guarantor. Lyondell Petrochemical Company, with respect to Lyondell GP and
Lyondell LP; and Millennium Chemicals Inc., with respect to Millennium GP and
Millennium LP; and any successor or additional guarantor party to an agreement
substantially in the form of the Parent Agreement and entered into in accordance
with Section 10.
Highest Lawful Rate. The maximum rate of interest, if any, that may be
charged to any person under all Applicable Usury Laws on any principal balance
from time to time outstanding pursuant to this Agreement.
HSE Law. "HSE Law," as defined in Section 1 of the Asset Contribution
Agreement.
Indemnified Party. See Section 13.2(c).
Indemnifying Party. See Section 13.2(c).
Initial Assets. "Assets," as defined in Section 1 of the Asset
Contribution Agreements.
Initial Notice. See Section 10.2(a).
IRS. Internal Revenue Service.
Liability. Any loss, claim, damages, fine, penalty, assessment by public
agencies, settlement, cost or expense (including costs of investigation, defense
and attorneys' fees) or other liability.
Limited Partner. Each Person who executes this Agreement and who is hereby
admitted to the Partnership as a limited partner of the Partnership, unless such
Limited Partner ceases to be a Limited Partner hereunder or sells, transfers,
forfeits or otherwise disposes of its Units and is replaced by a Substitute
Limited Partner in accordance with this Agreement and the Act, and each Person
that becomes a Substitute Limited Partner, if any, of the Partnership as
provided herein, in such Person's capacity as a limited partner of the
Partnership.
Limited Partners Pro Rata. From or to the Limited Partners in the ratio of
the Units owned by each.
Liquidation. See Section 11.4.
Losses. See definition of "Profits and Losses."
Lyondell. Lyondell Petrochemical Company, a Delaware corporation.
Lyondell Assumed Debt. Debt issued by Lyondell having an aggregate
principal amount of $745 million, as specified in the Asset Contribution
Agreement with respect to Lyondell.
Lyondell GP. Lyondell Petrochemical G.P. Inc., a Delaware corporation, the
General Partner that is an Affiliate of Lyondell.
Appendix A-8
<PAGE>
Lyondell LP. Lyondell Petrochemical L.P. Inc., a Delaware corporation, the
Limited Partner that is an Affiliate of Lyondell.
Lyondell Note. That certain promissory note to be dated as of the Closing
Date in the amount of $345 million payable by Lyondell LP to the Partnership, as
contemplated by the Master Transaction Agreement.
Master Transaction Agreement. That certain agreement between Lyondell
Petrochemical Company and Millennium Chemicals Inc. dated July 25, 1997, as
amended, providing for the execution of various agreements concerning the
Partnership and the Initial Assets.
Maximum Amount. The maximum nonusurious amount of interest that may be
lawfully contracted for, charged or received by any person in connection with
any indebtedness arising under this Agreement under all Applicable Usury Laws.
Millennium. Millennium Chemicals Inc., a Delaware corporation.
Millennium America. Millennium America Inc., a Delaware corporation.
Millennium America Guarantee. See Section 8.6(c).
Millennium America Guaranteed Debt. The portion, if any, of the debt
outstanding under the Bank Credit Agreement and the portion, if any, of any debt
that refinances the debt outstanding under the Bank Credit Agreement or any
subsequent refinancing thereof (in any case, not to exceed a guarantee of $750
million principal amount), in each case to the extent such debt is guaranteed by
Millennium America, or an Affiliate thereof, as contemplated by Section 8.6(c).
Millennium Debt. That certain indebtedness of Millennium or an Affiliate
thereof in the amount of $750 million to be assumed by the Partnership pursuant
to the Millennium Asset Contribution Agreement.
Millennium GP. Millennium Petrochemicals GP LLC, a Delaware limited
liability company, the General Partner that is an Affiliate of Millennium.
Millennium LP. Millennium Petrochemicals LP LLC, a Delaware limited
liability company, the Limited Partner that is an Affiliate of Millennium.
Neutral. A neutral Person acceptable to all of the appointing Partners and
not affiliated with any of the Partners.
Nonconflicted General Partner. With respect to any Conflict Circumstance,
the General Partner that is not the Conflicted Partner with respect thereto.
Non-Defaulting Partners. The two Partners other than the two Defaulting
Partners.
Appendix A-9
<PAGE>
Offeree Partners. See Section 10.2(a).
Operating Budget. See Section 8.2(c).
Parent Agreement. Parent Agreement to be entered into among Millennium,
Lyondell and the Partnership providing, among other things, for a guarantee from
each Guarantor to the Partnership, executed in connection with this Agreement,
as amended from time to time, the form of which is referenced in the Master
Transaction Agreement.
Partners. The General Partners and the Limited Partners on the date of
this Agreement until such Person ceases to be a partner of the Partnership.
Partners Pro Rata. From or to all Partners in the ratio of the Units
owned by each.
Partnership. Equistar Chemicals, LP, a Delaware limited partnership, the
limited partnership formed and continued under the Act and this Agreement.
Partnership Governance Committee. See Section 6.1.
Partnership Governance Committee Action. See Section 6.1.
Profits and Losses. For each applicable period, the Partnership's taxable
income or loss for such 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:
(i) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken in account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss.
(ii) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as such pursuant to Regulation
(S)1.704-1(b)(2)(iv)(i) and not otherwise taken in account in computing
Profits or Losses pursuant to this definition shall be subtracted from such
taxable income or loss.
(iii) Depreciation for such period shall be taken into account in
lieu of the depreciation, amortization and other cost recovery deductions
taken into account in computing such taxable income or loss.
(iv) Gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed with reference to the Book Value of
the property disposed of, rather than the adjusted tax basis of such
property.
Appendix A-10
<PAGE>
(v) If any property is distributed in kind to any Partner, the
difference between its fair market value and its Book Value at the time of
distribution shall be treated as Profit or Loss, as the case may be,
recognized by the Partnership.
(vi) The amount of any adjustment to the Book Value of any Partnership
asset pursuant to clause (iii) of the definition of Book Value herein shall
be taken into account as Profit or Loss from the disposition of such asset.
Percentage Interest. The percentage determined by dividing the number of
Units owned by a Partner by the total number of outstanding Units.
Person. Any natural person or any corporation, limited liability company,
partnership, joint venture, association, trust or other entity.
Pledge. To mortgage, pledge, encumber or create or suffer to exist any
pledge, lien or encumbrance upon or security interest in. Such defined term is
used in this Agreement as both a noun and a verb.
Pro Rata. In the ratio of the Units owned by a Partner to the total number
of Units.
Proposing Partner. See Section 9.3(c).
Regulations. The income tax regulations promulgated by Department of the
Treasury and in effect from time to time.
Related Agreements. The agreements (other than the Partnership Agreement)
defined as "Related Agreements" in the Master Transaction Agreement, as such
agreements may be amended from time to time after the Closing Date.
Related Business. See Section 9.3(c).
Related Persons. See Section 13.1.
Representative. See Section 6.4(a).
SEC. Securities and Exchange Commission.
Selling Partners. See Section 10.2(a).
Specified Petrochemicals Businesses. The businesses of:
(i) Olefins and olefins coproducts consisting of: ethylene, propylene,
butadiene, and mixed butylenes; aromatics and gasoline blending components
(benzene, toluene, MTBE, alkylate, pyrolysis gasolines); mixed C5 hydrocarbons;
resin formers (dicyclopentadiene, isoprene, piperylenes, resin oil); pyrolysis
liquid fuel products (pyrolysis gas oil, pyrolysis fuel oil);
Appendix A-11
<PAGE>
(ii) Polyolefins consisting of: low-density, linear low-density, and high-
density polyethylene; polypropylene; ethylene/propylene copolymers; rotomolding
and polymeric powders; wire and cable resins; adhesive tie layers; hot melt
adhesive resins; colors and concentrates; fuel additives; and
(iii) Ethyl alcohol and ethyl ether.
Strategic Plan. See Section 8.1.
Substitute General Partner. A Person who is admitted as a General Partner
to the Partnership in place of and with all the rights of a General Partner.
Substitute Limited Partner. A Person who is admitted as a Limited Partner
to the Partnership in place of and with all the rights of a Limited Partner.
Taxes. All taxes, charges, fees, levies or other assessments imposed by
any taxing authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, transfer, payroll, license, ad valorem, value
added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, severance and stamp taxes (including any
interest, fines, penalties or additions attributable to, or imposed on or with
respect to, any such taxes, charges, fees, levies or other assessments) and "Tax
Return" means any return, report, information return or other document
(including any related or supporting information) with respect to Taxes.
Tax Matters Partner. Lyondell GP shall serve as the tax matters partner.
Third Party Claim. Any allegation, claim, civil, criminal or other action,
proceeding, charge or prosecution brought by any Person other than the
Partnership, any Partner or any Affiliate of a Partner.
Transfer. To sell, assign or otherwise in any manner dispose of, whether
by act, deed, merger, consolidation, conversion or otherwise. Such defined term
is used in this Agreement as both a noun and a verb.
Unit. A unit representing a partnership interest in the Partnership.
Wholly Owned Affiliate. As to any Person, an Affiliate of such Person all
of the equity interests of which are owned, directly or indirectly, by a
Partner, by another Wholly Owned Affiliate of such Person or by the ultimate
parent entity thereof.
Wholly Owned Subsidiary. As to any Person, a subsidiary of such Person
all of the equity interests of which are owned, directly or indirectly, by such
Person.
Appendix A-12
<PAGE>
APPENDIX B
TO LIMITED PARTNERSHIP AGREEMENT
PARTNERSHIP FINANCIAL STATEMENTS AND REPORTS
<TABLE>
<CAPTION>
Item & Frequency Due Dates
<S> <C>
Monthly:
Income Statement - current period 10th work day following month-end
and year-to-date
Balance Sheet - current period 10th work day following month-end
Cash Flow Statement - current period 10th work day following month-end
and year-to-date
Schedule of Income Allocation - 5th work day following month-end
preliminary
Schedule of Income Allocation - final 10th work day following month-end
Calculation of Distribution of
Available Net Operating 15th work day following month-end
Cash - final
Results of Operations Analysis 10th work day following month-end
Quarterly:
Analysis for Investor Relations and
Form 10-Q disclosures: 15th work day following quarter-end
- Results of Operations 15th work day following quarter-end
- Cash Flow 15th work day following quarter-end
- Sales Variances 15th work day following quarter-end
- Capital Expenditures 15th work day following quarter-end
- Intercompany Transactions 15th work day following quarter-end
- Volumes 15th work day following quarter-end
- Prices 15th work day following quarter-end
- Unusual Items
Income Statement - current quarter and 10th work day following quarter-end
year-to-date
Balance Sheet - current period 10th work day following quarter-end
Cash Flow Statement - current quarter 10th work day following quarter-end
and year-to-date
Annual:
Analysis for Investor Relations and
Form 10-K disclosures
- Same as quarterly requirements 15th work day following year-end
- Plant Capacities
Audited Financial Statements 60 days following year-end
</TABLE>
Appendix B-1
<PAGE>
APPENDIX C
INITIAL EXECUTIVE OFFICERS
Dan F. Smith Chief Executive Officer
Eugene R. Allspach President and Chief Operating Officer
Joseph M. Putz Senior Vice President, Finance and Administration
Debra L. Starnes Senior Vice President, Polymers
John R. Beard Vice President, Manufacturing
J. R. Fontenot Vice President, Engineering
Alan Houlton Vice President, Customer Supply Chain
Gerald A. O'Brien Vice President and Secretary
Myra J. Perkinson Vice President, Human Resources
W. Norman Phillips, Jr. Vice President, Petrochemicals
Kerry F. Williams Vice President, Research and Development
Jeffrey L. Hemmer Director, Business Process Improvement
Appendix C-1
<PAGE>
APPENDIX D
DISPUTE RESOLUTION PROCEDURES
(1) Binding and Exclusive Means. Except as otherwise provided in the
Partnership Agreement, the dispute resolution provisions set forth in this
Appendix shall be the binding and exclusive means to resolve all disputes
arising under the Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such Dispute shall, unless the Partners in their
discretion jointly stipulate otherwise, be as set forth in Appendix 1 to this
Appendix.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented:
(a) Each Partner may at any time invoke the dispute resolution procedures
set forth in this Appendix as to any Dispute by providing written notice of such
action to the Secretary of the Partnership, who within five Business Days after
such notice shall schedule a meeting to be held in Houston, Texas between the
Partners. The Partners' meeting shall occur within 10 Business Days after
notice of the meeting is delivered to the Partners. The meeting shall be
attended by representatives of each Partner having decision-making authority
regarding the Dispute as well as the dispute resolution process and who shall
attempt in a commercially reasonable manner to negotiate a resolution of the
Dispute.
(b) The representatives of the Partners shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be
reached by the Partners resolving the Dispute; (ii) one of the Partners shall
determine and notify the other Partners in writing that no agreement resolving
the Dispute is likely to be reached; (iii) if a technique of alternative dispute
resolution is agreed upon, the completion date therefor shall occur without the
Partners having resolved the Dispute; or (iv) if another technique of
alternative dispute resolution is not agreed upon, two full meeting days (or
such other time period as may be agreed upon) shall expire without the Partners
having resolved the Dispute.
(c) If, as of the Interim Decision Date, the Partners have not succeeded in
negotiating a resolution of the Dispute pursuant to subsection (b), the Partners
shall proceed under subsection (d).
(d) The Partners shall jointly appoint a Neutral. If the Partners have
been unable to agree upon such appointment within 30 days from the Interim
Decision Date, then such Neutral upon the application of any Partner shall be
appointed within 10 days of the filing of such application by the
Appendix D-1
<PAGE>
Center for Public Resources, or if such appointment is not so made promptly then
promptly thereafter by the American Arbitration Association in Philadelphia,
Pennsylvania, or if such appointment is not so made promptly then promptly
thereafter by the senior United States District Court judge sitting in
Wilmington, Delaware. The fees of the Neutral shall be paid equally by the
Partners except that the Neutral shall have discretion to award fees.
(e) In consultation with the Neutral, the Partners shall agree upon a
binding schedule and procedure (which procedure may have been previously
discussed under subsection (b)) to be used as a means to resolve or to attempt
to resolve the Dispute, with the Neutral making the decision as to the schedule
and/or procedure if the Partners have been unable to agree on any of such
matters within 20 days after the initial selection of the Neutral. The Partners
agree to participate in a commercially reasonable manner in the procedure to its
conclusion as determined by the Neutral. If the Partners are not successful in
resolving the dispute through the procedure described above, then the Partners
agree that (i) the Neutral shall act as the arbitrator in a binding arbitration
in accordance with American Arbitration Association rules and shall render a
decision and (ii) judgment upon the decision rendered by the Neutral may be
entered in any court having jurisdiction.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
or the pendency of any procedures pursuant to this Appendix, the Partners agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
Appendix D-2
<PAGE>
APPENDIX 1 TO APPENDIX D
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the Partners and their Affiliates as set forth in the Partnership Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Partnership Agreement and the Related Agreements and permits the
Partners to realize the benefits intended to be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
Partners or the Neutral shall determine to be appropriate under the
circumstances.
Appendix D-3
<PAGE>
APPENDIX E
DIVISION OF PARTNERSHIP BUSINESS
If the Partnership is dissolved and Section 12.2(e) applies to the winding
up of the affairs of the Partnership, the Partnership properties shall, to the
extent legally and contractually feasible and, after satisfaction of the
liabilities of the Partnership (whether by payment or reasonable provision for
payment), be distributed in kind to the Partners in accordance with a division
(the "Division") of the properties. The Division shall be implemented by
dividing the properties, to the extent feasible, in accordance with the
following priorities and principles:
A. First priority shall be given to maximizing the consistency of the Division
with a division of the Partnership properties that allocates to each
Partner (subject to such Partner's Percentage Interest of the Partnership's
liabilities) Partnership properties in proportion to the value of such
Partner's Percentage Interest in the Partnership's business taking into
account the aggregate Asset Fair Market Value of the Partnership's
properties and the value and benefits afforded to such Partner under the
Partnership Agreement and the other Related Agreements.
B. Second priority shall be given to the allocation of the Partnership's
various assets and business units between the Partners so as to maximize
the aggregate going concern value of the respective assets and business
units allocated to each Partner, taking into account, without limitation,
the potential synergies and efficiencies that are reasonably achievable in
connection with the operation of such allocated assets and business units
as an independent business entity.
C. Third priority shall be given to maximizing the consistency of the Division
with the nature and quality of the Assets and Contributed Business
originally transferred to the Partnership by the respective Partners or
their Affiliates.
Absent an agreement by the Partners or direction by the Neutral as to both
(i) how the Partners should allocate Partnership debt and (ii) the process for
relieving each Partner of liability for that portion of Partnership debt
allocated to the other Partner, the Partners (A) shall be jointly and severally
liable to the holders of all Partnership debt and (B) as between the Partners,
each Partner shall be obligated to pay to holders of the debt its Percentage
Interest of all payments of principal and interest on Partnership Debt.
Notwithstanding the foregoing, the Neutral shall be entitled to direct, and any
Partner may propose, an alternative allocation of Partnership debt in any
circumstance where such alternative allocation is reasonably likely to result in
a Division that is more consistent with the priorities outlined above.
For purposes of this Appendix E, Lyondell GP and Lyondell LP shall be
treated as if they were a single Partner and Millennium GP and Millennium LP
shall be treated as if they were a single Partner.
Appendix E-1
<PAGE>
The Partners shall attempt to agree on a plan for a mutually acceptable
Division. If they are unable to so agree after 60 days following the occurrence
of the dissolution, a Neutral shall be appointed in accordance with Appendix D
and each Partner shall submit to the Neutral a written proposal for a Division.
The Neutral shall decide which of the two proposals (without in any way
modifying or compromising between the two proposals) more closely follows the
priorities and principles set forth above, and the proposal so chosen shall
thereupon be binding upon all Partners and shall be promptly implemented under
the direction of the Neutral. The Neutral shall be entitled to employ (at the
expense of the Partnership) such financial and accounting advisors and legal
counsel as he or she shall select, provided that no such advisor or counsel
shall have any affiliation with any Partner.
Appendix E-2
<PAGE>
SCHEDULE 2.3
CREDITS TO LIMITED PARTNER CAPITAL ACCOUNTS PURSUANT TO SECTION 2.3
Lyondell LP: $1.975 billion
Millennium LP: $1.750 billion
<PAGE>
EXHIBIT 10.34
EXHIBIT B TO FIRST AMENDMENT TO
MASTER TRANSACTION AGREEMENT
ASSET CONTRIBUTION AGREEMENT
BETWEEN
[CONTRIBUTOR],
[CONTRIBUTING PARTNER]
AND
EQUISTAR CHEMICALS, LP
DATED: ____________, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
SECTION 1 DEFINITIONS.................................................... 1
SECTION 2 CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN
LIABILITIES.................................................... 8
2.1 Transfer of Assets............................................. 8
2.2 Excluded Assets................................................ 10
2.3 Instruments of Conveyance and Assignment....................... 11
2.4 Further Assurances............................................. 12
2.5 Assumption of Liabilities...................................... 13
2.6 Excluded Liabilities........................................... 14
2.7 Technology and Trademark Licenses.............................. 14
2.8 Employee Matters............................................... 14
2.9 Joint Contracts................................................ 16
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR.............. 17
3.1 Due Organization; Good Standing and Power...................... 17
3.2 Authorization and Validity of Agreements....................... 17
3.3 No Consents Required; No Conflict with Instruments to which the
Contributor is a Party......................................... 17
3.4 Employee Benefits.............................................. 18
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases..... 19
3.6 Title Matters; Defects in Improvements......................... 20
3.7 Working Capital................................................ 20
3.8 Technology and Similar Rights.................................. 20
3.9 Government Licenses, Permits and Related Approvals............. 20
3.10 All Necessary Assets........................................... 21
3.11 Conduct of Business in Compliance with Regulatory and
Contractual Requirements....................................... 21
3.12 Legal Proceedings.............................................. 21
3.13 Consents....................................................... 21
3.14 Tax Matters.................................................... 21
3.15 [Reserved]..................................................... 21
3.16 HSE Matters.................................................... 21
3.17 Investigation to Acquire Knowledge............................. 22
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP.............. 22
4.1 Due Organization; Good Standing and Power...................... 22
4.2 Authorization and Validity of Agreement........................ 23
4.3 No Consents Required; No Conflict with Instruments to which the
Partnership is a Party......................................... 23
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<PAGE>
SECTION 5 COVENANTS SUBSEQUENT TO CLOSING DATE........................... 23
5.1 Access to Information.......................................... 23
5.2 Mail or Other Communications................................... 24
5.3 Use of Contributor's Trade Name................................ 24
5.4 Closing Date Balance Sheet..................................... 24
5.5 Payment of Retained Accounts Payable........................... 24
5.6 Collection of Accounts Receivable.............................. 25
5.7 Reimbursement for Prepaid Expenses............................. 25
SECTION 6 SURVIVAL AND INDEMNIFICATION................................... 25
6.1 Survival Limitations........................................... 25
6.2 Indemnification................................................ 26
6.3 Procedures..................................................... 28
6.4 Subrogation.................................................... 30
6.5 Claims for HSE Work............................................ 31
6.6 EXTENT OF INDEMNIFICATION...................................... 31
SECTION 7 MISCELLANEOUS.................................................. 31
7.1 Construction................................................... 31
7.2 Payment of Certain Expenses and Taxes.......................... 31
7.3 Notices........................................................ 33
7.4 [Reserved]..................................................... 33
7.5 Binding Effect; Benefit........................................ 33
7.6 Occasional and Bulk Sales...................................... 34
7.7 Assignability.................................................. 34
7.8 Amendment; Waiver.............................................. 34
7.9 Dispute Resolution............................................. 34
7.10 Severability................................................... 34
7.11 Counterparts................................................... 34
7.12 APPLICABLE LAW................................................. 34
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER............ 34
7.14 WAIVER OF JURY TRIAL........................................... 35
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<PAGE>
LIST OF SCHEDULES AND EXHIBITS TO AGREEMENT
-------------------------------------------
Schedules
---------
Schedule A - Contributed Business
Schedule 2.1(a) - Fee Interests, Facilities, Terminals and Warehouses
Schedule 2.1(b) - Leases
Schedule 2.1(d) - Equipment
Schedule 2.1(k) - Contributed Subsidiaries
Schedule 2.2(c) - Excluded Tradenames and Logos
Schedule 2.2(h) - Certain Excluded Assets
Schedule 2.5(a)(vii) - Assumed Indebtedness
Schedule 2.5(a)(x) - Assumed Long-Term Liabilities
Schedule 3 - Disclosure Schedule
Appendices
----------
Appendix A - Dispute Resolution Procedures
Exhibits
--------
Exhibit A - Form of Deeds for Fee Interests
Exhibit B - Form of Assignments of Leases for Leaseholds
Exhibit C - Form of Bill of Sale and Assignment
Exhibit D - Form of Trademark Assignment
Exhibit E - Form of Patent Assignment
Exhibit F - Form of Assumption Agreement
Exhibit G - Form of Technology License
Exhibit H - Form of Trademark License
Exhibit I - Form of Intellectual Property License
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<PAGE>
ASSET CONTRIBUTION AGREEMENT
----------------------------
ASSET CONTRIBUTION AGREEMENT (this "Agreement"), dated as of __________,
199__, between [for Lyondell: Lyondell Petrochemical Company, a Delaware
corporation] [for Millennium: Millennium Petrochemicals Inc., a Virginia
corporation] (the "Contributor"), [for Lyondell: Lyondell Petrochemical L.P.
Inc., a Delaware corporation] [for Millennium: Millennium Petrochemicals LP LLC,
a Delaware limited liability company] (the "Contributing Partner") and Equistar
Chemicals, LP, a Delaware limited partnership (the "Partnership").
WHEREAS, the Contributor owns all of the issued and outstanding shares of
capital stock of Contributing Partner and the Contributing Partner is a partner
in the Partnership;
WHEREAS, the Contributor wishes to contribute the assets subject to the
liabilities associated with the olefins, polyolefins and related petrochemicals
businesses described in Schedule A (the "Contributed Business") to the
Contributing Partner; and
WHEREAS, the Contributing Partner wishes to contribute such assets and
liabilities to the Partnership, and the Partnership wishes to accept such assets
and assume such liabilities, all upon the terms and conditions hereinafter set
forth; and
WHEREAS, the Partnership will consummate certain transactions and enter
into certain agreements as provided for in the Master Transaction Agreement,
dated as of July 25, 1997, between Lyondell Petrochemical Company and Millennium
Chemicals Inc., as amended (the "Master Transaction Agreement").
NOW THEREFORE, in consideration of the premises and of the mutual covenants
of the parties hereto, it is hereby agreed as follows:
SECTION 1
DEFINITIONS
-----------
The terms used in this Agreement have the following definitions or are
defined in the Sections referenced below:
"Accounts Receivable" constitute, as of the Closing Date, all uncollected
accounts receivable that have been generated by, or are attributable to, the
Contributor's operation prior to the Closing Date of the Contributed Business in
the ordinary course and in all respects in a manner consistent with the
provisions of Section 3.2 of the Master Transaction Agreement.
<PAGE>
"Affiliate" means any Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified; provided, however, that for purposes of this
Agreement [for Lyondell: (i) Atlantic Richfield Company and any Person
controlled by it shall not be considered an Affiliate of Contributor;] [for
Millennium: (i) Suburban Propane Partners, L.P. and any Persons controlled by
it shall not be considered an Affiliate of Contributor;] and (ii) neither the
Partnership nor any Person controlled by it shall be considered an Affiliate of
the Contributor. For purposes of this definition, the term "control" shall have
the meaning set forth in 17 CFR 230.405 as in effect on the date hereof.
"Agreed Rate" means the base commercial lending rate announced by Citibank,
N.A. (or its successor) at its principal office in effect from time to time,
such interest rate to change automatically, effective as of the date of each
change in such base rate.
"Agreement" is defined in the Preamble.
"Assets" means all of the assets, rights and properties being contributed,
conveyed, assigned, transferred and delivered to the Partnership pursuant to
Section 2.1.
"Assignment and Assumption Agreements" means the Deeds, the Assignments of
Lease, the Bill of Sale and Assignment, the Trademark Assignment, the Patent
Assignment and the Assumption Agreement.
"Assignments of Lease" is defined in Section 2.3(a).
"Associated Rights" is defined in Section 2.1(c).
"Assumed Liabilities" is defined in Section 2.5(a).
[For Millennium: "Assumed Plan" means the Pension Plan for Eligible Hourly
Represented Employees of Quantum Chemical Corporation.]
"Authority" means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal (or any commonwealth,
territory or possession thereof), state, local or foreign, or any agency,
department or instrumentality thereof, or any court or arbitrator (public or
private).
"Basic Severance" is defined in Section 2.8(b).
"Capital Spares" means the inventory of spare parts used by the Contributor
in the Contributed Business and owned by the Contributor as of the Closing Date.
"CERCLA" is defined in Section 3.16(b).
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<PAGE>
"Chemical Substance" means any (i) chemical substance, pollutant,
contaminant, constituent, chemical, mixture, raw material, intermediate, product
or byproduct that is regulated (including any requirement for the reporting of
any Release thereof) under any HSE Law or defined or listed as an industrial,
toxic, deleterious, harmful, radioactive, infectious, disease-causing or
hazardous substance, material or waste under any HSE Law, and (ii) petroleum or
any fraction thereof, asbestos or asbestos-containing material or
polychlorinated biphenyls ("PCBs").
"Closing" means the closing of the transactions contemplated by the Master
Transaction Agreement.
"Closing Date" means the date hereof.
"Closing Date Balance Sheet" is defined in Section 5.4.
"Code" means the Internal Revenue Code of 1986, as amended.
[For Millennium: "Confirmed Accounts Receivable" is defined in Section
5.6.].
"Consent" means any consent, waiver, appraisal, authorization, exception,
registration, license or declaration of or by any Person or any Authority, or
any expiration or termination of any applicable waiting period under any Legal
Requirement, required with respect to the Contributed Business or the
Contributor or any Affiliate thereof in connection with (i) the execution and
delivery of this Agreement or any of the Related Agreements or (ii) the
consummation of the transactions contemplated hereby or thereby.
"Contracts" means contracts, maintenance and service agreements, purchase
commitments for materials and other services, advertising and promotional
agreements, leases, taxation agreements with any Authority, and other
agreements.
"Contributed Contracts" is defined in Section 2.1(f).
"Contributed Business" is defined in the Preamble.
"Contributed Intellectual Property" is defined in Section 2.1(g).
"Contributed Subsidiaries" is defined in Section 2.1(k).
"Contributor" is defined in the Preamble.
"Deeds" is defined in Section 2.3(a).
"De Minimis Claim" means any Third Party Claim for which the Liability
associated therewith is less than $25,000.
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<PAGE>
"Employee Plan" is defined in Section 3.4(a)(i).
"Encumbrance" means any lien, charge, encumbrance, security interest, title
defect, option or any other restriction or third party right.
"Environment" is defined in this Section 1 in the definition of "HSE Laws".
"Equipment" is defined in Section 2.1(d).
"Excluded Assets" is defined in Section 2.2.
"Excluded Liabilities" is defined in Section 2.6.
"Fee Interests" is defined in Section 2.1(a).
"GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
"Government Licenses" means all licenses, permits or franchises issued by
any Authority relating to the operation, development, use, maintenance or
occupancy of the Facilities or any other Asset or of the Contributed Business to
extent that such licenses, permits or franchises relate principally to the
normal operation and conduct of the Contributed Business.
"HSE Claim" means (i) any actions, events, circumstances or
responsibilities (including compliance actions or requirements) that are
necessary to comply with HSE Laws but only to the extent that any of the
foregoing give rise to out of pocket costs or expenses or result in a Liability
that is required by GAAP to be reflected on the balance sheet of the applicable
party or (ii) any third party (including private parties, Authorities and
employees acting on each such party's own behalf or on the behalf of other third
parties) actions, lawsuits, claims, investigations or proceedings arising under
HSE Laws.
"HSE Laws" means any Legal Requirements or rule of common law now in effect
(including any amendments now in effect) and any current judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree, or judgment, relating to (i) any ambient air, surface
water, drinking water, groundwater, land surface, subsurface strata, river
sediment, natural resources or real property and the physical buildings,
structures and fixtures thereon, including sewer, septic and waste treatment,
storage or disposal systems (the "Environment"), including pollution,
contamination, cleanup, preservation, protection and reclamation of the
Environment; (ii) health or safety, including the exposure of employees and
other Persons to any Chemical Substance; (iii) the Release or threatened Release
of any Chemical Substance, noxious noise or odor, including investigation,
study, assessment, testing, monitoring, containment, removal, remediation,
response, cleanup and abatement of such Release or threatened Release; and (iv)
the management of any Chemical Substance, including the manufacture,
-4-
<PAGE>
generation, formulation, processing, labeling, use, treatment, handling,
storage, disposal, transportation, distribution, re-use, recycling or
reclamation of any Chemical Substance.
"HSE Proceeding" is defined in Section 3.16(d).
"Indemnified Party" is defined in Section 6.3(a).
"Indemnifying Party" is defined in Section 6.3(a).
"Intellectual Property" means research material, technical information,
marketing information, patent rights, patent licenses, pending patent
applications, trade secrets, technical information, know-how, management
information systems, technology, quality control data, specifications, designs,
drawings, software, sales promotion literature and advertising materials.
"Intellectual Property License" is defined in Section 2.7(b).
"Inventory" means materials used by the Contributor in the Contributed
Business and owned by the Contributor as of the Closing Date including raw
materials, feed stocks, supplies, additives, pigments, process chemicals,
packaging materials (to the extent the Partnership's use thereof would be
consistent with Section 5.3), catalysts, work-in-process and finished goods that
relate principally to the normal operation and conduct of the Contributed
Business.
"Inventory Tax" is defined in Section 7.2(d).
"Knowledge" with respect to the Contributor means the actual knowledge of
(i) any plant manager, (ii) any officer of the Contributor having
responsibilities with respect to the Contributed Business, and (iii) any
employee reporting directly to an officer described in clause (ii), in each case
employed by the Contributor in connection with the Contributed Business.
"Leased Premises" is defined in Section 2.1(b).
"Leaseholds" is defined in Section 2.1(b).
"Leases" is defined in Section 2.1(b).
"Legal Requirement" means any law, statute, rule, ordinance, decree,
requirement, regulation, order or judgment of any Authority, including the terms
of any Government License.
"Liability" is defined in Section 6.2(a).
"Licensed Technology" means the technology licensed to the Partnership
pursuant to the Technology License.
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<PAGE>
"Licensed Trademarks" means the trademarks licensed to the Partnership
pursuant to the Trademark License.
"Licenses" means the Technology Licenses, Trademark Licenses and
Intellectual Property Licenses.
"Lowest Cost Response" means the response required or allowed under HSE
Laws that addresses the Chemical Substances present at the lowest cost
(considered as a whole taking into consideration any negative impact such
response may have on the conduct of the Contributed Business and any potential
additional costs or liabilities that may arise as a result of such response) as
compared to any other response that is consistent with HSE Laws. Taking no
action shall constitute the Lowest Cost Response if, after investigation, taking
no action is determined to be consistent with HSE Laws. If taking no action is
not consistent with HSE Laws, the least costly non-permanent remedy (such as
mechanisms to contain or stabilize Chemical Substances, including caps, dikes,
encapsulation, leachate collection systems, etc.) shall be the Lowest Cost
Response, provided that such non-permanent remedy is consistent with HSE Laws
and less costly than the least costly permanent remedy (such as the excavation
and removal of soil).
"Master Transaction Agreement" is defined in the fourth WHEREAS clause.
"Material Adverse Effect" means any adverse circumstance or consequence
that, individually or in the aggregate, has an effect that is material to the
financial condition, results of operations, assets or business of the
Contributed Business or the Assets, taken as a whole.
"Neutral" means a neutral Person acceptable to each of the appointing
parties and not affiliated with any of the parties or their Affiliates.
"Partnership" is defined in the Preamble.
"Partnership Employees" is defined in Section 2.8(a).
"Patent Assignment" is defined in Section 2.3(a).
"PCBs" is defined in this Section in the definition of "Chemical
Substance".
"Person" means any natural person or any corporation, partnership, limited
liability company, joint venture, association, trust or other entity or
organization.
"Pre-Closing Contingent Liabilities" means all Liabilities of every kind
and nature arising out of, in connection with or related to the ownership,
operation or use prior to the Closing Date of the Assets or the Contributed
Business other than the Liabilities referred to in Sections 2.5(a)(i), (ii),
(iii), (vii), (viii) and (ix).
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<PAGE>
"Prepaid Expenses" means the balances in the prepaid accounts consistent
with GAAP of the Contributor or its Affiliates, as of the Closing Date, that are
associated with the Contributed Business and that will have value to the
Partnership in owning and operating the Contributed Business after the Closing
Date.
"Property Tax" is defined in Section 7.2(c).
"Related Agreements" means the Master Transaction Agreement, Tier 1 Related
Agreements (other than this Agreement) and Tier 2 Related Agreements of the
Contributor or its Affiliates, as such terms are defined in the Master
Transaction Agreement.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, dumping, discharge, dispersal, leaching, escaping, emanation
or migration of any Chemical Substance in, into or onto the Environment of any
kind whatsoever, including the movement of any Chemical Substance through or in
the Environment, exposure of any type in any workplace, any release as defined
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any other HSE Law and any noxious noise or odor
emission.
"Retained Accounts Payable" means, as of the Closing Date, all current
trade accounts payable and current accrued expenses other than those related to
[(A)] employee vacation [for Lyondell: and lag-week] accruals for employees that
become Partnership Employees [for Millennium: and (B) the current portion of the
deferred maintenance].
"SEC Reports" means the 1996 Annual Report on Form 10-K and the 10-Q for
the first quarter of 1997 of the Contributor [for Millennium:'s parent company]
required to be filed with the Securities and Exchange Commission.
"Seven Year PCCL Claims" means Third Party Claims (other than any De
Minimis Claim) related to Pre-Closing Contingent Liabilities that are asserted
within seven years after the Closing Date.
"Shared Services Agreements" means the agreements between the Contributor
(or its Affiliates) and the Partnership set forth on Appendix B-2 of the Master
Transaction Agreement.
"Stores Inventory" means the inventory of spare parts, excluding Capital
Spares, that are used by the Contributor or any Affiliate thereof in the
Contributed Business and owned by the Contributor or any Affiliate thereof as of
the Closing Date and that consist of items that generally can be used for
several processes or types of equipment, including, but not limited to, such
items as pumps, motors, pipe fittings, electrical wiring, instruments, nuts and
bolts, unfabricated metals, safety items, small hand tools and other
miscellaneous repair parts or supplies.
"Taxes" means all taxes, charges, fees, levies or other assessments imposed
by any taxing Authority, including, but not limited to, income, gross receipts,
excise, property, sales, use, transfer,
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<PAGE>
payroll, license, ad valorem, value added, withholding, social security,
national insurance (or other similar contributions or payments), franchise,
severance and stamp taxes (including any interest, fines, penalties or additions
attributable to, or imposed on or with respect to, any such taxes, charges,
fees, levies or other assessments).
"Technology Licenses" is defined in Section 2.7(a).
"Third Party Claim" means any allegation, claim, civil or criminal action,
proceeding, charge or prosecution brought by a Person other than the
Contributor, any Affiliate thereof, the Partnership, or any member of the [for
Lyondell: Millennium] [for Millennium: Lyondell] Group (as defined in the
Master Transaction Agreement).
"Trademarks" means trade names, trademarks, trademark registrations or
trademark applications, copyrights, copyright applications or copyright
registrations or any derivative thereof or design used in connection therewith.
"Trademark Assignment" is defined in Section 2.3(a).
"Trademark License" is defined in Section 2.7(a).
"Unrecorded Assets:" is defined in Section 2.1(e).
"WARN" is defined in Section 2.8(f).
SECTION 2
CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES
---------------------------------------------------------
2.1 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, on the date hereof, the Contributor contributes to the
Contributing Partner and the Contributing Partner is contributing, conveying,
assigning, transferring and delivering to the Partnership, or shall cause to be
contributed, conveyed, assigned, transferred and delivered to the Partnership,
and the Partnership shall accept, acquire and assume all of the assets, rights,
and properties used or held for use in the contemplated operation and conduct of
the Contributed Business of every kind, nature, character and description,
tangible and intangible, real, personal or mixed, wherever located other than
the Excluded Assets; and which conveyance, subject to Section 2.2, shall
include, without limitation, the following:
(a) All right, title and interest of the Contributor and any Affiliate
thereof in the parcels of land described as fee property on Schedule 2.1(a),
together with all buildings, structures, fixtures and other improvements
situated thereon and all right, title and interest of the Contributor and any
Affiliate thereof under easements, privileges, rights-of-way, riparian and other
water rights, lands
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<PAGE>
underlying any adjacent streets or roads, appurtenances and licenses to the
extent pertaining to or accruing to the benefit of the land (the "Fee
Interests");
(b) All right, title and interest of the Contributor and any Affiliate
thereof under the leases and subleases, all amendments thereto and all
agreements related thereto described on Schedule 2.1(b) (the "Leases"), for the
use and occupancy of the premises described therein (the "Leased Premises"),
together with all buildings, structures, fixtures and other improvements
situated thereon and, all rights and interests of the Contributor and any
Affiliate thereof under all easements, privileges, rights-of-way, riparian and
other water rights, appurtenances and licenses pertaining to the Leases or
accruing to the benefit of the tenant under the Leases (the "Leaseholds");
(c) All right, title and interest of the Contributor and any Affiliate
thereof, if any, in lands, or real property of others, used principally in the
normal operation and conduct of the Contributed Business (the "Associated
Rights"), including, without limitation, all contracts, easements, rights-of-
way, permits, licenses and leases and other similar rights for related
equipment, power and communications cables, and other related property and
equipment used principally in the normal operation and conduct of the
Contributed Business;
(d) All of the right, title and interest of the Contributor and any
Affiliate thereof in and to the equipment, furniture, furnishings, fixtures,
machinery, Capital Spares, vehicles, tools, computers and other tangible
personal property used principally in the normal operation and conduct of the
Contributed Business including without limitation the items listed on Schedule
2.1(d), (the equipment described in this Section 2.1(d), to be referred to
collectively as the "Equipment") and all warranties and guarantees, if any,
express or implied, existing for the benefit of the Contributor or any Affiliate
thereof in connection with the Equipment to the extent assignable;
(e) Subject, to the extent applicable, to Section 5.3, all (i) customer
lists, customer credit information (to the extent neither the Contributor nor
any Affiliate thereof is bound to any confidentiality obligation with respect
thereto), customer payment histories and credit limits, vendor lists, catalogs,
and (ii) Intellectual Property to the extent used or contemplated for use
principally in the normal operation and conduct of (or to the extent under
development for use principally in the normal operation and conduct of) or the
marketing or promotion of, the Contributed Business (collectively, the
"Unrecorded Assets");
(f) All Contracts, whether or not entered into in the ordinary course of
business, that relate principally to the normal operation and conduct of the
Contributed Business, or in the case of any Contracts under which either the
Contributor or any Affiliate thereof retains rights with respect to its other
businesses, to the extent any such Contract relates to the operation of the
Contributed Business (all the foregoing excluding Government Licenses, but,
together with all agreements and instruments setting forth the Contributor's and
any of its Affiliates' rights with respect to rights-of-way, privileges,
riparian and other rights, appurtenances, licenses or franchises and in respect
of intellectual property rights, in each case that constitute Assets described
in clauses (a) through (e), of this Section 2.1 to be referred to collectively
as the "Contributed Contracts");
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<PAGE>
(g) Any Trademarks to the extent used or contemplated to be used
principally in the normal operation and conduct of the Contributed Business (all
of the items referred to in this Section 2.1(g), together with the items
referred to in clause (ii) of Section 2.1(e), collectively the "Contributed
Intellectual Property");
(h) All Government Licenses that are transferable and as to which Consents
to transfer are obtained where required;
(i) The Inventory, Stores Inventory and Prepaid Expenses;
[(j) For Lyondell: Subject to Section 5.6, Accounts Receivable.] [For
Millennium: [Reserved]]
(k) All right, title and interest of the Contributor and any Affiliate
thereof in the subsidiaries listed on Schedule 2.1(k) (the "Contributed
Subsidiaries");
(l) All claims and rights against third parties (including, without
limitation, insurance carriers, indemnitors, suppliers and service providers) to
the extent, but only to the extent that, they relate to the Assumed Liabilities;
provided, however, that to the extent that any claims or rights of the
Contributor against any third parties are not assigned to the Partnership, and
the partnership incurs Liabilities that would create such claims or rights on
behalf of the Contributor, the Contributor shall enforce such claims or rights
for the benefit (and at the cost) of the Partnership to the extent it may
lawfully do so; and
(m) Any other asset of the Contributor or its Affiliate contributed to the
Partnership pursuant to the terms of this Agreement.
2.2 Excluded Assets. It is expressly understood and agreed that the
Assets shall not include the following (the "Excluded Assets"):
(a) Except as otherwise provided in Section 2.1(j), cash and cash
equivalents or similar type investments, such as certificates of deposit,
Treasury bills and other marketable securities;
(b) Except [For Millennium: for the Assumed Plan transferred as provided
under Section 2.8(g) or] as may be agreed pursuant to Section 2.8(g), any
assets of any qualified or non-qualified pension or welfare plans or other
deferred compensation arrangements maintained by the Contributor or any
Affiliate thereof for employees of the Contributor or any Affiliate thereof
prior to the Closing Date;
(c) Any of the Contributor's or any Affiliate's right, title and interest
in and to (i) the names and logos set forth on Schedule 2.2(c) and any other
statutory names, trade names or trademarks, indications or descriptions of which
such names or any name similar thereto forms a part and (ii) any other trade
names, trademarks, trademark registrations or trademark applications,
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copyrights, copyright applications or copyright registrations or any derivative
thereof or design used in connection therewith that are not used principally in
the normal operation and conduct of and are not uniquely applicable to the
Contributed Business;
(d) All claims and rights against third parties (including, without
limitation, insurance carriers, indemnitors, suppliers and service providers),
to the extent they do not relate to the Assumed Liabilities;
(e) Claims for refunds of Taxes for time periods ending on or before the
Closing Date, which Taxes remain the liability of Contributor under this
Agreement;
(f) Subject to the Technology License and Trademark License, any and all
of the Intellectual Property and Trademarks of the Contributor or any Affiliate
thereof to the extent not used principally in the normal operation and conduct
of or to the extent not applicable to the Contributed Business;
(g) All items sold in the ordinary course of business prior to the Closing
Date, none of which individually or in the aggregate are material to the normal
operation and conduct of the Contributed Business; and
(h) The tangible assets, intangible assets, real properties, contracts and
rights, described in Schedule 2.2(h).
2.3 Instruments of Conveyance and Assignment. On the Closing Date, the
Contributor shall:
(a) deliver or cause to be delivered to the Partnership (i) properly
executed and acknowledged warranty deeds, in substantially the form attached
hereto as Exhibit A (the "Deeds"), for all Fee Interests being conveyed
hereunder, (ii) assignments of lease for the Leases in substantially the form
attached hereto as Exhibit B, (the "Assignments of Lease"), (iii) a bill of sale
and assignment in substantially the form attached hereto as Exhibit C (the "Bill
of Sale and Assignment") conveying title to the Assets (other than the Fee
Interests and Leaseholds) and assigning the Contracts, (iv) an assignment of the
trademarks included in the Assets in substantially the form attached hereto as
Exhibit D (the "Trademark Assignment") and (v) an assignment of patent rights,
licenses and applications included in the Assets in substantially the form
attached hereto as Exhibit E (the "Patent Assignment"); and
(b) transfer to the Partnership the originals (to the extent the
Contributor or any Affiliate thereof possesses an original and retained no
rights thereunder after the Closing Date) or copies, as appropriate, of the
Contributed Contracts and the originals or copies, as appropriate, of all
current records, files and other data that relate to the Assets and that are
necessary for continuing the normal operation and conduct of the Contributed
Business by the Partnership.
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2.4 Further Assurances.
(a) On and from time to time after the Closing Date, the Contributor will
execute and deliver, or cause to be executed and delivered, such other
instruments of conveyance, assignment, transfer and delivery as the Partnership
may reasonably request in order to fulfill and implement the terms of this
Agreement, to vest in the Partnership title to the Assets, or to enable the
Partnership to realize the benefits intended to be afforded hereby.
(b) On and from time to time after the Closing Date, the Partnership will
execute and deliver, or cause to be executed and delivered, such other
instruments of assumption, conveyance, assignment, transfer, power of attorney
or assurance as the Contributor may reasonably request in order to vest in the
Partnership all of the Assumed Liabilities and to enable the Contributor to
realize the benefits intended to be afforded hereby.
(c) Notwithstanding any other provision of this Agreement to the contrary,
the Partnership and the Contributor acknowledge and agree that any Government
Licenses, Contributed Contracts or warranties which by their terms require
Consent from any other unaffiliated contracting party thereto shall not be
assigned to the Partnership unless any such Consent has been obtained prior to
the Closing Date. Following the Closing, the Partnership and the Contributor
shall cooperate with each other and use commercially reasonable efforts to
obtain those Consents that were not obtained prior to the Closing and (i) if
such Consents are obtained following the Closing, the Partnership and the
Contributor shall execute and deliver any other and further instruments of
assignment, assumption, transfer and conveyance and take such other and further
action as the Partnership may request in order to assign to the Partnership any
Government Licenses, Contributed Contracts or warranties to which such Consents
relate and (ii) pending such transfer or issuance to the Partnership, shall
provide, to the extent it may lawfully do so, the Partnership with the benefits
of any such Government Licenses, Contributed Contracts or warranties, in which
case, the Partnership shall promptly assume and discharge (or reimburse the
Contributor or its Affiliate for) all obligations and liabilities associated
with the benefits of such Government Licenses, Contributed Contracts or
warranties so made available to the Partnership. If the Contributor obtains a
Consent to assign any Government Licenses, Contributed Contract or warranties
after the Closing, each such Government Licenses, Contributed Contract or
warranties shall be deemed to be assigned to the Partnership promptly after such
Consent is obtained.
(d) Following the Closing, the Contributor, Contributing Partner and the
Partnership shall cooperate in good faith and in a commercially reasonable
manner with respect to all matters pertinent to the carrying into effect of this
Agreement and the discharge by each party of its obligations and liabilities
hereunder and thereunder, and shall furnish to each other such information,
cooperation and assistance as reasonably may be requested in connection with the
foregoing.
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2.5 Assumption of Liabilities.
(a) On the terms and subject to the conditions, including Section 6.2, set
forth in this Agreement, on the Closing Date, the debts, liabilities and
obligations of the Contributor and its Contributed Subsidiaries set forth in
this Section 2.5 shall be assumed by the Contributing Partner in connection with
the transfer of Assets to it and shall be assumed by the Partnership in
connection with the transfer of Assets to it, and the Partnership agrees to pay,
perform and discharge all such debts, liabilities and obligations when due:
(i) All obligations arising after the Closing Date under the
Contracts and Leases that are assigned to the Partnership hereunder unless
and to the extent that such obligation arises out of a violation of such
Contract or Lease prior to the Closing Date;
(ii) All obligations under purchase orders accepted by the
Contributor or its Contributed Subsidiaries in the ordinary course of
business of the Contributed Business prior to the Closing Date that are not
filled as of the Closing Date;
(iii) Current accrued expenses related to [(A)] employee vacation
[for Lyondell: and lag-week] accruals for employees that become Partnership
Employees [for Millennium: and (B) the current portion of the deferred
maintenance];
(iv) All obligations and liabilities, of every kind and nature,
without limitation, arising out of, in connection with or related to the
ownership, operation or use after the Closing Date of the Assets or the
Contributed Business;
(v) Seven Year PCCL Claims to the extent the aggregate thereof does
not exceed $7,000,000;
(vi) Third Party Claims that are related to Pre-Closing Contingent
Liabilities and that are first asserted seven years or more after the
Closing Date;
(vii) The obligations for indebtedness described on Schedule
2.5(a)(vii);
(viii) [For Millennium: Subject to Section 2.8(g), all Liabilities
associated with the Assumed Plan] [for Lyondell: [Reserved]];
(ix) All Liabilities associated with products sold after the Closing
Date regardless of when manufactured;
(x) The long-term liabilities set forth on Schedule 2.5(a)(x); and
(xi) Any other Liability specifically assumed by the Partnership
pursuant to the terms of this Agreement.
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The liabilities and obligations assumed by the Partnership pursuant to this
Section are sometimes hereinafter referred to collectively as the "Assumed
Liabilities."
(b) On the Closing Date, the Partnership shall deliver to the Contributor
an instrument of assumption of the Assumed Liabilities substantially in the form
attached hereto as Exhibit F (the "Assumption Agreement").
2.6 Excluded Liabilities. Except as otherwise expressly provided in this
Agreement (including, without limitation, Sections 6.2 and 7.2) or the
Assumption Agreement, the Partnership is assuming only the Assumed Liabilities
and is not assuming any other liability or obligation of the Contributor or any
Affiliate thereof, of whatever nature, whether presently in existence or arising
hereafter, whether known or unknown, or whether absolute or contingent, and all
such other liabilities and obligations of the Contributor and any Affiliate
thereof that are not Assumed Liabilities shall be retained by and remain
obligations and liabilities of the Contributor or such Affiliate (all such
liabilities and obligations being herein referred to as the "Excluded
Liabilities"), including the following:
(i) Any Pre-Closing Contingent Liability that is not an Assumed
Liability;
(ii) any obligation or liability relating to the Excluded Assets;
and
(iii) any obligation (A) for the payment of severance benefits to
employees of the Contributor or any of its Affiliates except as set forth
in Sections 2.8(b) or (c), or (B) attributable to Contributor's or any of
its Affiliates' employment of any employee, agent or independent contractor
prior to the Closing Date.
2.7 Technology and Trademark Licenses.
(a) Any Intellectual Property and Trademarks used, contemplated for use or
that could be used, in the Contributed Business that is not conveyed to the
Partnership pursuant to Section 2.1 will be licensed at the Closing, to the
Partnership pursuant to non-exclusive, royalty-free licenses ("Technology
Licenses" and "Trademark Licenses") substantially in the forms of Exhibit G and
H hereto.
(b) Any Contributed Intellectual Property acquired by the Partnership
pursuant to Section 2.1 of this Agreement used, contemplated for use or that
could be used in the business of the Contributor or its Affiliates will be
licensed at the Closing to the Contributor or its Affiliate pursuant to non-
exclusive, royalty-free licenses (the "Intellectual Property Licenses")
substantially in the form of Exhibit I.
2.8 Employee Matters. If the Closing Date occurs prior to January 1,
1998, the effective employment date shall be January 1, 1998 and the Contributor
and the Partnership shall enter into an agreement to provide employee services
to the Partnership through December 31, 1997.
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(a) At or prior to the Closing, the Partnership shall determine which
employees of the Contributor or any Affiliate thereof will be offered employment
by the Partnership. Any such employee that accepts such offer is herein called
a "Partnership Employee." Partnership Employees shall be employed effective on
(i) January 1, 1998, or (ii) if the Closing Date is after January 1, 1998, the
Closing Date.
(b) If, within six months after the Closing Date or in anticipation of
Closing, the Contributor or any Affiliate thereof terminates (other than for
cause) the employment of any employee of the Contributor or any Affiliate
thereof who is primarily associated with the Assets or the Contributed Business
but who does not become a Partnership Employee, then the Partnership will pay to
the Contributor an amount equal to the Basic Severance to the extent the
Contributor or any Affiliate thereof pays the Basic Severance to such employee.
"Basic Severance" means two weeks of base pay for each full year of service by
the employee with the Contributor or any Affiliate (or predecessors of either,
to the extent service therefor is credited by the Contributor), subject to a 52
week maximum and a 12 week minimum; provided, however, that with respect to any
employee who has an employment agreement that contains provisions providing for
one or more payments in the event of a change in control of the Contributor,
"Basic Severance" means up to 52 weeks of base pay notwithstanding the
employee's years of service.
(c) Any Partnership Employee whose employment is terminated by the
Partnership (other than for cause) within six months after the Closing Date
shall be entitled to receive a severance benefit from the Partnership equal to
the Basic Severance (which, for purposes of calculating service time, shall
include the employee's time of service with the Contributor, its predecessors
(to the extent service therefor is credited by the Contributor) and the
Partnership).
(d) Any employees of the Contributor that the Partnership and the
Contributor agree are necessary for the orderly transfer of the Contributed
Business to the Partnership but who will not become Partnership Employees
("Transition Employees") shall be compensated by the Contributor on terms and
conditions and for a duration to be agreed upon by the Partnership and the
Contributor. The Partnership shall reimburse the Contributor for any such
agreed upon compensation, including payroll taxes, benefit costs and workers
compensation premiums and claims, paid by the Contributor to or with respect to
any Transition Employee.
(e) If any employee of the Contributor is eligible for and receiving short
term disability benefits or sick pay as of the Closing Date and the Partnership
has offered such employee employment by the Partnership, that employee shall
become employed by the Partnership (and become a Partnership Employee for
purposes of this Section 2.8) upon eligibility to return to active employment
with the Contributor under the applicable conditions of the Contributor's short
term disability benefits or sick pay plan. Partnership employment shall not be
effective until the Contributor verifies that the employee has satisfied the
conditions (if any) to return to active employment. Until such time as such
employee becomes a Partnership Employee the Contributor shall continue to bear
all costs and expenses associated with such employee.
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(f) Neither the Contributor nor any of its Affiliates shall, at any time
prior to 60 days after the Closing Date, effect a "plant closing" or "mass
layoff", as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN"), affecting in whole or in part any facility,
site of employment, operating unit or employee of the Contributor or any of its
Affiliates without complying fully with the notice and all other applicable
requirements of WARN.
(g) In connection with the development by the Partnership of benefit plans
and programs for Partnership Employees as provided in the Master Transaction
Agreement, (i) the Contributor may direct the trustee of any of its employee
plans to transfer assets and liabilities in those employee plans associated with
the accrued benefits of Partnership Employees to a comparable Partnership
benefit plan in which the Partnership Employees participate, and (ii) the
Contributor or any of its Affiliates may direct the trustee of its grantor trust
to transfer assets and liabilities relating to any accounts for Partnership
Employees under an executive deferral plan to a trust established by the
Partnership to provide benefits under a comparable non-qualified deferred
compensation plan; provided, however, with respect to (i) and (ii) above, the
assets associated with any such plans, as of the Closing Date, are not less than
the liabilities associated therewith as determined by the Partnership and a
trust to trust transfer of assets does not result in a taxable event. In
connection with the development and implementation of such plans and programs,
the Partnership agrees, for purposes of calculating service time, to include
each employee's time of service with the Contributor, its predecessors (to the
extent service therefor is credited by the Contributor) or the Partnership. [For
Millennium: The Partnership will accept sponsorship of the Assumed Plan as soon
as practicable after the Closing Date and the Contributor shall make all
necessary governmental filings in connection therewith on a timely basis. In
connection with the transfer of the sponsorship of the Assumed Plan, the
Partnership may require such representations concerning the Assumed Plan as the
Partnership reasonably determines are necessary, including, that the assets are
not less than the liabilities and no Consents from the union are necessary for
such transfer.]
(h) To the extent that the Partnership adopts benefit plans or policies
that contemplate the provision of post-retirement life and medical benefits to
the Partnership Employees, the Partnership shall record and recognize, in
accordance with GAAP, the associated liability for providing the post-retirement
life and medical benefits to the Partnership Employees.
2.9 Joint Contracts.
(a) Any Contributed Contracts contributed to the Partnership pursuant to
Section 2.1 that relate principally to the Contributed Business but also relate
to the business (other than the Contributed Business) of the Contributor or its
Affiliates will be made available to the Contributor and its Affiliates by the
Partnership pursuant to the Shared Services Agreements and other arrangements by
which the Contributor and its Affiliates will enjoy the benefits of such
Contributed Contracts as they relate to their business (other than the
Contributed Business) on the same terms and conditions as the Partnership.
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(b) Any Contracts that relate principally to the business (other than the
Contributed Business) of the Contributor or its Affiliates but also relate to
the Contributed Business will be made available to the Partnership by the
Contributor or its Affiliates pursuant to the Shared Services Agreements and
other arrangements by which the Partnership will enjoy the benefits of such
Contracts as they relate to the Contributed Business on the same terms and
conditions as the Contributor or its Affiliates.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
-------------------------------------------------
Except as set forth on Schedule 3 or in the SEC Reports, the Contributor
represents and warrants to the Partnership as follows:
3.1 Due Organization; Good Standing and Power. The Contributor is a
corporation duly organized, validly existing and in good standing under the laws
of the [for Lyondell: State of Delaware] [for Millennium: Commonwealth of
Virginia] and has the corporate power and authority to own, lease and operate
the properties to be contributed hereunder and to conduct the Contributed
Business as now conducted by it. The Contributor has all corporate power and
authority to enter into this Agreement and the Assignment and Assumption
Agreements and to perform its obligations hereunder and thereunder. The
Contributor is duly authorized, qualified or licensed to do business as a
foreign corporation, and is in good standing, in the State of Texas and in each
of the other jurisdictions in which its right, title or interest in or to any of
the Assets held by it, or the conduct of the Contributed Business by it,
requires such authorization, qualification or licensing, except where the
failure to so qualify or to be in good standing would not reasonably be expected
to have a Material Adverse Effect.
3.2 Authorization and Validity of Agreements. The execution, delivery and
performance of this Agreement and the other Related Agreements by the
Contributor and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by the Board of Directors of the
Contributor. Except to the extent heretofore obtained, no other corporate or
stockholder action is necessary for the authorization, execution, delivery and
performance by the Contributor of this Agreement and the other Related
Agreements and the consummation by the Contributor of the transactions
contemplated hereby or thereby. This Agreement and the other Related Agreements
have been duly executed and delivered by the Contributor and constitute legal,
valid and binding obligations of the Contributor, enforceable in accordance with
their terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equity principles.
3.3 No Consents Required; No Conflict with Instruments to which the
Contributor is a Party. The execution, delivery and performance of this
Agreement and the other Related Agreements by the Contributor or by any
Affiliate of the Contributor that is a party thereto and the consummation by the
Contributor or any such Affiliate of the transactions contemplated thereby (i)
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will not require any Consent except for such Consents the failure of which to be
obtained or made, would not in the aggregate reasonably be expected to have a
Material Adverse Effect; and (ii) will not violate (with or without the giving
of notice or the lapse of time or both), or conflict with, or result in the
breach or termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of the
Contributor or any such Affiliate under, or result in the creation of an
Encumbrance upon any Assets or a portion of the Contributed Business pursuant
to, the charter or by-laws of the Contributor or any such Affiliate, or any
indenture, mortgage, deed of trust, lease, licensing agreement, contract,
instrument or other agreement to which the Contributor or any such Affiliate is
a party or by which the Contributor or any such Affiliate or any of the Assets
held by the Contributor or any such Affiliate is bound, except for such
violations, conflicts, breaches, terminations, defaults, accelerations or
Encumbrances which would not in the aggregate reasonably be expected to have a
Material Adverse Effect.
3.4 Employee Benefits.
(a) (i) Each of the Contributor's Defined Benefit and Defined
Contribution Pension Plans covering employees ("Employee Plan") is in
substantial compliance with applicable requirements prescribed by any and
all Legal Requirements, including, but not limited to the Code, except for
violations the occurrence of which would not in the aggregate reasonably be
expected to have a Material Adverse Effect. Each Employee Plan that is
intended to be qualified under Section 401(a) of the Code currently has a
favorable determination letter from the Internal Revenue Service as to that
Plan's qualification under Section 401(a) of the Code and nothing has
occurred since the date of such letter that could reasonably be expected to
cause the loss of such qualification.
(ii) The Contributor has in all material respects performed all
obligations required to be performed by it under ERISA, the Code and any
other applicable Legal Requirements and under the terms of each Employee
Plan, except such failures to perform which would not in the aggregate
reasonably be expected to have a Material Adverse Effect. The Contributor
has received no written notice of the existence of any material default or
violation by any other party of any of such Legal Requirements, terms or
requirements applicable to any of the Employee Plans.
(iii) Other than routine claims for benefits, the Contributor has not
received any written notice of any pending material claims or lawsuits
which have been asserted or instituted against any of the Employee Plans,
the assets of the trust or funds under the Employee Plans, the sponsor or
administrator of any of the Employee Plans, or against any fiduciary of any
of the Employee Plans with respect to the operation of such Plan.
(iv) The Contributor has not received any written notice of any
pending investigation or pending enforcement action by the Pension Benefit
Guaranty Corporation, the Department of Labor, the Internal Revenue Service
or any other Authority with respect to any of the Employee Plans.
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(v) All contributions required to be made under the terms of the
Contributor's Employee Plans have been timely made. No Employee Plan has
an "accumulated funding deficiency" (within the meaning of section 412 of
the Code or Section 402 of ERISA).
(b) All of the Contributor's "group health plans" (within the meaning of
Code Section 5000(b)(1)) have been operated in substantial compliance with the
group health plan continuation coverage requirements of Section 4980B of the
Code and Sections 601 through 608 of ERISA, Title XXII of the Public Health
Service Act and the provisions of the Social Security Act.
(c) There has been no act or omission by the Contributor that has given
rise to or may give rise to material fines, penalties, taxes, or related charges
under Section 502(c), (i) or (l) or Section 4071 of ERISA or Chapter 43 of the
Code or the imposition of a lien pursuant to Sections 401(a)(29) or 412(n) of
the Code or pursuant to ERISA.
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases.
(a) The Contributor has good and marketable title to all of the Fee
Interests described in the Deeds, free and clear of all Encumbrances, except (i)
those exceptions contained in the Deeds, (ii) liens for current taxes not yet
due and payable and mechanics and similar statutory liens arising in the
ordinary course of business, (iii) liens of employees and laborers for current
wages not yet due; (iv) building, zoning and health regulations of the
jurisdictions in which the Assets are located; and (v) such imperfections of
title, easements and Encumbrances, if any, as do not in the aggregate materially
detract from the value or materially interfere with the use of the Assets as
they are currently being used or as otherwise would not reasonably be expected
to have a Material Adverse Effect.
(b) The Contributor is the sole lessee under the Leases and the sole party
entitled to the Leasehold interests in favor of the lessee thereunder, and the
sole owner of the improvements situated on the Leased Premises, free and clear
of all Encumbrances affecting the Leaseholds except such Encumbrances, if any,
as do not in the aggregate materially detract from the value or materially
interfere with the use of the Assets or as otherwise would not reasonably be
expected to have a Material Adverse Effect. Neither Contributor nor any
Affiliate thereof has received from or delivered to the lessors under the
Leaseholds any written notice of termination or threat of termination of the
respective Leaseholds. True and complete copies of all written lease agreements
(including any written amendments or modifications thereof) constituting, or
evidencing the terms of, the Leaseholds have been delivered to the Partnership.
No material default or event of default on the part of the Contributor nor any
Affiliate thereof under the provisions of any of the Leaseholds, and no event
that with the giving of notice or passage of time or both would constitute such
default or event of default on the part of the Contributor, has occurred (which
default or event of default has not been cured). Neither the Contributor nor
any Affiliate thereof has received any written notice from any lessor under any
Leasehold, that any material default or event of default on the part of the
Contributor or such Affiliate as lessee under the provisions of any Leaseholds,
or that any event that with the giving of notice or passage of time or both
would constitute such a default or an event of
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default on the part of the Contributor or any such Affiliate, as lessee, has
occurred (which default or event of default has not been cured). No material
default or event of default on the part of the lessor under the provisions of
any of such Leaseholds, and no event that with the giving of notice or passage
of time or both would constitute such default or event of default on the part of
any such lessor, has occurred (which default or event of default has not been
cured).
(c) The Contributor or an Affiliate thereof has good title to all of the
personal property purported to be owned by it, free and clear of all
Encumbrances, except for liens for Taxes not yet due and payable and such
Encumbrances, if any, that do not in the aggregate materially detract from the
value or materially interfere with the use of the Assets (as they are currently
being used) or as otherwise would not reasonably be expected to have a Material
Adverse Effect.
3.6 Title Matters; Defects in Improvements. There are no trespassers or
other adverse parties in possession on or affecting the Fee Interests or the
Leased Premises that would reasonably be expected to have a Material Adverse
Effect. Neither the Contributor nor any Affiliate thereof has granted and none
of the foregoing is party to any unrecorded options, rights of refusal, sales
contracts or other such contractual rights in favor of any third parties
relating to the Fee Interests or the Leased Premises. No written notice has been
received by the Contributor or any Affiliate thereof from any insurance company
with respect to the Fee Interests or the Leased Premises or by any board of fire
underwriters claiming any material defects or deficiencies or requiring the
performance of any repairs, replacement, alteration or other work relating to
the improvements situated thereon (in each case, which have not been cured).
3.7 Working Capital. The Contributor has operated the Contributed
Business in the ordinary course of business from March 31, 1997 to the Closing
Date such that the Inventory, Stores Inventory, Prepaid Expenses and Accounts
Receivable, as of the Closing Date, are at substantially the same level as would
have existed for the Contributor without regard to the transactions contemplated
by the Master Transaction Agreement.
3.8 Technology and Similar Rights. The Contributor owns or is licensed to
use all of the Intellectual Property, Licensed Technology and Licensed
Trademarks, and the Intellectual Property, Licensed Technology and Licensed
Trademarks together constitute all relevant patents, pending patent
applications, invention disclosures, copyrights, software, trade secrets,
technical information, technology, know-how, processes, tradenames, trademarks,
trademark registrations or applications, copyrights, copyright applications or
registrations or any derivative thereof or design used in connection therewith
necessary for the normal operation and conduct of the Contributed Business as it
is currently operated and conducted, except where the failure to have such
ownership or licenses would not reasonably be expected to have a Material
Adverse Effect.
3.9 Government Licenses, Permits and Related Approvals. The Government
Licenses constitute all those necessary for the normal operation and conduct of
the Contributed Business as it is currently operated and conducted, except where
the failure to have such Government Licenses would not reasonably be expected to
have a Material Adverse Effect.
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3.10 All Necessary Assets. The Assets together with the rights under the
Related Agreements constitute all property and other rights necessary to enable
the Partnership to operate and conduct the Contributed Business in substantially
the same manner as it is being operated and conducted on the date of this
Agreement, except in all cases where the failure of the Partnership to acquire
such property or other rights by conveyance or license would not in the
aggregate reasonably be expected to have a Material Adverse Effect.
3.11 Conduct of Business in Compliance with Regulatory and Contractual
Requirements. The Contributor, and any Affiliate thereof, is operating and
conducting the Contributed Business in compliance with all applicable Legal
Requirements, rights of concession, licenses, know-how or other proprietary
rights of others, the failure to comply with which would reasonably be expected
to have a Material Adverse Effect.
3.12 Legal Proceedings. There is no litigation, proceeding, claim,
grievance, arbitration, investigation or other action to which the Contributor
or any Affiliate thereof is a party (i) that is pending or, to the Knowledge of
the Contributor, threatened, (ii) that relates in any way to the Assets, to the
operation or conduct of the Contributed Business, or to the transactions
contemplated by this Agreement, and (iii) that upon resolution adverse to
Contributor or any of its Affiliates, could reasonably be expected to have a
Material Adverse Effect.
3.13 Consents. Except for the Consents set forth in Schedule [for
Lyondell: 4.2(e)] [for Millennium: 4.3(e)] of the Master Transaction Agreement,
there are no Consents required to be obtained by the Contributor or any of its
Affiliates in connection with the transfer of the Assets or the Contributed
Business to the Partnership except to the extent the failure to obtain such
Consent would not be reasonably likely to have a Material Adverse Effect.
3.14 Tax Matters.
(a) There are no material liens for Taxes (other than for current Taxes
not yet due and payable) upon the Assets.
(b) None of the Assets directly or indirectly secures any indebtedness
for money borrowed the interest on which is tax-exempt.
3.15 [Reserved].
3.16 HSE Matters. Except as would not be reasonably likely to have a
Material Adverse Effect:
(a) (i) The Fee Interests, the Leased Premises and the operations of
the Contributor and any Affiliate thereof in connection with the Contributed
Business are in compliance with all HSE Laws and (ii) to the extent arising out
of the Contributor's or any Affiliate's ownership or use of the Assets or
operation of the Contributed Business, there are no Chemical Substances held,
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located, released, generated, treated, stored or disposed of, on, under or from
the Fee Interests or the Leased Premises or in, on or from any fixtures or
improvement thereon in excess of any standard prescribed or permitted by any HSE
Laws or which require corrective or other action pursuant to the provisions of
any HSE Laws.
(b) Neither the Contributor nor any Affiliate has received any notice from
any federal, state, or local agency naming the Contributor or such Affiliate as
a potentially responsible party ("PRP"), or otherwise notifying the Contributor
or such Affiliate of any potential liability under either the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
("CERCLA" or "Superfund"), the Resource Conservation and Recovery Act of 1976,
as amended ("RCRA"), or any state statute, rule or local regulation imposing
liability similar to CERCLA or RCRA that relates in any way to any Chemical
Substances generated by or derived from the operations on the Fee Interests, or
the Leased Premises; nor has the Contributor nor any of its Affiliates received
any comparable claim or notice from any private party.
(c) The Contributor or an Affiliate thereof, as applicable, has been and
is, in compliance with, all permits, licenses, approvals, permission, or
authorizations necessary for its operations in connection with the Contributed
Business to comply in all respects with HSE Laws.
(d) (i) Neither the Contributor nor any Affiliate thereof has received
written notice of any actual, impending, or potential proceedings, allegations,
claims, losses, actions, investigations or inquiries of any kind in connection
with the Contributed Business and HSE Laws or Chemical Substances ("HSE
Proceedings") and (ii) neither the Contributor nor any Affiliate thereof has any
Knowledge of any facts, events or occurrences that would reasonably be expected
to result in any HSE Proceedings being brought.
(e) Neither the Contributor nor any Affiliate thereof is party to, or is
subject to the terms of, any consent order, consent judgment, consent decree,
court or administrative order or judgment, agreement, schedule, or decree issued
by any Authority with respect to the Contributed Business.
3.17 Investigation to Acquire Knowledge. Each of the persons covered by
the definition of "Knowledge" set forth in Section 1 has reviewed, with counsel
to the Contributor, the other representations and warranties contained in, and
the Schedules that relate to, this Section 3 to the extent that they relate to
such person's area of responsibility or expertise and has made a reasonable
inquiry as to the accuracy and completeness of such representations, warranties
and Schedules.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
-------------------------------------------------
The Partnership represents and warrants to the Contributor as follows:
4.1 Due Organization; Good Standing and Power. The Partnership is a
limited partnership duly formed and validly existing under the laws of the State
of Delaware. The
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Partnership has all partnership power and authority to enter into this Agreement
and the other Related Agreements and to perform its obligations hereunder and
thereunder. The Partnership is duly authorized, qualified or licensed to do
business as a foreign partnership, in each of the jurisdictions in which its
right, title or interest in or to any asset, or the conduct of its business,
requires such authorization, qualification or licensing, except where the
failure to so qualify would not have a material adverse effect on the ability of
the Partnership to perform its obligations hereunder or under the Assignment and
Assumption Agreements.
4.2 Authorization and Validity of Agreement. The execution, delivery and
performance of this Agreement and the other Related Agreements by the
Partnership and the consummation by the Partnership of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
partnership action on the part of the Partnership. No other partnership action
is necessary for the authorization, execution, delivery and performance by the
Partnership of this Agreement, the other Related Agreements and the consummation
by the Partnership of the transactions contemplated hereby or thereby. This
Agreement and the other Related Agreements have been duly executed and delivered
by the Partnership and constitute legal, valid and binding obligations of the
Partnership, enforceable in accordance with their terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equity
principles.
4.3 No Consents Required; No Conflict with Instruments to which the
Partnership is a Party. The execution, delivery and performance of this
Agreement and the other Related Agreements by the Partnership and the
consummation by it of the transactions contemplated thereby (i) will not require
any Consent except for such Consents the failure of which to be obtained or
made, would not in the aggregate reasonably be expected to have a Material
Adverse Effect on the Partnership's ability to perform its obligations hereunder
or thereunder, and (ii) will not violate (with or without the giving of notice
or the lapse of time or both), conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or result in the
acceleration of the performance of the obligations of the Partnership under, the
partnership agreement of the Partnership, or any indenture, mortgage, deed of
trust, lease, licensing agreement, contract, instrument or other agreement to
which the Partnership is a party or by which the Partnership or any of its
assets or properties is bound, except for such violations, conflicts, breaches,
terminations, defaults, accelerations or liens which would not in the aggregate
reasonably be expected to have a material adverse effect on the Partnership's
ability to perform its obligations hereunder or thereunder.
SECTION 5
COVENANTS SUBSEQUENT TO CLOSING DATE
------------------------------------
5.1 Access to Information. Following the Closing Date, the Partnership
shall afford, and will cause its Affiliates to afford, to the Contributor, its
counsel, accountants and other authorized representatives, during normal
business hours, reasonable access to the books, records and other data of the
Contributed Business with respect to the period prior to the Closing Date (and
any personnel
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familiar therewith) to the extent that such access may be reasonably required by
the Contributor to facilitate (i) the preparation by the Contributor of such tax
returns as it may be required to file with respect to the operations of the
Assets and the Contributed Business or in connection with any audit, amended
return, claim for refund or any proceeding with respect thereto, (ii) the
investigation, litigation and final disposition of any claims which may have
been or may be made against the Contributor in connection with the Assets and
the Contributed Business, (iii) the payment of any amount in connection with any
liabilities or obligations which have not been assumed by the Partnership under
this Agreement and (iv) for any other reasonable business purpose. For a period
of ten years after the date of this Agreement, the Partnership will not dispose
of, alter or destroy any such books, records and other data without giving 90
days' prior notice to the Contributor to permit it, at its expense, to examine,
duplicate or repossess such records, files, documents and correspondence.
5.2 Mail or Other Communications. The Contributor authorizes and empowers
the Partnership on and after the Closing Date to receive and open all mail
received by the Partnership relating to the Contributed Business or the Assets
and to deal with the contents of such communications in any proper manner. The
Contributor shall promptly deliver to the Partnership any mail or other
communication received by it on and after the Closing Date pertaining to the
Contributed Business or the Assets and any cash, checks or other instruments of
payment to which the Partnership is entitled. The Partnership shall promptly
deliver to the Contributor any mail or other communication received by it after
the Closing Date pertaining to the Excluded Assets or Excluded Liabilities, and
any cash, checks or other instruments of payment in respect of such.
5.3 Use of Contributor's Trade Name. Except as set forth on Schedule
2.2(d), after the Closing Date the Partnership shall be permitted to use any
items of Inventory or packaging material, any sales or promotional materials,
any forms or documents or any other printed material that bear any of the names
[for Lyondell: "Lyondell"] [for Millennium: "Millennium," "USI" or "Quantum"] or
other statutory names, trade names or trademarks, indications or descriptions of
which such names or any name similar thereto forms a part until the earlier to
occur of (i) such time as inventory of such materials existing as of the Closing
Date are used, or (ii) two years after the Closing Date.
5.4 Closing Date Balance Sheet. Not later than 60 days after the Closing
Date, the Contributor shall cause [for Lyondell: Coopers & Lybrand L.L.P.] [for
Millennium: Price Waterhouse LLP] to prepare and deliver to the Contributor and
the Partnership an audited balance sheet of the Contributed Business as of the
Closing Date (the "Closing Date Balance Sheet").
5.5 Payment of Retained Accounts Payable. The Contributor will retain all
accounts payable including Retained Accounts Payable; however the Partnership,
as payment agent of the Contributor, shall pay such amounts on behalf of the
Contributor on a timely basis. As soon as practicable following the end of each
month after which such Retained Accounts Payable are paid by the Partnership,
but in any event within fifteen days after the end of such month, each
Contributor will reimburse the Partnership for such payments attributable to its
Contributed Business.
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5.6 Collection of Accounts Receivable. [For Millennium: The Partnership,
as collecting agent for the Contributor, shall take all commercially reasonable
efforts to collect the Accounts Receivable. As soon as practicable after such
Accounts Receivable are collected, but in any event within fifteen days after
the end of each month, the Partnership shall remit such collections to the
Contributor. If the Accounts Receivable as of the Closing Date as set forth in
the Closing Date Balance Sheet (the "Confirmed Accounts Receivable") are less
than $250 million, then in addition to the foregoing, the Partnership shall pay
the Contributor the difference between $250 million and the Confirmed Accounts
Receivable within 10 days after the receipt of the Closing Date Balance Sheet.
If the Confirmed Accounts Receivable are more than $250 million, the Contributor
shall pay the Partnership the difference between $250 million and the Confirmed
Accounts Receivable.] [For Lyondell: The Partnership shall take all commercially
reasonable efforts to collect the Accounts Receivable; however, to the extent
any Accounts Receivable set forth on the Closing Date Balance Sheet are not
collected within 180 days after the Closing Date by the Partnership, the
Contributor will buy such uncollected Accounts Receivable from the Partnership
at the amount set forth on the Closing Date Balance Sheet.]
5.7 Reimbursement for Prepaid Expenses. The Partnership and the
Contributor acknowledge that the Prepaid Expenses attributable to its
Contributed Business have been conveyed to the Partnership solely in order to
facilitate the timely and efficient transfer of the Contributed Business to the
Partnership. Consequently, the Partnership shall reimburse the Contributor for
the Prepaid Expenses associated with its Contributed Business (other than the
prepaid expenses for "turnaround" costs) within 10 days following the receipt of
the Closing Date Balance Sheet.
SECTION 6
SURVIVAL AND INDEMNIFICATION
----------------------------
6.1 Survival Limitations. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until the date that is 60 months after the Closing Date, except (i)
Section 3.14, which shall survive until the expiration of the applicable statute
of limitations and (ii) Section 3.5, which shall survive without limitation. No
action can be brought with respect to any breach of any representation or
warranty (except with respect to Section 3.5) pursuant to this Agreement unless
a written notice that complies with Section 6.3 has been delivered pursuant to
such Section 6.3 prior to the expiration of the survival period applicable to
such representation or warranty; provided that upon the giving of such notice,
notwithstanding any other provision of this Agreement the representation and
warranty that is the basis of such action shall continue with respect to such
action beyond the time at which the representation and warranty would otherwise
terminate.
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6.2 Indemnification.
(a) Subject to the other provisions of this Section 6, the Contributor
hereby agrees, to the fullest extent permitted by applicable law, to indemnify,
defend and hold harmless the Partnership and its Affiliates and their respective
officers, directors and employees from, against and in respect of any losses,
claims, damages, fines, penalties, assessments by public agencies, settlement,
cost or expenses (including costs of defense and attorneys' fees) and other
liabilities (any of the foregoing being a "Liability") incurred or suffered by
the Partnership or any of its Affiliates, arising out of, in connection with or
relating to:
(i) Any misrepresentation in or breach of the representations and
warranties of the Contributor or any of its Affiliates in this Agreement,
the Assignment and Assumption Agreements, the Licenses, or the Master
Transaction Agreement;
(ii) Any failure of the Contributor or any of its Affiliates to
perform any of its covenants or obligations contained in this Agreement,
the Assignment and Assumption Agreements, the Licenses, or the Master
Transaction Agreement;
(iii) Excluded Liabilities;
(iv) Any Pre-Closing Contingent Liability that is not an Assumed
Liability; or
(v) [for Lyondell: Any action by the Contributor or its Affiliates
that results in the occurrence of a "Designated Event" as such term is
defined in the Contributor's or its Affiliates' 1989 Indenture and Medium
Term Notes described in Schedule 2.5 but only to the extent that the
Partnership incurs an economic loss directly as a result of the occurrence
of the "Designated Event" and in such case the Contributor's or its
Affiliates' indemnification obligation is limited to the amount of such
economic loss;]
provided, however, that the following limitations shall apply to the
Contributor's indemnification obligations in clauses (i) and (iv) above:
(A) the Contributor shall not have any indemnification obligation
under clause (i) and (iv) above for any individual Liability unless the
amount of such Liability exceeds $25,000 (the "Individual Basket") (it
being understood that all Liabilities arising from the same event,
condition or set of circumstances shall be considered as an individual
Liability for purposes of such calculation), but if the amount of such
Liability exceeds the Individual Basket, the entire amount of such
Liability, including the first $25,000 of such Liability, may be the
subject of indemnification hereunder; provided, further, that the parties
agree that the amount of Liability for which indemnification may be sought
for breach of any representation or warranty under clause (i) above shall
be calculated taking into account the Individual Basket but without regard
to any qualification or exception regarding materiality or Material Adverse
Effect qualification contained in such representation or warranty (it
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being understood that such materiality or Material Adverse Effect
qualifications shall apply for purposes of determining whether there has
been such a breach in the first place, but once it has been established
that there is such a breach, the Partnership shall be entitled to indemnity
relating back to the first dollar); and
(B) to the extent any misrepresentation in or breach of the
representations and warranties of the Contributor results in a Liability of
the Partnership in excess of the Individual Basket and such Liability would
also constitute a Pre-Closing Contingent Liability, such misrepresentation
or breach shall be treated as a Pre-Closing Contingent Liability.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NEITHER THE CONTRIBUTOR NOR ANY OF ITS AGENTS,
EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY THE
PARTNERSHIP (I.E., A CLAIM BY THE PARTNERSHIP THAT DOES NOT SEEK REIMBURSEMENT
FOR A THIRD PARTY CLAIM PAID OR PAYABLE BY THE PARTNERSHIP) WITH RESPECT TO
THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT UNLESS ANY SUCH CLAIM
ARISES OUT OF THE FRAUDULENT ACTIONS OF THE CONTRIBUTOR. IN DETERMINING THE
AMOUNT OF ANY LOSS, LIABILITY, OR EXPENSE FOR WHICH THE PARTNERSHIP IS ENTITLED
TO INDEMNIFICATION UNDER THIS AGREEMENT, THE GROSS AMOUNT THEREOF WILL BE
REDUCED (BUT NOT BELOW ZERO) BY THE NET PRESENT VALUE OF ANY CORRELATIVE
INSURANCE PROCEEDS ACTUALLY REALIZED BY THE PARTNERSHIP UNDER POLICIES TO THE
EXTENT THAT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED BY CLAIM EXPERIENCE.
(c) Notwithstanding the provisions of Sections 6.2(a)(i) and 6.2(a)(iv),
it is expressly agreed that the Contributor shall not be required to indemnify
the Partnership for any Liability arising out of, in connection with or related
to any HSE Claim to the extent that the condition, event, circumstance or other
basis for the HSE Claim was exacerbated or accelerated by the Partnership. The
Partnership shall not be deemed to have exacerbated a condition, event,
circumstance or other basis for an HSE Claim by reason of the continuance
thereof after the Closing (i) under circumstances where the Partnership does not
know of its existence and has not breached any legal duty to have conducted an
investigation or inquiry that would have uncovered the matter or (ii) under
circumstances where the Partnership does know of its existence but is taking
commercially reasonable actions to cure the matter or to otherwise achieve
compliance in a commercially reasonable and prudent manner.
(d) Subject to the other provisions of this Section 6, the Partnership
hereby indemnifies, to the fullest extent permitted by law, the Contributor and
its Affiliates against and agrees to hold each of them harmless from any and all
Liability incurred or suffered by the Contributor or any of its Affiliates
arising out of or relating to:
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(i) Any misrepresentation in or breach of the representations and
warranties of the Partnership or the failure of the Partnership to perform
any of its covenants or obligations contained in this Agreement and the
Assignment and Assumption Agreements or the Licenses;
(ii) Assumed Liabilities; or
(iii) Any HSE Claim to the extent arising out of the Partnership's
exacerbation or acceleration of such HSE Claim.
(e) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE FULLEST
EXTENT PERMITTED BY LAW, NEITHER THE PARTNERSHIP NOR ANY OF ITS AGENTS,
EMPLOYEES, REPRESENTATIVES OR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY THE
CONTRIBUTOR WITH RESPECT TO THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS
AGREEMENT UNLESS ANY SUCH CLAIM ARISES OUT OF THE FRAUDULENT ACTIONS OF THE
PARTNERSHIP. IN DETERMINING THE AMOUNT OF ANY LOSS, LIABILITY, OR EXPENSE FOR
WHICH THE CONTRIBUTOR IS ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT, THE
GROSS AMOUNT THEREOF WILL BE REDUCED (BUT NOT BELOW ZERO) BY THE NET PRESENT
VALUE OF ANY CORRELATIVE INSURANCE PROCEEDS ACTUALLY REALIZED BY THE CONTRIBUTOR
UNDER POLICIES TO THE EXTENT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED BY
CLAIM EXPERIENCE.
(f) The rights provided to the Partnership pursuant to this Section 6, as
limited by and subject to the provisions of this Section 6, shall be the
Partnership's sole remedy for breach of representation and warranty by or
covenant or obligation of the Contributor under this Agreement, the Assignment
and Assumption Agreements and the Licenses. The rights provided to the
Contributor pursuant to this Section 6, as limited by and subject to the
provisions of this Section 6, shall be the Contributor's sole remedy for breach
of representation and warranty by or covenant of obligation of the Partnership
under this Agreement, the Assignment and Assumption Agreements and the Licenses.
6.3 Procedures.
(a) Any Person seeking indemnification under Section 6.2 (the "Indemnified
Party") agrees to give prompt written notice to the party against whom indemnity
is sought (the "Indemnifying Party") of the assertion of any claim that does not
involve a Third Party Claim, which notice shall describe in reasonable detail
the nature of the claim, an estimate of the amount of damages attributable to
such claim to the extent feasible and the basis of the Indemnified Party's
request for indemnification under this Agreement. If the Indemnifying Party
disputes such claim and such dispute is not resolved by the parties, such
dispute shall be resolved in accordance with Section 7.9.
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(b) If an Indemnified Party is notified of a Third Party Claim which may
give rise to a claim for indemnification against any Indemnifying Party under
this Section, then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing (including copies of all papers served with respect to
such Third Party Claim), which notice shall describe in reasonable detail the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible and the basis of
the Indemnified Party's request for indemnification under this Agreement;
provided that any failure to timely give such notice shall not relieve the
Indemnifying Party of any of its obligations under this Section 6 except to the
extent that such failure prejudices or impairs, in any material respect, any of
the rights or obligations of the Indemnifying Party.
(c) Any Indemnifying Party may, and at the request of the Indemnified
Party shall, participate in and control the defense of the Third Party Claim
with counsel of its choice reasonably satisfactory to the Indemnified Party.
The Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the Indemnified Party unless (i) the
employment thereof has been specifically authorized in writing by the
Indemnifying Party, (ii) the Indemnifying Party failed to assume the defense and
employ counsel or failed to diligently prosecute or settle the Third Party Claim
or (iii) there shall exist or develop a conflict that would ethically prohibit
counsel to the Indemnifying Party from representing the Indemnified Party. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
that the Indemnifying Party elects to contest, including, without limitation, by
making any counterclaim against the person or entity asserting the Third Party
Claim or any cross-complaint against any person or entity, in each case only if
and to the extent that any such counterclaim or cross-complaint arises from the
same actions or facts giving rise to the Third Party Claim. The Indemnifying
Party shall be the sole judge of the acceptability of any compromise or
settlement of any claim, litigation or proceeding in respect of which indemnity
may be sought hereunder, provided that the Indemnifying Party will give the
Indemnified Party reasonable prior written notice of any such proposed
settlement or compromise and will not consent to the entry of any judgment or
enter into any settlement with respect to any Third Party Claim without the
prior written consent of the Indemnified Party, which shall not be unreasonably
withheld. The Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder) shall reimburse the Indemnified Party for its
reasonable out of pocket costs incurred with respect to such cooperation.
(d) If the Indemnifying Party fails to assume the defense of a Third Party
Claim within a reasonable period after receipt of written notice pursuant to the
first sentence of subparagraph (c), or if the Indemnifying Party assumes the
defense of the Indemnified Party pursuant to subparagraph (c) but fails
diligently to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and
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proceedings; provided that the Indemnified Party shall not settle such Third
Party Claim without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section, and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
(e) Notwithstanding the other provisions of this Section 6.3, if the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 6.3 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
6.3 or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of the litigation concerning such
dispute. If a dispute over potential liability is resolved in favor of the
Indemnified Party, the Indemnifying Party shall reimburse the Indemnified Party
in full for all costs of the litigation concerning such dispute.
(f) After it has been determined, by acknowledgment, agreement, or ruling
of court of law, that an Indemnifying Party is liable to the Indemnified Party
under this Section 6, the Indemnifying Party shall pay or cause to be paid to
the Indemnified Party the amount of the Liability within ten business days of
receipt by the Indemnifying Party of a notice reasonably itemizing the amount of
the Liability but only to the extent actually paid or suffered by the
Indemnified Party.
(g) In the event a Third Party Claim is brought in which the liability as
between the Partnership and the Contributor is alleged to be joint (it being
agreed that any Third Party Claim related to a Pre-Closing Contingent Liability
shall be deemed joint) or in which the entitlement to indemnification under this
Section 6 has not been determined, the Partnership and the Contributor shall
cooperate in the joint defense of such Third Party Claim and shall offer to each
other such assistance as may reasonably be requested in order to ensure the
proper and adequate defense of any such matter. Such joint defense shall be
under the general management and supervision of the party which is expected to
bear the greater share of the liability, unless otherwise agreed; provided,
however, that neither party shall settle or compromise any such joint defense
matter without the consent of the other, which consent shall not be unreasonably
withheld or delayed. Any uninsured costs of such joint defense shall be borne
as the parties may agree, provided, however, that in the absence of such
agreement, the defense costs shall be borne by the party incurring such costs;
provided, further, that, if it is determined that one party was entitled to
indemnification under this Section 6, the other party shall reimburse the party
entitled to indemnification for all of its costs incurred in connection with
such defense.
6.4 Subrogation. In the event of any payment by an Indemnifying Party to
an Indemnified Party in connection with any Liability, the Indemnifying Party
shall be subrogated to and shall stand in the place of the Indemnified Party as
to any events or circumstances in respect of which the Indemnified Party may
have any right or claim against any third party relating to such
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event or indemnification. The Indemnified Party shall cooperate with the
Indemnifying Party in any reasonable manner in prosecuting any subrogated claim.
6.5 Claims for HSE Work. Notwithstanding the other provisions of this
Section 6, in the case of any assertion, claim or demand requiring the
performance of investigatory, removal or remedial work with respect to
(environmental conditions, HSE Laws or Chemical Substances for which the
Partnership may seek indemnification, the Partnership shall have the right to
conduct and control such work provided (i) it uses its good faith, commercially
reasonable efforts to achieve the Lowest Cost Response and (ii) it provides the
Contributor with the opportunity to: (A) review and comment upon any work plans
for any remedial action prior to finalization and implementation; (B) attend
meetings with regulators concerning the remedial action; and (C) have a
representative present during the performance of any remedial action.
6.6 EXTENT OF INDEMNIFICATION. WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH HEREIN, TO THE
FULLEST EXTENT PERMITTED BY LAW, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO
INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF
WHETHER THE INDEMNIFIABLE LOSS GIVING RISE TO ANY SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF ANY LAW
OF OR BY ANY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS STATEMENT
CONSTITUTES A CONSPICUOUS LEGEND.
SECTION 7
MISCELLANEOUS
-------------
7.1 Construction. In construing this Agreement, the following principles
shall be followed: (i) no consideration shall be given to the captions of the
articles, sections, subsections or clauses, which are inserted for convenience
in locating the provisions of this Agreement and not as an aid in construction:
(ii) no consideration shall be given to the fact or presumption that any of the
parties had a greater or lesser hand in drafting this Agreement; (iii) examples
shall not be construed to limit, expressly or by implication, the matter they
illustrate; (iv) the word "includes" and its syntactic variants mean "includes,
but is not limited to" and corresponding syntactic variant expressions; (v) the
plural shall be deemed to include the singular, and vice versa; (vi) each gender
shall be deemed to include the other gender; and (vii) each exhibit, appendix,
attachment and schedule to this Agreement is a part of this Agreement.
7.2 Payment of Certain Expenses and Taxes.
(a) Subject to the further provisions of this Section 7.2, the Contributor
shall be responsible for all Taxes attributable to the Contributor's ownership
or use of the Assets or operation of the Contributed Business prior to the
Closing and the Partnership shall be responsible for all
-31-
<PAGE>
Taxes attributable to the Partnership's ownership or use of the Assets or
operation of the Contributed Business after the Closing. The Contributor shall
be responsible for any liability of the Partnership pursuant to Texas Tax Code
Section 111.020 (including interest, penalties and attorneys' fees in connection
therewith) with respect to any amounts owed or owing by the Contributor under
Title 2, Texas Tax Code.
(b) All sales, transfer, or other similar taxes incurred in connection
with the transfer of the Assets shall be borne by the Partnership. The
Partnership, the Contributor and the Contributing Partner shall cooperate fully
with each other after the Closing in connection with (i) the preparation and
filing of any tax return, exemption certificate, or other filing in connection
with such taxes, and (ii) any audit examination by any taxing Authority of the
tax returns, exemption certificates, or other filings referred to above.
(c) All real property taxes, personal property taxes, ad valorem taxes,
and other similar taxes (or payments in lieu of such taxes) assessed on any of
the Assets in the tax period in which the Closing Date occurs (other than the
Inventory Taxes referred to in Section 7.2(d) below) ("Property Taxes") shall be
prorated between the Partnership and the Contributor as of the Closing.
(d) All real property taxes, personal property taxes, ad valorem taxes,
and other similar taxes (or payments in lieu of such taxes) assessed on the
Inventory or Stores Inventory in the tax period in which the Closing Date occurs
("Inventory Tax") shall be payable by the Contributor.
(e) The Partnership shall pay any title or recordation fees in connection
with the transfer of the Assets. The Partnership shall also pay for any title
insurance policies or surveys of the Fee Interests that are requested or ordered
by the Partnership.
(f) After the Closing, the Contributor receiving each Property Tax or
Inventory Tax bill or notice applicable to the Assets for the period in which
the Closing Date occurred shall promptly notify the Partnership and shall pay
each such tax bill prior to the last day such taxes may be paid without penalty
or interest. The Partnership shall promptly on receipt of a written request
(accompanied by appropriate supporting documentation) reimburse the paying party
with respect to the Partnership's share of such amount so paid as provided under
this Agreement. The Contributor and the Partnership shall cooperate fully with
each other on and after Closing with respect to any Property Tax assessment or
valuation (or protest in connection therewith) by any taxing Authority with
respect to the tax period in which the Closing Date occurs.
(g) If either party receives a refund of any Taxes for which the other is
liable or responsible under this Agreement, the party receiving such refund
shall, within 30 days after the receipt of such refund, remit it to the party
who is liable.
(h) Notwithstanding any other provision of this Agreement, the obligations
of the parties set forth in this Section 7.2 shall be unconditional and absolute
and shall remain in effect until audit, assessment and collection of any such
taxes are barred by the applicable statute of limitations.
-32-
<PAGE>
7.3 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall unless otherwise
provided for elsewhere in this Agreement, be in writing and shall be deemed to
have been duly given if and when (i) transmitted by telecopier facsimile with
proof of confirmation from the transmitting machine, or (ii) delivered by
courier or other hand delivery, as follows:
(a) If to the Contributor:
_____________________
_____________________
_____________________
_____________________
_____________________
(b) If to the Contributing Partner:
_____________________
_____________________
_____________________
_____________________
_____________________
(c) If to the Partnership:
_____________________
_____________________
_____________________
_____________________
_____________________
or to such other address or telecopy number as either party shall have specified
by notice in writing to the other party. All such notices, requests, demands
and communications shall be deemed to be effective upon receipt.
7.4 [Reserved].
7.5 Binding Effect; Benefit. Subject to Section 7.7, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective permitted successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the parties
hereto or their respective permitted successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
-33-
<PAGE>
7.6 Occasional and Bulk Sales. To the extent applicable, the Partnership
and the Contributor each agree to waive, to the fullest extent permitted by law,
compliance by the other with the provisions of the Bulk Sales Law of any
jurisdiction.
7.7 Assignability. Neither this Agreement nor any of the rights or
obligations hereunder shall be assignable (by operation of law or otherwise) by
the Contributor or the Contributing Partner without the prior written consent of
the Partnership or shall be assignable (by operation of law or otherwise) by the
Partnership (except to a wholly-owned subsidiary thereof) without the prior
written consent of the Contributor. Any assignment or purported assignment in
violation of this Section shall be null and void.
7.8 Amendment; Waiver. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Subject to
the agreements and obligations of the Partnership hereunder or under applicable
Legal Requirements, no investigations by the Partnership heretofore or hereafter
made shall affect the representations and warranties of the Contributor, and,
except as otherwise provided in Section 6.1, such representations and warranties
shall survive any such investigation. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach.
7.9 Dispute Resolution. All disputes under this Agreement shall be
resolved in accordance with the Dispute Resolution Procedures set forth in
Appendix A.
7.10 Severability. In the event that any provisions of this Agreement
shall finally be determined to be unlawful, such provision shall, so long as the
economic and legal substance of the transactions contemplated hereby is not
affected in any materially adverse manner as to Contributor, the Contributing
Partner or the Partnership, be deemed severed from this Agreement and every
other provision of this Agreement shall remain in full force and effect.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
7.12 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE EXCLUDING CONFLICTS OF LAW
PRINCIPLES OF SUCH JURISDICTION EXCEPT TO THE EXTENT SUCH MATTERS ARE
MANDATORILY SUBJECT TO THE LAWS OF ANOTHER JURISDICTION PURSUANT TO THE LAWS OF
SUCH OTHER JURISDICTION.
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER. ANY JUDICIAL
PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT OR ANY DISPUTE UNDER OR
ARISING OUT OF OR IN CONNECTION WITH THIS
-34-
<PAGE>
AGREEMENT OR ANY MATTER RELATED HERETO SHALL BE BROUGHT IN THE FEDERAL OR STATE
COURTS OF THE STATE OF DELAWARE, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES TO THIS AGREEMENT ACCEPTS THE EXCLUSIVE
JURISDICTION OF SUCH COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
(AS FINALLY ADJUDICATED) RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT
EXCEPT TO THE EXTENT THIS AGREEMENT RELATES TO THE CONVEYANCE OR ASSIGNMENT OF
ANY INTEREST IN REAL ESTATE OR THE CREATION, PERFECTION, PRIORITY OR FORECLOSURE
OF ANY LIEN ON ANY INTEREST IN REAL ESTATE IN WHICH CASE, SUCH COURTS
JURISDICTION SHALL BE NON-EXCLUSIVE. EACH OF THE PARTIES TO THIS AGREEMENT SHALL
APPOINT THE CORPORATION TRUST COMPANY, THE PRENTICE-HALL CORPORATION SYSTEM,
INC. OR A SIMILAR ENTITY (THE "AGENT") AS AGENT TO RECEIVE ON ITS BEHALF SERVICE
OF PROCESS IN ANY PROCEEDING IN ANY SUCH COURT IN THE STATE OF DELAWARE BY
ENTERING INTO AN AGREEMENT AS OF THE DATE OF THIS AGREEMENT WITH THE AGENT TO
SUCH EFFECT. THE FOREGOING CONSENTS TO JURISDICTION AND APPOINTMENTS OF AGENT TO
RECEIVE SERVICE OF PROCESS SHALL NOT CONSTITUTE GENERAL CONSENTS TO SERVICE OF
PROCESS IN THE STATE OF DELAWARE FOR ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND
SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE PARTIES
HERETO. EACH PARTY HEREBY WAIVES ANY OBJECTION IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.
7.14 WAIVER OF JURY TRIAL. THE PARTNERSHIP, THE CONTRIBUTING PARTNER AND
THE CONTRIBUTOR HEREBY KNOWINGLY AND INTENTIONALLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
-35-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
[CONTRIBUTOR]
By:______________________________
Name:
Title:
[CONTRIBUTING PARTNER]
By:______________________________
Name:
Title:
[PARTNERSHIP]
By:______________________________
Name:
Title:
-36-
<PAGE>
SCHEDULE A
----------
For Lyondell:
The businesses described in the PETROCHEMICALS SEGMENT Section of
Lyondell Petrochemical Company's 1996 Annual Report on Form 10-K except the
assets and operations related to Lyondell Methanol described therein.
For Millennium:
The businesses described in the Millennium Petrochemicals section of
Millennium Chemicals Inc.'s 1996 Annual Report on Form 10-K under the
subheadings: (i) Polyethylene and Related Products, (ii) Acetyls and Ethyl
Alcohol (other than the business described in the Acetic Acid and VAM and
Methanol subsections thereof), and (iii) Performance Polymers.
<PAGE>
Schedule 2.1(a)
Facilities, Terminals and Warehouses
------------------------------------
To Be Attached At Closing
[Including, with respect to Millennium: Millennium's Research Center located in
Cincinnati, Ohio]
<PAGE>
Schedule 2.1(b)
To be attached at Closing
-39-
<PAGE>
Schedule 2.1(d)
To be attached at Closing
-40
<PAGE>
Schedule 2.1(k)
Contributed Subsidiaries
------------------------
[For Lyondell:
(i) Lyondell Mont Belvieu Corporation
(ii) Lyondell Transportation Company]
[For Millennium: Quantum Pipeline Company]
-41-
<PAGE>
Schedule 2.2(h)
Certain Excluded Assets
-----------------------
[With respect to Lyondell: (i) Lyondell's interest in and assets associated
with the methanol business of Lyondell Methanol Company L.P. and the related
hydrogen purification and sales; (ii) certain technology rights (ARCO Technology
Licensing & Immunity From Suit Agreements & prod flex technology (including
Lyondell improvements))*; (iii) mainframe leases (computers & equipment) to be
transferred to Lyondell-CITGO Refining Company Ltd. ("LCR"); (iv) mainframe
owned assets (hardware & software) to be transferred to LCR; (v) assets
associated with Lyondell's ongoing corporate operations, including equipment,
records, computer hardware and software and other personal property and
fixtures; (vi) Outstanding claims related to Mt. Belvieu valve failure in 1996
and Colonial Pipeline fire in 1995; (vii) Lyondell's interest in the following
subsidiaries: Lyondell Refining Company, Lyondell General Methanol Company,
Lyondell Limited Methanol Company and Lyondell FSC, Inc.; and (viii) the assets
of Lyondell (or its Affiliates) that are covered by a Shared Services Agreement
in which the service is to be provided by Lyondell or its Affiliates to the
Partnership.]
*To be licensed to the Partnership pursuant to Technology License.
[With respect to Millennium: (i) Millennium's corporate office and data center
located in Cincinnati, Ohio and all equipment, personal property and fixtures
associated therewith; (ii) the cafeteria/conference center adjacent to
Millennium's office and data center in Cincinnati, Ohio and all equipment,
personal property and fixtures associated therewith; (iii) assets associated
with the ongoing corporate operations of Millennium Petrochemicals and its
direct and indirect corporate parents, including equipment, records, computer
hardware and software and other personal property and fixtures; (iv) assets
associated with the businesses described under the headings "Millennium
Petrochemicals--Acetyls and Ethyl Alcohol--Acetic Acid and VAM" and "--Methanol"
in its 1996 Annual Report on Form 10-K, as such businesses are being conducted
on the date of this Agreement (the "Acetyls Business") and located within the
boundaries of the Acetic Acid, VAM and Methanol (including Syngas) production
facilities at Millennium Petrochemicals' LaPorte, Texas facility, as such
boundaries are established by agreement between Millennium Petrochemicals Inc.
and Lyondell Petrochemical Company before the Closing Date (the "Boundaries");
including without limitation the waste water treatment plant and the barge dock
at Millennium Petrochemicals' LaPorte, Texas facility and associated equipment;
(v) assets used or held for use in the operation and conduct of the Acetyls
Business as such businesses are being conducted on the date of this Agreement
and not either (y) located within the Boundaries or (z) provided to Millennium
Petrochemicals under a Shared Services Agreement; (vi) outstanding claims
related to Millennium Petrochemicals v. M.W. Kellogg Co., (vii) all subsidiaries
of Millennium Petrochemicals other than Quantum Pipeline Company, including
without limitation CUE Insurance Limited, DR Insurance Company, Millennium
Plastics Inc., Millennium Polymers Inc., Millennium Chemicals Export Ltd.,
Millennium Petrochemicals Canada, Ltd., NDCC International II Inc., USI
Chemicals International,
<PAGE>
Inc., Quantum UK Limited, Millennium Petrochemicals Europe B.V., and Suburban
Propane GP, Inc.; (viii) Millennium Petrochemical's interest in Suburban Propane
Partners, L.P. and any entities controlled by it; (ix) Millennium
Petrochemical's former research laboratories on Section Road, Cincinnati, Ohio,
(x) certain unimproved real estate at Millennium Petrochemicals' LaPorte, Texas
Facility proximate to the real estate retained by Millennium Petrochemicals
under (iv) above, ** (xi) Accounts Receivable of the Contributor as of the
Closing Date, (xii) the assets of Millennium (or its Affiliates) that are
covered by a Shared Service Agreement in which the service is to be provided by
Millennium (or its Affiliates) to the Partnership [Query whether Amoco's PAO
facility at LaPorte is on land owned by Amoco or on land owned by Millennium, in
which case it should be excluded].]
** The open or unimproved real estate at LaPorte, Texas to be retained by
Millennium Petrochemicals will be selected on the principle that the
Partnership and Millennium Petrochemicals shall both have room for
expansion at LaPorte. Final selection of the excluded land shall be made
before execution of the definitive Asset Contribution Agreement.
-43-
<PAGE>
Schedule 2.2(c)
Excluded names, logos, tradenames, trademarks, etc.
---------------------------------------------------
[For Lyondell:
(i) all marks with "Lyondell", including Lyondell.com and all rights to "LYO"
(ii) Synergist Logo;
[For Millennium: The Millennium Chemicals, Millennium Petrochemicals, Quantum
Chemicals, Quantum Petrochemicals, USI, National Distillers and Chemical
Corporation trademarks and trade names]
-44-
<PAGE>
Schedule 2.5(a)(vii)
Assumed Indebtedness
--------------------
[For Lyondell:
PUBLIC DEBT
- -----------
1989 Indenture $150,000,000 Due June 1999
1992 Indenture $100,000,000 Due March 2002
1996 Indenture $150,000,000 Due February 2006
$150,000,000 Due February 2026
MEDIUM TERM NOTES
- -----------------
$195,000,000 Due Jan. 1998-March 2005]
[For Millennium: The Millennium Debt as defined in the Master Transaction
Agreement]
-45-
<PAGE>
Schedule 2.5(a)(x)
Long-term Liabilities
---------------------
The following liabilities related to (i) the operations of the Contributed
Business or (ii) employees who will become employees of the Partnership:
Deferred Compensation
Other post-retirement benefits
Deferred licensing revenue
Environmental reserves
Other deferred credits
[For Millennium: Long-term portion of deferred maintenance]
-46-
<PAGE>
Schedule 3
Disclosure Schedule
-------------------
[For Lyondell: None]
[For Millennium: None]
-47-
<PAGE>
Appendix A
Dispute Resolution Procedures
-----------------------------
(1) Binding and Exclusive Means. The dispute resolution provisions set
forth in this Appendix A shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such dispute shall, unless the Contributor and the
Partnership in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix A.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented:
(a) The Indemnifying Party may at any time invoke the dispute resolution
procedures set forth in this Appendix A as to any Dispute by providing written
notice of such action to the Indemnified Party, who within five Business Days
after such notice shall schedule a meeting to be held in Houston, Texas between
the parties. The meeting shall occur within 10 Business Days after notice of
the meeting is delivered to the Indemnifying Party. The meeting shall be
attended by representatives of each party having decision-making authority
regarding the Dispute as well as the dispute resolution process and who shall
attempt in a commercially reasonable manner to negotiate a resolution of the
Dispute.
(b) The representatives of the parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the parties resolving the Dispute; (ii) one of the parties shall determine
and notify the other party in writing that no agreement resolving the Dispute is
likely to be reached; (iii) if a technique of alternative dispute resolution is
agreed upon, the completion date therefor shall occur without the parties having
resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the parties having resolved the
Dispute.
(c) If, as of the Interim Decision Date, the parties have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the parties
shall proceed under subsection (d).
(d) The parties shall jointly appoint a Neutral. If the parties have been
unable to agree upon such appointment within 30 days after the Interim Decision
Date, then such Neutral, upon the
<PAGE>
application of either of the parties shall be appointed within 10 days of the
filing of such application by the Center for Public Resources, or if such
appointment is not so made promptly then promptly thereafter by the American
Arbitration Association in Philadelphia, Pennsylvania, or if such appointment is
not so made promptly then promptly thereafter by the senior United States
District Court judge sitting in Wilmington, Delaware. The fees of the Neutral
shall be paid equally by the parties except that the Neutral shall have
discretion to award fees.
(e) In consultation with the Neutral, the parties shall agree upon a
binding schedule and procedure (which procedure may have been previously
discussed under subsection (b)) to be used as a means to resolve or to attempt
to resolve Dispute, with the Neutral making the decision as to the schedule
and/or procedure if the parties have been unable to agree on any of such matters
within 20 days after the initial selection of the Neutral. The parties agree to
participate in a commercially reasonable manner in the procedure to its
conclusion as determined by the Neutral. If the parties are not successful in
resolving the Dispute through the procedure described above, then the parties
agree that (i) the Neutral shall act as the arbitrator in a binding arbitration
in accordance with the American Arbitration Association rules and shall render a
decision and (ii) judgment upon the decision rendered by the Neutral may be
entered in any court having jurisdiction.
(4) Continuation of Business. Notwithstanding the existence of any Dispute
or the pendency of any procedures pursuant to this Appendix A, the parties agree
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
-2-
<PAGE>
Appendix 1
----------
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the parties and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a
manner which best achieves the objectives of the business activities and
arrangements under the Agreement and permits the parties to realize the benefits
intended to be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
parties or the Neutral shall determine to be appropriate under the
circumstances.
-3-
<PAGE>
Exhibit A
To be attached at Closing
-4-
<PAGE>
Exhibit B
To be attached at Closing
-5-
<PAGE>
Exhibit C
To be attached at Closing
-6-
<PAGE>
Exhibit D
To be attached at Closing
-7-
<PAGE>
Exhibit E
To be attached at Closing
-8-
<PAGE>
Exhibit F
To be attached at Closing
-9-
<PAGE>
Exhibit G
Terms of Technology Licenses
----------------------------
(from Contributor to Partnership)
(i) Perpetual and irrevocable
(ii) Non-exclusive
(iii) Royalty-free
(iv) Grant back of Partnership improvements[; provided, however, that any
significant improvement would not be granted back but instead a right of
first refusal would be granted.]
(v) Partnership - No rights to sublicense
[Actual Form of Agreement to be Attached at Closing]
-10-
<PAGE>
Exhibit H
Terms of Trademark Licenses
---------------------------
(from Contributor to Partnership)
(i) Non-exclusive
(ii) Royalty-free
(iii) No rights to sublicense
(iv) Right of control in Licensor
[Actual Form of Agreement to be Attached at Closing]
-11-
<PAGE>
Exhibit I
Terms of Intellectual Property License
--------------------------------------
(from Partnership to Contributors)
(i) Perpetual and irrevocable (except for Trademarks)
(ii) Non-exclusive
(iii) Royalty-free
(iv) Grant backs of improvements[; provided, however, that any significant
improvement would not be granted back but instead a right of first
refusal would be granted.]
(v) Contributors - no rights to sublicense
[Actual Form of Agreement to be Attached at Closing]
-12-
<PAGE>
EXHIBIT 10.35
EXHIBIT C TO FIRST AMENDMENT TO
MASTER TRANSACTION AGREEMENT
PARENT AGREEMENT
AMONG
LYONDELL PETROCHEMICAL COMPANY,
MILLENNIUM CHEMICALS INC.
AND EQUISTAR CHEMICALS, LP
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
SECTION 1 GUARANTEE OF OBLIGATIONS................................... 2
1.1 Guarantee.................................................. 2
1.2 Guarantee Regarding Interested Owner Agreements............ 2
1.3 No Demand or Notice........................................ 3
1.4 Waiver of Resort to Security............................... 3
1.5 No Discharge............................................... 3
1.6 Waivers by the Parent...................................... 3
1.7 No Reduction............................................... 4
1.8 Enforcement................................................ 4
1.9 Continued Effectiveness.................................... 4
1.10 Certain Defenses........................................... 4
1.11 Parties in Interest........................................ 4
SECTION 2 OWNERSHIP AND BUSINESS OF PARTNER SUBS..................... 5
2.1 Restrictions on Transfer and Pledge of Partner Sub Stock... 5
2.2 Right of First Option...................................... 6
2.3 Prohibition on Affiliated Obligor Bankruptcy, Etc.......... 8
2.4 Special Purpose Subsidiaries............................... 8
SECTION 3 STANDSTILL AGREEMENT....................................... 8
3.1 Standstill................................................. 8
3.2 Exceptions................................................. 9
SECTION 4 MISCELLANEOUS.............................................. 9
4.1 No Waivers................................................. 9
4.2 Expenses in Connection with Exercise....................... 10
4.3 Subordination.............................................. 10
4.4 Confidentiality and Use of Information..................... 10
4.5 Competing Businesses....................................... 10
4.6 Further Assurances......................................... 10
4.7 Successors and Assigns..................................... 10
4.8 Benefits of Agreement Restricted to the Parties............ 11
4.9 Notices 11
4.10 Severability............................................... 12
4.11 Termination................................................ 12
4.12 Construction and Certain Definitions....................... 12
4.13 Counterparts............................................... 12
4.14 Governing Law.............................................. 12
4.15 Jurisdiction; Consent to Service of Process; Waiver........ 12
4.16 Waiver of Jury Trial....................................... 13
4.17 Dispute Resolution......................................... 13
4.18 Amendment.................................................. 13
-i-
<PAGE>
APPENDICES
Appendix A List of Related Agreements
Appendix B Dispute Resolution Procedures
-ii-
<PAGE>
PARENT AGREEMENT
----------------
This Parent Agreement (this "Agreement") is made as of this ____ day of
__________, 1997 among Lyondell Petrochemical Company, a Delaware corporation
("Lyondell"), Millennium Chemicals Inc., a Delaware corporation ("Millennium"
and, together with Lyondell, the "Parents") and Equistar Chemicals, LP, a
Delaware limited partnership (the "Partnership").
WHEREAS, Lyondell and Millennium entered into the Master Transaction
Agreement dated as of July 25, 1997, as amended (the "Master Transaction
Agreement").
WHEREAS, Lyondell Petrochemical G.P. Inc. ("Lyondell GP") and Lyondell
Petrochemical L.P. Inc. ("Lyondell LP" and, together with Lyondell GP, the
"Lyondell Partner Subs") are both Delaware corporations and direct or indirect
wholly owned subsidiaries of Lyondell.
WHEREAS, Millennium Petrochemicals GP LLC ("Millennium GP") and Millennium
Petrochemicals LP LLC ("Millennium LP" and, together with Millennium GP, the
"Millennium Partner Subs") are both Delaware limited liability companies and
direct or indirect wholly owned subsidiaries of Millennium.
WHEREAS, pursuant to the terms of the Master Transaction Agreement, the
Partnership has been formed under the laws of the State of Delaware pursuant to
the Limited Partnership Agreement being entered into simultaneously herewith (as
it may in the future be amended, supplemented, restated or otherwise modified or
amended, the "Partnership Agreement"), with Lyondell GP and Millennium GP as the
general partners and Lyondell LP and ML Partner as the limited partners of the
Partnership. The Lyondell Partner Subs, together with any other direct or
indirect subsidiary of Lyondell that is a party to any of the Related Agreements
(as defined herein), are referred to herein as the "Lyondell Affiliated
Obligors." The Millennium Partner Subs, together with any other direct or
indirect subsidiary of Millennium that is a party to any of the Related
Agreements, are referred to herein as the "Millennium Affiliated Obligors." The
Lyondell Affiliated Obligors and the Millennium Affiliated Obligors,
collectively or individually as the context may require, are referred to herein
as the "Affiliated Obligors." The Lyondell Partner Subs and the Millennium
Partner Subs, collectively or individually as the context may require, are
referred to herein as the "Partner Subs."
WHEREAS, in connection with the closing of the transactions to be effected
pursuant to the Master Transaction Agreement, the Parents and certain of their
respective affiliates, have entered into or are entering into various agreements
and other legal documents, including the Partnership Agreement, services
agreements and asset contribution agreements (including this Agreement, the
"Related Agreements"), each of which is integrally related to the capitalization
and future operations of the Partnership and is listed on Appendix A hereto.
The Related Agreements (other than this Agreement) and any additional agreements
that may from time to time be added to Appendix A hereto by agreement of the
Parents, as they may in the future be amended, supplemented, restated or
otherwise modified, are referred to herein as the "Other Agreements".
<PAGE>
WHEREAS, this Agreement is essential to the consummation of the closing
pursuant to the Master Transaction Agreement and the entering into and
effectiveness of the Other Agreements, and each of the parties to such
agreements is relying on this Agreement in connection with entering into each of
the Other Agreements.
WHEREAS, in order to induce the parties thereto to enter into the Other
Agreements, each Parent is willing, solely for the benefit of the Beneficiaries
(as defined below in Section 1.11) and their successors and assigns, to
guarantee the performance by its Affiliated Obligors of the obligations of such
Affiliated Obligors as set forth in this Agreement.
WHEREAS, each Parent is willing to subject the Partner Sub Stock (as
defined herein) to certain restrictions on transfer, as set forth in this
Agreement.
NOW THEREFORE, in, consideration of the foregoing and the mutual promises
and covenants of the parties hereto, the Parents and the Partnership hereby
agree as follows:
SECTION 1
GUARANTEE OF OBLIGATIONS
------------------------
1.1 Guarantee. Each Parent hereby unconditionally, absolutely and
irrevocably guarantees, undertakes and promises to cause, as herein provided,
the due and punctual payment and the full and prompt performance by its
Affiliated Obligors of all of the amounts to be paid and all of the terms and
provisions to be performed or observed by or on the part of its Affiliated
Obligors under the Other Agreements in accordance with the terms thereof (all
such terms and provisions as now or hereafter in existence being collectively
called the "Obligations") as follows: in the event that its Affiliated Obligors
shall fail in any manner whatsoever to pay, perform or observe any of their
Obligations, when and as the same shall be required to be paid, performed or
observed under the terms of the Other Agreements, such Parent will itself duly
and punctually pay, or fully and promptly perform or observe, as the case may
be, such Obligations, or cause the same to be duly and punctually paid, or fully
and promptly performed or observed, in each case as if such Parent were itself
the obligor with respect to such Obligations under the Other Agreements. Insofar
as this Section 1.1 relates to the obligations of an Affiliated Obligor under
the Partnership Agreement and except as set forth in Section 1.2, no Parent
shall be required to make, or cause a Partner Sub to make, any contribution to
the Partnership that such Partner Sub is not otherwise required to make pursuant
to the terms of Section 2.3, 2.4, or 12.2(d)(ii) of the Partnership Agreement.
Insofar as this Section 1.1 applies to Other Agreements other than the
Partnership Agreement, the term "Affiliated Obligors" will not include the
Partnership nor any partner in the Partnership in its capacity as such.
1.2 Guarantee Regarding Interested Owner Agreements. Each Parent
acknowledges that the Partnership Agreement sets forth definitions of
"Conflicted Partner" and "Nonconflicted Partner," and provides that a
Nonconflicted Partner has certain exclusive rights to control the Partnership
with respect to any Conflict Circumstance (as defined in the Partnership
Agreement); and accordingly, without limiting the rights of its Partner Sub
under Section 6.8 of the Partnership Agreement, each Parent hereby agrees to
cause its Partner Sub (i) to cause the Partnership to pay,
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perform and observe all of the Obligations to be paid, performed or observed by
or on the part of the Partnership under the Other Agreements, in accordance with
the terms thereof, to the extent that such Partner Sub is the Nonconflicted
Partner and is thereby entitled to cause the payment, performance and observance
of such Obligations and (ii) to abide by its obligations as the Nonconflicted
Partner with respect to any Conflict Circumstance in accordance with the terms
of the Partnership Agreement applicable thereto; provided, however, that each
Parent's responsibility under this Section 1.2 for a failure of the Partnership
to pay, perform or observe its obligations under the Other Agreements shall be
limited to the circumstances in which the Partnership's failure to so pay,
perform or observe its obligations under the Other Agreements was directly
caused by an act or failure to act of its Partner Sub; provided, further, that
nothing in this Section 1.2 shall require a Parent to make or cause such Partner
Sub to make any contribution to the Partnership that such Partner Sub is not
otherwise required to make pursuant to Section 2.3, 2.4, or 12.2(d)(ii) of the
Partnership Agreement.
1.3 No Demand or Notice. It shall not be a condition to the guarantees
and agreements set forth in Sections 1.1 and 1.2 above (together, the
"Guarantee") that a Beneficiary shall have first made any request of or demand
upon, or given any notice of the occurrence of a default under the Other
Agreements or any other notice whatsoever to, either Parent or its Affiliated
Obligors or any other Person, or shall have instituted any action or proceeding
against any Affiliated Obligor or any other Person in respect thereof, or shall
have joined any Affiliated Obligor or the Partnership in any such action or
proceeding. A Beneficiary in asserting the benefit of the Guarantee shall give
prompt notice to a Parent of any failure by its Affiliated Obligors or the
Partnership to pay, perform or observe any Obligation; provided, however, that
any failure, delay or defect in the giving of such notice shall not alter or
affect the Guarantee under this Agreement.
1.4 Waiver of Resort to Security. Each Parent further agrees that this
Agreement, insofar as it constitutes a guarantee of monetary Obligations,
constitutes a guarantee of payment when due and not of collection, and each
Parent waives any right to require as a condition to its Guarantee that any
resort be had by a Beneficiary to any security held for the payment of any
Obligations.
1.5 No Discharge. The Guarantee is and shall remain absolute and
unconditional irrespective of any circumstance that might otherwise constitute a
legal or equitable discharge of a surety or guarantor, as the case may be, with
respect to its Guarantee.
1.6 Waivers by the Parent. Each Parent hereby waives, with respect to the
Guarantee but without prejudice to the rights of the parties to the several
Other Agreements, any notice of acceptance of this Agreement, grace,
presentment, demand, protest, notice of the occurrence of a default under the
Other Agreements and any other notice of any kind whatsoever and promptness in
making any claim or demand hereunder. The Guarantee shall not be affected by (i)
the failure of a Beneficiary to assert any claim or demand or to enforce any
right or remedy under the provisions of any of the Other Agreements or any
agreement related thereto or otherwise, (ii) any extension or renewal of any of
the Other Agreements or any agreement related thereto, (iii) any rescission,
waiver, amendment or modification of any of the terms or provisions of any of
the Other Agreements or of any agreement related thereto, including, without
limitation, any change in the time, manner
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or place of payment or performance of any of the obligations under the Other
Agreements, or (iv) the release of any security held for payment of any
Obligations.
1.7 No Reduction. The Guarantee shall not be subject to any reduction,
limitation, impairment or termination for any reason, including, without
limitation, any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense or set-off, counterclaim, recoupment or
termination whatsoever, except as provided in Section 1.10.
1.8 Enforcement. Notwithstanding anything herein to the contrary, a
Beneficiary may proceed to enforce the Guarantee without first pursuing or
exhausting any right or remedy that it or any of its successors or assigns may
have against any Affiliated Obligor or either Parent or any other person.
1.9 Continued Effectiveness. The Guarantee shall continue to be effective
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any Obligation of an Affiliated Obligor is rescinded or must
otherwise be restored or returned by the Person receiving such payment upon the
insolvency, bankruptcy or reorganization of an Affiliated Obligor, all as though
such payment or part thereof had not been made.
1.10 Certain Defenses. Nothing herein is intended to deny to either
Parent, and it is expressly agreed that each Parent shall have and may assert,
any and all of the defenses, set-offs, counterclaims and other rights (other
than those relating to insolvency, bankruptcy or reorganization as described in
Section 1.9) with regard to any Obligations that its Affiliated Obligors may
possess except any defense its Affiliated Obligors may possess relating to lack
of validity or enforceability of the Other Agreements or any other agreement or
instrument relating thereto as against its Affiliated Obligors arising from the
defective incorporation or other defective organization of its Affiliated
Obligors, their lack of qualification to do business in any applicable
jurisdiction or their defective corporate or other organizational authority to
enter into, deliver or perform the Other Agreements.
1.11 Parties in Interest. This Agreement shall inure solely to the
benefit of the Beneficiaries, each of whom has the right to enforce the
Guarantee against the Parents, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement. As used in this Agreement, "Beneficiaries" shall mean (i) as to any
obligations of Millennium hereunder, the Partnership, Lyondell and the Lyondell
Affiliated Obligors, and (ii) as to any obligations of Lyondell hereunder, the
Partnership, Millennium and the Millennium Affiliated Obligors. As used in this
Agreement, the term Parent includes any successor or transferee of the Parent,
and the term Affiliated Obligors includes any successor to or transferee of the
Affiliated Obligors' interest in the Partnership permitted pursuant to the
Partnership Agreement.
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SECTION 2
OWNERSHIP AND BUSINESS OF PARTNER SUBS
--------------------------------------
2.1 Restrictions on Transfer and Pledge of Partner Sub Stock. (a) Each
Parent agrees that except as otherwise provided below in this Section 2.1 or
Section 2.2 or with the written consent of the other Parent (or any Successor
Parent, as defined in Section 2.1(d)), which consent may be granted or withheld
in such Parent's sole discretion, it will not, in any transaction or series of
transactions, directly or indirectly, (i) sell, assign or otherwise in any
manner dispose of, whether by act, deed, merger or otherwise ("Transfer") or
(ii) mortgage, pledge, encumber or create or suffer to exist any pledge, lien or
encumbrance upon or security interest in ("Pledge"), all or any part of the
capital stock (including any securities convertible into or exchangeable for or
carrying any rights to purchase, subscribe for or otherwise acquire any such
capital stock) of its Partner Subs (collectively, the "Partner Sub Stock").
(Each of the defined terms "Transfer"and "Pledge" is used herein both as a noun
and as a verb.) Any attempt by a Parent to Transfer or Pledge all or a portion
of its Partner Sub Stock in violation of this Agreement shall be void ab initio
and shall not be effective to transfer such Partner Sub Stock or any portion
thereof. The Partnership Agreement contains provisions relating to the Transfer
and Pledge of the Partner Subs' direct interests in the Partnership.
(b) The Parent agrees that all certificates representing shares of Partner
Sub Stock, whether currently owned or hereafter acquired, shall carry the
following legend, which legend each Parent agrees to cause to be placed thereon
and to cause to remain thereon as long as such shares are subject to the
restrictions of this Agreement:
THE SALE, ASSIGNMENT, PLEDGE OR OTHER TRANSFER OR HYPOTHECATION OF THE
STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS
PURSUANT TO AND MAY NOT BE EFFECTED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF AN AGREEMENT BINDING UPON THE OWNER OF THE STOCK REPRESENTED
HEREBY. THE OWNER OR ISSUER WILL FURNISH A COPY OF SUCH AGREEMENT TO ANY
PROPOSED TRANSFEREE OR PLEDGEE WITHOUT CHARGE UPON REQUEST.
(c) Without the need for the consent of any Person, any Parent may
Transfer its Partner Sub Stock to any wholly-owned Affiliate of such Parent.
(d) Each Parent may Transfer all (but not less than all) of its Partner
Sub Stock if such Transfer is in connection with (i) a merger, consolidation,
conversion or share exchange of such Parent or (ii) a sale or other disposition
of (x) the Partner Sub Stock plus (y) other assets representing at least fifty
percent (50%) of the book value of such Parent's assets excluding the Partner
Sub Stock, as reflected on its most recent audited consolidated (or combined)
financial statements; provided, however, the ultimate parent entity of the
acquiring, succeeding or surviving entity in any such transaction (the
"Successor Parent") (i) shall succeed to and be substituted for such Parent,
with the same effect as if it had been named herein and (ii) shall execute an
instrument wherein such ultimate parent entity shall agree to be bound by the
obligations of such Parent under this Agreement, with the same effect as if it
had been named herein, whereupon, unless such Parent shall
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become a direct or indirect subsidiary of the Successor Parent, such Parent
shall thereupon be released from all obligations hereunder.
(e) Nothing in this Agreement shall prevent the Transfer or Pledge of the
capital stock, equity ownership interests or other securities of a Parent, and
no such Transfer or Pledge of securities issued by a Parent shall be deemed to
constitute a Transfer or Pledge of Partner Sub Stock hereunder.
(f) Each Parent may Pledge all (but not less than all) of its Partner Sub
Stock to any one or more Approved Lenders; provided that the Pledge shall be
evidenced by an instrument, reasonably satisfactory to the Partnership, wherein
the Approved Lender receiving such Pledge shall agree that in the event such
Approved Lender obtains a right of foreclosure on such Parent's Partner Sub
Stock, such Approved Lender will foreclose on the Partner Sub Stock of each of
such Parent's Partner Subs equally so that such Approved Lender will in all
events hold equal portions of Partner Sub Stock of LG Partner and Lyondell LP or
Millennium GP and Millennium LP, as the case may be. An "Approved Lender" shall
be any bank, insurance company, investment bank or other financial institution
that is regularly engaged in the business of making loans.
2.2 Right of First Option.
(a) Without the consent of the other Parent, neither Parent may
Transfer less than all of its Partner Sub Stock. Unless such Transfer is
otherwise permitted by Section 2.1, any Parent desiring to Transfer (pursuant to
a cash sale) all of its Partner Sub Stock (the "Selling Parent") shall give
written notice (the "Initial Notice") to the Partnership and the other Parent
(the "Offeree Parent") stating that the Selling Parent desires to Transfer its
Partner Sub Stock and stating the cash purchase price and all other terms on
which it is willing to sell (the "Offer Terms"). Delivery of an Initial Notice
shall constitute the irrevocable offer of the Selling Parent to sell its Partner
Sub Stock to the Offeree Parent hereunder.
(b) The Offeree Parent shall have the option, exercisable by
delivering written notice (the "Acceptance Notice") of such exercise to the
Selling Parent within 45 days of the date of the Initial Notice, to elect to
purchase all of the Partner Sub Stock of the Selling Parent on the Offer Terms
described in the Initial Notice. The Acceptance Notice shall set a date for
closing the purchase, such date to be not less than 30 nor more than 90 days
after delivery of the Acceptance Notice; provided that such time period shall be
subject to extension as reasonably necessary (up to a maximum of an additional
120 days after such 90 day period) in order to comply with any applicable filing
and waiting period requirements under the Hart-Scott-Rodino Antitrust
Improvements Act. The closing shall be held at the Partnership's offices. The
purchase price for the Selling Parent's Partner Sub Stock shall be paid in cash
delivered at the closing. The purchase shall be consummated by appropriate and
customary documentation (including the giving of representations and warranties
substantially similar to those set forth in Sections 2.1 through 2.4 of the
Master Transaction Agreement and customary representations and warranties
regarding the Selling Parent's title to its Partner Sub Stock).
(c) If the Offeree Parent does not elect to purchase the Selling
Parent's Partner Sub Stock within 45 days after the receipt of the Initial
Notice, the Selling Parent shall have a further
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180 days during which it may, subject to Sections 2.2(d) and (e), consummate the
sale of its Partner Sub Stock to a third party purchaser at a purchase price and
on such other terms that are no more favorable to such purchaser than the Offer
Terms. If the sale is not completed within such further 180-day period, the
Initial Notice shall be deemed to have expired and a new notice and offer shall
be required before the Selling Parent may make any Transfer of its Partner Sub
Stock.
(d) Before the Selling Parent may consummate a Transfer of its
Partner Sub Stock to a third party in accordance with this Agreement, the
Selling Parent shall demonstrate to the Partnership that such proposed purchaser
(or the Person willing to serve as its guarantor as contemplated by Section
2.2(f)) has outstanding indebtedness that is rated investment grade by either
Moody's Investor Services Inc. or Standard & Poor's Corporation, or if such
proposed purchaser (or such other Person) has no rated indebtedness outstanding,
such Person shall provide an opinion from a nationally recognized investment
banking firm that it could be reasonably expected to obtain such a rating.
(e) Notwithstanding the foregoing provisions of this Section 2.2, a
Parent may Transfer its Partner Sub Stock (other than pursuant to Section 2.1)
only if all of the following occur:
(i) The Transfer is accomplished in a non-public offering in
compliance with, and exempt from, the registration and qualification
requirements of all federal and state securities laws and regulations.
(ii) The Transfer does not cause a default under any material
contract to which the Partnership is a party or by which the
Partnership or any of its properties is bound.
(iii) The transferee executes an appropriate agreement to be
bound by this Agreement.
(iv) The transferor and/or transferee bears all reasonable costs
incurred by the Partnership in connection with the Transfer.
(v) The transferee (or the guarantor of the obligations of the
transferee) satisfies the criteria set forth in Section 2.2(d) and
delivers an agreement to the other Parent and the Partnership
substantially in the form of this Agreement.
(vi) The proposed transferor is not in default in the timely
performance of any of its material obligations to the Partnership.
(vii) The provisions of Section 2.2(f) are satisfied.
(f) Neither Parent may Transfer the Partner Sub Stock of either of
its Partner Subs to any Person unless such Parent simultaneously Transfers the
Partner Sub Stock of its other Partner Sub to such Person or a wholly-owned
Affiliate (as defined in the Partnership Agreement) of such Person.
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2.3 Prohibition on Affiliated Obligor Bankruptcy, Etc. Each Parent hereby
agrees that it will not, without the written consent of the other Parent, permit
any of its Affiliated Obligors (or their successors or assigns) (i) to commence
a voluntary action under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency or
other similar law, (ii) to institute a proceeding to be adjudicated a voluntary
bankrupt, (iii) to consent to the filing of a bankruptcy proceeding against it,
(iv) to fail to contest a bankruptcy proceeding against it, (v) to consent to
the appointment of a receiver, custodian, liquidator or trustee for it or for
all or any substantial portion of its property, (vi) in the case of its Partner
Subs, to issue or sell other than to such Parent any of its own Partner Sub
Stock or (vii) to effect, recognize or permit any transfer of any of its own
Partner Sub Stock other than in accordance with the provisions of Section 2 of
this Agreement.
2.4 Special Purpose Subsidiaries. Each Parent agrees that (i) the
business of its Partner Subs shall be restricted solely to the holding of the
respective interests in the Partnership and the doing of things necessary or
incidental in connection therewith, and (ii) it will cause its Partner Subs not
to own any assets, incur any liabilities or engage, participate or invest in any
business outside the scope of their businesses as described in clause (i);
provided, however, that this Section 2.4 shall not apply with respect to any
Wholly Owned Affiliates to whom such Partner Subs shall transfer their
respective interests in the Partnership if such Wholly Owned Affiliates are not
bound by Section 9.6 of the Partnership Agreement.
SECTION 3
STANDSTILL AGREEMENT
--------------------
3.1 Standstill. Each Parent agrees that, until the expiration of 24
months from the date on which either such Parent and its Affiliates or the other
Parent and its Affiliates no longer hold an interest in the Partnership, neither
it, nor any of its Affiliated Obligors or other subsidiaries, shall, without
prior written approval of the other Parent: (i) in any manner acquire, agree to
acquire or make any proposal to acquire, directly or indirectly, any securities,
assets or property of the other Parent (other than such Parent's Partner Sub
Stock or the interests in the Partnership held by such Parent's Partner Subs),
whether such agreement or proposal is made with or to the other Parent or a
third party; (ii) make any unsolicited proposal to enter into, directly or
indirectly, any merger or other business combination involving the other Parent;
(iii) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) to vote, or seek to advise or influence any
person with respect to the voting of, any voting securities of the other Parent;
(iv) form, join or in any way participate in a "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to any
voting securities of the other Parent; (v) otherwise act, alone or in concert
with others, to seek to control or influence the management, Board of Directors
or policies of the other Parent (other than with respect to the ownership,
business, property and affairs of the Partnership); (vi) disclose any intention,
plan or arrangement inconsistent with the foregoing; or (vii) advise, encourage,
provide assistance (including financial assistance) to or hold discussions with
any other persons in connection with any of the foregoing. Each Parent also
agrees during such period not to: (i) request the other Parent (or its
directors, officers, employees or agents), directly or indirectly, to amend or
waive any provision of this Section 3.1 (including this sentence); or (ii) take
any action which might reasonably be expected to require the other Parent to
make a public announcement regarding the possibility of a business combination
or merger.
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3.2 Exceptions. Notwithstanding the provisions of Section 3.1:
(a) Either Parent may, by notice to the other, terminate the provisions of
Section 3.1 (as applied to both Parents) at any time within 30 days after the
occurrence of any of the following events with respect to the other Parent: (i)
a Change of Control (as defined below) of such other Parent shall have occurred,
(ii) such other Parent shall have entered into a definitive agreement providing
for, or publicly announced its intention to effect, any transaction involving a
Change of Control of such other Parent or (iii) a tender offer or exchange offer
shall have been commenced or publicly announced that, if consummated, would have
the effect with respect to such other Parent described in clause (c) of the
definition of "Change of Control." A "Change of Control" of a Parent shall mean
the occurrence of any of the following events: (a) there shall be consummated
any consolidation, merger or share exchange of such Parent (i) in which such
Parent is not the continuing or surviving Person (other than a consolidation,
merger or share exchange with a wholly owned subsidiary of such Parent in which
all shares of common stock of such Parent outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same number of
shares of common stock of such subsidiary) or (ii) pursuant to which the common
stock of such Parent is converted into cash, securities or other property, other
than, in each case, a consolidation, merger or share exchange of such Parent in
which the holders of the common stock immediately prior to the consolidation,
merger or share exchange hold, directly or indirectly, at least a majority of
the voting power and common equity of the continuing or surviving Person
immediately after such consolidation, merger or share exchange; (b) such
Parent's properties and assets are sold or otherwise disposed of substantially
as an entirety on a consolidated basis to any Person or group of Persons in any
one transaction or a series of related transactions, other than as contemplated
by the Master Transaction Agreement; or (c) any Person or any Persons acting
together which would constitute a "group" (as defined in Section 3.1) (other
than such Parent, any subsidiary of such Parent, any employee stock purchase
plan, stock option plan or other stock incentive plan or program, retirement
plan or automatic dividend reinvestment plan or any substantially similar plan
of such Parent or any subsidiary of such Parent or any Person holding securities
of such Parent for or pursuant to the terms of any such employee benefit plan),
together with any affiliates thereof, shall acquire beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 50% or more
of the voting stock of such Parent.
(b) The terms of the first sentence of Section 3.1 shall not be applicable
to the purchase and sale of any securities of the other Parent by independent
third-party managers of any pension or other related employee benefit plans who
are acting as passive investors in the other Parent.
SECTION 4
MISCELLANEOUS
-------------
4.1 No Waivers. No failure or delay by a Beneficiary or a Parent in
exercising any right or power under this Agreement, or any single or partial
exercise of any such right or power, shall preclude any other or further
exercise thereof or the exercise of any other right or power. Such single or
partial exercise of any right or power shall be cumulative and not exclusive of
any rights or remedies provided by law.
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4.2 Expenses in Connection with Exercise. In the event of a dispute
between parties hereto regarding the exercise or enforcement of any of the
rights of a Beneficiary under this Agreement or the failure by a Parent to
perform or observe any of the provisions of this Agreement, the party that does
not ultimately prevail in such dispute shall be liable, and hereby agrees, to
reimburse, on demand, each other such party for any and all costs and expenses,
including the fees and expenses of legal counsel and of any other counsel,
experts, consultants or agents, that such other party may incur in connection
therewith.
4.3 Subordination. The rights of a Parent against its Affiliated Obligors
arising from any payment or performance by a Parent hereunder shall be
subordinate in all respects to the rights of the Beneficiaries against such
Affiliated Obligors, and such Parent shall not compete in any way with a
Beneficiary in any winding-up or dissolution of such Affiliated Obligors unless
and until all sums due and to become due from such Affiliated Obligors to the
Beneficiaries have been paid in full. If any amount shall be paid to a Parent in
violation of this Section, such amount shall be held in trust for the benefit of
the Beneficiaries and shall forthwith be paid to the Beneficiaries to be
credited and applied to any sums owed or to be owed by such Parent's Affiliated
Obligors. Subject to the foregoing, upon payment of all sums due or to become
due by Affiliated Obligors to the Beneficiaries, the Parent of such Affiliated
Obligors shall be subrogated to the rights of the Beneficiary against such
Affiliated Obligors, and the Beneficiaries agree to take at such Parent's
expense such steps as such Parent may reasonably request to implement such
subrogation.
4.4 Confidentiality and Use of Information. (a) Each Parent agrees to be
bound by the terms and conditions of Section 13.1 of the Partnership Agreement
as if such Parent was a "Partner" as defined in such agreement.
(b) The Parents shall consult with each other on an ongoing basis with
respect to disclosures regarding the Partnership and its business and affairs
that each is required to make in reports filed from time to time with the
Securities and Exchange Commission.
4.5 Competing Businesses. If either Parent desires to initiate or pursue
any opportunity to undertake, engage in, acquire or invest in a Business
Opportunity (as such term is defined in the Partnership Agreement), such Parent
agrees to offer such Business Opportunity to the Partnership under the terms and
conditions set forth in Sections 9.3(c) and (d) of the Partnership Agreement as
if such Parent were the "Proposing Partner" (as defined in the Partnership
Agreement) with respect thereto, and in such event the Partnership shall have
the rights and obligations with respect thereto set forth in such Sections
9.3(c) and (d).
4.6 Further Assurances. From time to time, each Parent agrees to execute
and deliver such additional documents and provide such additional information
and assistance as the Beneficiaries may reasonably require to carry out the
terms of this Agreement.
4.7 Successors and Assigns. Except as may be expressly provided herein,
this Agreement shall be binding upon and inure to the benefit of the successors
of the Beneficiaries. Except as provided in this Agreement and except that a
Parent may assign its rights or obligations under this Agreement to a third
party in connection with a transfer of direct interests in the Partnership owned
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by its Partner Subs if such transfer is permitted and consummated in accordance
with the Partnership Agreement, no Parent may assign or delegate any of its
rights or obligations under this Agreement without the prior written consent of
all the Beneficiaries, which consent shall be in the sole and absolute
discretion of such Beneficiaries. Any purported assignment or delegation without
such consent shall be void and ineffective.
4.8 Benefits of Agreement Restricted to the Parties. This Agreement is
made solely for the benefit of the Beneficiaries (as defined in Section 1.11),
and no other Person shall have any right, claim or cause of action under or by
virtue of this Agreement.
4.9 Notices. All notices, requests, demands and other communications
(collectively, "notices") required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i)
transmitted by telecopier facsimile with proof of confirmation from the
transmitting machine or (ii) delivered by commercial courier or other hand
delivery, as follows:
If to Lyondell If to the Lyondell Partner Subs
Lyondell Petrochemical Company c/o Lyondell Petrochemical Company
1221 McKinney Street 1221 McKinney Street
Houston, Texas 77010 Houston, Texas 77010
Attention: Jeffrey R. Pendergraft Attention: Jeffrey R. Pendergraft
Telecopy Number: (713) 652-4538 Telecopy Number: (713) 652-4538
If to Millennium If to the Millennium Partner Subs
Millennium Chemicals Inc. c/o Millennium Chemicals Inc.
99 Wood Avenue South 99 Wood Avenue South
Iselin, New Jersey 08830 Iselin, New Jersey 08830
Attention: George H. Hempstead, III Attention: George H. Hempstead, III
Telecopy Number: (908) 603-6857 Telecopy Number: (908) 603-6857
If to the Partnership
______________________________
______________________________
______________________________
Attention:____________________
Telecopy Number:______________
or to such other address as such Parent or Beneficiary shall have specified by
notice to the other Parent.
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4.10 Severability. In the event that any provisions of this Agreement
shall finally be determined to be unlawful, such provision shall, so long as the
economic and legal substance of the transactions contemplated hereby is not
affected in any materially adverse manner as to any party hereto, be deemed
severed from this Agreement and every other provision of this Agreement shall
remain in full force and effect.
4.11 Termination. Except for Sections 3.1 and 3.2, this Agreement shall
terminate and be of no further force and effect as to a Parent (i) as and when
provided in Section 2.1(d) or (ii) if and when such Parent Transfers all of its
Partner Sub Stock in a transaction permitted by Section 2.2; provided, however,
that such termination shall not discharge (x) any accrued Obligations owed by a
Parent as of the date of such termination or (y) any Obligations, whether
arising before or after such termination, under such Parent's Asset Contribution
Agreement or any Related Agreement executed pursuant to such Asset Contribution
Agreement. In addition, the Guarantee by a Parent of Obligations of an
Affiliated Obligor other than a Partner Sub shall terminate as and when the
Parent ceases to own any stock of such Affiliated Obligor, insofar as such
Guarantee relates to Obligations arising thereafter.
4.12 Construction and Certain Definitions.
(a) In construing this Agreement, the following principles shall be
followed: (i) no consideration shall be given to the captions of the articles,
sections, subsections or clauses, which are inserted for convenience in locating
the provisions of this Agreement and not as an aid in construction; (ii) no
consideration shall be given to the fact or presumption that any party hereto
had a greater or lesser hand in drafting this Agreement; (iii) examples shall
not be construed to limit, expressly or by implication, the matter they
illustrate; (iv) the word "includes" and its syntactic variants mean "includes,
but is not limited to" and corresponding syntactic variant expressions; (v) the
plural shall be deemed to include the singular, and vice versa; (vi) each gender
shall be deemed to include the other gender; and (vii) each exhibit, attachment
and schedule to this Agreement is a part of this Agreement.
(b) The term "Person" shall mean any natural person or any corporation,
partnership, limited liability company, joint venture, association, trust or
other entity or organization.
4.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, and all of which when
taken together shall constitute one and the same original document.
4.14 Governing Law. The laws of the State of Delaware shall govern the
construction, interpretation and effect of this Agreement without giving effect
to any conflicts of law principles.
4.15 Jurisdiction; Consent to Service of Process; Waiver. ANY JUDICIAL
PROCEEDING BROUGHT AGAINST ANY PARTY TO THIS AGREEMENT OR ANY DISPUTE UNDER OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER RELATED HERETO
SHALL BE BROUGHT IN THE FEDERAL OR STATE COURTS OF THE STATE OF DELAWARE, AND,
BY EXECUTION AND DELIVERY OF
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<PAGE>
THIS AGREEMENT, EACH OF THE PARTIES TO THIS AGREEMENT ACCEPTS THE EXCLUSIVE
JURISDICTION OF SUCH COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
(AS FINALLY ADJUDICATED) RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
EACH OF THE PARTIES TO THIS AGREEMENT SHALL APPOINT THE CORPORATION TRUST
COMPANY, THE PRENTICE-HALL CORPORATION SYSTEM, INC. OR A SIMILAR ENTITY (THE
"AGENT") AS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF PROCESS IN ANY PROCEEDING
IN ANY SUCH COURT IN THE STATE OF DELAWARE. THE FOREGOING CONSENTS TO
JURISDICTION AND APPOINTMENTS OF AGENT TO RECEIVE SERVICE OF PROCESS SHALL NOT
CONSTITUTE GENERAL CONSENTS TO SERVICE OF PROCESS IN THE STATE OF DELAWARE FOR
ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND SHALL NOT BE DEEMED TO CONFER RIGHTS ON
ANY PERSON OTHER THAN THE PARTIES HERETO. EACH PARENT HEREBY WAIVES ANY
OBJECTION IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OR FORUM NON-CONVENIENS.
4.16 Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY AND INTENTIONALLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
4.17 Dispute Resolution. All disputes under this Agreement shall be
resolved in accordance with the Dispute Resolution Procedures set forth in
Appendix B.
4.18 Amendment. All waivers, modifications, amendments or alterations of
this Agreement shall require the execution of a written instrument signed by
each of the parties hereto.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Guarantee Agreement as of the date first above written.
LYONDELL PETROCHEMICAL COMPANY
By:______________________________
Name:
Title:
MILLENNIUM CHEMICALS INC.
By:______________________________
Name:
Title:
EQUISTAR CHEMICALS, LP
By:______________________________
Name:
Title:
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<PAGE>
APPENDIX A
TO
PARENT AGREEMENT
LIST OF RELATED AGREEMENTS
--------------------------
1. Partnership Agreement
2. Lyondell Note
3. Asset Contribution Agreements
a. From Lyondell to the Partnership
b. From Millennium to the Partnership
4. [List here all agreements listed as Tier 2 Agreements in Master
Transaction Agreement]
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<PAGE>
APPENDIX B
TO
PARENT AGREEMENT
DISPUTE RESOLUTION PROCEDURES
-----------------------------
(1) Binding and Exclusive Means. The dispute resolution provisions set
forth in this Appendix B shall be the binding and exclusive means to resolve all
disputes arising under this Agreement (each a "Dispute").
(2) Standards and Criteria. In resolving any Dispute, the standards and
criteria for resolving such dispute shall, unless the Parents in their
discretion jointly stipulate otherwise, be as set forth in Appendix 1 to this
Appendix B.
(3) ADR and Binding Arbitration Procedures. If a Dispute arises, the
following procedures shall be implemented:
(a) The Parent from whom recovery is sought may at any time invoke the
dispute resolution procedures set forth in this Appendix B as to any Dispute by
providing written notice of such action to the other Parent, who within five
Business Days after such notice shall schedule a meeting to be held in Houston,
Texas between the Parents. The meeting shall occur within 10 Business Days
after notice of the meeting is delivered to the other Parent. The meeting shall
be attended by representatives of each Parent having decision-making authority
regarding the Dispute as well as the dispute resolution process and who shall
attempt in a commercially reasonable manner to negotiate a resolution of the
Dispute.
(b) The representatives of the Parents shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the Parents resolving the Dispute; (ii) one of the Parents shall determine
and notify the other Parent in writing that no agreement resolving the Dispute
is likely to be reached; (iii) if a technique of alternative dispute resolution
is agreed upon, the completion date therefor shall occur without the Parents
having resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full meeting days (or such other time period
as may be agreed upon) shall expire without the Parents having resolved the
Dispute.
(c) If, as of the Interim Decision Date, the Parents have not succeeded in
negotiating a resolution of the dispute pursuant to subsection (b), the Parents
shall proceed under subsection (d).
B-1
<PAGE>
(d) The Parents agree to appoint a mutually acceptable neutral person not
affiliated with any of the Parents (the "Neutral"). If the Parents have been
unable to agree upon such appointment within 30 days after the Interim Decision
Date, then such Neutral, upon the application of either of the Parents shall be
appointed within 10 days of the filing of such application by the Center for
Public Resources, or if such appointment is not so made promptly then promptly
thereafter by the American Arbitration Association in Philadelphia,
Pennsylvania, or if such appointment is not so made promptly then promptly
thereafter by the senior United States District Court judge sitting in
Wilmington, Delaware. The fees of the Neutral shall be paid equally by the
Parents except that the Neutral shall have discretion to award fees.
(e) In consultation with the Neutral, the Parents shall agree upon a
binding schedule and procedure (which procedure may have been previously
discussed under subsection (b)) to be used as a means to resolve or to attempt
to resolve Dispute, with the Neutral making the decision as to the schedule
and/or procedure if the Parents have been unable to agree on any of such matters
within 20 days after the initial selection of the Neutral. The Parents agree to
participate in a commercially reasonable manner in the procedure to its
conclusion as determined by the Neutral. If the Parents are not successful in
resolving the Dispute through the procedure described above, then the Parents
agree that (i) the Neutral shall act as the arbitrator in a binding arbitration
in accordance with the American Arbitration Association rules and shall render a
decision and (ii) judgment upon the decision rendered by the Neutral may be
entered in any court having jurisdiction.
(4) Continuation of Business. Notwithstanding the existence of any
Dispute or the pendency of any procedures pursuant to this Appendix B, the
Parents agree and undertake that all payments not in dispute shall continue to
be made and all obligations not in dispute shall continue to be performed.
B-2
<PAGE>
Appendix 1
----------
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the Parents and their Affiliates as set forth in the Agreement.
(b) Second priority shall be given to resolution of the Dispute in a
manner which best achieves the objectives of the business activities and
arrangements under the Agreement and permits the Parents to realize the benefits
intended to be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
Parents or the Neutral shall determine to be appropriate under the
circumstances.
B-3
