<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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) April 30, 1999
THE GEON COMPANY
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-11804 34-1730488
(Commission file number) (I.R.S. Employer Identification No.)
One Geon Center Avon Lake, Ohio 44012
-------------------------------------------------
(Address of principal executive offices ) (Zip Code)
(440) 930-1001
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 30, 1999, The Geon Company (Geon or the Company) formed two
partnerships (Partnerships) with Occidental Chemical Corporation (OxyChem),
named Oxy Vinyls, LP (OxyVinyls or PVC Partnership) and PVC Powder Blends, LP
(PVC Powder Blends or Compounding Partnership). OxyVinyls is owned 24% by Geon
and 76% by OxyChem. The partnership combines the polyvinyl chloride (PVC) resin
and vinyl chloride monomer (VCM) businesses and related operations of both
companies, and also includes OxyChem's Houston Chlor-Alkali complex. OxyVinyls
will be North America's largest and the world's third largest PVC producer. PVC
Powder Blends is owned 90% by Geon and 10% by OxyChem. The Compounding
Partnership will manufacture dry-blend compounds.
In conjunction with the formation of the Partnerships Geon realized
approximately $104 million in cash and working capital retention and transferred
$189 million of debt obligations to OxyVinyls, and OxyChem transferred its PVC
flexible film and specialty pellet compound businesses located in Burlington,
New Jersey and Pasadena, Texas to the Company (Related Transactions).
1
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Audited Combined Financial Statements of the OxyChem
Transferred Businesses
Report of Independent Public Accountants
Combined Balance Sheets as of December 31, 1998 and 1997
Combined Statements of Operations and Invested Capital for
the years ended December 31, 1998, 1997 and 1996
Combined Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Notes to Combined Financial Statements
(b) Unaudited Pro Forma Condensed Consolidated Financial
Statements of The Geon Company
Introduction
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of December 31, 1998
Notes to Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of December 31, 1998
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the Year Ended December 31, 1998
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Income for the Year Ended December 31, 1998
EXHIBITS
10.1 Master Transaction Agreement *
10.2 Limited Partnership Agreement of Oxy Vinyls, LP
10.3 Asset Contribution Agreement - PVC Partnership (Geon)
10.4 Parent Agreement (Oxy Vinyls, LP)
10.5 Parent Agreement (PVC Powder Blends, LP) and Business Opportunity
Agreement
23 Consent of Independent Public Accountants
99 Press Release
* Incorporated by reference to the corresponding Exhibit filed with the
registrant's Special Meeting Proxy Statement dated March 29, 1999.
2
<PAGE> 4
Signature
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.
THE GEON COMPANY
(Registrant)
By: \S\GREGORY L. RUTMAN
-------------------------------
Gregory L. Rutman
Secretary
Dated May 13, 1999
3
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors,
Occidental Chemical Corporation:
We have audited the accompanying combined balance sheets of the OxyChem
Transferred Businesses, as defined in Note 1, as of December 31, 1998 and 1997,
and the related combined statements of operations and invested capital and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of Occidental Chemical Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the OxyChem Transferred
Businesses as of December 31, 1998 and 1997, and the related combined statements
of operations and invested capital and cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Dallas, Texas,
April 30, 1999
4
<PAGE> 6
OXYCHEM TRANSFERRED BUSINESSES
COMBINED BALANCE SHEETS
December 31, 1998 and 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 18 $ 18
Trade receivables 13,574 26,903
Other receivables 18,064 487
Inventories 69,973 76,019
Prepaid expenses 4,101 2,691
-------- --------
Total current assets 105,730 106,118
EQUITY INVESTMENT -- 9,300
PROPERTY, PLANT AND EQUIPMENT, net 623,831 606,199
OTHER ASSETS 17,684 12,949
-------- --------
TOTAL ASSETS $747,245 $734,566
======== ========
CURRENT LIABILITIES:
Current maturities of long-term debt $ 209 $ 209
Accounts payable 58,960 52,588
Accrued liabilities 30,281 27,233
-------- --------
Total current liabilities 89,450 80,030
EQUITY INVESTMENT 25,632 --
LONG-TERM DEBT, net of unamortized discount
and current maturities 21,968 21,997
DEFERRED CREDITS AND OTHER LIABILITIES 33,855 33,486
INVESTED CAPITAL 576,340 599,053
-------- --------
TOTAL LIABILITIES AND INVESTED CAPITAL $747,245 $734,566
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
5
<PAGE> 7
OXYCHEM TRANSFERRED BUSINESSES
COMBINED STATEMENTS OF OPERATIONS AND INVESTED CAPITAL
For the years ended December 31, 1998, 1997 and 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
NET SALES $ 839,805 $ 993,612 $ 956,911
OPERATING COSTS AND EXPENSES:
Costs of sales (711,002) (817,918) (752,738)
Selling, general and administrative and
other operating expenses (45,670) (84,199) (49,559)
Loss from equity investments (35,347) (22,267) (7,586)
--------- --------- ---------
OPERATING INCOME 47,786 69,228 147,028
Interest expense (1,807) (1,821) (1,841)
Other expense, net (4,772) (3,912) (3,166)
--------- --------- ---------
INCOME BEFORE TAXES 41,207 63,495 142,021
Provision for income taxes (17,391) (24,796) (55,502)
--------- --------- ---------
NET INCOME 23,816 38,699 86,519
MINIMUM PENSION LIABILITY ADJUSTMENT -- -- 222
--------- --------- ---------
COMPREHENSIVE INCOME 23,816 38,699 86,741
INCREASE (DECREASE) IN INVESTED CAPITAL (46,529) 5,945 (43,778)
INVESTED CAPITAL, beginning of year 599,053 554,409 511,446
--------- --------- ---------
INVESTED CAPITAL, end of year $ 576,340 $ 599,053 $ 554,409
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
6
<PAGE> 8
OXYCHEM TRANSFERRED BUSINESSES
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 23,816 $ 38,699 $ 86,519
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of assets 43,087 34,498 29,878
Unfunded losses from equity investee 35,347 22,267 7,586
Reserve for asset impairment -- 32,800 --
Other noncash charges to income 4,937 10,626 3,452
Changes in operating assets and liabilities:
Decrease (increase) in receivables (4,248) (8,235) 16,619
Decrease (increase) in inventories 6,046 (4,275) 980
Decrease (increase) in prepaid expenses (1,410) (1,812) 1,177
Increase (decrease) in accounts payable
and accrued liabilities 9,414 (3,570) 3,174
Other operating, net (8,827) (3,972) (3,350)
--------- --------- ---------
Net cash provided by operating activities 108,162 117,026 146,035
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (61,364) (122,711) (102,011)
--------- --------- ---------
Net cash used by investing activities (61,364) (122,711) (102,011)
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and
capital lease liability (269) (263) (243)
Increase (decrease) in invested capital (46,529) 5,945 (43,778)
--------- --------- ---------
Net cash provided (used) by financing activities (46,798) 5,682 (44,021)
--------- --------- ---------
Change in cash -- (3) 3
Cash - beginning of period 18 21 18
--------- --------- ---------
Cash - end of period $ 18 $ 18 $ 21
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
7
<PAGE> 9
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(1) BASIS OF PRESENTATION AND DESCRIPTION OF THE TRANSFERRED BUSINESSES -
On June 24, 1998, Occidental Chemical Corporation (together with its
wholly-owned subsidiaries, "OxyChem") signed a letter of intent with The Geon
Company (together with its wholly-owned subsidiaries, "Geon") to effect, among
other things, the proposed formation by Geon and OxyChem of two separate limited
partnerships, focusing on the suspension/mass polyvinyl chloride ("PVC") and
vinyl chloride monomer ("VCM") businesses, together with OxyChem's Houston
Chlor-Alkali Complex and the powder/dry blend compound business, respectively,
and the transfer of a compound and flexible film plant and a pellet compound
business by OxyChem to Geon, as well as certain related supply arrangements. The
formation of each entity will involve the contribution by both Geon and OxyChem
of such assets, together with certain related assets and liabilities as well as
the transfer of related employees. All of the foregoing transactions shall be
referred to collectively hereinafter as the "Proposed Transactions."
OxyChem's transfers to the Proposed Transactions include the following:
1. OxyChem and Geon will form a limited partnership (the
"PVC Partnership") to which OxyChem will contribute its PVC
and VCM facilities in Pasadena, Texas, and Deer Park, Texas,
as well as a fifty percent investment interest in OxyMar, a
partnership which manufactures VCM at its plant in Ingleside,
Texas. OxyMar is owned by an OxyChem affiliate, Oxy VCM, Inc.
Additionally, OxyChem will contribute its Houston Chlor-Alkali
Complex facilities to the PVC Partnership.
2. OxyChem and Geon will also form a limited partnership
(the "Compounding Partnership") to which OxyChem will
contribute its powder compound business and related assets at
its Pasadena, Texas, facility.
3. OxyChem's specialty cube or pellet compound business
being constructed and installed at its Pasadena, Texas, plant
("Pasadena Subject Business"), and its Burlington, New Jersey,
plant, which manufactures flexible film and compound (the
"Burlington Plant"), will be conveyed to Geon.
In return for the contributions and transfers of assets mentioned
above, OxyChem will acquire a 76% controlling interest in the PVC Partnership
and a 10% non-controlling interest in the Compounding Partnership. Under the
Proposed Transactions, the PVC Partnership and the Compounding Partnership will
also assume certain liabilities of OxyChem.
The accompanying combined financial statements include the assets and
liabilities and results of operations of OxyChem's contributions to the PVC
Partnership and the Compounding Partnership as well as the Pasadena Subject
Business, the Burlington Plant and Oxy VCM, Inc. (collectively, the "OxyChem
Transferred Businesses"). The OxyChem Transferred Businesses are represented by
OxyChem and Oxy VCM, Inc., which are indirect subsidiaries of Occidental
Chemical Holding Corporation ("OCHC"). OCHC is an indirect subsidiary of
Occidental Petroleum Corporation ("OPC"). Certain amounts in the accompanying
combined financial statements have been allocated in a consistent manner in
order to depict the financial position, results of operations and cash flows of
the OxyChem Transferred Businesses on a stand alone basis. OxyChem's management
believes these allocations are reasonable. Consequently, the financial position,
results of operations, and cash flows may not be indicative of what would have
been reported if the OxyChem Transferred Businesses had been one or more
separate, stand-alone entities or had been operated as a part of the Proposed
Transactions during the periods presented.
8
<PAGE> 10
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(1) BASIS OF PRESENTATION AND DESCRIPTION OF THE TRANSFERRED BUSINESSES -
(continued)
Certain assets and liabilities of the OxyChem Transferred Businesses
will be retained by OPC or OxyChem after closing of the Proposed Transactions.
The retained assets and liabilities include certain trade receivables and
finished goods inventory, long-term debt, property tax, and other liabilities.
The amount of assets and liabilities that would have been retained was
approximately $7 million and $47 million, respectively, at December 31, 1998.
The OxyChem Transferred Businesses operate as OxyChem and enter into
operating and sales contracts administered by OxyChem. These include national
sales agreements as well as purchase and energy agreements.
(2) SIGNIFICANT ACCOUNTING POLICIES -
Principles of combination -
The combined financial statements include the assets and liabilities
and results of operations of the OxyChem Transferred Businesses. All material
intercompany accounts and transactions between the OxyChem Transferred
Businesses have been eliminated.
Risks and uncertainties -
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts, generally not by material amounts.
OxyChem's management believes that these estimates and assumptions, as well as
any allocations, provide a reasonable basis for the fair presentation of the
OxyChem Transferred Businesses' combined financial position and results of
operations.
Since the OxyChem Transferred Businesses' major products are
commodities, significant changes in the prices of chemical products could have a
significant impact on the OxyChem Transferred Businesses' results of operations
for any particular period.
Revenue recognition -
Revenue from product sales is recognized upon shipment of product to
the customer.
Environmental liabilities and costs -
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Reserves for estimated costs that relate
to existing conditions caused by past operations and that do not contribute to
current or future revenue generation are recorded when environmental remedial
efforts are probable and the costs can be reasonably estimated. In determining
the reserves, OPC uses the most current information available, including similar
past experiences, available technology, regulations in effect, the timing of
remediation and cost-sharing arrangements. The environmental reserves are based
on management's estimate of the most likely cost to be incurred and are reviewed
periodically and adjusted as additional or new information becomes available.
9
<PAGE> 11
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(2) SIGNIFICANT ACCOUNTING POLICIES - (continued)
Equity investment -
The OxyChem Transferred Businesses' fifty percent interest in OxyMar is
accounted for on the equity method. At December 31, 1998 and 1997, the
historical underlying equity in net assets of OxyMar exceeded the OxyChem
Transferred Businesses' investment in OxyMar by $8.3 million and $8.8 million,
respectively. The investment deficiency is being amortized on a straight-line
basis into income over 25 years. The following table presents summarized
financial information of OxyMar as of December 31, 1998 and 1997, and for the
years ended December 31, 1998, 1997 and 1996 (in thousands).
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $ 257,344 $ 334,983 $ 273,651
Costs and expenses 328,906 380,373 289,691
----------- ----------- ---------
Net loss $ (71,562) $ (45,390) $ (16,040)
=========== =========== =========
Current assets $ 35,055 $ 49,874
Noncurrent assets $ 393,113 $ 414,331
Current liabilities $ 78,362 $ 52,653
Noncurrent liabilities $ 384,378 $ 375,342
Partners' equity $ (34,572) $ 36,210
</TABLE>
As of December 31, 1998, OPC unconditionally provides guarantees of
$192.5 million of the OxyMar partnership obligations, which includes bonds and a
revolving credit line.
Income taxes -
The OxyChem Transferred Businesses have been included in the
consolidated U.S. federal income tax return and in certain unitary state income
tax returns of OPC. A portion of the income tax provision for these returns is
allocated to the OxyChem Transferred Businesses on the basis of a tax sharing
arrangement with OPC using net income determined on a separate tax return basis.
Income tax provisions under the tax sharing arrangement are calculated using the
applicable U.S. federal statutory rate and a unitary state effective rate (based
on unitary state income taxes incurred by OPC and subsidiaries).
The OxyChem Transferred Businesses also record state income tax
provisions for operations required to be reported in separate tax returns. The
difference between the provision for income taxes at the U.S. federal statutory
rate and the effective tax rate is primarily due to state income taxes.
Liabilities for current and/or deferred income taxes have been and remain the
responsibility of OPC and, accordingly, have been included in the Combined
Balance Sheets as invested capital.
Fair value of financial instruments -
The fair value of on-balance sheet financial instruments approximates
carrying value.
10
<PAGE> 12
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(2) SIGNIFICANT ACCOUNTING POLICIES - (continued)
Asset impairment -
During 1997, OxyChem decided to sell the Burlington Plant after
determining it to be a non-strategic asset. OxyChem estimated its fair value
based on discussions with prospective buyers adjusted for selling costs. OxyChem
reduced its carrying value by $32.8 million to record the assets held for sale
at fair value. The charge for this write-down is included in selling, general
and administrative and other operating expenses in the accompanying Combined
Statement of Operations and Invested Capital. Management believes there will be
no additional write-down resulting from the sale of the Burlington Plant to
Geon.
(3) RECEIVABLES -
As of December 31, 1998 and 1997, the OxyChem Transferred Businesses
transferred, with limited recourse, to an OPC affiliate certain trade
receivables under a revolving sale program in connection with the ultimate sale
for cash of an undivided ownership interest in such receivables by the
affiliate. The net receivables transferred amounted to approximately $98 million
and $85 million as of December 31, 1998 and 1997, respectively. The OxyChem
Transferred Businesses transferred the receivables to the affiliate in a noncash
transaction that was reflected as a reduction in invested capital. OPC retained
collection responsibility with respect to the receivables sold. An interest in
newly created receivables is transferred monthly, net of collections made from
customers. Fees related to the sales of receivables under this program, which
are allocated from OPC to the OxyChem Transferred Businesses, were $4.8 million,
$3.9 million and $3.2 million for 1998, 1997 and 1996, respectively, and are
included in other expense, net.
(4) INVENTORIES -
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) cost method was used in determining the costs of raw materials
and finished goods. Materials and supplies inventories were determined using the
weighted-average-cost method. Inventories consisted of the following as of
December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Raw materials $ 12,135 $ 15,667
Materials and supplies 17,687 16,153
Finished goods 38,428 48,073
----------- -----------
68,250 79,893
LIFO/lower of cost or market reserve 1,723 (3,874)
----------- -----------
Inventories at lower of cost or market $ 69,973 $ 76,019
=========== ===========
</TABLE>
11
<PAGE> 13
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(5) PROPERTY, PLANT AND EQUIPMENT -
Property additions and major renewals and improvements are capitalized
at cost. Depreciation is primarily provided using the units-of-production method
based on estimated total productive life.
Interest costs incurred in connection with major capital expenditures
which extend longer than one year are capitalized and amortized over the lives
of the related assets. Capitalized interest is calculated based on the average
borrowing rate of OPC and allocated to the OxyChem Transferred Businesses.
Interest allocated and capitalized was approximately $1 million, $6 million and
$2 million for the years ended December 31, 1998, 1997 and 1996, respectively.
Property, plant and equipment consists of the following as of December
31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Land and land improvements $ 21,133 $ 19,272
Buildings 49,784 46,034
Machinery and equipment 791,120 665,001
Construction in progress 88,107 169,877
----------- -----------
950,144 900,184
Accumulated depreciation (326,313) (293,985)
----------- -----------
Property, plant and equipment, net $ 623,831 $ 606,199
=========== ===========
</TABLE>
(6) OTHER ASSETS -
Other assets, net of any accumulated amortization, consist of the
following as of December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred start-up costs $ 4,052 $ 3,710
Asbestos and lead abatement 6,572 6,197
Other 7,060 3,042
----------- -----------
$ 17,684 $ 12,949
=========== ===========
</TABLE>
Deferred start-up costs are amortized over a period of 10 years. Other
amortizable assets are written off to income over the estimated periods to be
benefited.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5), which requires that costs of start-up activities,
including organizational costs, be expensed as incurred. The initial application
of the statement will result in a charge to income for any costs of start-up
activities that have not yet been fully amortized. OPC will implement SOP 98-5
effective January 1, 1999.
12
<PAGE> 14
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(7) ACCRUED LIABILITIES -
Accrued liabilities consist of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Turnaround maintenance $ 11,758 $ 7,307
Property taxes 14,355 13,052
Other 4,168 6,874
----------- -----------
$ 30,281 $ 27,233
=========== ===========
</TABLE>
Maintenance turnarounds are generally performed every 2 to 5 years.
OxyChem utilizes an accrual methodology under which it estimates the projected
cost of a turnaround and accrues the cost equally over the years between
turnarounds. Turnaround costs charged to operations for the years ended December
31, 1998, 1997 and 1996 were $7.7 million, $8.0 million, and $7.3 million,
respectively.
(8) LONG-TERM DEBT -
Long-term debt, including current maturities, at December 31 consisted
of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Pollution control and solid waste disposal
revenue bonds, 6 to 7%, due through 2020 $ 23,875 $ 24,084
Unamortized discount (1,698) (1,878)
----------- -----------
$ 22,177 $ 22,206
=========== ===========
</TABLE>
Minimum principal payments on long-term debt subsequent to 1998 are as
follows (in thousands):
<TABLE>
<S> <C>
1999 $ 209
2000 218
2001 218
2002 218
2003 237
Thereafter 22,775
----------
$ 23,875
==========
</TABLE>
Unamortized discount is being amortized to interest expense over the
lives of the related issues.
Certain of the pollution control revenue bonds are secured by the
equipment purchased with the proceeds of the bond financing.
At December 31, 1998, $8 million of the long-term debt was guaranteed
by OPC.
13
<PAGE> 15
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(9) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS -
Effective January 1, 1998, OPC adopted the provisions of SFAS No. 132
"Employers' Disclosures about Pensions and Other Postretirement Benefits." This
statement standardized the disclosure requirements for pensions and other
postretirement benefits and amends SFAS No. 87 "Employers' Accounting for
Pensions," SFAS No. 88 "Employers' Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans" and SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions". The provisions of SFAS No. 132 are
disclosure oriented and do not change the measurement or recognition of the
plans. Accordingly, the implementation of SFAS No. 132 did not have an impact on
the OxyChem Transferred Businesses' combined financial position or results of
operations. The prior disclosures for 1997 have been changed to conform to the
new disclosure requirements.
The OxyChem Transferred Businesses participate in various defined
contribution retirement plans sponsored by OPC for its salaried, domestic union
and nonunion hourly, and certain foreign national employees that provide for
periodic contributions by the OxyChem Transferred Businesses based on
plan-specific criteria, such as base pay, age level, and/or employee
contributions. The OxyChem Transferred Businesses contributed and expensed
approximately $5 million under the provisions of these plans in each of the
years 1998, 1997 and 1996.
OPC provides medical and dental benefits and life insurance coverage
for certain active, retired and disabled employees and their eligible
dependents. Beginning in 1993, certain salaried participants pay for all medical
cost increases in excess of increases in the consumer Price Index (CPI). The
benefits generally are funded by OPC as the benefits are paid during the year.
The cost of providing these benefits is based on claims filed and insurance
premiums paid for the period.
The OxyChem Transferred Businesses' retirement and postretirement
defined benefit plans are accrued based on various assumptions and discount
rates, as described below. The actuarial assumptions used could change in the
near term as a result of changes in expected future trends and other factors
which, depending on the nature of the changes, could cause increases or
decreases in the liabilities accrued.
Retirement plans -
Pension costs for the OxyChem Transferred Businesses' defined benefit
pension plans, determined by independent actuarial valuations, are generally
funded by payments to trust funds, which are administered by independent
trustees. The following table sets forth the components of the net periodic
benefit costs for the OxyChem Transferred Businesses' defined benefit pension
plans for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 426 $ 435 $ 427
Interest cost on projected benefit obligation 1,024 981 901
Expected return on plan assets (1,233) (1,031) (924)
Net amortization and deferral (30) (21) (21)
--------- -------- ---------
Net periodic benefit cost $ 187 $ 364 $ 383
========= ======== =========
</TABLE>
In 1996, the OxyChem Transferred Businesses recorded adjustments to
invested capital of $222,000 to reflect the net-of-tax difference between the
additional liability required under pension accounting provisions and the
corresponding intangible asset.
14
<PAGE> 16
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(9) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS - (continued)
Retirement plans - (continued)
The following table sets forth the reconciliation of the beginning and
ending balances of the benefit obligation for the OxyChem Transferred
Businesses' defined pension plans (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Changes in benefit obligation:
Benefit obligation - beginning of year $ 14,246 $ 13,100
Service cost - benefits earned during the period 426 435
Interest cost on projected benefit obligation 1,024 981
Actual loss 649 220
Benefits paid (540) (490)
----------- -----------
Benefit obligation - end of year $ 15,805 $ 14,246
=========== ===========
</TABLE>
The following table sets forth the reconciliation of the beginning and
ending balances of the fair value of plan assets for OxyChem Transferred
Businesses' defined benefit pension plans (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Changes in plan assets:
Fair value of plan assets - beginning of year $ 15,556 $ 13,396
Actual return on plan assets 2,045 2,575
Employer contribution 452 75
Benefits paid (540) (490)
----------- -----------
Fair value of plan assets - end of year $ 17,513 $ 15,556
=========== ===========
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligations was 7 percent in 1998 and 7.5
percent in 1997. The weighted average rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligations was approximately 5 percent in both 1998 and 1997. The expected
weighted average long-term rate of return on assets was 8 percent in both 1998
and 1997.
The following table sets forth the funded status and amounts recognized
in the OxyChem Transferred Businesses' combined balance sheets for the defined
pension plans at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Funded status $ 1,708 $ 1,309
Unrecognized net transition obligation (62) (83)
Unrecognized prior service cost 1 1
Unrecognized net gain (1,483) (1,328)
-------------- -------------
Net amount recognized $ 164 $ (101)
============== =============
Prepaid benefit cost $ 164 $ -
Accrued benefit liability - (101)
-------------- -------------
Net amount recognized $ 164 $ (101)
============== =============
</TABLE>
15
<PAGE> 17
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(9) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS - (continued)
Postretirement benefits -
To reflect the OxyChem Transferred Businesses' participation in the OPC
plan, the net periodic postretirement benefit costs and the postretirement
benefit obligations are based on an allocation of the OPC actuarial study using
participant counts and demographic information for the OxyChem Transferred
Businesses for each of the years presented in the tables below. This allocation
excludes amounts attributable to salaried retirees and surviving spouses because
nonunion retiree information is not maintained for such participants by plant
location.
The postretirement benefit obligation as of December 31, 1998 and 1997
was determined by application of the terms of medical and dental benefits and
life insurance coverage, including the effect of established maximums on covered
costs, together with relevant actuarial assumptions and health care cost trend
rates projected at a CPI increase of 2.5 percent and 3 percent as of December
31, 1998 and 1997, respectively (beginning in 1993, participants other than
certain union employees pay for all medical cost increases in excess of
increases in the CPI). For certain union employees, the health care cost trend
rates were projected at annual rates ranging ratably from 8 percent in 1998 to 5
percent through the year 2004 and level thereafter. A one percent increase or a
one percent decrease in these assumed health care cost trend rates would result
in an increase of $1 million or a reduction of $1 million, respectively, in the
postretirement benefit obligation as of December 31, 1998. The annual service
and interest costs would not be materially affected by these changes. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7 percent in 1998 and 7.5 percent in 1997.
The plans are unfunded.
The following table sets forth the components of the allocated net
periodic benefit costs for the OxyChem Transferred Businesses' defined
postretirement benefit plans for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 403 $ 428 $ 443
Interest cost on accumulated benefit obligation 1,351 1,306 1,322
Net amortization and deferral (83) - -
--------- ------ ---------
Allocated net periodic benefit cost $ 1,671 $ 1,734 $ 1,765
========= ======== =========
</TABLE>
The following table sets forth the reconciliation of the beginning and
ending balances of the allocated benefit obligation for the OxyChem Transferred
Businesses' defined postretirement benefit plans (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Changes in allocated benefit obligation:
Allocated benefit obligation - beginning of year $ 18,177 $ 18,086
Service cost - benefits earned during the period 403 428
Interest cost on projected benefit obligation 1,351 1,306
Actual (gain) loss 991 (884)
Benefits paid (697) (759)
----------- -----------
Allocated benefit obligation - end of year $ 20,225 $ 18,177
=========== ===========
</TABLE>
16
<PAGE> 18
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(9) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS - (continued)
Postretirement benefits - (continued)
The following table sets forth the funded status and amounts recognized
in the OxyChem Transferred Businesses' combined balance sheets for the defined
postretirement benefit plans at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Funded status $ (20,225) $ (18,177)
Unrecognized net gain (1,502) (2,576)
--------------- -------------
Net amount recognized $ (21,727) $ (20,753)
=============== =============
Accrued benefit liability $ (21,727) $ (20,753)
-------------- -------------
Net amount recognized $ (21,727) $ (20,753)
============== =============
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES -
At December 31, 1998, future operating lease commitments for railcars
with terms greater than one year are as follows (in thousands):
<TABLE>
<S> <C>
1999 $ 8,065
2000 8,401
2001 7,905
2002 7,812
2003 6,027
Thereafter 90,028
-----------
Total minimum lease payments $ 128,238
===========
</TABLE>
Rental expense for railcars was approximately $17 million for 1998, $15
million for 1997, and $16 million for 1996.
Lawsuits -
OxyChem has been named as defendant or as a potentially responsible
party with regard to the OxyChem Transferred Businesses in a number of lawsuits,
claims and proceedings, including governmental proceedings under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
and corresponding state acts. OxyChem has accrued reserves with regard to the
OxyChem Transferred Businesses at the most likely cost to be incurred, if any.
In management's opinion, after taking into account reserves and indemnities, it
is unlikely that any of the foregoing matters will have a material adverse
effect upon the combined financial position or results of operations of the
OxyChem Transferred Businesses.
17
<PAGE> 19
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(10) COMMITMENTS AND CONTINGENCIES - (continued)
Other -
The OxyChem Transferred Businesses have entered into an agreement
providing for the following minimum future payments to purchase brine, a raw
material, as of December 31, 1998 (in thousands).
<TABLE>
<S> <C>
1999 $ 850
2000 820
2001 790
2002 760
2003 730
2003 through 2014 5,726
-----------
$ 9,676
===========
</TABLE>
Payments under this agreement were $880,000, $909,000 and $939,000 in
1998, 1997 and 1996, respectively.
The OxyChem Transferred Businesses have certain other commitments to
purchase electrical power, raw materials and other potential obligations, all in
the ordinary course of business.
(11) RELATED PARTY TRANSACTIONS -
OPC utilizes a centralized cash management system for its operations,
including the OxyChem Transferred Businesses. Cash distributed to or advanced
from OPC has been reflected in invested capital in the accompanying Combined
Balance Sheets. In addition, settlements of transactions with other OPC
affiliates are recorded through invested capital.
OPC provided certain corporate, general and administrative services to
the OxyChem Transferred Businesses, including legal, financial, marketing, sales
and customer service, technical, executive and other services. Charges for these
services were allocated based on ratios in a reasonable and consistent manner
and by the estimated costs of specific functions performed by OPC and affiliates
for the OxyChem Transferred Businesses. OxyChem's management believes the
allocations, which totaled $41.7 million in 1998, $41.9 million in 1997 and
$41.6 million in 1996, are reasonable. Such amounts are included in selling,
general and administrative and other operating expenses.
The OxyChem Transferred Businesses were also allocated research and
development costs by OxyChem, which are charged to operations as incurred. These
charges, which are included in selling, general and administrative and other
operating expenses in the accompanying Combined Statements of Operations and
Invested Capital, were $2.6 million, $2.5 million and $1.6 million for 1998,
1997 and 1996, respectively.
The OxyChem Transferred Businesses sell to other OxyChem facilities and
affiliated businesses of OPC. These sales, reflected at market prices and
included in the accompanying Combined Statements of Operations and Invested
Capital, were approximately $49 million, $69 million and $68 million for 1998,
1997 and 1996, respectively.
18
<PAGE> 20
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(11) RELATED PARTY TRANSACTIONS - (continued)
The OxyChem Transferred Businesses purchase VCM from OxyMar under the
terms of a VCM purchase agreement between OxyChem and OxyMar that runs for the
life of the OxyMar partnership. Purchases are at market prices and totaled
approximately $96 million, $83 million and $69 million in 1998, 1997 and 1996,
respectively. Accounts payable as of both December 31, 1998 and 1997 include
approximately $8 million and $7 million, respectively, payable to OxyMar.
The OxyChem Transferred Businesses purchase ethylene at market prices
from an affiliate of OxyChem. These purchases totaled approximately $88 million
in 1998, $136 million in 1997, and $99 million in 1996.
See Note 3 regarding the transfer of receivables to an affiliate.
(12) SUMMARIZED FINANCIAL INFORMATION -
The following is summarized financial information (in millions) for (1)
the business to be contributed by Oxychem to the PVC Partnership and (2) the
business to be contributed by OxyChem to the Compounding Partnership combined
with the Pasadena Subject Business and the Burlington Plant which are to be
acquired by Geon. As the Compounding Partnership, Pasadena Subject Business
and the Burlington Plant will be controlled and consolidated by Geon, they
have been combined in the presentation below. Net sales of resins by the PVC
Partnership to the Compounding Partnership have been eliminated in combining
the OxyChem Transferred Businesses.
<TABLE>
<CAPTION>
OxyChem
Compounding Partnership Transferred
PVC Pasadena and Businesses
Partnership(1) Burlington(2) Eliminations Combined
-------------- ------------- ------------ --------
<S> <C> <C> <C> <C>
December 31, 1998
Current assets $ 68 $ 38 $ 106
Current liabilities (74) (15) (89)
--------- --------- ---------
Working capital (6) 23 17
Noncurrent assets 626 15 641
Noncurrent liabilities (69) (13) (82)
--------- --------- ---------
Invested capital $ 551 $ 25 $ 576
========= ========= =========
December 31, 1997
Current assets $ 73 $ 33 $ 106
Current liabilities (69) (11) (80)
--------- --------- ---------
Working capital 4 22 26
Noncurrent assets 626 2 628
Noncurrent liabilities (41) (14) (55)
--------- --------- ---------
Invested capital $ 589 $ 10 $ 599
========= ========= =========
</TABLE>
19
<PAGE> 21
OXYCHEM TRANSFERRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(12) SUMMARIZED FINANCIAL INFORMATION - (continued)
<TABLE>
<CAPTION>
OxyChem
Compounding Partnership Transferred
PVC Pasadena and Businesses
Partnership(1) Burlington(2) Eliminations Combined
-------------- ------------- ------------ --------
<S> <C> <C> <C> <C>
For the year ended December 31, 1998
Net sales $ 726 $ 167 $ (53) $ 840
Operating income 37 11 48
Net income 18 6 24
Loss from equity investment (35) - (35)
Depreciation and amortization 41 2 43
For the year ended December 31, 1997
Net sales $ 883 $ 178 $ (67) $ 994
Operating income (loss) 98 (29) 69
Net income (loss) 57 (18) 39
Loss from equity investment (22) - (22)
Depreciation and amortization 32 2 34
For the year ended December 31, 1996
Net sales $ 849 $ 165 $ (57) $ 957
Operating income 139 8 147
Net income 83 4 87
Loss from equity investment (8) - (8)
Depreciation and amortization 28 2 30
</TABLE>
20
<PAGE> 22
ITEM 7B.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE GEON
COMPANY
The unaudited pro forma condensed consolidated financial statements of Geon
reflect the formation of the Partnerships and Related Transactions as if they
had been completed on December 31, 1998 for pro forma balance sheet data
purposes and on January 1, 1998, for pro forma income statement data purposes.
The Unaudited Pro Forma Condensed Consolidated Statement of Income includes
amounts derived from the audited consolidated statement of income of Geon for
the year ended December 31, 1998 and the audited combined statement of
operations of the OxyChem Transferred Businesses for the year ended December 31,
1998. The Unaudited Pro Forma Condensed Consolidated Balance Sheet includes
amounts derived from the audited consolidated balance sheet of Geon and the
audited combined balance sheet of the OxyChem Transferred Businesses as of
December 31, 1998. OxyChem's transfer of its PVC flexible film and specialty
pellet compound businesses to Geon and OxyChem's business contributed to the
Compounding Partnership are collectively referred to as the "Acquired
Businesses" in the accompanying Unaudited Pro Forma Condensed Consolidated
Financial Statements.
For accounting purposes, Geon's interest in the PVC Partnership is reflected on
the equity basis. Geon's majority ownership of the Compounding Partnership
requires the assets and liabilities contributed by OxyChem to the Compounding
Partnership to be valued at their estimated fair value in Geon's consolidated
financial statements. OxyChem's transfer of its PVC flexible film and specialty
pellet compound businesses to Geon requires the assets and liabilities
transferred to be valued at their estimated fair value in Geon's consolidated
financial statements. Certain pro forma adjustments result from a preliminary
determination of purchase accounting adjustments and are based upon information
provided by management of OxyChem and certain assumptions that management of
Geon considers reasonable under the circumstances. Consequently, the amounts
reflected in Geon's Unaudited Pro Forma Condensed Consolidated Financial
Statements are subject to change.
The contributions by Geon to the PVC Partnership and the Compounding Partnership
will trigger the recognition of an after-tax gain (estimated to be $53 million
on a pro forma basis) in the second quarter of 1999. Such contributions include,
for accounting purposes, a sale to OxyChem of 76% of Geon's PVC business
contributed to the PVC Partnership and a sale to OxyChem of 10% of Geon's
compounding business contributed to the Compounding Partnership. The resultant
gain represents the excess of fair value (including the realization of a net
$104 million in cash and working capital retention benefits from the PVC
Partnership) over book value for the 76% and 10% of Geon's PVC and Compounding
Contributed Businesses, respectively.
21
<PAGE> 23
In the Unaudited Pro Forma Condensed Consolidated Financial Statements, the
following components comprise the net cash and working capital retention
benefits:
<TABLE>
<CAPTION>
$ MILLIONS
---------------------------------------------------------------------------
ESTIMATED AMOUNTS
PER THE DEFINITIVE
PROXY STATEMENT REALLOCATION REDUCTION REVISED
<S> <C> <C> <C> <C>
Working capital of Geon's PVC Contributed
Business retained by Geon $ 70 $ (8) $ 62
Cash realized from the PVC Partnership to Geon
76 8 $ (6) 78
Purchase price paid by Geon to OxyChem for the
PVC flexible film and specialty pellet
compound businesses
(27) (27)
Geon's share of the PVC Partnership's
incremental financing (9) (9)
---------------------------------------------------------------------------
$ 110 $ 0 $ (6) $ 104
===========================================================================
</TABLE>
The $6 million reduction in the net cash and working capital retention benefits
result from the contribution of $4 million of additional debt and lease
obligations plus $2 million which represents Geon's funding of a portion of the
LaPorte plant maintenance shutdown scheduled for the second quarter of 1999
after formation of the PVC Partnership.
The Unaudited Pro Forma Condensed Consolidated Financial Statements of Geon and
the accompanying notes should be read in conjunction with the audited
consolidated financial statements of Geon as of and for the year ended December
31, 1998 and the audited combined financial statements of the OxyChem
Transferred Businesses as of and for the year ended December 31, 1998 which are
included herein.
The Unaudited Pro Forma Condensed Consolidated Financial Statements of Geon do
not purport to be indicative of what Geon's financial condition or results of
operations would have been had the formation of the Partnerships and Related
Transactions in fact been consummated as of the assumed dates and for the
periods presented, nor are they indicative of the results of operations or
financial condition for any future period or date. The pro forma adjustments
reflected in the Unaudited Pro Forma Condensed Consolidated Financial Statements
to give effect to the formation of the Partnerships and Related Transactions,
are based on available information and certain assumptions that Geon believes
are reasonable in the circumstances.
22
<PAGE> 24
The Geon Company
Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 31, 1998
(In millions)
<TABLE>
<CAPTION>
ACQUIRED
INVESTMENT BUSINESS
IN PVC PURCHASE
DEDUCT PARTNERSHIP ADD ACCOUNTING
GEON PVC AND ACQUIRED AND OTHER PRO
HISTORICAL BUSINESS ADJUSTMENTS BUSINESSES ADJUSTMENTS FORMA
---------------------------------------------------------------------------------
(a)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14.4 $ 0.1 $ 14.3
Accounts receivable 70.8 24.1 $ 24.1 (m) $ 0.3 $ 18.1 (e) 89.2
Inventories 113.9 39.6 3.0 (m) 34.8 1.0 (e) 113.1
Other current assets 35.6 3.6 2.2 34.2
-----------------------------------------------------------------------------------
Total current assets 234.7 67.4 27.1 37.3 19.1 250.8
Property, plant and equipment (net) 443.5 222.1 (6.0)(b) 15.5 1.5 (e) 232.4
Other non-current assets:
Investments, goodwill and other assets 123.8 4.8 0.2 119.2
Investment in PVC Partnership 202.9 (c) 202.9
-----------------------------------------------------------------------------------
$ 802.0 $ 294.3 $224.0 $ 53.0 $ 20.6 $ 805.3
===================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term debt including current $ 51.7 $ 0.2 $(78.0)(i) $ 27.0 (f) $ 0.5
maturities
Accounts payable 129.1 63.8 $ 13.6 78.9
Accrued expenses 76.0 17.4 18.0 (b) 1.4 (0.5)(k) 97.7
15.7 (m) 4.5 (e)
-----------------------------------------------------------------------------------
Total current liabilities 256.8 81.4 (44.3) 15.0 31.0 177.1
Non-current liabilities:
Long-term debt 135.4 9.6 125.8
Deferred income taxes 32.8 27.7 (d) 6.2 (l) 66.7
Other liabilities 162.9 1.9 0.6 (m) 13.0 (5.0)(k) 164.9
(4.7)(n)
Minority interest 3.6 (g) 3.6
-----------------------------------------------------------------------------------
Total liabilities 587.9 92.9 (20.7) 28.0 35.8 538.1
Total stockholders' equity 214.1 201.4 244.7 (o) 25.0 9.8 (h) 267.2
(25.0)(j)
-----------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 802.0 $ 294.3 $224.0 $ 53.0 $ 20.6 $ 805.3
===================================================================================
</TABLE>
23
<PAGE> 25
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) Reflects the historical cost of the assets and liabilities of the Geon
PVC Business. The Geon PVC Business refers to Geon's suspension and mass
resin business including certain assets and liabilities, described in
note (m) below, which will be retained by Geon.
(b) Reflects accrual of direct transaction costs related to the formation of
the PVC Partnership to be borne by Geon and the write-off of
non-contributed assets related to Geon's PVC business consisting of
management information systems assets that will no longer be used upon
formation of the PVC Partnership.
(c) Geon's investment in the PVC Partnership is as follows:
<TABLE>
<S> <C>
Geon's proportionate share of the PVC Partnership fair value $ 232.9
Cash received 78.0
--------
310.9
Net book value of Geon's PVC Business' contributed net assets (185.9)
--------
125.0
Ownership percentage sold to OxyChem 76%
--------
Pre-tax gain before one time charges associated with formation of the PVC
Partnership 95.0
Plus net book value, net of assets and liabilities retained by Geon, of
Geon's PVC Business 185.9
Less cash received (78.0)
--------
Investment in PVC Partnership $ 202.9
========
</TABLE>
(d) Represents the income tax effects, computed at an estimated effective tax
rate of 39%, associated with the gain on the contribution of Geon's net
assets to the PVC Partnership and the direct costs related to the
formation of the PVC Partnership.
24
<PAGE> 26
(e) Represents adjustments for the Acquired Businesses under the purchase
method of accounting as follows:
<TABLE>
<S> <C>
TRADE RECEIVABLES (NET)
To reflect trade receivables of the Acquired Businesses which were sold
under a receivable sales agreement. The receivable sales agreement was
terminated as it related to the Acquired Businesses as of the date of
acquisition. $ 18.1
INVENTORIES
To write-up the acquired inventories to fair value. $ 1.0
PROPERTY, PLANT AND EQUIPMENT, NET
To write-up the acquired property, plant and equipment to fair value and
to reflect the write-off of plant and equipment of Geon's Conroe, Texas,
facility. $ 1.5
ACCRUED EXPENSE AND OTHER LIABILITIES
To reflect accrual of costs primarily associated with the demolition of
an idle facility of the Acquired Businesses and the closure of Geon's
Conroe, Texas facility. $ 4.5
</TABLE>
(f) Represents the amount payable to OxyChem to affect the acquisition of the
PVC flexible film and specialty pellet compound businesses.
(g) Represents the minority interest liability related to OxyChem's 10%
ownership interest in the Compounding Partnership.
(h) Represents the after-tax effects of the gain on the contribution of
Geon's net assets to the Compounding Partnership.
(i) To reflect the reduction of debt resulting from the $78 million of cash
received from the PVC Partnership.
(j) To eliminate the equity accounts of the Acquired Business under
purchase method of accounting.
(k) To reflect certain obligations of OxyChem which will not be contributed
to the Compounding Partnership or transferred to Geon.
25
<PAGE> 27
(l) Represents the income tax effects, computed at an estimated effective tax
rate of 39%, associated with the gain on the contribution of Geon's net
assets to the Compounding Partnership and the purchase price adjustments
relating to the Acquired Businesses. Such gain represents the difference
between the fair value and historical net book value of 10% of Geon's
compounding net assets contributed to the Compounding Partnership.
(m) Reflects the following items which were not contributed to the PVC
Partnership and were retained by the Company: accounts receivable (net of
receivables sold of $34.9 million at December 31, 1998), certain
inventories, and accrued liabilities primarily consisting of sales taxes,
environmental, and employee liabilities.
(n) To reflect the assumption by the PVC Partnership of the Geon corporate
liability for post retirement health care for active employees
transferring employment to the PVC Partnership.
(o) Geon's equity is estimated to increase $43.3 million as a result of the
formation of the PVC Partnership. This increase represents the gain on
Geon's disposition of 76% of its interest in its PVC Business.
<TABLE>
<S> <C>
Equity after Geon's investment in the PVC Partnership and
adjustments $ 244.7
Equity of the Geon PVC Business on a historical basis (201.4)
---------
Equity increase at formation $ 43.3
=========
</TABLE>
26
<PAGE> 28
The Geon Company
Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 1998
(In millions)
<TABLE>
<CAPTION>
ACQUIRED
INVESTMENT BUSINESS
IN PVC PURCHASE
DEDUCT PARTNERSHIP ADD ACCOUNTING
GEON PVC AND ACQUIRED AND OTHER PRO
HISTORICAL BUSINESS ADJUSTMENTS BUSINESSES ADJUSTMENTS FORMA
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 1,284.4 $ 577.7 $ 131.7 (g) $ 167.4 $ 1,005.8
Cost of goods sold 1,092.6 564.1 131.7 (g) 146.2 $ 1.0 (k) 814.2
8.6 (b) (1.8)(j)
Depreciation and amortization 57.9 27.5 2.3 0.1 (c) 32.8
Selling, general and administrative
expenses 82.0 21.2 9.4 (b) 7.7 77.9
Employee separation and plant phase out 14.6 14.6(h)
-------------------------------------------------------------------------------------
Operating income (loss) 37.3 (35.1) (18.0) 11.2 0.7 66.3
Interest (expense) (16.0) (1.0) 5.1 (i) (1.8)(d) (11.7)
Interest income 1.2 1.2
Other income (expense), net (2.6) 0.6 (1.2) 1.2 (j) (3.2)
Equity (loss) from equity affiliates 3.7 (5.4)(a) (1.7)
Minority interest (1.3)(e) (1.3)
-------------------------------------------------------------------------------------
Income (loss) before provision for income
taxes 23.6 (35.5) (18.3) 10.0 (1.2) 49.6
(Expense) benefit for income taxes (9.8) 13.8 7.1 (f) (4.2) 0.5 (20.2)
=====================================================================================
Net income (loss) $ 13.8 $ (21.7) $ (11.2) $ 5.8 $ (0.7) $ 29.4
=====================================================================================
Earnings per share of common share:
Basic 0.60 1.28
Diluted 0.58 1.25
Number of share used to compute earnings
per share:
Basic 22.9 22.9
Diluted 23.6 23.6
</TABLE>
27
<PAGE> 29
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN
MILLIONS):
(a) To reflect the sum of Geon's 24% share of the pro forma PVC Partnership
loss for the period and the amortization of the difference between the
carrying value of Geon's investment in and its underlying equity in the PVC
Partnership. Geon's share of the loss from the PVC Partnership has also
been adjusted by the amount of supplemental pension benefit costs
associated with former Geon personnel who continue employment with the PVC
Partnership. Such benefits will be paid by Geon.
Such loss is computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Pre-tax income (loss) contributed by:
Geon PVC Business $ (35.5)
OxyChem PVC Business 31.1
Pro forma adjustments of the PVC Partnership (19.1)
-----------
(23.5)
Geon's ownership in the PVC Partnership 24%
-----------
Geon's share of the PVC Partnership's losses (5.6)
Amortization of the difference between Geon's investment in and
underlying equity in the PVC Partnership 1.0
Supplemental Pension Benefit Costs (0.8)
-----------
Geon's pro forma equity loss from the PVC Partnership $ (5.4)
===========
</TABLE>
28
<PAGE> 30
The PVC Partnership Pro Forma adjustments are comprised of the following items:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Adjust PVC and VCM pricing to supply contracts (Represents adjustments to the
historical PVC and VCM pricing of the Geon PVC Business and the OxyChem PVC
Business to reflect the pricing terms of the PVC and VCM supply contracts
between the PVC Partnership and the parent companies)
$ (6.1)
Incremental Depreciation (Represents incremental depreciation on the write-up to
fair value of Geon's PVC assets contributed to the
PVC Partnership.) (9.0)
Interest on PVC Partnership debt (Represents the PVC Partnership's interest
expense relating to the $104 million to be paid to Geon or to finance initial
working capital requirements)
(4.0)
----------
$ (19.1)
==========
</TABLE>
(b) Represents overhead and selling, general and administrative costs
historically allocated to the Geon PVC Business that will not be
transferred to the PVC Partnership.
(c) Represents incremental depreciation expense due to the write-up of
property of the Acquired Businesses to fair value under the purchase
method of accounting.
(d) Includes incremental interest expense based on the $27 million payable
to OxyChem for the acquisition of the Acquired Businesses at an
estimated borrowing rate of 6.5%.
(e) Represents the minority interest related to OxyChem's 10% interest in
the Compounding Partnership.
(f) To record the tax effect of the pro forma adjustments using an
estimated income tax rate of 39%.
(g) To adjust for the historical elimination in consolidation of revenue and
cost of sales related to the sale of PVC and VCM from the Geon PVC
Business to the other businesses of Geon.
(h) Reflects a pre-tax employee separation and plant phase out charge of
$14.6 million related to the Company's consolidation of its compounding
operations.
29
<PAGE> 31
(i) Reflects the reduction in interest expense associated with the $78
million reduction in debt at an estimated short-term borrowing rate of
6.5%.
(j) Reflects the reversal of costs associated with obligations and assets of
the Acquired Businesses which were not transferred to Geon and adjusts
PVC resin costs to the PVC Partnership's PVC supply contract with OxyChem
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Adjust PVC resin costs to the supply contract (represents an
adjustment to OxyChem's historical transfer prices to reflect the
pricing terms of its PVC supply contract with the PVC
Partnership) (classified as cost of goods sold) $ 1.8
Reverse OxyChem's allocation of the discount from the sale of receivables
pursuant to a receivables sales agreement, which were terminated and total
trade receivables from customers transferred to the Compounding Partnership
and Geon (classified as other expense)
1.2
----------
$ 3.0
==========
</TABLE>
(k) Represents the incremental costs of sales due to the write-up of acquired
inventory to fair value under the purchase method of accounting.
The Unaudited Pro Forma Consolidated Statement of Income does not reflect the
following:
(i) The one time estimated after tax gain of $53 million resulting from
Geon's contributions to the PVC Partnership and the Compounding
Partnership, which for accounting purposes are treated as a sale to
OxyChem of 76% of Geon's PVC Businesses contributed to the PVC
Partnership and a sale to OxyChem of 10% of Geon's Compounding Business
contributed to the Compounding Partnership. The resultant gain represents
the excess of fair value (including cash received of $78 million) over
the book value of the 76% and 10% of Geon's PVC and Compounding
Contributed Businesses, respectively.
30
<PAGE> 32
Such gain is net of certain one-time costs directly related to the formation of
the PVC Partnership and Compounding Partnership as follows:
<TABLE>
<CAPTION>
COSTS ATTRIBUTED TO THE FORMATION COSTS ATTRIBUTED TO THE FORMATION
OF THE PVC PARTNERSHIP OF THE COMPOUNDING PARTNERSHIP
--------------------------------- ---------------------------------
<S> <C> <C> <C>
One-time benefit payment to be made
to Geon employees that will Conroe, Texas, powder plant closures
become employees of the PVC
Partnership $ (4.0) Asset write-off $ (2.5)
Employee separation (1.5)
-------
Transaction costs (legal, accounting) (9.0) $ (4.0)
=======
Personnel costs (consisting
primarily of pension and
post-retirement benefit (5.0)
curtailment losses)
Write-off of capitalized software
cost specifically related to the
management information systems of
Geon's PVC Business (6.0)
-------
$ (24.0)
=======
</TABLE>
(ii) The synergies and the cost of such synergies expected to be realized by
Geon as a result of the formation of the Partnerships and Related
Transactions. Geon expects its share of the synergies and the cost of such
synergies resulting from the PVC Partnership to approximate $20 million
and $4 million, respectively, and the synergies and related costs of the
synergies related to the Compounding Partnership to approximate $7 million
and $3 million, respectively. The synergies are expected to be fully
realized in 2001, and the costs of such synergies are expected to be
incurred in 1999 and 2000. Such synergies, as they relate to the PVC
Partnership, are expected to be realized from cost reductions resulting
from production, logistics, and distribution efficiencies; the
consolidation of production facilities, reductions in executive management
positions and related compensation and benefits; elimination of duplicate
overhead, staffing and information systems costs; the consolidation of
research and development facilities, as well as, legal, environmental,
health and safety and risk management services; and reductions in the cost
of property and liability insurance coverage. The synergies related to the
Compounding Partnership are expected to be realized through the reduction
of excess production capacity, the benefits resulting from the volume
purchasing of materials, and the reduction of selling, general and
administrative costs.
(iii) The charges and expected cost savings associated with the completion of
Geon's consolidation of its compounding operations.
In the first quarter of 1999, the Company will recognize costs totaling $1.7
million relating to the completion of the compound consolidation plan previously
announced in
31
<PAGE> 33
November 1998. Such costs consist of $0.6 million of accelerated depreciation on
software assets to be taken out of service in the second quarter of 1999, asset
write-offs of $0.4 million, legal and professional fees of $0.5 million and
employee separation costs of $0.2 million.
The Company anticipates incurring, in the second quarter of 1999 and upon
formation of the powder compound partnership, estimated costs totaling $6.0
million relating to the completion of the compound consolidation plan.
The amounts expected to be incurred are as follows:
accelerated depreciation of $0.6 million and disposition costs of $1.4
million which will be expensed as incurred, and (b) costs associated with
exiting Geon's Conroe, Texas, powder compounding facility, which will be
closed subject to the consummation of the Joint Venture Transactions,
totaling $4.0 million. The costs of closing the Conroe, Texas, facility
primarily represent non-cash write-offs of fixed assets with a net book
value of $2.0 million and other assets with a carrying value of $.5
million, and cash employee separation costs of approximately $1.5 million
relating to the termination of 70 individuals. These terminations are
expected to be completed in the third quarter of 1999.
These costs are in addition to the $14.6 million recorded in the fourth quarter
1998 related to the consolidation of the compounding operations.
The consolidation is projected to produce total cost savings of $6 million in
1999 and $14 million annually thereafter.
32
<PAGE> 1
Exhibit 10.2
FIRST AMENDED AND RESTATED
LIMITED PARTNERSHIP
AGREEMENT
OF
OXY VINYLS, LP
- -------------------------------------------------------------------------------
ORGANIZED UNDER THE DELAWARE
REVISED UNIFORM LIMITED PARTNERSHIP ACT
- -------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
SECTION 1 ORGANIZATION MATTERS ..................................... 2
1.1 Continuation of Partnership...................... 2
1.2 Name............................................. 2
1.3 Business Offices................................. 2
1.4 Purpose and Business............................. 2
1.5 Filings.......................................... 2
1.6 Power of Attorney................................ 3
1.7 Term............................................. 3
SECTION 2 CAPITAL CONTRIBUTIONS..................................... 3
2.1 Acquisition of Units............................. 3
2.2 Property Contributions........................... 4
2.3 Other Contributions.............................. 4
2.4 Capital Accounts................................. 5
2.5 No Return of or on Capital....................... 5
2.6 Partner Loans.................................... 5
2.7 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.................................. 6
4.1 General Book Allocations......................... 6
4.2 Special Allocations.............................. 6
4.3 Change in Partner's Units........................ 6
4.4 Deficit Capital Account and Nonrecourse Debt
Rules........................................... 7
4.5 Federal Tax Allocations.......................... 8
4.6 Other Tax Allocations............................ 9
4.7 Transaction Costs................................ 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.......................................... 10
5.4 Reports and Financial Statements................ 10
5.5 Method of Accounting for Book and Tax Purposes.. 10
5.6 Taxation........................................ 10
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.7 Delegation...................................... 13
SECTION 6 MANAGEMENT .............................................. 13
6.1 Partnership Governance Committee................ 13
6.2 Limitations on Authority........................ 14
6.3 Lack of Authority............................... 14
6.4 Composition of Partnership Governance
Committee...................................... 15
6.5 Partnership Governance Committee Meetings....... 16
6.6 Partnership Governance Committee Quorum and
General Voting Requirement..................... 17
6.7 Partnership Governance Committee Unanimous
Voting Requirements............................ 17
6.8 Auxiliary Committees............................ 20
SECTION 7 OFFICERS AND EMPLOYEES................................... 21
7.1 Partnership Officers............................ 21
7.2 Selection and Term of Executive Officers........ 22
7.3 Removal of Executive Officers................... 22
7.4 Duties.......................................... 23
7.5 CEO............................................. 24
7.6 Other Officers.................................. 24
7.7 Secretary....................................... 24
7.8 Salaries........................................ 24
7.9 Delegation...................................... 25
7.10 General Authority............................... 25
SECTION 8 STRATEGIC PLANS, ANNUAL BUDGETS AND LOANS................ 25
8.1 Strategic Plan.................................. 25
8.2 Annual Budget................................... 26
8.3 Funding of Partnership Expenses................. 27
8.4 Implementation of Budgets and Discretionary
Expenditures by CEO............................ 27
8.5 Strategic Plan Deadlock......................... 27
8.6 Loans........................................... 28
SECTION 9 RIGHTS OF PARTNERS....................................... 28
9.1 Delegation and Contracts with Related Parties... 28
9.2 General Authority............................... 29
9.3 Limitation on Fiduciary Duty; Non-Competition;
Right of First Opportunity..................... 29
9.4 Limited Partners................................ 31
9.5 Partner Covenants............................... 31
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9.6 Special Purpose Entities........................ 32
SECTION 10 TRANSFERS AND PLEDGES........................................... 32
10.1 Restrictions on Transfer and Prohibition on
Pledge......................................... 32
10.2 Right of First Option and Right of First
Refusal........................................ 32
10.3 Inclusion of General or Limited Partner
Units.......................................... 34
10.4 Rights of Transferee............................ 34
10.5 Effective Date of Transfer...................... 34
10.6 Transfer to 80%-Owned Affiliate................. 35
10.7 Invalid Transfer................................ 35
SECTION 11 DEFAULT......................................................... 35
11.1 Default......................................... 35
11.2 Remedies for Default............................ 36
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........................ 38
12.1 Dissolution and Termination..................... 38
12.2 Procedures Upon Dissolution..................... 38
12.3 Termination of the Partnership.................. 40
12.4 Asset and Liability Statement................... 40
SECTION 13 MISCELLANEOUS 40
13.1 Confidentiality and Use of Information.......... 40
13.2 Indemnification................................. 42
13.3 Third Party Claim Reimbursement................. 44
13.4 Dispute Resolution.............................. 45
13.5 Extent of Limitation of Liability,
Indemnification, Etc........................... 45
13.6 Further Assurances.............................. 45
13.7 Successors and Assigns.......................... 46
13.8 Benefits of Agreement Restricted to the
Parties........................................ 46
13.9 Notices......................................... 46
13.10 Severability ................................... 46
13.11 Construction.................................... 47
13.12 Counterparts.................................... 47
13.13 Waiver of Right to Partition.................... 47
13.14 Governing Law................................... 47
13.15 Expenses........................................ 47
13.16 Payment Terms and Interest Calculations......... 47
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
13.17 Usury Savings Clause............................ 48
13.18 Amendment....................................... 48
</TABLE>
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
SCHEDULES
Schedule 2.2 Credits to Partner Capital Accounts
iv
<PAGE> 6
FIRST AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
OXY VINYLS, LP
This FIRST AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF OXY
VINYLS, LP, dated as of the 1st day of May, 1999, is entered into among
Occidental PVC, LLC, a Delaware limited liability company ("OCC GP"), Occidental
PVC LP, Inc., a Delaware corporation ("OCC LP"), and 1999 PVC Partner Inc., a
Delaware corporation ("Geon LP").
WHEREAS, the definitions of capitalized terms used in this Agreement
are set forth in Appendix A hereto; and
WHEREAS, as contemplated by the Master Transaction Agreement,
Occidental Chemical Corporation ("OCC"), the parent entity of each of OCC GP and
OCC LP, and The Geon Company ("Geon"), the ultimate parent entity of Geon LP,
desired to establish a joint venture in the form of a limited partnership; and
WHEREAS, the Partnership was formed as a Delaware limited partnership
named "Oxy Vinyls, LP" by the filing on April 6, 1999 with the Delaware
Secretary of State of a Certificate of Limited Partnership under and pursuant to
the Act; and
WHEREAS, OCC GP, OCC LP, and GEON LP entered into that certain Limited
Partnership Agreement of the Partnership dated as of April 6, 1999 (the "Initial
Agreement"); and
WHEREAS, in furtherance of the foregoing, OCC GP, OCC LP, and Geon LP
wish to utilize the Partnership to acquire, own and operate the Contributed
Business, the Initial Assets and such other assets and businesses as are
consistent with the purposes of the Partnership; and
WHEREAS, on or before the Closing Date, the Related Agreements relating
to the Partnership and the Contributed Business also will be entered into, all
as set forth in the Master Transaction Agreement; and
WHEREAS, OCC GP, OCC LP, and Geon LP now desire to amend and restate
the Initial Agreement in its entirety to set forth new terms and conditions for
the ownership and management of the Partnership;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto, it is hereby agreed to amend and restate the
Initial Agreement in its entirety as follows:
<PAGE> 7
SECTION 1
ORGANIZATION MATTERS
--------------------
1.1 CONTINUATION OF PARTNERSHIP. The Partnership is hereby continued as
a limited partnership under the Act. The Partners desire to enter into this
Agreement, which amends and restates the Initial Agreement in its entirety and
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 the execution of this Agreement, (i) OCC GP is hereby
admitted to the Partnership as a general partner of the Partnership and (ii)
each of OCC LP and Geon LP is hereby admitted to the Partnership as a limited
partner of the Partnership. Subject to the terms, conditions and 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 and appropriate for the conduct of the business of the Partnership.
1.2 NAME. The name of the Partnership is "Oxy Vinyls, LP." The
Partnership's business shall be conducted under such name or any other name or
names determined by the Partnership Governance Committee. The General Partner
will comply and will 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 located at 5005 LBJ Freeway in Dallas, Texas, or such other
place as the General Partner may from time to time determine. The registered
agent of the Partnership in the State of Delaware is The Prentice-Hall
Corporation System, Inc., 1013 Centre Road, Wilmington, Delaware 19805.
1.4 PURPOSE AND BUSINESS. The purpose of the business of the
Partnership shall be to (i) engage in the Specified Business and (ii) do all
things necessary and appropriate in connection with the ownership, operation or
financing of the foregoing business as are permitted under the Act, including
the acquisition and operation of the Contributed Business.
1.5 FILINGS. The General Partner 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
Partner, the Limited Partners shall execute all such certificates and other
documents as may be necessary, in the sole judgment of the General Partner, in
order for the General Partner to accomplish all such executions, swearings,
acknowledgments, deliveries, filings, recordings in public offices, publishings
and other acts. The General Partner hereby agrees and covenants that it will
execute any appropriate amendment to the Certificate of Limited Partnership of
the Partnership
2
<PAGE> 8
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 the 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) that the General Partner deems 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 that the 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 that the 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 the
General Partner within five Business Days after receipt of a written request
therefor such other further statements of interest and holdings, designations,
powers of attorney and other instruments as the General Partner deems necessary
or appropriate to effect the transactions contemplated by this Agreement. 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 that 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 and termination of the Partnership in
accordance with the provisions of Section 12.
SECTION 2
CAPITAL CONTRIBUTIONS
---------------------
2.1 ACQUISITION OF UNITS. In exchange for the capital contributions
made pursuant to Section 2.2, each Partner shall be entitled to the following
Units:
3
<PAGE> 9
<TABLE>
PARTNER UNITS
<S> <C>
OCC GP 1
OCC LP 75
Geon LP 24
TOTAL 100
</TABLE>
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 PROPERTY CONTRIBUTIONS. On the Closing Date, the Partners shall
make the following capital contributions:
(a) OCC. Pursuant to the applicable Asset Contribution Agreement, each
of OCC GP and OCC LP will contribute or cause to be contributed to the
Partnership the Initial Assets contemplated thereby subject to the Assumed
Liabilities contemplated thereby. Thereupon, OCC GP's and OCC LP's respective
Capital Accounts will be credited with the amount set forth on Schedule 2.2.
(b) GEON. Pursuant to the applicable Asset Contribution Agreement, Geon
LP will contribute or cause to be contributed to the Partnership the Initial
Assets contemplated thereby subject to the Assumed Liabilities contemplated
thereby. Thereupon, Geon LP's Capital Account will be credited with the amount
set forth on Schedule 2.2.
The Partners intend that the contribution of assets subject to liabilities
provided for in Sections 2.2(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.
2.3 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 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 Partners Pro Rata; and
4
<PAGE> 10
(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.
Each 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.
2.4 CAPITAL ACCOUNTS. Each Partner's Capital Account shall be
determined and maintained in accordance with Regulation Section
1.704-l(b)(2)(iv). 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.
2.5 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.
2.6 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's 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.
2.7 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, distributions to the Partners shall be made as provided in
the Strategic Plan. The Partners contemplate that the Strategic Plan will
provide that, except for debt redemption or prepayment goals contained therein,
the Distributable Cash as of the end of each month shall be distributed to the
Partners Pro Rata.
5
<PAGE> 11
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 the appropriate foreign, federal,
state or local government tax authority 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 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) NOTES. 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.
(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 5 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 Section 2.3 (other than pursuant to
its Asset Contribution Agreement).
SECTION 4
BOOK AND TAX ALLOCATIONS
------------------------
4.1 GENERAL BOOK ALLOCATIONS. Except as otherwise provided in this
Section 4, Profits or Losses each year shall be allocated among the Partners Pro
Rata for book purposes. As used herein and in Section 4.5(a), "book" means the
allocations used to determine debits and credits to the Capital Accounts of the
Partners as set forth in Section 2.5. It does not refer to the method in which
books are maintained for financial reporting purposes pursuant to Section 5.2.
4.2 SPECIAL ALLOCATIONS. Depreciation and other amortization with
respect to each Partnership asset acquired pursuant to Section 6.7(iv) shall be
allocated to each Partner in accordance with its contribution, or obligation to
contribute, to the cost of the underlying asset.
4.3 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
6
<PAGE> 12
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.
4.4 DEFICIT CAPITAL ACCOUNT AND NONRECOURSE DEBT RULES. The special
rules in this Section 4.4 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 Section 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 Sections 1.704-2(g)(2), except to the extent not required by
Regulation Section 1.704-2(f). To the extent that this Section 4.4(a) is
inconsistent with Regulation Section 1.704-2(f) or Section 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 Section 1.704-2(i)(2), each Partner who has a share of such gain,
determined in accordance with Regulation Section 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 Section 4.4(b) is inconsistent with
Regulation Section 1.704-2(i) or Section 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 OFFSET. 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
Sections 1.704-l(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 Section 4.4(c) is intended to constitute a "qualified income
offset" pursuant to Regulation Section 1.704-l(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
Sections 1.704-2(i) or Section 1.704-2(k).
(e) CURATIVE ALLOCATIONS. The Allocations provided by this Section 4.4
may not be consistent with the manner in which the Partners intend to allocate
Profits and Losses. Accordingly, Profits and Losses will be reallocated among
the Partners (in the same year and to the extent
7
<PAGE> 13
necessary, in subsequent years) in a manner consistent with Regulation Section
1.704-l(b) and Section 1.704-2 so as to prevent such allocations from distorting
the manner in which Profits and Losses are intended to be allocated among the
Partners pursuant to Sections 4.1, 4.2, and 4.3.
(f) NONRECOURSE DEBT SHARING. For purposes of this Agreement,
nonrecourse deductions, within the meaning of Regulation Section 1.704-2(b),
shall 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 Section
1.752-3(a)(3), Partnership Profits are allocated to the Partners Pro Rata.
4.5 FEDERAL TAX ALLOCATIONS.
(a) GENERAL RULE. Except as otherwise provided in the following
paragraphs of this Section 4.5, 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) SPECIAL ALLOCATIONS. Except as provided in Section 4.5(c),
depreciation and other amortization with respect to each Partnership asset
acquired pursuant to Section 6.7(iv) shall be allocated to each Partner in
accordance with its contribution to the adjusted tax basis of such asset.
(c) 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.
(i) To account for such variation, effective as of the
formation of the Partnership:
(A) the depreciation and other deductions
attributable to the basis that the contributing Partner had in
each property at the time of contribution shall be allocated
to such Partner, and
(B) upon disposition of a contributed property, the
excess of its Book Value at the time of such disposition over
its tax basis at the time of such disposition shall be
allocated to the Partner who contributed the property.
(ii) If the Book Value of a Partnership property is revalued
as of a date subsequent to the date of its acquisition by the
Partnership, the portion of its Book Value at the time of its
disposition that is attributable to the increase resulting from such
revaluation:
(A) shall be disregarded in applying Section
4.5(c)(i)(B) to the Partner who contributed such property, and
8
<PAGE> 14
(B) shall be treated for purposes of this Section
4.5(c) as a separate property that was contributed on the
revaluation date by the Persons who were partners immediately
prior to the revaluation date.
(iii) The Partners agree that the foregoing allocations
constitute a reasonable method for purposes of Regulation Section
1.704-3(a)(1) and will be so reported and defended by the Partnership
and all Partners unless and until the Partners otherwise agree or it is
otherwise Finally Determined.
(d) 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 Regulation Section 1.1245-1(e)(2) and Section 1.1250-l(f).
(e) SECTION 754 ELECTION ALLOCATIONS. Income and deductions of the
Partnership that are attributable to the election under section 754 of the Code
shall be allocated to the Partners entitled thereto.
4.6 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.
4.7 TRANSACTION COSTS. If the Partnership is entitled to deductions
with respect to costs described in Section 6.10 of the Master Transaction
Agreement that have been incurred by a Partner and for which that Partner is not
entitled to reimbursement, such deductions shall be allocated to that Partner.
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.
9
<PAGE> 15
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 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. The Partnership shall maintain
one or more bank accounts in a manner so that the amount of such funds can at
all times be determined.
(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 all
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.
(c) The Partnership will cause an independent audit to be conducted
annually, and the independent auditors for the Partnership shall be Arthur
Andersen L.L.P. unless and until changed by the Partnership Governance
Committee.
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 12.2), Capital Accounts and Profits and 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 Section 1.704-l(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.
10
<PAGE> 16
(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;
(E) Elect the most rapid depreciation period and
method available;
(F) Elect to amortize start-up expenditures over a
60-month period under section 195 of the Code;
(G) Apply the recurring items exception under section
461(h)(3)(A)(iii) of the Code to the extent applicable;
(H) Apply ratable accrual of property Taxes under
section 461(c) of the Code; and
(I) 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 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.
11
<PAGE> 17
(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
90 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 days after receipt of the draft in which to
furnish any objections or comments on the draft to the Tax Matters Partner. The
Tax Matters Partner shall use commercially reasonable efforts to finalize the
Partnership's federal income tax return at least 60 days before the due date for
filing (as extended) of such return. 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 second 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 OCC LP in its
capacity as the sole owner of OCC 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 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 act in good faith in deciding
whether to contest at the administrative and judicial level any
proposed adjustment of a Partnership item and whether to appeal any
adverse judicial decision. The Tax Matters Partner shall keep each
Partner advised of all material developments with respect to any
proposed adjustment that comes to its attention. All costs incurred by
the Tax Matters Partner in performing under this subsection (d) shall
be paid by the Partnership. The Tax Matters Partner shall have sole
authority to represent the Partnership in connection with all tax
audits, including the power to extend the statute of limitations, to
enter in any settlement, and to litigate any proposed partnership
adjustment, subject to the following: (A) No settlement will be entered
into with respect to an item that would materially affect any Partner
adversely unless each Partner is first notified of the terms of the
settlement; and no Partner will be bound by any settlement unless it
consents thereto; (B) If a Partner does not consent to a settlement,
the settlement will nevertheless be binding on all Partners who do
consent; and the non-consenting Partner may, at its sole cost, pursue
12
<PAGE> 18
such administrative or judicial remedies as it deems appropriate; (C)
If the Tax Matters Partner brings an action in any court, each Partner,
at its sole cost, shall have the right to intervene in the proceeding
to the extent permitted by the court; and (D) The Tax Matters Partner
shall take any and all actions as may be necessary to cause Geon LP to
become a partner required to be notified pursuant to section 6223 of
the Code or a similar provision under any state law.
(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 that 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 that come to its attention.
(iii) CONTINUATION OF RIGHTS. Each Partner shall continue to
have the rights described in this Section 5.6(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.
(f) TAX INFORMATION. At the request of any Partner, the Tax Matters
Partner shall timely furnish annual earnings and profits computations (as
defined in section 312 of the Code) with respect to that Partner's share of
Partnership income.
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 Partner and Geon LP 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 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
13
<PAGE> 19
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 and
appropriate 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 that the Partnership
Governance Committee is authorized and empowered to take in accordance with this
Agreement and the Act and that 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 consistent 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. Except as expressly set forth in this
Agreement, each of the General Partner and Geon LP agrees to exercise its
authority to manage and control the Partnership only through the Partnership
Governance Committee. Each of the General Partner and Geon LP 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. Except as expressly set forth in this Agreement,
no Person or Persons other than (i) the General Partner and Geon LP, 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 Committee Action, shall be authorized
(a) to exercise
14
<PAGE> 20
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, with the General Partner designating three Representatives and
Geon LP designating three Representatives (each a "Representative"). All the
Representatives of both the General Partner and Geon LP shall together
constitute the Partnership Governance Committee.
(b) The General Partner and Geon LP 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 either the General
Partner or Geon LP, as applicable), 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 either the General Partner or Geon LP, as
applicable, that 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, the General Partner and Geon LP shall
have delivered to the other a written notice (i) designating the three persons
to serve as such 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 of the General Partner and Geon LP may, in its sole discretion
and by written notice delivered to the other 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 Partner, whether the General
Partner or Geon LP, 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 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 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 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 Partnership or to any
15
<PAGE> 21
Partner other than the Partner that designated such Representative; PROVIDED,
HOWEVER, that nothing in this Agreement is intended to or shall relieve or
discharge any Representative or 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 but not less often than quarterly 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 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 of the General Partner and Geon LP 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.
16
<PAGE> 22
(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 at least equally effective 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 of the General Partner and Geon LP, 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 the General Partner 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 of the General
Partner and Geon LP 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, with a reasonable level of specificity, on an agenda for such meeting
that was delivered in accordance with Section 6.5 unless at least one
Representative of each of the General Partner and Geon LP 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 the General
Partner 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 the General Partner and two or
more Representatives of Geon LP 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
17
<PAGE> 23
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 nor any subsidiary thereof nor any person acting in the
name or on behalf of any of them directly or indirectly may take or commit to
take, any of the actions described below (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) except as contemplated by Section 12.2, to authorize any
disposition of assets outside the ordinary course of business having a
fair market value exceeding $50 million in any one transaction or a
series of related transactions not contemplated in an approved
Strategic Plan; PROVIDED, HOWEVER, that no such approval shall be
required in respect of a disposition of assets in excess of such
threshold amount if the CEO, acting through the Partnership Governance
Committee, shall obtain an opinion, in form and substance reasonably
satisfactory to the representatives of both the General Partner and
Geon LP, from a nationally recognized independent professional
appraisal firm with a recognized expertise in process chemical plants,
as to the fairness and adequacy of the consideration received by the
Partnership for such assets, taking into consideration all of the terms
of such disposition; PROVIDED, FURTHER, HOWEVER, that in no event shall
a disposition of assets in excess of such threshold amount be made to
an Affiliate of the General Partner or Geon LP;
(iv) to authorize any acquisition of assets outside the
ordinary course of business or any capital expenditure exceeding $25
million that is not contemplated in an approved Strategic Plan;
PROVIDED, HOWEVER, that, if the Representatives of Geon LP do not
approve an acquisition of assets or a capital expenditure exceeding $25
million that is not contemplated in an approved Strategic Plan or Geon
LP does not agree to pay its Pro Rata share of any additional capital
contribution required to effect such acquisition or capital
expenditure, approval of the Representatives of Geon LP is not required
for the Partnership Governance Committee to authorize such acquisition
or capital expenditure if all amounts for such acquisition or
expenditure that exceed $1 million are paid, directly or indirectly, by
OCC GP and OCC LP, and in such an event, (a) all such amounts paid by
OCC GP and OCC LP shall be deemed additional capital contributions to
the Partnership, and (b) OCC GP and OCC LP shall receive additional
Units to account for such additional capital contributions. The number
of additional Units received by such contributing Partners shall,
immediately after being issued, constitute a percentage of all then
outstanding Units equal to the following, expressed as a percentage:
A/B, where A = the Enterprise Value Increase; and B = the Enterprise
Value Increase plus the Partnership Annual Agreed Value for the year
during which such acquisition or expenditure is made;
18
<PAGE> 24
(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 or other law) within any fiscal year (a) if the total of
such contributions required from the Partners within that year would
exceed $10 million or (b) to the extent the aggregate principal amount
of the Partnership's borrowings is less than the Leverage Ceiling;
(vi) to make borrowings under one or more of the Partnership's
bank credit facilities, its uncommitted lines of credit or any credit
facility or debt instrument of the Partnership of any kind that
finances or refinances all or any portion of the Partnership's credit
facilities, or to enter into any capitalized lease or similar
off-balance sheet financing arrangement, at any time, if as a result of
any such borrowing the aggregate principal amount of all such
borrowings outstanding at such time would exceed $575 million (the
"Leverage Ceiling");
(vii) to enter into interest rate protection or other hedging
agreements, including commodity hedging agreements, unless the
transactions resulting from such agreements constitute a "hedge" as
such term is defined in the Financial Accounting Standards Board
Statement of Financial Accounting Standards Number 80 and Number 133
(other than commodity hedging agreements offset by physical positions
arising in the ordinary course of business);
(viii) except as otherwise provided in Section 2.1, 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);
(ix) except as contemplated by Section 12.2, to make
Partnership distributions that are not contemplated in (a) an approved
Strategic Plan or (b) Section 1.3(b)(x) of the Master Transaction
Agreement;
(x) to initiate or settle any litigation or governmental
proceedings if the effect thereof could reasonably be expected to be
material to the financial condition of the Partnership;
(xi) 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);
(xii) to create or change the authority of any Auxiliary
Committee;
(xiii) 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);
19
<PAGE> 25
(xiv) to file a petition in bankruptcy or seeking any
reorganization, liquidation or similar relief on behalf of the
Partnership or any subsidiary of the Partnership; or to consent to the
filing of a petition in bankruptcy against the Partnership or any
subsidiary of the Partnership; or to consent to the appointment of a
receiver, custodian, liquidator or trustee for the Partnership or any
subsidiary of the Partnership or for all or any substantial portion of
their respective property;
(xv) to enter into any raw material supply contract with a
term of two years or longer that calls for payments by the Partnership
that exceed $50 million in any fiscal year;
(xvi) except in connection with transactions contemplated by
Section 12.2, to enter into an indemnification agreement whereby the
Partnership agrees (a) to indemnify a Partner, (b) to an
indemnification outside of the ordinary course of business or (c) to an
indemnification for any item that could cause obligations of the
Partnership in excess of $5 million;
(xvii) except in connection with transactions contemplated by
Section 12.2, to authorize prepayments of the loans to the Partnership
guaranteed by Geon pursuant to Section 1.3(b)(x) of the Master
Transaction Agreement; or
(xviii) to approve any loan referred to in Section 1.1(e) of
the Parent Agreement.
6.8 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.
(b) Each of the General Partner and Geon LP 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
20
<PAGE> 26
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.
The members of any Auxiliary Committee, at their discretion, may participate in
or hold regular meetings by means of a telephone conference or any at least
equally effective 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.
6.9 ENTERPRISE VALUE INCREASE AND PARTNERSHIP ANNUAL AGREED VALUE. The
"Enterprise Value Increase" shall mean, for any acquisition or expenditure, the
Annual Agreed Multiple times the EBITDA Contribution of such acquisition or
expenditure. The "Partnership Annual Agreed Value" of the Partnership shall mean
the enterprise value of the Partnership as agreed upon between the General
Partner and Geon LP, with such value being updated annually in January of each
calendar year and applying for the entire calendar year in which such value is
determined; PROVIDED, HOWEVER, that (i) the Partnership Annual Agreed Value
shall be $2 billion for 1999 and 2000, and (ii) if the General Partner and Geon
LP are unable to agree on a Partnership Annual Agreed Value by January 31 of any
year in which such determination is necessary, then the Partnership Annual
Agreed Value for that year shall be the same as the Partnership Annual Agreed
Value for the immediately preceding year. The setting of the initial Partnership
Annual Agreed Value at $2 billion is solely for the purposes of the calculation
under Section 6.7(iv) and is not intended necessarily to reflect or bear upon
the determination of the Fair Market Value of the Partnership.
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. 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 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.
(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 Action (collectively, the "Executive
Officers").
21
<PAGE> 27
(c) 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 three-year term, subject to the
CEO's earlier death, resignation or removal. Upon the expiration of such term or
earlier death, resignation or removal, OCC GP shall designate the replacement
CEO. The CEO shall not be required to be an employee of the Partnership but
shall be required to devote substantially all of his or her efforts to the
Partnership's business.
(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 (i) 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 or (ii) by Geon LP, at any time after
twelve months have passed following the delivery of written notice from Geon LP
to the Partnership Governance Committee stating that the CEO should be removed
for cause and setting forth with reasonable specificity the factual bases for
such removal, if the bases for such removal for cause have not been rescinded,
removed or cured (to the reasonable satisfaction of Geon LP) within such twelve
month period.
(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 6.6, 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 of the General Partner or Geon LP 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 the General Partner and two or
more Representatives of Geon LP as contemplated by Section 6.7. Any such removal
shall be effected by delivery by such Representatives of written notice of such
removal (i) to such
22
<PAGE> 28
Executive Officer and (ii) to the Representatives of the other Partner; PROVIDED
THAT such removal shall not be effective if such action is rescinded or cured
(to the reasonable satisfaction of the Partner, whether the General Partner or
Geon LP, who has delivered such notice) promptly after such notice is delivered.
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 either the General Partner or Geon LP shall, in his
capacity as a Representative, owe no duty (fiduciary or otherwise) to any Person
other than such Representative's appointing 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.
23
<PAGE> 29
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 its day-to-day operations
in a manner consistent with the Annual Budget and the most recently approved
Strategic Plan. The Partnership Governance Committee shall establish and
maintain a compensation plan for the CEO and the other key employees of the
Partnership. The level of compensation provided in such plan for the CEO and the
other key employees of the Partnership shall be consistent with levels obtaining
in the industry generally for comparably situated persons, and such plan shall
establish incentive compensation goals intended to reward the CEO and the other
key employees of the Partnership for achievement of the synergies and objectives
set forth in the 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 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 (if
any) 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
24
<PAGE> 30
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 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") that 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 45 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. Subject to Section 3.1, the
Strategic Plan also shall establish the Partnership's policies regarding the
timing and amount of any distributions to the Partners. 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
25
<PAGE> 31
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. Except for entering into the Related Agreements, the
Partnership shall not, on other than an arm's length basis, enter into, or waive
any material rights under, any agreement between the Partnership and a Partner
or its Affiliates unless the taking of such action is specifically contemplated
by an approved Strategic Plan.
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 45 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 reflecting the
passage of time, such as general changes in general economic or industry
circumstances, or the occurrence of events beyond the control of the
Partnership, and notwithstanding any other provision of this Agreement, the CEO
shall be authorized to take or cause to be taken, on behalf of the Partnership,
all actions that the CEO determines in good faith are appropriate in order to
satisfy such obligations or respond to such changed circumstances. Except as may
be required above, the CEO shall not be authorized to cause the Partnership to
proceed with discretionary 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.
26
<PAGE> 32
(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 bythe
Partnership Governance Committee. Subject to the limitations of Sections 2.3 and
6.7(v), if applicable, to the extent that the CEO determines at any time that
funds are needed to fund Partnership operations, the CEO may issue a Funding
Notice to the Limited Partners calling for an additional capital contribution.
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, after the fifth anniversary of the
date of this Agreement, the Partnership Governance Committee has not agreed upon
and approved an updated Strategic Plan, as contemplated by Sections 6.7 and 8.1,
within 12 months after the beginning of the first fiscal year that would have
been covered by such plan, then the General Partner and Geon LP shall each
submit their disagreements to non-binding mediation by a Neutral. If the General
Partner and Geon LP are unable to agree upon a mutually acceptable Neutral
within 30 days after a nomination of a Neutral is made by the General Partner or
Geon LP to the other, then such Neutral shall upon the application of either the
General Partner or Geon LP 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 Dallas,
Texas, or if such appointment is not
27
<PAGE> 33
so made promptly, then promptly thereafter by the senior United States District
Court judge sitting in Dallas, Texas. The fees of the Neutral shall be paid
equally by the General Partner and Geon LP. Within 20 days of selection of the
Neutral, two persons having decision-making authority on behalf of each the
General Partner and Geon LP shall meet with the Neutral and agree upon
procedures and a schedule for attempting to resolve the differences between the
General Partner and Geon LP. They shall continue to meet thereafter on a regular
basis until (i) agreement is reached by the General Partner and Geon LP (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 on or after the
fifth anniversary of the date of this Agreement that would have been covered by
the updated plan for which agreement was not reached, and the General Partner or
Geon LP shall determine and notify the other and the Neutral in writing (a
"Deadlock Notice") that no agreement resolving the dispute is likely to be
reached. Notwithstanding anything contained in this Agreement to the contrary,
in no event shall the General Partner or Geon LP have the right to commence the
procedures contained in this Section 8.5 until after the fifth anniversary of
the date of this Agreement.
8.6 LOANS.
(a) INITIAL FACILITIES. On the Closing Date, the Partnership shall
enter into the credit agreement provided for in Section 1.3(b)(x) of the Master
Transaction Agreement.
(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. No 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 of
the Partnership, for such period of time and on such other terms as the Partner
shall determine.
SECTION 9
RIGHTS OF PARTNERS
------------------
9.1 DELEGATION AND CONTRACTS WITH RELATED PARTIES.
(a) The Partners acknowledge that the General Partner and Geon LP
(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) The Related Agreements, and upon receipt of any required approval
by the Partnership Governance Committee (including, as applicable, any approval
required by Section 6.7), all other 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 the status of
being a Partner or by reason of any provision of this Agreement or the existence
of the Partnership. In the
28
<PAGE> 34
case of any contract (including applicable Related Agreements) between the
Partnership and OCC or any Affiliate thereof, Geon LP shall have the right under
all reasonable circumstances, after reasonable prior notice to the General
Partner, to cause the Partnership to exercise all of the Partnership's audit and
similar rights under any such contract, and shall have full access to any audit
or other reports resulting from the exercise of such rights.
9.2 GENERAL AUTHORITY. Persons dealing with the Partnership are
entitled to rely conclusively on the power and authority of each of the General
Partner and Geon LP as set forth in this Agreement. In no event shall any Person
dealing with either the General Partner or Geon LP or such Partners'
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 Geon LP or such Partners' representatives; and every
contract, agreement, deed, mortgage, security agreement, promissory note or
other instrument or document executed by the General Partner or Geon LP or such
Partners' 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)
either the General Partner or Geon LP or such Partners' 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 the General Partner's or Geon LP's
obligations to the other Partners as set forth elsewhere in this Agreement.
9.3 LIMITATION ON FIDUCIARY DUTY; NON-COMPETITION; RIGHT OF FIRST
OPPORTUNITY.
(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 Business, 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 the General Partner (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 the
General Partner and Geon LP shall at all times owe to the other a fiduciary duty
in observing the requirement described in Section 6.7 that (except as provided
in Section 6.7(iv)) two or more Representatives of the General Partner and two
or more Representatives of Geon LP shall be required to give their approval
before the Partnership may undertake any of the actions listed in Section 6.7.
Nothing in this Section 9.3(a) shall relieve any Partner from liability
29
<PAGE> 35
for any breach of this Agreement, and the General Partner and Geon LP shall at
all times owe to each other 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.
(c) (i) If a Partner's Affiliate desires to initiate or pursue an
opportunity to undertake, engage in, acquire or invest in a 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 Affiliate (such Affiliate,
together with its Affiliates, being called the "Proposing Person") shall offer
the Partnership the Business Opportunity on the terms set forth in Section
9.3(c)(ii).
(ii) When a Proposing Person offers a Business Opportunity to the
Partnership, the Partnership shall elect to do one of the following within a
reasonably prompt period:
(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 Person will be entitled to proceed
under clause (B) below; or
(B) permit the Proposing Person 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 Person and the Partnership shall, if either so
elects, promptly 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 Person 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 Person, or (ii) enter into a
management agreement with the Proposing Person to manage the
Competing Opportunity on behalf of the Proposing Person on
terms and conditions mutually acceptable to the Proposing
Person and the Partnership. If the Partnership and the
Proposing Person do not reach agreement as to such arrangement
within a reasonable period not to
30
<PAGE> 36
exceed 30 days, the Proposing Person 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 of the
business to be acquired or invested in 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 Person 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 Person must offer the Business Opportunity to the
Partnership pursuant to the terms of Section 9.3(c)(ii); and if the Partnership
elects option (A) of Section 9.3(c)(ii) with respect thereto, the Business
Opportunity shall be acquired by the Partnership at its fair market value as
mutually agreed or Finally Determined as of the date of such acquisition.
(e) 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 the General Partner or Geon LP, but
not the other, desired that the Partnership acquire or undertake such Business
Opportunity, then the Partnership shall permit such first Partner's 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 Partner's
Affiliates were a Proposing Person with respect to such Business Opportunity.
9.4 LIMITED PARTNERS.
(a) Except as expressly set forth in this Agreement, 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 the General Partner or Geon LP
acting pursuant to the Partnership Governance
31
<PAGE> 37
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 appropriate in connection therewith (including the
exercise of its rights and powers under this 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.
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 without the consent of the
Other Partner, which consent may be granted or withheld in the Other Partner's
sole discretion. 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 without the consent of the Other Partner, which
consent may be granted or withheld in the Other Partner's sole discretion.
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 securities of a Partner or any Affiliate of a Partner, whether such
Transfer or Pledge by such owner is in connection with the merger,
consolidation, conversion, share exchange or Change of Control of such owner or
otherwise.
10.2 RIGHT OF FIRST OPTION AND RIGHT OF FIRST REFUSAL.
(a) Except as provided in Section 10.6, without the consent of the
Partnership Governance Committee, no Partner may Transfer less than all of its
Units, and no Partner may Transfer its Units, directly or indirectly, for
consideration other than cash. Any Limited Partner and, in the case of OCC LP,
OCC GP (together, the "Selling Partners"), that receive a bona fide offer to
purchase all of their Units that the Selling Partners desire to accept (an
"Offer") or that otherwise
32
<PAGE> 38
desire to Transfer all of their Units to any Person shall give written notice
(the "Initial Notice") to the Partnership and the other Partners (the "Offeree
Partners") stating that the Selling Partners have received an Offer or otherwise
desire to Transfer their Units and shall set forth the cash purchase price and
all other terms of the Offer or the cash purchase price (established as provided
below) and all other terms on which they are willing to sell their Units (in
each case, the "Offer Terms"). In establishing the Offer Terms for a proposed
sale that does not involve an Offer, the Selling Partners shall obtain an
appraisal from an independent appraiser with a reasonable level of industry
experience of the cash price that a willing buyer under no compulsion to buy
would pay and a willing seller under no compulsion to sell would accept for the
Units of the Selling Partners (the "Appraised Value"). 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 60 days of the date of the Initial Notice, to elect to
purchase all, but not less than 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, HOWEVER, 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 (or any successor statute) or other Legal
Requirement. The closing shall be held at the Partnership's offices. The
purchase price for the Selling Partners' Units shall be paid in immediately
available funds delivered at the closing, and all actions at the closing shall
conform in all material respects to the Offer Terms.
(c) If the Offeree Partners do not elect to purchase all of the Selling
Partners' Units within 60 days after the receipt of the Initial Notice, the
Selling Partners shall have a further 180 days during which they may, subject to
Section 10.2(d), consummate the sale of their Units (i) substantially in
accordance with the terms of the Offer or (ii) if no Offer is involved, to a
third party purchaser on terms that are not substantially more favorable to such
purchaser than the Offer Terms and at a price equal to not less than 90% of the
Appraised Value of the Units. 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. If the Selling Partners receive a written offer during
such further 180-day period from a third party purchaser that is for less than
90% of the Appraised Value, and the Selling Partners are willing to accept the
offer, then (1) the offer shall be treated as an Offer, and (2) the Selling
Partners must comply with the provisions of this Section 10.2 before the Selling
Partners may make any Transfer of their Units to the third party purchaser that
made the Offer.
(d) Notwithstanding the foregoing provisions of this Section 10.2, a
Partner may Transfer its Units only if all of the following occur:
33
<PAGE> 39
(i) The proposed transferor is not in default in the timely
performance of any of its material obligations to the Partnership.
(ii) 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.
(iii) The Transfer does not cause a default under any material
contract (A) that has been approved unanimously by the Partnership
Governance Committee and (B) to which the Partnership is a party or by
which the Partnership or any of its properties is bound.
(iv) The transferee executes an appropriate agreement to be
bound by this Agreement.
(v) The transferor and transferee bear all reasonable costs
incurred by the Partnership in connection with the Transfer.
(vi) The business and activities of the transferee comply with
Section 9.6.
(vii) The provisions of Section 10.3 are satisfied.
(viii) The parent of the transferee satisfies the criteria set
forth in Section 1.2(d)(vii) of the Parent Agreement and delivers an
agreement to the Parent of the Offeree Partners and to the Partnership,
substantially in the form of the Parent Agreement.
10.3 INCLUSION OF GENERAL OR LIMITED PARTNER UNITS. OCC LP may not
Transfer its Units to any Person (other than in accordance with Section 10.6)
unless the Units of OCC GP are simultaneously transferred to such Person or a
Wholly-Owned Affiliate of such Person. OCC GP may not transfer its Units to any
Person (other than in accordance with Section 10.6) unless the Units of OCC LP
are simultaneously transferred to such Person or a Wholly-Owned Affiliate 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.
34
<PAGE> 40
10.6 TRANSFER TO 80%-OWNED AFFILIATE. Without the need for the consent
of any Person (subject to the provisions contained in Section 10.2(d) and this
Section 10.6):
(a) any Partner may Transfer its Units to any 80%-Owned Affiliate of
such Partner. 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) OCC LP may, at its option and at any time, Transfer up to 99% of
its Limited Partner Units to OCC GP, 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 amendments to this Agreement or supplemental agreements hereto) as
may be reasonably necessary to ensure that OCC GP and OCC LP 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 the portion
of any Partnership cash distributable to OCC GP and OCC LP).
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; or
(ii) 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 Parent.
35
<PAGE> 41
(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, each of the Non-Defaulting Partners may elect to purchase its pro rata
share (based on the ratio of the number of Units owned by such Partners to the
number of Units owned by each of the Non-Defaulting Partners electing to
purchase) of 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 withdraw their election, in which
case the Non-Defaulting Partners shall have an 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, in the aggregate, 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 at the sole cost and expense of the Defaulting Partners 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
36
<PAGE> 42
applicable filing and waiting period requirements under the Hart-Scott-Rodino
Antitrust Improvements Act or other Legal Requirement.
(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 and 2.2
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 without the consent of any Partner hereunder.
(e) If Units are transferred in accordance with this Section 11.3,
whether to the Non-Defaulting Partners or a third party, 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 of the Defaulting Partner if and to the extent that Limited Partner
Units were transferred to such Person and (ii) a Substitute General Partner of
the Defaulting Partner if and to the extent that General Partner Units were
transferred to such Person.
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 Parent described in Section 11.1(a)(ii); and
PROVIDED FURTHER, that in the case of a Default under Section 11.1(a)(i), the
foregoing loss of voting and decisional rights shall not apply to those voting
and decisional rights contained in Sections 6.7(i), (viii), (xi) or (xiii) of
this Agreement, which rights shall continue in full force and effect at all
times.
37
<PAGE> 43
SECTION 12
DISSOLUTION, LIQUIDATION AND TERMINATION
----------------------------------------
12.1 DISSOLUTION AND TERMINATION. As long as Geon LP is willing then to
convert its Units to General Partner Units and thereafter serve as the General
Partner (who is hereby authorized in such event to so convert its Units and to
conduct the business of the Partnership without dissolution), the withdrawal,
retirement, resignation, dissolution or Bankruptcy of the 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 the General Partner and
Geon LP to dissolve the Partnership;
(ii) the entry of a judicial decree of dissolution;
(iii) any other act or event that 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 either the
General Partner or Geon LP pursuant to Section 8.5, the written
determination by either the General Partner or Geon LP to dissolve the
Partnership.
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 (i) if OCC GP and OCC LP are then Defaulting Partners and Geon LP
is a Non-Defaulting Partner, such winding-up shall be conducted under the
direction of Geon LP, and (ii) 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. The term "Liquidator" shall mean the Person or committee conducting
such winding-up of the Partnership.
(c) MANNER OF WINDING-UP. Unless the provisions of Section 12.2(e)
apply, the Liquidator shall cause the Partnership to attempt to sell all
Partnership properties and apply the
38
<PAGE> 44
proceeds therefrom in accordance with this Section 12.2(c) and Section 12.2(d).
Upon dissolution of the Partnership and subject to Section 12.2(f), the
Liquidator 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 creditors (including Partners and Affiliates of
the Partners who are creditors), 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 Liquidator
may deem advisable, such reserves shall be distributed to the Partners
or their assigns in the manner set forth in Section 12.2(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.
(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 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.
(f) SUPPLY AGREEMENTS. In connection with a sale of Partnership
properties pursuant to Section 12.2(c), the Liquidator shall, at its option,
either (i) if a single purchaser acquires all or substantially all of such
properties, cause such purchaser to assume and agree to perform under all the
Supply Agreements, or if such properties are sold to more than one purchaser,
cause such purchasers (on a several basis) in the aggregate to assume and agree
to perform under all the Supply Agreements, with the benefits, duties and
obligations under the Supply Agreements being allocated among such purchasers as
deemed appropriate by the Liquidator, or (ii) cause the Supply Agreements to be
terminated prior to the sale of such properties with the purchaser or purchasers
of
39
<PAGE> 45
such properties not assuming the Supply Agreements, and prior to any
distribution of the Partnership's assets in connection with the dissolution and
winding-up of the Partnership, cause the Partnership to pay Geon LP in cash an
amount equal to the remaining value of the Supply Agreements (to the parties
thereto other than the Partnership) as of the date of the termination of the
Supply Agreements, assuming the extension of the Supply Agreements beyond their
respective initial terms pursuant to Geon's two five-year renewal options. The
Partners agree that any dispute regarding the value of the Supply Agreements
shall be resolved pursuant to the Dispute Procedures.
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 Liquidator 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 Section 13.1(c) or (d), 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 Person; 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
40
<PAGE> 46
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 or its respective
Affiliate competes.
(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 that, 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).
41
<PAGE> 47
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 Party 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
Section 13.2(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 INDEMNIFICATION. 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 Party 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 Section 13.2(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 Section 13.2(b) unless (i) the indemnified Partner shall first make a
written demand for indemnification from the Partnership in accordance with
Sections 13.2(a) and (c) 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 (ii) the Partnership is insolvent or otherwise unable to satisfy
its obligations. The indemnifying Partner shall periodically reimburse any
Person entitled to indemnity under this Section 13.2(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 Person to whom the Indemnified Party is
entitled
42
<PAGE> 48
to look for indemnification (the "Indemnifying Party") of the commencement
thereof, 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 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 Section 13.2(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 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 Section 13.2(c), or if the Indemnifying Party assumes the
defense of the Indemnified Party pursuant to this Section 13.2(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
43
<PAGE> 49
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.
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 mutually agreed or Finally Determined 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 (not including the Partnership) relating to such
event or indemnification, but only to the extent of any such payments. The
Indemnified Party shall cooperate with the Indemnifying Party (or such
guarantor) in any reasonable manner in prosecuting any subrogated claim.
(f) NO LIMITATION. Nothing in this Agreement shall be deemed to (i)
limit the Partnership's power to indemnify its officers, employees, agents or
any other Person, to the fullest extent permitted by law, or (ii) limit the
Partnership's indemnity obligations to the Partners under the Act.
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 either the General Partner or Geon LP, its Affiliates or
any of their respective officers, directors or employees (acting in their
capacities as such) against whom reimbursement is being sought, such Partner,
whether the General Partner or Geon LP, hereby agrees to reimburse the
Partnership for such Liability to the extent that:
44
<PAGE> 50
(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 proceeds actually
received by the Partnership under policies of a nature such that future
premium rates thereunder will not be increased by claim experience
relating to such Liability; PROVIDED that, if the Partnership is
reimbursed by either the General Partner or Geon LP pursuant to this
Section 13.3(a) and subsequently receives insurance proceeds covering
such Expense under policies of a nature that future premium rates
thereunder will not be increased by claim experience relating to such
Liability, the Partnership shall promptly pay such insurance proceeds
to the reimbursing Partner up to the amount reimbursed by such Partner;
and
(iii) the Expense is not offset by third party indemnification
or otherwise;
PROVIDED, HOWEVER, that such reimbursing 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 either the General Partner or Geon LP upon written notice to
the other, and the General Partner and Geon LP 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 Partner and Geon LP 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.
45
<PAGE> 51
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, including any officer or employee of the Partnership or any Partner,
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 during business
hours with proof of confirmation from the transmitting machine or (ii) delivered
by commercial courier or other hand delivery, as follows:
<TABLE>
<CAPTION>
If to OCC GP or OCC LP: If to Geon LP:
<S> <C>
c/o Occidental Chemical Corporation c/o The Geon Company
5005 LBJ Freeway One Geon Center
Dallas, Texas 75244 Avon Lake, Ohio 44012
Attention: President Attention: Chief Executive Officer
Telecopy Number: (972) 404-3906 Telecopy Number: (440) 930-1002
With a copy to: With a copy to:
Occidental Petroleum Corporation The Geon Company
10889 Wilshire Boulevard One Geon Center
Los Angeles, California 90024 Avon Lake, Ohio 44012
Attention: General Counsel Attention: General Counsel
Telecopy Number: (310) 443-6333 Telecopy Number: (440) 930-1002
And to:
Occidental Chemical Corporation
5005 LBJ Freeway
Dallas, Texas 75244
Attention: General Counsel
Telecopy Number: (972) 404-3957
</TABLE>
13.10 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
46
<PAGE> 52
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.
13.11 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.
13.12 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.
13.13 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.
13.14 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.
13.15 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.
13.16 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 13.17, accrue at a per annum rate equal to the
lesser of (i) the Agreed Rate plus 2% per annum, compounded quarterly, to the
extent permitted by law or (ii) the Highest Lawful Rate.
47
<PAGE> 53
(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.
13.17 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 13.17 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, 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
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.
13.18 AMENDMENT. All waivers, modifications, amendments or alterations
of this Agreement shall require the written approval of the General Partner and
each of the Limited Partners.
48
<PAGE> 54
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 PARTNER
OCCIDENTAL PVC, LLC
By: /s/ John L. Hurst, III
-----------------------------------
John L. Hurst, III
President
LIMITED PARTNERS
OCCIDENTAL PVC LP, INC.
By: /s/ James R. Havert
-----------------------------------
James R. Havert
Vice President and Treasurer
1999 PVC PARTNER INC.
By: /s/ Woodrow W. Ban
-----------------------------------
Name: Woodrow W. Ban
--------------------------------
Title: Assistant Secretary
--------------------------------
<PAGE> 55
APPENDIX A
TO LIMITED PARTNERSHIP AGREEMENT
DEFINITIONS
-----------
"AAA" has the meaning set forth in Appendix D.
"Acceptance Notice" has the meaning set forth in Section 10.2(b).
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
amended and in effect from time to time.
"Adjusted Capital Account Deficit" means, 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 Section 1.704-2(g)(1) and Section 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 Regulationss. 1.704-l(b)(2)(ii)(d)(4), (5) and
(6).
The foregoing definition of Adjusted Capital Deficit is intended to comply with
the provisions of Regulation Section 1.704-l(b)(2)(ii)(d) and shall be
interpreted and applied consistently therewith.
"Affiliate" means any other 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 neither the Partnership nor Compounding Partnership, nor any entity
controlled by either entity, shall be considered an Affiliate of any Partner.
For purposes of this definition, the term "control" (including the terms
"controlled by" and "under common control with") means the ownership of more
than 50% of the equity interests, Fully Diluted.
"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" means this First Amended and Restated Limited Partnership
Agreement of Oxy Vinyls, LP, as amended from time to time.
"Alternate" has the meaning set forth in Section 6.4(b).
Appendix A-1
<PAGE> 56
"Annual Agreed Multiple" means five, unless and until otherwise
mutually agreed between the General Partner and Geon LP.
"Annual Budget" has the meaning set forth in Section 8.2.
"Applicable Usury Laws" means 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.
"Appraised Value" has the meaning set forth in Section 10.2(a).
"Asset Contribution Agreement" means (i) in the case of OCC LP and OCC
GP, the Asset Contribution Agreement to be entered into between the Partnership,
OCC, OCC LP and OCC GP, and (ii) in the case of Geon LP, the Asset Contribution
Agreement to be entered into between the Partnership, Geon, and Geon LP.
"Asset Fair Market Value" means, 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" means (i) in the case of OCC LP and OCC GP,
"Assumed Liabilities," as defined in the Asset Contribution Agreement of OCC,
and (ii) in the case of Geon LP, "Assumed Liabilities," as defined in the Asset
Contribution Agreement of Geon.
"Auxiliary Committee" has the meaning set forth in Section 6.8.
"Bankruptcy" means the occurrence of any of the following: (i) a
Partner or its Parent 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 Parent 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
Parent 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 Parent shall acquiesce in the entry of such
order, judgment or decree or such other order, judgment or decree
Appendix A-2
<PAGE> 57
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 Parent 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 Parent and such appointment shall
remain unvacated and unstayed for an aggregate of 60 days (whether or not
consecutive); (iii) a Partner or its Parent shall admit in writing its inability
to pay its debts as they mature; (iv) a Partner or its Parent 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 Parent shall make an
assignment for the benefit of creditors or take any other similar action for the
protection or benefit of creditors.
"Book Value" means, with respect to any asset of the Partnership, the
asset's adjusted basis for federal income tax purposes as of the relevant date,
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 Section 1.704-l(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 Section 1.704-l(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.
Appendix A-3
<PAGE> 58
The foregoing definition of Book Value is intended to comply with the provisions
of Regulation Section 1.704-l(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" means any day other than a Saturday, Sunday or other day
on which banks are closed in New York City, New York.
"Business Opportunity" has the meaning set forth in Section 9.3(c).
"Capital Account" means the separate capital account established and
maintained by the Partnership for each Partner, as contemplated by Section 2.
"Capital Expenditure Budget" has the meaning set forth in Section
8.2(d).
"CEO" has the meaning set forth in Section 7.1(b).
"Change of Control" means "Change of Control," as defined in Section
1.1(c) of the Parent Agreement.
"Claim" has the meaning set forth in Section 13.2(c).
"Closing Date" means "Closing Date," as defined in the Master
Transaction Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time and any successor thereto.
"Competing Opportunity" has the meaning set forth in Section 9.3(c).
"Compounding Partnership" means "Compounding Partnership," as defined
in the Master Transaction Agreement.
"Confidential Information" means all documents and information
(including commercial information and information with respect to customers,
trade secrets and proprietary technologies or processes (including with respect
to the Specialty Resin Business) 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 chemical 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
Appendix A-4
<PAGE> 59
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.
"Contributed Business" means the "Contributed Business," as defined in
both of the Asset Contribution Agreements.
"Damages" means, 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
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 13.17, interest
on amounts actually due until payment thereof is made at a rate per annum equal
to the rate set forth in Section 13.16(b). "Damages" shall not include any
consequential, incidental, indirect, punitive, exemplary, special or other
similar damages.
"Deadlock Notice" has the meaning set forth in Section 8.5.
"Default" has the meaning set forth in Section 11.1.
"Default Date" has the meaning set forth in Section 11.1.
"Defaulting Partners" means (i) OCC GP and OCC LP, in the case of a
Default by OCC GP, OCC LP or their Parent; and (ii) Geon LP, in the case of a
Default by Geon LP or its Parent.
"Depreciation" means, 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
Appendix A-5
<PAGE> 60
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.
"Dispute Notice" has the meaning set forth in Appendix D.
"Dispute Procedures" has the meaning set forth in Section 13.4.
"Disputing Partner" has the meaning set forth in Appendix D.
"Distributable Cash" means as of the end of each month during the term
of this Agreement the cash plus short-term investments of the Partnership less
(i) the amount needed to meet the current operating expenses of the Partnership,
(ii) the amount needed for capital expenditures, (iii) the amount needed for
debt service, and (iv) the amount needed to fund reserves, in each case as
determined by the Partner Governance Committee pursuant to the authority granted
under Section 6 and as set forth in the Strategic Plan.
"EBITDA" means, for any period, the sum of the Partnership's net income
from operations before any extraordinary items, plus the following expenses or
charges to the extent deducted to arrive at net income in such period: interest
expense, income taxes, depreciation, and amortization, all determined in
accordance with GAAP.
"EBITDA Contribution" means, for any acquisition or expenditure, the
estimated average annual EBITDA attributable to such acquisition or expenditure,
calculated on an average annual basis with respect to a five year period
commencing at the end of a transition and integration period (the duration of
which shall be determined by the General Partner, acting reasonably) following
such acquisition or expenditure.
"80%-Owned Affiliate" means, as to any Person, an Affiliate of such
Person where the level of ownership of the equity interests involved, Fully
Diluted, is 80% or more.
"Enterprise Value Increase" has the meaning set forth in Section 6.9.
"Executive Officers" has the meaning set forth in Section 7.1(b).
"Expense" has the meaning set forth in Section 13.3(a).
"Fair Market Value" means (i) with respect to the Partnership, 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; and
(ii) with respect to a Related Business, 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> 61
(a) The General Partner and Geon LP shall first attempt to
agree on such value, which if agreed to shall be the Fair Market Value.
(b) If the General Partner and Geon LP are unable to agree
within 20 days of the first written notice from either the General
Partner or Geon LP to the other proposing an amount to be the Fair
Market Value (the "Notice"), then if requested by either the General
Partner or Geon LP, the General Partner and Geon LP shall each (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.
(c) If the lower appraised value is less than 90% of the
higher appraised value, then the General Partner and Geon LP shall
jointly appoint a Neutral within 20 days of the delivery of both such
appraisals. If the General Partner and Geon LP have been unable to
agree upon such appointment within such 20 days, then such Neutral
shall upon the application of either the General Partner or Geon LP 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 Dallas, Texas or if such appointment is not so made
promptly then promptly thereafter by the senior United States District
Court judge sitting in Dallas, Texas. The fees and expenses of the
Neutral shall be paid equally by the General Partner and Geon LP.
(d) 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" means 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" means determined by any final, nonappealable
judicial order or pursuant to a binding alternative dispute resolution
procedure.
"Fully Diluted" means a computation of equity interests on a basis as
if all potentially dilutive securities, including warrants, stock options and
convertible bonds, have been exercised or converted.
"Funding Notice" has the meaning set forth in Section 2.3.
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
Appendix A-7
<PAGE> 62
"General Partner" means 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.
"Geon" has the meaning set forth in the second recital.
"Geon LP" has the meaning set forth in the first paragraph.
"Highest Lawful Rate" means 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" means "HSE Law," as defined in both of the Asset Contribution
Agreements.
"Indemnified Party" has the meaning set forth in Section 13.2(c).
"Indemnifying Party" has the meaning set forth in Section 13.2(c).
"Initial Agreement" has the meaning set forth in the fourth recital.
"Initial Assets" means "Assets," as defined in Section 1 of both of the
Asset Contribution Agreements.
"Initial Notice" has the meaning set forth in Section 10.2(a).
"IRS" means Internal Revenue Service.
"Legal Requirement" means any law, statute, rule, ordinance, decree,
regulation, requirement, order (including any executive order) or judgment of
any court or government or regulatory body or political subdivision thereof.
"Leverage Ceiling" has the meaning set forth in Section 6.7(vi).
"Liability" means any loss, claim, damages, fine, penalty, assessment
by public agencies, settlement, cost or expense (including costs of
investigation, defense and reasonable attorneys' fees) or other liability.
"Limited Partner" means 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
Appendix A-8
<PAGE> 63
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" means from or to the Limited Partners in
the ratio of the Units owned by each.
"Liquidation" has the meaning set forth in Section 11.4.
"Losses" has the meaning set forth in definition of "Profits and
Losses."
"Master Transaction Agreement" means that certain agreement between OCC
and Geon dated December 22, 1998, providing for the execution of various
agreements concerning the Partnership and the Initial Assets.
"Maximum Amount" means the maximum nonusurious amount of interest that
may be lawfully contracted for, charged or received by the applicable Person in
connection with any indebtedness arising under this Agreement under all
Applicable Usury Laws.
"Neutral" means a neutral Person acceptable to all of the appointing
Partners and not affiliated with any of the Partners, except where otherwise
specifically provided; PROVIDED that, if the appointing Partners are not able to
agree upon a neutral Person to act as the Neutral, the AAA shall select the
Neutral.
"Non-Defaulting Partners" means the Partners other than the Defaulting
Partners.
"OCC" has the meaning set forth in the second recital.
"OCC GP" has the meaning set forth in the first paragraph.
"OCC LP" has the meaning set forth in the first paragraph.
"Offer" has the meaning set forth in Section 10.2(a).
"Offeree Partners" has the meaning set forth in Section 10.2(a).
"Operating Budget" has the meaning set forth in Section 8.2(c).
"Other Partner" means, in the case of Geon LP, OCC GP, and in the case
of OCC GP or OCC LP, Geon LP.
"Parent" means "Parent," as defined in the Parent Agreement.
Appendix A-9
<PAGE> 64
"Parent Agreement" means the Parent Agreement (Oxy Vinyls, LP) to be
entered into among Occidental Petroleum Corporation, OCC, Geon and the
Partnership in connection with this Agreement, as amended from time to time, the
form of which is referenced in the Master Transaction Agreement.
"Partners" means the General Partner and the Limited Partners on the
date of this Agreement until such Person ceases to be a partner of the
Partnership.
"Partnership" means Oxy Vinyls, LP, a Delaware limited partnership, the
limited partnership formed and continued under the Act and this Agreement.
"Partnership Annual Agreed Value" has the meaning set forth in Section
6.9.
"Partnership Governance Committee" has the meaning set forth in Section
6.1.
"Partnership Governance Committee Action" has the meaning set forth in
Section 6.1.
"Percentage Interest" means the percentage determined by dividing the
number of Units owned by a Partner by the total number of outstanding Units.
"Person" means any natural person or any corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization, business, government (or any agency or subdivision thereof) or
other entity.
"Pledge" means to mortgage, pledge, encumber or create or suffer to
exist any lien or encumbrance upon or security interest in. Such defined term is
used in this Agreement as both a noun and a verb.
"Profits and Losses" means, 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, deduction or credit 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
Section 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.
Appendix A-10
<PAGE> 65
(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.
(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.
"Pro Rata" means in the ratio of the Units owned by a Partner to the
total number of applicable Units.
"Proposing Person" has the meaning set forth in Section 9.3(c).
"PVC" means polyvinyl chloride.
"Reconstituted Basis" means, as to each Partnership property, the
Partnership's basis in such property immediately after it is contributed to the
Partnership reduced by any depreciation and other deductions allocated to a
Partner pursuant to Section 4.5(c)(i)(a).
"Regulations" means the final or temporary income tax regulations
promulgated by Department of the Treasury and in effect from time to time.
"Related Agreements" means the agreements (other than this 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" means any Specified Business, except for any
business of producing, purchasing or otherwise acquiring, using, distributing,
marketing or exchanging caustic soda, chlorine, ethylene dichloride, ethylene,
sodium methylate or chlorinated paraffins.
"Related Persons" has the meaning set forth in Section 13.1.
"Representative" has the meaning set forth in Section 6.4(a).
Appendix A-11
<PAGE> 66
"Retained Business" means, in the case of OCC, the Specialty Resin
Business conducted primarily at its manufacturing plant located in Pottstown,
Pennsylvania and all related assets, and in the case of Geon, the Specialty
Resin Business conducted primarily at its retained portion of the Pedricktown,
New Jersey manufacturing plant and all related assets and its manufacturing
plant located in Henry, Illinois and all related assets.
"SEC" means the Securities and Exchange Commission.
"Selling Partners" has the meaning set forth in Section 10.2(a).
"Specialty Resin Business" means the business of producing, purchasing
or otherwise acquiring, using, distributing, marketing and exchanging (i)
dispersion, blending and copolymer resins and (ii) Specialty Suspension PVC
Resin (as that term is defined in the Related Agreements that are attached as
Exhibits T and V to the Master Transaction Agreement), including those produced
by any Retained Business.
"Specified Business" means the business of doing the following: (i) to
produce, purchase or otherwise acquire, use, distribute, market and exchange
suspension/mass PVC resin products, chlorinated PVC, VCM (to the extent
permitted under applicable agreements concerning VCM produced by OxyMar),
caustic soda, chlorine, ethylene dichloride, sodium methylate and chlorinated
paraffins (the "Primary Business"); (ii) to maintain, conduct and expand the
Primary Business, including the development of new technologies and products
for, the licensing of intellectual property related to, and the transportation,
storage and exchange of any products produced, purchased, acquired, used,
distributed, marketed or exchanged by, the Primary Business; PROVIDED, HOWEVER,
that the production of caustic soda, chlorine and ethylene dichloride may be
expanded by the Partnership only to meet the internal consumption demand of the
other parts of the Primary Business for such products; (iii) to produce,
purchase or otherwise acquire electricity and to purchase or otherwise acquire
ethylene, in each case as required to conduct the Primary Business; (iv) to
distribute and market, but only through OCC in accordance with agreements
between the Partnership and OCC, any excess caustic soda, chlorine, ethylene
dichloride, sodium methylate and chlorinated paraffins that the Partnership
produces, purchases or otherwise acquires for, and does not consume in, the
Primary Business; (v) to distribute and market any ethylene, electricity and
other products and by-products (except for caustic soda, chlorine, ethylene
dichloride, sodium methylate and chlorinated paraffins, the distribution and
marketing of which are covered in clause (iv) above) that the Partnership
produces, purchases or otherwise acquires for, but does not consume in, the
Primary Business; PROVIDED, HOWEVER, that the distribution and marketing of any
such ethylene shall only be through Equistar Chemicals, LP in accordance with
agreements between the Partnership and Equistar Chemicals, LP; (vi) to engage in
the incidental purchase, acquisition, use or sale of PVC dry blend powder
compounds to support customers of the pipe segment of the Primary Business and
to support other customers of the Primary Business as approved by all Partners
(such approval not to be unreasonably withheld); and (vii) to produce, purchase
or otherwise acquire, use, distribute, market and exchange PVC pipe and pipe
fittings; PROVIDED, HOWEVER, that the "Specified Business" shall not include the
Specialty Resin Business.
Appendix A-12
<PAGE> 67
"Strategic Plan" has the meaning set forth in Section 8.1.
"Substitute General Partner" means 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" means a Person who is admitted as a
Limited Partner to the Partnership in place of and with all the rights of a
Limited Partner.
"Supply Agreements" means the Related Agreements that are attached as
Exhibits L and O to the Master Transaction Agreement.
"Taxes" means all taxes, charges, fees, levies or other assessments
imposed by any taxing authority, including 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" means OCC LP in its capacity as the sole owner of
OCC GP or any substitute Partner designated by OCC LP.
"Third Party Claim" means any allegation, claim, demand, civil or
criminal action, proceeding, charge or prosecution brought by a Person other
than the Partnership, any Partner or any Affiliate of a Partner; PROVIDED,
HOWEVER, that if such allegation, claim, demand, civil or criminal action,
proceeding, charge or prosecution is brought by any Partner or any Affiliate of
a Partner, in each case in its capacity as the owner or operator of property not
transferred pursuant to the OCC or Geon Asset Contribution Agreement, such
allegation, claim, demand, civil or criminal action, proceeding, charge or
prosecution shall be a Third Party Claim.
"Transfer" means to sell, assign or otherwise dispose of, whether by
act, deed, merger or otherwise. Such defined term is used in this Agreement as
both a noun and a verb.
"Unit" means a unit representing a partnership interest in the
Partnership.
"VCM" means vinyl chloride monomer.
"Wholly-Owned Affiliate" means, 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 Parent
thereof
"Wholly-Owned Subsidiary" means, 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-13
<PAGE> 68
APPENDIX B
TO LIMITED PARTNERSHIP AGREEMENT
--------------------------------
PARTNERSHIP FINANCIAL STATEMENTS AND REPORTS
--------------------------------------------
<TABLE>
<CAPTION>
Item & Frequency Due Dates
- ---------------- ---------
<S> <C>
Monthly:
Income Statement - current period and year-to-date 8th Business Day following month-end
Balance Sheet - current period 9th Business Day following month-end
Cash Flow Statement - current period and year-to-date 9th Business Day following month-end
Schedule of Income Allocation - preliminary 6th Business Day following month-end
Schedule of Income Allocation - final 10th Business Day following month-end
Calculation of Distribution of Available Net Operating
Cash - final 15th Business Day following month-end
Results of Operations Analysis 10th Business Day following month-end
Quarterly:
Analysis for Investor Relations and Form 10-Q
disclosures:
- Results of Operations 15th Business Day following quarter-end
- Cash Flow 15th Business Day following quarter-end
- Sales Variances 15th Business Day following quarter-end
- Capital Expenditures 15th Business Day following quarter-end
- Intercompany Transactions 15th Business Day following quarter-end
- Volumes 15th Business Day following quarter-end
- Prices 15th Business Day following quarter-end
- Unusual Items 15th Business Day following quarter-end
Income Statement - current quarter and year-to-date 10th Business Day following quarter-end
Balance Sheet - current period 11th Business Day following quarter-end
Cash Flow Statement - current quarter and year-to-date 11th Business Day following quarter-end
</TABLE>
Appendix B-1
<PAGE> 69
<TABLE>
<CAPTION>
Annual:
<S> <C>
Analysis for Investor Relations and Form 10-K
disclosures
- Same as quarterly requirements
- Plant Capacities 15th Business Day following year-end
Audited Financial Statements 90days following year-end
</TABLE>
Appendix B-2
<PAGE> 70
APPENDIX C
INITIAL EXECUTIVE OFFICERS
--------------------------
John L. Hurst, III, Chief Executive Officer
Appendix C-1
<PAGE> 71
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 involved in the
Dispute 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 (with references to "Partners" meaning
the Partners involved in the Dispute):
(a) Any 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 Dallas,
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 Business 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 subsections (d), (e) and (f).
Appendix D-1
<PAGE> 72
(d) After satisfying the requirements above, such Dispute shall be
submitted to mandatory and binding arbitration at the election of any Partner
involved in the Dispute (the "Disputing Partner"). The arbitration shall be
subject to the Federal Arbitration Act as supplemented by the conditions set
forth in this Appendix. The arbitration shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date the notice of arbitration is served, other than as
specifically modified herein. In the absence of an agreement to the contrary,
the arbitration shall be held in Dallas, Texas. The Arbitrator (as defined
below) will allow reasonable discovery in the forms permitted by the Federal
Rules of Civil Procedure, to the extent consistent with the purpose of the
arbitration. During the pendency of the Dispute, each Partner shall make
available to the Arbitrator and the other Partners all books, records and other
information within its control requested by the other Partners or the Arbitrator
subject to the confidentiality provisions contained herein, and PROVIDED that no
such access shall waive or preclude any objection to such production based on
any privilege recognized by law. Recognizing the express desire of the Partners
for an expeditious means of dispute resolution, the Arbitrator may limit the
scope of discovery between the Partners as may be reasonable under the
circumstances. In deciding the substance of the Partners' claims, the laws of
the State of Delaware shall govern the construction, interpretation and effect
of this Agreement (including this Appendix) without giving effect to any
conflicts of law principles. The arbitration hearing shall be commenced promptly
and conducted expeditiously, with each Partner involved in the Dispute being
allocated an equal amount of time for the presentation of its case. Unless
otherwise agreed to by the Partners, the arbitration hearing shall be conducted
on consecutive days. Time is of the essence in the arbitration proceeding, and
the Arbitrator shall have the right and authority to issue monetary sanctions
against any of the Partners if, upon a showing of good cause, that Partner is
unreasonably delaying the proceeding. To the fullest extent permitted by law,
the arbitration proceedings and award shall be maintained in confidence by the
Arbitrator and the Partners.
(e) The Disputing Partner shall notify the American Arbitration
Association ("AAA") and the other Partners in writing describing in reasonable
detail the nature of the Dispute (the "Dispute Notice"). The arbitrator (the
"Arbitrator") shall be selected within 15 days of the date of the receipt of the
Dispute Notice by all of the Partners from the members of a panel of arbitrators
of the AAA or, if the AAA fails or refuses to provide a list of potential
arbitrators, of the Center for Public Resources, and shall be experienced in
commercial arbitration. In the event that the Partners are unable to agree on
the selection of the Arbitrator, the AAA shall select the Arbitrator, using the
criteria set forth in this Appendix, within 30 days of the date of the Dispute
Notice. In the event that the Arbitrator is unable to serve, his or her
replacement will be selected in the same manner as the Arbitrator to be
replaced. The Arbitrator shall be neutral. The Arbitrator shall have the
authority to assess the costs and expenses of the arbitration proceeding
(including the arbitrators' costs and attorneys' fees and expenses) against any
or all Partners.
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental,
Appendix D-2
<PAGE> 73
indirect, punitive, exemplary, special or other similar damages or (ii) amend
this Agreement. The Arbitrator shall render the arbitration award, in writing,
within 20 days following the completion of the arbitration hearing, and shall
set forth the reasons for the award. In the event that the Arbitrator awards
monetary damages in favor of either party, the Arbitrator must certify in the
award that no indirect, consequential, incidental, punitive, exemplary, special
or other similar damages are included in such award. If the Arbitrator's
decision results in a monetary award, the interest to be granted on such award,
if any, and the rate of such interest shall be determined by the Arbitrator in
his or her discretion. The arbitration award shall be final and binding on the
Partners, and judgment thereon may be entered in any court of competent
jurisdiction, and may not be appealed except to the extent permitted by the
Federal Arbitration Act.
(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-3
<PAGE> 74
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 Arbitrator shall determine to be appropriate under the
circumstances.
Appendix D-4
<PAGE> 75
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, OCC GP and OCC LP shall be treated as
if they were a single Partner.
Appendix E-1
<PAGE> 76
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> 1
Exhibit 10.3
ASSET CONTRIBUTION AGREEMENT -
PVC PARTNERSHIP (GEON)
AMONG
THE GEON COMPANY,
1999 PVC PARTNER INC.
AND
OXY VINYLS, LP
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES............ 1
1.1 Transfer of Assets............................................ 1
1.2 Excluded Assets............................................... 2
1.3 Instruments of Conveyance and Assignment...................... 3
1.4 Further Assurances............................................ 4
1.5 Assumption of Liabilities..................................... 5
1.6 [Intentionally Omitted]....................................... 6
1.7 Employee Matters.............................................. 6
1.8 Joint Contracts............................................... 10
1.9 Retained Business; Support Services.......................... 11
SECTION 2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR........................ 11
2.1 Employee Benefits............................................. 11
2.2 Labor Relations............................................... 14
2.3 Title to Assets; Absence of Liens and Encumbrances; Leases.... 15
2.4 Title Matters; Defects in Improvements........................ 16
2.5 Working Capital............................................... 16
2.6 Government Licenses, Permits and Related Approvals............ 16
2.7 All Necessary Assets.......................................... 16
2.8 Conduct of Business in Compliance with Regulatory and
Contractual Requirements..................................... 17
2.9 Legal Proceedings............................................. 17
2.10 Tax Matters................................................... 17
2.11 HSE Matters................................................... 18
2.12 Contributed Subsidiaries...................................... 19
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP.................... 19
3.1 Due Organization; Good Standing and Power..................... 19
3.2 Authorization and Validity of Agreement....................... 19
3.3 No Consents Required; No Conflict with Instruments to
which the Partnership is a Party............................. 20
SECTION 4 COVENANTS SUBSEQUENT TO CLOSING DATE................................. 20
4.1 Access to Information......................................... 20
4.2 Mail or Other Communications.................................. 21
4.3 Asset Transfer Effective Time Balance Sheet................... 21
4.4 Insurance Claims.............................................. 21
4.5 Special Covenant.............................................. 21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5 SURVIVAL AND INDEMNIFICATION........................................ 21
5.1 Survival Limitations.......................................... 21
5.2 Indemnification............................................... 22
5.3 Procedures.................................................... 27
5.4 Subrogation................................................... 29
5.5 Claims for HSE Remedial Action................................ 29
5.6 Extent of Indemnification..................................... 32
SECTION 6 MISCELLANEOUS........................................................ 33
6.1 Construction.................................................. 33
6.2 Payment of Certain Expenses and Taxes......................... 33
6.3 Notices....................................................... 34
6.4 Binding Effect; Benefit....................................... 35
6.5 Occasional and Bulk Sales..................................... 35
6.6 Assignability................................................. 36
6.7 Amendment; Waiver............................................. 36
6.8 Dispute Resolution............................................ 36
6.9 Severability.................................................. 36
6.10 Counterparts.................................................. 36
6.11 Conflict with Transfer Documents.............................. 36
6.12 Transfer Documents............................................ 36
</TABLE>
SCHEDULES
Schedule A Contributed Business
Schedule B Tier 1 Employees
Schedule C Tier 2 Employees
Schedule 1.1(a) Fee Interests
Schedule 1.1(b) Leases
Schedule 1.1(d) Equipment
Schedule 1.1(g) Certain Contributed Contracts
Schedule 1.2(g) Certain Excluded Assets
Schedule 1.2(j) Excluded Railcars
Schedule 1.5(a)(vi) Assumed Indebtedness
Schedule 1.5(a)(x) Assumed Long-Term Liabilities
Schedule 2 Disclosure Schedule
Schedule 2.1 Employee Benefit Plans
Schedule 2.9 Legal Proceedings
Schedule 2.10 Tax Exempt Indebtedness
APPENDICES
Appendix A Definitions
Appendix B Dispute Resolution Procedures
-ii-
<PAGE> 4
EXHIBITS
Exhibit A Form of Deeds
Exhibit B Form of Assignment of Leases
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 Partnership Assumption Agreement
Exhibit G Form of Site Lease Agreement
-iii-
<PAGE> 5
ASSET CONTRIBUTION AGREEMENT-
-----------------------------
PVC PARTNERSHIP (GEON)
----------------------
This ASSET CONTRIBUTION AGREEMENT - PVC PARTNERSHIP (GEON) (this
"Agreement"), dated as of the 30th day of April, 1999, is entered into among The
Geon Company, a Delaware corporation ("Contributor"), 1999 PVC Partner Inc., a
Delaware corporation ("Geon LP"), and Oxy Vinyls, LP, a Delaware limited
partnership (the "Partnership").
WHEREAS, the definitions of capitalized terms used in this Agreement
are set forth in Appendix A hereto; and
WHEREAS, Contributor owns all of the issued and outstanding shares of
capital stock of Geon LP; and
WHEREAS, Contributor wishes to contribute the assets subject to certain
liabilities associated with the businesses described in Schedule A (the
"Contributed Business") 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, Contributor will become a limited partner in the Partnership
and receive 24 PVC Units and the Specified Amount, if any, from the Partnership;
and
WHEREAS, Contributor will transfer the 24 PVC Units to Geon LP,
whereupon Geon LP will be admitted to the Partnership as a limited partner; and
WHEREAS, the Partnership will consummate certain transactions and enter
into certain agreements as provided for in the Master Transaction Agreement,
dated as of December 22, 1998, between Occidental Chemical Corporation ("OCC")
and Contributor (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 I
CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES
---------------------------------------------------------
1.1 TRANSFER OF ASSETS. On the terms and subject to the conditions set
forth in this Agreement, on the date hereof and effective as of the Asset
Transfer Effective Time, Contributor hereby contributes, conveys, assigns,
transfers and delivers to the Partnership, or causes to be contributed,
conveyed, assigned, transferred and delivered to the Partnership, and the
Partnership hereby accepts and acquires, all of the assets, rights, and
properties used or held for use in the operation and conduct or contemplated
operation and conduct of the Contributed Business of every kind, nature,
character and description, tangible and intangible, real, personal or mixed,
whether held by Contributor or an Affiliate thereof, wherever located, other
than the Excluded Assets; and which conveyance, subject to Section 1.2, shall
include the following:
<PAGE> 6
(a) the Fee Interests;
(b) the Leaseholds;
(c) the Associated Rights, including 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) the Equipment and all warranties and guarantees, if any, express or
implied, existing for the benefit of Contributor or any Affiliate thereof in
connection with the Equipment to the extent assignable;
(e) Subject to the Master Intellectual Property Agreement, the
Unrecorded Assets;
(f) Subject to the Master Intellectual Property Agreement, the
Contributed Intellectual Property;
(g) the Contributed Contracts;
(h) All Government Licenses that are transferable and as to which
Consents to transfer are obtained where required;
(i) Accounts Receivable, Inventory, Stores Inventory, Prepaid Expenses,
and plant petty cash funds, including, by way of illustration only, any amounts
or balances owing to Contributor under any product exchange or similar
agreeement, other than the Specified Working Capital Items;
(j) All of the outstanding capital stock of LaPorte Chemicals Corp.
(the "Contributed Subsidiary");
(k) All claims and rights against third parties (including 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 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 Contributor,
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, except that
Contributor shall not be required to enforce insurance claims against fronting,
captive or retrospectively rated policies which would ultimately result in such
claims being ultimately borne, directly or indirectly, by Contributor; and
(l) Any other asset of Contributor or its Affiliates contributed to the
Partnership pursuant to the terms of this Agreement.
1.2 EXCLUDED ASSETS. It is expressly understood and agreed that the
Assets shall not include the following (the "Excluded Assets"):
-2-
<PAGE> 7
(a) Specified Working Capital Items;
(b) Except as may be agreed pursuant to Section 1.7, any assets of any
qualified or non-qualified pension or welfare plans or other deferred
compensation arrangements maintained by any Contributor or any Affiliate thereof
for employees of such Contributor or any Affiliate thereof prior to the Asset
Transfer Effective Time;
(c) Subject to the Master Intellectual Property Agreement, any and all
of the Intellectual Property of Contributor or any Affiliate thereof to the
extent not primarily used in the normal operation and conduct of, or to the
extent not applicable to, the Contributed Business, and any and all Trademarks
of Contributor or any Affiliate thereof except for the Trademarks assigned or
licensed in the Master Intellectual Property Agreement;
(d) All claims and rights against third parties (including insurance
carriers, indemnitors, suppliers and service providers), to the extent they do
not relate to the Assumed Liabilities;
(e) Claims held by Contributor or any Affiliate thereof for refunds of
Taxes for time periods ending on or before the Asset Transfer Effective Time,
which Taxes remain the liability of Contributor or its Affiliates under this
Agreement;
(f) All items sold in the ordinary course of business prior to the
Asset Transfer Effective Time, none of which individually or in the aggregate
are material to the normal operation and conduct of the Contributed Business;
(g) The tangible assets, intangible assets, real properties, contracts
and rights described on Schedule 1.2(g);
(h) Any of Contributor's or any Affiliates' right, title and interest
in and to any dispersion PVC resin producing plant assets, co-polymer PVC resin
producing plant assets, or specialty homopolymer suspension and blending resins;
(i) Any real property of Contributor or any Affiliate thereof in the
vicinity of but not within the metes and bounds or other descriptions of the Fee
Interests and any related easements or rights-of-way surveyed pursuant to
Section 6.2(d); and
(j) The interest of Contributor and its Affiliates in all railcars
(whether owned or leased) utilized in the operation and conduct of the
Contributed Business and described on Schedule 1.2(j) (the "Excluded Railcars").
1.3 INSTRUMENTS OF CONVEYANCE AND ASSIGNMENT. On the Closing Date:
(a) Contributor shall 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 "Assignment of
Leases"), (iii) a bill of sale
-3-
<PAGE> 8
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 Contributed Contracts, (iv) an
assignment of the trademarks included in the Assets in substantially the form
attached as Exhibit D (the "Trademark Assignment"), (v) an assignment of those
patent rights included in the Assets, as specifically provided in the Master
Intellectual Property Agreement, in substantially the form attached hereto as
Exhibit E (the "Patent Assignment"), and (vi) stock certificates representing
all of the outstanding capital stock of the Contributed Subsidiary, together
with stock powers duly executed in blank;
(b) Contributor and the Partnership shall deliver or cause to be
delivered to each other a Site Lease Agreement with respect to certain
properties in Pedricktown, New Jersey, in substantially the form attached hereto
as Exhibit G (the "Site Lease Agreement"); and
(c) Contributor shall transfer to the Partnership the originals (to the
extent Contributor or any Affiliate thereof possesses an original and retained
no rights thereunder after the Asset Transfer Effective Time) 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.
1.4 FURTHER ASSURANCES.
(a) On and from time to time after the Closing Date, Contributor will
execute and deliver, or cause to be executed and delivered, at its sole cost and
expense, 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 continue the normal operation and conduct of the
Contributed Business and otherwise 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, at its sole
cost and expense, such other instruments of assumption, conveyance, assignment,
transfer, power of attorney or assurance as Contributor may reasonably request
in order to fulfill and implement the terms of this Agreement, to vest in the
Partnership all of the Assumed Liabilities or to enable Contributor to realize
the benefits intended to be afforded hereby.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the Partnership and Contributor acknowledge and agree that any
Government Licenses, Contributed Contracts, warranties or other Assets related
to the Contributed Business and required to be conveyed pursuant to this
Agreement that by their terms require Consent from any other Person shall not be
assigned to the Partnership unless any such Consent has been obtained prior to
the Closing Date.
(d) From and after the Closing Date, Contributor 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
-4-
<PAGE> 9
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, including any and all financial information
necessary for the Partnership's operation of the Contributed Business or
required for financial reporting or other purposes.
1.5 ASSUMPTION OF LIABILITIES.
(a) On the terms and subject to the conditions, including Sections 1.7
and 5.2, set forth in this Agreement, effective as of the Asset Transfer
Effective Time, the debts, liabilities and obligations of Contributor set forth
in this Section 1.5 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 on or after the Asset Transfer
Effective Time under the Contributed 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 Contributed Contract
or Lease prior to the Asset Transfer Effective Time;
(ii) All obligations under purchase orders accepted by
Contributor in the ordinary course of business of the Contributed
Business prior to the Asset Transfer Effective Time that are assigned
to the Partnership hereunder and that are not filled as of the Asset
Transfer Effective Time, but only to the extent not filled;
(iii) Trade Accounts Payable;
(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 on or after the Asset
Transfer Effective Time of the Assets or the Contributed Business,
except for HSE Claims that are related to Pre-Closing Liabilities and
that arise out of the Partnership's status after the Asset Transfer
Effective Time as an owner or operator of the Assets or the Contributed
Business;
(v) Except for HSE Claims, Exposure Claims and Product
Exposure Claims, any Third Party Claims that are related to Pre-Closing
Liabilities and that are first asserted ten years or more after the
Asset Transfer Effective Time;
(vi) The obligations for Indebtedness described on Schedule
1.5(a)(vi);
(vii) All Liabilities associated with products sold by the
Partnership after the Asset Transfer Effective Time regardless of when
manufactured;
(viii) Any Product Exposure Claims that are first asserted 20
years or more after the Asset Transfer Effective Time;
(ix) Any HSE Claims that are related to Pre-Closing
Liabilities and that are first asserted ten years or more after the
Asset Transfer Effective Time;
-5-
<PAGE> 10
(x) The long-term Liabilities set forth on Schedule 1.5(a)(x);
and
(xi) Any other Liability specifically assumed by the
Partnership pursuant to the terms of this Agreement.
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 Contributor
an instrument of assumption of the Assumed Liabilities substantially in the form
attached hereto as Exhibit F (the "Partnership Assumption Agreement").
1.6 [Intentionally Omitted].
1.7 EMPLOYEE MATTERS.
(a) In accordance with and subject to Section 3.7 of the Master
Transaction Agreement, the Partnership shall offer employment to certain
Salaried Employees and to each Union Employee in accordance with the terms and
conditions negotiated between the Partnership and the Unions. Any Employee that
accepts such offer is hereinafter referred to as a "Partnership Employee."
Partnership Employees shall be employed effective as of the Asset Transfer
Effective Time. Notwithstanding the foregoing, if as of the Asset Transfer
Effective Time, any Employee is eligible for and receiving short term disability
benefits or sick pay, or is on leave of absence, and the Partnership has offered
such Employee an offer of employment, such Employee shall become employed by the
Partnership (and become a Partnership Employee for purposes of this Section 1.7)
upon eligibility to return to active employment with Contributor under the
applicable conditions of the short term disability benefits or sick pay plan of
Contributor, or upon return from leave of absence. Such Employee's employment by
the Partnership shall not be effective until 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, Contributor
shall continue to bear all costs and expenses associated with such Employee.
(b) Contributor shall remain solely responsible for (i) any liability
with respect to Tier 1 Employees who do not become Partnership Employees (as
well as any employees of Contributor who do not become Partnership Employees and
who are not Tier 1 Employees, Tier 2 Employees or Plant Employees), including
any liability for severance benefit payments and any costs associated with
violations of any Legal Requirements; (ii) bonus or executive compensation, if
any, to Employees covered by Contributor's bonus or executive compensation
programs; and (iii) any liability related to the termination of any employees of
Contributor or any of its Affiliates at any time prior to the Asset Transfer
Effective Time, including liability for all severance benefit payments to such
employees pursuant to any applicable severance plan and any costs associated
with violations of any Legal Requirements. With respect to Employees who become
Partnership Employees, Contributor shall pay prior to the Asset Transfer
Effective Time bonus or executive compensation earned in 1998. Contributor shall
promptly reimburse the Partnership for a pro rata portion of any bonus or
executive compensation paid by the Partnership that is earned in 1999 by
Partnership
-6-
<PAGE> 11
Employees, based on the months of employment in 1999 with Contributor prior to
the Asset Transfer Effective Time.
(c) The Partnership shall be responsible for any severance costs with
respect to Plant Employees pursuant to the applicable plan or program of the
Partnership, as applicable to such Employee and in effect as of the termination
date of such Employee. Any Partnership Employee whose employment is terminated
by the Partnership within six months after the Asset Transfer Effective Time
shall be entitled to receive a severance benefit from the Partnership not
less than the benefits, if any, provided under the severance plan of
Contributor in effect as of the Asset Transfer Effective Time.
(d) Any employees of Contributor that the Partnership and 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 Contributor on terms and conditions and for
a duration to be agreed upon by the Partnership and Contributor. The Partnership
shall reimburse Contributor for any such agreed upon compensation, including
payroll taxes, travel expenses and other support expenses, benefit costs and
workers compensation premiums and claims, paid by Contributor to or with respect
to any Transition Employee.
(e) With regard to the Contributed Business, the Partnership shall not
at any time prior to 60 days after the Asset Transfer Effective Time, effectuate
a "plant closing" or a "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 or operating unit, or any Employees
without complying fully with the notice and all other applicable requirements of
WARN.
(f) As of the Asset Transfer Effective Time, the Partnership shall
provide each Salaried Employee that is a Partnership Employee with "Partnership
Benefit Plans," which shall mean the benefit plans and programs under (i) Plans
effective immediately prior to the Asset Transfer Effective Time, (ii) the
benefit plans and programs applicable to employees of OCC in similar jobs, or
(iii) a combination of the Plans and OCC's benefit plans and programs, the
determination of which shall be at the sole discretion of the Partnership. From
and after the Asset Transfer Effective Time, each Salaried Employee that is a
Partnership Employee shall be eligible to participate in such Partnership
Benefit Plans in accordance with the terms and conditions thereof. Under such
Partnership Benefit Plans that are Employee Welfare Benefit Plans, Salaried
Employees that are Partnership Employees and their eligible dependents, if
participants in any health, long term disability or life insurance plans, as
applicable, of Contributor immediately prior to the Asset Transfer Effective
Time, (i) shall participate in such Partnership Benefit Plans as of the Asset
Transfer Effective Time, and (ii) shall be deemed to satisfy any pre-existing
condition limitations under group medical, dental, life insurance or disability
plans that shall be provided after the Asset Transfer Effective Time. In
addition, amounts paid by such Salaried Employees that are Partnership Employees
towards deductibles and copayment limitations under the health plans of
Contributor shall be counted toward meeting any similar deductible and copayment
limitations under the health plans that shall be provided under the Partnership
Benefit Plans.
(g) The Partnership shall recognize all service credited for each of
the Salaried Employees that are Partnership Employees on Contributor's records
for purposes of eligibility for
-7-
<PAGE> 12
benefits and vesting under the Partnership Benefit Plans and the level of
benefits under the Partnership Benefit Plans, but no such recognition will be
made for any benefit accrual under any Partnership Benefit Plan that is a
defined benefit pension plan.
(h) Contributor agrees that, for Partnership Employees with an accrued
benefit under any Employee Pension Benefit Plan, Contributor shall, or shall
cause an Affiliate, as appropriate, to amend such Employee Pension Benefit Plans
so that full vesting in such accrued benefits shall occur as of the Asset
Transfer Effective Time.
(i) Contributor and the Partnership shall take all necessary and
reasonable steps to prevent a default of any loans of any Partnership Employee
under the Geon Retirement Savings Plan ("Contributor's 401(k) Plan"), including
taking prompt action to provide for a plan-to-plan asset transfer (as such
transfer is defined in section 414(l) of the Code) of account balances
(including outstanding loans) of those Partnership Employees who so elect to
transfer from Contributor's 401(k) Plan to the appropriate Partnership Benefit
Plan pursuant to section 401(k) of the Code.
(j) From and after the Asset Transfer Effective Time, Salaried
Employees that are Partnership Employees shall be entitled to retain and take
any paid vacation days accrued during the period from January 2, 1999 through
the Asset Transfer Effective Time but not taken under Contributor's vacation
policy, if applicable. On or promptly after the Asset Transfer Effective Time,
Contributor shall pay any Banked Vacation to each Salaried Employee. "Banked
Vacation" shall mean vacation time accrued on Contributor's records as payable
to any Salaried Employee who becomes a Partnership Employee for which vacation
time has not been taken prior to January 2, 1999.
(k) Contributor and the Partnership agree that they will satisfy their
respective obligations, if any, under the National Labor Relations Act regarding
Union Employees. The Partnership will recognize each Union, and each Union
Employee shall participate in such plans and programs as are applicable to the
Union Employees in accordance with the terms and conditions negotiated by the
Partnership.
(l) From and after the Asset Transfer Effective Time, Employees that
are Partnership Employees shall cease to accrue service credit and benefits,
except as expressly provided in this Section 1.7, under any and all welfare
plans of Contributor and its Affiliates, under any and all pension plans of
Contributor and its Affiliates, and under any and all non-ERISA plan or programs
of Contributor and its Affiliates, in which participation had been available to
such Employees prior to the Asset Transfer Effective Time; provided, however,
that Contributor at its sole expense may provide additional benefits to such
Partnership Employees.
(m) Except as otherwise provided in this Section 1.7, Contributor and
the Partnership agree that this Agreement does not contemplate the transfer of
any assets or liabilities from any benefit plan of Contributor to any
Partnership Benefit Plan. The Partnership hereby waives any and all claims that
the Partnership or any of its Affiliates might have to any of the assets of any
plan of Contributor or its Affiliates.
-8-
<PAGE> 13
(n) Except with respect to Assumed Liabilities (other than Assumed
Liabilities described in Section 1.5(a)(v)), Contributor shall retain the sole
responsibility for, and shall continue to pay, all hospital, medical, and health
care continuation coverage benefits as described in section 4980B of the Code,
life insurance, disability, other welfare plan expenses and benefits (including
all benefits under any benefit plan of Contributor), and worker's compensation
for employees of Contributor (including each Employee) and their covered
dependents, including "qualified beneficiaries" within the meaning of section
607(3) of ERISA, with respect to claims incurred prior to the Asset Transfer
Effective Time. In addition, except with respect to Assumed Liabilities (other
than Assumed Liabilities described in Section 1.5(a)(v)), Contributor shall
retain sole responsibility for the payment of any claim for medical benefits,
health care continuation coverage benefits as described in section 4980B of the
Code, life insurance benefits or other welfare benefits by, Exposure Claims by,
or any other item of compensation or benefits payable under any Contributor Plan
to, (i) any employee of Contributor after the Asset Transfer Effective Time, and
(ii) any former employee of Contributor who retired, died, became disabled or
otherwise terminated employment prior to the Asset Transfer Effective Time.
Expenses and benefits relating to such claims incurred by Partnership Employees
and their covered dependents attributable to employment with the Partnership on
or after the Asset Transfer Effective Time shall be the sole responsibility of
the Partnership under the terms of its benefit plans. For the purposes of this
Section 1.7(n), a claim is deemed incurred when the medical or other therapeutic
services giving rise to the claim were performed.
(o) Except as otherwise specified in this Section 1.7 and except with
respect to Exposure Claims, the Partnership hereby agrees to indemnify
Contributor and its Affiliates and to defend and hold Contributor and its
Affiliates harmless from and against any claims, losses, expenses, obligations,
and liabilities (including cost of defense and reasonable attorney's fees)
asserted against and imposed on Contributor and its Affiliates and arising out
of or otherwise in respect of the following:
(i) any failure by the Partnership to comply with its
obligations hereunder or otherwise with respect to any Partnership
Employee;
(ii) any suit or claim of violation brought against
Contributor or its Affiliates under WARN for any actions taken by the
Partnership after the Asset Transfer Effective Time with regard to the
Partnership Employees at any facility, site of employment or operating
unit affected by this Agreement;
(iii) all claims by any Partnership Employee attributable to
employment after the Asset Transfer Effective Time who the Partnership
or its Affiliates actually or constructively terminates or by any
spouse, dependent, estate or other beneficiary of such Employee; or
(iv) any claims or charges by or relating to Employee
concerning wrongful termination, discrimination, harassment, or
violation of (1) the Fair Labor Standards Act, (2) the Labor Management
Relations Act, (3) WARN, (4) the Americans With Disabilities Act, (5)
ERISA, (6) the Consolidated Omnibus Budget Reconciliation Act of 1985,
(7) the National Labor Relations Act, (8) the Family and Medical Leave
Act, (9) the Health Insurance Portability and Accountability Act, (10)
Title VII of the Civil Rights Act of 1964,
-9-
<PAGE> 14
(11) the Age Discrimination in Employment Act, or (12) any and all
applicable state and local laws relating to employees or labor
relations;
all as attributable to the conduct of the Partnership or its Affiliates with
respect to such Employee relating to the period subsequent to the Asset Transfer
Effective Time.
(p) Nothing expressed or implied in this Agreement shall confer upon
any Employee or any other Person other than the parties hereto, or any legal
representative thereof, any rights or remedies, including any right to
employment, whether directly or as a third party beneficiary, or continued
employment for any specified period, of any nature or kind whatsoever.
(q) Except as otherwise specified in this Section 1.7 and except with
respect to Assumed Liabilities (other than the Assumed Liabilities described in
Section 1.5(a)(v)), Contributor agrees to indemnify the Partnership and to
defend and hold the Partnership and its Affiliates harmless from and against
claims, losses, expenses, obligations, and liabilities (including costs of
defense and reasonable attorney's fees) arising out of or otherwise in respect
of the following: (i) any Contributor employee benefit plans, or claims of
employees or former employees of Contributor or of any spouse, dependent,
estate, or other beneficiary of such employees or former employees attributable
to employment with Contributor or any of its Affiliates, including any such
liability or obligation that may arise under Section 1.7(n), and (ii) any claims
or charges relating to wrongful termination, discrimination, harassment, or
violation of (1) the Fair Labor Standards Act, (2) the Labor Management
Relations Act, (3) WARN, (4) the Americans With Disabilities Act, (5) ERISA, (6)
the Consolidated Omnibus Budget Reconciliation Act of 1985, (7) the National
Labor Relations Act, (8) the Family and Medical Leave Act, (9) the Health
Insurance Portability and Accountability Act, (10) Title VII of the Civil Rights
Act of 1964, (11) the Age Discrimination in Employment Act, or (12) any and all
applicable state and local laws relating to employees or labor relations, all as
attributable to the conduct of Contributor or its Affiliates with respect to (I)
any employees or former employees of Contributor who do not become Partnership
Employees relating to the periods both before and after the Asset Transfer
Effective Time, and (II) the Employees, attributable to employment with
Contributor or any of its Affiliates.
(r) Representatives of the Partnership shall be entitled to meet with
the Employees at mutually agreeable times prior to the Asset Transfer Effective
Time to explain and answer questions about the conditions, policies and benefits
of employment by Partnership after the Asset Transfer Effective Time.
Contributor shall cooperate with the Partnership until the Asset Transfer
Effective Time in communicating to such Employees any additional information
concerning employment after the Asset Transfer Effective Time which such
Employees may seek, or which the Partnership may desire to provide, and during
normal business hours shall allow additional meetings by representatives of the
Partnership with such Employees upon the reasonable request of the Partnership.
In addition, Contributor and the Partnership agree to furnish each other with
appropriate records for each of the Employees, subject to customary
confidentiality restrictions, compliance with Legal Requirements and appropriate
employee consents, as may be necessary to assist in proper benefit
administration.
(s) The indemnity provisions of this Section shall be subject to the
requirements of Section 5.3.
-10-
<PAGE> 15
1.8 JOINT CONTRACTS.
(a) Any Contributed Contracts contributed to the Partnership pursuant
to Section 1.1 that relate principally to the Contributed Business but also
relate to the business (other than the Contributed Business) of Contributor or
its Affiliates will be made available to Contributor and its Affiliates by the
Partnership pursuant to arrangements by which 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.
(b) Any Contracts that relate principally to the business (other than
the Contributed Business) of Contributor or its Affiliates but also relate to
the Contributed Business will be made available to the Partnership by
Contributor or its Affiliates pursuant to 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 Contributor or its Affiliates.
1.9 RETAINED BUSINESS; SUPPORT SERVICES. In addition to the
Partnership's rights under the Related Agreements, for two years from the date
hereof, the Partnership shall have the right to purchase services from the
Retained Business at full cost and otherwise on arms'-length terms, in all cases
where it is reasonable under all the circumstances for the Retained Business to
provide such services but in no event in excess of the quantity of, or in kind
other than, such services provided to the Contributed Business prior to the
Asset Transfer Effective Time. In addition, for two years from the date hereof,
the Retained Business shall have the right to purchase services from the
Partnership at full cost and otherwise on arms'-length terms, in all cases where
it is reasonable under all the circumstances for the Partnership to provide such
services. In no event, however, shall this Section 1.9 override the express
terms and conditions of a Related Agreement as to particular services.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
---------------------------------------------
Except as set forth on Schedule 2, Contributor and Geon LP jointly and
severally represent and warrant to the Partnership as follows:
2.1 EMPLOYEE BENEFITS.
(a) Schedule 2.1 contains a true and complete list of each bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
employment, consulting, severance or termination pay, hospitalization or other
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program, agreement or arrangement,
and each other "employee benefit plan" (within the meaning of section 3(2) of
ERISA), program, agreement or arrangement, whether formal or informal, written
or oral, and whether legally binding or not, sponsored, maintained or
contributed to or required to be contributed to by Contributor or by any trade
or business, whether or not incorporated, that, together with Contributor, would
be deemed a "single employer" within the meaning of section 4001(b)(1) of ERISA,
a "controlled group" within the meaning of section 414(b) of the Code, "trades
or businesses under common control" within the meaning of section 414(c) of the
Code, or an "affiliated service group"
-11-
<PAGE> 16
within the meaning of section 414(m) of the Code (an "ERISA Affiliate") within
the last three years, for the benefit of any employee, former employee,
consultant, officer, or director of Contributor or its Affiliates (collectively,
the "Plans"). Neither Contributor nor any ERISA Affiliate has any plan or
commitment, whether legally binding or not, to create any additional Plan or to
modify or change any existing Plan that would affect any employee or terminated
employee of Contributor or any ERISA Affiliate. There has been no merger,
consolidation, or transfer of assets or liabilities (including any spinoff,
split up or split off) with respect to any of the ERISA Plans.
(b) With respect to each of the Plans, neither Contributor nor any
ERISA Affiliate is obligated to continue with any such Plan beyond the Asset
Transfer Effective Time.
(c) To the extent necessary or appropriate for the proper operation and
administration of each of the Plans, the participant and beneficiary records of
each Plan accurately state the history of each participant and beneficiary in
connection with such Plan and accurately states the benefits earned and owed to
each person under such Plan.
(d) To the Knowledge of Contributor, each of the Plans is, and has
always been, operated in all respects in accordance with all Legal Requirements,
and all persons who participate in the operation of such Plans and all Plan
"fiduciaries" (within the meaning of section 3(2) of ERISA) have always acted in
accordance with the provisions of all Legal Requirements, the Plan documents and
written descriptions of the Plans. Each of the Plans intended to be "qualified"
within the meaning of section 401(a) of the Code is so qualified and has
received a currently applicable favorable determination letter, and nothing has
occurred since the date of such letter that could reasonably be expected to
cause the loss of such qualification.
(e) No liability under Title IV of ERISA has been incurred, directly or
indirectly, by Contributor or any ERISA Affiliate since the effective date of
ERISA that has not been satisfied in full, and no condition exists that presents
a material risk to Contributor or an ERISA Affiliate of incurring liability
under such Title, other than a liability for premiums due the Pension Benefit
Guaranty Corporation ("PBGC"), which payments have been or will be made when
due. To the extent that this representation applies to sections 4064, 4069 or
4204 of Title IV of ERISA, it is made not only with respect to ERISA Plans but
also with respect to any employee benefit plan, program, agreement or
arrangement subject to Title IV of ERISA to which Contributor or an ERISA
Affiliate made, or was required to make, contributions during the three year
period ending on the last day of Contributor's most recent fiscal year.
(f) The PBGC has not instituted any Proceedings to terminate any of the
ERISA Plans, and no condition exists that presents a material risk that any such
Proceedings will be instituted.
(g) No reportable event within the meaning of section 4043 of ERISA, or
prohibited transaction within the meaning of section 406 of ERISA, has occurred
with respect to any Plan.
(h) Neither Contributor, any ERISA Affiliate, any of the ERISA Plans or
any trust created thereunder nor any trustee or administrator thereof has
engaged in any transaction or has taken or failed to take any action in
connection with which Contributor, any ERISA Affiliate, any of the ERISA Plans,
any such trust, any trustee or administrator thereof, or any party dealing with
-12-
<PAGE> 17
the ERISA Plans or any such trust could be subject to any liability, fine,
penalty, tax or related charge under section 409, section 502(c)(i) or (1), or
section 4071 of ERISA or Chapter 43 of the Code, or the imposition of a lien
pursuant to section 401(a)(29) or 412(n) of the Code. Each welfare plan of
Contributor or any ERISA Affiliate that is subject to section 1862(b)(1) of
Social Security Act has been operated in compliance with the secondary payor
requirements of such section.
(i) No assets of any of the Plans are invested, directly or indirectly,
in real or personal property used by Contributor or, with respect to the ERISA
Plans, any ERISA Affiliate. There is sufficient liquidity of assets in each of
the funded Plans to promptly pay for the benefits earned and other liabilities
owed under such Plan. With respect to each of the Plans, no insurance contract,
annuity contract, or other agreement or arrangement with any financial or other
organization would impose any penalty, discount or other reduction on account of
the withdrawal of assets from such organization or the change in the investment
of such assets.
(j) No Plan is a "multiemployer plan" as such term is defined in
section 3(37) of ERISA. No Plan is a plan maintained by more than one employer
(a so-called "multiple employer plan") for purposes of section 413(c) of the
Code.
(k) No amounts payable under the Plans or any other agreement or
arrangement to which Contributor or any ERISA Affiliate is a party will, as a
result of the transactions contemplated by this Agreement, fail to be deductible
for federal income tax purposes by virtue of section 280G of the Code.
(l) No "leased employee," as that term is defined in section 414(n) of
the Code, performs services for Contributor or any ERISA Affiliate.
(m) No Plan provides benefits, including death or medical benefits
(whether or not insured), with respect to current or former employees after
retirement or other termination of service other than (i) coverage mandated by
applicable law, (ii) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of Contributor or the
ERISA Affiliates, or (iv) benefits, the full cost of which is borne by the
current or former employee (or his beneficiary).
(n) With respect to each Plan that is funded wholly or partially
through an insurance policy, there will be no liability of Contributor or an
ERISA Affiliate, as of the Closing Date, under any such insurance policy or
ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual contingent
liability arising wholly or partially out of events occurring prior to the
Closing Date.
(o) There is, and has been, no actual, and to the Knowledge of
Contributor, no anticipated, threatened or expected, litigation or arbitration
concerning or involving any of the Plans. No complaints to or by any Authority
have been filed, or, to the knowledge of Contributor, are threatened or
expected, with respect to any of the Plans. No claims have been made, or, to the
Knowledge of Contributor, are expected, with respect to any bond or any
fiduciary or other similar insurance with regard to the actions of any Person in
connection with any of the ERISA Plans or other funded Plans, nor has there
been, nor is there, to the Knowledge of Contributor, expected, any
-13-
<PAGE> 18
notice to any insurer under any such bond or policy with regard to any of such
Plans. No application for any bond or fiduciary liability or similar insurance
policy has been issued subject to any qualification, condition or exclusion.
(p) Except as provided in this Agreement, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or officer of Contributor or any of its Affiliates to severance
pay, unemployment compensation or any other similar payment, (ii) accelerate the
time of payment or vesting, or increase the amount of, any compensation due to
any such employee or officer, (iii) result in any employment-related expenses or
liabilities, the full cost of which will not be paid by Contributor, or (iv)
result in any prohibited transaction described in section 406 of ERISA or
section 4975 of the Code for which an exemption is not available.
2.2 LABOR RELATIONS.
(a) As related to the Contributed Business, (i) there are no collective
bargaining agreements or other similar agreements, arrangements or undertakings,
written or oral, with employees as a group to or by which Contributor is a party
or is bound, (ii) no employees of Contributor are represented by any labor
organization, collective bargaining representative or group of employees, (iii)
no labor organization, collective bargaining representative or group of
employees claims to represent a majority of the employees of Contributor in an
appropriate unit of Contributor, (iv) Contributor has not been the subject of
any representational campaign or organizing activity by any union or other
organization or group seeking to become the collective bargaining representative
of any of Contributor employees, (v) Contributor has not been subject to, or
threatened with, any strike, labor dispute, slowdown, stoppage, or other
concerted labor activity or dispute during the period of 12 months prior to the
date hereof, (vi) Contributor is not obligated to bargain collectively with
respect to wages, hours and other terms and conditions of employment with any
recognized or certified labor organization, collective bargaining representative
or group of employees, and (vii) to the Knowledge of Contributor,
employer-employee relations of Contributor are generally satisfactory.
(b) As related to the Contributed Business, Contributor is in
compliance in all material respects with all Legal Requirements pertaining to
labor, employment and employment practices and wages, hours, and other terms and
conditions of employment, with respect to Contributor employees, including each
Legal Requirement pertaining to equal opportunity, discrimination, immigration,
promotion or pay of employees, wages, hours of work, family or medical leaves of
absence, plant closings and layoffs, collective bargaining, occupational safety
and health, unemployment, and ERISA. There is no pending, or to the Knowledge of
Contributor, threatened, Proceeding by or before the National Labor Relations
Board, the Equal Employment Opportunity Commission, the Department of Labor or
any other Authority in connection with any current, former or prospective
employee related to the Contributed Business.
(c) As related to the Contributed Business, Contributor (i) has
withheld all amounts required by Legal Requirements or by agreement to be
withheld from the wages, salaries and other payments to Employees, (ii) is not
liable for any arrears of wages, (iii) is not delinquent with respect to any
payment to any trust or other fund or to any Authority with respect to
unemployment
-14-
<PAGE> 19
compensation benefits, workers' compensation, social security, or other benefits
for Employees, and (iv) is not liable for any Taxes, fines, or penalties, or
involved in any pending or, to the Knowledge of Contributor, threatened
Proceeding for the failure (or alleged failure) to comply with any of the
foregoing.
2.3 TITLE TO ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES; LEASES.
(a) Each of Contributor and Contributed Subsidiary has good and
marketable title to all of its Fee Interests, free and clear of all
Encumbrances, except (i) any prior reservations, rights of way, easements and
other matters of record to the extent valid, subsisting and affecting the
Assets, (ii) any prior unrecorded easements set forth in a written instrument or
agreement for which permanent improvements have been constructed in such a
manner as to be apparent to the Partnership from inspection of the Assets to the
extent valid, subsisting and affecting the Assets, (iii) liens for current Taxes
not yet due and payable and mechanics and similar statutory liens arising in the
ordinary course of business, (iv) liens of employees and laborers for current
wages not yet due, (v) building, zoning and health regulations of the
jurisdictions in which the Assets are located, (vi) such imperfections of title
or 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, and (vii) any matters disclosed by surveys obtained in
connection with the transactions contemplated by this Agreement.
(b) Each of Contributor and Contributed Subsidiary is the sole lessee
under its Leases and the sole party entitled to its Leasehold interests in favor
of the lessee thereunder, and the sole owner of the permanent improvements
(other than fixtures) situated on its Leased Premises, free and clear of all
Encumbrances affecting its Leaseholds except (i) any prior reservations,
easements and other matters of record to the extent valid, subsisting and
affecting the Assets, (ii) any prior unrecorded easements set forth in a written
instrument or agreement for which permanent improvements have been constructed
in such a manner as to be apparent to the Partnership from inspection of the
Assets to the extent valid, subsisting and affecting the Assets, (iii) liens for
current Taxes not yet due and payable and mechanics and similar statutory liens
arising in the ordinary course of business, (iv) liens of employees and laborers
for current wages not yet due, (v) building, zoning and health regulations of
the jurisdictions in which the Assets are located, (vi) such imperfections of
title or 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,
and (vii) any matters disclosed by surveys obtained in connection with the
transactions contemplated by this Agreement. Neither Contributor nor any
Affiliate thereof has received from or delivered to the lessors under such
Leases any written notice of termination or threat of termination of such
respective Leases. True and complete copies of all written lease agreements
(including any written amendments, modifications or assignments thereof)
constituting, or evidencing the terms of, such Leases have been delivered or
made available to the Partnership. No material default or event of default on
the part of a Contributor or any Affiliate thereof under the provisions of any
of such Leases, 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 such
Contributor, has occurred (which default or event of default has not been
cured). Contributor and its Affiliates have not received any written notice from
any lessor under any Lease, that any material
-15-
<PAGE> 20
default or event of default on the part of Contributor or such Affiliate, as
lessee, under the provisions of any Leases, 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 default on the part of Contributor or any such Affiliate, as lessee,
has occurred (which default or event of default has not been cured). To
Contributor's Knowledge, no material default or event of default on the part of
the lessor under the provisions of any of such Leases, 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) Contributor or its Affiliates have good title to all of the
personal property constituting Assets (other than the Contributed Intellectual
Property) owned or 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.
(d) No Asset is burdened by (i) an Encumbrance that secures an
obligation that is of such a nature that, after the consummation of the
transactions contemplated by this Agreement, (A) will be binding upon or
applicable to a Person other than the Partnership or (B) in the event of a
breach of such obligation by a Person other than the Partnership, would cause
such Asset to be foreclosed upon or otherwise taken from the Partnership or (ii)
an Encumbrance that secures Indebtedness.
2.4 TITLE MATTERS; DEFECTS IN IMPROVEMENTS. To Contributor's Knowledge,
there are no trespassers or other adverse parties in possession on or affecting
the Fee Interests, the Leased Premises or the Leaseholds of Contributor or any
of its Affiliates that would reasonably be expected to have a Material Adverse
Effect. Contributor and its Affiliates have not granted and none of the
foregoing is party to any unrecorded options, rights of refusal, sales contracts
or other such contractual rights to acquire such Fee Interests, Leased Premises
or Leaseholds in favor of any third parties relating to its Fee Interests,
Leased Premises or Leaseholds. No written notice has been received by
Contributor or any of its Affiliates (i) from any insurance company or any
Authority with respect to its Fee Interests, Leased Premises or Leaseholds 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 permanent improvements situated thereon (in each case, which
have not been cured) or (ii) from any other Person making an adverse claim
against the Assets.
2.5 WORKING CAPITAL. Including for this purpose the Specified Working
Capital Items, (a) Contributor has operated the Contributed Business in the
ordinary course of business from June 24, 1998 to the Asset Transfer Effective
Time such that its Inventory, Stores Inventory, Prepaid Expenses, Accounts
Receivable and Trade Accounts Payable, as of the Asset Transfer Effective Time,
are at substantially the same level as would have existed for Contributor
without regard to the transactions contemplated by the Master Transaction
Agreement, and (b) the level of Working Capital of Contributor as of the Asset
Transfer Effective Time is reasonably sufficient to operate the Contributed
Business consistent with current and historical practices.
-16-
<PAGE> 21
2.6 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.
2.7 ALL NECESSARY ASSETS. Including for this purpose the Excluded
Railcars, the Assets together with the rights under this Agreement and 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.
2.8 CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY AND CONTRACTUAL
REQUIREMENTS. Contributor and its Affiliates are operating and conducting the
Assets and 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.
2.9 LEGAL PROCEEDINGS. Schedule 2.9 contains a complete and accurate
list of all current Proceedings to which any of Contributor or its Affiliates is
a party and involving the Assets. There is no Proceeding to which Contributor or
its Affiliates is a party (i) that is pending or, to the Knowledge of
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.
2.10 TAX MATTERS.
(a) There are no Encumbrances for Taxes (other than for current Taxes
not yet due and payable) upon the Assets.
(b) Except for the Indebtedness listed on Schedule 2.10, none of the
Assets directly or indirectly secures any Indebtedness the interest on which is
exempt from federal income taxation under the Code.
(c) The interest on the Indebtedness listed on Schedule 2.10 is exempt
from federal income taxation under the Code.
(d) All tax returns of the Contributed Subsidiary, Canco 1 or Canco 2
that are required by any Legal Requirement to be filed with respect to periods
ending on or prior to the Asset Transfer Effective Time have been timely filed,
and all Taxes required to be paid for the periods covered by such tax returns or
related to such tax returns have been timely paid in full by or on behalf of the
Contributed Subsidiary, Canco 1 or Canco 2.
-17-
<PAGE> 22
(e) There are no Proceedings pending against Contributor, Geon LP, the
Contributed Subsidiary, Canco 1 or Canco 2 or any of their respective Affiliates
with respect to any Taxes due from the Contributed Subsidiary, Canco 1 or Canco
2 or for which the Contributed Subsidiary, Canco 1 or Canco 2 may be liable.
(f) None of Contributor, Geon LP, the Contributed Subsidiary, Canco 1
or Canco 2 or any of their respective Affiliates has any outstanding agreement,
waiver or arrangement (i) extending the statute of limitations with respect to
Taxes due from any such party or (ii) agreeing to any extension of time with
respect to any Tax assessment or deficiency for any taxable period for which the
Contributed Subsidiary, Canco 1 or Canco 2 may be liable. There have been no
issues raised in any audit or assessment of Contributor, Geon LP, the
Contributed Subsidiary, Canco 1 or Canco 2 or any of their respective Affiliates
that may result in the Contributed Subsidiary, Canco 1 or Canco 2 being liable
for any Taxes.
(g) There are no overall foreign losses associated with the Contributed
Subsidiary.
2.11 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
Contributor and its Affiliates in connection with the Assets are in compliance
with all HSE Laws and (ii) to the extent arising out of Contributor's or its
Affiliates' ownership, use or operation of the Assets, there are no Chemical
Substances held, located, released, generated, treated, stored or disposed of
on, under or from such Fee Interests or such Leased Premises or in, on or from
any fixtures or permanent improvements thereon or transported, disposed or
arranged for transport or disposal offsite such Fee Interests or such Leased
Premises in excess or in contravention of any standard prescribed or permitted
by any HSE Laws or that require corrective or other action pursuant to the
provisions of any HSE Laws.
(b) Since May 1, 1993, Contributor and its Affiliates have not received
any written notice from any Authority, or any comparable written claim or notice
from any other Person, naming Contributor or its Affiliates as a potentially
responsible party, or otherwise notifying Contributor or any of its Affiliates
of any potential liability under any HSE Law that relates in any way to any
Chemical Substances stored or disposed on or under or generated by or derived or
transported from the operations on the Fee Interests, or the Leased Premises of
Contributor or any of its Affiliates, regardless of whether the events that gave
rise to such claim or notice allegedly occurred before or after May 1, 1993.
(c) Contributor and its Affiliates, as applicable, have been, since May
1, 1993, and are 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 then applicable HSE Laws
and all such permits, licenses, approvals, permission, and authorizations have
been issued and are in full force and effect.
(d) (i) Contributor and its Affiliates have not received written notice
of any actual, pending, threatened or potential Proceedings of any kind in
connection with the Contributed
-18-
<PAGE> 23
Business and HSE Laws, Product Exposure Claims or Exposure Claims (including
exposure of any Person or the Environment to any Chemical Substances) ("HSE
Proceedings") and (ii) Contributor and its Affiliates have no Knowledge of any
facts, events or occurrences that are reasonably expected to result in any HSE
Proceedings being brought.
(e) Contributor and its Affiliates are not parties to, or 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 any HSE Proceedings.
(f) There are no underground storage tanks owned or operated by
Contributor and its Affiliates in, on, or under the Fee Interests or Leased
Premises, and Contributor and its Affiliates have no Knowledge of such tanks
that were previously located thereon that have since been removed or abandoned
in place.
2.12 CONTRIBUTED SUBSIDIARIES. As of the time immediately after the
consummation of the Closing: (i) the Partnership is the record and beneficial
owner of all of the issued and outstanding shares of capital stock of the
Contributed Subsidiary, and the Contributed Subsidiary is the record and
beneficial owner of all of the issued and outstanding shares of capital stock of
Canco 2, in each case free and clear of any Encumbrances or limitations on the
voting or transfer thereof; (ii) there are no subscriptions, options to
purchase, rights of refusal, rights of first offer, conversion or exchange
rights, warrants, preemptive rights or other agreements, claims or commitments
of any kind obligating the Contributed Subsidiary or Canco 2 to issue, transfer,
deliver or sell shares of the capital stock or other securities of, or interests
in, the Contributed Subsidiary or Canco 2 or obligating the Contributed
Subsidiary or Canco 2 to grant, extend or enter into any such agreement or
commitment; (iii) the Contributed Subsidiary has no assets other than all of the
issued and outstanding shares of capital stock of Canco 2, and has no
Liabilities, whether accrued, contingent or otherwise, and whether due or to
become due; and (iv) Canco 2 has no Liabilities, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than (a) the
Liabilities assumed by Canco 1 pursuant to the Geon Canada Transfer Agreement
and (b) the Canco Lending Liability, if any.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
-------------------------------------------------
The Partnership represents and warrants to Contributor as follows:
3.1 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 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.
-19-
<PAGE> 24
3.2 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 and the Related Agreements and the consummation by
the Partnership of the transactions contemplated hereby or thereby. This
Agreement and the 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.
3.3 NO CONSENTS REQUIRED; NO CONFLICT WITH INSTRUMENTS TO WHICH THE
PARTNERSHIP IS A PARTY. The execution, delivery and performance of this
Agreement and the Related Agreements by the Partnership and the consummation by
it of the transactions contemplated hereby and 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
Limited 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 4
COVENANTS SUBSEQUENT TO CLOSING DATE
------------------------------------
4.1 ACCESS TO INFORMATION. Following the Closing Date, the Partnership
shall afford, and will cause its Affiliates to afford, to 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 Asset Transfer
Effective Time (and any personnel familiar therewith) to the extent that such
access may be reasonably required by Contributor to facilitate (i) the
preparation by Contributor or its Affiliates 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 Contributor or its Affiliates in connection with the Assets or 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, (iv) the preparation by Contributor or its Affiliates of
financial statements and reports, and (v) 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
-20-
<PAGE> 25
Contributor to permit it, at its expense, to examine, duplicate or repossess
such records, files, documents and correspondence. Without limiting the
foregoing, Contributor shall cooperate fully in the preparation of the balance
sheets, statements of income and retained earnings and statements of cash flow
of the Contributed Business and shall provide access to financial books and
records and all such information as may be reasonably requested by OCC or any of
its Affiliates, in connection with the satisfaction of disclosure requirements
under the federal securities laws, any Legal Requirement or as may otherwise be
appropriate or necessary.
4.2 MAIL OR OTHER COMMUNICATIONS. 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.
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 Contributor any mail or other communication received by it after the
Closing Date pertaining to the Excluded Assets or liabilities not assumed by the
Partnership, and any cash, checks or other instruments of payment in respect of
such.
4.3 ASSET TRANSFER EFFECTIVE TIME BALANCE SHEET. Not later than 60 days
after the Closing Date, Contributor shall cause its independent accountants to
prepare and deliver to Contributor and the Partnership a consolidated audited
balance sheet of the Contributed Business and the Transferred Business as of the
Asset Transfer Effective Time (the "Asset Transfer Effective Time Balance
Sheet"). The Asset Transfer Effective Time Balance Sheet shall be prepared in
accordance with GAAP, consistent with past practices. In addition, Contributor
shall prepare and deliver to the Partnership such other financial statements or
information as the Partnership may reasonably request in connection with any
proposed Partnership financing.
4.4 INSURANCE CLAIMS. From and after the Closing Date, Contributor and
the Partnership shall each cooperate in making information available to the
other to assist the other in preparing and filing any insurance claims relating
to occurrences prior to the Asset Transfer Effective Time and pertaining to the
Contributed Business. From and after the Closing Date, Contributor shall not be
required to maintain any policy, binder or contract of insurance that provides
coverage for Contributor, any of its Affiliates or the Assets and covers the
Assets or the Contributed Business. Contributor or its representatives may,
after the Closing Date, cancel any such policy, binder or contract of insurance
that covers the Assets or the Contributed Business by issuing a cancellation
notice with respect to such policies owned by Contributor.
4.5 SPECIAL COVENANT. Contributor agrees to use all reasonable efforts
to obtain as soon as practicable the approval from, or other agreement with, B.
F. Goodrich Company as contemplated by Schedule 4.3(g) to the Master Transaction
Agreement, all at the sole cost and expense of Contributor.
-21-
<PAGE> 26
SECTION 5
SURVIVAL AND INDEMNIFICATION
----------------------------
5.1 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 until
the date that is 24 months after the Asset Transfer Effective Time, except for
the representations and warranties contained in (i) Section 2.10, which shall
survive until the expiration of the applicable statute of limitations, (ii)
Sections 2.3 and 2.4, which shall survive until the date that is ten years after
the Asset Transfer Effective Time and shall not be merged with the Assignment
and Assumption Agreements, and (iii) Section 2.12, 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 2.12) pursuant to
this Agreement unless a written notice that complies with Section 5.3 has been
delivered pursuant to such Section 5.3 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
only with respect to such action beyond the time at which the representation and
warranty would otherwise terminate, and only until the resolution of such action
pursuant to this Agreement.
5.2 INDEMNIFICATION.
(a) Subject to the other provisions of this Section 5, Contributor
hereby agrees, to the fullest extent permitted by applicable law, to indemnify,
defend and hold harmless the Partnership, its partners, their 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 such indemnitees arising out of, in
connection with or relating to:
(i) Any misrepresentation in or breach of the representations
and warranties of Contributor or any of its Affiliates in this
Agreement, the Assignment and Assumption Agreements, the Master
Intellectual Property Agreement, or the Master Transaction Agreement,
PROVIDED that any Liability arising out of, in connection with or
relating to any breach of the warranties in any Assignment and
Assumption Agreement that is not a breach of the warranties in this
Agreement shall not be indemnified against pursuant to this Section 5;
(ii) Any failure of Contributor or any of its Affiliates to
perform any of its covenants or obligations contained in this
Agreement, the Assignment and Assumption Agreements, the Master
Intellectual Property Agreement, or the Master Transaction Agreement;
(iii) Any obligation or liability relating to the Excluded
Assets;
(iv) Any Exposure Claim;
-22-
<PAGE> 27
(v) Any Product Exposure Claim that is not an Assumed
Liability;
(vi) Any HSE Claim that is related to a Pre-Closing Liability
and that is not an Assumed Liability;
(vii) Any Third Party Claim (other than Exposure Claims,
Product Exposure Claims and HSE Claims) that is related to a
Pre-Closing Liability and that is not an Assumed Liability;
(viii) Any obligation (A) for the payment of severance
benefits to employees of Contributor or any of its Affiliates except as
set forth in Section 1.7, (B) attributable to Contributor's or any of
its Affiliates' employment of any employee, agent or independent
contractor prior to the Asset Transfer Effective Time or (C) assumed by
Contributor and its Affiliates pursuant to Section 1.7;
(ix) Any Taxes of Contributor, Contributed Subsidiary, Canco
1, Canco 2 or Geon LP for any taxable period or portion thereof ending
before the Asset Transfer Effective Time or arising from any of the
transactions contemplated by this Agreement, except to the extent
otherwise provided in Sections 6.2(c) and (d); or
(x) any Proceeding instituted or asserted against the
Partnership by any Person (A) that arises, directly or indirectly, as a
result of the parcels identified as "Assigned Area C" and "Assigned
Area D" on the survey of Contributor's Pedricktown, New Jersey facility
(collectively, the "Parcels") not being owned by Contributor, but
instead being owned by B.F. Goodrich Company or (B) to prevent,
prohibit, or place a material restriction upon the Partnership from
utilizing the Parcels in connection with its operation of the
Contributed Business.
PROVIDED, HOWEVER, that the following provisions shall apply to the
indemnification obligations of Contributor:
(A) Contributor, in the aggregate, shall not have any
indemnification obligation under clause (i) above for any individual
Liability (I) unless the amount of such Liability exceeds $100,000 (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)
and (II) until the total of all Liabilities under said clause (i)
equals an aggregate deductible of $500,000 (the "Deductible") (after
which point, subject to clause (I) above, Contributor will be obligated
to indemnify the Partnership and the other indemnitee against such
further Liabilities); and 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 and
Deductible but without regard to any qualification or exception
regarding materiality or Material Adverse Effect qualification
contained in such representation or warranty (it 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
-23-
<PAGE> 28
Partnership and the other indemnitee shall be entitled to indemnity
relating back to the first dollar, subject to the Individual Basket and
Deductible); and PROVIDED, FURTHER, that this clause (A) shall not be
applicable to a misrepresentation in or a breach of the representations
and warranties in Section 2.3(d)(ii).
(B) If Contributor is indemnifying against a particular
Liability under two or more of clauses (i) - (x) above, the Partnership
and the other indemnitee shall have the right to select the clause or
clauses under which they seek indemnification; PROVIDED, that the
aggregate indemnification shall in no event exceed the amount of the
particular Liability.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, TO THE
FULLEST EXTENT PERMITTED BY LAW, EXCEPT FOR CLAIMS ARISING SOLELY UNDER SECTION
5.2(a)(x), NEITHER CONTRIBUTOR NOR ANY OF ITS AGENTS, EMPLOYEES, REPRESENTATIVES
OR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, INDIRECT, PUNITIVE,
EXEMPLARY, SPECIAL OR OTHER SIMILAR DAMAGES IN CONNECTION WITH DIRECT CLAIMS BY
AN INDEMNIFIED PARTY (I.E., A CLAIM BY AN INDEMNIFIED PARTY THAT DOES NOT SEEK
REIMBURSEMENT FOR A THIRD PARTY CLAIM PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY)
WITH RESPECT TO THEIR INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT UNLESS
ANY SUCH CLAIM ARISES OUT OF THE FRAUDULENT ACTIONS OF CONTRIBUTOR OR ANY OF ITS
AFFILIATES. IN DETERMINING THE AMOUNT OF ANY LOSS, LIABILITY, OR EXPENSE FOR
WHICH AN INDEMNIFIED PARTY 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 SUCH
INDEMNIFIED PARTY UNDER POLICIES TO THE EXTENT THAT THE FUTURE PREMIUM RATE WILL
NOT BE INCREASED BY CLAIM EXPERIENCE RELATING TO SUCH LOSS, LIABILITY OR
EXPENSE.
(c) Notwithstanding the provisions of this Section 5 to the contrary,
it is expressly agreed that Contributor shall not be required to indemnify the
Partnership and the other indemnitee for any Liability arising out of, in
connection with or related to any HSE Claim to the extent that the action,
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 an action, condition, event, circumstance or other basis for an HSE
Claim by reason of the continuance thereof after the Asset Transfer Effective
Time (i) under circumstances where the Partnership does not know of its
existence and has not breached any affirmative 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. By way of example,
and not by way of limitation, the following actions by the Partnership shall not
be deemed to be exacerbation or acceleration of any HSE Claim or any condition,
event, circumstance or other basis therefor:
(A) any action required to comply with Legal
Requirements or with any Contracts with third parties;
-24-
<PAGE> 29
(B) any action that, in the Partnership's reasonable
judgment, is necessary to be taken in emergencies or in order
to protect human health and safety from any imminent and
substantial endangerment;
(C) any investigation, or any report to any
Authority, directly resulting from repair or maintenance
activities necessary to the continued operation of the Assets
or from the replacement, relocation, demolition, closure or
expansion of buildings, structures, fixtures or other
improvements on or appurtenant to the Fee Interests or the
Leaseholds (where there was no reasonably practicable
alternative, in the reasonable judgment of the Partnership, to
effecting such replacement, relocation, demolition, closure or
expansion in the place and manner in which it was effected),
which investigation or report is required pursuant to HSE
Laws, including waste classification or characterization and
reports of Releases or the presence of Chemical Substances, if
such discovery is made in the ordinary course of such
activities;
(D) periodic compliance or management system audits
conducted in the ordinary course of business, including any
OSHA Star or IS 14000 audits;
(E) responding to an inquiry, inspection, request for
information or other communication from an Authority,
regardless of whether a subpoena or other Legal Requirement
mandates a response;
(F) responding to an inquiry, request for information
or other communication from a third party, regardless of
whether a subpoena or other Legal Requirement mandates a
response, and providing information to a community advisory
panel or the public;
(G) filing or processing applications for issuance,
renewal, modification, amendment or termination of Government
Licenses and providing information to an Authority or other
third party in connection therewith; or
(H) participating in or communicating with a group of
potentially responsible parties involved in a Remedial Action,
regardless of whether a subpoena or other Legal Requirement
mandates such participation or communication, if the
Partnership believes in good faith that such participation or
communication may reduce any Liability associated with such
Remedial Action.
(d) Subject to the other provisions of this Section 5, the Partnership
hereby indemnifies, to the fullest extent permitted by applicable law,
Contributor and its Affiliates, officers, directors and employees against and
agrees to hold each of them harmless from any and all Liability incurred or
suffered by such indemnitee arising out of or relating to:
(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
-25-
<PAGE> 30
contained in this Agreement, the Assignment and Assumption Agreements,
the Master Intellectual Property Agreement or the Master Transaction
Agreement;
(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, PUNITIVE, EXEMPLARY, SPECIAL OR OTHER SIMILAR DAMAGES IN
CONNECTION WITH DIRECT CLAIMS BY AN INDEMNIFIED PARTY (I.E., A CLAIM BY AN
INDEMNIFIED PARTY THAT DOES NOT SEEK REIMBURSEMENT FOR A THIRD PARTY CLAIM PAID
OR PAYABLE BY SUCH INDEMNIFIED PARTY ) 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 AN INDEMNIFIED PARTY 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 SUCH INDEMNIFIED PARTY UNDER POLICIES TO THE
EXTENT THE FUTURE PREMIUM RATE WILL NOT BE INCREASED BY CLAIM EXPERIENCE
RELATING TO SUCH LOSS, LIABILITY OR EXPENSE.
(f) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, CONTRIBUTOR
AND GEON LP MAKE NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AND THERE
ARE NO EXPRESS OR IMPLIED CONDITIONS, AS TO THE FOLLOWING MATTERS: THE
MAINTENANCE, REPAIR, DESIGN OR MARKETABILITY OF THE TANGIBLE PERSONAL PROPERTY
AND FIXTURES THAT CONSTITUTE PART OF THE CONTRIBUTED BUSINESS OR ASSETS,
INCLUDING ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE OF SUCH TANGIBLE PERSONAL PROPERTY AND FIXTURES, IT BEING
EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT THE PARTNERSHIP SHALL
BE DEEMED TO BE OBTAINING RIGHTS IN SUCH TANGIBLE PERSONAL PROPERTY AND FIXTURES
IN THE PRESENT STATE OF REPAIR OF SUCH TANGIBLE PERSONAL PROPERTY AND FIXTURES,
"AS IS, WHERE IS, AND WITH ALL FAULTS."
(g) The rights provided to each Indemnified Party pursuant to this
Section 5, as limited by and subject to the provisions of this Section 5, shall
be such Indemnified Party's sole remedy for breach of any representation or
warranty by or covenant or obligation of any Indemnifying Party under this
Agreement, the Assignment and Assumption Agreements, the Master Intellectual
Property Agreement and the Master Transaction Agreement, or arising in
connection with or related in any way to the subject matter of this Agreement or
such agreements. Each Indemnified Party
-26-
<PAGE> 31
hereby waives and relinquishes any other rights, remedies, causes of action or
other claims in respect of any such breach, including equitable and common law
rights and rights created by statute, that such Indemnified Party would
otherwise have for any such breach or with respect to this Agreement or such
agreements or any Liability arising from, in connection with or related to the
subject matter of this Agreement, including any such Liability arising from, in
connection with or related to HSE Laws.
5.3 PROCEDURES.
(a) Any Person seeking indemnification under Section 5.2 (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 6.8.
(b) If an Indemnified Party is notified of a Third Party Claim that 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 5 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 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
-27-
<PAGE> 32
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; and PROVIDED FURTHER that the Indemnifying Party will
not, without the written consent of the Indemnified Party, consent to the entry
of any judgment or enter into any settlement that (A) does not provide for the
unconditional written release of, or final resolution of, Liability of the
Indemnified Party with respect to such Third Party Claim, or (B) places any
obligations, other than payment obligations fully indemnified by the
Indemnifying Party under this Agreement, on the Indemnified Party or on or
relating to the Assets. 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 Section 5.3(a) or (b), or if the Indemnifying Party
assumes the defense of the Indemnified Party pursuant to Section 5.3(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, including interest from the date any sum is so
expended by the Indemnified Party at a rate calculated pursuant to Section
13.16(b) of the Limited Partnership Agreement of the Partnership (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; and PROVIDED FURTHER, that the Indemnified Party will
not, without the written consent of the Indemnifying Party, consent to the entry
of any judgment or enter into any settlement that (i) does not provide for the
unconditional written release of, or final resolution of, Liability of the
Indemnifying Party with respect to such Third Party Claim, or (ii) places any
obligations, other than payment obligations fully indemnified by the
Indemnifying Party under this Agreement, on the Indemnifying Party or on or
relating to the Assets. 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 5.3, if the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 5.3 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
5.3 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, together with
interest as provided in Section 5.3(d).
(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 5, the Indemnifying Party shall pay or cause to be paid
to the Indemnified Party the amount of the Liability
-28-
<PAGE> 33
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 or on behalf of the Indemnified Party.
(g) In the event a Third Party Claim is brought in which both the
Partnership and Contributor are alleged to be liable or the liability as between
the Partnership and Contributor is alleged to be joint, or in which the
entitlement to indemnification under this Section 5 has not been determined, the
Partnership and 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 that 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 5, the other party
shall reimburse the party entitled to indemnification for all of its costs
incurred in connection with such defense.
5.4 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 event or
indemnification, but only to the extent of any such payment. The Indemnified
Party shall cooperate with the Indemnifying Party in any reasonable manner in
prosecuting any subrogated claim.
5.5 CLAIMS FOR HSE REMEDIAL ACTION. This Section 5.5 shall govern the
interpretation of the indemnification obligations under Sections 5.2(a)(vi) and
5.2(d)(iii) in respect of any HSE Claim requiring the performance of
investigatory, removal or remedial work, correction of noncompliance or other
corrective action (but not the payment of money other than to third parties
performing such investigatory, removal or remedial work, correction of
noncompliance or other corrective action) by or on behalf of the Partnership or
Contributor ("Remedial Action") for which the Partnership or Contributor,
respectively, may seek indemnification (an "HSE Remedial Action Claim") from the
other, regardless of whether such HSE Claim is an HSE Type A Claim or an HSE
Type B Claim. Notwithstanding the other provisions of this Section 5:
(a) In the case of an HSE Remedial Action Claim, the Partnership shall
have the right to conduct and control such Remedial Action; PROVIDED, that the
Partnership provides Contributor with the opportunity to: (i) review and comment
to the Partnership upon any significant work plans for such Remedial Action
prior to finalization and implementation; (ii) attend meetings with Authorities
concerning such Remedial Action, PROVIDED that the Partnership will control the
negotiations with any Authorities during such meetings; and (iii) have a
representative present during the performance of such Remedial Action.
-29-
<PAGE> 34
(b) Contributor and the Partnership agree that Contributor shall have
no obligation pursuant to Section 5.2(a)(vi) to indemnify against any HSE
Remedial Action Claim unless the Remedial Action for which the Partnership is
seeking indemnification was or will be undertaken as a result of the
Partnership's discovery or receipt of notice of (i) with respect to an HSE Type
B Claim, any noncompliance with HSE Laws, (ii) with respect to an HSE Type A
Claim, the presence, Release or threatened Release of Chemical Substances on or
before the Asset Transfer Effective Time at levels in excess or in contravention
of any applicable level or standard of any HSE Law applicable to such Remedial
Action or any levels set forth in the EPA Region III Risk-Based Concentration
Table (or any replacement or modification thereof) for water, ambient air or
soil (as applicable) as in effect on the date of such Remedial Action
(collectively, the "Threshold Level"), (iii) with respect to an HSE Type A
Claim, any requirement of any HSE Law or any agreement with a third party who
has asserted an HSE Claim, or (iv) any imminent and substantial endangerment to
human health and safety.
(c) Contributor and the Partnership agree that any Remedial Action to
be undertaken pursuant to this Section 5.5 for which either party may seek
indemnification shall: (i) be the Lowest Cost Response under the circumstances
and based on the assumption that the Fee Interests and the Leaseholds are and
will continue to be used for industrial (as opposed to residential) purposes,
unless (A) any HSE Law applicable to such Remedial Action requires a different
land use assumption (e.g., residential) or (B) the Lowest Cost Response would
result from a different land use assumption; (ii) not, unless required to
achieve the Lowest Cost Response, exceed the least stringent requirements of all
HSE Laws and agreements with third parties who have asserted an HSE Claim; and
(iii) be conducted and completed in compliance in all material respects with all
HSE Laws. To the extent that the Partnership elects to exceed the Lowest Cost
Response in undertaking a Remedial Action that is the subject of an HSE Remedial
Action Claim, Contributor's obligation under Section 5.2(a)(vi) shall be limited
to the Lowest Cost Response, and the Partnership shall be responsible for any
costs associated with exceeding the Lowest Cost Response.
(d) Each of Contributor and the Partnership agrees that it shall not
solicit or importune any Authority to require any Remedial Action for which it
may seek indemnification unless (i) required by any HSE Law or agreement with a
third party who has asserted an HSE Claim, (ii) an HSE Law or Threshold Level
has been contravened or exceeded or (iii) such Remedial Action, in the
Partnership's reasonable judgment, is necessary in order to protect human health
and safety from any imminent and substantial endangerment, PROVIDED, that in the
event a Threshold Level has been contravened or exceeded, the Partnership may
undertake any Remedial Action under any applicable self-directed or voluntary
cleanup program. Nothing in this Section 5 shall prevent Contributor or the
Partnership from reporting any noncompliance or potential noncompliance with any
HSE Law, or any Release, threatened Release or the discovery or presence of any
Chemical Substance to any Authority, or from seeking written approval or
certification from such Authority that Contributor or the Partnership has
completed any Remedial Action regarding an HSE Remedial Action Claim, if, in
each case, Contributor or the Partnership believes in good faith that such
reporting is (A) required by any HSE Law or any agreement with a third party who
has asserted an HSE Claim, (B) necessary to achieve the Lowest Cost Response or
(C) necessary to receive immunity or penalty mitigation under any HSE Law,
including the U.S. Environmental Protection Agency's Incentives for
Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations
dated December 22, 1995, as it may be amended from time to time; PROVIDED, that
Contributor's obligation under
-30-
<PAGE> 35
Section 5.2(a)(vi) or the Partnership's obligation under Section
5.2(d)(iii) in connection with any Remedial Action resulting from any notice
described in clause (C) shall be limited to the Lowest Cost Response.
(e) Contributor and the Partnership shall promptly notify the other
party of any action, condition, event or circumstance that may be subject to
Remedial Action under this Section 5.5 for which either party may seek
indemnification upon receipt of any written document concerning such matter.
Contributor and the Partnership shall promptly notify the other party of any
Release or threatened Release of Chemical Substances or other action, condition,
event or circumstance that such party believes may adversely impact a Remedial
Action after any such matter comes to such party's attention, PROVIDED, that
failure to so notify shall not affect the rights of an Indemnified Party except
to the extent that an Indemnifying Party is actually prejudiced as a result of
such delay. The Partnership shall develop and administer its standards and
practices for determining whether to undertake Remedial Action and, if
undertaken, how to carry out Remedial Action, so that comparable circumstances
or conditions existing at its various properties and facilities are managed in a
comparable way, regardless of whether or not the Partnership acquired such
properties and facilities from Contributor.
(f) Contributor and the Partnership agree to consult with each other in
connection with any Remedial Action subject to indemnification under this
Section 5. If so requested by the other party, Contributor or the Partnership,
as the case may be, shall provide the requesting party with (i) any material
correspondence, reports, technical data or other material written information
generated regarding such Remedial Action, (ii) reasonable access to the
properties and to employees, books and records related to such Remedial Action,
and (iii) the right to take split samples, in each case for the purpose of
verifying the performance of any Remedial Action, the costs for which Remedial
Action Contributor is required to indemnify the Partnership pursuant to this
Section 5. Contributor and the Partnership agree that they shall maintain in
strict confidence, and in accordance with any confidentiality or joint defense
agreements then in effect between the Partnership and Contributor, any of the
foregoing information that is non-public and confidential and any other
confidential information concerning any HSE Remedial Action Claim, subject to
disclosure required by Legal Requirements. If either party is required to
disclose any such non-public, confidential information as a result of any Legal
Requirement, such party will promptly notify the other party and will give such
other party the opportunity to review and comment in advance upon the content
and timing of any such disclosure. The Partnership shall submit any
reimbursement request for indemnification pursuant to this Section 5 to
Contributor and Contributor shall pay the amount requested in such reimbursement
request within 30 days of receipt thereof. If Contributor objects to any portion
of such reimbursement request, it shall notify the Partnership in writing of
such objection with ten days of receipt thereof, and shall pay the undisputed
portion as set forth in the previous sentence. Any dispute regarding any
reimbursement request shall be resolved pursuant to the dispute resolution
procedures set forth in Appendix B.
(g) Upon performance of a Remedial Action subject to indemnification
pursuant to this Section 5.5, the party conducting such Remedial Action (the
Partnership or Contributor, as applicable), shall use commercially reasonable
efforts to obtain written documentation, approval or certification of such
completion. The obligation of Contributor in respect of a particular HSE
Remedial Action Claim shall cease when: (i) with respect to a Remedial Action
involving an HSE
-31-
<PAGE> 36
Type A Claim over which an Authority has not asserted jurisdiction, the Remedial
Action has been completed, and any Chemical Substances for which the Threshold
Level was contravened or exceeded have been satisfactorily investigated, removed
or remediated, in accordance with HSE Laws, and the contractor conducting the
Remedial Action (on behalf of the Partnership or Contributor, as applicable)
provides a written certification reasonably satisfactory to the Partnership
confirming the completion of the Remedial Action in accordance with HSE Laws;
(ii) with respect to a Remedial Action involving an HSE Type A Claim over which
an Authority has asserted jurisdiction, the Remedial Action has been completed
in accordance with HSE Laws to the satisfaction of such Authority, and the
Authority has either (A) issued a written approval or certification of
completion of such Remedial Action that provides that no further action is
required or planned at a future date as of the time of such approval, but which
approval may be qualified or conditioned by the Authority with respect to the
accuracy or completeness of the data or information provided, the discovery of
new information, changes in land use which affect the Remedial Action or other
standard or model reservations of similar type or form in use by the Authority
at the time of such approval (an "Approval"), or (B) failed through inaction to
issue such Approval within one year of the submission of a written request by
the party conducting such Remedial Action for such Approval, without during this
one-year period rejecting approval or requesting further information or further
Remedial Action; (iii) with respect to a Remedial Action involving an HSE Type B
Claim over which an Authority has not asserted jurisdiction, the Remedial Action
has been completed in accordance with HSE Laws and the contractor conducting the
Remedial Action (on behalf of the Partnership or Contributor, as applicable)
provides a written certification reasonably satisfactory to the Partnership
confirming the completion of the Remedial Action in accordance with HSE Laws; or
(iv) with respect to a Remedial Action involving an HSE Type B Claim over which
an Authority has asserted jurisdiction, the Remedial Action has been completed
in accordance with HSE Laws and to the satisfaction of such Authority, and the
Authority has either (A) issued an Approval or (B) failed through inaction to
issue such Approval within one year of the submission of a written request by
the party conducting such Remedial Action for such Approval, without during this
one-year period rejecting approval or requesting further information or further
Remedial Action.
(h) Completion of a Remedial Action shall not preclude Contributor or
the Partnership from asserting a subsequent HSE Remedial Action Claim that
arises from the same condition, event, circumstance or other basis that resulted
in the original Remedial Action (except with respect to the work completed in
such original Remedial Action); PROVIDED, that the Partnership shall be
responsible, pursuant to Section 5.2(d), if and to the extent that it
exacerbates or accelerates such subsequent HSE Remedial Action Claim as set
forth in Section 5.2(c); and PROVIDED, FURTHER, that the Partnership shall be
responsible for maintaining compliance with HSE Laws from and after the date on
which the correction of any noncompliance with HSE Laws is completed consistent
with Section 5.5(g).
(i) Notwithstanding any other provision of this Agreement, Contributor
shall have the right to conduct and control all Remedial Action related to the
authorities and approvals necessary in order to consummate the transactions
contemplated hereby under the New Jersey Environmental Cleanup Responsibility
Act, including the New Jersey Industrial Site Recovery Act, including such
Remedial Action that occurs after the Closing Date. Such Remedial Action
conducted by the Seller shall not be subject to Section 5.5(c).
-32-
<PAGE> 37
5.6 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 6
MISCELLANEOUS
-------------
6.1 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.
6.2 PAYMENT OF CERTAIN EXPENSES AND TAXES.
(a) Subject to the further provisions of this Section 6.2, (i)
Contributor shall be responsible for all Taxes attributable to Contributor's or
its Affiliates' ownership, use or transfer of the Assets or operation of the
Contributed Business prior to the Asset Transfer Effective Time, including all
Taxes, tax returns, and filings (A) of the Contributed Subsidiary, Canco 1 and
Canco 2 attributable to the period before the Asset Transfer Effective Time or
(B) attributable to the transfer and assignment to the Partnership pursuant to
this Agreement, and (ii) the Partnership shall be responsible for all Taxes
attributable to the Partnership's ownership, use or transfer of the Assets or
operation of the Contributed Business after the Asset Transfer Effective Time.
(b) All sales, use, value added, excise, transfer, land transfer or
similar taxes incurred or arising in connection with the transfer of the Assets
to the Partnership shall be borne solely by Contributor.
(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 Contributed Business or the Assets (including Inventory) in the tax period
in which the Asset Transfer Effective Time occurs ("Property Taxes") shall be
prorated between the Partnership and Contributor, as of the Asset Transfer
Effective Time.
-33-
<PAGE> 38
(d) The Partnership shall pay any title or recordation fees in
connection with the transfer of the Assets. The Partnership shall also pay for
any surveys of the Fee Interests and any related easements or rights-of-way that
are requested or ordered by the Partnership.
(e) After the Closing Date, either Contributor or the Partnership
receiving each Property Tax bill or notice applicable to the Contributed
Business or the Assets for the period in which the Asset Transfer Effective Time
occurred shall, if other than the Partnership, 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. If paid by Contributor, the Partnership shall
promptly on receipt of a written request (accompanied by appropriate supporting
documentation) reimburse the paying party with respect to the share of the
Partnership of such amount so paid as provided under this Agreement. If paid by
the Partnership, Contributor shall promptly on receipt of a written request
(accompanied by appropriate supporting documentation) reimburse the Partnership
with respect to the share of Contributor of such amount so paid as provided
under this Agreement. Contributor and the Partnership shall cooperate fully with
each other on and after the Closing Date with respect to any Property Tax
assessment or valuation (or protest in connection therewith) by any Authority
with respect to the tax period in which the Asset Transfer Effective Time
occurs.
(f) If any 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.
(g) Notwithstanding any other provision of this Agreement, the
obligations of the parties set forth in this Section 6.2 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.
6.3 NOTICES. All notices, requests, demands 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 during
business hours with proof of confirmation from the transmitting machine, or (ii)
delivered by courier or other hand delivery, as follows:
(a) If to Contributor or Geon LP:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Attention: Chief Executive Officer
Telecopy Number: (440) 930-1002
with a copy to:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Attention: General Counsel
-34-
<PAGE> 39
Telecopy Number: (440) 930-1002
(b) If to the Partnership:
Oxy Vinyls, LP
5005 LBJ Freeway
Dallas, Texas 75244
Attention: Chief Executive Officer
Telecopy Number: (972) 720-7402
with a copy to:
Oxy Vinyls, LP
5005 LBJ Freeway
Dallas, Texas 75244
Attention: General Counsel
Telecopy Number: (972) 720-7403
and to:
Occidental Petroleum Corporation
10889 Wilshire Boulevard
Los Angeles, California 90024
Attention: General Counsel
Telecopy Number: (310) 443-6333
and to:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Attention: Chief Executive Officer
Telecopy Number: (440) 930-1002
and to:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Attention: General Counsel
Telecopy Number: (440) 930-1002
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.
-35-
<PAGE> 40
6.4 BINDING EFFECT; BENEFIT. Subject to Section 6.6, 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 and their Affiliates or their respective permitted successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
6.5 OCCASIONAL AND BULK SALES. To the extent applicable, the
Partnership and 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. Notwithstanding the foregoing, Contributor agrees to indemnify and
save harmless the Partnership from and against any Liability that may be made or
brought against the Partnership or that the Partnership may suffer or incur as a
result of, in respect of, or arising out of such non-compliance.
6.6 ASSIGNABILITY. Neither this Agreement nor any of the rights or
obligations hereunder shall be assignable (by operation of law or otherwise) by
Contributor or Geon LP 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 Contributor and Geon LP. Any assignment or purported assignment in violation
of this Section shall be null and void.
6.7 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 Contributor, and, except
as otherwise provided in Section 5.1, 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.
6.8 DISPUTE RESOLUTION. All disputes under this Agreement shall be
resolved in accordance with the Dispute Resolution Procedures set forth in
Appendix B.
6.9 SEVERABILITY. In the event that any provisions of this Agreement
shall finally be determined to be unlawful, such provision shall, so long as the
severance of such provision does not have a Material Adverse Effect on the
economic and legal substance of the transactions contemplated hereby as to
Contributor or the Partnership, be deemed severed from this Agreement and every
other provision of this Agreement shall remain in full force and effect.
6.10 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.
6.11 CONFLICT WITH TRANSFER DOCUMENTS. Notwithstanding anything to the
contrary contained in any Transfer Document, no remedy or claim shall be
available to any Person under or by reason of any Transfer Document or any terms
or warranties thereof, except to the extent, if any,
-36-
<PAGE> 41
such remedy or claim arises under this Agreement. In the event of any conflict
between this Agreement and any of the Transfer Documents, this Agreement
shall prevail for all purposes.
6.12 TRANSFER DOCUMENTS. Notwithstanding the form of any Transfer
Document attached to this Agreement as an Exhibit, on the Closing Date, the
parties may, upon mutual agreement, execute and deliver revised forms of such
Transfer Documents or elect to not use any such Transfer Document.
-37-
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
THE GEON COMPANY
By: /s/ Thomas A. Waltermire
-------------------------------------
Thomas A. Waltermire
President and Chief Operating Officer
1999 PVC PARTNER INC.
By: /s/ Woodrow W. Ban
-------------------------------------
Name: Woodrow W. Ban
-----------------------------------
Title: Assistant Secretary
----------------------------------
OXY VINYLS, LP
By: Occidental PVC, LLC, general partner
By: /s/ John L. Hurst, III
-------------------------------------
John L. Hurst, III
President
<PAGE> 43
Appendix A
Definitions
-----------
The terms used in this Agreement have the following definitions or are
defined in the Sections referenced below:
"AAA" is defined in Appendix B.
"Accounts Receivable" means all uncollected accounts receivable that
have been generated by, or are attributable to, Contributor's and its
Affiliates' operation prior to the Asset Transfer Effective Time of the
Contributed Business in the ordinary course and in all respects in a manner
consistent with the provisions of Section 3.3 of the Master Transaction
Agreement.
"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 neither the Partnership nor the Compounding Partnership nor any Person
controlled by either entity shall be considered an Affiliate of Contributor. For
purposes of this definition, the term "control" (including the terms "controlled
by" and "under common control with") means the ownership of more than 50% of the
equity interests, Fully Diluted. With respect to the period from and after the
Asset Transfer Effective Time, the Contributed Subsidiary and Canco shall not be
considered Affiliates of Contributor.
"Agreement" is defined in the first paragraph of this Agreement.
"Approval" is defined in Section 5.5(g).
"Arbitrator" is defined in Appendix B.
"Asset Transfer Effective Time" is defined in the Master Transaction
Agreement.
"Asset Transfer Effective Time Balance Sheet" is defined in Section
4.3.
"Assets" means all of the assets, rights and properties being
contributed, conveyed, assigned, transferred and delivered to the Partnership
pursuant to Section 1.1.
"Assignment and Assumption Agreements" means the Assignment of Leases,
the Deeds, the Bill of Sale and Assignment, the Trademark Assignment, the Patent
Assignment, the Partnership Assumption Agreement and the Site Lease Agreement.
"Assignment of Leases" is defined in Section 1.3(a).
"Associated Rights" means all right, title and interest of Contributor
and any of its Affiliates, if any, in the lands, real property and personal
property of others used principally in the normal operation and conduct of the
Contributed Business.
A-1
<PAGE> 44
"Assumed Liabilities" is defined in Section 1.5(a).
"Authority" means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal (or any commonwealth,
territory or possession thereof), provincial, state, local or foreign, or any
agency, department or instrumentality thereof, or any court or arbitrator
(public or private).
"Banked Vacation" is defined in Section 1.7(j).
"Canco Lending Liability" means the Liability of Canco 2 that is
created if the alternative is utilized that is described in clause (iii) of the
term "Canco Financing Arrangements," as defined in the Master Transaction
Agreement.
"Canco 1" is defined in the Master Transaction Agreement.
"Canco 2" is defined in the Master Transaction Agreement.
"Capital Spares" means the inventory of spare parts used by Contributor
in the Contributed Business and owned by Contributor as of the Asset Transfer
Effective Time.
"Chemical Substance" means any (i) chemical substance, pollutant,
contaminant, constituent, chemical, mixture, raw material, intermediate or final
product or byproduct the manufacture, generation, formulation, processing,
labeling, use, treatment, handling, storage, disposal, transportation,
arrangement for transportation or disposal, distribution, re-use, recycling or
reclamation of which is regulated (including any requirement for the reporting
of any Release thereof) for the protection of health, safety or the Environment
under any Legal Requirement or defined or listed as an industrial, toxic,
deleterious, harmful, radioactive, infectious, disease-causing or hazardous
substance, material or waste under any Legal Requirement, and (ii) petroleum,
crude oil or any fraction or derivative thereof, (iii) asbestos or
asbestos-containing material or (iv) polychlorinated biphenyls ("PCBs").
"Closing" is defined in the Master Transaction Agreement.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compounding Partnership" is defined in the Master Transaction
Agreement.
"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 Contributor or any of its Affiliates 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.
A-2
<PAGE> 45
"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 Business" is defined in the third WHEREAS clause.
"Contributed Contracts" means, other than the Leases and Government
Licenses, all right, title, and interest of Contributor and any Affiliate
thereof in (i) all Contracts to which Contributor or an Affiliate thereof is a
party, whether or not entered into in the ordinary course of business, that
relate principally to the normal operation and conduct of the Contributed
Business, but in the case of any Contracts under which either Contributor or any
Affiliate thereof retains rights with respect to its other businesses, only to
the extent any such Contract relates to the operation of the Contributed
Business, (ii) all agreements and instruments setting forth 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 (f) of Section 1.1, and (iii) the Contracts listed on
Schedule 1.1(g).
"Contributed Intellectual Property" means, to the extent such items are
not Excluded Assets, all right, title, and interest of Contributor and any
Affiliate thereof (i) in Intellectual Property primarily used in the Contributed
Business, and a non-exclusive, royalty-free license as set forth in the Master
Intellectual Property Agreement in Intellectual Property used in, but not
primarily used in, the Contributed Business, and (ii) in any Trademarks
specifically assigned or licensed by Contributor in the Master Intellectual
Property Agreement.
"Contributed Subsidiary" is defined in Section 1.1(j).
"Contributor" is defined in the first paragraph of this Agreement.
"Contributor's 401(k) Plan" is defined in Section 1.7(i).
"Deeds" is defined in Section 1.3(a).
"Dispute Notice" is defined in Appendix B.
"Disputing Party" is defined in Appendix B.
"Employee Pension Benefit Plan" has the meaning set forth in section
3(2) of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in section
3(1) of ERISA
"Employees" means, collectively, the Salaried Employees and the Union
Employees.
"Encumbrance" means any lien, easement, adverse claim, charge,
encumbrance, security interest, title defect, option, right of first refusal or
any other restriction or third party right.
"Environment" is defined in Section (a) of the definition of "HSE
Laws".
A-3
<PAGE> 46
"Equipment" means all of the right, title and interest of Contributor
and any of its Affiliates 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 the items listed on Schedule 1.1(d).
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"Excluded Assets" is defined in Section 1.2.
"Excluded Railcars" is defined in Section 1.2(j).
"Exposure Claim" means any Liability, other than a Product Exposure
Claim, arising out of or relating to exposure of any individual to PVC, VCM or
any other Chemical Substances in connection with the Contributed Business, to
the extent such Liability is attributable to the period prior to the Asset
Transfer Effective Time.
"Fee Interests" means fee title in and to the parcels of land described
as fee property on Schedule 1.1(a), together with all buildings, structures,
fixtures and other permanent improvements situated thereon and all easements,
privileges, rights-of-way, riparian and other water rights, lands underlying any
adjacent streets or roads, appurtenances and licenses to the extent pertaining
to or accruing to the benefit of such land.
"Fully Diluted" means a computation of equity interests on a basis as
if all potentially dilutive securities, including warrants, stock options and
convertible bonds, have been exercised or converted.
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"Geon Canada Transfer Agreement" is defined in the Master Transaction
Agreement.
"Geon LP" is defined in the first paragraph of this Agreement.
"Geon PVC Resin Supply Agreement" means the Geon PVC Resin Supply
Agreement between Contributor and the Partnership executed and delivered
pursuant to the Master Transaction Agreement.
"Government Licenses" means all licenses, permits or franchises issued
by any Authority relating to the operation, development, use, maintenance or
occupancy of the Assets 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 action, condition, event, circumstance or
responsibility (including any compliance action or requirement) that is
necessary to comply with HSE Laws but only to the extent that any of the
foregoing gives rise to out of pocket costs or expenses or results
A-4
<PAGE> 47
in a Liability that is required by GAAP to be reflected on the balance sheet of
the applicable party or (ii) any Third Party Claim arising under HSE Laws,
excluding, however, Exposure Claims and Product Exposure Claims.
"HSE Laws" means, (i) with respect to an HSE Type A Claim, Legal
Requirements in effect as of the Asset Transfer Effective Time, together with
all changes from time to time in such Legal Requirements, and (ii) with respect
to an HSE Type B Claim, Legal Requirements in effect as of the Asset Transfer
Effective Time, in each case relating to (a) any ambient air, surface water,
drinking water, groundwater, land surface, subsurface strata, river or marine
sediments, 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; (b) health or safety, including the exposure of employees and other
Persons to any Chemical Substance; (c) 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 (d) the
management of any Chemical Substance, including the manufacture, generation,
formulation, processing, labeling, use, treatment, handling, storage, disposal,
transportation, arrangement for transportation or disposal, distribution,
re-use, recycling or reclamation of any Chemical Substance.
"HSE Proceeding" is defined in Section 2.11(d).
"HSE Remedial Action Claim" is defined in Section 5.5.
"HSE Type A Claim" means an HSE Claim, or portion thereof, in which the
sole relief sought is the investigation, removal or remediation of Chemical
Substances present in soil, sediment, surface water or groundwater prior to the
Asset Transfer Effective Time or the restoration of natural resources allegedly
affected thereby.
"HSE Type B Claim" means an HSE Claim other than an HSE Type A Claim.
"Indebtedness" is defined in the Master Transaction Agreement.
"Indemnified Party" is defined in Section 5.3(a).
"Indemnifying Party" is defined in Section 5.3(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, copyrights, copyright applications or copyright
registrations, sales promotion literature and advertising materials.
"Inventory" means materials used by Contributor in the Contributed
Business and owned by Contributor as of the Asset Transfer Effective Time
including raw materials, feed stocks, supplies, additives, pigments, process
chemicals, packaging materials (to the extent the Partnership's use
A-5
<PAGE> 48
thereof would be consistent with the Master Intellectual Property Agreement),
catalysts, work-in-process and finished goods that relate principally to the
normal operation and conduct of the Contributed Business.
"Knowledge" with respect to Contributor means the actual knowledge of
(i) any current plant manager employed in the Contributed Business and (ii) any
current officer of Contributor having responsibilities with respect to the
Contributed Business or the transactions contemplated in this Agreement.
"Leased Premises" means the premises described in the Leases.
"Leaseholds" means the interest of the tenant under the Leases, for the
use and occupancy of the Leased Premises, together with all buildings,
structures, fixtures and other permanent improvements situated thereon and 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.
"Leases" means the leases and subleases, all amendments thereto and all
agreements related thereto described on Schedule 1.1(b).
"Legal Requirement" means any law, common law, statute, rule,
ordinance, consent or other decree, regulation, requirement, standard (including
any clean-up standard), order (including any executive, judicial or
administrative order) or judgment of any Authority, as enacted, established,
published or applied, and any judicial or administrative interpretation thereof,
including (i) the terms of any Government License, (ii) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
(iii) the Resource Conservation and Recovery Act of 1976, as amended.
"Liability" is defined in Section 5.2(a).
"Licensed Technology" means the technology licensed to the Partnership
pursuant to the Master Intellectual Property Agreement.
"Lowest Cost Response" means the response required or allowed under HSE
Laws that corrects the noncompliance with HSE Law, and/or addresses the Chemical
Substances present, as applicable, 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. With respect to an HSE Type A
Claim: (i) taking no action shall constitute the Lowest Cost Response if, after
investigation, taking no action is determined to be consistent with HSE Laws;
and (ii) if taking no action is not consistent with such 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 such HSE Laws and less costly than the least costly permanent
remedy (such as the excavation and removal of soil). With respect to an HSE Type
B Claim: (a) the Lowest Cost Response shall be that required to
A-6
<PAGE> 49
achieve compliance with HSE Laws, recognizing that the amount of penalties
assessed may be determined by HSE Laws as in effect as of the date the HSE Claim
is asserted; (b) the least costly permanent remedy that would minimize the
likelihood of subsequent or repeated HSE Claims related to the same condition,
event, circumstance or other basis for noncompliance consistent with HSE Laws
shall constitute the Lowest Cost Response, provided that Contributor may elect
to pay the penalty, and to mitigate the negative impacts and assume any
additional costs or liabilities associated with a non-permanent remedy to the
reasonable satisfaction of the Partnership, and thereby avoid such a permanent
remedy; and (c) the Partnership may elect to conduct a supplemental
environmental project or perform corrective action that is more costly than a
proposed penalty in lieu of paying some or all of the proposed penalty, and such
project or action shall constitute the Lowest Cost Response if, in the
reasonable judgment of the Partnership, paying penalties would subject the
Partnership to negative impacts on the Contributed Business or potential
additional costs or liabilities sufficient to warrant the additional cost of
such project or action; PROVIDED, that Contributor may elect to pay the penalty,
and to mitigate the negative impacts and assume such additional costs or
liabilities to the reasonable satisfaction of the Partnership, and thereby avoid
such a project or action.
"Master Intellectual Property Agreement" means the Related Agreement
that is attached as Exhibit T to the Master Transaction Agreement.
"Master Transaction Agreement" is defined in the sixth 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. Without limiting the
generality of the foregoing, a "Material Adverse Effect" shall be deemed to have
occurred if the applicable effect, individually or in the aggregate with all
other effects or matters that are qualified by materiality or Material Adverse
Effect, would be reasonably likely to involve liability, loss, or diminution in
value of $5,000,000 or more in the aggregate.
"OCC" is defined in the sixth WHEREAS clause.
"Partnership" is defined in the first paragraph of this Agreement.
"Partnership Assumption Agreement" is defined in Section 1.5(b).
"Partnership Benefit Plans" is defined in Section 1.7(f).
"Partnership Employee" is defined in Section 1.7(a).
"Patent Assignment" is defined in Section 1.3(a).
"PBGC" is defined in Section 2.1(e).
"PCBs" is defined in this Appendix in the definition of "Chemical
Substance".
A-7
<PAGE> 50
"Person" means any natural person, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, business, Authority or other entity.
"Plans" is defined in Section 2.1(a).
"Plant Employees" means the Salaried Employees whose principal place of
employment is at a manufacturing facility and who are not Tier 1 Employees or
Tier 2 Employees.
"Pre-Closing 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 Asset Transfer Effective Time of the Assets or the
Contributed Business other than the Liabilities referred to in Sections
1.5(a)(i), (ii), (iii), (vi), (vii), (viii) and (x).
"Prepaid Expenses" means the balances in the prepaid accounts
consistent with GAAP of Contributor or its Affiliates, as of the Asset Transfer
Effective Time, that are associated with the Contributed Business and that will
have value to the Partnership in owning and operating the Contributed Business
after the Asset Transfer Effective Time.
"Proceeding" means any audit, litigation, allegation, claim, grievance,
arbitration, investigation, civil, criminal, quasi-criminal or administrative
action, proceeding, charge, prosecution, suit or other action, in each case
instituted or asserted in writing.
"Product Exposure Claim" means any Liability arising out of or relating
to exposure of any individual to PVC, VCM or any other Chemical Substances from
an alleged defect in a finished product manufactured by a Person other than
Contributor, any Affiliate thereof, the Partnership, any member of the OCC Group
(as defined in the Master Transaction Agreement) or any member of the Geon Group
(as defined in the Master Transaction Agreement) from one or more products of
the Contributed Business sold before the Asset Transfer Effective Time.
"Property Tax" is defined in Section 6.2(c).
"PVC" means polyvinyl chloride.
"PVC Unit" is defined in the Master Transaction Agreement.
"Related Agreements" means the Related Agreements (as such term is
defined in the Master Transaction Agreement), other than this 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.
"Remedial Action" is defined in Section 5.5.
A-8
<PAGE> 51
"Retained Business" means any business of Contributor or its Affiliates
that is not part of the Contributed Business.
"Salaried Employees" means all employees (either salaried or hourly) of
Contributor whose work relates solely and exclusively to, or substantially in
support of, the Assets, who are not Union Employees, and who are, immediately
prior to the Asset Transfer Effective Time, either (i) in the active employment
of Contributor or (ii) on short-term disability leave, sick leave, or other
temporary leave of absence approved by Contributor.
"Site Lease Agreement" is defined in Section 1.3(b).
"Specified Amount" is defined in the Master Transaction Agreement.
"Specified Working Capital Items" is defined in the Master Transaction
Agreement.
"Stores Inventory" means the inventory of spare parts, excluding
Capital Spares, that are used by a Contributor or any Affiliate thereof in the
Contributed Business and owned by such Contributor or any Affiliate thereof as
of the Asset Transfer Effective Time and that consist of items that generally
can be used for several processes or types of equipment, including 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. Stores Inventory shall include any reserve for slow
moving or obsolete materials and supplies, and for any inventory volume or price
adjustments.
"Taxes" means all taxes, charges, fees, levies or other assessments
imposed by any Authority, including 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).
"Third Party Claim" means any allegation, claim, demand, civil,
criminal or administrative action, proceeding, charge or prosecution brought by
a Person other than Contributor, any Affiliate thereof, the Partnership, any
member of the OCC Group (as defined in the Master Transaction Agreement) or any
member of the Geon Group (as defined in the Master Transaction Agreement);
PROVIDED, HOWEVER, that, if such allegation, claim, demand, civil, criminal or
administrative action, proceeding, charge or prosecution is brought by
Contributor, any Affiliate thereof, any member of the OCC Group or any member of
the Geon Group, in each case in its capacity as the owner or operator of
property not transferred pursuant to the Asset Contribution and Sale Agreements
(as defined in the Master Transaction Agreement), such allegation, claim,
demand, civil, criminal or administrative action, proceeding, charge or
prosecution shall be a Third Party Claim.
"Threshold Level" is defined in Section 5.5.
"Tier 1 Employees" means the Salaried Employees who are identified on
Schedule B, consisting of (i) certain Salaried Employees who are not Plant
Employees and whose work relates
A-9
<PAGE> 52
indirectly to the support of the Assets and (ii) certain Salaried Employees
whose principal place of business is at a manufacturing facility.
"Tier 2 Employees" means the Salaried Employees who are identified on
Schedule C, consisting of Salaried Employees who are not Plant Employees and
whose work relates directly to the support of the Assets.
"Trade Accounts Payable" means, as of the Asset Transfer Effective
Time, all current trade accounts payable and current accrued expenses, including
salaries and wages due to Partnership Employees, that are generated by and
result from the execution by Contributor and its Affiliates of normal and
customary payment and month-end closing processes prior to the Asset Transfer
Effective Time. Trade Accounts Payable includes unpaid invoices or accruals for
services, materials, supplies, feedstocks and products received in the ordinary
course of business prior to the Asset Transfer Effective Time and which are
attributable to the Contributed Business, including, by way of illustration
only, any amounts or balances owing by Contributor under any product exchange or
similar agreement. Trade Accounts Payable shall not include any payments due to
an Affiliate of Contributor including any payments due for services, rent,
overhead or similar items.
"Trademark Assignment" is defined in Section 1.3(a).
"Trademarks" means trade names, trademarks, trademark registrations or
trademark applications or any derivative thereof or design used in connection
therewith.
"Transfer Documents" means documents transferring, conveying, assigning
or contributing any of the Assets to the Partnership, including the Assignment
and Assumption Agreements.
"Transferred Business" is defined in the Geon Canada Transfer
Agreement.
"Transition Employees" is defined in Section 1.7(d).
"Union Contracts" means any contracts in place between any of the
Unions and Contributor immediately prior to the Asset Transfer Effective Time.
"Union Employees" means all employees who are part of a collective
bargaining unit represented by any Union, and who are, immediately prior to the
Asset Transfer Effective Time, either (i) in the active employment of
Contributor or (ii) on short-term disability leave, sick leave or other
temporary leave of absence approved by Contributor.
"Unions" means (i) the International Brotherhood of Electrical Workers
Local Union Number 369, (ii) the International Association of Machinists and
Aerospace Workers, District Lodge Number 27, (iii) the United Food and
Commercial Workers Union Number 72D (AFL/CIO), and (iv) the United Association
of Journeyman and Apprentices of the Plumbing and Pipe Fitting Industry, Local
Union Number 522.
"Unrecorded Assets" means all right, title and interest of Contributor
and any of its Affiliates in customer lists, customer credit information (to the
extent neither Contributor nor any of its
A-10
<PAGE> 53
Affiliates is bound to any confidentiality obligation with respect thereto),
customer payment histories and credit limits, vendor lists, and catalogs.
"VCM" means vinyl chloride monomer.
"WARN" is defined in Section 1.7(e).
"Working Capital" means working capital, determined in accordance with
GAAP.
A-11
<PAGE> 54
Appendix B
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 Contributor and the
Partnership 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) Any party to this Agreement 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 party or parties to the
Dispute, who within five business days after such notice shall schedule a
meeting to be held in Dallas, Texas between the parties. The meeting shall occur
within 10 business days after notice of the meeting is delivered to the other
party or parties. 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 subsections (d), (e) and (f).
(d) After satisfying the requirements above, such Dispute shall be
submitted to mandatory and binding arbitration at the election of any party
involved in the Dispute (the "Disputing Party"). The arbitration shall be
subject to the Federal Arbitration Act as supplemented by the conditions set
forth in this Appendix. The arbitration shall be conducted in accordance with
B-1
<PAGE> 55
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date the notice of arbitration is served, other than as
specifically modified herein. In the absence of an agreement to the contrary,
the arbitration shall be held in Dallas, Texas. The Arbitrator (as defined
below) will allow reasonable discovery in the forms permitted by the Federal
Rules of Civil Procedure, to the extent consistent with the purpose of the
arbitration. During the pendency of the Dispute, each party shall make available
to the Arbitrator and the other parties all books, records and other information
within its control requested by the other parties or the Arbitrator subject to
the confidentiality provisions contained herein, and PROVIDED that no such
access shall waive or preclude any objection to such production based on any
privilege recognized by law. Recognizing the express desire of the parties for
an expeditious means of dispute resolution, the Arbitrator may limit the scope
of discovery between the parties as may be reasonable under the circumstances.
In deciding the substance of the parties' claims, the laws of the State of New
York shall govern the construction, interpretation and effect of this Agreement
(including this Appendix) without giving effect to any conflict of law
principles. The arbitration hearing shall be commenced promptly and conducted
expeditiously, with each party involved in the Dispute being allocated an equal
amount of time for the presentation of its case. Unless otherwise agreed to by
the parties, the arbitration hearing shall be conducted on consecutive days.
Time is of the essence in the arbitration proceeding, and the Arbitrator shall
have the right and authority to issue monetary sanctions against any of the
parties if, upon a showing of good cause, that party is unreasonably delaying
the proceeding. To the fullest extent permitted by law, the arbitration
proceedings and award shall be maintained in confidence by the Arbitrator and
the parties.
(e) The Disputing Party shall notify the American Arbitration
Association ("AAA") and the other parties involved in the Dispute in writing
describing in reasonable detail the nature of the Dispute (the "Dispute
Notice"). The arbitrator (the "Arbitrator") shall be selected within 15 days of
the date of receipt of the Dispute Notice by all of the parties from the members
of a panel of arbitrators of the AAA or, if the AAA fails or refuses to provide
a list of potential arbitrators, of the Center for Public Resources, and shall
be experienced in commercial arbitration. In the event that the parties are
unable to agree on the selection of the Arbitrator, the AAA shall select the
Arbitrator, using the criteria set forth in this Appendix, within 30 days of the
date of the Dispute Notice. In the event that the Arbitrator is unable to serve,
his or her replacement will be selected in the same manner as the Arbitrator to
be replaced. The Arbitrator shall be neutral. The Arbitrator shall have the
authority to assess the costs and expenses of the arbitration proceeding
(including the arbitrators' costs and attorneys' fees and expenses) against any
or all parties.
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental, indirect, punitive, exemplary, special or other
similar damages or (ii) amend this Agreement. The Arbitrator shall render the
arbitration award, in writing, within 20 days following the completion of the
arbitration hearing, and shall set forth the reasons for the award. In the event
that the Arbitrator awards monetary damages in favor of a party, the Arbitrator
must certify in the award that no indirect, consequential, incidental, punitive,
exemplary, special or other similar damages are included in such award. If the
Arbitrator's decision results in a monetary award, the interest to be granted on
such award, if any, and the rate of such interest shall be determined by the
Arbitrator in
B-2
<PAGE> 56
his or her discretion. The arbitration award shall be final and binding on the
parties, and judgment thereon may be entered in any court of competent
jurisdiction, and may not be appealed except to the extent permitted by the
Federal Arbitration Act.
(g) In the event that a Dispute involving Remedial Action pursuant to
Section 5.5 is submitted to mandatory and binding arbitration, any factual or
technical dispute regarding the presence, Release or threatened Release of
Chemical Substances under Section 5.5(b)(ii) or the Lowest Cost Response under
Section 5.5(c)(i) or (ii) shall be submitted, either by the Arbitrator or by the
parties, to a nationally-recognized environmental consulting firm acceptable to
both parties for binding resolution of such factual or technical dispute, and
the Arbitrator shall be bound to accept and apply the factual or technical
findings of such firm in rendering its decision hereunder.
(h) To assist the Arbitrator or the environmental consulting firm in
resolving Disputes where the Disputing Party alleges, pursuant to Section
5.3(g), and the Arbitrator and/or environmental consulting firm determines, that
both the Partnership and Contributor are liable for a Remedial Action, the
parties authorize the Arbitrator to allocate the Liability, as between
Contributor and the Partnership and for purposes of this Agreement only, based
upon the following rebuttable presumptions:
(i) with respect to an HSE Type A Claim involving a Remedial
Action in, on, under, at, or in the vicinity of the Fee Interests or
the Leaseholds, the Liability should be allocated based upon the
relative years of use or operation by Contributor and the Partnership
of the building, structure, fixture or improvement from which the
Chemical Substance was Released;
(ii) with respect to an HSE Type A Claim involving a Remedial
Action in, on, under, at or in the vicinity of an offsite treatment,
storage or disposal facility, which facility received solid or
hazardous waste or recyclable materials as a public or commercial
enterprise and to which the Contributed Business is alleged to have
sent or transported such materials for treatment, storage, recycling or
disposal both before and after the Asset Transfer Effective Time, the
Liability should be allocated based upon the relative volume of
materials attributed to Contributor and its Affiliates and the
Partnership, PROVIDED that the Chemical Substances attributed to the
parties, and the constituents, toxicity, mobility and concentrations
thereof, are similar in all material respects;
(iii) with respect to an HSE Type B Claim, the Liability to
attain compliance with HSE Laws in effect as of the Asset Transfer
Effective Time should be allocated solely to Contributor, while the
Liability to attain compliance with HSE Laws that become more stringent
after the Asset Transfer Effective Time and to continue to operate in
compliance with then applicable HSE Laws should be allocated to the
Partnership. To the extent penalties for noncompliance with HSE Laws in
effect as of the Asset Transfer Effective Time are assessed for a
period of time before the Asset Transfer Effective Time, before the
Partnership knows of the existence of the noncompliance, or after the
Partnership knows of the existence of such noncompliance but is taking
commercially reasonable actions to cure the matter or to otherwise
achieve compliance in a commercially reasonable and prudent matter,
Liability in each case should be allocated solely to Contributor. To
the extent
B-3
<PAGE> 57
penalties for noncompliance with HSE Laws are assessed for a period of
time after the Partnership knows of the existence of the noncompliance
but has failed to take commercially reasonable actions to cure the
matter or to otherwise achieve compliance in a commercially reasonable
and prudent matter pursuant to Section 5.2(c), Liability should be
allocated solely to the Partnership.
(4) CONTINUATION OF BUSINESS. Notwithstanding the existence of any
Dispute or the pendency of any procedures pursuant to this Appendix B, 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.
B-4
<PAGE> 58
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 Arbitrator shall determine to be appropriate under the
circumstances.
B-5
<PAGE> 1
Exhibit 10.4
PARENT AGREEMENT
(OXY VINYLS, LP)
AMONG
OCCIDENTAL CHEMICAL CORPORATION,
OCCIDENTAL PETROLEUM CORPORATION,
THE GEON COMPANY
AND
OXY VINYLS, LP
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 OWNERSHIP AND BUSINESS OF PARTNER SUBS...........................................3
1.1 Restrictions on Transfer and Pledge of Partner Sub Stock................3
1.2 Right of First Refusal and Right of First Option........................4
1.3 Effect of Transfer......................................................6
1.4 Special Purpose Subsidiaries............................................6
SECTION 2 STANDSTILL AGREEMENT AND CERTAIN OTHER MATTERS...................................6
2.1 Standstill..............................................................6
2.2 Exceptions..............................................................7
SECTION 3 MISCELLANEOUS....................................................................8
3.1 No Waivers..............................................................8
3.2 Expenses in Connection with Exercise. .................................8
3.3 Confidentiality and Use of Information..................................8
3.4 Non-Solicitation. .....................................................9
3.5 Further Assurances......................................................9
3.6 Assignment; Successors and Assigns......................................9
3.7 Benefits of Agreement Restricted to the Parties.........................9
3.8 Notices.................................................................9
3.9 Severability...........................................................11
3.10 Termination............................................................11
3.11 Construction and Certain Definitions...................................12
3.12 Counterparts...........................................................12
3.13 Governing Law..........................................................12
3.14 Obligations Regarding Affiliates.......................................12
3.15 Amendment..............................................................12
3.16 Jurisdiction; Consent to Service of Process; Waiver....................12
3.17 Waiver of Jury Trial...................................................13
</TABLE>
1
<PAGE> 3
PARENT AGREEMENT
----------------
(OXY VINYLS, LP)
----------------
This PARENT AGREEMENT (OXY VINYLS, LP) (this "Agreement") dated as of
the 30th day of April, 1999, is entered into among Occidental Chemical
Corporation, a New York corporation ("OCC"), The Geon Company, a Delaware
corporation ("Geon"), Occidental Petroleum Corporation, a Delaware corporation
("OPC"), and Oxy Vinyls, LP, a Delaware limited partnership (the "Partnership,"
and together with OCC, OPC and Geon, the "Parties", and each individually, a
"Party").
WHEREAS, each of OCC and Geon is a "Parent" for purposes of this
Agreement; and
WHEREAS, each of OPC and Geon is a "Subject Parent" for purposes of
this Agreement; PROVIDED, HOWEVER, that neither OPC nor Geon shall be a "Subject
Parent" from and after the expiration of 12 months from the date on which it and
its Affiliates no longer hold any Units in the Partnership; and
WHEREAS, 1999 PVC Partner Inc., a Delaware corporation ("Geon Partner
Sub"), is a direct wholly-owned subsidiary of Geon; and
WHEREAS, Occidental PVC, LLC, a Delaware limited liability company
("OCC GP"), and Occidental PVC LP, Inc., a Delaware corporation ("OCC LP" and,
together with OCC GP, the "OCC Partner Subs"), are both direct or indirect
wholly-owned subsidiaries of OCC; and OCC is an indirect wholly-owned subsidiary
of OPC; and
WHEREAS, OCC and Geon entered into a Master Transaction Agreement,
dated December 22, 1998 (the "Master Transaction "Agreement"), providing for,
among other things, the formation of the Partnership pursuant to the Limited
Partnership Agreement of the Partnership dated as of the date of this Agreement
(the "Partnership Agreement") and the admission of the OCC Partner Subs and the
Geon Partner Sub as partners in the Partnership. The OCC Partner Subs and the
Geon Partner Sub, collectively or individually, as the context may require, are
referred to herein as the "Partner Subs"; and
WHEREAS, this Agreement is essential to the consummation of the closing
pursuant to the Master Transaction Agreement; and
WHEREAS, each Parent is willing to subject the Partner Sub Stock (as
defined in Section 1.1) to certain restrictions on transfer, as set forth in
this Agreement; and
WHEREAS, each of OPC and Geon is willing to agree to certain covenants
in favor of the other in connection with the closing of the transactions
contemplated by the Master Transaction Agreement;
2
<PAGE> 4
NOW THEREFORE, in consideration of the foregoing and the mutual
promises and covenants of the Parties, the Parties hereby agree as follows:
SECTION 1
OWNERSHIP AND BUSINESS OF PARTNER SUBS
--------------------------------------
1.1 RESTRICTIONS ON TRANSFER AND PLEDGE OF PARTNER SUB STOCK.
(a) Each Parent agrees that, except as otherwise provided below in this
Section 1, or with the written consent of the other Parent, 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 dispose of, whether by act, deed, merger or otherwise ("Transfer")
or (ii) mortgage, pledge, encumber or create or suffer to exist any lien or
encumbrance upon or security interest in ("Pledge"), all or any part of the
capital stock or other equity interests (including any securities convertible
into or exchangeable for or carrying any rights to purchase, subscribe for or
otherwise acquire any such capital stock or other equity interests) 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) Each Parent agrees that all certificates (if any) representing
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 the Partner Sub Stock is
subject to the restrictions of this Agreement:
THE SALE, ASSIGNMENT, PLEDGE OR OTHER TRANSFER OR HYPOTHECATION OF THE
STOCK OR OTHER EQUITY INTEREST 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 OR OTHER EQUITY INTEREST 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 and without the
application of the requirements of Section 1.2, each Parent may Transfer all
(but not less than all) of its Partner Sub Stock, if such Transfer is: (i) in
connection with (A) a merger, consolidation, conversion, share exchange or
Change of Control of such Parent or (B) a sale or other disposition by such
Parent of assets including the Partner Sub Stock where such Partner Sub Stock
constitutes less than 50% of the book value of the aggregate assets to be sold
or disposed of, as reflected on such Parent's most recent audited consolidated
(or combined) financial statements; (ii) to an 80%-Owned Affiliate of
3
<PAGE> 5
such Parent; or (iii) to the shareholders of (A) such Parent, in the case of
Geon, or (B) OPC, in the case of OCC; PROVIDED, HOWEVER, that the requirements
of Section 1.2(d)(i)-(vi) must be satisfied in connection therewith. For
purposes of the preceding sentence, the term "Change of Control" shall (A) for
Geon be defined in the same way as that term is defined for Geon in Section 2.2
in its capacity as a Subject Parent and (B) for OCC mean an event or
circumstance that results in OCC's no longer being an Affiliate of OPC.
(d) Except as provided in Section 1.1(c), nothing in this Agreement
shall prevent or restrict the Transfer or Pledge of the capital stock, equity
ownership interests or other securities of a Parent or any Person that owns a
direct or indirect interest in 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.
(e) Each Parent (so long as such Parent is performing its obligations
hereunder) may Pledge all (but not less than all) of its Partner Sub Stock in
connection with a loan to such Parent, PROVIDED that (i) the loan to such Parent
has been approved by the Partnership and (ii) the Pledge shall be evidenced by
an instrument, reasonably satisfactory to the Partnership, wherein, in the case
of the Partner Sub Stock of OCC GP and OCC LP, the lender receiving such Pledge
shall agree that in the event such lender obtains a right of foreclosure on
OCC's Partner Sub Stock, such lender will foreclose on the Partner Sub Stock of
OCC's Partner Subs proportionately so that such lender will in all events hold
portions of Partner Sub Stock of OCC GP and OCC LP proportionate to OCC's
holdings thereof.
1.2 RIGHT OF FIRST REFUSAL AND RIGHT OF FIRST OPTION.
(a) Without the consent of the other Parent, no Parent may Transfer
less than all of its Partner Sub Stock, and unless such Transfer is otherwise
permitted by Section 1.1, no Parent may Transfer its Partner Sub Stock, directly
or indirectly, for consideration other than cash. Unless such Transfer is
otherwise permitted by Section 1.1, any Parent (the "Selling Parent") that
receives a bona fide offer to purchase all of its Partner Sub Stock that it
desires to accept (an "Offer") or that otherwise desires to Transfer all of its
Partner Sub Stock to any Person shall give written notice (the "Initial Notice")
to the Partnership and the other Parent (the "Offeree Parent") stating that the
Selling Parent has received an Offer or otherwise desires to Transfer its
Partner Sub Stock and shall set forth the cash purchase price and all other
terms of the Offer or the cash purchase price (established as provided below)
and all other terms on which it otherwise is willing to sell its Partner Sub
Stock (in each case, the "Offer Terms"). In establishing the Offer Terms for a
proposed sale that does not involve an Offer, the Selling Parent shall obtain an
appraisal from an independent appraiser with a reasonable level of industry
experience of the cash price that a willing buyer under no compulsion to buy
would pay and a willing seller under no compulsion to sell would accept for the
Partner Sub Stock of the Selling Parent (the "Fair Market Value"). 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.
4
<PAGE> 6
(b) The Offeree Parent shall have the option, exercisable by delivering
written notice (the "Acceptance Notice") of such exercise to the Selling Parent
within 60 days of the date of the Initial Notice, to elect to purchase all, but
not less than 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, HOWEVER, 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 (or any successor statute) or other Legal
Requirement. 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
immediately available funds delivered at the closing, and all actions at the
closing shall conform in all material respects to the Offer Terms.
(c) If the Offeree Parent does not elect to purchase all of the Selling
Parent's Partner Sub Stock within 60 days after the receipt of the Initial
Notice, the Selling Parent shall have a further 180 days during which it may,
subject to Section 1.2(d), consummate the sale of its Partner Sub Stock (i)
substantially in accordance with the terms of the Offer or (ii) if no Offer is
involved, to a third party purchaser on terms that are not substantially more
favorable to such purchaser than the Offer Terms and at a price equal to not
less than 90% of the Fair Market Value of the Partner Sub Stock. 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. If the Selling
Parent receives a written offer during such further 180-day period from a third
party purchaser that is for less than 90% of the Fair Market Value, and the
Selling Parent is willing to accept the offer, then (1) the offer shall be
treated as an Offer, and (2) the Selling Parent must comply with the provisions
of this Section 1.2 before the Selling Parent may make any Transfer of its
Partner Sub Stock to the third party purchaser that made the Offer.
(d) Notwithstanding the foregoing provisions of this Section 1.2,
except as provided in Section 1.1(c), a Parent may Transfer its Partner Sub
Stock only if all of the following occur:
(i) The proposed transferor is not in default in the timely
performance of any of its material obligations to the Partnership.
(ii) 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.
(iii) The Transfer does not cause a default under any material
contract (A) that has been approved unanimously by the Partnership
Governance Committee and (B) to which the Partnership is a party or by
which the Partnership or any of its properties is bound.
(iv) The Successor Parent executes an appropriate agreement to
be bound by this Agreement.
5
<PAGE> 7
(v) The transferor and transferee bear all reasonable costs
incurred by the Partnership in connection with the Transfer.
(vi) The provisions of Section 1.2(e) are satisfied.
(vii) The Successor Parent must have sufficient resources to
assume the obligations of the Parent, including any capital that may
reasonably be expected to be requested from its Partner Subs by the
Partnership under the then effective Strategic Plan, or the Successor
Parent's obligations must be supported by a guarantee, letter of credit
or other credit support reasonably satisfactory to the other Parent,
and such Successor Parent must otherwise be reasonably acceptable to
the other Parent.
(e) OCC may Transfer the Partner Sub Stock of either of its Partner
Subs to any Person only if it simultaneously Transfers the Partner Sub Stock of
its other Partner Sub to such Person or a wholly-owned Affiliate of such Person.
1.3 EFFECT OF TRANSFER. Upon completion of any Transfer that is
permitted hereunder, the Successor Parent shall succeed to and be substituted
for the applicable Parent, with the same effect as if it had been named herein,
and unless such Parent shall then be an Affiliate of such Successor Parent, such
Parent and its Affiliates shall thereupon be released from all obligations under
this Section 1 and Section 3. For purposes of this Section 1, the term
"Successor Parent" shall mean the acquiring, succeeding or surviving entity in
any permitted Transfer that directly or indirectly owns the applicable Partner
Sub Stock following such transaction, if other than a Parent. In addition, a
Parent and its Affiliates shall be released from all obligations under this
Section 1 and Section 3 at such time as neither such Parent nor any of its
Affiliates holds any Units in the Partnership pursuant to a Transfer of such
Units in accordance with the Partnership Agreement.
1.4 SPECIAL PURPOSE SUBSIDIARIES. Each Parent covenants and 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 appropriate 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)
hereof.
SECTION 2
STANDSTILL AGREEMENT AND CERTAIN OTHER MATTERS
----------------------------------------------
2.1 STANDSTILL. Each Subject Parent agrees for the benefit of the other
Subject Parent that, until the fifth anniversary of the date of this Agreement,
neither it, nor any of its Affiliates shall, without prior written invitation or
request of the other Subject Parent: (i) in any manner acquire, agree to acquire
or make any proposal to acquire, directly or indirectly, any securities, assets
or property (other than an acquisition of assets or property in the ordinary
course of business) of the other Subject Parent, whether such agreement or
proposal is made with or to the other Subject Parent
6
<PAGE> 8
or a third party; (ii) make any unsolicited proposal to enter into, directly or
indirectly, any merger or other business combination involving the other Subject
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 Subject
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 Subject Parent; (v) otherwise act, alone
or in concert with others, to seek to control the management, board of directors
or policies of the other Subject Parent; (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 Subject Parent also
agrees during such period not to: (a) request that the other Subject Parent (or
its respective directors, officers, employees or agents), directly or
indirectly, amend or waive any provision of this Section 2.1 (including this
sentence); or (b) take any action that might reasonably be expected to require
that the other Subject Parent make a public announcement regarding the
possibility of a business combination or merger.
2.2 EXCEPTIONS. Notwithstanding the provisions of Section 2.1:
(a) As to a Subject Parent, the provisions of Section 2.1 shall
automatically be terminated and of no further force and effect if any of the
following events occur with respect to the other Subject Parent: (i) a Change of
Control (as defined below) of the other Subject Parent shall have occurred, (ii)
the other Subject 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 the other Subject 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 the other Subject Parent
described in clause (C) of the definition of "Change of Control." A "Change of
Control" of a Subject Parent shall mean the occurrence of any of the following
events: (A) there shall be consummated any consolidation, conversion, merger or
share exchange of such Subject Parent (I) in which such Subject Parent is not
the continuing or surviving Person (other than a consolidation, merger or share
exchange with a wholly-owned subsidiary of such Subject Parent in which all
shares of common stock of such Subject Parent outstanding immediately prior to
the effectiveness thereof are changed into or exchanged for shares of common
stock of such subsidiary) or (II) pursuant to which the common stock of such
Subject Parent is converted into cash, securities or other property, other than,
in each case, a consolidation, conversion, merger or share exchange of such
Subject Parent in which the holders of the common stock immediately prior to the
consolidation, conversion, 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, conversion,
merger or share exchange; (B) such Subject 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 that would
constitute a "group" (as defined in Section 2.1) (other than such Subject
Parent, any subsidiary of
7
<PAGE> 9
such Subject 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 Subject Parent or
any subsidiary of such Subject Parent or any Person holding securities of such
Subject 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 Subject Parent.
(b) The terms of the first sentence of Section 2.1 shall not apply to
the purchase and sale of any securities of a Subject Parent by any pension or
other related employee benefit plans who are acting as passive investors in such
Subject Parent.
SECTION 3
MISCELLANEOUS
-------------
3.1 NO WAIVERS. No failure or delay by a Party 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.
3.2 EXPENSES IN CONNECTION WITH EXERCISE. In the event of a dispute
between Parties regarding the exercise or enforcement of any of the rights of a
Party under this Agreement or the failure by a Party to perform or observe any
of the provisions of this Agreement, the Party or Parties that do not ultimately
prevail in such dispute shall be liable, and hereby agree, to reimburse, on
demand, each prevailing 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 prevailing Party may incur in connection
therewith.
3.3 CONFIDENTIALITY AND USE OF INFORMATION.
(a) Each Parent agrees that it and its Affiliates shall be bound by the
terms and conditions of Section 13.1 of the Partnership Agreement as if such
Person was a "Partner" as defined in such agreement.
(b) Geon and OPC 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.
(c) The letter agreements regarding confidentiality dated January 21,
1998 and May 18, 1998 between Geon and OCC are hereby terminated.
8
<PAGE> 10
3.4 NON-SOLICITATION. Each Parent agrees that, for a period ending on
the first anniversary of the date of this Agreement (unless the applicability of
this provision is terminated earlier pursuant to Section 1.3), it will not, and
it will cause its Affiliates not to directly or knowingly induce or attempt to
induce any officers or employees of the Partnership to leave the employ of the
Partnership; PROVIDED, HOWEVER, that nothing in this Section 3.4 shall prohibit
any Parent or its Affiliates from hiring or engaging any of the foregoing who
respond to a general solicitation not directed specifically to officers or
employees of the Partnership.
3.5 FURTHER ASSURANCES. From time to time, each Party agrees to execute
and deliver such additional documents and provide such additional information
and assistance as the other Parties may reasonably require to carry out the
terms of this Agreement.
3.6 ASSIGNMENT; SUCCESSORS AND ASSIGNS.
(a) 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 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 the other
Parent, which consent shall be in the sole discretion of such other Parent. Any
purported assignment or delegation without such consent shall be void and
ineffective.
(b) No Subject Parent may assign or delegate any of its rights or
obligations under this Agreement without the prior consent of the other Subject
Parent, which consent shall be in the sole discretion of such other Subject
Parent, except that a Subject Parent may assign its rights or obligations under
the agreement without such consent in connection with any Change of Control.
3.7 BENEFITS OF AGREEMENT RESTRICTED TO THE PARTIES. This Agreement is
made solely for the benefit of the Parties, and no other Person shall have any
right, claim or cause of action under or by virtue of this Agreement.
3.8 NOTICES. All notices, requests, demands and other communications
that are 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 during business hours with proof of confirmation from the
transmitting machine or (ii) delivered by commercial courier or other hand
delivery, as follows:
9
<PAGE> 11
<TABLE>
<S> <C>
If to OPC: If to OCC:
Occidental Petroleum Company Occidental Chemical Corporation
10889 Wilshire Blvd. 5005 LBJ Freeway
Los Angeles, CA 90024 Dallas, TX 75244
Attention: President Attention: President
Telecopy Number: (310) 443-6977 Telecopy Number: (972) 404-3906
With a copy to: With a copy to:
Occidental Petroleum Corporation Occidental Petroleum Corporation
10889 Wilshire Boulevard 10889 Wilshire Boulevard
Los Angeles, California 90024 Los Angeles, California 90024
Attention: General Counsel Attention: General Counsel
Telecopy Number: (310) 443-6333 Telecopy Number: (310) 443-6333
If to Geon: And to:
The Geon Company Occidental Chemical Corporation
One Geon Center 5005 LBJ Freeway
Avon Lake, Ohio 44012 Dallas, Texas 75244
Attention: Chief Executive Officer Attention: General Counsel
Telecopy Number: (440) 930-1002 Telecopy Number: (972) 404-3957
With a copy to:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Attention: General Counsel
Telecopy Number: (440) 930-1002
If to the Partnership:
Oxy Vinyls, LP
5005 LBJ Freeway
Dallas, Texas 75244
Attention: Chief Executive Officer
Telecopy Number: (972) 720-7402
</TABLE>
10
<PAGE> 12
With a copy to:
Oxy Vinyls, LP
5005 LBJ Freeway
Dallas, Texas 75244
Attention: General Counsel
Telecopy Number: (972) 720-7403
And to:
Occidental Petroleum Corporation
10889 Wilshire Boulevard
Los Angeles, California 90024
Attention: General Counsel
Telecopy Number: (310) 443-6333
And to:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Attention: Chief Executive Officer
Telecopy Number: (440) 930-1002
And to:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Attention: General Counsel
Telecopy Number: (440) 930-1002
or to such other address as such Party shall have specified by notice to the
other Parties.
3.9 SEVERABILITY. In the event that any provisions of this Agreement
shall be Finally 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, be deemed severed
from this Agreement and every other provision of this Agreement shall remain in
full force and effect.
3.10 TERMINATION. The second Recital to this Agreement and Sections
1.3, 2.1, 2.2 and 3.4 set forth therein the timing for the termination of, or
release from, the applicable provisions of this Agreement. In addition, Section
3.3(b) shall terminate at such time as OPC or Geon, as the case
11
<PAGE> 13
may be, is no longer required to make the disclosures referred to in Section
3.3(b) to the Securities and Exchange Commission. Except for the foregoing, this
Agreement shall terminate upon the termination of the Partnership; PROVIDED,
HOWEVER, that no termination under this Agreement shall discharge any accrued
obligations owed by a Parent or a Subject Parent as of the date of such
termination.
3.11 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 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; and (vi) each gender
shall be deemed to include the other gender.
(b) The terms "Affiliate," "80%-Owned Affiliate," "Finally Determined,"
"Legal Requirement," "Partnership Governance Committee," "Person," "Strategic
Plan" and "Units" have the meanings set forth in the Partnership Agreement.
3.12 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.
3.13 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.
3.14 OBLIGATIONS REGARDING AFFILIATES. Each Parent shall cause its
Affiliates (including any Person controlling such Parent) to comply with all
provisions of this Agreement that apply to Affiliates of such Parent, and each
Parent shall be responsible for any failure of any such Affiliate to comply with
any such provision.
3.15 AMENDMENT. All waivers, modifications, amendments or alterations
of this Agreement shall require the execution of a written instrument signed by
each of the Parties.
3.16 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
12
<PAGE> 14
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. THE PARTIES AGREE THAT ANY AND ALL SERVICE OF PROCESS AND
ANY OTHER NOTICE IN ANY PROCEEDING SHALL BE EFFECTIVE AGAINST ANY PARTY IF
DELIVERED PURSUANT TO THE NOTICE PROVISIONS CONTAINED IN SECTION 3.8. THE
FOREGOING CONSENTS TO JURISDICTION 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.
3.17 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
<PAGE> 15
IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement as of the date first above written.
OCCIDENTAL CHEMICAL CORPORATION
By: /s/ Richard A. Lorraine
------------------------------------------
Richard A. Lorraine
Executive Vice President and Chief
Financial Officer
THE GEON COMPANY
By: /s/ Thomas A. Waltermire
-------------------------------------------
Thomas A.Waltermire
President and Chief Operating Officer
OCCIDENTAL PETROLEUM CORPORATION
By: /s/ Stephen I. Chazen
-------------------------------------------
Stephen I. Chazen
Chief Financial Officer and Executive
Vice President - Corporate
Development
OXY VINYLS, LP
By: OCCIDENTAL PVC, LLC, general partner
By: /s/ John L. Hurst, III
-------------------------------------------
John L. Hurst, III
President
<PAGE> 1
Exhibit 10.5
PARENT AGREEMENT
(PVC POWDER BLENDS, LP)
AND BUSINESS OPPORTUNITY AGREEMENT
AMONG
OCCIDENTAL CHEMICAL CORPORATION,
OCCIDENTAL PETROLEUM CORPORATION,
THE GEON COMPANY,
PVC POWDER BLENDS, LP
AND
OXY VINYLS, LP
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
SECTION 1 OWNERSHIP AND BUSINESS OF PARTNER SUBS............................... 3
1.1 Restrictions on Transfer and Pledge of Partner Sub Stock.... 3
1.2 Right of First Refusal and Right of First Option............ 4
1.3 Effect of Transfer.......................................... 6
1.4 Special Purpose Subsidiaries................................ 6
SECTION 2 STANDSTILL AGREEMENT AND CERTAIN OTHER MATTERS....................... 7
2.1 Standstill.................................................. 7
2.2 Exceptions.................................................. 7
SECTION 3 MISCELLANEOUS........................................................ 8
3.1 No Waivers.................................................. 8
3.2 Expenses in Connection with Exercise........................ 8
3.3 Confidentiality and Use of Information...................... 8
3.4 Partnership Competing Businesses............................ 9
3.5 Further Assurances.......................................... 9
3.6 Assignment; Successors and Assigns.......................... 9
3.7 Benefits of Agreement Restricted to the Parties............. 10
3.8 Notices..................................................... 10
3.9 Severability................................................ 12
3.10 Termination................................................. 12
3.11 Construction and Certain Definitions........................ 12
3.12 Counterparts................................................ 13
3.13 Governing Law............................................... 13
3.14 Obligations Regarding Affiliates............................ 13
3.15 Amendment................................................... 13
3.16 Jurisdiction; Consent to Service of Process; Waiver......... 13
3.17 Waiver of Jury Trial........................................ 14
3.18 Burlington Type Business.................................... 14
3.19 Pasadena Type Business...................................... 15
3.20 Burlington Non-Solicitation................................. 15
3.21 Pasadena Non-Solicitation................................... 16
</TABLE>
1
<PAGE> 3
PARENT AGREEMENT
----------------
(PVC POWDER BLENDS, LP)
-----------------------
AND BUSINESS OPPORTUNITY AGREEMENT
----------------------------------
This PARENT AGREEMENT (PVC POWDER BLENDS, LP) AND BUSINESS OPPORTUNITY
AGREEMENT (this "Agreement") dated as of the 30th day of April, 1999, is entered
into among Occidental Chemical Corporation, a New York corporation ("OCC"), The
Geon Company, a Delaware corporation ("Geon"), Occidental Petroleum Corporation,
a Delaware corporation ("OPC"), PVC Powder Blends, LP, a Delaware limited
partnership (the "Partnership"), and Oxy Vinyls, LP, a Delaware limited
partnership (the "PVC Partnership," and together with OCC, OPC, Geon, and the
Partnership, the "Parties", and each individually, a "Party").
WHEREAS, each of OCC and Geon is a "Parent" for purposes of this
Agreement; and
WHEREAS, each of OPC and Geon is a "Subject Parent" for purposes of
this Agreement; PROVIDED, HOWEVER, that neither OPC nor Geon shall be a "Subject
Parent" from and after the expiration of 12 months from the date on which it and
its Affiliates no longer hold any Units in the Partnership; and
WHEREAS, Occidental PVC Compound LP, Inc., a Delaware corporation ("OCC
Partner Sub"), is a direct or indirect wholly-owned subsidiary of OCC; and OCC
is an indirect wholly-owned subsidiary of OPC; and
WHEREAS, 1999 General Compounding Partner Inc., a Delaware corporation
("Geon GP"), and 1999 Limited Compounding Partner Inc., a Delaware corporation
("Geon LP" and, together with Geon GP, the "Geon Partner Subs"), are both direct
wholly-owned subsidiaries of Geon; and
WHEREAS, OCC and Geon entered into a Master Transaction Agreement,
dated December 22, 1998 (the "Master Transaction Agreement"), providing for,
among other things, the formation of the Partnership pursuant to the Limited
Partnership Agreement of the Partnership dated as of the date of this Agreement
(the "Partnership Agreement") and the admission of the Geon Partner Subs and the
OCC Partner Sub as partners in the Partnership. The Geon Partner Subs and the
OCC Partner Sub, collectively or individually, as the context may require, are
referred to herein as the "Partner Subs"; and
WHEREAS, this Agreement is essential to the consummation of the closing
pursuant to the Master Transaction Agreement; and
WHEREAS, each Parent is willing to subject the Partner Sub Stock (as
defined in Section 1.1) to certain restrictions on transfer, as set forth in
this Agreement; and
2
<PAGE> 4
WHEREAS, each of OPC and Geon is willing to agree to certain covenants
in favor of the other in connection with the closing of the transactions
contemplated by the Master Transaction Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
promises and covenants of the Parties, the Parties hereby agree as follows:
SECTION 1
OWNERSHIP AND BUSINESS OF PARTNER SUBS
--------------------------------------
1.1 RESTRICTIONS ON TRANSFER AND PLEDGE OF PARTNER SUB STOCK.
(a) Each Parent agrees that, except as otherwise provided below in this
Section 1, or with the written consent of the other Parent, 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 dispose of, whether by act, deed, merger or otherwise ("Transfer")
or (ii) mortgage, pledge, encumber or create or suffer to exist any lien or
encumbrance upon or security interest in ("Pledge"), all or any part of the
capital stock or other equity interests (including any securities convertible
into or exchangeable for or carrying any rights to purchase, subscribe for or
otherwise acquire any such capital stock or other equity interests) 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) Each Parent agrees that all certificates (if any) representing
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 the Partner Sub Stock is
subject to the restrictions of this Agreement:
THE SALE, ASSIGNMENT, PLEDGE OR OTHER TRANSFER OR HYPOTHECATION OF THE
STOCK OR OTHER EQUITY INTEREST 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 OR OTHER EQUITY INTEREST 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 and without the
application of the requirements of Section 1.2, each Parent may Transfer all
(but not less than all) of its Partner Sub Stock, if such Transfer is: (i) in
connection with (A) a merger, consolidation, conversion, share
3
<PAGE> 5
exchange or Change of Control of such Parent or (B) a sale or other disposition
by such Parent of assets including the Partner Sub Stock where such Partner Sub
Stock constitutes less than 50% of the book value of the aggregate assets to be
sold or disposed of, as reflected on such Parent's most recent audited
consolidated (or combined) financial statements; (ii) to an 80%-Owned Affiliate
of such Parent; or (iii) to the shareholders of (A) such Parent, in the case of
Geon, or (B) OPC, in the case of OCC; PROVIDED, HOWEVER, that the requirements
of Section 1.2(d)(i)-(vi) must be satisfied in connection therewith. For
purposes of the preceding sentence, the term "Change of Control" shall (A) for
Geon be defined in the same way as that term is defined for Geon in Section 2.2
in its capacity as a Subject Parent and (B) for OCC mean an event or
circumstance that results in OCC's no longer being an Affiliate of OPC.
(d) Except as provided in Section 1.1(c), nothing in this Agreement
shall prevent or restrict the Transfer or Pledge of the capital stock, equity
ownership interests or other securities of a Parent or any Person that owns a
direct or indirect interest in 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.
(e) Each Parent (so long as such Parent is performing its obligations
hereunder) may Pledge all (but not less than all) of its Partner Sub Stock in
connection with a loan to such Parent, PROVIDED that (i) the loan to such Parent
has been approved by the Partnership and (ii) the Pledge shall be evidenced by
an instrument, reasonably satisfactory to the Partnership, wherein, in the case
of the Partner Sub Stock of Geon GP and Geon LP, the lender receiving such
Pledge shall agree that in the event such lender obtains a right of foreclosure
on Geon's Partner Sub Stock, such lender will foreclose on the Partner Sub Stock
of Geon's Partner Subs proportionately so that such lender will in all events
hold portions of Partner Sub Stock of Geon GP and Geon LP proportionate to
Geon's holdings thereof.
1.2 RIGHT OF FIRST REFUSAL AND RIGHT OF FIRST OPTION.
(a) Without the consent of the other Parent, no Parent may Transfer
less than all of its Partner Sub Stock, and unless such Transfer is otherwise
permitted by Section 1.1, no Parent may Transfer its Partner Sub Stock, directly
or indirectly, for consideration other than cash. Unless such Transfer is
otherwise permitted by Section 1.1, any Parent (the "Selling Parent") that
receives a bona fide offer to purchase all of its Partner Sub Stock that it
desires to accept (an "Offer") or that otherwise desires to Transfer all of its
Partner Sub Stock to any Person shall give written notice (the "Initial Notice")
to the Partnership and the other Parent (the "Offeree Parent") stating that the
Selling Parent has received an Offer or otherwise desires to Transfer its
Partner Sub Stock and shall set forth the cash purchase price and all other
terms of the Offer or the cash purchase price (established as provided below)
and all other terms on which it otherwise is willing to sell its Partner Sub
Stock (in each case, the "Offer Terms"). In establishing the Offer Terms for a
proposed sale that does not involve an Offer, the Selling Parent shall obtain an
appraisal from an independent appraiser with a reasonable level of industry
experience of the cash price that a willing buyer under no compulsion to buy
would pay and a willing seller under no compulsion to sell would accept for the
Partner Sub
4
<PAGE> 6
Stock of the Selling Parent (the "Fair Market Value"). 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 60 days of the date of the Initial Notice, to elect to purchase all, but
not less than 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, HOWEVER, 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 (or any successor statute) or other Legal
Requirement. 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
immediately available funds delivered at the closing, and all actions at the
closing shall conform in all material respects to the Offer Terms.
(c) If the Offeree Parent does not elect to purchase all of the Selling
Parent's Partner Sub Stock within 60 days after the receipt of the Initial
Notice, the Selling Parent shall have a further 180 days during which it may,
subject to Section 1.2(d), consummate the sale of its Partner Sub Stock (i)
substantially in accordance with the terms of the Offer or (ii) if no Offer is
involved, to a third party purchaser on terms that are not substantially more
favorable to such purchaser than the Offer Terms and at a price equal to not
less than 90% of the Fair Market Value of the Partner Sub Stock. 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. If the Selling
Parent receives a written offer during such further 180-day period from a third
party purchaser that is for less than 90% of the Fair Market Value, and the
Selling Parent is willing to accept the offer, then (1) the offer shall be
treated as an Offer, and (2) the Selling Parent must comply with the provisions
of this Section 1.2 before the Selling Parent may make any Transfer of its
Partner Sub Stock to the third party purchaser that made the Offer.
(d) Notwithstanding the foregoing provisions of this Section 1.2,
except as provided in Section 1.1(c), a Parent may Transfer its Partner Sub
Stock only if all of the following occur:
(i) The proposed transferor is not in default in the timely
performance of any of its material obligations to the Partnership.
(ii) 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.
5
<PAGE> 7
(iii) The Transfer does not cause a default under any material
contract (A) that has been approved unanimously by the Partnership
Governance Committee and (B) to which the Partnership is a party or by
which the Partnership or any of its properties is bound.
(iv) The Successor Parent executes an appropriate agreement to
be bound by this Agreement.
(v) The transferor and transferee bear all reasonable costs
incurred by the Partnership in connection with the Transfer.
(vi) The provisions of Section 1.2(e) are satisfied.
(vii) The Successor Parent must have sufficient resources to
assume the obligations of the Parent, including any capital that may
reasonably be expected to be requested from its Partner Subs by the
Partnership under the then effective Strategic Plan, or the Successor
Parent's obligations must be supported by a guarantee, letter of credit
or other credit support reasonably satisfactory to the other Parent,
and such Successor Parent must otherwise be reasonably acceptable to
the other Parent.
(e) Geon may Transfer the Partner Sub Stock of either of its Partner
Subs to any Person only if it simultaneously Transfers the Partner Sub Stock of
its other Partner Sub to such Person or a wholly-owned Affiliate of such Person.
1.3 EFFECT OF TRANSFER. Upon completion of any Transfer that is
permitted hereunder, the Successor Parent shall succeed to and be substituted
for the applicable Parent, with the same effect as if it had been named herein,
and unless such Parent shall then be an Affiliate of such Successor Parent, such
Parent and its Affiliates shall thereupon be released from all obligations under
this Section 1 and Section 3. For purposes of this Section 1, the term
"Successor Parent" shall mean the acquiring, succeeding or surviving entity in
any permitted Transfer that directly or indirectly owns the applicable Partner
Sub Stock following such transaction, if other than a Parent. In addition, a
Parent and its Affiliates shall be released from all obligations under this
Section 1 and (except as provided in Section 3.10) Section 3 at such time as
neither such Parent nor any of its Affiliates holds any Units in the Partnership
pursuant to a Transfer of such Units in accordance with the Partnership
Agreement.
1.4 SPECIAL PURPOSE SUBSIDIARIES. Each Parent covenants and 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 appropriate 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)
hereof.
6
<PAGE> 8
SECTION 2
STANDSTILL AGREEMENT AND CERTAIN OTHER MATTERS
----------------------------------------------
2.1 STANDSTILL. Each Subject Parent agrees for the benefit of the other
Subject Parent that, until the fifth anniversary of the date of this Agreement,
neither it, nor any of its Affiliates shall, without prior written invitation or
request of the other Subject Parent: (i) in any manner acquire, agree to acquire
or make any proposal to acquire, directly or indirectly, any securities, assets
or property (other than an acquisition of assets or property in the ordinary
course of business) of the other Subject Parent, whether such agreement or
proposal is made with or to the other Subject 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 Subject 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 Subject 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 Subject Parent; (v) otherwise act, alone or in concert
with others, to seek to control the management, board of directors or policies
of the other Subject Parent; (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 Subject Parent also agrees during
such period not to: (a) request that the other Subject Parent (or its respective
directors, officers, employees or agents), directly or indirectly, amend or
waive any provision of this Section 2.1 (including this sentence); or (b) take
any action that might reasonably be expected to require that the other Subject
Parent make a public announcement regarding the possibility of a business
combination or merger.
2.2 EXCEPTIONS. Notwithstanding the provisions of Section 2.1:
(a) As to a Subject Parent, the provisions of Section 2.1 shall
automatically be terminated and of no further force and effect if any of the
following events occur with respect to the other Subject Parent: (i) a Change of
Control (as defined below) of the other Subject Parent shall have occurred, (ii)
the other Subject 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 the other Subject 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 the other Subject Parent
described in clause (C) of the definition of "Change of Control." A "Change of
Control" of a Subject Parent shall mean the occurrence of any of the following
events: (A) there shall be consummated any consolidation, conversion, merger or
share exchange of such Subject Parent (I) in which such Subject Parent is not
the continuing or surviving Person (other than a consolidation, merger or share
exchange with a wholly-owned subsidiary of such Subject Parent in which all
shares of common stock of such Subject Parent outstanding immediately prior to
the effectiveness thereof are changed into or exchanged for shares of common
stock of such subsidiary) or (II) pursuant to which the common stock of such
Subject Parent is converted into cash, securities or other property,
7
<PAGE> 9
other than, in each case, a consolidation, conversion, merger or share exchange
of such Subject Parent in which the holders of the common stock immediately
prior to the consolidation, conversion, 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, conversion,
merger or share exchange; (B) such Subject 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 that would
constitute a "group" (as defined in Section 2.1) (other than such Subject
Parent, any subsidiary of such Subject 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
Subject Parent or any subsidiary of such Subject Parent or any Person holding
securities of such Subject 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 Subject Parent.
(b) The terms of the first sentence of Section 2.1 shall not apply to
the purchase and sale of any securities of a Subject Parent by any pension or
other related employee benefit plans who are acting as passive investors in such
Subject Parent.
SECTION 3
MISCELLANEOUS
-------------
3.1 NO WAIVERS. No failure or delay by a Party 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.
3.2 EXPENSES IN CONNECTION WITH EXERCISE. In the event of a dispute
between Parties regarding the exercise or enforcement of any of the rights of a
Party under this Agreement or the failure by a Party to perform or observe any
of the provisions of this Agreement, the Party or Parties that do not ultimately
prevail in such dispute shall be liable, and hereby agree, to reimburse, on
demand, each prevailing 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 prevailing Party may incur in connection
therewith.
3.3 CONFIDENTIALITY AND USE OF INFORMATION.
(a) Each Parent agrees that it and its Affiliates shall be bound by the
terms and conditions of Section 13.1 of the Partnership Agreement as if such
Person was a "Partner" as defined in such agreement.
8
<PAGE> 10
\
(b) Geon and OPC 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.
(c) The letter agreements regarding confidentiality dated January 21,
1998 and May 18, 1998 between Geon and OCC are hereby terminated.
3.4 PARTNERSHIP COMPETING BUSINESSES.
(a) If any Parent or an Affiliate thereof desires to initiate or pursue
any opportunity to undertake, engage in, acquire or invest in a Business
Opportunity, such Person shall 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 Person were the Proposing Person 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).
(b) If any Parent or an Affiliate thereof desires to initiate or pursue
any opportunity to undertake, engage in, acquire or invest in an Oxy Vinyls
Business Opportunity, such Person shall offer such Oxy Vinyls Business
Opportunity to the PVC Partnership under the terms and conditions set forth in
Sections 9.3(c) and (d) of the Limited Partnership Agreement of the PVC
Partnership as if such Person were the PVC Proposing Person with respect
thereto, and in such event the PVC Partnership shall have the rights and
obligations with respect thereto set forth in such Sections 9.3(c) and (d).
3.5 FURTHER ASSURANCES. From time to time, each Party agrees to
execute and deliver such additional documents and provide such additional
information and assistance as the other Parties may reasonably require to carry
out the terms of this Agreement.
3.6 ASSIGNMENT; SUCCESSORS AND ASSIGNS.
(a) 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 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 the other
Parent, which consent shall be in the sole discretion of such other Parent. Any
purported assignment or delegation without such consent shall be void and
ineffective.
(b) No Subject Parent may assign or delegate any of its rights or
obligations under this Agreement without the prior consent of the other Subject
Parent, which consent shall be in the sole discretion of such other Subject
Parent, except that a Subject Parent may assign its rights or obligations under
the agreement without such consent in connection with any Change of Control.
9
<PAGE> 11
3.7 BENEFITS OF AGREEMENT RESTRICTED TO THE PARTIES. This Agreement is
made solely for the benefit of the Parties, and no other Person shall have any
right, claim or cause of action under or by virtue of this Agreement.
3.8 NOTICES. All notices, requests, demands and other communications
that are 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 during business hours with proof of confirmation from the
transmitting machine or (ii) delivered by commercial courier or other hand
delivery, as follows:
<TABLE>
<CAPTION>
If to OPC: If to OCC:
<S> <C>
Occidental Petroleum Company Occidental Chemical Corporation
10889 Wilshire Blvd. 5005 LBJ Freeway
Los Angeles, CA 90024 Dallas, TX 75244
Attention: President Attention: President
Telecopy Number: (310) 443-6977 Telecopy Number: (972) 404-3906
With a copy to: With a copy to:
Occidental Petroleum Corporation Occidental Petroleum Corporation
10889 Wilshire Boulevard 10889 Wilshire Boulevard
Los Angeles, California 90024 Los Angeles, California 90024
Attention: General Counsel Attention: General Counsel
Telecopy Number: (310) 443-6333 Telecopy Number: (310) 443-6333
If to Geon: And to:
The Geon Company Occidental Chemical Corporation
One Geon Center 5005 LBJ Freeway
Avon Lake, Ohio 44012 Dallas, Texas 75244
Attention: Chief Executive Officer Attention: General Counsel
Telecopy Number: (440) 930-1002 Telecopy Number: (972) 404-3957
With a copy to: If to the PVC Partnership:
The Geon Company Oxy Vinyls, LP
One Geon Center 5005 LBJ Freeway
Avon Lake, Ohio 44012 Dallas, Texas 75244
Attention: General Counsel Attention: Chief Executive Officer
Telecopy Number: (440) 930-1002 Telecopy Number: (972) 720-7402
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
If to the Partnership: With a copy to:
<S> <C>
PVC Powder Blends, LP Oxy Vinyls, LP
One Geon Center 5005 LBJ Freeway
Avon Lake, Ohio 44012 Dallas, Texas 75244
Attention: Chief Executive Officer Attention: General Counsel
Telecopy Number: (440) 930-1002 Telecopy Number: (972) 720-7403
With a copy to: And to:
PVC Powder Blends, LP Occidental Petroleum Corporation
One Geon Center 10889 Wilshire Boulevard
Avon Lake, Ohio 44012 Los Angeles, California 90024
Attention: General Counsel Attention: General Counsel
Telecopy Number: (440) 930-1002 Telecopy Number: (310) 443-6333
And to: And to:
Occidental Chemical Corporation The Geon Company
5005 LBJ Freeway One Geon Center
Dallas, Texas 75244 Avon Lake, Ohio 44012
Attention: President Attention: Chief Executive Officer
Telecopy Number: (972) 404-3906 Telecopy Number: (440) 930-1002
And to: And to:
Occidental Chemical Corporation The Geon Company
5005 LBJ Freeway One Geon Center
Dallas, Texas 75244 Avon Lake, Ohio 44012
Attention: President Attention: General Counsel
Telecopy Number: (972) 404-3906 Telecopy Number: (440) 930-1002
And to:
Occidental Petroleum Corporation
10889 Wilshire Boulevard
Los Angeles, California 90024
Attention: General Counsel
Telecopy Number: (310) 443-6333
</TABLE>
11
<PAGE> 13
or to such other address as such Party shall have specified by notice to the
other Parties.
3.9 SEVERABILITY. In the event that any provisions of this Agreement
shall be Finally 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, be deemed severed
from this Agreement and every other provision of this Agreement shall remain in
full force and effect.
3.10 TERMINATION. The second Recital to this Agreement and Sections
1.3, 2.1, 2.2, 3.18, 3.19, 3.20 and 3.21 set forth therein the timing for the
termination of, or release from, the applicable provisions of this Agreement. In
addition, (i) Section 3.3(b) shall terminate at such time as OPC or Geon, as the
case may be, is no longer required to make the disclosures referred to in
Section 3.3(b) to the Securities and Exchange Commission, and (ii) Section 3.4
shall terminate as of the later to occur of (a) the Not Partners Date or (b) the
fifth anniversary of the date of this Agreement. Except for the foregoing, this
Agreement shall terminate upon the termination of the Partnership; PROVIDED,
HOWEVER, that no termination under this Agreement shall discharge any accrued
obligations owed by a Parent or a Subject Parent as of the date of such
termination.
3.11 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 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; and (vi) each gender
shall be deemed to include the other gender.
(b) The terms "Affiliate," "Business Opportunity," "80%-Owned
Affiliate," "Finally Determined," "Legal Requirement," "Partnership Governance
Committee," "Person," "Proposing Person," "Strategic Plan" and "Units" have the
meanings set forth in the Partnership Agreement.
(c) The terms "Burlington Asset Sale Agreement," "Burlington Subject
Business," "Pasadena Asset Sale Agreement," "Pasadena Subject Business," "PVC"
and "PVC Partnership" have the meanings set forth in the Master Transaction
Agreement.
(d) The term "Burlington Type Business" means a business that (i)
develops, manufactures in the United States and Canada, and markets flexible
film and compounding PVC for molding applications and (ii) competes with the
Burlington Subject Business; PROVIDED, HOWEVER, that "Burlington Type Business"
shall not include any "Specified Business," as defined in the Partnership
Agreement or as defined in the Limited Partnership Agreement of the PVC
Partnership.
12
<PAGE> 14
(e) The term "Pasadena Type Business" means a business that (i) owns,
leases and operates, or contracts with third parties to operate, equipment used
to manufacture in the United States and Canada pellets from PVC resin, (ii)
markets, sells and distributes pellets manufactured from PVC resin and (iii)
competes with the Pasadena Subject Business; PROVIDED, HOWEVER, that "Pasadena
Type Business" shall not include any "Specified Business," as defined in the
Partnership Agreement or as defined in the Limited Partnership Agreement of the
PVC Partnership.
(f) The term "Oxy Vinyls Business Opportunity" means "Business
Opportunity," as defined in the Limited Partnership Agreement of the PVC
Partnership.
(g) The term "PVC Proposing Person" means "Proposing Person," as
defined in the Limited Partnership Agreement of the PVC Partnership.
(h) The term "Not Partners Date" means the first date hereafter when
neither the Partnership nor the PVC Partnership has both OCC or an Affiliate
thereof and Geon or an Affiliate thereof as partners (and by way of example only
and not of limitation, OCC or its Affiliate and Geon or its Affiliate would not
be partners of the Partnership upon the termination of the Partnership).
3.12 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.
3.13 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.
3.14 OBLIGATIONS REGARDING AFFILIATES. Each Parent shall cause its
Affiliates (including any Person controlling such Parent) to comply with all
provisions of this Agreement that apply to Affiliates of such Parent, and each
Parent shall be responsible for any failure of any such Affiliate to comply with
any such provision.
3.15 AMENDMENT. All waivers, modifications, amendments or alterations
of this Agreement shall require the execution of a written instrument signed by
each of the Parties.
3.16 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. THE PARTIES AGREE THAT ANY AND ALL SERVICE OF PROCESS AND
ANY OTHER NOTICE IN ANY PROCEEDING
13
<PAGE> 15
SHALL BE EFFECTIVE AGAINST ANY PARTY IF DELIVERED PURSUANT TO THE NOTICE
PROVISIONS CONTAINED IN SECTION 3.8. THE FOREGOING CONSENTS TO JURISDICTION
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.
3.17 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.
3.18 BURLINGTON TYPE BUSINESS.
(a) If, at any time within five years after the date of this Agreement,
OPC or an Affiliate of OPC desires to initiate or pursue an opportunity to
undertake, engage in, acquire or invest in a Burlington Type Business by
investing in or acquiring a Person whose business is a Burlington Type Business,
acquiring assets of a Burlington Type Business, or otherwise engaging in or
undertaking a Burlington Type Business (a "Burlington Opportunity"), such Person
(a "Burlington Proposing Person") shall offer Geon the Burlington Opportunity on
the terms set forth in Section 3.18(b).
(b) When a Burlington Proposing Person offers a Burlington Opportunity
to Geon, Geon shall elect to do one of the following within a reasonably prompt
period:
(i) acquire or undertake the Burlington Opportunity for the
benefit of Geon as a whole, at the cost, expense and benefit of Geon;
PROVIDED, HOWEVER, that if Geon ceases to actively pursue such
opportunity for any reason, then the Burlington Proposing Person will
be entitled to proceed under clause (ii) below; or
(ii) permit the Burlington Proposing Person to acquire or
undertake the Burlington Opportunity for its own benefit and account
without any duty to Geon with respect thereto.
(c) Notwithstanding the provisions of Section 3.18(b), if the
Burlington Opportunity constitutes less than 25% (based on annual revenues of
the business to be acquired or invested in for the most recently completed
fiscal year) of an acquisition of or investment in assets, activities,
operations or businesses that is not otherwise a Burlington Type Business, then
a Burlington Proposing Person may acquire or invest in such Burlington
Opportunity without first offering it to Geon; PROVIDED, that after completion
of the acquisition or investment thereof, such Burlington Proposing Person must
offer the Burlington Opportunity to Geon pursuant to the terms of Section
3.18(b); and if Geon elects option (i) of Section 3.18(b) with respect thereto,
the Burlington
14
<PAGE> 16
Opportunity shall be acquired by Geon at its fair market value as
mutually agreed or Finally Determined as of the date of such acquisition.
3.19 PASADENA TYPE BUSINESS.
(a) If, at any time within five years after the date of this Agreement,
OPC or an Affiliate of OPC desires to initiate or pursue an opportunity to
undertake, engage in, acquire or invest in a Pasadena Type Business by investing
in or acquiring a Person whose business is a Pasadena Type Business, acquiring
assets of a Pasadena Type Business, or otherwise engaging in or undertaking a
Pasadena Type Business (a "Pasadena Opportunity"), such Person (a "Pasadena
Proposing Person") shall offer Geon the Pasadena Opportunity on the terms set
forth in Section 3.19(b).
(b) When a Pasadena Proposing Person offers a Pasadena Opportunity to
Geon, Geon shall elect to do one of the following within a reasonably prompt
period:
(i) acquire or undertake the Pasadena Opportunity for the
benefit of Geon as a whole, at the cost, expense and benefit of Geon;
PROVIDED, HOWEVER, that if Geon ceases to actively pursue such
opportunity for any reason, then the Pasadena Proposing Person will be
entitled to proceed under clause (ii) below; or
(ii) permit the Pasadena Proposing Person to acquire or
undertake the Pasadena Opportunity for its own benefit and account
without any duty to Geon with respect thereto.
(c) Notwithstanding the provisions of Section 3.19(b), if the Pasadena
Opportunity constitutes less than 25% (based on annual revenues of the business
to be acquired or invested in for the most recently completed fiscal year) of an
acquisition of or investment in assets, activities, operations or businesses
that is not otherwise a Pasadena Type Business, then a Pasadena Proposing Person
may acquire or invest in such Pasadena Opportunity without first offering it to
Geon; PROVIDED, that after completion of the acquisition or investment thereof,
such Pasadena Person must offer the Pasadena Opportunity to Geon pursuant to the
terms of Section 3.19(b); and if Geon elects option (i) of Section 3.19(b) with
respect thereto, the Pasadena Opportunity shall be acquired by Geon at its fair
market value as mutually agreed or Finally Determined as of the date of such
acquisition.
3.20 BURLINGTON NON-SOLICITATION. OCC agrees that, for a period ending
on the first anniversary of the date of this Agreement (unless the applicability
of this provision is terminated earlier pursuant to Section 1.3), it will not,
and will cause its Affiliates not to, directly or knowingly induce or attempt to
induce any Hired Employees (as defined in the Burlington Asset Sale Agreement)
to leave the employ of Geon; PROVIDED, HOWEVER, that nothing in this Section
3.20 shall prohibit OCC or its Affiliates from hiring or engaging any of the
foregoing who respond to a general solicitation not directed specifically to the
Hired Employees.
15
<PAGE> 17
3.21 PASADENA NON-SOLICITATION. OCC agrees that, for a period ending on
the first anniversary of the date of this Agreement (unless the applicability of
this provision is terminated earlier pursuant to Section 1.3), it will not, and
will cause its Affiliates not to directly or knowingly induce or attempt to,
induce any Hired Employees (as defined in the Pasadena Asset Sale Agreement) to
leave the employ of Geon; PROVIDED, HOWEVER, that nothing in this Section 3.21
shall prohibit OCC or its Affiliates from hiring or engaging any of the
foregoing who respond to a general solicitation not directed specifically to the
Hired Employees.
16
<PAGE> 18
IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement as of the date first above written.
OCCIDENTAL CHEMICAL CORPORATION
By: /s/ Richard A. Lorraine
-----------------------------------------------
Richard A. Lorraine
Executive Vice President and Chief
Financial Officer
THE GEON COMPANY
By: /s/ Thomas A. Waltermire
-----------------------------------------------
Thomas A. Waltermire
President and Chief Operating
Officer
OCCIDENTAL PETROLEUM CORPORATION
By: /s/ Stephen I. Chazen
-----------------------------------------------
Stephen I. Chazen
Chief Financial Officer and
Executive Vice President
PVC POWDER BLENDS, LP
By: 1999 General Compounding Partner Inc.,
general partner
By: /s/ Woodrow W. Ban
-----------------------------------------------
Name: Woodrow W. Ban
--------------------------------------------
Title: Assistant Secretary
-------------------------------------------
OXY VINYLS, LP
By: Occidental PVC, LLC, general partner
By /s/ John L. Hurst, III
--------------------------------------------
John L. Hurst, III
President
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K into the Company's previously filed
Registration Statements on Form S-3 No. 33-80522 and Form S-8 No. 33-92398,
33-80262, 33-65520, 33-62112, 33- 65518.
Arthur Andersen LLP
Dallas, Texas
May 12, 1999
<PAGE> 1
Exhibit 99
GEON COMPLETES RESIN JOINT VENTURE WITH OXYCHEM
Cleveland, Ohio - May 3, 1999 - The Geon Company (NYSE:GON) announced today that
Oxy Vinyls, LP (OxyVinyls), its joint venture with the OxyChem division of
Occidental Petroleum Corporation, began operations on May 1, as expected.
OxyVinyls combined the two companies polyvinyl chloride (PVC)/vinyl chloride
monomer resin businesses and other related operations.
Geon will own 24 percent and OxyChem 76 percent of OxyVinyls, which will be
North America's largest and the world's third-largest PVC producer.
Previously, the joint venture underwent federal government review and received
the approval of the boards of directors of both Geon and Occidental Petroleum.
On April 19, Geon stockholders approved the transaction.
"This is an important beginning for both the joint venture and the 'new' Geon,"
said William F. Patient, chairman and chief executive officer. "Adding OxyChem's
compounding and film businesses to Geon is a significant next step as we create
a multi-billion-dollar global performance polymers and services business."
As part of its agreements with OxyChem, Geon acquired OxyChem's compound and
vinyl film businesses in Burlington, New Jersey, and will create another,
smaller joint venture for dry blend compounding. Geon also will receive $110
million in cash and/or cash equivalents, and will transfer $185 million in debt
to OxyVinyls.
The Geon Company is a leading North American-based polymer services and
technology company with operations in PVC compounds, specialty PVC resins and
other value-added products and services. Headquartered in Avon Lake, Ohio, The
Geon Company and its subsidiaries employ more than 2,400 people and have 24
manufacturing plants in the United States, Canada, England and Australia, and
joint ventures in the United States, Canada, England, Australia and Singapore.
Information on the Company's products and services, as well as news releases,
EDGAR filings, Form 10-K, 10-Q, etc., are available on the Internet at
http://www.geon.com.
