CONTRIBUTION AGREEMENT
by and among
PHILLIPS PETROLEUM COMPANY,
CHEVRON CORPORATION
and
CHEVRON PHILLIPS CHEMICAL COMPANY LLC
Dated as of May 23, 2000
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TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
CONTRIBUTION TO THE COMPANY
Section 2.1 The Company............................................12
Section 2.2 Contribution of P Chem to the Company..................13
Section 2.3 Contribution of C Chem to the Company..................13
Section 2.4 Assumption of Liabilities by the Company...............14
ARTICLE III
THE CLOSING
Section 3.1 Closing Place and Date.................................14
Section 3.2 Closing Date Deliveries................................14
Section 3.3 Post-Closing Adjustment................................15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PHILLIPS
Section 4.1 Corporate Organization.................................17
Section 4.2 Capitalization.........................................17
Section 4.3 Authority; No Violation................................18
Section 4.4 Consents and Approvals.................................18
Section 4.5 Licenses; Compliance with Applicable Law...............18
Section 4.6 Financial Statements; Undisclosed Liabilities..........19
Section 4.7 Brokers'Fees...........................................19
Section 4.8 Absence of Certain Changes or Events...................19
Section 4.9 Legal Proceedings......................................20
Section 4.10 Contracts..............................................20
Section 4.11 Real Property..........................................22
Section 4.12 Environmental Matters..................................22
Section 4.13 Intellectual Property..................................23
Section 4.14 Employee Benefit Plans.................................23
Section 4.15 Labor Relations........................................24
Section 4.16 Transactions with Affiliates...........................24
Section 4.17 Personal Property......................................24
Section 4.18 Year 2000..............................................24
Section 4.19 Insurance..............................................25
Section 4.20 Acquisition of Company Interests for Investment........25
Section 4.21 Sufficiency of Contribution............................25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CHEVRON
Section 5.1 Corporate Organization.................................25
Section 5.2 Capitalization.........................................26
Section 5.3 Authority; No Violation................................26
Section 5.4 Consents and Approvals.................................27
Section 5.5 Licenses; Compliance with Applicable Law...............27
Section 5.6 Financial Statements; Undisclosed Liabilities..........27
Section 5.7 Brokers'Fees...........................................28
Section 5.8 Absence of Certain Changes or Events...................28
Section 5.9 Legal Proceedings......................................28
Section 5.10 Contracts..............................................29
Section 5.11 Real Property..........................................30
Section 5.12 Environmental Matters..................................31
Section 5.13 Intellectual Property..................................31
Section 5.14 Employee Benefit Plans.................................32
Section 5.15 Labor Relations........................................32
Section 5.16 Transactions with Affiliates...........................33
Section 5.17 Personal Property......................................33
Section 5.18 Year 2000..............................................33
Section 5.19 Insurance..............................................33
Section 5.20 Acquisition of Company Interests for Investment........33
Section 5.21 Sufficiency of Contribution............................34
ARTICLE VI
COVENANTS
Section 6.1 Investigation of Business; Access to Properties and
Records............................................34
Section 6.2 Consents and Approvals.................................35
Section 6.3 Further Assurances.....................................36
Section 6.4 Conduct of the Phillips Chemicals Business.............36
Section 6.5 Conduct of the Chevron Chemicals Business..............38
Section 6.6 Preservation of Business...............................40
Section 6.7 Public Announcements...................................40
Section 6.8 Assignment of Contracts, Leases, Permits, etc..........40
Section 6.9 Corporate Names........................................41
Section 6.10 D&O Indemnification....................................42
Section 6.11 Additional Agreements..................................42
Section 6.12 Company Integration Expenses...........................44
Section 6.13 Insurance..............................................44
Section 6.14 Guarantees.............................................46
Section 6.15 Actions by Affiliates of Phillips and Chevron..........46
Section 6.16 Financing..............................................46
Section 6.17 Risk Allocation between the Company and the Parties....47
Section 6.18 Intellectual Property..................................47
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions to Phillips'Obligation to Close.............53
Section 7.2 Conditions to Chevron's Obligation to Close............54
ARTICLE VIII
TERMINATION
Section 8.1 Termination............................................55
Section 8.2 Procedure and Effect of Termination....................55
ARTICLE IX
SURVIVAL; INDEMNIFICATION
Section 9.1 Indemnification by Company.............................56
Section 9.2 Indemnification by Phillips and Chevron................56
Section 9.3 Indemnification Procedure..............................56
Section 9.4 Survival...............................................56
Section 9.5 Indemnification Limitation.............................57
Section 9.6 Materiality Qualifiers.................................58
Section 9.7 Knowledge Qualifiers...................................58
ARTICLE X
EMPLOYEE MATTERS
ARTICLE XI
TAX MATTERS
ARTICLE XII
MISCELLANEOUS
Section 12.1 Counterparts...........................................58
Section 12.2 Governing Law; Jurisdiction and Forum; Waiver
of Jury Trial.........................................58
Section 12.3 Entire Agreement.......................................59
Section 12.4 Expenses...............................................59
Section 12.5 Notices................................................60
Section 12.6 Successors and Assigns.................................61
Section 12.7 Headings; Definitions..................................61
Section 12.8 Amendments and Waivers.................................61
Section 12.9 Schedules..............................................61
Section 12.10 Severability...........................................62
Section 12.11 Interpretation.........................................62
Section 12.12 Specific Performance...................................62
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Appendices
Appendix A Form of Amended and Restated Limited Liability Company
Agreement of the Company
Appendix B Tradename License Agreement
Exhibits
Exhibit A - 1 P Chem Assets
Exhibit A - 2 C Chem Assets
Exhibit B - 1 Phillips Excluded Assets
Exhibit B - 2 Chevron Excluded Assets
Exhibit C - 1 Phillips Excluded Liabilities
Exhibit C - 2 Chevron Excluded Liabilities
Annexes
Annex A Employee Matters Annex
Annex B Tax Matters Annex
Annex C Continuing Indemnification Annex
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CONTRIBUTION AGREEMENT (this "Agreement"), dated as of May 23,
2000, by and among PHILLIPS PETROLEUM COMPANY, a Delaware corporation
("Phillips"), CHEVRON CORPORATION, a Delaware corporation ("Chevron"), and
CHEVRON PHILLIPS CHEMICAL COMPANY LLC, a Delaware limited liability company (the
"Company").
RECITALS:
WHEREAS, Phillips and Chevron (each, a "Party") desire to
combine certain of their chemicals businesses in order to realize synergies and
increase the efficiency and profitability of such businesses;
WHEREAS, each of Phillips and Chevron intends that the Company
shall be the primary vehicle by which each Party conducts its chemicals
businesses;
WHEREAS, each of Phillips and Chevron envisions that the
Company will be a competitive, growing chemical venture meeting or exceeding the
financial return expectations of the Parties on their investment in
petrochemicals, plastics, and selected specialties;
WHEREAS, Phillips and Chevron desire to create a structure
pursuant to which each of Phillips and Chevron shall, directly or through direct
or indirect wholly-owned subsidiaries, own 50% of the voting and economic
interests of the Company, into which each of Phillips and/or Affiliates (as
defined herein) of Phillips and Chevron and/or Affiliates of Chevron shall
contribute certain assets and related liabilities, operations and subsidiaries
engaged in the chemicals businesses, all as more fully provided for herein;
WHEREAS, the Parties intend that the Company will be a
self-financing entity with an investment-grade credit rating; and
WHEREAS, the parties hereto, at the closing of the
transactions contemplated by this Agreement (the "Closing"), shall cause the
limited liability company agreement of the Company to be amended and restated in
the form set forth as Appendix A (as amended, the "Amended LLC Agreement");
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Actual Contributed Cash" shall have the meaning set forth
in Section 3.3(c).
"Actual Net Working Capital" shall have the meaning set forth
in Section 3.3(c).
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"Affiliate" shall mean, with respect to any Person, a Person,
directly or indirectly, Controlling, Controlled by, or under common Control
with, such Person.
"Agreement" shall have the meaning set forth in the Preamble.
"Amended LLC Agreement" shall have the meaning set forth in
the Recitals.
"Basket" shall mean, with respect to either Party's obligation
under Article IX, $300,000,000.
"Beneficially Own" shall mean, with respect to any security,
having or sharing the power to direct or control the voting or disposition of
such security.
"Beneficial Owner" shall mean, with respect to any security, a
Person who Beneficially Owns such security, and "Beneficial Ownership" has a
corresponding meaning.
"BI Insurance Policy" shall have the meaning set forth in
Section 6.19(d).
"BI Insurance Proceeds" shall have the meaning set forth in
Section 6.19(d).
"Business Day" shall mean any day on which banks are generally
open to conduct business in the State of New York.
"C Chem" shall mean, collectively, the businesses, operations
and assets that comprise the Chemicals segment separately reported in Chevron's
September 30, 1999 Form 10-Q, including the assets set forth in Part I of
Exhibit A-2 (including, in the case of any real property assets identified in
Part I of Exhibit A-2, all right, title and interest of Chevron and its
Subsidiaries in and to all land, improvements, easements, rights of way,
fixtures, equipment and personal property associated with such real property
assets, irrespective of whether such land, improvements, easements, rights of
way, fixtures, equipment and personal property are specifically identified in
Exhibit A-2 or in Schedule 5.11(a)(i) or Schedule 5.11(a)(ii) of the Chevron
Disclosure Schedule, but subject to any specific exclusions or limitations, if
any, set forth in Part I of Exhibit A-2), the entities set forth in Part II of
Exhibit A-2 and C Chem Liabilities, but excluding the Chevron Excluded Assets
and the Chevron Excluded Liabilities.
"C Chem December 31 Balance Sheet" shall mean the consolidated
balance sheet of C Chem as of December 31, 1999, including the pro forma
adjustments, attached as Schedule 5.6 the Chevron Disclosure Schedule.
"C Chem Discontinued Business" shall mean the AgChem and
Consumer Products businesses of Chevron, the Specialty Polymers business of
Chevron and any business which is materially different in terms of both products
and processes from the businesses conducted by C Chem as of the date of this
Agreement.
"C Chem Employee" shall have the meaning set forth in Annex A.
"C Chem Intellectual Property" shall have the meaning set
forth in Section 5.13(a).
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"C Chem Leases" shall have the meaning set forth in Section
5.11(c).
"C Chem Liabilities" shall mean all Liabilities of Chevron and
its Subsidiaries and/or Affiliates attributable to the businesses and operations
of C Chem, including (i) all Liabilities arising from the ownership or use of
assets that are part of C Chem, (ii) all Liabilities attributable to products
produced by or with such assets, (iii) all Liabilities attributable to the
production of such products, including all claims for personal injury, defective
products, and the like, (iv) all Liabilities under contracts, leases or permits
if and to the extent utilized in the business of C Chem as conducted on or
before the Closing Date, and (v) all Liabilities made the responsibility of the
Company pursuant to Annex A, Annex B or Annex C; but excluding the Chevron
Excluded Liabilities.
"C Chem Material Contracts" shall have the meaning set forth
in Section 5.10(a).
"C Chem Patent Rights" shall mean all claims of letters patent
and patent applications owned or controlled by Chevron or its Patent
Subsidiaries, in the sense of having the right to grant licenses thereunder, all
subject to the terms and conditions, including the obligation to account to
third parties, under which such rights are held, based upon inventions conceived
prior to the later of (i) December 31, 2000 or (ii) the six-month anniversary of
the Closing Date, insofar and only insofar as such claims cover in whole or in
part technology or inventions that are primarily used by or identified as
relating primarily to the C Chem business, or which arose from research,
development or demonstration activities which relate primarily to the C Chem
business, including those patents and patent applications listed on Schedule
6.18 of the Chevron Disclosure Schedule and foreign counterparts thereof. C Chem
Patent Rights (i) shall specifically exclude patent claims to the extent they
cover Oronite technology for fuel and lubricant additives or additive precursors
and their manufacture and blending and products, packages, and formulations
containing such additives or additive precursors except where such products,
packages, and formulations are comprised of a major portion of normal alpha
olefins and their derivatives, and (ii) shall specifically exclude patent claims
covering Fischer-Tropsch gas-to-liquids technology and upgrading of products
therefrom to chemical products other than normal alpha olefins and their
derivatives.
"C Chem Proprietary Technology" shall mean transferable rights
in unpublished technical information, knowhow and trade secrets owned or
controlled by Chevron or its Patent Subsidiaries prior to the later of (i)
December 31, 2000 or (ii) the six-month anniversary of the Closing Date,
relating primarily to the C Chem business and research, development, and
demonstration activities relating primarily to the C Chem business, including
information relating to proprietary computer programs, data bases, computer
models, engineering correlations, process design, engineering and operating
data, proprietary catalysts and other materials, formulations, experimental
data, performance testing information, pilot plant data, and test methods, and
including information licensed from third parties, all subject to the terms and
conditions, including the obligation to account to third parties, under which
such rights are held. C Chem Proprietary Technology (i) shall specifically
exclude Oronite technology for fuel and lubricant additives or additive
precursors and their manufacture and blending and products, packages, and
formulations containing such additives or additive precursors except where such
products, packages, and formulations are comprised of a major portion of normal
alpha olefins and their derivatives, and (ii) shall specifically exclude
Fischer-Tropsch gas-to-liquids
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technology and upgrading of products therefrom to chemical products other than
normal alpha olefins and their derivatives.
"C Chem Real Property" shall have the meaning set forth in
Section 5.11(b).
"C Chem Subsidiaries" shall mean, collectively, any
Subsidiaries to be contributed by Chevron or Chevron Member Affiliates to the
Company.
"C Chem Working Capital Difference" shall mean (i) C Chem's
Actual Net Working Capital, plus (ii) $18.76 million, minus (iii) Net Working
Capital set forth on the C Chem December 31 Balance Sheet.
"Cap" shall mean, with respect to either Party's obligation
under Article IX, $800,000,000.
"Chevron" shall have the meaning set forth in the Preamble.
"Chevron Disclosure Schedule" shall mean the disclosure
schedules delivered by Chevron concurrently herewith.
"Chevron Excluded Assets" shall mean the assets set forth on
Exhibit B-2.
"Chevron Excluded Liabilities" shall mean the liabilities set
forth on Exhibit C-2.
"Chevron Indemnified Person" shall have the meaning set forth
in Section 9.1.
"Chevron Member Affiliates" shall have the meaning set forth
in Section 2.1(a).
"Chevron Plans" shall mean, collectively, all material
employee benefit plans providing benefits to any C Chem Employees that are
sponsored or maintained by Chevron or any of its Affiliates or to which Chevron
or any of its Affiliates contributes or is obligated to contribute on behalf of
C Chem Employees, including any employee welfare benefit plan within the meaning
of Section 3(1) of ERISA, any employee pension benefit plan within the meaning
of Section 3(2) of ERISA, and any bonus, incentive, deferred compensation, stock
purchase, stock option, severance, change of control or fringe benefit plan.
"Chevron Pipe Line Contribution" shall have the meaning set
forth in Exhibit A-2.
"Chevron Retained Affiliates" shall mean, collectively, all
Affiliates of Chevron other than C Chem Subsidiaries.
"Chevron Savings Plan" shall have the meaning set forth in
Annex A.
"Claim Notice" shall have the meaning set forth in Annex C.
"Claims" shall have the meaning set forth in Annex C.
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"Class C Member" shall have the definition set forth in the
Amended LLC Agreement.
"Class C Membership Interests" shall have the definition set
forth in the Amended LLC Agreement.
"Class P Member" shall have the definition set forth in the
Amended LLC Agreement.
"Class P Membership Interests" shall have the definition set
forth in the Amended LLC Agreement.
"Closing" shall have the meaning set forth in the Recitals.
"Closing Date" shall have the meaning set forth in Section
3.1.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended.
"Company" shall have the meaning set forth in the Preamble.
"Company Interests" shall mean limited liability company
interests of any class in the Company.
"Confidentiality Agreement" shall mean that certain
Confidentiality Agreement, dated as of September 8, 1999, by and between
Phillips and Chevron.
"Contributed Cash" shall mean, with respect to P Chem or C
Chem, cash and cash equivalents owned by a wholly-owned P Chem Subsidiary or
Sweeny Olefins Limited Partnership, or a wholly-owned C Chem Subsidiary, as the
case may be.
"Contributed Cash Statement" shall have the meaning set forth
in Section 3.3(a).
"Control", with respect to any entity, shall mean the
possession, directly or indirectly, through one or more intermediaries, by any
Person or group (within the meaning of Section 13(d)(3) of the Exchange Act) of
both of the following:
(a) (i) in the case of a corporation, more than 25% of the
economic interests in the outstanding equity securities thereof; (ii) in the
case of a limited liability company, partnership, limited partnership or
venture, the right to more than 25% of the distributions therefrom (including
liquidating distributions); (iii) in the case of a trust or estate, including a
business trust, more than 25% of the current and residual beneficial interest
therein; and (iv) in the case of any other entity, more than 25% of the economic
or beneficial interest therein; and
(b) in the case of any entity, the power or authority, through ownership of
voting securities, by contract or otherwise, to control or direct the management
and policies of the entity.
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"Controlled Group Liability" shall mean any and all
liabilities (a) under Title IV of ERISA, (b) under Section 302 of ERISA, (c)
under Sections 412 and 4971 of the Code, or (d) as a result of a failure to
comply with the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code, and (e) under corresponding or similar
provisions of foreign laws or regulations.
"Cut-Off Date" shall have the meaning set forth in Section
6.19(b).
"Damages" shall have the meaning set forth in Annex C.
"Designated Replacement Facilities" shall have the meaning set
forth in Annex C.
"Designated Representatives" shall have the meaning set forth
in Section 6.1(a).
"Direct Claim" shall have the meaning set forth in Annex C.
"Environmental Law" shall mean any and all principles of
common law and any and all laws, statutes, ordinances, rules, regulations, or
orders of any Governmental Entity pertaining to the protection of the natural
environment or to Hazardous Materials in any and all jurisdictions in which the
party in question and its Subsidiaries own property or conduct business,
including the Clean Air Act, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Federal Water Pollution Control
Act, the Occupational Safety and Health Act of 1970, the Resource Conservation
and Recovery Act of 1976, the Safe Drinking Water Act, the Toxic Substances
Control Act, the Hazardous & Solid Waste Amendments Act of 1984, the Superfund
Amendments and Reauthorization Act of 1986, the Hazardous Materials
Transportation Act, the Oil Pollution Act of 1990, any state or local laws
implementing or substantially equivalent to the foregoing federal laws, and all
other environmental conservation or protection laws, all as amended from time to
time from enactment or adoption through the date of this Agreement.
"Environmental Liabilities" shall have the meaning set forth
in Annex C.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean, with respect to any entity,
trade or business, any other entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or that
is a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Final Determination" shall have the meaning set forth in
Annex B.
"Financing" shall have the meaning set forth in Section 6.16.
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"GAAP" shall mean generally accepted accounting principles in
the United States.
"Governmental Entity" shall mean any federal, state, political
subdivision or other governmental agency or instrumentality, foreign or
domestic.
"Hazardous Materials" shall mean: (a) any chemicals, materials
or substances defined or as included in the definition of "hazardous
substances," "hazardous materials," "toxic substances," or words of similar
import, under any Environmental Law; (b) radioactive materials (other than
naturally occurring radioactive materials), asbestos in any form that is or
could be friable, polychlorinated biphenyls, radon, mercury, lead-based paint;
and (c) regulated constituents or substances in concentrations or levels that
exceed numeric or risk-based standards established pursuant to Environmental
Laws.
"HSR Act" shall mean the United States Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
"Indemnified Party" shall mean the party seeking
indemnification under Article IX, Annex B or Annex C.
"Indemnifying Party" shall mean the party against whom an
indemnification claim is asserted under Article IX, Annex B or Annex C.
"K-Resin Plant" shall have the meaning set forth in Annex C.
"K-Resin Repair" shall have the meaning set forth in Annex C.
"knowledge" shall have the meaning set forth in Section 12.11.
"Knowledge Requirement" shall mean any requirement in a
representation or warranty that a condition, event or state of fact be "known"
by Chevron or Phillips, or be "to Chevron's knowledge" or be "to Phillips'
knowledge" (or other words or phrases of similar effect or impact) in order for
such condition, event or state of facts to cause such representation or warranty
to be inaccurate.
"Liabilities" shall mean liabilities and obligations of any
nature, whether known or unknown, absolute, accrued, contingent or otherwise and
whether due or to become due.
"Lien" shall mean any lien, claim, option, mortgage, pledge,
hypothecation, security interest, encumbrance, lien, charge or deposit
arrangement, or other arrangement having the practical effect of the foregoing.
"Material Adverse Effect" shall mean, (a) with respect to P
Chem, a material adverse effect on the businesses, assets, operations, results
of operations or financial condition of P Chem as set forth on the P Chem
December 31 Balance Sheet, taken as a whole, (b) with respect to C Chem, a
material adverse effect on the businesses, assets, operations, results of
operations or financial condition of C Chem as set forth on the C Chem December
31 Balance Sheet, taken as a whole, and (c) with respect to any Person (other
than P Chem or C Chem), a
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material adverse effect on the businesses, assets, operations, financial
condition or results of operations of such Person and its Subsidiaries, taken as
a whole, in each case, excluding effects reasonably attributable to the general
state of the industries in which P Chem, C Chem or such Person and its
Subsidiaries, as applicable, operate (including chemicals price levels), to
general economic conditions in the United States (including prevailing interest
rate and stock market levels), to the transactions contemplated by this
Agreement or the Amended LLC Agreement, or to the fire and explosion on March
27, 2000 at the K-Resin plant in Pasadena, Texas.
"Materiality Requirement" shall mean any requirement in a
representation or warranty that a condition, event or state of fact be
"material," correct or true in "all material respects," have a "Material Adverse
Effect," or be or not be "reasonably expected to have a Material Adverse Effect"
(or other words or phrases of similar effect or impact) in order for such
condition, event or state of facts to cause such representation or warranty to
be inaccurate.
"Membership Interests" shall have the definition set forth in
the Amended LLC Agreement.
"Multiemployer Plans" shall have the meaning set forth in
Section 4.14(c).
"Net After-Tax Basis" shall mean after any U.S. federal, state
or local income or franchise taxes (computed using the Tax Rate) incurred as a
result of certain indemnification (assuming the deductibility of such state and
local income and franchise taxes in calculating federal income tax), reduced by
any tax benefit arising as a result of such indemnification or disguised sale
treatment, as the case may be.
"Net Working Capital" shall mean, with respect to P Chem or C
Chem, non-cash current assets (including accounts receivable, the book value of
inventory and current prepaid and deferred charges and excluding prepaid or
deferred Income Taxes) less accounts payable and other current liabilities
(excluding current Income Taxes payable and the current portion of long- term
debt), in each case as actually contributed to the Company, excluding any
receivables from and payables to Phillips or its Affiliates or Chevron or its
Affiliates. For purposes of this calculation, all items shall be determined in
accordance with GAAP, applied on a basis consistent with the P Chem December 31
Balance Sheet or the C Chem December 31 Balance Sheet, as applicable.
"Net Working Capital Statement" shall have the meaning set
forth in Section 3.3(a).
"Neutral Firm" shall have the meaning set forth in Section
3.3(c).
"P Chem" shall mean, collectively, the businesses, operations
and assets that comprise the Chemicals segment separately reported in Phillips'
September 30, 1999 Form 10-Q, including the assets set forth in Part I of
Exhibit A-1 (including, in the case of any real property assets identified in
Part I of Exhibit A-1, all right, title and interest of Phillips and its
Subsidiaries in and to all land, improvements, easements, rights of way,
fixtures, equipment and personal property associated with such real property
assets, irrespective of whether such land, improvements, easements, rights of
way, fixtures, equipment and personal property are specifically identified in
Part I of Exhibit A-1 or in Schedule 4.11(a)(i) or Schedule 4.11(a)(ii) of
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the Phillips Disclosure Schedule, but subject to any specific exclusions or
limitations, if any, set forth in Part I of Exhibit A-1), the entities set forth
in Part II of Exhibit A-1, and the P Chem Liabilities, but excluding the
Phillips Excluded Assets and the Phillips Excluded Liabilities.
"P Chem December 31 Balance Sheet" shall mean the consolidated
balance sheet of P Chem as of December 31, 1999, including the pro forma
adjustments, attached as Schedule 4.6 the Phillips Disclosure Schedule.
"P Chem Discontinued Busi0ness" shall mean American
Thermoplastics Company, Catalyst Services Inc., fertilizer and biotechnology
businesses and any business which is materially different in terms of both
products and processes from the businesses conducted by P Chem as of the date of
this Agreement.
"P Chem Employee" shall have the meaning set forth in Annex A.
"P Chem Intellectual Property" shall have the meaning set
forth in Section 4.13(a).
"P Chem Leases" shall have the meaning set forth in Section
4.11(c).
"P Chem Liabilities" shall mean all Liabilities of Phillips
and its Subsidiaries and/or Affiliates attributable to the businesses and
operations of P Chem, including (i) all Liabilities arising from the ownership
or use of assets that are part of P Chem, (ii) all Liabilities attributable to
products produced by or with such assets, (iii) all Liabilities attributable to
the production of such products, including all claims for personal injury,
defective products, and the like, (iv) all Liabilities under contracts, leases
or permits if and to the extent utilized in the business of P Chem as conducted
on or before the Closing Date, and (v) all Liabilities made the responsibility
of the Company pursuant to Annex A, Annex B or Annex C; but excluding the
Phillips Excluded Liabilities.
"P Chem Material Contracts" shall have the meaning set forth
in Section 4.10(a).
"P Chem Patent Rights" shall mean all claims of letters patent
and patent applications owned or controlled by Phillips or its Patent
Subsidiaries, in the sense of having the right to grant licenses thereunder, all
subject to the terms and conditions, including the obligation to account to
third parties, under which such rights are held, based upon inventions conceived
prior to the later of (i) December 31, 2000 or (ii) the six-month anniversary of
the Closing Date, insofar and only insofar as such claims cover in whole or in
part technology or inventions that are primarily used by or identified as
relating primarily to the P Chem business, or which arose from research,
development or demonstration activities which relate primarily to the P Chem
business, including those patents and patent applications listed on Schedule
6.18 of the Phillips Disclosure Schedule and foreign counterparts thereof. P
Chem Patent Rights shall specifically exclude patent claims covering S Zorb
sulfur removal technology and the Phillips MaxCat coke reduction technology.
"P Chem Proprietary Technology" shall mean transferable rights
in unpublished technical information, knowhow and trade secrets owned or
controlled by Phillips or its Patent Subsidiaries prior to the later of (i)
December 31, 2000 or (ii) the six-month anniversary of the
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Closing Date, relating primarily to the P Chem business and research,
development, and demonstration activities relating primarily to the P Chem
business, including information relating to proprietary computer programs, data
bases, computer models, engineering correlations, process design, engineering
and operating data, proprietary catalysts and other materials, formulations,
experimental data, performance testing information, pilot plant data, and test
methods, and including information licensed from third parties, all subject to
the terms and conditions, including the obligation to account to third parties
under which such rights are held. P Chem Proprietary Technology shall
specifically exclude S Zorb sulfur removal technology and the Phillips MaxCat
coke reduction technology.
"P Chem Real Property" shall have the meaning set forth in
Section 4.11(b).
"P Chem Subsidiaries" shall mean, collectively, any
Subsidiaries to be contributed by Phillips or Phillips Member Affiliates to the
Company.
"P Chem Working Capital Difference" shall mean P Chem's Actual
Net Working Capital minus the Net Working Capital set forth on the P Chem
December 31 Balance Sheet.
"Party" shall have the meaning set forth in the Recitals.
"Patent Subsidiary" shall mean, when used with respect to any
Person, any corporation, partnership, limited liability company, or other
organization, whether incorporated or unincorporated, of which such Person owns
or controls, directly or indirectly, more than 50% of the voting power of the
outstanding equity securities (or equivalent voting interests).
"Permit" shall have the meaning set forth in Section 4.5.
"Permitted Encumbrances" shall mean, with respect to or upon
any of the property or assets of P Chem or C Chem, as the case may be, whether
owned as of the date hereof or thereafter, any Liens, Claims, rights (including
rights of Governmental Entities), reservations, exceptions, easements,
rights-of-way, conditions, restrictions (including restrictive covenants and
zoning and land use restrictions imposed by applicable laws, regulations and
ordinances), leases, and other similar title exceptions or encumbrances
affecting such property or assets that either (a) affect such property or assets
as of the date of this Agreement and are identified with reasonable
particularity in the Phillips Disclosure Schedule or the Chevron Disclosure
Schedule, as applicable, or (b) were not incurred in the borrowing of money and,
individually and in the aggregate, do not and will not materially interfere with
the use in the ordinary conduct of such Person's businesses or present or impose
any material financial obligations not reflected in the financial statements
described in Section 4.6 or Section 5.6, as applicable. Without limiting the
generality of the foregoing definition, the following shall constitute
"Permitted Encumbrances": (a) all rights to consent by, required notices to,
filings with, or other actions by Governmental Entities in connection with the
sale or conveyance of such properties or assets if the same are customarily
obtained subsequent to the transfer of title; and (b) the terms and conditions
of all easements, rights-of-way, and leases included within such properties and
assets, but only to the extent such terms and conditions would be acceptable to
a reasonably prudent person acquiring those easements, rights of way and leases
for the purposes for which they have been used.
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"Person" shall mean any individual, partnership, firm,
corporation, association, joint venture, limited liability company, trust or
other entity, or any Governmental Entity.
"Phillips" shall have the meaning set forth in the Preamble.
"Phillips Disclosure Schedule" shall mean the disclosure
schedules delivered by Phillips concurrently herewith.
"Phillips Excluded Assets" shall mean the assets set forth on
Exhibit B-1.
"Phillips Excluded Liabilities" shall mean the liabilities set
forth on Exhibit C-1.
"Phillips Indemnified Person" shall have the meaning set forth
in Section 9.1.
"Phillips Member Affiliates" shall have the meaning set forth
in Section 2.1(a).
"Phillips Plans" shall mean, collectively, all material
employee benefit plans providing benefits to any P Chem Employees that are
sponsored or maintained by Phillips or any of its Affiliates or to which
Phillips or any of its Affiliates contributes or is obligated to contribute on
behalf of P Chem Employees, including any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, any employee pension benefit plan within
the meaning of Section 3(2) of ERISA, and any bonus, incentive, deferred
compensation, stock purchase, stock option, severance, change of control or
fringe benefit plan.
"Phillips Retained Affiliates" shall mean, collectively, all
Affiliates of Phillips other than P Chem Subsidiaries.
"Phillips Savings Plans" shall have the meaning set forth in
Annex A.
"Projected K-Resin EBITDA" shall mean (i) $37.4 million for
the year 2000 (prorated from the Closing Date), plus (ii) $40.7 million for the
year 2001 (prorated to the Cut-Off Date if prior to December 31, 2001), plus
(iii) $45.8 million for the year 2002 (prorated to the Cut-Off Date if prior to
December 31, 2002).
"Reference Rate" shall have the meaning set forth in Section
3.3(e).
"Returns" or "Tax Returns" shall have the meaning set forth
in Annex B.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Subsidiary" shall mean, when used with respect to any Person,
any corporation, partnership, limited liability company, or other organization,
whether incorporated or unincorporated, of which such Person owns or controls,
directly or indirectly, 50% or more of the voting power of the outstanding
equity securities (or equivalent voting interests).
"Target Quantities" shall have the meaning set forth in
Section 6.19(a).
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"Tax" or "Taxes" shall mean all taxes (whether federal, state,
local or foreign) based upon or measured by income and any other tax whatsoever,
including gross receipts, profits, windfall profits, sales, use, occupation,
value added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, stamp, premium, capital stock, production, business and occupation,
disability, severance, or real or personal property taxes, fees, or assessments
of any kind whatsoever imposed by any Governmental Entity, together with any
interest or penalties imposed with respect thereto.
"Tax-Adjusted Shortfall" shall have the meaning set forth in
Section 6.19(b).
"Tax Rate" shall have the meaning set forth in the Amended
LLC Agreement.
"Tax Return" shall have the meaning set forth in Annex B.
"Taxing Authority" shall mean any Governmental Entity having
jurisdiction over the assessment, determination, collection or other imposition
of any Tax.
"Third Party Claim" shall have the meaning set forth in
Annex C.
"Trademarks and Logos" shall mean any names, marks, trade
names, trademarks and logos.
"Tradename License Agreement" shall have the meaning set
forth in Section 6.9(a).
"Transition Services Agreement" shall have the meaning set
forth in Section 6.11(a).
"Year 2000 Problem" shall mean the inability of any hardware,
software or process to recognize and correctly calculate dates or the failure of
computer systems, products or services to perform any of their intended
functions in a proper manner in connection with data containing any date.
ARTICLE II
CONTRIBUTION TO THE COMPANY
Section 2.1 The Company. (a) At the Closing, (i) Phillips shall execute and
deliver, and shall cause to be executed and delivered by each of its Affiliates
set forth on Schedule 2.1(a) of the Phillips Disclosure Schedule (such
Affiliates, the "Phillips Member Affiliates"), the Amended LLC Agreement, and
(ii) Chevron shall execute and deliver, and shall cause to be executed and
delivered by each of its Affiliates set forth on Schedule 2.1(a) of the Chevron
Disclosure Schedule (such Affiliates, the "Chevron Member Affiliates"), the
Amended LLC Agreement.
(b) Unless otherwise agreed by the Parties prior to the Closing, at the Closing,
(i) all indebtedness for borrowed money between P Chem Subsidiaries, on the one
hand, and Phillips or any of its Affiliates (excluding P Chem Subsidiaries), on
the other hand, shall be
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distributed, capitalized, discharged or otherwise canceled in a manner
consistent with the pro forma adjustments reflected in the P Chem December 31
Balance Sheet, and (ii) all indebtedness for borrowed money between C Chem
Subsidiaries, on the one hand, and Chevron or any of its Affiliates (excluding C
Chem Subsidiaries), on the other hand, shall be distributed, capitalized,
discharged or otherwise canceled in a manner consistent with the pro forma
adjustments reflected in the C Chem December 31 Balance Sheet.
(c) At the Closing, the Company shall accept the contributions from Phillips and
the Phillips Member Affiliates referred to in Section 2.2, and, in consideration
therefor, Phillips and the Phillips Member Affiliates shall become Class P
Members of the Company owning an aggregate of 100% of the Class P Membership
Interests, which represents 50% of the Membership Interests in the Company.
Phillips and the Phillips Member Affiliates shall receive Membership Interests
as set forth on Schedule 2.1(a) of the Phillips Disclosure Schedule.
(d) At the Closing, the Company shall accept the contributions from the Chevron
Member Affiliates referred to in Section 2.3, and, in consideration therefor,
the Chevron Member Affiliates shall become Class C Members of the Company owning
an aggregate of 100% of the Class C Membership Interests, which represents 50%
of the Membership Interests in the Company. The Chevron Member Affiliates shall
receive Membership Interests as set forth on Schedule 2.1(a) of the Chevron
Disclosure Schedule.
Section 2.2 Contribution of P Chem to the Company. Phillips shall, at the
Closing, convey, transfer, assign and deliver, and cause to be conveyed,
transferred, assigned and delivered by the Phillips Member Affiliates, to the
Company all right, title and interest in the assets, operations and entities
that constitute P Chem in the manner set forth on Schedule 2.2 of the Phillips
Disclosure Schedule. To the extent any of the P Chem Subsidiaries currently own
any Phillips Excluded Assets, such Phillips Excluded Assets shall, where
feasible, be conveyed, transferred, leased or assigned by such P Chem
Subsidiaries to Phillips or a Subsidiary of Phillips (other than a P Chem
Subsidiary) prior to the Closing (and, to the extent conveyance, transfer,
leasing or assignment of such Phillips Excluded Assets prior to Closing is not
feasible, Phillips shall be entitled, as provided in Section 6.11(d), to require
such P Chem Subsidiaries or the Company, as applicable, to convey, transfer,
lease or assign such Phillips Excluded Assets to Phillips or a Subsidiary of
Phillips (other than the Company or a P Chem Subsidiary) as soon as practicable
subsequent to the Closing).
Section 2.3 Contribution of C Chem to the Company. Chevron shall, at the
Closing, convey, transfer, assign and deliver, and cause to be conveyed,
transferred, assigned and delivered by the Chevron Member Affiliates, to the
Company all right, title and interest in the assets, operations and entities
that constitute C Chem in the manner set forth on Schedule 2.3 of the Chevron
Disclosure Schedule. To the extent any of the C Chem Subsidiaries currently own
any Chevron Excluded Assets, such Chevron Excluded Assets shall, where feasible,
be conveyed, transferred, leased or assigned by such C Chem Subsidiaries to
Chevron or a Subsidiary of Chevron (other than a C Chem Subsidiary) prior to the
Closing (and, to the extent conveyance, transfer, leasing or assignment of such
Chevron Excluded Assets prior to Closing is not feasible, Chevron shall be
entitled, as provided in Section 6.11(d), to require such C Chem Subsidiaries or
the Company, as applicable, to convey, transfer, lease or assign such Chevron
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Excluded Assets to Chevron or a Subsidiary of Chevron (other than the Company or
a C Chem Subsidiary) as soon as practicable subsequent to the Closing).
Section 2.4 Assumption of Liabilities by the Company. (a) The Company shall, at
the Closing, assume from Phillips and each Phillips Member Affiliate (and,
thereafter, pay, perform and discharge), and Phillips shall, at the Closing,
convey, transfer, assign and deliver, and cause to be conveyed, transferred,
assigned and delivered by the Phillips Member Affiliates to the Company, the P
Chem Liabilities.
(b) The Company shall, at the Closing, assume from Chevron and each Chevron
Member Affiliate (and, thereafter, pay, perform and discharge), and Chevron
shall, at the Closing, convey, transfer, assign and deliver, and cause to be
conveyed, transferred, assigned and delivered by the Chevron Member Affiliates
to the Company, the C Chem Liabilities.
ARTICLE III
THE CLOSING
Section 3.1 Closing Place and Date. The Closing shall take place at the offices
of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York
10019, as of the close of business on June 30, 2000, or if later, on the second
Business Day after the date on which all conditions to each party's obligations
hereunder have been satisfied or waived, or such other time and place upon which
the parties may agree. The day on which the Closing occurs is referred to as the
"Closing Date."
Section 3.2 Closing Date Deliveries.
(a) Phillips Deliveries. At the Closing, Phillips shall deliver,
or cause to be delivered, the following:
(i) to Chevron, the certificate required to be
delivered by Phillips pursuant to Section 7.2(a)(iii);
(ii) to the Company, bills of sale, bargain and sale deeds, assignments and
other instruments of transfer, and documents as shall be appropriate to
effectively convey and transfer P Chem to the Company and to put the Company in
operational control of P Chem or for aiding, assisting, collecting and reducing
to possession the assets of P Chem and exercising rights with respect thereto;
and
(iii) to Chevron and the Company, the Amended LLC Agreement, executed by the
Phillips Member Affiliates.
(b) Chevron Deliveries. At the Closing, Chevron shall deliver,
or cause to be delivered, the following:
(i) to Phillips, the certificate required to be delivered by Chevron pursuant
to Section 7.1(a)(iii);
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(ii) to the Company, bills of sale, bargain and sale deeds, assignments and
other instruments of transfer, and documents as shall be appropriate to
effectively convey and transfer C Chem to the Company and to put the Company in
operational control of C Chem or for aiding, assisting, collecting and reducing
to possession the assets of C Chem and exercising rights with respect thereto;
and
(iii) to Phillips and the Company, the Amended LLC Agreement, executed by the
Chevron Member Affiliates.
(c) Company Deliveries. At the Closing, the Company shall deliver the following:
(i) to Phillips and each Phillips Member Affiliate, an assignment and assumption
agreement relating to the assumption of P Chem Liabilities, in a form reasonably
satisfactory to the Parties; and
(ii) to each Chevron Member Affiliate, an assignment and assumption agreement
relating to the assumption of C Chem Liabilities, in a form reasonably
satisfactory to the Parties.
Section 3.3 Post-Closing Adjustment. (a) Within 30 days after the Closing, (i)
Phillips will deliver to Chevron and the Company an unaudited statement of Net
Working Capital of P Chem as of the Closing Date, prepared on a basis consistent
with the P Chem December 31 Balance Sheet (Phillips' "Net Working Capital
Statement") and an unaudited statement of Contributed Cash (Phillips'
"Contributed Cash Statement"), and (ii) Chevron will deliver to Phillips an
unaudited statement of Net Working Capital of C Chem as of the Closing Date,
prepared on a basis consistent with the C Chem December 31 Balance Sheet
(Chevron's "Net Working Capital Statement") and an unaudited statement of
Contributed Cash (Chevron's "Contributed Cash Statement").
(b) Each Party shall provide the other Party (and, if applicable, the Neutral
Firm), upon request, prompt and reasonable access to its books and records and
other supporting information reasonably necessary for the other Party (and, if
applicable, the Neutral Firm) to verify the determination of such Party's Net
Working Capital Statement and Contributed Cash Statement.
(c) Unless, within 45 days after receipt by a Party of the other Party's Net
Working Capital Statement and Contributed Cash Statement, the receiving Party
notifies the delivering Party that the receiving Party does not agree with the
determination of Net Working Capital and/or Contributed Cash as of the Closing
Date set forth in such delivering Party's Net Working Capital Statement and/or
Contributed Cash Statement, such delivering Party's Net Working Capital and
Contributed Cash determinations shall be final and binding on the Parties and
shall be deemed such Party's "Actual Net Working Capital" and "Actual
Contributed Cash," respectively. If the receiving Party notifies the delivering
Party in writing during such 45-day period that the receiving Party does not
agree with the delivering Party's Net Working Capital or Contributed Cash
determination, then the Parties shall discuss such disagreement in good faith
for 15 days from the date of such written notice, and, if such disagreement is
not resolved at the
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end of such 15-day period, the disagreement will be submitted to KPMG LLP (the
"Neutral Firm"). The Neutral Firm will review the disagreement, and, as soon as
possible but in any event not later than 60 days after the disagreement was
submitted to it, the Neutral Firm shall deliver to Phillips and Chevron its
determination of the Actual Net Working Capital and/or Actual Contributed Cash,
which determination shall be final and binding on the Parties and then shall be
deemed such Party's Actual Net Working Capital and/or Actual Contributed Cash.
The fees and expenses of the Neutral Firm shall be allocated between Phillips
and Chevron by the Neutral Firm.
(d) After a determination of either Party's Contributed Cash shall have become
final and binding on Phillips and Chevron as described in Section 3.3(c), the
Company shall pay to such Party an amount equal to the Actual Contributed Cash
of such Party.
(e) After a determination of both Parties' Actual Net Working Capital shall have
become final and binding on Phillips and Chevron as described in Section 3.3(c):
(i) if both of the C Chem Working Capital Difference and the P Chem Working
Capital Difference are greater than or equal to zero, then the absolute
difference between the C Chem Working Capital Difference and the P Chem
Working Capital Difference shall be a loan to the Company and the
Company shall pay such difference either to Chevron, if the C Chem
Working Capital Difference is greater than the P Chem Working Capital
Difference, or to Phillips, if the P Chem Working Capital Difference is
greater than the C Chem Working Capital Difference;
(ii) if both of the C Chem Working Capital Difference and the P Chem Working
Capital Difference are less than zero, then the absolute difference
between the C Chem Working Capital Difference and the P Chem Working
Capital Difference shall be a loan to the Company and the Company shall
pay such difference either to Chevron, if the C Chem Working Capital
Difference is closer to zero than the P Chem Working Capital
Difference, or to Phillips, if the P Chem Working Capital Difference is
closer to zero than the C Chem Working Capital Difference;
(iii) if the C Chem Working Capital Difference is greater than or equal to
zero and the P Chem Working Capital Difference is less than zero, then
the sum of the C Chem Working Capital Difference and the absolute value
of the P Chem Working Capital Difference shall be a loan to the Company
and the Company shall pay such sum to Chevron; or
(iv) if the P Chem Working Capital Difference is greater than or equal to
zero and the C Chem Working Capital Difference is less than zero, then
the sum of the P Chem Working Capital Difference and the absolute value
of the C Chem Working Capital Difference shall be a loan to the Company
and the Company shall pay such sum to Phillips.
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(f) The payments described in Sections 3.3(d) and 3.3(e), together with interest
thereon from and including the Closing Date to but excluding such payment date,
at a rate equal to the rate of interest from time to time announced publicly by
Chase Manhattan Bank as its prime rate (the "Reference Rate"), will be paid out
of borrowings by the Company and will be made within five (5) Business Days
after the necessary determination(s) has become final and binding as described
above and will be made in immediately available funds by wire transfer to an
account designated by the Person to receive the payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PHILLIPS
Phillips hereby represents and warrants to each of Chevron and
the Company that, except as disclosed on the Phillips Disclosure Schedule
(provided that, as used in this Article IV only, unless the context otherwise
requires, all references to Phillips (and/or its Affiliates) shall be deemed to
refer to Phillips and all of the Subsidiaries of Phillips, but in each case,
only with respect to the businesses of P Chem):
Section 4.1 Corporate Organization. Phillips and the P Chem Subsidiaries are
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or organization. Each of Phillips and
each P Chem Subsidiary has all requisite corporate power and authority to own or
lease all of its properties and assets and to carry on its businesses as it is
now being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the businesses conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have, individually or in the aggregate, a
Material Adverse Effect on either Phillips or P Chem, as applicable. True and
complete copies of the certificate of incorporation and by-laws or comparable
organizational documents of each P Chem Subsidiary, in effect as of the date of
this Agreement, have previously been made available by Phillips to Chevron.
Section 4.2 Capitalization. Schedule 4.2 of the Phillips Disclosure Schedule
sets forth a complete list of all of the P Chem Subsidiaries and their
respective jurisdictions of organization and capitalization as of the date
hereof. All of the outstanding shares of capital stock or outstanding limited
liability company interests of each P Chem Subsidiary are validly issued, fully
paid and nonassessable, and, except as set forth on Schedule 4.2 of the Phillips
Disclosure Schedule, such shares or interests are owned by Phillips or a
wholly-owned Subsidiary of Phillips free and clear of any material Lien with
respect thereto. Except as described above, as of the date of this Agreement,
there are not, and, at the Closing, there will not be, any capital stock or
other equity interests in any P Chem Subsidiary issued or outstanding or any
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character obligating any P Chem Subsidiary to
issue, transfer or sell any of its capital stock or other equity interests, or
any agreements, arrangements or understandings granting any person any rights in
any P Chem Subsidiary similar to capital stock or other equity interests. Except
as set forth on Schedule 4.2 of the Phillips Disclosure Schedule, P Chem does
not include any material interest in any corporation, partnership, joint venture
or other entity.
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Section 4.3 Authority; No Violation. (a) Phillips has full corporate power and
authority to execute and deliver this Agreement and the Amended LLC Agreement,
and to consummate the transactions contemplated by this Agreement and the
Amended LLC Agreement. The execution and delivery of this Agreement and the
Amended LLC Agreement and the consummation of the transactions contemplated by
this Agreement and the Amended LLC Agreement have been duly and validly approved
by all corporate action on the part of Phillips. No other corporate proceedings
on the part of Phillips or any of its Affiliates are necessary to approve this
Agreement or the Amended LLC Agreement or to consummate the transactions
contemplated by this Agreement or the Amended LLC Agreement. This Agreement has
been duly and validly executed and delivered by Phillips, and, assuming due
authorization, execution and delivery by Chevron and the Company, constitutes a
valid and binding obligation of Phillips, enforceable against Phillips in
accordance with its terms.
(b) Phillips has full corporate power, right and authority to transfer and
convey, or cause to be transferred and conveyed, to the Company at the Closing,
P Chem.
(c) The execution, delivery and performance of this Agreement and the Amended
LLC Agreement by Phillips do not, and the consummation by Phillips of the
transactions contemplated by this Agreement and the Amended LLC Agreement will
not, constitute (i) a breach or violation of, or a default under, the
certificate of incorporation or by-laws of Phillips, (ii) constitute a breach or
violation of, or a default under, or give rise to any Lien, any buy-out right,
any right of first offer or refusal, any acceleration of remedies, or any right
of termination under or trigger any "change of control" rights or remedies
under, any indenture, license, contract, agreement or other instrument to which
Phillips is a party or by which any of its properties or assets may be bound, or
(iii) assuming compliance with the applicable requirements of the HSR Act,
violate any law, rule, regulation, judgment, decree or order applicable to P
Chem or any of its properties or assets, except, in the case of (ii) and (iii),
for such breaches, violations, defaults, Liens, accelerations or rights as would
not be reasonably expected, individually or in the aggregate, to result in a
Material Adverse Effect on P Chem or to adversely affect the ability of Phillips
to consummate the transactions contemplated by this Agreement or the Amended LLC
Agreement.
Section 4.4 Consents and Approvals. Except for applicable requirements of the
HSR Act and the European Commission, no notice to, filing with, authorization
of, exemption by, or consent or approval of, or the taking of any other action
in respect of, any Governmental Entity or any other Person on the part of
Phillips is necessary for the consummation by Phillips of the transactions
contemplated by this Agreement, except where the failure to provide such notice,
make such filing or obtain such authorization, exemption, consent or approval
would not, individually or in the aggregate, be reasonably expected to result in
a Material Adverse Effect on P Chem or to adversely affect the ability of
Phillips to consummate the transactions contemplated by this Agreement or the
Amended LLC Agreement.
Section 4.5 Licenses; Compliance with Applicable Law. Phillips or a P Chem
Subsidiary holds all licenses, franchises, permits and authorizations (each, a
"Permit") necessary for the lawful conduct of P Chem's businesses under and
pursuant to, and has complied with and is not in default under, any applicable
laws, statutes, orders, rules or regulations of any Governmental Entity relating
to P Chem, except, in each case, where the failure to hold such
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Permit or such noncompliance or default would not, individually or in the
aggregate, have a Material Adverse Effect on P Chem. To Phillips' knowledge, the
businesses of P Chem are not being and have not been conducted in violation of
any applicable laws or any orders, writs, injunctions or decrees of any
Governmental Entity, except for such violations, if any, as would not,
individually or in the aggregate, have a Material Adverse Effect on P Chem.
Section 4.6 Financial Statements; Undisclosed Liabilities. Phillips has
previously made available to Chevron copies of the unaudited consolidated
balance sheets of P Chem as of December 31, for the fiscal years 1998 and 1999,
and the related unaudited consolidated statements of income and cash flows for
the years then ended. The financial statements referred to in this Section 4.6
fairly present in all material respects (except for the absence of footnotes)
the financial position of P Chem at December 31, 1999 and 1998, and the results
of its operations and its cash flows for the respective fiscal periods therein
set forth. The financial statements described in this Section 4.6 (including the
related notes, if any) comply in all material respects with applicable internal
Phillips accounting requirements with respect thereto; and these statements
(including the related notes, if any) have been prepared in all material
respects in accordance with GAAP consistently applied during the periods
involved, except for the absence of footnotes. P Chem does not have any
liabilities required by GAAP to be set forth on a consolidated balance sheet of
P Chem (other than as set forth in the notes thereto, if any), except (i) as set
forth on the P Chem December 31 Balance Sheet, (ii) for liabilities incurred in
the ordinary course of business since December 31, 1999 and (iii) for
liabilities that would not reasonably be expected to have a Material Adverse
Effect on P Chem. The financial statements described in this Section 4.6
(including the related notes, if any) are derived from the financial statements
used in preparing Phillips' audited financial statements set forth in Phillips'
filings with the SEC. Schedule 4.6 of the Phillips Disclosure Schedule sets
forth the P Chem December 31 Balance Sheet.
Section 4.7 Brokers' Fees. Except for Goldman, Sachs & Co., neither Phillips nor
any Affiliate of Phillips nor any of their respective officers or directors has
employed any broker or finder or incurred any Liability for any brokers' fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement or the Amended LLC Agreement.
Section 4.8 Absence of Certain Changes or Events. From December 31, 1999 through
the date of this Agreement, the businesses of P Chem have been operated in the
ordinary and normal course in all material respects, and there has not been:
(a) any event (whether covered by insurance or not) that, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on P Chem;
(b) any increase in compensation (including severance or termination pay)
payable to or to become payable to any consultants, officers, directors,
employees or agents working in connection with the businesses of P Chem or any
change in any insurance, pension or other benefit plan, payment or arrangement
made to, for or with any of such consultants, officers, directors, employees or
agents, in each case, other than (i) general increases or changes reasonably
consistent with past practices and applicable to at least 10% of the employees
of
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Phillips and its Subsidiaries, or (ii) other increases that are in accordance
with past practice and are not material in the aggregate;
(c) any change in financial accounting methods, principles or practices by P
Chem materially affecting its assets, Liabilities or businesses, except insofar
as such change may have been required by a change in GAAP;
(d) any indebtedness for borrowed money incurred by P Chem other than from
Phillips or its Affiliates, any issuance of debt securities by P Chem other than
to Phillips or its Affiliates, any assumption, guarantee, endorsement or other
action that would result in P Chem having responsibility for the obligations of
any other Persons, or any mortgage or encumbrance on properties or assets of P
Chem other than Liens that do not materially restrict or detract from the value
of such properties or assets; or
(e) any declaration, setting aside or payment of any distribution (other than in
cash), directly or indirectly, except as permitted by this Agreement.
Section 4.9 Legal Proceedings. (a) As of the date hereof, neither Phillips nor
any of its Subsidiaries is a party to any, and there are no pending or, to
Phillips' knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against Phillips or any of its Subsidiaries that (i) individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect on
P Chem, or (ii) would adversely affect the ability of Phillips to consummate the
transactions contemplated by this Agreement or the Amended LLC Agreement.
Schedule 4.9 of the Phillips Disclosure Schedule lists all legal,
administrative, arbitral or other proceedings relating to the businesses and
operations of P Chem to which Phillips or any of its Subsidiaries is a party,
and all pending or, to Phillips' knowledge, theatened claims which are material
to the business and operations of P Chem.
(b) There is no injunction, order, judgment or decree imposed upon P Chem, or
any assets of P Chem, which has had, or would reasonably be expected to have, a
Material Adverse Effect on P Chem.
Section 4.10 Contracts. (a) Schedule 4.10(a) of the Phillips Disclosure Schedule
sets forth a true and complete list, as of the date of this Agreement, of all
contracts, agreements and commitments of the following categories, whether oral
or written, express or implied, to which Phillips or any P Chem Subsidiary is a
party, relating to P Chem or by which any of P Chem's properties or assets are
bound (excluding the agreements contemplated by this Agreement or the Amended
LLC Agreement) (collectively, the "P Chem Material Contracts"):
(i) any employment, product design or development, personal services,
consulting, non-competition, severance, golden parachute, or indemnification
contract requiring payments by P Chem in excess of $500,000 per year;
(ii) any contract involving or requiring expenditures or receipts by P Chem of
more than $2,000,000 in any calendar year and not cancelable or terminable
within one year from the Closing Date;
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(iii) any contract containing covenants limiting the freedom of P Chem to engage
in any line of business or compete with any Person or operate at any location;
(iv) any contract granting a right of first refusal or first negotiation other
than for the purchase of goods or services in the aggregate less than
$2,000,000;
(v) any partnership or joint venture agreement;
(vi) any agreement for the acquisition, sale or lease of material properties or
assets of P Chem (by merger, purchase or sale of assets or stock, or otherwise)
entered into since January 1, 1998;
(vii)any contract or agreement with any Governmental Entity requiring
expenditures or receipts by P Chem in excess of $2,000,000;
(viii) any collective bargaining agreement or other labor union contract;
(ix) any contract between P Chem, on the one hand, and Phillips or any Affiliate
of Phillips (other than P Chem), on the other hand; and
(x) any commitments and agreements to enter into any of the foregoing.
(b) Each P Chem Material Contract is a valid, binding and enforceable (except as
such enforceability may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally) obligation of P
Chem. There is no default under any P Chem Material Contract by P Chem or, to
Phillips' knowledge, by any other party thereto, and no event has occurred that
with the lapse of time or the giving of notice or both would constitute a
default thereunder by P Chem, or, to Phillips' knowledge, any other party, which
default or event, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect on P Chem. As of the date of this Agreement,
no party to any P Chem Material Contract has given notice to P Chem or made a
claim against P Chem with respect to any breach or default thereunder, which
breach or default, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on P Chem. As of the date of this
Agreement, there has been no amendment or modification of any of the P Chem
Material Contracts, except as specifically listed on Schedule 4.10(a) of the
Phillips Disclosure Schedule. The enforceability of any P Chem Material Contract
shall not be impaired by the execution and delivery of this Agreement or the
Amended LLC Agreement or the consummation of the transactions contemplated
hereby or thereby, and, as of the date of this Agreement, no P Chem Material
Contract requires that a transaction of the kind contemplated by this Agreement
or the Amended LLC Agreement receive the approval of any party to such P Chem
Material Contract, except where such impairments or failures to receive
approvals, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on P Chem.
(c) As of the date of this Agreement, Phillips has delivered to Chevron or
otherwise made available to Chevron at the offices of Phillips or its
Subsidiaries true, correct and complete copies of all P Chem Material Contracts.
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Section 4.11 Real Property. (a) Schedule 4.11(a)(i) of the Phillips Disclosure
Schedule identifies all real property assets (other than real property assets
associated with pipelines identified on Exhibit A-1) the fee title to which is
owned, beneficially and/or of record, by Phillips as of the date of this
Agreement and which are material to the businesses of P Chem. Schedule
4.11(a)(ii) of the Phillips Disclosure Schedule identifies all real property
assets (other than real property assets associated with pipelines identified on
Exhibit A-1) a leasehold interest in which is owned, beneficially and/or of
record, by Phillips as of the date of this Agreement and which are material to
the businesses of P Chem.
(b) With respect to any real property owned or leased by Phillips (the "P Chem
Real Property"), Phillips has good and valid fee or leasehold title, as the case
may be, to all real property owned or leased by Phillips, in each case, free and
clear of all Liens, except for Permitted Encumbrances, defects in title or Liens
described on Schedules 4.11(a)(i) or 4.11(a)(ii) of the Phillips Disclosure
Schedule and other defects in title or Liens that, individually or in the
aggregate, do not and would not reasonably be expected to have a Material
Adverse Effect on P Chem.
(c) Each of the leases (including subleases) to which Phillips is a party (the
"P Chem Leases") is a valid, binding and enforceable (except as such
enforceability may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in effect,
relating to or limiting creditors' rights generally) obligation of each of the
lessee and the lessor under such P Chem Lease, and neither Phillips nor, to
Phillips' knowledge, the other party to any P Chem Lease is in default under
such P Chem Lease in any material respect, other than such defaults, if any,
which would not, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on P Chem. As of the date of this
Agreement, except where, individually or in the aggregate, there would not
reasonably be expected to be a Material Adverse Effect on P Chem or as otherwise
set forth on Schedule 4.11(a)(ii) of the Phillips Disclosure Schedule, (i) the
enforceability of any of the P Chem Leases will not be impaired by the execution
or delivery of this Agreement or the Amended LLC Agreement, (ii) the execution
and delivery of this Agreement or the Amended LLC Agreement or the consummation
of the transactions contemplated by this Agreement or the Amended LLC Agreement
will not entitle the lessor under any P Chem Lease to terminate such P Chem
Lease prior to the scheduled expiration thereof, and (iii) neither Phillips nor
any P Chem Subsidiary is currently participating in any discussions or
negotiations regarding termination of any P Chem Lease of a property at which P
Chem conducts business operations prior to the scheduled expiration of such P
Chem Lease by reason of a breach or alleged breach by the tenant thereunder.
Section 4.12 Environmental Matters. Except for matters that, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on P Chem, (a) the properties, operations and activities of P Chem are in
material compliance with all applicable Environmental Laws; (b) P Chem is not
subject to any existing, pending or, to Phillips' knowledge, threatened, action,
suit, proceeding or remediation activity under any Environmental Law; (c)
Hazardous Materials have not at any time been released or disposed of at the
properties currently owned, operated, leased or used by P Chem; (d) the previous
and current methods of releasing or disposing of Hazardous Materials generated,
used, treated, recycled or stored at, upon or under the properties previously or
currently owned, operated,
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leased or used by P Chem have been disclosed to Chevron; and (e) Phillips has
not restricted access for the review of and copying by Chevron all of the
environmental reports, documents, data and other information prepared by or for
P Chem relating to the properties previously or currently owned, operated,
leased or used by P Chem.
Section 4.13 Intellectual Property. (a) Phillips has, or will as of the Closing
have, such ownership of or such rights by license or other agreement to use all
patents and patent applications, trademarks and service marks, trademark and
service mark registrations and applications, trade names, logos, copyrights and
copyright registrations and applications, proprietary information and data,
including trade secrets, as are necessary to permit P Chem to conduct its
businesses as currently conducted (collectively, the "P Chem Intellectual
Property"), except where the failure to have such ownership, license or right to
use would not, individually or in the aggregate, have a Material Adverse Effect
on P Chem.
(b) To Phillips' knowledge, the conduct of the businesses of P Chem as currently
conducted does not infringe the valid proprietary rights of any third party, and
there are no present or threatened infringements of the P Chem Intellectual
Property by any third party, except, in either case, for such infringements that
would not, individually or in the aggregate, have a Material Adverse Effect on P
Chem. There are no pending or, to Phillips' knowledge, threatened infringement
proceedings, litigation or claims by any Person against the use by P Chem of any
P Chem Intellectual Property or any third-party intellectual property.
(c) Schedule 6.18 of the Phillips Disclosure Schedule sets forth a list of all
United States patents and United States patent applications which are primarily
used by or identified as relating primarily to the P Chem business, including
licensing, research, development and demonstration activities.
(d) Schedule 6.18 of the Phillips Disclosure Schedule sets forth a list of all
United States registered trademarks other than Trademarks and Logos as defined
in Section 6.9 which are primarily used or identified as relating to the P Chem
business.
Section 4.14 Employee Benefit Plans. (a) Schedule 4.14(a) of the Phillips
Disclosure Schedule includes a complete list of all Phillips Plans. Except as
set forth on Schedule 4.14(a) of the Phillips Disclosure Schedule, none of the
Phillips Plans is sponsored or maintained by P Chem or any P Chem Subsidiary.
(b) With respect to each Phillips Plan, Phillips has delivered or made available
to Chevron a true, correct and complete copy of all plan documents and the
current summary plan description.
(c) No Phillips Plans are "multiemployer plans" within the meaning of Section
4001(a)(3) of ERISA ("Multiemployer Plans"). None of the P Chem Subsidiaries or
any of their respective ERISA Affiliates has, at any time during the last six
years, contributed to or been obligated to contribute to any Multiemployer Plan,
and none of the P Chem Subsidiaries or any of their respective ERISA Affiliates
has incurred any withdrawal liability under Part I of Subtitle E of Title IV of
ERISA that has not been satisfied in full.
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(d) There does not now exist, nor do any circumstances exist that could result
in, any Controlled Group Liability that would be a liability of any of the P
Chem Subsidiaries following the Closing.
(e) Except as specifically provided in Annex A and except for stock options
granted by Phillips to P Chem Employees, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(either alone or in conjunction with any other event) result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any P Chem Employee.
Section 4.15 Labor Relations. Phillips is in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, employment discrimination, equal
opportunity, affirmative action, workers' compensation, unemployment insurance,
immigration, and occupational safety and health, and is not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable laws, except where the failure to comply would not reasonably be
expected to cause a Material Adverse Effect on P Chem. Neither Phillips nor any
Subsidiary of Phillips is a party to any collective bargaining agreement or
other labor union contract with respect to any P Chem Employee, and, to
Phillips's knowledge, there are no activities or proceedings of any labor union
to organize any P Chem Employees. No claim has been made by any labor
organization that the operations of P Chem to be contributed to the Company
under this Agreement would be subject to any agreement with such labor
organization or to a duty to bargain with such labor organization regarding the
terms and conditions of employment for any group of employees involved in such
operations. There is no labor strike, slowdown, stoppage or lockout actually
pending, or, to the knowledge of Phillips, threatened, against or affecting P
Chem.
Section 4.16 Transactions with Affiliates. As of the date of this Agreement,
except as set forth on Schedule 4.16 of the Phillips Disclosure Schedule and
except for transactions contemplated by this Agreement, (a) no director or
officer of Phillips is currently, directly or indirectly, a party to any
transaction with P Chem, including any agreement, arrangement or understanding,
written or oral, providing for the employment of, furnishing of services by,
rental of real or personal property from or otherwise requiring payment to any
such director or officer, and (b) P Chem has no outstanding material contract,
agreement or other arrangement with Phillips or any of its Affiliates (other
than P Chem) and has not engaged in any material transaction outside the
ordinary course of business with Phillips or its Affiliates (other than P Chem)
since January 1, 1999.
Section 4.17 Personal Property. Phillips owns, or holds valid leasehold
interests in, the personal property owned or used by it, in each case, free and
clear of all Liens, except for such Liens that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
P Chem.
Section 4.18 Year 2000. Phillips has developed and implemented a plan for
addressing the Year 2000 Problem, except where its failure to do so would not
reasonably be expected to have a Material Adverse Effect on P Chem. As of the
date of this Agreement, except as would not reasonably be expected to have a
Material Adverse Effect on P Chem, none of the
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assets or equipment owned or utilized by P Chem will fail to perform because of,
or due in any way to, a Year 2000 Problem. As of the date of this Agreement, to
Phillips' knowledge, no vendor, supplier or customer of P Chem is reasonably
expected to experience a Year 2000 Problem that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on P
Chem.
Section 4.19 Insurance. P Chem is, and has been continuously since December 31,
1999, insured with Phillips-affiliated insurance companies or with third-party
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the businesses as conducted by P
Chem during such time period. As of the date of this Agreement, P Chem has not
received any notice of cancellation or termination with respect to any insurance
policy of P Chem that would reasonably be expected to have a Material Adverse
Effect on P Chem.
Section 4.20 Acquisition of Company Interests for Investment. With respect to
Phillips' acquisition of Company Interests, Phillips has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its acquisition of Company Interests. Phillips is
acquiring the Company Interests for investment and not with a view toward or for
sale in connection with any distribution thereof, or with any present intention
of distributing or selling the Company Interests. Phillips agrees that the
Company Interests may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act, except pursuant to an exemption from such registration available under the
Securities Act, and without compliance with foreign securities laws, in each
case, to the extent applicable.
Section 4.21 Sufficiency of Contribution. Except as disclosed elsewhere in this
Agreement or in the Phillips Disclosure Schedule, as of the Closing, Phillips
holds, and shall transfer and convey to the Company at Closing, all right, title
and interest of Phillips and its Affiliates to all properties, rights, assets
and Liabilities (other than the Phillips Excluded Assets and the Phillips
Excluded Liabilities) of the chemicals businesses of Phillips and its Affiliates
as conducted as of the date of this Agreement and as of the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CHEVRON
Chevron hereby represents and warrants to each of Phillips and
the Company that, except as disclosed on the Chevron Disclosure Schedule
(provided that, as used in this Article V only, unless the context otherwise
requires, all references to Chevron (and/or its Affiliates) shall be deemed to
refer to Chevron and all of the Subsidiaries of Chevron, but, in each case, only
with respect to the businesses of C Chem):
Section 5.1 Corporate Organization. Chevron and the C Chem Subsidiaries are duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or organization. Each of Chevron and
each C Chem Subsidiary has all requisite corporate power and authority to own or
lease all of its properties and assets and to
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carry on its businesses as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
businesses conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have,
individually or in the aggregate, a Material Adverse Effect on either Chevron or
C Chem, as applicable. True and complete copies of the certificate of
incorporation and by-laws or comparable organizational documents of each C Chem
Subsidiary, in effect as of the date of this Agreement, have previously been
made available by Chevron to Phillips.
Section 5.2 Capitalization. Schedule 5.2 of the Chevron Disclosure Schedule sets
forth a complete list of all of the C Chem Subsidiaries and their respective
jurisdictions of organization and capitalization, as of the date hereof. All of
the outstanding shares of capital stock or outstanding limited liability company
interests of each C Chem Subsidiary are validly issued, fully paid and
nonassessable, and, except as set forth on Schedule 5.2 of the Chevron
Disclosure Schedule, such shares or interests are owned by Chevron or a
wholly-owned Subsidiary of Chevron free and clear of any material Lien with
respect thereto. Except as described above, as of the date of this Agreement,
there are not, and, at the Closing, there will not be, any capital stock or
other equity interests in any C Chem Subsidiary issued or outstanding or any
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character obligating any C Chem Subsidiary to
issue, transfer or sell any of its capital stock or other equity interests, or
any agreements, arrangements or understandings granting any person any rights in
any C Chem Subsidiary similar to capital stock or other equity interests. Except
as set forth on Schedule 5.2 of the Chevron Disclosure Schedule, C Chem does not
include any material interest in any corporation, partnership, joint venture or
other entity.
Section 5.3 Authority; No Violation. (a) Chevron has full corporate power and
authority to execute and deliver this Agreement and the Amended LLC Agreement
and to consummate the transactions contemplated by this Agreement and the
Amended LLC Agreement. The execution and delivery of this Agreement and the
Amended LLC Agreement and the consummation of the transactions contemplated by
this Agreement and the Amended LLC Agreement have been duly and validly approved
by all corporate action on the part of Chevron. No other corporate proceedings
on the part of Chevron or any of its Affiliates are necessary to approve this
Agreement or the Amended LLC Agreement or to consummate the transactions
contemplated by this Agreement or the Amended LLC Agreement. This Agreement has
been duly and validly executed and delivered by Chevron, and, assuming due
authorization, execution and delivery by Phillips and the Company, constitutes a
valid and binding obligation of Chevron, enforceable against Chevron in
accordance with its terms.
(b) Chevron has full corporate power, right and authority to transfer and
convey, or cause to be transferred and conveyed, to the Company at the Closing,
C Chem.
(c) The execution, delivery and performance of this Agreement and the Amended
LLC Agreement by Chevron do not, and the consummation by Chevron of the
transactions contemplated by this Agreement and the Amended LLC Agreement will
not, constitute (i) a breach or violation of, or a default under, the
certificate of incorporation or by-laws of Chevron, (ii) constitute a breach or
violation of, or a default under, or give rise to any Lien, any buy-out right,
any right of first offer or refusal, any acceleration of remedies, or any
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right of termination under or trigger any "change of control" rights or remedies
under, any indenture, license, contract, agreement or other instrument to which
Chevron is a party or by which any of its properties or assets may be bound, or
(iii) assuming compliance with the applicable requirements of the HSR Act,
violate any law, rule, regulation, judgment, decree or order applicable to C
Chem or any of its properties or assets, except, in the case of (ii) and (iii),
for such breaches, violations, defaults, Liens, accelerations or rights as would
not be reasonably expected, individually or in the aggregate, to result in a
Material Adverse Effect on C Chem or to adversely affect the ability of Chevron
to consummate the transactions contemplated by this Agreement or the Amended LLC
Agreement.
Section 5.4 Consents and Approvals. Except for applicable requirements of the
HSR Act and the European Commission, no notice to, filing with, authorization
of, exemption by, or consent or approval of, or the taking of any other action
in respect of, any Governmental Entity or any other Person on the part of
Chevron is necessary for the consummation by Chevron of the transactions
contemplated by this Agreement, except where the failure to provide such notice,
make such filing or obtain such authorization, exemption, consent or approval
would not, individually or in the aggregate, be reasonably expected to result in
a Material Adverse Effect on C Chem or to adversely affect the ability of
Chevron to consummate the transactions contemplated by this Agreement or the
Amended LLC Agreement.
Section 5.5 Licenses; Compliance with Applicable Law. Chevron or a C Chem
Subsidiary holds all Permits necessary for the lawful conduct of C Chem's
businesses under and pursuant to, and has complied with and is not in default
under, any applicable laws, statutes, orders, rules or regulations of any
Governmental Entity relating to C Chem, except, in each case, where the failure
to hold such Permit or such noncompliance or default would not, individually or
in the aggregate, have a Material Adverse Effect on C Chem. To Chevron's
knowledge, the businesses of C Chem are not being and have not been conducted in
violation of any applicable laws or any orders, writs, injunctions or decrees of
any Governmental Entity, except for such violations, if any, as would not,
individually or in the aggregate, have a Material Adverse Effect on C Chem.
Section 5.6 Financial Statements; Undisclosed Liabilities. Chevron has
previously made available to Phillips copies of the unaudited consolidated
balance sheets of C Chem as of December 31, for the fiscal years 1998 and 1999,
and the related unaudited consolidated statements of income and cash flows for
the years then ended. The financial statements referred to in this Section 5.6
fairly present in all material respects (except for the absence of footnotes)
the financial position of C Chem at December 31, 1999 and 1998, and the results
of its operations and its cash flows for the respective fiscal periods therein
set forth. The financial statements described in this Section 5.6 (including the
related notes, if any) comply in all material respects with applicable internal
Chevron accounting requirements with respect thereto; and these statements
(including the related notes, if any) have been prepared in all material
respects in accordance with GAAP consistently applied during the periods
involved, except for the absence of footnotes. C Chem does not have any
liabilities required by GAAP to be set forth on a consolidated balance sheet of
C Chem (other than as set forth on the notes thereto, if any), except (i) as set
forth on the C Chem December 31 Balance Sheet, (ii) for liabilities incurred in
the ordinary course of business since December 31, 1999 and (iii) for
liabilities that would not reasonably be expected to have a Material Adverse
Effect on C Chem.
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The financial statements described in this Section 5.6 (including the related
notes, if any) are derived from the financial statements used in preparing
Chevron's audited financial statements set forth in Chevron's filings with the
SEC. Schedule 5.6 of the Chevron Disclosure Schedule sets forth the C Chem
December 31 Balance Sheet.
Section 5.7 Brokers' Fees. Except for Lehman Brothers, neither Chevron nor any
Affiliate of Chevron nor any of their respective officers or directors has
employed any broker or finder or incurred any Liability for any brokers' fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement or the Amended LLC Agreement.
Section 5.8 Absence of Certain Changes or Events. From December 31, 1999 through
the date of this Agreement, the businesses of C Chem have been operated in the
ordinary and normal course in all material respects, and there has not been:
(a) any event (whether covered by insurance or not) that, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on C Chem;
(b) any increase in compensation (including severance or termination pay)
payable to or to become payable to any consultants, officers, directors,
employees or agents working in connection with the businesses of C Chem or any
change in any insurance, pension or other benefit plan, payment or arrangement
made to, for or with any of such consultants, officers, directors, employees or
agents, in each case, other than (i) general increases or changes reasonably
consistent with past practices and applicable to at least 10% of the employees
of Chevron and its Subsidiaries, or (ii) other increases that are in accordance
with past practice and are not material in the aggregate;
(c) any change in financial accounting methods, principles or practices by C
Chem materially affecting its assets, Liabilities or businesses, except insofar
as such change may have been required by a change in GAAP;
(d) any indebtedness for borrowed money incurred by C Chem other than from
Chevron or its Affiliates, any issuance of debt securities by C Chem other than
to Chevron or its Affiliates, any assumption, guarantee, endorsement or other
action that would result in C Chem having responsibility for the obligations of
any other Persons, or any mortgage or encumbrance on properties or assets of C
Chem other than Liens that do not materially restrict or detract from the value
of such properties or assets; or
(e) any declaration, setting aside or payment of any distribution (other than in
cash), directly or indirectly, except as permitted by this Agreement.
Section 5.9 Legal Proceedings. (a) As of the date hereof, neither Chevron nor
any of its Subsidiaries is a party to any, and there are no pending or, to
Chevron's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against Chevron or any of its Subsidiaries that (i) individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect on
C Chem, or (ii) would adversely affect the ability of Chevron to consummate the
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transactions contemplated by this Agreement or the Amended LLC Agreement.
Schedule 5.9 of the Chevron Disclosure Schedule lists all legal, administrative,
arbitral or other proceedings relating to the businesses and operations of C
Chem to which Chevron or any of its Subsidiaries is a party, and all pending or,
to Chevron's knowledge, theatened claims which are material to the business and
operations of C Chem.
(b) There is no injunction, order, judgment or decree imposed upon C Chem, or
any assets of C Chem, which has had, or would reasonably be expected to have, a
Material Adverse Effect on C Chem.
Section 5.10 Contracts. (a) Schedule 5.10(a) of the Chevron Disclosure Schedule
sets forth a true and complete list, as of the date of this Agreement, of all
contracts, agreements and commitments of the following categories, whether oral
or written, express or implied, to which Chevron or any C Chem Subsidiary is a
party, relating to C Chem or by which any of C Chem's properties or assets are
bound (excluding the agreements contemplated by this Agreement or the Amended
LLC Agreement) (collectively, the "C Chem Material Contracts"):
(i) any employment, product design or development, personal services,
consulting, non-competition, severance, golden parachute or indemnification
contract requiring payments by C Chem in excess of $500,000 per year;
(ii) any contract involving or requiring expenditures or receipts by C Chem of
more than $2,000,000 in any calendar year and not cancelable or terminable
within one year from the Closing Date;
(iii) any contract containing covenants limiting the freedom of C Chem to engage
in any line of business or compete with any Person or operate at any location;
(iv) any contract granting a right of first refusal or first negotiation other
than for the purchase of goods or services in the aggregate less than
$2,000,000;
(v) any partnership or joint venture agreement;
(vi) any agreement for the acquisition, sale or lease of material properties or
assets of C Chem (by merger, purchase or sale of assets or stock, or otherwise)
entered into since January 1, 1998;
(vii) any contract or agreement with any Governmental Entity requiring
expenditures or receipts by C Chem in excess of $2,000,000;
(viii)any collective bargaining agreement or other labor union contract;
(ix) any contract between C Chem, on the one hand, and Chevron or any Affiliate
of Chevron (other than C Chem), on the other hand; and
(x) any commitments and agreements to enter into any of the foregoing.
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(b) Each C Chem Material Contract is a valid, binding and enforceable
(except as such enforceability may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally) obligation of C
Chem. There is no default under any C Chem Material Contract by C Chem or, to
Chevron's knowledge, by any other party thereto, and no event has occurred that
with the lapse of time or the giving of notice or both would constitute a
default thereunder by C Chem, or, to Chevron's knowledge, any other party, which
default or event, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect on C Chem. As of the date of this Agreement,
no party to any C Chem Material Contract has given notice to C Chem or made a
claim against C Chem with respect to any breach or default thereunder, which
breach or default, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on C Chem. As of the date of this
Agreement, there has been no amendment or modification of any of the C Chem
Material Contracts, except as specifically listed on Schedule 5.10(a) of the
Chevron Disclosure Schedule. The enforceability of any C Chem Material Contract
shall not be impaired by the execution and delivery of this Agreement or the
Amended LLC Agreement or the consummation of the transactions contemplated
hereby or thereby, and, as of the date of this Agreement, no C Chem Material
Contract requires that a transaction of the kind contemplated by this Agreement
or the Amended LLC Agreement receive the approval of any party to such C Chem
Material Contract, except where such impairments or failures to receive
approvals, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on C Chem.
(c) As of the date of this Agreement, Chevron has delivered to Phillips or
otherwise made available to Phillips at the offices of Chevron or its
Subsidiaries true, correct and complete copies of all C Chem Material Contracts.
Section 5.11 Real Property. (a) Schedule 5.11(a)(i) of the Chevron Disclosure
Schedule identifies all real property assets the fee title to which is owned,
beneficially and/or of record, by Chevron as of the date of this Agreement and
which are material to the businesses of C Chem. Schedule 5.11(a)(ii) of the
Chevron Disclosure Schedule identifies all real property assets a leasehold
interest in which is owned, beneficially and/or of record, by Chevron as of the
date of this Agreement and which are material to the businesses of C Chem.
(b) With respect to any real property owned or leased by Chevron (the "C Chem
Real Property"), Chevron has good and valid fee or leasehold title, as the case
may be, to all real property owned or leased by Chevron, in each case, free and
clear of all Liens, except for Permitted Encumbrances, defects in title or Liens
described on Schedules 5.11(a)(i) and 5.11(a)(ii) of the Chevron Disclosure
Schedule and other defects in title or Liens that, individually or in the
aggregate, do not and would not reasonably be expected to have a Material
Adverse Effect on C Chem.
(c) Each of the leases (including subleases) to which Chevron is a party (the "C
Chem Leases") is a valid, binding and enforceable (except as such enforceability
may be subject to any bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other laws, now or hereafter in effect, relating to or
limiting creditors' rights generally) obligation of each of the lessee and the
lessor under such C Chem Lease, and neither Chevron nor, to Chevron's knowledge,
the other party to any C Chem Lease is in default under such C Chem
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Lease in any material respect, other than such defaults, if any, which would
not, individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect on C Chem. As of the date of this Agreement, except
where, individually or in the aggregate, there would not reasonably be expected
to be a Material Adverse Effect on C Chem or as otherwise set forth on Schedule
5.11(a)(i) of the Chevron Disclosure Schedule, (i) the enforceability of any of
the C Chem Leases will not be impaired by the execution or delivery of this
Agreement or the Amended LLC Agreement, (ii) the execution and delivery of this
Agreement or the Amended LLC Agreement or the consummation of the transactions
contemplated by this Agreement or the Amended LLC Agreement will not entitle the
lessor under any C Chem Lease to terminate such C Chem Lease prior to the
scheduled expiration thereof, and (iii) neither Chevron nor any C Chem
Subsidiary is currently participating in any discussions or negotiations
regarding termination of any C Chem Lease of a property at which C Chem conducts
business operations prior to the scheduled expiration of such C Chem Lease by
reason of a breach or alleged breach by the tenant thereunder.
Section 5.12 Environmental Matters. Except for matters that, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on C Chem, (a) the properties, operations and activities of C Chem are in
material compliance with all applicable Environmental Laws; (b) C Chem is not
subject to any existing, pending or, to Chevron's knowledge, threatened, action,
suit, proceeding or remediation activity under any Environmental Law; (c)
Hazardous Materials have not at any time been released or disposed of at the
properties currently owned, operated, leased or used by C Chem; (d) the previous
and current methods of releasing or disposing of Hazardous Materials generated,
used, treated, recycled or stored at, upon or under the properties previously or
currently owned, operated, leased or used by C Chem have been disclosed to
Phillips; and (e) Chevron has not restricted access for the review of and
copying by Phillips all of the environmental reports, documents, data and other
information prepared by or for C Chem relating to the properties previously or
currently owned, operated, leased or used by C Chem.
Section 5.13 Intellectual Property. (a) Chevron has, or will as of the Closing
have, such ownership of or such rights by license or other agreement to use all
patents and patent applications, trademarks and service marks, trademark and
service mark registrations and applications, trade names, logos, copyrights and
copyright registrations and applications, proprietary information and data,
including trade secrets, as are necessary to permit C Chem to conduct its
businesses as currently conducted (collectively, the "C Chem Intellectual
Property"), except where the failure to have such ownership, license or right to
use would not, individually or in the aggregate, have a Material Adverse Effect
on C Chem.
(b) To Chevron's knowledge, the conduct of the businesses of C Chem as currently
conducted does not infringe the valid proprietary rights of any third party, and
there are no present or threatened infringements of the C Chem Intellectual
Property by any third party, except, in either case, for such infringements that
would not, individually or in the aggregate, have a Material Adverse Effect on C
Chem. There are no pending or, to Chevron's knowledge, threatened infringement
proceedings, litigation or claims by any Person against the use by C Chem of any
C Chem Intellectual Property or any third-party intellectual property.
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(c) Schedule 6.18 of the Chevron Disclosure Schedule sets forth a list of all
United States patents and United States patent applications which are primarily
used by or identified as relating primarily to the C Chem business, including
licensing, research, development and demonstration activities.
(d) Schedule 6.18 of the Chevron Disclosure Schedule sets forth a list of all
United States registered trademarks other than Trademarks and Logos as defined
in Section 6.9 which are primarily used or identified as relating to the C Chem
business.
Section 5.14 Employee Benefit Plans. (a) Schedule 5.14(a) of the Chevron
Disclosure Schedule includes a complete list of all Chevron Plans. Except as set
forth on Schedule 5.14(a) of the Chevron Disclosure Schedule, none of the
Chevron Plans is sponsored or maintained by C Chem or any C Chem Subsidiary.
(b) With respect to each Chevron Plan, Chevron has delivered or made available
to Phillips a true, correct and complete copy of all plan documents and the
current summary plan description.
(c) No Chevron Plans are Multiemployer Plans. None of the C Chem Subsidiaries or
any of their respective ERISA Affiliates has, at any time during the last six
years, contributed to or been obligated to contribute to any Multiemployer Plan,
and none of the C Chem Subsidiaries or any of their respective ERISA Affiliates
has incurred any withdrawal liability under Part I of Subtitle E of Title IV of
ERISA that has not been satisfied in full.
(d) There does not now exist, nor do any circumstances exist that could result
in, any Controlled Group Liability that would be a liability of any of the C
Chem Subsidiaries following the Closing.
(e) Except as specifically provided in Annex A and except for stock options
granted by Chevron to C Chem Employees, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(either alone or in conjunction with any other event) result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any C Chem Employee.
Section 5.15 Labor Relations. Chevron is in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, employment discrimination, equal
opportunity, affirmative action, workers' compensation, unemployment insurance,
immigration, and occupational safety and health, and is not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable laws, except where the failure to comply would not reasonably be
expected to cause a Material Adverse Effect on C Chem. Neither Chevron nor any
Subsidiary of Chevron is a party to any collective bargaining agreement or other
labor union contract with respect to any C Chem Employee, and, to Chevron's
knowledge, there are no activities or proceedings of any labor union to organize
any C Chem Employees. No claim has been made by any labor organization that the
operations of C Chem to be contributed to the Company under this Agreement would
be subject to any agreement with such labor organization or to a duty to bargain
with such labor organization regarding the terms and conditions of employment
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for any group of employees involved in such operations. There is no labor
strike, slowdown, stoppage or lockout actually pending, or, to the knowledge of
Chevron, threatened, against or affecting C Chem.
Section 5.16 Transactions with Affiliates. As of the date of this Agreement,
except as set forth on Schedule 5.16 of the Chevron Disclosure Schedule and
except for transactions contemplated by this Agreement, (a) no director or
officer of Chevron is currently, directly or indirectly, a party to any
transaction with C Chem, including any agreement, arrangement or understanding,
written or oral, providing for the employment of, furnishing of services by,
rental of real or personal property from or otherwise requiring payment to any
such director or officer, and (b) C Chem has no outstanding material contract,
agreement or other arrangement with Chevron or any of its Affiliates (other than
C Chem) and has not engaged in any material transaction outside the ordinary
course of business with Chevron or its Affiliates (other than C Chem) since
January 1, 1999.
Section 5.17 Personal Property. Chevron owns, or holds valid leasehold interests
in, the personal property owned or used by it, in each case, free and clear of
all Liens, except for such Liens that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on C Chem.
Section 5.18 Year 2000. Chevron has developed and implemented a plan for
addressing the Year 2000 Problem, except where its failure to do so would not
reasonably be expected to have a Material Adverse Effect on C Chem. As of the
date of this Agreement, except as would not reasonably be expected to have a
Material Adverse Effect on C Chem, none of the assets or equipment owned or
utilized by C Chem will fail to perform because of, or due in any way to, a Year
2000 Problem. As of the date of this Agreement, to Chevron's knowledge, no
vendor, supplier or customer of C Chem is reasonably expected to experience a
Year 2000 Problem that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on C Chem.
Section 5.19 Insurance. C Chem is, and has been continuously since December 31,
1999, insured with Chevron-affiliated insurance companies or with third-party
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the businesses as conducted by C
Chem during such time period. As of the date of this Agreement, C Chem has not
received any notice of cancellation or termination with respect to any insurance
policy of C Chem that would reasonably be expected to have a Material Adverse
Effect on C Chem.
Section 5.20 Acquisition of Company Interests for Investment. With respect to
Chevron's acquisition of Company Interests, Chevron has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its acquisition of Company Interests. Chevron is
acquiring the Company Interests for investment and not with a view toward or for
sale in connection with any distribution thereof, or with any present intention
of distributing or selling the Company Interests. Chevron agrees that the
Company Interests may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
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Act, except pursuant to an exemption from such registration available under the
Securities Act, and without compliance with foreign securities laws, in each
case, to the extent applicable.
Section 5.21 Sufficiency of Contribution. Except as disclosed elsewhere in this
Agreement or in the Chevron Disclosure Schedule, as of the Closing, Chevron
holds, and shall transfer and convey to the Company at Closing, all right, title
and interest of Chevron and its Affiliates to all properties, rights, assets and
Liabilities (other than the Chevron Excluded Assets and the Chevron Excluded
Liabilities) of the chemicals businesses of Chevron and its Affiliates as
conducted as of the date of this Agreement and as of the Closing.
ARTICLE VI
COVENANTS
Section 6.1 Investigation of Business; Access to Properties and Records. (a)
From the date of this Agreement through the Closing, Phillips and Chevron shall
cause P Chem and C Chem, respectively, to afford to representatives of the other
Party reasonable access to their offices, properties, books and records, during
normal business hours, in order that the other Party may have a full opportunity
to make such investigations as it desires of their affairs; provided, however,
that such investigation shall be at reasonable times and upon reasonable notice
and shall not unreasonably disrupt the personnel or operations of Phillips or P
Chem, or Chevron or C Chem, respectively. All requests for access to the
offices, properties, books, and records relating to P Chem or C Chem shall be
made to such representatives as may be designated in writing by Phillips or
Chevron, as appropriate (the "Designated Representatives"), which Designated
Representatives shall be solely responsible for coordinating all such requests
and all access permitted hereunder. Neither Phillips nor Chevron nor their
respective representatives shall contact any of the employees, customers or
suppliers of the other Party and its Subsidiaries, in connection with the
transactions contemplated by this Agreement and the Amended LLC Agreement,
whether in person or by telephone, mail or other means of communication, without
the specific prior written authorization of the other Party's Designated
Representatives, which consent shall not be unreasonably withheld.
(b) Any information provided to a Party or its representatives pursuant to this
Agreement or the Amended LLC Agreement shall be held by such Party and its
representatives in accordance with, and shall be subject to the terms of, the
Confidentiality Agreement and the Amended LLC Agreement, as applicable. From and
after the Closing, each Party shall, and shall cause its Affiliates to, maintain
in confidence and not use nonpublic information of the other Party, except as
otherwise specifically permitted by this Agreement or the Amended LLC Agreement
or as required by law.
(c) Except as contemplated by this Agreement and the Amended LLC Agreement, each
of Phillips and Chevron agrees, and agrees to cause its representatives not to,
until the earlier of the Closing or termination of this Agreement in accordance
with its terms, not to (i) enter into any agreement with any third party, or
engage in any discussions with attorneys, investment bankers, other advisors or
representatives, or any third party, regarding a transaction involving the sale
of, or creation of a joint venture involving, all or any material portion of the
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operations of P Chem or C Chem, as applicable, or (ii) solicit, initiate or
encourage offers in respect thereof.
(d) The Company agrees to (i) hold all of the books and records of each of P
Chem and C Chem existing on the Closing Date and not to destroy or dispose of
any thereof for a period of four years from the Closing Date or such longer time
as may be required by law, and, thereafter, if it desires to destroy or dispose
of such books and records, to offer first in writing, at least 60 days prior to
such destruction or disposition, to surrender them to Phillips or Chevron,
respectively, and (ii) following the Closing Date to afford Phillips and
Chevron, their respective accountants and counsel, during normal business hours,
upon reasonable notice, full access to such books and records to the extent that
such access may be requested for any legitimate purpose at no cost to Phillips
or Chevron (other than for reasonable out-of-pocket expenses); provided,
however, that nothing herein shall limit any of Phillips' or Chevron's
respective rights of discovery pursuant to any legal proceeding. The Company
shall have the same rights, and Phillips and Chevron, respectively, the same
obligations, as are set forth in this Section 6.1(d) with respect to any books,
non-privileged records and employees of Phillips or Chevron pertaining to the
Company and its Subsidiaries, with the exception of Tax Returns. The Company
will provide additional information to the extent reasonably requested and
required by Phillips or Chevron for a legitimate purpose.
Section 6.2 Consents and Approvals. (a) Subject to the terms and conditions of
this Agreement and the Amended LLC Agreement, each of Phillips and Chevron
agrees to use its best commercially reasonable efforts to promptly (i) take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Amended LLC Agreement, (ii) obtain and maintain all approvals, consents,
registrations, Permits and other confirmations required to be obtained from any
third party (including any Governmental Entity) that are necessary, proper or
advisable to consummate the transactions contemplated by this Agreement and the
Amended LLC Agreement, (iii) lift or rescind any injunction or restraining order
or other order adversely affecting its ability to consummate the transactions
contemplated by this Agreement and the Amended LLC Agreement, and (iv) fulfill
all conditions to this Agreement and the Amended LLC Agreement. Subject to
applicable laws relating to the exchange of information, Phillips and Chevron
shall each have the right to review, in advance, and to the extent practicable
will consult each other on, all submissions and communications relating to P
Chem or C Chem, as the case may be, made with any third party and/or any
Governmental Entity in connection with the transactions contemplated by this
Agreement and the Amended LLC Agreement.
(b) Notwithstanding anything to the contrary in this Agreement, in the event of
any sale of non-current assets approved by Phillips or Chevron, as applicable,
and consummated prior to the Closing pursuant to Sections 6.2, 6.4 or 6.5, at
the Closing, all after-Tax proceeds from such sale shall be held by P Chem or C
Chem, as applicable, and the representations and warranties in Articles IV and V
shall be deemed to be adjusted appropriately.
(c) In furtherance and not in limitation of the foregoing, each of Phillips and
Chevron agrees to (i) make appropriate antitrust filings, including filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
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transactions contemplated by this Agreement, and filings with the European
Commission, as promptly as practicable (if not already completed by the date of
this Agreement), (ii) supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to any
applicable antitrust laws in connection with the transaction contemplated by
this Agreement, and (iii) complete the review process under any relevant
antitrust laws to permit the consummation of the transactions contemplated by
this Agreement and the Amended LLC Agreement, including causing the expiration
or termination of the applicable waiting periods under any relevant antitrust
laws as soon as possible.
Section 6.3 Further Assurances. (a) Phillips and Chevron agree that, from time
to time, whether before, at or after the Closing Date, each of them will execute
and deliver, or cause to be executed and delivered, such further instruments of
conveyance and transfer and take such other action as may be necessary to carry
out the purposes and intents of this Agreement and the Amended LLC Agreement.
(b) To the extent not already in the possession of the Company or its
Subsidiaries on or before the Closing Date, Phillips shall deliver to the
Company all original agreements, documents, books, records and files relating to
the ownership or operation of the businesses of P Chem or its respective
properties or assets, including all books of account, journals and ledgers,
correspondence, memoranda, maps, plats, customer lists, information and account
histories, supplier lists and information, personnel records relating to P Chem
Employees, engineering plans, property records, title insurance policies, stock
certificates and stock transfer records, minute books and corporate seals.
(c) To the extent not already in the possession of the Company or its
Subsidiaries on or before the Closing Date, Chevron shall deliver to the Company
all original agreements, documents, books, records and files relating to the
ownership or operation of the businesses of C Chem or its properties or assets,
including all books of account, journals and ledgers, correspondence, memoranda,
maps, plats, customer lists, information and account histories, supplier lists
and information, personnel records relating to C Chem Employees, engineering
plans, property records, title insurance policies, stock certificates and stock
transfer records, minute books and corporate seals.
Section 6.4 Conduct of the Phillips Chemicals Business. From the date of this
Agreement through the Closing, except as disclosed on Schedule 6.4 of the
Phillips Disclosure Schedule or otherwise provided for in, or contemplated by,
this Agreement or the Amended LLC Agreement, and, except as consented to or
approved by Chevron in writing, Phillips covenants and agrees that:
(a) Phillips shall cause the businesses of P Chem to be operated in the ordinary
course in substantially the same manner as conducted as of the date hereof,
including by funding all capital expenditures in the ordinary course as
contemplated by the 2000 capital expenditure budget set forth on Schedule 6.4(a)
of the Phillips Disclosure Schedule;
(b) none of the P Chem Subsidiaries shall (i) amend its respective certificate
or articles of incorporation or by-laws or comparable organizational documents,
or (ii) make any
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change in its authorized or issued capital stock, limited liability company
interests or other equity interests;
(c) none of the P Chem Subsidiaries shall (i) issue, sell or agree to issue or
sell any shares of capital stock, limited liability company interests or any
other securities (including any securities convertible into, or options with
respect to, or warrants to purchase or rights to subscribe for, any shares of
capital stock, limited liability company interests or other securities), or (ii)
redeem, purchase or otherwise acquire, directly or indirectly, any securities of
any of the P Chem Subsidiaries;
(d) except in the ordinary course of business, Phillips shall cause the P Chem
Subsidiaries not to, and Phillips and its Affiliates shall not, with respect to
P Chem, enter into any joint venture, partnership or other similar arrangement,
or enter into or assume any material contract which would be required to be
listed on Schedule 4.10 of the Phillips Disclosure Schedule if such contract
were entered into or assumed prior to the date of this Agreement;
(e) except (i) in the ordinary course of business or (ii) for the transactions
set forth on Schedule 6.4(e) of the Phillips Disclosure Schedule and any other
acquisition involving expenditures of less than $5,000,000, Phillips shall cause
the P Chem Subsidiaries not to, and Phillips and its Affiliates shall not, with
respect to P Chem, (A) acquire any material assets or securities of any Person
or any interests therein or (B) except pursuant to Section 6.2, sell, assign,
license, transfer, lease (as lessor) or otherwise dispose of any material assets
or securities;
(f) except as contemplated by the 2000 capital expenditure budget set forth on
Schedule 6.4(a) of the Phillips Disclosure Schedule, and except for acquisitions
permitted under Section 6.4(e), Phillips shall cause the P Chem Subsidiaries not
to, and Phillips and its Affiliates shall not, with respect to P Chem, make or
authorize any capital expenditure or expenditures that will be paid for by the
Company following the Closing;
(g) Phillips shall cause the P Chem Subsidiaries not to, and Phillips and its
Affiliates shall not, with respect to P Chem, make any change in any of their
present financial accounting methods and practices pertaining to P Chem, except
as required by changes in GAAP;
(h) Phillips shall cause the P Chem Subsidiaries not to, and Phillips and its
Affiliates shall not, with respect to P Chem, declare or pay any non-cash
dividend or make any similar distribution or payment, directly or indirectly;
provided, however, that Phillips shall be entitled to cause the Phillips
Excluded Assets to be conveyed, transferred, leased or assigned to Phillips or a
Subsidiary of Phillips (other than a P Chem Subsidiary);
(i) Phillips shall cause (i) any trade accounts payable, (ii) any payments
required by any indentures, mortgages, financing arrangements, loan agreements
or similar arrangements, or (iii) any other obligations, in each case pertaining
to P Chem, to be paid in full when due unless Phillips or its Affilitate is in
good faith contesting the same (with appropriate reserves);
(j) except in the ordinary course of business, Phillips shall cause the P Chem
Subsidiaries not to, and Phillips and its Affiliates shall not, with respect to
P Chem, (i) incur any
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indebtedness for borrowed money other than from Phillips or its Affiliates,
issue any debt securities other than to Phillips and its Affiliates, or assume,
guarantee, endorse or otherwise be responsible for the obligations of any other
Persons, or (ii) mortgage or encumber any of its properties or assets other than
with Liens that do not materially restrict or detract from the value of such
properties or assets;
(k) Phillips shall cause the P Chem Subsidiaries not to, and Phillips and its
Affiliates shall not, with respect to P Chem, enter into any contract, agreement
or other arrangement with Phillips or its Affiliates; and
(l) none of Phillips or its Affiliates (including Subsidiaries of Phillips)
shall agree to take any action prohibited by this Section 6.4.
Notwithstanding the provisions of this Section 6.4, nothing in
this Agreement or the Amended LLC Agreement shall be construed or interpreted to
prevent any entity from (i) paying or making regular or special dividends or
other distributions consisting of cash, (ii) making or accepting inter- or
intra-company advances, or (iii) engaging in any transaction incident to the
normal cash management procedures of Phillips and its Affiliates prior to the
Closing.
Section 6.5 Conduct of the Chevron Chemicals Business. From the date of this
Agreement through the Closing, except as disclosed on Schedule 6.5 of the
Chevron Disclosure Schedule or otherwise provided for in, or contemplated by,
this Agreement or the Amended LLC Agreement, and, except as consented to or
approved by Phillips in writing, Chevron covenants and agrees that:
(a) Chevron shall cause the businesses of C Chem to be operated in the ordinary
course in substantially the same manner as conducted as of the date hereof,
including by funding all capital expenditures in the ordinary course as
contemplated by the 2000 capital expenditure budget set forth on Schedule 6.5(a)
of the Chevron Disclosure Schedule;
(b) none of the C Chem Subsidiaries shall (i) amend its respective certificate
or articles of incorporation or by-laws or comparable organizational documents
or (ii) make any change in its authorized or issued capital stock, limited
liability company interests or other equity interests;
(c) none of the P Chem Subsidiaries shall (i) issue, sell or agree to issue or
sell any shares of capital stock, limited liability company interests or any
other securities (including any securities convertible into, or options with
respect to, or warrants to purchase or rights to subscribe for, any shares of
capital stock, limited liability company interests or other securities), or (ii)
redeem, purchase or otherwise acquire, directly or indirectly, any securities of
any of the C Chem Subsidiaries;
(d) except in the ordinary course of business, Chevron shall cause the C Chem
Subsidiaries not to, and Chevron and its Affiliates shall not, with respect to C
Chem, enter into any joint venture, partnership or other similar arrangement, or
enter into or assume any material contract which would be required to be listed
on Schedule 5.10 of the Chevron Disclosure Schedule if such contract were
entered into or assumed prior to the date of this Agreement;
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(e) except (i) in the ordinary course of business or (ii) for the transactions
set forth on Schedule 6.5(e) of the Chevron Disclosure Schedule and any other
acquisition involving expenditures of less than $5,000,000, Chevron shall cause
the C Chem Subsidiaries not to, and Chevron and its Affiliates shall not, with
respect to C Chem, (A) acquire any material assets or securities of any Person
or any interests therein or (B) except pursuant to Section 6.2, sell, assign,
license, transfer, lease (as lessor) or otherwise dispose of any material assets
or securities;
(f) except as contemplated by the 2000 capital expenditure budget set forth on
Schedule 6.5(a) of the Chevron Disclosure Schedule, and except for acquisitions
permitted under Section 6.5(e), Chevron shall cause the C Chem Subsidiaries not
to, and Chevron and its Affiliates shall not, with respect to C Chem, make or
authorize any capital expenditure or expenditures that will be paid for by the
Company following the Closing;
(g) Chevron shall cause the C Chem Subsidiaries not to, and Chevron and its
Affiliates shall not, with respect to C Chem, make any change in any of their
present financial accounting methods and practices pertaining to C Chem, except
as required by changes in GAAP;
(h) Chevron shall cause the C Chem Subsidiaries not to, and Chevron and its
Affiliates shall not, with respect to C Chem, declare or pay any non-cash
dividend or make any similar distribution or payment, directly or indirectly;
provided, however, that Chevron shall be entitled to cause the Chevron Excluded
Assets to be conveyed, transferred, leased or assigned to Chevron or a
Subsidiary of Chevron (other than a C Chem Subsidiary);
(i) Chevron shall cause (i) any trade accounts payable, (ii) any payments
required by any indentures, mortgages, financing arrangements, loan agreements
or similar arrangements, or (iii) any other obligations, in each case pertaining
to C Chem, to be paid in full when due unless Chevron or its Affiliate is in
good faith contesting the same (with appropriate reserves);
(j) except in the ordinary course of business, Chevron shall cause the C Chem
Subsidiaries not to, and Chevron and its Affiliates shall not, with respect to C
Chem, (i) incur any indebtedness for borrowed money other than from Chevron or
its Affiliates, issue any debt securities other than to Chevron and its
Affiliates, or assume, guarantee, endorse or otherwise be responsible for the
obligations of any other Persons, or (ii) mortgage or encumber any of its
properties or assets other than with Liens that do not materially restrict or
detract from the value of such properties or assets;
(k) Chevron shall cause the C Chem Subsidiaries not to, and Chevron and its
Affiliates shall not, with respect to C Chem, enter into any contract, agreement
or other arrangement with Chevron or its Affiliates; and
(l) none of Chevron or its Affiliates (including Subsidiaries of Chevron) shall
agree to take any action prohibited by this Section 6.5.
Notwithstanding the provisions of this Section 6.5, nothing in
this Agreement or the Amended LLC Agreement shall be construed or interpreted to
prevent any entity from (i) paying or making regular or special dividends or
other distributions consisting of cash,
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(ii) making or accepting inter- or intra-company advances, or (iii) engaging in
any transaction incident to the normal cash management procedures of Chevron and
its Affiliates prior to the Closing.
Section 6.6 Preservation of Business. (a) Subject to the terms and conditions of
this Agreement and the Amended LLC Agreement, Phillips shall use reasonable
efforts to preserve the businesses of P Chem intact, to keep available to P Chem
and the Company the services of P Chem Employees and to preserve the goodwill of
customers and others having business relations with P Chem in all material
respects.
(b) Subject to the terms and conditions of this Agreement and the Amended LLC
Agreement, Chevron shall use reasonable efforts to preserve the businesses of C
Chem intact, to keep available to C Chem and the Company the services of C Chem
Employees and to preserve the goodwill of customers and others having business
relations with C Chem in all material respects.
Section 6.7 Public Announcements. Except as otherwise required by law, each of
Phillips and Chevron will consult with the other and obtain the consent of the
other (which consent shall not be unreasonably withheld or delayed) before
issuing, or permitting any agent or Affiliate to issue, any press releases or
otherwise making, or permitting any agent or Affiliate to make, any public
statements with respect to this Agreement or the transactions contemplated
hereby.
Section 6.8 Assignment of Contracts, Leases, Permits, etc. (a) Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any contract, lease or Permit, or any Claim or benefit if
an attempted assignment thereof, without the consent of a third party, would
constitute a breach or other contravention thereof, be ineffective with respect
to any party thereto or in any way adversely affect the rights of the Company, P
Chem or C Chem thereunder.
(b) With respect to any contract, lease or Permit necessary to the conduct of
businesses of P Chem or C Chem as presently conducted (and any Claim or benefit
arising thereunder or resulting therefrom) and not held as of the Closing by a P
Chem Subsidiary or a C Chem Subsidiary, and with respect to any P Chem Material
Contract or C Chem Material Contract, and any other contract, lease or Permit
pertaining to and advantageous for the businesses of P Chem or C Chem, Phillips,
Chevron and the Company will use their best commercially reasonable efforts to
obtain as expeditiously as possible the written consent of the other parties to
such contract, lease or Permit for the assignment or, if required, novation,
thereof to the Company or a Subsidiary thereof, as applicable, or,
alternatively, written confirmation from such parties reasonably satisfactory in
form and substance to Phillips and Chevron that such consent is not required. In
furtherance of the foregoing, as soon as practicable following the date hereof,
Phillips and Chevron shall submit, or cause to be submitted, to the other party
or parties thereto documentation seeking the written waiver or approval of such
other contracting party or parties thereto to the transfer and assignment of all
of Phillips' or Chevron's (or their respective Affiliates'), as applicable,
Claims, benefits and Liabilities thereunder to the Company or a Subsidiary
thereof, as applicable.
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(c) The failure by the Parties to obtain any required consent, waiver,
confirmation, novation or approval with respect to any contract, lease or Permit
shall not relieve either Party from its obligation to consummate at the Closing
the transactions contemplated by this Agreement or the Amended LLC Agreement or
any other obligations hereunder or thereunder unless such failures would, in the
aggregate, have a Material Adverse Effect on C Chem or P Chem.
(d) If any consent, waiver, confirmation, novation or approval is not obtained
prior to the Closing with respect to any contract, lease or Permit described in
subparagraph (b) of this Section 6.8, then Phillips or Chevron, as applicable,
shall establish, or cause to be established, an agency type or other arrangement
satisfactory to the other Party and to the Company under which Phillips or
Chevron, as applicable, shall hold, or cause to be held, such interest, lease or
Permit for the Company and the Company would obtain the Claims and benefits and
assume the corresponding Liabilities thereunder in accordance with this
Agreement (including by means of any subcontracting, sublicensing or subleasing
arrangement) or under which Phillips or Chevron, as applicable, would enforce,
or cause to be enforced, at the direction of and for the benefit of the Company
with the Company assuming and agreeing to pay Chevron's or Phillips' (or their
respective Affiliates') obligations and expenses, any and all Claims and
benefits of Phillips or Chevron (or their respective Affiliates) against a third
party thereto; provided, however, that Phillips' or Chevron's obligation to
maintain, or cause to be maintained, any such arrangement shall terminate upon
the earliest to occur of: (i) the expiration or termination of such contract,
lease or Permit in accordance with its terms (without regard to any extensions,
automatic or otherwise); or (ii) with regard to a Permit, such time as the
Company shall obtain a Permit in reasonable substitution therefor, or have its
application for such substitute Permit denied. In any such arrangement, Phillips
or Chevron, as applicable, shall promptly pay, or cause to be paid, to the
Company when received, all moneys relating to the period after the Closing Date
received by it under any contract or any Claim, right or benefit arising
thereunder not transferred pursuant to this Section 6.8, and the Company shall
promptly pay, perform or discharge when due any Liability arising thereunder
after the Closing Date.
Section 6.9 Corporate Names. (a) The Company and Phillips acknowledge that, from
and after the Closing Date, the Company and Phillips shall have no rights with
respect to any Trademarks and Logos incorporating "Chevron" by itself or in
combination with any other Trademark or Logo, including the corporate design
logos associated therewith, and that Chevron shall retain absolute and exclusive
proprietary rights thereto or goodwill represented thereby or pertaining
thereto, except as granted in the Tradename License Agreement among Phillips,
Chevron and the Company, in the form set forth as Appendix B (the "Tradename
License Agreement"). Phillips shall not and, except as permitted in such
Tradename License Agreement, the Company shall not, nor shall they permit any of
their respective Affiliates to, use any name, phrase or logo incorporating
"Chevron" or such corporate design logo or any confusingly similar name, phrase,
logo or corporate design logo in or on any of its literature, sales materials or
products or otherwise in connection with the sale of any products or services;
provided, however, that the Company may continue to use any signage, printed
literature, sales materials, purchase orders and sales or lease agreements, and
sell any products, that are included in the inventories of C Chem on the Closing
Date and that bear a name, phrase or logo incorporating "Chevron" or such
corporate design logo, until the supplies thereof existing on the
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Closing Date have been exhausted, but in any event for not longer than one year
from the Closing Date.
(b) The Company and Chevron acknowledge that, from and after the Closing Date,
the Company and Chevron shall have no rights with respect to any Trademarks and
Logos incorporating "Phillips" or "66" by themselves or in combination with any
other Trademark or Logo, including the corporate design logos associated
therewith, and that Phillips shall retain absolute and exclusive proprietary
rights thereto or goodwill represented thereby or pertaining thereto, except as
granted in the Tradename License Agreement. Chevron shall not and, except as
permitted in such Tradename License Agreement, Company shall not, nor shall they
permit any of their respective Affiliates to, use any name, phrase or logo
incorporating "Phillips" or "66" or such corporate design logo or any
confusingly similar name, phrase, logo or corporate design logo in or on any of
its literature, sales materials or products or otherwise in connection with the
sale of any products or services; provided, however, that the Company may
continue to use any signage, printed literature, sales materials, purchase
orders and sales or lease agreements, and sell any products, that are included
in the inventories of P Chem on the Closing Date and that bear a name, phrase or
logo incorporating "Phillips" or "66" or such corporate design logo, until the
supplies thereof existing on the Closing Date have been exhausted, but in any
event for not longer than one year from the Closing Date.
(c) Each of Phillips, Chevron and the Company shall execute and deliver to each
other the Tradename License Agreement on or prior to the Closing.
Section 6.10 D&O Indemnification. The parties hereto agree that the transactions
contemplated by this Agreement and the Amended LLC Agreement shall not affect or
diminish any duties and obligations of indemnification from Phillips or Chevron
or their respective Affiliates (other than the P Chem Subsidiaries and the C
Chem Subsidiaries) existing as of the Closing Date in favor of employees,
agents, directors or officers of the P Chem Subsidiaries or the C Chem
Subsidiaries, respectively, arising by virtue of their respective certificates
of incorporation or by-laws or comparable organizational documents in the form
in effect at the date of this Agreement or arising by operation of law or
arising by virtue of any contract, resolution or other agreement or document
existing at the date of this Agreement, and such duties and obligations shall
continue in full force and effect and shall be honored by the Company for so
long as they would (but for the transactions contemplated by this Agreement and
the Amended LLC Agreement) otherwise survive and continue in full force and
effect.
Section 6.11 Additional Agreements. (a) At the Closing, Phillips and certain of
its Affiliates, Chevron and certain of its Affiliates shall enter into the
Amended LLC Agreement. At the Closing, Phillips, Chevron and the Company shall
enter into one or more transition services agreement(s) (the "Transition
Services Agreements"), providing for the provision of certain administrative,
information technology and other transitional services by Phillips and Chevron
to be reasonably requested by the Company on a fully allocated cost basis for a
period of not more than two years after the Closing Date and subject to
termination by the Company at any time on thirty (30) days' notice.
(b) The P Chem Subsidiaries and/or the Company and/or its wholly owned
subsidiaries, on the one hand, and Phillips and its Affiliates, on the other
hand, shall enter into
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agreements relating to operating and supply commitments (including pricing)
between, the P Chem Subsidiaries and/or the Company and/or its wholly owned
subsidiaries, on the one hand, and Phillips and its Affiliates, on the other
hand. Schedule 6.11(b)(i) of the Phillips Disclosure Schedule sets forth a list
of such agreements to be entered into as of the Closing Date in the forms
attached to Schedule 6.11(b)(i) of the Phillips Disclosure Schedule, such forms
being agreed to as of the date hereof. Section 6.11(b)(ii) of the Phillips
Disclosure Schedule sets forth a list of such agreements to be entered into as
of the Closing Date (and the assets, properties or subject matter to which such
agreements pertain) which shall be based on customary terms consistent with past
practice and consistent in all material respects with financial information
previously provided by Phillips to Chevron with regard to P Chem, except as may
otherwise be provided in Schedule 6.11(b)(ii). The C Chem Subsidiaries and/or
the Company and/or its wholly owned subsidiaries, on the one hand, and Chevron
and its Affiliates, on the other hand, shall enter into agreements relating to
operating and supply commitments (including pricing) between, the C Chem
Subsidiaries and/or the Company and/or its wholly owned subsidiaries, on the one
hand, and Chevron and its Affiliates, on the other hand. Schedule 6.11(b)(i) of
the Chevron Disclosure Schedule sets forth a list of such agreements to be
entered into as of the Closing Date in the forms attached to Schedule 6.11(b)(i)
of the Chevron Disclosure Schedule, such forms being agreed to as of the date
hereof. Section 6.11(b)(ii) of the Chevron Disclosure Schedule sets forth a list
of such agreements to be entered into as of the Closing Date (and the assets,
properties or subject matter to which such agreements pertain) which shall be
based on customary terms consistent with past practice and consistent in all
material respects with financial information previously provided by Chevron to
Phillips with regard to C Chem, except as may otherwise be provided in Schedule
6.11(b)(ii).
(c) The P Chem Subsidiaries and/or the Company and/or its wholly owned
subsidiaries, on the one hand, and Phillips and its Affiliates, on the other
hand, shall enter into the lease and sublease agreements set forth in Schedule
6.11(c) of the Phillips Disclosure Schedule as of the Closing Date, in the forms
attached to Schedule 6.11(c) of the Phillips Disclosure Schedule, such forms
being agreed to as of the date hereof. The C Chem Subsidiaries and/or the
Company and/or its wholly owned subsidiaries, on the one hand, and Chevron and
its Affiliates, on the other hand, shall enter into the lease and sublease
agreements set forth in Schedule 6.11(c) of the Chevron Disclosure Schedule as
of the Closing Date, in the forms attached to Schedule 6.11(c) of the Chevron
Disclosure Schedule, such forms being agreed to as of the date hereof.
(d) With regard to assets and facilities involving P Chem, C Chem or the Company
and/or its wholly owned subsidiaries, on the one hand, and Phillips or Chevron,
on the other hand, other than assets and facilities for which arrangements have
been provided in the agreements listed in Schedule 6.11(b) or 6.11(c) of the
Chevron Disclosure Schedule or in Schedule 6.11(b) or 6.11(c) of the Phillips
Disclosure Schedule, such assets and facilities shall, to the extent reasonably
practicable (including taking into account the costs of any actions taken), be
severed, divided or otherwise separated from each other so that the P Chem
Subsidiaries, C Chem Subsidiaries or the Company and/or its wholly owned
subsidiaries, on the one hand, and Phillips or Chevron, on the other hand, shall
own and control their respective assets as of the Closing Date; provided,
however, that none of Phillips, Chevron or the Company or its wholly owned
subsidiaries shall be obligated to make significant expenditures to effect such
separation prior to the Closing Date. Actions taken and expenditures incurred to
separate
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the shared assets and facilities shall be subject to the agreement of
Phillips, Chevron and the Company. Such separation may include subdivision of
real property, subleasing or other division of shared buildings or premises and
allocation of shared working capital, equipment and other assets. Such
separation shall be effected in a manner that does not unreasonably disrupt
either the businesses of P Chem, C Chem or the Company or its wholly owned
subsidiaries or the businesses of Phillips or Chevron, and minimizes, to the
extent practicable, current and future costs (and losses of tax or other
economic benefits) of the respective businesses. With respect to any assets or
facilities that cannot reasonably be separated or otherwise allocated as
provided above, (i) right, title and interest shall be allocated between
Phillips and its Affiliates (other than the P Chem Subsidiaries, the Company
and/or its wholly owned subsidiaries) and the Company and between Chevron and
its Affiliates (other than the C Chem Subsidiaries, the Company and/or its
wholly owned subsidiaries) based on which entity predominantly uses or holds
such asset or facility for use or to which entity's business the asset or
facility predominantly relates, and (ii) the other entity shall have a right to
use such assets or facilities in its businesses in a manner consistent with past
practice for a period which is coterminous with the life of the asset or
facility described in (i) (and the coextensive obligation to pay its allocable
share of any costs or expenses related to such asset or facility pursuant to the
last sentence of this Section 6.11(d)). To the extent the separation of assets
and facilities cannot be achieved in a reasonably practicable manner, the
parties will enter into appropriate arrangements regarding the shared assets and
facilities. Such arrangements shall provide that any costs related to the use of
shared assets or facilities that are not separated as of the Closing Date shall
be allocated, with respect to the twelve month period beginning immediately
after the Closing Date, based on the methodology historically used by Phillips
or Chevron, as applicable, and, for any period thereafter, using such reasonable
manner as agreed by Phillips and the Company or by Chevron and the Company, as
applicable; provided, that the Company may terminate such arrangements at any
time after six months after the Closing Date upon written notice to the other
party or parties to such arrangements, and any party to such arrangements may
terminate the arrangements at any time after twelve months from the Closing Date
upon written notice to the other party or parties to such arrangements.
(e) From and after the Closing Date, (i) Phillips shall be entitled to require
the Company or P Chem, as applicable, to convey, transfer, lease or assign to
Phillips or a Phillips Subsidiary (other than the Company or a P Chem
Subsidiary) any Phillips Excluded Assets that shall not have been conveyed,
transferred, leased or assigned by P Chem prior to the Closing, and (ii) Chevron
shall be entitled to require the Company or C Chem, as applicable, to convey,
transfer, lease or assign to Chevron or a Chevron Subsidiary (other than the
Company or a C Chem Subsidiary) any Chevron Excluded Assets that shall not have
been conveyed, transferred, leased or assigned by C Chem prior to the Closing.
Section 6.12 Company Integration Expenses. All integration expenses
(excluding corporate expenses of Phillips or Chevron) shall be borne by the
Company.
Section 6.13 Insurance. (a) Phillips and the Company acknowledge that the
programs and policies of insurance maintained by Chevron and its Affiliates to
provide coverage in favor of the C Chem operations shall be terminated effective
12:01 A.M. on the day following the Closing Date. From and after the Closing
Date, except as otherwise provided in this Agreement, all risk of loss with
respect to properties and assets of C Chem shall be borne by the
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Company, notwithstanding any insurance coverage that Phillips or Chevron have
for their own benefit. With respect to events occurring after December 31, 1999
but prior to the Closing Date, the C Chem operations shall be entitled to the
benefits of insurance from independent sources (not affiliated with Chevron),
including insurance benefits from third-party reinsurance of any
Chevron-affiliated insurance company maintained by or for the benefit of the C
Chem operations with respect to properties and assets of C Chem; provided,
however, that, notwithstanding anything to the contrary contained in this
Agreement, the Company is not an "insured" under any Chevron-affiliated
insurance company policy with respect to events occurring from and after the
Closing Date and therefore is not entitled to any insurance recovery under such
insurance; provided, however, that, notwithstanding anything to the contrary
contained in this Agreement, Chevron retains its status as an "insured" under
any Chevron-affiliated insurance company policy including its rights to such
insurance for liability arising out of the transactions contemplated by this
Agreement. Further, the Company shall indemnify and hold harmless Chevron and
its Affiliates from any retroactive premiums imposed by any insurer under
programs or policies maintained by Chevron prior to the Closing as a result of
any claims made after the Closing Date with respect to the properties and assets
of C Chem, regardless of the date of loss.
(b) Chevron and the Company acknowledge that the programs and policies of
insurance maintained by Phillips and its Affiliates to provide coverage in favor
of the P Chem operations shall be terminated effective 12:01 A.M. on the day
following the Closing Date. From and after the Closing Date, except as otherwise
provided in this Agreement, all risk of loss with respect to properties and
assets of P Chem shall be borne by the Company, notwithstanding any insurance
coverage that Phillips or Chevron have for their own benefit. With respect to
events occurring after December 31, 1999 but prior to the Closing Date, the P
Chem operations shall be entitled to the benefits of insurance from independent
sources (not affiliated with Phillips), including insurance benefits from
third-party reinsurance of any Phillips-affiliated insurance company maintained
by or for the benefit of the P Chem operations with respect to properties and
assets of P Chem; provided, however, that, notwithstanding anything to the
contrary contained in this Agreement, from and after the Closing Date, the
Company is not an "insured" under any Phillips-affiliated insurance company
policy with respect to events occurring from and after the Closing Date and
therefore is not entitled to any insurance recovery under such insurance;
provided, however, that, notwithstanding anything to the contrary contained in
this Agreement, Phillips retains its status as an "insured" under any
Phillips-affiliated insurance company policy including its rights to such
insurance for liability arising out of the transactions contemplated by this
Agreement. Further, the Company shall indemnify and hold harmless Phillips and
its Affiliates from any retroactive premiums imposed by any insurer under
programs or policies maintained by Phillips prior to the Closing as a result of
any claims made after the Closing Date with respect to the properties and assets
of P Chem, regardless of the date of loss.
(c) Each of Phillips and Chevron shall cooperate to cause the Company to have
insurance from independent sources (not affiliated with either Phillips or
Chevron) in such amounts and against such risks and losses as are customary for
companies conducting the businesses to be conducted by the Company.
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Section 6.14 Guarantees. (a) In the event that, after the Closing Date, Phillips
or any Affiliate of Phillips (other than the Company and its Subsidiaries)
remains liable for any guarantees (whether of payment or performance), letters
of credit or other undertakings it has delivered prior to the Closing Date to
others for the benefit of P Chem, the Company agrees to indemnify and hold
harmless Phillips or such Affiliate of Phillips from any cost, expense or loss
(including reasonable attorneys' fees) incurred by Phillips or such Affiliate of
Phillips arising, directly or indirectly, therefrom, except insofar as such
cost, expense or loss constitutes or arises from a matter with respect to which
the Company or any of its Affiliates (excluding Phillips) is entitled to
indemnification hereunder. Any such guarantees, letters of credit or other
undertakings (including performance guarantees) are set forth on Schedule
6.14(a) of the Phillips Disclosure Schedule. The Company shall use its
commercially reasonable best efforts (including an offer of a substitute
guarantee, letter of credit or undertaking) to cause or procure the release, as
soon as practicable following the Closing Date, of all Liabilities of Phillips
or any Affiliate of Phillips (other than the Company and its Subsidiaries) with
respect to such guaranties, letters of credit or other undertakings from any of
the P Chem Liabilities; provided however, that neither the Company nor its
Subsidiaries shall incur any cost or expense in causing or procuring such
release.
(b) In the event that, after the Closing Date, Chevron or any Affiliate of
Chevron (other than the Company and its Subsidiaries) remains liable for any
guarantees (whether of payment or performance), letters of credit or other
undertakings it has delivered prior to the Closing Date to others for the
benefit of C Chem, the Company agrees to indemnify and hold harmless Chevron or
such Affiliate of Chevron from any cost, expense or loss (including reasonable
attorneys' fees) incurred by Chevron or such Affiliate of Chevron arising,
directly or indirectly, therefrom, except insofar as such cost, expense or loss
constitutes or arises from a matter with respect to which the Company or any of
its Affiliates (excluding Chevron) is entitled to indemnification hereunder. Any
such guarantees, letters of credit or other undertakings (including performance
guarantees) are set forth on Schedule 6.14(b) of the Chevron Disclosure
Schedule. The Company shall use its commercially reasonable best efforts
(including an offer of a substitute guarantee, letter of credit or undertaking)
to cause or procure the release, as soon as practicable following the Closing
Date. of all Liabilities of Chevron or any Affiliate of Chevron (other than the
Company and its Subsidiaries) with respect to such guaranties, letters of credit
or other undertakings from any of the C Chem Liabilities; provided however, that
neither the Company nor its Subsidiaries shall incur any cost or expense in
causing or procuring such release.
Section 6.15 Actions by Affiliates of Phillips and Chevron. Each of Phillips and
Chevron shall ensure that each of its Affiliates (other than, following the
Closing, the Company and its Subsidiaries) takes all actions necessary to be
taken by such Affiliate in order to fulfill the obligations of Phillips or
Chevron, as the case may be under this Agreement.
Section 6.16 Financing. Each of Phillips and Chevron shall use its commercially
reasonable best efforts and cooperate with each other to cause the Company to
secure, by the Closing Date or as soon as practicable thereafter, bank credit
facilities of $1,670,000,000 (or such lesser amount as would allow the Company
to maintain an investment-grade debt rating) on reasonably available commercial
terms mutually agreeable to the Parties (the "Financing"). Upon the funding of
the Financing, the Company shall distribute 50% of the
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net proceeds of the Financing to Phillips and 50% of the net proceeds of the
Financing to Chevron; provided, however, that the amount distributed to Phillips
shall be reduced by (a) the sum of any P Chem Liability as of the Closing Date
representing indebtedness for borrowed money of a P Chem Subsidiary other than
indebtedness of the entities set forth on Schedule 6.16 of the Phillips
Disclosure Schedule and other than debt incurred in the ordinary course of
business (pursuant to financial arrangements or plans previously disclosed to
Chevron) by such entities, and (b) the SOLP adjustment amount set forth on
Schedule 6.16 of the Phillips Disclosure Schedule, and the amount distributed to
Chevron shall be reduced by the sum of any C Chem Liability as of the Closing
Date representing indebtedness for borrowed money of a C Chem Subsidiary other
than indebtedness of the entities set forth on Schedule 6.16 of the Chevron
Disclosure Schedule and other than debt incurred in the ordinary course of
business (pursuant to financial arrangements or plans previously disclosed to
Phillips) by such entities; and provided, further that the distributions set
forth in this sentence shall be done in accordance with the terms of Section
9.2(f) of the Amended LLC Agreement.
Section 6.17 Special Indemnities and Risk Allocation between the Company and
the Parties. The provisions of Annex C are hereby incorporated herein.
Section 6.18 Intellectual Property. (a) At the Company's election and expense, P
Chem Patent Rights will be transferred and assigned to the Company upon Closing
or at such later time as the Company may specify, subject to Phillips'
reservation of (1) an irrevocable, nonexclusive royalty free worldwide license
extendible to Phillips' Patent Subsidiaries for use in Phillips' and such Patent
Subsidiaries' own business operations and (2) an irrevocable, nonexclusive
royalty free worldwide right to Phillips, or its designee, to license any of its
Affiliates or any third party for use in any field other than a field primarily
related to the P Chem or C Chem business without obligation to account to any
other party. If the Company elects not to be assigned any or all of the P Chem
Patent Rights, Phillips shall provide the Company with an exclusive license
under such P Chem Patent Rights as indicated in subsection (b) below.
Notwithstanding the foregoing, Phillips shall not be obligated to assign to the
Company title to specific letters patent and patent applications which contain
claims that cover technology and inventions that are not primarily used by or
identified as relating to the P Chem business or to the extent that such
assignment would compromise or adversely impact the validity or enforceability
of other letters patent and patent applications owned by Phillips. Nothing in
this Agreement shall be deemed to require that Phillips obtain or maintain any
patent; provided, however, that prior to Phillips' abandonment of any P Chem
patent by failure to pay maintenance fees or taxes or by disclaimer of rights or
other dedication to the public, Phillips will offer to assign such P Chem patent
to the Company at the Company's expense.
(b) Upon Closing, Phillips shall and shall cause, if necessary, its Patent
Subsidiaries to grant to the Company the exclusive, irrevocable, royalty free
worldwide right and license, including the right to sublicense, to practice,
make, use and sell under all P Chem Proprietary Technology and P Chem Patent
Rights not otherwise assigned to Company; provided, however, that Phillips
reserves (1) an irrevocable, nonexclusive royalty free worldwide license
extendible to Phillips' Patent Subsidiaries for use in Phillips' and such Patent
Subsidiaries' own business operations and (2) an irrevocable, nonexclusive
royalty free worldwide right to Phillips, or its designee, to license any of its
Affiliates or any third party for use in any field other than a field primarily
related to the P Chem or C Chem business without
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obligation to account to any other party. Phillips shall and shall cause its
Affiliates and third parties to take appropriate measures to protect the
confidentiality of P Chem Proprietary Technology and to limit its use, which
shall be no less stringent than measures Phillips takes with respect to its own
proprietary technology of the same type and shall cause its Affiliates and third
parties to accept any applicable restrictions placed on proprietary technology
by others.
(c) The Company shall have (1) an irrevocable, royalty-free worldwide license
under any proprietary technology owned or otherwise licensable by Phillips or
its Patent Subsidiaries not contained in the definition of P Chem Proprietary
Technology and (2) an irrevocable, royalty-free worldwide immunity from suit
under any patent rights which are owned or otherwise licensable by Phillips or
its Patent Subsidiaries not contained within the definition of P Chem Patent
Rights, insofar, and only insofar as such proprietary technology and claims of
such patent rights cover technology and inventions that are used in the P Chem
or C Chem business as of the Closing Date, or which embody technology or
inventions relating to the P Chem or C Chem business conceived by the Company or
on its behalf prior to the later of (i) December 31, 2000 or (ii) the six-month
anniversary of the Closing Date, provided such patent rights are based on
applications for patents filed or claiming priority from applications filed
heretofore or hereafter prior to three years after the Closing Date, in each
case subject to the terms and conditions, including the obligation to account to
third parties, under which such rights are held. Such license and immunity from
suit shall be limited to the conduct of the Company's business operations
primarily related to the P Chem or C Chem business, including without limitation
research, development, and demonstration activities, the manufacture, use, or
sale of P Chem or C Chem products and the licensing of P Chem or C Chem
technology by the Company, and may be extended by the Company to its Affiliates,
contractors, suppliers, customers and other third parties, only as appropriate
for the purpose of conducting such P Chem or C Chem business and P Chem or C
Chem licensing operations; provided, however, that no licenses or immunities
will be granted to Company covering technology and inventions that are part of
Phillips non-P Chem technology licensing packages being offered as of the date
that is the later of December 31, 2000 or the six-month anniversary of the
Closing Date, except under separate agreement by the Company and Phillips
thereto. The Company shall and shall cause its Affiliates and third parties to
take appropriate measures to protect the confidentiality of such proprietary
technology and to limit its use as provided above, which shall be no less
stringent than measures the Company takes with respect to its own proprietary
technology of the same type and shall cause its Affiliates and third parties to
accept any applicable contractual restrictions placed on proprietary technology
obtained from others..
(d) Promptly after the later of (i) December 31, 2000 or (ii) the six-month
anniversary of the Closing Date, Phillips shall fully disclose and, if
necessary, shall cause its Patent Subsidiaries to fully disclose and make
available to the Company any and all P Chem Proprietary Technology not
theretofore disclosed and made available to Company, including any inventions
within the scope of the P Chem Patent Rights, and shall cooperate and cause its
personnel to cooperate with the Company or its nominee as may be reasonably
required in order to obtain patent protection therefor.
(e) At the Company's election and expense, C Chem Patent Rights will be
transferred and assigned to the Company upon Closing or at such later time as
the Company may specify, subject to Chevron's reservation of (1) an irrevocable,
nonexclusive royalty free
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worldwide license extendible to Chevron's Patent Subsidiaries for use in
Chevron's and such Patent Subsidiaries' own business operations and (2) an
irrevocable, nonexclusive royalty free worldwide right to Chevron, or its
designee, to license its Affiliates or any third party for use in any field
other than a field primarily related to the P Chem or C Chem business without
obligation to account to any other party. If the Company elects not to be
assigned any or all of the C Chem Patent Rights, Chevron shall provide the
Company with an exclusive license under such C Chem Patent Rights as indicated
in subsection (f) below. Notwithstanding the foregoing, Chevron shall not be
obligated to assign to the Company title to specific letters patent and patent
applications which contain claims that cover technology and inventions that are
not primarily used by or identified as relating to the C Chem business or to the
extent that such assignment would compromise or adversely impact the validity or
enforceability of other letters patent and patent applications owned by Chevron.
Nothing in this Agreement shall be deemed to require that Chevron obtain or
maintain any patent; provided, however, that prior to Chevron's abandonment of
any C Chem patent by failure to pay maintenance fees or taxes or by disclaimer
of rights or other dedication to the public, Chevron will offer to assign such C
Chem patent to Company at Company's expense.
(f) Upon Closing, Chevron shall and shall cause, if necessary, its Patent
Subsidiaries to grant to the Company the exclusive, irrevocable, royalty free
worldwide right and license, including the right to sublicense, to practice,
make, use and sell under all C Chem Proprietary Technology and C Chem Patent
Rights not otherwise assigned to the Company; provided, however, that Chevron
reserves (1) an irrevocable, nonexclusive royalty free worldwide license
extendible to Chevron's Patent Subsidiaries for use in Chevron's and such Patent
Subsidiaries' own business operations and (2) an irrevocable, nonexclusive
royalty free worldwide right to Chevron, or its designee, to license its
Affiliates or any third party for use in any field other than a field primarily
related to the P Chem or C Chem business without obligation to account to any
other party. Chevron shall and shall cause its Affiliates and third parties to
take appropriate measures to protect the confidentiality of C Chem Proprietary
Technology and to limit its use, which shall be no less stringent than Chevron
takes with respect to its own proprietary technology of the same type and shall
cause its Affiliates and third parties to accept any applicable contractual
restrictions placed on proprietary technology obtained from others.
(g) The Company shall have (1) an irrevocable, royalty-free worldwide license
under any proprietary technology owned or otherwise licensable by Chevron or its
Patent Subsidiaries not contained in the definition of C Chem Proprietary
Technology and (2) an irrevocable, royalty-free worldwide immunity from suit
under any patent rights which are owned or otherwise licensable by Chevron or
its Patent Subsidiaries not contained within the definition of C Chem Patent
Rights, insofar as, and only insofar as such proprietary technology and claims
of such patent rights cover technology and inventions that are used in the C
Chem or P Chem business as of the Closing Date or which embody technology or
inventions relating to C Chem or P Chem business conceived by the Company or on
its behalf prior to the later of (i) December 31, 2000 or (ii) the six-month
anniversary of the Closing Date, provided such patent rights are based on
applications for patents filed or claiming priority from applications filed
heretofore or hereafter prior to three years after the Closing Date; in each
case subject to the terms and conditions, including the obligation to account to
third parties, under which such rights are held. Such license and immunity from
suit shall be limited to the conduct of the Company's business
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operations primarily related to the P Chem or C Chem business, including without
limitation research, development, and demonstration activities, the manufacture,
use, or sale of P Chem or C Chem products and the licensing of P Chem or C Chem
technology by the Company, and may be extended by the Company to its Affiliates,
contractors, suppliers, customers and to other third parties, only as
appropriate for the purpose of conducting such P Chem or C Chem business and P
Chem or C Chem licensing operations; provided, however, that no licenses or
immunities will be granted to the Company covering technology and inventions
that are part of Chevron non-C Chem technology licensing packages being offered
as of the date that is the later of December 31, 2000 or the six-month
anniversary of the Closing Date, except under separate agreement by the Company
and Chevron thereto. Company shall and shall cause its Affiliates and third
parties to take appropriate measures to protect the confidentiality of such
proprietary technology and to limit its use as provided above as the Company
takes with respect to its own proprietary technology of the same type and shall
cause its Affiliates and third parties to accept any applicable contractual
restrictions placed on proprietary technology obtained from others.
(h) Promptly after the later of (i) December 31, 2000 or (ii) the six-month
anniversary of the Closing Date, Chevron shall fully disclose and, if necessary,
shall cause its Patent Subsidiaries to fully disclose and make available to the
Company any and all C Chem Proprietary Technology not theretofore disclosed and
made available to the Company, including any inventions within the scope of C
Chem Patent Rights, and shall cooperate and cause its personnel to cooperate
with the Company or its nominee as may be reasonably required in order to obtain
patent protection therefor.
(i) The Company's exclusive license granted under subsections (b) and (f) above
and subject to the reservations therein, shall include, without limitation, the
exclusive right to file, prosecute or abandon patent applications, issue
patents, and license third parties under such patent rights and proprietary
technology and the exclusive right to enforce such patents and proprietary
technology rights, including the exclusive discretion to commence, control and
settle any litigation and other proceedings and to recover for past, present, or
future damages and other relief under such patents and proprietary technology
rights; and the licensor shall participate in any such litigation or proceedings
and provide the Company with such information and assistance as reasonably
necessary for such litigation or other proceedings, including execution of
documents and assignment of such patent or proprietary technology to the Company
upon the Company's request and at the Company's cost.
(j) Phillips and Chevron recognize that each has entered into numerous
agreements with third parties which contain provisions for the transfer of
technology and improvements and for granting licenses and patent rights to such
technology and improvements, and it is the intent of Chevron and Phillips that
such third parties shall not acquire rights pursuant to this Agreement or at
Closing except through separately negotiated contractual provisions with the
Company. Consequently, notwithstanding anything in this Agreement to the
contrary, the Company's licenses and rights to assignment under P Chem Patent
Rights and C Chem Patent Rights and rights to use P Chem Proprietary Technology
and C Chem Proprietary Technology shall not include:
(i) the right for the Company to disclose P Chem Proprietary Technology to any
third party or to license or sublicense any third party to use P Chem
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Proprietary Technology or to license or sublicense any third party under P Chem
Patent Rights pursuant to contractual obligations entered into or otherwise
existing between Chevron and such third party prior to Closing; and
(ii) the right for the Company to disclose C Chem Proprietary Technology to any
third party or to license or sublicense any third party to use C Chem
Proprietary Technology or to license or sublicense any third party under C Chem
Patent Rights pursuant to contractual obligations entered into or otherwise
existing between Phillips and such third party prior to closing;
unless and until the Company after Closing has executed a separate written
agreement with such third party providing for such disclosure, license or
sublicense of proprietary technology or patent rights.
(k) All registered trademarks, other than Trademarks and Logos, which are
primarily used or identified as relating to the P Chem business as listed in
Schedule 6.18 of the Phillips Disclosure Schedule and to the C Chem business as
listed in Schedule 6.18 of the Chevron Disclosure Schedule and all foreign
counterparts thereof, shall be assigned to the Company at Closing (with
recording of such assignments in the applicable trademark registration issuance
office to occur as soon as practicable after the Closing with the costs of such
assignment to be borne by the Company, subject to such written agreements,
licenses or consents as exist as of the Closing Date.
Section 6.19 K-Resin Contribution. (a) Phillips shall make a cash advance to the
Company that may be either repaid in part to Phillips or added to and treated as
part of the capital contribution that Phillips and its Affiliates are making at
the Closing, in any case, as set forth in this Section 6.19(a). At Closing,
Phillips shall advance to the Company $70 million, subject to adjustment
depending on the calendar month by which the Company has produced at the K-Resin
Plant (and/or Designated Replacement Facilities) and sold into the market an
aggregate of 143 million pounds of K-Resin, of which at least 114 million pounds
must be of prime quality (the "Target Quantities") and subject to a maximum cap
of $109 million. No adjustment shall be due if Target Quantities are achieved
later than November 30, 2001 but prior to the close of business on December 31,
2001, and in such event the entire advance shall be added to Phillips' capital
contribution to the Company. For each calendar month prior to December 2001 by
which Target Quantities have been achieved, Phillips' advance shall be repaid by
$3.2 million and the balance of the advance shall be treated as a capital
contribution to the Company. If it is determined that the Target Quantities have
not been achieved by December 31, 2001, then the entire advance shall be treated
as a capital contribution to the Company and, on the tenth business day of each
calendar month after December 2001 until Target Quantities have been achieved,
Phillips shall make an additional capital contribution of $3.2 million to the
Company; provided that no contribution will be due after December 2002 even if
Target Quantities have not been achieved by December 31, 2002.
(b) In addition to the capital contribution set forth in Section 6.19(a),
Phillips shall make a capital contribution to the Company equal in amount to the
tax-adjusted shortfall (the "Tax-Adjusted Shortfall") from the Projected K-Resin
EBITDA for the period commencing on the Closing Date and ending on the earlier
of (i) December 31, 2002 or (ii) six months after
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production capacity equal to 370 million pounds per year has been restored at
the K-Resin Plant (the "Cut-Off Date"), subject to a maximum cap of $30 million.
The amount of Phillips' contribution pursuant to this Section 6.19(b) shall be
determined as soon as practicable after the Cut-Off Date, and any contribution
which is then due shall be made within three business days of such
determination. However, no capital contribution will be due unless there is a
cumulative EBITDA shortfall at the end of the period. The "Tax-Adjusted
Shortfall" is an amount equal to the product of (i) the applicable cumulative
EBITDA shortfall and (ii) the excess of 100% over the applicable Tax Rate (as
defined in the Amended LLC Agreement). The "Tax-Adjusted Shortfall" shall be
determined after giving effect to the provisions contained below in Section
6.19(e).
(c) The Parties intend that the capital contributions set forth in Sections
6.19(a) and 6.19(b) above are intended to be capital contributions to the
Company and not taxable income to the Company or its members. In furtherance of
this intent, Phillips shall indemnify Chevron and the Class C Members of the
Company on a Net After-Tax Basis against any income or franchise tax incurred in
the event that any such capital contribution is treated as taxable income.
Phillips shall indemnify Chevron and the Class C Members of the Company on a Net
After-Tax Basis against any income or franchise tax in the event that there is a
disguised sale under section 707(a)(2)(B) of the Internal Revenue Code or
corresponding provision of state or local law by Chevron or any Class C Member
that would not have occurred but for Phillips capital contributions in Sections
6.19(a) and 6.19(b) and any related distribution to Chevron or any Class C
Member or payment of a liability by the Company or any of its Subsidiaries,
provided, however, that in each case the terms and conditions of the Amended LLC
Agreement have been complied with.
(d) Phillips shall, by assignment or other means, take appropriate steps to
ensure that the Company promptly receives, for the period following the Closing,
the benefits of and proceeds (the "BI Insurance Proceeds") from any insurance
policy for losses from business interruption ("BI Insurance Policy") due to the
K-Resin Accident.
(e) The Company shall have the economic benefit of any BI Insurance Policy and
any BI Insurance Proceeds and shall include such proceeds in the calculation of
its taxable income for federal income tax purposes, and Phillips shall have no
indemnity obligation with respect to any such income. When actually received by
the Company, such proceeds will be credited toward the K-Resin Plant EBITDA. The
amount credited toward the K-Resin Plant EBITDA will be equal to 100% of the
amount of the BI Insurance Proceeds unless it is determined by a Final
Determination with respect to the Company or Phillips that the Company should
not include such proceeds in the calculation of its taxable income for federal
income tax purposes then the amount credited towards the K-Resin Plant EBITDA
shall be equal to the product of the amount of such proceeds and a fraction
(expressed as a percent), the numerator of which is 100 and the denominator of
which is 100 minus the Tax Rate. In the event that the Company receives the BI
Insurance Proceeds and it is so determined that the Company should not include
such proceeds in the calculation of its taxable income for federal income tax
purposes, the Company shall refund to Phillips an amount equal to the product of
(i) the BI Insurance Proceeds and (ii) the Tax Rate. Phillips, as a member of
the Company and on behalf of the Company, will have sole and exclusive authority
to manage any recovery under a BI
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Insurance Policy, and the Company will cooperate fully with Phillips in making
and establishing claims and in seeking to maximize recovery under the BI
Insurance Policies.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions to Phillips' Obligation to Close. Phillips' obligation to
consummate the transactions contemplated by this Agreement and the Amended LLC
Agreement on the terms specified herein shall be subject to the satisfaction or
waiver, on or prior to the Closing Date, of all of the following conditions:
(a) Representations, Warranties and Covenants of Chevron. (i) The
representations and warranties of Chevron contained in this Agreement shall be
true and correct both when made and on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date (except for representations and warranties expressly made as of an
earlier date, in which case as of such date), except for such failures to be
true and correct (without giving effect to any Materiality Requirement) which,
individually or in the aggregate, do not have a Material Adverse Effect on C
Chem.
(ii) The covenants and agreements of Chevron to be performed on or before the
Closing Date in accordance with this Agreement shall have been duly performed in
all material respects.
(iii) Phillips shall have received, at the Closing, a certificate dated the
Closing Date and validly executed on behalf of Chevron by an officer of Chevron
to the effect that the conditions specified in Sections 7(a)(i) and 7(a)(ii)
have been satisfied.
(b) Regulatory Approvals. Any waiting periods applicable to the transactions
contemplated by this Agreement under applicable antitrust or trade regulation
laws and regulations, including under the HSR Act, shall have expired or been
terminated.
(c) No Injunction. At the Closing Date, there shall be no statute, rule,
regulation, injunction, restraining order or decree of any nature of any
Governmental Entity of competent jurisdiction that is in effect that restrains
or prohibits the consummation of a material portion of the transactions
contemplated by this Agreement.
(d) Material Adverse Effect. From December 31, 1999 through the Closing, other
than actions contemplated by Section 6.2, no Material Adverse Effect on C Chem
shall have occurred, and there shall exist no fact or circumstances that would
reasonably be expected to have a Material Adverse Effect on C Chem.
(e) Affiliate Agreements. All contracts and agreements between C Chem
Subsidiaries and/or the Company and/or its wholly owned subsidiaries, on the one
hand, and Chevron and its Affiliates (other than C Chem Subsidiaries, the
Company and its wholly owned subsidiaries), on the
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other hand, relating to operating, supply and lease commitments and pricing
between, C Chem Subsidiaries and/or the Company and/or its wholly owned
subsidiaries, on the one hand, and Chevron and its Affiliates (other than C Chem
Subsidiaries, the Company and its wholly owned subsidiaries), including the
agreements set forth on Schedules 6.11(b) and 6.11(c) of the Chevron Disclosure
Schedule and the Tradename License Agreement, are in full force and effect.
Section 7.2 Conditions to Chevron's Obligation to Close. Chevron's obligation to
consummate the transactions contemplated by this Agreement and the Amended LLC
Agreement on the terms specified herein shall be subject to the satisfaction or
waiver, on or prior to the Closing Date, of all of the following conditions:
(a) Representations, Warranties and Covenants of Phillips. (i) The
representations and warranties of Phillips contained in this Agreement shall be
true and correct both when made and on and as of the Closing Date, with the same
effect as though such representations and warranties had been made on and as of
such date (except for representations and warranties expressly made as of an
earlier date, in which case as of such date), except for such failures to be
true and correct (without giving effect to any Materiality Requirement) which,
individually or in the aggregate, do not have a Material Adverse Effect on P
Chem.
(ii) The covenants and agreements of Phillips to be performed on or before the
Closing Date in accordance with this Agreement shall have been duly performed in
all material respects.
(iii) Chevron shall have received, at the Closing, a certificate dated the
Closing Date and validly executed on behalf of Phillips by an officer of
Phillips to the effect that the conditions specified in Sections 7.2(a)(i) and
7.2(a)(ii) have been satisfied.
(b) Regulatory Approvals. Any waiting periods applicable to the transactions
contemplated by this Agreement under applicable antitrust or trade regulation
laws and regulations, including under the HSR Act, shall have expired or been
terminated.
(c) No Injunction. At the Closing Date, there shall be no statute, rule,
regulation, injunction, restraining order or decree of any nature of any
Governmental Entity of competent jurisdiction that is in effect that restrains
or prohibits the consummation of a material portion of the transactions
contemplated by this Agreement.
(d) Material Adverse Effect. From December 31, 1999 through the Closing, other
than actions contemplated by Section 6.2, no Material Adverse Effect on P Chem
shall have occurred, and there shall exist no fact or circumstances that would
reasonably be expected to have a Material Adverse Effect on P Chem.
(e) Affiliate Agreements. All contracts and agreements between P Chem
Subsidiaries and/or the Company and/or its wholly owned subsidiaries, on the one
hand, and Phillips and its Affiliates (other than P Chem Subsidiaries, the
Company and its wholly owned subsidiaries), on the other hand, relating to
operating, supply and lease commitments and pricing between, P Chem Subsidiaries
and/or the Company and/or its wholly owned subsidiaries, on the one hand, and
Phillips and its Affiliates (other than P Chem Subsidiaries, the Company and its
wholly owned subsidiaries), including the agreements set forth on Schedules
6.11(b) and 6.11(c)
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of the Phillips Disclosure Schedule and the Tradename License Agreement, are in
full force and effect.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Closing by:
(b) the mutual written consent of Phillips and Chevron;
(c) either Phillips or Chevron if the Closing has not occurred by the close of
business on September 30, 2000; provided, however, that the failure to
consummate the transactions contemplated by this Agreement did not result from
the failure by the party seeking termination of this Agreement to fulfill any
material undertaking or commitment provided for herein that is required to be
fulfilled prior to the Closing;
(d) either Phillips or Chevron if the other Party shall have breached or failed
to perform in any material respect any of its respective representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform (i) would give rise to the failure of a condition
set forth in Section 7.1(a) or 7.2(a), as applicable, and (ii) cannot be or has
not been cured within 30 days after the giving of written notice to Phillips or
Chevron, as applicable; or
(e) either Phillips or Chevron in the event that any order, law, statute,
ordinance, rule, regulation or decree becomes effective (and final and
nonappealable), permanently restraining, enjoining or otherwise prohibiting or
making illegal or otherwise prohibiting the consummation of a material portion
of the transactions contemplated by this Agreement or the Amended LLC Agreement,
upon notification of the non-terminating party by the terminating party.
Section 8.2 Procedure and Effect of Termination. In the event of termination of
this Agreement by either or both of Phillips and Chevron pursuant to Section
8.1, written notice thereof shall forthwith be given by the terminating party to
the other parties hereto, and this Agreement shall thereupon terminate and
become void and have no effect, and the transactions contemplated by this
Agreement shall be abandoned without further action by the parties hereto,
except that the provisions of Section 6.1(b) shall survive the termination of
this Agreement; provided, however, that such termination shall not relieve any
party hereto of any liability for any willful breach of this Agreement. If this
Agreement is terminated as provided herein, all filings, applications and other
submissions made pursuant hereto shall, to the extent practicable, be withdrawn
from the agency or other Person to which they were made by the party making such
filing, application or other submission.
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ARTICLE IX
SURVIVAL; INDEMNIFICATION
Section 9.1 Indemnification by Company. Subject to the provisions of this
Article IX, the Company shall indemnify and hold harmless each of Phillips and
its Affiliates (other than the Company and its Subsidiaries) (each a "Phillips
Indemnified Person") and Chevron and its Affiliates (other than the Company and
its Subsidiaries) (each a "Chevron Indemnified Person") from and against any and
all Damages incurred by such Phillips Indemnified Person or Chevron Indemnified
Person in connection with any failure by the Company to perform any covenant or
other agreement hereunder.
Section 9.2 Indemnification by Phillips and Chevron. (a) Subject to the
provisions of this Article IX, Phillips shall indemnify and hold harmless
Chevron and its Affiliates and the Company and its Affiliates (excluding
Phillips, but including the P Chem Subsidiaries following the Closing) from and
against any and all Damages incurred by Chevron and its Affiliates or the
Company or its Affiliates (excluding Phillips, but including the P Chem
Subsidiaries following the Closing) in connection with (i) a breach of any
representation or warranty made by Phillips hereunder or in any schedule,
exhibit or other document attached to or delivered pursuant to this Agreement,
and (ii) any failure by Phillips to perform any covenant or agreement hereunder.
(b) Subject to the provisions of this Article IX, Chevron shall indemnify and
hold harmless Phillips and its Affiliates and the Company and its Affiliates
(excluding Chevron, but including the C Chem Subsidiaries following the Closing)
from and against any and all Damages incurred by Phillips and its Affiliates or
the Company and its Affiliates (excluding Chevron, but including the C Chem
Subsidiaries following the Closing) in connection with (i) a breach of any
representation or warranty made by Chevron hereunder or in any schedule, exhibit
or other document attached to or delivered pursuant to this Agreement, and (ii)
any failure by Chevron to perform any covenant or agreement hereunder.
(c) Matters relating to indemnification for Taxes shall not be governed by this
Article IX (other than this Section 9.2(c)), except to the extent otherwise
provided in Annex B. The parties hereto agree that the indemnification
provisions in Annex B shall be the exclusive remedy of the parties with respect
to breaches of the representations and warranties in Sections 6.1 and 6.2 of
Annex B, except for actions grounded in fraud, with respect to which the
remedies and limitations set forth in this Agreement shall not apply or in any
manner limit the scope or availability of any other remedy at law or in equity.
Section 9.3 Indemnification Procedure. All claims by any Indemnified Party under
this Article IX shall be asserted and resolved as set forth in Section 2.3 and
Article 3 of Annex C.
Section 9.4 Survival. The representations and warranties of the parties
contained in this Agreement shall survive the Closing and remain enforceable for
24 months from the Closing Date; provided, however, that (i) the representations
and warranties set forth in Sections 4.1, 4.2, 4.3, 4.7, 5.1, 5.2, 5.3 and 5.7
shall survive the Closing and remain enforceable
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without time limit and (ii) the representations and warranties set forth in
Annex B shall survive to the extent provided in Annex B. No claim for indemnity
under this Article IX for any breach of a representation or warranty may be
brought unless the appropriate Claim Notice shall have been delivered to the
Indemnifying Party prior to expiration of the applicable survival period.
Notwithstanding the foregoing, any covenants or agreements contained in this
Agreement (including any covenants or agreements contained in any representation
or warranty) shall survive the Closing and remain enforceable without time
limit.
Section 9.5 Indemnification Limitation. (a) Each Indemnified Party under this
Article IX shall use its reasonable efforts to mitigate Damages for which it
seeks indemnification hereunder, and shall assign to the Indemnifying Party all
of such Indemnified Party's claims for recovery against third parties as to
Damages, whether by insurance coverage, contribution claims, subrogation or
otherwise.
(b) Phillips' obligation to indemnify Chevron and its Affiliates and the Company
and its Affiliates as provided in Section 9.2(a)(i) shall not become effective
until the aggregate of all Damages sustained by Chevron and its Affiliates and
the Company and its Affiliates as described in Section 9.2(a)(i) shall have
exceeded the Basket. If the aggregate amount of Damages sustained by Chevron and
its Affiliates and the Company and its Affiliates as described in Section
9.2(a)(i) exceeds the Basket, then Chevron and its Affiliates and the Company
and its Affiliates shall be entitled to assert claims under this Article IX for
indemnification for the amount of such Damages in excess of the Basket only;
provided that Phillips' obligation with respect to indemnification under Section
9.2(a)(i) shall not exceed the Cap in the aggregate.
(c) Chevron's obligation to indemnify Phillips and its Affiliates and the
Company and its Affiliates as provided in Section 9.2(b)(i) shall not become
effective until the aggregate of all Damages sustained by Phillips and its
Affiliates and the Company and its Affiliates as described in Section 9.2(b)(i)
shall have exceeded the Basket. If the aggregate amount of Damages sustained by
Phillips and its Affiliates and the Company and its Affiliates as described in
Section 9.2(b)(i) exceeds the Basket, then Phillips and its Affiliates and the
Company and its Affiliates shall be entitled to assert claims under this Article
IX for indemnification for the amount of such Damages in excess of the Basket
only; provided that Chevron's obligation with respect to indemnification under
Section 9.2(b)(i) shall not exceed the Cap in the aggregate.
(d) Notwithstanding the foregoing, none of Phillips, Chevron or the Company or
their respective Affiliates shall be entitled to assert claims for
indemnification under this Article IX unless the aggregate amount of Damages
claimed in any individual Claim Notice exceeds $2,000,000 in the aggregate.
(e) For avoidance of doubt, the indemnification provisions set forth in Sections
9.1, 9.2(a)(ii) and 9.2(b)(ii) shall not be subject to the Basket or Cap.
(f) The parties hereto agree that the indemnification provisions in this Article
IX shall be the exclusive remedy of the parties with respect to breaches of the
representations and warranties in Articles IV and V, except for actions grounded
in fraud, with respect to which
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the remedies and limitations set forth in this Agreement shall not apply or in
any manner limit the scope or availability of any other remedy at law or in
equity.
Section 9.6 Materiality Qualifiers. For purposes of determining Damages and
rights to indemnification under this Article IX, the representations and
warranties set forth in Articles IV and V shall be read without giving effect to
any Materiality Requirement set forth therein; provided that representations and
warranties qualified by "Material Adverse Effect" shall be deemed to be true to
the extent the breach thereof is reasonably attributable to the general state of
the industries in which such Person and its Subsidiaries operate (including
chemicals price levels), to general economic conditions in the United States
(including prevailing interest rate and stock market levels,) or to the
transactions contemplated by this Agreement or the Amended LLC Agreement.
Section 9.7 Knowledge Qualifiers. For purposes of determining Damages and rights
to indemnification under this Article IX, the representations and warranties set
forth in Sections 4.5 and 5.5 shall be read without giving effect to any
Knowledge Requirement set forth therein.
ARTICLE X
EMPLOYEE MATTERS
[The provisions of Annex A are hereby incorporated herein.]
ARTICLE XI
TAX MATTERS
[The provisions of Annex B are hereby incorporated herein.]
ARTICLE XII
MISCELLANEOUS
Section 12.1 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered (including by facsimile) to the other parties
hereto.
Section 12.2 Governing Law; Jurisdiction and Forum; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without reference to the choice of law principles
thereof.
(b) Each party hereto irrevocably submits to the jurisdiction of any Delaware
state court or any federal court sitting in the State of Delaware in any action
arising out of or
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relating to this Agreement, and hereby irrevocably agrees that all claims in
respect of such action may be heard and determined in such Delaware state or
federal court. Each party hereto hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The parties hereto further agree, to
the extent permitted by law, that final and unappealable judgment against any of
them in any action or proceeding contemplated above shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified copy of which shall be conclusive evidence of
the fact and amount of such judgment.
(c) To the extent that any party hereto has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, each
party hereto hereby irrevocably waives such immunity in respect of its
obligations with respect to this Agreement.
(d) Each party hereto waives, to the fullest extent permitted by applicable
laws, any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement. Each party hereto
certifies that it has been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications set forth above in this Section
12.2.
Section 12.3 Entire Agreement. This Agreement and the annexes, schedules and
exhibits hereto (which are each incorporated herein and made a part hereof),
together with the Confidentiality Agreement, contain the entire agreement
between the parties with respect to the subject matter hereof, and there are no
agreements, understandings, representations or warranties between the parties
other than those set forth or referred to herein. Except for Annex C hereto and
Articles IX and XI, which are intended to benefit, and to be enforceable by, any
of the indemnified parties thereunder, this Agreement is not intended to confer
upon any Person not a party hereto (and their successors and assigns) any rights
or remedies hereunder.
Section 12.4 Expenses. (a) Except as set forth in this Agreement, whether or not
the transactions contemplated in this Agreement or the Amended LLC Agreement are
consummated, all legal and other costs and expenses incurred in connection with
this Agreement and the Amended LLC Agreement and the transactions contemplated
by this Agreement and the Amended LLC Agreement shall be paid by the party
incurring such costs and expenses.
(b) Any sales, use, transfer, excise or similar Taxes (but not Taxes imposed on
income, gain or profit) incurred in connection with any transfers required by
this Agreement shall be paid and borne as follows (provided both Parties consult
and cooperate with each other regarding transfer tax planning):
(i) with respect to any transfer between the Company, on the one hand, and
Phillips or any of its Affiliates (other than P Chem Subsidiaries and the
Company), or Chevron or any of its Affiliates (other than C Chem Subsidiaries
and the Company), on the other hand, 100% by the Company;
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(ii) with respect to any transfer between Phillips or any Phillips Retained
Affiliate, on the one hand, and any P Chem Subsidiaries, on the other hand, 100%
by Phillips; and
(iii) with respect to any transfers between Chevron or any Chevron Retained
Affiliate, on the one hand, and any C Chem Subsidiaries, on the other hand, 100%
by Chevron.
(c) Any Taxes imposed on income, gain or profit incurred in connection with any
transfers required by this Agreement shall be paid and borne by Chevron and
Phillips, respectively.
Section 12.5 Notices. All notices and other communications to be given to any
party hereunder shall be sufficiently given for all purposes hereunder if in
writing and delivered by hand, courier or overnight delivery service or three
days after being mailed by certified or registered mail, return receipt
requested, with appropriate postage prepaid, or when received in the form of a
telegram or facsimile and shall be directed to the address or facsimile number
set forth below (or at such other address or facsimile number as such party
shall designate by like notice):
(b) If to Phillips:
Phillips Petroleum Company
1266 Adams Building
Bartlesville, Oklahoma 74004
Attention: Clyde W. Lea
Fax No.: (918) 662-2301
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Fax No.: (212) 403-2000
(c) If to Chevron:
Chevron Corporation
575 Market Street
San Francisco, California 94104
Attention: Harvey D. Hinman, Vice President and
General Counsel
Fax No.: (415) 894-6017
With a copy to:
Pillsbury Madison & Sutro
50 Fremont Street
San Francisco, California 94105
Attention: Terry Kee, Esq.
Fax No.: (415) 983-1200
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(d) If to the Company:
Chevron Phillips Chemical Company LLC
1301 McKinney Street
Houston, Texas 77010
Attention: James Gallogly
Fax No.:
Section 12.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that no party hereto will assign its
rights or delegate any or all of its obligations under this Agreement without
the express prior written consent of each other party hereto.
Section 12.7 Headings; Definitions. The Section and Article headings contained
in this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated and except in the Annexes hereto, wherein
references to Sections or Articles shall mean Articles or Sections of such Annex
unless otherwise stated. All capitalized terms defined herein are equally
applicable to both the singular and plural forms of such terms.
Section 12.8 Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by all parties
hereto. The parties hereto may, only by an instrument in writing, waive
compliance by the other parties hereto with any term or provision of this
Agreement on the part of such other party hereto to be performed or complied
with. The waiver by any party hereto of a breach of any term or provision of
this Agreement shall not be construed as a waiver of any subsequent breach.
Except as otherwise expressly provided herein, no failure to exercise, delay in
exercising or single or partial exercise of any right, power or remedy by any
party, and no course of dealing between the parties, shall constitute a waiver
of any such right, power or remedy.
Section 12.9 Schedules. The disclosure or inclusion of any matter or item in any
Schedule to the Phillips Disclosure Schedule or the Chevron Disclosure Schedule
shall not be deemed an acknowledgment or admission that any such matter or item
is required to be disclosed or is material for purposes of the representations
and warranties set forth in this Agreement or whether the subject matter of such
disclosure may have a Material Adverse Effect on P Chem or C Chem. Phillips and
Chevron shall not be prejudiced in any manner whatsoever by, and no presumptions
shall be created by virtue of, any disclosure of any matter in the Phillips
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Disclosure Schedule or the Chevron Disclosure Schedule, respectively, which is
not expressly required to be disclosed under this Agreement. Information
disclosed in any schedule hereto shall only constitute a disclosure with respect
to the specific Section of this Agreement in which such schedule is referenced.
Section 12.10 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions of this Agreement shall not be affected thereby, and there
shall be deemed substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at issue.
Section 12.11 Interpretation. For the purposes of this Agreement, "knowledge"
shall mean, with respect to Phillips, except as otherwise specified in this
Agreement, the actual knowledge (after due inquiry) of the Persons identified on
Schedule 12.11 of the Phillips Disclosure Schedule and, with respect to Chevron,
the actual knowledge (after due inquiry) of the Persons identified on Schedule
12.11 of the Chevron Disclosure Schedule. The phrase "including" shall be deemed
to be followed by "without limitation." The words "hereof," "hereby," "herein,"
"hereunder" and similar terms in this Agreement shall refer to this Agreement as
a whole and not any particular Section or Article in which such words appear. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
Section 12.12 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any party fails to consummate the
transactions contemplated by this Agreement in accordance with the terms of this
Agreement, and that the parties shall be entitled to specific performance in
such event in addition to any other remedy at law or in equity.
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IN WITNESS WHEREOF, each of the undersigned, intending to be
legally bound, has caused this Agreement to be duly executed and delivered on
the date first set forth above.
PHILLIPS PETROLEUM COMPANY
By: /s/ John E. Lowe
---------------------------------
John E. Lowe
Senior Vice President
Planning and Strategic Transactions
CHEVRON CORPORATION
By: /s/ John S. Watson
----------------------------------
John S. Watson
Vice President, Strategic Planning
CHEVRON PHILLIPS CHEMICAL COMPANY LLC
By: /s/ James L. Gallogly
----------------------------------
James L. Gallogly
President and Chief Executive Officer
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ANNEX A
EMPLOYEE MATTERS ANNEX
CERTAIN DEFINITIONS
Section 1.1 Definitions. (a) Capitalized terms used and not
defined in this Annex shall have the respective meanings ascribed to them in the
Contribution Agreement. Notwithstanding the foregoing, references to
"Subsidiaries" of Phillips or Chevron in this Annex shall not include the
Company, the P Chem Subsidiaries, the C Chem Subsidiaries, or any of their
respective Subsidiaries, except where specifically so provided.
(b) As used in this Annex, the following terms shall have the
respective meanings set forth below:
"Bonuses" shall have the meaning set forth in Section 3.2.
"C Chem Employee" shall mean any individual (i) who is,
immediately before the Closing Date, an Employee of Chevron or a Subsidiary of
Chevron (including the C Chem Subsidiaries) principally associated with the
businesses conducted by the C Chem Subsidiaries, including each such Employee
who is seconded to C Chem and each such Employee who is a member of the research
and development staff associated with such businesses, or (ii) who becomes such
an Employee during the period from the Closing Date through the Transfer Date
through hiring in the normal course of such businesses.
"Chevron DCP" shall mean the Chevron Dependent Care Program.
"Chevron Savings Plan" shall mean the Chevron Corporation
Profit Sharing/Savings Plan.
"Chevron Severance Plan" shall mean the Chevron Corporation
2000 Surplus Employee Severance Program for Involuntary Termination and for
Demotion or Transfer.
"COBRA Coverage" shall mean continuation of health coverage
required pursuant to Section 4980B of the Code or Part 6 of Subtitle B of Title
I of ERISA.
"Eligible Expenses" shall mean eligible expenses under an Old
Welfare Plan for the plan year in which the Transfer Date occurs that are
recorded as such by the applicable plan administrator as of the 60th day after
the Transfer Date and reported to the Company on or before the 105th day after
the Transfer Date.
"Employee" shall mean an employee of the relevant entity who
is, on the relevant day, either (i) actively at work or (ii) not actively at
work but not classified as a terminated employee (including without limitation,
on vacation, holiday, sick leave or other approved leave of absence with the
right of reinstatement). Notwithstanding the foregoing, the term "Employee"
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shall not include any individual who is on an inactive employee status leave,
unless such individual's absence is designated as covered by the Family and
Medical Leave Act of 1993.
"Key Employee" shall mean those P Chem Employees whose skills
and experience are critical to the P Chem business and those C Chem Employees
whose skills and experience are critical to the C Chem business, and for whom
replacements are not readily available.
"New FSP" shall have the meaning set forth in Section 4.5(d).
"New Welfare Plans" shall have the meaning set forth in
Section 4.5(c).
"Old Welfare Plans" shall have the meaning set forth in
Section 4.5(c).
"Parent Plans" shall mean the Chevron Plans and the Phillips
Plans.
"P Chem Employee" shall mean any individual (i) who is,
immediately before the Closing Date, an Employee of Phillips or a Subsidiary of
Phillips (including the P Chem Subsidiaries) principally associated with the
businesses conducted by P Chem Subsidiaries, including each such Employee who is
seconded to P Chem and each such Employee who is a member of the research and
development staff associated with such businesses, or (ii) who becomes such an
Employee during the period from the Closing Date through the Transfer Date
through hiring in the normal course of such businesses.
"Phillips FSP" shall mean the Health Care Account and Child
Care Account components of the Phillips Petroleum Company Flexible Spending
Plan.
"Phillips Savings Plans" shall mean the Thrift Plan of
Phillips Petroleum Company and the Long Term Stock Savings Plan of Phillips
Petroleum Company.
"Release" means (i) in the case of a P Chem Employee, a
release of claims against the Company, Phillips, Chevron and their respective
Subsidiaries, in form and substance acceptable to Phillips, Chevron and the
Company, and (ii) in the case of a C Chem Employee, a release of claims against
the Company, Chevron, Phillips and their respective Subsidiaries, in form and
substance acceptable to Chevron, Phillips and the Company.
"Required Severance Amount" shall mean any severance benefits,
pay in lieu of notice, or other similar benefits payable to a Transferred
Employee by the Company or any of its Subsidiaries, which becomes payable on
account of such Transferred Employee's termination of employment pursuant to any
applicable law, statute, regulation, court order, or other legal requirement,
including without limitation, the Worker Adjustment and Retraining Notification
Act, as amended.
"Severance Amount" shall mean the amount of cash severance to
which a Transferred Employee would have been entitled under (i) the Phillips
Layoff Plan as in effect on the date of the execution of the Contribution
Agreement (in the case of a Transferred P Chem Employee), or (ii) under the
Chevron Severance Plan as in effect on the date of the execution of the
Contribution Agreement (in the case of a Transferred C Chem Employee), in either
case if he
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or she had been covered by such plan and terminated employment from Phillips or
Chevron, as applicable, under the same circumstances as his or her termination
from the Company and its Subsidiaries.
"Severance Costs" shall mean all Liabilities relating to or
arising out of providing severance pay or benefits (including, without
limitation, any benefit plan allowance payable under the terms of the Chevron
Severance Plan to any Transferred Employee), redundancy pay or benefits, pay in
lieu of notice, or other similar pay or benefits under applicable laws,
contracts or employee benefit plans or arrangements.
"Termination Costs" shall mean all Liabilities incurred in
connection with, arising out of or in connection with the termination of
employment of any Employee (whether actual or constructive), including
Liabilities relating to or arising out of any claim of discrimination or other
illegality in connection with such termination, but excluding Severance Costs.
"Transfer Date" shall have the meaning set forth in
Section 2.1.
"Transferred Employee" shall mean a Transferred P Chem
Employee or a Transferred C Chem Employee.
"Transferred C Chem Employee" shall mean a C Chem Employee
whose employment actually transfers pursuant to Section 2.1 below.
"Transferred P Chem Employee" shall mean a P Chem Employee
whose employment actually transfers pursuant to Section 2.1 below.
"Welfare Benefit Plans" shall mean "welfare plans" as defined
in Section 3(1) of ERISA.
TRANSFER OF EMPLOYEES TO THE COMPANY
Section 2.1 Selection of Employees. The Company shall select
its employees from among the P Chem Employees and the C Chem Employees based
upon their skills and experience, without regard to the severance obligations
that might be due to them if they are not selected. Each P Chem Employee and C
Chem Employee who is so selected shall be offered a transfer of employment to
the Company or one of its Subsidiaries. All such transfers of employment shall
take place on a date determined by mutual agreement of the Company, Phillips and
Chevron, but in any event not later than January 1, 2001. The "Transfer Date"
shall be the day immediately following the Employee's last day of employment
with Phillips or Chevron.
Section 2.2 No Restrictions on Changes. Nothing in this Annex
shall require or be construed or interpreted as requiring the Company and its
Subsidiaries to continue the employment of any of their employees (including
Transferred Employees). Nothing in this Annex shall require or be construed or
interpreted to prevent the Company or any of its Subsidiaries from changing the
terms and conditions of employment (including compensation and benefits) of any
of their employees (including Transferred Employees) following the
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Transfer Date, except as specifically provided in Sections 4.1(c), 4.2, 4.4(b),
4.5(c) and 4.5(d).
Section 2.3 Severance Costs; Liabilities for Selection;
Employee Liabilities Generally. (a) Severance Costs incurred within 90 days
after the Transfer Date with respect to any P Chem Employee who does not become
a Transferred P Chem Employee and any C Chem Employee who does not become a
Transferred C Chem Employee, and who is eligible for and receives benefits under
the Phillips Layoff Plan or the Chevron Severance Plan, shall be borne equally
by Phillips and Chevron by reimbursement by the Company to Phillips or Chevron,
as applicable, subject to the execution by such Employee of a Release; provided,
that any such Severance Costs shall not be so reimbursed to the extent they are
incurred as a result of any amendment to the Phillips Layoff Plan or the Chevron
Severance Plan after the date hereof.
(b) In addition, the Company and its Subsidiaries shall be
solely responsible for any and all Termination Costs and other Liabilities
relating to or arising out of the selection process set forth in Section 2.1
above, including any Termination Costs or Severance Costs with respect to
Transferred Employees arising out of or relating to the transfer of their
employment to the Company and its Subsidiaries or any subsequent action by the
Company and its Subsidiaries.
(c) Any and all Liabilities arising out of or relating to the
employment of (i) any P Chem Employee by Phillips or any of its Subsidiaries or
(ii) any C Chem Employee by Chevron or any of its Subsidiaries before the
Transfer Date that are not specifically provided for in this Annex shall remain
the responsibility of Phillips and its Subsidiaries, or Chevron and its
Subsidiaries, as applicable. Any and all Liabilities arising out of or relating
to the employment of any Transferred Employee by the Company or any of its
Subsidiaries on or after the Transfer Date that are not specifically provided
for in this Annex shall be the responsibility of the Company and its
Subsidiaries.
Section 2.4 Availability of C Chem and P Chem Employees.
Phillips and Chevron agree, on behalf of themselves and their respective
Subsidiaries, that from the date hereof through the Transfer Date, they shall
not, without first consulting with the other party, transfer or permit the
transfer of employment, directly or indirectly, of any Key Employees employed by
the P Chem Subsidiaries to Phillips or its Subsidiaries or of any Key Employees
employed by the C Chem Subsidiaries to Chevron and its Subsidiaries; provided,
however, the final discretion for such transfer shall rest with the employer of
such Key Employee.
COMPENSATION
Section 3.1 Compensation Generally. Without limiting the scope
of Section 2.3, except as provided in the following sentence and in Section 3.2,
Phillips or Chevron or their respective Subsidiaries, as applicable, shall
retain all liability and responsibility for wages, salary, overtime pay,
bonuses, incentive pay, and other cash compensation of P Chem Employees and C
Chem Employees attributable to periods before the Transfer Date. Effective as of
the Transfer Date, the Company and its Subsidiaries shall assume and be solely
responsible for (a) all accrued but unused vacation and sick leave entitlements
of Transferred Employees attributable to periods before the Transfer Date and
(b) all wages, salary, overtime pay, bonuses,
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incentive pay, vacation pay, sick pay and other cash compensation of Transferred
Employees attributable to the period beginning on the Transfer Date. From and
after the Transfer Date, the Company shall provide to Transferred Employees all
wages, salary, overtime pay, bonuses, vacation pay, sick pay, other cash
compensation and cash and equity-based incentive compensation on such terms as
may be determined from time to time by the Company in its sole discretion.
Section 3.2 Incentive Compensation. If the Transfer Date is on
or before December 31, 2000, Phillips and Chevron shall determine the amounts of
the annual bonuses (the "Bonuses") earned by Transferred Employees for the year
2000 under its bonus plans, and the Company shall reimburse Phillips (in the
case of Transferred P Chem Employees) and Chevron (in the case of Transferred C
Chem Employees) for a pro-rata portion of the Bonuses, based upon the number of
days in such year after the Transfer Date. Such reimbursement shall be net of
the employer's share of any employment taxes relating to such pro-rata Bonuses
for the period before the Transfer Date and required to be paid by the Company
or any of its Subsidiaries. Nothing contained herein shall preclude Phillips or
Chevron from designating the Company as an "affiliate" under their respective
stock option and incentive plans for purposes of continued vesting, exercise and
payouts under their respective stock option and incentive plans.
Section 3.3 Indemnification and Reimbursement. Notwithstanding
anything to the contrary in this Annex, the Company shall indemnify Phillips and
Chevron, respectively, for all employment-related liabilities and Termination
Costs of P Chem Employees and C Chem Employees incurred during the period
beginning on the Closing Date and continuing through the Transfer Date, and
shall reimburse Phillips and Chevron, respectively, for all employment- related
expenses of P Chem Employees and C Chem Employees incurred during the period
beginning on the Closing Date and continuing through the Transfer Date, through
the provisions of the Transition Services Agreement.
EMPLOYEE BENEFITS
Section 4.1 Employee Benefits Generally. (a) Effective as of
the Transfer Date, except as provided in Section 4.2(b), the Transferred
Employees shall cease to be active participants in the Parent Plans. Effective
as of the Closing Date, neither the Company nor any of its Subsidiaries shall be
a participating employer in any Parent Plan. Phillips and Chevron shall remain
solely responsible for all liabilities with respect to the Phillips Plans and
the Chevron Plans, respectively, and the Company and its Subsidiaries shall not
assume any Parent Plan and shall have no obligations and shall assume no
liabilities with respect to the Parent Plans, in each case except as
specifically provided in Section 4.2(b) and Section 4.5(d) below.
(b) From and after the Transfer Date, the Company and its
Subsidiaries shall be solely responsible for providing Transferred Employees
with employee benefits, including without limitation welfare, savings and
pension benefits, which shall be designed by the Company in its sole discretion.
Phillips and Chevron shall provide the Company and its Subsidiaries with all
necessary transition assistance to enable them to develop and implement their
compensation and benefit plans and programs. The Company and its Subsidiaries
shall
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provide compensation and benefits to Transferred Employees sufficient such that
neither Phillips (and its Subsidiaries), nor Chevron (and its Subsidiaries),
shall incur any Severance Costs with respect to the Transferred Employees. If
the Company (or its Subsidiaries) offers employment to any Employee whose
Severance Costs were reimbursed pursuant to Section 2.3 the Company (or its
Subsidiary) may, as a condition to the acceptance of such offer, require the
Employee to repay the amount of such reimbursement.
(c) For purposes of eligibility to participate and vesting
under all compensation and benefit plans applicable to Transferred Employees on
or after the Transfer Date, the Company and its Subsidiaries shall give
Transferred Employees credit for all applicable service with Phillips and its
Subsidiaries (including the P Chem Subsidiaries), or Chevron and its
Subsidiaries (including the C Chem Subsidiaries), as applicable, before the
Transfer Date. For these purposes, the applicable service for a Transferred P
Chem Employee shall be determined by the elapsed time since his or her Service
Award Entry Date as recorded in the personnel records of Phillips.
Section 4.2 Severance Benefits. The Company and its
Subsidiaries shall provide to each Transferred P Chem Employee and each
Transferred C Chem Employee whose employment terminates on or before the first
anniversary of the Closing Date cash severance benefits at least equal to the
greater of the applicable Severance Amount and the applicable Required Severance
Amount, subject to the execution by such Transferred P Chem Employee or
Transferred C Chem Employee of a Release.
Section 4.3 Pension Benefits. Effective as of the Transfer
Date, Phillips shall cause the Transferred P Chem Employees to be 100% vested in
their accrued benefit under the Retirement Income Plan of Phillips Petroleum
Company and any nonqualified excess plan associated with such plan
(collectively, the "Phillips RIP") as required by the terms thereof, and Chevron
shall cause the Transferred C Chem Employees to be 100% vested in their accrued
benefit under the Chevron Corporation Retirement Plan and any nonqualified
excess plan associated with such plan (collectively, the "Chevron RP"). The
Company shall establish a retirement plan for the Transferred Employees. In no
event shall the benefit provided under the Company's retirement plan (expressed
as a life annuity commencing at age 65), be less than the benefit the
Transferred Employees would have obtained under the Phillips RIP or the Chevron
RP, as applicable, taking into account only service with Phillips or Chevron, as
applicable, prior to the Transfer Date and the final average pay from the
Company and its Subsidiaries, reduced by the benefit actually accrued under the
Phillips RIP or the Chevron RP, as applicable.
Section 4.4 Savings Plans. (a) Effective as of the Transfer
Date, Phillips shall cause the Transferred P Chem Employees to be 100% vested in
their accrued benefit under the Phillips Savings Plans, and Chevron shall cause
the Transferred C Chem Employees to be 100% vested in their accrued benefits
under the Chevron Savings Plan.
(b) The Company, Phillips and Chevron shall take all
reasonable steps necessary and appropriate so that Transferred Employees who
participated in the Phillips Savings Plans or the Chevron Savings Plan, as
applicable, and who have loans outstanding from any such plan as of the Transfer
Date may continue to repay such loans using voluntary payroll deductions from
their paychecks from the Company and its Subsidiaries.
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Section 4.5 Welfare Benefits. Without limiting the generality
of the above provisions, this Section 4.5 contains certain specific provisions
regarding the provision of benefits under Welfare Benefit Plans, unemployment
compensation benefits and workers compensation benefits.
(a) Effective as of the Transfer Date, the Company shall cause
the Transferred Employees to be eligible to be covered by such Welfare Benefit
Plans sponsored by the Company and/or one or more of its Subsidiaries as the
Company shall determine to implement.
(b) Except as specifically provided in Section 4.5(d) below:
(i) Phillips and its Subsidiaries shall be solely responsible for (A) claims of
Transferred P Chem Employees and their eligible beneficiaries and dependents for
workers compensation, unemployment compensation and under Welfare Benefit Plans
that are incurred before the Transfer Date, and (B) claims relating to COBRA
Coverage attributable to "qualifying events" occurring on or before the Transfer
Date with respect to any Transferred P Chem Employees and their eligible
beneficiaries and dependents; (ii) Chevron and its Subsidiaries shall be solely
responsible for (I) claims of Transferred C Chem Employees and their eligible
beneficiaries and dependents for workers compensation, unemployment compensation
and under Welfare Benefit Plans that are incurred before the Transfer Date, and
(II) claims relating to COBRA Coverage attributable to "qualifying events"
occurring on or before the Transfer Date with respect to any Transferred C Chem
Employees and their eligible beneficiaries and dependents; and (iii) the Company
and its Subsidiaries shall be solely responsible for (x) claims of Transferred
Employees and their eligible beneficiaries and dependents for workers
compensation and unemployment compensation benefits and claims under Welfare
Benefit Plans that are incurred on or after the Transfer Date, and (y) claims
relating to COBRA Coverage attributable to "qualifying events" occurring after
the Transfer Date with respect to Transferred Employees and their beneficiaries
and dependents. A medical/dental claim shall be considered incurred on the date
when the medical services are rendered or medical supplies are provided, and not
when the condition arose or when the course of treatment began. An unemployment
compensation or workers compensation claim shall be considered incurred before
the Transfer Date if the occurrence leading up to the claim occurs before the
Transfer Date.
(c) Each Transferred Employee who is employed in an eligible
job classification shall be immediately eligible to participate, without any
waiting time, in any and all Welfare Benefit Plans sponsored by the Company and
its Subsidiaries for the benefit of Transferred Employees (such plans,
collectively, the "New Welfare Plans") to the extent coverage under such New
Welfare Plan replaces coverage under a similar Phillips Plan or Chevron Plan, in
which such Transferred Employee was previously eligible to participate (such
plans, collectively, the "Old Welfare Plans"). For purposes of each New Welfare
Plan providing medical, dental, pharmaceutical and/or vision benefits, the
Company shall cause all pre-existing condition exclusions and actively-at-work
requirements of such New Welfare Plan to be waived for Transferred Employees and
their eligible beneficiaries and dependents, to the extent such exclusions and
restrictions did not apply under the applicable Old Welfare Plan, and the
Company shall cause any Eligible Expenses incurred by any Transferred Employee
and his or her eligible beneficiaries and dependents during the portion of the
plan year of the Old Welfare Plan ending on the Transfer Date, to be taken into
account under such New Welfare Plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements
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applicable to such Transferred Employee and his or her eligible beneficiaries
and dependents for the applicable plan year as if such amounts had been paid in
accordance with such New Welfare Plan.
(d) The Company shall establish one or more flexible spending
plans (collectively, the "New FSP") in which Transferred Employees shall be
eligible to participate following the Transfer Date. Phillips, Chevron and the
Company shall take all reasonable steps necessary or appropriate so that the
account balances under the Phillips FSP or the Chevron DCP, as applicable, of
each Transferred Employee who has elected to participate therein in the year in
which the Transfer Date occurs shall be transferred, as soon as practicable
after the Transfer Date, from the Phillips FSP or the Chevron DCP, as
applicable, to the New FSP, and so that the contribution elections of each such
Transferred Employee as in effect immediately before the Transfer Date remain in
effect under the New FSP immediately after the transfer of such account balance.
If the aggregate amount of the transferred account balances of Transferred P
Chem Employees or Transferred C Chem Employees is negative, then the Company
shall pay Phillips or Chevron, as applicable, the amount of such aggregate
negative balance promptly following such account balance transfer.
Notwithstanding the provisions of Section 4.5(b), from and after the date a
Transferred Employee's FSP account is transferred in accordance with this
Section 4.5(d), the Company shall be solely responsible for, and shall satisfy
from the New FSP, all claims, whether incurred before, on or after the Transfer
Date, for which such Transferred Employee was entitled to seek reimbursement
under the Phillips FSP or the Chevron DCP for the year in which the Transfer
Date occurs.
TAX BENEFITS
Section 5.1 Tax Benefits Generally. It is the intention of
Phillips, Chevron and the Company that any tax deductions or other tax benefits
associated with any compensation or benefits payable to P Chem Employees and C
Chem Employees by any of them be enjoyed by the party that bears the economic
cost thereof, whether through direct payment or provision of such compensation
or benefits or through reimbursement, and they agree to cooperate to ensure such
result to the greatest extent possible, through allocation of partnership
deductions, adjustment of the amounts of any reimbursement or otherwise.
FOREIGN BENEFITS
Section 6.1 Foreign Benefits Generally. Notwithstanding
anything in this Annex to the contrary, the Company may adopt or maintain
compensation and benefit plans and programs of Phillips and/or Chevron in Puerto
Rico and locations outside the United States, where appropriate and agreed by
both Phillips and Chevron (but not including any equity-based plans).
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ANNEX B
TAX MATTERS ANNEX
ARTICLE I
CERTAIN DEFINITIONS
Any capitalized term used in this Annex but not otherwise
defined herein shall have the meaning ascribed to such term in the Contribution
Agreement (including Annex C thereto) or, if not defined in the Contribution
Agreement, the Amended and Restated LLC Agreement. Any Section reference in this
Annex shall refer to such section of this Annex, except as otherwise indicated.
As used in this Annex, the following terms shall have the respective meanings
set forth below:
"Chevron Acquired Entity" shall mean (i) any entity (including
but not limited to a corporation, limited liability company or partnership)
Contributed to the Company by Chevron or a Subsidiary of Chevron and (ii) any
entity owned by an entity described in clause (i) at the time the entity
described in said clause (i) is Contributed
"Chevron Group" shall mean Chevron and its Subsidiaries (other
than the Company and Subsidiaries of the Company).
"Contributed" shall mean transferred (including a transfer by
way of merger into the Company or by other means) to the Company or any
Subsidiary of the Company pursuant to Section 2.2 or 2.3 of the Contribution
Agreement.
"Final Determination" shall mean with respect to any Tax for
any period the later of (i) the date on which the statute of limitations for
instituting a claim for refund of such Tax has expired, or if such claim was
filed, the expiration of the time for instituting suit with respect thereto; and
(ii) the date on which all administrative and judicial proceedings with respect
to any such assessments or refunds of such Tax have been finally settled through
agreement of the parties to the proceeding or by an administrative or judicial
decision from which no appeal can be taken or the time for taking any such
appeal has expired.
"Income Taxes" shall mean all United States federal, state and
local income and franchise Taxes of any Phillips Acquired Entity and any Chevron
Acquired Entity, as the case may be.
"Phillips Acquired Entity" shall mean (i) any entity
(including but not limited to a corporation, limited liability company or
partnership) Contributed to the Company by Phillips or a Subsidiary of Phillips
or (ii) any entity owned by an entity described in clause (i) at the time the
entity described in said clause (i) is Contributed.
"Phillips Group" shall mean Phillips and its Subsidiaries
(other than the Company and Subsidiaries of the Company).
"Post-Closing Period" shall mean, for any Person, any taxable
period beginning,
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with respect to such Person, after the Closing Date, and the portion, beginning
after the Closing Date, of any taxable period that includes, with respect to
such Person, but does not end on, the Closing Date.
"Pre-Closing Period" shall mean, for any Person, any taxable
period ending, with respect to such Person, on or prior to the Closing Date, and
the portion, ending on the Closing Date, of any taxable period that includes,
with respect to such Person, but does not end on, the Closing Date.
"Returns" or "Tax Returns" shall mean returns, declarations,
statements, reports, forms, property tax renditions or other documents or
information required to be filed with or supplied to any Taxing Authority.
"Tax Basket Amount" shall mean $20,000,000.
"Tax Indemnified Party" shall have the meaning set forth in
Section 2.4(e).
"Tax Indemnifying Party" shall have the meaning set forth
in Section 2.4(e).
"Tax Matters Annex" shall mean this Annex B.
"Tax Proceeding" means any Tax audit, contest, litigation or
other proceeding with or against a Governmental Entity.
"Tax Refund" shall mean a refund of Tax (including any refund
of Tax applied as an offset against a Tax otherwise currently payable) together
with any interest received with respect thereto less all costs (including
reasonable legal, accounting and consulting fees and costs) of obtaining such
refund paid or incurred by the Company or any Subsidiary of the Company;
provided, however, that a Tax Refund (including any refund of Tax applied as an
offset against a Tax otherwise currently payable) shall not include any refund
of Tax for a Pre-Closing Period to the extent such refund is attributable to a
carryback to such Pre-Closing Period from a Post-Closing Period of the Company
or any of its Subsidiaries of items of deduction, loss or credit of the Company
or any Subsidiary of the Company.
TAX INDEMNIFICATION
Indemnification by Chevron. Subject to Section 2.4 and without
duplication, Chevron shall be liable for, shall pay or cause to be paid, and
shall indemnify and hold harmless the Company and each of its Subsidiaries and
each member of the Phillips Group against, the following:
Any and all (i) Income Taxes for any Pre-Closing Period of any
Chevron Acquired Entity, and (ii) any Income Taxes incurred by the Company or
any of its Subsidiaries or any member of the Phillips Group in connection with a
breach of any representation or warranty made by Chevron in Section 6.1, in each
case other than Income Taxes referred to in Section 2.4(f);
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(i) Any and all Taxes, other than Income Taxes, for any
Pre-Closing Period attributable to the assets and operations Contributed by
Chevron or any of its Subsidiaries, (ii) any and all Taxes other than Income
Taxes of any Chevron Acquired Entity for any Pre-Closing Period, and (iii) any
Taxes other than Income Taxes incurred by the Company or any of its Subsidiaries
or any member of the Phillips Group in connection with a breach of any
representation or warranty made by Chevron in Section 6.1; provided, however, in
the case of clauses (i) and (ii), other than Taxes referred to in Section 2.4(f)
and except as provided in Section 12.4(b) of the Contribution Agreement;
Any and all Taxes with respect to the operations, assets,
investments and activities of Chevron and its Subsidiaries that would not have
arisen but for Treasury Regulation Section 1.1502-6 or any comparable or similar
provisions under state, local or foreign laws or regulations; and
Except as set forth in Section 12.4 of the Contribution
Agreement, any and all Taxes arising from or relating to the Chevron Excluded
Assets and Liabilities or any transfer thereof by the Company or any of its
Subsidiaries pursuant to Section 2.3 of the Contribution Agreement.
Indemnification by Phillips. Subject to Section 2.4 and
without duplication, Phillips shall be liable for, shall pay or cause to be
paid, and shall indemnify and hold harmless the Company and each of its
Subsidiaries and each member of the Chevron Group against, the following:
Any and all (i) Income Taxes for any Pre-Closing Period of any
Phillips Acquired Entity, and (ii) any Income Taxes incurred by the Company or
any of its Subsidiaries or any member of the Chevron Group in connection with a
breach of any representation or warranty made by Phillips in Section 6.2, in
each case other than Income Taxes referred to in Section 2.4(f);
(i) Any and all Taxes, other than Income Taxes, for any
Pre-Closing Period attributable to the assets and operations Contributed by
Phillips or any of its Subsidiaries, (ii) any and all Taxes other than Income
Taxes of any Phillips Acquired Entity for any Pre-Closing Period, and (iii) any
Taxes other than Income Taxes incurred by the Company or any of its Subsidiaries
or any member of the Chevron Group in connection with a breach of any
representation or warranty made by Phillips in Section 6.2; provided, however,
in the case of clauses (i) and (ii), other than Taxes referred to in Section
2.4(f) and except as provided in Section 12.4(b) of the Contribution Agreement;
Any and all Taxes with respect to the operations, assets,
investments and activities of Phillips and its Subsidiaries that would not have
arisen but for Treasury Regulation Section 1.1502-6 or any comparable or similar
provisions under state, local or foreign laws or regulations; and
Except as set forth in Section 12.4 of the Contribution
Agreement, any and all Taxes arising from or relating to the Phillips Excluded
Assets and Liabilities or any transfer thereof by the Company or any of its
Subsidiaries pursuant to Section 2.2 of the Contribution Agreement.
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Indemnification by the Company. Except for Taxes described in
the indemnifications set forth in Section 2.1 and 2.2, the Company shall be
liable for, shall pay or cause to be paid, and shall indemnify and hold harmless
each member of the Chevron Group and each member of the Phillips Group against
(i) any and all Taxes of the Company and its Subsidiaries (including the Chevron
Acquired Entities and the Phillips Acquired Entities), (ii) any and all Taxes
with respect to any asset transferred to the Company by any member of the
Chevron Group or the Phillips Group pursuant to the Contribution Agreement and
(iii) any Taxes referred to in Section 2.4(f). For the avoidance of doubt, the
Company will not indemnify any member of the Chevron Group or the Phillips Group
for Taxes that arise in a Post-Closing Period as a result of the ownership of
membership interests in the Company.
Limitation on Tax Indemnities.
As provided in Section 9.2(c) of the Contribution Agreement,
the indemnification provided in Sections 2.1, 2.2 and 2.3 shall not be subject
to the limitations set forth in Section 9.5 of the Contribution Agreement except
as otherwise set forth herein.
Chevron's indemnification obligations under Section 2.1(b)
shall not become effective until, and no claims for indemnification under this
Article II may be asserted unless, the aggregate amount of Taxes subject to
indemnification under Section 2.1(b) (determined without regard to this Section
2.4(b)) exceeds the Tax Basket Amount and, if the aggregate amount of Taxes so
determined exceeds the Tax Basket Amount, then Phillips and the Company shall be
entitled to assert claims under this Article II for indemnification for the
amount in excess of the Tax Basket Amount only; provided, that the obligation
with respect to indemnification under Article II hereof shall be subject to, and
included in determining, the Cap. For the avoidance of doubt, Taxes referred to
in Section 2.4(f) are for the account of the Company and are not subject to
indemnification under Section 2.1.
Phillip's indemnification obligations under Section 2.2(b)
shall not become effective until, and no claims for indemnification under this
Article II may be asserted unless, the aggregate amount of Taxes subject to
indemnification under Section 2.2(b) (determined without regard to this Section
2.4(c)) exceeds the Tax Basket Amount and, if the aggregate amount of Taxes so
determined exceeds Tax Basket Amount, then Chevron and the Company shall be
entitled to assert claims under this Article II for indemnification for the
amount in excess of the Tax Basket Amount only; provided, that the obligation
with respect to indemnification under Article II hereof shall be subject to, and
included in determining, the Cap. For the avoidance of doubt, Taxes referred to
in Section 2.4(f) are for the account of the Company and are not subject to
indemnification under Section 2.2.
The amount of any indemnification pursuant to Section 2.1 or
2.2 shall be reduced to the extent both the amount was accrued as a liability
for the indemnified Tax on the C Chem December 31 Balance Sheet or the P Chem
December 31 Balance, as the case may be, and was taken into account in the
calculation of Phillips' Actual Net Working Capital or Chevron's Actual Net
Working Capital under Section 3.3 of the Contribution Agreement, as the case may
be.
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Except as otherwise provided in this Annex B, no party (a "Tax
Indemnifying Party") shall be required to make any indemnity payments to a party
seeking payments (a "Tax Indemnified Party") pursuant to Article II until there
occurs a Final Determination of the liability for which indemnification is
sought. Any such payment to a Tax Indemnified Party shall be made not later than
twenty (20) business days after receipt by the Tax Indemnifying Party of written
notice of such Final Determination together with written notice from the Tax
Indemnified Party stating that any payment for which the Tax Indemnified Party
is to be indemnified pursuant to Article II has been paid by the Tax Indemnified
Party, the payment requested and documentation reasonably establishing payment
of the amount sought to be indemnified. If at any time prior to a Final
Determination a party controlling a Tax Proceeding pursuant to Section 3.1(a) or
(b) hereof elects to pay a Tax and to pursue a claim for refund of such Tax, the
party controlling the Tax Proceeding shall have sole responsibility for the
payment of such Tax and shall be entitled to any refund thereof. The obligations
and rights set forth in the preceding sentence are independent from, and not in
limitation of, the obligations and rights set forth in the first two sentences
of this Section 2.4(e) and the other provisions of Article II.
Neither Chevron nor Phillips shall have any indemnity
obligations to the Company under this Article II or under the Contribution
Agreement with respect to or arising out of any tax matter disclosed in
reasonable detail on any Schedule of the Phillips Disclosure Schedule or the
Chevron Disclosure Schedule, as the case may be.
Notwithstanding any other provision of this Article II, (i) in
the case of a breach of a warranty or representation set forth in Section 6.1,
the amount subject to indemnification under Section 2.1(a) or 2.1(b) shall be
the incremental amount of Taxes incurred by the Company, its Subsidiaries and
the Phillips Group in the aggregate that would not have been incurred but for
such breach of warranty or representation, and (ii) in the case of a breach of a
warranty or representation set forth in Section 6.2, the amount subject to
indemnification under Section 2.2(a) or 2.2(b) shall be the incremental amount
of Taxes incurred by the Company, its Subsidiaries and the Chevron Group in the
aggregate that would not have been incurred but for such breach of warranty or
representation.
To the extent not inconsistent with any provisions of this Tax
Matters Annex, Article III of Annex C to the Contribution Agreement, governing
Dispute Resolution Procedure, shall be incorporated into this Tax Matters Annex.
TAX PROCEDURES
Procedures for Certain Tax Proceedings. Notwithstanding
Section 9.3 or any other contrary provision of the Contribution Agreement:
Chevron shall be entitled to control in all respects,
including with respect to settlement, any Tax Proceeding with respect to any Tax
if Chevron would have an indemnity obligation with respect to such Tax under
Section 2.1 and the resolution of the Tax will not result in any
non-indemnifiable liability for the Company. None of the Company or its
Subsidiaries and Phillips and its Subsidiaries shall be entitled to participate
in any such Tax Proceeding.
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Phillips shall be entitled to control in all respects,
including with respect to settlement, any Tax Proceeding with respect to any Tax
if Phillips would have an indemnity obligation with respect to such Tax under
Section 2.2 and the resolution of the Tax will not result in any
non-indemnifiable liability for the Company. None of the Company or its
Subsidiaries and Chevron and its Subsidiaries shall be entitled to participate
in any such Tax Proceeding.
if (i) neither Chevron nor Phillips is entitled to control a
Tax Proceeding because the Tax which is the subject of the Tax Proceeding is
both an indemnifiable Tax and a non-indemnifiable Tax or (ii) the party entitled
to control a Tax Proceeding elects not to control such Tax Proceeding or fails
to do so, the Tax Matters Partner, acting in accordance with Section 9.6 of the
Amended LLC Agreement, shall control such Tax Proceeding.
Allocation of Certain Taxes.
If a Chevron Acquired Entity or a Phillips Acquired Entity
(each an "Acquired Entity") is permitted but not required under applicable
state, local or foreign Income Tax laws to treat the Closing Date as the last
day of a taxable period, then the parties shall cause such Acquired Entity to
treat that day as the last day of a taxable period.
In the case of Income Taxes and other taxes based upon income
or receipts arising in a taxable period of a Chevron Acquired Entity or a
Phillips Acquired Entity that includes but does not end on the Closing Date,
except as provided in Section 3.2(c), the allocation of such Taxes between the
Pre-Closing Period and the Post-Closing Period shall be made on the basis of an
interim closing of the books as of the end of the Closing Date. For the
avoidance of doubt, for purposes of this Section 3.2(b), the taxable year of
each Acquired Entity that is a partnership or "flowthrough" entity, shall be
treated as if it ended at the close of business on the Closing date and Taxes
attributable to the income and gain of such entities through the close of
business on the Closing date shall be treated as Pre-Closing Period Taxes.
In the case of (i) property Taxes and other taxes that are not
based upon income or receipts and (ii) ad valorem Taxes, in either case
attributable to any taxable period that includes but does not end on the Closing
Date, the portion of such Taxes attributable to the Pre-Closing Period shall be
the amount of such Taxes for the entire taxable period, multiplied by a fraction
the numerator of which is the number of calendar days in such taxable period
ending on and including the Closing Date and the denominator of which is the
entire number of calendar days in such taxable period, and the balance of such
Taxes shall be attributable to the Post-Closing Period.
Filing Responsibility.
Chevron shall prepare and file, or shall cause to be prepared
and filed, any Tax Return for any Income Tax (which this provision only shall
include foreign income taxes) that includes a member of the Chevron Group.
Phillips shall prepare and file, or shall cause to be prepared
and filed, any Tax Return for any Income Tax (which this provision only shall
include foreign income taxes) that includes a member of the Phillips Group.
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The Company shall file or cause to be filed all Tax Returns
with respect to the Company or any of its Subsidiaries for which neither Chevron
nor Phillips has filing responsibility pursuant to (a) or (b) above. The Company
shall not, and shall cause its Subsidiaries not to, file any amended Tax Return
for any Pre-Closing Period, without the prior written consent of Chevron, in the
case of any such Tax Return that could affect the indemnification obligations of
Chevron under this Annex or any Taxes for which Chevron is otherwise
responsible, or Phillips, in the case of any such Tax Return that could affect
the indemnification obligations of Phillips under this Annex or any Taxes for
which Phillips is otherwise responsible.
Cooperation and Exchange of Information. Chevron, Phillips and
the Company shall (and each shall cause its respective Subsidiaries to)
cooperate with one another with respect to Tax matters. As soon as practicable,
but in any event within 30 days after the request of Chevron, Phillips or the
Company, from and after the Closing Date, the Company shall deliver to Chevron
or Phillips, respectively, and Chevron or Phillips, as the case may be, shall
deliver to the Company, such information and data and make available such
employees as Chevron, Phillips or the Company may reasonably request in order to
enable Chevron, Phillips or the Company to complete and file all Tax Returns
which they each may be required to file with respect to the Company and its
Subsidiaries and the Contributed assets and liabilities or to respond to Tax
Proceedings or other inquiries relating to Taxes by any Governmental Entities
and to otherwise enable Chevron, Phillips and the Company each to satisfy their
respective accounting, Tax and other legitimate business requirements. Such
cooperation and information shall include provision of powers of attorney to
Chevron, Phillips or the Company relating to Tax matters (e.g., for the purpose
of signing Returns and defending Tax Proceedings) and promptly forwarding copies
of appropriate notices and forms or other communications received from or sent
to any Governmental Entity that relate to the Company and its Subsidiaries and
the Contributed assets and liabilities, and providing copies of all relevant Tax
Returns, together with accompanying schedules and related workpapers, documents
relating to rulings or other determinations by any Governmental Entities and
records concerning the ownership and tax basis of property, which Chevron,
Phillips or the Company and its Subsidiaries may possess. Chevron, Phillips and
the Company shall (and each shall cause its respective Subsidiaries to) make its
employees and facilities available on a mutually convenient basis to provide
explanation of any documents or information provided hereunder. Notwithstanding
any other provision, (i) Chevron shall not be required to provide any Person
with any consolidated, combined, affiliated or unitary Income Tax Return or copy
thereof that includes Chevron or any other member of the Chevron Group and (ii)
Phillips shall not be required to provide any Person with any consolidated,
combined, affiliated or unitary Income Tax Return or copy thereof that includes
Phillips or any other member of the Phillips Group.
REFUNDS
Chevron Tax Refunds. If the Company or any of its Subsidiaries
or any member of the Phillips Group shall receive (i) a Tax Refund of an Income
Tax of a Chevron Acquired Entity for a Pre-Closing Period or any Tax the
liability for which Chevron indemnified the Company or any of its Subsidiaries
or any member of the Phillips Group or (ii) a Tax Refund
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identified on Schedule B-2 as a Chevron Excluded Asset, the recipient shall
promptly pay over to Chevron an amount equal to such Tax Refund.
Phillips Tax Refunds. If the Company or any of its
Subsidiaries or any member of the Chevron Group shall receive (i) a Tax Refund
of an Income Tax of a Phillips Acquired Entity for a Pre-Closing Period or any
Tax the liability for which Phillips indemnified the Company or any of its
Subsidiaries or any member of the Chevron Group or (ii) a Tax Refund identified
on Schedule B-1 as a Phillips Excluded Asset, the recipient shall promptly pay
over to Phillips an amount equal to such Tax Refund.
Company Tax Refunds. The Company shall be entitled to any Tax
Refunds of the Company or any of its Subsidiaries (or with respect to any asset
Contributed by any member of the Phillips Group or the Chevron Group) other than
such Tax Refunds to which Chevron or Phillips is entitled under Section 4.1 or
4.2 above.
MISCELLANEOUS
Survival. The provisions of this Tax Matters Annex shall
survive Closing until the tenth anniversary of the Closing Date (the
"Termination Date"), provided, however, (i) in the case of a provision or
provisions of this Tax Matters Annex relating to a breach of warranty or
representation set forth in Article VI, such provision shall survive as to such
representation or warranty until the earlier of such tenth anniversary or 30
days after the expiration of the statute of limitations applicable to such
representation or warranty and (ii) in the case of any provision or provisions
of this Tax Matters Annex relating to a Tax matter involved in an administrative
proceeding or litigation on the Termination Date, such provision shall survive
until there occurs a Final Determination with respect to such matter.
Tax Sharing Agreements. Any Tax sharing agreement or
arrangement between Chevron or any member of the Chevron Group, on the one hand,
and any Chevron Acquired Entity, on the other hand, shall be terminated as of
the Closing Date and shall thereafter have no further effect for any taxable
year (whether the current year, a future year, or a past year). Any Tax sharing
agreement or arrangement between Phillips or any member of the Phillips Group,
on the one hand, and any Phillips Acquired Entity, on the other hand, shall be
terminated as of the Closing Date and shall thereafter have no further effect
for any taxable year (whether the current year, a future year, or a past year).
TAX REPRESENTATIONS
Chevron Tax Representations. Chevron hereby represents and
warrants to each of Phillips and the Company that, except (i) as disclosed in
Section B-6.1 of the Chevron Disclosure Schedule and (ii) to the extent that any
breach, failure or inaccuracy, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect:
as of the date the assets are Contributed, all Tax Returns
that were or are required
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to be filed on or prior to such date by or with respect to any Chevron Acquired
Entity have been or will be duly and timely filed and all such Tax Returns are
and will be complete and accurate in all material respects;
as of the date the assets are Contributed, all Taxes shown to
be due on the Tax Returns referred to in clause (a) have been or will be paid in
full; and
except that no representations are being made with respect to
Chevron Phillips Chemical Company LP, Chevron Phillips Chemical Company LLC,
Chevron Phillips Chemical Holdings I LLC and Chevron Phillips Chemical Holdings
II LLC and other than those entities (or arrangements treated as entities for
U.S. federal income tax purposes) identified in Section B-6.1 of the Chevron
Disclosure Schedule, each partnership, joint venture, limited liability company
and other entity (or arrangement treated as an entity for U.S. federal income
tax purposes) Contributed by Chevron or any of its Subsidiaries has since the
date of its formation continually qualified and been treated as, and at the time
it is Contributed will qualify and be treated as, a disregarded entity (i.e., an
entity that is not treated as an entity separate from its owners under Section
301.7701-3 of the Income Tax Regulations) or a partnership for U.S. federal
income tax purposes.
Phillips Tax Representations. Phillips hereby represents and
warrants to each of Chevron and the Company that, except (i) as disclosed in
Section B-6.2 of the Phillips Disclosure Schedule and (ii) to the extent that
any breach, failure or inaccuracy, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on any Phillips
Acquired Entity:
as of the date the assets are Contributed, all Tax Returns
that were or are required to be filed on or prior to such date by or with
respect to any Phillips Acquired Entity have been or will be duly and timely
filed and all such Tax Returns are and will be complete and accurate in all
material respects;
as of the date the assets are Contributed, all Taxes shown to
be due on the Tax Returns referred to in clause (a) have been or will be paid in
full; and
except that no representations are being made with respect to
Chevron Phillips Chemical Company LP, Chevron Phillips Chemical Company LLC,
Chevron Phillips Chemical Holdings I LLC and Chevron Phillips Chemical Holdings
II LLC and other than those entities (or arrangements treated as entities for
U.S. federal income tax purposes) identified in Section B-6.2 of the Phillips
Disclosure Schedule, each partnership, joint venture, limited liability company
and other entity (or arrangement treated as an entity for U.S. federal income
tax purposes) Contributed by Phillips or any of its Subsidiaries has since the
date of its formation continually qualified and been treated as, and at the time
it is Contributed will qualify and be treated as, a disregarded entity (i.e., an
entity that is not treated as an entity separate from its owners under Section
301.7701-3 of the Income Tax Regulations) or a partnership for U.S. federal
income tax purposes.
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