EXHIBIT 2.4
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AMENDED AND RESTATED
LIMITED PARTNERSHIP
AGREEMENT
OF
PO JV, LP
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ORGANIZED UNDER THE DELAWARE
REVISED UNIFORM LIMITED PARTNERSHIP ACT
________________________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I ORGANIZATION MATTERS.............................................................................. 2
Section 1.1 Formation of Partnership; Amended and Restated Agreement.................................. 2
Section 1.2 Name...................................................................................... 2
Section 1.3 Business Offices.......................................................................... 2
Section 1.4 Purpose and Business...................................................................... 2
Section 1.5 Filings................................................................................... 2
Section 1.6 Power of Attorney......................................................................... 3
Section 1.7 Term...................................................................................... 4
ARTICLE II CAPITAL CONTRIBUTIONS............................................................................ 4
Section 2.1 Holdings of Units......................................................................... 4
Section 2.2 Closing Date Property Contributions and Capital Account Balances.......................... 4
Section 2.3 Monthly Production Cost Contributions for Operating Costs................................. 5
Section 2.4 Mandatory Capital Projects; Discretionary Capital Projects................................ 7
Section 2.5 Allocation of Costs and Revenues Between PO Product and Co-Product........................ 8
Section 2.6 No Other Contributions.................................................................... 8
Section 2.7 Payment Disputes.......................................................................... 8
Section 2.8 Capital Accounts.......................................................................... 8
Section 2.9 No Return of or on Property............................................................... 10
Section 2.10 Issuance of Additional Units for Discretionary Capital Projects That Increase Capacity.... 10
ARTICLE III DISTRIBUTIONS................................................................................... 11
Section 3.1 Operating Distributions In-Kind........................................................... 11
Section 3.2 Cash Distributions........................................................................ 11
Section 3.3 Characterization of Proceeds.............................................................. 11
Section 3.4 Liquidating Distributions................................................................. 12
Section 3.5 Withholding............................................................................... 12
ARTICLE IV BOOK AND TAX ALLOCATIONS......................................................................... 12
Section 4.1 General Book Allocations.................................................................. 12
Section 4.2 Federal Tax Allocations................................................................... 14
ARTICLE V ACCOUNTING, FINANCIAL REPORTING AND TAX MATTERS................................................... 15
Section 5.1 Fiscal Year............................................................................... 15
Section 5.2 Method of Accounting for Financial Reporting Purposes..................................... 15
Section 5.3 Books and Records; Right of Partners to Audit............................................. 15
Section 5.4 Reports and Financial Statements.......................................................... 15
Section 5.5 Method of Accounting for Book and Tax Purposes............................................ 16
Section 5.6 Taxation.................................................................................. 16
Section 5.7 Delegation................................................................................ 18
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ARTICLE VI RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER................................................ 18
Section 6.1 Name and Address......................................................................... 18
Section 6.2 Duties of the General Partner............................................................ 18
Section 6.3 Powers................................................................................... 19
Section 6.4 Reimbursement............................................................................ 19
Section 6.5 Action by the General Partner............................................................ 19
Section 6.6 Delegation to Operator................................................................... 19
Section 6.7 Segregation of Funds..................................................................... 20
Section 6.8 Limitation on Liens...................................................................... 20
Section 6.9 Restoration Following Casualty Loss...................................................... 20
ARTICLE VII RIGHTS, POWERS AND DUTIES OF THE LIMITED PARTNERS.............................................. 21
Section 7.1 Name and Address......................................................................... 21
Section 7.2 Limited Partners Shall Not Act; Limitation of Responsibility............................. 21
Section 7.3 Limited Partner Consents................................................................. 22
Section 7.4 Failure of General Partner to Enforce Certain Obligations of Affiliates.................. 22
Section 7.5 Additional Operator Services............................................................. 23
ARTICLE VIII FORECASTS; ANNUAL PLAN AND BUDGET; CAPITAL PROJECTS........................................... 23
Section 8.1 Three Year Demand Forecast; Annual Forecast, Annual Plan and Annual Budget............... 23
Section 8.2 Rolling Product Forecast................................................................. 24
Section 8.3 Mandatory Capital Projects............................................................... 24
Section 8.4 Discretionary Capital Projects........................................................... 25
Section 8.5 Mutual Provision of Information.......................................................... 28
ARTICLE IX RIGHTS OF THE PARTNERS.......................................................................... 28
Section 9.1 Delegation............................................................................... 28
Section 9.2 General Authority........................................................................ 28
Section 9.3 Limitation on Fiduciary Duty; Competition................................................ 29
Section 9.4 Partner Covenants........................................................................ 29
Section 9.5 Special Purpose Entities................................................................. 30
Section 9.6 Use of Technology........................................................................ 30
ARTICLE X TRANSFERS AND PLEDGES GENERALLY.................................................................. 31
Section 10.1 Restrictions on Transfer and Prohibition on Pledge....................................... 31
Section 10.2 Transfer of Units by the Limited Partners................................................ 31
Section 10.3 Transfer of Units by the General Partner................................................. 31
Section 10.4 Transfer Prerequisites................................................................... 32
Section 10.5 Rights of Transferee; Closing Date of Transfer........................................... 32
Section 10.6 Transfer to Wholly Owned Affiliate....................................................... 32
Section 10.7 Right to Admit New Partners for Capacity Expanding Discretionary Capital Project......... 33
Section 10.8 Right of General Partner to Classify Series B Units...................................... 33
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ARTICLE XI WITHDRAWAL; REMOVAL OF THE GENERAL PARTNER; REMEDIES AND PURCHASE OPTION FOR UNCURED OFFTAKE
AND PAYMENT DEFAULT; REMEDIES FOR GENERAL PARTNER BREACH OF OBLIGATIONS TO DELIVER
PRODUCT.................................................................................... 33
Section 11.1 Withdrawal of Limited Partners.............................................................. 33
Section 11.2 Non-Supply Failure Step-in.................................................................. 33
Section 11.3 Supply Failure Step-in...................................................................... 35
Section 11.4 Remedies and Purchase Option for Uncured Partner Offtake or Payment Default................. 38
Section 11.5 Appraisal Procedures........................................................................ 40
Section 11.6 Remedies of Limited Partners for Failure of General Partner to Deliver Product.............. 40
Section 11.7 Mitigation.................................................................................. 40
ARTICLE XII DISSOLUTION, LIQUIDATION AND TERMINATION.......................................................... 41
Section 12.1 Dissolution and Termination................................................................. 41
Section 12.2 Procedures Upon Dissolution................................................................. 41
Section 12.3 Termination of Partnership.................................................................. 42
Section 12.4 Asset and Liability Statement............................................................... 42
ARTICLE XIII CONFIDENTIALITY.................................................................................. 43
Section 13.1 Confidentiality and Use of Information...................................................... 43
Section 13.2 Survival.................................................................................... 44
Section 13.3 Relationship with Other Agreements.......................................................... 44
ARTICLE XIV INDEMNITY; WAIVER OF CLAIMS....................................................................... 44
Section 14.1 Partner Indemnity........................................................................... 44
Section 14.2 Waiver of Claims............................................................................ 44
Section 14.3 Indemnification Procedures.................................................................. 45
Section 14.4 Joint Defense............................................................................... 47
Section 14.5 Extent of Indemnification, Release and Limitation on Reimbursement Liability................ 47
Section 14.6 Permitted Contribution...................................................................... 48
ARTICLE XV Miscellaneous...................................................................................... 48
Section 15.1 Construction................................................................................ 48
Section 15.2 Notices..................................................................................... 48
Section 15.3 Severability................................................................................ 49
Section 15.4 Counterparts................................................................................ 49
Section 15.5 Governing Law............................................................................... 49
Section 15.6 Jurisdiction; Consent to Service of Process; Waiver......................................... 49
Section 15.7 Specific Performance........................................................................ 50
Section 15.8 Amendment................................................................................... 50
Section 15.9 Performance Extended to Next Business Day................................................... 50
Section 15.10 Waiver...................................................................................... 50
Section 15.11 Dispute Resolution.......................................................................... 50
Section 15.12 Successors and Assigns...................................................................... 50
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Section 15.13 Further Assurances.......................................................................... 51
Section 15.14 Benefits of Agreement Restricted to the Parties............................................. 51
Section 15.15 Waiver of Right to Partition................................................................ 51
Section 15.16 Payment Terms and Interest Calculation...................................................... 51
Section 15.17 Mutual Provision of Information............................................................. 51
Section 15.18 Adversely Impacted Partner Recourse......................................................... 51
EXHIBITS
EXHIBIT A: Defined Terms
EXHIBIT B: Dispute Resolution Procedures
EXHIBIT C: Initial Three Year Demand Forecast
EXHIBIT D: Initial Annual Plan
EXHIBIT E: [Intentionally Deleted]
EXHIBIT F: Delivery Point
SCHEDULES
Schedule 2.1: Ownership of Units; Names and Addresses of Partners; Capital
Account Balances as of the Closing Date
Schedule 2.3: G&A Lyondell Personnel Cost Basket
Schedule 6.3: Lyondell Insurance Program Requirements
Schedule 9.6: Accommodation Fee Procedures
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AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
PO JV, LP
This Amended and Restated Limited Partnership Agreement (this
"Agreement") of PO JV, LP (the "Partnership") is dated as of the Closing Date
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and is entered into by and among PO Offtake LP, a Delaware limited partnership
("Lyondell GP", in its capacity as general partner of the Partnership, and
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"Lyondell LP", in its capacity as a limited partner of the Partnership), and
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BAYPO Limited Partnership, a Delaware limited partnership ("Xxxxx XX").
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The definitions of capitalized terms used in this Agreement, including
Exhibits, Schedules and Appendices hereto, are set forth in Exhibit A hereto.
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RECITALS
(A) Lyondell GP, Lyondell LP and Lyondell SAT, Inc. (together, the "Initial
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Partners") entered into the Limited Partnership Agreement of the
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Partnership, dated as of March 17, 2000 (the "Initial Agreement").
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(B) As contemplated by the Master Transaction Agreement, Lyondell GP,
Lyondell LP and Xxxxx XX desire to establish a joint venture in the
form of a limited partnership to engage in the production of PO and
related co-products in the United States.
(C) In accordance with the Master Transaction Agreement, (i) the Initial
Partners have contributed to the Partnership the Plant Facilities and
an undivided interest with correlative capacity reservation in certain
of the Infrastructure Assets and (ii) the Transaction Documents have
been entered into.
(D) Simultaneously with the execution and delivery of this Agreement and
pursuant to the Master Transaction Agreement and the PIPA, (i) Xxxxx XX
has made a payment of the Bayer PO Partnership Payment Amount to
Lyondell LP to purchase Series A Units comprising a limited partnership
interest in the Partnership and (ii) in consideration of such payment,
Lyondell GP and Lyondell LP have agreed to admit Xxxxx XX to the
Partnership as a limited partner and to amend and restate the Initial
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto, it is hereby agreed as follows:
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ARTICLE I
ORGANIZATION MATTERS
Section 1.1 Formation of Partnership; Amended and Restated Agreement.
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The Certificate of Limited Partnership was filed with the Secretary of State of
the State of Delaware on March 17, 2000. The Initial Agreement was entered into
on March 17, 2000. The Partners desire to enter into this Agreement, which
amends and restates the Initial Agreement and constitutes the limited
partnership agreement of the Partnership as of the date hereof. Except as
expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall be
governed by the Act. Without the need for consent of any Person, upon execution
of the PIPA, and Lyondell LP's receipt of the Bayer PO Partnership Payment
Amount for Bayer LP's limited partnership interest in the Series A Units, Xxxxx
XX is hereby admitted to the Partnership as a limited partner of the Partnership
holding Series A Units. Subject to the restrictions set forth in this Agreement,
the Partnership shall have the power to exercise all the powers and privileges
granted by this Agreement and by the Act, together with any powers incidental
thereto, so far as such powers and privileges are necessary, appropriate,
convenient or incidental for the conduct, promotion or attainment of the
purposes of the Partnership.
Section 1.2 Name. The name of the Partnership is PO JV, LP. The
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Partnership's business may be conducted under such name or any other name or
names deemed advisable by the General Partner; provided, however, that the
Partnership shall not conduct business under any name that includes the word
"Bayer" or any trademark registered by Bayer or any Affiliate of Bayer without
Bayer LP's previous written consent. The General Partner will comply or cause
the Partnership to comply with all Applicable Law and other requirements
relating to fictitious or assumed names.
Section 1.3 Business Offices. The principal place of business of the
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Partnership shall be 2 Greenville Crossing, 0000 Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxx 00000, or such other place as the General Partner may from
time to time determine. The registered agent of the Partnership in the State of
Delaware is The Corporation Trust Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000.
Section 1.4 Purpose and Business. The business of the Partnership shall
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be to, directly or indirectly, (i) own, operate and produce PO Product and Co-
Product manufacturing facilities at the Complexes and distribute PO Product and
Co-Product, as applicable, to the Partners, (ii) own an undivided interest in
certain of the Infrastructure Assets at each Complex pursuant to the
Infrastructure Assets Capacity Reservation Instruments, (iii) acquire and
dispose of properties and other assets used or useful in connection with the
foregoing and (iv) do all things necessary, appropriate, convenient or
incidental in connection with the ownership or financing of such business and
activities, or otherwise in connection with the foregoing, as are permitted
under the Act.
Section 1.5 Filings. The General Partner shall, or shall cause the
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Partnership to, execute, swear to, acknowledge, deliver, file or record in
public offices and publish all such certificates, notices, statements or other
instruments, and take all such other actions, as may be required by Applicable
Law (i) for the formation, reformation, qualification, registration,
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operation or continuation of the Partnership in any jurisdiction, (ii) to
maintain the limited liability of the Limited Partners, (iii) to preserve the
Partnership's status as a partnership for tax purposes or (iv) otherwise to
comply with Applicable Law. Upon request of the General Partner, the Limited
Partners shall execute all such certificates and other documents as may be
necessary, in the sole judgment of the General Partner, in order for the General
Partner to accomplish all such executions, swearings, acknowledgments,
deliveries, filings, recordings in public offices, publishings and other acts,
except that no Limited Partner shall be required to execute any such certificate
or document which, in the reasonable judgment of such Limited Partner, would
result in either (i) a violation of Applicable Law or (ii) a breach of such
Limited Partner's obligations under any of the Transaction Documents or any
other material agreement to which such Limited Partner is a Party and that is in
existence as of the Closing Date and that is not in conflict with the terms of
this Agreement. The General Partner hereby agrees and covenants that it will
execute any appropriate amendment to the Certificate of Limited Partnership of
the Partnership pursuant to Section 17-204 of the Act to reflect any admission
of a Substitute General Partner in accordance with this Agreement.
Section 1.6 Power of Attorney.
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(a) Each Limited Partner hereby makes, constitutes and appoints the
General Partner and any successor thereto permitted as provided herein,
with full power of substitution and resubstitution, as the true and lawful
agent and attorney-in-fact of such Limited Partner, with full power and
authority in the name, place and stead of such Limited Partner to execute,
swear to, acknowledge, deliver, file or record in public offices and
publish (i) all certificates and other instruments (including counterparts
thereof) which are appropriate to reflect any amendment, change or
modification of or supplement to this Agreement in accordance with the
terms of this Agreement, (ii) all certificates and other instruments and
all amendments thereto which are appropriate or necessary to form, qualify
or continue the Partnership in any jurisdiction, to maintain the limited
liability of such Limited Partner, to preserve the Partnership's status as
a partnership for tax purposes or otherwise to comply with Applicable Law
the failure to comply with which would result in a material adverse effect
and (iii) all conveyances and other instruments or documents which are
appropriate or necessary to reflect the transfers or assignments of
interests in, to or under this Agreement, the dissolution, liquidation and
termination of the Partnership and the distribution of the Partnership
Property in connection therewith, pursuant to the terms of this Agreement.
The power of attorney granted under this Section 1.6 is irrevocable until
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the earlier to occur of (i) the termination of this Agreement or (ii) the
withdrawal or removal of the General Partner in accordance with the terms
of Section 11.2.
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(b) Each Limited Partner hereby agrees to execute and deliver to the
General Partner within five Business Days after receipt of a written
request therefor such other further statements of interest and holdings,
designations, powers of attorney and other instruments as are necessary to
give effect to the terms of this Section 1.6. The power of attorney granted
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herein shall survive the bankruptcy, dissolution or termination of such
Limited Partner and shall extend to and be binding upon such Limited
Partner's successors and permitted assigns. Each Limited Partner hereby (i)
agrees to be bound by any representations made by the agent and
attorney-in-fact acting in good faith pursuant to such power of attorney
and (ii) waives any and all defenses which may be available
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to contest, negate or disaffirm any action of the agent and attorney-in-
fact taken in accordance with such power of attorney. For the avoidance of
doubt, no power of attorney granted by a Limited Partner under this
Section 1.6 shall be construed to grant any right to the General Partner to
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take any action for which a consent of such Limited Partner is required
under Section 7.3 unless such consent is separately obtained in writing
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from such Limited Partner.
Section 1.7 Term. The term for which the Partnership is to exist as a
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limited partnership is from the date the first filing of the Partnership's
Certificate of Limited Partnership was filed with the office of the Secretary of
State of the State of Delaware through the dissolution and winding-up of the
Partnership in accordance with the provisions of Article XII.
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ARTICLE II
CAPITAL CONTRIBUTIONS
Section 2.1 Holdings of Units. The Partnership will have two series of
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Units, the Series A Units and the Series B Units, each with its own rights and
responsibilities. As of the date hereof, the Units shall be owned as set forth
in Schedule 2.1. The Units shall entitle the holder to the distributions set
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forth in Article III and to the allocation of Profits, Losses and other items
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set forth in Article IV.
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Section 2.2 Closing Date Property Contributions and Capital Account
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Balances.
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(a) As of the Closing Date, Lyondell will have contributed, or will
have caused to be contributed to the Partnership on behalf of Lyondell GP
and Lyondell LP, the Partnership Property existing as of the Closing Date,
subject to the Assumed Liabilities as scheduled in the PIPA, in exchange
for the issuance of Series A Units and Series B Units to Lyondell LP and
Lyondell GP.
(b) Following the sale of the limited partnership interest to Xxxxx
XX as described in Section 1.1, the Capital Account balances of the
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Partners shall be set forth in Schedule 2.1.
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(c) No later than 90 days after the Closing Date, the Lyondell
Partners and Xxxxx XX shall endeavor in good faith to agree to an
allocation of the Bayer PO Partnership Payment Amount, and any liability
assumption that constitutes consideration for Tax purposes, among the
assets of the Partnership Property in accordance with Section 1060 of the
Code. If the Lyondell Partners and Xxxxx XX are unable to agree to a final
allocation of such total consideration, the Lyondell Partners and Xxxxx XX
shall select an independent appraisal firm that, in consultation with the
Partners and their respective consultants, shall make a final allocation of
the total consideration consistent with Applicable Law.
(d) The independent appraisal firm shall be selected by agreement of
the Lyondell Partners and Xxxxx XX from a list of nationally-recognized,
independent appraisers nominated by each Partner. In the event that either
Partner fails to nominate a nationally-
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recognized, independent appraiser then the other Partner's separate
appraiser shall be selected. Any determinations of such independent or
separate appraisal firm, as the case may be, shall be conclusive and
binding on the Partnership and the Partners. The Partnership and each
Partner shall file all its Tax Returns consistent with any agreements and
determinations made under Section 2.2(c) and (d).
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(e) The Lyondell Partners and Xxxxx XX shall share 50/50 the fees and
expenses of any independent appraisal firm retained under Section 2.2(d).
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Each Partner shall solely bear the costs of its consultants.
Section 2.3 Monthly Production Cost Contributions for Operating Costs
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(a) On or before the first day of each month, the General Partner, on
behalf of the Partnership, will separately invoice each Partner (the
"Operating Cost Partner Invoice") for additional cash contribution to the
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Partnership by such Partner for the Operating Cost component of Operating
Services Costs. For each Partner, the Operating Cost Partner Invoice will
set forth the forecasted Operating Cost component of Operating Services
Costs for the billed month payable by such Partner, determined in
accordance with the following provisions of this Section 2.3 and the
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remainder of this Article II, plus or minus the difference between
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forecasted Operating Services Costs and the actual Operating Cost component
of Operating Services Cost for the second preceding month. Each Operating
Cost Partner Invoice shall be broken down by category of Operating Services
Costs (as set forth in Section 2.3(d) and Section 2.3(g)), and shall
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contain information sufficient to enable each Partner to evaluate actual
compared to budgeted Operating Services Costs payable by such Partner. Each
Operating Cost Partner Invoice shall be accompanied by reasonable
supporting documentation for items of Operating Services Costs included in
the Operating Cost Partner Invoice and not otherwise included in the Annual
Budget.
(b) Absent manifest error in calculations contained in the Operating
Cost Partner Invoice (if there is manifest error, the Partner will correct
such error and show such recalculation), each Partner shall pay the amounts
invoiced to it by wire transfer within 30 days after receipt of the
Operating Cost Partner Invoice. Interest will accrue on any unpaid invoiced
amounts at the Default Rate from the date due, compounded quarterly, until
such amounts, together with all accrued and unpaid interest thereon, are
paid in full.
(c) The General Partner shall make an annual reconciliation of the
Fixed Costs components of Operating Services Costs payable by each Partner
for each year and provide the reconciliation applicable to each Partner
within 90 days of the end of each calendar year. A retroactive year-end
adjustment shall be made in the next Operating Cost Partner Invoice.
(d) Subject to any adjustments required to implement Section 8.4(g),
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the cash contributions payable by each Series A Unit Partner each month are
the sum of the following, subject to reconciliation in accordance with the
foregoing provisions of this Section 2.3 and, as to the PO Share of
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Operating Services Costs, Exhibit C to the Operating Agreement:
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(i) Xxxxx XX shall pay a portion of the PO Share of the
budgeted Fixed Costs for the Existing Plant Complexes in accordance
with Exhibit C to the Operating Agreement.
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(ii) [This section intentionally left blank.]
(iii) [This section intentionally left blank.]
(iv) The Series A Partners other than Xxxxx XX shall pay the
Partnership PO Share of the Fixed Costs for the Existing Plant
Complexes remaining after Bayer LP's payments under Section 2.3(d)(i).
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(v) Each Series A Unit Partner shall pay the PO Variable Unit
Costs times the pounds of PO Product scheduled to be delivered to the
Partner during the billed month pursuant to the Monthly Production
Statement (subject to subsequent reconciliation for the pounds of PO
Product actually tendered to the Partner for the month). Additionally,
if the Partner's nomination of PO Product for any month is less than
90% of the aggregate nominated offtake included in the Annual Plan for
the month and as a result the Operator incurs Variable Costs that it
is not able to avoid through Reasonable Best Efforts, then, regardless
of any lower nominations included in the Rolling Product Forecast, the
Partner shall be responsible for the Variable Costs that the Operator
is not able to avoid through Reasonable Best Efforts.
(vi) Each Series A Unit Partner shall pay the forecasted
Propylene Cost for the billed month times the pounds of PO Product
scheduled to be delivered to the Partner during the billed month
pursuant to the Monthly Production Statement (subject to subsequent
reconciliation for the pounds of PO Product actually tendered to the
Partner for the month).
(vii) Xxxxx XX shall pay the Bayer Monthly Stipulated G&A
Allocation.
(viii) In the event that the Bayer partner in the Technology
Partnership does not pay in full its annual Bayer Monthly Technology
Budget Payments (without regard to the Bayer Budget Cap), then the
General Partner in conjunction with the Existing Plant Operators shall
make appropriate economic arrangements and apportionment of the cost
savings benefits resulting from process development research so that
Xxxxx XX does not participate in the portion of any cost saving,
reliability improvement or other performance enhancement corresponding
to the portion of the annual Bayer Monthly Technology Budget Payments
to which Xxxxx XX did not contribute its full share.
(ix) Each Series A Partner shall pay the forecasted PO
Additional Monthly Costs for the billed month determined in accordance
with Section 2.3(e), times the Partner's Series A Percentage Interest.
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(x) Each Series A Partner shall pay any incremental costs
incurred by the Operator or the General Partner to accommodate the
special needs of a Partner
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and agreed by such Partner, including resulting from any agreed
deviations from the Monthly Production Statement for any month.
(e) The "PO Additional Monthly Costs" are (to the extent that
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such costs are not included in the budget for Fixed Costs at the Existing
Plants and without duplication of other components of Operating Services
Costs or other PO Additional Monthly Costs) the Partnership Existing Plant
PO Share of:
(i) Casualty Restoration Costs, subject to Section 7.3(j);
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(ii) costs or Damages incurred by any Existing Plant
Operator in connection with any Third Party Claim to the extent
that such Third Party Claim is of the type covered by Lyondell's
insurance policies with respect to the applicable Existing Plant
Complex and is below the self-insurance and/or deductible limits
under such policies; and
(iii) costs incurred by any Existing Plant Operator as a
result of Force Majeure, excluding any Operator Retained
Obligation.
(f) The Operating Cost components of the Operating Services Costs
payable by the Series A Unit Owners shall be calculated on a System-wide Pooled
Cost Basis in accordance with Exhibit C to the Operating Agreement.
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(g) The cash contributions payable by each Series B Unit Partner
each month are the sum of the following, subject to reconciliation in accordance
with the foregoing provisions of this Section 2.3:
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(i) the Partner's Series B Percentage Interests times all
forecasted Operating Services Costs for the billed month
remaining after the allocation of Operating Services Costs to the
Series A Unit Partners under the foregoing provisions of this
Section 2.3, excluding incremental Operating Services Costs
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incurred by the Operator or the General Partner to accommodate
special needs of any Partner, including any agreed deviations
from the Monthly Production Statement for any month;
(ii) incremental Operating Services Costs incurred by the
Operator or the General Partner to accommodate special needs of
such Series B Unit Partner, including any agreed deviations from
the Monthly Production Statement for any month; and
(iii) all costs charged to and liabilities of the
Partnership not otherwise allocated to the Series A Partners
under the terms of this Agreement.
Section 2.4 Mandatory Capital Projects; Discretionary Capital Projects.
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Each Partner shall be separately invoiced (a "Partner Capital Cost Invoice") for
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and shall timely pay its invoiced share of the Capital Costs for Maintenance
Capital Projects, EHS Capital Projects and Discretionary Capital Projects with
respect to the Plant Facilities and Infrastructure Assets of each Complex as to
which the Partner is participating in the Capital Costs. The Partner Capital
Cost Invoice shall separately itemize for each Plant Facility each Above
Threshold Capital
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Project and shall show the project funding for each itemized Above Threshold
Capital Project. Each quarter the Partner Capital Cost Invoice shall separately
itemize and show for each Plant Facility the project funding for each Below
Threshold Capital Project. Each Partner shall pay the amount invoiced within 30
days of invoice. The Partner Capital Cost Invoice shall show for each Plant
Facility each Capital Project not previously invoiced the allocation of the
Capital Costs for such Capital Project between PO Product and Co-Product in
accordance with Exhibit D to the Operating Agreement. The invoiced amounts with
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respect to such Capital Projects shall be based on the forecasted expenditures
for the month invoiced for such Capital Projects, plus or minus the difference
between the forecasted Capital Costs and the actual Capital Costs for the second
preceding month for the Capital Project. The invoiced amounts to all Partners
shall be sufficient so that there is no out-of-pocket funding by the General
Partner or the Operator of Capital Costs.
Section 2.5 Allocation of Costs and Revenues Between PO Product and Co-
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Product.
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(a) The PO Share for any Operating Cost item shall be determined
based on the PO Cost Allocation Methodology. In the case of revenues (e.g.,
from asset dispositions), the allocation shall be made based on the extent
to which the revenue item is attributable to the production of PO Product
compared to Co-Product.
(b) For any Maintenance Capital Project, EHS Capital Project and to
the extent applicable, Discretionary Capital Project, the PO Share shall be
determined in accordance with Exhibit D to the Operating Agreement.
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Section 2.6 No Other Contributions. Except as expressly set forth in
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this Agreement, no Partner shall be permitted or required to make any additional
cash contribution to the Partnership.
Section 2.7 Payment Disputes.
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(a) Any Partner may object to invoiced amounts at any time before, at
the time of or after payment is made, provided such objection is made in
writing before or in the next periodic audit of Operating Services Costs
pursuant to Exhibit C to the Operating Agreement. Payment of any Partner
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Invoice shall not constitute approval thereof. The General Partner and the
disputing Partner shall meet as expeditiously as possible to resolve any
dispute. The disputing Partner must timely pay the disputed items in full
pending resolution of the dispute. Any dispute that is not resolved in
connection with an audit under Exhibit C to the Operating Agreement shall
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be resolved in accordance with Exhibit B.
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(b) Interest will accrue on any unpaid invoiced amount from the date
due until paid in full at the Default Rate.
Section 2.8 Capital Accounts. The procedures regarding Capital Accounts
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are as follows:
(a) A separate Capital Account shall be established and maintained in
respect of each Partner.
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(b) Each Partner's Capital Account shall be credited with (i) the
amount of cash and the fair market value of other property (net of
liabilities that the Partnership is considered to assume or take subject to
under Section 752 of the Code) contributed by such Partner to the capital
of the Partnership and (ii) allocations to it pursuant to Article IV of
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income (or items thereof) including tax-exempt income and gain. A Partner's
Capital Account shall be debited with (i) the cash and fair market value of
property distributed to such Partner (net of liabilities that such Partner
is considered to assume or take subject to under Section 752 of the Code),
(ii) allocations to it of expenditures of the Partnership described in
Section 705(a)(2)(b) of the Code and (iii) allocations to it pursuant to
Article IV and of deduction or loss (or items thereof). If any property
----------
other than cash is distributed to a Partner, the Capital Accounts of the
Partners shall be adjusted as if the property had instead been sold by the
Partnership for a price equal to its fair market value, with the resulting
gain or loss allocated among the Partners pursuant to Article IV and the
----------
proceeds thereof distributed.
(c) In the event that any Partnership Interest or portion thereof is
transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor Partner to the
extent such Capital Account relates to the transferred Partnership Interest
or portion thereof.
(d) For purposes of adjusting the Partners' Capital Accounts upon the
distribution of PO Product and Co-Product pursuant to Section 2.8(b), the
--------------
fair market value of PO Product and Co-Product shall be based upon each
Partner's realizations from the sale or other disposition of the PO Product
and Co-Product distributed to such Partner. Each Partner shall report the
appropriate fair market value amounts to the Partnership on a quarterly
basis for PO Product and Co-Product distributed to such Partner. The
Partnership shall use such fair market value amounts for purposes of
maintaining Capital Accounts.
(e) The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Section 1.7041(b)
and shall be interpreted and applied in a manner consistent with such
Regulations. In the event that the General Partner shall determine, after
consultation with the other Partners, that it is prudent to modify the
manner in which the Capital Accounts are computed in order to comply with
changes in such Regulations or for other reasons, the General Partner may
in its sole discretion make such modification; provided, however, that
should another Partner reasonably deem that any such modification may be
detrimental to such other Partner, the General Partner shall refrain from
making such modification without first obtaining the consent of such other
Partner, which consent shall not unreasonably be withheld.
9
Section 2.9 No Return of or on Property. Except as provided in Articles
--------------------------- --------
III and IV, no Partner shall receive any interest or other return on its capital
--- --
contributions or on the balance in its Capital Account. Except as provided in
Articles III and IV, no Partner shall receive a return of its capital
contributions.
Section 2.10 Issuance of Additional Units for Discretionary Capital
------------------------------------------------------
Projects That Increase Capacity
-------------------------------
(a) For any Discretionary Capital Project to either Plant Facility
that increases production of PO Product at such Plant Facility, each Series
A Unit Partner participating in such Discretionary Capital Project shall be
issued additional Series A Units in an amount equal to (i) the incremental
capacity in annual pounds of PO Product demonstrated from such
Discretionary Capital Project times (ii) the percentage participation of
such Series A Unit Partner in the cost of such Discretionary Capital
Project compared to that of all participating Series A Unit Partners
divided by (iii) the total annual PO Product capacity of the Plant
Facilities before taking into account the demonstrated incremental capacity
from the Discretionary Capital Project times (iv) the total number of
Series A Units then outstanding.
(b) For any Discretionary Capital Project to either Plant Facility
that increases production of Co-Product at such Plant Facility, each Series
B Unit Partner participating in such Discretionary Capital Project shall be
issued additional Series B Units in an amount equal to (i) the incremental
capacity in annual Pounds of Co-Product demonstrated from such
Discretionary Capital Project times (ii) the percentage participation of
such Series B Unit Partner in the cost of such Discretionary Capital
Project compared to that of all participating Series B Unit Partners,
divided by (iii) the total annual Co-Product capacity of the Plant
Facilities before taking into account the demonstrated incremental capacity
from the Discretionary Capital Project times (iv) the total number of
Series B Units then outstanding.
(c) For purposes of allocating Capital Costs for the period from the
first invoicing of a capacity expansion Capital Project until the increased
PO Product and Co-Product capacity is actually demonstrated, the Partners'
Pro Rata Share shall be calculated taking into account the expected
additional Series A and Series B Units, as applicable, to be issued under
this Section 2.10 for such capacity increase. Once the actual number of
------------
Units is issued based on the actual demonstrated capacity increase, the
Partners shall make retroactive adjustments, with interest at the Interest
Rate, for differences between the invoiced amounts under Section 2.4 paid
-----------
by the Partners for Capital Costs and PO Additional Monthly Amounts and
what such payments would have been based on the number of Series A and
Series B Units actually issued.
10
ARTICLE III
DISTRIBUTIONS
Section 3.1 Operating Distributions In-Kind
-------------------------------
(a) Subject to Section 17-607 of the Act, the Partnership will
distribute and each Partner will accept:
(i) to each holder of Series A Units, its Series A Percentage
Interest of PO Product that is produced from the Plant Facilities, as
and when produced, subject to the limitation that (x) Xxxxx XX shall
not be entitled to aggregate distributions in any year in excess of
the Bayer Annual PO Offtake Amount, and (y) Lyondell LP shall be
entitled to distributions of any such excess amount; and
(ii) to each holder of Series B Units, its Series B Percentage
Interest of Co-Product that is produced from the Plant Facilities, as
and when produced.
(b) Each Partner shall offtake all on-spec PO Product and Co-Product
that is distributed to it by the Partnership pursuant to Section 3.1(a) and
--------------
make cash contributions to the Partnership with respect to such offtake in
accordance with Section 2.3; provided, however, Xxxxx XX shall have no
-----------
obligation to offtake more than 110% of the pounds of PO Product set forth
in the Monthly Production Statement, and any such excess above 110% of the
pounds at PO Product set forth in the Monthly Production Statement shall
not be credited against the Bayer PO Annual Offtake Amount unless and to
the extent that Bayer accepts delivery thereof. A Partner may in its sole
discretion choose to accept off-spec PO Product or Co-Product and thereby
shall pay for such product in accordance with Section 2.3 and accept
-----------
responsibility for such product on the same basis as if the product were
on-spec product.
(c) The General Partner shall use Reasonable Best Efforts to cause the
Operator to deliver to each Partner PO Product and/or Co-Product meeting
specifications each month in accordance with the Monthly Production
Statement for such month. Actual deliveries of PO Product and Co-Product
shall be subject to Disruption Events.
Section 3.2 Cash Distributions. Except as may otherwise be agreed by
------------------
each of the Partners, the Partnership will not make any distributions of cash or
property except as otherwise provided in this Article III.
-----------
Section 3.3 Characterization of Proceeds. The General Partner shall
----------------------------
classify all proceeds received by the Partnership from the sale, exchange,
involuntary conversion or other disposition of Partnership assets as "PO
--
Proceeds" or "Co-Product Proceeds." The characterization of proceeds will be
-------- -------------------
made in accordance with the characterization of the assets to which such
proceeds relate, which characterization shall be made in accordance with Section
-------
2.5. Except as otherwise provided, the PO Proceeds will be distributed Pro Rata
---
to the holders of the Series A Units and the Co-Product Proceeds will be
distributed Pro Rata to the holders of the Series B Units, subject to
adjustments for the Partners' relative contributions to Capital Projects.
11
Section 3.4 Liquidating Distributions. Distributions to the Partners of
-------------------------
cash or property arising from a liquidation of the Partnership shall be made in
accordance with the Capital Account balances of the Partners as provided in
Section 12.2(d).
---------------
Section 3.5 Withholding. The Partnership is authorized to withhold from
-----------
distributions to a Partner and pay over to a foreign, federal, state or local
government, any amounts required to be withheld pursuant to the Code or any
provisions of any other foreign, federal, state or local law. Any amounts
required to be withheld by the Partnership with respect to distribution of PO
Product or Co-Product shall be funded by capital contributions from the Partner
receiving such distribution. Any amounts so withheld shall be treated as
distributed to such Partner pursuant to this Article III for all purposes of
-----------
this Agreement and shall be offset against any amounts otherwise distributable
to such Partner.
ARTICLE IV
BOOK AND TAX ALLOCATIONS
Section 4.1 General Book Allocations. This Section 4.1 controls
------------------------ -----------
Partnership allocations for book purposes. As used herein, "book" means the
----
allocations used to determine debits and credits to the Capital Accounts of the
Partners and to determine the amounts distributable to the Partners pursuant to
Article III and Section 12.2(d). It does not refer to the method in which books
----------- ---------------
are maintained for financial reporting purposes pursuant to Section 5.2. The
-----------
book allocations for the Partnership are as follows:
(a) Distributions. For purposes of maintaining Capital Accounts in
-------------
accordance with Section 2.8 (and applying the constructive sale provision
-----------
contained in the last sentence of Section 2.8(b)), the Profit and Loss
--------------
calculated for book purposes in connection with the distribution of product
to the Partners shall be allocated to each Partner in accordance with the
distributions of PO Product and Co-Product made to that Partner.
(b) Depreciation.
------------
(i) Except as otherwise provided, depreciation deductions
with respect to PO Assets shall be allocated among holders of Series A
Units in accordance with their Series A Percentage Interests.
Depreciation deductions with respect to Co-Product Assets shall be
allocated among holders of Series B Units in accordance with their
Series B Percentage Interests.
(ii) If Capital Costs with respect to the Plant Facilities are
funded by the Partners other than in proportion to their then current
Series A Percentage Interests or Series B Percentage Interests,
respectively, depreciation deductions with respect to such
expenditures shall be allocated among the Partners in accordance with
the manner in which the Capital Costs were funded.
(c) Product Costs. Deductions attributable to Operating Services
-------------
Costs invoiced to the Partnership by the Operator shall be allocated among
the Partners in accordance with the manner in which those costs are funded
pursuant to Section 2.3.
-----------
12
(d) Gain or Loss from the Sale; Involuntary Conversion or Other
-----------------------------------------------------------
Disposition of Partnership Property. The General Partner shall allocate any
-----------------------------------
gains or losses from the sale, exchange, involuntary conversion or other
disposition of all or any part of the Plant Facilities among PO Assets, Co-
Product Assets and Discretionary Capital Projects. Within each category,
such gain or loss shall be allocated as follows:
(i) any gain or loss with respect to PO Assets shall be
allocated among the holders of Series A Units in accordance with their
Series A Percentage Interests, any gain or loss with respect to Co-
Product Assets shall be allocated among the holders of Series B Units
in accordance with their Series B Percentage Interests, and any gain
or loss on Discretionary Capital Projects shall be allocated to the
Partner(s) who funded the cost of those assets in relation to such
funding; and
(ii) in the event that any loss allocated in accordance with the
provisions of this Section 4.1(d) would cause a Limited Partner's
--------------
Capital Account to have a negative balance, such loss shall be
allocated instead to the General Partner and, notwithstanding the
otherwise applicable provisions of this Article IV, any gain
----------
subsequently recognized by the Partnership shall first be allocated to
the General Partner to the extent of the cumulative, unrecouped loss
previously allocated to the General Partner under this Section
-------
4.1(d)(ii).
----------
(e) Tax Audit Costs. Costs incurred by the Partnership pursuant to its
---------------
obligations in Section 5.6(c)-(f) shall be allocated 50% to Lyondell GP's
------------------
interest and 50% to Bayer LP's interest, except that any costs incurred by
the Partnership pursuant to its obligations in Section 5.6(e)-(f) may be
------------------
allocated among the Partners as determined by the General Partner, which
determination shall be reasonably based on the proportionate effect of any
proposed adjustments or possible proposed adjustment to the Partners.
(f) Reimbursements. Any Profit or Loss resulting from a reimbursement
--------------
made by or to the Partnership (such as insurance proceeds or judgment
amounts), which reimbursement is allocable to an item specifically
allocated in the above subsections of this Section 4.1, shall be allocated
-----------
in a manner consistent with the above allocation of such item.
(g) Miscellaneous. Any other item of Profit or Loss not otherwise
-------------
allocated pursuant to this Article IV shall be allocated between the
----------
holders of Series A Units and the holders of Series B Units (and among such
holders) to reflect the manner in which such Profit or Loss is economically
received or borne by each Partner.
(h) Nonrecourse Debt Rules. In the event that the Partnership incurs
----------------------
nonrecourse debt within the meaning of Regulations (S)1.704-2, the General
Partner shall make such allocations to the Capital Accounts as are
appropriate pursuant to the rules for nonrecourse deductions, partner
nonrecourse deductions, partnership minimum gain chargebacks and partner
minimum gain chargebacks as set forth in such Regulations.
(i) Change in Partner's Interest. If, during a year, Units are
----------------------------
transferred or distributed, allocations among the Partners shall be made in
accordance with their
13
interests in the Partnership from time to time during such year in
accordance with Section 706 of the Code, using the closing-of-the-books
method, except that depreciation and other amortization with respect to
each Partnership asset shall be deemed to accrue ratably on a daily basis
over the entire period during such year that the asset is owned and in
service by the Partnership.
(j) Deficit Account Chargeback and Qualified Income. If any Partner
-----------------------------------------------
has an Adjusted Capital Account Deficit at the end of any year, including
an Adjusted Capital Account Deficit for such Partner caused or increased by
an adjustment, allocation or distribution described in Regulation
(S)(S)1.704-1(b)(2)(ii)(d)(4), (5) or (6), such Partner shall be allocated
items of income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain) in an amount and in a
manner sufficient to eliminate such Adjusted Capital Account Deficit as
quickly as possible. This Section 4.1(j) is intended to constitute a
--------------
"qualified income offset" pursuant to Regulation (S)1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
(k) Curative Allocations. The special allocations in Section 4.1(h)
-------------------- --------------
and (j) (the "Regulatory Allocations") are intended to comply with certain
--- ----------------------
requirements of the Regulations. It is the intent of the Partners that, to
the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss or deduction pursuant to this Article IV.
----------
Therefore, notwithstanding any other provision of this Article IV (other
----------
than the Regulatory Allocations), the General Partner shall make such
offsetting special allocations of Partnership income, gain, loss or
deduction in whatever manner appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the
extent possible, equal to the Capital Account balance such Partner would
have had if the Regulatory Allocations were not part of the Agreement and
all Partnership items were allocated pursuant to Section 4.1(a)-(g).
------------------
Section 4.2 Federal Tax Allocations. The federal tax allocation
-----------------------
procedures for the Partnership are as follows:
(a) General Rule. Except as otherwise provided in the following
------------
subsections of this Section 4.2, allocations for federal income tax
-----------
purposes of items of income, gain, loss and deduction, and credits and
basis therefor, shall be made in the same manner as book allocations are
made in this Article IV.
----------
(b) Elimination of Book/Tax Disparities.
-----------------------------------
(i) General. If as a result of contributions of property by a
-------
Partner to the Partnership (or revaluations pursuant to the
regulations under Section 704(b)), Section 704(c) of the Code requires
allocations of income, gain, loss or deduction of the Partnership in a
manner different from that set forth in Section 4.2(a), then the
--------------
General Partner may adopt any reasonable methodology for allocating
items of Partnership income, gain, loss and deduction so as to comply
with the principles of Section 704(c) of the Code and the Regulations
thereunder as agreed by the holders of a majority of the Series A
Units and the holders of a majority of the Series B Units, to the
extent affected by such methodology.
14
(ii) Built-In Gain or Loss. The PO Asset Built-In Gain or Loss
---------------------
shall be allocated among the holders of Series A Units in accordance
with their Series A Percentage Interests and the Co-Product Asset
Built-In Gain or Loss shall be allocated among the holders of the
Series B Units in accordance with their Series B percentage interests.
(c) Section 754 Election Allocations. Income and deductions of the
--------------------------------
Partnership that are attributable to the Section 754 election shall be
allocated to the Partners entitled thereto.
(d) Transaction and Other Costs. If the Partnership is entitled to
---------------------------
deductions with respect to any costs borne by a Partner without reimbursement
pursuant to this Agreement, the Master Transaction Agreement or the Transaction
Documents, the incurrence of such costs shall not increase the Capital Account
of such Partner, and such Partner shall be entitled to any deductions
attributable to such costs on its separate return.
ARTICLE V
ACCOUNTING, FINANCIAL REPORTING AND TAX MATTERS
Section 5.1 Fiscal Year. The fiscal year of the Partnership shall be the
-----------
calendar year.
Section 5.2 Method of Accounting for Financial Reporting Purposes. For
-----------------------------------------------------
financial reporting purposes, the Partnership shall adopt a standard set of GAAP
accounting policies and shall maintain separate books of account. The
Partnership's financial reports shall comply with requirements of the SEC to the
extent applicable to the Partnership and any Partner or any controlling Person
of such Partner, to the extent such information is necessary, in conjunction
with the financial reporting obligations of such Person under applicable SEC
requirements.
Section 5.3 Books and Records; Right of Partners to Audit.
---------------------------------------------
(a) Proper and complete records and books of account of the
Partnership's business, including all such transactions and other matters
as are usually entered into records and books of account maintained by
businesses of like character or as are required by Applicable Law, shall be
kept by the Partnership at the Partnership's principal place of business
for at least five years after the year to which they relate or such longer
period as may be required under Applicable Law. None of the Partnership's
funds shall be commingled with the funds of any Partner.
(b) Each Partner, through independent auditors whose compensation is
not in whole or in part dependent on the results of the audit, shall have
the right to periodically audit Operating Services Costs once every two
years in accordance with the provisions of Exhibit C to the Operating
---------
Agreement.
Section 5.4 Reports and Financial Statements. The General Partner shall
--------------------------------
inform the other Partners of the adjustments necessary to reflect the net Profit
and Loss in accordance with GAAP.
15
Section 5.5 Method of Accounting for Book and Tax Purposes. For purposes
----------------------------------------------
of making allocations and distributions hereunder (including distributions in
liquidation of the Partnership in accordance with Capital Account balances as
required by Section 12.2), Capital Accounts and Profits, Losses and other items
------------
described in Section 4.1 shall be determined in accordance with federal income
-----------
tax accounting principles utilizing the accrual method of accounting, with the
adjustments required by Regulation (S)1.704-1(b) to properly maintain Capital
Accounts.
Section 5.6 Taxation.
--------
(a) Status of the Partnership. The Partners acknowledge that the
-------------------------
Partnership is a partnership for federal and state income tax purposes, and
hereby agree not to elect to be treated other than as a partnership for
federal and state income tax purposes.
(b) Consistency. The Partners intend that (i) the contribution of
-----------
assets subject to liabilities heretofore made by Lyondell GP and Lyondell
LP to the Partnership pursuant to Section 2.2(a) have qualified and
--------------
will qualify as a tax-free contribution under Section 721 of the Code in
which no Partner has recognized or will recognize gain or loss and (ii) the
subsequent sale of Series A Units to Xxxxx XX qualifies and will qualify as
the purchase of a partnership interest resulting in the adjustment of the
tax basis of Partnership Property with respect to Xxxxx XX only, pursuant
to Code Section 743. The Partners agree that the Partnership will so file
its tax return, and each Partner agrees to file its tax return on the same
basis and to maintain and defend such position consistently thereafter.
(c) Tax Elections and Reporting. The Partnership has made or shall
---------------------------
make the following elections under the Code and the Regulations and any
similar state statutes:
(i) adopt the calendar year as the annual accounting period;
(ii) adopt the accrual method of accounting;
(iii) elect to deduct organization costs ratably over a 60-month
period as provided in Section 709 of the Code;
(iv) elect not to be excluded from the TEFRA audit procedures
set forth in Subchapter C of Chapter 63 of the Code;
(v) make the elections provided by Code Section 754; and
(vi) make any other elections available under the Code that the
General Partner determines are appropriate, with the determination of
whether an election is appropriate to be made pursuant to the
principle that each Partner shall be treated equally (i.e., no Partner
will receive preferential tax treatment to the disadvantage of another
Partner).
(d) Tax Returns. The Tax Matters Partner, on behalf of the
-----------
Partnership, shall prepare and file all necessary and appropriate Tax Returns.
Each Partner shall timely provide such information, if any, as may be needed by
the Partnership for purposes of
16
preparing such Tax Returns. The General Partner shall provide to each Partner a
substantially complete draft of the federal income tax return for the
Partnership not less than 30 days prior to the date such return is required to
be filed (including extensions). In connection with the preparation and filing
of the Partnership's Tax Returns for its first taxable year, the Tax Matters
Partner shall consult with the other Partners regarding the methodologies and
conventions to be adopted by the Partnership in such returns and the Tax Matters
Partner shall not unreasonably disregard any objections raised by such other
Partners. Thereafter, the Tax Matters Partner shall provide reasonable advance
notice of its intention to make any significant changes in the methodologies and
conventions adopted in the Tax Returns for the Partnership's first taxable year.
A Partner shall not report its share of any Partnership Tax item in a manner
inconsistent with the Partnership's reporting of such item, unless the
Partnership's reporting of such item results in a material disadvantage to such
Partner. In such event, and provided the Partner has a reasonable basis for its
position and provided the Partner has given 10 days' written notice to the Tax
Matters Partner of its intent to file inconsistently, such Partner may file in
an inconsistent manner. In connection with any Code Section 754 election, in the
case of a transfer of an interest in the Partnership, the transferee Partner
shall establish and maintain its resulting Code Section 743 special basis
adjustments, including filing any statement required by Regulation Section
1.743-1(b)(3). The General Partner and the Partnership shall provide information
as reasonably requested by a transferee Partner for purposes of establishing and
maintaining such Code Section 743 basis adjustments.
(e) Tax Audits.
----------
(i) Federal Tax Matters. The Partnership is authorized to
-------------------
make such filings with the IRS as may be required to designate
Lyondell GP as the "Tax Matters Partner." The Tax Matters Partner, as
-------------------
an authorized representative of the Partnership, shall direct the
defense of any claims made by the IRS to the extent that such claims
relate to the adjustment of Partnership items at the Partnership
level. The Tax Matters Partner shall promptly deliver to each Partner
a copy of all notices, communications, reports or writings of any kind
(including, without limitation, any notice of beginning of
administrative proceedings or any report explaining the reasons for a
proposed adjustment) received from the IRS relating to or potentially
resulting in an adjustment of Partnership items, as well as any other
information requested by a Partner that is commercially reasonable to
request. The Tax Matters Partner shall, diligently and in good faith,
contest any proposed adjustment of a Partnership item which
principally affects the Series A Unit holders at the administrative
and judicial levels, including, if appropriate, appealing any adverse
judicial decision. The Tax Matters Partner shall keep each Partner
advised of all material developments with respect to any proposed
adjustment which comes to its attention and shall advise each Partner
in advance, to the extent practicable, of all material meetings and
discussions with the IRS. All costs incurred by the Tax Matters
Partner in performing under this Section 5.6(e) shall be paid by the
--------------
Partnership and allocated among the Partners in accordance with
Section 4.1(e). Any amount so allocated to a Partner shall be funded
--------------
as an additional contribution pursuant to Article II.
----------
17
(ii) State and Local Tax Matters. The Partnership shall
---------------------------
promptly deliver to each Partner a copy of all notices,
communications, reports or writings of any kind with respect to Taxes
received from any state, local or foreign taxing authority relating to
the Partnership which might, in the judgment of the Tax Matters
Partner, materially and adversely affect any Partner, and shall keep
each Partner advised of all material developments with respect to any
proposed adjustment of Partnership items which come to its attention.
(iii) Consultation. The Tax Matters Partner shall (a) keep
------------
Xxxxx XX apprised of all significant developments and shall consult
with Xxxxx XX in the contest of any audit, and (b) settle any issue
materially affecting Xxxxx XX only with the consent of Xxxxx XX, which
consent shall not be unreasonably withheld. If any depreciation,
amortization or other deduction or credit with respect to Bayer LP's
special basis adjustment or any other issue that affects Xxxxx XX but
does not materially and adversely impact Lyondell is raised in any
audit, or other communication from any taxing authority, the Tax
Matters Partner shall (x) permit Xxxxx XX to direct the contest of the
issue and (y) settle any such issue in accordance with Bayer LP's
direction.
(iv) Continuation of Rights. Each Partner shall continue to have
----------------------
the rights described in this Section 5.6(e) with respect to Tax
matters relating to any period during which it was a Partner, whether
or not it is a Partner at the time of the Tax audit or contest.
(f) Tax Rulings. No Person shall request an administrative ruling (or
-----------
similar administrative procedures) from any taxing authority with respect
to any Partnership tax item the treatment of which could materially and
adversely affect the taxation of another Partner unless such Person shall
have received written authorization from such other Partner to make such
request, which authorization shall not be unreasonably withheld.
Section 5.7 Delegation. The Partners agree that all the tasks to be
----------
performed under this Article V (other than serving as Tax Matters Partner) may
---------
be delegated to consultants of the Partnership.
ARTICLE VI
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER
Section 6.1 Name and Address. Lyondell GP shall be the general partner of
----------------
the Partnership. The place of business of the General Partner is One Houston
Center, 2 Greenville Cross, 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx
00000.
Section 6.2 Duties of the General Partner.
-----------------------------
(a) The General Partner shall devote to the affairs of the
Partnership such time and attention as shall be reasonably required for the
conduct of the Partnership's business. The General Partner shall not engage
in any other activities or assume any involvement or acquire any interest
in any entity other than the Partnership.
18
(b) The General Partner shall enforce the obligations of the Operator
to perform or provide the Operating Services in accordance with the terms,
conditions and standards of the Operating Agreement. If the Operating
Agreement is terminated for any reason, the General Partner (including any
Substitute General Partner) shall provide, or engage a Qualified
Replacement Operator to provide, the Operating Services in accordance with
the terms, conditions and standards of the Operating Agreement, as if the
Operating Agreement remained in full force and effect.
Section 6.3 Powers. Except to the extent otherwise provided herein or in
------
the Act, the General Partner shall have full power and authority to take all
action in connection with the Partnership's affairs, to exercise exclusive
management, supervision and control of the Partnership's properties and business
and to do all things necessary, appropriate, convenient or incident thereto.
Without limiting the foregoing, the General Partner shall have the following
powers and, to the extent that the Partnership provides necessary funds, duties:
(a) to control and manage the Partnership Property and to arrange for
collections, disbursements and other matters necessary or desirable in
connection with the management, operation, maintenance and preservation of
the Partnership Property;
(b) to pay and discharge all Taxes and assessments levied and
assessed against the Partnership Property or any part thereof for the
account of the Partnership;
(c) to carry and/or cause the Partnership to carry or participate in
the insurance coverages that are set forth on Schedule 6.3, as revised from
------------
time to time;
(d) to determine the number of employees, if any, the selection of
such employees, the hours of labor and compensation for the service of such
employees; and
(e) to direct the Operator, on behalf of the Partnership, to take any
action or perform any duty pursuant to the Operating Agreement; provided,
however, that the General Partner shall so direct the Operator only after
obtaining the advise and consent of each Limited Partner, such consent not
to be unreasonably withheld.
Section 6.4 Reimbursement. The General Partner shall not be reimbursed by
-------------
the Partnership for any expenses incurred in connection with the discharge of
its duties hereunder as General Partner other than as expressly provided in this
Agreement.
Section 6.5 Action by the General Partner. Except as may be expressly
-----------------------------
limited by the provisions of this Agreement, the General Partner is specifically
authorized, as appropriate, to execute, sign, seal and deliver in the name and
on behalf of the Partnership any and all agreements, certificates, instruments
or other documents requisite to carrying out the intentions and purposes of this
Agreement and of the Partnership.
Section 6.6 Delegation to Operator. The General Partner is specifically
----------------------
authorized to delegate to the Operator any of the General Partner's obligations
under this Agreement except to the extent such obligations include enforcing a
right of the Partnership against the Operator. No such delegation shall relieve
the General Partner from its obligations under this Agreement.
19
Section 6.7 Segregation of Funds. Partnership funds shall be kept
--------------------
exclusively in one or more bank accounts in the Partnership's name, which
accounts shall designate the Partnership as the sole beneficiary thereof. No
funds of the General Partner or any of its Affiliates shall be kept in such
accounts. No funds of the Limited Partners or any of their Affiliates shall be
kept in such accounts. Funds shall be withdrawn from the Partnership's accounts
exclusively for Partnership purposes.
Section 6.8 Limitation on Liens.
-------------------
(a) The General Partner shall not permit to exist liens against the
Partnership Property, unless such liens are incurred in good faith in the
ordinary course of business and secure obligations that are not overdue for
a period of more than 60 days or which are being contested in good faith by
appropriate proceedings.
(b) No Limited Partner shall be entitled to enforce the obligations
of the General Partner under Section 6.8(a) if and for so long as an
--------------
Uncured Partner Offtake or Payment Default exists with respect to such
Limited Partner and the lien in violation of Section 6.8 above directly
-----------
relates to such Uncured Partner Offtake or Payment Default.
Section 6.9 Restoration Following Casualty Loss.
-----------------------------------
(a) In accordance with the procedures set forth in Section 7.3, the
-----------
written approval of the holders of a majority of the Series A Percentage
Interests and the Series B Percentage Interests shall be required to elect
to restore or not to restore either of the Plant Facilities upon any
Casualty to the Plant Facilities as to which the restoration will take more
than two years to complete or there will be insufficient proceeds, after
and assuming payment of applicable deductibles and self insurance retention
limits, to restore the Plant Facilities after taking into account other
property damage at the Complex and business interruption claims, treating
all of such claims on an equal footing with those of the Partnership.
Unless the Partners agree to extend the decision period, if the Partners do
not vote to restore the Plant Facilities within 120 days after the
Casualty, then the Partners shall be deemed to have voted not to restore
the Plant Facilities. For any Casualty below the foregoing threshold or
above the foregoing threshold as to which the Partners timely vote to
restore the Plant Facilities, the restoration shall be treated in the same
manner as a Maintenance Capital Project for purposes of this Agreement and
the General Partner shall diligently prosecute the restoration to
completion, provided the Partners timely fund their share of Casualty
Restoration Costs. The Partners shall mutually agree on required changes to
the PO Cost Allocation Methodology and to Exhibit D of the Operating
---------
Agreement to reflect changes made to the Plant Facilities, including as to
technology. If the Partners vote not to restore, the available insurance
proceeds attributable to the Plant Facilities shall be allocated between
the PO Product business and Co-Product business in accordance with Section
-------
2.5 hereof and Exhibit D to the Operating Agreement, gain or loss shall be
--- ---------
determined and allocated to the Partners pursuant to Section 4.1(d) and the
--------------
PO Share of such proceeds shall be distributed in accordance with the
relative Capital Account balances of the Series A Unit holders and the
balance of the proceeds shall be distributed in accordance with the Capital
Account balances of the Series B Unit holders. If the unrestored Plant
Facilities are the remaining material assets of the Partnership, then the
Partnership shall be wound up and liquidated
20
in accordance with Article XII. If the Partnership continues to own the other
-----------
Plant Facilities, then the Partnership shall not be wound up or liquidated and
the Bayer PO Annual Offtake Amount shall be reduced by the pounds of PO Product
attributable to Xxxxx XX for the unrestored Plant Facilities, as provided in the
Baseline Sourcing Plan in existence prior to the Casualty, and the PO Logistics
Agreement and the corresponding Baseline Sourcing Plan shall be appropriately
changed by agreement of the Parties.
(b) If Xxxxx XX desires to restore a damaged or destroyed Plant
Facilities and Lyondell does not, then, at Bayer LP's election, Xxxxx XX
may rebuild the damaged or destroyed Plant Facilities (using its share of
insurance proceeds and its own funds) in their original location for the
same (or reduced) PO Product and Co-Product capacity. The Partnership shall
sell to Xxxxx XX the Partnership Property at the Complex for fair market
value and the Partnership shall assign its estate and interest under the
applicable Ground Lease to Xxxxx XX. The Technology Partnership shall
provide a limited, personal (subject to rights of Transfer permitted under
Section 10.2(c)), site specific, non-sublicensable royalty-free license of
----------------
the PO Product and Co-Product technology as practiced at the Plant
Facilities to enable Xxxxx XX to restore and operate the Plant Facilities
at the Complex for the production of PO Product and Co-Product for the
remainder of the term of the applicable Ground Lease. The Parties shall
mutually determine whether, and on what terms, Lyondell would continue to
operate the restored Plant Facilities, taking into account Lyondell's other
businesses at the Complex, know-how and work force efficiencies. Lyondell
shall have the right, exercisable within one year of completion of
restoration, to acquire interests in the restored Plant Facilities up to
the PO Product and Co-Product capacity that it owned in the Plant
Facilities prior to the Casualty, provided that Bayer LP's PO Product
capacity in the Plant Facilities shall not be reduced below that existing
prior to the Casualty. Lyondell shall pay to Xxxxx XX for the acquisition
of such interest its proportionate share, based on its PO Product and Co-
Product capacity, of the cost of restoration, with interest at the Interest
Rate from the date incurred by Xxxxx XX until paid by Lyondell.
ARTICLE VII
RIGHTS, POWERS AND DUTIES OF THE LIMITED PARTNERS
Section 7.1 Name and Address. The names and addresses of the Limited
----------------
Partners of the Partnership are set forth on Schedule 2.1, which may be amended
------------
from time to time by the General Partner to reflect the admission of any
Substitute Limited Partner or Additional Limited Partner or the change of any
such address.
Section 7.2 Limited Partners Shall Not Act; Limitation of Responsibility.
------------------------------------------------------------
Except as may otherwise be provided herein, the Limited Partners shall have no
control over the management of the Partnership and shall have no power to
transact any Partnership business. No Limited Partner shall be personally liable
for all or any part of the debts or other obligations of the Partnership. No
Limited Partner shall have the right or power to withdraw from the Partnership
(except as set forth in Article X) or to cause the liquidation of the
---------
Partnership or the partition of its properties.
21
Section 7.3 Limited Partner Consents. Notwithstanding anything herein
------------------------
contained to the contrary, the written approval of the holders of a majority of
the Series A Percentage Interests and the holders of a majority of the Series B
Percentage Interests shall be required for each of the decision matters listed
below in this Section 7.3; each Limited Partner shall respond in writing within
-----------
15 days of any written request for approval by the General Partner to any such
decision. If any Limited Partner fails to timely respond, the General Partner
may send a written notice to the Limited Partner informing such Limited Partner
of its failure and if such Limited Partner fails to respond within 10 days of
such written notice, it shall be deemed not to have approved the matter in
question:
(a) the amendment of this Agreement (other than ministerial changes
to Schedule 2.1) or the Certificate of Limited Partnership or the Operating
------------
Agreement;
(b) the dissolution and winding-up of the Partnership pursuant to
Section 12.1(a) or the extension of the term of the Partnership or the
---------------
merger or consolidation of the Partnership or the Transfer of all or any
portion of the Partnership Property necessary for its operations, unless
replaced by property of equal or greater utility;
(c) the issuance or acquisition by the Partnership of any Partnership
Units except as otherwise specifically provided in this Agreement;
(d) any borrowing of funds by the Partnership;
(e) any decision to initiate, or to approve initiation of, the
commencement of a case by or against the Partnership under any bankruptcy,
insolvency or reorganization statute;
(f) the admission of new or additional partners to the Partnership,
except as permitted by Article X;
---------
(g) the Transfer of any Partnership Units, except as permitted by
Article X or Article XI;
--------- ----------
(h) any decision to reduce insurance coverages in a manner
inconsistent with the rights to do so as provided in Schedule 6.3;
------------
(i) the approval of the Operator's engaging in any activity
prohibited under Section 2.5 of the Operating Agreement;
-----------
(j) the decision to restore or not to restore either of the Plant
Facilities upon any Casualty to the Plant Facilities in accordance with
Section 6.9; and
-----------
(k) any other action which, pursuant to this Agreement or the Act,
requires the approval of the Limited Partners.
Section 7.4 Failure of General Partner to Enforce Certain Obligations of
------------------------------------------------------------
Affiliates. If for any reason the General Partner fails or refuses to enforce
----------
either (i) the obligations of the Operator under the Operating Agreement or (ii)
the rights of the Partnership against a Limited Partner that is an Affiliate of
the General Partner to the detriment of any Limited Partner that is
22
not affiliated with the General Partner, then, upon written notice to the
General Partner, any Limited Partner that is not Affiliated with the General
Partner shall have the right to enforce such obligations on behalf of the
Partnership. The holders of a majority of the Series A Units and the holders of
a majority of the Series B Units shall each have the right to initiate and
reasonably approve an audit pursuant to the provisions of Exhibit C to the
---------
Operating Agreement with respect to Operating Services Costs payable by the
holders of the Series A Units or Series B Units, as the case may be.
Section 7.5 Additional Operator Services. Each Limited Partner shall have
----------------------------
the right to require the General Partner on behalf of the Partnership to request
that the Operator perform Additional Services pursuant to the terms of the
Operating Agreement, and the requesting Partners shall pay the Operator directly
for the Additional Services Charges established by the Operator for any
Additional Services which the Operator has agreed to provide to the requesting
Partner. No Limited Partner shall be responsible for Additional Services Charges
for Additional Services which it did not request or approve.
ARTICLE VIII
FORECASTS; ANNUAL PLAN AND BUDGET; CAPITAL PROJECTS
Section 8.1 Three Year Demand Forecast; Annual Forecast, Annual Plan and
------------------------------------------------------------
Annual Budget.
-------------
(a) On or before September 1 of each year, each Limited Partner shall
furnish to the General Partner for delivery to the Operator such Limited
Partner's good faith estimate of its total volume requirements of PO
Product and Co-Product to which it is entitled under this Agreement for the
next succeeding three years (the "Three Year Demand Forecast"), broken down
--------------------------
by month for the first year and by quarter for the following two years. The
initial Three Year Demand Forecast is set forth on Exhibit C. In addition,
---------
the Limited Partners shall provide to the General Partner for delivery to
the Operator such other information as the General Partner and the Operator
may reasonably request to enable the Operator to prepare the Annual
Forecast.
(b) Xxxxx XX will nominate for offtake each year the Bayer PO Annual
Offtake Amount. However, Xxxxx XX may nominate less than the Bayer PO
Annual Offtake Amount for any year in the Three Year Demand Forecast. Bayer
LP's failure to nominate its full share of PO Product shall not relieve it
from its obligations to pay its full share of Fixed Costs. Additionally,
Xxxxx XX shall be responsible for PO Variable Unit Costs attributable to
the production of PO Product that Xxxxx XX elects not to nominate which
cannot be avoided by the Operator through Reasonable Best Efforts.
(c) The General Partner shall cause the Operator, in accordance with
Section 7.2 of the Operating Agreement, to prepare and deliver not later
-----------
than October 1 of each year for review:
23
(i) to each Limited Partner that is a Series A Unit holder, the
portions of the Annual Forecast for the upcoming year that relate to
scheduled PO Product deliveries to each Series A Unit holder, budgeted
Operating Services Costs to be paid by each Series A Unit holder,
Capital Projects in which such Limited Partner is or will be required
to participate and those in which such Limited Partner will be invited
to participate and other production and operational information
relevant to such Limited Partner's business; and
(ii) to each Limited Partner that is a Series B Unit holder, the
portions of the Annual Forecast for the upcoming year that relate to
scheduled Co-Product deliveries to each Series B Unit holder, budgeted
Operating Services Costs to be paid by each Series B Unit holder,
Capital Projects in which such Limited Partner is or will be required
to participate and those in which such Limited Partner will be invited
to participate and other production and operational information
relevant to such Partner's business.
Each Limited Partner shall inform the General Partner within 30 days
after such Limited Partner's receipt of the proposed Annual Forecast of any
concerns or issues that the Limited Partner may have with respect to the
components of the Annual Forecast relevant to such Limited Partner and the
General Partner shall forward such concerns and issues to the Operator;
provided, however, the Operator shall have final decision making authority as to
the Annual Plan. The Annual Plan for the remainder of the year containing the
Closing Date is attached hereto as Exhibit D. The Annual Forecast shall become
---------
the Annual Plan upon finalization of the Annual Forecast by the Operator,
subject to Section 7.2(b) of the Operating Agreement. No finalization of the
--------------
Annual Plan by the Operator shall limit the audit rights of the Limited Partners
under Exhibit C to the Operating Agreement.
---------
Section 8.2 Rolling Product Forecast.
------------------------
(a) At least 10 Business Days prior to the beginning of each month,
each Partner shall deliver to the General Partner for delivery to the
Operator such Partner's forecast of its monthly volume requirements of PO
Product or Co-Product, subject to the monthly volume deviation limitations
imposed under in Section 7.2(b) of the Operating Agreement, for each of the
--------------
succeeding three months and the following five quarters (the "Rolling
-------
Product Forecast"). Each Partner shall provide good faith estimates of its
----------------
weekly offtake information for the first month included in the Rolling
Product Forecast. Each Partner's estimate shall be binding on each such
Partner and the Operator for the first month, binding on each such Partner
and the Operator within plus or minus 10% for the second month, and a good
faith estimate for the third month and the five quarters thereafter.
(b) Within five Business Days of receiving the Rolling Product
Forecast, the General Partner shall cause the Operator to prepare and
deliver to each Partner the Monthly Production Statement provided for in
Section 7.3(b) of the Operating Agreement.
--------------
Section 8.3 Mandatory Capital Projects. As provided in Section 7.4 of the
-------------------------- -----------
Operating Agreement, the Annual Forecast shall include for each Plant Facility
all proposed Maintenance
24
Capital Projects and EHS Capital Projects for the next succeeding year known at
the time of the Operator's preparation of the Annual Forecast, including such
Capital Projects as are commenced or approved in prior years that have not been
completed, and shall separately itemize all Above Threshold Non-Discretionary
Capital Projects. A copy of the Capital Project forecast for each Plant Facility
for the following four years that is prepared by the Operator and included in
the Annual Forecast shall be provided to each Partner. The Annual Forecast shall
describe for each proposed Above Threshold Non-Discretionary Capital Project the
scope, nature, expected costs and benefits and justifications for each Capital
Project and the short-term and long-term impact on production that the Capital
Project is anticipated to have. For each such itemized Maintenance Capital
Project and EHS Capital Project, the capital budget shall identify the PO Share
of the budgeted Capital Costs for such Capital Project and the methodology used
to determine the PO Share in accordance with Exhibit D of the Operating
---------
Agreement. The capital budget shall describe in reasonable detail the
anticipated expenditure profile for the Capital Project over the life of the
project. At any time during the year, as provided in Section 7.4 of the
-----------
Operating Agreement, the Operator may initiate Maintenance Capital Projects and
EHS Capital Projects that are recommended by the Operator, even if not included
in the Annual Plan. The General Partner shall procure from the Operator and
deliver to the Limited Partners the information provided for above with respect
to Above Threshold Non-Discretionary Capital Projects initiated during the year
that were not included in the Annual Plan; to the extent practical, such
information shall be provided not less than 30 days prior to commencing work for
the Capital Project. Subject to Section 2.10(c), each Partner shall be invoiced
---------------
under Section 2.4 for its Pro Rata share of the Capital Costs.
Section 8.4 Discretionary Capital Projects.
------------------------------
(a) Annual Forecast. As provided in Section 7.4 of the Operating
--------------- -----------
Agreement, all Discretionary Capital Projects proposed by the Operator for
the upcoming year shall be included in the Annual Forecast to the extent
practical. A copy of the Capital Project forecast for each Plant Facility
for the following four years that is prepared by the Operator and included
in the Annual Forecast shall be provided to each Partner. As provided in
Section 7.4 of the Operating Agreement, the Operator may propose
-----------
Discretionary Capital Projects the budgeted Project Cost of which are below
$2.5 million (which threshold shall be mutually adjusted as of the January
1 following each fifth anniversary of the Closing Date taking into account
inflation and other factors) during the year that were not included in the
Annual Plan, provided that the Discretionary Capital Project budget for the
year is not increased.
(b) Cost-Savings Discretionary Capital Projects to the Plant
--------------------------------------------------------
Facilities Proposed by the Operator. For each Above Threshold Discretionary
-----------------------------------
Capital Project to the Plant Facilities proposed by the Operator the
primary purpose of which is to reduce Operating Services Costs, the General
Partner shall cause the Operator to include a description of the scope,
nature and quantitative assessment of the reduction in Operating Services
Charges estimated to result from the Above Threshold Discretionary Capital
Project and the short-term impact on production that the installation of
the Capital Project is anticipated to have. For each cost savings Above
Threshold Discretionary Capital Project, the capital budget shall specify
the PO Share of the budgeted Capital Costs for such Capital Project and the
methodology used to determine the PO Share in accordance with Exhibit D to
---------
the Operating Agreement. The capital budget shall describe in
25
reasonable detail the estimated expenditure profile for each Above
Threshold Discretionary Capital Project over the life of the project. Each
Partner shall have the right to participate or not participate in any Above
Threshold Discretionary Capital Project the primary purpose of which is to
reduce Operating Services Costs by agreeing to fund its pro rata share of
the Capital Costs for the Capital Project, subject to Section 2.10(c), and
---------------
the participating Partners shall receive its pro rata share of the actual
realized Operating Services Costs savings. The pro rata share of each of
the Series A Unit Partners electing to participate shall be the PO Share
times the Series A Percentage Interest of each such Partner divided by the
sum of the Series A Percentage Interests of the participating Series A Unit
Partners and the pro rata share of each of the Series B Unit Partners
electing to participate shall be [one minus the PO Share] times the Series
B Percentage Interest of each such Partner divided by the sum of the Series
B Percentage Interests of the participating Series B Unit Partners, unless
no Series A Unit holders elect to participate, in which case the PO Share
shall be deemed to be zero for purposes of the foregoing calculation. The
Operator may proceed with Below Threshold Discretionary Capital Projects to
the Plant Facilities that are intended to reduce Operating Services Costs,
provided that for Below Threshold Discretionary Capital Projects that are
not included in the Annual Plan the overall discretionary capital budget
for the year is not increased, and each Partner (i) shall be required to
participate by funding its pro rata share of the Capital Costs as provided
in this Section 8.4(b) and (ii) shall receive its pro rata share of the
--------------
actual realized Operating Services Costs savings.
(c) Cost Savings Discretionary Capital Projects to the Plant
--------------------------------------------------------
Facilities Proposed by a Limited Partner. Each Limited Partner shall have
----------------------------------------
the right to propose to the General Partner and the Operator for
consideration for inclusion in the Annual Forecast Discretionary Capital
Projects to the Plant Facilities. Such proposal must be made in reasonable
detail on or before October 1 of each year to be considered in the Annual
Forecast for the following year. The Operator or the General Partner may
determine, acting in their good faith but otherwise sole discretion, not to
include such proposed Discretionary Capital Project in the Annual Forecast.
(d) Cost Savings Discretionary Capital Projects that Increase
---------------------------------------------------------
Production Capacity. If any Discretionary Capital Project is expected to
-------------------
increase production capacity and reduce Operating Services Costs, then the
General Partner shall make a reasonable and supported allocation of the
Capital Costs of the Discretionary Capital Project between cost savings and
capacity increase by calculating the net present value of the projected
cost savings compared to the net present value of the projected additional
PO Product capacity valued as if sold at fair market value. The net present
value calculations shall be performed using consistent discount rates and
time periods. Any expected lost PO Product and Co-Product production due to
downtime in implementing the Discretionary Capital Project shall be
allocated between cost savings and capacity increase in the same manner as
the Capital Costs are allocated. The provisions of Section 8.4(b) shall
--------------
govern the Limited Partners' rights to participate as to cost savings and
Section 8.4(e) shall govern as to any rights of the Limited Partners to
--------------
participate as to capacity increases.
(e) Increased Production Capacity Discretionary Capital Projects. For
------------------------------------------------------------
each Discretionary Capital Project to the Plant Facilities proposed by the
Operator which is
26
expected to increase production capacity of PO Product and/or Co-Product,
the Annual Forecast shall include a description of the scope, nature and
quantitative assessment of the expected production capacity increase from
the Discretionary Capital Project and the short-term impact on production
that the installation of the Capital Project is anticipated to have. For
each such Discretionary Capital Project, the capital budget shall specify
the PO Share of the budgeted Capital Costs for such Capital Project and the
methodology used to determine the PO Share in accordance with Exhibit D of
---------
the Operating Agreement. The capital budget shall describe in reasonable
detail the anticipated expenditure profile for the Capital Project over the
life of the project on which the Discretionary Capital Project Funding
Notices will be based. Partners other than Xxxxx XX shall have the right to
participate or not participate in any Discretionary Capital Project with
respect to production capacity increases by agreeing to fund its pro rata
share of the Capital Costs for the Capital Project and receive their
respective pro rata share of the actual realized PO Product or Co-Product
production capacity increase.
(f) Discretionary Capital Projects - Infrastructure Assets. For
------------------------------------------------------
each Discretionary Capital Project to Infrastructure Assets for a Complex
as to which the Partnership does not have approval rights under Section
-------
7.4(c)(iv) of the Operating Agreement, the General Partner shall cause the
----------
Operator to describe in a writing delivered to each Partner the scope,
nature, benefits and justifications for such Capital Project and the short-
term impact on production that installation of the Capital Project is
anticipated to have. For each such Infrastructure Asset Discretionary
Capital Project as to which the Partnership does not have approval rights
under Section 7.4(d) of the Operating Agreement, the capital budget shall
--------------
specify the PO Share of the budgeted Capital Costs for such Capital Project
and the methodology used to determine the PO Share in accordance with
Exhibit D of the Operating Agreement. The PO Share of the Capital Costs
---------
shall be allocated to the Series A Unit Partners Pro Rata and the remaining
portion of the Capital Costs shall be allocated to the Series B Unit
Partners Pro Rata. Each Discretionary Capital Project to the Infrastructure
Assets proposed by the Operator as to which the Partnership has approval
rights under Section 7.4(c)(iv) of the Operating Agreement or which are
------------------
proposed by Limited Partner shall be proposed and addressed in accordance
with the applicable provisions of Sections 8.4(b), (c) or (d).
--------------- --- ---
(g) Failure to Participate. Any Partner must elect to participate in
----------------------
an Above Threshold Discretionary Capital Projects within (i) 30 days after
the Operator's submission of a proposal for such Discretionary Capital
Project if the budgeted Capital Costs for the Capital Project are $500,000
or less; (ii) 60 days after the Operator's submission of a proposal for
such Discretionary Capital Project if the budgeted Capital Costs for the
Capital Project are more than $500,000 and not more than $1.1 million;
(iii) 90 days after the Operator's submission of a proposal for such
Discretionary Capital Project if the budgeted Capital Costs for the Capital
Project are more than $1.1 million and not more than $2.5 million; and (iv)
120 days after the Operator's submission of a proposal for such
Discretionary Capital Projects (which shall be included in the Annual
Forecast) if the budgeted Capital Costs for the Capital Project are more
than $2.5 million, unless each of the Partners otherwise agree. Failure to
timely respond shall be deemed an election to participate for all Capital
Projects except for Discretionary Capital Projects in excess of $2.5
million, as to which failure to respond shall be deemed an election not to
participate. For Discretionary Capital Projects to Infrastructure Assets
proposed by the
27
Operator in excess of the threshold set forth in Section 7.4(d)(iv) of the
------------------
Operating Agreement, a Partner must make its election to participate in
such Capital Project within (i) 90 days after the Operator's submission of
a proposal if the expected Capital Costs to such Partner are more than $1.5
million, and (ii) 120 days after the Operator's submission of a proposal
for such Capital Project if the expected Capital Costs to such Partner are
more than $2.5 million, unless each of the Partners otherwise agree. For
purpose of the preceding sentence, failure to timely respond shall be
deemed an election not to participate in such Discretionary Capital Project
to Infrastructure Assets. The thresholds contained in this Section 8.4(g)
--------------
shall be mutually adjusted as of the January 1 following each fifth
anniversary of the Closing Date taking into account inflation and other
factors. Any Partner failing or refusing to participate in the costs of any
Discretionary Capital Projects shall not participate in the cost savings,
capacity increase, reliability improvement or other performance enhancement
resulting from such Discretionary Capital Project, and the General Partner
shall make appropriate economic arrangements among the Partners under
Section 2.3 to achieve this result. Partners who are not entitled to, or
-----------
who elect not to, participate in a Discretionary Capital Project shall not
bear any of the PO Product or Co-Product production loss from downtime in
implementing such Discretionary Capital Project. Such product loss shall be
borne entirely by the participating Partners.
(h) No Benefit if Failure to Contribute to R&D. Notwithstanding the
------------------------------------------
foregoing provisions of this Section 8.4, in the event that the Bayer
-----------
partner in the Technology Partnership does not pay in full its annual Bayer
Monthly Technology Budget Payments (without regard to the Bayer Budget
Cap), then the General Partner in conjunction with the Existing Plant
Operators shall make appropriate economic arrangements and apportionment of
the cost savings benefits resulting from any Discretionary Capital Project
implementing the process development research so that Xxxxx XX does not
participate in the portion of any cost saving, reliability improvement or
other performance enhancement resulting from such Capital Project
corresponding to the portion of the annual Bayer Monthly Technology Budget
Payments to which Xxxxx XX did not contribute its full share.
Section 8.5 Mutual Provision of Information. The Partners will keep each
-------------------------------
other timely informed about planned turnarounds, shutdowns, major technical
projects, Capital Projects and any other major events which in each case are
relevant to this Agreement or the Operating Agreement.
ARTICLE IX
RIGHTS OF THE PARTNERS
Section 9.1 Delegation. The Partners acknowledge that the General Partner
----------
is permitted to delegate responsibility for day-to-day operations of the
Partnership to the Operator and/or to officers and employees of the General
Partner's Affiliates.
Section 9.2 General Authority. Persons dealing with the Partnership are
-----------------
entitled to rely conclusively on the power and authority of the General Partner
as set forth in this Agreement. In no event shall any Person dealing with the
General Partner or the General
28
Partner's representatives with respect to any business or asset of the
Partnership be obligated to ascertain that the terms of this Agreement have been
complied with, or be obligated to inquire into the necessity or expedience of
any act or action of the General Partner or the General Partner's
representatives. Every contract, agreement, deed, mortgage, security agreement,
promissory note or other instrument or document executed by the General Partner
or the General Partner's representatives with respect to any business or asset
of the Partnership shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (i) at the time of the execution and
delivery thereof, this Agreement was in full force and effect, (ii) the
instrument or document was duly executed in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership and (iii) the
General Partner or the General Partner's representative was duly authorized and
empowered to execute and deliver any and every such instrument or document for
and on behalf of the Partnership. Nothing in this Section 9.2 shall be deemed to
-----------
be a waiver or release of any obligation of the General Partner to the other
Partners as set forth elsewhere in this Agreement.
Section 9.3 Limitation on Fiduciary Duty; Competition.
-----------------------------------------
(a) Each Partner (directly or through its Affiliates) is a
sophisticated party, possessing extensive knowledge of and experience
relating to, and is actively engaged in, significant businesses in addition
to the Partnership, has been represented by legal counsel, is capable of
evaluating and has thoroughly considered the merits, risks and consequences
of the provisions of this Section 9.3 and agrees to such provisions
-----------
knowingly and advisedly. The liability of the General Partner (including
any liability of its Affiliates or its or their respective officers,
directors, agents and employees) or of any Limited Partner (including any
liability of its Affiliates or its or their respective officers, agents,
directors and employees), either to the Partnership or to any other
Partner, for any act or omission by such Partner in its capacity as a
partner of the Partnership that is imposed by such Partner's status as a
"general partner" or "limited partner" (as such terms are used in the Act)
of a limited partnership is hereby eliminated, waived and limited to the
fullest extent permitted by Applicable Law. Nothing in this subsection
shall relieve any Partner from any liability for any breach of this
Agreement. Nothing in this subsection alters the indemnification provisions
of Article XIV.
-----------
(b) Except as may be set forth in a Related Agreement, each Partner's
Affiliates shall be free to engage in or possess an interest in any other
business of any type, including any business in direct competition with the
Partnership, and to avail itself of any business opportunity available to
it without having to offer the Partnership or any Partner the opportunity
to participate in such business. It is expressly agreed that the legal
doctrine of "corporate or business opportunities" sometimes applied to a
Person deemed to be subject to fiduciary or other similar duties so as to
prevent such Persons from engaging in or enjoying the benefits of
additional business opportunities shall not be applied in the case of any
investment, acquisition, business, activity or operation of any Partner's
Affiliates.
Section 9.4 Partner Covenants. Each Partner covenants and agrees with the
-----------------
Partnership and with the other Partners that it shall not (i) exercise, or
purport or attempt to exercise, any authority it has to withdraw, retire, resign
or assert that it has been expelled from the Partnership, (ii) do any act that
would make it impossible or impracticable to carry on the
29
Partnership's business and (iii) act or purport or attempt to act in a manner
contrary to the agreements of the Partners set forth in this Agreement; provided
that nothing in this Section 9.4 shall be deemed to waive any Partner's rights
-----------
under Article X, XI or XII.
--------- -- ---
Section 9.5 Special Purpose Entities. Each Partner covenants and agrees
------------------------
that (i) its business shall be restricted in its organizational documents solely
to holding of its Partnership Interests and the doing of things necessary or
incidental in connection therewith, (ii) it will not own any assets, incur any
indebtedness or similar liabilities or engage, participate or invest in any
business outside the scope of the business described in clause (i), (iii) it
shall be restricted in its organizational documents from engaging in any merger,
consolidation, sale of substantially all of its assets or reorganization except
in compliance with the terms of this Agreement, (iv) it shall be required in its
organizational documents to have on its board of directors at least one
independent director to be nominated by the ultimate parent entity of the other
Party whose vote is required for voluntary bankruptcy filings by such Partner
pursuant to the Master Transaction Agreement and (v) its organizational
documents shall require it to abide by the Separateness Covenants (as such term
is defined in the Master Transaction Agreement).
Section 9.6 Use of Technology. The Partnership shall produce PO Product and
-----------------
Co-Product pursuant to technology licenses from the Technology Partnership held
by Lyondell LP and Xxxxx XX. To the extent that Xxxxx XX receives a
distribution-in-kind of PO Product pursuant to Section 3.1 that it uses outside
-----------
of the field of use specified in the License Agreement, Lyondell LP will
accommodate Xxxxx XX and allow Xxxxx XX to use Lyondell LP's unrestricted field
of use technology license for such purpose; provided, however, that Xxxxx XX
pays to Lyondell LP on or before the fifteenth day of the month in which Xxxxx
XX makes such use of the PO Product, accompanied by a report to the Lyondell
Partners showing a computation in sufficient detail of all fees so accruing, an
accommodation fee (the "Accommodation Fee") for each such pound of PO Product
-----------------
equal to the difference between (i) Lyondell's U.S. volume weighted average
sales price for Third Party sales of the PO Product and (ii) the average "all
in" Operating Services Costs per pound of product payable by Xxxxx XX for the
month in which Xxxxx XX receives a distribution of the PO Product in question,
including a per pound of PO Product imputed depreciation charge equal to Bayer
LP's annual book depreciation for the immediately preceding year for Capital
Projects under Section 8.3 and Section 8.4 as reflected in Bayer LP's books for
----------- -----------
parent reporting purposes, divided by the Bayer PO Annual Offtake Amount. The
foregoing Accommodation Fee shall not apply with respect to any pounds of PO
Product sold to Lyondell, or marketed by Lyondell pursuant to Sections 11.01(c),
-----------------
11.03(a) and 11.10 of the Master Transaction Agreement under the term of the
-------- -----
Master Transaction Agreement. For pounds of PO Product permitted to be sold by
Xxxxx XX pursuant to Section 11.03(b) of the Master Transaction Agreement, Bayer
----------------
LP shall
be free to sell such PO Product outside the field of use specified in the
Buckeye License Agreement; provided, however, that Xxxxx XX shall pay the
Accommodation Fee for such PO Product sold until the tenth anniversary of the
Closing Date. In accordance with Schedule 9.6, on or before April 1 of each
------------
year, an executive officer of Bayer shall make a certification to Lyondell as to
the implementation of, and the determination of the Accommodation Fee, if any,
payable as provided in, this Section 9.6.
-----------
30
ARTICLE X
TRANSFERS AND PLEDGES GENERALLY
Section 10.1 Restrictions on Transfer and Prohibition on Pledge.
--------------------------------------------------
Except pursuant to Section 11.2 or in accordance with this Article X, a
------------ ---------
Partner shall not, in any transaction or series of transactions, directly or
indirectly Transfer all or any part of its Units. A Partner shall not, in any
transaction or series of transactions, directly or indirectly Pledge all or any
part of its Units or its interest in the Partnership. Neither the term
"Transfer" nor the term "Pledge," however, shall include an assignment by a
--------- -------
Partner of such Partner's right to receive distributions from the Partnership so
long as such assignment does not purport to assign any right of such Partner to
participate in or manage the affairs of the Partnership, to receive any
information or accounting of the affairs of the Partnership, or to inspect the
books or records of the Partnership or any other right of a Partner pursuant to
this Agreement or the Act. Any attempt by a Partner to Transfer or Pledge all
or a portion of its Units in violation of this Agreement shall be void and shall
not be effective to Transfer or Pledge such Units or any portion thereof.
Subject to any applicable restrictions imposed by the Master Transaction
Agreement, nothing in this Agreement shall prevent the Transfer or Pledge by the
owner thereof of any capital stock, equity ownership interests or other security
of a Partner or any Affiliate of a Partner.
Section 10.2 Transfer of Units by the Limited Partners.
-----------------------------------------
(a) Without the need for the consent of any Person, a holder of
Series B Units may Transfer all or part of its Series B Units; provided
that any transferee is Creditworthy at the time of Transfer.
(b) Without the need for the consent of any Person, Lyondell LP
may Transfer all (but not less than all) of its Series A Units if (and only
if) such Transfer is in connection with the sale or other disposition of
all of the Lyondell GP Units pursuant to Section 10.3 in a transaction
------------
meeting the requirements of Section 10.4.
------------
(c) Without the need for the consent of any Person, Xxxxx XX may
Transfer all (but not less than all) of its Series A Units, if (and only
if) such Transfer is in connection with the sale or other disposition of
(i) all of the Series A Partnership Interests owned by Xxxxx XX, (ii) other
assets representing at least 90% of the book value of all of the polyols
production assets worldwide of Bayer and its Affiliates other than the
Series A Units and (iii) all of the interests of Bayer in the Technology
Partnership.
Section 10.3 Transfer of Units by the General Partner. Without the need
----------------------------------------
for the consent of any Person, Lyondell GP may Transfer all (but not less than
all) of its Units, if (and only if) (a) such Transfer is in connection with the
sale or other disposition of (i) all of the Units owned by Lyondell GP, (ii) all
of the Series A Units owned by Lyondell LP, (iii) other assets representing at
least 90% of the book value of all of the PO Product production assets worldwide
of Lyondell and its Affiliates other than the Lyondell GP Units and (iv) all of
the interests of Lyondell in the Technology Partnership and (b) the Existing
Plants will be operated by a Lyondell Affiliate or the transferee or its
Affiliate following the Transfer. Any permitted transferee to the Units of
Lyondell GP under this Section 10.3 is called herein a "Permitted PO Successor."
------------ ----------------------
31
Section 10.4 Transfer Prerequisites.
----------------------
Notwithstanding the foregoing provisions of Section 10.2 or Section 10.3, a
------------ ------------
Partner may Transfer its Units only if all the following occur:
(a) the Transfer is accomplished in a non-public offering in
compliance with, and exempt from, the registration and qualification
requirements of all federal and state securities laws and regulations;
(b) the Transfer does not cause a default under any material contract
to which the Partnership is a party or by which the Partnership or any of
its properties is bound;
(c) the transferee executes an appropriate agreement to be bound by
this Agreement and assumes all obligations of the transferor from and after
the date of the transfer, including the obligation to offtake and pay for
PO Product or Co-Product, as applicable;
(d) the transferor and/or transferee bears all reasonable costs
incurred by the Partnership in connection with the Transfer;
(e) the transferee is a single purpose entity fulfilling the
requirements of Section 9.5; and
-----------
(f) the proposed transferor is not in material default in the timely
performance of any of its obligations to the Partnership at the time of
transfer.
Section 10.5 Rights of Transferee; Closing Date of Transfer.
----------------------------------------------
(a) Upon consummation of a Transfer in accordance with Sections 10.2
-------------
or 10.3, the transferee shall immediately, and without any further action
----
of any Person, become (i) a Substitute Limited Partner if and to the extent
Limited Partner Units are transferred and (ii) a Substitute General
Partner, if General Partner Units are transferred.
(b) Each Transfer shall become effective as of the first day of the
calendar month following the calendar month during which the remaining
Partner or Partners receives a copy of the instrument of assignment and, to
the extent required, all such certificates and documents of the character
described in Section 10.4, which it or they may reasonably request.
------------
Section 10.6 Transfer to Wholly Owned Affiliate. Without the need for the
consent of any Person, but without releasing the transferring Partner from any
of its obligations under this Agreement accruing both before and after the date
of transfer, the General Partner may Transfer all but not part and any Limited
Partner may Transfer all or any part of its Units to any Wholly Owned Affiliate
of such Partner (other than another Partner), provided the transferee executes
an instrument reasonably satisfactory to all of the other Partners accepting the
terms and provisions of this Agreement and the transferee satisfies the
requirements of Section 9.5. Upon consummation of a Transfer in accordance with
-----------
this Section 10.6, the transferee shall immediately, and without any further
------------
action of any Person, become (i) a Substitute Limited Partner, if and to the
extent Limited Partner Units are transferred, and (ii) a Substitute General
Partner, if General Partner Units are transferred.
32
Section 10.7 Right to Admit New Partners for Capacity Expanding
--------------------------------------------------
Discretionary Capital Project. For avoidance of doubt, and without limiting
-----------------------------
Section 10.2, the General Partner shall have the right to cause the Partnership
------------
to admit new Series A Unit Partners or Series B Unit Partners who are Wholly
Owned Affiliates of then existing Partners meeting the requirements of
Section 9.5 in connection with the issuance of new Units in connection with a
-----------
capacity expanding Discretionary Capital Project.
Section 10.8 Right of General Partner to Classify Series B Units.
---------------------------------------------------
At any time following the Closing Date, the General Partner may at its sole
discretion divide the Series B Units into two classes of Series B Units, with
one class of Series B Units representing an interest in the SM Co-Product and
one class of Series B Units representing an interest in the TBA Co-Product, and
designate the rights and privileges of holders of such classes and alter other
terms and provisions of this Agreement as appropriate; provided, however, that
the classification of Series B Units pursuant to this Section 10.8 may not
------------
change or impact the rights or obligations of any of the existing Series A Unit
Partners under this Agreement; and provided, further, that the Partners shall
consent to the amendment of this Agreement to give effect to the classification
of Series B Units pursuant to this Section 10.8.
------------
ARTICLE XI
WITHDRAWAL; REMOVAL OF THE GENERAL PARTNER; REMEDIES AND PURCHASE OPTION FOR
UNCURED OFFTAKE AND PAYMENT DEFAULT; REMEDIES FOR GENERAL PARTNER BREACH OF
OBLIGATIONS TO DELIVER PRODUCT
Section 11.1 Withdrawal of Limited Partners. A Limited Partner shall not
------------------------------
withdraw from the Partnership without the prior written consent of the other
Partners, which consent a Partner may withhold in its sole and absolute
discretion.
Section 11.2 Non-Supply Failure Step-in. The procedures for withdrawal or
--------------------------
the forced sale of the Units of the General Partner to Xxxxx XX are as follows
and as provided in Section 11.3:
------------
(a) The General Partner shall not withdraw or resign from the
Partnership without the prior written consent of holders of the majority of
the Series A Percentage Interests and the holders of a majority of the
Series B Percentage Interests.
(b) A "Non-Supply Failure Step-in Triggering Event" is either one of
-------------------------------------------
the following: the occurrence of (i) the Bankruptcy of Lyondell or (ii) an
Uncured Partner Offtake or Payment Default with respect to any Series B
Unit holder that is an Affiliate of Lyondell and as to which Xxxxx XX has
elected to purchase the Series B Units pursuant to Section 11.4.
------------
(c) Upon the occurrence of a Non-Supply Failure Step-in Triggering
Event, Xxxxx XX or its permitted successor hereunder shall have the right
to exercise the following remedies by notice to Lyondell GP within 60 days
of the occurrence of the Step-in Triggering Event:
33
(i) Acquire all (but not part) of Lyondell GP's Units and
Lyondell LP's Series A Units on a date specified in Bayer LP's
election notice that is not later than 90 days from the date of the
election notice for a cash purchase price equal to the fair market
value of such Units (which purchase price shall be deemed to be not
less than zero), determined in accordance with the appraisal
procedures of Section 11.5.
------------
(ii) If Xxxxx XX contemporaneously exercises the right afforded
to it under Section 11.2(c)(i) in connection with a Bankruptcy of
------------------
Lyondell (but without derogation of Bayer LP's rights under Section
-------
11.4), Bayer may also acquire all (but not part) of the Series B Units
----
then held by Lyondell Affiliates on the date on which the Units are to
be acquired under Section 11.2(c)(i) for a cash purchase price equal
------------------
to the fair market value of such Units (which purchase price shall be
deemed to be not less than zero), determined in accordance with the
appraisal procedures of Section 11.5; provided, however, that Xxxxx XX
------------
shall not have the right to acquire the Series B Units then held by
Lyondell Affiliates if (x) no Uncured Partner Offtake or Payment
Default then exists with respect to such Series B Units and (y) Xxxxx
XX is provided reasonable assurances within 10 days of the filing of
the Bankruptcy that the Lyondell Affiliate which holds such Series B
Units will meet its offtake and payment obligations. The Lyondell
Partners shall not have the right to challenge Bayer LP's
determination of whether it has received such reasonable assurances,
including under the arbitration procedures set forth in Exhibit B or
---------
by seeking injunctive relief through the courts. If the conditions set
forth in clauses (x) and (y) of the preceding sentence are not
satisfied and Xxxxx XX in connection with a Lyondell Bankruptcy
acquires the Series B Units held by Lyondell Affiliates, Lyondell
Affiliates shall have the right to reacquire such Series B Units for
the purchase price paid by Xxxxx XX at any time within three years
after the purchase by Xxxxx XX (A) that the Lyondell Affiliates are
able to provide reasonable assurances to Xxxxx XX that they will be
able to meet their offtake and payment obligations or (B) within 180
days following the dismissal or completion of a Chapter 11 Bankruptcy
case with respect to Lyondell. Except in connection with a Bankruptcy
of Lyondell as provided in this Section 11.2(c)(ii), a Non-Supply
-------------------
Failure Step-in Triggering Event or a Supply Failure Step-in
Triggering Event shall not entitle Xxxxx XX to acquire the Series B
Units of Lyondell Affiliates and no Non-Supply Failure Step-in
Triggering Event or Supply Failure Step-in Triggering Event shall
entitle Xxxxx XX to acquire the Series B Units not held by Lyondell
Affiliates.
(d) If Xxxxx XX or its permitted successor hereunder exercises its
rights under Section 11.2(c), then Xxxxx XX shall, directly or through a
---------------
Qualified Replacement Operator, operate the Partnership Property for the
benefit of all Partners for the production of PO Product and Co-Product in
accordance with the terms, conditions and standards of this Agreement and
the Operating Agreement, as if the Operating Agreement remained in full
force and effect.
34
Section 11.3 Supply Failure Step-in.
----------------------
(a) Two Month 80% Failure. If (i) Xxxxx XX (together with its
---------------------
Affiliates pursuant to any product "swap" or similar arrangement then in
existence between Lyondell and Bayer) did not receive at least 80% for the
immediately prior month of the lesser of (x) Bayer LP's binding nominations
for pounds of PO Product or (y) 1/12th of the Bayer PO Annual Offtake
Amount for the year, and (ii) Lyondell GP anticipates in good faith that
Xxxxx XX (together with its Affiliates pursuant to any product "swap" or
similar arrangement then in existence between Lyondell and Bayer) will not
receive at least 80% for the current month of the lesser of (x) Bayer LP's
binding nominations for pounds of PO Product or (y) 1/12th of the Bayer PO
Annual Offtake Amount for the year, then on or before the 15th day of the
month, Lyondell GP shall provide Bayer with a full written technical
assessment of the condition causing the curtailment (the "Operating
---------
Problem") and Lyondell's efforts and plans to remediate the Operating
-------
Problem. If the Operating Problem is not the result of Force Majeure, the
60 day period under this Section 11.3(a) will be applied to the five month
---------------
threshold under Section 11.3(b).
---------------
(b) Threshold for Initiating Curative Action Plan. If Xxxxx XX
---------------------------------------------
(together with its Affiliates pursuant to any product "swap" or similar
arrangement then in existence between Lyondell and Bayer) has not received
pounds of PO Product equal to at least (i) for any consecutive five month
period, 80% of the lesser of (x) the aggregate binding nominations for
pounds of PO Product of Xxxxx XX during such period or (y) 5/12th of the
Bayer PO Annual Offtake Amount for such year or (ii) for any consecutive 12
month period, 85% of the lesser of (x) the aggregate binding nominations
for pounds of PO Product of Xxxxx XX during such period or (y) the Bayer PO
Annual Offtake Amount during such period, and as to either clause (i) or
(ii), such failure is not the result of Force Majeure (a "Major Unexcused
---------------
PO Delivery Failure"), then upon written notice from Xxxxx XX, which notice
-------------------
may be given at any time for so long as the Major Unexcused PO Delivery
Failure continues, Lyondell GP shall cause the Existing Plant Operator for
the Existing Plant at which the problem exists to meet with Xxxxx XX or its
Affiliate to develop a "Curative Action Plan" on a cooperative, mutually
--------------------
consensual basis to address the problem on the terms set forth in
Section 11.3(c) below.
---------------
(c) Attempt to Reach Mutual Agreement on a Mutual Curative Action
-------------------------------------------------------------
Plan. Lyondell GP shall arrange a technical review, a review of the
----
relevant Existing Plant and other necessary arrangements with Bayer
(subject to making appropriate confidentiality arrangements). The Parties
shall negotiate in good faith to develop and finalize a mutually acceptable
Curative Action Plan within 30 days of the date of Bayer LP's notice
pursuant to Section 11.3(b) above or such longer period as the Parties may
---------------
agree. Costs incurred by both Lyondell and Bayer in developing the Curative
Action Plan shall be included in Operating Services Costs to be shared
between them on a System-wide Pooled Cost Basis. The Curative Action Plan
will contain specific steps to be taken by the Existing Plant Operator at
the Existing Plant at which the problem exists and a time period for
completing the Curative Action Plan.
(d) If the Parties Reach Agreement. If the Parties reach agreement
------------------------------
on a Curative Action Plan within such 30 day period (as such period may be
extended by mutual agreement), then the Existing Plant Operator shall
implement the agreed Curative Action
35
Plan and shall use Reasonable Best Efforts to complete such Curative Action
Plan within the time period specified in the Curative Action Plan. If the
Curative Action Plan is successful, then the Parties shall be restored to
their positions prior to the existence of the Major Unexcused PO Delivery
Failure (subject to any curtailment protocol then in effect). If the
Curative Action Plan is not successful, then the Parties shall review the
continuing Operating Problem under Section 11.3(c) and mutually determine
---------------
to either proceed (i) with another mutually developed Curative Action Plan,
(ii) to derate the Existing Plant by mutual agreement or (iii) to proceed
under Section 11.3(e) and the following provisions of this Section 11.3.
--------------- ------------
For purposes of this Section 11.3, "successful" means "solving" the
------------
Operating Problem to the extent required so that Xxxxx XX is not being
curtailed from that point forward as a result of the Operating Problem. For
purposes of this Section 11.3, "derate" means reducing the rated PO
------------
capacity of the Existing Plant in question to account for an expected long-
term reduction in the PO production capacity of the Existing Plant, which
shall in turn reduce the Existing Plant Total PO Capacity. Any curtailment
protocol then in effect between the Parties shall be appropriately changed
to reflect the derating of the affected Existed Plant under this
Section 11.3.
------------
(e) If the Parties Do Not Reach Agreement. If the Parties fail to
-------------------------------------
finalize a mutually acceptable Curative Action Plan within such 30 day
period (as such period may be extended by mutual agreement), then the
Existing Plant Operator may implement its chosen Curative Action Plan.
Lyondell GP shall provide a written description of such Curative Action
Plan to Xxxxx XX within 30 days of the end of the period for reaching
mutual agreement on a Curative Action Plan.
(f) Implementation of Lyondell Curative Action Plan. The Existing
-----------------------------------------------
Plant Operator's Curative Action Plan shall provide for completion of the
Curative Action Plan within seven months from the Parties' failure to reach
agreement with respect to a mutually approved plan under Section 11.3(c),
---------------
subject to fabrication and/or delivery items and regulatory approvals that
will result in the Curative Action Plan taking more than seven months to
complete, which shall be identified in the Curative Action Plan. If Xxxxx
XX disputes the time periods specified by the Existing Plant Operator for
such fabrication and/or delivery items and/or regulatory approvals, then
Xxxxx XX may have the reasonableness of such time periods reviewed by a
three member panel consisting of technical experts appointed pursuant to
Exhibit B. The three member panel will reach its decision within 15 days
---------
after appointment of the third member of the panel. Lyondell GP shall cause
the Existing Plant Operator to proceed with implementation of its Curative
Action Plan pending the arbitration panel's decision. If the Existing Plant
Operator's Curative Action Plan is successful, then the Parties shall be
restored to their positions prior to the existence of the Major Unexcused
PO Delivery Failure (subject to any curtailment protocol then in effect) .
(g) If Lyondell Plan is Not Successful. If the Existing Plant
----------------------------------
Operator's Curative Action Plan is not successful, or if the Existing Plant
Operator did not have a Curative Action Plan, then either the provisions of
Section 11.3(h)-(j) or Section 11.3(k)-(l) shall apply, depending on
------------------- -------------------
whether or not the Existing Plant as to which the Operating Problem relates
is one of the Plant Facilities.
36
(h) If the Plant is one of the Plant Facilities. If the Existing
-------------------------------------------
Plant affected by the Operating Problem is one of the Plant Facilities, and
either (i) the Existing Plant Operator's Curative Action Plan is
unsuccessful or (ii) the Existing Plant Operator did not have a Curative
Action Plan, then Xxxxx XX shall have the right to present in good faith a
Curative Action Plan to Lyondell GP for consideration. If Xxxxx XX does not
present a Curative Action Plan, then either (i) Lyondell GP shall cause the
Operator to continue to use Reasonable Best Efforts to remediate the
Operating Problem or (ii) if the Operator does not believe in good faith
that the Operating Problem can be remediated on a commercially reasonable
basis, then the Operator shall derate the Plant Facilities. If Xxxxx XX
presents a Curative Action Plan, Lyondell GP shall review the Curative
Action Plan for compliance with the Existing Plant EHS Policies. If Bayer
LP's Curative Action Plan does not comply with the Existing Plant EHS
Policies, then Xxxxx XX shall make such alterations to the Curative Action
Plan as may be required to comply with the Existing Plant EHS Policies.
Within 10 Business Days following Lyondell GP's receipt of the Curative
Action Plan (revised, if and as provided in the previous sentence),
Lyondell GP must elect (i) to agree to guarantee Bayer LP's Pro Rata share
of the rated PO capacity of the affected Plant Facilities, subject only to
Force Majeure, which guarantee shall continue until Lyondell GP can
demonstrate to Xxxxx XX that the Operating Problem is solved or (ii) permit
Xxxxx XX to proceed with its rights under Section 11.3(i).
---------------
(i) Step-in for Plant Facilities. If Lyondell GP does not timely
----------------------------
elect to provide the volume guarantee to Xxxxx XX described under the last
sentence of Section 11.3(h), then Xxxxx XX shall have the right, through an
---------------
Affiliate, to assume the operation of the Plant Facilities affected by the
Operating Problem under the terms and conditions of the Operating
Agreement, and with the same liabilities and responsibilities of the
Operator under the Operating Agreement, for the remaining term of the
Operating Agreement. Xxxxx XX shall cause its Affiliate operator to
implement the Curative Action Plan presented to Lyondell GP under
Section 11.3(h). Xxxxx XX shall not have the right to purchase Lyondell
---------------
GP's Units, Lyondell LP's Series A Units or any Series B Units or to
operate the Plant Facilities at the other Complex.
(j) Bayer Obligations. The Xxxxx XX Affiliate operator shall
-----------------
guarantee the Lyondell Partners' monthly deliveries of PO Product and the
Series B Unit Partners' deliveries of Co-Product from the Plant Facilities
at the monthly average of the Lyondell Partners' share of PO Product and
the Co-Product produced from the Plant Facilities during the six months
immediately prior to the assumption of operations by Bayer LP's Affiliate,
subject only to Force Majeure and loss of production resulting from any
shutdown of the Plant Facility (such period not to exceed 30 days) as may
be required to implement Bayer LP's Curative Action Plan pursuant to
Section 11.3(i). Such guarantee shall continue until the Xxxxx XX
---------------
Affiliated operator demonstrates to the Partners other than Xxxxx XX that
the Operating Problem is solved.
(k) If the Plant is Not a Plant Facilities. If the affected Existing
--------------------------------------
Plant is not a Plant Facilities, then Xxxxx XX may by delivering written
notice to Lyondell GP at any time prior to the time that the Operating
Problem is solved (i) require Lyondell GP to exercise on behalf of its
Affiliates the option under Section 11.3(l); (ii) proceed again under
---------------
Section 11.3(c); or (iii) require Lyondell GP to cause the Existing Plant
----------------
Operator
37
either (x) to continue to use Reasonable Best Efforts to remediate the
Operating Problem or (y) if the Existing Plant Operator does not believe in
good faith that the Operating Problem can be remediated on a commercially
reasonable basis, then the Existing Plant Operator shall derate the Plant
Facilities.
(l) Lyondell Options. Within 30 days after Bayer LP's notice under
----------------
Section 11.3(k)(i), Lyondell GP shall elect on behalf of its relevant
------------------
Affiliate to either (i) agree to not curtail Bayer due to the Disruption
Events from the Existing Plant affected by the Operating Problem, subject
only to Force Majeure, which agreement shall continue until Lyondell GP can
demonstrate to Xxxxx XX that the Operating Problem is solved or (ii) allow
Xxxxx XX, directly or through its Affiliate, to purchase at fair market
value (to be determined in accordance with Section 11.5) equivalent PO
-------------
capacity in any of the Existing Plants as may be designated by Lyondell to
the annual pounds of which Xxxxx XX would receive absent the Disruption
Event that are curtailed by reason of the Operating Problem. Lyondell GP
shall provide to Xxxxx XX at the time Lyondell GP delivers its election
notice under this Section 11.3(l)(ii) a description of the most recent
-------------------
Curative Action Plan that the relevant Existing Plant Operator may have to
address the Operating Problem. If Xxxxx XX so desires, it may rescind its
election pursuant to Section 11.3(k) in order to permit the Existing Plant
---------------
Operator to implement such Curative Action Plan. If the Existing Plant
Operator subsequently solves the Operating Problem, the restored PO
production in the affected Existing Plant shall be treated as debottleneck
capacity for purposes of this Agreement.
(m) Dispute Resolution. Except with respect to rights triggered by a
------------------
Bankruptcy of Lyondell, Xxxxx XX may not exercise its rights under Section
-------
11.2(c) or Section 11.3 during the pendency of a dispute resolution
------- ------------
procedure in accordance with the provisions of Exhibit B as to whether a
---------
Non-Supply Failure Step-in Triggering Event or a Supply Failure Step-in
Triggering Event has occurred. If Lyondell GP is not the prevailing Party
in any such dispute, submission of such dispute to resolution in accordance
with Exhibit B shall not extend or shorten the total period within which
---------
Lyondell GP may cure the event giving rise to a Non-Supply Failure Step-in
Triggering Event or a Supply Failure Step-in Triggering Event, except as
may be agreed by the Parties or awarded by the arbitrator pursuant to
Exhibit B.
---------
Section 11.4 Remedies and Purchase Option for Uncured Partner Offtake
--------------------------------------------------------
or Payment Default.
------------------
(a) If a Partner fails to offtake its full Pro Rata Share of PO
Product or Co-Product produced from the Plant Facilities under the terms
set forth in Article III and/or to timely pay in full any Partner Invoice
when due, then the General Partner shall within 30 days thereafter deliver
a written notice to the defaulting Partner of such default, informing the
defaulting Partner that (i) the Partnership will declare an Uncured Partner
Offtake or Payment Default and (ii) if the default is a payment default, at
the General Partner's election, the Partnership may withhold distributions
of PO Product (if the default relates to Series A Units) or Co-Product (if
the default relates to Series B Units held by a Person other than a
Lyondell Affiliate) if the default is not cured within 30 days of the date
of such notice. If the default (including as to a payment default, payment
of interest at the Default Rate on the unpaid invoiced amount from the date
due until paid in
38
full), is not cured on or before the expiration of such 30 day period, then
an "Uncured Partner Offtake or Payment Default" shall have occurred. For
------------------------------------------
any payment default, the General Partner may withhold distributions of PO
Product or Co-Product, as the case may be, to such defaulting Partner (a
"Defaulting Limited Partner") until the Defaulting Limited Partner pays the
--------------------------
invoiced amount and interest thereon in full. Any Defaulting Limited
Partner shall be obligated to compensate the other Partners (the "Non-
----
Defaulting Partners") for any lost production sustained by the other
-------------------
Partners resulting from the Operator's ceasing production by reason of such
default by paying the product of (i) the positive difference between the
Non-Defaulting Partners' cost per pound of purchasing substitute PO Product
or Co-Product of comparable specifications and the per pound cost of such
product to such Partner under Section 2.3 (or if no product is then
-----------
available in the market, the then prevailing "spot" price and (ii) the
number of pounds of such lost pounds). Any Non-Defaulting Partner seeking
compensation under this Section 11.4(a) shall mitigate such claim by taking
---------------
all actions which a reasonable Person would undertake to minimize or
alleviate the amount of such claim, including availing itself of available
business interruption insurance coverage under the Lyondell insurance
program and purchasing replacement product from the lowest cost alternative
source meeting the Non-Defaulting Partner's delivery timing and location
needs. Additionally, if a payment default relates to a Discretionary
Capital Project, then in addition to the foregoing, the General Partner may
withhold any benefits of the Discretionary Capital Project from that
Partner in accordance with Section 8.4(g).
--------------
(b) Following the occurrence of an Uncured Partner Offtake or Payment
Default, the Non-Defaulting Partners shall have the right to pay the unpaid
amounts (without interest, which shall remain the obligation of the
defaulting Partner) and receive in-kind distributions of PO Product or Co-
Product (whichever the payment default relates to) equal to the payment
default divided by the then applicable PO Production Costs or per pound
Fixed Costs and Variable Costs of producing Co-Product, as applicable. Upon
such payment, the Defaulting Limited Partner shall be deemed to have
received such product and the Defaulting Limited Partner shall be deemed to
have paid the amount paid by the Non-Defaulting Partners to the extent of
the payment made.
(c) If and for so long as an Uncured Partner Offtake or Payment
Default with respect to a Defaulting Limited Partner exists, then the
General Partner and each of the other Non-Defaulting Partners, acting
individually or collectively shall have the right but not the obligation to
notify the Defaulting Limited Partner in writing that, unless the
Defaulting Partner shall offtake all PO Product or Co-Product that the
Defaulting Limited Partner has failed or refused to offtake and/or to pay
the full amount owing to the Partnership, including accrued and unpaid
interest, within 15 days from the date of the notice, the Non-Defaulting
Partners will elect to purchase all of the Defaulting Limited Partner's
Series A Units and/or Series B Units as to which the default has occurred
for a cash purchase price equal to the fair market value (which purchase
price shall be deemed to be not less than zero) of the Series A Units
and/or Series B Units as to which the default has occurred. If the default
is not cured on or before the expiration of the 15 day period, then the
Non-Defaulting Partners may notify the Defaulting Limited Partner that they
are electing to proceed with the purchase on a date specified in the
election notice not later than 90 days from the date of the election
notice, and the Defaulting Limited Partner shall have no further curative
rights. If more than one Non-Defaulting Partner
39
elects to so acquire the Defaulting Limited Partner's Units, the Non-
Defaulting Partners shall purchase the Units in equal shares unless they
unanimously agree to a different allocation. The fair market value of the
Defaulting Limited Partner's Units shall be determined in accordance with
the appraisal procedures of Section 11.5. The Non-Defaulting Partners
------------
purchasing Units under this Section 11.4(c) shall not be liable to the
---------------
Partnership for the unpaid amounts owed to the Partnership, which
obligation shall remain that of the Defaulting Limited Partner.
Section 11.5 Appraisal Procedures. The fair market value for the General
--------------------
Partner's Units being sold under Section 11.2(c), a Defaulting Limited Partner's
---------------
Units being sold under Section 11.4 or the fair market value of the capacity
------------
purchased by Xxxxx XX or its Affiliates under Section 11.3(l) will be decided by
---------------
a three-member panel of independent valuation experts. Each buying and selling
Partner(s) will choose an investment bank of national standing within 15 days
after the purchase election notice of the purchasing Partner(s) and the two
sides will mutually agree within 15 days after the later of such appointments on
a third independent investment bank of national standing to value such Units.
The appraisers will be instructed to finalize their appraisal within 15 days
after the appointment of the third appraiser. The appraisers will determine fair
market value without any control premium. Each of the two investment banks
chosen by the buying and selling Partners shall provide their appraisals to the
mutually chosen investment bank, and the mutually chosen investment bank shall
then choose the value that most closely equals the value determined by such
investment bank set forth in one of the appraisals as the purchase price for the
sale, which purchase price shall be binding upon the buying and selling
Partners.
Section 11.6 Remedies of Limited Partners for Failure of General Partner
-----------------------------------------------------------
to Deliver Product. Without derogation of any Partner's rights under
------------------
Section 11.2(b), if the General Partner fails or refuses to deliver PO Product
---------------
or Co-Product to any Limited Partner in the amount to which such Limited Partner
is entitled (subject to any curtailment protocol in effect between the Partners
or their Affiliates with respect to Disruption Events and Planned Outages), then
at such Limited Partner's option and as their sole and exclusive remedy
exercised by written notice to the General Partner (other than as provided in
Section 11.2) (a) the General Partner shall pay the positive difference in the
-------------
Limited Partner's cost of purchasing substitute PO Product or Co-Product of
comparable specifications or (b) the Limited Partner shall be entitled to first
priority distributions of PO Product or Co-Product, as applicable, sufficient to
make up the pounds of product to which the Limited Partner was entitled that
were not delivered by the General Partner on a schedule specified by such
Limited Partner in the Sourcing Plan. If (a) such Limited Partner is unable to
purchase the full amount of the PO Product or Co-Product, as applicable, to
which the Limited Partner was entitled (subject to any curtailment protocol then
in effect) and (b) the General Partner willfully refused in bad faith to deliver
PO Product or Co-Product to such Limited Partner (including, for example, in
order to favor other businesses of the General Partner's Affiliates), then such
Limited Partner will be entitled to recover from the General Partner its
demonstrated lost profits proximately caused by the failure to receive the PO
Product or Co-Product, as applicable.
Section 11.7 Mitigation. If any Limited Partner asserts any claim against
----------
the General Partner under clause (a) of Section 11.6, the Limited Partner shall
------------
mitigate such claim by taking all actions which a reasonable Person would
undertake to minimize or alleviate the amount of such claim, including availing
itself of available business interruption insurance coverage under
40
the Lyondell insurance program and purchasing replacement product from the
lowest cost alternative source meeting the Limited Partner's delivery timing and
location needs.
ARTICLE XII
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 12.1 Dissolution and Termination. The Partnership shall be
---------------------------
dissolved and wound up upon the happening of any one of the following events:
(a) the written determination of all Partners to dissolve the
Partnership;
(b) the entry of a judicial decree of dissolution;
(c) the expiration of the term of the Ground Leases; or
(d) the sale, distribution or other Transfer of all or
substantially all of the Partnership Property.
Section 12.2 Procedures Upon Dissolution. The procedures upon dissolution
---------------------------
of the Partnership are as follows:
(a) General. If the Partnership dissolves, it shall commence
-------
winding up pursuant to the appropriate provisions of the Act and the
procedures set forth in this Article XII. Notwithstanding the dissolution
-----------
of the Partnership, prior to the termination of the Partnership, the
business of the Partnership and the affairs of the Partners, as such, shall
continue to be governed by this Agreement.
(b) Control of Winding Up. The winding up of the Partnership shall
---------------------
be conducted under the direction of the General Partner; provided, however,
that if the dissolution is caused by entry of a decree of judicial
dissolution, the winding up shall be carried out in accordance with such
decree.
(c) Manner of Winding Up. The Partnership shall offer all of its
--------------------
assets for sale and shall consider all appropriate bids, including bids
from Partners, in an effort to obtain the best price for such assets. Upon
sale, the Partnership shall apply the proceeds therefrom in accordance with
this Section 12.2(c) and Section 12.2(d). In the event that a Partner is
--------------- ---------------
the winning bidder, the assets shall not be sold, but will be distributed
to such Partner. In the event the distribution in this paragraph causes the
distributee Partner to have a deficit balance in its Capital Account, that
Partner shall restore such deficit to zero through cash contributions. Upon
dissolution of the Partnership, the General Partner shall determine the
time, manner and terms of any sale or distribution of Partnership property
pursuant to such winding up, consistent with its duties and having due
regard to the activity and condition of the relevant market and general
financial and economic conditions. Except as otherwise agreed by the
Partners or as provided in this Section 12.2(c), no distributions will be
---------------
made in kind to any Partner without the consent of each Partner.
41
(d) Application of Partnership Property. In the case of a dissolution
-----------------------------------
and winding up of the Partnership, the Partnership Property shall be
applied as follows:
(i) First, to satisfaction of the liabilities of the
Partnership owing to creditors (including Partners and Affiliates of
Partners who are creditors), whether by payment or reasonable
provision for payment. Any reserves created to make any such provision
for payment may be paid over by the Partnership to an independent
escrow holder or trustee, to be held in escrow or trust for the
purpose of paying any such contingent, conditional or unmatured
liabilities or obligations, and, at the expiration of such period as
the General Partner may deem advisable, such reserves shall be
distributed to the Partners or their assigns in the manner set forth
in subsection (d)(ii) below.
------------------
(ii) Second, to Lyondell LP in an amount equal to the
initial working capital contributed by Lyondell LP to the Partnership,
and, notwithstanding the provisions of Section 4.1, the Partnership
-----------
shall make allocations of Profit and Loss for the last year of
Partnership operations as are necessary to assure that the
distribution in this Section 12.2(d)(ii) does not cause Lyondell LP to
-------------------
have a deficit Capital Account balance after the distribution
described in Section 12.2(d)(ii).
-------------------
(iii) Third, after all allocations of Profits or Losses and
other items pursuant to Article IV, to the Partners in accordance with
----------
the balances in their Capital Accounts, any General Partner that then
has a deficit in its Capital Account shall contribute cash in the
amount necessary to eliminate such deficit. Such contributions shall
be made within 90 days after the date on which all undistributed
assets of the Partnership have been converted to cash.
(iv) Notwithstanding the foregoing, if any Partner shall
be indebted to the Partnership, then until payment in full of the
principal of and accrued but unpaid interest on such indebtedness,
regardless of the stated maturity or maturities thereof, the
Partnership shall retain such Partner's distributive share of the
Partnership Property and apply such sums to the liquidation of such
indebtedness and the cost of operation of such Partnership assets
during the period of such liquidation.
Section 12.3 Termination of Partnership. Upon the completion of the
--------------------------
liquidation of the Partnership and the distribution of all Partnership Property,
the Partnership's affairs shall terminate and the General Partner shall cause to
be executed and filed a Certificate of Cancellation of the Partnership's
Certificate of Limited Partnership pursuant to the Act, as well as any and all
other documents required to effectuate the termination of the Partnership.
Section 12.4 Asset and Liability Statement. Within a reasonable time
-----------------------------
following the completion of the winding up and liquidation of the Partnership's
business, the General Partner shall supply to each of the Partners a statement
(which may be unaudited) which shall set forth the assets and the liabilities of
the Partnership as of the date of complete liquidation, and each Partner's pro
rata portion of distributions pursuant to Section 12.2.
------------
42
ARTICLE XIII
CONFIDENTIALITY
Section 13.1 Confidentiality and Use of Information. The Partners'
--------------------------------------
obligations concerning confidentiality are as follows:
(a) Each Partner shall maintain in strictest confidence and not
disclose any Confidential Information of the Partnership, any other Partner
or any Affiliate of any other Partner, except to (i) the Partnership and
its Related Persons, (ii) the Operator and its Related Persons, (iii) such
Partner's Related Persons and other Partners and their respective Related
Persons and (iv) any permitted lender to the Partnership, in each case, on
a "need to know" basis in connection with the conduct or furtherance of the
business or affairs of the Partnership; provided, that, the disclosure of
financial statements of, or other information relating to the Partnership,
shall not be deemed to be the disclosure of Confidential Information (x) to
the extent that any Partner (or its ultimate parent entity) deems it
necessary, pursuant to law, regulation or stock exchange rule (in the
reasonable good faith judgment of such parent entity) to disclose such
information in or in connection with filings with the SEC or other
Governmental Entity, presentations to lenders or presentations to ratings
agencies or (y) to the extent that in order to sustain a position taken for
tax purposes, any Partner (or its parent) deems it necessary and
appropriate to disclose such financial statements or other information. All
disclosed Confidential Information shall remain the assets of the Person
whose assets it was prior to such disclosure, except that Confidential
Information transferred to the Partnership by Lyondell and its Affiliates
on or about the Closing Date shall be an asset of the Partnership.
(b) No Confidential Information regarding the plans or operations of
any Partner or any Affiliate thereof received or acquired by or disclosed
to any unaffiliated Partner or Affiliate thereof in the course of the
conduct of Partnership business, or otherwise as a result of the existence
of the Partnership, may be used by such unaffiliated Partner or Affiliate
thereof for any purpose other than for the benefit of the Partnership in
conducting the Partnership's business. The Partnership and each Partner
shall have the affirmative obligation to take all necessary steps to
prevent the disclosure to any Partner or Affiliate thereof of information
regarding the plans or operations of such Partner and its Affiliates in
markets and areas unrelated to the business of the Partnership in which any
other Partner and their respective Affiliates compete.
(c) In the event that any Partner is required by Applicable Law or
administrative process to disclose any Confidential Information, it is
agreed that such Partner prior to disclosure will provide the General
Partner (and, if such Confidential Information concerns another Partner or
any of its Affiliates, such other Partner) with prompt notice of such
request(s) so that the General Partner (or such other Partner) may seek an
appropriate protective order or other appropriate remedy and/or waive the
Partner's compliance with the provisions of this Section 13.1. In the event
------------
that such protective order or other remedy is not obtained, or that the
General Partner (and, if such Confidential Information concerns another
Partner or any of its Affiliates, such Partner) grants a waiver hereunder,
the Partner required to furnish Confidential Information may
43
furnish that portion (and only that portion) of the Confidential
Information which, in the opinion of such Partner's counsel, such Partner
is legally compelled to disclose, and such Partner will exercise its
Reasonable Best Efforts to obtain reliable assurance that confidential
treatment will be accorded any Confidential Information so furnished.
(d) Any Partner may disclose Confidential Information to a Third
Party who requires such Confidential Information for the purpose of
evaluating a possible purchase of such Partner's Units in accordance with
Article X; provided, however, that (i) such Third Party shall be informed
---------
by such Partner of the confidential nature of the information and the
existence of this Section 13.1, (ii) the disclosing Partner shall redact
------------
all price, volume and other information of a competitive or sensitive
nature prior to such disclosure and (iii) prior to any disclosure, such
Third Party shall execute a written confidentiality agreement with such
Partner substantially identical in scope to this Section 13.1 and provided
------------
further, however, that such confidentiality agreement is also made for the
benefit of the Partnership and each of the other Partners and its
Affiliates.
(e) The Partners and their Affiliates shall consult with each other
on an ongoing basis with respect to disclosures regarding the Partnership
and its business and affairs permitted under Section 13.1(a).
---------------
Section 13.2 Survival. The provisions of this Article XIII shall survive
-------- ------------
the dissolution and liquidation of the Partnership.
Section 13.3 Relationship with Other Agreements. The provisions of this
----------------------------------
Article XIII are subject to the confidentiality provisions of the Bayer License
------------
Agreement, which shall control in the event of a conflict with this Article
XIII.
ARTICLE XIV
INDEMNITY; WAIVER OF CLAIMS
Section 14.1 Partner Indemnity. Each Partner shall be responsible for, and
-----------------
shall indemnify, defend and hold harmless the Partnership, each other Partner,
each other Partners' Eligible Indemnitees, the Operator and the Operator's
Eligible Indemnitees from, any Third Party Claim and resulting Damages arising
out of (a) products or services sold or made available or distributed by the
indemnifying Partner and/or the storage, transportation, processing or sale of
PO Product or Co-Product after receipt by such Partner at the Delivery Point,
and (b) except for Third Party Claims and resulting Damages covered by the
indemnification of another Partner under Section 14.1(a) or the indemnification
---------------
of the Operator under Section 10.2 of the Operating Agreement, the acts or
------------
omissions of the Partner, its Affiliates and their respective employees and
agents.
Section 14.2 Waiver of Claims.
----------------
(a) Each Partner waives all Claims against the Partnership, the other
Partners (including the General Partner), the Operator and their respective
Affiliates, employees and agents, and the Partnership waives all Claims
against the Partners, the Operator and
44
their respective Affiliates, employees and agents, for personal injury to
or death of employees or agents or damage to or destruction or loss of
tangible property that is located within a Complex and is owned or leased
by the Partner or such Partner's Affiliates or the Partnership or in which
the Partner or such Partner's Affiliates or the Partnership owns an
interest, legal or beneficial, regardless of the acts, omissions,
negligence or Fault of any Person. Notwithstanding the foregoing, no
Partner waives any right to be reimbursed by the Operator under Section
-------
10.5 of the Operating Agreement with respect to any Casualty to the Plant
----
Facilities to the extent that such Casualty is an Uninsured Plant
Facilities Casualty.
(b) Without limiting any indemnification obligations of any Partner
with respect to Third Party Claims under Section 14.1 or of the Operator
------------
under Section 10.2 of the Operating Agreement, and without limiting any
------------
Partner's rights to be reimbursed by the Operator under Section 10.5 of the
------------
Operating Agreement, and except as provided in Sections 11.4 and 11.6, no
------------- ----
Partner, the Operator nor any of their respective Affiliates shall be
liable to any other Partner, the Operator or their respective Affiliates
for, and each Partner waives on its behalf and on behalf of its Affiliates
all Claims against the other Partners, the Operator and/or their respective
Affiliates for, its own Damages, including actual, consequential, special,
incidental, punitive or exemplary damages under any theory, arising out of
activities or obligations under or related to this Agreement or the
Operating Agreement, regardless of the acts, omissions, negligence or Fault
of any Person.
(c) The provisions of Sections 10.1 and Sections 10.8 and 10.10 of
------------- ------------- -----
the Operating Agreement are hereby incorporated by reference and shall bind
the Partners.
(d) Each Partner shall secure waivers of subrogation from its
insurers so that each insurer is bound by the waiver of Claims under this
Section 14.2. The General Partner shall obtain such waivers on behalf of
------------
the Partnership.
Section 14.3 Indemnification Procedures.
--------------------------
(a) In order for a Party (the "Indemnified Person"), to be entitled
------------------
to any indemnification provided for under this Agreement in respect of,
arising out of or involving a Third Party Claim, such Indemnified Person
must notify the Indemnifying Person in writing (including copies of all
papers served or delivered with respect to such claim) of the Third Party
Claim promptly following receipt by such Indemnified Person of written
notice of the Third Party Claim, which notice shall describe in reasonable
detail the nature of the Third Party Claim, an estimate of the amount of
Damages attributable to the Third Party Claim to the extent feasible and
the basis of the Indemnified Person's request for indemnification
hereunder; provided, however, that failure to give such notification shall
not affect the indemnification provided hereunder except to the extent the
Indemnifying Person shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Person shall not be liable for any
expenses incurred during the period in which the Indemnified Person failed
to give such notice). Thereafter, the Indemnified Person shall deliver to
the Indemnifying Person, promptly following the Indemnified Person's
receipt thereof, copies of all notices and
45
documents (including court papers) received by the Indemnified Person
relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnified Person, the
Indemnifying Person shall be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected
by the Indemnifying Person; provided, however, that such counsel is not
reasonably objected to by the Indemnified Person. Should the Indemnified
Person so elect to assume the defense of a Third Party Claim, the
Indemnifying Person shall not be liable to the Indemnified Person for any
legal expenses subsequently incurred by the Indemnified Person in
connection with the defense thereof. If the Indemnifying Person assumes
such defense, the Indemnified Person shall have the right to participate in
the defense thereof and to employ counsel, at its own expense, separate
from the counsel employed by the Indemnifying Person, it being understood
that the Indemnifying Person shall control such defense. The Indemnifying
Person shall be liable for the fees and expenses of counsel employed by the
Indemnified Person for any period during which the Indemnifying Person has
not assumed the defense thereof (other than during any period in which the
Indemnified Person shall have failed to give notice of the Third Party
Claim as provided above). If the Indemnifying Person chooses to defend or
prosecute a Third Party Claim, the Indemnified Person shall cooperate in
the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the Indemnifying Person's request) the provision to the
Indemnifying Person of records and information that are reasonably relevant
to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Provided the Indemnifying Person elects to
defend the Third Party Claim and is diligently prosecuting the defense
and/or settlement of any such Claim, the Indemnified Person shall not
assert in any such proceedings or otherwise any Claim, counterclaim or
cross-claim against the Indemnifying Person or its Affiliates (including
the Operator, if an Affiliate of Operator is the Indemnifying Person) for
indemnification or otherwise until the Third Party Claim is resolved by
final judgment or settlement and any related claims of the Indemnifying
Person and its Affiliates against its insurers or Third Parties for payment
or reimbursement of all or part of the costs of the Third Party Claim and
resulting Damages are finally resolved by judgment or settlement. Whether
or not the Indemnifying Person assumes the defense of a Third Party Claim,
the Indemnified Person shall not admit any liability with respect to, or
settle, compromise or discharge, such Third Party Claim without the
Indemnifying Person's prior written consent (which consent shall not be
unreasonably withheld). If the Indemnifying Person assumes the defense of a
Third Party Claim, the Indemnified Person shall agree to any settlement,
compromise or discharge of a Third Party Claim that the Indemnifying Person
may recommend and that by its terms obligates the Indemnifying Person (or
its insurer) to pay the full amount of the liability in connection with
such Third Party Claim, which releases the Indemnified Person completely in
connection with such Third Party Claim. Notwithstanding the foregoing, the
Indemnifying Person shall not be entitled to assume the defense of any
Third Party Claim (and shall be liable for the reasonable fees and expenses
of counsel incurred by the Indemnified Person in defending such Third Party
Claim) if the Third Party Claim seeks and has a reasonable prospect of
obtaining an order, injunction or other equitable relief against the
Indemnified Person that the Indemnified Person reasonably determines, after
conferring with its outside counsel,
46
cannot be separated from any related claim for money damages. If such
equitable relief portion of the Third Party Claim can be so separated from
that for money damages, the Indemnifying Person shall be entitled to assume
the defense of the portion relating to money damages.
(c) After it has been determined, by acknowledgment, agreement or
arbitration ruling pursuant to Exhibit B, that an Indemnifying Person is
---------
liable to the Indemnified Person(s) under Section 14.1, the Indemnifying
------------
Person shall pay or cause to be paid to the Indemnified Person the amount
of the Damage within 10 Business Days of receipt by the Indemnifying Person
of a notice reasonably itemizing the amount of the Damage but only to the
extent actually paid or suffered by the Indemnified Person(s).
(d) The indemnities contained in Section 14.1 shall survive the
-------------
termination and liquidation of the Indemnifying Person.
(e) In the event of any payment by or on behalf of an Indemnifying
Person to an Indemnified Person in connection with any Damage, the
Indemnifying Person (or any guarantor who made such payment) shall be
subrogated to and shall stand in the place of the Indemnified Person as to
any events or circumstances in respect of which the Indemnified Person may
have any right or claim against any third party (not including the
Indemnifying Person or the Operator) relating to such event or
indemnification. The Indemnified Person shall cooperate with the
Indemnifying Person (or such guarantor) in any reasonable manner in
prosecuting any subrogated claim.
Section 14.4 Joint Defense.
-------------
(a) Upon notification or receipt of any Third Party Claim, the
Partnership or any Partner, as applicable, shall notify the Partnership and
the other Partners, the Operator and, as appropriate, any Third Party
(including, as relevant, any insurance providers) of the pendency of the
Third Party Claim. In order to respond to any such Claim, the Partnership,
the Partners and the Operator during the course of one or more meetings
shall define in accordance with the provisions of Section 14.3 the scope
------------
and nature of the arrangement for defending against the Claim. The
Partnership and the Partners agree that to the extent practicable they will
utilize joint defense arrangements to defend against all Third Party
Claims. For any Third Party Claim for which the Operator assumes the
defense under Section 10.2 of the Operating Agreement (but without
------------
admitting liability for the Claim or waiving rights to indemnification or
contribution from the Partners), the Operator shall control the defense of
the Claim and the joint defense arrangements provided for herein shall be
mandatory.
Section 14.5 Extent of Indemnification, Release and Limitation on
----------------------------------------------------
Reimbursement Liability.
-----------------------
(a) WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OR
RELEASE PROVISIONS SET FORTH HEREIN, THE PARTNERSHIP, EACH PARTNER AND THE
OPERATOR SHALL BE ENTITLED TO INDEMNIFICATION OR RELEASE HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS GIVING
RISE TO
47
ANY SUCH INDEMNIFICATION OBLIGATION OR COVERED BY SUCH RELEASE IS THE
RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF ANY LAW OF OR
BY THE PARTNERSHIP, EACH PARTNER OR THE OPERATOR.
(b) THE PARTIES AGREE THAT THE STATEMENTS SET FORTH IN THIS SECTION
-------
14.5 CONSTITUTE A CONSPICUOUS LEGEND.
----
Section 14.6 Permitted Contribution. Any payment made by any Partner to the
----------------------
Partnership as an indemnification of the Partnership shall be accounted for as
an additional permitted contribution to the Partnership pursuant to Article II.
----------
ARTICLE XV
MISCELLANEOUS
Section 15.1 Construction. In construing this Agreement: (i) no
------------
consideration shall be given to the captions of the Articles, Sections,
subsections or clauses, which are inserted for convenience in locating the
provisions of this Agreement and not as an aid to construction and shall not be
interpreted to limit or otherwise affect the provisions of this Agreement, (ii)
no consideration shall be given to the fact or presumption that any party had a
greater or lesser hand in drafting this Agreement, (iii) examples shall not be
construed to limit, expressly or by implication, the matter they illustrate,
(iv) the word "includes" and its syntactic variants means "includes, but is not
limited to" and corresponding syntactic variant expressions, words such as
"herein," "hereafter," "hereof," "hereto" and "hereunder" refer to this
Agreement as a whole and the word "and" shall be deemed to mean "and/or" where
the context so requires, (v) the plural shall be deemed to include the singular,
and vice versa, (vi) each gender shall be deemed to include the other gender,
(vii) each Exhibit, Attachment and Schedule to this Agreement is part of this
Agreement, (viii) references to a Person are also to its permitted successors
and permitted assigns and (ix) unless otherwise expressly provided herein, any
agreement, instrument or statute defined or referred to herein means such
agreement, instrument or statute as from time to time amended, modified or
supplemented, included (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and reference to all attachments thereto and instruments incorporated
therein.
Section 15.2 Notices. All notices, requests, demands and other
-------
communications that are required or may be given to any Party under this
Agreement, unless otherwise provided herein, shall be in writing (including a
facsimile or similar writing) and shall be given to a party thereto at the
address or facsimile number specified below or as such Party shall at any time
otherwise specify by like notice to each of the other Parties to this Agreement.
Each such notice, request, demand or other communication shall be effective (i)
if given by facsimile, at the time such facsimile is transmitted and the
appropriate confirmation is received (or, if such time is not during regular
business hours of a Business Day, at the beginning of the next such Business
Day), (ii) if given by mail, five Business Days (or, if to an address outside
the United States, ten calendar days) after such communication is deposited in
the United States mail with first-class postage prepaid, addressed as aforesaid,
or (iii) if given by any other means, upon receipt or refusal of service at the
address specified below.
48
If to PO Offtake, LP:
One Houston Center
0000 XxXxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
Telecopy Number: 000-000-0000
If to BAYPO Limited Partnership:
Bayer Corporation
000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: President Polyurethanes Division
Telecopy Number: (000) 000-0000
Phone: (000) 000-0000
With copies to:
Bayer Corporation
000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: V.P. Assistant General Counsel for the
Polyurethanes Division
Telecopy Number: (000) 000-0000
Phone: (000) 000-0000
Section 15.3 Severability. In the event that any provision of this
------------
Agreement shall be finally determined to be unenforceable, such provision shall,
so long as the economic and legal substance of the transactions contemplated
hereby is not affected in any materially adverse manner as to any Party, be
deemed severed from this Agreement and every other provision of this Agreement
shall remain in full force and effect.
Section 15.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original, and all of which when
taken together shall constitute one and the same original document. All
signatures need not be on the same counterpart.
Section 15.5 Governing Law. This Agreement shall be governed by, and
-------------
construed and interpreted in accordance with, the laws of the State of Delaware,
without giving effect to any conflicts of law principles.
Section 15.6 Jurisdiction; Consent to Service of Process; Waiver. Each of
---------------------------------------------------
the Parties to this Agreement agrees, subject to Section 15.11 in the case of an
-------------
arbitration, that it shall bring any action or proceeding in respect of any
claim arising out of or related to this Agreement or the transactions contained
in or contemplated this Agreement, whether in tort or contract or at law or in
equity, exclusively in any Federal or state court in the State of Delaware and
solely in connection with claims arising under such agreement or instrument or
the transactions contained
49
in or contemplated by such agreement or instrument, (i) irrevocably submits to
the exclusive jurisdiction of such courts, (ii) waives any objection to laying
venue in any such action or proceeding in such courts, (iii) waives any
objection that such courts are an inconvenient forum or do not have jurisdiction
over it and (iv) agrees that service of process upon it may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to it at its address specified in
Section 15.2. The foregoing consents to jurisdiction and service of process
------------
shall not constitute general consents to service of process in the State of
Delaware for any purpose except as provided herein and shall not be deemed to
confer rights on any Person other than the Parties to this Agreement. Each Party
hereby knowingly and intentionally, irrevocably and unconditionally waives trial
by jury in any legal action or proceeding relating to this Agreement and for any
counterclaim therein.
Section 15.7 Specific Performance. Each of the Parties to this Agreement
--------------------
agrees with the other Parties thereto that such other Parties would be
irreparably damaged if any of the provisions of this Agreement are not performed
in accordance with its specific terms and that monetary damages would not
provide an adequate remedy in such event. Accordingly, unless as otherwise
specifically provided herein, in addition to any other remedy to which the
nonbreaching Parties may be entitled, at law or in equity, the nonbreaching
Parties may be entitled to injunctive relief to prevent breaches of this
Agreement and to specifically enforce the terms and provisions hereof.
Section 15.8 Amendment. This Agreement may not be amended, modified or
---------
altered except by an instrument in writing signed on behalf of each Party. By an
instrument in writing any Party may waive compliance by any other Party with any
term or provision of this Agreement that such other Party was or is obligated to
comply with or perform or any breach hereof.
Section 15.9 Performance Extended to Next Business Day. Notwithstanding
-----------------------------------------
any deadline for payment, performance, notice or election under this Agreement,
if such deadline falls on a date that is not a Business Day, then the deadline
for such payment, performance, notice or election will be extended to the next
succeeding Business Day.
Section 15.10 Waiver. The failure of a Party at any time to strictly
------
enforce any provision of this Agreement shall in no way affect its right
thereafter to require performance thereof, nor shall the waiver of any breach of
any provision of this Agreement be taken or held to be a waiver of any
succeeding breach of any such provision or as a waiver of the provision itself.
Unless otherwise specified herein, the rights and remedies provided in this
Agreement are cumulative and the exercise of any one right or remedy by any
Party shall not preclude or waive its right to exercise any or all other rights
or remedies.
Section 15.11 Dispute Resolution. All controversies or disputes arising
-------------------
out of and related to this Agreement shall be resolved pursuant to the
provisions set forth on Exhibit B.
---------
Section 15.12 Successors and Assigns. Except as may be expressly provided
----------------------
herein, this Agreement shall be binding upon, and inure to the benefit of, the
permitted successors and assigns.
50
Section 15.13 Further Assurances. From time to time, each Partner agrees
------------------
to execute and deliver such additional documents, and will provide such
additional information and assistance, as the Partnership or any Partner may
reasonably require to effect the terms of this Agreement and to accomplish the
Partnership's business.
Section 15.14 Benefits of Agreement Restricted to the Parties. This
-----------------------------------------------
Agreement is made solely for the benefit of the Partnership and the Partners,
and no other Person, including any officer or employee of the Partnership or any
Partner, shall have any right, claim or cause of action under or by virtue of
this Agreement.
Section 15.15 Waiver of Right to Partition. Each Person who now or
----------------------------
hereafter is a party hereto or who may have any right herein or hereunder
irrevocably waives during the term of the Partnership any right to maintain any
action for partition with respect to Partnership Property.
Section 15.16 Payment Terms and Interest Calculation. Payment terms and
--------------------------------------
interest calculations shall be as follows:
(a) If the payment due date for any payment hereunder (including
capital contributions and Damages) falls on a Saturday or a bank or federal
holiday, other than a Monday, the payment shall be due on the immediately
preceding Business Day. If the payment due date falls on a Sunday or Monday
bank or federal holiday, the payment shall be due on the following Business
Day.
(b) Interest shall accrue on any unpaid and outstanding amount from
the time such amount is due and payable through the date upon which such
amount, together with accrued interest thereon, is paid in full. Interest
shall accrue at a per annum rate equal to the Default Rate.
(c) A wire transfer or delivery of a check shall not operate to
discharge any payment under this Agreement and shall be accepted subject to
collection.
Section 15.17 Mutual Provision of Information. The Partners will keep each
-------------------------------
other timely informed about planned turnarounds, shutdowns, major technical
projects, Capital Projects and any other major events which in each case are
relevant to the Partnership Agreement or the Operating Agreement.
Section 15.18 Adversely Impacted Partner Recourse. To the extent that
-----------------------------------
future developments, through no fault of any Partner, result in a material
adverse impact on one or more Partners (each such Partner, an "Adversely
---------
Impacted Partner"), the Adversely Impacted Partner may request to negotiate a
----------------
resetting of the arrangements of this Agreement, the Operating Agreement and the
Transaction Documents to improve such Partner's position. The unaffected
Partner(s) (each such Partner, an "Unaffected Partner") shall make a good faith
------------------
assessment of the situation and, at its sole discretion, shall determine whether
such negotiated arrangements for the situation are warranted. If the Unaffected
Partner determines that such negotiated arrangements are unwarranted, then the
terms of the existing arrangements between the Parties shall remain. Future
developments that may be considered to warrant a reset under this Section 15.18
-------------
shall not include Co-Product market economics, Operator liability, EHS liability
(except for retroactive changes in EHS Law) and other related issues.
51
IN WITNESS WHEREOF, this Agreement has been executed on behalf of each
of the parties hereto, by their respective officers thereunto duly authorized,
effective as of the date first written above.
GENERAL PARTNER
PO OFFTAKE, LP
By: Lyondell POJVGP, LLC, its general partner
By: /s/ Xxxxxxx. X. XxXxxxx
----------------------------------
Name: Xxxxxxx X. XxXxxxx
Title: President and Treasurer
LIMITED PARTNERS
PO OFFTAKE, LP
By: Lyondell POJVGP, LLC, its general partner
By: /s/ Xxxxxxx. X. XxXxxxx
----------------------------------
Name: Xxxxxxx X. XxXxxxx
Title: President and Treasurer
BAYPO LIMITED PARTNERSHIP
By: BAYPO I LLC, its general partner
By: /s/ Xxxx X. Xxxxx
----------------------------------
Name: Xxxx X. Xxxxx
--------------------------------
[Signature Page to PO Limited Partnership Agreement]
52
EXHIBIT A
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
DEFINED TERMS
-------------
The following defined terms are used in the Partnership Agreement,
Operating Agreement and Ground Leases.
"AAA" has the meaning specified in Exhibit B of the Partnership
---
Agreement and the Operating Agreement.
"Above Threshold Capital Projects" has the meaning specified in Section
--------------------------------
7.4 of the Operating Agreement.
"Above Threshold Discretionary Capital Projects" has the meaning
----------------------------------------------
specified in Section 7.4 of the Operating Agreement.
"Above Threshold Non-Discretionary Capital Projects" has the meaning
--------------------------------------------------
specified in Section 7.4 of the Operating Agreement.
"Accommodation Fee" has the meaning specified in Section 9.6 of the
-----------------
Partnership Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
---
amended and in effect from time to time.
"Additional Limited Partner" means any Series A Unit or Series B Unit
--------------------------
limited partner that is admitted to the Partnership following the Closing Date
in accordance with the terms of the Partnership Agreement.
"Additional Services" has the meaning specified in Section 2.4 of the
-------------------
Operating Agreement.
"Additional Services Fee" has the meaning specified in Section 2.4 of
-----------------------
the Operating Agreement.
"Additional Services Charges" means all costs and fees associated with
---------------------------
Additional Services.
Exhibit A-1
"Adjusted Capital Account Deficit" means, with respect to any Partner,
--------------------------------
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(i) such Capital Account shall be deemed to be increased by
any amounts that such Partner is obligated to restore to the
Partnership (pursuant to the Partnership Agreement or otherwise) or is
deemed to be obligated to restore pursuant to the second to last
sentence of Regulation (S)(S) 1.704-2(g)(1) and 1.704-2(i)(5)
(relating to allocations attributable to nonrecourse debt); and
(ii) such Capital Account shall be deemed to be decreased by
the items described in Regulation (S)(S) 1.704-1(b)(2)(ii)(d)(4), (5)
and (6).
The foregoing definition of Adjusted Capital Deficit is intended to
comply with the provisions of Regulation (S) 1.704-1(b)(2)(ii)(d) and shall be
interpreted and applied consistently therewith.
"Adversely Impacted Partner" has the meaning specified in Section
-------------------------- -------
15.18 of the Partnership Agreement.
-----
"Affiliate" means, with respect to any Person, any other Person who
---------
directly or indirectly, through one or more intermediaries or otherwise,
controls, is controlled by or is under common control with, the specified
Person. As used in this definition, "control" means the power to direct or cause
the direction of the management or policies of a Person, directly or indirectly,
whether through ownership of voting securities by contract or otherwise); the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, in no event shall the Operator and the
Partnership be deemed to be Affiliates of one another.
"Affiliated General Partner" means Lyondell GP, in the case of
--------------------------
Lyondell LP.
"Affiliated Limited Partner" means Lyondell LP, in the case of
--------------------------
Lyondell GP.
"Agreement" has the meaning, with respect to any agreement, given that
---------
term in such agreement.
"Annual Budget" has the meaning specified in Section 7.2 of the
------------- -----------
Operating Agreement.
"Annual Forecast" has the meaning specified in Section 7.2 of the
--------------- -----------
Operating Agreement.
"Annual Plan" has the meaning specified in Section 7.2 of the
----------- -----------
Operating Agreement.
"Applicable Law" means any Judgement or any applicable statute, law,
--------------
ordinance, rule or regulation of a Governmental Entity that is applicable to the
Existing Plants or the ownership or operation thereof, the Partners or the
Partnership, as the context may require.
"Arbitrator" has the meaning specified in Exhibit B of the Partnership
---------- ---------
Agreement and the Operating Agreement.
Exhibit A-2
"Assets" means the PO Assets and the Co-Product Assets.
------
"Assumed Liabilities" means the liabilities assumed by the Partnership
-------------------
in connection with the contribution of the Assets to the Partnership.
"Bankruptcy" means, with respect to any Person, the voluntary or
----------
involuntary filing of a Chapter 11 or Chapter 7 case under the Bankruptcy Code
that, with respect to any involuntary filing, is not vacated or stayed within 90
days of filing.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
---------------
Sec. 101, as amended from time to time.
"Baseline Sourcing Plan" has the meaning given such term in the PO
----------------------
Logistics Agreement.
"Bayer" means Xxxxx XX, a German Corporation.
-----
"Bayer Budget Cap" has the meaning given such term in the Technology
----------------
Partnership Agreement.
"Xxxxx XX" means BAYPO Limited Partnership, a Delaware limited
--------
partnership, and its permitted successors and assigns under the Partnership
Agreement.
"Bayer Monthly Stipulated G&A Allocation" means 1/12/th/ of $11.2MM in
---------------------------------------
2000 (prorated from the Closing Date), $12.3MM in 2001, $12.8MM in 2002, $12.9MM
in 2003 and $13.3MM in 2004 and thereafter, subject to annual adjustment for
changes in the G&A Escalator.
"Bayer Monthly Technology Budget Payment" has the meaning specified in
---------------------------------------
the Technology Partnership Agreement.
"Bayer License Agreement" means the license, dated as of the Closing
-----------------------
Date, by the Technology Partnership to Xxxxx XX of Lyondell's PO Technology for
the production of Identified Polyols, as the same may be amended from time to
time.
"Bayer PO Annual Offtake Amount" means 1.34 billion pounds for 2000
------------------------------
(the figure shall be prorated for the period following the Closing Date), 1.47
billion pounds for 2001, 1.53 billion pounds for 2002, 1.55 billion pounds for
2003 and 1.6 billion pounds for 2004 and each year thereafter through the term
of the Partnership Agreement. The foregoing amounts are calculated for PO
Product meeting specifications and off-spec PO Product accepted by Bayer and its
Affiliates. The foregoing Bayer PO Annual Offtake Amount is based on Lyondell's
specifications for PO Product in existence as of the Effective Date and will be
equitably adjusted if such specifications change for any reason.
"Bayer PO Partnership Payment Amount" has the meaning specified in the
-----------------------------------
Master Transaction Agreement.
"Bayer PO Technology Partnership Payment Amount" has the meaning
----------------------------------------------
specified in the Master Transaction Agreement.
Exhibit A-3
"Bayer 300 Million Pound PO Option Agreement" means the agreement so
-------------------------------------------
styled dated as of the Closing Date between Lyondell Chemical Nederland, Ltd.
and Bayer Antwerp N.A./S.V., as the same may be amended or replaced from time to
time.
"Bayport Plant Facility" means the plant, fixtures, equipment and
----------------------
other personal property for the manufacture, storage and piping and loading of
PO Product and Co-Product located at Bayport, Texas, as contributed to the
Partnership as of the Closing Date and as the same may be changed thereafter by
the Partnership.
"Below Threshold Capital Projects" has the meaning specified in
--------------------------------
Section 7.4 of the Operating Agreement.
-----------
"Below Threshold Discretionary Capital Projects" has the meaning
----------------------------------------------
specified in Section 7.4 of the Operating Agreement.
"Below Threshold Non-Discretionary Capital Projects" has the meaning
--------------------------------------------------
specified in Section 7.4 of the Operating Agreement.
"Book Value" means with respect to any asset of the Partnership, the
----------
adjusted basis of the asset as of the relevant date for federal income tax
purposes, except as follows:
(i) the initial Book Value of the assets of the Partnership
shall be set forth on Exhibit E to the Partnership Agreement;
---------
(ii) the initial Book Value of any asset contributed by a
Partner to the Partnership after the Closing Date shall be the gross
fair market value of such asset, which shall be equal to the amount
credited to such Partner's Capital Account for such contribution
(increased by the amount of any liabilities which the Partnership
assumes or takes subject to);
(iii) the Book Values of all Partnership assets (including
intangible assets such as goodwill) shall be adjusted (at the election
of the General Partner) to equal their respective gross fair market
values upon the occurrence of any of the events described in
Regulation (S) 1.704-1(b)(2)(iv)(f)(5);
(iv) the Book Value of any asset distributed by the Partnership
to a Partner shall be equal to the gross fair market value of such
asset on the date of the distribution;
(v) the Book Value of any Partnership asset with respect to
which an adjustment to tax basis has occurred by reason of the
application of Section 734(b) or 754(b) of the Code shall be adjusted
to the extent such adjustment to tax basis is taken into account
pursuant to Regulation (S) 1.704-1(b)(2)(iv)(m); and
(vi) if the Book Value of an asset is not equal to its adjusted
tax basis for federal income tax purposes, such Book Value shall be
adjusted by the Depreciation taken into account with respect to such
asset for purposes of computing Profits and Losses and other items
allocated pursuant to Section 4.1 of the Partnership Agreement.
-----------
Exhibit A-4
The foregoing definition of Book Value is intended to comply with the
provisions of Regulation (S) 1.704-1(b)(2)(iv) and shall be interpreted and
applied consistently therewith. Any determinations of "gross fair market value"
in this definition of Book Value shall be made by the General Partner.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which banks are closed in Houston, Texas; provided, however, that for
purposes of the definition of "LIBOR," "Business Day" shall mean a day on which
banks are not required or authorized to close in Houston, Texas and on which
commercial banks are open for international business (including dealings for
dollar deposits) in the London interbank market.
"Capital Account" means the separate capital account established and
---------------
maintained by the Partnership for each Partner, as contemplated by Section 2.8
-----------
of the Partnership Agreement.
"Capital Cost Invoice" has the meaning specified in Section 5.1 of the
-------------------- -----------
Operating Agreement.
"Capital Costs" means all Operating Services Costs that are
-------------
capitalized by the Operator in accordance with GAAP and that Lyondell
capitalizes in accordance with its accounting capitalization procedures, as the
same may be modified from time to time.
"Capital Project" means any project with respect to the Plant
---------------
Facilities or the Infrastructure Assets of a Complex that is permitted to be
treated as a capital project under GAAP and that is the type of project which
Lyondell treats as a capital project in accordance with its accounting
capitalization procedures.
"Capital Project Planned Outage" means, with respect to any Partner, a
------------------------------
shutdown or other outage to implement a Capital Project in which such Partner is
required or elects to participate in the costs and benefits thereof.
"Casualty" means any damage or destruction to the Plant Facilities or
--------
the Infrastructure Assets of a Complex by explosion, fire or other cause.
"Casualty Restoration Costs" means in the event of a Casualty to the
--------------------------
Plant Facilities of a Complex, the sum of (i) the portion of the cost of
restoration of such Plant Facilities that is not paid under any property and/or
boiler and machinery insurance policies maintained by the Operator, plus (ii)
any surcharge that is payable under such policies thereafter in respect of the
insured claim. In the event of a Casualty to Infrastructure Assets of a Complex,
the Casualty Restoration Costs are (x) the forecasted use of the Operating
Services provided to the Plant Facilities from such Infrastructure Assets
divided by (y) the forecasted use of Operating Services by all Users thereof,
times the sum of (i) the portion of the cost of restoration of the Plant
Facilities that is not paid under any property and/or boiler and machinery
insurance policies maintained by the Operator plus (ii) any surcharge that is
payable under such policies thereafter in respect of the insured claim.
"Channelview Plant Facility" means the plant, fixtures, equipment and
--------------------------
other personal property for the manufacture, storage and piping and loading of
PO Product and Co-Product located at Channelview, Texas, as contributed to the
Partnership as of the Closing Date and as the same may be changed thereafter by
the Partnership.
Exhibit A-5
"Chemical Substance" means any (i) petroleum or any fraction thereof,
------------------
(ii) chemical substance, pollutant, contaminant, constituent, chemical, mixture,
raw material, intermediate, product or byproduct that is regulated (including
any requirement for the reporting of any Release thereof) under any EHS Law, as
now or hereafter in effect, or defined or listed as an industrial, toxic,
deleterious, harmful, radioactive, infectious, disease-causing or hazardous
substance, material or waste under any EHS Law, as now or hereafter in effect
and (iii) asbestos or asbestos-containing material or polychlorinated biphenyls.
"Claim" means any claim, demand or Litigation made or pending for
-----
Damages.
"Closing Date" means March 31, 2000.
------------
"Code" means the Internal Revenue Code of 1986, as amended and in
----
effect from time to time, and any successor thereto.
"Complexes" means the chemicals manufacturing complexes operated by
---------
Lyondell and/or its Affiliates located at Channelview, Texas and Bayport, Texas,
including all additions thereto and excluding all deletions therefrom, effective
as of the date of any such addition or deletion.
"Confidential Information" means with respect to any Person, all
------------------------
nonpublic or proprietary information of any nature (including trade secrets,
technological know-how, research and development data, product formulations,
processes and application technology and all other non public or proprietary
concepts, methods of doing business, ideas, materials or information of or
prepared or performed for, by or on behalf of that Person), and all information
derived from any nonpublic or proprietary information of that Person.
"Contained Propylene" is the total quantity of propylene on a 100%
-------------------
basis contained in a propylene stream that is used in production of PO Product
at the Existing Plants.
"Co-Product" means, with respect to an Existing Plant, SM or TBA, or
----------
any other product other than PO Product produced at the Existing Plant. SM is
the primary Co-Product produced at the Channelview Plant Facility and TBA is the
primary Co-Product produced at the Bayport Plant Facility.
"Co-Product Asset" means an asset of the Partnership used exclusively
----------------
in connection with production of Co-Product or other aspects of the Co-Product
business, or an allocable share for the Co-Product business of an asset of the
Partnership used in both the production of Co-Product and PO Product or in other
aspects of both the Co-Product and PO Product businesses. Allocation
methodologies for shared assets will be in accordance with Exhibit D to the
---------
Operating Agreement.
"Co-Product Asset Built-In Gain or Loss" means the difference between
--------------------------------------
the agreed value of each Co-Product Asset contributed to the Partnership on the
Effective Date as set forth in Exhibit E to the Partnership Agreement and the
adjusted tax basis of such asset on such date, as subsequently adjusted pursuant
to the regulations under Section 704(c) of the Code.
"Co-Product Credits" has the meaning specified in Exhibit C to the
------------------ ---------
Operating Agreement.
Exhibit A - 6
"Co-Product Proceeds" has the meaning specified in Section 3.3 of the
------------------- -----------
Partnership Agreement.
"Creditworthy" means any Person (i) whose current unsecured
------------
indebtedness is rated BBB- or higher by Standard & Poor Company or Baa3 or
higher by Moody's Investment Services or an equivalent rating by any other
rating agent of international repute and (ii) any Person without current
unsecured rated indebtedness that would be able to secure such a rating.
"Curative Action Plan" has the meaning specified in Section 11.3 of the
--------------------
Partnership Agreement.
"Cure Period" has the meaning specified in Exhibit B of the Partnership
----------- ---------
Agreement and the Operating Agreement.
"Damage" means, with respect to any Person, any cost, damage or expense
------
(including attorneys' fees and disbursements), any fine of or penalty on or any
liability of any nature of that Person.
"Defaulting Limited Partner" has the meaning specified in Section 11.4
-------------------------- ------------
of the Partnership Agreement.
"Default Rate" means LIBOR plus 2.5%.
------------
"Delivery Point" means, with respect to PO Product produced from an
--------------
Existing Plant, delivery of PO Product to (i) the paymeter for same in the
transportation pipe leaving an Existing Plant or (ii) if there is no paymeter,
the flange between the Plant Facilities piping and (a) an on-site polyols
facility, (b) an on-site PO storage facility utilized by Bayer or its
Affiliates, (c) the outside battery limits piping of the Plant Facilities
leading to an off-site PO storage facility utilized by Bayer or its Affiliates
or (d) the loading flange of any transport vessel, and, with respect to
Co-Product produced from an Existing Plant, means delivery of Co-Product to (i)
the paymeter for same in the transportation pipe leaving an Existing Plant or
(ii) if there is no paymeter, the flange between the Plant Facilities piping and
(a) a Co-Product derivatives plant, (b) the outside battery limits piping of the
Plant Facilities leading to an off-site Co-Product storage facility, or (c) the
loading flange of any transport vessel. The Delivery Points for the Existing
Plants existing as of the Closing Date are set forth on Exhibit H to the
---------
Operating Agreement and Exhibit F to the Partnership Agreement. Changes to such
---------
Delivery Points are subject to Bayer LP's consent, not to be unreasonably
withheld.
"Depreciation" means, for each fiscal year or part thereof, an amount
------------
equal to the depreciation, amortization or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such year
or other period, except that if the Book Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year,
Depreciation shall be (i) an amount which bears the same ratio to such Book
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year bears to such adjusted tax basis or (ii) if the
federal income tax depreciation, amortization or other cost recovery deduction
for such year is equal to zero, an amount determined with reference to such Book
Value using a reasonable method selected by the Tax Matters Partner.
Exhibit A - 7
"Discretionary Capital Project" means a Capital Project that is not an
-----------------------------
EHS Capital Project or a Maintenance Capital Project and that enhances the
operating efficiency, production capability, reliability or other performance
characteristics of the Plant Facilities or an Infrastructure Asset.
"Dispute" has the meaning specified in Exhibit B of the Partnership
------- ---------
Agreement and the Operating Agreement.
"Dispute Notice" has the meaning specified in Exhibit B of the
-------------- ---------
Partnership Agreement and the Operating Agreement.
"Disputing Party" has the meaning specified in Exhibit B of the
--------------- ---------
Partnership Agreement and the Operating Agreement.
"Disruption Event" means any event not resulting from the Fault of the
----------------
Existing Plant Operators resulting in a disruption or impairment of PO and/or
Co-Product production below capacity levels from any cause whatsoever, including
(i) any event of Force Majeure; (ii) any shortage in supplies, impairment in the
facilities of production, manufacture, or transportation; (iii) that is
attributable to mechanical or other breakdown or failure or preventative
maintenance that is performed to avoid such breakdown or failure, (iv) any
Unscheduled Turnaround or continuation of a Planned Outage beyond its
anticipated duration; or (v) the inability to obtain any Feedstock or other raw
material (including energy) on reasonable terms. In the case of an Unscheduled
Turnaround that shifts the timing of a Scheduled Turnaround, only the
incremental loss of production shall constitute a Disruption Event.
"EHS" means the environment, health and safety or environmental,
---
health and safety, as the context requires.
"EHS Capital Project" means a Capital Project with respect to Plant
-------------------
Facilities or an Infrastructure Asset of a Complex that in the Operator's good
faith judgement is necessary to achieve or maintain compliance with any EHS Law
or the Existing Plant EHS Policies. Remediation under EHS Law with respect to a
Release that is an Operator Reimbursable Expense shall not be an EHS Capital
Project.
"EHS Law" means any Applicable Law relating to (i) any ambient air,
-------
surface water, drinking water, groundwater, land surface, subsurface strata,
river sediment, natural resources or real property and the physical buildings,
structures and fixtures thereon, including sewer, septic and waste treatment,
storage or disposal systems (the "Environment"), including pollution,
-----------
contamination, cleanup, preservation, protection and reclamation of the
Environment, (ii) health or safety of employees and other individuals, including
the exposure of employees and other individuals to any Chemical Substance, (iii)
a Release or threatened Release, including investigation, study, assessment,
testing, monitoring, containment, removal, remediation, response, cleanup and
abatement of such Release or threatened Release and (iv) the management of any
Chemical Substance, including the manufacture, generation, formulation,
processing, labeling, use, treatment, handling, storage, disposal,
transportation, distribution, re-use, recycling or reclamation of any Chemical
Substance.
"Eligible Indemnitees" means, with respect to any Person, its
--------------------
Affiliates and their respective employees, officers and directors (or the
equivalent thereof).
Exhibit A - 8
"Environment" has the meaning given such term in the definition of EHS
-----------
Law.
"Environmental Condition" means any presence of Chemical Substances in,
-----------------------
on, at, under or from any Existing Plant.
"Equistar" has the meaning given such term in Exhibit C-1 of the
-------- -----------
Operating Agreement.
"Equistar Propylene Agreement" has the meaning given such term in
----------------------------
Exhibit C-1 to the Operating Agreement.
-----------
"Event of Default" has the meaning specified in Section 15.1 of each
---------------- ------------
Ground Lease with respect to an Event of Default by Lessee and has the meaning
specified in Section 15.2 with respect to an Event of Default by Lessor.
"Existing Plant Complexes" means the Complexes and the other chemical
------------------------
manufacturing complexes operated by Lyondell or its Affiliates within which the
other Existing Plants are located, including all additions thereto and excluding
all deletions therefrom, effective as of the date of any such addition or
deletion.
"Existing Plant Operator" means the Operator or the operator of any of
-----------------------
the other Existing Plants, as context requires.
"Existing Plant EHS Policies" has the meaning specified in Section 13.1
---------------------------
of the Operating Agreement.
"Existing Plant Total PO Capacity" means 3.48 billion pounds of PO as
--------------------------------
of the Closing Date. The Existing Plant Total PO Capacity shall be (i) increased
to account for changes in the PO capacity of the Existing Plants by reason of
"capacity creep" through improved operations or "debottleneck" Capital Projects
and (ii) decreased to account for any sale or other transfer to a Third Party of
any of the Existing Plants or permanent closing or long-term "mothballing" of
any of the Existing Plants or non-restoration following a Casualty to any of the
Existing Plants, as of the date Lyondell informs Xxxxx XX of such decision not
to restore (which decision shall be made within 120 days of the Casualty).
Lyondell GP shall demonstrate to Xxxxx XX any increase or decrease to the
Existing Plant Total PO Capacity. As to any capacity increase, Lyondell GP shall
demonstrate that the stated capacity increase takes into account turnarounds
that are expected to take place in the ordinary course of business and
reliability factors.
"Existing Plants" means the Plant Facilities, the PO/XX XX plant, the
---------------
Fos Sur Mer PO/TBA plant and the Botlek PO/TBA plant, for so long as such plants
are owned by the Partnership or Lyondell Affiliates. If any of the Existing
Plants is permanently closed, "mothballed" or not restored following a Casualty,
it shall cease to be an Existing Plant as of the date Lyondell notifies Bayer of
such closure, "mothballing" or decision not to restore (which decision shall be
made within 120 days of such Casualty).
"Ex-Works" has the meaning given to such term in Incoterms 2000.
--------
"Fault" is defined as any act or omission by Managerial Personnel of a
-----
Person that viewed objectively from the standpoint of the Person at the time the
events occurred (and without viewing the matter in hindsight) (i) involved an
extreme degree of risk, considering the
Exhibit A - 9
probability and magnitude of the potential harm to others and (ii) Managerial
Personnel of the Person must have actual, subjective awareness of the risk
involved, but nevertheless proceed in conscious indifference to the rights,
safety or welfare of others. The Parties agree that with respect to the Existing
Plant Operators, the material disregard by a member of the Senior Plant
Management Team at an Existing Plant of the policies and procedures manual for
the Existing Plant proximately causing a Third Party Claim shall be deemed to be
Fault.
"Feedstock" means propylene and any other feedstock that may now or in
---------
the future be used for the production of PO Product or Co-Product.
"Fixed Costs" means costs associated with the production of PO Product
-----------
or Co-Product, as the case may be, that do not vary directly to a significant
extent with changes in production levels.
"Force Majeure" means acts of God, floods, storms or unusually bad
-------------
weather; war or other military action, national emergency, governmental
rationing, prioritization, taking or requisition, civil commotion or riot; any
strike or other difference with workers or unions, without regard to the
reasonableness of acceding to the demands of such workers or unions; explosions,
fires, mechanical breakdown, electrical shortage or blackouts or other
production shutdown; inability to obtain sufficient Feedstocks, catalysts or
other raw materials or supplies; or other event beyond the reasonable control of
Managerial Personnel of a Party, provided that restrictions imposed by any
Governmental Authority pertaining solely to the sale or use of MTBE or TBA as a
gasoline additive shall not constitute an event of Force Majeure.
"G&A Escalator" means 75% of the percentage positive or negative change
-------------
from the January 1 of the prior year in the G&A Lyondell Personnel Cost Basket.
"G&A Support Pool" has the meaning given such term in Schedule 2.3 to
---------------- ------------
the Partnership Agreement.
"G&A Lyondell Personnel Cost Basket" is as described in Schedule 2.3 to
---------------------------------- ------------
the Partnership Agreement.
"GAAP" means United States generally accepted accounting principles as
----
in effect from time to time.
"General Partner" means Lyondell GP, for so long as it remains a
---------------
General Partner of the Partnership and each Person that becomes a Substitute
General Partner, if any, of the Partnership as provided in the Partnership
Agreement, in such Person's capacity as a general partner of the Partnership.
"Governmental Entity" means any federal, state, regional or local
-------------------
governmental body or authority exercising executive, legislative, judicial,
regulatory, administrative or other governmental function with jurisdiction over
a Party or any of the Existing Plants or their ownership or operation.
"Governmental Planned Outage" means any shutdown or other outage
---------------------------
required to comply with any EHS Law or other Applicable Law.
Exhibit A - 10
"Ground Leases" means the ground leases between Lyondell Chemical
-------------
Company and the Partnership dated as of the Closing Date whereby the Partnership
leases the land covered thereby that constitutes part of the Partnership
Property located at the Bayport Plant Facility and the Channelview Plant
Facility, each as amended from time to time.
"Identified Polyols" means: (i) materials containing one hydroxyl
------------------
group, one or more propylene oxide units, and having a number average molecular
weight of more than 500, (ii) materials having an average hydroxyl functionality
of greater than one, containing one or more propylene oxide units and having a
number average molecular weight of more than 250, or (iii) materials that are
exceptions to (i) and (ii) because they fall below the minimum average molecular
weight recited, are prepared by reacting PO with a starter compound which is not
a glycol, and are used in polyurethane applications
"Indemnified Person" has the meaning specified in Section 10.2 of the
------------------ ------------
Operating Agreement and in Section 14.3 of the Partnership Agreement.
------------
"Indemnifying Person" has the meaning specified in Section 14.3 of the
------------------- ------------
Partnership Agreement.
"Indemnitee" has the meaning specified in Section 13.1 of each Ground
---------- ------------
Lease.
"Indemnitor" has the meaning specified in Section13.1 of each Ground
---------- -----------
Lease.
"Infrastructure Asset" means an asset within an Existing Plant Complex
--------------------
that is used in the provision of utility or other services to an Existing Plant.
"Infrastructure Assets Capacity Reservation Instruments" means those
------------------------------------------------------
conveyance instruments dated as of the Closing Date pursuant to which the
Partnership has been granted an undivided interest and correlative capacity
reservation in certain of the Infrastructure Assets located at the Complexes.
"Initial Agreement" has the meaning specified in the Recitals of the
-----------------
Partnership Agreement.
"Initial Partners" has the meaning specified in the Recitals of the
----------------
Partnership Agreement.
"Insured Third Party Claim" means a Third Party Claim, or any portion
-------------------------
of a Third Party Claim, that is not an Uninsured Third Party Claim.
"Interest Rate" means LIBOR.
-------------
"Interim Decision Date" has the meaning specified in Exhibit B of the
--------------------- ---------
Partnership Agreement and the Operating Agreement.
"IRS" means the Internal Revenue Service.
---
"Invoice" means an Operating Cost Invoice or a Capital Cost Invoice, as
-------
the context requires.
Exhibit A - 11
"Joint Employees" has the meaning specified in Section 10.2 of the
---------------
Operating Agreement.
"Judgment" means any judgment, order, decree or injunction.
--------
"Lessee" means the entity specified in the opening paragraph of each
------
Ground Lease, together with its permitted successors and assigns.
"Lessor" means the entity specified in the opening paragraph of each
------
Ground Lease, together with its permitted successors and assigns.
"Lessor's Retained Property" has the meaning specified in Section 19.1
--------------------------
of each Ground Lease.
"LIBOR" means, for the day, the one-month LIBOR as published on that
-----
day in the Money Rates section of the Wall Street Journal, Northeastern Edition;
------------------- --------------------
provided that if that day is not a Business Day, the one-month LIBOR as so
published on the immediately preceding Business Day.
"Limited Partner" means Lyondell LP and Xxxxx XX, unless and until
---------------
Lyondell LP or Xxxxx XX ceases to be a Limited Partner under the Partnership
Agreement or sells, transfers, forfeits or otherwise disposes of its respective
Units and is replaced by a Substitute Limited Partner in accordance with the
Partnership Agreement and the Act, and each Person that becomes an Additional
Limited Partner or a Substitute Limited Partner of the Partnership as provided
in the Partnership Agreement.
"Litigation" means any action, case, suit or other proceeding pending
----------
before any Governmental Authority or any arbitration proceeding.
"Losses" has the meaning specified in the definition of "Profits and
------
Losses."
"Lyondell" means Lyondell Chemical Company, a Delaware corporation.
--------
"Lyondell GP" means PO Offtake, LP, a Delaware limited partnership, in
-----------
its capacity as general partner of the Partnership, and its successors and
assigns permitted under the Partnership Agreement.
"Lyondell LP" means Lyondell PO Offtake, LP, a Delaware limited
-----------
partnership, in its capacity as a limited partner in the Partnership, and its
successors and assigns permitted under the Partnership Agreement.
"Lyondell Partners" means Lyondell GP and Lyondell LP.
-----------------
"Major Unexcused PO Delivery Failure" has the meaning specified in
-----------------------------------
Section 11.3 of the Partnership Agreement.
------------
"Maintenance Capital Project" means a Capital Project with respect to
---------------------------
the Plant Facilities or an Infrastructure Asset as to which the primary purpose
is, in the Operator's reasonable judgment, to maintain the Plant Facilities or
an Infrastructure Asset within either Complex in
Exhibit A - 12
their respective condition and performance levels existing as of the Closing
Date. The restoration of the Plant Facilities or an Infrastructure Asset
following a Casualty shall be considered a Maintenance Capital Project. The
Parties acknowledge that Maintenance Capital Projects may also result in
enhanced efficiency or other performance characteristics.
"Managerial Personnel" means (i) with respect to a Partner, any
--------------------
employee of that Person or its Affiliate who holds a senior managerial or higher
position with such Person and who has direct responsibility for the
administration and oversight of the Partner's investment in the Partnership and
(ii) with respect to any of the Existing Plant Operators (including the
Operator), any employee of the Existing Plant Operator or its Affiliate who
holds a position with the Existing Plant Operator or its Affiliate of "Plant
Manager" of the Existing Plant Complex or higher and who has direct
responsibility for the operation of the Existing Plant.
"Master Transaction Agreement" means the Master Transaction Agreement
----------------------------
between Lyondell and Bayer dated as of the Closing Date, as amended from time to
time.
"month" means a calendar month.
-----
"Monthly Production Reports" has the meaning specified in Section 2.3
-------------------------- -----------
of the Operating Agreement.
"Monthly Production Statement" has the meaning specified in Section 7.3
---------------------------- -----------
of the Operating Agreement.
"MTBE" means methyl tertiary butyl ether.
----
"Non-Defaulting Partners" has the meaning specified in Section 11.4 of
----------------------- ------------
the Partnership Agreement.
"Non-Supply Failure Step-in Event" has the meaning specified in Section
-------------------------------- -------
11.2 of the Partnership Agreement.
----
"Operating Agreement" means the PO Operating and Services Agreement
-------------------
between the Partnership and the Operator dated as of the Closing Date, as
amended from time to time.
"Operating Cost Invoice" has the meaning specified in Section 5.1 of
---------------------- -----------
the Operating Agreement.
"Operating Costs" means Operating Services Costs that the Operator does
---------------
not capitalize and which are not required to be capitalized in accordance with
GAAP and Lyondell's accounting capitalization procedures, as the same may be
modified from time to time.
"Operating Principles" has the meaning specified in Article III of the
-------------------- -----------
Operating Agreement.
"Operating Problem" has the meaning specified in Section 11.3 of the
----------------- ------------
Partnership Agreement.
Exhibit A - 13
"Operating Services" means all services, utilities, materials,
------------------
facilities and access easements required to be supplied for the operation of the
Existing Plants and production of PO Product and Co-Product at the Existing
Plants. The Operating Services for the Plant Facilities are described in more
detail in Article II of the Operating Agreement.
----------
"Operating Services Costs" means all costs charged by the Existing
------------------------
Plant Operators to the Partnership (or incurred by the General Partner or a
Qualified Replacement Operator if the Operating Agreement is terminated) in
connection with the provision of Operating Services. Certain methodologies and
other provisions with respect to the calculation of Operating Services Costs are
set forth on Exhibit C to the Operating Agreement. The payments made by Xxxxx XX
---------
pursuant to Section 2.3(d)(vii) of the Partnership Agreement shall be treated
------------------
and paid as Operating Services Costs.
"Operator" means the Operator named under the Operating Agreement and
--------
its permitted successors and assigns thereunder.
"Operator Cost Partner Invoice" has the meaning specified in Section
----------------------------- -------
2.3 of the Partnership Agreement.
---
"Operator Property" means the plants, buildings and other improvements,
-----------------
land and other real property interests, fixtures, equipment, inventory, finished
product, vehicles and other tangible personal property interests owned or leased
by the Operator that are now or in the future located within the Complexes.
"Operator Reimbursable Expense" has the meaning given to such term in
-----------------------------
Section 10.5 of the Operating Agreement.
------------
"Operator Retained Obligation" has the meaning specified in Section
---------------------------- -------
10.5 of the Operating Agreement.
----
"Original Lessee" has the meaning specified in Section 8.1 of each
--------------- -----------
Ground Lease.
"Partner" means any General Partner or Limited Partner of the
-------
Partnership.
"Partner Capital Cost Invoice" has the meaning specified in Section 2.4
---------------------------- -----------
of the Partnership Agreement.
"Partner Invoice" means a Partner Capital Cost Invoice or a Partner
---------------
Operating Cost Invoice, as the context requires.
"Partner Operating Cost Invoice" has the meaning specified in Section
------------------------------ -------
2.3 of the Partnership Agreement.
---
"Partners" means the General Partner and the Limited Partners
--------
collectively.
"Partnership" means PO JV, LP, a Delaware limited partnership formed
-----------
and continuing under the Act and the Partnership Agreement and, with respect to
the Operating Agreement, such term also includes the Partnership's permitted
successors and assigns under the Operating Agreement.
Exhibit A - 14
"Partnership Agreement" means the Amended and Restated Limited
---------------------
Partnership Agreement of the Partnership dated as of the Closing Date between
Lyondell GP, as general partner, and Xxxxx XX and Lyondell LP, as limited
partners, as amended from time to time.
"Partnership Existing Plant PO Share" means with respect to a component
-----------------------------------
of Operating Services Costs determined on a System-wide Pooled Cost Basis, (i)
for Fixed Costs, (a) the PO production capacity of the Plant Facilities times
(b) the PO Share of the Operating Services Cost in question times (c) the
Operating Services Cost divided by (d) the total PO production capacity of the
Existing Plants and (ii) for Variable Costs, (w) the monthly PO production of
the Plant Facilities times (x) the PO Share of the Operating Services Cost in
question times (y) the Operating Services Cost divided by (z) the total PO
production of the Existing Plants for the month.
"Partnership Interest" means, as the context requires, all of a
--------------------
Partner's Series A Units or Series B Units.
"Partnership Property" means the land leased by the Partnership under
--------------------
the Ground Leases, the Plant Facilities, the Partnership's interests in certain
of the Infrastructure Assets at the Complexes created under the Infrastructure
Assets Capacity Reservation Instruments and other tangible and intangible
property owned by the Partnership from time to time.
"Partnership PO Share" means the fraction equal to the Partnership's
--------------------
capacity allocated to production and related activities for PO Product divided
by the Existing Plant Total PO Capacity.
"Party" or "Parties" means (i) as used in the Partnership Agreement,
----- -------
Lyondell GP, Lyondell LP and Xxxxx XX and (ii) as used in the Operating
Agreement, the Operator and the Partnership.
"Permitted PO Successor" has the meaning specified in Section 10.3 of
---------------------- ------------
the Partnership Agreement.
"Person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, joint, venture, governmental authority, association or
other entity or organization.
"PIPA" means the Limited Partnership Interest Purchase and Sale
----
Agreement by and among Lyondell and Bayer Affiliates dated as of the Closing
Date with respect to (i) a Bayer Affiliate's acquisition of Series A Units in
the Partnership and (ii) the acquisition by a Bayer Affiliate of limited
partnership interests in the Technology Partnership.
"Planned Outage" means any Scheduled Turnaround, Capital Project
--------------
Planned Outage (as applicable to each Partner) or Governmental Planned Outage at
an Existing Plant.
"Plant Facilities" means either or both of the Bayport Plant Facility
----------------
and the Channelview Plant Facility, as the case may be.
"Pledge" means to mortgage, pledge, hypothecate, charge, encumber or
------
create or suffer to exist any pledge lien or encumbrance upon or security
interest in the assets. Such defined term is used as both a noun and a verb.
Exhibit A - 15
"PO" means propylene oxide.
--
"PO Additional Monthly Costs" has the meaning specified in Section 2.3
--------------------------- -----------
of the Partnership Agreement.
"PO Asset" means an asset of the Partnership used exclusively in
--------
connection with production of PO Product or other aspects of the PO Product
business, and the allocable share attributable to the PO Product business of an
asset of the Partnership used in both the production of Co-Product and PO
Product or in other aspects of both the PO Product and Co-Product businesses.
Allocation methodologies for shared assets will be in accordance with the
principles of Exhibit D to the Operating Agreement.
---------
"PO Asset Built-In Gain or Loss" means the difference between the
------------------------------
agreed value of each PO Asset contributed to the Partnership on the date hereof
as set forth in Exhibit E to the Partnership Agreement and the adjusted tax
---------
basis of such asset on such date, as subsequently adjusted pursuant to Section
704(c) of the Code.
"PO Cost Allocation Methodology" has the meaning defined in Exhibit C
------------------------------ ---------
to the Operating Agreement.
"PO Logistics Agreement" means the PO Logistics and Exchange Agreement
----------------------
dated as of the Closing Date between Lyondell and Bayer, and their respective
Affiliates, as the same may be amended or replaced from time to time.
"PO Proceeds" has the meaning specified in Section 3.3 of the
----------- -----------
Partnership Agreement.
"PO Product" means PO produced from the Existing Plants.
----------
"PO Product Cash Fixed Production Costs" has the meaning specified in
--------------------------------------
Exhibit C to the Operating Agreement.
---------
"PO Production Costs" means the total per pound of PO Fixed Costs and
-------------------
Variable Costs for the production of PO at the Existing Plants, determined on a
System-wide Pooled Cost Basis.
"PO Share" means the percentage share allocated to production and
--------
related activities for PO Product of any item of Operating Costs or Capital
Costs or any Partnership revenue, determined in accordance with Section 2.5 of
-----------
the Partnership Agreement.
"PO Technology" means all technical information relating to PO/SM and
-------------
PO/TBA processes, including process descriptions, production and production
results, tests and test results, data, plans, designs, specifications, reports,
know-how, inventions, software operating experience and other information in the
Technology Partnership's possession or control, or acquired by or assigned to
the Technology Partnership during the term of the Bayer PO License.
"PO Variable Unit Costs" means the actual Variable Costs attributable
----------------------
to the production of PO Product per Pound of PO Product, as calculated in
accordance with the Stipulated Cost Allocation Methodology and adjusted in
accordance with Exhibit C to the Operating Agreement.
---------
"Premises" has the meaning specified in the Recitals of each Ground
--------
Lease.
Exhibit A - 16
"Property" means the Premises, together with the Plant Facilities and
--------
all future improvements, fixtures, equipment and other tangible property of the
Lessee located thereon.
"Profits and Losses" means for each applicable period, the
------- ------
Partnership's taxable income or loss for such period determined in accordance
with Section 703(a) of the Code (for this purpose, all items of income, gain,
loss or deduction required to be stated separately pursuant to Section 703(a)(1)
of the Code shall be included in taxable income or loss) with the following
adjustments:
(i) any income of the Partnership that is exempt from
federal income tax and not otherwise taken in account in computing
Profits or Losses pursuant to this definition shall be added to such
taxable income or loss;
(ii) any Capital Project of the Partnership described in
Section 705(a)(2)(B) of the Code or treated as such pursuant to
Regulation ss.1.704-1(b)(2)(iv)(i) and not otherwise taken in account
in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(iii) depreciation for such period shall be taken into account
in lieu of the depreciation, amortization and other cost-recovery
deductions taken into account in computing such taxable income or loss;
(iv) gain or loss resulting from any disposition of
Partnership Property with respect to which gain or loss is recognized
for federal income tax purposes shall be computed with reference to the
Book Value of the property disposed of, rather than the adjusted tax
basis of such property;
(v) if any property is distributed in kind to any Partner,
the difference between its fair market value and its Book Value at the
time of distribution shall be treated as Profit or Loss, as the case
may be, recognized by the Partnership; and
(vi) the amount of any adjustment to the Book Value of any
Partnership asset pursuant to clause (iii) of the definition of Book
Value herein shall be taken into account as Profit or Loss from the
disposition of such asset.
"Propylene Cost" means for any month, the Propylene Purchase Cost
--------------
multiplied by the Propylene Yield.
"Propylene Purchase Cost" means for any month, the total cost for
-----------------------
Lyondell to acquire and deliver propylene for use in production of PO Product at
the Existing Plants divided by the Contained Propylene delivered to Lyondell and
its Affiliates under then existing supply contracts.
"Propylene Yield" means the monthly total quantity of pounds of
---------------
Contained Propylene consumed in production of PO Product at the Existing Plants
equal to: the sum of (x) purchased propylene and (y) propylene delivered by toll
processing customers and other sources, divided by (z) the total pounds of PO
Product produced during such month at the Existing Plants.
Exhibit A - 17
"Pro Rata" means (i) in respect of holders of Series A Units, the ratio
--------
of Series A Units owned by a Partner to the total number of applicable Series A
Units and (ii) in respect of holders of Series B Units, the ratio of Series B
Units owned by a Partner to the total number of applicable Series B Units.
"Qualified Non-ST Planned Outage" means a Capital Project Planned
-------------------------------
Outage or Governmental Planned Outage that (i) does not replace or overlap with
any Scheduled Turnaround or (ii) if such Planned Outage does replace or overlap
with a Scheduled Turnaround, the incremental loss, if any, of PO Product or
Co-Product production beyond that caused by the Scheduled Turnaround. With
respect to a Maintenance Capital Project that overlaps with a Scheduled
Turnaround, the incremental days of downtime must exceed 10% of the downtime of
the Scheduled Turnaround in order to constitute a Qualified Non-ST Planned
Outage. With respect to a Below Threshold Discretionary Capital Project, a
Partner must approve such Below Threshold Discretionary Capital Project to
constitute a Qualified Non-ST Planned Outage with respect to such Partner.
"Qualified Replacement Operator" means a Person that has substantial,
------------------------------
current experience in operating manufacturing plants for the production of PO
Product and the Co-Product produced at the Plant Facilities.
"Reasonable Best Efforts" means a Party's best efforts consistent with
-----------------------
reasonable commercial practice and without payment of any assignment, consent or
similar fee requested by any Person or the incurrence of unreasonable expense or
the requirement to engage in litigation.
"Regulations" means the income tax regulations promulgated by the U.S.
-----------
Department of the Treasury and in effect from time to time.
"Regulatory Allocations" has the meaning set forth in Section 4.1 of
---------------------- -----------
the Partnership Agreement.
"Related Persons" has the meaning specified on Section 12.1 of the
--------------- ------------
Operating Agreement.
"Release" means any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, dumping, discharge, dispersal, leaching, escaping,
emanation or migration of any Chemical Substance in, into or onto the
Environment of any kind whatsoever, including the movement of any Chemical
Substance through or in the Environment, exposure of any type in any workplace,
any release as defined under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any other EHS Law and any
noxious noise or odor emission.
"Remediation" means, for purposes of Section 10.5 of the Operating
----------- ------------
Agreement, (i) cleanup, containment, excavation, removal, treatment or
restoration work, including institutional and engineering controls; (ii)
obtaining any EHS permits necessary to conduct any such activity; (iii)
preparing and implementing any plans or studies for any such activity; and (iv)
obtaining a written notice from the Governmental Authority with jurisdiction
over the matter under applicable EHS Law that no material additional work is
required by such Governmental Authority.
Exhibit A - 18
"Rolling Product Forecast" has the meaning specified in Section 8.2 of
------------------------ -----------
the Partnership Agreement.
"Scheduled Turnaround" means any scheduled turnaround for periodic
--------------------
maintenance to any of the Existing Plants.
"SEC" means the United States Securities and Exchange Commission.
---
"Senior Plant Management Team" means the Plant Manager at an Existing
----------------------------
Plant Complex and the Technical Manager, Operations Manager, Maintenance Manager
and EHS Manager at such Existing Plant Complex.
"Series A Percentage Interest" means for each Series A Unit Partner,
----------------------------
the number of Series A Units owned by such Partner divided by the total number
of issued and outstanding Series A Units.
"Series A Unit" means a Series A Unit representing a partnership
-------------
interest in the Partnership.
"Series B Percentage Interest" means for each Series B Partner, the
----------------------------
number of Series B Units owned by such Partner divided by the total number of
issued and outstanding Series B Units.
"Series B Unit" means a Series B Unit representing a partnership
-------------
interest in the Partnership.
"SM" means styrene monomer.
--
"Sourcing Plan" has the meaning specified in the PO Logistics
-------------
Agreement.
"Substitute General Partner" means a Person who is admitted as a
--------------------------
General Partner to the Partnership in place of and with all the rights of the
General Partner being replaced.
"Substitute Limited Partner" means a Person who is admitted as a
--------------------------
Limited Partner to the Partnership in place of and with all the rights of the
Limited Partner being replaced.
"Supply Failure Step-in Triggering Event" has the meaning specified in
---------------------------------------
Section 11.2 of the Partnership Agreement.
------------
"System-wide Pooled Cost Basis" has the meaning specified in Exhibit C
----------------------------- ---------
to the Operating Agreement.
"Taking" means a permanent or temporary condemnation or taking of all
------
or any portion of the Premises in any manner for public or quasi-public use,
including a conveyance or assignment in lieu of a condemnation or taking.
"Taxes" means all taxes, charges, fees, levies or other assessments
-----
imposed by any taxing authority, including, but not limited to, income, gross
receipts, excise, property, sales, use, transfer, payroll, license, ad valorem,
value added, withholding, social security, national
Exhibit A - 19
insurance (or other similar contributions or payments), franchise, severance and
stamp taxes (including any interest, fines, penalties or additions attributable
to, or imposed on or with respect to, any such taxes, charges, fees, levies or
other assessments).
"Tax Matters Partner" means Lyondell GP acting in the capacity provided
-------------------
for in Section 5.6(e) of the Partnership Agreement.
"Tax Return" means any return, declaration, report, claim for refund,
----------
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TBA" means tertiary butyl alcohol.
---
"Technology Partnership" means Technology JV, LP, a Delaware limited
----------------------
partnership, and its successors and assigns.
"Technology Partnership Agreement" means the Amended and Restated
--------------------------------
Agreement of Limited Partnership of Technology Partnership.
"Term" has the meaning specified in Section 1.1 of each Ground Lease.
----
"Third Party" means any Person other than a Partner, the Existing Plant
-----------
Operators or the Partnership or their respective Affiliates.
"Third Party Claim" means any Claim by a Third Party. For avoidance of
-----------------
doubt, any obligation to remediate under EHS Law or Applicable Law shall be
considered a Third Party Claim.
"Transaction Documents" has the meaning given to such term in the
---------------------
Master Transaction Agreement.
"Three Year Demand Forecast" has the meaning specified in Section 8.1
-------------------------- -----------
of the Partnership Agreement.
"Transfer" means to sell, assign or otherwise in any manner other than
--------
a Pledge dispose of, whether by act, deed, merger, consolidation, conversion or
otherwise. Such defined term is used as both a noun and a verb.
"Unaffected Partner" has the meaning specified in Section 15.18 of the
------------------ -------------
Partnership Agreement.
"Uncured Partner Offtake or Payment Default" has the meaning specified
------------------------------------------
in Section 11.4 of the Partnership Agreement.
------------
"Uninsured Plant Facilities Casualty" means a Casualty to the Plant
-----------------------------------
Facilities that is not covered by the insurance program maintained by or on
behalf of the Operator. A Casualty that would be insured but for deductibles
and/or self insurance retention limits under the insurance program maintained by
or on behalf of the Operator shall not be considered an Uninsured Plant
Facilities Casualty. The portion of the costs to restore the Plant Facilities to
their condition
Exhibit A - 20
immediately prior to the Casualty that exceeds coverage limits or that would
have been covered but for a lapse in coverage due to non-payment of premium or
otherwise shall be treated as an Uninsured Plant Facilities Casualty.
"Uninsured Third Party Claim" means a Third Party Claim with respect to
---------------------------
the operations of an Existing Plant Complex that is not covered by the insurance
program maintained by or on behalf of the Existing Plant Operator. A Third Party
Claim that would be insured but for deductibles and/or self-insurance retention
limits under the insurance program maintained by or on behalf of the Existing
Plant Operator shall not be considered an Uninsured Third Party Claim. The
portion of a Third Party Claim that exceeds coverage limits or that would have
been covered but for a lapse in coverage due to non-payment of premium or
otherwise shall be treated as an Uninsured Third Party Claim.
"Unit" means a Series A Unit or a Series B Unit.
----
"Unscheduled Turnarounds" has the meaning specified in Section 2.8 of
----------------------- -----------
the Operating Agreement.
"User" means any entity, division or business unit (including divisions
----
and business units of the Existing Plant Operators and their Affiliates) to
which services from Infrastructure Assets are provided.
"Variable Costs" means the portion of cash costs associated with the
--------------
production of PO Product or Co-Product, as the case may be, that vary directly
with changes in production levels.
"Wholly Owned Affiliate" means as to any Person, an Affiliate of such
----------------------
Person all the equity interests of which are owned, directly or indirectly, by a
Partner, by another Wholly Owned Affiliate of such Person or by the ultimate
parent entity thereof.
"year" means a calendar year.
----
Exhibit A - 21
EXHIBIT B
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
DISPUTE RESOLUTION PROCEDURES
-----------------------------
1. Binding and Exclusive Means. The dispute resolution provisions set
---------------------------
forth in this Exhibit B shall be the binding and exclusive means to resolve all
---------
disputes arising under the Agreement (each a "Dispute"); provided, however, that
this Exhibit B shall not limit either Party's recourse to courts of competent
---------
jurisdiction for injunctive or equitable relief that may be necessary to protect
the rights and property of such Party or maintain the status quo before, during
or after the pendency of the process set forth in this Exhibit B (except as
---------
specifically set forth in Section 11.2(c)(ii) of the Partnership Agreement). If
------------------
any such Dispute also involves the Operator, then all claims among the Partners,
the Partnership and the Operator shall be combined in a single proceeding
pursuant to this Exhibit B and the corresponding Exhibit B to the Operating
---------
Agreement.
2. Standards and Criteria. In resolving any Dispute, the standards and
----------------------
criteria for resolving such Dispute shall, unless the Parties involved in the
Dispute in their discretion jointly stipulate otherwise, be as set forth in
Attachment 1 to this Exhibit B.
------------ ---------
3. ADR and Binding Arbitration Procedures. If a Dispute arises, the
---------------------------------------
following procedures shall be implemented (with references to "Parties" meaning
the Partners involved in the Dispute and the Operator, if joined in the
proceeding in accordance with Section 1):
---------
(a) Any Party may at any time invoke the dispute resolution
procedures set forth in this Exhibit B as to any Dispute by providing written
notice of such action to the other Parties. The disputing Parties within five
Business Days after such notice shall schedule a meeting between the Parties to
be held in Houston, Texas. The meeting shall occur within 10 Business Days after
notice of the meeting is delivered to the Parties. The meeting shall be attended
by representatives of each Party having decision-making authority regarding the
Dispute as well as the dispute resolution process. The meeting shall also be
attended by upper management level personnel of each of the Parties, which
persons have not previously been directly engaged in asserting or responding to
the dispute. Such persons shall attempt in a commercially reasonable manner to
negotiate a resolution of the dispute, which negotiations may entail the
involvement of and meetings attended by additional upper management level
personnel senior to such persons. If such upper management level personnel shall
not have negotiated a resolution to the dispute within 45 days of the initial
notice of such dispute, then a meeting attended by the Chief Executive Officer
or a member of the Management Board of Directors with full decision-making
authority of each ultimate parent company of the disputing Parties shall occur
in New York, New York and such persons shall attempt in a commercially
reasonable manner to negotiate a resolution of the dispute before these
procedures may be deemed to have been exhausted. If such persons succeed in
negotiating a resolution of the dispute, one or more of the disputing Parties
shall be directed (in as comprehensive detail as reasonably practicable) to take
the actions necessary to carry out such resolution. Each Party shall have a
commercially reasonable time in which to take such actions, and such period
shall
Exhibit B - 1
automatically be extended if such party has in good faith and diligently
commenced and continued with its actions (a "Cure Period").
-----------
(b) If a dispute is not resolved pursuant to subsection (a), or, if
--------------
following the Cure Period, a Party believes in good faith that a dispute still
exists, the representatives of the Parties shall cooperate in a commercially
reasonable manner and shall explore whether techniques such as mediation,
minitrials, mock trials or other techniques of alternative dispute resolution
might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
---------------------
the earliest to occur of the following events: (i) an agreement shall be
reached by the Parties resolving the Dispute; (ii) one of the Parties shall
determine and notify the other Parties in writing that no agreement resolving
the Dispute is likely to be reached; (iii) if a technique of alternative dispute
resolution is agreed upon, the completion date therefor shall occur without the
Parties having resolved the Dispute; or (iv) if another technique of alternative
dispute resolution is not agreed upon, two full meeting days (or such other time
period as may be agreed upon) shall expire without the Parties having resolved
the Dispute.
(c) If, as of the Interim Decision Date, the Parties have not
succeeded in negotiating a resolution of the Dispute pursuant to subsection (b),
--------------
the Parties shall proceed under subsections (d), (e) and (f).
--------------- --- ---
(d) After satisfying the requirements above, such Dispute shall be
submitted to mandatory and binding arbitration at the election of any Party
involved in the Dispute (the "Disputing Party"). The arbitration shall be
---------------
subject to the Federal Arbitration Act as supplemented by the conditions set
forth in this Exhibit B. The arbitration shall be conducted in accordance with
---------
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date the notice of arbitration is served, other than as
specifically modified herein. In the absence of an agreement to the contrary,
the arbitration shall be held in Houston, Texas. The Arbitrators (as defined
below) will allow reasonable discovery in the forms permitted by the Federal
Rules of Civil Procedure, to the extent consistent with the purpose of the
arbitration. During the pendency of the Dispute, each Party shall make
available to the Arbitrator and the other Parties all books, records and other
information within its control requested by the other Parties or the Arbitrators
subject to the confidentiality provisions contained herein, and provided that no
such access shall waive or preclude any objection to such production based on
any privilege recognized by law. Recognizing the express desire of the Parties
for an expeditious means of dispute resolution, the Arbitrators may limit the
scope of discovery between the Parties as may be reasonable under the
circumstances. In deciding the substance of the Parties' claims, the laws of
the State of Delaware shall govern the construction, interpretation and effect
of this Agreement (including this Exhibit B) without giving effect to any
---------
conflict of law principles. The arbitration hearing shall be commenced promptly
and conducted expeditiously, with each Party involved in the Dispute being
allocated an equal amount of time for the presentation of its case. Unless
otherwise agreed to by the Parties, the arbitration hearing shall be conducted
on consecutive days. Time is of the essence in the arbitration proceeding, and
the Arbitrators shall have the right and authority to issue monetary sanctions
against any of the Parties if, upon a showing of good cause, that Party is
unreasonably delaying the proceeding. To the fullest extent permitted by law,
the arbitration proceedings and award shall be maintained in confidence by the
Arbitrators and the Parties.
Exhibit B - 2
(e) The Disputing Party shall notify the American Arbitration
Association ("AAA") and the other Parties in writing describing in reasonable
---
detail the nature of the Dispute (the "Dispute Notice"). Each Party to the
--------------
dispute shall select one arbitrator (the "Selected Arbitrators") within 15 days
--------------------
of the date of the Dispute Notice by all of the Parties from the members of a
panel of arbitrators of the AAA. The Selected Arbitrators shall then jointly
select a third arbitrator (together with the Selected Arbitrators, the
"Arbitrators") from the members of a panel of arbitrators of the AAA or, if the
-----------
AAA fails or refuses to provide a list of potential arbitrators, of the Center
for Public Resources, and such Arbitrator shall be experienced in commercial
arbitration. With respect to any dispute under Section 11.3 of the Partnership
------------
Agreement, the Selected Arbitrators shall meet the criteria set forth in Section
-------
11.3(f) of the Partnership Agreement. In the event that the Selected
-------
Arbitrators are unable to agree on the selection of the third Arbitrator, the
AAA shall select the third Arbitrator, using the criteria set forth in this
Exhibit B, within 30 days of the date of the Dispute Notice. In the event that
---------
any Arbitrator is unable to serve, his or her replacement will be selected in
the same manner as the Arbitrator to be replaced. The vote of two of the three
Arbitrators shall be required for any decision under this Exhibit B. The
---------
Arbitrators shall have the authority to assess the costs and expenses of the
arbitration proceeding (including the arbitrators', and attorneys' fees and
expenses) against any or all Parties.
(f) The Arbitrators shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrators shall have the authority to issue injunctive relief;
however, the Arbitrators shall not have any power or authority to (i) award
consequential (except as specifically set forth under the terms of the
Transaction Documents) incidental, indirect or punitive damages or (ii) amend
this Agreement. The Arbitrators shall render the arbitration award, in writing,
within 20 days following the completion of the arbitration hearing, and shall
set forth the reasons for the award. In the event that the Arbitrators award
monetary damages in favor of either Party, the Arbitrators must certify in the
award that no indirect, consequential (except as specifically set forth under
the terms of the Transaction Documents), incidental, indirect or punitive
damages are included in such award. If the Arbitrators' decision results in a
monetary award, the interest to be granted on such award, if any, and the rate
of such interest shall be determined by the Arbitrators in their discretion.
The arbitration award shall be final and binding on the Parties, and judgment
thereon may be entered in any court of competent jurisdiction, and may not be
appealed except to the extent permitted by the Federal Arbitration Act.
(g) If the issue of whether a breach of this Agreement or whether one
of the Parties was entitled to exercise remedial rights is in Dispute, the non-
prevailing Party shall have a commercially reasonable period of time to cure the
default or circumstance before the prevailing Party shall be entitled to
exercise such remedial rights. The Arbitrator shall include the time in which
the non-prevailing Party must complete such cure in its award.
4. Continuation of Business. Notwithstanding the existence of any Dispute
------------------------
or the pendency of any procedures pursuant to this Exhibit B, the Parties agree
---------
and undertake that all payments not in dispute shall continue to be made and all
obligations not in dispute shall continue to be performed.
Exhibit B - 3
ATTACHMENT 1 TO EXHIBIT B
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the Parties and their Affiliates as set forth in the Partnership Agreement and
the Operating Agreement.
(b) Second priority shall be given to resolution of the Dispute in a manner
which best achieves the objectives of the business activities and arrangements
under the Partnership Agreement, the Operating Agreement and the Transaction
Documents and permits the Parties to realize the benefits intended to be
afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
Parties or the Arbitrators shall determine to be appropriate under the
circumstances.
Exhibit B - 4
EXHIBIT C
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
INITIAL THREE YEAR DEMAND FORECAST
----------------------------------
[to be attached at Closing]
Exhibit C - 2
EXHIBIT D
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
INITIAL ANNUAL PLAN
-------------------
[to be attached at Closing]
---------------------------
Exhibit D - 1
EXHIBIT E
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
[Intentionally Deleted]
Exhibit E - 1
EXHIBIT F
---------
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
DELIVERY POINT
--------------
Exhibit F - 1
SCHEDULE 2.1
------------
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
OWNERSHIP OF UNITS; NAMES AND ADDRESSES OF PARTNERS; CAPITAL ACCOUNT BALANCES AS
--------------------------------------------------------------------------------
OF THE CLOSING DATE
-------------------
Series A Units Series B Units
-------------- --------------
Lyondell LP 1,085 9,900
-----------
PO Offtake, LP
2 Greenville Crossing
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Lyondell GP 100 100
-----------
PO Offtake, LP
2 Greenville Crossing
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
BAYPO Limited Partnership 8,815 0
------------------------- ====== ======
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Total: 10,000 10,000
[Capital account balances will be provided following completion of the appraisal
process.]
SCHEDULE 2.3
------------
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
G&A LYONDELL PERSONNEL COST BASKET
----------------------------------
1. The Operator shall prepare a list of job titles to represent a typical G&A
support pool ("G&A Support Pool") for the propylene oxide business and the
----------------
administration of this Agreement.
- On an annual basis the change in the market reference rate versus the
prior years market reference will be calculated for this pool of positions
consistent with the annual market reference process. This escalation
factor will be calculated at the end of the first quarter and will be
multiplied by the prior years fee in order to determine the fee for the
current year.
- The basket of positions will be defined as:
- 35% accountants
- 10% accounting manager
- 10% tax accountant
- 10% humans relations
- 10% lawyers
- 10% logistics
- 15% information systems
- For purpose of this calculation market reference is defined to include
both base salary and bonus for these positions.
- The specific job titles and market reference rates for 1998 and 2000 are
attached.
Every five years, the Parties shall review the composition of the G&A
Support Pool and will make such adjustments by mutual agreement as may be
appropriate to better reflect the actual composition of the personnel
providing general overhead and administrative services to the PO business.
2. As of January 1 of every year, the total personnel costs (all wages and
salaries, benefits, insurance and bonuses) for Lyondell for the G&A support
personnel weighted-averaged basket described above shall be compared to
January 1 of the prior year. The Bayer Monthly Stipulated G&A Allocation in
effect during the prior year shall be multiplied by (1 + .75 X the
percentage change in such personnel costs) to arrive at the new Buckeye
Stipulated G&A Allocation. If the personnel costs have decreased, the
formula shall be changed to (1 -.75 X the percentage change in such
personnel costs).
Determination of Salary-based Escalators for Bayer PO G&A Charges
-------------------------------------------------------------------------------
Baseline
1998 Market Reference Basket of Administrative Positions
Position 1998 MR Target Bonus % Target Bonus $ Total Target Comp % in Basket
Accountant, II $ 61,568.00 3% $ 1,848.00 $ 63,416.00 35%
Manager, Accounting $109,044.00 25% $27,261.00 $136,305.00 10%
Accountant, Tax, II $ 72,176.00 3% $ 2,166.00 $ 74,342.00 10%
Analyst, Workstation $ 61,620.00 3% $ 1,849.00 $ 63,469.00 10%
Manager, HR $ 98,852.00 20% $19,771.00 $118,623.00 10%
Attorney $ 96,356.00 20% $ 9,272.00 $115,628.00 10%
Specialist, Product $ 55,588.00 3% $ 1,668.00 $ 57,256.00 15%
----------- ---------- -----------
Weighted Totals $ 73,691.80 $ 7,928.90 $ 81,620.70
Current Year
2000 Market Reference Basket of Administrative Positions
Position 1998 MR Target Bonus % Target Bonus $ Total Target Comp % in Basket
Accountant, II $ 63,024.00 5% $ 3,152.00 $ 66,176.00 35%
Manager, Accounting $113,412.00 25% $28,353.00 $141,765.00 10%
Accountant, Tax, II $ 79,976.00 5% $ 3,999.00 $ 83,975.00 10%
Analyst, Workstation $ 68,484.00 5% $ 3,425.00 $ 71,909.00 10%
Manager, HR $102,856.00 25% $25,714.00 $128,570.00 10%
Attorney $ 98,176.00 20% $19,636.00 $117,812.00 10%
Specialist, Product $ 58,708.00 5% $ 2,936.00 $ 61,644.00 15%
----------- ---------- -----------
Weighted Totals $ 77,155.00 $ 9,656.30 $ 86,811.30
Escalation Factor for 2000 (75% of increase versus baseline): =(86811.30/81620.70-1)*0.75 = 4.7696%
Year 2000 costs = $0.933 MM/month X 104.7696% = $0.978 MM/month
SCHEDULE 6.3
-------------
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
LYONDELL INSURANCE PROGRAM REQUIREMENTS
---------------------------------------
--------------------------------------------------------------------------------------------------
Insurance Policy Coverage Limit Deductible
--------------------------------------------------------------------------------------------------
Property Damage and Business $1,225MM current worldwide . $10MM deductible for Property
Interruption Insurance aggregate maximum limit Damage and Scheduled Business
Interruption
--------------------------------------------------------------------------------------------------
. Other Business Interruption
- $30MM or 30 days, which is
less (Channelview and
Bayport plants only)
- $20MM or 30 days, whichever
is less (all other
locations)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Commercial General $2MM non-US aggregate No deductible for non-US
Liability Insurance limit operations and locations
Excess Liability Insurance $800MM $10MM
Commercial Criminal $40MM $500,000
Insurance
Fiduciary Liability $40MM $500,000
Insurance
Marine Liability Insurance $9MM $1MM
Automobile Liability $9MM US limit $1MM
Insurance $1MM non-US limit
Workers' Compensation various statutory coverage $1MM
Insurance as required by limits
state or federal law
Employers' Liability $2MM US limit $1MM
Insurance $1MM non-US limit
--------------------------------------------------------------------------------------------------
The Operator has the right to increase or decrease the coverage limits,
deductibles and self-insurance retention limits, scope of coverages and insurers
and reinsurers in accordance with Lyondell's general risk management policies
applied to manufacturing operations of similar scope and risk to the Plant
Facilities and their operation. Lyondell GP will cause the Operator to consult
with Xxxxx XX before increasing deductibles or self-insurance retention limits,
reducing coverage limits or eliminating types of coverage. If Xxxxx XX does not
agree to such increase, reduction or elimination, then, to the extent available
on commercially reasonable terms, the Operator shall retain the original limits
and coverage for the Plant Facilities. The incremental
costs to maintain the original limits and coverage levels shall be a Partnership
expense to be allocated in accordance with Section 2.5 of the Partnership
-----------
Agreement. Nothing herein affects the rights of the Existing Plants in
accordance with the foregoing provisions of this Schedule 6.3.
------------
2
SCHEDULE 9.6
------------
TO AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
-----------------------------------------------------
ACCOMMODATION FEE PROCEDURES
----------------------------
On or before April 1 of each year, an executive officer of Bayer shall certify
to Lyondell as to one of the following alternatives:
(A) that the world-wide sales volumes of Identified Polyols for Bayer and
its Affiliates for the prior year multiplied by the actual PO to
Identified Polyols yields for such volumes for the year, exceeds the
sum of (x) the Bayer PO Annual Offtake Amount plus (y) for the
duration of the Bayer 300 Million Pound PO Option Agreement,
deliveries under the Bayer 300 Million Pound PO Option Agreement, in
each case for the prior year; or
(B) if the world-wide sales volumes of Identified Polyols for Bayer and
its Affiliates for the prior year multiplied by the actual PO to
Identified Polyols yields for such volumes for the year, is less than
the sum of (x) the Bayer PO Annual Offtake Amount plus (y) for the
duration of the Bayer 300 Million Pound PO Option Agreement,
deliveries under the Bayer 300 Million Pound PO Option Agreement, in
each case for the prior year, then Bayer shall certify the amount of
such difference.
The certification shall include a calculation of the Accommodation Fee, if any,
that is payable under Section 9.6.
-----------
Bayer will keep appropriate records to support its certification and/or
calculation under the preceding paragraph. If Lyondell, in good faith, believes
that Bayer has not complied with Bayer's obligation under Section 9.6, then, at
-----------
Lyondell's request, Bayer shall provide a certification from Bayer's outside
independent auditor within 90 days after such request, which confirms that Bayer
is in compliance.
3
