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EXHIBIT 10.24
CONFIDENTIAL
LIMITED PARTNERSHIP AGREEMENT OF
LYONDELL-CITGO REFINING LP
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UNDER THE DELAWARE
REVISED UNIFORM LIMITED PARTNERSHIP ACT
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DATED DECEMBER 31, 1998
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TABLE OF CONTENTS
1. DEFINITIONS.............................................................1
2. ORGANIZATION MATTERS....................................................1
2.1. Name.......................................................1
2.2. Conversion to Partnership and Partners.....................1
2.3. Purpose and Business.......................................2
2.4. Principal Office...........................................3
2.5. Term.......................................................3
2.6. Filings....................................................3
2.7. Power of Attorney..........................................3
3. MANAGEMENT..............................................................4
3.1. Partnership Governance Committee..........................4
3.2. Partnership Governance Committee Composition. ............4
3.3. Partnership Governance Committee: Duties, Powers and
Authority.................................................4
3.4. Partnership Governance Committee: Meetings...............6
3.5. Compensation of Representatives...........................8
3.6. Partnership Governance Committee Action...................8
3.7. Partnership Governance Committee: Quorum and Voting......8
3.8. Partnership Governance Committee Actions for Which
Unanimous Consent Necessary...............................9
3.9. Majority Approval........................................11
3.10. Auxiliary Committees.....................................11
4. OFFICERS AND EMPLOYEES.................................................12
4.1. Partnership Officers.....................................12
4.2. Selection; Term; Qualification...........................12
4.3. Removal and Vacancies....................................12
4.4. Duties...................................................13
4.5. CEO......................................................14
4.6. Vice Presidents..........................................14
4.7. Secretary................................................14
4.8. Assistant Officers.......................................14
4.9. Other Officers...........................................15
4.10. Salaries.................................................15
4.11. Bonds of Officers........................................15
4.12. Delegation...............................................15
4.13. Loaned Employees.........................................15
4.14. Employee Transfers.......................................16
5. RIGHTS, DUTIES AND COVENANTS OF PARTNERS...............................16
5.1. Delegation...............................................16
5.2. General Authority........................................16
5.3. Nature of Partner Obligations............................17
5.4. Limited Partners.........................................17
(ii)
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5.5. Partner Not Agent of Other Partners......................17
5.6. Transactions with the Partnership........................17
5.7. Control of Certain Claims and Certain Transactions.......18
5.8. Partnership Interest.....................................19
5.9. Access to and Copies of Records and Documents............19
5.10. Partner Covenants........................................19
5.11. Indemnification..........................................20
6. CAPITAL CONTRIBUTIONS AND PARTICIPATION PERCENTAGE.....................22
6.1. Prior Capital Contributions..............................22
6.2. Capital Contributions....................................22
6.3. Partner Loans............................................23
6.4. Participation Percentages................................23
6.5. Capital Expenditure Funding..............................24
6.6. CITGO Partners' Option to Increase Their Collective
Participation Percentage.................................24
6.7. Return of Capital Contributions..........................26
6.8. Administration and Investment of Funds...................26
7. ALLOCATIONS AND DISTRIBUTIONS..........................................26
7.1. Capital Accounts.........................................26
7.2. Income and Distribution Determinations; Restriction on
Distributions and Advances...............................27
7.3. Distributable Cash.......................................28
7.4. Distributions............................................29
7.5. Interim Loans............................................29
7.6. Internal Revenue Code Section 704(b) Book Allocations
for Tax Purposes.........................................30
7.7. Tax Allocations..........................................31
7.8. Transfers of Interest....................................33
8. BOOKS OF ACCOUNT AND TAX MATTERS.......................................33
8.1. Books of Account.........................................33
8.2. Tax Treatment............................................34
8.3. Tax Returns..............................................34
8.4. Tax Controversies........................................35
8.5. Tax Rulings..............................................36
9. ANNUAL BUDGETS, FIVE YEAR PLAN AND COMMERCIAL LOANS....................36
9.1. Fiscal Year..............................................36
9.2. Annual Budgets...........................................36
9.3. Approval of Budgets......................................37
9.4. Funding of Budgets.......................................37
9.5. Implementation of Budgets and Discretionary Expenditures
by CEO...................................................37
9.7. Commercial Loans.........................................38
9.8. Insurance and Risk Management............................38
(iii)
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10. TRANSFERS AND PLEDGES..................................................38
10.1. Prohibition of Transfer..................................38
10.2. Transfers Prior to the Option Date.......................39
10.3. Transfers After the Option Date..........................39
10.4. Transferees..............................................41
10.5. Pledge of Interest.......................................41
11. REMEDIES AND DISSOLUTION...............................................42
11.1. Security for Performance.................................42
11.2. Default..................................................43
11.3. Remedies for Default.....................................45
11.4. Consequences of Default..................................46
11.5. Purchase of Defaulting Partners' Interest................46
11.6. Liquidation..............................................47
11.7. Closing of Purchase Rights...............................47
11.8. Recision. ..............................................47
11.9. Dissolution..............................................48
11.10. Reconstitution of Partnership............................48
11.11. Liquidation; Winding Up and Distributions upon
Dissolution..............................................48
11.12. Enforcement..............................................49
12. MISCELLANEOUS..........................................................49
12.1. Confidentiality and Use of Information...................49
12.2. Auditors.................................................50
12.3. Indemnification of Officers..............................50
12.4. Waivers, Modifications and Amendments....................52
12.5. Further Assurances.......................................52
12.6. Successors and Assigns...................................52
12.7. Benefits of Agreement Restricted to the Parties..........52
12.8. Expenses. ..............................................52
12.9. Currency Conversions.....................................52
12.10. Payment Terms and Interest Calculations..................52
12.11. Usury Savings Clause.....................................53
12.12. Notices..................................................53
12.13. Waiver of Immunity.......................................54
12.14. Governing Law............................................55
12.15. Jurisdiction; Consent to Service of Process; Waiver......55
12.16. Entire Agreement.........................................56
12.17. Severability.............................................56
12.18. Construction.............................................56
12.19. Counterparts.............................................57
(iv)
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EXHIBITS.
Exhibit 1 Definition of Terms in Agreement
Exhibit 1A Related Agreements
Exhibit 6.1(B) Working Capital Valuation
Exhibit 6.4 Qualified Capital Contributions; Participation Percentages
Exhibit 6.6(E) Form of Note for Portion of Option Date Payment
(v)
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LIMITED PARTNERSHIP AGREEMENT OF
LYONDELL-CITGO REFINING LP
(THE "PARTNERSHIP")
1. DEFINITIONS
The definitions of the capitalized defined terms used in this Limited
Partnership Agreement (the "Agreement"), including the Exhibits hereto
other than Exhibit 1, and not elsewhere defined herein or therein, as
well as cross-references to all capitalized defined terms, are set
forth in Exhibit 1 to this Agreement.
2. ORGANIZATION MATTERS
2.1. Name. The name of the limited partnership is "LYONDELL-CITGO
Refining LP" (the "Partnership"). The Partnership Business may
be conducted under such name or any other name or names deemed
advisable by the Partnership Governance Committee. The General
Partners will comply or cause the Partnership to comply with all
applicable laws and other requirements relating to fictitious or
assumed names.
2.2. Conversion to Partnership and Partners. The Partnership
converted from LYONDELL-CITGO Refining Company Ltd., a limited
liability company formed under the laws of the State of Texas
(the "Company"), effective as of the date of this Agreement (the
"Conversion Date"), pursuant to Articles of Conversion filed
pursuant to the Texas Limited Liability Company Act, and a
Certificate of Conversion and a Certificate of Limited
Partnership, each filed pursuant to the Delaware Revised Uniform
Limited Partnership Act (the "Act"). In connection with such
conversion, the Amended and Restated Regulations of the Company
dated July 1, 1993 (the "Closing Date"), as amended (the
"Regulations"), were superseded by this Agreement. On the
Conversion Date, the limited liability company interests in the
Company were converted into partnership interests in the
Partnership held by (i) Lyondell Refining LP, LLC, a Delaware
limited liability company ("Lyondell LP"), a Wholly Owned
Subsidiary of Lyondell Chemical Company (formerly known as
Lyondell Petrochemical Company), a Delaware corporation
("LParent"), (ii) CITGO Refining Investment Company, an Oklahoma
corporation ("CITGO LP"), a Wholly Owned Subsidiary of CITGO
Petroleum Corporation, a Delaware corporation ("CParent"), (iii)
Lyondell Refining Company, a Delaware corporation ("Lyondell
GP"), a Wholly Owned Subsidiary of LParent, and (iv) CITGO Gulf
Coast Refining, Inc., a Delaware corporation ("CITGO GP"), a
Wholly Owned Subsidiary of CParent.
Upon the Conversion Date, the percentage ownership of the
Partnership was as follows:
Lyondell GP 10.10%
CITGO GP 1.00%
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Lyondell LP 48.65%
CITGO LP 40.25%
Upon the Conversion Date, Lyondell GP's 10.10% interest consists
of a 1.00% general partnership interest and a 9.10% limited
partnership interest; provided, however, that for all other
purposes under this Agreement, Lyondell GP shall be considered
only a General Partner (as defined herein) and not a Limited
Partner (as defined herein).
Except as expressly provided herein to the contrary, the rights
and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act.
Without the need for the consent of any other Person, upon the
execution of this Agreement: (i) each of Lyondell GP and CITGO
GP is hereby admitted to the Partnership as a general partner of
the Partnership (together, the "General Partners"), and (ii)
each of Lyondell LP and CITGO LP is hereby admitted to the
Partnership as a limited partner of the Partnership (together,
the "Limited Partners"). 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. As of the
Conversion Date, the Regulations (i) are superseded by this
Agreement except to the extent of their ongoing relevance in
governing matters relating to the Company and (ii) shall no
longer have any force or effect except to the extent of their
ongoing relevance in governing matters relating to the Company,
provided, however, that all prior acts of Lyondell Refining
Company, a Delaware corporation, and CITGO Refining Investment
Company, an Oklahoma corporation, as members, or acts of or on
behalf of the Company, under the Regulations shall remain in
effect until modified or rescinded by Partnership Governance
Committee Action.
2.3. Purpose and Business. The business of the Partnership (the
"Partnership Business") shall be as follows: (i) to own and
operate the Refinery Business, (ii) to carry out any Capital
Enhancement Projects, (iii) to purchase, sell, exchange and
refine crude oil and other feedstocks, (iv) to market the
products produced by the Partnership, (v) to engage in the
refining business generally, and (vi) to do all things necessary
or incidental in connection with the foregoing as are permitted
under the Act, all such business being managed, subject to then
existing contractual obligations, with the objectives of (a)
operating the Refinery, as modified by any Capital Enhancement
Projects, and any other refinery or refining business owned or
operated by the Partnership so as to maximize long-term
Partnership value as measured by cash flow and earnings and (b)
achieving the highest levels of efficiency, productivity and
profitability consistent with good safety and environmental
practices and performance. The Partnership shall be strictly
limited to the Partnership Business, and the Partnership
Business shall not be extended by implication or otherwise,
except by express written amendment to this Agreement or by
Unanimous Partnership Governance Committee Action pursuant to
Section 3.8.(A).
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2.4. Principal Office. The principal business office of the
Partnership shall be at 12000 Lawndale, Xxxxxxx, Xxxxx 00000 or
such other place as may be designated from time to time by the
Partnership Governance Committee. The registered agent of the
Partnership in the State of Delaware is The Corporation Trust
Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
2.5. Term. The Partnership shall continue until dissolved as
described in Section 11.9.
2.6. Filings. The General Partners shall, or shall cause the
Partnership to, execute, swear to, acknowledge, deliver, file or
record in public offices and publish all such certificates,
notices, statements or other instruments, and take all such
other actions, as may be required by law for the formation,
reformation, qualification, registration, operation or
continuation of the Partnership in any jurisdiction, to maintain
the limited liability of the Limited Partners, to preserve the
Partnership's status as a partnership for tax purposes or
otherwise to comply with applicable law. Upon request of the
General Partners, the Limited Partners shall execute all such
certificates and other documents as may be necessary, in the
sole judgment of the General Partners, in order for the General
Partners to accomplish all such executions, swearings,
acknowledgments, deliveries, filings, recordings in public
offices, publishings and other acts. Each General Partner hereby
agrees and covenants that it will execute any appropriate
amendment to the Certificate of Limited Partnership of the
Partnership pursuant to Section 17-204 of the Act to reflect any
admission of a Substitute General Partner in accordance with
this Agreement.
2.7. Power of Attorney. Each Limited Partner hereby irrevocably
makes, constitutes and appoints its Affiliated General Partner
and any successor thereto permitted as provided herein, with
full power of substitution and resubstitution, as the true and
lawful agent and attorney-in-fact of such Limited Partner, with
full power and authority in the name, place and stead of such
Limited Partner to execute, swear, acknowledge, deliver, file or
record in public offices and publish: (i) all certificates and
other instruments (including counterparts thereof) which such
General Partner deems appropriate to reflect any amendment,
change or modification of or supplement to this Agreement in
accordance with and as permitted by the terms of this Agreement;
(ii) all certificates and other instruments and all amendments
thereto which such General Partner deems appropriate or
necessary to form, qualify or continue the Partnership in any
jurisdiction, to maintain the limited liability of such Limited
Partner, to preserve the Partnership's status as a partnership
for tax purposes or otherwise to comply with applicable law; and
(iii) all conveyances and other instruments or documents which
such General Partner deems appropriate or necessary to reflect
the transfers or assignments of interests in, to or under this
Agreement, including the Interests, the dissolution, liquidation
and termination of the Partnership, and the distribution of
assets of the Partnership in connection therewith, in accordance
with and as permitted by the terms of this Agreement.
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Each Limited Partner hereby agrees to execute and deliver to its
Affiliated General Partner within five (5) 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 such General Partner deems
necessary. The power of attorney granted herein is hereby
declared irrevocable and a power coupled with an interest, shall
survive the bankruptcy, dissolution or termination of such
Limited Partner and shall extend to and be binding upon such
Limited Partner's successors and permitted assigns. Each Limited
Partner hereby (i) agrees to be bound by any representations
made by the agent and attorney-in-fact acting in good faith
pursuant to such power of attorney; and (ii) waives any and all
defenses which may be available to contest, negate, or disaffirm
any action of the agent and attorney-in-fact taken in accordance
with such power of attorney.
3. MANAGEMENT.
3.1. Partnership Governance Committee.
(1) To facilitate the management of the Partnership by the
General Partners, the General Partners hereby establish a
committee (the "Partnership Governance Committee") to
manage and control the business, property and affairs of
the Partnership, including the determination and
implementation of the Partnership's strategic direction.
Except to the extent expressly set forth in this
Agreement, each General Partner agrees to exercise its
authority to manage the affairs of the Partnership only
through Partnership Governance Committee Action. Further,
each General Partner agrees not to exercise, or purport
or attempt to exercise, its authority (notwithstanding
that each General Partner may have such authority
pursuant to the Act) (i) to act for or incur, create or
assume any obligation, liability or responsibility on
behalf of the Partnership or any other General Partner,
or (ii) to execute any documents on behalf of, or
otherwise bind, or purport or attempt to bind, the
Partnership, or (iii) to otherwise transact any business
in the Partnership's name, in each case except pursuant
to Partnership Governance Committee Action or except as
provided in Section 5.7.
(2) Except as expressly set forth in this Agreement, no
Person or Persons other than (i) the General Partners,
acting through the Partnership Governance Committee, and
(ii) the officers of the Partnership appointed in
accordance with this Agreement and acting as agents or
employees, as applicable, of the Partnership in
conformity with this Agreement and any applicable
Partnership Governance Committee Action, shall be
authorized (a) to exercise the powers of the Partnership,
(b) to manage the business, property and affairs of the
Partnership or (c) to contract for, or incur on behalf
of, the Partnership any debts, liabilities or other
obligations.
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3.2. Partnership Governance Committee Composition.
(1) The Partnership Governance Committee shall consist of six
representatives (each a "Representative") and each
General Partner shall designate three Representatives.
All the Representatives of both General Partners shall
together constitute the Partnership Governance Committee.
Representatives shall not be employees of the Partnership
or otherwise serve the Partnership in any capacity except
that, as provided in Section 3.10., a Representative may
also serve as a member of an Auxiliary Committee.
(2) Each General Partner may designate one or more
individuals (each an "Alternate") who (i) shall be
authorized, in the event a Representative is absent from
any meeting of the Partnership Governance Committee (and
in the order of succession designated by the General
Partner so designating the Alternates), to attend such
meeting in the place of, and as substitute for, such
Representative and (ii) shall be vested with all the
powers to cast votes on behalf of such General Partner
which the absent Representative could have exercised at
such meeting. Alternates shall not be employees of the
Partnership or otherwise serve the Partnership in any
capacity except that, as provided in Section 3.10., an
Alternate may also serve as a member of an Auxiliary
Committee. The term "Representative," when used herein
with reference to any Representative who is absent from a
meeting of the Partnership Governance Committee, shall
mean and refer to any Alternate attending such meeting in
place of such absent Representative.
(3) Each General Partner may, by written notice delivered
to the other General Partner and the CEO, at any time or
from time to time, remove or replace one or more of its
Representatives or Auxiliary Committee members or change
one or more of its Alternates. If a Representative,
Auxiliary Committee member or Alternate dies, resigns, or
becomes disabled or incapacitated, the General Partner
that designated such Representative, Auxiliary Committee
member or Alternate, as the case may be, shall promptly
designate a replacement. Each Representative, each
Auxiliary Committee member and each Alternate shall serve
until replaced by the General Partner that designated
such Representative, Auxiliary Committee member or
Alternate, as the case may be. The Owners Committee
Representatives, the Auxiliary Committee members and the
Alternates representing Lyondell GP and CITGO LP,
respectively (in their capacities as members of the
Company), who are serving in such capacities in respect
of the Company as of the Conversion Date will continue to
hold such positions representing
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Lyondell GP and CITGO GP, respectively (in their
capacities as General Partners), following the Conversion
Date until removed or replaced in accordance with the
terms of this Section 3.2.(C).
(4) Copies of all written notices designating
Representatives, Auxiliary Committee members and
Alternates shall be delivered to the Secretary and shall
be placed in the Partnership minute books, but the
failure to deliver a copy of any such notice to the
Secretary shall not affect the validity or effectiveness
of such notice or the designation described therein. (1)
(5) Each Representative, in his capacity as such, shall be
the agent of the General Partner that designated such
Representative. Accordingly, (i) each Representative, as
such, shall act (or refrain from acting) with respect to
the business, property and affairs of the Partnership
solely in accordance with the wishes of the General
Partner that designated such Representative and (ii) no
Representative, as such, shall owe (or be deemed to owe)
any duty (fiduciary or otherwise) to the Partnership, to
any General Partner (other than the General Partner that
designated such Representative), or to any Limited
Partner; provided, however, that nothing in this
Agreement is intended to or shall relieve or discharge
any Representative or General Partner from liability to
the Partnership or the Partners on account of any
fraudulent or intentional misconduct of such
Representative; and provided further, that each
Representative shall not disclose any material
information regarding the business of the Partnership and
shall not use any such information, in either case, in
any manner not related to the Partnership Business.
3.3. Partnership Governance Committee: Duties, Powers and Authority.
(1) Except as otherwise provided by this Agreement, the
Partnership Governance Committee (on behalf of the
General Partners) shall have (i) the full authority of
the General Partners to exercise all of the powers of the
Partnership and (ii) full control (on behalf of the
General Partners) over the business, property and affairs
of the Partnership.
(2) The Partnership Governance Committee shall adopt
policies and procedures, not inconsistent with this
Agreement (including Section 3.8.) or the Act, governing
financial controls and legal compliance, including
delegations of authority (and limitations thereon) to the
officers of the Partnership as described in Section 4.
Such policies and procedures may be revised or revoked
(in a manner consistent with this Agreement and the Act)
from time to time as determined by the Partnership
Governance Committee. Without
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limiting the generality of the foregoing, the General
Partners intend that the Partnership's policies and
procedures will address such matters as conflicts of
interest, political contributions, illegal or unethical
business practices, antitrust compliance, anti-boycott
compliance, Foreign Corrupt Practices Act compliance,
employee practices, agreements with employees relating to
inventions, contractual obligations, purchasing and
advertising. To the extent any authority is not delegated
to officers of the Partnership in this Agreement or in
accordance with Partnership Governance Committee Action,
it shall remain with the Partnership Governance
Committee.
3.4. Partnership Governance Committee: Meetings.
(1) Regular meetings of the Partnership Governance Committee
shall be held at such times (no less frequently than
quarterly) and at such places (within the States of Texas
or Oklahoma or any other state designated by the
Partnership Governance Committee) as shall from time to
time be determined by the Partnership Governance
Committee. The first regular meeting of the Partnership
Governance Committee during each fiscal year of the
Partnership shall be deemed to be the "Annual Meeting."
No notice need be given with respect to any regular
meeting of the Partnership Governance Committee; however,
the Secretary following receipt of comments thereto from
each General Partner shall deliver, by messenger or other
hand delivery or by facsimile transmission (with proof of
confirmation from the transmitting machine), an agenda
for such meeting to each of the Representatives at least
five (5) Business Days prior to such meeting. At any
regular meeting of the Partnership Governance Committee
at which a quorum is present, any and all business of the
Partnership may be transacted.
(2) Special meetings of the Partnership Governance Committee
may be called by any Representative or the CEO by
delivering, via messenger or other hand delivery or by
facsimile transmission (with proof of confirmation from
the transmitting machine), written notice to each of the
other Representatives, or, in the case of a meeting
called by the CEO, each of the Representatives, at least
three (3) Business Days before such meeting. Each notice
of a special meeting shall specify, to a reasonable
degree, the business to be transacted at, or the purpose
of, such meeting; provided, however, that additional
business may be transacted at any special meeting as
agreed by all the Representatives present at such
meeting. Special meetings of the Partnership Governance
Committee shall be held at such times and at such places
within the State of Texas or Oklahoma as may be stated in
the notice of such meeting or in a duly executed waiver
of notice thereof. Any Representative may waive notice of
any special meeting (whether before or after the time of
such meeting) but only if the waiver is in
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writing. Attendance of any Representative at any special
meeting shall constitute a waiver of notice of such
meeting by such Representative, unless the Representative
states at the beginning of the meeting his objection to
the transaction of business because the meeting was not
lawfully called or convened.
(3) One Representative shall serve as chair of each
meeting (regular or special) of the Partnership
Governance Committee. The right to designate the chair of
meetings of the Partnership Governance Committee shall
rotate between the respective General Partners every
calendar year. The Representative who on the Conversion
Date is serving as chair of the meetings shall continue
to so serve until December 31, 1998, which is the next
rotation date.
(4) Following each meeting of the Partnership Governance
Committee, the Secretary shall promptly draft and
distribute minutes of such meeting to the Representatives
for approval at the next meeting, and after such approval
shall retain the minutes in the Partnership minute books.
(5) Representatives may participate in or hold regular or
special meetings of the Partnership Governance Committee
by means of a telephone conference or any comparable
device or technology by which all individuals
participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence
in person at such meeting.
(6) Any action required or permitted to be taken at a meeting
of the Partnership Governance Committee may be taken
without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by at least two (2)
Representatives (or their Alternates) of each General
Partner, and such consent shall have the same force and
effect as a duly conducted vote of the Partnership
Governance Committee. A counterpart of each such consent
to action shall be delivered to the Secretary for
placement in the minute books of the Partnership, but the
failure to deliver a counterpart of any such consent to
action to the Secretary shall not affect the validity or
effectiveness of such consent to action.
3.5. Compensation of Representatives. Representatives shall not
receive from the Partnership any compensation for their service
or any reimbursement for attendance at meetings of the
Partnership Governance Committee.
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3.6. Partnership Governance Committee Action.
(1) The Partnership Governance Committee shall act
exclusively by means of Partnership Governance Committee
Action. As used in this Agreement, "Partnership
Governance Committee Action" means any action which the
Partnership Governance Committee is authorized and
empowered to take in accordance with this Agreement and
the Act and which is taken by the Partnership Governance
Committee either (i) by votes cast at a meeting of the
Partnership Governance Committee duly called and held in
accordance with this Agreement or (ii) by a formal
written consent complying with the requirements of
Section 3.4.(F). In no event shall the Partnership
Governance Committee be authorized to act other than by
Partnership Governance Committee Action, and any action
or purported action by the Partnership Governance
Committee (including any authorization, consent,
approval, waiver, decision or vote) not constituting a
Partnership Governance Committee Action shall be null and
void and of no force and effect.
(2) Each Partnership Governance Committee Action shall be
binding on the Partnership.
3.7. Partnership Governance Committee: Quorum and Voting.
(1) The presence of one Representative (including any
duly present Alternates) from each General Partner shall
constitute a quorum of the Partnership Governance
Committee for the transaction of business and the taking
of any Partnership Governance Committee Action at any
meeting, except that no quorum of the Partnership
Governance Committee will be deemed to exist (i) with
respect to any regular meeting of the Partnership
Governance Committee unless an agenda for such meeting is
delivered in accordance with Section 3.4.(A) or (ii) with
respect to any special meeting of the Partnership
Governance Committee unless a notice of such meeting is
given or waived in accordance with Section 3.4.(B). No
Partnership Governance Committee Action may be taken at
any meeting at which a quorum is not present.
(2) All actions of the Partnership Governance Committee
shall be determined by vote of the Representatives.
Collectively, the Representatives shall have 100 votes.
The Representatives of a General Partner shall have, in
the aggregate, such number of votes as is equal to the
product of 100 and the sum of the Participation
Percentages of such General Partner and its Affiliated
Limited Partner. The Representatives of each General
Partner present at the meeting
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shall together and by joint action cast all of the votes
held by all of the Representatives of such General
Partner.
3.8. Partnership Governance Committee Actions for Which
Unanimous Consent Necessary. Subject to Section 5.7., Section
11.4. and Section 11.11.(A), no Partnership Governance
Committee Action will be deemed for any purpose to have been
taken at any Partnership Governance Committee meeting unless
and until 100 votes (constituting all the outstanding votes)
are duly cast at such meeting in favor of such Partnership
Governance Committee Action which would cause or permit the
Partnership (or any Person acting in the name or on behalf of
the Partnership), directly or indirectly, to take (or commit to
take) any of the actions (each a "Unanimous Partnership
Governance Committee Action") described below in this Section
3.8. (whether in a single transaction or series of related
transactions):
(1) to engage, participate or invest in any business
outside the scope of the Partnership Business;
(2) to make any acquisition or divestiture of any other
entity or of any material line of business or business
unit, or to merge or consolidate the Partnership with any
other entity;
(3) to amend or alter this Agreement or the Certificate
of Limited Partnership;
(4) to issue, redeem or acquire any Interests (or rights
to acquire, or any securities convertible into,
Interests) in the Partnership;
(5) to borrow money or to engage in other financing
activities, including the grant or use of credit and the
pledge of any assets or the granting of a security
interest in any asset; (1)
(6) to file a petition in bankruptcy or seeking any
reorganization, liquidation or similar relief on behalf
of the Partnership; or to consent to the filing of a
petition in bankruptcy against the Partnership; or to
consent to the appointment of a receiver, custodian,
liquidator or trustee for the Partnership or for all or
any substantial portion of its property;
(7) to approve the entry into of, amendments to, or
termination or modification of, any material permit,
government approval or other right;
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(8) to approve any Capital Enhancement Project or any
expenditures pursuant to a Capital Budget pursuant to
Section 9.2.(B), or to increase the amount below which a
capital expenditure would not require Partnership
Governance Committee Action regarding an "authority for
commitment" as contemplated by Section 9.5.(A);
(9) to make distributions other than those expressly
provided for in Section 7.;
(10) to enter into, amend, terminate or modify any
product sales agreement or any raw materials purchase
agreement pursuant to which the Partnership's commitments
can reasonably be expected to exceed $50 million annually
or that is for a term in excess of 18 months;
(11) to enter into, amend, terminate or modify any
agreement other than as described in Section 3.8.(J)
pursuant to which the Partnership's commitments can
reasonably be expected to exceed $25 million;
(12) to commence or settle any litigation or arbitration
proceeding by or on behalf of, or in the name or right
of, the Partnership involving any claims or payments in
excess of $1 million;
(13) to make determinations with respect to the
Partnership's commercial insurance program in accordance
with Section 9.8.;
(14) to designate or disband Auxiliary Committees and to
establish the purposes thereof in all cases as described
in Section 3.10.;
(15) to delegate to any Auxiliary Committee powers or
authority to take any action that would otherwise require
unanimous approval by the Partnership Governance
Committee, or to delegate to any officer powers or
authority to take any action that would otherwise require
approval by the Partnership Governance Committee;
(16) to adopt or amend, as the Partnership Governance
Committee, the policies and procedures referred to in
Section 3.3.(B);
(17) to enter into, materially amend or terminate any
employee benefit plan; (1)
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(18) to fix the salary and other compensation of Executive
Officers in accordance with Section 4.10.;
(19) to consent to the loan of an employee to the Partnership
by a Partner as provided in Section 4.13. or to consent
to the hiring of employees of the Partnership by a
General Partner (or a General Partner's Affiliate) as
anticipated by Section 4.14.;
(20) to make any determinations concerning indemnification of
officers pursuant to Section 12.3.;
(21) to adopt or effect any change in the Partnership's
accounting policies or practices in regards to
Maintenance Capital;
(22) to approve, amend or supplement either annual budget
referred to in Section 9.2., including any Financing Plan
thereunder;
(23) to change at any time the Cash Balance Amount as provided
for in Section 7.5;
(24) to appoint the CEO or to designate an officer as an
Executive Officer; or
(25) to change the Partnership's method of accounting for
inventory as provided in Section 8.2.(C).
3.9. Majority Approval. Except as otherwise expressly provided in
this Agreement, the approval of Representatives representing a
majority of the total 100 votes will be sufficient for the
Partnership Governance Committee to take any Partnership
Governance Committee Action.
3.10. Auxiliary Committees.
(1) The Partnership Governance Committee shall, by
Partnership Governance Committee Action, designate an (i)
Operating Committee, (ii) a Finance and Control Committee
and (iii) a Compensation Committee. Each such committee
shall be a standing committee.
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(2) From time to time, the Partnership Governance
Committee may, by resolution adopted by the Partnership
Governance Committee, designate one or more additional
committees or disband any committee.
(3) Each committee designated by the Partnership Governance
Committee pursuant to this Section 3.10. (each an
"Auxiliary Committee") shall (i) operate under the
auspices of the Partnership Governance Committee for the
purpose of assisting the Partnership Governance Committee
in managing (on behalf of the General Partners) the
business and affairs of the Partnership and (ii) report
to the Partnership Governance Committee.
(4) Each Auxiliary Committee shall consist of two or more
members and each General Partner shall have the right to
appoint one member. The remaining members, if any, of
each Auxiliary Committee shall be appointed by the
Partnership Governance Committee.
(5) Auxiliary Committee members may (but need not) be
members of the Partnership Governance Committee or
employees of the Partnership. No Auxiliary Committee
member shall be compensated by the Partnership for
service as a member of such Auxiliary Committee.
(6) Each resolution adopted by the Partnership Governance
Committee for the purpose of designating an Auxiliary
Committee shall set forth (i) the size, name and rotation
and designation of a chairman of such Auxiliary Committee
and (ii) in such detail as the Partnership Governance
Committee deems appropriate, the purposes, powers and
authorities of such Auxiliary Committee; provided,
however, that in no event shall any Auxiliary Committee
have any powers or authority not permitted by this
Agreement or the Act.
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4. OFFICERS AND EMPLOYEES
4.1. Partnership Officers. The officers of the Partnership
shall consist of a President and Chief Executive Officer
("CEO"), one or more Vice Presidents, a Secretary and such
other officers and assistant officers and agents as may be
deemed necessary or desirable by the Partnership Governance
Committee. Officers shall be elected or appointed pursuant to
Partnership Governance Committee Action (subject to Section
3.8.(X)) and shall have such authority and shall perform such
duties in the management of the Partnership as may be provided
in this Agreement or as may be determined by resolution of the
Partnership Governance Committee (consistent with Section
3.8.(O)). In its discretion, the Partnership Governance
Committee may leave unfilled any office or offices, except
those of CEO and Secretary. Two or more offices may be held by
the same person. The officers of the Company on the Conversion
Date shall remain in office until such officers are changed by
Partnership Governance Committee Action.
4.2. Selection; Term; Qualification. All officers shall be
chosen by the Partnership Governance Committee annually at the
Annual Meeting of the Partnership Governance Committee. Prior
to each Annual Meeting the CEO shall present the Partnership
Governance Committee with a list of nominees, but the
Partnership Governance Committee shall not be bound to select
officers solely from such list. The CEO and each other officer
shall hold office until a successor has been chosen and
qualified, or until the officer's death, resignation, or
removal.
4.3. Removal and Vacancies. Any officer or agent may be removed by
Partnership Governance Committee Action, with or without cause,
whenever in the judgment of the Partnership Governance
Committee the best interests of the Partnership would be served
thereby. Any vacancy in any office may be filled by the
Partnership Governance Committee at any time. The CEO may, at
any time, recommend to the Partnership Governance Committee the
appointment or removal of any officer.
4.4. Duties.
(1) Each officer or employee of the Partnership shall owe
to the Partnership, but not to any Partner, all such
duties (fiduciary or otherwise) as are imposed upon such
an officer or employee of a Delaware corporation. Without
limitation of the foregoing, each officer and employee in
any dealings with a Partner shall have a duty to act in
good faith and to deal fairly.
(2) The policies and procedures of the Partnership adopted by
the Partnership Governance Committee may set forth the
powers and duties of the officers of the Partnership to
the extent not set forth in or
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inconsistent with this Agreement. The officers of the
Partnership shall have such powers and duties, except as
modified by the Partnership Governance Committee, as
generally pertain to their respective offices in the case
of a Delaware corporation, as well as such powers and
duties as from time to time may be conferred by the
Partnership Governance Committee and by this Agreement.
The CEO and the other officers and employees of the
Partnership shall develop and implement management and
other Partnership policies and procedures consistent with
this Agreement and the general policies and procedures
established by the Partnership Governance Committee. The
duties of each officer shall include the obligation to
notify the Partnership Governance Committee of any facts
or circumstances of which such officer becomes aware that
indicate a Partner or any of its Affiliates is or may be
in breach of its obligations under this Agreement or
under any of the Related Agreements.
(3) Notwithstanding any other provision of this
Agreement, no Partner, Representative, officer, employee
or agent of the Partnership shall have the power or
authority, without specific authorization from the
Partnership Governance Committee, to undertake any of the
following:
(i) to do any act which contravenes (or
otherwise is inconsistent with) this
Agreement or which would make it
impossible to carry on the Partnership
Business;
(ii) to confess a judgment against the
Partnership;
(iii) to possess Partnership property other
than in the ordinary conduct of the
Partnership Business; or
(iv) to take, or cause to be taken, any of the
actions described in Section 3.8.
4.5. CEO. The CEO shall be the chief executive and chief
operating officer of the Partnership, shall have general
authority for direction of the business and affairs of the
Partnership and general supervision over its several officers,
subject, however, to the control of the Partnership Governance
Committee and shall see that all orders and resolutions of the
Partnership Governance Committee or, as applicable, any
Auxiliary Committee(s) are carried into effect. The CEO shall
be authorized to execute and deliver, in the name and on behalf
of the Partnership, (i) contracts or other instruments
authorized by Partnership Governance Committee Action and (ii)
contracts or instruments in the usual and regular course of
business, except in cases when the execution and delivery
thereof shall be expressly delegated by the Partnership
Governance Committee to some other officer or agent of the
Partnership, and, in general, shall perform all duties incident
to the office of CEO and such other duties as from time to time
may be
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assigned to him or her by the Partnership Governance Committee
(consistent with Section 3.8.(O)) or as are prescribed by this
Agreement. Unless otherwise requested by a Representative, the
CEO shall attend all meetings of the Partnership Governance
Committee.
4.6. Vice Presidents. The Vice Presidents shall perform such
duties as may, from time to time, be assigned to them by the
Partnership Governance Committee (consistent with Section
3.8.(O)). In addition, at the request of the CEO, or in the
absence or disability of the CEO, the Vice Presidents, or any
of them, in the order of their election or in any other order
determined by the Partnership Governance Committee, temporarily
shall perform all (or if limited through the scope of the
delegation, some of) the duties of the CEO, and, when so
acting, shall have all the powers of, and be subject to all
restrictions upon, the CEO.
4.7. Secretary. The Secretary shall keep the minutes of all
meetings (and copies of written records of action taken without
a meeting) of the Partnership Governance Committee and the
Auxiliary Committees in minute books provided for such purpose
and shall see that all notices are duly given in accordance
with the provisions of this Agreement. The Secretary shall be
the custodian of the records. The Secretary shall have general
charge of books and papers of the Partnership as the
Partnership Governance Committee may direct and, in general,
shall perform all duties and exercise all powers incident to
the office of Secretary and such other duties and powers as the
Partnership Governance Committee (consistent with Section
3.8.(O)) or the CEO from time to time may assign to or confer
upon the Secretary.
4.8. Assistant Officers. Any assistant officer appointed by the
Partnership Governance Committee shall have power to perform,
and shall perform, all duties incumbent upon the officer he or
she is assisting, subject to the general direction of such
officer, and shall perform such other duties as this Agreement
may require or the Partnership Governance Committee (consistent
with Section 3.8.(O)) may prescribe.
4.9. Other Officers. The Partnership Governance Committee may
appoint such other officers and delegate (consistent with
Section 3.8.(O)) to them such duties as it sees fit.
4.10. Salaries. The salaries or other compensation of the
Executive Officers of the Partnership shall be fixed from time
to time by the Partnership Governance Committee. Except for
previously granted stock options, stock appreciation rights,
deferred compensation and other similar arrangements, the
benefits of which might be realized subsequent to the officer
becoming an employee of the Partnership, no officer or employee
(other than an employee of a Partner or an Affiliate of a
Partner) of the Partnership shall receive any fees or
compensation
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from any Partner or any Affiliate of any Partner. Further, all
fees and compensation of the officers and employees of the
Partnership with respect to their services as such officers and
employees shall be payable solely by the Partnership and no
Partner or its Affiliates shall pay (or offer to pay) any such
fees or compensation to any officer or employee, except to the
extent permitted by Section 4.13. in the case of loaned
employees or that the Partnership shall have agreed with a
Partner or one of its Affiliates pursuant to a separate
agreement that a portion of the compensation of such officer or
employee shall be paid by such Partner or Affiliate.
4.11. Bonds of Officers. The Partnership Governance Committee
may (but shall have no obligation to) secure the fidelity of
any officer of the Partnership by bond or otherwise, on such
terms and with such surety or sureties, conditions, penalties
or securities as shall be deemed proper by the Partnership
Governance Committee.
4.12. Delegation. The Partnership Governance Committee may
delegate temporarily the powers and duties of any officer of
the Partnership, in case of absence or for any other reason, to
any other officer of the Partnership, and may authorize the
delegation by any officer of the Partnership of any of such
officer's powers and duties to any other officer or employee of
the Partnership, subject to the general supervision of such
officer.
4.13. Loaned Employees. If there is a vacancy in a job position above
a certain grade (but below the level of the Executive Officers)
in the Partnership (such grade to be established by the
Partnership Governance Committee), either General Partner shall
be entitled to nominate one of its (or its Affiliate's) own
employees to fill such vacancy for a fixed period of up to
three years, subject to renewal or extension by the CEO with
the consent of each General Partner. The selection of a
nominating General Partner's (or its Affiliate's) employee to
fill a Partnership vacancy and all of the terms of such
selection and the nominated employee's service shall be subject
to the approval and control of the CEO; provided, however, that
the selection and appointment of a nominating General Partner's
(or its Affiliate's) employee to fill a vacancy shall be
confirmed by Partnership Governance Committee Action. A
nominating General Partner's (or its Affiliate's) employee who
fills a Partnership vacancy shall in all respects perform as an
employee of the Partnership and, as such, shall have the duties
to the Partnership and the General Partners set forth or
referred to in Section 4.4. (and each General Partner shall at
all times cause all of its (or its Affiliate's) employees on
loan to the Partnership to perform in a manner consistent with
the requirements of Section 4.4.); provided, however, that such
employees shall continue to participate in the compensation and
benefit plans of the nominating General Partner or its
Affiliate. Each General Partner shall at any one time have no
more than 10 of its (or its Affiliate's) employees filling
Partnership vacancies. The Partnership shall compensate the
nominating General Partner (or its Affiliate) for the services
of the employee in accordance with terms determined by the
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nominating General Partner and the CEO prior to the employee's
commencing work for the Partnership.
4.14. Employee Transfers. With the prior approval of the
Partnership Governance Committee, which approval shall not be
unreasonably withheld, either General Partner (or its
Affiliates) shall be entitled to hire specific employees of the
Partnership to fill vacancies with such General Partner or its
Affiliate. With the prior approval of the relevant General
Partner, which approval shall not be unreasonably withheld, the
Partnership shall be entitled to hire specific employees of
either General Partner (or its Affiliates) to fill vacancies
with the Partnership. The granting of credit for past service
with the prior employer for purposes of the hired employee's
compensation and benefit plans shall be within the discretion
of the General Partner who is hiring such employee, or in the
case of the Partnership, shall be determined in accordance with
an appropriate Partnership policy or procedure.
4.15. General Authority. Persons dealing with the Partnership
are entitled to rely conclusively on the power and authority of
each of the officers as set forth in this Agreement. No Person
dealing with any officer with respect to any business or
property of the Partnership shall be obligated to ascertain
that the terms of this Agreement have been complied with. No
Person dealing with the Partnership shall be required to
investigate or inquire as to the authority of the officers of
the Partnership to execute contracts, agreements, deeds,
mortgages, security agreements, promissory notes or other
instruments or documents with respect to any business or
property of the Partnership or to take actions on behalf of the
Partnership.
5. RIGHTS, DUTIES AND COVENANTS OF PARTNERS
5.1. Delegation. The Partners acknowledge that the General
Partners (acting through the Partnership Governance Committee)
are permitted to delegate responsibility for day-to-day
operations of the Partnership to officers and employees of the
Partnership.
5.2. General Authority. Persons dealing with the Partnership
are entitled to rely conclusively on the power and authority of
each of the General Partners as set forth in this Agreement or
as specifically authorized by Partnership Governance Committee
Action. No Person dealing with either General Partner or such
General Partner's agents or representatives with respect to any
business or property of the Partnership shall 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 a General Partner or a
General Partner's representatives. Nothing in this Section 5.2.
shall be deemed to be a waiver or release of any General
Partner's obligations to the other Partners as set forth
elsewhere in this Agreement.
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5.3. Nature of Partner Obligations. 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
Refinery Business, has been represented by legal counsel, is
capable of evaluating and has thoroughly considered the merits,
risks and consequences of the provisions of this Section 5.3.
and is agreeing to such provisions knowingly and advisedly. The
liability of each of the General Partners (including any
liability of its Affiliates or its and their respective
officers, directors, agents and employees), either to the
Partnership or to any other Partner, for any act or omission by
such Partner in its capacity as a partner of the Partnership
that is imposed by such Partner's status as a "general partner"
or "limited partner" (as such terms are used in the Act) of a
limited partnership is hereby eliminated, waived and limited to
the fullest extent permitted by law. Nothing in this subsection
shall relieve any Partner from liability for any breach of this
Agreement and each General Partner shall at all times owe to
the other General Partner a duty to act in good faith with
respect to all matters involving the Partnership; provided,
however, that the duty of a Nonconflicted General Partner in
exercising the authority described in Section 5.7. shall be as
set forth in Section 5.7.(B).
5.4. Limited Partners.
(1) No Limited Partner shall take part in the management
or control of the Partnership Business, transact any
business in the Partnership's name or have the power to
sign documents for or otherwise to bind the Partnership.
(2) Each Limited Partner shall have the rights with
respect to the Partnership's books and records as set
forth in Section 5.9.
5.5. Partner Not Agent of Other Partners. Except as expressly
provided in Section 2.7., Section 5.7., Section 10.5. or
Section 11.1., nothing in this Agreement shall be deemed to
constitute a Partner as an agent or legal representative of any
other Partner.
5.6. Transactions with the Partnership. Subject to any required
approval of the Nonconflicted General Partner in accordance
with Section 5.7., each Partner and its Affiliates shall be
entitled without restriction to enter into contracts and
transactions with the Partnership. Upon receipt of any required
approval by the Nonconflicted General Partner Representatives,
all contracts and transactions between the Partnership and a
Partner or its Affiliates shall be deemed to be entered into on
an arm's-length basis and to be subject to ordinary contract
and commercial law.
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5.7. Control of Certain Claims and Certain Transactions.
(1) With respect to each Conflict Circumstance, the
Nonconflicted General Partner (through its
Representatives) shall have the sole and exclusive power
and right for and on behalf, and at the sole expense, of
the Partnership (i) to control (including the right from
time to time, in its discretion, to make delegations to
officers or employees of the Partnership as to) all
decisions, elections, notifications, actions, exercises
or nonexercises and waivers of all rights, privileges and
remedies provided to, or possessed by, the Partnership
with respect to a Conflict Circumstance and (ii) in the
event of any potential, threatened or asserted claim,
dispute or action with respect to such Conflict
Circumstance, to retain and direct legal counsel and to
control, assert, enforce, defend, litigate, mediate,
arbitrate, settle, compromise or waive any and all such
claims, disputes and actions. Accordingly, Partnership
Governance Committee Action with respect to a Conflict
Circumstance shall require only the approval of the
Representatives of the Nonconflicted General Partner. As
used herein, the term "Conflict Circumstance" shall mean
any transaction, dealing or agreement between the
Partnership, on the one hand, and a General Partner (the
"Conflicted General Partner") or any of its Affiliates,
on the other hand, including each of the Related
Agreements to which the Partnership is a party and each
transaction thereunder; provided, however, that a
Conflict Circumstance shall cease to exist (i) upon the
Conflicted General Partner ceasing to be a Partner or
(ii) upon the third party with which the transaction,
dealing or agreement exists, ceasing to be an Affiliate
of a General Partner. As used herein the term
"Nonconflicted General Partner" shall mean the General
Partner that is not the Conflicted General Partner. Each
General Partner shall, and shall cause its Affiliates to,
take all such actions, execute all such documents and
enter into all such agreements as may be necessary or
appropriate to facilitate or further assure the
accomplishment of this Section 5.7.
(2) The Nonconflicted General Partner, in exercising its
control, power and rights pursuant to this Section 5.7.,
shall act in good faith and in a manner it reasonably
believes to be in the best interests of the Partnership.
The Conflicted General Partner (or its Affiliate) that is
the other party to such negotiation, contract,
transaction, claim, dispute or action shall have the
right to deal with the Partnership and with the
Nonconflicted General Partner on an arm's-length basis
and in its own best interests, but in any event in good
faith.
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(3) This Section 5.7. shall not apply to: (i) any sale by the
Partnership of a product or service that the Partnership
also sells to unrelated third parties; provided, however,
that any agreement for such sales by the Partnership to a
Partner or one of its Affiliates shall, to the extent not
previously performed, be terminable without penalty upon
not more than sixty (60) days notice and such sales shall
be at market-based prices that are not less than the
prices the Partnership charges third parties for such
products or services; or (ii) any purchase by the
Partnership of a product or service that the Partnership
also purchases from unrelated third parties; provided,
however, that any agreement for such purchases by the
Partnership from a Partner or one of its Affiliates
shall, to the extent not previously performed, be
terminable without penalty upon not more than sixty (60)
days notice and such purchases shall be at market-based
prices that are not more than the prices the Partnership
pays third parties for such products or services.
5.8. Partnership Interest. All assets contributed to or
acquired by the Partnership shall be owned by the Partnership.
Each Partner shall have a right only to its "partnership
interest" (as such term is used in the Act) in the Partnership
(an "Interest"), and to the maximum extent permitted by
applicable law each Partner waives any right to partition of
the Partnership's assets and agrees that it will not seek or be
entitled to partition any such assets, whether by way of
physical partition, judicial sale or otherwise, prior to the
termination of the Partnership.
5.9. Access to and Copies of Records and Documents.
(1) Except as otherwise required by law, any Partner may
examine and copy, in person or by representative, at any
reasonable time, all records and other information of the
Partnership.
(2) Upon request by any Partner, the Partnership shall
provide without charge true copies of the Certificate of
Limited Partnership, this Agreement, all amendments or
restatements thereto, and copies of all federal, state,
and local information or income tax returns for each of
the Partnership's six most recent tax years.
5.10. Partner Covenants. Except to the extent it takes action
pursuant to its rights as a Nondefaulting Partner under Section
11., each Partner covenants and agrees with the Partnership and
with each other Partner as follows:
(1) It shall not exercise, or purport or attempt to exercise,
its authority (i) to withdraw, retire, resign, or assert
that it has been expelled from the Partnership, or (ii)
to dissolve or enter into any proceeding seeking any
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dissolution of such Partner, or (iii) to make any
application for judicial dissolution of the Partnership;
(2) It shall not do any act that would make it impossible or
impracticable to carry on the Partnership Business;
(3) It shall not, directly or indirectly through any
entity, conduct or engage in any business other than the
holding of its Interest and the doing of things necessary
or incidental in connection therewith, the exercise of
its authority as a Partner, the exercise of its authority
pursuant to Section 5.7., and the performance and
enforcement of its obligations and rights pursuant to
this Agreement; and (1)
(4) It shall not act or purport or attempt to act in a
manner inconsistent with any Partnership Governance
Committee Action or in a manner contrary to the
agreements of the Partners set forth in this Agreement.
5.11. Indemnification.
(1) (1) Indemnification by Partnership. The Partnership
shall, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless
each Partner, its Affiliates and their respective
officers, directors and employees from, against and
in respect of any losses, claims, damages, costs
and expenses (including costs of investigation,
defense and attorneys' fees) and liabilities
arising out of or in connection with the business
or affairs of the Partnership (collectively,
"Indemnified Losses"), except to the extent that it
is finally judicially determined that such
Indemnified Losses arose out of or were related to
actions or omissions of the indemnified Partner,
its Affiliates or any of their respective officers,
directors or employees (acting in their capacities
as such) constituting (a) bad faith, fraud,
violation of law or intentional misconduct or (b) a
breach of this Agreement. The Partnership shall
periodically reimburse any Person entitled to
indemnity under this Section 5.11.(A)(1) for its
legal and other expenses incurred in connection
with defending any claim (other than a claim by the
Partnership or a Partner) with respect to such
Indemnified Losses if such Person shall agree to
reimburse promptly the Partnership for such amounts
if it is finally judicially determined that such
Person was not entitled to indemnity hereunder.
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(2) Partner's Right of Contribution. Each Affiliated
Partner Group hereby agrees to indemnify, defend
and hold harmless the other Affiliated Partner
Group and their respective officers, directors and
employees from and against the indemnifying
Affiliated Partner Group's Participation Percentage
of any Indemnified Losses (calculated at the time
any such Indemnified Loss was incurred), except to
the extent that it is finally judicially determined
that such Indemnified Losses arose out of or were
related to actions or omissions of the indemnified
Affiliated Partner Group or any of their respective
officers, directors or employees (acting in their
capacity as such) constituting (a) bad faith,
fraud, violation of law or intentional misconduct
or (b) a breach of this Agreement; provided,
however, that such indemnified Affiliated Partner
Group, and their respective officers, directors and
employees shall not be entitled to indemnity under
this Section 5.11.(A)(2) unless (i) the indemnified
Affiliated Partner Group shall make a written
demand for indemnification from the Partnership in
accordance with Section 5.11.(D) and the
Partnership shall fail to satisfy such demand in a
manner reasonably satisfactory to the indemnified
Affiliated Partner Group within sixty (60) days of
such notice or (ii) the Partnership is Insolvent or
otherwise unable to satisfy its obligations.
(2) Indemnification by Partners. Each Partner hereby
indemnifies and shall hold harmless the Partnership and
the other Partners, their Affiliates and each director,
officer and employee of such other Partners, its
Affiliates and the Partnership without duplication from
and against any and all Indemnified Losses arising out of
any act of, or any purported assumption of any obligation
or responsibility by, such indemnifying Partner or its
Affiliates, or any of the directors, officers or
employees of such indemnifying Partner or its Affiliates,
in violation of this Agreement.
(3) Indemnification Under Related Agreements. Notwithstanding
any other provision of this Agreement, no Partner or its
Affiliates or their respective officers, directors or
employees shall be entitled to indemnification under this
Section 5.11. in respect of any breach by such Partner or
its Affiliates of the Related Agreements or in respect of
any matter for which such Partner or its Affiliates is
required to indemnify the Partnership under the
applicable terms of any of the Related Agreements.
(4) Procedures. Promptly after receipt by a person
entitled to indemnification under Section 5.11.(A) or
Section 5.11.(B) (an "Indemnified Party") of notice of
any pending or threatened claim against it (an "Action"),
such Indemnified Party shall give notice to the
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party to whom the Indemnified Party is entitled to look
for indemnification (the "Indemnifying Party") of the
commencement thereof, but the failure so to notify the
Indemnifying Party shall not relieve it of any liability
that it may have to any Indemnified Party except to the
extent the Indemnifying Party demonstrates that it is
prejudiced thereby. In case any Action that is subject to
indemnification under Section 5.11.(A) or Section
5.11.(B) shall be brought against an Indemnified Party
and it shall give notice to the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be
entitled to participate therein and, to the extent that
it shall wish, to assume the defense thereof with counsel
reasonably satisfactory to such Indemnified Party and,
after notice from the Indemnifying Party to the
Indemnified Party of its election to assume the defense
thereof, the Indemnifying Party shall not be liable to
such Indemnified Party under this Section for any fees of
other counsel or any other expenses, in each case
subsequently incurred by such Indemnified Party in
connection with the defense thereof, other than
reasonable costs of investigation. Notwithstanding an
Indemnifying Party's election to assume the defense of
any such Action that is subject to indemnification under
Section 5.11.(A) or Section 5.11.(B), the Indemnified
Party shall have the right to employ separate counsel and
to participate in the defense of such Action, and the
Indemnifying Party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of
counsel chosen by the Indemnifying Party to represent the
Indemnified Party would present such counsel with a
conflict of interest; (ii) the actual or potential
defendants in, or targets of, any such Action include
both the Indemnifying Party and the Indemnified Party,
and the Indemnified Party shall have reasonably concluded
that there may be legal defenses available to it which
are different from or additional to those available to
the Indemnifying Party (in which case the Indemnifying
Party shall not have the right to assume the defense of
such Action on the Indemnified Party's behalf); (iii) the
Indemnifying Party shall not have employed counsel
satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice
of the institution of such Action; or (iv) the
Indemnifying Party shall authorize the Indemnified Party
to employ separate counsel at the Indemnifying Party's
expense. If an Indemnifying Party assumes the defense of
such Action, (a) no compromise or settlement thereof may
be effected by the Indemnifying Party without the
Indemnified Party's consent (which shall not be
unreasonably withheld) unless (I) there is no finding or
admission of any violation of law or any violation of the
rights of any person and no effect on any other claims
that may be made against the Indemnified Party and (II)
the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party and (b) the
Indemnified Party shall have no liability with respect to
any compromise or settlement thereof effected without its
consent (which shall not be unreasonably withheld). The
indemnities contained in this Section 5.11. shall survive
the termination and liquidation of the Partnership.
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6. CAPITAL CONTRIBUTIONS AND PARTICIPATION PERCENTAGE
6.1. Prior Capital Contributions. Upon formation of the
Company, LParent on behalf of Lyondell GP and CParent on behalf
of CITGO LP, contributed certain Assets to and the Company
assumed certain liabilities and obligations, as provided for in
the Regulations and the Contribution Agreement. From time to
time prior to the Conversion Date, Lyondell GP and CITGO LP, as
the two members of the Company, made Capital Contributions and
loans to the Company as provided for in the Regulations.
Capital Contributions and proceeds of loans made prior to the
Conversion Date that were of a specific character or designated
for a specific purpose shall retain such character or
designation and be subject to the restrictions applicable
thereto set forth in the Regulations.
6.2. Capital Contributions. Except as expressly provided in
this Section 6., Section 7.1(D) or as determined by the
Partnership Governance Committee, the Partners (i) shall have
no obligation to contribute any capital to the Partnership for
any purpose and (ii) shall not be entitled to contribute any
capital to the Partnership.
6.3. Partner Loans. A Partner or its Affiliates may loan funds
to the Partnership on such terms and conditions as may be
approved by the Partnership Governance Committee pursuant to
Section 3.8.(E), and, subject to other applicable law, have the
same rights and obligations with respect thereto as a Person
who is neither a Partner nor an Affiliate of a Partner. The
existence of such a relationship and acting in such a capacity
will not result in a Limited Partner being deemed to be
participating in the control of the business of the Partnership
or otherwise affect the limited liability of a Limited Partner.
If a Partner or any Affiliate thereof is a lender, in
exercising its rights as a lender, including making its
decision whether to foreclose on property of the Partnership,
such lender will have no duty to consider (i) its status as a
Partner or an Affiliate of a Partner, (ii) the interests of the
Partnership, or (iii) any duty it may have to any other Partner
or the Partnership.
6.4. Participation Percentages.
(1) Capital Contributions and Participation Percentages.
(1) As of and following the Conversion Date, the
Partners' respective Capital Contributions shall be
equal to the respective amounts set forth in
Exhibit 6.4 hereto plus any adjustments thereto
made following the Conversion Date in accordance
with the terms of this Section 6.4.
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(2) Each Partner's respective Capital Contributions
shall be adjusted to reflect the Distributions (as
hereinafter defined), if any, from any financing by
the Partnership from the Conversion Date until the
Option Date (the "Refinancing"). As used herein,
the term "Distributions" shall mean the net
proceeds of the Refinancing after the Partnership
(i) repays any existing indebtedness of the
Partnership (including any and all indebtedness
owed to the Partners) which the Partners have
agreed to repay but excluding any repayment of the
Partnership's revolving credit facility which may
be refinanced subsequent to the Refinancing and
(ii) withholds any amount of such Refinancing
proceeds which the Partnership Governance Committee
determines should be maintained by the Partnership.
(3) The Participation Percentage for each Partner
shall equal the sum of the Capital Contributions of
such Partner divided by the sum of the Capital
Contributions of all Partners.
(4) For the Calendar Quarter in which the Conversion
occurs, the Participation Percentages through the
end of that Calendar Quarter shall be as set forth
on Exhibit 6.4. For each Calendar Quarter following
such Calendar Quarter, the Participation
Percentages of the Partners shall be calculated and
in effect as of the first day of the Calendar
Quarter based on all events which occurred or are
deemed to have occurred through the close of
business on the last day of the preceding Calendar
Quarter. Except as otherwise provided, the
Participation Percentages in effect as of the first
day of the Calendar Quarter shall be operative for
the entire Calendar Quarter and shall not be
changed for any reason until the first day of the
next succeeding Calendar Quarter.
(2) From the Option Date, if any: (i) each of the CITGO
Partners' Capital Contributions shall include the amount
of the Option Date Payment and shall be adjusted by the
CITGO Partners Option Date Amount; and (ii) each of the
Lyondell Partners' Capital Contributions shall be
adjusted by their respective amounts of the Lyondell
Partners Option Date Amount.
6.5. Capital Expenditure Funding. To the extent that the Partnership
Governance Committee determines at any time after the
Conversion Date that certain capital expenditures will be
required and that funds are needed by the Partnership for such
capital expenditures, the Partners shall fund the amount needed
by the Partnership for such purposes. With respect to the
funding required under this Section, the Partnership Governance
Committee or the CEO shall inform the Partners as to the
aggregate amount required to be funded, the intended use of the
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funds, and the due date or dates for each Partner's funding
obligation. The amount required to be funded by each Partner on
any given date shall equal the aggregate amount due on such
date multiplied by the Partner's Participation Percentage on
such date. The amounts to be funded by the Partners shall be
funded with Capital Contributions, if such amounts are funded
prorated in accordance with the Partners' Participation
Percentage, or may be funded with loans (by unanimous consent
of the Partnership Governance Committee). The amounts funded
hereunder shall be used solely for the purposes set forth
herein as determined by the Partnership Governance Committee.
6.6. CITGO Partners' Option to Increase Their Collective
Participation Percentage.
(1) CITGO Partners may elect (and in the event of such
election shall give the Partnership and Lyondell Partners
written notice of CITGO Partners' election), as provided
herein, to increase CITGO Partners' Participation
Percentage to any Participation Percentage up to fifty
percent (50%), in the aggregate (the "Intended
Percentage"). The notice shall set forth (i) the Intended
Percentage, (ii) CITGO Partners' tentative calculation of
the amount it must contribute in order to achieve the
Intended Percentage and (iii) the date on which CITGO
Partners will make the Capital Contribution to achieve
the Intended Percentage, which date ("Option Date") shall
be the last date of a calendar quarter, subsequent to
January 1, 2000 and not later than September 30, 2000 and
must not be less than thirty (30) days following the date
of the notice.
(2) CITGO Partners shall be permitted to elect to
increase their Participation Percentage only one time
under the provisions of this Section 6.6.
(3) On the Option Date, CITGO Partners shall contribute
to the Partnership cash in an amount equal to 50% of the
Option Date Payment and a promissory note equal to 50% of
the Option Date Payment given to the Partnership in
accordance with the terms of Section 6.6.(E). "Option
Date Payment" shall mean the amount of a Capital
Contribution by CITGO Partners such that on the day
following the Option Date, and after giving effect to the
CITGO Partners Option Date Amount and the Lyondell
Partners Option Date Amount, CITGO Partners Participation
Percentage would equal the Intended Percentage.
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(4) To the extent the exact amount of the Option Date
Payment cannot be determined on the Option Date, CITGO
Partners shall contribute on the Option Date an amount
equal to CITGO Partners' good faith estimate of the
amount of cash due hereunder. At least ten (10) Business
Days prior to the Option Date, CITGO Partners shall
furnish the Partnership and Lyondell Partners with a
written determination of CITGO Partners' good faith
estimate of the total amount due under Section 6.6.(C).
Promptly after the Option Date, the Partnership
Governance Committee shall determine such amounts as are
necessary to be contributed by CITGO Partners under this
Section 6.6. Within five (5) Business Days of the
determination by the Partnership Governance Committee of
the amount of cash required to be contributed by CITGO
Partners under this Section 6.6., CITGO Partners shall
contribute to the Partnership (i) the difference between
such amount and the amount of cash contributed by CITGO
Partners on the Option Date plus (ii) interest on the
amount contributed under clause (i) at the Agreed Rate
(subject to Section 12.11.) from the Option Date through
the date CITGO Partners makes the contribution required
herein. If the amount of cash contributed by CITGO
Partners on the Option Date is greater than the amount
required to have been contributed by CITGO Partners, then
within five (5) Business Days of such determination the
Partnership shall pay such excess to CITGO Partners with
interest at the Agreed Rate (subject to Section 12.11.)
from the Option Date through the date the Partnership
makes the required payment. For purposes of determining
Participation Percentages, only the final net amount of
CITGO Partners' contribution under this Section 6.6.
shall be taken into account and any interim contributions
or distributions or interest payments shall be
disregarded.
(5) CITGO Partners shall deliver to the Partnership a
promissory note equal to 50% of the Option Date Payment.
The promissory note shall be delivered to the Partnership
as soon as the exact amount of the Option Date Payment is
determined pursuant to the procedures set forth in
Section 6.6.(D). The promissory note shall be in the form
set forth in Exhibit 6.6(E) to this Agreement. All
scheduled payments of principal under the promissory note
shall be used or deemed used by the Partnership for
capital expenditures incurred by the Partnership
subsequent to the Option Date and such payments shall be
treated as having been used to acquire property in
accordance with Section 7.7.(B)(2). The Partnership shall
have the right to withhold from distributions payable to
CITGO Partners any amounts then due under the promissory
note and to apply such withheld amounts to the amounts
payable by CITGO Partners to the Partnership under the
promissory note.
(6) The amount contributed by CITGO Partners under Section
6.6.(C) shall be applied, in order of priority, towards
repayment of the Initial
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Construction Loan, the Additional Construction Loan and,
to the extent funds are available, any loan from Lyondell
Partners. Any such amounts used to repay Lyondell
Partners Loans shall be applied in inverse order by
reference to the date each such loan was extended, that
is the first repayment shall be of the loans most
recently made by Lyondell Partners. If no such loans are
outstanding on the Option Date, the amount contributed by
CITGO Partners under Section 6.6.(C) shall be used or
deemed used by the Partnership for capital expenditures
incurred by the Partnership subsequent to the Option Date
and such payments shall be treated as having been used to
acquire property in accordance with Section 7.7.(B)(2)
and all depreciation, cost recovery, or amortization
deductions associated with said capital expenditures
shall be allocated to CITGO Partners in accordance with
Section 7.7.(B)(2).
6.7. Return of Capital Contributions. Except as otherwise expressly
provided by this Agreement, no Partner shall be entitled to
have all or any part of its Capital Contribution returned and
no Partner shall be paid interest or any other return on any
Capital Contribution or on the balance of its Capital Account,
as that term is hereafter defined.
6.8. Administration and Investment of Funds. The administration
and investment of Partnership funds shall be in accordance with
the procedures and guidelines as shall be adopted by the
Partnership Governance Committee. The Partnership may delegate
to a third party (which may be a Partner or an Affiliate of one
of the Partners) the responsibility for administering and
investing Partnership funds pursuant to such guidelines.
7. ALLOCATIONS AND DISTRIBUTIONS
7.1. Capital Accounts. A separate capital account (each a
"Capital Account") will be maintained for each Partner. Each
Partner's Capital Account shall be credited and debited in
accordance with the following provisions:
(1) To each Partner's Capital Account there shall be credited
such Partner's capital contributions (including the
principal amount of any promissory note contributed by a
CITGO Partner pursuant to Section 6.6.(E) but excluding
the payment of principal on such promissory note), such
Partner's distributive share of Profits as determined
under Section 7.6(A), and the amount of any Partnership
liabilities secured by any Partnership properties
distributed to such Partner such that the Partner is
considered to assume or take subject to such liabilities
under Section 752 of the Code;
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(2) To each Partner's Capital Account there shall be
debited the amount of cash and the fair market value of
any Partnership properties distributed to such Partner
pursuant to any provision of this Agreement and such
Partner's distributive share of Losses as determined
under Section 7.6(A);
(3) On the day following an Option Date Payment, if any, the
Capital Accounts of the Partners shall be adjusted
pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(f) to reflect the Asset Value on such
date of (i) the Working Capital, (ii) the Assets and
(iii) any capital assets acquired with funds contributed
to the Partnership by a Partner so that the balances in
such accounts are in the Proper Ratio on the date of such
adjustment; provided, however, that for purposes of this
Section 7.1.(C), the Asset Value of such assets shall be
adjusted to the extent necessary to cause the balances in
the Partners' Capital Accounts to be in the Proper Ratio;
(D) Any payment made by LParent or the Lyondell Partners to
the Partnership pursuant to LParent's obligations to the
Partnership under the Contribution Agreement or any
Related Agreement shall be considered a Capital
Contribution; provided, however, the increase to Lyondell
Partners' Capital Accounts as a result of any such
Capital Contribution shall occur simultaneously with the
corresponding reduction in Lyondell Partners' Capital
Accounts due to the reduction in Asset Value of the
Assets because of the receipt by the Partnership of any
such payment. Subject to the provisions of Section
7.4.(B), to the extent any such payment is not expended
by the Partnership to pay costs for which it is being
indemnified by LParent or Lyondell Partners, such amount
shall be deposited in the operating fund; and
(E) Any adjustment of Capital Accounts under this Section
7.1. shall have no impact upon the determination of
Participation Percentages.
7.2. Income and Distribution Determinations; Restriction on
Distributions and Advances. Profits and Losses shall be
allocated as of the close of business on the last day of each
Calendar Quarter. Distributions of Distributable Cash shall be
made on a monthly basis and, regardless of the date a
distribution is actually paid, distributions shall be treated
as having been made on the last day of the calendar month
immediately preceding the date of the distribution. Any other
provisions of this Agreement to the contrary notwithstanding,
however, the Partnership shall not make any distribution of
Distributable Cash or any advances for so long as, under the
terms of any agreement, contract or instrument evidencing,
governing or securing any indebtedness for borrowed money
(including loans or capital leases), an event of default exists
(or would exist upon the making of such distribution or
advance) and such agreement, contract or instrument prohibits
the
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making of such distribution or advance during the continuance
of such event of default.
7.3. Distributable Cash.
(1) Following the end of each calendar month the amount
of Distributable Cash for the immediately preceding
calendar month shall be determined, and, subject to the
provisions set forth herein, such Distributable Cash
amount shall be distributed promptly to the Partners as
provided in Section 7.4. Notwithstanding any other
provision of this Agreement, the Partnership shall not be
required to make any distribution if such distribution is
prohibited by Section 17-607 of the Act.
(2) The amount of the Partnership's Distributable Cash
for any calendar month shall be the Partnership's net
cash provided or used by operating activities for such
month (determined in accordance with GAAP) less (i) cash
used in financing activities for repayment of long term
debt (including but not limited to bonds and Partner
Loans) and (ii) any capitalized interest. If the
resulting Distributable Cash for any calendar month is
negative, no distribution of cash will be made to any
Partner until after such amount is reserved from future
positive amounts.
A Partner's Distributable Cash for any calendar month
shall be equal to the product of (i) the Partnership's
Distributable Cash for such month and (ii) such Partner's
Participation Percentage for the Calendar Quarter in
which such month occurs.
(3) To the extent that the Partnership does not have
sufficient cash or remaining capacity under its working
capital credit facility to make the distributions as
provided in Section 7.4., then, except as otherwise
expressly provided, distributions shall be made in
proportion to the amounts distributable to each Partner.
Any amount which is required to be distributed pursuant
to Section 7.3.(A), but which is not distributed for any
reason, including, without limitation, by reason of
insufficient cash or by virtue of the last sentence of
Section 7.2., shall constitute a debt owed by the
Partnership to the Partner entitled to such distribution,
which debt is to be paid, with interest at the Agreed
Rate (subject to Section 12.11.), as quickly as possible,
but in all events before any other distributions with
respect to subsequent months are paid to the Partners.
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7.4. Distributions.
(A) Except as otherwise expressly provided in this
Agreement, each Partner's Distributable Cash for each
calendar month shall be distributed to such Partner. If,
following the end of a Calendar Quarter, it is
determined that the sum of the monthly distributions to
a Partner attributable to the Calendar Quarter exceeds
the Partner's Distributable Cash for the Calendar
Quarter, such Partner shall promptly contribute the
excess to the Partnership together with interest thereon
at the Agreed Rate (subject to Section 12.11.).
Additional distributions shall be made in such amounts
as the Partnership Governance Committee shall determine;
provided, however, that such distributions shall be made
in proportion to the Partners' Participation Percentages
for the Calendar Quarter in which the distribution is
made.
(B) After the earlier of the Option Date or the expiration
of the period during which CITGO Partners may exercise
its option to increase its Participation Percentage
under Section 6.6., any cash attributable to a payment
described in Section 7.1.(D) but which is not expended
by the Partnership to pay costs for which it is being
indemnified by LParent or Lyondell Partners, shall be
distributed to the Partners in proportion to their
Participation Percentages.
7.5. Internal Loans. Distributions under this Section 7.5 may be
made, as provided herein, to both Partners of an Affiliated
Partner Group at any time. Each Affiliated Partner Group shall
be entitled to receive distributions hereunder not more than
once during each calendar quarter provided additional
distributions can be made with the consent of the General
Partner of the other Affiliated Partner Group, which consent
shall be granted or withheld in the sole discretion of such
other General Partner. Any time the Partnership's cash
(excluding cash in the capital fund and any other cash held
for a specific project) is greater than the Cash Balance
Amount, by written notice to the Partnership both Partners of
an Affiliated Partner Group shall be entitled to borrow from
the Partnership and the Partnership shall promptly advance to
such Partners, their respective Participation Percentages of
the Partnership's cash in excess of the Cash Balance Amount.
The "Cash Balance Amount" shall initially be $20 million,
which amount may be changed from time to time by Unanimous
Partnership Governance Committee Action. Any advance hereunder
shall (subject to Section 12.11) bear interest at the same
rate payable by the Partnership on its working capital
facility or if the Partnership has no such facility then at
the Agreed Rate. Any advance hereunder shall be repaid by
withholding from all distributions otherwise payable to the
Partner the amount of the advance plus interest thereon.
Amounts withheld shall first be applied to interest and
thereafter to principal. Each loan shall have a term of 90
days so that if the amount of the loan plus interest thereon
is not repaid from distributions otherwise payable to the
Partner within 90 days of the loan, then the Partner shall be
required to repay the loan with other funds.
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7.6. Internal Revenue Code Section 704(b) Book Allocations for
Tax Purposes.
(1) General. For each Calendar Quarter or portion thereof,
except as provided in this Section 7.6., each item
comprising Profits or Losses shall be allocated to the
Partners in proportion to their Participation
Percentages.
(2) Internal Revenue Code Section 704(b) Book
Depreciation. For each Calendar Quarter or portion
thereof, Depreciation shall be allocated to the Partners
in proportion to their Participation Percentages.
(3) Partnership Minimum Gain Chargeback. Notwithstanding
any other provision of Section 7., if there is a net
decrease in "partnership minimum gain" (as defined in
Treasury Regulation Sections 1.704-2(b)(2)) during any
Partnership taxable year, each Partner shall be
specifically allocated, before any other allocation is
made, items of income and gain for such year (and, if
necessary, subsequent years) equal to such Partner's
share of the net decrease in minimum gain (determined in
accordance with Treasury Regulation Section 1.704-2(g)).
Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to
be allocated to Partners. This provision shall be applied
so that it will constitute a "minimum gain chargeback"
within the meaning of Treasury Regulation Section
1.704-2(f).
(4) Partner Minimum Gain Chargeback. Notwithstanding any
provision of Section 7. except Section 7.6.(C), if there
is a net decrease in "partner nonrecourse debt minimum
gain" (as defined in Treasury Regulation Section
1.704-2(i)(2)) during any Partnership taxable year, each
Partner with a share of that partnership nonrecourse debt
minimum gain (determined under Treasury Regulation
Section 1.704-2(i)(5)) as of the beginning of the year
shall be specifically allocated, before any other
allocation is made, items of income and gain for such
year (and if necessary, subsequent years) equal to that
Partner's share of the net decrease in partner
nonrecourse debt minimum gain. Allocations pursuant to
the previous sentence shall be made in proportion to the
respective amounts required to be allocated to Partners.
This provision shall be applied so that it will
constitute a "chargeback of Partner nonrecourse debt
minimum gain" as prescribed by Treasury Regulation
Section 1.704-2(i)(4).
(5) Distribution of Property to Partners. In the event that
any property (other than cash) is distributed by the
Partnership to a Partner, gain or
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loss will be allocated to the Partners as if there were a
taxable disposition of such property on the date of
distribution.
(6) Indemnity Payment Expenditure. All deductions
attributable to the expenditure of all amounts described
in Section 7.1.(D) shall be allocated to Lyondell LP.
(7) Qualified Income Offset. Notwithstanding any other
provisions of Section 7.6. or 7.7., if a Partner
unexpectedly receives any adjustments, allocations or
distributions described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) which would create a
deficit balance in its Capital Account (and reduced by
the amount described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and the outstanding principal amount
of any promissory note(s) contributed by the CITGO
Partners to the Partnership pursuant to Section 6.6.(E)
such Partner(s) will be allocated gross income and gain
in an amount and manner sufficient to eliminate such
deficit as quickly as possible. Allocations under this
Section 7.6.(G) shall be comprised of a pro rata share of
each item of Partnership income and gain for the period.
This provision shall be applied so that it will
constitute a "qualified income offset" within the meaning
of Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
(8) Curative Allocations. If items of income, gain, loss or
deduction are allocated under Section 7.6.(G), to the
extent possible the allocation of any remaining items of
income, gain, loss or deduction pursuant to Section 7.6.
shall be allocated such that the net amount allocated to
each Partner will be the same amount that would have been
allocated if no items of income gain, loss or deduction
had been allocated under Section 7.6.(G).
(9) Gain or Loss in Liquidation. To the extent the
Partners' Capital Account balances are not in the Proper
Ratio, gain or loss on the sale or distribution of assets
under Section 11.11. shall be allocated, to the maximum
extent possible, so as to cause the Partners' Capital
Account balances to be in the Proper Ratio.
7.7. Tax Allocations.
(1) General. Except as otherwise provided in this Section
7.7., for income tax purposes, each item of income, gain,
deduction, loss and credit shall be allocated among the
Partners in the same manner as the corresponding items
are otherwise allocated under Section 7.6.
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(2) 704(c) Depreciation Allocations. For income tax
purposes, pursuant to Section 704(c) of the Code and the
Treasury Regulations promulgated thereunder,
depreciation, cost recovery and amortization deductions
shall be allocated to the Partners as set forth in this
Section 7.7.(B) in order to take into account any
difference between (x) the Asset Value (as adjusted
pursuant to the proviso in Section 7.1.(C)) of the assets
on the date the assets are contributed to the Partnership
or on any date on which the Capital Accounts are adjusted
pursuant to Section 7.1.(C) and (y) the Partnership's
adjusted tax basis in the assets on each such date. The
foregoing allocation shall be implemented through the
following provisions:
(1) If a Partner contributes property to the
Partnership, all depreciation, cost recovery or
amortization deductions attributable to the
property shall be allocated to the Partner
contributing the property;
(2) Subject to Section 7.7.(B)(6) below, if a Partner
contributes cash (including the amounts described
in Section 7.1.(D) and payments made with respect
to the promissory note, if any, delivered under
Section 6.6.(E)) which is used or deemed to be used
to acquire property, all depreciation, cost
recovery or amortization deductions attributable to
the property acquired with the Partner's
contribution shall be allocated to the Partner
contributing the cash;
(3) All depreciation, cost recovery or amortization
deductions attributable to the expenditure of any
funds paid by LParent or a Lyondell Partner to the
Partnership pursuant to LParent's indemnity
obligation to the Partnership under the
Contribution Agreement or any Related Agreement
shall be allocated to Lyondell Partner LP;
(4) Subject to Section 7.7.(B)(5) and Section
7.7.(B)(6), all depreciation, cost recovery or
amortization deductions attributable to property
acquired with funds loaned to the Partnership by a
third party shall be allocated to the Partners in
accordance with their Participation Percentages;
(5) Subject to Section 7.7.(B)(6), all depreciation,
cost recovery or amortization deductions
attributable to funds loaned to the Partnership by
a Partner shall be allocated to the Partner loaning
such funds; and
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(6) If a Partner contributes cash to the Partnership
which is used to repay a debt of the Partnership,
any remaining deductions for depreciation, cost
recovery or amortization attributable to the
property acquired with the borrowed funds shall be
allocated to the Partner contributing the funds
used to repay the debt. If the Partnership borrows
funds from a third party which are used to repay a
debt of the Partnership from a Partner, any
remaining deductions from depreciation, cost
recovery or amortization attributable to the
property acquired with the funds so borrowed from a
Partner shall be allocated to the Partners in
accordance with their Participation Percentages.
(3) 704(c) Gain or Loss Allocations. Solely for income
tax purposes, gain or loss resulting from any sale,
exchange or disposition of an asset shall be allocated
among the Partners, in accordance with Section 704(c) of
the Code and the Treasury Regulations promulgated
thereunder, so as to take into account any difference
between (i) the Asset Value (as adjusted pursuant to the
proviso in Section 7.1.(C)) of such asset, adjusted to
reflect Depreciation and (ii) the Partnership's adjusted
tax basis in such asset.
(4) Recapture. Solely for income tax purposes, in the event
that a portion of the taxable gain recognized on the
sale, exchange or other disposition of a Partnership
asset is characterized as ordinary income under the
recapture provisions of the Code, each Partner's
distributive share of taxable gain from the sale of
Partnership assets (to the extent possible) shall include
a proportionate share of the recapture income equal to
that Partner's share of prior depreciation deductions
with respect to the assets that gave rise to the
recapture income.
(5) Imputed Interest Income. To the extent the Partnership
recognizes imputed interest income in connection with any
transaction involving a Partner, such interest income
shall, for tax purposes, be allocated to the Partner who
is a party to the transaction which generated the imputed
interest income.
(6) Production Expenditures. All "production expenditures",
as defined for purposes of Section 263A of the Code,
which result from any construction that is financed with
funds contributed by a Partner, shall be allocated to the
Partner which contributed such funds.
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(7) Payments. To the extent that the Partnership recognizes
income or gain as a result of any payment (other than any
interest payments) made by LParent or Lyondell LP to the
Partnership pursuant to LParent's obligations to the
Partnership under the Contribution Agreement or any
Related Agreement, such income or gain shall be allocated
to Lyondell LP.
7.8. Transfers of Interest. Each item of income, gain, loss,
deduction and credit allocable to any Interest transferred
during a quarter shall be allocated between the transferor and
transferee in proportion to the number of days during the
quarter for which each was the owner of the Interest, without
regard to the results of Partnership operations during the
portions of the quarter the transferor and transferee owned the
Interest. Distributions attributable to the ownership of a
transferred Interest shall be paid to the Person who owned the
Interest on the last day of the calendar month preceding the
date of the distribution.
8. BOOKS OF ACCOUNT AND TAX MATTERS
8.1. Books of Account. The Partnership will maintain at its
principal office proper books of account on the accrual method
of accounting in accordance with GAAP. The Partnership shall
also maintain proper books of account necessary to enable the
Partnership to file all required tax returns and reports and to
make all determinations required under this Agreement.
Financial statements and a list of commitments for expenditures
will be delivered to the Partners monthly. The books of account
shall be reviewed quarterly and audited annually and certified
financial statements in accordance with GAAP will be delivered
to each Partner. Further, the Partnership shall keep and
maintain books and records at its principal office as required
by applicable law.
8.2. Tax Treatment.
(1) Amounts reimbursed pursuant to Section 6.6.(D) shall be
treated as distributions described in Treasury Regulation
1.707-4(d).
(2) The Partnership will be taxed as a partnership and no
Partner will elect to be excluded from the application of
any of the provisions of Subchapter K, Chapter 1 of
Subtitle A of the Code or any similar provision of any
applicable state law.
(3) The Partnership will use the LIFO method of
accounting for inventory unless the Partnership
Governance Committee unanimously decides to use an
alternative method.
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(4) The Partnership will file an election under Section
754 of the Code to cause the tax basis of Partnership
property to be adjusted for federal income tax purposes
as provided in Sections 734, 743 and 754 of the Code.
8.3. Tax Returns.
(1) Lyondell GP shall be the Tax Matters Partner as defined
in Section 6231(a)(7) of the Code ("TMP") for all taxable
years of the Partnership through the earlier of the
taxable year that includes the Option Date or the
expiration of the period during which CITGO Partners may
exercise its option to increase its Participation
Percentage under Section 6.6. Thereafter, at any time
during the first sixty (60) days of a taxable year, CITGO
GP, by written notice to Lyondell GP, may elect to be the
TMP for the current taxable year and the next two
succeeding taxable years; provided, however, that CITGO
GP shall serve as TMP at no cost to the Partnership.
Thereafter, the Partnership Governance Committee shall
select one of the General Partners to serve as TMP for a
specified term. If the Partnership Governance Committee
cannot agree as to which General Partner shall be the
TMP, the General Partners shall alternate serving as TMP
for a term of three taxable years each, beginning with
the General Partner that has not served as TMP for the
most recent taxable year; provided, however, that any
General Partner serving as TMP shall serve at no cost to
the Partnership. In the event of any change of TMP, the
General Partner serving as TMP for a given taxable year
shall (unless such General Partner ceases to be a General
Partner) continue as TMP with respect to all matters
concerning that year. The TMP shall use its best efforts
to cause the Partnership to file all tax returns and
reports by the due date thereof (after taking into
account any extensions thereof). At least twelve (12)
weeks prior to the filing of the Partnership's U.S.
Partnership Return of Income, a draft of such return
shall be circulated to the other Partners for their
review. The TMP shall circulate to the other Partners a
draft of any state income tax return promptly after it is
available, and, in any event, at least four (4) weeks
prior to the filing of any such return. Prior to the
filing of any other federal, state or local tax return,
the TMP shall cause a draft of such tax return to be
circulated to the other Partners for their review
promptly after it is available.
(2) If a Partner objects to the tax treatment of an item on
any income tax return, such Partner shall promptly inform
the TMP of its objection and the grounds upon which the
objection is based and shall in any event use its best
efforts to inform the TMP of such objection and the
grounds upon which such objection is based at least two
(2) weeks
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(eight (8) weeks as to any U.S. Partnership Return of
Income) prior to the date on which the tax return is
required to be filed. However, if the TMP, after due
consideration of a Partner's objection, is of the view
that the tax treatment of the item in question on the
return as originally submitted is reasonable, then the
TMP shall cause the Partnership to file the return
reporting the item in question in the manner originally
submitted. A Partner may treat the item in question (but
no other item) in a manner different from that reported
on the return and file a statement of inconsistent
treatment with its tax return. If any Partner files a
statement of inconsistent treatment of a Partnership
item, the Partner filing the statement shall use its best
efforts to inform the Partnership at least two (2) weeks
prior to filing the statement.
8.4. Tax Controversies. The Partners shall comply with the
responsibilities outlined in this Section 8.4. and in Sections
6222 through 6231 and 6050K of the Code (including any Treasury
Regulations promulgated thereunder) and in doing so shall incur
no liability to any other Partner. The TMP shall not agree to
any extension of the statute of limitations for making
assessments of tax on behalf of any other Partner without first
obtaining the written consent of such other Partner. The TMP
shall not bind any other Partner to a settlement agreement in
respect of taxes without obtaining the written consent of such
other Partner. If a notice or assessment for any tax (Federal
or State) is agreed to by the TMP, the TMP shall notify each
other partner of such agreement within 30 days from the date
such notice or assessment is agreed to. Any Partner who enters
into a settlement agreement with the Secretary of the Treasury
with respect to any "partnership items", as defined by Section
6231(a)(3) of the Code, shall notify each other Partner of such
settlement agreement and its terms within ninety (90) days from
the date of settlement. No Partner shall file a request
pursuant to Section 6227 of the Code for an administrative
adjustment of partnership items for any partnership taxable
year without first notifying each other Partner. If each of the
other Partners agrees with a requested adjustment, the TMP
shall file the request for administrative adjustment on behalf
of the Partnership. If any other Partner does not agree with
the requested adjustment within thirty (30) days from such
notice, or, if shorter, within the period required to timely
file the request for administrative adjustment, then the
requesting Partner may file a request for administrative
adjustment on its own behalf. The TMP shall not, in its
capacity as TMP, file a petition under Code Sections 6226, 6228
or any other Code Sections with respect to any Partnership
item, or other tax matters involving the Partnership, without
the consent of each Partner. A Partner intending to file a
petition under Section 6226, 6228 or any other Code Sections
with respect to any Partnership item, or other tax matters
involving the Partnership, will notify each of the other
Partners of that intention and the nature of the contemplated
proceeding. If any Partner intends to seek review of any court
decision rendered as a result of a proceeding instituted under
the preceding part of this Section 8.4., that Partner will
notify the other Partners of that intended action. The
provisions of this Section 8.4. will survive the termination of
the Partnership and the transfer of any Partner's Interest and
will remain binding on the Partners for a period of time
necessary to resolve any and all matters regarding the federal
and, if
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applicable, state income taxation of the Partnership. The
Partnership shall retain its records with respect to each
fiscal year until the expiration of ninety (90) days after the
period within which additional federal or state income tax may
be assessed for such year.
8.5. Tax Rulings. No Person other than the TMP shall request an
administrative ruling (or similar administrative procedures)
from any taxing authority with respect to any tax issue
relating to the Partnership or affecting the taxation of any
other Partner. The TMP shall not request such a ruling (or
similar procedure) without the consent of each General Partner.
9. ANNUAL BUDGETS, FIVE YEAR PLAN AND COMMERCIAL LOANS
9.1. Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
9.2. Annual Budgets. The Partnership will operate on the basis
of the following annual budgets:
(1) "Operating Budget," which shall be an estimate for a
fiscal year of all of the Partnership's operating
revenues and expenses, including expenses required to
maintain, repair and restore to good and usable condition
the Partnership's assets; and
(2) "Capital Budget", which shall be an estimate for a
fiscal year of the capital expenditures (i) necessary to
maintain the Partnership's assets; (ii) necessary to
achieve or maintain compliance with any Environmental
Law; (iii) necessary to accomplish capital enhancement
projects approved by the Partnership Governance Committee
("Capital Enhancement Projects"); and (iv) permitted,
pursuant to Partnership Governance Committee Action, to
be undertaken by the CEO in his or her discretion (the
funding and overrun provisions with respect to such
expenditures being set forth in such budget).
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9.3. Approval of Budgets.
(1) Each budget shall be approved by Partnership Governance
Committee Action. Prior to November 15 of each fiscal
year, the CEO shall prepare and submit to the Partnership
Governance Committee for approval each of the budgets for
the ensuing fiscal year (and, as appropriate, for
subsequent periods), and on or before December 1, the
Partnership Governance Committee shall by Partnership
Governance Committee Action approve, with such
modifications as it considers appropriate, each such
budget.
(2) If the Partnership Governance Committee does not approve
the Operating Budget for the next fiscal year by December
1, pending approval of such budget by Partnership
Governance Committee Action, the preceding fiscal year's
Operating Budget shall, to the extent practicable, guide
the operation of the Partnership. The failure to approve
an Operating Budget shall in no way limit or restrain the
authority of the Partnership or its officers to conduct
operations.
(3) The Partnership Governance Committee may, by Partnership
Governance Committee Action, amend or supplement any
previously approved budget at any time.
9.4. Funding of Budgets. The Operating Budget and all operating
expenses regardless of whether included in any such budget
shall be funded from operating cash flows. The Capital Budget
shall be funded in accordance with Section 6.5. and no other
additional Capital Contributions by the Partners shall be
required with respect thereto unless otherwise agreed by the
Partnership Governance Committee.
9.5. Implementation of Budgets and Discretionary Expenditures
by CEO.
(1) After the Capital Budget has been approved, the
Partnership will be authorized, without further action by
the Partnership Governance Committee, to make any
expenditures specifically identified within such budget;
provided, however, that all internal control policies and
procedures, including those regarding the required
authority for certain expenditures, shall have been
followed and that with respect to each capital
expenditure above an amount established from time to time
by Unanimous Partnership Governance Committee Action
there shall have been a Partnership Governance Committee
Action approval of the "authority for commitment."
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(2) In any emergency, the CEO or the CEO's designee shall be
authorized to take such actions and to make such
expenditures as may be reasonably necessary to react to
the emergency, regardless of whether such expenditures
have been included in an approved budget. As soon as
practical after the commencement of an emergency, the CEO
or such designee shall notify the Representatives of the
response that has been made, or is committed or proposed
to be made, with respect to the emergency.
9.6. Five Year Plan. The CEO of the Partnership shall prepare
and furnish annually to the Partnership Governance Committee a
projected five year business plan.
9.7. Commercial Loans.
(1) Other Loans. The Partnership Governance Committee may by
Partnership Governance Committee Action, authorize the
CEO to cause the Partnership to borrow funds from third
party lenders. No Partner shall be required, and the
Partnership Governance Committee shall not be authorized
to require any Partner, to guarantee or to provide other
credit or financial support for any loan.
(2) Partner Loans. The Partnership Governance Committee
may by unanimous Partnership Governance Committee Action,
subject to Section 3.8., authorize the CEO to cause the
Partnership to borrow money from a Partner.
9.8. Insurance and Risk Management. The Company is either an
additional named insured under LParent's insurance program or
has its own policy of insurance under LParent's insurance
program and as of the Conversion Date, LParent shall substitute
the Partnership for the Company, making the Partnership an
additional named insured, if applicable, under LParent's
insurance program. As such coverages become subject to renewal
or otherwise expire, the Partnership, by Partnership Governance
Committee Action, shall approve any material change in the
amount and scope of such coverages (including the extent to
which the Partnership will continue to be included as an
additional named insured under LParent's insurance program), or
in the portion of the premium charges for such coverages
allocable to the Partnership.
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10. TRANSFERS AND PLEDGES
10.1. Prohibition of Transfer. Except pursuant to Section 11. or as
described below in this Section 10., a Partner shall not, in
any transaction or series of transactions, directly or
indirectly, (i) sell, assign or otherwise in any manner dispose
of all or any part of its Interest (such term, as used in this
Section 10.1., including any Profits Interest), whether by act,
deed, merger or otherwise (any of the foregoing, as referred to
in this Section 10., a "transfer"), or (ii) mortgage, pledge or
create a lien or security interest upon all or any part of its
Interest; provided, however, that notwithstanding this Section
10.1., a General Partner may transfer all or any portion of its
Interest to its Affiliated Limited Partner and a Limited
Partner may transfer all or any portion of its Interest to its
Affiliated General Partner. Any attempt by a Partner to
transfer all or a portion of its Interest in violation of this
Agreement shall be void ab initio and shall not be effective to
transfer such Interest or any portion thereof.
10.2. Transfers Prior to the Option Date. No Partner shall
transfer all or any part of its Interest or Profits Interest
prior to the Option Date; provided, however, that in any event
this restriction shall cease upon the expiration of the period
during which the CITGO Partners may exercise their option to
increase their Participation Percentages under Section 6.6.
10.3. Transfers After the Option Date.
(1) After the earlier of the Option Date or the expiration of
the period during which the CITGO Partners may exercise
their option to increase their Participation Percentages
under Section 6.6., an Affiliated Partner Group (the
"transferring Partners") may transfer all (but not less
than all) of its Profits Interests; provided, however,
that it complies with all of the provisions of Sections
10.3.(C), 10.3.(D), 10.3.(E) and 10.3.(F).
(2) After the earlier of the Option Date or the expiration of
the period during which the CITGO Partners may exercise
their option to increase their Participation Percentages
under Section 6.6., any Affiliated Partner Group may
transfer all (but not less than all) of its Interests,
collectively, but only if: (i) it obtains the prior
written consent of the other Affiliated Partner Group
(the "nontransferring Partners"), which consent may be
withheld in the sole discretion of such other Affiliated
Partner Group; (ii) it complies with the provisions of
Sections 10.3.(C), 10.3.(D), 10.3.(E) and 10.3.(F); and
(iii) the purchaser or transferee of such Interests
executes a written agreement to be bound by this
Agreement (including the encumbrance of such Interest
pursuant to this Agreement including Section 11.1.), to
assume and satisfy all the liabilities and pay and
perform all the obligations and duties of the
transferring Partners and, subject to the consent of the
nontransferring
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Partners as provided in Section 10.4., to become
substituted Partners in place of the transferring
Partners.
(3) Any Affiliated Partner Group desiring to transfer its
Interest (such term, as used in Sections 10.3.(C),
10.3.(D), 10.3.(E) and 10.3.(F), meaning either its
Interest or its Profits Interest, as applicable) shall
deliver a written notice to the other Affiliated Partner
Group, which notice shall specify the Interests desired
to be transferred and shall constitute an offer to sell
all (but not less than all) of the transferring Partners'
Interests (the "Purchase Offer"). The Purchase Offer
shall specify the price (which shall be cash payable in
same-day funds in Houston, Texas) and other terms (e.g.,
provisions for the elimination of loans to or from the
Partners, the release of any guarantees, the procedure
for closing the books on the effective date of the sale
and the treatment of Partnership distributions payable to
the transferring Partners) upon which the transferring
Partners are willing to sell all (but not less than all)
of their Interests to the nontransferring Partners. The
nontransferring Partners shall have sixty (60) days from
the date of receipt of the Purchase Offer within which to
accept the Purchase Offer and shall have the right to
assign their rights with respect to the Purchase Offer in
whole or in part to an Affiliate or to any other person
or entity. If the nontransferring Partners or their
assignee accept the Purchase Offer, the closing shall
take place within sixty (60) days of such acceptance.
(4) If the nontransferring Partners do not accept a
Purchase Offer pursuant to Section 10.3.(C), the
transferring Partners shall, as provided herein, have one
hundred eighty (180) days after expiration of the first
60-day period described in Section 10.3.(C) (or after the
earlier express written rejection of the Purchase Offer
by the nontransferring Partners) within which, subject to
the provisions of this Section 10.3.(D), Section 10.1.,
Section 10.3.(B) and Section 10.4., the transferring
Partners may attempt to sell all of their Interests,
subject to Section 10.3.(F), to a single (and only a
single) third party at a price and on terms and
conditions that are identical to (or more favorable in
all respects to the transferring Partners than) the cash
price, terms and conditions contained in the Purchase
Offer. If during this 180-day period, the transferring
Partners identify a proposed purchaser (i) that is a
single entity that is organized under the laws of the
United States, (ii) that is not insolvent prior to or
immediately upon consummation of the proposed transfer,
and (iii) that makes a bona fide offer (not subject to
due diligence, financing or any other similar
contingencies) to purchase the transferring Partners'
Interests at a cash price and on terms and conditions
that are identical to (or more favorable in all respects
to the transferring Partners than) the cash price, terms
and conditions contained in the Purchase Offer, the
transferring Partners shall notify the nontransferring
Partners of the identity of the proposed purchaser
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and the terms of the proposed sale (the "Second Notice").
The nontransferring Partners or their assignee then shall
have thirty (30) days from the Second Notice within which
to elect to purchase the transferring Partner's Interests
at the cash price and on the terms and conditions
contained in the Second Notice. If the nontransferring
Partners elect to make the purchase, the closing shall
take place within sixty (60) days of its election to
purchase.
(5) If the nontransferring Partners or their assignee do not
elect to purchase the transferring Partners' Interest
after receiving the Second Notice, then subject to
Section 10.1., Section 10.3.(B) and Section 10.4. the
transferring Partners may then sell such Interest to the
third party at the cash price and on the terms and
conditions specified in the Second Notice; provided,
however, that if the transferring Partners do not dispose
of their Interest at the cash price and on the terms and
conditions specified in the Second Notice, and in all
events within sixty (60) days after expiration of the
30-day period described in the penultimate sentence of
Section 10.3.(D) (or after the earlier express written
rejection by the nontransferring Partners after receiving
the Second Notice), the transferring Partners' Interest
shall not be transferred and shall again be subject to
the restrictions contained in Section 10.3. (1)
(6) Inclusion of General or Limited Partner Interest. No
Limited Partner may transfer its Interest to any Person
unless the Interest of its Affiliated General Partner is
simultaneously transferred to such Person or a Wholly
Owned Subsidiary of such Person. No General Partner may
transfer its Interest to any Person unless the Interest
of its Affiliated Limited Partner is simultaneously
transferred to such Person or a Wholly Owned Subsidiary
of such Person.
10.4. Transferees. The purchaser or transferee of a Partner's
Interest pursuant to Section 10.3. or Section 10.5. shall not
become a Partner without the consent of the nontransferring
Partners as provided for in clause (i) of Section 10.3.(B). A
transferee who acquires an Interest pursuant to Section 10.3.
or Section 10.5. but who does not receive such consent shall be
entitled only to allocations of income and loss and
distributions with respect to such Interest in accordance with
this Agreement and shall not be or become entitled to exercise
the rights or powers of a Partner. However, the nontransferring
Partners may, in the exercise of their sole discretion, at any
time thereafter consent to such purchaser or transferee
becoming a Partner or withhold such consent. A purchaser or
transferee as to whom the nontransferring Partners at any time
grants such consent shall be deemed to become a substituted
Partner in place of the transferring Partners when and as
provided in such consent.
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10.5. Pledge of Interest.
(1) Except as contemplated by Section 10.5.(B) and Section
11.1., no Partner shall mortgage, pledge, encumber or
create or suffer to exist any pledge, lien or encumbrance
upon, or security interest in ("pledge"), all or any part
of its Interest (such term, as used in this Section
10.5., including any Profits Interest). Any attempt by a
Partner to pledge all or a portion of its Interest in
violation of this Agreement shall be void ab initio and
shall not be effective to pledge such Interest.
(2) Any Affiliated Partner Group (the "pledging Partners")
may pledge its Interest; provided, however, that (i) any
such pledge, shall expressly be subject and fully
subordinated, on terms reasonably acceptable to the other
Affiliated Partner Group (the "nonpledging Partners"), to
the encumbrance of the pledging Partners' Interests
pursuant to this Agreement including Section 11.1. and
(ii) no such pledge shall give any right to the pledgee
as a Partner (as such term is used in the Act) with
respect to the Partnership or the nonpledging Partners or
create any duty to the pledgee on the part of the
Partnership or the nonpledging Partners other than the
payment to the extent pledged of distributions from the
Partnership under Section 7.
(3) Prior to any pledge under Section 10.5.(B), (i) the
pledging Partners shall submit to the nonpledging
Partners all documentation relating to the proposed
pledge for the approval of the nonpledging Partners and
shall not effect such pledge without the prior written
approval of the nonpledging Partners (such approval not
to be unreasonably withheld); (ii) the proposed pledgee
shall deliver a written agreement of such pledgee (which
shall be binding upon any of its successors or assigns)
to the Partnership and the nonpledging Partners,
providing that (a) the right to foreclose upon the
pledging Partners' Interests pursuant to the pledge shall
be conditioned upon delivery to the nonpledging Partners
of an opinion of counsel satisfactory to the nonpledging
Partners that such foreclosure would not cause the
Partnership to be treated as an association taxable as a
corporation and that any "termination" of the Partnership
within the meaning of Section 708 of the Code caused by
such foreclosure would not create any adverse
consequences for the nonpledging Partners and (b) the
pledgee's right to receive any distributions that are
pledged is subject to being reduced pursuant to the
provisions of this Agreement; and (iii) the proposed
pledgee and the pledging Partners shall deliver to the
nonpledging Partners a written agreement, in form
reasonably satisfactory to the nonpledging Partners,
providing that (a) the pledgee shall notify the
nonpledging Partners in writing at least one hundred
twenty (120) days prior to initiation of foreclosure
proceedings, (b) the nonpledging Partners shall have the
right during such 120-day period to purchase the debt
owed
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by the pledging Partners to the pledgee, together with
all rights of the pledgee in, to and with respect to the
pledged Partners' Interests, for an amount equal to the
outstanding principal amount of such debt plus the
interest due and payable on and any cost of collection
associated with such debt, (c) immediately upon the
purchase of the debt, together with all rights of the
pledgee in, to and with respect to the pledged Partners'
Interests, by the nonpledging Partners pursuant to clause
(iii)(b) of this Section 10.5.(C), the pledgee shall (1)
deliver to the nonpledging Partners a written
acknowledgment that its debt has been satisfied in full
and (2) take any action necessary to transfer to the
nonpledging Partners possession of a perfected first
priority security interest in the pledging Partners'
Interest and (d) the pledging Partners appoint the
nonpledging Partners as its attorney-in-fact authorized
to take on the pledging Partners' behalf all actions
required to effect any purchase of the pledgee's debt and
any transfer of the pledging Partners' Interest pursuant
to this clause (iii) of this Section 10.5.(C).
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11. REMEDIES AND DISSOLUTION
11.1. Security for Performance. Each Affiliated Partner Group (the
"Pledgor Group") shall and hereby does pledge and grant to the
other Affiliated Partner Group (the "Pledgee Group") a first
priority lien on and security interest in the Pledgor Group's
Interests in the Partnership as security for the satisfaction
of all the Pledgor Group's liabilities and the payment and
performance of all the Pledgor Group's obligations and duties
under this Agreement. At any time and from time to time, the
Pledgor Group also will promptly execute and deliver all such
further agreements, instruments and documents and take all such
further action that may be necessary or desirable or that the
Pledgee Group may reasonably request in order (i) to perfect
and protect the lien and security interest created hereby,
including the execution and filing of appropriate financing
statements and directing the Partnership to register, on the
Partnership's books and records, the pledge of the Pledgor
Group's Interest to the Pledgee Group; (ii) to enable the
Pledgee Group to exercise and enforce its rights and remedies
under this Agreement in respect to the Pledgor Group's
Interest; or (iii) otherwise to effect the purposes of this
Section 11.1. The Pledgor Group hereby authorizes the Pledgee
Group to file, without the signature of such Pledgor Group
granting the security interest provided for herein, where
permitted by applicable law, at any time the Pledgee Group
acting as a secured party deems necessary or appropriate to
protect its lien and security interest under this Agreement,
one or more financing or continuation statements, and
amendments thereto, relating to such lien and security
interest. If the Pledgor Group fails to perform any agreement
or obligation contained in this Section 11.1., the Pledgee
Group may perform, or cause performance of, such agreement or
obligation, and the expenses of the Pledgee Group so performing
incurred in connection therewith shall be payable to the
Pledgee Group, on demand, by the Pledgor Group that has failed
to so perform. The Pledgee Group shall not, without the prior
written consent of the Pledgor Group, sell, assign, transfer,
mortgage, pledge or otherwise encumber any of its rights in the
Pledgor Group's Interests as pledged to the Pledgee Group under
this Section 11.1. except with regard to a failure by the
Pledgor Group to satisfy the Pledgor Group's liabilities, and
the payment and performance of all its obligations and duties
under this Agreement.
11.2. Default.
(1) Each of the following events shall, upon determination of
the existence thereof as provided in Section 11.2.(B),
constitute a "Default" and create the rights provided for
in this Agreement in favor of the Nondefaulting Partners
against the Defaulting Partners:
(1) the failure by a Partner to make any contribution,
including, without limitation, a Partner's failure
to make when due any contribution for capital
expenditures as determined by Partnership
Governance Committee Action to be due form the
Partners, or loan to the Partnership as required
by this Agreement, which failure continues for at
least three (3)
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Business Days from the date such contribution
should have been received;
(2) other than as described in item (1) above, a
material breach or violation under this Agreement
by a Partner, which breach or violation continues
unremedied for at least ninety (90) days after the
Nondefaulting Partners have given written notice
of such breach or violation to the Defaulting
Partners;
(3) as to Lyondell Partners, a material breach or
default by LParent under the terms of the
Contribution Agreement, which breach or default
continues unremedied or uncured for at least 90
days after the Partnership or the CITGO GP has
given written notice of such breach or default to
LParent; (1)
(4) as to CITGO Partners, a material breach or default
by CParent under the terms of the Product Purchase
Agreement, which breach or default continues
unremedied or uncured for at least ninety (90)
days after the Partnership or Lyondell GP has
given written notice of such breach or default to
CParent; or
(5) the withdrawal, retirement, resignation or
dissolution of a Partner; or the bankruptcy of a
Partner or its Parent (including the filing
against a Partner or its Parent of a petition in
bankruptcy or seeking any reorganization,
liquidation or similar relief, which petition
shall remain undismissed or unstayed for an
aggregate of ninety (90) days; the adjudication of
a Partner or its Parent as Insolvent, or the
institution by a Partner or its Parent of
proceedings to be adjudicated as a voluntary
bankrupt, or the consent by a Partner or its
Parent to the filing of a bankruptcy proceeding
against it, or the failure of a Partner or its
Parent to contest a bankruptcy proceeding against
it; or the appointment, or any consent by a
Partner or its Parent to the appointment, of a
receiver, custodian, liquidator or trustee for the
Partner or its Parent or for all or any
substantial portion of its property, which
appointment remains undismissed or unstayed for a
period of ninety (90) days).
(2) The existence of a Default shall be determined either by
written agreement among the Partners or by resort to an
appropriate court. Once such Default has been determined
to exist (including, as appropriate, exhausting all
appeals), then the Defaulting Partners shall have thirty
(30) days from the determination date to cure such
Default; provided, however, that there shall not be a
cure period for a Default described in Section
11.2.(A)(5) and that the cure period for a Default
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described in Section 11.2.(A)(1) shall be limited to
three (3) Business Days.
(3) The day upon which the Default is determined to exist (or
if the Default is subject to a cure period and is not
timely cured, then the day following the end of the
applicable cure period) shall be the "Default Date."
Without prejudice to a Partner's (or any of its
Affiliates') rights to seek temporary or preliminary
judicial relief, prior to any such Default Date all
rights and obligations of the Partners under this
Agreement shall remain in full force and effect.
(4) With respect to any Default, the term "Damages" shall
mean (in each case to the extent reasonably and
necessarily incurred) any and all obligations (including
all obligations to take an affirmative or curative act),
liabilities, damages (including, damages arising out of
any breach of any representation or warranty, damages
related to investigations, proceedings, audits, the
interruption of the Partnership's Business, restrictions
upon the use of, or adverse impact on, the assets or the
Partnership's Business, or the interruption, breach or
termination of any Related Agreements, including any lost
profits attributable thereto), fines, penalties,
deficiencies, losses, judgments, settlements, costs and
expenses (including costs and expenses incurred in
connection with performing obligations, bonding and
appellate costs and attorneys', accountants', engineers',
health, safety, environmental and other consultants' and
investigators' fees and disbursements, liquidating,
selling or offering for sale the Partnership Business and
assets or winding up the Partnership Business, or other
payments in respect of such payments) arising out of or
incurred in connection with such Default, regardless of
whether any of the foregoing are foreseeable,
unforeseeable, matured or unmatured, existing or
contingent as of the date of such Default. "Damages" also
shall include, if and to the extent interest is not
already included therein under applicable law or other
provisions hereof and subject to Section 12.11., interest
on amounts actually due until payment thereof is made at
a rate per annum equal to the rate set forth in Section
12.10.(B).
11.3. Remedies for Default. Provided that there shall be no
duplication of remedies, without prejudice to the Nondefaulting
Partners' right to foreclose upon the Defaulting Partners'
Interest pursuant to the lien and security interest created in
Section 11.1. or to pursue independently and at any time,
including simultaneously, any other remedy it may have under
law, including the right to seek to recover Damages, or equity,
upon determination (either judicially or otherwise) of a
Default and the related Damages, and the failure of the
Defaulting Partners to cure such Default as provided in Section
11.2.(B), the Nondefaulting Partners in their sole discretion
may elect to pursue the following remedies:
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(1) At any time prior to the expiration of sixty (60) days
from the Default Date (or if later, from the judicial or
other determination of the Default Date and the related
Damages), the Nondefaulting Partners may elect to
exercise their purchase right for the Defaulting
Partners' Interest as described in Section 11.5. and
thereby cause the Partnership to dissolve under Section
11.9(D); provided, however, that within ten (10) days
after the determination of the Fair Market Value, the
Nondefaulting Partners may elect not to proceed with a
purchase of the Defaulting Partners' Interest, in which
case the Nondefaulting Partners shall have an additional
thirty (30) days from its determination not to proceed to
elect as an alternative remedy Section 11.3.(B) below;
and
(2) At any time prior to the expiration of sixty (60) days
from the Default Date (or if later, from the judicial or
other determination of the Default Date and the related
Damages) (or if the Nondefaulting Partners initially
elected to pursue its remedy under Section 11.3.(A)
above, then at any time prior to the expiration of the
30-day extension period), the Nondefaulting Partners may
elect to effect a liquidation of the Partnership under
Section 11.6. and thereby cause the Partnership to
dissolve under Section 11.9.(E).
11.4. Consequences of Default. Notwithstanding any other provision of
this Agreement, commencing on the Default Date and (i) prior to
the Nondefaulting Partners' collection of Damages through the
exercise of its legal remedies or otherwise, or (ii) while the
Nondefaulting Partners are pursuing its remedies under Section
11.5. or Section 11.6., the Defaulting Partners'
Representatives on the Partnership Governance Committee shall
not have any voting rights and all matters requiring
Partnership Governance Committee Action shall be determined
solely by the Nondefaulting Partners' Representatives;
provided, however, that the foregoing loss of voting rights
shall not occur as a result of a Default caused solely by the
insolvency, bankruptcy or similar proceedings of a Partner or a
Parent described in the second through final clauses of Section
11.2.(A)(5); and provided further, that the foregoing loss of
voting rights shall not apply to those voting rights contained
in Sections 3.8.(A), 3.8.(B), 3.8.(C), 3.8.(D), 3.8.(F), and
3.8.(Y), which voting rights shall continue in full force and
effect at all times.
11.5. Purchase of Defaulting Partners' Interest
(1) The Nondefaulting Partners shall have the right to elect
to purchase the Interest of the Defaulting Partners by
delivering notice of such election in writing to the
Partnership Governance Committee and the Defaulting
Partners (the "Purchase Notice"). The purchase of such
Interest shall be consummated prior to the expiration of
thirty (30) days from the determination of the purchase
price as provided herein.
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(2) The purchase price that the Nondefaulting Partners shall
pay to the Defaulting Partners for the Defaulting
Partners' Interest shall be an amount equal to (i) the
amount that the Defaulting Partners would receive in a
Liquidation (assuming that the sale under Section
11.11.(B)(1) is for an amount equal to the Fair Market
Value) reduced by (ii) the Damages incurred by the
Partnership.
(3) "Fair Market Value" shall be the fair market value of all
of the Partnership Business and assets (including
tangible and intangible assets) as of the date of the
Purchase Notice, without giving effect to the Damages,
determined as follows:
(1) The Defaulting Partners and the Nondefaulting
Partners shall first attempt to agree on such
value, which if agreed to shall be the Fair Market
Value;
(2) If the Partners are unable to agree within twenty
(20) days of the Purchase Notice, then the
Defaulting Partners, on the one hand, and the
Nondefaulting Partners, on the other hand, shall
(at their own cost) cause an independent,
qualified appraiser to deliver a written appraisal
of such value within fifty (50) days of the
Purchase Notice. If the lower appraised value is
greater than or equal to ninety percent (90%) of
the higher appraised value, then the average of
the two appraised values shall be the Fair Market
Value; and (1)
(3) If the lower appraised value is less than ninety
percent (90%) of the higher appraised value, then
the Partners shall jointly appoint a mutually
acceptable neutral person or entity (the
"Neutral") not affiliated with either of the
Partners within seventy (70) days of the Purchase
Notice (and if the Partners have been unable to
agree upon such appointment within sixty (60) days
of the Purchase Notice, then such Neutral shall
upon the application of either the Defaulting
Partners or the Nondefaulting Partners be
appointed within seventy (70) days of the Purchase
Notice by the Center for Public Resources, or if
such appointment is not so made then promptly
thereafter by the American Arbitration Association
in New York, New York, or if such appointment is
not so made then promptly thereafter by the senior
United States District Court judge sitting in the
Borough of Manhattan, in New York, New York), and
the Neutral shall within ninety (90) days of the
Purchase Notice or, if later, within twenty (20)
days of the appointment of the Neutral determine
which of the two appraised values is closest
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to the fair market value of the Partnership's
assets as determined by the Neutral, and that
appraised value shall be the Fair Market Value.
11.6. Liquidation. The Nondefaulting Partners shall have the right to
elect to dissolve and liquidate the Partnership pursuant to the
procedures in Section 11.11. (such procedures constituting a
"Liquidation"); provided, however, that any amount payable to
the Defaulting Partners in such Liquidation pursuant to Section
11.11.(B)(7) shall be reduced by the Nondefaulting Partners'
Participation Percentage of the Damages incurred by the
Partnership. The Nondefaulting Partners shall deliver notice of
such election to dissolve and liquidate in writing to the
Partnership Governance Committee and the Defaulting Partners.
11.7. Closing of Purchase Rights. In the event of the exercise of
purchase rights pursuant to Section 11.5. (any such event a
"Purchase"), the Purchase shall be consummated by appropriate
and customary documentation (including customary
representations and warranties) as soon as practicable and in
any event within the applicable time period specified in
Section 11.5 or Section 11.8. The Partners entitled or
obligated to Purchase shall have the right to transfer or
assign, in whole or in part, its right or obligation to
Purchase to an Affiliate or to a third party.
11.8. Recision. In the event that the Partnership is rendered
Insolvent by reason of a breach, default or failure of an
agreement, covenant, indemnity, representation or warranty made
by LParent in the Contribution Agreement (including the
exhibits and schedules thereto) and such breach, default or
failure has not been cured as provided in the Contribution
Agreement (a "Recision Event"), then CITGO GP shall deliver a
notice to Lyondell GP specifying in reasonable detail the
particulars of such Recision Event (a "Recision Event Notice").
Within 60 days after the earlier to occur of agreement between
the Partners or final judicial determination that a Recision
Event has occurred, Lyondell Partners shall purchase CITGO
Partners' Interest (a "Recision Purchase") for an amount of
cash (the "Recision Purchase Price") equal to the sum, without
duplication, of the following amounts, each calculated or
determined from the Closing Date to the date of purchase: (i)
CITGO Partners' capital contributions made pursuant to Section
6., plus (ii) all Profits allocated to CITGO Partners, minus
(iii) all Losses allocated to CITGO Partners and minus (iv) the
amount of all distributions actually made to CITGO Partners
pursuant to Section 7.4. In the event of a Recision Purchase,
CITGO Partners shall execute and deliver to Lyondell Partners
such documents as Lyondell Partners shall reasonably require to
evidence and effect the Recision Purchase against receipt by
CITGO Partners of the Recision Purchase Price. The amount of
any debt to CITGO Partners under Section 7.3.(C) shall be
deemed to be paid upon payment of the Recision Purchase Price.
11.9. Dissolution. The Partnership shall be dissolved within the
meaning of the Act upon the first to occur of the following:
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(1) the written determination of all General Partners to
dissolve the Partnership;
(2) the bankruptcy (including the matters referred to in
Section 11.2.(A)(5) of the Partnership;
(3) the withdrawal, retirement, resignation, dissolution
or bankruptcy (including the matters referred to in
Section 11.2.(A)(5)) of a Partner;
(4) the closing of a Purchase as the result of a Default;
(5) the election of the Nondefaulting Partners to effect
a dissolution of the Partnership under Section 11.6.; or
(6) any other act or event which results in the
dissolution of a limited partnership under the Act.
11.10. Reconstitution of Partnership. If the Partnership dissolves
pursuant to Section 11.9.(C) or Section 11.9(D) (even if other
dissolution provisions also are invoked), it may be
reconstituted and continued upon the written consent of all
remaining Partners other than the former Partner that sold its
Interest.
11.11. Liquidation; Winding Up and Distributions upon Dissolution.
(1) Upon a dissolution, absent a reconstitution and
continuation of the Partnership under Section 11.10., the
Partnership shall commence to wind up its affairs and the
Partners shall file appropriate documents of dissolution
and proceed to effect the Liquidation of the Partnership
pursuant to the procedures set forth in this Section
11.11.; provided, however, that in the event of a
dissolution resulting from an event described in Section
11.9.(D), sufficient time shall be allowed prior to any
liquidation or winding up of the Partnership to give
effect to the remedies provided by Section 11.5. and
Section 11.6. Notwithstanding any other provision of this
Agreement, during the period of the winding up, the
Nondefaulting Partners (or the Partnership Governance
Committee if the Partners have agreed to terminate the
Partnership or there are otherwise not Nondefaulting
Partners) shall make all decisions relating to the
conduct of any business or operations, and the sale or
disposition of the Partnership's assets.
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(2) Upon dissolution of the Partnership, the following
shall occur unless the Partners agree otherwise:
(1) The Partnership's assets shall be collected and
sold to unaffiliated third parties in arm's-length
transactions; provided, however, that any Partner
or its Affiliates shall have the right to
participate in any public sale or auction of the
Partnership's property or any other reasonable
competitive bid process (such as a private sale
pursuant to a "data room" process conducted by an
independent investment banking firm);
(2) Gain or loss with respect to the Partnership's
sale or distribution of assets shall be allocated
to the Partners' Capital Accounts as provided in
Section 7.6.;
(3) Any liabilities owed to third parties shall be
paid in full;
(4) Appropriate reserves for contingencies shall
be established;
(5) Any outstanding loans that have been made to
the Partnership by any Partner shall be repaid in
full;
(6) CITGO Partners' Capital Accounts shall be reduced
by the amount of the outstanding principal of any
promissory note contributed to the Partnership
pursuant to Section 6.6.(E); and
(7) Any remaining cash or non-cash assets that cannot
be sold for cash shall be distributed to the
Partners in accordance with their positive Capital
Account balances.
No Partner shall have any obligation to contribute capital to
restore any negative balance in its Capital Account.
11.12. Enforcement. Only a General Partner shall have the ability to
enforce the provisions of this Section 11.
12. MISCELLANEOUS
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12.1. Confidentiality and Use of Information. Each Partner will keep
confidential all information regarding the business of the
Partnership and will not use any such information in any manner
not related to the business of the Partnership; provided,
however, that the term "information" as used in this Section
does not include any information that (i) is or becomes
generally available to and known by the public or the petroleum
refining industry (other than as a result of an unpermitted
disclosure directly or indirectly by the Partnership or a
Partner), (ii) is or becomes available to a Partner on a
nonconfidential basis from a source other than the Partnership
or a Partner; provided, however, that such source is not and
was not bound by a confidentiality agreement with, or other
obligation of secrecy to, the Partnership or any other Partner,
(iii) has already been or is hereafter independently acquired
or developed by a Partner without violating any confidentiality
agreement with or other obligation of secrecy to the
Partnership or another Partner or (iv) is generated by the
Partnership with the intention that it not be held as
confidential.
12.2. Auditors. Selection of the Partnership's auditors will be
delegated to the Finance-Control Committee. The Partnership
Governance Committee will have final authority to select,
appoint and establish the terms of the engagement of the
Partnership's auditors. The Partnership Governance Committee
shall, in consultation with the Finance and Control Committee,
establish the accounting policies for the Partnership,
including the policy for determining whether an expenditure
should be capitalized or expensed.
12.3. Indemnification of Officers.
(1) The Partnership shall indemnify any person who was or is
a named defendant or respondent or is threatened to be
made a named defendant or respondent to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or
investigative, any appeal to such an action, suit or
proceeding and any inquiry or investigation that could
lead to such an action, suit or proceeding (collectively,
such actions, suits, proceedings, appeals, inquiries and
investigations are referred to collectively as
"Proceedings" and individually as "Proceeding") by reason
of the fact that such person either is or was an officer
of the Partnership, or, while an officer of the
Partnership, is or was serving at the request of the
Partnership as a director, manager, officer, partner,
venturer, proprietor, trustee, employee, agent or similar
functionary of another domestic or foreign corporation,
limited partnership, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other
enterprise, against judgments, penalties (including
excise and similar taxes), fines, settlements and
reasonable expenses actually incurred by such person in
connection with such Proceeding if it is determined that
such person conducted himself in good faith, and if such
conduct was in such person's official capacity as an
officer of the Partnership, in a manner
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he reasonably believed to be in the best interests of the
Partnership and, in all other cases, in a manner he
reasonably believed was not opposed to the best interests
of the Partnership, and, in the case of any criminal
Proceeding, had no reasonable cause to believe his
conduct was unlawful; provided, however, that if a person
is found liable to the Partnership or is found liable on
the basis that personal benefit was improperly received
by him, the indemnification shall not be available. The
Partnership may pay or reimburse expenses incurred by an
officer in connection with such person's appearance as a
witness or other participation in a Proceeding at a time
when such person is not a named defendant or respondent
in such Proceeding.
(2) The determination to be made in the preceding subsection
(A) shall be made (i) by the Partnership Governance
Committee; or (ii) by special legal counsel selected by
the Partnership Governance Committee. A determination as
to the reasonableness of expenses (including court costs
and attorneys' fees) shall be made in the same manner as
the determination that indemnification is permissible.
(3) Reasonable expenses incurred by an officer in connection
with a Proceeding may be paid by the Partnership in
advance of the final disposition of such Proceeding and
without any of the determinations specified in the
preceding subsection (B) upon receipt by the Partnership
of a written affirmation by the officer of his good faith
belief that he has met the standard of conduct necessary
for indemnification under this Section 12.3. and a
written undertaking by or on behalf of the officer to
repay such amount if it is ultimately determined that he
is not entitled to be indemnified by the Partnership as
authorized in this Section 12.3., which undertaking shall
be an unlimited general obligation of such officer and
may be unsecured.
(4) The right to indemnification conferred in this Section
12.3. shall be a contract right and shall not be deemed
exclusive of any other rights to which those indemnified
may be entitled under any other law, agreement,
Partnership Governance Committee Action, or otherwise,
both as to action in their official capacities and as to
action in another capacity while acting as an officer and
shall continue as to a person who has ceased to be an
officer and shall inure to the benefit of the heirs,
executors and administrators of such person. Any
indemnification of or advance of expenses to an officer
in accordance with this Section 12.3. shall be reported
in writing to the Partnership Governance Committee.
(5) The Partnership may purchase and maintain insurance on
behalf of any person who is or was an officer or employee
of the Partnership, or who
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is or was serving at the request of the Partnership as a
manager, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another
foreign or domestic corporation, limited partnership,
partnership, joint venture, sole proprietorship, trust,
other enterprise, or employee benefit plan, against any
liability asserted against or incurred by that person in
such a capacity or arising out of his status as such a
person, whether or not the Partnership would have the
power to indemnify such person against such liability
under this Section 12.3.
(6) Except as indicated in the proviso in Section
12.3.(A), the Partnership intends that the
indemnification provided hereunder shall indemnify its
officers to the fullest extent possible under the Act;
and if any indemnification which would otherwise be
granted by this Section 12.3. shall be disallowed by any
competent court or administrative body as illegal, then
any officer with respect to whom such adjudication was
made, and any other officer, shall be indemnified to the
fullest extent permitted under the Act.
12.4. Waivers, Modifications and Amendments. All modifications or
amendments of this Agreement or the Certificate of Limited
Partnership shall require the approval of Representatives
representing 100 percent of the total votes as provided in
Section 3.8.(C).
12.5. Further Assurances. From time to time, each Partner agrees to
execute and deliver such additional documents, and will provide
such additional information and assistance as the Partnership
may reasonably require to carry out the terms of this Agreement
and to accomplish the Partnership's Business.
12.6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the successors of the Partners,
but, except as expressly provided herein, no Limited Partner or
its Affiliated General Partner may assign or delegate any of
their rights or obligations under this Agreement without the
prior written consent of the other Partners, which consent
shall be in the sole and absolute discretion of such other
Partners. Any purported assignment or delegation without such
consent shall be void and ineffective.
12.7. 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 or entity shall have any right,
claim or cause of action under or by virtue of this Agreement.
12.8. Expenses. Except as otherwise provided herein, each party
hereto shall be responsible for its own expenses incurred in
connection with this Agreement.
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12.9. Currency Conversions. All contributions, allocations,
distributions and other payments shall be made, and all
calculations performed and books and records kept, in United
States currency, without any reference to foreign currency
exchange rates or other conversion calculations.
12.10. Payment Terms and Interest Calculations
(1) If the payment due date for any payment hereunder
(including Capital Contributions and Damages) falls on a
Saturday or a bank or federal holiday, other than a
Monday, the payment shall be due on the past preceding
business day. If the payment due date falls on a Sunday
or Monday bank or federal holiday, the payment shall be
due on the following business day.
(2) Interest shall accrue on any unpaid and outstanding
amount from the time such amount is due and payable
through the date upon which such amount, together with
accrued interest thereon, is paid in full. Interest
shall, subject to the provisions of Section 12.11.,
accrue at a per annum rate equal to the lesser of (i) 125
percent of the Agreed Rate, compounded quarterly, to the
extent permitted by law or (ii) the Highest Lawful Rate.
(3) 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.
12.11. Usury Savings Clause. Notwithstanding any other provision of
this Agreement, it is the intention of the parties hereto to
conform strictly to applicable usury laws regarding the use,
forbearance or detention of any indebtedness arising under this
Agreement whether such laws are now or hereafter in effect,
including the laws of the United States of America or any other
jurisdiction whose laws are applicable, and including any
subsequent revisions to or judicial interpretations of those
laws, in each case to the extent they are applicable to this
Agreement (the "Applicable Usury Laws"). Accordingly, if any
payments made pursuant to this Agreement result in any person
having paid any interest in excess of the Maximum Amount, as
hereinafter defined, or if any transaction contemplated hereby
would otherwise be usurious under any Applicable Usury Laws,
then, in that event, it is agreed as follows: (i) the
provisions of this Section 12.11. shall govern and control;
(ii) the aggregate of all interest under Applicable Usury Laws
that is contracted for, charged or received under this
Agreement shall under no circumstances exceed the Maximum
Amount, and any excess shall be promptly refunded to the payor
by the recipient hereof; (iii) no person shall be obligated to
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pay the amount of such interest to the extent that it is in
excess of the Maximum Amount; and (iv) the effective rate of
any interest payable under this Agreement shall be ipso facto
reduced to the Highest Lawful Rate, as hereinafter defined, and
the provisions of this Agreement immediately shall be deemed
reformed, without the necessity of the execution of any new
document or instrument, so as to comply with all Applicable
Usury Laws. All sums paid, or agreed to be paid, to any person
pursuant to this Agreement for the use, forbearance or
detention of any indebtedness arising hereunder shall, to the
fullest extent permitted by the Applicable Usury Laws, be
amortized, pro rated, allocated and spread throughout the full
term of any such indebtedness so that the actual rate of
interest does not exceed the Highest Lawful Rate in effect at
any particular time during the full term thereof. As used
herein, the term "Maximum Amount" means the maximum nonusurious
amount of interest that may be lawfully contracted for, charged
or received by any person in connection with any indebtedness
arising under this Agreement under all Applicable Usury Laws,
and the term "Highest Lawful Rate" means the maximum rate of
interest, if any, that may be charged to any person under all
Applicable Usury Laws on any principal balance from time to
time outstanding pursuant to this Agreement.
12.12. Notices. All notices, requests, demands and other
communications that are required or may be given under this
Agreement shall, unless otherwise provided for elsewhere in
this Agreement, be in writing and shall be deemed to have been
duly given if and when (i) transmitted by telecopier facsimile,
(ii) delivered personally or (iii) mailed, first class mail,
postage prepaid, return receipt requested, as follows:
(a) if to CITGO LP, CITGO GP or its Representatives:
CITGO Refining Investment Company
P. O. Xxx 0000
Xxxxx, Xxxxxxxx 00000
Attention: Treasurer
Telecopy: 000-000-0000
with a copy to:
Vice President and General Counsel
CITGO Petroleum Corporation
P. O. Xxx 0000
Xxxxx, Xxxxxxxx 00000
Telecopy: 000-000-0000
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(b) if to Lyondell LP, Lyondell GP or its Representatives:
Lyondell Refining Company
P. O. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Vice President, General Counsel & Secretary
with a copy to:
Lyondell Refining LP, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Vice President, General Counsel & Secretary
(c) if to the Partnership:
LYONDELL-CITGO Refining LP
P. O. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: President & CEO
Telecopy: 713-321-6900
Any changes to the addresses set forth above shall be made by
written notice delivered to the Secretary of the Partnership
who shall maintain such addresses.
12.13. Waiver of Immunity. EACH OF THE CITGO PARTNERS HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO CLAIM FOR ITSELF OR
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12.14. WITH RESPECT TO ITS REVENUES, ASSETS OR PROPERTIES IMMUNITY
FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS.
TO THE EXTENT ANY JURISDICTION WOULD ATTRIBUTE SUCH IMMUNITY TO
EITHER OR BOTH OF THE CITGO PARTNERS, EACH OF THE CITGO
PARTNERS HEREBY WAIVES ANY RIGHT TO CLAIM SUCH IMMUNITY AND TO
ANY DEFENSES AVAILABLE TO IT UNDER THE FOREIGN SOVEREIGN
IMMUNITIES ACT, AND ANY DEFENSE BASED ON IMMUNITY ARISING UNDER
U.S. FEDERAL OR STATE LAW, OR UNDER ANY INTERNATIONAL, FOREIGN
OR OTHER APPLICABLE LAW.
12.15. Governing Law. THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS
PRINCIPLES OF CONFLICTS OF LAW.
12.16. Jurisdiction; Consent to Service of Process; Waiver. ANY
JUDICIAL PROCEEDING BROUGHT AGAINST ANY OF THE PARTNERS OR THE
PARTNERSHIP OR ANY DISPUTE UNDER OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY MATTER RELATED HERETO
SHALL BE BROUGHT IN THE FEDERAL OR XXXXX XXXXXX XX XXX XXXXX XX
XXX XXXX LOCATED IN THE BOROUGH OF MANHATTAN, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTNERS AND THE
PARTNERSHIP ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT (AS FINALLY
ADJUDICATED) RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. EACH OF THE PARTNERS AND THE PARTNERSHIP SHALL
APPOINT C T CORPORATION SYSTEM, THE XXXXXXXX-XXXX CORPORATION
SYSTEM, INC. OR A SIMILAR ENTITY (THE "AGENT") AS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF PROCESS IN ANY PROCEEDING IN
ANY SUCH COURT IN THE STATE OF NEW YORK BY ENTERING INTO AN
AGREEMENT WITH THE AGENT TO SUCH EFFECT, AND EACH PARTNER AND
THE PARTNERSHIP SHALL MAINTAIN SUCH AGREEMENT (OR AN
APPROPRIATE SUBSTITUTE TO THE SAME EFFECT WITH THE SAME OR A
DIFFERENT AGENT) FOR THE ENTIRE TERM OF EXISTENCE OF THE
PARTNERSHIP. THE FOREGOING CONSENTS TO JURISDICTION AND
APPOINTMENTS OF AGENT TO RECEIVE SERVICE OF PROCESS SHALL NOT
CONSTITUTE GENERAL CONSENTS TO SERVICE OF PROCESS IN THE STATE
OF NEW YORK FOR ANY PURPOSE EXCEPT AS PROVIDED ABOVE AND SHALL
NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER THAN THE
PARTNERSHIP AND THE PARTNERS.
62
68
IN LIGHT OF THE EXPRESS INTENT OF THE PARTIES TO
SUBMIT TO THE JURISDICTION OF NEW YORK COURTS FOR THE
RESOLUTION OF ANY AND ALL DISPUTES ARISING UNDER THIS
AGREEMENT, THE PARTIES FURTHER HEREBY WAIVE ANY AND ALL
AFFIRMATIVE DEFENSES THEY COULD OR MIGHT OTHERWISE BE ABLE TO
ASSERT BASED ON AN ALLEGED INCAPACITY OF THE PARTNERSHIP TO
ASSERT A CLAIM OR COUNTER-CLAIM IN EITHER THE FEDERAL OR XXXXX
XXXXXX XX XXX XXXXX XX XXX XXXX LOCATED IN THE BOROUGH OF
MANHATTAN. THE AFFIRMATIVE DEFENSES AND MOTIONS HEREBY WAIVED
INCLUDE BUT ARE NOT LIMITED TO OBJECTIONS TO SUIT PURSUANT TO
N.Y. BUSINESS CORPORATION LAW SS. 1312, N.Y. PARTNERSHIP LAW
SS. 121-907, N.Y. CLS GENERAL BUSINESS LAW SS. 130 SUBD.
1(II)(A) AND N.Y. GENERAL ASSOCIATIONS LAW SS. 18(4). THE
PARTIES WAIVE ALL AFFIRMATIVE DEFENSES AND DEFENSIVE MOTIONS
PREDICATED ON, BUT NOT LIMITED TO, THE FOREGOING STATUTORY
PROVISIONS WITH FULL KNOWLEDGE OF THEIR RIGHTS, IF ANY, UNDER
THOSE PROVISIONS. IT IS THE EXPRESS AND KNOWING INTENTION OF
THE PARTIES TO WAIVE THE RIGHT TO ASSERT AS AN AFFIRMATIVE
DEFENSE THE LEGAL INCAPACITY OF THE PARTNERSHIP TO MAINTAIN A
CLAIM OR COUNTER-CLAIM ON THE GROUNDS THAT THE PARTNERSHIP
FAILED TO COMPLY WITH ANY OR ALL REGISTRATION, CERTIFICATION,
NOTIFICATION, FILING OR DESIGNATION-OF-AGENT REQUIREMENTS SET
FORTH AND ENFORCED BY THE FOREGOING OR ANY SIMILAR STATUTORY
PROVISIONS.
12.17. Entire Agreement. This Agreement, together with the Certificate
of Limited Partnership, the Master Transaction Agreement, the
Confidentiality Agreements (as defined in the Master
Transaction Agreement) and the Related Agreements constitute
the entire agreement between the parties and supersedes all
prior agreements and understandings, oral and written, between
the parties with respect to the subject matter hereof, with the
exception of those matters which will continue to be governed
under the Regulations.
12.18. Severability. In the event that any provision of this Agreement
shall finally be determined to be unlawful, such provision
shall, so long as the economic and legal substance of the
transactions contemplated hereby is not affected in any
materially adverse manner as to any Partner, be deemed severed
from this Agreement and every other provision of this Agreement
shall remain in full force and effect.
12.19. Construction. In construing this Agreement, the following
principles shall be followed: (i) no consideration shall be
given to the captions of the articles, sections, subsections or
clauses, which are inserted for convenience in locating the
63
69
provisions of this Agreement and not as an aid in construction;
(ii) no consideration shall be given to the fact or
presumptions that any Partner had a greater or lesser hand in
drafting this Agreement; (iii) examples shall not be construed
to limit, expressly or by implication, the matter they
illustrate; (iv) the word "includes" and its syntactic variants
mean "includes, but is not limited to" and corresponding
syntactic variant expressions; (v) the plural shall be deemed
to include the singular, and vice versa; (vi) each gender shall
be deemed to include the other genders; and (vii) each exhibit,
attachment and schedule to this Agreement is a part of this
Agreement.
12.20. 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.
[signature page follows]
64
70
IN WITNESS WHEREOF, this Limited Partnership Agreement has been
executed on behalf of each Partner, by their respective officers thereunto duly
authorized, effective as of the 31st day of December, 1998.
LYONDELL REFINING LP, LLC
a Delaware limited liability company (Lyondell LP)
By:
-----------------------------------------
Name:
-------------------------------
Title:
-----------------------------
CITGO GULF COAST REFINING, INC.
a Delaware corporation (CITGO GP)
By:
-----------------------------------------
Name:
-------------------------------
Title:
-----------------------------
LYONDELL REFINING COMPANY,
a Delaware corporation (Lyondell GP)
By:
-----------------------------------------
Name:
-------------------------------
Title:
-----------------------------
CITGO REFINING INVESTMENT COMPANY
an Oklahoma corporation (CITGO LP)
By:
-----------------------------------------
Name:
-------------------------------
Title:
-----------------------------
65
71
EXHIBIT 1
TO PARTNERSHIP AGREEMENT
DEFINITION OF TERMS IN PARTNERSHIP AGREEMENT
Act. The Delaware Revised Uniform Limited Partnership Act, as amended
and in effect from time to time. See Section 2.2.
Action. See Section 5.11.(D).
Additional Construction Loan. As defined in the Regulations.
Affiliate. As to any specified Person, any other Person that directly
or indirectly through one or more intermediaries controls or is controlled by or
is under common control with the specified Person; provided, however, that for
purposes of this Agreement and regardless of whether the specified Person would
otherwise be deemed an Affiliate for any other purpose or under any other
agreement, the Partnership or any entities controlled by the Partnership shall
not be deemed to be an Affiliate of LParent, Lyondell GP or Lyondell LP or any
entities controlled by LParent, Lyondell GP or Lyondell LP or of CParent, CITGO
GP or CITGO LP or any entities controlled by CParent, or CITGO GP or CITGO LP.
For purposes of this definition the term "control" shall have the meaning set
forth in 17 CFR 230.405.
Affiliated General Partner. In the case of Lyondell LP, the "Affiliated
General Partner" shall mean Lyondell GP. In the case of CITGO LP, the
"Affiliated General Partner" shall mean CITGO GP.
Affiliated Limited Partner. In the case of Lyondell GP, the "Affiliated
Limited Partner" shall mean Lyondell LP. In the case of CITGO GP, the
"Affiliated Limited Partner" shall mean CITGO LP.
Affiliated Partner Group. A General Partner and its Affiliated Limited
Partner.
Agent. See Section 12.15.
Agreed Rate. With respect to any period for which interest is to be
calculated, the Citibank, N.A. "base rate" from time to time in effect for each
day in such period, calculated by multiplying the Citibank, N.A. "base rate" by
the number of days such "base rate" is in effect, determining the sum of the
products obtained thereby and dividing such sum by the number of days in such
period.
Alternate. See Section 3.2.(B).
Annual Meeting. See Section 3.4.(A).
Applicable Usury Laws. See Section 12.11.
Assets. The assets defined as such in the Contribution Agreement
together with all assets provided to the Partnership pursuant to the Related
Agreements.
Exhibit 1, Page 1
72
Asset Value. With respect to any asset, the asset's adjusted basis for
federal income tax purposes, except that the Asset Value of any asset
contributed by a Partner to the Partnership or acquired with funds contributed
by a Partner shall be the fair market value of such asset on the date of
contribution or on any date on which the asset is revalued pursuant to Section
7.1.(C) hereof; provided, however, that the fair market value of the Assets (net
of the Assumed Liabilities) on each such date shall be deemed to be $825
million, reduced, without duplication, (i) by the amount of any payment
described in Section 7.1.(D) and (ii) by the amount of any indemnification
forgone by the Partnership pursuant to the proviso of Section 5.2 of the
Contribution Agreement; and provided further (a) that the fair market value of
the Working Capital on each such date shall be the amount determined pursuant to
Exhibit 6.1(B) and (b) that the fair market value of the assets which are
acquired with funds contributed by a Partner in each such date shall be the
original cost of such assets. Any such adjustments shall be effective on a
prospective basis only.
Auxiliary Committee. See Section 3.10.
Average Participation Percentage. The mathematical average of a
Partner's Participation Percentages, by Calendar Quarter, for any applicable
period.
Blended Rate. For any Calendar Quarter or portion thereof, a fraction
(i) the numerator of which is equal to the aggregate federal income tax
depreciation, amortization or other cost recovery deductions for such period
with respect to all assets and (ii) the denominator of which is equal to the
aggregate adjusted tax basis of the assets on the date such assets were
contributed to the Partnership or, if any adjustment to the Capital Accounts has
occurred pursuant to Section 7.1.(C), the date of the most recent such
adjustment.
Business Day. Any day other than a Saturday, Sunday or other day on
which banks are closed in New York City, New York.
Calendar Quarter. In each year, each calendar quarter.
Capital Account. See Section 7.1.
Capital Budget. See Section 9.2.(B).
Capital Contribution. See Section 6.4.
Capital Enhancement Projects. See Section 9.2.(B).
Cash Balance Amount. See Section 7.5.
CEO. The President and Chief Executive Officer of the Partnership. See
Section 4.5.
CERCLA shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
Chemical Substance shall mean (i) any 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 Environmental Law, as now or hereafter in effect,
or defined or listed as an industrial, toxic, deleterious, harmful,
Exhibit 1, Page 2
73
radioactive, infectious, disease-causing or hazardous substance, material or
Waste under any Environmental Law, as now or hereafter in effect, and (ii)
petroleum or any fraction thereof, asbestos or asbestos-containing material or
polychlorinated biphenyls.
CITGO GP. CITGO Gulf Coast Refining, Inc., a Delaware corporation, the
General Partner that is an Affiliate of CParent. See Section 2.2.
CITGO LP. CITGO Refining Investment Company, an Oklahoma corporation,
the Limited Partner that is an Affiliate of CParent. See Section 2.2.
CITGO Partners. CITGO GP and CITGO LP.
CITGO Partners Option Date Amount. The product of (i) CITGO Partners
Average Participation Percentage for the period beginning on the day following
the In-Service Date and ending on the Option Date times (ii) the remainder of
Option Date Working Capital minus In-Service Date Working Capital.
Closing Date. See Section 2.2.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time and any successor thereto.
Company. LYONDELL-CITGO Refining Company Ltd., a Texas limited
liability company, which was converted into the Partnership as of the date of
this Agreement.
Compensation Committee. See Section 3.10.(A).
Conflict Circumstance. See Section 5.7.
Conflicted General Partner. See Section 5.7.
Contribution Agreement. The agreement dated July 1, 1993 between the
Company and LParent pursuant to which the Refinery Business and certain other
Assets and Working Capital were contributed to the Company by LParent on behalf
of Lyondell Refining Company n/k/a Lyondell GP.
Conversion Date. See Section 2.2.
CParent. CITGO Petroleum Corporation, a Delaware corporation. See
Section 2.2.
Damages. See Section 11.2.(D).
Default. See Section 11.2.(A).
Default Date. See Section 11.2.(C).
Defaulting Partners. Lyondell GP and Lyondell LP, in the case of a
Default by Lyondell GP or Lyondell LP; and CITGO GP and CITGO LP, in the case of
a Default by CITGO GP or CITGO LP.
Exhibit 1, Page 3
74
Depreciation. For each Calendar Quarter or portion thereof, an amount
equal to the federal income tax depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such period.
Notwithstanding the preceding sentence, if the Asset Value (after taking into
account any adjustment pursuant to the proviso of Section 7.1.(C)) of an asset
differs from its adjusted tax basis on the date such asset is contributed or, if
applicable, on the date of any adjustment to Capital Accounts which has taken
place pursuant to Section 7.1.(C), Depreciation for any period shall be an
amount which bears the same ratio to such Asset Value (as adjusted pursuant to
the proviso of Section 7.1.(C)) as the federal income tax depreciation,
amortization or other cost recovery deduction for such period bears to such
adjusted tax basis, except that in the case of any asset that has a zero
adjusted tax basis on either the date of its contribution to the Partnership or
on the date of any adjustment pursuant to Section 7.1.(C), Depreciation for any
period shall be an amount equal to the product of (i) the Asset Value (as
adjusted pursuant to the proviso of Section 7.1.(C)) of such asset on the date
of contribution, or, if applicable, the date of the most recent adjustment to
Capital Accounts pursuant to Section 7.1.(C) and (ii) the Blended Rate.
Distributable Cash. The amount of cash distributable to the Partners as
determined under Section 7.3., and in regard to each Partner.
Distributions. See 6.4.(A)(2).
Environment shall mean 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.
Environmental Law shall mean any legal requirement or permit relating
to (i) the Environment, including pollution, contamination, cleanup,
preservation, protection and reclamation of the Environment; (ii) health or
safety, including the exposure of employees and other Persons to any Chemical
Substance; (iii) the Release or threatened Release of any Chemical Substance,
noxious noise or odor, including investigation, study, assessment, testing,
monitoring, containment, removal, remediation, response, cleanup and abatement
of such Release or threatened Release; and (iv) the management of any Chemical
Substance, including the manufacture, generation, formulation, processing,
labeling, use, treatment, handling, storage, disposal, transportation,
distribution, re-use, recycling or reclamation of any Chemical Substance.
Executive Officers. Those officers of the Partnership then designated
as Executive Officers by Partnership Governance Committee Action.
Fair Market Value. See Section 11.5.(C).
Finance-Control Committee. See Section 3.10(A).
Financing Plan. Certain Partnership plans, as approved by unanimous
actions of the Partnership Governance Committee, setting forth the Partnership's
funding requirements for the Capital Budget and the sources of funds to finance
such requirements.
GAAP. Generally accepted accounting principles.
Exhibit 1, Page 4
75
General Partners. Each Person who executes this Agreement and who is
hereby admitted to the Partnership as a general partner of the Partnership,
unless such General Partner ceases to be a General Partner hereunder or sells,
transfers, forfeits or otherwise disposes of its Interest and is replaced by a
Substitute General Partner in accordance with this Agreement and the Act, and
each Person that becomes a Substitute General Partner, if any, of the
Partnership as provided herein, in such Person's capacity as a general partner
of the Partnership.
Highest Lawful Rate. See Section 12.11.
Indemnified Losses. See Section 5.11.(A)(1).
Indemnified Party. See Section 5.11.(D).
Indemnifying Party. See Section 5.11.(D).
Initial Construction Loan. As defined in the Regulations.
In-Service Date. February 28, 1997, except for the Working Capital
Valuation for which the In-Service Date is March 31, 1997.
In-Service Date Working Capital. The value of the Working Capital on
the In-Service Date determined pursuant to Exhibit 6.1(B).
Insolvent and Insolvency. The Partnership is insolvent if it has ceased
to pay its debts in the ordinary course of business or cannot pay its debts as
they become due or is insolvent within the meaning of the federal bankruptcy
law.
Intended Percentage. See Section 6.6.(A).
Interest. At any point in time, the entire ownership interest of a
Partner in the Partnership at such time. See Section 5.8.
Limited Partner. Each Person who executes this Agreement and who is
hereby admitted to the Partnership as a limited partner of the Partnership,
unless such Limited Partner ceases to be a Limited Partner hereunder or sells,
transfers, forfeits or otherwise disposes of its Interest and is replaced by a
Substitute Limited Partner in accordance with this Agreement and the Act, and
each Person that becomes a Substitute Limited Partner, if any, of the
Partnership as provided herein, in such Person's capacity as a limited partner
of the Partnership.
Liquidation. See Section 11.6.
LParent. Lyondell Chemical Company, a Delaware corporation, formerly
known as Lyondell Petrochemical Company. See Section 2.2.
Lyondell GP. Lyondell Refining Company, a Delaware corporation, the
General Partner that is an Affiliate of LParent.
Lyondell LP. Lyondell Refining LP, LLC, a Delaware limited liability
company, the Limited Partner that is an Affiliate of LParent.
Exhibit 1, Page 5
76
Lyondell Partners. Lyondell GP and Lyondell LP.
Lyondell Partners Option Date Amount. The product of (i) Lyondell
Partners Average Participation Percentage for the period beginning on the first
day following the In-Service Date and ending on the Option Date times (ii) the
remainder of the Option Date Working Capital minus In-Service Date Working
Capital.
Maintenance Capital. Those capital expenditures reasonably required to
fund capital expenditures that are necessary to maintain the Refinery in
substantially the same condition existing on the Closing Date.
Master Transaction Agreement. The agreement so named, dated as of May
5, 1993, among LParent, CParent, Lyondell GP and CITGO LP.
Maximum Amount. See Section 12.11.
Neutral. See Section 11.5.(C)(3).
Nonconflicted General Partner. See Section 5.7.
Nondefaulting Partners. The Partners other than the Defaulting
Partners. See Section 11.2.
Operating Budget. See Section 9.2.(A).
Operating Committee. See Section 3.10.(A).
Option Date. See Section 6.6.(A).
Option Date Payment. See Section 6.6.(C).
Option Date Working Capital. The value of Working Capital on the Option
Date determined pursuant to Section 6.6.
Owners. Lyondell GP and CITGO LP in their capacity as members of the
Company.
Parents. LParent and CParent.
Partners. The General Partners and the Limited Partners on the date of
this Agreement until such Person ceases to be a partner of the Partnership.
Partnership Business. See Section 2.3.
Partnership Governance Committee. The committee of six Representatives
through which the General Partners manage the Partnership. See Section 3.1.(A).
Partnership Governance Committee Action. The formal actions taken by
vote of the Partnership Governance Committee, which is the exclusive method by
which the General Partners manage the Partnership. See Section 3.6.(A).
Exhibit 1, Page 6
77
Participation Percentage. The percentage calculated for each Partner,
from time to time, pursuant to Section 6.4.
Person. Any natural person or any corporation, limited liability
company, partnership, group, joint venture, trust or other entity.
Pledgee Group. See Section 11.1.
Pledgor Group. See Section 11.1.
Product Sales Agreement. The Product Sales Agreement-Refined Products
dated July 1, 1993 between the Company and CITGO Petroleum Corporation, as
amended from time to time.
Profits and/or Losses. For each Calendar Quarterly period or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined for federal income tax purposes in accordance with
Code Section 703(a) (for this purpose, all items of income, gain, loss,
deduction or credit required to be stated separately pursuant to Code Section
703(a)(1) shall be included in Profits or Losses), with the following
adjustments:
(i) any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this definition shall be added to such Profits or
subtracted from such Losses;
(ii) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this definition, shall be subtracted from
such Profits or added to such Losses;
(iii) gain or loss resulting from any disposition of an asset
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Asset Value (as adjusted
pursuant to the proviso in Section 7.1.(C), adjusted to reflect
Depreciation; and
(iv) in lieu of the depreciation, amortization, and other cost
recovery deductions otherwise required to be taken into account in
computing such Profits or Losses, there shall be taken into account
Depreciation.
Profits Interest. The right of any Partner to receive Profits allocated
or cash distributed to such Partner pursuant to Section 7, but not including the
right to participate in or manage the affairs of the Partnership as a Partner,
the right to receive any information or accounting of the affairs of the
Partnership, the right to inspect the books or records of the Partnership or any
other right of a Partner pursuant to this Agreement.
Proper Ratio. With respect to the Capital Account balances of the
Partners at any time, the ratio of the Partners' Participation Percentages at
such time.
Purchase. See Section 11.7.
Exhibit 1, Page 7
78
Purchase Notice. Notice given by the Nondefaulting Partners exercising
their purchase rights. See Section 11.5.(A).
Purchase Offer. See Section 10.3.(C).
Recision Event. See Section 11.8.
Recision Event Notice. See Section 11.8.
Refinery. The Refinery located at 12000 Lawndale in Houston, Texas.
Refinery Business. The Refinery and lube blending facility located in
Birmingport, Alabama and all related assets (of every kind, nature, character
and description, tangible and intangible, real, personal or mixed, wherever
located), businesses, contracts and permits, that are used solely in the
operations of such Refinery and lube blending facility, and all activities
reasonably related or incidental thereto.
Regulations. See Section 2.2.
Related Agreements. Those agreements defined as such in Exhibit 1A to
this Agreement.
Release shall mean 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 CERCLA or any other Environmental Law and any
noxious noise or odor emission.
Representatives. Those persons designated by each General Partner to
serve as such General Partner's representatives on the Partnership Governance
Committee. See Section 3.2.(A).
Second Notice. See Section 10.3.(D).
Secretary. See Section 4.7.
Substitute General Partner. A Person who is admitted as a General
Partner to the Partnership in place of and with the rights of a General Partner.
Substitute Limited Partner. A Person who is admitted as a Limited
Partner to the Partnership in place of and with the rights of a Limited Partner.
TMP. The "tax matters partner" as defined in Section 6231(a)(7) of the
Code. See Section 8.3.(A).
Treasury Regulations. The income tax regulations promulgated by the
Department of Treasury, as amended from time to time. Treasury Regulations
include final and temporary regulations.
Unanimous Partnership Governance Committee Action. See Section 3.8.
Exhibit 1, Page 8
79
U.S. Partnership Return of Income. See Section 8.3.(A).
Vice President. See Section 4.6.
Wholly Owned Subsidiary. As to any Person, a subsidiary of such Person
all of the equity interests of which are owned, directly or indirectly, by such
Person.
Working Capital. The Partnership's current assets minus current
liabilities (excluding the current portion of long-term debt and capital
leases). Current assets and current liabilities will be determined in accordance
with current accounting principles under GAAP as in effect at the Conversion
Date, except (i) that any cash, cash equivalents and short-term investments
included in the capital fund will be excluded and (ii) that inventory will be
carried at its Fair Market Value. The inventory value on the Conversion Date
will be its actual Fair Market Value as determined by Exhibit 6.1.(B) and on
other valuation dates will be valued in accordance with Exhibit 6.1.(B).
Exhibit 1, Page 9
80
EXHIBIT 1A
RELATED AGREEMENTS
TIER 1 RELATED AGREEMENTS
13. Amended and Restated Regulations
14. Performance Guaranty and Control Agreement 15. Contribution Agreement,
including the following exhibits:
15.1. General Warranty Deed (relating to Houston Land) (Exhibit A-1)
15.2. General Warranty Deed (relating to Birmingport Land) (Exhibit A-2)
15.3. Assignment of Real Property Interests (relating to the "Ballpark)
(Exhibit A-3)
15.4. Pipeline Deed, Xxxx of Sale and Assignment of Easements (relating
to the Company Pipelines) (Exhibit (A-4)
15.5. Assignment and Assumption Agreement (between Lyondell and the
Company relating to Assets other than real property) (Exhibit A-5)
15.6. Grants of Easements for Pipelines and Meter Sites (Exhibit B)
16. Crude Supply Agreement
17. Supplemental Supply Agreement
18. Product Sales Agreement Refined Products , CITGO
19. Inter-Plant Agreements:
19.1. Company Feedstock Purchase Agreements:
(1) Heavy Pyrolysis Gasoline
(2) Light Pyrolysis Gasoline
(3) C5 Raffinate
(4) OP Hydrogen
Exhibit 1A, Page 1
81
(5) MeOH Hydrogen
(6) Pyrolysis Gas Oil
(7) Toluene
(8) Methanol
(9) RAFF II
(10) RAFF II Isomerate
(11) MTBE
(12) Isopentane/Heavy Py Mix
(13) Ethylene
19.2. Company Product Sales Agreement , Lyondell:
(1) OP , 400
(2) OP , 700
(3) Mixed Propylene
(4) Refinery Normal Butane
(5) Refinery Propane
Exhibit 1A, Page 2
82
(6) Alkylation Normal Butane
(7) Alkylation Propane
(8) Benzene
(9) Toluene
19.3. Tolling Agreement
TIER 2 RELATED AGREEMENTS
20. Employee Transfer and Benefits Agreement
21. Intellectual Property Rights Agreement
22. Trademark Assignment Agreement
23. Trademark License Agreement
24. Tradename Licensing Agreement
25. Software Agreement
26. Terminal and Storage Agreement
27. Mont Belvieu Storage and Pipeline Agreement
28. Marketing Services Agreement , Aromatics
29. Paraffinic Lubricants Base Oil Sales Agreement
30. Naphthenic Lubricants, White Mineral Oils and Specialty Oils Sales
Agreement
31. Lubricant Facility Operating Agreement
32. Manufacturing Services Agreement
33. Employee Services Agreement
34. Administrative Services Agreement
35. Product Sales Agreement MTBE , Lyondell and CITGO
36. Refinery Office Lease
37. Exchange Agreement
38. Assignment and Assumption Agreement - CITGO and LCR (Lubricants)
Exhibit 1A, Page 3
83
EXHIBIT 6.4
CONVERSION
CAPITAL DATE
CONTRIBUTION PARTICIPATION
PERCENTAGES
Lyondell LP 784,315,812 48.65
Lyondell GP 162,828, 154 10.10
$ 947,143,966 58.75%
--------------- ---------
CITGO LP 648,866,453 40.25
CITGO GP 16,120,906 1.00
--------------- ---------
$ 664,987,359 41.25%
--------------- ---------
$ 1,612,131,325 100.00%
=============== =========
