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EXHIBIT 10.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
of
HOVENSA L.L.C.
between
PDVSA V.I., INC.
and
XXXX OIL VIRGIN ISLANDS CORP.
Dated as of October 30, 1998
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions; Usage........................................................1
1.2 Interpretation............................................................1
ARTICLE II
ORGANIZATION
2.1 Formation of the Company..................................................2
2.2 Name......................................................................2
2.3 Purposes..................................................................2
2.4 Principal Place of Business...............................................3
2.5 Registered Office; Filings................................................3
2.6 Ownership of Property.....................................................3
2.7 Liability of Members......................................................3
2.8 Term......................................................................3
ARTICLE III
COMPANY CAPITAL
3.1 Percentage Interests......................................................4
3.2 Capital Contributions.....................................................4
3.3 Additional Contributions..................................................4
3.4 Defaulting Member.........................................................4
3.5 Advances by a Non-Defaulting Member.......................................4
3.6 Cure of an Investment Default.............................................5
3.7 Suspension of Rights; Change in Percentage Interest.......................5
ARTICLE IV
ALLOCATIONS
4.1 Profits...................................................................8
4.2 Losses....................................................................8
4.3 Special Allocations.......................................................8
4.4 Curative Allocations.....................................................10
4.5 Loss Limitation..........................................................10
4.6 Other Allocation Rules...................................................11
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4.7 Tax Allocation; Code Section 704(c)......................................11
ARTICLE V
DISTRIBUTIONS
5.1 Distributions............................................................12
5.2 Certain PDVSA V.I. Distributions Directed to HOVIC.......................12
5.3 No Priority..............................................................12
5.4 Form of Distributions....................................................12
5.5 Distributions Upon Liquidation...........................................12
5.6 Restricted Distributions.................................................13
5.7 Third Party Restrictions on Certain Cash Distributions...................13
ARTICLE VI
MANAGEMENT AND OPERATION OF THE COMPANY
6.1 Executive Committee......................................................14
6.2 Officers of the Company..................................................15
6.3 Certain Specified Matters Requiring Executive Committee Approval.........16
6.4 Meetings of the Executive Committee; Quorum..............................20
6.5 Compensation, Reimbursement and Expenses.................................21
6.6 Operating Restrictions...................................................21
6.7 Operations Advisory Committee............................................21
6.8 Secondment of Personnel..................................................22
6.9 Liability of the Executive Committee.....................................22
6.10 Duties...................................................................22
6.11 Deadlock of Executive Committee..........................................23
6.12 Budget and Business Plan; Annual Refinery Program........................23
6.13 Marketing................................................................25
6.14 Employment Policy........................................................25
ARTICLE VII
CERTAIN OTHER AGREEMENTS OF THE MEMBERS
7.1 Ratification and Authorization...........................................26
7.2 Reasonable Best Efforts..................................................26
7.3 Company Records; Tax Matters.............................................26
7.4 Reports..................................................................28
7.5 Company Information; Confidentiality.....................................29
7.6 Insurance................................................................30
7.7 Election of LIFO Accounting Method.......................................30
7.8 Completion of Xxxxx Project..............................................30
7.9 Storage and Blending Facilities..........................................31
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ARTICLE VIII
TRANSFERS AND RESIGNATIONS
8.1 Restriction on Transfers of Interests....................................31
8.2 Permitted Transfers of Interests.........................................32
8.3 Conditions to Transfers of Interests.....................................34
8.4 Change of Control........................................................35
8.5 Unauthorized Change of Control...........................................36
8.6 Resignation..............................................................37
ARTICLE IX
DISSOLUTION
9.1 Dissolution Events.......................................................37
9.2 Winding-Up...............................................................37
9.3 Negative Capital Accounts................................................39
9.4 Rights of the Members....................................................39
9.5 Notice of Dissolution....................................................39
9.6 Termination of the Company...............................................39
9.7 Reasonable Time for Winding-Up...........................................39
9.8 Contribution to New Company..............................................39
ARTICLE X
INDEMNIFICATION
10.1 Indemnification..........................................................40
10.2 Duration.................................................................42
ARTICLE XI
MISCELLANEOUS
11.1 Governing Law............................................................42
11.2 Submission to Jurisdiction; Appointment of Agent for Service of
Process; Waiver of Objection to Venue....................................42
11.3 Binding Effect...........................................................43
11.4 Third Party Rights.......................................................43
11.5 Notices..................................................................43
11.6 Waiver and Amendments....................................................44
11.7 Headings.................................................................44
11.8 Entire Agreement.........................................................44
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
HOVENSA L.L.C.
This Amended and Restated Limited Liability Company Agreement
(the "Agreement") of HOVENSA L.L.C. is made and entered into, effective as of
October 30, 1998, by and among PDVSA V.I., Inc., a U.S. Virgin Islands
corporation ("PDVSA V.I."), Xxxx Oil Virgin Islands Corp., a U.S. Virgin Islands
corporation, ("HOVIC") and HOVENSA L.L.C., a U.S. Virgin Islands limited
liability company (the "Company"). PDVSA V.I. and HOVIC are referred to herein
individually as a "Member" and, collectively, as the "Members."
WITNESSETH:
WHEREAS, the Company was formed as a limited liability company
pursuant to the provisions of the Act on June 30, 1998;
WHEREAS, the Members desire to continue the Company, and to
have the Company own and operate the Refinery;
WHEREAS, the Members desire that the Company undertake and
complete the Xxxxx Project; and
WHEREAS, PDVSA V.I., HOVIC and the Company have entered into
the Asset Purchase and Contribution Agreement, pursuant to which PDVSA V.I. will
purchase from HOVIC an undivided interest in certain assets relating to the
Refinery and both PDVSA V.I. and HOVIC will contribute (or cause to be
contributed) to the Company each of their respective interests in such assets.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members, intending to be
legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions; Usage. Unless the context shall otherwise
require, terms used herein and not defined herein shall have the meanings
assigned to them in the Glossary attached hereto, which is hereby incorporated
in the terms of this Agreement.
1.2 Interpretation. In this Agreement and in the Schedules,
Exhibits, Annexes and Appendices hereto:
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(a) the Table of Contents and headings are for convenience
only and shall not affect the interpretation of this Agreement;
(b) unless otherwise specified, references to Articles,
Sections, clauses, Schedules, Exhibits, Annexes and Appendices are
references to Articles, Sections and clauses of, and Schedules,
Exhibits, Annexes and Appendices to, this Agreement;
(c) references to any document or agreement, including this
Agreement, shall be deemed to include references to such document or
agreement as amended, supplemented or replaced from time to time in
accordance with its terms and (where applicable) subject to compliance
with the requirements set forth therein; and
(d) references to any Party to this Agreement or any other
document or agreement shall include its successors and permitted
assigns.
ARTICLE II
ORGANIZATION
2.1 Formation of the Company. PDVSA V.I. and HOVIC have formed
and established the Company as a limited liability company under the Act.
Effective as of the Closing, the rights, duties and liabilities of the Members
as such shall be as provided in this Agreement and, except as herein otherwise
expressly provided, in the Act.
2.2 Name. The name of the Company shall be HOVENSA L.L.C.,
under which all business affairs of the Company shall be conducted, except that
the Executive Committee may (i) change the name of the Company or (ii) elect to
conduct the business of the Company under another name; provided that any such
name shall contain the words "limited liability company," the abbreviation
"L.L.C." or the designation "LLC". The Company shall not include in its name,
nor use in connection with its operations, any name, trademark, service xxxx,
logo or advertising slogan of any Member without the express written consent of
both Members.
2.3 Purposes. (a) The Company is formed for the object and
purpose of, and the nature of the business to be conducted by the Company is,
engaging in any lawful act or activity for which limited liability companies may
be formed under the Act and engaging in any and all activities necessary or
incidental to the foregoing. In furtherance of its purpose, (i) the Company
shall have and may exercise all of the powers now or hereafter conferred by the
Act and the other laws of the U.S. Virgin Islands on limited liability companies
formed under the Act and (ii) the Company shall have the power to do any and all
acts necessary, appropriate, proper, advisable, incidental or convenient to or
for the protection and benefit of the Company.
(b) Without limiting the permissible scope of the Company's
activities for purposes of the Act, the Members have agreed that the initial
business of the Company shall consist of the following activities:
(i) own and operate the Assets and the Refinery Business,
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(ii) construct a xxxxx with an approximate minimum
capacity of 45,000 barrels per day and related
facilities substantially in accordance with the Xxxxx
Project EPC Proposals and make such improvements to
the Refinery as are necessary to allow the Refinery
to process heavy sour crude oil in a deep conversion
mode (the xxxxx, related facilities and improvements
collectively, the "Xxxxx Project"),
(iii) enter into long-term crude supply agreements for the
purchase of certain crude oil from Petromar and to
purchase other feedstocks as may be required in
operating the Refinery Business, and
(iv) market and sell the products produced by the Refinery
Business (collectively, the "Company Business").
2.4 Principal Place of Business. The Company's principal place
of business shall be located in St. Croix, U.S. Virgin Islands, or such other
location as the Executive Committee may from time to time determine. The Company
may have such other places of business as the Executive Committee may determine
to be appropriate.
2.5 Registered Office; Filings. The Company shall maintain a
registered office at the offices of 0 Xxxxxx Xxxx, Xx. Xxxxx, X.X. Xxxxxx
Xxxxxxx 00000, or at such other location as the Executive Committee may from
time to time determine. The Company shall maintain a registered agent for
service of process in the U.S. Virgin Islands. The Executive Committee shall
cause to be executed, filed and published all such certificates, notices,
statements or other instruments required under the laws of any jurisdiction.
2.6 Ownership of Property. The Interest of each Member shall
be personal property for all purposes. All Property and interests in Property
owned by the Company shall be deemed owned by the Company as an entity, and no
Member individually shall have any ownership of such Property or interest in
Property except as a Member in the Company.
2.7 Liability of Members. No Member shall have any personal
liability whatsoever in its capacity as a Member for the debts, liabilities,
contracts or other obligations of the Company, except to the extent of Capital
Contributions paid to the Company by such Member or as otherwise provided in the
Act. Except as otherwise provided by this Agreement or applicable law, each
Member shall be liable only to make the Capital Contributions specified in
Sections 3.2 and 3.3, and shall not be required to make any other contributions
or to lend or advance funds to the Company for any purpose.
2.8 Term. The Company was formed upon the filing of the
Certificate with the office of the Lieutenant Governor of the U.S. Virgin
Islands on June 30, 1998, and shall exist in perpetuity until its termination
pursuant to this Agreement.
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ARTICLE III
COMPANY CAPITAL
3.1 Percentage Interests. (a) Upon the terms and subject to
the conditions of this Agreement, the relative Interests of PDVSA V.I. and HOVIC
in the Company will, upon execution of this Agreement, be equal to their
Percentage Interests.
(b) The Interest of PDVSA V.I. is subject to a Lien to secure
the payment in full of amounts due under the Note and the Contingency Amount
Note, all as more fully provided in the Security Agreement.
3.2 Capital Contributions. Upon the terms and subject to the
conditions of this Agreement and the Asset Purchase and Contribution Agreement,
each of PDVSA V.I. and HOVIC shall contribute to the Company the assets and
liabilities required to be contributed to the Company pursuant to Section 2.2 of
the Asset Purchase and Contribution Agreement.
3.3 Additional Contributions. If at any time the Members
unanimously determine that the Company requires additional capital and that such
additional capital cannot or should not be obtained through third-party debt
financing, (i) the Members shall authorize the Executive Committee to make one
or more capital calls up to an aggregate amount specified by the Members, (ii)
the Executive Committee shall, as it deems appropriate, notify the Members in
writing of the amount of additional capital required at any given time and (iii)
each Member shall within thirty (30) days of such notice make a capital
contribution (an "Additional Contribution") to the capital of the Company in an
amount equal to the required additional capital multiplied by such Member's
Percentage Interest in the Company; provided, however, that it is the Members'
current expectation that additional capital contributions to the Company by the
Members will not be required and provided, further, that Additional
Contributions shall not be Distributable Cash. All Additional Contributions
shall be made in cash unless the Members mutually agree otherwise.
3.4 Defaulting Member. If a Member (a "Defaulting Member")
fails to make any Capital Contribution required pursuant to Section 3.2 or 3.3
and such default continues unremedied for five (5) Business Days after the
Executive Committee or one of the non-defaulting Members notifies the Defaulting
Member of such failure, such failure shall be deemed to constitute an
"Investment Default". The amount of an Investment Default (the "Default Amount")
shall accrue interest at the Default Rate, as in effect from time to time,
payable quarterly by the Defaulting Member to the Advancing Member or the
Company, as the case may be, from the date of the Investment Default until the
date the Default Amount and any accrued and unpaid interest is paid in full or
converted to a Capital Contribution pursuant to Section 3.7(d).
3.5 Advances by a Non-Defaulting Member. (a) Upon the
occurrence of an Investment Default, a non-defaulting Member (the "Advancing
Member") may send the Executive Committee and the Defaulting Member a notice
(the "Advancing Notice") that it intends to advance all or a portion of the
Default Amount as a loan. The Advancing Member
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shall advance to the Company (within ten (10) Business Days after the delivery
of the Advancing Notice to the Executive Committee and the Defaulting Member)
the entire amount indicated in the Advancing Notice (the "Advance Amount") if
the Defaulting Member has not cured the Investment Default within five (5)
Business Days after the delivery of the Advancing Notice by the Advancing
Member.
(b) With regard to each advance in respect of an Investment
Default, an Advancing Member shall be entitled to take all (or its pro rata
portion if there is more than one Advancing Member) of the Defaulting Member's
share of Distributions (such Distributions otherwise due to the Defaulting
Member and paid to an Advancing Member are referred to hereinafter as
"Redirected Distributions") until the net aggregate Redirected Distributions
received by such Advancing Member equals (A) its Advance Amount, plus (B) two
hundred fifty percent (250%) of its Advance Amount (the "Default Premium"), plus
(C) interest on its Advance Amount at the Default Rate accruing from the date of
the advance until the date on which such Advancing Member has recovered all
amounts owing to it in respect of such advance. Any Redirected Distributions
shall be applied first against accrued interest on the Advance Amount, second
against any Default Premium and third against the Advance Amount, with any
excess being remitted to the Defaulting Member. If any Advancing Member has
advanced multiple Advance Amounts on different dates, the Redirected
Distributions received by such Member shall be applied first against accrued
interest on each Advance Amount, second against any Default Premium on such
Advance Amount and third against the Advance Amounts in each case in the order
in which such Advance Amounts were advanced, with the excess being remitted to
the Defaulting Member.
(c) Subject to Section 3.7(d), for Capital Account purposes,
an Advance Amount shall be considered a loan from the Advancing Member to the
Defaulting Member followed by a contribution by the Defaulting Member of the
Advance Amount to the Company. For Distribution and Capital Account purposes, a
Redirected Distribution shall be considered a Distribution to the Defaulting
Member followed by the Defaulting Member's payment of that amount to the
Advancing Member in respect of the aforementioned loan.
3.6 Cure of an Investment Default. To cure an Investment
Default, the Defaulting Member shall pay (i) to each Advancing Member in the
manner set forth in Section 3.5(b), an amount equal to (A) its Advance Amount,
plus (B) the Default Premium, plus (C) interest on its Advance Amount at the
Default Rate from the date of the advance to the date of repayment, in each case
to the extent not previously recovered by such Advancing Member pursuant to
Section 3.5(b), and (ii) to the Company, an amount equal to (A) the Default
Amount, to the extent not advanced by the non-defaulting Members, plus (B)
interest on such amount at the Default Rate from the date of default to the date
of the repayment, in each case to the extent not recovered by the Company
pursuant to Section 3.7(a). All such payments to the Company shall be applied
first against accrued interest on the Default Amount and second against the
Default Amount.
3.7 Suspension of Rights; Change in Percentage Interest. (a)
For so long as an Investment Default has occurred and is continuing, the
Defaulting Member shall not be entitled
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to any Distributions and the Distributions to which the Defaulting Member
otherwise would have been entitled (i) first, shall be allocated to the
Advancing Members pursuant to Section 3.5(b), (ii) second, after all amounts due
to Advancing Members under Section 3.5(b) have been paid in full, shall be paid
to the Company pursuant to Section 3.6(ii), to be applied first against accrued
interest on the Default Amount and then against the Default Amount, and (iii)
third, after all amounts due to the Advancing Members under Section 3.5(b) and
to the Company under Section 3.6(ii) have been paid in full, any remaining
Distributions shall be remitted to the Defaulting Member. For so long as an
Investment Default by PVDSA V.I. has occurred and is continuing during the
Restricted Period, PDVSA V.I. shall not be entitled to any Distributions and,
the Distributions to which PDVSA would have been entitled (i) first, shall be
applied to any unpaid amounts due under the Note and Contingency Amount Note,
pursuant to Section 5.2, (ii) second, after all unpaid amounts owed with respect
to the Note and Contingency Note under Section 5.2 have been paid in full, shall
be allocated to the Advancing Members pursuant to Section 3.5(b), (iii) third,
after all amounts due to Advancing Members under Section 3.5(b) and with respect
to the Note and Contingency Amount Note under Section 5.2 have been paid in
full, shall be paid to the Company pursuant to Section 3.6(ii), to be applied
first against accrued interest on the Default Amount and then against the
Default Amount and (iv) fourth, after all amounts due to Advancing Members under
Section 3.5(b), with respect to the Note and Contingency Amount Note under
Section 5.2 and to the Company under Section 3.6(ii) have been paid in full, any
remaining Distributions shall be remitted to PDVSA V.I.
(b) For so long as a Member is a Defaulting Member or has
committed a material breach of Article VIII which remains uncured, such Member's
Representatives shall not be entitled to vote, nor shall the vote of such
Member's Representatives be required, with respect to any matters requiring a
vote of the Executive Committee pursuant to this Agreement; provided, however,
that such Member's Representatives shall retain their rights for thirty (30)
days under Article VI with respect to the matters set forth in Section
6.3(a)(i), (ii), (iii), (iv) (but only if the assets in question have a Fair
Market Value of more than $25,000,000), (v), (vi), (vii), (xviii), (xix) and
(xxiii) following which thirty (30) day period such Member's Representatives
shall retain their rights under Article VI with respect only to the matters set
forth in Section 6.3(a)(i), (vii), (xix) and (xxiii) (but only in connection
with a decision to permanently shut down the Refinery).
(c) If an Event of Default occurs under the Note or the
Contingency Amount Note, and is continuing, PDVSA V.I.'s Representatives shall
not be entitled to vote, nor shall the vote of PDVSA V.I.'s Representatives be
required, with respect to any matters requiring a vote of the Executive
Committee pursuant to this Agreement; provided, however, that PDVSA's
Representatives shall retain their rights under Article VI with respect to the
matters set forth in Section 6.3(a)(i), (ii), (iii), (iv) (but only if the
assets in question have a Fair Market Value of more than $25,000,000), (v),
(vi), (vii), (xviii), (xix) and (xxiii) and, provided further, that if (i) the
default giving rise to such Event of Default has continued or is continuing for
a period of more than thirty (30) days or (ii) there is at any time prior to the
end of such thirty (30) day period a material or anticipatory breach by the
seller under either Crude Oil Supply Agreement, PDVSA V.I. shall retain only
those rights under Article VI with respect to the matters set forth in
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Section 6.3(a)(i), (vii), (xix) and (xxiii) (but only in connection with a
decision to permanently shut down the Refinery).
(d) If (i) an Investment Default has occurred and is
continuing for a period of more than thirty (30) days or (ii) all amounts
payable with respect to the loan made by an Advancing Member under Section
3.5(b) have not been repaid in full within twelve (12) months of the payment by
an Advancing Member of an Advance Amount to the Company, then such Advancing
Member may, on ten (10) days notice (the "Contribution Notice") to the Executive
Committee and the Defaulting Member, elect to (A) have any Advancing Amount paid
by it after the date of such notice treated as a capital contribution to the
Company rather than a loan to the Defaulting Member or (B) assign to the
Company, as consideration for a capital contribution, all of its right, title
and interest in and to the outstanding portion of any Advance Amount previously
made as a loan (including all outstanding principal and interest, but excluding
Default Premium) as specified in such Contribution Notice, whereupon (1) such
Advance Amount (including all interest but excluding Default Premium accrued
thereon) and the corresponding loan deemed to have been made by the Advancing
Member to the Defaulting Member under Section 3.5(c) shall be canceled and (2)
an amount equal to the principal of and interest (but excluding Default Premium)
accrued on such Advance Amount shall be credited, for book and tax purposes, to
the Capital Account of the Advancing Member assigning such Advance Amount, and
an amount equal to the principal and interest (but excluding Default Premium)
accrued on such Advance Amount shall be debited from the Capital Account of the
Defaulting Member. Upon such election, the Advancing Member shall have its
Percentage Interest increased to reflect the payment of such capital
contribution and the Defaulting Member's Percentage Interest shall be reduced as
provided in Section 3.7(f).
(e) If a Member has committed a material breach of Article
VIII which remains uncured, or the circumstances described in clauses (i) or
(ii) of the proviso to Section 3.7(c) have occurred and are continuing, the
consent of the breaching Member or PDVSA V.I. (as the case may be) shall not be
required in order for the Members to authorize the Executive Committee to call
for Additional Contributions pursuant to Section 3.3 and such breaching Member's
or PDVSA V.I's (as the case may be) vote shall not be required in order for the
Executive Committee to notify Members of a call for Additional Contributions.
If, under such circumstances, the Executive Committee makes a call for
Additional Contributions and the breaching Member or PDVSA V.I. (as the case may
be) fails to meet such call within (30) days of the Executive Committee notice
contemplated by Section 3.3, the non-Defaulting Member shall make all or a
portion of the Defaulting Member's Additional Contribution; provided, however,
that under such circumstances the non-Defaulting Member may not make an
Advancing Notice. Upon such contribution, the non-Defaulting Member's Percentage
Interest shall be increased to reflect the payment of such capital contribution
and the Defaulting Member's Percentage Interest shall be reduced as provided in
Section 3.7(f).
(f) Upon delivery of a Contribution Notice pursuant to Section
3.7(d), or the payment by the non-defaulting Member to the Company of all or a
portion of the Defaulting Member's Additional Contribution pursuant to Section
3.7(d) or (e), the Advancing Member's Percentage Interest shall be adjusted by
increasing the Percentage Interest of such Advancing
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Member (and making a corresponding reduction in the Percentage Interest of the
Defaulting Member) to a new percentage the amount of which shall be calculated
to equal a fraction, the numerator of which is X and the denominator of which is
Y, where (i) X equals the sum of (1) the Capital Account of the Advancing Member
as of the Effective Time and (2) the aggregate amount contributed by the
Advancing Member in respect of all requests for Additional Contributions under
Section 3.3 or Section 3.7(e) prior to such date and (3) the aggregate amount of
(and accrued interest, if any, on) the Advance Amount so paid or assigned to the
Company and any Advance Amount and accrued interest thereon previously paid or
assigned to the Company by the Advancing Member making such payment or
assignment (in the case of capital contributions and Advance Amount, deflated to
January 1, 1999 dollars based on the Implicit GDP Price Deflater published
quarterly by the U.S. Department of Commerce) and (ii) Y equals the sum of (1)
the Capital Accounts of the Members as of the Effective Time and (2) the
amounts, if any, contributed by each of the Defaulting Member and by the
Advancing Member in respect of all requests for Additional Contributions under
Section 3.3 or Section 3.7(e) prior to such date and (3) the aggregate principal
amount of (and accrued interest, if any, on) the Advance Amount so paid or
assigned to the Company and any Advance Amount and accrued interest thereon
previously assigned to the Company by either Member (in the case of capital
contributions and Advance Amount, deflated to January 1, 1999 dollars based on
the Implicit GDP Price Deflater published quarterly by the U.S. Department of
Commerce).
ARTICLE IV
ALLOCATIONS
4.1 Profits. After giving effect to the special allocations
set forth in Sections 4.3 and 4.4, Profits for any Allocation Year shall be
allocated to the Members in proportion to their Percentage Interests.
4.2 Losses. After giving effect to the special allocations set
forth in Sections 4.3 and 4.4 and subject to Section 4.5, Losses for any
Allocation Year shall be allocated to the Members in proportion to their
Percentage Interests.
4.3 Special Allocations. The following special allocations
shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, notwithstanding any other provision of
this Article IV, if there is a net decrease in Company Minimum Gain during any
Allocation Year, each Member shall be specially allocated items of Company
income and gain for such Allocation Year (and, if necessary, subsequent
Allocation Years) in an amount equal to such Member's share of the net decrease
in Company Minimum Gain, determined in accordance Regulations 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 each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section
4.3(a) is intended to comply with the minimum gain chargeback
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requirement in Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other
provision of this Article IV, if there is a net decrease in Member Nonrecourse
Debt Minimum Gain attributable to a Member Nonrecourse debt during any
Allocation Year, each Member who has a share of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of Company income and gain for such Allocation Year (and, if
necessary, subsequent Allocation Years) in an amount equal to such Member's
share of the net decrease in Member Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 4.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of the Member as quickly as possible, provided that an
allocation pursuant to this Section 4.3(c) shall be made only if and to the
extent that the Member would have an Adjusted Capital Account Deficit after all
other allocations provided for this Article IV have been tentatively made as if
this Section 4.3(c) were not in this Agreement.
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Allocation Year which is in excess of
the sum of (i) the amount such Member is obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Member shall be specially allocated items of Company income and gain
in the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 4.3(d) shall be made only if and to the extent that
such Member would have a deficit Capital Account in excess of such sum after all
other allocations provided for in this Article IV have been made as if Section
4.3(c) and this Section 4.3(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Allocation Year shall be specially allocated to the Members in proportion to
their respective Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Allocation Year shall be specially allocated to the Member
who bears the economic risk of loss with respect to the Member Nonrecourse Debt
to which such Member Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
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(g) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in
complete liquidation of such Member's interest in the Company, the amount of
such adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis of the asset) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member
to whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) Allocations Relating to Taxable Issuance of Company
Interests. Any income, gain, loss or deduction realized as a direct or indirect
result of the issuance of Interests by the Company to a Member (the "Issuance
Items") shall be allocated among the Members so that, to the extent possible,
the net amount of such Issuance Items, together with all other allocations under
this Agreement to each Member shall be equal to the net amount that would have
been allocated to each Member if the Issuance Items had not been realized.
4.4 Curative Allocations. The allocations set forth in
Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.3(f), 4.3(g) and 4.5 (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Regulations. It is the intent of the Members that, to the extent possible,
all Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain,
loss or deduction pursuant to this Section 4.4. Therefore, notwithstanding any
other provision of this Article IV (other than the Regulatory Allocations), the
Tax Committee shall make such offsetting special allocations of Company income,
gain, loss or deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 4.1, 4.2,
and 4.3(h).
4.5 Loss Limitation. Losses allocated pursuant to Section 4.2
shall not exceed the maximum amount of Losses that can be allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end of any
Allocation Year. In the event some but not all of the Members would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 4.2, the limitations set forth in this Section 4.5 shall be
applied on a Member by Member basis and Losses not allocable to any Member as a
result of such limitation shall be allocated to the other Members in accordance
with the positive balances in such Member's Capital Accounts so as to allocate
the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d)
of the Regulations.
4.6 Other Allocation Rules. (a) Profits, Losses and any other
items of income, gain, loss or deduction shall be allocated to the Members
pursuant to this Article IV as of the last day of each Fiscal Year, provided
that, Profits, Losses and such other items shall also be
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allocated at such times as the Gross Asset Values of Company Property are
adjusted pursuant to the definition of "Gross Asset Value" in Article I.
(b) For purposes of determining the Profits, Losses, or any
other items allocable to any period, Profits, Losses, and any such other items
shall be determined on a daily, monthly, or other basis, as determined by the
Tax Committee, using any permissible method under Code Section 706 and the
Regulations thereunder.
(c) The Members are aware of the income tax consequences of
the allocations made by this Article IV and hereby agree to be bound by the
provisions of this Article IV in reporting their shares of Company income and
loss for income tax purposes. Nothing herein will limit the right of the Members
to file a notice of inconsistent treatment under Section 6222(b) of the Code.
(d) Solely for purposes of determining a Member's
proportionate share of the "excess nonrecourse liabilities" of the Company
within the meaning of Regulations Section 1.752-3(a)(3), the Members' interests
in Company profits are in proportion to their Percentage Interests.
(e) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Tax Committee shall endeavor to treat Distributions pursuant to
Section 5.1 as having been made from the proceeds of a Nonrecourse Liability or
a Member Nonrecourse Debt only to the extent that such distributions would not
cause or increase an Adjusted Capital Account Deficit for any Member.
4.7 Tax Allocation; Code Section 704(c). (a) For U.S. Virgin
Islands income tax purposes, items of income, gain, loss, deduction and credit
shall be allocated to the Members in accordance with the allocations of the
corresponding items under this Article IV, except that, in accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
with respect to any Property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such Property to the Company for
U.S. Virgin Islands income tax purposes and its initial Gross Asset Value
(computed in accordance with the definition of Gross Asset Value) using the
traditional method with curative allocations pursuant to the Regulations under
Section 704(c) of the Code. In the event the Gross Asset Value of any Company
asset is adjusted pursuant to subparagraph (ii) of the definition of Gross Asset
Value, subsequent allocations of income, gain, loss, and deduction with respect
to such asset shall take account of any variation between the adjusted basis of
such asset for U.S. Virgin Islands income tax purposes and its Gross Asset Value
in the same manner as under Section 704(c) of the Code. Any elections or other
decisions relating to such allocations shall be made by the Tax Committee in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 4.7 are solely for purposes of U.S. Virgin
Islands income taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
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ARTICLE V
DISTRIBUTIONS
5.1 Distributions. (a) Subject to Section 5.1(b) and Section
5.7, Distributions for each Distribution Period shall be equal to the amount of
Distributable Cash calculated with respect to such Distribution Period pursuant
to the Distribution Protocol. Distributions shall be made to the Members in
accordance with their Percentage Interests as follows: the first Distribution
shall be made in respect of the period commencing on the Closing Date and ending
six months after the last day of the calendar quarter in which the Closing Date
falls (the "Initial Period"). Subsequent distributions (other than Liquidation
Distributions) shall be made in respect of each subsequent six (6) month period
(each, together with the Initial Period, a "Distribution Period"). All
Distributions (other than Liquidation Distributions) shall be made forty-five
(45) days (or, if such day is not a Business Day, on the Business Day
immediately preceding such day) after the end of the relevant Distribution
Period (each a "Distribution Date").
(b) The Executive Committee may make such other Distributions
as it deems necessary and appropriate.
(c) PDVSA V.I.'s right to receive Distributions as a Member of
the Company is pledged to HOVIC as security for the payment in full of amounts
due under the Note and the Contingency Amount Note, all as more fully provided
in the Security Agreement.
5.2 Certain PDVSA V.I. Distributions Directed to HOVIC.
Notwithstanding Section 5.1, so long as the Note or the Contingency Amount Note
is outstanding, all unpaid amounts due under the Note or the Contingency Amount
Note on or prior to such Distribution Date (up to but not exceeding an amount
equal to PDVSA V.I.'s share of the relevant Distribution) shall be paid directly
to HOVIC, with any excess paid to PDVSA V.I. For Distribution and Capital
Account purposes, any such payment shall be considered a Distribution to PDVSA
V.I. followed by PDVSA V.I.'s payment of that amount to HOVIC in respect of the
Note or the Contingency Amount Note, as appropriate. All payments in respect of
the Note and the Contingency Amount Note pursuant to this Section 5.2 shall be
paid in the following order of priority: (i) expenses due under the Note, (ii)
interest due under the Note, (iii) principal of the Note, (iv) expenses due
under the Contingency Amount Note, (v) interest due under the Contingency Amount
Note, and (vi) principal of the Contingency Amount Note.
5.3 No Priority. Except as otherwise provided in this
Agreement, there shall be no priority of one or more of the Members over the
other Members as to any Distributions.
5.4 Form of Distributions. Except as agreed to by the Members,
all Distributions shall be made by wire transfer of immediately available funds.
5.5 Distributions Upon Liquidation. Notwithstanding the
foregoing provisions of Article V, distributions in liquidation of the Company
shall be made in accordance with Section 9.2(a).
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5.6 Restricted Distributions. Notwithstanding any provision to
the contrary contained in this Agreement, the Company shall not make a
distribution to any Member on account of its Interest in the Company if such
distribution would violate Section 1406 of the Act or other applicable law.
5.7 Third Party Restrictions on Certain Cash Distributions.
The parties recognize that financing agreements entered into with third parties,
(e.g., for working capital or the Xxxxx Project) may restrict the level of
Distributions otherwise required by Section 5.1, and that accordingly, payments
on the Contingency Amount Note may be less than would otherwise be the case
under the terms of this Agreement and the Contingency Amount Note. In the event
and during the period such restrictions apply, (a) the Company shall maintain a
notional account representing an amount equal to two (2) times the amount of
Excess Distributions calculated pursuant to the Contingency Amount Note that
would have been paid absent such third-party restrictions (such amount of Excess
Distributions, the "Restricted Amount") plus interest on the Restricted Amount
at a rate equal to the average rate earned by the Company on its cash and cash
equivalents during the period during which such Excess Distribution would have
been made but for such third-party restriction (the "Notional Account Rate") and
(b) interest under the Contingency Amount Note with respect to the Restricted
Amount shall accrue at the Notional Account Rate rather than the Note Rate.
Whenever there is a balance in such account and, under the terms of any
applicable third party agreement, all or a portion of such balance represented
by such notional account may be paid out to Members, the Company shall pay an
amount representing the amount available in such account to Members in
accordance with their Percentage Interests in the Company, as soon as
practicable, provided that so long as any amount is payable in respect of the
Contingency Amount Note as provided in this Section 5.7, the amount otherwise
payable to PDVSA V.I. (up to but not exceeding an amount equal to PDVSA V.I.'s
then obligation on the Contingency Amount Note) shall be paid directly to HOVIC
(including interest thereon at the Notional Account Rate as provided in clause
(b) above). For Distribution and Capital Account purposes, the portion of any
such payment allocable to PDVSA V.I. and paid directly to HOVIC shall be
considered a Distribution to PDVSA V.I. followed by PDVSA V.I.'s payment of that
amount to HOVIC in respect of the Contingency Amount Note. Such amount payable
in respect of the Contingency Amount Note shall be applied first to expenses due
under the Contingency Amount Note, second to interest on the Contingency Amount
Note and, third, to principal of the Contingency Amount Note. The foregoing
provision shall apply notwithstanding the maturity of the Contingency Amount
Note. If the notional account has a positive balance on the maturity date of the
Contingency Amount Note, such amount shall then be fixed and thereafter such
fixed amount (plus interest accrued thereon at a rate equal to the Notional
Account Rate) shall be payable to the Members by the Company as a Distribution
as soon as permitted pursuant to such restrictions, provided, however, that the
amount otherwise payable to PDVSA V.I. shall be paid to HOVIC whenever permitted
by such third party agreement or by virtue of termination of such third party
agreement, notwithstanding the maturity of the Contingency Amount Note. For
Distribution and Capital Account purposes, the portion of any such payment
allocable to PDVSA V.I. and paid directly to HOVIC shall be considered a
Distribution to PDVSA V.I. followed by PDVSA V.I.'s payment of that amount to
HOVIC.
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ARTICLE VI
MANAGEMENT AND OPERATION OF THE COMPANY
6.1 Executive Committee. (a) The power and authority to manage
the Company's business shall be vested in the Members. To facilitate the
management of the Company by the Members, a committee of the Members (the
"Executive Committee") is hereby established. The Members agree to exercise
their authority to manage the Company's business only through action of the
Executive Committee. Except as otherwise provided by this Agreement, the
Executive Committee shall have the full right and authority (acting on behalf of
the Members) to manage the business and affairs of the Company. Except as
otherwise provided in this Agreement (including Sections 3.7, 6.1(b) and
6.3(b)), decisions of the Executive Committee shall require the approval of at
least two (2) of PDVSA V.I.'s Representatives and two (2) of HOVIC's
Representatives at a validly constituted meeting of the Executive Committee.
Unless authorized in writing by the Executive Committee or in a Related
Agreement, no Member or Representative, and no officer, employee or agent of any
Member, shall directly or indirectly act as agent of the Company for any
purpose, engage in any transaction, make any commitment, enter into any contract
or incur any obligation in the name of the Company or in any other way hold
itself out as acting for or on behalf of the Company. Any attempted action in
contravention of the preceding sentence shall be null and void ab initio, and
not binding upon the Company, unless ratified or authorized in writing by the
Executive Committee.
(b) The Executive Committee shall consist of six (6)
individuals (the "Representatives"), appointed to act as representatives of
their appointing Members. PDVSA V.I. shall have the right to appoint three (3)
Representatives, and HOVIC shall have the right to appoint three (3)
Representatives; provided, however, that if any Member's Percentage Interest
shall be increased pursuant to Section 3.5(f) to 66 2/3% or greater and for so
long as its Percentage Interest continues to be more than 66 2/3%, (i) such
Member shall be entitled to appoint an additional representative to the
Executive Committee and (ii) all decisions of the Executive Committee during the
period that such Member's additional representative serves on the Executive
Committee (other than with respect to the matters set forth in Section
6.3(a)(i), (vii), (xix) and (xxiii) (but only in connection with a decision to
permanently shut down the Refinery)) shall require a simple majority vote of
those entitled to vote on the Executive Committee without the requirement of
approval by at least two Representatives appointed by each Member. Each Member
shall have the right to remove or replace one or more of its appointed
Representatives at any time and in its sole discretion. If a Representative is
dismissed, dies, resigns, or becomes disabled or incapacitated, the Member that
appointed such Representative shall promptly appoint a replacement. The names
and addresses of the initial Representatives to be appointed by the Members
pursuant to this Section shall be notified to the Company and the other Members
on the date hereof.
(c) Each Representative shall be the agent of the Member that
designated such Representative. Accordingly, to the fullest extent permitted by
law, (i) each Representative shall act (or refrain from acting) with respect to
the business and affairs of the Company solely in
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accordance with the instructions of the Member that designated such
Representative and (ii) no Representative shall owe (or be deemed to owe) any
duty (fiduciary or otherwise) to the Company or to any Member other than the
Member that designated such Representative. In connection with the determination
of any and all matters presented to the Executive Committee, the Company and
each Member waive, to the fullest extent permitted by law and to the extent
provided in this Agreement, any claim or cause of action against the other
Member or any Representative appointed by the other Member that could be
asserted for breach of fiduciary duty or duty of loyalty.
6.2 Officers of the Company.
(a) The day-to-day operations of the Company shall be the
responsibility of the chief operating officer, who shall be assisted by the
deputy chief operating officer. The initial chief operating officer and deputy
chief operating officer are listed on Schedule 6.2(a) (the "Initial Officers").
The chief operating officer shall have authority to appoint the other members of
senior management of the Company, whose appointment shall be subject to the
approval of the Executive Committee. In addition, the Executive Committee may,
from time to time, designate one or more Persons to be officers of the Company.
(b) The chief operating officer and the deputy chief operating
officer shall be elected by the Executive Committee, in accordance with its
normal quorum and voting requirements (or, in the case of the Initial Officers,
appointed by the Members), and shall hold office for a term of two years;
provided, however, that the term of any chief operating officer or deputy chief
operating officer holding office prior to the completion of the Xxxxx Project
shall have a term lasting until the later of (i) the second anniversary of the
date such chief operating officer is elected or (ii) the completion of the Xxxxx
Project. If, during any chief operating officer's or deputy chief operating
officer's term, either Member notifies the other Member that it desires to
dismiss the chief operating officer, the deputy chief operating officer or any
individual performing substantially the same functions, the Members will, unless
the other Member agrees to such dismissal (in which case the chief operating
officer, the deputy chief operating officer or such individual shall be
dismissed), consult and attempt to remedy the problems giving rise to such
Member's desire to dismiss the chief operating officer, the deputy chief
operating officer or such individual. At any time following the date six (6)
months after such notice, the notifying Member may unilaterally effect the
dismissal of the chief operating officer, the deputy chief operating officer or
such individual by notice to him and such other Member.
(c) If the chief operating officer or deputy chief operating
officer is dismissed, dies, resigns, or becomes disabled or incapacitated, the
Executive Committee shall, as promptly as practicable, elect a new chief
operating officer or deputy chief operating officer; provided, however, that
during any period that there is no chief operating officer, the day-to-day
operations of the Company shall be the responsibility of such other individual
as the Executive Committee shall designate or failing such designation the
deputy chief operating officer.
(d) Notwithstanding Section 6.2(b), if any chief operating
officer identified on Schedule 6.2(a) or subsequently elected pursuant to this
Section 6.2 is an employee or former
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employee of any Member or an Affiliate of any Member, then the other Member
shall have the right to appoint the deputy chief operating officer subject to
the consent of the first Member (which consent shall not be unreasonably
withheld). The deputy chief operating officer shall serve at the direction of
the Executive Committee; provided, however, that in addition to reporting to and
assisting the chief operating officer, the deputy chief operating officer shall
have significant line management responsibilities as specified by the Executive
Committee.
(e) Any officer of the Company elected, approved or designated
by the Executive Committee shall have such authority and perform such duties as
the Executive Committee may, from time to time, delegate to them. The Executive
Committee may assign titles to particular officers, and, unless the Executive
Committee decides otherwise, the assignment of such title shall constitute the
delegation to such officer of the authority and duties that are normally
associated with that office for a corporation organized under the General
Corporation Law of the U.S. Virgin Islands, subject to any specific delegation
of authority and duties made to such officer by the Executive Committee pursuant
to this Section 6.2. Each officer shall hold office for the term for which such
officer is designated or until his successor shall be duly designated and shall
qualify, or until his death, resignation or removal as provided in this
Agreement. Any Person may hold any number of offices. Any officer of the Company
may be removed as such, with or without cause, by the chief operating officer
subject to the approval of the Executive Committee or by the Executive Committee
in each case whenever in their judgment the best interests of the Company will
be served thereby.
6.3 Certain Specified Matters Requiring Executive Committee
Approval. (a) Subject to Sections 3.7 and 6.3(b), the approval by the Executive
Committee at a validly constituted meeting thereof shall be required to cause or
permit the Company to do any of the following ("Fundamental Decisions"):
(i) amend its Certificate;
(ii) request that the Members make Additional
Contributions pursuant to Section 3.3;
(iii) make any material change in the nature of
its business, including with respect to the
Xxxxx Project;
(iv) sell, lease or dispose of assets (other than
refined petroleum products and byproducts)
having a value in excess of $2,500,000 (or
such other amount as may be determined by
the Executive Committee), if authorized in
an Annual Budget, or $500,000 (or such other
amount as may be determined by the Executive
Committee), if not authorized in an Annual
Budget, except in each case in connection
with a liquidation in accordance with
Article IX;
(v) enter into any agreement or group of
agreements with a single purchaser for the
sale of refined products with a term longer
than
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12 months or that contemplate sales in
excess of $40,000,000 (or such other amount
as may be determined by the Executive
Committee), except in connection with a
liquidation in accordance with Article IX;
(vi) create any subsidiary or Affiliate of the
Company or enter into any joint venture or
partnership with, or invest in (other than
by way of an Eligible Investment), another
Person;
(vii) merge with or into, or consolidate with or
convert into, another Person or sell, lease,
exchange or alienate all or substantially
all of the assets of the Company;
(viii) adopt any Business Plan or Annual Budget or
amend any Business Plan or Annual Budget in
any material respect;
(ix) obtain, amend, modify or terminate any
material permit, government approval or
other similar right, other than as required
by any applicable Authority;
(x) make, amend or modify any appropriation or
make any capital expenditure (or group of
related expenditures) involving in excess of
$2,500,000 (or such other amount as may be
determined by the Executive Committee), if
authorized in an Annual Budget, or $500,000
or such other amount as may be determined by
the Executive Committee, if not authorized
in an Annual Budget;
(xi) enter into, amend, modify or terminate (x)
any raw materials purchase agreement or
commodities transaction or group of
agreements or transactions with a single
counterparty pursuant to which the Company's
commitments can reasonably be expected to
exceed $120,000,000 (or such other amount as
may be determined by the Executive
Committee) or that is for a term longer than
12 months, or (y) any lease, or any purchase
of materials and supplies, pursuant to which
its commitments can reasonably be expected
to exceed $2,500,000 (or such other amount
as may be determined by the Executive
Committee), if authorized in an Annual
Budget, or $500,000, if (or such other
amount as may be determined by the Executive
Committee), if not authorized in an Annual
Budget;
(xii) commence or settle any litigation,
arbitration or administrative proceeding
brought by or on behalf of, or against, it
involving any claims or payments in excess
of $250,000 net of insurance proceeds (or
such other amount as may be determined by
the
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Executive Committee) or which may result in
a material change in the Company's
administrative, procurement, hiring or
accounting practices or procedures;
provided, however, that the consent of a
Representative shall not be required in
connection with any such litigation,
arbitration or administrative proceeding in
which the Member which appointed such
Representative or any of its Affiliates is a
party adverse to the Company;
(xiii) fix the salary and other compensation of the
chief operating officer or the Company's
officers, or enter into, materially amend or
terminate any employee benefit plan relating
to Company employees;
(xiv) adopt, or make material changes to, policies
and practices regarding procurement and
contracting, internal control, delegation of
authority, cash management, treasury or
human resources or accounting principles;
(xv) appoint or dismiss any of its officers or
the chief operating officer (other than
dismissals made in accordance with Section
6.2(b)), or adopt any significant policies
or instructions for the chief operating
officer;
(xvi) appoint, dismiss or replace its independent
auditors or external accounting and tax
consultants;
(xvii) enter into any arrangements for the
borrowing of money, or issue any evidence of
Indebtedness (including any guarantee of the
Indebtedness of another) for any term or for
any amount, repay any Indebtedness before
its stated maturity (except for mandatory
prepayments) or permit the encumbrance of
any of its Property with any material Lien
other than Permitted Encumbrances;
(xviii) amend, modify or terminate any material
provision of either of the Crude Oil Supply
Agreements or the Product Sales Agreement;
(xix) dissolve, liquidate or take any action that
constitutes a Voluntary Bankruptcy, except
in accordance with this Agreement;
(xx) sell or otherwise dispose of an Eligible
Investment at a loss which exceeds $50,000;
(xxi) enter into any contract or commitment or
take any other action or series of actions
which constitute a material deviation from
the Annual Budget or Business Plan;
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(xxii) enter into, amend, modify in a material way
or terminate any collective bargaining
agreement, or other agreement which has a
direct impact on the individuals employed in
the operations of the Company including,
without limitation, any agreement with the
unions representing the Company's employees;
(xxiii) shut down, cease production, or materially
reduce or restrict production levels, of the
Refinery for a period in excess of 48 hours
other than in the ordinary course of
business or because of an Event of Force
Majeure;
(xxiv) admit any Person as a member of the Company
under the Act;
(xxv) issue or purchase any interest in the
Company;
(xxvi) take any other action or make any
determination as specified by this Agreement
or the Executive Committee as requiring
Executive Committee approval;
(xxvii) amend, modify, or withdraw any material
portion of the application by HOVIC for a
RCRA Part B Operating Permit as such
application pertains to the Refinery's
surface impoundments, or to otherwise
terminate or modify currently planned
changes to such surface impoundments so that
such surface impoundments comply with
minimum technology requirements for surface
impoundments which receive hazardous waste
contained in 42 USC 3004(o) or 3005(j); or
(xxviii) adopt, amend or modify any Annual Refinery
Program.
(b) Notwithstanding the provisions of Sections 3.7, 6.1,
6.3(a) and 6.4, no action shall be taken by the Company, the Members, the
officers of the Company, the Executive Committee or the Managing Representatives
with respect to the Company's entry into, or amendment, modification, extension
or termination of, or the waiver, compromise, assertion or enforcement of any
claim or right with respect to, any contract or other arrangement between the
Company and a Member or between the Company and an Affiliate of a Member (or any
director or officer of a Member or Affiliate of a Member), whether or not the
other Member (or any director or officer of the other Member or Affiliate of the
other Member) is also a party thereto, without the consent of the other Member
(or the unanimous consent of the Representatives appointed by the other Member);
provided, however, that for so long as any Member is (or is deemed to be) a
Defaulting Member or has committed any other Material Breach which remains
uncured, such Member's consent shall only be required to the extent that the
relevant contract or arrangement is not within the ordinary course of the
Company's Business and requires payment of more than $10,000,000 by or to the
Company. The Representatives of the Member having, or whose Affiliate has, a
direct interest in the matter shall not be permitted to vote with respect to any
such action and the presence of the other Members entitled to vote thereon (or
of the
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Representatives appointed by such other Members) shall be sufficient to
constitute a quorum for any vote with respect to such action. Any such action
shall be taken in good faith and, to the extent reasonably practicable,
following consultation with the other Members.
(c) Notwithstanding any provision of this Agreement to the
contrary, no action by the Executive Committee or any Member shall be required
in order to authorize the Company to enter into and perform any of the Related
Agreements nor shall any action be required in order to authorize the Company to
renew any Related Agreement; provided that such renewal shall be pursuant to an
automatic renewal provision under the terms of such Related Agreement or shall
be on terms no less favorable to the Company than those prevailing prior to such
renewal. Each Related Agreement shall, for purposes of this Agreement, be deemed
to be on an Arm's-length Basis.
6.4 Meetings of the Executive Committee; Quorum. (a) The
Executive Committee shall hold regular meetings not less than four (4) times per
year, unless the Executive Committee otherwise agrees. Special meetings of the
Executive Committee may be held at any time and shall be called by the secretary
of the Executive Committee (the "Secretary"), who shall be appointed in
accordance with Section 6.4(e), at the written request of any Representative.
Meetings of the Executive Committee shall be held at such locations as the
Executive Committee shall determine from time to time. Any business may be
transacted, and any Company action may be taken, at any regular or special
meeting of the Executive Committee at which a quorum is present, whether such
business or proposed action was stated in the notice of such meeting or not.
(b) Meetings, whether regular or special, shall be convened by
the Executive Committee by a written notice from the Secretary (or, if the
Secretary fails or refuses to make such written notice, by either Managing
Representative) sent to all Representatives at least ten (10) days prior to the
date of the meeting, at their last address as formally notified to the Company
and as indicated in the records of the Company. However, if any Representative
notifies the Secretary in writing within three (3) days of receipt of such
notice that he shall be unable to attend such meeting, and requests that the
meeting be rescheduled, then the Secretary shall reschedule such meeting to the
next available date mutually agreeable to the Representatives, but in no event
later than fourteen (14) days following the originally scheduled date. The
notice of an Executive Committee meeting shall include the date, time and venue,
and agenda for the meeting. An Executive Committee meeting shall be considered
duly constituted, even if a notice of such meeting has not been delivered, if a
quorum is present, and all Representatives that are present agree on the matters
to be submitted for consideration at such a meeting or sign a written waiver of
notice.
(c) Any action required or permitted to be taken at any
meeting of the Executive Committee may be taken without a meeting if all of the
Representatives entitled to vote consent to such action in writing, and the
writing or writings are filed with the minutes of the proceedings of the
Executive Committee. Representatives may participate in a meeting of the
Executive Committee by means of a conference telephone or similar communications
equipment by means
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of which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
(d) Subject to Sections 3.7 and 6.3(b), a meeting of the
Executive Committee, whether regular or special, will be considered validly
constituted and a quorum shall exist when at least two (2) of the
Representatives appointed by PDVSA V.I. and at least two (2) of the
Representatives appointed by HOVIC are present.
(e) The Executive Committee may elect to appoint two (2)
managing Representatives (the "Managing Representatives") to oversee the
business and affairs of the Executive Committee (including, without limitation,
through the exercise of any rights or authorities assigned to a Managing
Representative in any agreement entered into by the Company). If the Executive
Committee so elects, one Managing Representative shall be selected by a majority
of the Representatives appointed by PDVSA V.I., and one shall be selected by a
majority of the Representatives appointed by HOVIC. If Managing Representatives
have been appointed, Executive Committee meetings shall be chaired alternately
by each Managing Representative. An individual chosen by the Executive Committee
shall serve as Secretary of the Executive Committee meetings, and shall draw up
the minutes of each meeting, which shall include the names of all those present,
the matters considered and the decisions taken. The minutes shall be signed by
all Representatives present at the meeting (or, if Managing Representatives have
been appointed, by both Managing Representatives) and shall be entered into the
minute book of the Company.
6.5 Compensation, Reimbursement and Expenses. (a) Except as
otherwise provided in this Agreement or a written agreement entered into between
a Member and the Company, no Member or Representative shall receive any
compensation for services rendered to or on behalf of the Company, nor shall any
Member receive any interest with respect to its Capital Contributions or the
balance in its Capital Account or be reimbursed for any expenses incurred by
such Member on behalf of the Company.
(b) Expenses incurred by a Representative in connection with
attending Executive Committee meetings and related activities shall be borne by
the Member that appointed such Representative.
6.6 Operating Restrictions. All Property in the form of cash
shall be invested for the benefit of the Company in Eligible Investments, unless
otherwise approved by the Executive Committee. No such cash shall be commingled
with the funds of any other Person, including the Members.
6.7 Operations Advisory Committee. To assist in resolving
issues that arise during operations of the Refinery, an operations advisory
committee (the "Operations Advisory Committee") composed of an equal number of
designees of PDVSA V.I. and HOVIC (who may or may not be Representatives) will
be established. The Company will provide to the Operations Advisory Committee
all information necessary for such committee to be kept fully informed
concerning the operations of the Refinery. The Operations Advisory Committee
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will meet at least monthly and will report to the Executive Committee. The
Operations Advisory Committee will be subject to such rules and procedures as
may be adopted from time to time by the Executive Committee.
6.8 Secondment of Personnel. Subject to the reasonable
approval of the chief operating officer, each Member shall be permitted at any
given time to have seconded up to fifteen (15) management or professional
personnel to the Company on a full time basis. Subject to the requirements of
the Company, the number of such secondees may be adjusted by action of the
Executive Committee. If the chief operating officer determines, in his
reasonable judgment, that any individual designated for secondment or already
seconded to the Company is not suitable for employment, the chief operating
officer may refuse to accept such individual, or require the Member who has
seconded such individual to the Company to withdraw and replace such individual,
as the case may be, or to take such other steps as he may deem necessary or
expedient. The Company may require secondees to sign an appropriate
confidentiality agreement to protect confidential and proprietary information
from disclosure to others; provided, however, that no such agreement shall
restrict the right of a secondee to make disclosures to the Member seconding
such secondee or, subject to Section 7.5, its Affiliates. Personnel identified
by the seconding Member as being on short-term secondment shall not be or be
deemed to be regular employees of the Company and shall not accrue or be
eligible for any benefit plans of the Company, and shall continue to be
compensated by the Member who seconded them, provided that such Member shall be
reimbursed by the Company at the same level, including normal fringe benefit and
reasonable overhead costs, as if such seconded personnel had been employed by
the Company. Personnel identified by the seconding Member as being on long-term
secondment shall become regular employees of and be compensated by the Company
and shall accrue and be eligible for any benefit plans of the Company. Seconded
personnel will, during the term of secondment, perform in accordance with the
direction of the chief operating officer.
6.9 Liability of the Executive Committee, etc. . Neither the
Executive Committee, any Representative, the Operations Advisory Committee or
any member of the Operations Advisory Committee shall be liable, responsible or
accountable for damages or otherwise to the Company or any Member for any act or
failure to act on behalf of the Company within the scope of the authority
conferred on it by this Agreement or by applicable law, unless such act or
omission involved fraud or a knowing violation of the law, or was the result of
willful misconduct or gross negligence.
6.10 Duties. To the extent that, at law or in equity, a
Member, a Representative or an officer of the Company has duties (including
fiduciary duties) and liabilities relating thereto to the Company or to any
Member, such Person shall not be liable to the Company or to any Member for its
good faith reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they eliminate or restrict the duties and
liabilities of a Member, a Representative or an officer of the Company otherwise
existing at law or in equity, are agreed by the Members to replace, to the
fullest extent permitted by law, such other duties and liabilities of such
Member, Representative or officer.
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6.11 Deadlock of Executive Committee. (a) If the Executive
Committee, after a reasonable period of discussion at a duly constituted meeting
or meetings, is unable to resolve any issue before it, the resolution of which
is necessary for the continued long-range economic and strategic operation of
the Refinery Business or the completion of the Xxxxx Project in a commercially
reasonable manner, (i) a Special Meeting of the Executive Committee to further
consider the issue shall be scheduled, (ii) consideration of the matter shall be
suspended until such Special Meeting and (iii) the matter shall be referred to a
special committee (the "Deadlock Committee") which shall be composed of one (1)
Representative appointed by each of PDVSA V.I. and HOVIC (or, if Managing
Representatives have been appointed, the Managing Representatives) and which
shall meet within seven (7) days to discuss the matter. The Deadlock Committee
shall consider ways in which the deadlock can be resolved and/or develop
alternatives that the Executive Committee can consider. At the Special Meeting
to discuss the issue, the Deadlock Committee shall make a report to the
Executive Committee and the Executive Committee shall again consider the matter;
provided, however, that the Executive Committee shall not be bound by the
findings of the Deadlock Committee.
(b) If the Executive Committee, after a reasonable period of
discussion at a Special Meeting called pursuant to Section 6.11(a), is unable to
resolve the issue that necessitated such meeting, (i) a subsequent Special
Meeting to further consider the issue shall be scheduled, (ii) consideration of
the matter shall be suspended until such Special Meeting and (iii) the chief
executive officer of Hess and the President of the Manufactura y Mercadeo
division of PDVSA Petroleo y Gas, S.A. (the "Senior Deadlock Committee") shall
meet within twenty (20) days to discuss the matter. At the subsequent Special
Meeting to discuss the issue, the Senior Deadlock Committee shall make a report
to the Executive Committee and the Executive Committee shall adopt any proposal
agreed to by both members of the Senior Deadlock Committee.
(c) During any period in which a deadlock continues, the
Members through the Executive Committee shall continue to conduct the Refinery
Business in good faith and to the best of their abilities consistent with past
practices, the Annual Budget and the current Business Plan.
6.12 Budget; Business Plan; Annual Refinery Program. (a) The
chief operating officer shall submit annually to the Executive Committee at
least ninety (90) days prior to the start of each Fiscal Year after the first
full Fiscal Year (i) a proposed budget (the "Proposed Budget") for the
forthcoming Fiscal Year including a projected income statement which shall show
in reasonable detail the revenues and expenses projected for the Company for the
forthcoming Fiscal Year and a projected cash flow statement which shall show in
reasonable detail the receipts and disbursements projected for the Company for
the forthcoming Fiscal Year and the amount of any projected corresponding cash
deficiency or surplus, and any contemplated incurrence of indebtedness of the
Company, (ii) a proposed Business Plan (the "Proposed Business Plan") for the
Fiscal Year covered by the Proposed Budget and the succeeding four Fiscal Years
in substantially the same or greater detail as the Initial Business Plan and
(iii) a capital budget which, for each year, shall include any capital projects
included in the previous year's capital budget but not yet completed. Such
Proposed Budget and Proposed Business Plan shall be prepared on a basis
consistent with the Company's audited financial statements. If such
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Proposed Budget or such Proposed Business Plan is approved by the Executive
Committee pursuant to Section 6.3(a), then such Proposed Budget or such Proposed
Business Plan, as the case may be, shall be considered adopted and shall
constitute the "Approved Annual Budget" or the "Approved Business Plan," as the
case may be, for all purposes of this Agreement and shall supersede any previous
Annual Budget or Business Plan, as the case may be. If a Proposed Budget or
Proposed Business Plan is not approved by the Executive Committee pursuant to
Section 6.3(a), then the Members shall cause their Representatives to cooperate
in good faith and confer with the chief operating officer and other senior
officers of the Company for the purpose of attempting to arrive at a Proposed
Budget or Proposed Business Plan, as the case may be, that will be approved by
the Executive Committee pursuant to Section 6.3(a).
(b) If, notwithstanding the foregoing procedures, on January 1
of any Fiscal Year no Proposed Budget for such Fiscal Year has been approved by
the Executive Committee pursuant to Section 6.3(a), then the Annual Budget for
the prior Fiscal Year, adjusted (without duplication) to reflect increases or
decreases resulting from the following events, shall govern until such time as
the Executive Committee approves a new Proposed Budget:
(i) the operation of escalation or de-escalation
provisions in Contracts in effect at the time of
approval of the prior Fiscal Year's Annual Budget
solely as a result of the passage of time or the
occurrence of events beyond the control of the
Company to the extent such Contracts are still in
effect;
(ii) elections made in any prior Fiscal Year under
Contracts contemplated by the Annual Budget for the
prior Fiscal Year regardless of which party to such
Contracts makes such election;
(iii) increases or decreases in expenses attributable to
the annualized effect of employee additions or
reductions during the prior Fiscal Year contemplated
by the Annual Budget for the prior Fiscal Year;
(iv) changes in interest expense attributable to any
indebtedness of the Company;
(v) increases in operating and overhead expenses in an
amount equal to (A) the total of operating and
overhead expenses reflected in the Annual Budget for
the prior Fiscal Year multiplied by (B) the increase
in the Consumer Price Index for the prior Fiscal
Year;
(vi) the anticipated incurrence of costs during such
Fiscal Year for any legal, accounting and other
professional fees or disbursements in connection with
events or changes not contemplated at the time of
preparation of the Annual Budget for the prior Fiscal
Year;
(vii) decreases in expense attributable to non-recurring
items reflected in the prior Fiscal Year's Annual
Budget;
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(viii) increases in expenses attributable to the effects of
Fundamental Decisions made in the prior Fiscal Year
and not otherwise provided for above;
(ix) the anticipated incurrence of costs during such
Fiscal Year to comply with any Legal Requirements not
contemplated at the time of preparation of the Annual
Budget for the prior Fiscal Year; and
(x) such other adjustments as may be unanimously agreed
by the Executive Committee.
Any budget established pursuant to this Section 6.12(b) is
herein referred to as a "Default Budget". In the event that the Executive
Committee is unable to unanimously agree on the application of any adjustment to
be made pursuant to clauses (i) through (ix) above, such adjustment shall be
conclusively determined by the Appraiser.
(c) If a Proposed Business Plan is submitted for approval
pursuant to Section 6.12(a) and is not approved in accordance with Section
6.12(a), the initial Business Plan or the Business Plan most recently approved
by the Executive Committee pursuant to Section 6.12(a) shall remain in effect as
the Approved Business Plan; provided that, if a Proposed Budget is approved
pursuant to Section 6.12(a) and the corresponding Proposed Business Plan is not
so approved, the Approved Business Plan then in effect shall be deemed to be
amended so that the Fiscal Year therein corresponding to the Fiscal Year for
which such Annual Budget has been approved shall be consistent with such Annual
Budget.
(d) Not later than October 31 of each year (the "Allocation
Date"), the Executive Committee will establish the volume of each category of
refined petroleum products to be produced by the Company during the following
calendar year (the "Annual Refinery Program"), in accordance with the provisions
of Exhibit B.
(e) The Refinery Business shall be conducted in accordance
with the Business Plan, the Annual Budget and the Annual Refinery Program then
in effect and the policies, strategies and standards established by the
Executive Committee. The Executive Committee and the officers and employees of
the Company shall implement such Business Plan, Annual Budget and Annual
Refinery Program.
6.13 Marketing. Unless otherwise agreed by the Executive
Committee in connection with the approval of any Annual Budget or Business Plan,
the quantities of the Products identified in Schedule 6.13 shall be reserved for
sale by the Company to third parties on both a term basis and a spot basis. In
addition, the Company shall in all cases have the exclusive right to market and
sell all coke and sulfur products produced at the Refinery.
6.14 Employment Policy. The Company shall comply with the
provisions of the Concession Amendment, including with respect to employment
matters.
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ARTICLE VII
CERTAIN OTHER AGREEMENTS OF THE MEMBERS
7.1 Ratification and Authorization. Except as otherwise
provided in Section 10.1(c), all actions taken in good faith by or on behalf of
the Company in furtherance of the interests of the Company prior to the date of
the execution of this Agreement are hereby expressly authorized, approved,
ratified and confirmed in all respects.
7.2 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each Member shall, and shall cause the Company to,
use its reasonable best efforts to take or cause to be taken all actions and to
do or cause to be done all things necessary or desirable in order to consummate
the transactions and fulfill all obligations contemplated by or set forth in
this Agreement.
7.3 Company Records; Tax Matters. (a) The Members acknowledge
that the books and records of the Company shall be kept in accordance with GAAP
at the offices of the Company in the U.S. Virgin Islands.
(b) The Members intend that the Company will be classified as
a partnership for U.S. Virgin Islands and any other applicable income tax
purposes. To the extent necessary, the Company will make any election necessary
to obtain treatment consistent with the foregoing.
(c) The Company shall elect pursuant to Section
6231(a)(1)(B)(ii) of the Code to apply the provisions of Subtitle F, Chapter 63,
Subchapter C of the Code to the Company. The Members agree that HOVIC is hereby
appointed as the initial "Tax Matters Partner" of the Company, as such term is
defined in Section 6231(a)(7) of the Code (or in similar provisions under other
applicable law) and shall serve in such capacity through the first two full
taxable years of the Company. Thereafter, at any time during the first 60 days
of a taxable year, PDVSA V.I., by written notice to HOVIC, may elect to be the
Tax Matters Partner for the current taxable year and the next succeeding taxable
year. Thereafter, the Tax Committee shall select one of the Members to serve as
the Tax Matters Partner for a specified term. If the Tax Committee cannot agree
as to which Member shall be the Tax Matters Partner, the Members shall alternate
serving as Tax Matters Partner for a term of two taxable years each, beginning
with the Member that has not served as Tax Matters Partner for the most recent
taxable year. In the event of any change of Tax Matters Partner, (i) the Member
serving as Tax Matters Partner for a given taxable year shall (unless such
Member ceases to be a Member) continue as Tax Matters Partner with respect to
all matters concerning that year, (ii) except as otherwise provided in the
Services Agreement, if the Member serving as Tax Matters Partner for the
immediately preceding two taxable years has also been responsible for tax
administration and other tax compliance functions, such Member may, or, upon the
request of the other Member, shall, relegate the tax administration and other
tax compliance functions to the new Tax Matters Partner, by giving notice of
such decision within 15 days of the selection of a new Tax Matters Partner and
(iii) if there is a change in the Tax Matters Partner under this section, the
Members will cooperate to ensure that such change is effective under the
applicable regulations of Section 6231 of the Code; provided that such Member
shall cooperate fully with the new Tax Matters Partner, including (without
limitation)
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sharing of working papers and other internal documents necessary to ensure a
smooth transition of functions. The Tax Matters Partner (i) shall take such
action as may be necessary to cause each other Member to become a "notice
partner" within the meaning of Section 6223 of the Code, (ii) may not take any
action contemplated by Sections 6222 through 6232 of the Code without the
express consent of the other Members, and (iii) shall be subject to the
instructions and control of the Tax Committee with respect to any and all
actions contemplated under this Agreement. The Tax Matters Partner shall notify
the Tax Committee, within ten (10) Business Days after it receives (i) any
notice from the Internal Revenue Service (or any foreign tax authority), of any
administrative proceedings with respect to an examination of, or proposed
adjustments to, Company items or (ii) any notice from any state or local tax
authority of any material matter with respect to the Company. Any other Member
may notify the Tax Matters Partner of such Member's intention to represent
itself, or to cause independent tax counsel or accountants to represent it, in
connection with any such examination, proceeding or proposed adjustment. In the
event that any other Member notifies the Tax Matters Partner of its intention to
represent itself, or to cause independent tax counsel or accountants to
represent it, in connection with any such examination, proceeding or proposed
adjustment, the Tax Matters Partner agrees, upon request, to supply such Member
and its tax counsel or accountants with copies of all written communications
received by the Tax Matters Partner with respect thereto, together with such
other information as may be reasonably requested in connection herewith. The Tax
Matters Partner further agrees, in the event of such separate representation, to
cooperate with such Member and its tax counsel or accountants in connection with
such separate representation. The Tax Matters Partner shall notify the Tax
Committee prior to submitting a request for administrative adjustment on behalf
of the Company.
(d) The Tax Matters Partner is hereby irrevocably authorized
and instructed by all other Members to take, and shall take, such action as may
be required under the Code and the Regulations issued thereunder (or under other
applicable law) to cause the Company to be taxable as a partnership for U.S.
Virgin Islands income tax purposes.
(e) The Tax Committee shall be responsible for the preparation
and filing of any income tax returns of the Company.
(f) The Tax Matters Partner shall not be liable, responsible
or accountable for damages or otherwise to the Company or any other Member for
any act or failure to act in its capacity as Tax Matters Partner on behalf of
the Company or another Member unless such act or omission constitutes fraud,
willful misconduct or gross negligence.
(g) If a Member intends to file a notice of inconsistent
treatment under Section 6222(b) of the Code, such Member shall, thirty (30) days
prior to the filing of such notice, notify the Tax Committee Members of such
intent and the manner in which such Member's intended treatment of a partnership
item may be inconsistent with the treatment of that item by the Company.
(h) If a Member intends to file a request pursuant to Section
6227 of the Code for an administrative adjustment of partnership items, such
Member shall, thirty (30) days prior to
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the filing of such request, notify the Tax Committee Members of such intent and
describe in reasonable detail such request.
(i) The Company shall elect to be treated as a partnership for
U.S. federal income tax purposes. HOVIC is hereby authorized to execute and file
evidence of such election as may be required by the U.S. Internal Revenue
Service, including Form 8832 or any successor form, on the Company's behalf.
Such filings shall be submitted to the Tax Committee for its review and comments
prior to their filing with the U.S. tax authorities. Nothing in this provision
shall constitute or be construed as constituting a submission by Company or any
Member to the tax jurisdiction of the United States.
7.4 Reports. (a) As early as practicable, but in no event
later than thirty (30) days after the close of each fiscal quarter of the
Company, the Company shall deliver to all Members a detailed income statement, a
cash flow statement and balance sheet for the Company for such fiscal quarter
and as of the end of such fiscal quarter, prepared in accordance with GAAP and
certified by the Company as fairly presenting the financial condition and
results of operations of the Company at and for the periods indicated therein.
(b) As early as practicable, but in no event later than thirty
(30) days after the end of each Fiscal Year, the Company shall deliver to all
Members unaudited financial statements for the Company for such year prepared in
accordance with GAAP. As early as practicable, but in no event later than
seventy-five (75) days after the end of each Fiscal Year, the Company shall
deliver to all Members financial statements for the Company for such year
prepared in accordance with GAAP, audited by a nationally recognized certified
public accounting firm selected by the Executive Committee. The Members
acknowledge that the Company may reflect under "push down" accounting the Assets
contributed by HOVIC on the Company's financial statements at a value different
than that assigned to the Assets contributed by PDVSA VI. In that event, the
Members agree that such a presentation for financial statement purposes does not
in any way affect the Members respective rights under this Agreement (including
without limitation under Articles IV, V and IX hereunder). HOVIC agrees to
indemnify and hold harmless PDVSA VI from any Damages arising from the
application of such "push down" accounting that would not have been incurred had
the Assets contributed by each Member been valued at an equivalent amount. Ernst
& Young LLP shall act as the Company's accountants during its first year of
operation, subject to annual reappointment by the Executive Committee. Such
unaudited and audited financial statements shall include, in addition to an
income statement, cash flow statement, balance sheet and related footnotes, one
or more schedules setting forth in reasonable detail the basis for the
calculation of Profits and Losses and other items of income, gain, losses or
deductions (including the calculation of each of the significant components
thereof) and the allocation of Profits and Losses and such other items pursuant
to Article IV (including the calculation of each of the components thereof).
(c) The Company shall provide each Member with information
sufficient to support such Member's determination of its estimated tax payments,
at such times and in such manner as reasonably requested by such Member, which
may include such Member's share of taxable income, AMT/ACE adjustments, and
capital gains and losses. For purposes of the
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preceding sentence, a requested time for the provision of information shall be
deemed reasonable if such requested time is twelve (12) days after the close of
any relevant period, absent unusual circumstances. In the event actual
information is not available at the time requested, the Company shall provide
reasonable estimates of such information based on the information available at
such time. The Tax Committee shall be responsible for delivering to each Member
a Form K-1 and such other information with respect to the Company as may be
necessary for the preparation of such Member's U.S. Virgin Islands income tax
returns, including, without limitation, a statement showing each Member's share
of income, loss and credits for such Fiscal Year for U.S. Virgin Islands income
tax purposes (A) in draft form, as early as practicable, but in no event later
than one hundred eighty (180) days after the end of each Fiscal Year, and
comments (if any), must be made within twenty-five (25) days thereafter; and (B)
in final form, as early as practicable but not later than twenty five (25) days
after the twenty-five (25) day period in (A) above.
7.5 Company Information: Confidentiality. (a) Promptly upon
request, the Company shall provide each Member with copies of all Company
Information. In addition, each Member shall provide the other Member with copies
of any Company Information in its possession. Each of the Members, its
Affiliates and their respective directors, officers, employees, consultants,
counsel or other representatives who have a need to know such information shall
have the right to use (i) all Company Information in connection with the
ownership, management, business and operations of the Company and (ii) all
Company Information (other than Restricted Information) in connection with its
own ordinary course of business, whether conducted alone or through joint
venture companies; provided that ordinary course of business shall not include
licensing to third parties (other than non-exclusive and non-assignable licenses
to such joint venture companies).
(b) From and after the date hereof, except to the extent
otherwise agreed in writing by all Members, each Member agrees to (and shall
cause its Affiliates, directors, officers, employees, consultants, counsel and
other representatives to) keep confidential and not disclose to any other Person
or use in any way any Company Information except as contemplated by Section
7.5(a) (i) and (ii); provided, that the foregoing restriction shall not apply to
any Company Information that (i) has entered the public domain other than by
breach of this Section 7.5; (ii) was in the possession of the Member prior to
its disclosure to or acquisition by the Member as demonstrated by documentary
evidence; or (iii) was received by the Member from a third party lawfully in
possession of that information and whose disclosure of that information was not
in breach of any confidential relationship with the Company known to the Member
or (iv) that is, in the opinion of counsel to the disclosing party, required to
be disclosed in compliance with applicable laws or regulations or order by a
court or other regulatory body having competent jurisdiction and in those
circumstances the Member who is required to make the disclosure shall give the
Company prompt written notice of that disclosure before it occurs so that the
Company shall have sufficient opportunity to prevent such disclosure through
appropriate legal means.
(c) Notwithstanding the foregoing, a Member may disclose
Company Information to any Person with whom such Member enters into bona fide
negotiations for the Transfer of all or part of its Interest, or for the
financing of any Company activities, or their
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respective advisors, so long as (i) the Company Information is limited to such
information as the potential assignee, transferee or financier, or any such
advisor, requires for purposes of evaluating the proposed transaction, and (ii)
the potential assignee, transferee, financier, or any such advisor, agrees in
writing to abide by confidentiality restrictions identical to those set forth in
this Section.
(d) The obligations of each Member pursuant to Section 7.5
shall continue for so long as such Member retains an Interest and for a period
of three (3) years thereafter.
7.6 Insurance. (a) The Executive Committee shall cause the
Company to maintain such liability, casualty, property and other insurance, in
such amounts, and with such entities, as the Executive Committee may determine.
Such insurance shall name the Members as named insureds as to their interests in
the Company and provide for a waiver of subrogation with respect to the Members.
(b) Notwithstanding the foregoing, the Executive Committee
shall cause the Company to acquire, no later than 30 days after the Closing
Date, fifty percent (50%) of the insurance coverage set forth in Schedule 7.6
hereto from Jamestown Insurance Co. Limited, and the remaining fifty percent
(50%) of such insurance coverage from PVD Insurance Company.
7.7 Election of LIFO Accounting Method. The Executive
Committee shall select (or ratify a prior selection of) the LIFO method of
inventory accounting for book purposes. The Tax Committee shall determine the
method of inventory accounting for tax purposes.
7.8 Completion of Xxxxx Project. (a) The Company has
heretofore received the Xxxxx Project EPC Proposals, including Qualified Bids
for the Xxxxx Project other than the Related Xxxxx Facilities. As soon as
practicable after the date hereof, the Company shall seek bids for the
engineering, permitting, procurement and construction required for the Related
Xxxxx Facilities from the Qualified Bidders listed on Schedule 7.8. If one or
more Qualified Bids are received by the Company, which when aggregated with the
Qualified Bid for the Xxxxx Project other than the Related Xxxxx Facilities are
no more than 50% higher than the aggregate amount of the Xxxxx Project EPC
Proposals, the Company shall enter into a definitive contract or contracts with
(x) one of the Persons who submitted a Qualified Bid for the Xxxxx Project other
than the Related Xxxxx Facilities for the engineering, permitting, procurement
and construction of the Xxxxx Project other than the Related Xxxxx Facilities
and (y) one or more of the Qualified Bidders for the engineering, permitting,
procurement and construction of the Related Xxxxx Facilities, provided that in
the aggregate such contracts are no more than 50% higher than the aggregate
amount of the Xxxxx Project EPC Proposals, and neither the Company nor either of
the Members shall take any steps (or omit to take any steps reasonably within
its control) that will delay or frustrate the Xxxxx Project (including without
limitation by causing its representatives on the Executive Committee to fail to
approve the execution of such contract).
(b) The Members agree that the long-range economic and
strategic benefits associated with the completion of the Xxxxx Project were the
primary reasons for entering into this Agreement and the Related Agreements.
Accordingly the Members acknowledge that monetary damages would not be an
adequate remedy in the event of a breach of Section 7.8(a)
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above and each Member hereby agrees that injunctive relief, including specific
performance, is the appropriate remedy in such circumstances; provided, however,
that a Member in Material Breach (or PDVSA V.I. if an Event of Default has
occurred under the Note or the Contingency Amount Note and is continuing) shall
not be entitled to such injunctive relief.
7.9 Storage and Blending Facilities (a) The Parties agree that
PDVSA, or a PDVSA Affiliate designated by PDVSA, shall have the option to
discharge, blend and reload foreign barrels at the Refinery and shall also have
the option to store U.S. originated barrels, non-U.S. originated barrels or
refinery production at the Refinery (collectively, the "Blending and Storage
Services"). For these purposes, the Company agrees to make available to PDVSA
dedicated storage consisting of up to two No. 6 oil tanks, with a capacity of
265 kb shell each, on the basis set forth in a storage agreement (the "Storage
Agreement"), to be negotiated in accordance with this Section, and such
agreement shall include an undertaking by PDVSA or any relevant PDVSA Affiliate
to comply with all applicable laws and, if the storage is on a month-by-month
basis, an undertaking by the Company granting PDVSA the right to exercise an
option to use the tanks fifteen (15) days before the commencement of any
relevant calendar month. The Company shall negotiate with PDVSA or a designated
PDVSA Affiliate a fee with respect to each year (the "Fee") for the Blending and
Storage Services, which for the first year of the Storage Agreement shall be no
greater than $0.15 per Barrel and no less than $0.085 per Barrel. The Fee shall
include storage, agitation, blending and inter-tank transfer fees. The Executive
Committee shall review and revise the Fee on an annual basis with reference to
the current market rate at the time such review takes place. Further details and
other terms and conditions of the Storage Agreement shall be negotiated by the
Company and PDVSA or a designated PDVSA Affiliate as soon as practicable after
the Closing Date, provided that such negotiations shall be completed no later
than forty five (45) days therefrom. The negotiations will include, among other
matters, such items as whether the Blending and Storage Services will be
provided on a month-by-month basis or on an annual basis.
(b) In addition to the foregoing, full or part cargoes
assigned to PDVSA or a PDVSA Affiliate under the Product Sales Agreement may be
transferred to the dedicated storage tanks. In this case, the inter-tank
transfer date will be deemed the xxxx of lading date for pricing and payment
purposes.
ARTICLE VIII
TRANSFERS AND RESIGNATIONS
8.1 Restriction on Transfers of Interests. During the period
prior to the payment in full of the Note and the Contingency Amount Note (the
"Restricted Period") and except as otherwise provided in this Agreement, the
Note, the Contingency Amount Note or the Security Agreement, a Member may not
directly or indirectly sell, pledge, grant a security interest in, transfer or
assign, distribute or otherwise dispose of ("Transfer") any or all of its
Interest without the prior written consent of the other Members, which consent
may be withheld with or without cause and without any liability or
accountability to any Person. Any purported Transfer by a Member in violation of
this Agreement shall be void ab initio, and shall not bind the Company.
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8.2 Permitted Transfers of Interests. (a) Notwithstanding the
provisions of Section 8.1 and subject to this Section 8.2 at any time:
(i) PDVSA V.I. may Transfer all or any part of its Interest to
any direct or indirect wholly-owned subsidiary of PDVSA; provided that
PDVSA guarantees the performance by such subsidiary of its obligations
in respect of such Interest; and
(ii) HOVIC may Transfer all or any part of its Interest to any
direct or indirect wholly-owned subsidiary of Hess; provided that Hess
guarantees the performance by such subsidiary of its obligations in
respect of such Interest.
(b) If either Member intends to make a Transfer permitted by
Section 8.2(a)(i) or (ii), it shall notify the other Member in writing at least
sixty (60) days prior to the date of the intended transfer. If the
non-transferring Member notifies the transferring Member within forty-five (45)
days after receiving such notice, and demonstrates that such transfer would
result in adverse tax consequences to such non-transferring Member as a result
of the Company being treated as terminated for U.S. federal or U.S. Virgin
Islands income tax purposes, the consent of such non-transferring Member shall
be required but shall not be unreasonably withheld.
(c) At any time after the Restricted Period, any Member shall
have the right to Transfer all (but not less than all) of its Interest to a
Qualified Purchaser; provided that such sale is made in compliance with the
procedures set forth in Sections 8.2 and 8.3.
(d) A Member intending to Transfer its Interest (the "Selling
Member") shall after the end of the Restricted Period (but in any event at least
six (6) months prior to the proposed date of such Transfer) deliver a written
notice of such fact (the "Selling Member's Offer Notice") to the other Member or
Members (the "Offeree Members") which shall (i) set forth the proposed price at
which the Selling Member will sell its Interest to the Offeree Members (the
"Selling Member's Price") and (ii) describe the other terms and conditions of
such sale. If the Offeree Members desire to purchase the Interest so offered,
the Offeree Members (pro rata based on their Percentage Interests at such time
(unless the Offeree Members agree to a different allocation), provided that in
the event that any such Offeree Member does not purchase its pro rata portion of
the Interest so offered, the other Offeree Members shall have the pro rata right
to purchase all such unpurchased Interest) shall, within three (3) months of the
receipt by the Offeree Members of the Selling Member's Offer Notice (the
"Offeree Member Response Date"), deliver a written notice (the "Offeree Member's
Acceptance Notice") to the Selling Member. The Offeree Member's Acceptance
Notice shall set forth an irrevocable commitment by the Offeree Members to
purchase the Interest so offered at the Selling Member's Price and on the other
terms and conditions set forth in the Selling Member's Offer Notice and in
Sections 8.2 and 8.3.
(e) If the Offeree Member's Acceptance Notice sets forth a
commitment to purchase the Interest of the Selling Member at the Selling
Member's Price, the closing of the purchase contemplated by the Offeree Member's
Acceptance Notice shall take place within three months after delivery of the
Offeree Member's Acceptance Notice (subject to extension for up to six months if
required to satisfy the condition set forth in Section 8.3(a)(iv)).
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(f) If the Offeree Members either notify the Selling Member in
writing that they have elected not to purchase the Interest of the Selling
Member or fail to provide the Offeree Member's Acceptance Notice on or prior to
the Offeree Member Response Date, the Selling Member (or, with regard to a
Change of Control pursuant to Section 8.4(b), the relevant Affiliate of such
Selling Member) shall have three (3) months in which to execute a letter of
intent setting forth the terms and conditions of the proposed Transfer or a
definitive agreement with any Qualified Purchaser regarding the Transfer to such
Qualified Purchaser (subject to the Offeree Member's right of first refusal set
forth in Section 8.2(g)) of the Interest of the Selling Member (or with regard
to a Change of Control pursuant to Section 8.4(b), the relevant Affiliate of
such Selling Member). If the Selling Member (or with regard to a Change of
Control pursuant to Section 8.4(b), the relevant Affiliate of such Selling
Member) fails to either execute a letter of intent or a definitive Transfer
agreement within such period, it shall not again be entitled to invoke the offer
procedure set forth in this Section 8.2 during the 18 months following the end
of the relevant period.
(g) Prior to consummating a proposed Transfer of the Interest
of the Selling Member (or with regard to a Change of Control pursuant to Section
8.4(b), the ownership interest of the relevant Affiliate of such Selling Member)
to any Qualified Purchaser pursuant to Section 8.2(f), the Selling Member shall
provide the Offeree Members with a description of the material terms and
conditions of the proposed Transfer (including the proposed Transfer price and
structure), together with the letter of intent or definitive agreement relating
to such proposed sale (collectively, the "Sale Materials"). The Offeree Members
shall thereafter have the right to purchase the Interest of such Selling Member,
exercisable by delivery of a written notice to the Selling Member within thirty
(30) days after receipt by the Offeree Member of the Sale Materials. This right
of first refusal to buy the Interest of the Selling Member shall be pro rata
between the Offeree Members based on their Percentage Interests at such time
(unless the Offeree Members agree to a different allocation), provided that in
the event that any Offeree Member does not exercise its right of first refusal
with respect to the pro rata portion of the Interest so offered, the other
Offeree Member or Members shall have the right to purchase all such unpurchased
Interest. The Offeree Members' notice shall set forth an irrevocable commitment
by the Offeree Members to purchase the Interest of the Selling Member on the
same terms and conditions as set forth in the Sale Materials. The closing of
such sale shall take place within 60 days after the delivery of such notice by
the Offeree Members or Member, subject to reasonable extension if required to
satisfy the condition set forth in Section 8.3(iv). If the Offeree Members or
Member fails to deliver such written notice to the Selling Member within such
30-day period, the Selling Member shall be free to consummate its proposed sale
to the Qualified Purchaser in accordance with such Sale Materials; provided,
however, that, if the Selling Member fails to consummate such transaction within
six (6) months after the expiration of such 30-day period (if a definitive
agreement relating to the proposed sale has not yet been entered into) or within
three (3) months (if such a definitive agreement has been entered into), it
shall not again be entitled to invoke the offer procedures set forth in this
Section 8.2 during the eighteen (18) months following the end of the relevant
period.
(h) Upon the consummation of any purchase and sale to an
Offeree Member pursuant to Section 8.2(g), the Selling Member shall deliver the
Interest of the Selling Member,
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free and clear of all Liens, together with duly executed written instruments of
transfer with respect thereto, in form and substance reasonably satisfactory to
the purchaser of such Interest, against (i) delivery of the cash portion of the
offer price for such Interest by wire transfer, in immediately available funds,
to the account of the Selling Member designated for such purpose (such
designation to be made at least two Business Days prior to the date of such
purchase and sale) and (ii) delivery of any other consideration as required by
the definitive agreement for such purchase and sale.
8.3 Conditions to Transfers of Interests. (a) Any Transfer of
Interests shall be subject to the satisfaction of the following conditions:
(i) unless otherwise provided in this Agreement, a duly
executed and acknowledged written instrument of Transfer shall have
been delivered to the Company, which instrument shall specify the
Interest being transferred and shall set forth the intention of the
transferor that the transferee succeed to the transferor's Interest as
a substituted Member in the transferor's place;
(ii) the transferor and the transferee shall have executed,
acknowledged and delivered such other instruments as the Executive
Committee may deem reasonably necessary or desirable to effect such
substitution, including the written acceptance and adoption by the
transferee of the provisions of this Agreement;
(iii) the transferee pays or reimburses the Company for any
legal, filing and publication costs that the Company incurs in
connection with the admission of the transferee as a Member;
(iv) any and all necessary governmental consents have been
obtained, including any required approvals under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 (the Members agreeing to cooperate
and to cause their Affiliates to cooperate in the preparation and
filing of any and all reports or other submissions required in
connection with obtaining such governmental consents and in obtaining
any necessary third party approvals); and
(v) the transferee makes customary representations and
warranties regarding due execution, due organization, good standing,
requisite power, enforceability and absence of conflicts to the Company
and the other Members as of the date of the Transfer.
(b) Notwithstanding any other provision of this Agreement, no
Transfer by a Member of any of its Interest may be made if it (i) would require
filing of a registration statement under, or would violate, any U.S. Virgin
Islands, U.S. federal, state or foreign securities laws or regulations, or (ii)
would violate any loan documents or other agreements to which the Company is a
party or by which the Company is bound.
(c) Any permitted transferee of an Interest in accordance with
the provisions of this Agreement (other than in accordance with Section 8.2(c))
shall automatically become a
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Member of the Company. Admission of any other Person as a Member of the Company
shall require the written consent of all of the Members.
8.4 Change of Control. (a) Any Change of Control with respect
to a Member (the "Subject Member") will give rise to the rights in favor of the
other Member (the "Non-Subject Member") and restrictions set forth in this
Section 8.4.
(b) If, at the time of any proposed transaction occurring
after the end of the Restricted Period that would result in a Change of Control,
all or substantially all of the assets of the Subject Member (or any parent
company of such Subject Member) are directly or indirectly comprised of the
Subject Member's Interest, then such Change of Control shall be deemed to be a
Transfer and shall be subject in all respects to Sections 8.2(d), 8.2(e),
8.2(f), 8.2(g), 8.2(h) and 8.3.
(c) Promptly after becoming subject to any transaction that
would result in a Change of Control that involves the equity interests or voting
rights in any company that owns (directly or indirectly) substantial assets in
addition to the Subject Member's Interests, the Subject Member shall deliver a
notice thereof to the Non-Subject Member, containing the following information:
(i) the name and jurisdiction of organization of the Person
that will control the Subject Member upon the consummation of the
Change of Control transaction and of the ultimate parent of such
Person;
(ii) a summary of the proposed terms of the Change of Control
transaction, including, without limitation, all financial terms and
conditions, the value of any non-monetary assets proposed to be used as
consideration in such transaction and the value allocated to the
Subject Member's Interest in such transaction; and
(iii) the proposed date of consummation of the Change of
Control transaction.
(d) If a Non-Subject Member objects to the value allocated to
the Subject Member's Interest specified in the notice within sixty (60) days of
its receipt of such notice, the Non-Subject Member shall have the right to
request that the value properly allocable to such interest in the change of
control transaction be determined by an investment bank jointly chosen by the
Members (or, if the Members cannot agree on an investment bank within fifteen
(15) days of such request, an investment bank appointed by the President of the
International Chamber of Commerce), which investment bank shall be instructed to
deliver its opinion within sixty (60) days of its engagement. The Company shall
bear the costs and expenses of such investment bank. The allocated value
notified in the notice specified above or, if applicable, determined by the
investment bank as set forth above, shall be referred to herein as the
"Allocated Value."
(e) Following delivery of the notice specified in Section
8.4(b) or, if applicable, the determination of the Allocated Value by the
investment bank selected in accordance with Section 8.4(d), the Non-Subject
Member shall have the right, by providing notice to the Subject Member no later
than three (3) months after such notice or determination, to acquire the Subject
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Member's Interest, for a price equal to the Allocated Value and on the payment
terms and other terms and conditions applicable to the notified change of
control transaction. Any Transfer by the Subject Member to any other Member
effected pursuant to this Section 8.4 shall be exempt from the consent
requirements set forth in Section 8.1. The Non-Subject Member may exercise its
acquisition rights under this Section 8.4 either directly or by designating
another Person to exercise such rights in such Non-Subject Member's stead for a
price equal to the Allocated Value and on the payment terms and other terms and
conditions applicable to the notified Change of Control transaction.
(f) If the Non-Subject Member elects to purchase the Subject
Member's Interest pursuant to Section 8.4(e), the closing of the purchase
contemplated thereby shall take place within three months after delivery of an
acceptance notice pursuant to Section 8.4(e) (subject to extension for up to six
months if required to satisfy the condition set forth in Section 8.3(a)(iv)).
(g) If the Non-Subject Member either notifies the Subject
Member in writing that it has elected not to purchase the Interest of the
Subject Member or fails to provide an acceptance notice within the time period
specified in Section 8.4(e), the Change of Control transaction may be
consummated within three (3) months (subject to reasonable extension if required
to obtain any necessary governmental consents) in accordance with the terms and
conditions described in the notice provided pursuant to Section 8.4(c). If such
Change of Control transaction is not consummated within such period, then the
Subject Member shall so notify the Non-Subject Member.
8.5 Unauthorized Change of Control. In addition to, and
without limitation of any other rights or remedies available under any Related
Agreement, if a Change of Control of a Member takes place (a) other than in
accordance with the provisions of Section 8.4, (b) prior to the end of the
Restricted Period or (c) that would result in any interest in such Member being
owned, directly or indirectly, by a Person that is not a Qualified Purchaser,
then (without limiting any other rights that the Non-Subject Member may have)
(i) the Non-Subject Member shall have the right to request that the Allocated
Value be determined by an investment bank chosen in accordance with Section
8.4(d) (except that the fees and expenses of the relevant investment bank shall
be borne by the Subject Member), (ii) the Subject Member shall be deemed to have
granted to the Non-Subject Member a call option, exercisable for a period of one
year from the date upon which the Non-Subject Member first learns of the Change
of Control, enabling the Non-Subject Member to purchase the Subject Member's
Interest at a price equal to the Allocated Value minus twenty percent (20%), and
(iii) the Subject Member shall be deemed to have granted to the Non-Subject
Member a put option, exercisable for a period of one year from the date upon
which the Non-Subject Member first learns of the Change of Control, enabling the
Non-Subject Member to sell the Non-Subject Member's Interest to the Subject
Member at a price equal to the Allocated Value plus twenty percent (20%) plus an
amount equal to any capital gains tax that might be incurred by the Non-Subject
Member as a result of such sale; provided, however, that the Non-Subject Member
may not exercise both of such options.
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8.6 Resignation. No Member may resign from the Company, other
than as a result of a permitted Transfer of all of such Member's Interest or the
purchase of all of such Member's Interest by another Member in accordance with
this Agreement.
ARTICLE IX
DISSOLUTION
9.1 Dissolution Events. Except as set forth in this Article
IX, no Member shall have the right to dissolve the Company. The Company shall
not be dissolved by the admission of substituted or new Members pursuant to
Article VIII. The Company shall dissolve, and its affairs shall be wound up,
upon the first to occur of any of the following (each a "Dissolution Event"):
(a) the sale or disposition of all or substantially all of the
Property;
(b) unanimous election to that effect by all Members;
(c) the election to that effect by a Member following: (i) the
institution by any other Member of bankruptcy proceedings, or (ii) the
filing against any other Member of bankruptcy proceedings which are not
stayed or withdrawn within one-hundred and twenty (120) days of such
institution or filing; or
(d) at any time there are no Members (unless the business of
the Company is continued in accordance with the Act).
9.2 Winding-Up. (a) Upon the dissolution of the Company, the
Company shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets and satisfying the claims of its
creditors and Members. No Member shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the Company's
business and affairs; provided that, except as otherwise expressly provided
herein, all covenants contained in this Agreement and all obligations provided
for in this Agreement shall continue until such time as all of the assets or the
proceeds from the sale thereof have been distributed pursuant to this Section
9.2(a) and the Company has been terminated. The Executive Committee or any
Person elected by the Executive Committee (the Executive Committee or such other
Person being referred to herein as the "Liquidator") shall be the "liquidating
trustee" of the Company and shall be responsible for overseeing the winding up
and dissolution of the Company and shall take full account of the Company's
liabilities and Property, and the Property shall be liquidated as promptly as is
consistent with obtaining the fair market value thereof, and the proceeds
therefrom shall be applied and distributed in the following order, subject to
any different requirements of law: (i) first, to the satisfaction of creditors
of the Company, including Members who are creditors, to the extent permitted by
law, whether by payment or the making of reasonable provision for payment
thereof; and (ii) the balance, if any to the Members in accordance with their
respective Capital Accounts; provided that, until the end of the Restricted
Period, any such distributions to be made to PDVSA V.I. shall be made to HOVIC
until HOVIC has received payment in full of all amounts outstanding and unpaid
under, first, the Note and,
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second, the Contingency Amount Note, including all outstanding principal
(including, in the case of the Note, all outstanding principal irrespective of
whether such principal is then due and payable) and all accrued and unpaid
interest up to and including the date of payment hereunder. For distribution and
capital account purposes, any such payment shall be considered a Distribution to
PDVSA V.I. followed by PDVSA V.I.'s payment of that amount to HOVIC in respect
of, first, the Note or, second, the Contingency Amount Note, as appropriate. The
Liquidator shall, as promptly as possible, present to the Members for approval a
proposed plan of liquidation containing such detail concerning the disposition
of the Property, anticipated revenues from such dispositions, Persons to be
engaged to effect such dispositions, and other matters, as shall be reasonably
requested. Any such plan of liquidation that is approved by the Liquidator and
the Members is called the "Approved Plan of Liquidation." The Liquidator shall
effect the liquidation of the Company substantially in accordance with the
Approved Plan of Liquidation.
(b) Notwithstanding the provisions of Section 9.2(a) which
require liquidation of the Property, but subject to the order of priorities set
forth therein, if prior to or following dissolution of the Company the
Liquidator determines that an immediate sale of part or all of the Property
would be impractical or would cause undue loss to the Members, the Liquidator
may defer for a reasonable time the liquidation of any Property except as is
necessary to satisfy liabilities of the Company (including to Members in their
capacity as creditors) and/or distribute to the Members in lieu of cash, as
tenants in common and in accordance with the provisions of Section 9.2(a),
undivided interests in such Property as the Liquidator deems not suitable for
liquidation. Any such distributions in kind shall be made subject to such
conditions relating to the disposition and management of the Property as the
Liquidator deems reasonable and equitable and to any agreements governing the
operation of such Property at such time. The Liquidator shall determine the Fair
Market Value of any Property distributed in kind.
(c) In the discretion of the Liquidator, a pro rata portion of
the Distributions that would otherwise be made to the Members pursuant to this
Article IX may be (i) distributed to a trust established for the benefit of the
Members for the purposes of liquidating the Property, collecting amounts owed to
the Company and paying any contingent, conditional or unmatured liabilities or
obligations of the Company, and the assets of any such trust shall be
distributed to the Members from time to time, in the reasonable discretion of
the Liquidator, in the same manner and priority as such assets would have been
distributed by the Company to the Members pursuant to Section 9.2(a), or (ii)
withheld or escrowed to provide a reasonable reserve for Company liabilities
(contingent or otherwise) and to collect the unrealized portion of any
installment obligations owed to the Company; provided that such withheld or
escrowed amounts shall be distributed to the Members in the manner and order of
priority set forth in Section 9.2(a) as soon as practicable.
(d) No value shall be attributed to the firm name of the
Company, or to the right of its use, or to the goodwill appertaining to the
Company or its business, for any purposes under this Agreement.
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(e) All payments made in liquidation of the interest of a
Member in the Company shall be made in exchange for the interest of such Member
in Property pursuant to Section 736(b)(l) of the Code, including the interest of
such Member in Company goodwill.
(f) During the period commencing on the first day of the
Fiscal Year during which a Dissolution Event occurs and ending on the date on
which all of the assets of the Company have been distributed to the Members
pursuant to Section 9.2 (the "Liquidation Period"), the Members shall continue
to share Profits, Losses, gain, loss and other items of Company income, gain,
loss or deduction in the manner provided in Article IV.
9.3 Negative Capital Accounts. In the event the Company is
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), (a)
distributions shall be made pursuant to this Article IX to the Members who have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Member has a deficit balance in his Capital
Account (after giving effect to all contributions, distributions and allocations
for all Allocation Years, including the Allocation Year during which such
liquidation occurs), such Member shall have no obligation to make any
contribution to the capital of the Company with respect to such deficit, and
such deficit shall not be considered a debt owed to the Company or to any other
Person for any purpose whatsoever.
9.4 Rights of the Members. The Members shall look solely to
the assets of the Company for the return of their Capital Contributions.
9.5 Notice of Dissolution. If an event of dissolution
described in Section 9.1(a) occurs, the Liquidator shall, as soon as
practicable, but in no event later than thirty (30) days thereafter, provide
written notice thereof to each of the Members. In addition, the Executive
Committee shall promptly notify the Members of any imminent event of dissolution
of which it is aware.
9.6 Termination of the Company. Upon the completion of the
liquidation of the Property as provided in Section 9.2, the Company shall be
terminated, a certificate of cancellation shall be filed with the Lieutenant
Governor of the U.S. Virgin Islands, all qualifications of the Company as a
foreign limited liability company in jurisdictions other than the U.S. Virgin
Islands shall be canceled, and such other actions as may be necessary to
terminate the Company shall be taken, including without limitation any filings
with tax authorities.
9.7 Reasonable Time for Winding-Up. A reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the Company
and the liquidation of its Property pursuant to Section 9.2, in order to
minimize any losses otherwise attendant upon such winding-up, and the provisions
of this Agreement shall remain in effect between the Members during the period
of winding-up and liquidation.
9.8 Contribution to New Company. Notwithstanding any other
provision of this Article IX, in the event the Company is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has
occurred, the Property shall not be liquidated,
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the Company's debts and other liabilities shall not be paid or discharged, and
the Company's affairs shall not be wound up. Instead, solely for U.S. Virgin
Islands income tax purposes, the Company shall be deemed to have contributed all
of its Property and liabilities to a new limited liability company in exchange
for an interest in such new company and, immediately thereafter, the Company
will be deemed to liquidate by distributing interests in the new company to the
Members.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification. (a) The Company shall, to the fullest
extent permitted by Legal Requirements, indemnify, hold harmless and defend each
officer and employee of the Company or any of its wholly-owned subsidiaries (and
may so indemnify some or all of the officers and employees of any other
subsidiary of the Company) against any and all Damages arising from or in
connection with or related to this Agreement, any Related Agreement or the
Company Business.
(b) The Company shall, to the fullest extent permitted by
Legal Requirements, indemnify, hold harmless and defend the Members and their
Affiliates and their respective directors, officers, employees, consultants,
shareholders, members, agents and representatives, and all successors and
assigns of the foregoing, against and from any Damages (including any Damages
resulting from a claim asserted by a third party) arising out of the Company
Business, except to the extent (i) such Damages are incurred by such indemnified
party in its capacity as a party to any agreement with the Company other than
this Agreement or (ii) that it is finally judicially determined that such
Damages arose out of or were related to actions or omissions of the indemnified
Member, its Affiliates or any of their respective officers, directors or
employees (acting in their capacities as such) constituting (a) bad faith,
fraud, intentional violation of law or intentional misconduct or (b) a Material
Breach. The Company shall reimburse any Person entitled to indemnity under this
Section for its legal and other expenses incurred in connection with defending
any claim (other than a claim by the Company or a Member) with respect to such
Damages if such Person shall agree to reimburse promptly the Company for such
amounts if it is finally judicially determined that such Person was not entitled
to indemnity hereunder.
(c) Each Member hereby agrees, to the fullest extent permitted
by Legal Requirements, to indemnify, hold harmless and defend each other Member,
its Affiliates or any of their respective officers, directors and employees from
and against the indemnifying Member's share of any Damages (calculated in
accordance with the indemnifying Member's Percentage Interest at the time any
such Damages were incurred) arising out of the Company Business (including any
Damages resulting from a claim asserted by a third party), except to the extent
(i) such Damages are incurred by such indemnified party in its capacity as a
party to any agreement with the Company other than this Agreement or (ii) that
it is finally judicially determined that such Damages arose out of or were
related to actions or omissions of the indemnified Member, its Affiliates or any
of their respective officers, directors and employees (acting in their capacity
as such) constituting (a) bad faith, fraud, intentional violation of law or
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intentional misconduct or (b) a Material Breach; provided, however, that such
indemnified Member, its Affiliates or any of their respective officers,
directors and employees shall not be entitled to indemnity under this Section
unless (x) the indemnified Member makes a written demand for indemnification
from the Company in accordance with Section 10.1(a) and the Company shall fail
to satisfy such demand in a manner reasonably satisfactory to the indemnified
Member within sixty (60) days of such notice or (y) the Company is insolvent or
otherwise unable to satisfy its obligations.
(d) Each Member hereby agrees, to the fullest extent permitted
by Legal Requirements, to indemnify, defend and hold harmless the Company and
each other Member and its Affiliates and each director, officer and employee of
such other Member and its Affiliates from and against any and all Damages
arising out of any act of, or any purported assumption of any obligation or
responsibility by, such indemnifying Member or its Affiliates, or any of the
directors, officers or employees of such indemnifying Member or its Affiliates,
in violation of this Agreement.
(e) Promptly after receipt by a Person entitled to
indemnification under this Section 10.1 (an "Indemnified Party") of notice of
any pending or threatened claim against it (an "Action"), such Indemnified Party
shall give notice to the Person to whom the Indemnified Party is entitled to
look for indemnification (the "Indemnifying Party") of the commencement thereof,
provided that the failure so to notify the Indemnifying Party shall not relieve
it of any liability that it may have to any Indemnified Party hereunder, except
to the extent the Indemnifying Party demonstrates that it is prejudiced thereby.
In case any Action that is subject to indemnification under Section 10.1(a) or
(b) is brought against an Indemnified Party and notice is given to the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate therein and, if it so desires, 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 10.1(a) or (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 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, no
compromise
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or settlement thereof may be effected by the Indemnifying Party without the
Indemnified Party's written consent unless (I) there is no finding or admission
of any violation of law and no effect on any other claims that may be made
against the Indemnified Party or its Affiliate and (II) the sole relief provided
is monetary damages that are paid in full by the Indemnifying Party.
(f) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder which does not involve a claim being
asserted by a third party, the Indemnified Party shall as promptly as is
practical notify the Indemnifying Party as provided in Section 11.5 of such
claim, describing such claim, the amount thereof (if known) and the method of
computation of the amount of the claim, all with reasonable particularity. The
failure to give any such notice shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent that such failure results in actual
prejudice to the Indemnifying Party.
10.2 Duration. This Article X and Article XI shall survive the
dissolution and winding up of the Company.
ARTICLE XI
MISCELLANEOUS
11.1 Governing Law. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the U.S. Virgin
Islands (without regard to conflict of laws principles).
11.2 Submission to Jurisdiction; Appointment of Agent for
Service of Process; Waiver of Objection to Venue. (a) Each Member and the
Company hereby irrevocably agrees that any legal action or proceeding against it
arising out of or concerning this Agreement shall be brought only in the Supreme
Court of the State of New York in and for the County of New York or the U.S.
District Court for the Southern District of New York, preserving, however, all
rights of removal to a federal court under 28 U.S.C. Section 1441. Each Member
and the Company hereby irrevocably designates, appoints and empowers CT
Corporation System, with offices currently at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000 as its lawful agent to receive for and on its behalf service of process in
the State of New York in any such action or proceeding and irrevocably consents
to the service of process outside the territorial jurisdiction of said courts in
any such action or proceeding by mailing copies thereof by registered United
States mail, postage prepaid, to its address as specified in or pursuant to
Section 11.5. Any service made on such agent or its successor shall be effective
when delivered regardless of whether notice thereof is given to the affected
Member or the Company. If any Person or firm designated as agent hereunder shall
no longer serve as agent of such Member to receive service of process in the
State of New York, the Member so affected shall be obligated promptly to appoint
a successor to so serve; and, unless and until such successor is appointed and
the other Members notified of the same in writing, service upon the last
designated agent shall be good and effective. Each Member hereby agrees to at
all times maintain an agent to receive service of process in the State of New
York pursuant to this Section 11.2. The foregoing provisions of this Section
11.2 shall not affect, limit or prevent any Member from serving process in any
other manner permitted by law.
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(b) Each Member irrevocably waives any objection to the venue
of the courts designated in Section 11.2(a) (whether on the basis of forum non
conveniens or otherwise), and accepts and submits to the jurisdiction of such
courts in connection with any legal action or proceeding against it arising out
of or concerning this Agreement.
(c) Each Member hereby agrees that the activities contemplated
hereby are commercial in nature. To the extent that any Member has or hereafter
may acquire any immunity from jurisdiction of any court, or from attachment in
aid of execution or any other legal process (other than prejudgment attachment)
in any action or proceeding in any manner arising out of this Agreement with
respect to itself or its assets, such Party hereby irrevocably agrees not to
invoke such immunity as a defense and irrevocably waives such immunity. Each
Member also agrees that any trial arising out of, or in connection with, a claim
against it arising out of this Agreement or the transaction contemplated hereby
shall be before the court and each Member's right to a trial by jury is hereby
waived.
11.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Members and their respective successors and
permitted assigns.
11.4 Third Party Rights. This Agreement is not intended to
confer any benefits upon, or create any rights in favor of, any Person or entity
other than the Members.
11.5 Notices. All notices, demands, instructions, waivers,
consents or other communications to be provided pursuant to this Agreement shall
be in writing, shall be effective upon receipt, and shall be sent by hand,
facsimile, air courier or registered mail, return receipt requested, as follows:
if to PDVSA V.I.:
PDVSA V.I., Inc.
0X Xxxxxxxxxxxxx Xxxx
Xx. Xxxxxx, X.X. Xxxxxx Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxx
with a copy to:
PDVSA Petroleo y Gas, S.A.
Division de Manufatura y Mercadeo
Av. Libertador, Edificio PDVSA
Torre Oeste, La Xxxxxxx
Xxxxxxx 0000-X, Xxxxxxxxx
Telephone: 00-0-000-0000
Facsimile: 00-0-000-0000
Attn: Consultor Juridico
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if to HOVIC:
Xxxx Oil Virgin Islands Corp.
Kingshill
X.X. Xxx 000
Xx. Xxxxx, X.X. Xxxxxx Xxxxxxx 00000-0000
Attention: Vice-President
with a copy to:
Amerada Xxxx Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
or to such other address as hereafter shall be furnished as provided in this
Section 11.5 by any of the Members to the other Members.
11.6 Waiver and Amendments. No waiver shall be deemed to have
been made by any Member of any of its rights under this Agreement unless the
same is in writing and is signed on its behalf by its authorized officer. Any
such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the Member
granting such waiver in any other respect or at any other time. To be binding,
any amendment of this Agreement must be effected by an instrument in writing
signed by the Members.
11.7 Headings. The headings contained in this Agreement are
for convenience of reference only and shall not in any way affect, the meaning
or interpretation of this Agreement.
11.8 Entire Agreement. This Agreement (including the Exhibit
hereto, which are hereby incorporated in the terms of this Agreement) sets forth
the entire understanding and agreement among the Members as to the matters
covered herein and therein and supersedes any prior understanding, agreement or
statement (written or oral) of intent, with respect to such matters. Without
limiting the generality of the foregoing, this Agreement replaces and supersedes
the Limited Liability Company Agreement of the Company dated as of July 2, 1998.
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IN WITNESS WHEREOF, the Members have executed this Agreement
as of the date first herein written above.
PDVSA V.I., INC.
By: /s/ XXXXXX XXXXXXXX
_____________________________________
Name: Xxxxxx Xxxxxxxx
Title: Vice President
XXXX OIL VIRGIN ISLANDS CORP.
By: /s/ XXXX X. XXXX
_____________________________________
Name: Xxxx X. Xxxx
Title: Chairman of the Board
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EXHIBIT A
Distribution Protocol
On or prior to the twentieth (20th) day following the final
day of each Distribution Period, the chief operating officer (or such other
officer designated by the chief operating officer and responsible for the
financial and/or accounting function of the Company) shall prepare and submit to
the Executive Committee a Report of Distributable Cash, prepared in accordance
with the following description.
"Distributable Cash" in respect of any Distribution Period
means an amount equal to the cumulative net income of the Company since
inception through such Distribution Period, determined in accordance with U.S.
GAAP, plus or minus, on a cumulative basis from inception through such
Distribution Period, without duplication, the following items for the Company:
(a) plus, (1) depreciation and amortization (including asset
impairment) deducted in calculating net income (other than
depreciation and amortization with respect to (i) the Xxxxx
Project, and (ii) any other Financed Assets (as defined below)
in the same proportion that the Xxxxx Project and such other
Financed Assets are financed), (2) turnaround amortization and
accruals, and (3) net losses on sales of assets; and minus net
gains on sales of assets;
(b) minus, $8,000,000 paid to the U.S. Virgin Islands pursuant to
the Concession Amendment (to the extent not taken into account
in the determination of net income);
(c) plus, proceeds from sales of assets (except sales in
connection with a sale and leaseback or other comparable
financing transactions);
(d) minus, cash paid for turnarounds;
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(e) minus, $12.5 million for capital expenditures (other than (i)
the Xxxxx Project and (ii) Financed Assets) per Distribution
Period, regardless of whether or not actually expended (each a
"Capex Allowance");
(f) plus, any portion of any Capex Allowance that has not been
actually expended within the current Distribution Period and
one year after the end of the current Distribution Period in
which it arose, taking into account on a cumulative basis all
capital expenditures (other than (i) the Xxxxx Project and
(ii) other Financed Assets) during such Distribution Period
and such year;
(g) minus, Distributable Cash for prior Distribution Periods that
has actually been distributed.
As used above, "Financed Assets" means capitalized assets
acquired after the Effective Time and financed in whole or in part by
specifically associated borrowings from third parties (including without
limitation lease financings or vendor credits) as identified and agreed by the
Executive Committee.
Only Distributable Cash (as calculated pursuant to the
preceding provisions) shall be taken into account for purposes of calculating
any Excess Distributions under the Contingency Amount Note; provided, however,
that if the Company is prohibited from distributing any or all of such
Distributable Cash as a result of the terms of any Indebtedness, the provisions
of Section 5.7 shall apply.
On or prior to the thirtieth (30th) day following the end of
the Distribution Period, the Executive Committee shall meet to approve the
Report of Distributable Cash. The Executive Committee shall declare a
distribution in the amount of Distributable Cash, plus any other amount upon
which it may agree, subject to Section 1406 of the Act and any requirements or
limitations imposed by any indebtedness; provided, however, that such other
amount shall not be taken into account for purposes of calculating any Excess
Distribution under the Contingency Amount Note.
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