Exhibit 10.2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR SUCH PORTIONS BY ASHLAND INC.
THESE PORTIONS HAVE BEEN MARKED WITH TWO ASTERISKS ENCLOSED IN BRACKETS
(i.e., [**]). THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.]
AMENDMENT NO. 1 dated as of March 17, 2004 (this "Amendment"), to the
Amended and Restated Limited Liability Company Agreement dated as of
December 31, 1998 (the "MAP LLC Agreement") of Marathon Ashland Petroleum
LLC (the "Company"), by and between Marathon Oil Company, an Ohio
corporation ("Marathon"), and Ashland Inc., a Kentucky corporation
("Ashland").
WHEREAS Ashland and Marathon are the only Members of the Company and
are parties to the MAP LLC Agreement, which sets forth the rights and
responsibilities of each of them with respect to the governance, financing
and operation of the Company (terms used in this Amendment and not defined
herein shall have the meanings given such terms in the MAP LLC Agreement);
WHEREAS the Board of Managers, by a unanimous written action in lieu
of meeting, has adopted resolutions effective as of December 5, 2003 (the
"Resolutions"), which, among other things, authorized the Company to expend
funds for the expansion of the Company's Detroit refinery (the "Detroit
Refinery") as previously reviewed by the Board of Managers;
WHEREAS the expansion and clean fuels modification of the Detroit
Refinery, upon completion, is intended to increase the Detroit Refinery's
crude oil throughput refining capacity to 100,000 barrels per calendar day,
enable it to produce low sulfur gasoline and ultra-low sulfur diesel fuel,
increase the crude oil pipeline capacity into the Detroit Refinery and
expand the truck loading rack to accommodate increased refinery output (the
"Project");
WHEREAS the Members intend to minimize any adverse impact that the
Project will have on the Distributable Cash payable to the Members pursuant
to the MAP LLC Agreement;
WHEREAS the Resolutions authorized and directed the Company to borrow
funds under a loan agreement (together with any amendments thereto approved
in accordance with the super majority voting procedures of Section 8.07(b)
of the MAP LLC Agreement, the "Loan Agreement") for an amount sufficient to
fully fund the Project, estimated to be $325 million exclusive of
Capitalized Interest and Additional Capitalized Interest (as such terms are
defined in the Loan Agreement), between Marathon and the Company (the
"Loan"), for the sole purpose of financing the Project, said Loan Agreement
having been executed the same date as this Amendment;
WHEREAS the Members intend that the Loan will be repaid solely from
cash flow associated with the Detroit Refinery;
WHEREAS, to minimize any adverse affect that the Project might have on
the value of Ashland's Membership Interest in the event that Marathon
exercises the Marathon Call Right (as defined in the Put/Call, Registration
Rights and Standstill Agreement, dated as of January 1, 1998, as amended by
Amendment No. 1 thereto dated as of December 31, 1998, among Marathon,
Marathon Oil Corporation (as successor to USX Corporation) ("MOC"), Ashland
and the Company (the "Put/Call Agreement")), the Members are entering into
Amendment No. 2 dated as of the date hereof to the Put/Call Agreement; and
WHEREAS Marathon and Ashland wish to make certain amendments to the
MAP LLC Agreement to facilitate the transactions contemplated by the
Resolutions and the Detroit Expansion Term Sheet.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. DEFINED TERMS. When used herein the following terms have
the following meanings:
"ADJUSTED DETROIT REFINERY CASH FLOW" means the Detroit Refinery Cash
Flow for an applicable Quarterly Measurement Period either (i) reduced by
the amount of the MOC Tax Reimbursement applicable to such Quarterly
Measurement Period or (ii) increased by the amount of the MOC Tax Benefit
Rebate paid to the Company for the applicable Quarterly Measurement Period.
"DETROIT REFINERY CASH FLOW" means all operational, pre-income tax
cash flows associated with the Detroit Refinery with profits based upon
refinery gate product values as determined on the Company's "Refinery
Profit/Cash Flow Report" substantially in the form of Exhibit A hereto as
prepared in good faith by the Company for the Detroit Refinery. Profits,
losses and cash flow associated with wholesale or retail operations in the
markets served by the Detroit Refinery are excluded from this calculation.
Detroit Refinery Cash Flow also excludes any other financings related to
the Detroit Refinery but includes normal asset sales, capital expenditures,
changes in working capital and similar items.
"MOC Tax Benefit Rebate" means for an applicable Quarterly Measurement
Period, the amount of the Federal and state income tax benefits (at an
assumed rate of 39%) recognized by MOC or Marathon (or their respective
successors and assigns) which are associated with the taxable losses from
the Detroit Refinery for such Quarterly Measurement Period. This adjustment
is the result of the allocation to Marathon (or its successor or assignee)
of all taxable income or loss (including tax depreciation and interest on
the Loan), from the date that the applicable Project assets are placed into
service for Federal income tax purposes, associated with the Detroit
Refinery until the Loan is paid in full.
"MOC Tax Reimbursement" means for an applicable Quarterly Measurement
Period, the amount necessary to satisfy Marathon and MOC's Federal and
state income tax liability (at an assumed rate of 39%) attributable to the
taxable income from the Detroit Refinery for such Quarterly Measurement
Period. This adjustment is the result of the allocation to Marathon of all
taxable income or loss (including tax depreciation and interest on the
Loan), from the date that the applicable Project assets are placed into
service for Federal income tax purposes, associated with the Detroit
Refinery until the Loan is paid in full.
"QUALIFIED EXPENDITURE REPORT" means a schedule summarizing all of the
Company's expenses, working capital and capital expenditures associated
with and reasonably allocated to the Project which were incurred by the
Company during a calendar month, which report will include costs incurred
by the Company's Refining, Pipeline and Terminal subsidiaries, affiliates
or divisions reasonably allocated to the Project, as well as the Company's
internal costs allocated to the Project during the month, including but not
limited to payroll, supplies and shared service expenses. The Qualified
Expenditure Report will also include, solely for informational purposes,
the life-to-date project expenditures. A sample Qualified Expenditure
Report is attached as Exhibit B. If, at any time following the Start Date,
the Adjusted Detroit Refinery Cash Flow does not fully satisfy the accrued
interest for a Quarterly Measurement Period, then the form of subsequent
Qualified Expenditure Reports shall be modified to include a running total
of Capitalized Interest and Additional Capitalized Interest (as such terms
are defined in the Loan Agreement) and the interest accrued thereon.
"Qualified Expenditures" means costs (including but not limited to the
Company's internal costs such as payroll, supplies and shared service
expenses), expenses, working capital and capital expenditures made by the
Company, its Affiliates (as defined in the Loan Agreement) or divisions in
furtherance of and reasonably allocated to the Project, as more fully
identified with general cost estimates in Exhibit C hereto.
"QUARTERLY MEASUREMENT PERIOD" means individually, each period of
three months ending February 28 (29th in a leap year), May 31, August 31
and November 30 commencing from the Start Date and ending on the Repayment
Date.
"REPAYMENT DATE" means the date on which the principal of and interest
on the Loan have been paid in full.
"START DATE" means the first day of the calendar month in which the
last of the Project assets are placed into service for Federal income tax
purposes.
Section 2. FUNDING OF THE PROJECT. (a) The Project shall be funded
solely with the proceeds of the Loan (excluding the first $13.2 million
previously paid by the Company for the Project), and the proceeds of the
Loan shall be used solely to fund the Project, including changes in working
capital related to the Project and interest on the Loan. Marathon and the
Company shall not amend, modify or supplement the Loan Agreement without
prior approval of the Board of Managers in accordance with the Super
Majority Decision voting procedures contained in Section 8.07(b) of the MAP
LLC Agreement. The Company shall not reduce the Commitment (as defined in
the Loan Agreement) or waive any rights under the Loan Agreement without
prior approval of the Board of Managers in accordance with the Super
Majority Decision voting procedures contained in Section 8.07(b) of the MAP
LLC Agreement. In the event that the Commitment is not sufficient to fully
fund the Project, Marathon and the Company shall amend the Loan Agreement
to increase the Commitment to an amount sufficient to complete the Project.
(b) On or prior to the 25th day of each month, the Company shall
deliver to each Member (at the same time) a Qualified Expenditure Report
schedule summarizing all of the Qualified Expenditures which were incurred
by the Company during the prior calendar month. In accordance with the
terms of the Loan Agreement, Marathon shall advance cash to the Company in
an amount equal to the Qualified Expenditures listed on the relevant
Qualified Expenditure Report on the third Business Day following Marathon's
receipt of such Qualified Expenditure Report. Each such cash advance to the
Company from Marathon shall constitute a borrowing under the Loan Agreement
by the Company.
(c) During the two years following the Company's delivery of each
Qualified Expenditure Report, each Member and its duly authorized
representatives shall have examination rights in accordance with Section
7.01 of the MAP LLC Agreement for the purpose of auditing the content of
the Qualified Expenditure Reports.
Section 3. REPAYMENT. Notwithstanding anything to the contrary in the
MAP LLC Agreement or the Loan Agreement, the Company shall not be required
to make any payment under the Loan Agreement other than from Adjusted
Detroit Refinery Cash Flow. The Company shall not make any payments of
principal or of interest on the Loan prior to the Start Date. After the
Start Date and until the Repayment Date, in accordance with the terms of
the Loan Agreement, on the 25th day of the last month of each Fiscal
Quarter, or if any such day is not a Business Day, on the next succeeding
Business Day (each such date being a "Payment Date"), the Company shall
make a payment to Marathon in an amount equal to the Adjusted Detroit
Refinery Cash Flow for the preceding Quarterly Measurement Period not to
exceed the Total Outstanding Amount (as defined in the Loan Agreement).
Section 4. (a) ALLOCATIONS AND OTHER TAX MATTERS. Notwithstanding
anything to the contrary in Article VI of the MAP LLC Agreement, or any
other provision of the MAP LLC Agreement, the tax deduction for all
expenses related to the Project incurred and expensed by the Company
whether prior to or after the date of this Agreement, and which have or
will be funded by Marathon, shall be allocated to Marathon. In addition,
all taxable income or loss of the Detroit Refinery for the period beginning
on the Start Date and ending on the Repayment Date shall be allocated to
Marathon. During such period, the Detroit Refinery Cash Flow shall first be
allocated to pay the MOC Tax Reimbursement to Marathon. During such period,
on the Business Day immediately preceding each Payment Date, Marathon shall
contribute to the Company cash in an amount equal to the MOC Tax Benefit
Rebate to the extent Marathon has not previously contributed to the Company
cash attributable to such MOC Tax Benefit Rebate. Any cash contributed by
Marathon to the Company pursuant to the preceding sentence shall be
distributed by the Company to Marathon in repayment of the Loan in
accordance with the Loan Agreement and Section 3 hereof. All tax
depreciation associated with the capital expenditures attributable to the
Project shall be allocated to Marathon, including depreciation remaining on
the Project subsequent to the Repayment Date. After the Repayment Date, all
income, cash flow and taxable income or loss (other than depreciation
associated with the capital expenditures attributable to the Project) of
the Detroit Refinery shall be allocated between the Members in proportion
to their respective Percentage Interests. For purposes of this Amendment,
income and loss shall be calculated in the same way and using the same
methods as the line item Taxable Income/(Loss) on the Refinery Profit/Cash
Flow Report, whether or not such calculations and methods are in accordance
with GAAP.
Section 5. ADDITIONAL AGREEMENTS. (a) For the avoidance of doubt,
nothing contained in this Amendment shall result in any adjustment to the
Members' respective Percentage Interests in the Company. The Members agree
that the capitalized expenditures and expenditures expensed by the Company
for the Project shall not affect the amount of Distributable Cash
distributed to the Members for any Fiscal Quarter.
(b) Notwithstanding Section 5.01(c) of the MAP LLC Agreement, each
Distributions Calculation Statement distributed during each Fiscal Quarter
beginning with the first Fiscal Quarter in which the Company incurred any
expenditures for the Project until and including the Fiscal Quarter in
which the Repayment Date occurs (the "Detroit Loan Period") shall set forth
the calculations (in reasonable detail), giving effect to this Amendment,
used by the Company for purposes of distributions pursuant to Section 5.01.
(c) During the Detroit Loan Period, the Company shall prepare and send
to each Member (at the same time) promptly, but in no event later than noon
on the 25th day of the last calendar month of each Fiscal Quarter, the
Refinery Profit/Cash Flow Report.
Section 6. PARTIES IN INTEREST. This Amendment shall inure to the
benefit of, and be binding upon, the parties hereto and their respective
successors, legal representatives and permitted assigns.
Section 7. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. ANY RIGHT TO
TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO OR ARISING
OUT OF THIS AMENDMENT, OR ANY TRANSACTION OR CONDUCT IN CONNECTION
HEREWITH, IS WAIVED.
Section 9. NO THIRD-PARTY BENEFICIARIES. This Amendment is not
intended to confer upon any person other than the parties hereto any rights
or remedies.
Section 10. INTERPRETATION. The headings contained in this Amendment
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Amendment. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation".
Section 11. SEVERABILITY. If any term or other provision of this
Amendment is invalid, illegal or incapable of being enforced by any rule or
Law, or public policy, all other conditions and provisions of this
Amendment shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions and amendments contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Amendment so as to effect the original intent of the
parties as closely as possible to the end that the transactions and
amendments contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first written above.
MARATHON OIL COMPANY,
By: /s/ C.P. Cazalot, Jr.
Name: C.P. Cazalot, Jr.
Title: President
ASHLAND INC.,
By: /s/ J. Marvin Quin
Name: J. Marvin Quin
Title: Senior Vice President
and Chief Financial
Officer
CONFIDENTIAL TREATMENT REQUESTED BY ASHLAND INC.
EXHIBIT A
Detroit Expansion Project
Refinery Profit/Cash Flow Report
(Using year 2002 as Example)
[**]
CONFIDENTIAL TREATMENT REQUESTED BY ASHLAND INC.
EXHIBIT B
Detroit Expansion Project
Qualified Expenditure Report
[**]
CONFIDENTIAL TREATMENT REQUESTED BY ASHLAND INC.
EXHIBIT C
Detroit Expansion Project
Description and Estimate of Amount Financed
(000s)
[**]