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LIMITED LIABILITY COMPANY AGREEMENT
of
MARATHON ASHLAND PETROLEUM LLC
Dated as of January 1, 1998
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TABLE OF CONTENTS
ARTICLE I
Certain Definitions; Applicable GAAP
SECTION 1.01. Definitions................................................2
SECTION 1.02. Applicable GAAP...........................................24
ARTICLE II
General Provisions
SECTION 2.01. Formation; Effectiveness..................................24
SECTION 2.02. Name......................................................25
SECTION 2.03. Term......................................................25
SECTION 2.04. Registered Agent and Office...............................26
SECTION 2.05. Purpose...................................................26
SECTION 2.06. Powers....................................................27
ARTICLE III
Members
SECTION 3.01. Members; Percentage Interests.............................28
SECTION 3.02. Adjustments in Percentage Interests.......................29
ARTICLE IV
Capital Contributions;Assumption of Assumed Liabilities
SECTION 4.01. Contributions.............................................29
SECTION 4.02. Additional Contributions..................................32
SECTION 4.03. Negative Balances; Withdrawal of Capital;
Interest....................................33
ARTICLE V
Distributions
SECTION 5.01. Distributions.............................................33
SECTION 5.02. Certain General Limitations...............................36
SECTION 5.03. Distributions in Kind.....................................36
SECTION 5.04. Distributions in the Event of an Exercise
of the Marathon Call Right, Ashland
Put Right or the Special Termination
Rights......................................37
ARTICLE VI
Allocations and Other Tax Matters
SECTION 6.01. Maintenance of Capital Accounts...........................37
SECTION 6.02. Allocation of Profit and Loss.............................38
SECTION 6.03. Tax Allocations...........................................38
SECTION 6.04. Entity Classification.....................................39
SECTION 6.05. Fiscal Year...............................................39
SECTION 6.06. Tax Returns...............................................39
SECTION 6.07. Tax Matters Partner.......................................40
SECTION 6.08. Duties of Tax Matters Partner.............................41
SECTION 6.09. Survival of Provisions....................................43
SECTION 6.10. Section 754 Election......................................43
SECTION 6.11. Qualified Income Offset, Minimum Gain
Chargeback..................................43
SECTION 6.12. Tax Treatment of Designated Sublease
Agreements..................................44
SECTION 6.13. Tax Treatment of Reimbursed Liability
Payments....................................44
SECTION 6.14. Tax Treatment of Disproportionate
Payments....................................45
ARTICLE VII
Books and Records
SECTION 7.01. Books and Records; Examination............................45
SECTION 7.02. Financial Statements and Reports..........................46
SECTION 7.03. Notice of Affiliate Transactions; Annual
List.......................................48
ARTICLE VIII
Management of the Company
SECTION 8.01. Managing Members..........................................49
SECTION 8.02. Board of Managers.........................................49
SECTION 8.03. Responsibility of the Board of Managers...................50
SECTION 8.04. Meetings..................................................50
SECTION 8.05. Compensation..............................................52
SECTION 8.06. Quorum....................................................52
SECTION 8.07. Voting....................................................53
SECTION 8.08. Matters Constituting Super Majority
Decisions...................................54
SECTION 8.09. Annual Capital Budget.....................................61
SECTION 8.10. Business Plan.............................................62
SECTION 8.11. Requirements as to Affiliate Transactions.................62
SECTION 8.12. Review of Certain Affiliate Transactions
Related to Crude Oil Purchases and Shared
Services....................................64
SECTION 8.13. Adjustable Amounts........................................67
SECTION 8.14. Company Leverage Policy...................................68
SECTION 8.15. Company's Investment Guidelines...........................68
SECTION 8.16. Requirements as to Operating Leases.......................69
SECTION 8.17. Limitations on Actions Relating to the
Calculation of Distributable Cash...........69
SECTION 8.18. Reliance by Third Parties.................................69
SECTION 8.19. Integration of Retail Operations. ........................70
ARTICLE IX
Officers
SECTION 9.01. (a) Election, Appointment and Term of
Office......................................71
SECTION 9.02. Resignation, Removal and Vacancies........................72
SECTION 9.03. Duties and Functions of Executive
Officers....................................73
ARTICLE X
Transfers of Membership Interests
SECTION 10.01. Restrictions on Transfers................................74
SECTION 10.02. Conditions for Admission.................................78
SECTION 10.03. Allocations and Distributions............................79
SECTION 10.04. Right of First Refusal...................................79
SECTION 10.05. Restriction on Resignation or Withdrawal.................80
ARTICLE XI
Liability, Exculpation and Indemnification
SECTION 11.01. Liability................................................81
SECTION 11.02. Exculpation..............................................81
SECTION 11.03. Indemnification..........................................81
ARTICLE XII
Fiduciary Duties
SECTION 12.01. Duties and Liabilities of Covered
Persons....................................82
SECTION 12.02. Fiduciary Duties of Members of the
Company and Members of the Board
of Managers................................82
ARTICLE XIII
Dispute Resolution Procedures
SECTION 13.01. General..................................................83
SECTION 13.02. Dispute Notice and Response..............................83
SECTION 13.03. Negotiation Between Senior Managers......................84
SECTION 13.04. Negotiation Between Chief Executive
Officer and President......................84
SECTION 13.05. Right to Equitable Relief Preserved......................85
ARTICLE XIV
Rights and Remedies with Respect to Monetary Disputes
SECTION 14.01. Ability of Company to Borrow
to Fund Disputed Monetary Amounts..........86
SECTION 14.02. Interim Payment of Disputed Monetary
Amount.....................................87
SECTION 14.03. Liquidated Damages.......................................87
SECTION 14.04. Right of Set-Off.........................................90
SECTION 14.05. Security Interest........................................90
ARTICLE XV
Dissolution and Termination
SECTION 15.01. Dissolution..............................................92
SECTION 15.02. Winding Up of Company....................................93
SECTION 15.03. Distribution of Property.................................93
SECTION 15.04. Time Limitation..........................................93
SECTION 15.05. Termination of Company...................................93
ARTICLE XVI
Miscellaneous
SECTION 16.01. Notices..................................................94
SECTION 16.02. Merger and Entire Agreement..............................95
SECTION 16.03. Assignment...............................................95
SECTION 16.04. Parties in Interest......................................95
SECTION 16.05. Counterparts.............................................95
SECTION 16.06. Amendment; Waiver........................................96
SECTION 16.07. Severability.............................................96
SECTION 16.08. GOVERNING LAW............................................96
SECTION 16.09. Enforcement..............................................97
SECTION 16.10. Creditors................................................97
SECTION 16.11. No Bill for Accounting...................................98
SECTION 16.12. Waiver of Partition......................................98
SECTION 16.13. Table of Contents, Headings and Titles...................98
SECTION 16.14. Use of Certain Terms; Rules of
Construction...............................98
SECTION 16.15. Holidays.................................................98
SECTION 16.16. Third Parties............................................98
SECTION 16.17. Liability for Affiliates.................................99
Appendix A Certain Definitions
Appendix B Procedures for Dispute Resolution
Exhibit A Speedway SuperAmerica LLC Retail
Integration Protocol
Schedule 1.01 Financed Properties
Schedule 4.01(c) Subleased Property
Schedule 4.02(a)-1 Marathon Capital Expenditures
Schedule 4.02(a)-2 Ashland Capital Expenditures
Schedule 8.01(k)
(i)(A) Closing Date Affiliate Transactions
Schedule 8.14 Company Leverage Policy
Schedule 8.15 Company Investment Guidelines
Schedule A Calculations re: Normal Annual Capital Budget
Amount
Schedule B-1 Adjustments to Historical EBITDA
(Marathon)
Schedule B-2 Adjustments to Historical EBITDA (Ashland)
Schedule C Initial Executive Officers
LIMITED LIABILITY COMPANY AGREEMENT
dated as of January 1, 1998, of MARATHON
ASHLAND PETROLEUM LLC (the "Company"), by and
between Marathon Oil Company, an Ohio
corporation ("Marathon"), and Ashland Inc., a
Kentucky corporation ("Ashland"), as Members.
Preliminary Statement
WHEREAS, on June 11, 1997, Marathon and Emro Marketing
Company ("Emro Marketing") formed the Company (formerly known as "Emro
Supply, LLC") by filing a Certificate of Formation of the Company with the
Secretary of State of the State of Delaware and executed the Limited
Liability Company Agreement of the Company pursuant to which Marathon
received a 60% interest in the Company and Emro Marketing received a 40%
interest in the Company;
WHEREAS, on July 18, 1997, Emro Marketing assigned its
interest in the Company to Marathon and Fuelgas Company, Inc., a wholly
owned subsidiary of Marathon ("Fuelgas"), with Marathon receiving an
additional 39% interest in the Company and Fuelgas receiving a 1% interest
in the Company, which interest will be transferred to Marathon immediately
following the Closing (for purposes of this Agreement and the other
Transaction Documents, all references to Marathon's interest in the Company
shall be deemed to include the 1% interest owned by Fuelgas);
WHEREAS, on July 18, 1997, Marathon and Fuelgas executed
the First Amended and Restated Limited Liability Company Agreement of the
Company and filed an Amended and Restated Certificate of Formation of the
Company with the Secretary of State of the State of Delaware;
WHEREAS, on October 29, 1997, Marathon and Fuelgas filed
a Second Amended and Restated Certificate of Formation of the Company with
the Secretary of State of the State of Delaware to change the name of the
Company to Marathon Ashland Petroleum LLC;
WHEREAS, on December 8, 1997, Marathon and Fuelgas
executed the Second Amended and Restated Limited Liability
2
Company Agreement of the Company which became effective on December 10,
1997;
WHEREAS the parties hereto desire that the Company (a) be
a premier petroleum supply, refining, marketing and transportation
business, (b) create a highly efficient, cost-effective and competitive
petroleum supply, refining, marketing and transportation system, (c)
deliver to the Members the highest possible economic value added, (d) be
customer-focused and market-driven in its business strategy, (e) be a
respected and responsible member of the communities in which the Company
will operate, with a high regard for environmental responsibility and
employee safety, and (f) seek to maximize Distributable Cash to the Members
consistent with the foregoing, including capital spending levels which over
time are expected to be generally equivalent to the level of non-cash
charges; and
WHEREAS the Members desire to enter into this Agreement
to set forth the rights and responsibilities of each of them with respect
to the governance, financing and operation of the Company.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
ARTICLE I
Certain Definitions; Applicable GAAP
Certain Definitions; Applicable GAAP
SECTION 1.01. Definitions. Defined terms used in this
Agreement shall have the meanings ascribed to them by definition in this
Agreement or in Appendix A. In addition, when used herein the following
terms have the following meanings:
"Accounting Determination" has the meaning set forth in
Section 1.02.
"Acquisition Expenditures" means, in connection with any
acquisition by the Company and its subsidiaries, without duplication (i)
the purchase price paid or to be paid for the net assets or capital stock
or other equity
3
interests in connection with such acquisition, (ii) any Indebtedness
assumed by the Company and its subsidiaries in connection with any such
acquisition, (iii) any contingent liabilities assumed or incurred by the
Company and its subsidiaries in connection with any such acquisition to the
extent that such contingent liabilities are required to be reflected on the
balance sheet of the Company and its subsidiaries in accordance with
Financial Accounting Standard Number 5 (or any successor or superseding
provision of Applicable GAAP), and (iv) all other costs and expenses
incurred or to be incurred by the Company or any of its subsidiaries in
connection with any such acquisition to the extent that such costs and
expenses would be capitalized if such acquisition were consummated.
"Adjustable Amount" has the meaning set forth in Section
8.13.
"Additional Monetary Amount" has the meaning set forth in
Section 14.03(c).
"Additional Required Cash Amount" has the meaning set
forth in Section 14.01(a).
"Adjusted DD&A" means:
(i) for the twelve-month periods ended December 31, 1995
and 1996, $348 million and $346 million, respectively;
(ii) for the twelve-month period ended December 31, 1997,
the total combined depreciation, depletion and amortization
expense of the Marathon Business and the Ashland Business during
such twelve-month period, including, without duplication, (a) any
gains (deductions from depreciation, depletion and amortization)
or losses (additions to depreciation, depletion and amortization)
on asset retirements during such period and (b) pro forma
depreciation, depletion and amortization expense related to the
Financed Properties during such period (calculated in the same
manner such pro forma depreciation, depletion and amortization
expense was calculated in Schedule A,
4
which considers the placed-in-service dates of the Financed
Properties);
(iii) for the twelve-month period ended September 30,
1998, the sum of:
(a) the total combined depreciation, depletion
and amortization expense of the Marathon Business and the
Ashland Business during the period commencing on October
1, 1997, and ended on the date immediately preceding the
Closing Date, including, without duplication, (1) any
gains (deductions from depreciation, depletion and
amortization) or losses (additions to depreciation,
depletion and amortization) on asset retirements during
such period and (2) pro forma depreciation, depletion and
amortization expense related to the Financed Properties
during such period (calculated in the same manner such
pro forma depreciation, depletion and amortization
expense was calculated in Schedule A, which considers the
placed-in-service dates of the Financed Properties); and
(b) the total depreciation, depletion and
amortization expense of the Company and its subsidiaries
for the period commencing on the Closing Date and ended
on September 30, 1998, including (1) any gains
(deductions from depreciation, depletion and
amortization) or losses (additions to depreciation,
depletion and amortization) on asset retirements during
such period, (2) depreciation, depletion and amortization
expense related to the Garyville Propylene Upgrade
Project during such period and (3) depreciation,
depletion and amortization expense related to all
Company-funded Capital Expenditures, but excluding (4)
depreciation, depletion and amortization expense related
to Member-Funded Capital Expenditures and (5) the
increase or decrease in such depreciation, depletion and
amortization expense related to the Ashland Transferred
Assets (including pro forma depreciation, depletion and
amortization expense
5
related to the Financed Properties) resulting from the
application of purchase accounting treatment to the
transactions contemplated by the Transaction Documents
(such purchase accounting treatment causing an increase
or decrease in the estimated useful lives and the net
book value of the Ashland Transferred Assets); and
(iv) for the twelve-month period ended September 30,
1999, and each twelve-month period ended September 30 thereafter,
the total depreciation, depletion and amortization expense of the
Company and its subsidiaries for such twelve-month period,
including, without duplication, (a) any gains (deductions from
depreciation, depletion and amortization) or losses (additions to
depreciation, depletion and amortization) on asset retirements
during such period, (b) depreciation, depletion and amortization
expense related to the Garyville Propylene Upgrade Project during
such period and (c) depreciation, depletion and amortization
expense related to Company-funded Capital Expenditures but
excluding (d) depreciation, depletion and amortization expense
related to Member-Funded Capital Expenditures and (e) the increase
or decrease in such depreciation, depletion and amortization
expense related to the Ashland Transferred Assets (including pro
forma depreciation, depletion and amortization expense related to
the Financed Properties) resulting from the application of
purchase accounting treatment to the transactions contemplated by
the Transaction Documents (such purchase accounting treatment
causing an increase or decrease in the estimated useful lives and
the net book value of the Ashland Transferred Assets);
all as determined on a consolidated basis with respect to (x) in the case
of any period ending prior to the Closing Date, Marathon and its
subsidiaries or Ashland and its subsidiaries, as applicable, or (y) in the
case of any period ending on or after the Closing Date, the Company and its
subsidiaries, in each case in accordance with Applicable GAAP.
6
"Adjusted EBITDA" means:
(i) for the twelve-month periods ended December 31, 1995
and 1996, $657 million and $600 million, respectively;
(ii) for the twelve-month period ended December 31, 1997,
the sum of:
(a) Historical EBITDA for such twelve-month period, plus
(b) $80 million, minus
(c) 38% of an amount equal to (1) the sum of the amounts
calculated pursuant to clauses (a) and (b) above for such
twelve-month period less (2) the Adjusted DD&A for such
twelve-month period.
(iii) for the twelve-month period ended September 30,
1998, the sum of:
(a) for the period commencing on October 1, 1997, and
ended on the date immediately preceding the Closing Date, the sum
of:
(1) Historical EBITDA for such period, plus
(2) $20 million, minus
(3) 38% of an amount equal to (A) the sum of the
amounts calculated pursuant to clauses (1) and (2) above
with respect to such period less (B) the Adjusted DD&A
for such period; and
(b) for the period commencing on the Closing Date and
ended on September 30, 1998, the sum of:
(1) EBITDA of the Company and its subsidiaries
for such period, plus
(2) $12.4 million, minus
7
(3) the Tax Distribution Amounts paid or to be
paid in respect of each of the three Fiscal Quarters (or
portion thereof) included in such period; and
(iv) for the twelve-month period ended September 30, 1999
and each twelve-month period ended September 30 thereafter, the sum of:
(a) EBITDA of the Company and its subsidiaries for such
twelve-month period, minus
(b) the Tax Distribution Amounts paid or to be paid in
respect of each of the four Fiscal Quarters included in such
twelve-month period;
all as determined on a consolidated basis with respect to (x) in the case
of any period ending prior to the Closing Date, Marathon and its
subsidiaries or Ashland and its subsidiaries, as applicable, or (y) in the
case of any period ending on or after the Closing Date, the Company and its
subsidiaries, in each case in accordance with then Current GAAP (other than
Ordinary Course Lease Expenses which shall be calculated in accordance with
Applicable GAAP).
"Advanced Amount" has the meaning set forth in Section
14.01(b).
"Affiliate Transaction" means any agreement or
transaction between the Company or any of its subsidiaries and any Member
or any Affiliate of any Member that:
(a) for purposes of Section 7.03(a)(i), will result or is
reasonably anticipated will result in expenditures, contingent or
actual liabilities or benefits to the Company and its subsidiaries
in excess of $2 million;
(b) for purposes of Section 7.03(b), is either (i)
outside the ordinary course of the Company and its subsidiaries'
business and results or will result in contingent or actual
liabilities or benefits to the Company and its subsidiaries in
excess of $100,000 in
8
the applicable Fiscal Year or (ii) within the ordinary course of
the Company and its subsidiaries' business and results or will
result in expenditures, contingent or actual liabilities or
benefits to the Company and its subsidiaries (A) in excess of $2
million individually in the applicable Fiscal Year or (B) when
taken together with all other agreements or transactions entered
into the same Fiscal Year as such agreement or transaction which
are either related to such agreement or transaction or are
substantially the same type of agreement or transaction as such
agreement or transaction, in excess of $2 million in the aggregate
in the applicable Fiscal Year; and
(c) for purposes of Section 8.08(k)(i), is either (i)
outside the ordinary course of the Company and its subsidiaries'
business and will result or is reasonably anticipated will result
in expenditures, contingent or actual liabilities or benefits to
the Company and its subsidiaries in excess of $2 million or (ii)
within the ordinary course of the Company and its subsidiaries'
business and will result or is reasonably anticipated will result
in expenditures, contingent or actual liabilities or benefits to
the Company and its subsidiaries in excess of $25 million.
For purposes of this definition of Affiliate Transaction,
any guarantee by a Member or any Affiliate of any Member of any obligations
of the Company or any of its subsidiaries that is provided by such Member
or such Affiliate without cost to the Company and its subsidiaries shall
not be deemed to be an Affiliate Transaction. Notwithstanding the
foregoing, the term "Affiliate Transaction" shall not include any
distributions of cash or other property to the Members pursuant to Article
V.
"Affiliate Transaction Dispute Notice" has the meaning
set forth in Section 8.11(b).
"Aggregate Tax Rate" has the meaning set forth in Section
5.01(a)(i).
"Agreed Additional Capital Contributions" has the meaning
set forth in Section 4.02(c).
9
"Agreement" means this Limited Liability Company
Agreement of the Company, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Annual Capital Budget" has the meaning set forth in
Section 8.09(a).
"Applicable GAAP" has the meaning set forth in Section
1.02.
"Approved Marathon Crude Oil Purchase Program" has the
meaning set forth in Section 8.12.
"Arbitratable Dispute" has the meaning set forth in
Section 13.04(a).
"Arbitration Payment Due Date" has the meaning set forth
in Section 14.03(a).
"Arbitration Proceeding" has the meaning set forth in
Section 14.01(a).
"Arbitration Tribunal" has the meaning set forth in
Appendix B.
"Arm's-Length Transaction" has the meaning set forth in
Section 8.11(a).
"Ashland Designated Sublease Agreements" shall mean the
Ashland Sublease Agreements attached as Exhibits L-1, L-2, L-3 and L-4 to
the Asset Transfer and Contribution Agreement.
"Ashland-Funded Capital Expenditures" has the meaning set
forth in Section 4.02(a).
"Audited Financial Statements" has the meaning set forth
in Section 7.02(c).
10
"Average Annual DD&A" means:
(a) for Fiscal Year 1998, the average of the Adjusted
DD&A for the three twelve-month periods ended December 31, 1995,
1996 and 1997;
(b) for Fiscal Year 1999, the average of the Adjusted
DD&A (i) for the two twelve-month periods ended December 31, 1996
and 1997 and (ii) for the one twelve-month period ended September
30, 1998;
(c) for Fiscal Year 2000, the average of the Adjusted
DD&A (i) for the twelve-month period ended December 31, 1997 and
(ii) for the two twelve-month periods ending on September 30, 1998
and 1999; and
(d) for Fiscal Year 2001 and each Fiscal Year thereafter,
the average of the Adjusted DD&A for the three twelve-month
periods ending on September 30 in each of the three Fiscal Years
immediately preceding such Fiscal Year.
"Average Adjusted EBITDA" means:
(a) for Fiscal Year 1998, the average of the Adjusted
EBITDA for the three twelve-month periods ended December 31, 1995,
1996 and 1997;
(b) for Fiscal Year 1999, the average of the Adjusted
EBITDA (i) for the two twelve-month periods ended December 31,
1996 and 1997 and (ii) for the one twelve-month period ended
September 30, 1998;
(c) for Fiscal Year 2000, the average of the Adjusted
EBITDA (i) for the twelve-month period ended December 31, 1997 and
(ii) for the two twelve-month periods ending on September 30, 1998
and 1999; and
(d) for Fiscal Year 2001 and each Fiscal Year thereafter,
the average of the Adjusted EBITDA for the three twelve-month
periods ending on September 30 in each of the three Fiscal Years
immediately preceding such Fiscal Year.
11
"Average Annual Level" means for any twelve-month period
ending on September 30 of any calendar year, the average of the level of
the Price Index ascertained by adding the twelve monthly levels of the
Price Index during such twelve-month period and dividing the total by
twelve.
"Bareboat Charters" has the meaning set forth in Section
9.3(k) of the Asset Transfer and Contribution Agreement.
"Base Level" means 161.2.
"Base Rate" has the meaning set forth in Section 1.01 of
the Put/Call, Registration Rights and Standstill Agreement.
"Board of Managers" has the meaning set forth in Section
8.02(a).
"Bulk Motor Oil Business" has the meaning set forth in
Section 14.03(h) of the Put/Call, Registration Rights and Standstill
Agreement.
"Business Plan" has the meaning set forth in Section 8.10.
"Capital Account" has the meaning set forth in Section 6.01.
"Capital Expenditures" means, for any period, the
aggregate of all expenditures incurred by the Company and its subsidiaries
during such period that, in accordance with Applicable GAAP, are or should
be included in "additions to property, plant or equipment" or similar items
reflected in the consolidated statement of cash flows of the Company and
its subsidiaries; provided, however, that Capital Expenditures shall not
include (a) exchanges of such items for other items, (b) expenditures of
proceeds of insurance settlements by the Company or any of its subsidiaries
in respect of lost, destroyed or damaged assets, equipment or other
property to the extent such expenditures are made to replace or repair such
lost, destroyed or damaged assets, equipment or other property within 18
months of such loss, destruction or damage, (c) funds expended by a Member
or an
12
Affiliate of a Member to purchase any Subleased Property that is
contributed to the Company or a subsidiary of the Company pursuant to
Section 4.01(c)(i)(A) or (d) Member-Funded Capital Expenditures; all as
determined on a consolidated basis with respect to the Company and its
subsidiaries in accordance with Applicable GAAP.
"Capital Lease" means any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for
as capital leases on a consolidated balance sheet of the Company and its
subsidiaries in accordance with Applicable GAAP.
"Closing Date Affiliate Transactions" has the meaning set
forth in Section 8.08(k)(i)(A).
"Company Independent Auditors" has the meaning set forth
in Section 7.01.
"Company Investment Guidelines" has the meaning set forth
in Section 8.15.
"Company Leverage Policy" has the meaning set forth in
Section 8.14.
"Competitive Business" has the meaning set forth in
Section 14.01(a) of the Put/Call, Registration Rights and Standstill
Agreement.
"Competitive Third Party" has the meaning set forth in
Section 14.01(d) of the Put/Call, Registration Rights and Standstill
Agreement.
"Contracting Member" has the meaning set forth in Section
8.11(b).
"Covered Person" means any Member, any Affiliate of a
Member or any officers, directors, shareholders, partners, employees,
representatives or agents of a Member or their respective Affiliates, or
any Representative, or any employee, officer or agent of the Company or its
Affiliates.
13
"Critical Decision" means each Primary Critical Decision
and each Other Critical Decision.
"Critical Decision Termination Date" means (a) in the
case of any Other Critical Decision, the first anniversary of the Closing
Date or (b) in the case of any Primary Critical Decision, the first
anniversary of the Closing Date or, if the Critical Decision Termination
Date shall be extended with respect to such Primary Critical Decision as
provided in Section 8.19(c), the fifteen-month anniversary of the Closing
Date.
"Crude Oil Purchases" means any purchase of crude oil by
the Company or any of its subsidiaries from Marathon or any Affiliate of
Marathon.
"Current GAAP" means, at any time, GAAP as in effect at
such time.
"Delinquent Member" has the meaning set forth in Section
14.01(a).
"Designated Sublease Agreements" means the Ashland
Designated Sublease Agreements and the Marathon Designated Sublease
Agreements.
"Designated Sublease Amount" means any obligation of a
Member to the Company or a subsidiary of the Company under Section 4.01(c)
with respect to a Subleased Property or a Designated Sublease Agreement.
"Dispute" has the meaning set forth in Section 13.01.
"Dispute Notice" has the meaning set forth in Section
13.02.
"Disputed Capital Contribution Amount" has the meaning
set forth in Section 13.04(a).
"Disputed Indemnification Amount" has the meaning set
forth in Section 14.01(a).
14
"Disputed Monetary Amount" has the meaning set forth in
Section 14.01(a).
"Distributable Cash" means, for each Fiscal Quarter,
without duplication:
(a) the Short-Term Investments of the Company and its
subsidiaries on the last day of such Fiscal Quarter, minus
(b) the Ordinary Course Debt of the Company and its
subsidiaries on the last day of such Fiscal Quarter, minus
(c) the Tax Distribution Amount to be paid in respect of
such Fiscal Quarter, minus
(d) funds held on the last day of such Fiscal Quarter for
financing Special Projects or Permitted Catlettsburg Capital
Projects, minus
(e) if the notional repayment of principal for Special
Project Indebtedness or Permitted Catlettsburg Capital Project
Indebtedness during such Fiscal Quarter calculated using a
notional repayment schedule established and approved by the Board
of Managers in accordance with the Company Leverage Policy was
more than the amount of actual principal repayments for such
Special Project Indebtedness or Permitted Catlettsburg Project
Indebtedness during such Fiscal Quarter, the amount of such
excess, plus
(f) if the amount of the actual principal repayments for
Special Project Indebtedness or Permitted Catlettsburg Capital
Project Indebtedness during such Fiscal Quarter was more than the
notional repayment of principal for such Special Project
Indebtedness or Permitted Catlettsburg Capital Project
Indebtedness during such Fiscal Quarter (calculated in the manner
described in clause (e) above), the amount of such excess, plus or
minus
(g) any adjustments or reserves (including any
adjustments for minimum cash balance requirements,
15
including cash reserves for accrued or withheld Taxes not yet due)
in the amounts and for the time periods established and approved
by the Board of Managers pursuant to a vote in accordance with
Section 8.07(b).
"Distribution Date" has the meaning set forth in Section
5.01(a).
"Distributions Calculation Statement" has the meaning set
forth in Section 5.01(c).
"EBITDA" means for any period:
(a) net income, plus
(b) to the extent deducted in computing such net income,
the sum of (i) estimated or actual Federal, state, local and
foreign income tax expense, (ii) interest expense, (iii)
depreciation, depletion and amortization expense, (iv) non-cash
charges resulting from the cumulative effect of changes in
accounting principles, and (v) non-cash lower of cost or market
inventory or fixed asset writedowns; minus
(c) to the extent added in computing such net income, (i)
any interest income (excluding interest income on accounts
receivable related to marketing programs), (ii) non-cash gains
resulting from the cumulative effect of changes in accounting
principles and (iii) non-cash lower of cost or market inventory or
fixed asset gains;
all as determined on a consolidated basis (x) in the case of any period
ended prior to the Closing Date, Marathon and its subsidiaries or Ashland
and its subsidiaries, as applicable, or (y) in the case of any period
ending on or after the Closing Date, with respect to the Company and its
subsidiaries, in each case in accordance with then Current GAAP. For
purposes of this definition, depreciation, depletion and amortization
expense will include any gains (deductions from depreciation, depletion and
amortization) or losses (additions to depreciation, depletion and
amortization) on asset retirements and excess purchase price amortization
adjustments. For the avoidance of doubt,
16
EBITDA shall not include any revenues or expenses constituting
Member-Funded Capital Expenditures or Member-Indemnified Expenditures.
"Executive Officers" has the meaning set forth in Section
9.01(a).
"Final Monetary Amount" has the meaning set forth in
Section 14.03(a).
"Financed Properties" means each of the properties listed
in Schedule 1.01.
"Fiscal Quarter" means the three-month period ended March
31, June 30, September 30 and December 31 of each Fiscal Year.
"Fiscal Year" has the meaning set forth in Section 6.05.
"Fuelgas Interest" means the 1% interest in the Company
which is owned by Fuelgas.
"GAAP" means United States generally accepted accounting
principles applied on a consistent basis.
"Garyville Propylene Upgrade Project" means the propylene
splitter with a capacity of approximately 800 million pounds per year that
is being constructed at the Garyville refinery for the production of
propylene.
"Historical EBITDA" means for any period ending prior to
the Closing Date the sum of:
(a) EBITDA of the Marathon Business for such period as
adjusted for each of the "EBIT Adjustment" items set forth in
lines 10-55 of Schedule B-1 and each of the "Depreciation
Adjustment" items set forth in lines 133 through 150 of Schedule
B-1, in each case calculated for such period in the same manner
that such adjustments were calculated in Schedule B-1, plus
(b) EBITDA of the Ashland Business for such period as
adjusted for each of the "EBIT Adjustment"
17
items set forth in lines 11-56 of Schedule B-2 and each of the
"Depreciation Adjustment" items set forth in lines 111-120 of
Schedule B-2, in each case calculated for such period in the same
manner that such adjustments were calculated in Schedule B-2;
all determined on a consolidated basis with respect to Marathon and its
subsidiaries or Ashland and its subsidiaries, as applicable, in accordance
with then Current GAAP.
"Initial GAAP" has the meaning set forth in Section 1.02.
"Initial Term" has the meaning set forth in Section 2.03.
"Maralube Express Business" has the meaning set forth in
Section 14.03(d)(i) of the Put/Call, Registration Rights and Standstill
Agreement.
"Marathon Crude Oil Purchase Program" has the meaning set
forth in Section 8.12.
"Marathon Designated Sublease Agreements" shall mean the
Marathon Sublease Agreements attached as Exhibits E-1, E-2 and E-3 to the
Asset Transfer and Contribution Agreement.
"Marathon-Funded Capital Expenditures" has the meaning
set forth in Section 4.02(a).
"Material Adverse Effect" has the meaning set forth in
the Asset Transfer and Contribution Agreement.
"Member-Funded Capital Expenditures" has the meaning set
forth in Section 4.02(a).
"Member-Indemnified Expenditures" has the meaning set
forth in Section 4.02(b).
"Monetary Dispute" has the meaning set forth in Section
14.01(a).
18
"Non-Contracting Member" has the meaning set forth in
Section 8.11(b).
"Non-Delinquent Member" has the meaning set forth in
Section 14.01.
"Non-Terminating Member" has the meaning set forth in the
Put/Call, Registration Rights and Standstill Agreement.
"Normal Annual Capital Budget Amount" means, for each
Fiscal Year, an amount equal to the sum of:
(i) an amount equal to 130% of the Average Annual DD&A
for such Fiscal Year, plus
(ii) if, with respect to any Fiscal Year, (a) the Average
Adjusted EBITDA for such Fiscal Year less the amount calculated
pursuant to clause (i) above for such Fiscal Year exceeds (b) $240
million (such excess, the "Excess EBITDA" for such Fiscal Year),
the sum of (1) the lesser of: (x) 10% of the Average Annual DD&A
for such Fiscal Year and (y) the Excess EBITDA for such Fiscal
Year and (2) 50% of the amount by which the Excess EBITDA for such
Fiscal Year exceeds an amount equal to 10% of the Average Annual
DD&A for such Fiscal Year.
An example of the calculation of Adjusted DD&A, Adjusted EBITDA, Average
Annual DD&A, Average Adjusted EBITDA and the Normal Annual Capital Budget
Amount is shown in Schedule A. In the event of any inconsistency between
such Schedule A and the language of this definition of Normal Annual
Capital Budget Amount, neither shall control over the other.
"Offer Notice" has the meaning set forth in Section 10.04(a).
"Ordinary Course Debt" means, without duplication, the
aggregate outstanding principal amount of all loans and advances under any
committed or uncommitted credit facilities (including any commercial paper
borrowings or borrowings under the Revolving Credit Agreement, but
excluding trade payables), provided that Ordinary Course
19
Debt shall not include any Permitted Intercompany Debt, any Special Project
Indebtedness or any Permitted Catlettsburg Capital Project Indebtedness.
"Ordinary Course Lease Expense" means, with respect to
any Fiscal Year, the rental or lease expense for such Fiscal Year of assets
rented or financed by operating leases (as determined in accordance with
Applicable GAAP).
"Original Lease" means the lease or charter underlying a
Marathon Designated Sublease Agreement or an Ashland Designated Sublease
Agreement in which Marathon or Ashland, as applicable, is the lessee or
charterer.
"Other Critical Decision" means each of the Level III
decisions set forth in paragraphs 2(c)(iii), (v), (vii), (viii) and (ix) of
the Retail Integration Protocol.
"Packaged Motor Oil Business" has the meaning set forth
in Section 14.03(h) of the Put/Call, Registration Rights and Standstill
Agreement.
"Percentage Interest" has the meaning set forth in
Section 3.01.
"Permitted Catlettsburg Capital Project Indebtedness" has
the meaning set forth in the Company Leverage Policy.
"Permitted Catlettsburg Capital Projects" has the meaning
set forth in the Company Leverage Policy.
"Permitted Intercompany Debt" has the meaning set forth
in the Company Leverage Policy.
"Price Index" means the Consumer Price Index for All
Urban Consumers of the United States Department of Labor Bureau of Labor
Statistics for all Urban Areas (on the 1982-84 equals 100 standard).
"Primary Critical Decision" means each of the Level III
decisions set forth in paragraphs 2(c)(i), (ii), (iv) and (vi) of the
Retail Integration Protocol.
20
"Prime Rate" means the rate of interest per annum
publicly announced from time to time by Citibank, NA, as its prime rate in
effect at its principal office in New York; each change in the Prime Rate
shall be effective on the date such change is publicly announced as being
effective.
"Private Label Packaged Motor Oil Business" has the
meaning set forth in Section 14.03(h) of the Put/Call Registration Rights
and Standstill Agreement.
"Profit and Loss", as appropriate, means, for any period,
the taxable income or tax loss of the Company and its subsidiaries under
Code Section 703(a) and Treasury Regulation Section 1.703-1 for the Fiscal
Year, adjusted as follows:
(a) All items of income, gain, loss or deduction required
to be separately stated pursuant to Code Section 703(a)(1) shall
be included;
(b) Tax exempt income as described in Code Section
705(a)(1)(B) realized by the Company during such Fiscal Year shall
be taken into account as if it were taxable income;
(c) Expenditures of the Company described in Code Section
705(a)(2)(B) for such Fiscal Year, including items treated under
Treasury Regulation Section 1.704-1(b)(2)(iv)(i) as items
described in Code Section 705(a)(2)(B), shall be taken into
account as if they were deductible items;
(d) With respect to any property (other than money) which
has been contributed to the capital of the Company, "Profit" and
"Loss" shall be computed in accordance with the provisions of
Treasury Regulation Section 1.704-1(b)(2)(iv)(g) by computing
depreciation, amortization, income, gain, loss or deduction based
upon the fair market value of such property at the date of
contribution;
(e) With respect to any property of the Company which has
been revalued as required or permitted by Treasury Regulations
under Code Section 704(b),
21
"Profit" or "Loss" shall be determined based upon the fair market
value of such property as determined in such revaluation; and
(f) With respect to any property of the Company which (i)
is distributed in kind to a Member, or (ii) has been revalued
under Section 6.03 upon the occurrence of any event specified in
Treasury Regulation Section 1.704-1(b)(2)(iv)(f), the difference
between the adjusted basis for federal income tax purposes and the
fair market value shall be treated as gain or loss upon the
disposition of such property.
"Qualified Candidate" has the meaning set forth in Section
9.02(c).
"Quick Lube Business" has the meaning set forth in
Section 14.03(h) of the Put/Call, Registration Rights and Standstill
Agreement.
"Refundable Amount" has the meaning set forth in Section
14.03(d).
"Representatives" has the meaning set forth in Section 8.01
"Response" has the meaning set forth in Section 13.02.
"Retail Integration Protocol" means the Speedway
SuperAmerica LLC Retail Integration Protocol attached hereto as Exhibit A.
"Revolving Credit Agreement" has the meaning set forth in
Section 2.2(a) of the Master Formation Agreement.
"Section 8.11(b) Affiliate Transaction" has the meaning
set forth in Section 8.11(b).
"Security Interest" has the meaning set forth in Section
14.05(a).
"Selling Member" has the meaning set forth in Section
10.04(a).
22
"Senior Manager" has the meaning set forth in Section
13.02.
"Shared Service" means an administrative service that is
provided to the Company or its subsidiaries by Marathon, Ashland or any of
their respective Affiliates pursuant to the Shared Services Agreement or
provided to Marathon, Ashland or any of their respective Affiliates by the
Company or its subsidiaries pursuant to the Shared Services Agreement.
"Shared Services Agreement" means the Shared Services
Agreement by and among Marathon, Ashland and the Company, including the
Schedules thereto, attached as Exhibit U to the Asset Transfer and
Contribution Agreement.
"Short-Term Investments" means, without duplication,
collected or available bank cash balances, the fair market value of any
investment made by the Company or any of its subsidiaries pursuant to the
Company's Investment Guidelines and the fair market value of any investment
made by the Company or any of its subsidiaries that should have been made
pursuant to the Company's Investment Guidelines, but excluding Incidental
Cash and any cash balances that represent uncollected funds.
"Significant Shared Service" means (a) any Shared Service
related to the Treasury and Cash Management function and (b) any Shared
Service (or group of related Shared Services) that results or is reasonably
anticipated to result in the payment by or to the Company or any of its
subsidiaries of more than $2 million in any contract year in the period
during which such Shared Service will be provided. For purposes of
determining whether the $2 million threshold of this definition has been
satisfied, payments for all Shared Services in each of the following
general administrative areas shall be aggregated within each area specified
below and considered related Shared Services: Human Resources; Health,
Environment and Safety; Law; Public Affairs; Governmental Affairs; Finance
and Accounting (including Internal Audit); Administrative Services;
Information Technology Services; Procurement; Business Development;
Aviation; Engineering and Technology; Economics; and Security.
23
"Sole Arbitrator" has the meaning set forth in Appendix
B.
"Special Project" has the meaning set forth in the
Company Leverage Policy.
"Special Project Indebtedness" has the meaning set forth
in the Company Leverage Policy.
"Special Termination Right" has the meaning set forth in
Section 2.01(a) of the Put/Call, Registration Rights and Standstill
Agreement.
"Subleased Property" has the meaning set forth in Section
4.01(c).
"Super Majority Decision" has the meaning set forth in
Section 8.08.
"Surplus Cash" has the meaning assigned to such term in
the Company Leverage Policy.
"Tax Distribution Amount" has the meaning set forth in
Section 5.01(a).
"Tax Liability" means, with respect to a Fiscal Year, a
Member's liability for Federal, state, local and foreign taxes attributable
to taxable income allocated to such Member pursuant to Section 6.03 and
Section 10.03, taking into account any Tax deduction or loss specifically
allocated to a Member pursuant to this Agreement or any other Transaction
Document.
"Term of the Company" has the meaning set forth in
Section 2.03.
"Terminating Member" has the meaning set forth in Section
2.01(a) of the Put/Call, Registration Rights and Standstill Agreement.
"Unaudited Financial Statements" has the meaning set
forth in Section 7.02(a).
24
"Valvoline Business" has the meaning set forth in Section
14.03(h) of the Put/Call, Registration Rights and Standstill Agreement.
SECTION 1.02. Applicable GAAPSECTION 1.02. Applicable
GAAP. In connection with the calculation pursuant to this Agreement of
Adjusted DD&A, Capital Expenditures or Ordinary Course Lease Expenses, the
determination of whether a lease is a Capital Lease or the determination of
whether the Company has entered into an operating lease for purposes of
Section 8.16 (each such calculation or determination, an "Accounting
Determination"), the Company shall apply then Current GAAP; provided,
however, that if at any time after the date of this Agreement, a change
shall occur in GAAP which would result in any Accounting Determination
being different under Current GAAP than such Accounting Determination would
have been under GAAP as in effect on the date of this Agreement ("Initial
GAAP"), then (a) the Members shall negotiate in good faith to make such
amendments to the relevant provisions of this Agreement as shall be
required to preserve the economic and other results intended by the Members
as of the date of this Agreement with respect to such Accounting
Determination and (b) unless and until such time as the Members shall in
good faith mutually agree to such amendments, Initial GAAP shall be applied
to make such Accounting Determination or, if the Members shall have
previously amended the relevant provisions of this Agreement pursuant to
this Section 1.02 in response to a prior change in GAAP, then GAAP as in
effect at the time the most recent such previous amendment was made shall
be used to make such Accounting Determination (the GAAP that is actually
applied by the Company in making any such Accounting Determination pursuant
to this Agreement being the "Applicable GAAP").
ARTICLE II
General Provisions
SECTION 2.01. Formation; Effectiveness. The Company has
been formed as a limited liability company pursuant to the provisions of
the Delaware Act by the filing of the Certificate of Formation with the
Secretary of State of the State of Delaware. Pursuant to Section 18-201(d)
of
25
the Delaware Act, the provisions of this Agreement shall be effective as of
the Closing Date. Each Member hereby adopts, confirms and ratifies the
Certificate of Formation and all acts taken in connection therewith.
Ashland shall be admitted as a member of the Company upon its execution and
delivery of this Agreement. Except as provided in this Agreement, the
rights, duties, liabilities and powers of the Members shall be as provided
in the Delaware Act.
SECTION 2.02. Name. The name of the Company shall be
Marathon Ashland Petroleum LLC. The Board of Managers may adopt such trade
or fictitious names as it may determine.
SECTION 2.03. Term. Subject to the provisions of Article
XIV providing for early termination in certain circumstances and the
provisions of Article IX of the Put/Call, Registration Rights and
Standstill Agreement, the initial term of the Company (the "Initial Term")
began on the date the Certificate of Formation was filed with the Secretary
of State of the State of Delaware, and shall continue until the close of
business on December 31, 2022 and, thereafter, the term of the Company
shall be automatically extended for successive 10-year periods unless at
least two years prior to the end of the Initial Term or any succeeding
10-year period, as applicable, a Member notifies the Board of Managers and
the other Member in writing that it wants to terminate the term of the
Company at the end of the Initial Term or such 10-year period, in which
event, the term of the Company shall not thereafter be extended for a
successive ten-year term. The President of the Company shall notify each
Member in writing at least six months prior to each such two-year
notification date that the Term of the Company will be automatically
extended unless a Member provides a notice to the contrary pursuant to this
Section 2.03. The failure of the President of the Company to give such
notice, or any defect in any notice so given, shall not affect the Members'
rights to terminate the Term of the Company pursuant to this Section 2.03,
and shall not result in a termination of the Term of the Company unless a
Member provides a notice to the contrary pursuant to this Section 2.03. The
Initial Term, together with any such extensions, is hereinafter referred to
as the "Term of the Company". The existence of the Company as a separate
26
legal entity shall continue until the cancelation of the Certificate of
Formation in the manner provided in the Delaware Act.
SECTION 2.04. Registered Agent and Office. The name of
the registered agent of the Company for service of process on the Company
in the State of Delaware is The Corporation Trust Company, and the address
of the registered agent and the address of the office of the Company in the
State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801. The Board of Managers may change such office
and such agent from time to time in its sole discretion.
SECTION 2.05. Purpose. (a) The purpose of the Company is
to engage in any lawful act or activity for which a limited liability
company may be formed under the Delaware Act (either directly or indirectly
through one or more subsidiaries). It is the Members' understanding and
intent that (i) the Company will be an independent, self-funding entity,
(ii) no additional capital contributions are expected to be required by the
Members and (iii) the administrative requirements of the Company will
generally be provided by the Company's own employees. In furtherance of
this understanding and intent, and without limiting the generality of the
foregoing, unless the Members shall mutually agree otherwise, the following
administrative functions and services shall be provided substantially by
the Company and its subsidiaries' employees (or by its unaffiliated third
party contractors) under the supervision and control of the Company's
officers: Human Resources; Health, Environment and Safety; Law; Finance and
Accounting; Internal Audit; Treasury and Cash Management; and Information
Technology. For the avoidance of doubt, the Members acknowledge and agree
that the provision at any time of the specific Shared Services identified
and described in Schedule 10.2(e) to the Marathon Asset Transfer and
Contribution Agreement Disclosure Letter and Schedule 10.2(e) to the
Ashland Asset Transfer and Contribution Agreement Disclosure Letter to the
Company and its subsidiaries by the Members shall not be deemed to violate
the requirements of the immediately preceding sentence.
27
(b) The Company, and the President on behalf of the
Company, may enter into and perform the Transaction Documents and the
Commercial Documents to which the Company is a party without any further
act, vote or approval of the Board of Managers or the Members
notwithstanding any other provision of this Agreement, the Delaware Act or
other Applicable Law. The President of the Company is hereby authorized to
enter into such Transaction Documents and such Commercial Documents on
behalf of the Company, but such authorization shall not be deemed a
restriction on the power of the Board of Managers to enter into other
agreements on behalf of the Company.
SECTION 2.06. Powers. In furtherance of its purposes, but
subject to all the provisions of this Agreement, the Company shall have the
power and is hereby authorized to:
(a) acquire by purchase, lease, contribution of property
or otherwise, own, operate, hold, sell, convey, transfer or
dispose of any real or personal property which may be necessary,
convenient or incidental to the accomplishment of the purpose of
the Company;
(b) act as a trustee, executor, nominee, bailee,
director, officer, agent or in some other fiduciary capacity for
any person or entity and to exercise all the powers, duties,
rights and responsibilities associated therewith;
(c) take any and all actions necessary, convenient or
appropriate as trustee, executor, nominee, bailee, director,
officer, agent or other fiduciary, including the granting or
approval of waivers, consents or amendments of rights or powers
relating thereto and the execution of appropriate documents to
evidence such waivers, consents or amendments;
(d) borrow money and issue evidences of indebtedness in
furtherance of any or all of the purposes of the Company, and
secure the same by
28
mortgage, pledge or other lien on the assets of the Company;
(e) invest any funds of the Company pending distribution
or payment of the same pursuant to the provisions of this
Agreement;
(f) prepay in whole or in part, refinance, recast,
increase, modify or extend any Indebtedness of the Company and, in
connection therewith, execute any extensions, renewals or
modifications of any mortgage or security agreement securing such
Indebtedness;
(g) enter into, perform and carry out contracts of any
kind, including, without limitation, contracts with any person or
entity affiliated with any of the Members, necessary to, in
connection with, convenient to, or incidental to the
accomplishment of the purposes of the Company;
(h) employ or otherwise engage employees, managers,
contractors, advisors, attorneys and consultants and pay
reasonable compensation for such services;
(i) enter into partnerships, limited liability companies,
trusts, associations, corporations or other ventures with other
persons or entities in furtherance of the purposes of the Company;
and
(j) do such other things and engage in such other
activities related to the foregoing as may be necessary,
convenient or incidental to the conduct of the business of the
Company, and have and exercise all of the powers and rights
conferred upon limited liability companies formed pursuant to the
Delaware Act.
ARTICLE III
Members
SECTION 3.01. Members; Percentage Interests. The names
and addresses of the Members and their respective
29
percentage interests in the Company ("Percentage Interests") are as
follows:
Percentage
Members Interests
------- ----------
Marathon Oil Company 62%
5555 San Felipe
P.O. Box 3128
Houston, TX 77056-2723
Ashland Inc. 38%
P.O. Box 391
Ashland, KY 41114
Marathon's Percentage Interest shall be deemed to include the Fuelgas
Interest. Promptly after the Closing, Marathon will cause Fuelgas to merge
with and into Marathon.
SECTION 3.02. Adjustments in Percentage Interests.
Marathon's and Ashland's Percentage Interests, and the Percentage Interests
of each other Member, if any, shall be adjusted (a) at the time of any
Transfer of such Member's Membership Interests pursuant to Section 10.02
and (b) at the time of the admission of each new Member pursuant to such
terms and conditions as the Board of Managers from time to time shall
determine pursuant to a vote in accordance with Section 8.07(b), in each
case to take into account such Transfer or admission of a new Member.
ARTICLE IV
Capital Contributions;
Assumption of Assumed Liabilities
SECTION 4.01. Contributions. (a) On or before the Closing
Date, Marathon shall contribute, convey, transfer, assign and deliver to
the Company or shall have contributed, conveyed, transferred, assigned and
delivered to the Company, the Marathon Transferred Assets, and Ashland
shall contribute, convey, transfer, assign and deliver to the Company or
shall have contributed, conveyed, transferred, assigned and delivered to
the Company, the
30
Ashland Transferred Assets, in each case pursuant to terms and conditions
of the Asset Transfer and Contribution Agreement. In addition, any
additional assets that Marathon or Ashland are required to contribute,
convey, transfer, assign and deliver to the Company at a later date
pursuant to the terms and conditions of the Asset Transfer and Contribution
Agreement shall be so contributed at such later date.
(b) The Company shall assume, as of the Closing Date, the
Assumed Liabilities pursuant to the terms of the Asset Transfer and
Contribution Agreement.
(c) Payments or Damages under Designated Sublease
Agreements as Contributions. (i) Each Member has agreed, pursuant to the
Designated Sublease Agreements to which it is a party, to sublease to the
Company or one of its subsidiaries the assets or property listed on
Schedule 4.01(c) ("Subleased Property") for a nominal consideration in lieu
of transferring such property to the Company or such subsidiary, free of
any Liens, other than Permitted Encumbrances, as a capital contribution.
(A) If at any time after the date of this Agreement a
Member in its capacity as a sublessor shall become the owner of
any Subleased Property, such Member shall promptly contribute,
convey, transfer, assign and deliver to the Company (or, if the
Company so directs, to one of its subsidiaries) at no cost to the
Company or such subsidiary, and the Company hereby agrees to
accept, or to cause such subsidiary to accept, such Subleased
Property and the related Designated Sublease Agreement shall be
terminated with respect to such Subleased Property, all as more
specifically set forth in such Designated Sublease Agreement. In
addition, if at any time after the date of this Agreement a Member
assigns to the Company (or a subsidiary of the Company) a purchase
option with respect to a Subleased Property pursuant to a
Designated Sublease Agreement and the Company or such subsidiary
exercises such purchase option and pays all or a portion of the
purchase price therefor, such Member shall promptly reimburse the
Company or such subsidiary such amount so paid and, if not so
reimbursed, such amount shall be subject to
31
set-off pursuant to Section 14.04. Any such payment by the Company
shall be treated as a distribution to the appropriate Member for
capital account purposes, and any such amount paid to the Company
or such subsidiary by a Member in connection with such
reimbursement obligation, or to the extent of a set-off applied
pursuant to Section 14.04 as a result of such failure to so
reimburse, shall be treated as a capital contribution to the
Company.
(B) Any amount paid by the Company or any of its
subsidiaries under a Designated Sublease Agreement to cure or
prevent a payment default by the sublessor Member under the
underlying Original Lease shall be reimbursed to the Company or
such subsidiary by such Member, and if not so reimbursed, shall be
subject to set-off pursuant to Section 14.04. Any such payment by
the Company shall be treated as a distribution to the appropriate
Member for capital account purposes, and any such amount paid to
the Company or such subsidiary by a Member in connection with a
default of its payment obligations under its respective Designated
Sublease Agreements, or to the extent of a set-off applied
pursuant to Section 14.04 as a result of such default, shall be
treated as a capital contribution to the Company.
(C) None of the capital contributions pursuant to (A) and
(B) above shall result in any adjustment to the Members'
respective Percentage Interests in the Company.
(ii) If (A) a Member commences a voluntary case under any
applicable bankruptcy, insolvency, liquidation, receivership,
reorganization or other similar law now in effect, or an order for relief
is entered against such Member in an involuntary case under any such law
and (B) a trustee of such Member rejects a Designated Sublease Agreement of
such Member, then (1) the Member shall be obligated to reimburse the
Company for the Loss to the Company as a result of such rejected Designated
Sublease Agreement, which Loss, if not so reimbursed, shall be subject to
set-off pursuant to Section 14.04 prior to the interest of such Member in
any distributions hereunder and
32
(2) the amount of such Loss shall be deemed to be the loss of use of such
Subleased Property for the economic life thereof rather than any other
period.
SECTION 4.02. Additional Contributions. (a) Member-Funded
Capital Expenditures. For each Capital Expenditure project identified on
Schedule 4.02(a)-1, Marathon shall contribute to the Company the amount of
funds necessary to comply with its obligations under Section 7.1(j) of the
Asset Transfer and Contribution Agreement with respect to such Capital
Expenditure project as, when and if the Company actually incurs Capital
Expenditures related to such Capital Expenditure project (such Capital
Expenditures, as, when and if they are funded by Marathon, are referred to
herein as the "Marathon-Funded Capital Expenditures"). For each Capital
Expenditure project identified on Schedule 4.02(a)-2, Ashland shall
contribute to the Company the amount of funds necessary to comply with its
obligations under Section 7.2(k) of the Asset Transfer and Contribution
Agreement with respect to such Capital Expenditure project as, when and if
the Company actually incurs Capital Expenditures related to such Capital
Expenditure project (such Capital Expenditures, as, when and if they are
funded by Ashland, are referred to herein as the "Ashland-Funded Capital
Expenditures", and together with the Marathon-Funded Capital Expenditures,
the "Member-Funded Capital Expenditures"). Each Member-Funded Capital
Expenditure shall be treated as a capital contribution to the Company, but
shall not result in any adjustment to the Members' respective Percentage
Interests in the Company. To the extent permitted by applicable Tax law,
any Tax deduction by the Company of a Member-Funded Capital Expenditure
shall be specially allocated so that each Member will have the Tax benefit
of its Member-Funded Capital Expenditures.
(b) Indemnification Payments as Contributions. Any
indemnity amount paid by Marathon or Ashland to the Company under Article
IX of the Asset Transfer and Contribution Agreement (each a
"Member-Indemnified Expenditure") shall be treated as a capital
contribution to the Company, but shall not result in any adjustment to the
Members' respective Percentage Interests in the Company. A determination of
whether the associated Loss will be deducted or capitalized by the Company
for Tax purposes
33
shall be made by the Company at the direction of the Indemnifying Party.
Any Tax deduction or loss claimed by the Company with respect to the
indemnified amount shall be specially allocated to the Indemnifying Party.
(c) Other Additional Capital Contributions. The Members
shall make other additional capital contributions ("Agreed Additional
Capital Contributions") pro rata based on their respective Percentage
Interests if and to the extent such capital contributions are approved by
the Board of Managers pursuant to a vote in accordance with Section
8.07(b).
(d) No Third-Party Beneficiaries. The provisions of this
Agreement, including without limitation, this Section 4.02, are intended
solely to benefit the Members and, to the fullest extent permitted by
Applicable Law, shall not be construed as conferring any benefit upon any
creditor of the Company other than the Members, and no such creditor of the
Company other than the Members shall be a third-party beneficiary of this
Agreement, and no Member or member of the Board of Managers shall have any
duty or obligation to any creditor of the Company to issue any call for
capital pursuant to this Agreement.
SECTION 4.03. Negative Balances; Withdrawal of Capital;
Interest. Neither of the Members shall have any obligation to the Company
or to the other Member to restore any negative balance in its Capital
Account. Neither Member may withdraw capital or receive any distributions
from the Company except as specifically provided herein. No interest shall
be paid by the Company on any capital contributions.
ARTICLE V
Distributions
SECTION 5.01. Distributions. (a) Within 45 days after the
end of each Fiscal Quarter, the Company shall
34
distribute to the Members (the date of such distribution being a
"Distribution Date") an amount in cash (the "Tax Distribution Amount")
determined as follows:
(i) The maximum Tax Liability of each Member with respect
to its allocable portion (as provided in Section 6.03) of the
Company's estimated taxable income for such Fiscal Quarter shall
be determined, based upon the highest aggregate marginal statutory
Federal, state and local income tax rate (determined taking into
account the deductibility, to the extent allowed, of income-based
taxes paid to governmental entities) to which any Member may be
subject for the related Fiscal Year (and excluding any deferred
taxes) (the "Aggregate Tax Rate").
(ii) If the Tax Liability determined in clause (i) is
positive with respect to either Member, there shall be a cash
distribution to each of the Members, in accordance with their
Percentage Interests, of an aggregate amount such that neither
Member shall receive less than its Tax Liability.
(iii) In the event that the Tax Liability with respect to
a Fiscal Quarter, determined pursuant to clause (i) above, is
negative with respect to each Member, such negative Tax Liability
shall not give rise to a payment obligation on the part of either
Member, but shall be carried forward and shall offset the positive
Tax Liability of the Members in succeeding Fiscal Quarters.
(iv) Following a determination by the Company of the
Company's actual net taxable income with respect to a Fiscal Year,
the maximum Tax Liability of each Member with respect to its
allocable portion (as provided in Section 6.03) of the Company's
net taxable income for such Fiscal Year shall be determined, based
upon the Aggregate Tax Rate. If the maximum Tax Liability of any
Member for the Fiscal Year is in excess of the cash distributions
previously made to the Member for such Fiscal Year under clause
(ii) above and subsection (b) below, the Company shall make a cash
distribution to all the Members, in accordance with their
Percentage
35
Interests, of an aggregate amount such that the excess is
eliminated for all the Members. Such distribution shall be made
within 45 days of the date the Company's actual net taxable income
is determined.
(v) In the event that the Company Independent Auditors
determine pursuant to Section 7.02(d) that the Company's actual
net taxable income with respect to a Fiscal Year is greater than
the amount determined by the Company pursuant to clause (iv)
above, the Company shall make a determination of the amount of
cash, if any, required to be distributed to the Members, in
accordance with their Percentage Interests, such that, after
taking into account cash distributions previously made to a Member
under clause (ii) above and subsection (b) below, no Member shall
receive less than its Tax Liability for such Fiscal Year based on
such higher net taxable income amount. The Company shall, within
15 days after the determination is made, distribute such
additional amount of cash to the Members, in accordance with their
Percentage Interests.
(vi) In the event that the Company Independent Auditors
determine pursuant to Section 7.02(d) that the Company's actual
net taxable income with respect to a Fiscal Year is less than the
amount determined by the Company pursuant to clause (iv) above, a
determination shall be made of the excess Tax Distribution Amount
that was distributed to the Members in respect of such Fiscal Year
based on the Company's determination of its actual net taxable
income and the Company shall deduct from the next Tax Distribution
Amount payable to the Members pursuant to this Section 5.01, the
amount of such excess distribution.
(b) In addition to the distributions pursuant to Section
5.01(a), on each Distribution Date, the Company shall distribute to the
Members all Distributable Cash for the Fiscal Quarter to which such
Distribution Date relates. Subject to Section 5.02(b), each such
distribution shall be allocated between the Members pro rata based upon
their respective Percentage Interests.
36
(c) The Company shall prepare and distribute to each
Member within 45 days after the end of each Fiscal Quarter a statement (a
"Distributions Calculation Statement") setting forth the calculations (in
reasonable detail) used by the Company for purposes of distributions
pursuant to this Section 5.01 of (i) the Tax Distribution Amount for each
Member for such Fiscal Quarter, (ii) the amount of Distributable Cash for
such Fiscal Quarter and (iii) the allocation of such Distributable Cash
between the Members.
SECTION 5.02. Certain General Limitations. (a)
Notwithstanding any provision to the contrary contained in this Agreement,
the Company, and the Board of Managers on behalf of the Company, shall not
be required to make a distribution to either Member with respect to such
Member's Membership Interests if such distribution would violate Section
18-607 of the Delaware Act or other applicable law.
(b) Notwithstanding any other provision of this Article
V, all amounts distributed to the Members in connection with a dissolution
of the Company or the sale or other disposition of all or substantially all
the assets of the Company that results in a dissolution of the Company
shall be distributed to the Members in accordance with their respective
Capital Account balances, as adjusted pursuant to Article VI for all
Company operations up to and including the date of such distribution.
SECTION 5.03. Distributions in Kind. The Company shall
not distribute to the Members any assets in kind unless approved by the
Board of Managers pursuant to a vote in accordance with Section 8.07(b). If
cash and property in kind are to be distributed simultaneously, the Company
shall distribute such cash and property in kind in the same proportion to
each Member, unless otherwise approved by the Board of Managers pursuant to
a vote in accordance with Section 8.07(b). For purposes of determining
amounts distributable to Members under Section 5.01, for purposes of
determining Profit and Loss under Section 1.01, for purposes of making
adjustments to Capital Accounts under Article VI and for purposes of
allocations under Article VI, any property to be distributed in kind shall
have the value assigned to such property by the Board of Managers pursuant
37
to a vote in accordance with Section 8.07(b) and such value shall be deemed
to be part of and included in Distributable Cash for purposes of
determining distributions to the Members under this Agreement.
SECTION 5.04. Distributions in the Event of an Exercise
of the Marathon Call Right, Ashland Put Right or the Special Termination
Rights. In the event of an exercise by Marathon of its Marathon Call Right
or its Special Termination Right or the exercise by Ashland of its Ashland
Put Right or its Special Termination Right pursuant to the Put/Call,
Registration Rights and Standstill Agreement, certain distributions to
Ashland or Marathon, as applicable, will be suspended in accordance with
the provisions of Section 5.01 thereof.
ARTICLE VI
Allocations and Other Tax Matters
SECTION 6.01. Maintenance of Capital Accounts. An account
(a "Capital Account") shall be established and maintained in the Company's
books for each Member in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv) and to which the following provisions apply to the extent
not inconsistent with such Regulation:
(a) There shall be credited to each Member's Capital
Account (i) the amount of money contributed by such Member to the
Company (including liabilities of the Company assumed by such
Member as provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(c)), (ii) the fair market value of any property
contributed by the Member to the Company (net of liabilities
secured by such contributed property that the Company is
considered to assume or take subject to under Code Section 752),
and (iii) such Member's share of the Company's Profit;
(b) There shall be debited from each Member's Capital
Account (i) the amount of money distributed to such Member by the
Company (including liabilities of
38
such Member assumed by the Company as provided in Treasury
Regulation Section 1.704-1(b)(2)(iv)(c)) other than amounts which
are in repayment of debt obligations of the Company to such
Member, (ii) the fair market value of property distributed to such
Member (net of liabilities secured by such property that such
Member is considered to assume or take subject to under Code
Section 752), and (iii) such Member's share of the Company's Loss;
(c) To each Member's Capital Account there shall be
credited, in the case of an increase, or debited, in the case of a
decrease, such Member's share of any adjustment to the adjusted
basis of Company assets pursuant to Code Section 734(b) or Code
Section 743(b) to the extent provided by Treasury Regulation
Section 1.704-(b)(2)(iv)(m); and
(d) Upon the transfer of all or any part of the
Membership Interests of a Member, the Capital Account of the
transferee Member shall include the portion of the Capital Account
of the transferor Member attributable to such transferred
Membership Interest (or portion thereof).
SECTION 6.02. Allocation of Profit and Loss. (a) Except
as provided in Section 6.02(b), Profit or Loss for any Fiscal Year shall be
allocated between the Members in proportion to their respective Percentage
Interests.
(b) To the extent any Tax deduction or loss is
specifically allocated to a Member pursuant to this Agreement (other than
pursuant to Section 6.03) or any other Transaction Document, including any
deduction or loss indemnified by a Member, any Member-Funded Capital
Expenditure, any Member-Indemnified Expenditure and any special allocations
pursuant to Sections 6.12, 6.13 and 6.14, the associated Profit and Loss
shall be allocated to the same Member.
SECTION 6.03. Tax Allocations. For income tax purposes
only, each item of income, gain, loss, deduction and credit of the Company
shall be allocated between the Members in accordance with their respective
shares of Profit
39
and Loss, subject to the rules of Section 704(c)(1)(A) of the Code and the
Treasury Regulations promulgated thereunder. The allocation of income,
gain, loss and deduction with respect to property contributed by a Member
to the Company shall be pursuant to the method set forth in Treasury
Regulation Section 1.704-3(c) (traditional method with curative
allocations), with book depreciation (as that term is used in Treasury
Regulation Section 1.704-1(b)(2)(iv)(g)(3)) for assets fully depreciated
for federal income tax purposes based on the applicable recovery period (as
determined in Code Section 168(c)) for new assets of the same type. Any
other elections or other decisions relating to allocations under this
Section 6.03, including the determination of the fair market value of
contributed property and the decision to adjust the Capital Accounts to
reflect the fair market value of the Company's assets upon the occurrence
of any event specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
shall be made jointly by the Members in any manner that reasonably reflects
the purpose and intention of this Agreement. Items described in this
Section 6.03 shall neither be credited nor charged to the Members' Capital
Accounts.
SECTION 6.04. Entity Classification. The Members intend
that the Company be treated as a partnership for Federal income tax
purposes. Accordingly, neither the Tax Matters Partner nor either Member
shall file any election or return on its own behalf or on behalf of the
Company that is inconsistent with that intent.
SECTION 6.05. Fiscal Year. The fiscal year (the "Fiscal
Year") of the Company for tax and accounting purposes shall be the 12-month
(or shorter) period ending on the last day of December of each year.
SECTION 6.06. Tax Returns. (a) The Company shall cause to
be prepared and timely filed all Federal, state, local and foreign income
tax returns and reports required to be filed by the Company and its
subsidiaries. The Company shall provide copies of all the Company's
Federal, state, local and foreign tax returns (and any schedules or other
required filings related to such returns) that reflect items of income,
gain, deduction, loss or credit that flow to separate Member returns, to
the Members
40
for their review and comment prior to filing, except as otherwise agreed by
the Members. The Members agree in good faith to resolve any difference in
the tax treatment of any item affecting such returns and schedules.
However, if the Members are unable to resolve the dispute, the position of
the Tax Matters Partner shall be followed if nationally recognized tax
counsel acceptable to both Members provides an opinion that substantial
authority exists for such position. Substantial authority shall be given
the meaning ascribed to it in Code Section 6662. If the Members are unable
to resolve the dispute prior to the due date for filing the return,
including approved extensions, the position of the Tax Matters Partner
shall be followed, and amended returns shall be filed if necessary at such
time the dispute is resolved. The costs of the dispute shall be borne by
the Company. The Members agree to file their separate Federal income tax
returns in a manner consistent with the Company's return, the provisions of
this Agreement and in accordance with applicable Federal income tax law.
(b) The Company shall elect the most rapid method of
depreciation and amortization allowed under Applicable Law, unless the
Members agree otherwise. The failure of either Member to agree that the
Company should elect a less rapid method of depreciation or amortization is
not subject to any dispute resolution provisions.
(c) The Members shall provide each other with copies of
all correspondence or summaries of other communications with the Internal
Revenue Service or any state, local or foreign taxing authority (other than
routine correspondence and communications) regarding the tax treatment of
the Company's operations. No Member shall enter into settlement
negotiations with the Internal Revenue Service or any state, local or
foreign taxing authority with respect to any issue concerning the Company's
income, gains, losses, deductions or credits if the tax adjustment
attributable to such issue (assuming the then current Aggregate Tax Rate)
would be $2 million or greater, without first giving reasonable advance
notice of such intended action to the other Member.
SECTION 6.07. Tax Matters Partner. (a) Initially,
Marathon shall be the "Tax Matters Partner"
41
of the Company within the meaning of Section 6231(a)(7) of the Code, and
shall act in any similar capacity under state, local or foreign law, but
only with respect to returns for which items of income, gain, loss,
deduction or credit flow to the separate returns of the Members. In the
event of a transfer of any Member's interest in the Company, the Tax
Matters Partner shall be the Member with the largest Percentage Interest
following such transfer.
(b) The Tax Matters Partner shall incur no liability
(except as a result of the gross negligence or willful misconduct of the
Tax Matters Partner) to the other Member including, but not limited to,
liability for any additional taxes, interest or penalties owed by the other
Member due to adjustments of Company items of income, gain, loss, deduction
or credit at the Company level.
SECTION 6.08. Duties of Tax Matters Partner. (a) Except
as provided in Section 6.08(b), the Tax Matters Partner shall cooperate
with the other Member and shall promptly provide the other Member with
copies of notices or other materials from, and inform the other Member of
discussions engaged in with, the Internal Revenue Service or any state,
local or foreign taxing authority and shall provide the other Member with
notice of all scheduled administrative proceedings, including meetings with
agents of the Internal Revenue Service or any state, local or foreign
taxing authority, technical advice conferences, appellate hearings, and
similar conferences and hearings, as soon as possible after receiving
notice of the scheduling of such proceedings, but in any case prior to the
date of such scheduled proceedings.
(b) The duties of the Tax Matters Partner under Section
6.08(a) shall not apply with respect to notices, materials, discussions,
proceedings, meetings, conferences, or hearings involving any issue
concerning the Company's income, gains, losses, deductions or credits if
the tax adjustment attributable to such issue (assuming the then current
Aggregate Tax Rate) would be less than $2 million except as otherwise
required under Applicable Law.
(c) The Tax Matters Partner shall not extend the period
of limitations or assessments without the consent of
42
the other Member, which consent shall not be unreasonably withheld.
(d) The Tax Matters Partner shall not file a petition or
complaint in any court, or file any claim, amended return or request for an
administrative adjustment with respect to partnership items, after any
return has been filed, with respect to any issue concerning the Company's
income, gains, losses, deductions or credits if the tax adjustment
attributable to such issue (assuming the then current Aggregate Tax Rate)
would be $2 million or greater, unless agreed by the other Member. If the
other Member does not agree, the position of the Tax Matters Partner shall
be followed if nationally recognized tax counsel acceptable to both Members
issues an opinion that a reasonable basis exists for such position.
Reasonable basis shall be given the meaning ascribed to it for purposes of
applying Code Section 6662. The costs of the dispute shall be borne by the
Company.
(e) The Tax Matters Partner shall not enter into any
settlement agreement with the Internal Revenue Service or any state, local
or foreign taxing authority, either before or after any audit of the
applicable return is completed, with respect to any issue concerning the
Company's income, gains, losses, deductions or credits, unless any of the
following apply:
(i) both Members agree to the settlement;
(ii) the tax effect of the issue if resolved adversely would be,
and the tax effect of settling the issue is, proportionately the same for
both Members (assuming each otherwise has substantial taxable income);
(iii) the Tax Matters Partner determines that the settlement of
the issue is fair to both Members and the amount of the tax adjustment
attributable to such issue (assuming the then current Aggregate Tax Rate)
would be less than $2 million; or
(iv) nationally recognized tax counsel acceptable to both Members
determines that the settlement is fair to both Members and is one it would
recommend to the Company if both
43
Members were owned by the same person and each had substantial taxable
income.
In all events, the costs incurred by the Tax Matters Partner in performing
its duties hereunder shall be borne by the Company in accordance with the
Shared Services Agreement.
(f) The Tax Matters Partner may request extensions to
file any tax return or statement without the written consent of, but shall
so inform, the other Member.
SECTION 6.09. Survival of Provisions. The provisions of
this Agreement regarding the Company's tax returns and Tax Matters Partner
shall survive the termination of the Company and the transfer of any
Member's interest in the Company and shall remain in effect for the period
of time necessary to resolve any and all matters regarding the federal,
state, local and foreign taxation of the Company and items of Company
income, gain, loss, deduction and credit.
SECTION 6.10. Section 754 Election. In the event that a
Member purchases the Membership Interests of a Selling Member pursuant to
Section 10.04, the purchasing Member shall have the right to direct the Tax
Matters Partner to make an election under Section 754 of the Code. The
purchasing Member shall pay all costs incurred by the Company in connection
with such election, including any costs borne by the Company to maintain
records required as a result of such election. The purchasing Member, at
its option and expense, may maintain on behalf of the Company any records
required as a result of such election.
SECTION 6.11. Qualified Income Offset, Minimum Gain
Chargeback. Notwithstanding anything to the contrary in this Agreement,
there is hereby incorporated a qualified income offset provision which
complies with Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and minimum
gain chargeback and partner minimum gain chargeback provisions which comply
with the requirements of Treasury Regulation Section 1.704-2 and such
provisions shall apply to the allocation of Profits and Losses.
44
SECTION 6.12. Tax Treatment of Designated Sublease
Agreements. (a) For purposes of Article VI, Ashland or Marathon, as the
case may be, shall be treated as transferring to the Company all of its
interest in Subleased Property pursuant to an Ashland Designated Sublease
Agreement or a Marathon Designated Sublease Agreement, as if the leasehold
interest in such Subleased Property was an Ashland Transferred Asset or a
Marathon Transferred Asset.
(b) Payments under the Original Lease made by Ashland or
Marathon, as the case may be, after the effective date of the Ashland
Designated Sublease Agreement or Marathon Designated Sublease Agreement, as
the case may be, shall be treated as made by the Company or its
subsidiaries, and then immediately reimbursed by Ashland or Marathon, as
the case may be.
(c) All items of loss, deduction and credit attributable
to payments under the Original Lease made by Ashland or Marathon, as the
case may be, including payments by the Company or any of its subsidiaries
that are charged to Ashland or Marathon by set-off or other means, shall be
allocated entirely to the Member incurring such payments.
(d) Depreciation and amortization deductions, if any, as
well as any deductions or offsets to taxable income or gain, attributable
to property described in the Ashland Designated Sublease Agreements or the
Marathon Designated Sublease Agreements, as the case may be, shall be
allocated entirely to Ashland or Marathon, as the case may be, except to
the extent such deductions or offsets are attributable to amounts paid by
the Company or any of its subsidiaries and not reimbursed by Ashland or
Marathon, as the case may be, either directly or indirectly.
SECTION 6.13. Tax Treatment of Reimbursed Liability
Payments. Any tax deduction or loss attributable to payments by the Company
or any of its subsidiaries of Assumed Liabilities, as described in
Schedules 2.3(d) and 3.3(d) to the Asset Transfer and Contribution
Agreement, that are reimbursed by a Member either directly or indirectly,
shall be allocated entirely to such Member.
45
SECTION 6.14. Tax Treatment of Disproportionate Payments.
Except as otherwise provided in this Agreement or in any other Transaction
Document, any Tax deduction or loss reflected on a Tax return, report or
other Tax filing by the Company, attributable to (i) payments made or costs
incurred by a Member, (ii) payments made or costs incurred by the Company
and reimbursed or to be reimbursed by a Member and (iii) payments made or
costs incurred by the Company and not shared among the Members based on
their Percentage Interests, shall be allocated among the Members to take
into account the amounts paid, incurred, reimbursed or shared by each.
ARTICLE VII
Books and Records
SECTION 7.01. Books and Records; Examination. The Board
of Managers shall keep or cause to be kept such books of account and
records with respect to the Company's business as they may deem
appropriate. Each Member and its duly authorized representatives shall have
the right at any time to examine, or to appoint independent certified
public accountants (the fees of which shall be paid by such Member) to
examine, the books, records and accounts of the Company and its
subsidiaries, their operations and all other matters that such Member may
wish to examine, including, without limitation, all documentation relating
to actual or proposed transactions with either Member or any Affiliate of
either Member. The Company, and the Board of Managers, shall not have the
right to keep confidential from the Members any information that the Board
of Managers would otherwise be permitted to keep confidential from the
Members pursuant to Section 18-305(c) of the Delaware Act. The Company's
books of account shall be kept using the method of accounting determined by
the Board of Managers. The Company Independent Auditors (the "Company
Independent Auditors") shall be an independent public accounting firm
selected by the Board of Managers pursuant to a vote in accordance with
Section 8.07(b) or Section 8.07(c), as applicable, and shall initially be
Price Waterhouse LLP.
46
SECTION 7.02. Financial Statements and Reports. (a)
Unaudited Monthly Financial Statements. (i) The Company shall prepare and
send to each Member (at the same time) promptly, but in no event later than
noon on the 15th Business Day after the last day of each month, the
following unaudited financial statements with respect to the Company and
its subsidiaries: a balance sheet, a statement of operations, a statement
of cash flows and a statement of changes in capital (collectively,
"Unaudited Financial Statements") as at the end of and for such month.
(ii) The Company shall prepare and send to each Member
promptly, but in no event later than noon on the 20th Business Day after
the last day of each month, an unaudited financial summary booklet
containing a breakdown of such operating and financial information by major
department or division of the Company and its subsidiaries as at the end of
and for such month as either Member shall reasonably request; provided that
each Member shall be provided with the same information at the same time as
the other Member.
(b) Unaudited Quarterly Financial Statements. The Company
shall prepare and send to each Member (at the same time) promptly, but in
no event later than the 30th day after the last day of each Fiscal Quarter,
(i) Unaudited Financial Statements as at the end of and for such Fiscal
Quarter; (ii) a management's discussion and analysis of financial condition
and results of operations section prepared in accordance with Rule 303 of
Regulation S-K of the Securities Act with respect to such Fiscal Quarter;
and (iii) an unaudited statement of changes in the Members' capital
accounts as at the end of and for such Fiscal Quarter.
(c) Audited Annual Financial Statements. Within 75 days
after the end of each Fiscal Year, the Board of Managers shall cause (i) an
examination to be made, at the expense of the Company, by the Company
Independent Auditors, covering (A) the assets, liabilities and capital of
the Company and its subsidiaries, and the Company's and its subsidiaries'
operations during such Fiscal Year, (B) an examination of the Distributions
Calculation Statement for such Fiscal Year, and (C) all other matters
customarily included in such examinations and (ii) to be delivered to
47
each Member (at the same time) a copy of the report of such examination,
stating that such examination has been performed in accordance with
generally accepted auditing standards, together with (1) the following
financial statements with respect to the Company and its subsidiaries
certified by such accountants as having been prepared in accordance with
GAAP: a balance sheet, a statement of operations, a statement of cash flows
and a statement of changes in capital as at the end of and for such Fiscal
Year (collectively, the "Audited Financial Statements") and (2) a
management's discussion and analysis of financial condition and results of
operations section prepared in accordance with Rule 303 of Regulation S-K
of the Securities Act with respect to such Fiscal Year. The Company shall
prepare the Audited Financial Statements in such manner and form as is
necessary to enable Ashland to file such Audited Financial Statements with
the Commission in accordance with Item 3-09 of Regulation S-X under the
Exchange Act.
(d) Schedule of Members' Capital Accounts. (i)
Preliminary Annual Capital Account Schedule. The Company shall prepare and
send to each Member (at the same time) promptly, but in no event later than
the 75th day after the last day of each Fiscal Year, a schedule showing the
respective Capital Accounts of the Members based on the Company's estimated
taxable income for such Fiscal Year.
(ii) Examination. Within 15 days after the date the
Company determines its net taxable income with respect to any Fiscal Year,
but in no event later than 7 months after the end of such Fiscal Year, the
Board of Managers shall cause (i) an examination to be made, at the expense
of the Company, by the Company Independent Auditors, covering (A) the
determination of the Company's taxable income with respect to such Fiscal
Year and (B) the respective Capital Accounts of the Members based on the
Company's taxable income for such Fiscal Year and (ii) to be delivered to
each Member (at the same time) a copy of the report of such examination,
stating that such examination has been performed in accordance with
generally accepting auditing standards.
(iii) Final Annual Capital Account Schedule. The Company
shall prepare and send to each Member (at the same
48
time) promptly, but in no event later than the 15th day after the date the
Company files its federal income tax return with respect to each Fiscal
Year, a schedule showing the respective Capital Accounts of the Members
based on the Company's actual taxable income for such Fiscal Year.
(e) Other Financial Information. The Company shall
prepare and send to each Member (at the same time) promptly such other
financial information as a Member shall from time to time reasonably
request.
SECTION 7.03. Notice of Affiliate Transactions; Annual
List. (a) (i) The Company shall notify each Member of any Affiliate
Transaction (other than an Affiliate Transaction that is a Significant
Shared Service) that the Company or any of its subsidiaries is considering
entering into or renewing or extending the term thereof (whether pursuant
to contractual provisions thereof or otherwise), which notice shall be
given, to the extent reasonably possible, sufficiently in advance of the
time that the Company intends to enter into, renew or extend the term of
such Affiliate Transaction so as to provide the Members with a reasonable
opportunity to examine the documentation related to such Affiliate
Transaction.
(ii) The Company shall notify each Member of any
Affiliate Transaction that is a Significant Shared Service that the Company
or any of its subsidiaries is considering entering into or renewing or
extending the term thereof (whether pursuant to contractual provisions
thereof or otherwise), which notice shall be given, to the extent
reasonably possible, sufficiently in advance of the time that the Company
intends to enter into, renew or extend the term of such Affiliate
Transaction so as to provide the Members with a reasonable opportunity to
examine the documentation related to such Affiliate Transaction.
(b) Within 60 days after the end of each Fiscal Year, the
Company shall prepare and distribute to each Member a list setting forth a
description of each Affiliate Transaction entered into by the Company or
any of its subsidiaries during such Fiscal Year and identifying all of the
parties to such Affiliate Transactions; provided that if two or more
Affiliate Transactions either (i) constitute a
49
series of related transactions or agreements or (ii) are substantially the
same type of transaction or agreement, the Company need not separately
describe each such Affiliate Transaction but instead can describe such
related or similar Affiliated Transactions as a group.
ARTICLE VIII
Management of the Company
SECTION 8.01. Managing Members. The business and affairs
of the Company shall be managed by the Members acting through their
respective representatives on the Board of Managers ("Representatives").
The President and the Representatives shall be deemed "managers" of the
Company within the meaning of the Delaware Act. Except for such matters as
may be delegated to a Member from time to time by the Board of Managers
pursuant to a vote in accordance with Section 8.07(b), and subject to the
provisions of Sections 6.07 and 6.08, no Member shall act unilaterally on
behalf of the Company or any of its subsidiaries without the approval of
the other Member and no Member shall have the power unilaterally to bind
the Company or any of its subsidiaries.
SECTION 8.02. Board of Managers. (a) The Members shall
exercise their management authority through a board of managers (the "Board
of Managers") consisting of (i) the President of the Company, who shall not
be deemed a Representative hereunder and who shall not be entitled to vote
on any matter coming before the Board of Managers, and (ii) five
Representatives, each of whom shall be entitled to vote, three of whom
shall be designated by Marathon and two of whom shall be designated by
Ashland. In the event of a Transfer by a Member of its Membership Interests
pursuant to Article X, effective at the time of such Transfer, (i) such
Member's Representatives shall automatically be removed from the Board of
Managers and (ii) the transferee of such Membership Interests shall be
permitted to designate the number of Representatives to the Board of
Managers as is equal to the number previously designated by the transferor
of such Membership Interests. Such transferee shall promptly notify the
other Member as to the names of the
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persons who such transferee has designated as its Representatives on the
Board of Managers.
(b) Each Representative may be removed and replaced, with
or without cause, at any time by the Member designating him or her, but,
except as provided in Section 8.02(a), may not be removed or replaced by
any other means. A Member who removes one or more of its Representatives
from the Board of Managers shall promptly notify the other Member as to the
names of its replacement Representatives.
SECTION 8.03. Responsibility of the Board of Managers.
The Board of Managers shall be responsible for overseeing the operations of
the Company and shall, in particular, have sole jurisdiction to approve
each of the following matters:
(i) hiring senior executives of the Company, evaluating
their performance and planning for their succession;
(ii) reviewing and approving Company strategies, Business
Plans and Annual Capital Budgets;
(iii) reviewing and approving significant external
business opportunities for the Company, including acquisitions,
mergers and divestitures;
(iv) reviewing and approving policies of the Company that
maintain high standards in areas of environmental responsibility,
employee safety and health, community, government, employee and
customer relations;
(v) reviewing external and internal audits and management
responses thereto; and
(vi) establishing compensation and benefits policies for
employees of the Company.
SECTION 8.04. Meetings. (a) Except as set forth in
Section 8.04(h), all actions of the Board of Managers
51
shall be taken at meetings of the Board of Managers in accordance with this
Section 8.04.
(b) As soon as practicable after the appointment of the
Representatives, the Board of Managers shall meet for the purpose of
organization and the transaction of other business.
(c) Regular meetings of the Board of Managers shall be
held at such times as the Board of Managers shall from time to time
determine, but no less frequently than once each Fiscal Quarter; provided
that an annual meeting of the Board of Managers (which annual meeting shall
count as one of the regular quarterly meetings) shall be held no later than
June 30 of each Fiscal Year.
(d) Special meetings of the Board of Managers shall be
held whenever called by any Member. Any and all business may be transacted
at a special meeting that may be transacted at a regular meeting of the
Board of Managers.
(e) The Board of Managers may hold its meetings at such
place or places as the Board of Managers may from time to time by
resolution determine or as shall be designated in the respective notices or
waivers of notice thereof; however, the Board of Managers shall consider
holding meetings from time to time at each of the Member's corporate
headquarters and at the operational sites of the Company.
(f) Notices of regular meetings of the Board of Managers
or of any adjourned meeting shall be given at least two weeks prior to such
meeting, unless otherwise agreed by each Member. Notices of special
meetings of the Board of Managers shall be mailed by the Secretary or an
Assistant Secretary to each member of the Board of Managers addressed to
him or her at his or her residence or usual place of business, so as to be
received at least two Business Days before the day on which such meeting is
to be held, or shall be sent to him or her by telegraph, cable, facsimile
or other form of recorded communication or be delivered personally, by
overnight courier or by telephone so as to be received not later than two
Business Days before the day on which such meeting is to be held. Such
notice shall include
52
the purpose, time and place of such meeting and shall set forth in
reasonable detail the matters to be considered at such meeting. However,
notice of any such meeting need not be given to any member of the Board of
Managers if such notice is waived by him or her in writing or by telegraph,
cable, facsimile or other form of recorded communication, whether before or
after such meeting shall be held, or if he or she shall be present at such
meeting.
(g) Action by Communication Equipment. The members of the
Board of Managers may participate in a meeting of the Board of Managers by
means of video or telephonic conferencing or similar communications
equipment by means of which all persons participating in the meeting can
hear each other, and such participation shall constitute presence in person
at such meeting.
(h) Unanimous Action by Written Consent. Any action
required or permitted to be taken at any meeting of the Board of Managers
may be taken without a meeting if all the Representatives consent thereto
in writing and such writing is filed with the minutes of the proceedings of
the Board of Managers.
(i) Organization. Meetings of the Board of Managers shall
be presided over by a chair, who will be a member of the Board of Managers
selected by a majority of the Board of Managers. The Secretary of the
Company or, in the case of his or her absence, any person whom the person
presiding over the meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof.
SECTION 8.05. Compensation. Unless the Members otherwise
agree, no person shall be entitled to any compensation from the Company in
connection with his or her services as a Representative.
SECTION 8.06. Quorum. (a) Quorum for Super Majority
Decisions. Subject to Section 14.01(e) of the Put/Call, Registration Rights
and Standstill Agreement and Sections 14.01 and 14.05 and Section 5 of
Schedule 8.14, at all meetings of the Board of Managers, the quorum
required for the transaction of any business that constitutes a Super
Majority Decision shall be the presence, either in person or
53
by proxy, of (i) at least one Representative of each Member and (ii) a
majority of all the Representatives on the Board of Managers (which may
include the Representatives referred to in the preceding clause (i)).
(b) Quorum for Other Decisions. Subject to Sections 14.01
and 14.05 and Section 5 of Schedule 8.14, at all meetings of the Board of
Managers, the quorum required for the transaction of any business that does
not constitute a Super Majority Decision shall be (i) in the case of all
matters that were described in the notice in reasonable detail for such
meeting delivered to the members of the Board of Managers pursuant to
Section 8.04(f), the presence, either in person or by proxy, of a majority
of all the Representatives on the Board of Managers and (ii) in the case of
all matters that were not described in the notice in reasonable detail for
such meeting delivered to the members of the Board of Managers pursuant to
Section 8.04(f), the presence, either in person or by proxy, of (A) at
least one Representative of each Member and (B) a majority of all the
Representatives on the Board of Managers (which may include the
Representatives referred to in the preceding clause (A)).
(c) Rescheduled Meetings. The Company shall use its
reasonable best efforts to schedule the time and place of each meeting of
the Board of Managers so as to ensure that a quorum will be present at each
such meeting and that at least one Representative of each Member will be
present at each such meeting. In the absence of a quorum at any such
meeting or any adjournment or adjournments thereof, a majority in voting
interest of those present in person or by proxy and entitled to vote
thereat may reschedule such meeting from time to time until the
Representatives requisite for a quorum, as aforesaid, be present in person
or by proxy. At any such rescheduled meeting at which a quorum is present,
any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 8.07. Voting. (a) General. Each Representative
shall be entitled to cast one vote on all matters coming before the Board
of Managers. In exercising their voting rights under this Agreement, the
Representatives may act by proxy.
54
(b) Super Majority Decisions. Subject to Section 14.01(e)
of the Put/Call, Registration Rights and Standstill Agreement and Sections
14.01 and 14.05 and Section 5 of Schedule 8.14, all Super Majority
Decisions to be decided by the Board of Managers shall be approved by the
unanimous affirmative vote of the votes cast by the Representatives who are
present, either in person or by proxy, at a duly called meeting of the
Board of Managers at which a quorum is present. The parties acknowledge and
agree that all references in this Agreement, any other Transaction Document
and any appendices, exhibits or schedules hereto or thereto to any
determination, decision, approval or other form of authorization by the
Board of Managers pursuant to a vote in accordance with Section 8.07(b)
shall be deemed to mean that such determination, decision, approval or
other form of authorization shall constitute a Super Majority Decision
which requires the approval of the Board of Managers in accordance with
this Section 8.07(b).
(c) Other Decisions. Subject to Sections 14.01 and 14.05
and Section 5 of Schedule 8.14, all matters other than Super Majority
Decisions to be decided by the Board of Managers shall be approved by the
affirmative vote of a majority of the votes cast by the Representatives who
are present, either in person or by proxy, at a duly called meeting of the
Board of Managers at which a quorum is present, unless the vote of a
greater number of Representatives is required by Applicable Law or this
Agreement.
SECTION 8.08. Matters Constituting Super Majority
Decisions. Subject to the provisions of Section 8.07(b), each of the
following matters, and only the following matters, shall constitute a
"Super Majority Decision" which requires the approval of the Board of
Managers pursuant to Section 8.07(b):
(a) (i) the purchase or investment by the Company or any
of its subsidiaries of or in any assets or securities, or
any group of assets or securities, that have an aggregate
purchase price or cost of more than $20 million, if the
purpose or effect of such purchase or investment is to
enable the
55
Company to enter into a line of business other than (A)
the Company's Business as such Business is conducted on
the Closing Date or (B) any other line of business that
is approved after the Closing Date by the Board of
Managers as a Super Majority Decision under this Section
8.08(a)(i) pursuant to a vote in accordance with Section
8.07(b), provided that any such purchase or investment by
the Company or any of its subsidiaries shall not require
a Super Majority Decision under this Section 8.08(a) if
and to the extent such purchase or investment is being
made to enable the Company to enter into the Bulk Motor
Oil Business, the Packaged Motor Oil Business, the
Private Label Packaged Motor Oil Business and/or the
Quick Lube Business and, at the time of such purchase or
investment, (1) the Company and its subsidiaries are
permitted to engage in such business under Section
14.03(b) of the Put/Call, Registration Rights and
Standstill Agreement and (2) Ashland and its Affiliates
shall own (beneficially or otherwise) 20% or more of the
Valvoline Business (it being understood and agreed that
this proviso shall not limit or constitute an exception
to any other provision of Section 8.08); and
(ii) the determination of whether any new line of
business approved by the Board of Managers as a Super
Majority Decision under Section 8.08(a)(i) should
constitute a "Competitive Business" for purposes of
Section 14.01 of the Put/Call, Registration Rights and
Standstill Agreement;
(b) any reorganization, merger, consolidation or similar
transaction between the Company or any of its subsidiaries and any
person (other than a direct or indirect Wholly Owned Subsidiary of
the Company) or any sale or lease of all or substantially all of
the Company's or any of its subsidiaries' assets to any person
(other than a direct or indirect Wholly Owned Subsidiary of the
Company);
56
(c) the admission of a new Member (other than as a result
of a Transfer of an existing Member's Membership Interests
pursuant to Article X) or the issuance of any additional
Membership Interests or other equity interests to any person,
including any existing Member;
(d) except as expressly provided in Sections 4.01(c),
4.02(a) and 4.02(b), the acceptance or requirement of any
additional capital contributions to the Company by either Member;
(e) the initial hiring of the following officers of the
Company: the President; the Executive Vice President; the officers
principally in charge of (i) refining, (ii) wholesale and branded
marketing, (iii) retail marketing (two initially), (iv) supply and
transportation and (v) environmental health and safety and human
resources; the Senior Vice President-Finance and Commercial
Services of the Company; and the general counsel of the Company;
(f) (i) the approval of Acquisition Expenditures, Capital
Expenditures and other expenditures included in the
Annual Capital Budget for any Fiscal Year (other than (A)
Ordinary Course Lease Expenses, (B) up to $100 million in
the aggregate for all periods in Capital Expenditures of
the Company and its subsidiaries directly associated with
the Garyville Propylene Upgrade Project, (C)
Member-Funded Capital Expenditures, (D)
Member-Indemnified Expenditures and (E) Capital
Expenditures of the Company and its subsidiaries directly
associated with Permitted Catlettsburg Capital Projects
that are funded with Permitted Catlettsburg Capital
Project Indebtedness) that exceed the Normal Annual
Capital Budget Amount for such Fiscal Year; and
(ii) the incurrence of rentals or operating leases which
result in aggregate Ordinary Course Lease Expenses (other
than Ordinary Course Lease Expenses incurred under the
Bareboat Charters) for any Fiscal Year that exceed $80
million; provided, however, in the event the Company or
one of its
57
subsidiaries shall make any acquisition or divestiture,
the Members shall negotiate in good faith to adjust the
dollar amount set forth in this Section 8.08(f)(ii) to
take into account the effect of such acquisition or
divestiture;
(g) (i) except for any acquisition or capital project
related to the Bulk Motor Oil Business, the Packaged
Motor Oil Business, the Private Label Motor Oil Business
and/or the Quick Lube Business, any acquisition,
divestiture or individual capital project (other than (i)
Ordinary Course Lease Expenses, (ii) up to $100 million
in the aggregate for all periods in Capital Expenditures
of the Company and its subsidiaries directly associated
with the Garyville Propylene Upgrade Project, (iii)
Member-Funded Capital Expenditures, (iv) Member-Funded
Indemnified Expenditures and (v) Capital Expenditures of
the Company and its subsidiaries directly associated with
Permitted Catlettsburg Capital Projects that are funded
with Permitted Catlettsburg Capital Project Indebtedness)
where the liability or consideration involved is more
than $50 million in the aggregate (including contingent
liabilities only to the extent required to be reflected
on the balance sheet of the Company in accordance with
Financial Accounting Standard Number 5 (or any successor
or superseding provision of Current GAAP));
(ii) any acquisitions or individual capital
projects related to the Bulk Motor Oil Business, the
Packaged Motor Oil Business, the Private Label Motor Oil
Business and/or the Quick Lube Business during any Fiscal
Year where the liability or consideration involved is
more than $50 million in the aggregate in such Fiscal
Year (including contingent liabilities only to the extent
required to be reflected on the balance sheet of the
Company in accordance with Financial Accounting Standard
Number 5 (or any successor or superseding provision of
Current GAAP)); provided that nothing in this Section
8.08(g)(ii) shall be deemed or interpreted to permit the
Company or any of its
58
subsidiaries to engage in any of such businesses except
as and to the extent expressly permitted under Section
14.03 of the Put/Call, Registration Rights and Standstill
Agreement;
(iii) for the avoidance of doubt, acquisitions
or individual capital projects related to the Maralube
Express Business shall be subject to clause (i) of this
Section 8.08(g) and not clause (ii) of this Section
8.08(g);
(h) the initiation or settlement of any action, suit,
claim or proceeding involving (i) an amount in excess of $50
million (with respect to initiation) or $25 million (with respect
to settlement), (ii) material non-monetary relief (including,
without limitation, entering into any consent decree that has or
could reasonably be expected to (A) impose any material obligation
on Ashland or any of its Affiliates or the Company or any of its
subsidiaries or (B) have a material adverse effect on the
business, operations, assets, liabilities, results of operations,
cash flows, condition (financial or otherwise) or prospects of
Ashland or any of its Affiliates or the Company or any of its
subsidiaries) or (iii) the initiation or settlement of any
criminal action, suit, claim or proceeding (other than a
misdemeanor) if such criminal action, suit or proceeding has or
could reasonably be expected to (A) impose any material obligation
on Ashland or any of its Affiliates or (B) have a material adverse
effect on the business, operations, assets, liabilities, results
of operations, cash flows, condition (financial or otherwise) or
prospects of Ashland or any of its Affiliates;
(i) any change in the Company Independent Auditors unless
the new firm is one of the "Big Six" accounting firms (or any
successor thereto) or a firm of comparable stature in Ashland's
opinion;
(j) any modification, alteration, amendment or
termination of this Agreement or any other Transaction Document to
which the Company or any of its subsidiaries is a party;
59
(k) (i) in the case of any Affiliate Transaction that is
not a Crude Oil Purchase, a Significant Shared Service or a
Designated Sublease Agreement, (A) any Affiliate Transaction
(other than the Affiliate Transactions listed on Schedule
8.08(k)(i)(A) (the "Closing Date Affiliate Transactions")), (B)
any material amendment to or change in the terms or provisions of
any Affiliate Transaction that was either a Closing Date Affiliate
Transaction or previously approved by the Board of Managers
pursuant to Section 8.08(k)(i)(A) (it being understood that a
renewal or extension of the term of an Affiliate Transaction
pursuant to contractual provisions that were previously approved
by the Board of Managers pursuant to this Section 8.08(k)(i) or
that were included in a Closing Date Affiliate Transaction on the
Closing Date shall be deemed for purposes of this Agreement not to
constitute a new Affiliate Transaction or a material amendment to
or change in an Affiliate Transaction) or (C) any amendment or
change in the terms or provisions of any agreement or transaction
between the Company or any of its subsidiaries and any Member or
any Affiliate of any Member which causes such agreement or
transaction to become an Affiliate Transaction;
(ii) in the case of Crude Oil Purchases, the approval of
such Crude Oil Purchases in accordance with Section 8.12(a);
(iii) in the case of any Significant Shared Service, (A)
any agreement or transaction constituting a Significant Shared
Service (other than the specific Significant Shared Services
identified and described in Schedule 10.2(e) to the Asset Transfer
and Contribution Agreement), (B) any material amendment to or
change in the terms and provisions of any Significant Shared
Service identified and described in Schedule 10.2(e) to the Asset
Transfer and Contribution Agreement or thereafter approved by the
Board of Managers in accordance with this Section 8.08(k)(iii),
(C) subject to the provisions of Section 8.11(b) and except as
expressly provided in Section 8.12(b), any cancelation or failure
by the Company or any of its subsidiaries to
60
renew any Significant Shared Service provided by Ashland or any
Affiliate of Ashland to the Company or any of its subsidiaries or
provided by the Company or any of its subsidiaries to Ashland or
any Affiliate of Ashland and (D) the periodic review and approval
of Significant Shared Services in accordance with Section 8.12(b);
and
(iv) any material amendment to or change in the terms or
provisions of, cancelation, termination or failure to renew, any
Designated Sublease Agreement or any election by the Company to
refuse or reject the contribution of any Subleased Property to the
Company or any of its subsidiaries;
(l) the commencement of a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent to the entry of an order for
relief in an involuntary case under any such law, or the consent
to the appointment of or the taking possession by a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or
similar official) of the Company or any of its subsidiaries or for
any substantial part of the Company's or any of its subsidiaries'
property, or the making of any general assignment for the benefit
of creditors;
(m) (i) the modification, alteration or amendment of the
amount, timing, frequency or method of calculation of
distributions to the Members from that provided in Article V or
(ii) an adjustment to the amount of Distributable Cash pursuant to
clause (g) of the definition of "Distributable Cash" in Section
1.01;
(n) (i) the modification, alteration or amendment of the
Company Leverage Policy, or (ii) the approval of any matter which
the Company Leverage Policy provides is to be approved by the
Board of Managers as a Super Majority Decision;
(o) (i) the approval of any distribution by the Company
to the Members of any assets in kind, (ii) the approval of any
distribution by the Company to the Members of cash and property in
kind on a non-pro rata
61
basis, and (iii) the determination of the value assigned to such
assets in kind;
(p) each Critical Decision or material amendment thereto
made on or prior to the Critical Decision Termination Date for
such Critical Decision; and
(q) the delegation to a Member of the power to
unilaterally bind the Company or any of its subsidiaries with
respect to any matter.
SECTION 8.09. Annual Capital Budget. (a) In Fiscal Year
1999 and in each Fiscal Year thereafter, the Executive Officers of the
Company shall timely prepare or cause to be prepared a draft capital budget
(the "Annual Capital Budget") for such Fiscal Year, which shall set forth
in reasonable line item detail the proposed Acquisition Expenditures,
Capital Expenditures and the Ordinary Course Lease Expenditures of the
Company and its subsidiaries for such Fiscal Year, including all Ordinary
Course Lease Expenditures and all Capital Expenditures of the Company and
its subsidiaries directly associated with the Garyville Propylene Upgrade
Project. In addition, to the extent that information can reasonably be
obtained on the nature of assets rented or financed by operating leases,
such information shall be presented along with the Annual Capital Budget.
Copies of the Annual Capital Budget shall be provided to each Member (at
the same time) and to the Board of Managers. No later than November 15 of
each Fiscal Year, the Executive Officers shall present to the Board of
Managers the Annual Capital Budget for their review, consideration and
approval, with such additions, deletions and changes thereto as the Board
of Managers shall deem necessary.
(b) If the Board of Managers shall fail to approve an
Annual Capital Budget for any Fiscal Year, the total expenditures provided
for in the Annual Capital Budget for such Fiscal Year shall be in an amount
equal to the Normal Annual Capital Budget Amount for such Fiscal Year.
(c) No later than July 15 of each Fiscal Year, the Board
of Managers shall review the Annual Capital Budget for such Fiscal Year and
shall make such additions, deletions and changes thereto as the Board of
Managers shall deem necessary.
62
SECTION 8.10. Business Plan. In Fiscal Year 1999 and in
each Fiscal Year thereafter, the Executive Officers of the Company shall
timely prepare or cause to be prepared a draft business plan (the "Business
Plan") for the next three Fiscal Years. Copies of the Business Plan shall
be provided to each Member (at the same time) and to the Board of Managers.
No later than November 15 of each Fiscal Year, the Executive Officers shall
present to the Board of Managers the Business Plan for their review,
consideration and approval, with such additions, deletions and changes
thereto as the Board of Managers shall deem necessary.
SECTION 8.11. Requirements as to Affiliate Transactions.
(a) The Company and its subsidiaries shall only be permitted to enter into
or renew or extend the term thereof (whether pursuant to contractual
provisions thereof or otherwise) an agreement or a transaction with a
Member or an Affiliate of a Member (which, solely for purposes of this
Section 8.11, shall be deemed to include any entity more than 10% of the
voting stock or other ownership interests of, or economic interest in,
which is owned by a Member (other than the Company or any of its
subsidiaries)) on the same terms or on terms no less favorable to the
Company or such subsidiary than could be obtained from a third party on an
arm's-length basis (an "Arm's-Length Transaction").
(b) (i) If (A) the Company or any subsidiary of the
Company enters into, renews or extends the term of (pursuant to contractual
provisions thereof that were previously approved by the Board of Managers
or otherwise) or materially amends or changes the terms or provisions of,
any agreement or transaction between the Company or any of its subsidiaries
and any Member or any Affiliate of any Member (a "Section 8.11(b) Affiliate
Transaction") or proposes to do any of the foregoing and (ii) not later
than 90 days after receiving written notice thereof from the Company
pursuant to Section 7.03 or otherwise (which notice describes the material
terms and conditions of such transaction in reasonable detail), the Member
that is not (or whose Affiliate is not) a party to such Section 8.11(b)
Affiliate Transaction (the "Non-Contracting Member")
63
notifies the Company and the Member that is (or whose Affiliate is) a party
to such Section 8.11(b) Affiliate Transaction (the "Contracting Member") in
writing that the Non-Contracting Member believes in good faith that either
such Affiliate Transaction is not an Arm's-Length Transaction or that the
quality of the service being provided or to be provided by the Contracting
Member is inferior to that which the Company and its subsidiaries could
otherwise obtain on comparable terms and conditions, then the Company shall
promptly (and, in any event within 30 days) provide the Non-Contracting
Member with a reasonably detailed explanation of the basis for the
Company's determination that such new, renewed or extended Affiliate
Transaction is an Arm's-Length Transaction or the quality of the service
being provided or to be provided to the Company and its subsidiaries is not
inferior.
(ii) If following receipt of such evidence, the
Non-Contracting Member is not reasonably satisfied that such Affiliate
Transaction is an Arm's-Length Transaction or the quality of the service
being provided or to be provided to the Company and its subsidiaries is not
inferior, then, at the written request of the Non-Contracting Member (such
written request being an "Affiliate Transaction Dispute Notice"), the
Company shall (A) modify the terms of such Affiliate Transaction so that it
becomes an Arm's-Length Transaction, (B) if the Company had given the
Members written notice pursuant to Section 7.03(a) prior to entering into,
renewing or extending such Affiliate Transaction, not enter into, renew or
extend such Affiliate Transaction or (C) if the Company had given the
Members written notice pursuant to Section 7.03(a) prior to entering into,
renewing or extending such Affiliate Transaction, enter into, renew or
extend such Affiliate Transaction in which event the determination of
whether such Affiliate Transaction is an Arm's Length Transaction and/or
whether the quality of the service being provided is inferior shall be in
accordance with the Dispute Resolution Procedures set forth in Article XIII
or (D) if the Company shall not have given the Members written notice
pursuant to Section 7.03(a) prior to entering into, renewing or extending
such Affiliate Transaction, commence the dispute resolution procedures set
forth in Article XIII.
64
(iii) For purposes of Article XIII, a Non-Contracting
Member's delivery of an Affiliate Transaction Dispute Notice to the Company
shall constitute delivery of a Dispute Notice thereunder, and the Company
shall be required to deliver a Response to the Non-Contracting Member
within 30 days thereafter. If it is finally determined pursuant to such
Dispute Resolution Procedures that such Affiliate Transaction is an
Arm's-Length Transaction and, if disputed, that the quality of service
being so provided is not inferior, then the Company shall be permitted to
enter into, renew or extend such Affiliate Transaction. If it is finally
determined pursuant to such Dispute Resolution Procedures that such
Affiliate Transaction is not an Arm's-Length Transaction or that the
quality of service being so provided is inferior, then the Company shall
either modify the terms of such Affiliate Transaction so that it becomes an
Arm's-Length Transaction and, if disputed, with an adequate level of
quality of service or not enter into, renew or extend such Affiliate
Transaction. In the event that such Affiliate Transaction has already been
entered into, renewed or extended, then (A) the Company and the Contracting
Member shall make such modifications to the terms of such Affiliate
Transaction as are necessary so that such Affiliate Transaction becomes an
Arm's-Length Transaction and, if disputed, with an adequate level of
quality of service and (B) the Contracting Member shall pay the Company an
amount equal to the difference between (I) the costs incurred by the
Company under such Affiliate Transaction since the time of such entering
into, renewal or extension and (II) the costs that the Company would have
incurred under such Affiliate Transaction during such time period had such
Affiliate Transaction been an Arm's-Length Transaction and, if disputed,
with an adequate level of quality of service at the time of such initial
agreement, renewal or extension.
SECTION 8.12. Review of Certain Affiliate Transactions
Related to Crude Oil Purchases and Shared Services.
(a) (i) Not less than 30 days prior to the regular
meeting of the Board of Managers during the fourth Fiscal Quarter
of each Fiscal Year (or, if no regular meeting of the Board of
Managers is scheduled during
65
such Fiscal Quarter, at a special meeting of the Board of Managers
during such Fiscal Quarter), the Company shall submit to the Board
of Managers a reasonably detailed description of any proposed
transactions or agreements related to crude oil purchases by the
Company and its subsidiaries from Marathon or any Affiliate of
Marathon that are intended to remain in effect or to be put into
effect during such next Fiscal Year (collectively, the "Marathon
Crude Oil Purchase Program"). Following such submission, the
Company shall provide the Board of Managers promptly with such
information with respect to such Marathon Crude Oil Purchase
Program and the Company's other proposed crude oil purchases and
policies for such next Fiscal Year as any Representative shall
reasonably request. At each such regular or special meeting during
the fourth Fiscal Quarter of each Fiscal Year, the Board of
Managers shall review such Marathon Crude Oil Purchase Program.
During such next Fiscal Year, the Company and its subsidiaries
shall be permitted to purchase crude oil from Marathon or any
Affiliate of Marathon only on the terms and conditions of the
proposed transactions and agreements submitted to and approved by
the Board of Managers at such regular or special meeting pursuant
to a vote in accordance with Section 8.07(b) (the "Approved
Marathon Crude Oil Purchase Program"). Any purchase (or group of
related purchases) of crude oil by the Company or any of its
subsidiaries from Marathon or any Affiliate of Marathon during
such Fiscal Year that is an Affiliate Transaction for purposes of
Section 8.08(k) and is not made under or in accordance with the
Approved Marathon Crude Oil Purchase Program and any material
amendment to or change in the Approved Marathon Crude Oil Purchase
Program during such Fiscal Year shall be made only with the prior
approval of the Board of Managers pursuant to a vote in accordance
with Section 8.07(b).
(ii) The Company shall prepare and send to each Member
(at the same time) promptly, but in no event later than the 30th
day after the last day of each Fiscal Quarter, (A) a summary of
all Crude Oil Purchases during such Fiscal Quarter, (B) a
description of any amendments to, changes in or deviations from
the
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Approved Marathon Crude Oil Purchase Program in effect during such
Fiscal Quarter, (C) a description of any then known proposed
amendments to, changes in or deviations from the Approved Marathon
Crude Oil Purchase Program in effect during the remaining balance
of the Fiscal Year and (D) such other information with respect to
purchases of crude oil by the Company and its subsidiaries as
either Member shall reasonably request.
(b)(i) All administrative services that Marathon, Ashland
and each of their respective Affiliates provide to the Company or
any of its subsidiaries, and that the Company and its subsidiaries
provide to Marathon, Ashland or any of their respective
Affiliates, shall be pursuant to the Shared Services Agreement. To
the extent that there is a conflict between the Shared Services
Agreement, Schedule 10.2(e) to the Marathon Asset Transfer and
Contribution Agreement Disclosure Letter or Schedule 10.2(e) to
the Ashland Asset Transfer and Contribution Agreement Disclosure
Letter, on the one hand, and this Agreement, on the other hand,
this Agreement shall control.
(ii) Not less than 90 days prior to each of the annual
meetings of the Board of Managers held in 2000, 2003 and every
three years thereafter, the Company shall submit to the Board of
Managers the provisions of the Shared Services Agreement that
relate to each Significant Shared Service then in effect or that
is proposed to be put into effect. Following such submission, the
Company shall provide the Board of Managers promptly with such
information with respect to such Significant Shared Services and
with respect to any other Shared Services then being provided or
proposed to be provided as any Representative shall reasonably
request. At each such annual meeting, unless all the
Representatives otherwise agree, the Board of Managers shall
review each such Significant Shared Service and shall determine
pursuant to a vote in accordance with Section 8.07(b) whether such
Significant Shared Service should be continued (or, in the case of
any proposed Significant Shared Service, put into effect). Unless
the Board of Managers
67
approves pursuant to a vote in accordance with Section 8.07(b) the
continuation or effectiveness of a Significant Shared Service, the
Shared Service Agreement to the extent it relates to such
Significant Shared Service shall be terminated effective 90 days
after such annual meeting or at such later date as the Board of
Managers shall specify pursuant to a vote in accordance with
Section 8.07(b) and the Company shall be deemed at the time of
such annual meeting to have given notice to the Member providing
or receiving (or whose Affiliate is providing or receiving) such
Significant Shared Service that the Company is terminating the
Shared Service Agreement with respect to such Significant Shared
Service.
SECTION 8.13. Adjustable Amounts. Within 30 days
following the date on which the United States Department of Labor Bureau of
Labor Statistics for all Urban Areas publishes the Price Index for the
month of September of each Fiscal Year commencing September, 1998, the
Company shall determine whether the Average Annual Level for the
immediately preceding twelve-month period exceeds the Base Level. If the
Company determines that the Average Annual Level for such twelve-month
period exceeds the Base Level, then the Company shall increase or decrease
each of the dollar amounts set forth in this Agreement (other than the $348
million and $346 million amounts set forth in the definition of Adjusted
DD&A, the $657 million, $600 million, $80 million, $20 million and $12.4
million amounts set forth in the definition of Adjusted EBITDA, the $240
million amount set forth in the definition of "Normal Annual Capital Budget
Amount" in Section 1.01, the $100 million amount set forth in Section
8.08(f)(i) and any dollar amount set forth in any Appendix, Exhibit or
Schedule to this Agreement, including Schedule 8.14) (each dollar amount
that is adjusted pursuant to this Section 8.13 being an "Adjustable
Amount"), including, without limitation, the following amounts, to an
amount calculated by multiplying the relevant Adjustable Amount by a
fraction whose numerator is the Average Annual Level for such twelve-month
period and whose denominator is the Base Level: (i) the $100,000, $2
million and $25 million amounts set forth in the definition of "Affiliate
Transaction" and the $2 million amount set forth in the definition of
"Significant Shared Service" in each
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case in Section 1.01; (ii) the $2 million amount set forth in Section
6.06(c); (iii) the $2 million amounts set forth in Sections 6.08(b), (d)
and (e); (iv) the $20 million amount set forth in Section 8.08(a)(i); (v)
the $80 million amount set forth on Section 8.08(f)(ii) (or such other
dollar amount as shall be agreed pursuant to the proviso to Section
8.08(f)(ii)); (vi) the $50 million amount set forth in Section 8.08(g);
(vii) the $50 million and $25 million amounts set forth in Section
8.08(h)(i); and (viii) each $7.5 million amount set forth in Section
14.01(a); provided that in no event shall any Adjustable Amount be
decreased below the initial amount thereof set forth herein. Within five
Business Days after making such determinations, the Company shall
distribute to each Member a notice setting forth: (A) the amount by which
the Average Annual Level for such Fiscal Year exceeded the Base Level and
(B) the calculations of any adjustments made to the Adjustable Amounts
pursuant to this Section 8.13. Any adjustment made to the Adjustable
Amounts pursuant to this Section 8.13 shall be effective as of January 1st
of the next Fiscal Year.
SECTION 8.14. Company Leverage Policy. The leverage
policy for the Company shall be the leverage policy set forth on Schedule
8.14, with such modifications, alterations or amendments thereto as the
Board of Managers shall from time to time approve pursuant to a vote in
accordance with Section 8.07(b) (such leverage policy, as so modified,
altered or amended, is referred to herein as the "Company Leverage
Policy").
SECTION 8.15. Company's Investment Guidelines. The
Company's Senior Vice President-Finance and Commercial Services, Vice
President-Finance and Controller and Treasurer (or Treasury Manager) shall
constitute an Investment Policy Committee of the Company and shall
establish investment guidelines for the Company and its subsidiaries (such
investment guidelines, as they may be modified, altered or amended by such
Investment Policy Committee from time to time, are referred to herein as
the "Company Investment Guidelines"). The initial Company Investment
Guidelines is set forth on Schedule 8.15. The Company and its subsidiaries
shall only make investments that are permitted under the Company Investment
Guidelines
69
at the time of such investments. In addition, the Company and its
subsidiaries shall invest all Surplus Cash (after meeting daily cash
requirements) in accordance with the Company Investment Guidelines.
SECTION 8.16. Requirements as to Operating Leases. The
Company and its subsidiaries shall not enter into any operating lease (as
determined in accordance with Applicable GAAP) if the purpose or intent of
entering into such operating lease is to circumvent the Company Leverage
Policy or the super majority voting requirement for Capital Expenditures of
the Company set forth in Section 8.08(f). The lease by the Company and its
subsidiaries of vehicles, railcars and computers in accordance with the
historical practices of the Ashland Business and the Marathon Business
shall not be deemed to violate this Section 8.16, provided, for the
avoidance of doubt, that all Ordinary Course Lease Expenses related to any
such leases shall be considered Ordinary Course Lease Expenses for the
purposes of Section 8.08(f)(ii).
SECTION 8.17. Limitations on Actions Relating to the
Calculation of Distributable Cash. Notwithstanding anything to the contrary
contained in this Agreement, the Company shall not, and shall cause its
subsidiaries not to (a) modify, alter or amend the Company Investment
Guidelines, (b) accelerate the payment of the Company's and its
subsidiaries' accounts payable, (c) delay the collection of the Company's
and its subsidiaries' accounts receivable or (d) take any other action, if
the purpose or intent of such action is to reduce the amount of
Distributable Cash in a manner that is inconsistent with the intent of the
Members to maximize the amount of Distributable Cash distributions to the
Members.
SECTION 8.18. Reliance by Third Parties. Persons dealing
with the Company are entitled to rely conclusively upon the power and
authority of the Board of Managers herein set forth. Except as provided in
this Agreement, neither the President, nor a Representative, nor any Member
shall have any authority to bind the Company or any of its subsidiaries.
70
SECTION 8.19. Integration of Retail Operations. (a) Until
the Critical Decision is made regarding the location of the Company's
retail operations' headquarters, the Company's retail operations' business
shall have headquarters in both Enon, Ohio and Lexington, Kentucky.
(b)(i) The Company shall make a formal recommendation to
the Board of Managers with respect to each Critical Decision not later than
the ten-month anniversary of the Closing Date. Following receipt of a
formal recommendation with respect to any Critical Decision, Marathon and
Ashland shall negotiate in good faith to reach an agreement with respect to
such Critical Decision not later than the first anniversary of the Closing
Date.
(ii) Each formal recommendation with respect to any
Critical Decision shall be accompanied by a report on the business and
economic analyses used by the Company to arrive at such recommendation,
including but not limited to, a reasonably detailed description of the
risks and benefits of the recommended decision and the anticipated impact
of the recommended decision on the Speedway and SuperAmerica brand images
and business models.
(iii) Following receipt of any formal recommendation with
respect to any Critical Decision, each Member may request, and the Company
shall promptly provide to both Members, such additional information and
analyses (including studies by outside consultants) as such Member may
reasonably request; provided, however, any additional information request
shall not extend the Critical Decision Termination Date.
(c) If any Primary Critical Decision shall not have been
agreed by the Board of Managers pursuant to a vote in accordance with
Section 8.07(b) prior to the first anniversary of the Closing Date, the
Critical Decision Termination Date with respect to such Primary Critical
Decision shall be automatically, and without any further action required by
either Member, the Company or the Board of Managers, extended until the
fifteen-month anniversary of the Closing Date. During the period of such
extension, the Company shall provide promptly to each Member such
additional information or analyses (including studies by
71
outside consultants) as either Member shall reasonably request. Not later
than 30 days prior to the fifteen-month anniversary of the Closing Date,
the Company shall, if requested by either Member, again make a formal
recommendation to the Board of Managers with respect to such Primary
Critical Decision. Such formal recommendation shall include a report on the
supporting business and economic analyses described in Section 8.19(b)(ii).
Any request for additional information shall not extend the Critical
Decision Termination Date.
(d) Until such time as the implementation of any Critical
Decision shall have been completed in all material respects, the President
of the Company shall report to the Board of Managers at each regular
meeting of the Board of Managers on the implementation of such Critical
Decision and on any material modifications or changes to such Critical
Decision.
(e) To the extent there is any conflict between the terms
and provisions of this Agreement and the terms and provisions of the Retail
Integration Protocol, the terms and provisions of this Agreement shall
control.
ARTICLE IX
Officers
SECTION 9.01. (a) Election, Appointment and Term of
Office. The executive officers of the Company (the "Executive Officers")
shall consist solely of: a President; an Executive Vice President; an
officer principally in charge of refining; an officer principally in charge
of wholesale and branded marketing; the officer or officers (two initially)
principally in charge of retail marketing; an officer principally in charge
of supply and transportation; an officer who shall be the Senior Vice
President-Finance and Commercial Services of the Company; and an officer
who shall be the general counsel of the Company. Schedule C sets forth a
list of (i) the persons who Marathon and Ashland have chosen to serve
initially as the Executive Officers of the Company, (ii) the executive
office for which each such person is to serve and (iii) whether
72
each such person was designated by Marathon or Ashland. Marathon and
Ashland agree that the composition of the initial Executive Officers is
intended to reflect their respective Percentage Interests in the Company.
Accordingly, if any person identified on Schedule C is for any reason
unable or unwilling to serve as an Executive Officer at the Closing Date,
the Member who designated such person shall have the right to designate a
substitute person, subject to the right of the other Member to consent to
such substitute nominee (which consent shall not be unreasonably withheld).
Marathon and Ashland shall cause their respective Representatives to
promptly approve the appointment of each person listed on Schedule C to the
related executive office position listed on Schedule C.
(b) Except as otherwise determined by the Board of
Managers, each Executive Officer shall hold office until his or her death
or until his or her earlier resignation or removal in the manner
hereinafter provided. Except as otherwise expressly provided herein, the
Executive Officers shall have such powers and duties in the management of
the Company as generally pertain to their respective offices as if the
Company were a corporation governed by the General Corporation Law of the
State of Delaware.
(c) The Board of Managers may elect or appoint such other
officers to assist and report to the Executive Officers as it deems
necessary. Subject to the preceding sentence, each such officer shall have
such authority and shall perform such duties as may be provided herein or
as the Board of Managers may prescribe. The Board of Managers may delegate
to any Executive Officer the power to choose such other officers and to
prescribe their respective duties and powers.
(d) Except as otherwise determined by the Board of
Managers, if additional officers are elected or appointed during the year
pursuant to Section 9.01(c), each such officer shall hold office until his
or her death or until his or her earlier resignation or removal in the
manner hereinafter provided.
SECTION 9.02. Resignation, Removal and Vacancies. (a) Any
officer may resign at any time by
73
giving written notice to the President or the Secretary of the Company, and
such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, when
accepted by action of the Board of Managers. Except as aforesaid, the
acceptance of such resignation shall not be necessary to make it effective.
(b) All officers and agents elected or appointed by the
Board of Managers shall be subject to removal at any time by the Board of
Managers with or without cause.
(c) Vacancies in all Executive Officer positions may only
be filled by the majority vote of the Representatives on the Board of
Managers. In each instance where a vacant Executive Officer position is to
be filled, Marathon, after consultation with the Company, shall first send
Ashland a notice which discloses the name and details of the candidate for
the vacant Executive Officer position that the Representatives of Marathon
will nominate and vote in favor of for such position. Ashland shall
thereafter have the right, by notice to the Company and Marathon within ten
days after receipt of such notice from Marathon, to veto such candidate.
Each candidate that Marathon proposes for a vacant Executive Officer
position shall be a bona fide candidate who is willing and able to serve
and who Marathon in good faith believes is qualified to fill such vacant
Executive Officer position (a "Qualified Candidate"). In the event Ashland
exercises its veto with respect to a Qualified Candidate, the vacancy will
be filled by the majority vote of the Representatives on the Board of
Managers.
SECTION 9.03. Duties and Functions of Executive Officers.
(a) President. The President of the Company, who shall be a non-voting
member of the Board of Managers, shall be in charge of the day-to-day
operations of the Company and shall preside at all meetings of the Board of
Managers and shall perform such other duties and exercise such powers, as
may from time to time be prescribed by the Board of Managers.
(b) Executive Vice President. The Executive Vice
President of the Company initially shall report to
74
the President and be the officer principally in charge of all supply,
refining, marketing and transportation operations of the Company other than
the Company's retail operations.
(c) Other Executive Officers. The Executive Officers of
the Company other than the President and the Executive Vice President shall
perform such duties and exercise such powers, as may from time to time be
prescribed by the President or the Board of Managers.
ARTICLE X
Transfers of Membership Interests
SECTION 10.01. Restrictions on Transfers. (a) General.
Except as expressly provided by this Article X, neither Member shall
Transfer all or any part of its Membership Interests to any person without
first obtaining the written approval of the other Member, which approval
may be granted or withheld in its sole discretion. Notwithstanding anything
to the contrary contained in this Agreement, no Transfer by a Member of its
Membership Interests to any person shall be made except to a permitted
assignee under Article XV of the Put/Call, Registration Rights and
Standstill Agreement.
(b) Transfer by Operation of Law. In the event a Member
shall be party to a merger, consolidation or similar business combination
transaction with a third party or sell all or substantially all its assets
to a third party, such Member may Transfer all (but not part) of its
Membership Interests to such third party; provided, however, that such
Member shall not be permitted to Transfer its Membership Interests to such
third party as aforesaid if the purpose or intent of such merger,
consolidation, similar business combination transaction or sale is to
circumvent or avoid the application of Sections 10.01(c) and 10.04 to the
Transfer of such Member's Membership Interests to such third party.
(c) Transfer by Sale to Third Party. At any time after
December 31, 2002, a Member may sell all (but not part) of its Membership
Interests (and, in the case of
75
Ashland, the Ashland LOOP/LOCAP Interest) to any person (other than a
Transfer by operation of law pursuant to Section 10.01(b), a Transfer to a
Wholly Owned Subsidiary pursuant to Section 10.01(d) or a Transfer by
Ashland to Marathon pursuant to Section 10.01(e)) if (i) it shall first
have offered the other Member the opportunity to purchase such Membership
Interests (and, in the case of Ashland, the Ashland LOOP/LOCAP Interest)
pursuant to the right of first refusal procedures set forth in Section
10.04, (ii) such sale is completed within the time periods specified in
Section 10.04, (iii) the other Member shall have approved the purchaser of
such Membership Interests (and, in the case of Ashland, the Ashland
LOOP/LOCAP Interest), which approval shall not be unreasonably withheld or
delayed and (iv) it shall use its commercially reasonable best efforts to
(A) terminate the outstanding Original Lease underlying each of its
Designated Sublease Agreements on or prior to the date of such Transfer and
(B) contribute the related Subleased Property to the Company or one of its
subsidiaries at no cost to the Company or such subsidiary on or prior to
the date of such Transfer; provided, however, that (i) such Member shall
not be obligated to pay more than a reasonable amount as consideration
therefor to, or make more than a reasonable financial accommodation in
favor of, or commence litigation against, a third party lessor with respect
to any such underlying Original Lease in order to obtain any consent
required from such lessor and (ii) any additional cost associated with
exercising an option under the Original Lease to purchase Subleased
Property or to terminate the Original Lease shall be deemed not to
constitute an obligation to pay more than a reasonable amount. In the event
that such Member is unable to terminate an outstanding Original Lease in
accordance with this Section 10.02(b), then (i) the Company shall be
entitled to continue to sublease the Subleased Property pursuant to the
related Designated Sublease Agreement until the term of the Original Lease
expires, (ii) the Member shall continue to use its commercially reasonable
best efforts to terminate the Original Lease and contribute the Subleased
Property to the Company as provided above; provided, however that (A) such
Member shall not be obligated to pay more than a reasonable amount as
consideration therefor to, or make more than a reasonable financial
accommodation in favor of, or commence litigation against, a third party
lessor with respect to any
76
such Original Lease in order to obtain any consent required from such
lessor and (b) any additional cost associated with exercising an option
under the Original Lease to purchase Subleased Property or to terminate the
Original Lease shall be deemed not to constitute an obligation to pay more
than a reasonable amount and (iii) if such Member subsequently acquires fee
title to the Subleased Property, such Member shall contribute such
Subleased Property to the Company or one of its subsidiaries at no cost to
the Company or such subsidiary at such time. It is expressly understood and
agreed that, in determining whether to reasonably withhold its approval of
a proposed purchaser of Marathon's Membership Interests pursuant to this
Section 10.01(c), Ashland shall be entitled to consider the
creditworthiness of such proposed purchaser, including whether such
proposed purchaser is likely to be able to perform all of Marathon's and
USX's respective obligations under the Put/Call, Registration Rights and
Standstill Agreement.
(d) Transfer to Wholly Owned Subsidiary. A Member may
Transfer all (but not part) of its Membership Interests at any time to a
Wholly Owned Subsidiary of such Member if (i) such Member shall have
received an opinion from nationally recognized tax counsel acceptable to
both Members that such Transfer will not result in a termination of the
status of the Company as a partnership for Federal income tax purposes and
(ii) the transferring Member enters into an agreement with the other Member
providing that so long as such Wholly Owned Subsidiary holds such
transferring Member's Membership Interests, such Wholly Owned Subsidiary
shall remain a Wholly Owned Subsidiary of such transferring Member.
(e) Transfer Pursuant to Put/Call, Registration Rights
and Standstill Agreement. Ashland may Transfer all of its Membership
Interests to Marathon in connection with the exercise by Marathon of its
Marathon Call Right or its Special Termination Right or the exercise by
Ashland of its Ashland Put Right. In addition, Marathon may Transfer all of
its Membership Interests to Ashland in connection with the exercise by
Ashland of its Special Termination Right.
(f) Consequences of Permitted Transfers. (i) In
connection with any Transfer by a Member to a third party
77
transferee pursuant to Section 10.01(b), (A) such third party transferee
shall at the time of such Transfer become subject to all of such
transferring Member's obligations hereunder and shall succeed to all of
such transferring Member's rights hereunder and (B) such transferring
Member shall be relieved of all of its obligations hereunder other than
with respect to any default hereunder by such transferring Member or any of
its Affiliates hereunder that occurred prior to the time of such Transfer.
(ii) In connection with any Transfer by a Member to a
third party transferee or to the other Member pursuant to Section 10.01(c),
(A) such third party transferee or such other Member shall at the time of
such Transfer become subject to all of such transferring Member's
obligations hereunder and shall succeed to all of such transferring
Member's rights hereunder and (B) such transferring Member shall at the
time of such Transfer be relieved of all of its obligations hereunder other
than with respect to any default hereunder by such transferring Member or
any of its Affiliates that occurred prior to the time of such Transfer.
(iii) In connection with any Transfer by a Member to a
Wholly Owned Subsidiary of such Member pursuant to Section 10.01(d), (A)
such Wholly Owned Subsidiary shall at the time of such Transfer become
subject to all of such Member's obligations hereunder and shall succeed to
all of such Member's rights hereunder and (B) such Member shall not be
relieved of its obligations hereunder without the prior written consent of
the other Member, which consent shall not be unreasonably withheld or
delayed.
(iv) In connection with any Transfer by Ashland to
Marathon pursuant to Section 10.01(e), (A) Marathon shall at the time of
such Transfer become subject to all of Ashland's obligations hereunder and
shall succeed to all of Ashland's rights hereunder and (B) Ashland shall at
the time of such Transfer be relieved of all of its obligations hereunder
other than with respect to any default hereunder by Ashland or any of its
Affiliates that occurred prior to the Exercise Date (as such term is
defined in the Put/Call, Registration Rights and Standstill Agreement).
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(v) In connection with any Transfer by Marathon to
Ashland pursuant to Section 10.01(e), (A) Ashland shall at the time of such
Transfer become subject to all of Marathon's obligations hereunder and
shall succeed to all of Marathon's rights hereunder and (B) Marathon shall
at the time of such Transfer be relieved of all of its obligations
hereunder other than with respect to any default hereunder by Marathon or
any of its Affiliates that occurred prior to the Special Termination
Exercise Date (as such term is defined in the Put/Call, Registration Rights
and Standstill Agreement).
(vi) In connection with any Transfer by Ashland to a
third party transferee pursuant to Section 10.01(b), 10.01(c) or 10.01(d),
such third party transferee shall at the time of such Transfer succeed to
all of Ashland's veto rights under Section 9.02(c); provided, that if
Ashland Transfers its Membership Interests to a third party transferee
pursuant to Section 10.01(c), such third party transferee shall not
thereafter be permitted to transfer its veto rights under Section 9.02(c)
to another third party transferee pursuant to Section 10.01(c).
(vii) In connection with any Transfer by a Member to a third
party transferee pursuant to this Article X, such transferring Member shall
retain all of the rights granted to a Member under Article VII to examine
the books and records of the Company and to receive financial statements
and reports prepared by the Company until such time following such Transfer
as such transferring Member ceases to have any liability under Article IX
of the Asset Transfer and Contribution Agreement.
(g) Consequences of an Unpermitted Transfer. Any Transfer
of a Member's Membership Interests made in violation of the applicable
provisions of this Agreement shall be void and without legal effect.
SECTION 10.02. Conditions for Admission. No transferee of
all of the Membership Interests of any Member shall be admitted as a Member
hereunder unless (a) such Membership Interests are Transferred to a person
in compliance with the applicable provisions of this Agreement, (b) such
transferee shall have executed and delivered to the
79
Company such instruments as the Board of Managers deems necessary or
desirable in its reasonable discretion to effectuate the admission of such
transferee as a Member and to confirm the agreement of such transferee or
recipient to be bound by all the terms and provisions of this Agreement
with respect to the Membership Interests acquired by such transferee and
(c) such transferee shall have executed and delivered an assignment and
assumption agreement pursuant to Section 15.04 of the Put/Call,
Registration Rights and Standstill Agreement.
SECTION 10.03. Allocations and Distributions. Subject to
applicable Treasury Regulations, upon the Transfer of all the Membership
Interests of a Member as herein provided, the Profit or Loss of the Company
attributable to the Membership Interests so transferred for the Fiscal Year
during which such Transfer occurs shall be allocated between the transferor
and transferee as of the date set forth on the written assignment, and such
allocation shall be based upon any permissible method agreed to by the
Members that is provided for in Code Section 706 and the Treasury
Regulations issued thereunder. Except as otherwise expressly provided in
Section 5.01 of the Put/Call, Registration Rights and Standstill Agreement,
distributions shall be made to the holder of record of the Membership
Interests on the date of distribution.
SECTION 10.04. Right of First Refusal.(a) If a Member
(the "Selling Member") shall desire to sell all (but not part) of its
Membership Interests (which, for purposes of this Section 10.04, shall be
deemed to include, in the case of Ashland, the Ashland LOOP/LOCAP Interest)
pursuant to Section 10.01(c), then the Selling Member shall give notice
(the "Offer Notice") to the other Member, identifying the proposed
purchaser from whom it has received a bona fide offer and setting forth the
proposed sale price (which shall be payable only in cash or purchase money
obligations secured solely by the Membership Interests being sold) and the
other material terms and conditions upon which the Selling Member is
proposing to sell such Membership Interests to such proposed purchaser. No
such sale shall encompass or be conditioned upon the sale or purchase of
any property other than such Membership Interests (other than, in the case
of Ashland, the Ashland LOOP/LOCAP Interest).
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The other Member shall have 30 days from receipt of the Offer Notice to
elect, by notice to the Selling Member, to purchase the Membership
Interests offered for sale on the terms and conditions set forth in the
Offer Notice.
(b) If a Member makes such election, the notice of
election shall state a closing date not later than 60 days after the date
of the Offer Notice. If such Member breaches its obligation to purchase the
Membership Interests of the Selling Member on the same terms and conditions
as those contained in the Offer Notice after giving notice of its election
to make such purchase (other than where such breach is due to circumstances
beyond such Member's reasonable control), then, in addition to all other
remedies available, the Selling Member may, at any time for a period of 270
days after such default, sell such Membership Interests to any person at
any price and upon any other terms without further compliance with the
procedures set forth in Section 10.04.
(c) If the other Member gives notice within the 30-day
period following the Offer Notice from the Selling Member that it elects
not to purchase the Membership Interests, the Selling Member may, within
120 days after the end of such 30-day period (or 270 days in the case where
such parties have received a second request under HSR), sell such
Membership Interests to the identified purchaser (subject to clause (iii)
of Section 10.01(c)) on terms and conditions no less favorable to the
Selling Member than the terms and conditions set forth in such Offer
Notice. In the event the Selling Member shall desire to offer the
Membership Interests for sale on terms and conditions less favorable to it
than those previously set forth in an Offer Notice, the procedures set
forth in this Section 10.04 must again be initiated and applied with
respect to the terms and conditions as modified.
SECTION 10.05. Restriction on Resignation or Withdrawal.
Except in connection with a Transfer permitted pursuant to Section 10.01,
neither Member shall resign or withdraw from the Company without the
consent of the other Member. Any purported resignation or withdrawal from
the Company in violation of this Section 10.05 shall be null and void and
of no force or effect.
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ARTICLE XI
Liability, Exculpation and Indemnification
SECTION 11.01. Liability. Except as otherwise provided by
the Delaware Act, the debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the Company, and no Covered Person shall be
obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Covered Person.
SECTION 11.02. Exculpation. (a) No Covered Person shall
be liable to the Company or any other Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by
such Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of authority conferred on such
Covered Person by this Agreement, except that a Covered Person shall be
liable for any such loss, damage or claim incurred by reason of such
Covered Person's gross negligence, wilful misconduct or breach of Section
12.02.
(b) A Covered Person shall be fully protected in relying
in good faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any person as
to any matters the Covered Person reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence
and amount of assets from which distributions to Members might properly be
paid.
SECTION 11.03. Indemnification. To the fullest extent
permitted by Applicable Law, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by
such Covered Person by reason of any act or omission performed or omitted
by such
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Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of authority conferred on such
Covered Person by this Agreement, except that no Covered Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred
by such Covered Person by reason of gross negligence, wilful misconduct or
breach of Section 12.02 with respect to such acts or omissions; provided,
however, that any indemnity under this Section 11.03 shall be provided out
of and to the extent of Company assets only, and no Covered Person shall
have any personal liability on account thereof.
ARTICLE XII
Fiduciary Duties
SECTION 12.01. Duties and Liabilities of Covered Persons.
To the extent that, at law or in equity, a Covered Person has duties
(including fiduciary duties) and liabilities relating thereto to the
Company or to any other Covered Person, a Covered Person acting under this
Agreement shall not be liable to the Company or to any other Covered Person
for its good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they expand or restrict
the duties and liabilities of a Covered Person otherwise existing at law or
in equity, are agreed by the parties hereto to replace such other duties
and liabilities of such Covered Person.
SECTION 12.02. Fiduciary Duties of Members of the Company
and Members of the Board of Managers. Each Member and each member of the
Board of Managers shall have the fiduciary duties of loyalty and care
(similar to the fiduciary duties of loyalty and care of directors of a
business corporation governed by the General Corporation Law of the State
of Delaware) to the Company and all of the Members. Notwithstanding any
provision of this Agreement to the contrary, each Member and each member of
the Board of Managers agrees to and shall exercise good faith, fairness and
loyalty to the Company and to all of the Members, and shall make all
decisions in a manner that such Member or such member of the Board of
Managers reasonably believes to
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be in the best interest of the Company and all of the Members.
Notwithstanding the foregoing, this Section 12.02 is not intended to limit
a Member's ability to exercise or enforce any of its rights and remedies
under this Agreement and the other Transaction Documents in good faith,
including, without limitation, Article IX of the Asset Transfer and
Contribution Agreement.
ARTICLE XIII
Dispute Resolution Procedures
SECTION 13.01. General. All controversies, claims or
disputes between the Members or between the Company and either Member that
arise out of or relate to this Agreement or the construction,
interpretation, performance, breach, termination, enforceability or
validity of this Agreement, or the commercial, economic or other
relationship of the parties hereto, whether such claim is based on rights,
privileges or interests recognized by or based upon statute, contract,
tort, common law or otherwise and whether such claim existed prior to or
arises on or after the date of this Agreement (a "Dispute") shall be
resolved in accordance with the provisions of this Article XIII (except as
otherwise expressly provided in Sections 6.06 and 6.08). Notwithstanding
anything to the contrary contained in this Article XIII, nothing in this
Article XIII shall limit the ability of the directors and officers of
either Member from communicating directly with the directors and officers
of the other Member.
SECTION 13.02. Dispute Notice and Response. Either Member
may give the other Member written notice (a "Dispute Notice") of any
Dispute which has not been resolved in the normal course of business.
Within fifteen Business Days after delivery of the Dispute Notice, the
receiving Member shall submit to the other Member a written response (the
"Response"). The Dispute Notice and the Response shall each include (i) a
statement setting forth the position of the Member giving such notice, a
summary of the arguments supporting such position and, if applicable, the
relief sought and (ii) the name and title of a senior manager of such
Member who has authority to settle the
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Dispute and will be responsible for the negotiations related to the
settlement of the Dispute (the "Senior Manager").
SECTION 13.03. Negotiation Between Senior Managers. (a)
Within 10 days after delivery of the Response provided for in Section
13.02, the Senior Managers of both Members shall meet or communicate by
telephone at a mutually acceptable time and place, and thereafter as often
as they reasonably deem necessary, and shall negotiate in good faith to
attempt to resolve the Dispute that is the subject of such Dispute Notice.
If such Dispute has not been resolved within 45 days after delivery of the
Dispute Notice, then the Members shall attempt to settle the Dispute
pursuant to Section 13.04.
(b) All negotiations between the Senior Managers pursuant
to this Section 13.03 shall be treated as compromise and settlement
negotiations. Nothing said or disclosed, nor any document produced, in the
course of such negotiations which is not otherwise independently
discoverable shall be offered or received as evidence or used for
impeachment or for any other purpose in any current or future arbitration
or litigation.
SECTION 13.04. Negotiation Between Chief Executive
Officer and President. (a) If the Dispute has not been resolved by
negotiation between the Senior Managers pursuant to Section 13.03, then
within 10 Business Days after the expiration of the 45 day period provided
in Section 13.03, the Chief Executive Officer of Ashland and the President
of Marathon shall meet or communicate by telephone at a mutually acceptable
time and place, and thereafter as often as they reasonably deem necessary,
and shall negotiate in good faith to attempt to resolve the Dispute that is
the subject of such Dispute Notice. If such Dispute has not been resolved
within 20 Business Days after the expiration of the 45 day period provided
in Section 13.03, then (i) if the Dispute relates solely to (A) a claim by
a Member or the Board of Managers that the other Member has failed to pay
the Company a Designated Sublease Amount or an amount in respect of a
Member-Funded Capital Expenditure, a Member-Funded Indemnity Expenditure or
an Agreed Additional Capital Contribution required to be made by it
pursuant to Section 4.02 (a "Disputed Capital
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Contribution Amount"), (B) the determination of any of the following
amounts with respect to any period: distributions pursuant to Article V;
the Aggregate Tax Rate; Adjusted DD&A; Adjusted EBITDA; EBITDA;
Distributable Cash; the Average Annual Level and adjustments to Adjustable
Amounts; the Normal Annual Capital Budget Amount; Ordinary Course Lease
Expenses; Profit and Loss; the Tax Distribution Amount; the Tax Liability
of any Member; and the determination of fair market value of property
distributed in kind under Section 15.03, (C) the resolution of any dispute
arising under Section 8.11(b) with respect to Affiliate Transactions or (D)
the resolution of any dispute arising under Section 8.12 with respect to
certain Affiliate Transactions related to Crude Oil Purchases and Shared
Services (any Dispute relating to any of the matters set forth in clause
(A), (B), (C) or (D) above being referred to herein as an "Arbitratable
Dispute"), such Dispute shall be settled pursuant to the arbitration
procedures set forth in Appendix B and (ii) if the Dispute does not relate
primarily to an Arbitratable Dispute, each party hereto shall be permitted
to take such actions at law or in equity as it is otherwise permitted to
take or as may be available under Applicable Law.
(b) All negotiations between the Chief Executive Officer
of Ashland and the President of Marathon pursuant to this Section 13.04
shall be treated as compromise and settlement negotiations. Nothing said or
disclosed, nor any document produced, in the course of such negotiations
which is not otherwise independently discoverable shall be offered or
received as evidence or used for impeachment or for any other purpose in
any current or future arbitration or litigation.
SECTION 13.05. Right to Equitable Relief Preserved.
Notwithstanding anything in this Agreement or Appendix B to the contrary,
either Member or the Company may at any time seek from any court of the
United States located in the State of Delaware or from any Delaware state
court, any interim, provisional or injunctive relief that may be necessary
to protect the rights or property of such party or maintain the status quo
before, during or after the pendency of the negotiation process or the
arbitration proceeding or any other proceeding contemplated by Section
13.03 or 13.04.
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ARTICLE XIV
Rights and Remedies with Respect to Monetary Disputes
SECTION 14.01. Ability of Company to Borrow to Fund
Disputed Monetary Amounts. (a) If the Company or a Member on behalf of the
Company (a "Non-Delinquent Member") claims that the other Member (a
"Delinquent Member") owes the Company a monetary amount in respect of
either (i) a Disputed Capital Contribution Amount or (ii) an
indemnification obligation under Article IX of the Asset Transfer and
Contribution Agreement that the Company or the Non-Delinquent Member claims
the Delinquent Member owes the Company and is either (A) past due or (B) in
dispute (a "Disputed Indemnification Amount") (each such claim described in
clauses (i) and (ii) above being a "Monetary Dispute", and each such
claimed amount being a "Disputed Monetary Amount"), and if (1) the Disputed
Monetary Amount itself, or when added together all other Disputed Monetary
Amounts, exceeds $7.5 million; (2) the Board of Managers (by vote of a
majority of the Representatives of the Non-Delinquent Member at a special
or regular meeting of the Board of Managers (which majority shall
constitute a quorum for purposes of the transaction of such business)) has
determined that an out-of-pocket disbursement of such Disputed Monetary
Amount or any portion thereof by the Company or one of its subsidiaries
within the next twelve months is reasonably necessary for the operation and
conduct of the Company's Business and, accordingly, that such amount should
be paid within the next twelve months; (3) the aggregate amount of all
Disputed Monetary Amounts (or portions thereof) that the Board of Managers
shall have determined pursuant to clause (2) above should be paid within
the next twelve months (such aggregate amount being the "Additional
Required Cash Amount") exceeds $7.5 million; (4) postponement by the
Company or such subsidiary of such disbursement until such time as the
Monetary Dispute is reasonably likely to be finally resolved pursuant to an
arbitration proceeding in accordance with Appendix B to this Agreement or
Appendix B to the Asset Transfer and Contribution Agreement, as applicable
(an "Arbitration Proceeding"), would have, or would reasonably be expected
to have, a Material Adverse Effect on the Company's Business;
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and (5) the Delinquent Member has not paid the Company the Disputed
Monetary Amount pursuant to Section 14.02 or otherwise, then the Board of
Managers (by vote of a majority of the Representatives of the
Non-Delinquent Member at a special or regular meeting of the Board of
Managers (which majority shall constitute a quorum for purposes of the
transaction of such business)) shall be permitted to cause the Company to
incur an amount of Indebtedness equal to such Additional Required Cash
Amount, which Indebtedness may be borrowed from a third party or the
Non-Delinquent Member.
(b) If the Non-Delinquent Member lends the Company the
Additional Required Cash Amount pursuant to Section 14.01(a), then (i) the
amount actually lent by the Non-Delinquent Member (the "Advanced Amount")
and all accrued interest thereon shall be due and payable on the
Arbitration Payment Due Date (provided that the Company shall be permitted
to prepay the Advanced Amount in whole or in part at any time prior to such
date); and (ii) the Advanced Amount shall bear interest at the Base Rate
from the date on which such advance is made until the date that the
Advanced Amount, together with all interest accrued thereon, is repaid to
the Non-Delinquent Member.
SECTION 14.02. Interim Payment of Disputed Monetary
Amount. In order to reduce the amount of liquidated damages that a
Delinquent Member would be required to pay to the Company pursuant to
Section 14.03 in the event that such Delinquent Member loses in an
Arbitration Proceeding with respect to a Monetary Dispute, the Delinquent
Member shall be permitted to pay the Company the related Disputed Monetary
Amount prior to the commencement of such Arbitration Proceeding. The
Arbitration Tribunal or Sole Arbitrator, as applicable, shall not take into
consideration in determining the liability of the Delinquent Member, a
decision by such Delinquent Member to pay the Disputed Monetary Amount
prior to the commencement of the Arbitration Proceeding.
SECTION 14.03. Liquidated Damages. (a) No Interim Payment
of Disputed Monetary Amount--Delinquent Member is Found Liable for Final
Monetary Amount. If (i) it is finally determined in an Arbitration
Proceeding that a Delinquent Member owes the Company a monetary amount in
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respect of (A) a Disputed Capital Contribution Amount or (B) a Disputed
Indemnification Amount (each such finally determined amount being a "Final
Monetary Amount") and (ii) the Delinquent Member had not paid the Company
the Disputed Monetary Amount prior to the commencement of such Arbitration
Proceeding pursuant to Section 14.02, then the Delinquent Member shall
promptly, and in any event on or before the tenth Business Day following
the date on which the Arbitration Tribunal or Sole Arbitrator makes its
final determination (such tenth Business Day being the "Arbitration Payment
Due Date"), pay to the Company (A) the Final Monetary Amount, together with
interest, accrued from the commencement of the Arbitration Proceeding to
the date that the Delinquent Member pays the Final Monetary Amount to the
Company, on the Final Monetary Amount, at a rate per annum equal to (1)
during the period from the commencement of the Arbitration Proceeding to
the Arbitration Payment Due Date, the Prime Rate and (2) at any time
thereafter, 150% of the Prime Rate, in each case, with daily accrual of
interest, plus (B) an amount equal to 25% of the Final Monetary Amount.
(b) Interim Payment of Disputed Monetary Amount--Delinquent
Member is Found Liable for the Same Amount. If (i) it is finally determined
in an Arbitration Proceeding that a Delinquent Member owes the Company a
Final Monetary Amount, (ii) the Final Monetary Amount is equal to the
Disputed Monetary Amount and (iii) the Delinquent Member had paid the
Company the Disputed Monetary Amount prior to the commencement of such
Arbitration Proceeding pursuant to Section 14.02, then if the Final
Monetary Amount is equal to the Disputed Monetary Amount, the Delinquent
Member shall not owe the Company any other amount in respect of the
Monetary Dispute.
(c) Interim Payment of Disputed Monetary Amount--Delinquent
Member is Found Liable for a Greater Amount. If (i) it is finally
determined in an Arbitration Proceeding that a Delinquent Member owes the
Company a Final Monetary Amount, (ii) the Final Monetary Amount is greater
than the Disputed Monetary Amount and (iii) the Delinquent Member had paid
the Company the Disputed Monetary Amount prior to the commencement of such
Arbitration Proceeding pursuant to Section 14.02, then the Delinquent
Member shall
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promptly, and in any event on or before the Arbitration Payment Due Date,
pay to the Company an amount (an "Additional Monetary Amount") equal to (A)
the Final Monetary Amount less (B) the Disputed Monetary Amount, together
with interest, accrued from the commencement of the Arbitration Proceeding
to the date that the Delinquent Member pays the Additional Monetary Amount
to the Company, on the Additional Monetary Amount, at a rate per annum
equal to (1) during for the period from the commencement of the Arbitration
Proceeding to the Arbitration Payment Due Date, the Prime Rate and (2) at
any time thereafter, 150% of the Prime Rate, in each case, with daily
accrual of interest.
(d) Interim Payment of Disputed Monetary
Amount--Delinquent Member is Found Liable for a Lesser Amount. If (i) it is
finally determined in an Arbitration Proceeding that a Delinquent Member
owes the Company a Final Monetary Amount, (ii) the Final Monetary Amount is
less than the Disputed Monetary Amount and (iii) the Delinquent Member had
paid the Company the Disputed Monetary Amount prior to the commencement of
such Arbitration Proceeding, then the Company shall promptly, and in any
event on or before the Arbitration Payment Due Date, repay to the
Delinquent Member an amount (a "Refundable Amount") equal to (A) the
Disputed Monetary Amount less (B) the Final Monetary Amount, together with
interest, accrued from the commencement of the Arbitration Proceeding to
the date that the Company repays the Refundable Amount to the Delinquent
Member, on the Refundable Amount, at a rate per annum equal to (1) during
the period from the commencement of the Arbitration Proceeding to the
Arbitration Payment Due Date, the Prime Rate and (2) at any time
thereafter, 150% of the Prime Rate, in each case, with daily accrual of
interest.
(e) Interim Payment of Disputed Monetary
Amount--Delinquent Member is Found Not Liable for Disputed Monetary Amount.
If (i) it is finally determined in an Arbitration Proceeding that a
Delinquent Member does not owe the Company the related Disputed Monetary
Amount and (ii) the Delinquent Member had paid the Company the Disputed
Monetary Amount prior to the commencement of such Arbitration Proceeding,
then the Company shall promptly, and in any event on or before the
Arbitration Payment Due Date, repay to the Delinquent Member an amount
equal to the
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Disputed Monetary Amount, together with interest, accrued from the
commencement of the Arbitration Proceeding to the date that the Company
repays the Disputed Monetary Amount to the Delinquent Member, on the
Disputed Monetary Amount, at a rate per annum equal to (A) during the
period from the commencement of the Arbitration Proceeding to the
Arbitration Payment Due Date, the Prime Rate and (B) at any time
thereafter, 150% of the Prime Rate, in each case, with daily accrual of
interest.
SECTION 14.04. Right of Set-Off. Notwithstanding any
provision to the contrary contained in this Agreement, if at the time of a
Distribution Date a Delinquent Member has failed to pay the Company an
amount that it was required pursuant to Section 14.03 to pay to the Company
on or before such Distribution Date, then on such Distribution Date, the
Company shall be permitted to set off from the distribution that it would
otherwise be required to make to such Delinquent Member pursuant to Section
5.01 on such Distribution Date, an amount equal to such unpaid amount. If
the amount of the distribution that such Delinquent Member was otherwise
entitled to receive pursuant to Section 5.01 on such Distribution Date is
less than the aggregate amount that such Delinquent Member owes to the
Company pursuant to Section 14.03, then the Company shall be permitted to
set off from subsequent distributions that it would otherwise make to such
Delinquent Member pursuant to Section 5.01 the remaining unpaid amount
until such time as such remaining unpaid amount shall have been paid in
full. A Delinquent Member's interest in distributions to be made to such
Delinquent Member pursuant to Section 5.01 shall be reduced by any amount
set off by the Company against such distributions pursuant to this Section
14.04(a).
SECTION 14.05. Security Interest. (a) Each Member hereby
agrees that if (i) it has failed to pay the Company an amount that it was
required to pay to the Company pursuant to Section 14.03 on or prior to the
related Arbitration Payment Due Date, and (ii) the Board of Managers (by
vote of a majority of the Representatives of the other Member at a special
or regular meeting of the Board of Managers (which majority shall
constitute a quorum for purposes of the transaction of such business) so
requests, such Member shall (A) on the Business Day next following
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such Arbitration Payment Due Date, grant to the Company, as security for
the performance of its obligation to pay the Company such amount owed (but
for no other amount), a first priority security interest in its Membership
Interests and the proceeds thereof (a "Security Interest"), all under the
Uniform Commercial Code of the State of Delaware and (ii) promptly
thereafter, execute and deliver to the Company all financing statements and
other instruments that the Board of Managers (by vote of a majority of the
Representatives of the other Member at a special or regular meeting of the
Board of Managers (which majority shall constitute a quorum for purposes of
the transaction of such business)) may request to effectuate and carry out
the preceding provisions of this Section 14.05(a). The Company shall be
entitled to all the rights and remedies of a secured party under the
Uniform Commercial Code of the State of Delaware with respect to any
Security Interest granted by such Member. At the option of the Company,
this Agreement or a carbon, photographic, or other copy hereof may serve as
a financing statement with respect to any such Security Interest. For
purposes of perfecting a Security Interest, a Member's Membership Interests
shall be deemed to be a "security" governed by Chapter 8 of the Delaware
Uniform Commercial Code and as such term is therein defined in Section
8-102(c) thereunder.
(b) If the Company incurs Indebtedness pursuant to
Section 14.01 by borrowing from a Non-Delinquent Member, the Company shall
be permitted to assign all its rights with respect to a Security Interest
granted to it pursuant to Section 14.05(a) to such Non-Delinquent Member as
security for such Indebtedness; provided that such Non-Delinquent Member
shall not be permitted to assign such Security Interest to a third party.
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ARTICLE XV
Dissolution and Termination
SECTION 15.01. Dissolution. The Company shall be
dissolved and its business and affairs wound up upon the earliest to occur
of any one of the following events:
(a) the expiration of the Term of the Company;
(b) the sale or other disposition of all or substantially
all the property of the Company;
(c) the written consent of both Members;
(d) the unanimous agreement of all Representatives on the
Board of Managers;
(e) the bankruptcy, involuntary liquidation or
dissolution of either Member; or
(f) the entry of a decree of judicial dissolution
pursuant to Section 18-802 of the Delaware Act.
The bankruptcy, involuntary liquidation of dissolution of a Member shall
cause a Member to cease to be a member of the Company. Notwithstanding the
foregoing, the Company shall not be dissolved and its business and affairs
shall not be wound up upon the occurrence of any event specified in (i)
clause (e) above if within 90 days after the date on which such event
occurs, the remaining Member elects in writing to continue the business of
the Company or (ii) clause (a) above if a Non-Terminating Member purchases
the Membership Interests of the Terminating Member pursuant to its Special
Termination Right. Except as provided in this paragraph and Section
15.01(e), and to the fullest extent permitted by the Delaware Act, the
occurrence of an event that causes a Member to cease to be a member of the
Company shall not cause the Company to be dissolved or its business or
affairs to be wound up, and upon the occurrence of such an event, the
business of the Company shall continue without dissolution.
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SECTION 15.02. Winding Up of Company. Upon dissolution,
the Company's business shall be liquidated in an orderly manner. The Board
of Managers shall act as the liquidating trustee (unless the Board of
Managers elects to appoint a liquidating trustee) to wind up the affairs of
the Company pursuant to this Agreement. In performing its duties, the
liquidating trustee is authorized to sell, distribute, exchange or
otherwise dispose of the assets of the Company in accordance with the
Delaware Act and in any reasonable manner that the liquidating trustee
shall determine to be in the best interest of the Members or their
successors-in-interest.
SECTION 15.03. Distribution of Property. In the event the
Board of Managers determines that it is necessary in connection with the
liquidation of the Company to make a distribution of property in kind, such
property shall be transferred and conveyed to the Members so as to vest in
each of them as a tenant in common an undivided interest in the whole of
such property equal to their interests in the property based upon the
amount of cash that would be distributed to each of the Members in
accordance with Article V if such property were sold for an amount of cash
equal to the fair market value of such property, as determined and approved
by the Board of Managers pursuant to a vote in accordance with Section
8.07(b).
SECTION 15.04. Time Limitation. Any liquidating
distribution pursuant to this Article XV shall be made no later than the
later of (a) the end of the taxable year during which such liquidation
occurs and (b) 90 days after the date of such liquidation.
SECTION 15.05. Termination of Company. The Company shall
terminate when all assets of the Company, after payment of or due provision
for all debts, liabilities and obligations of the Company, shall have been
distributed to the Members in the manner provided for in this Agreement,
and the Certificate of Formation shall have been canceled in the manner
provided by the Delaware Act.
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ARTICLE XVI
Miscellaneous
SECTION 16.01. Notices. Any notice, consent or approval
to be given under this Agreement shall be in writing and shall be deemed to
have been given if delivered: (i) personally by a reputable courier service
that requires a signature upon delivery; (ii) by mailing the same via
registered or certified first-class mail, postage prepaid, return receipt
requested; or (iii) by telecopying the same with receipt confirmation
(followed by a first-class mailing of the same) to the intended recipient.
Any such writing will be deemed to have been given: (a) as of the date of
personal delivery via courier as described above; (b) as of the third
calendar day after depositing the same into the custody of the postal
service as evidenced by the date-stamped receipt issued upon deposit of the
same into the mails as described above; and (c) as of the date and time
electronically transmitted in the case of telecopy delivery as described
above, in each case addressed to the intended party at the address set
forth below:
To the Board of Managers:
Marathon Ashland Petroleum LLC
539 South Main Street
Findlay, Ohio 45840
Attn: General Counsel
Phone: (419) 422-2121
Fax: (419) 421-4115
To Marathon:
Marathon Oil Company
5555 San Felipe
P.O. Box 3128
Houston, TX 77056-2723
Attn: General Counsel
Phone: (713) 296-4137
Fax: (713) 296-4171
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To Ashland:
Ashland Inc.
1000 Ashland Drive
Russell, KY 41169
Attn: General Counsel
Phone: (606) 329-3333
Fax: (606) 329-3823
Any party may designate different addresses or telecopy numbers by notice
to the other parties.
SECTION 16.02. Merger and Entire Agreement. This
Agreement (including the Exhibits, Schedules and Appendices attached
hereto), together with the other Transaction Documents (including the
exhibits, schedules and appendices thereto) and certain other agreements
executed contemporaneously with the Master Formation Agreement constitutes
the entire Agreement of the parties hereto and supersedes any prior
understandings, agreements, or representations by or among the parties
hereto, written or oral, to the extent they relate in any way to the
subject matter hereof.
SECTION 16.03. Assignment. A party hereto shall not
assign all or any of its rights, obligations or benefits under this
Agreement to any third party otherwise than (i) in connection with a
Transfer of its Membership Interests pursuant to Article X, (ii) with the
prior written consent of the other party hereto, which consent may be
withheld in such party's sole discretion, (iii) the granting by a Member of
a Security Interest to the Company pursuant to Section 14.05 or (iv)
pursuant to Article V of the Put/Call, Registration Rights and Standstill
Agreement, and any attempted assignment not in compliance with this Section
16.03 shall be void ab initio.
SECTION 16.04. Parties in Interest. This Agreement shall
inure to the benefit of, and be binding upon, the parties hereto and their
respective successors, legal representatives and permitted assigns.
SECTION 16.05. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed
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an original, but all of which together shall constitute one and the same
instrument.
SECTION 16.06. Amendment; Waiver. This Agreement may not
be amended except in a written instrument signed by each of the parties
hereto and expressly stating it is an amendment to this Agreement. Any
failure or delay on the part of any party hereto in exercising any power or
right hereunder shall not operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power preclude any other or
further exercise thereof or the exercise of any other right or power
hereunder or otherwise available at law or in equity.
SECTION 16.07. Severability. If any term, provision,
covenant, or restriction of this Agreement or the application thereof to
any person or circumstance, at any time or to any extent, is held by a
court of competent jurisdiction or other Governmental Authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement (or the application of such
provision in other jurisdictions or to persons or circumstances other than
those to which it was held invalid or unenforceable) shall in no way be
affected, impaired or invalidated, and to the extent permitted by
Applicable Law, any such term, provision, covenant or restriction shall be
restricted in applicability or reformed to the minimum extent required for
such to be enforceable. This provision shall be interpreted and enforced to
give effect to the original written intent of the parties hereto prior to
the determination of such invalidity or unenforceability.
SECTION 16.08. GOVERNING LAW. THIS AGREEMENT 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. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH SECTION
18-1101 OF THE DELAWARE ACT. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
CLAIM OR PROCEEDING RELATED TO OR ARISING OUT OF THIS AGREEMENT, OR ANY
TRANSACTION OR CONDUCT IN CONNECTION HEREWITH, IS WAIVED.
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SECTION 16.09. Enforcement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties
hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in the Delaware Chancery Court; provided that
if the Delaware Chancery Court does not have jurisdiction with respect to
such matter, the parties hereto shall be entitled to enforce specifically
the terms and provisions of this Agreement in any court of the United
States located in the State of Delaware or in Delaware state court, this
being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of the Delaware Chancery Court in the
event that any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement; provided that if the Delaware
Chancery Court does not have jurisdiction with respect to any such dispute,
such party consents to submit itself to the personal jurisdiction of any
Federal court located in the State of Delaware or any Delaware state court,
(ii) agrees to appoint and maintain an agent in the State of Delaware for
service of legal process, (iii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from
any such court, (iv) agrees that it will not plead or claim in any such
court that any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any such court has been brought in an
inconvenient forum and (v) agrees that it will not initiate any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than (1) the Delaware Chancery Court, or (2)
if the Delaware Chancery Court does not have jurisdiction with respect to
such action, a Federal court sitting in the State of Delaware or a Delaware
state court.
SECTION 16.10. Creditors. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any creditor of the
Company or of any Member.
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SECTION 16.11. No Bill for Accounting. In no event shall
either Member have any right to file a bill for an accounting or any
similar proceeding.
SECTION 16.12. Waiver of Partition. Each Member hereby
waives any right to partition of the Company property.
SECTION 16.13. Table of Contents, Headings and Titles.
The table of contents and section headings of this Agreement and titles
given to Exhibits and Schedules to this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
SECTION 16.14. Use of Certain Terms; Rules of
Construction. As used in this Agreement, the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular paragraph, subparagraph, section,
subsection or other subdivision. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and
verbs shall include the plural and vice versa. Each party hereto agrees
that any rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the
interpretation or construction of this Agreement or any Transaction
Document.
SECTION 16.15. Holidays. Notwithstanding any deadline for
payment, performance, notice or election under this Agreement, if such
deadline falls on a date that is not a Business Day, then the deadline for
such payment, performance, notice or election will be extended to the next
succeeding Business Day.
SECTION 16.16. Third Parties. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any person
and their respective successors, legal representatives and permitted
assigns any rights, remedies or basis for reliance upon, under or by reason
of this Agreement.
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SECTION 16.17. Liability for Affiliates. Except where and
to the extent that a contrary intention otherwise appears, where a Member
undertakes to cause its Affiliates to take or abstain from taking any
action, such undertaking shall mean (i) in the case of any Affiliate that
is controlled by such Member, that such Member shall cause such Affiliate
to take or abstain from taking such action and (ii) in the case of an
Affiliate that controls or is under common control with such Member, that
such Member shall use its commercially reasonable best efforts to cause
such Affiliates to take or abstain from taking such action; provided,
however, that such Member shall not be required to violate, or cause any
director of such Affiliate to violate, any fiduciary duty to minority
shareholders of such Affiliate.
IN WITNESS WHEREOF, this Agreement has been duly executed
by the Members as of the day and year first above written.
MARATHON OIL COMPANY
by /s/ Victor G. Beghini
----------------------------
Name: Victor G. Beghini
Title: President
ASHLAND INC.
by /s/ Paul W. Chellgren
----------------------------
Name: Paul W. Chellgren
Title: Chairman of the Board
and Chief Executive
Officer
[85244.6]
100
Each of the undersigned persons hereby accepts
his rights and authority as a Representative and agrees to perform
and discharge his duties and obligations as a member of the Board
of Managers, in each case until such person's successor as a
Representative is designated or until such person's resignation or
removal as a Representative in accordance with this Agreement.
/s/ Thomas J. Usher /s/ Paul W. Chellgren
------------------------ -------------------------
Name: Thomas J. Usher Name: Paul W. Chellgren
/s/ Victor G. Beghini /s/ J.A. Fred Brothers
----------------------- -------------------------
Name: Victor G. Beghini Name: J. A. Fred Brothers
/s/ John P. Surma
-----------------------
Name: John P. Surma