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Exhibit 10.2
FIRST AMENDED AND RESTATED
LIMITED PARTNERSHIP
AGREEMENT
OF
OXY VINYLS, LP
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ORGANIZED UNDER THE DELAWARE
REVISED UNIFORM LIMITED PARTNERSHIP ACT
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TABLE OF CONTENTS
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SECTION 1 ORGANIZATION MATTERS ..................................... 2
1.1 Continuation of Partnership...................... 2
1.2 Name............................................. 2
1.3 Business Offices................................. 2
1.4 Purpose and Business............................. 2
1.5 Filings.......................................... 2
1.6 Power of Attorney................................ 3
1.7 Term............................................. 3
SECTION 2 CAPITAL CONTRIBUTIONS..................................... 3
2.1 Acquisition of Units............................. 3
2.2 Property Contributions........................... 4
2.3 Other Contributions.............................. 4
2.4 Capital Accounts................................. 5
2.5 No Return of or on Capital....................... 5
2.6 Partner Loans.................................... 5
2.7 Administration and Investment of Funds........... 5
SECTION 3 DISTRIBUTIONS............................................. 5
3.1 Operating Distributions.......................... 5
3.2 Liquidating Distributions........................ 6
3.3 Withholding...................................... 6
3.4 Offset........................................... 6
SECTION 4 BOOK AND TAX ALLOCATIONS.................................. 6
4.1 General Book Allocations......................... 6
4.2 Special Allocations.............................. 6
4.3 Change in Partner's Units........................ 6
4.4 Deficit Capital Account and Nonrecourse Debt
Rules........................................... 7
4.5 Federal Tax Allocations.......................... 8
4.6 Other Tax Allocations............................ 9
4.7 Transaction Costs................................ 9
SECTION 5 ACCOUNTING, FINANCIAL REPORTING AND TAX MATTERS........... 9
5.1 Fiscal Year...................................... 9
5.2 Method of Accounting for Financial Reporting
Purposes........................................ 9
5.3 Books and Records; Right of Partners to
Audit.......................................... 10
5.4 Reports and Financial Statements................ 10
5.5 Method of Accounting for Book and Tax Purposes.. 10
5.6 Taxation........................................ 10
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5.7 Delegation...................................... 13
SECTION 6 MANAGEMENT .............................................. 13
6.1 Partnership Governance Committee................ 13
6.2 Limitations on Authority........................ 14
6.3 Lack of Authority............................... 14
6.4 Composition of Partnership Governance
Committee...................................... 15
6.5 Partnership Governance Committee Meetings....... 16
6.6 Partnership Governance Committee Quorum and
General Voting Requirement..................... 17
6.7 Partnership Governance Committee Unanimous
Voting Requirements............................ 17
6.8 Auxiliary Committees............................ 20
SECTION 7 OFFICERS AND EMPLOYEES................................... 21
7.1 Partnership Officers............................ 21
7.2 Selection and Term of Executive Officers........ 22
7.3 Removal of Executive Officers................... 22
7.4 Duties.......................................... 23
7.5 CEO............................................. 24
7.6 Other Officers.................................. 24
7.7 Secretary....................................... 24
7.8 Salaries........................................ 24
7.9 Delegation...................................... 25
7.10 General Authority............................... 25
SECTION 8 STRATEGIC PLANS, ANNUAL BUDGETS AND LOANS................ 25
8.1 Strategic Plan.................................. 25
8.2 Annual Budget................................... 26
8.3 Funding of Partnership Expenses................. 27
8.4 Implementation of Budgets and Discretionary
Expenditures by CEO............................ 27
8.5 Strategic Plan Deadlock......................... 27
8.6 Loans........................................... 28
SECTION 9 RIGHTS OF PARTNERS....................................... 28
9.1 Delegation and Contracts with Related Parties... 28
9.2 General Authority............................... 29
9.3 Limitation on Fiduciary Duty; Non-Competition;
Right of First Opportunity..................... 29
9.4 Limited Partners................................ 31
9.5 Partner Covenants............................... 31
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9.6 Special Purpose Entities........................ 32
SECTION 10 TRANSFERS AND PLEDGES........................................... 32
10.1 Restrictions on Transfer and Prohibition on
Pledge......................................... 32
10.2 Right of First Option and Right of First
Refusal........................................ 32
10.3 Inclusion of General or Limited Partner
Units.......................................... 34
10.4 Rights of Transferee............................ 34
10.5 Effective Date of Transfer...................... 34
10.6 Transfer to 80%-Owned Affiliate................. 35
10.7 Invalid Transfer................................ 35
SECTION 11 DEFAULT......................................................... 35
11.1 Default......................................... 35
11.2 Remedies for Default............................ 36
11.3 Purchase of Defaulting Partners' Units.......... 36
11.4 Liquidation..................................... 37
11.5 Certain Consequences of Default................. 37
SECTION 12 DISSOLUTION, LIQUIDATION AND TERMINATION........................ 38
12.1 Dissolution and Termination..................... 38
12.2 Procedures Upon Dissolution..................... 38
12.3 Termination of the Partnership.................. 40
12.4 Asset and Liability Statement................... 40
SECTION 13 MISCELLANEOUS 40
13.1 Confidentiality and Use of Information.......... 40
13.2 Indemnification................................. 42
13.3 Third Party Claim Reimbursement................. 44
13.4 Dispute Resolution.............................. 45
13.5 Extent of Limitation of Liability,
Indemnification, Etc........................... 45
13.6 Further Assurances.............................. 45
13.7 Successors and Assigns.......................... 46
13.8 Benefits of Agreement Restricted to the
Parties........................................ 46
13.9 Notices......................................... 46
13.10 Severability ................................... 46
13.11 Construction.................................... 47
13.12 Counterparts.................................... 47
13.13 Waiver of Right to Partition.................... 47
13.14 Governing Law................................... 47
13.15 Expenses........................................ 47
13.16 Payment Terms and Interest Calculations......... 47
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13.17 Usury Savings Clause............................ 48
13.18 Amendment....................................... 48
APPENDICES
Appendix A Defined Terms
Appendix B Partnership Financial Statements and Reports
Appendix C Initial Executive Officers
Appendix D Dispute Resolution Procedures
Appendix E Division of Partnership Business
SCHEDULES
Schedule 2.2 Credits to Partner Capital Accounts
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FIRST AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
OXY VINYLS, LP
This FIRST AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF OXY
VINYLS, LP, dated as of the 1st day of May, 1999, is entered into among
Occidental PVC, LLC, a Delaware limited liability company ("OCC GP"), Occidental
PVC LP, Inc., a Delaware corporation ("OCC LP"), and 1999 PVC Partner Inc., a
Delaware corporation ("Geon LP").
WHEREAS, the definitions of capitalized terms used in this Agreement
are set forth in Appendix A hereto; and
WHEREAS, as contemplated by the Master Transaction Agreement,
Occidental Chemical Corporation ("OCC"), the parent entity of each of OCC GP and
OCC LP, and The Geon Company ("Geon"), the ultimate parent entity of Geon LP,
desired to establish a joint venture in the form of a limited partnership; and
WHEREAS, the Partnership was formed as a Delaware limited partnership
named "Oxy Vinyls, LP" by the filing on April 6, 1999 with the Delaware
Secretary of State of a Certificate of Limited Partnership under and pursuant to
the Act; and
WHEREAS, OCC GP, OCC LP, and GEON LP entered into that certain Limited
Partnership Agreement of the Partnership dated as of April 6, 1999 (the "Initial
Agreement"); and
WHEREAS, in furtherance of the foregoing, OCC GP, OCC LP, and Geon LP
wish to utilize the Partnership to acquire, own and operate the Contributed
Business, the Initial Assets and such other assets and businesses as are
consistent with the purposes of the Partnership; and
WHEREAS, on or before the Closing Date, the Related Agreements relating
to the Partnership and the Contributed Business also will be entered into, all
as set forth in the Master Transaction Agreement; and
WHEREAS, OCC GP, OCC LP, and Geon LP now desire to amend and restate
the Initial Agreement in its entirety to set forth new terms and conditions for
the ownership and management of the Partnership;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto, it is hereby agreed to amend and restate the
Initial Agreement in its entirety as follows:
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SECTION 1
ORGANIZATION MATTERS
--------------------
1.1 CONTINUATION OF PARTNERSHIP. The Partnership is hereby continued as
a limited partnership under the Act. The Partners desire to enter into this
Agreement, which amends and restates the Initial Agreement in its entirety and
constitutes the limited partnership agreement of the Partnership as of the date
hereof. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. Without the need for the consent of
any other Person, upon the execution of this Agreement, (i) OCC GP is hereby
admitted to the Partnership as a general partner of the Partnership and (ii)
each of OCC LP and Geon LP is hereby admitted to the Partnership as a limited
partner of the Partnership. Subject to the terms, conditions and restrictions
set forth in this Agreement, the Partnership shall have the power to exercise
all the powers and privileges granted by this Agreement and by the Act, together
with any powers incidental thereto, so far as such powers and privileges are
necessary and appropriate for the conduct of the business of the Partnership.
1.2 NAME. The name of the Partnership is "Oxy Vinyls, LP." The
Partnership's business shall be conducted under such name or any other name or
names determined by the Partnership Governance Committee. The General Partner
will comply and will cause the Partnership to comply with all applicable laws
and other requirements relating to fictitious or assumed names.
1.3 BUSINESS OFFICES. The principal place of business of the
Partnership shall be located at 5005 LBJ Freeway in Dallas, Texas, or such other
place as the General Partner may from time to time determine. The registered
agent of the Partnership in the State of Delaware is The Prentice-Hall
Corporation System, Inc., 1013 Centre Road, Wilmington, Delaware 19805.
1.4 PURPOSE AND BUSINESS. The purpose of the business of the
Partnership shall be to (i) engage in the Specified Business and (ii) do all
things necessary and appropriate in connection with the ownership, operation or
financing of the foregoing business as are permitted under the Act, including
the acquisition and operation of the Contributed Business.
1.5 FILINGS. The General Partner shall, or shall cause the Partnership
to, execute, swear to, acknowledge, deliver, file or record in public offices
and publish all such certificates, notices, statements or other instruments, and
take all such other actions, as may be required by law for the formation,
reformation, qualification, registration, operation or continuation of the
Partnership in any jurisdiction, to maintain the limited liability of the
Limited Partners, to preserve the Partnership's status as a partnership for tax
purposes or otherwise to comply with applicable law. Upon request of the General
Partner, the Limited Partners shall execute all such certificates and other
documents as may be necessary, in the sole judgment of the General Partner, in
order for the General Partner to accomplish all such executions, swearings,
acknowledgments, deliveries, filings, recordings in public offices, publishings
and other acts. The General Partner hereby agrees and covenants that it will
execute any appropriate amendment to the Certificate of Limited Partnership of
the Partnership
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pursuant to Section 17-204 of the Act to reflect any admission of a Substitute
General Partner in accordance with this Agreement.
1.6 POWER OF ATTORNEY. Each Limited Partner hereby irrevocably makes,
constitutes and appoints the General Partner and any successor thereto permitted
as provided herein, with full power of substitution and resubstitution, as the
true and lawful agent and attorney-in-fact of such Limited Partner, with full
power and authority in the name, place and stead of such Limited Partner to
execute, swear, acknowledge, deliver, file or record in public offices and
publish: (i) all certificates and other instruments (including counterparts
thereof) that the General Partner deems appropriate to reflect any amendment,
change or modification of or supplement to this Agreement in accordance with the
terms of this Agreement; (ii) all certificates and other instruments and all
amendments thereto that the General Partner deems appropriate or necessary to
form, qualify or continue the Partnership in any jurisdiction, to maintain the
limited liability of such Limited Partner, to preserve the Partnership's status
as a partnership for tax purposes or otherwise to comply with applicable law;
and (iii) all conveyances and other instruments or documents that the General
Partner deems appropriate or necessary to reflect the transfers or assignments
of interests in, to or under, this Agreement, including the Units, the
dissolution, liquidation and termination of the Partnership, and the
distribution of assets of the Partnership in connection therewith, pursuant to
the terms of this Agreement.
Each Limited Partner hereby agrees to execute and deliver to the
General Partner within five Business Days after receipt of a written request
therefor such other further statements of interest and holdings, designations,
powers of attorney and other instruments as the General Partner deems necessary
or appropriate to effect the transactions contemplated by this Agreement. The
power of attorney granted herein is hereby declared irrevocable and a power
coupled with an interest, shall survive the bankruptcy, dissolution or
termination of such Limited Partner and shall extend to and be binding upon such
Limited Partner's successors and permitted assigns. Each Limited Partner hereby
(i) agrees to be bound by any representations made by the agent and
attorney-in-fact acting in good faith pursuant to such power of attorney; and
(ii) waives any and all defenses that may be available to contest, negate, or
disaffirm any action of the agent and attorney-in-fact taken in accordance with
such power of attorney.
1.7 TERM. The term for which the Partnership is to exist as a limited
partnership is from the date of first filing of the Partnership's Certificate of
Limited Partnership with the office of the Secretary of State of the State of
Delaware through the dissolution and termination of the Partnership in
accordance with the provisions of Section 12.
SECTION 2
CAPITAL CONTRIBUTIONS
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2.1 ACQUISITION OF UNITS. In exchange for the capital contributions
made pursuant to Section 2.2, each Partner shall be entitled to the following
Units:
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PARTNER UNITS
OCC GP 1
OCC LP 75
Geon LP 24
TOTAL 100
The Units shall entitle the holder to the distributions set forth in Section 3
and to the allocation of Profits, Losses and other items as set forth in Section
4. Units shall not be represented by certificates.
2.2 PROPERTY CONTRIBUTIONS. On the Closing Date, the Partners shall
make the following capital contributions:
(a) OCC. Pursuant to the applicable Asset Contribution Agreement, each
of OCC GP and OCC LP will contribute or cause to be contributed to the
Partnership the Initial Assets contemplated thereby subject to the Assumed
Liabilities contemplated thereby. Thereupon, OCC GP's and OCC LP's respective
Capital Accounts will be credited with the amount set forth on Schedule 2.2.
(b) GEON. Pursuant to the applicable Asset Contribution Agreement, Geon
LP will contribute or cause to be contributed to the Partnership the Initial
Assets contemplated thereby subject to the Assumed Liabilities contemplated
thereby. Thereupon, Geon LP's Capital Account will be credited with the amount
set forth on Schedule 2.2.
The Partners intend that the contribution of assets subject to liabilities
provided for in Sections 2.2(a) and (b) will qualify as a tax-free contribution
under section 721 of the Code in which no Partner will recognize gain or loss.
The Partners agree that the Partnership will so file its tax return, and each
Partner agrees to file its tax return on the same basis and to maintain such
position consistently at all times thereafter.
2.3 OTHER CONTRIBUTIONS. From time to time and subject to the
limitations of Section 6.7, if applicable, the Partnership Governance Committee
(or the CEO acting pursuant to Section 8.3), on behalf of the Partnership, may
issue a written notice ("Funding Notice") to the Partners calling for an
additional capital contribution to the Partnership. Any Funding Notice will set
forth:
(a) the use of funds therefor;
(b) the aggregate amount of the capital contribution required, which
amount shall be apportioned among the Partners Pro Rata; and
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(c) the date by which the capital contribution must be received by the
Partnership, which date will not be earlier than seven Business Days from the
date the Funding Notice is issued.
Each Partner shall timely wire transfer its Pro Rata share of the amount set
forth in the Funding Notice to the Partnership's bank account. Except as
expressly set forth in this Agreement, no Partner shall be permitted or required
to make any additional capital contribution to the Partnership.
2.4 CAPITAL ACCOUNTS. Each Partner's Capital Account shall be
determined and maintained in accordance with Regulation Section
1.704-l(b)(2)(iv). If any Partner transfers all or a portion of its Units in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent such Capital Account relates to
the transferred Units.
2.5 NO RETURN OF OR ON CAPITAL. Except as provided in Sections 3 and 4,
no Partner shall receive any interest or other return on its capital
contributions or on the balance in its Capital Account and no return of its
capital contributions.
2.6 PARTNER LOANS. A Partner or its Affiliates may loan funds to the
Partnership on such terms and conditions as may be approved by the Partnership
Governance Committee and, subject to other applicable law, have the same rights
and obligations with respect thereto as a Person who is neither a Partner nor an
Affiliate of a Partner. The existence of such a relationship and acting in such
a capacity will not result in a Limited Partner's being deemed to be
participating in the control of the business of the Partnership or otherwise
affect the limited liability of a Partner. If a Partner or any Affiliate thereof
is a lender, in exercising its rights as a lender, including making its decision
whether to foreclose on property of the Partnership, such lender will have no
duty to consider (i) its status as a Partner or an Affiliate of a Partner, (ii)
the interests of the Partnership or (iii) any duty it may have to any other
Partner or the Partnership.
2.7 ADMINISTRATION AND INVESTMENT OF FUNDS. The administration and
investment of Partnership funds shall be in accordance with the procedures and
guidelines as shall be adopted by the Partnership Governance Committee. The
Partnership may delegate to a third party (which may be an Affiliate of one of
the Partners) the responsibility for administering and investing Partnership
funds pursuant to such guidelines.
SECTION 3
DISTRIBUTIONS
-------------
3.1 OPERATING DISTRIBUTIONS. Subject to Section 17-607 of the Act and
other applicable law, distributions to the Partners shall be made as provided in
the Strategic Plan. The Partners contemplate that the Strategic Plan will
provide that, except for debt redemption or prepayment goals contained therein,
the Distributable Cash as of the end of each month shall be distributed to the
Partners Pro Rata.
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3.2 LIQUIDATING DISTRIBUTIONS. Distributions to the Partners of cash or
property arising from a liquidation of the Partnership shall be made in
accordance with the Capital Account balances of the Partners as provided in
Section 12.2(d).
3.3 WITHHOLDING. The Partnership is authorized to withhold from
distributions to a Partner and to pay over to the appropriate foreign, federal,
state or local government tax authority any amounts required to be withheld
pursuant to the Code or any provisions of any other foreign, federal, state or
local law. Any amounts so withheld shall be treated as distributed to such
Partner pursuant to this Section 3 for all purposes of this Agreement, and shall
be offset against any amounts otherwise distributable to such Partner.
3.4 OFFSET. Any amount otherwise distributable to a Partner pursuant to
this Section 3 shall be applied by the Partnership to satisfy any of the
following obligations that are owed by such Partner or its Affiliate to the
Partnership and that are not paid when due:
(a) NOTES. In the case of any Partner, the failure to pay any interest
or principal when due on any indebtedness for borrowed money of such Partner or
any Affiliate of such Partner to the Partnership.
(b) ASSET CONTRIBUTION AGREEMENT. In the case of any Partner, the
failure of such Partner or any Affiliate of such Partner to make any payment
pursuant to Section 5 of its Asset Contribution Agreement that has been Finally
Determined to be due.
(c) CONTRIBUTION. In the case of any Partner, the failure to make any
capital contribution required pursuant to Section 2.3 (other than pursuant to
its Asset Contribution Agreement).
SECTION 4
BOOK AND TAX ALLOCATIONS
------------------------
4.1 GENERAL BOOK ALLOCATIONS. Except as otherwise provided in this
Section 4, Profits or Losses each year shall be allocated among the Partners Pro
Rata for book purposes. As used herein and in Section 4.5(a), "book" means the
allocations used to determine debits and credits to the Capital Accounts of the
Partners as set forth in Section 2.5. It does not refer to the method in which
books are maintained for financial reporting purposes pursuant to Section 5.2.
4.2 SPECIAL ALLOCATIONS. Depreciation and other amortization with
respect to each Partnership asset acquired pursuant to Section 6.7(iv) shall be
allocated to each Partner in accordance with its contribution, or obligation to
contribute, to the cost of the underlying asset.
4.3 CHANGE IN PARTNER'S UNITS. If during a year Units are transferred
or new Units issued, allocations among the Partners shall be made in accordance
with their interests in the Partnership from time to time during such year in
accordance with section 706 of the Code, using the closing-of-the-books method,
except that depreciation and other amortization with respect to each Partnership
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asset shall be deemed to accrue ratably on a daily basis over the entire period
during such year that the asset is owned and in service by the Partnership.
4.4 DEFICIT CAPITAL ACCOUNT AND NONRECOURSE DEBT RULES. The special
rules in this Section 4.4 apply in the following order to take into account the
possibility of the Partners' having deficit Capital Account balances for which
they are not economically responsible and the effect of the Partnership's
incurring nonrecourse debt, directly or indirectly.
(a) PARTNERSHIP MINIMUM GAIN CHARGEBACK. If there is a net decrease in
"partnership minimum gain" during any year, determined in accordance with the
tiered partnership rules of Regulation Section 1.704-2(k), each Partner shall
be allocated items of income and gain for such year equal to such Partner's
share of the net decrease in partnership minimum gain within the meaning of
Regulation Sections 1.704-2(g)(2), except to the extent not required by
Regulation Section 1.704-2(f). To the extent that this Section 4.4(a) is
inconsistent with Regulation Section 1.704-2(f) or Section 1.704-2(k) or
incomplete with respect to such regulations, the minimum gain chargeback
provided for herein shall be applied and interpreted in accordance with such
regulations.
(b) PARTNER MINIMUM GAIN CHARGEBACK. If there is a net decrease in
"partner nonrecourse debt minimum gain" during any year, within the meaning of
Regulation Section 1.704-2(i)(2), each Partner who has a share of such gain,
determined in accordance with Regulation Section 1.704-2(i)(5), shall be
allocated items of income and gain for such year (and, if necessary, subsequent
years) equal to such Partner's share of the net decrease in partner nonrecourse
debt minimum gain. To the extent that this Section 4.4(b) is inconsistent with
Regulation Section 1.704-2(i) or Section 1.704-2(k) or incomplete with respect
to such regulations, the partner nonrecourse debt minimum gain chargeback
provided for herein shall be applied and interpreted in accordance with such
regulations.
(c) DEFICIT ACCOUNT CHARGEBACK AND QUALIFIED INCOME OFFSET. If any
Partner has an Adjusted Capital Account Deficit at the end of any year,
including an Adjusted Capital Account Deficit for such Partner caused or
increased by an adjustment, allocation or distribution described in Regulation
Sections 1.704-l(b)(2)(ii)(d)(4), (5) or (6), such Partner shall be allocated
items of income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain) in an amount and manner
sufficient to eliminate such Adjusted Capital Account Deficit as quickly as
possible. This Section 4.4(c) is intended to constitute a "qualified income
offset" pursuant to Regulation Section 1.704-l(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(d) PARTNER NONRECOURSE DEDUCTIONS. Any partner nonrecourse deductions
for any year or other period shall be allocated to the Partner who bears the
economic risk of loss with respect to the partner nonrecourse debt to which such
partner nonrecourse deductions are attributable in accordance with Regulation
Sections 1.704-2(i) or Section 1.704-2(k).
(e) CURATIVE ALLOCATIONS. The Allocations provided by this Section 4.4
may not be consistent with the manner in which the Partners intend to allocate
Profits and Losses. Accordingly, Profits and Losses will be reallocated among
the Partners (in the same year and to the extent
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necessary, in subsequent years) in a manner consistent with Regulation Section
1.704-l(b) and Section 1.704-2 so as to prevent such allocations from distorting
the manner in which Profits and Losses are intended to be allocated among the
Partners pursuant to Sections 4.1, 4.2, and 4.3.
(f) NONRECOURSE DEBT SHARING. For purposes of this Agreement,
nonrecourse deductions, within the meaning of Regulation Section 1.704-2(b),
shall be allocated among the Partners Pro Rata. Solely for purposes of
determining a Partner's proportionate share of the "excess nonrecourse
liabilities" of the Partnership within the meaning of Regulation Section
1.752-3(a)(3), Partnership Profits are allocated to the Partners Pro Rata.
4.5 FEDERAL TAX ALLOCATIONS.
(a) GENERAL RULE. Except as otherwise provided in the following
paragraphs of this Section 4.5, allocations for federal income tax purposes of
items of income, gain, loss and deduction, and credits and basis therefor, shall
be made in the same manner as book allocations are made.
(b) SPECIAL ALLOCATIONS. Except as provided in Section 4.5(c),
depreciation and other amortization with respect to each Partnership asset
acquired pursuant to Section 6.7(iv) shall be allocated to each Partner in
accordance with its contribution to the adjusted tax basis of such asset.
(c) ELIMINATION OF BOOK/TAX DISPARITIES. Taxable income and tax
deductions shall be shared among the Partners so as to take into account the
variation between the Book Value and the adjusted tax basis of each property at
the time it is contributed to the Partnership and at each time it is revalued.
(i) To account for such variation, effective as of the
formation of the Partnership:
(A) the depreciation and other deductions
attributable to the basis that the contributing Partner had in
each property at the time of contribution shall be allocated
to such Partner, and
(B) upon disposition of a contributed property, the
excess of its Book Value at the time of such disposition over
its tax basis at the time of such disposition shall be
allocated to the Partner who contributed the property.
(ii) If the Book Value of a Partnership property is revalued
as of a date subsequent to the date of its acquisition by the
Partnership, the portion of its Book Value at the time of its
disposition that is attributable to the increase resulting from such
revaluation:
(A) shall be disregarded in applying Section
4.5(c)(i)(B) to the Partner who contributed such property, and
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(B) shall be treated for purposes of this Section
4.5(c) as a separate property that was contributed on the
revaluation date by the Persons who were partners immediately
prior to the revaluation date.
(iii) The Partners agree that the foregoing allocations
constitute a reasonable method for purposes of Regulation Section
1.704-3(a)(1) and will be so reported and defended by the Partnership
and all Partners unless and until the Partners otherwise agree or it is
otherwise Finally Determined.
(d) ALLOCATION OF ITEMS AMONG PARTNERS. Each item of income, gain,
loss, deduction and credit and all other items governed by section 702(a) of the
Code shall be allocated among the Partners in proportion to the allocation of
Profits, Losses and other items to such Partners hereunder, PROVIDED that any
gain treated as ordinary income because it is attributable to the recapture of
any depreciation or amortization shall be allocated among the Partners in
accordance with Regulation Section 1.1245-1(e)(2) and Section 1.1250-l(f).
(e) SECTION 754 ELECTION ALLOCATIONS. Income and deductions of the
Partnership that are attributable to the election under section 754 of the Code
shall be allocated to the Partners entitled thereto.
4.6 OTHER TAX ALLOCATIONS. Items of income, gain, loss, deduction,
credit and tax preference for state, local and foreign income tax purposes shall
be allocated among the Partners in a manner consistent with the allocation of
such items for federal income tax purposes in accordance with the foregoing
provisions of this Section.
4.7 TRANSACTION COSTS. If the Partnership is entitled to deductions
with respect to costs described in Section 6.10 of the Master Transaction
Agreement that have been incurred by a Partner and for which that Partner is not
entitled to reimbursement, such deductions shall be allocated to that Partner.
SECTION 5
ACCOUNTING, FINANCIAL REPORTING AND TAX MATTERS
-----------------------------------------------
5.1 FISCAL YEAR. The fiscal year of the Partnership shall be the
calendar year.
5.2 METHOD OF ACCOUNTING FOR FINANCIAL REPORTING PURPOSES. For
financial reporting purposes, the Partnership shall adopt a standard set of
accounting policies and shall maintain separate books of account, all in
accordance with GAAP. The Partnership's financial reports shall comply with
requirements of the SEC to the extent applicable to the Partnership and any
Partner or any controlling Person of such Partner, to the extent such
information is necessary, in conjunction with the financial reporting
obligations of such Person under applicable SEC requirements.
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5.3 BOOKS AND RECORDS; RIGHT OF PARTNERS TO AUDIT.
(a) Proper and complete records and books of account of the
Partnership's business, including all such transactions and other matters as are
usually entered into records and books of account maintained by businesses of
like character or as are required by law, shall be kept by the Partnership at
the Partnership's principal place of business. The Partnership shall maintain
one or more bank accounts in a manner so that the amount of such funds can at
all times be determined.
(b) Each Partner and its internal and independent auditors, at the
expense of such Partner, shall have full and complete access to the internal and
independent auditors of the Partnership and shall have the right to inspect all
books and records and the physical properties of the Partnership during normal
business hours and, at its own expense, to cause an independent audit thereof.
The Partnership shall make all books and records of the Partnership available to
such Partner and its internal and independent auditors in connection with such
audit and shall cooperate with such Partner and auditors and to provide any
assistance reasonably necessary in connection with such audit.
(c) The Partnership will cause an independent audit to be conducted
annually, and the independent auditors for the Partnership shall be Arthur
Andersen L.L.P. unless and until changed by the Partnership Governance
Committee.
5.4 REPORTS AND FINANCIAL STATEMENTS. The Partnership shall prepare and
deliver to the Partners the Partnership financial statements and reports
described on Appendix B as soon as reasonably practicable and in any event on or
prior to the due date indicated on Appendix B.
5.5 METHOD OF ACCOUNTING FOR BOOK AND TAX PURPOSES. For purposes of
making allocations and distributions hereunder (including distributions in
liquidation of the Partnership in accordance with Capital Account balances as
required by Section 12.2), Capital Accounts and Profits and Losses and other
items described in Section 4.1 shall be determined in accordance with federal
income tax accounting principles utilizing the accrual method of accounting,
with the adjustments required by Regulation Section 1.704-l(b) to properly
maintain Capital Accounts.
5.6 TAXATION.
(a) STATUS OF THE PARTNERSHIP. The Partners acknowledge that the
Partnership is a partnership for federal, foreign and state income tax purposes,
and hereby agree not to elect to be excluded from the application of subchapter
K of chapter 1 of subtitle A of the Code or any similar state statute.
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(b) TAX ELECTIONS AND REPORTING.
(i) GENERALLY. The Partnership shall make the following
elections under the Code and the Regulations and any similar state
statutes:
(A) Adopt the calendar year as the annual accounting
period;
(B) Adopt the accrual method of accounting;
(C) Elect to deduct organization costs ratably over a
60-month period as provided in section 709 of the Code;
(D) Adopt the LIFO method of accounting for
inventory;
(E) Elect the most rapid depreciation period and
method available;
(F) Elect to amortize start-up expenditures over a
60-month period under section 195 of the Code;
(G) Apply the recurring items exception under section
461(h)(3)(A)(iii) of the Code to the extent applicable;
(H) Apply ratable accrual of property Taxes under
section 461(c) of the Code; and
(I) Make any other elections available under the Code
that the Partnership Governance Committee determine are
appropriate, with the determination of whether an election is
appropriate to be made pursuant to the principle that each
Partner shall be treated equally (i.e., no Partner will
receive preferential tax treatment to the disadvantage of
another Partner).
(ii) SECTION 754 ELECTION. The Partnership shall, upon the
written request of any Partner benefitted thereby, cause the
Partnership to file an election under section 754 of the Code to adjust
the basis of the Partnership assets under section 734(b) or 743(b) of
the Code, and a corresponding election under the applicable sections of
state and local law.
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(c) TAX RETURNS. The Tax Matters Partner, on behalf of the Partnership,
shall prepare and file the necessary tax and information returns. Each Partner
shall timely provide such information, if any, as may be needed by the
Partnership for purposes of preparing such tax and information returns. At least
90 days before the due date (as extended) for the Partnership's federal income
tax return, the Tax Matters Partner shall deliver a draft of such return to each
Partner. Each Partner shall have 15 days after receipt of the draft in which to
furnish any objections or comments on the draft to the Tax Matters Partner. The
Tax Matters Partner shall use commercially reasonable efforts to finalize the
Partnership's federal income tax return at least 60 days before the due date for
filing (as extended) of such return. A Partner may not report its share of any
Partnership tax item in a manner inconsistent with the Partnership's reporting
of such item unless the Partner has timely furnished its objection to the Tax
Matters Partner as provided in the second preceding sentence. If a Partner
reports its share of any Partnership tax item in a manner inconsistent with the
Partnership's reporting of such item, such Partner shall promptly notify the
Partnership in writing at least 20 Business Days prior to the filing of any
statement with the IRS in which such inconsistent position is reported. The
Partnership shall promptly deliver to each Partner a copy of the federal income
tax return for the Partnership as filed with the appropriate taxing authorities
and a copy of any material state and local income tax return as filed.
(d) TAX AUDITS.
(i) FEDERAL TAX MATTERS. The Partnership is authorized to make
such filings with the IRS as may be required to designate OCC LP in its
capacity as the sole owner of OCC GP as the Tax Matters Partner. The
Tax Matters Partner, as an authorized representative of the
Partnership, shall direct the defense of any claims made by the IRS to
the extent that such claims relate to the adjustment of Partnership
items at the Partnership level. The Tax Matters Partner shall promptly
deliver to each Partner a copy of all notices, communications, reports
or writings of any kind (including any notice of beginning of
administrative proceedings or any report explaining the reasons for a
proposed adjustment) received from the IRS relating to or potentially
resulting in an adjustment of Partnership items, as well as any other
information requested by a Partner that is commercially reasonable to
request. The Tax Matters Partner shall act in good faith in deciding
whether to contest at the administrative and judicial level any
proposed adjustment of a Partnership item and whether to appeal any
adverse judicial decision. The Tax Matters Partner shall keep each
Partner advised of all material developments with respect to any
proposed adjustment that comes to its attention. All costs incurred by
the Tax Matters Partner in performing under this subsection (d) shall
be paid by the Partnership. The Tax Matters Partner shall have sole
authority to represent the Partnership in connection with all tax
audits, including the power to extend the statute of limitations, to
enter in any settlement, and to litigate any proposed partnership
adjustment, subject to the following: (A) No settlement will be entered
into with respect to an item that would materially affect any Partner
adversely unless each Partner is first notified of the terms of the
settlement; and no Partner will be bound by any settlement unless it
consents thereto; (B) If a Partner does not consent to a settlement,
the settlement will nevertheless be binding on all Partners who do
consent; and the non-consenting Partner may, at its sole cost, pursue
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such administrative or judicial remedies as it deems appropriate; (C)
If the Tax Matters Partner brings an action in any court, each Partner,
at its sole cost, shall have the right to intervene in the proceeding
to the extent permitted by the court; and (D) The Tax Matters Partner
shall take any and all actions as may be necessary to cause Geon LP to
become a partner required to be notified pursuant to section 6223 of
the Code or a similar provision under any state law.
(ii) STATE AND LOCAL TAX MATTERS. The Partnership shall
promptly deliver to each Partner a copy of all notices, communications,
reports or writings of any kind with respect to income or similar taxes
received from any state or local taxing authority relating to the
Partnership that might, in the judgment of the Tax Matters Partner,
materially and adversely affect any Partner, and shall keep each
Partner advised of all material developments with respect to any
proposed adjustment of Partnership items that come to its attention.
(iii) CONTINUATION OF RIGHTS. Each Partner shall continue to
have the rights described in this Section 5.6(d) with respect to tax
matters relating to any period during which it was a Partner, whether
or not it is a Partner at the time of the tax audit or contest.
(e) TAX RULINGS. No Person other than the Tax Matters Partner shall
request an administrative ruling (or similar administrative procedures) from any
taxing authority with respect to any tax issue relating to the Partnership or
affecting the taxation of any other Partner unless such Person shall have
received written authorization from the Tax Matters Partner and any such other
Partner to make such request.
(f) TAX INFORMATION. At the request of any Partner, the Tax Matters
Partner shall timely furnish annual earnings and profits computations (as
defined in section 312 of the Code) with respect to that Partner's share of
Partnership income.
5.7 DELEGATION. The Partners agree that all of the tasks to be
performed under this Section (other than serving as Tax Matters Partner) may be
delegated to employees and consultants of the Partnership.
SECTION 6
MANAGEMENT
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6.1 PARTNERSHIP GOVERNANCE COMMITTEE.
(a) The General Partner and Geon LP hereby establish a committee (the
"Partnership Governance Committee") to manage and control the business, property
and affairs of the Partnership, including the determination and implementation
of the Partnership's strategic direction. The Partnership Governance Committee
(on behalf of the Partners) shall have (i) the full authority of the Partners to
exercise all of the powers of the Partnership and (ii) full control over the
business, property and affairs of the Partnership. Except to the extent set
forth in this Agreement, the
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Partnership Governance Committee shall have full, exclusive and complete
discretion to manage and control the business, property and affairs of the
Partnership, to make all decisions affecting the business, property and affairs
of the Partnership and to take all such actions as it deems necessary and
appropriate to accomplish the purpose of the Partnership as set forth in Section
1.4 (as such purpose may be expanded in accordance with Section 6.7(i)).
(b) The Partnership Governance Committee shall act exclusively by means
of Partnership Governance Committee Action. As used in this Agreement,
"Partnership Governance Committee Action" means any action that the Partnership
Governance Committee is authorized and empowered to take in accordance with this
Agreement and the Act and that is taken by the Partnership Governance Committee
either (i) by action taken at a meeting of the Partnership Governance Committee
duly called and held in accordance with this Agreement or (ii) by a formal
written consent complying with the requirements of Section 6.5(f). In no event
shall the Partnership Governance Committee be authorized to act other than by
Partnership Governance Committee Action, and any action or purported action by
the Partnership Governance Committee (including any authorization, consent,
approval, waiver, decision or vote) not constituting a Partnership Governance
Committee Action shall be null and void and of no force and effect. Each
Partnership Governance Committee Action shall be binding on the Partnership.
(c) The Partnership Governance Committee shall adopt policies and
procedures consistent with this Agreement (including Section 6.7) or the Act,
governing financial controls and legal compliance, including delegations of
authority (and limitations thereon) to the officers of the Partnership as
permitted hereby. Such policies and procedures may be revised or revoked (in a
manner consistent with this Agreement and the Act) from time to time as
determined by the Partnership Governance Committee. To the extent any authority
is not delegated to officers of the Partnership in this Agreement or in
accordance with Partnership Governance Committee Action, it shall remain with
the Partnership Governance Committee.
6.2 LIMITATIONS ON AUTHORITY. Except as expressly set forth in this
Agreement, each of the General Partner and Geon LP agrees to exercise its
authority to manage and control the Partnership only through the Partnership
Governance Committee. Each of the General Partner and Geon LP agrees not to
exercise, or purport or attempt to exercise any authority (i) to act for or
incur, create or assume any obligation, liability or responsibility on behalf of
the Partnership or any other Partner, (ii) to execute any documents on behalf
of, or otherwise bind, or purport or attempt to bind, the Partnership or (iii)
to otherwise transact any business in the Partnership's name, in each case
except pursuant to Partnership Governance Committee Action.
6.3 LACK OF AUTHORITY. Except as expressly set forth in this Agreement,
no Person or Persons other than (i) the General Partner and Geon LP, acting
through the Partnership Governance Committee, and (ii) the officers of the
Partnership appointed in accordance with this Agreement and acting as agents or
employees, as applicable, of the Partnership in conformity with this Agreement
and any applicable Partnership Governance Committee Action, shall be authorized
(a) to exercise
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the powers of the Partnership, (b) to manage the business, property and affairs
of the Partnership or (c) to contract for, or incur on behalf of, the
Partnership any debts, liabilities or other obligations.
6.4 COMPOSITION OF PARTNERSHIP GOVERNANCE COMMITTEE.
(a) The Partnership Governance Committee shall consist of six
Representatives, with the General Partner designating three Representatives and
Geon LP designating three Representatives (each a "Representative"). All the
Representatives of both the General Partner and Geon LP shall together
constitute the Partnership Governance Committee.
(b) The General Partner and Geon LP may designate one or more
individuals (each an "Alternate") who (i) shall be authorized, in the event a
Representative is absent from any meeting of the Partnership Governance
Committee (and in the order of succession designated by either the General
Partner or Geon LP, as applicable), to attend such meeting in the place of, and
as substitute for, such Representative and (ii) shall be vested with all the
powers to take action on behalf of either the General Partner or Geon LP, as
applicable, that the absent Representative could have exercised at such meeting.
The term "Representative," when used herein with reference to any Representative
who is absent from a meeting of the Partnership Governance Committee, shall mean
and refer to any Alternate attending such meeting in place of such absent
Representative.
(c) On or before the date hereof, the General Partner and Geon LP shall
have delivered to the other a written notice (i) designating the three persons
to serve as such Partner's initial Representatives and (ii) designating the
person or persons, if any, who are to serve as initial Alternates and their
order of succession.
(d) Each of the General Partner and Geon LP may, in its sole discretion
and by written notice delivered to the other and the Partnership at any time or
from time to time, remove or replace one or more of its Representatives or
change one or more of its Alternates. If a Representative or Alternate dies,
resigns or becomes disabled or incapacitated, the Partner, whether the General
Partner or Geon LP, that designated such Representative or Alternate, as the
case may be, shall promptly designate a replacement. Each Representative and
each Alternate shall serve until replaced by the Partner that designated such
Representative or Alternate, as the case may be.
(e) Copies of all written notices designating Representatives and
Alternates shall be delivered to the Secretary and shall be placed in the
Partnership minute books, but the failure to deliver a copy of any such notice
to the Secretary shall not affect the validity or effectiveness of such notice
or the designation described therein.
(f) Each Representative, in his capacity as such, shall be the agent of
the Partner that designated such Representative. Accordingly, (i) each
Representative, as such, shall act (or refrain from acting) with respect to the
business, property and affairs of the Partnership solely in accordance with the
wishes of the Partner that designated such Representative and (ii) no
Representative, as such, shall owe (or be deemed to owe) any duty (fiduciary or
otherwise) to the Partnership or to any
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Partner other than the Partner that designated such Representative; PROVIDED,
HOWEVER, that nothing in this Agreement is intended to or shall relieve or
discharge any Representative or Partner from liability to the Partnership or the
Partners on account of any fraudulent or intentional misconduct of such
Representative. Nothing in this Section 6.4(f) shall limit the duty owed to the
Partnership by any person acting in his capacity as an officer of the
Partnership (including any such officer who is also a Representative).
(g) Representatives shall not receive from the Partnership any
compensation for their service or any reimbursement of expenses for attendance
at meetings of the Partnership Governance Committee.
6.5 PARTNERSHIP GOVERNANCE COMMITTEE MEETINGS.
(a) Regular but not less often than quarterly meetings of the
Partnership Governance Committee shall be held at such times and at such places
as shall from time to time be determined in advance and committed to a written
schedule by the Partnership Governance Committee. The first regular meeting of
the Partnership Governance Committee during each fiscal year shall be deemed to
be the "Annual Meeting." The Secretary shall deliver by commercial courier
service or other hand delivery or transmit by facsimile transmission (with proof
of confirmation from the transmitting machine), an agenda for each regular
meeting to the Representatives at least five Business Days prior to such
meeting. Each agenda for a regular meeting shall specify, to a reasonable
degree, the business to be transacted at such meeting. Subject to Section 6.6,
at any regular meeting of the Partnership Governance Committee at which a quorum
is present, any and all business of the Partnership may be transacted.
(b) Special meetings of the Partnership Governance Committee may be
called by any Representative by delivering by commercial courier service or
other hand delivery or transmitting by facsimile transmission (with proof of
confirmation from the transmitting machine), written notice of a special meeting
to each of the other Representatives at least two Business Days before such
meeting. Each notice of a special meeting shall specify, to a reasonable degree,
the business to be transacted at, or the purpose of, such meeting. Notice of any
special meeting may be waived before or after the meeting by a written waiver of
notice signed by the Representative entitled to notice. A Representative's
attendance at a special meeting shall constitute a waiver of notice unless the
Representative states at the beginning of the meeting his objection to the
transaction of business because the meeting was not lawfully called or convened.
Special meetings of the Partnership Governance Committee shall be held at the
Partnership's offices (or at such other place or in such other manner as the
Representatives shall agree) at such time as may be stated in the notice of such
meeting.
(c) One Representative of each of the General Partner and Geon LP shall
serve as a co-chair of each meeting (regular and special) of the Partnership
Governance Committee. Either co-chair may instruct the Secretary to include one
or more items on a meeting agenda and neither co-chair nor the Secretary may
delete or exclude an agenda item proposed by the other.
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(d) Following each meeting of the Partnership Governance Committee, the
Secretary shall promptly draft and distribute minutes of such meeting to the
Representatives for approval at the next meeting, and after such approval shall
retain the minutes in the Partnership minute books.
(e) Representatives, at their discretion, may participate in or hold
regular or special meetings of the Partnership Governance Committee by means of
a telephone conference or any at least equally effective device or technology by
which all individuals participating in the meeting may hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting.
(f) Any action required or permitted to be taken at a meeting of the
Partnership Governance Committee may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by at least two
Representatives of each of the General Partner and Geon LP, and such consent
shall have the same force and effect as a duly conducted vote of the Partnership
Governance Committee. A counterpart of each such consent to action shall be
delivered promptly to each of the Representatives and to the Secretary for
placement in the minute books of the Partnership, but the failure to deliver a
counterpart of any such consent to action to the Secretary shall not affect the
validity or effectiveness of such consent to action.
6.6 PARTNERSHIP GOVERNANCE COMMITTEE QUORUM AND GENERAL VOTING
REQUIREMENT.
(a) The presence of at least two Representatives (including any duly
present Alternates) of the General Partner shall constitute a quorum of the
Partnership Governance Committee for the transaction of business and the taking
of appropriate Partnership Governance Committee Actions at any meeting;
PROVIDED, HOWEVER, that the presence at such meeting of at least two
Representatives (including any duly present Alternates) from each of the General
Partner and Geon LP shall be necessary for the taking of any action described in
Section 6.7; and PROVIDED, FURTHER, that no Partnership Governance Committee
Actions can be taken at any meeting with respect to any matter that was not
reflected, with a reasonable level of specificity, on an agenda for such meeting
that was delivered in accordance with Section 6.5 unless at least one
Representative of each of the General Partner and Geon LP is present. No
Partnership Governance Committee Action may be taken at any meeting at which a
quorum is not present.
(b) Except as otherwise provided in Section 6.7 or elsewhere in this
Agreement, the approval of two or more Representatives acting for the General
Partner will be sufficient for the Partnership Governance Committee to take any
Partnership Governance Committee Action and in such case the Partnership shall
be authorized to take such action without the consent of any other Person.
6.7 PARTNERSHIP GOVERNANCE COMMITTEE UNANIMOUS VOTING REQUIREMENTS.
Unless and until two or more Representatives of the General Partner and two or
more Representatives of Geon LP have given their approval (in which event a
Partnership Governance Committee Action is hereby authorized without the need
for the consent of any other Person), no Partnership Governance
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Committee Action will be deemed for any purpose to have been taken at any
Partnership Governance Committee meeting that would cause or permit the
Partnership or any subsidiary thereof (or any Person acting in the name or on
behalf of any of them) directly or indirectly to take (or commit to take), and
neither the Partnership nor any subsidiary thereof nor any person acting in the
name or on behalf of any of them directly or indirectly may take or commit to
take, any of the actions described below (whether in a single transaction or
series of related transactions):
(i) to cause the Partnership, directly or indirectly, to
engage, participate or invest in any business outside the scope of its
business as described in Section 1.4;
(ii) to approve any Strategic Plan, as well as any amendments
or updates thereto (including the annual updates provided for in
Section 8.1);
(iii) except as contemplated by Section 12.2, to authorize any
disposition of assets outside the ordinary course of business having a
fair market value exceeding $50 million in any one transaction or a
series of related transactions not contemplated in an approved
Strategic Plan; PROVIDED, HOWEVER, that no such approval shall be
required in respect of a disposition of assets in excess of such
threshold amount if the CEO, acting through the Partnership Governance
Committee, shall obtain an opinion, in form and substance reasonably
satisfactory to the representatives of both the General Partner and
Geon LP, from a nationally recognized independent professional
appraisal firm with a recognized expertise in process chemical plants,
as to the fairness and adequacy of the consideration received by the
Partnership for such assets, taking into consideration all of the terms
of such disposition; PROVIDED, FURTHER, HOWEVER, that in no event shall
a disposition of assets in excess of such threshold amount be made to
an Affiliate of the General Partner or Geon LP;
(iv) to authorize any acquisition of assets outside the
ordinary course of business or any capital expenditure exceeding $25
million that is not contemplated in an approved Strategic Plan;
PROVIDED, HOWEVER, that, if the Representatives of Geon LP do not
approve an acquisition of assets or a capital expenditure exceeding $25
million that is not contemplated in an approved Strategic Plan or Geon
LP does not agree to pay its Pro Rata share of any additional capital
contribution required to effect such acquisition or capital
expenditure, approval of the Representatives of Geon LP is not required
for the Partnership Governance Committee to authorize such acquisition
or capital expenditure if all amounts for such acquisition or
expenditure that exceed $1 million are paid, directly or indirectly, by
OCC GP and OCC LP, and in such an event, (a) all such amounts paid by
OCC GP and OCC LP shall be deemed additional capital contributions to
the Partnership, and (b) OCC GP and OCC LP shall receive additional
Units to account for such additional capital contributions. The number
of additional Units received by such contributing Partners shall,
immediately after being issued, constitute a percentage of all then
outstanding Units equal to the following, expressed as a percentage:
A/B, where A = the Enterprise Value Increase; and B = the Enterprise
Value Increase plus the Partnership Annual Agreed Value for the year
during which such acquisition or expenditure is made;
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(v) to require capital contributions to the Partnership (other
than contributions contemplated by the Asset Contribution Agreements or
an approved Strategic Plan or to achieve or maintain compliance with
any HSE Law or other law) within any fiscal year (a) if the total of
such contributions required from the Partners within that year would
exceed $10 million or (b) to the extent the aggregate principal amount
of the Partnership's borrowings is less than the Leverage Ceiling;
(vi) to make borrowings under one or more of the Partnership's
bank credit facilities, its uncommitted lines of credit or any credit
facility or debt instrument of the Partnership of any kind that
finances or refinances all or any portion of the Partnership's credit
facilities, or to enter into any capitalized lease or similar
off-balance sheet financing arrangement, at any time, if as a result of
any such borrowing the aggregate principal amount of all such
borrowings outstanding at such time would exceed $575 million (the
"Leverage Ceiling");
(vii) to enter into interest rate protection or other hedging
agreements, including commodity hedging agreements, unless the
transactions resulting from such agreements constitute a "hedge" as
such term is defined in the Financial Accounting Standards Board
Statement of Financial Accounting Standards Number 80 and Number 133
(other than commodity hedging agreements offset by physical positions
arising in the ordinary course of business);
(viii) except as otherwise provided in Section 2.1, to cause
the Partnership or any subsidiary of the Partnership to issue, sell,
redeem or acquire any Units or other equity securities (or any rights
to acquire, or any securities convertible into or exchangeable for,
Units or other equity securities);
(ix) except as contemplated by Section 12.2, to make
Partnership distributions that are not contemplated in (a) an approved
Strategic Plan or (b) Section 1.3(b)(x) of the Master Transaction
Agreement;
(x) to initiate or settle any litigation or governmental
proceedings if the effect thereof could reasonably be expected to be
material to the financial condition of the Partnership;
(xi) to change the Partnership's method of accounting as
adopted pursuant to Section 5.2 or to change the Partnership's method
of accounting as provided in Section 5.5 or to make the elections
referred to in Section 5.6(b)(i)(E);
(xii) to create or change the authority of any Auxiliary
Committee;
(xiii) to merge, consolidate or convert the Partnership or any
subsidiary thereof with or into any other entity (other than a
Wholly-Owned Subsidiary of the Partnership);
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(xiv) to file a petition in bankruptcy or seeking any
reorganization, liquidation or similar relief on behalf of the
Partnership or any subsidiary of the Partnership; or to consent to the
filing of a petition in bankruptcy against the Partnership or any
subsidiary of the Partnership; or to consent to the appointment of a
receiver, custodian, liquidator or trustee for the Partnership or any
subsidiary of the Partnership or for all or any substantial portion of
their respective property;
(xv) to enter into any raw material supply contract with a
term of two years or longer that calls for payments by the Partnership
that exceed $50 million in any fiscal year;
(xvi) except in connection with transactions contemplated by
Section 12.2, to enter into an indemnification agreement whereby the
Partnership agrees (a) to indemnify a Partner, (b) to an
indemnification outside of the ordinary course of business or (c) to an
indemnification for any item that could cause obligations of the
Partnership in excess of $5 million;
(xvii) except in connection with transactions contemplated by
Section 12.2, to authorize prepayments of the loans to the Partnership
guaranteed by Geon pursuant to Section 1.3(b)(x) of the Master
Transaction Agreement; or
(xviii) to approve any loan referred to in Section 1.1(e) of
the Parent Agreement.
6.8 AUXILIARY COMMITTEES.
(a) From time to time, the Partnership Governance Committee may, by
Partnership Governance Committee Action, designate one or more committees
("Auxiliary Committees") or disband any Auxiliary Committee. Each Auxiliary
Committee shall (i) operate under the specific authority delegated to it by the
Partnership Governance Committee (consistent with Section 6.7) for the purpose
of assisting the Partnership Governance Committee in managing (on behalf of the
General Partners) the business, property and affairs of the Partnership and (ii)
report to the Partnership Governance Committee.
(b) Each of the General Partner and Geon LP shall have the right to
appoint an equal number of members on each Auxiliary Committee. Auxiliary
Committee members may (but need not) be members of the Partnership Governance
Committee. No Auxiliary Committee member shall be compensated or reimbursed by
the Partnership for service as a member of such Auxiliary Committee.
(c) Each Partnership Governance Committee Action designating an
Auxiliary Committee shall be in writing and shall set forth (i) the name of such
Auxiliary Committee, (ii) the number of members and (iii) in such detail as the
Partnership Governance Committee deems appropriate, the purposes, powers and
authorities (consistent with Section 6.7) of such Auxiliary Committee; PROVIDED,
HOWEVER, that in no event shall any Auxiliary Committee have any powers or
authority in
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reference to amending this Agreement, adopting an agreement of merger,
consolidation or conversion of the Partnership, authorizing the sale, lease or
exchange of all or substantially all of the property and assets of the
Partnership, authorizing a dissolution of the Partnership or declaring a
distribution. Each Auxiliary Committee shall keep regular minutes of its
meetings and promptly deliver the same to the Partnership Governance Committee.
The members of any Auxiliary Committee, at their discretion, may participate in
or hold regular meetings by means of a telephone conference or any at least
equally effective device or technology by which all individuals participating in
the meeting may hear each other, and participation in such a meeting shall
constitute presence in person at such meeting.
6.9 ENTERPRISE VALUE INCREASE AND PARTNERSHIP ANNUAL AGREED VALUE. The
"Enterprise Value Increase" shall mean, for any acquisition or expenditure, the
Annual Agreed Multiple times the EBITDA Contribution of such acquisition or
expenditure. The "Partnership Annual Agreed Value" of the Partnership shall mean
the enterprise value of the Partnership as agreed upon between the General
Partner and Geon LP, with such value being updated annually in January of each
calendar year and applying for the entire calendar year in which such value is
determined; PROVIDED, HOWEVER, that (i) the Partnership Annual Agreed Value
shall be $2 billion for 1999 and 2000, and (ii) if the General Partner and Geon
LP are unable to agree on a Partnership Annual Agreed Value by January 31 of any
year in which such determination is necessary, then the Partnership Annual
Agreed Value for that year shall be the same as the Partnership Annual Agreed
Value for the immediately preceding year. The setting of the initial Partnership
Annual Agreed Value at $2 billion is solely for the purposes of the calculation
under Section 6.7(iv) and is not intended necessarily to reflect or bear upon
the determination of the Fair Market Value of the Partnership.
SECTION 7
OFFICERS AND EMPLOYEES
----------------------
7.1 PARTNERSHIP OFFICERS.
(a) The Partnership Governance Committee may select natural persons who
are (or upon becoming an officer will be) agents or employees of the Partnership
to be designated as officers of the Partnership, with such titles as the
Partnership Governance Committee shall determine. The Partnership Governance
Committee also shall appoint a Secretary and may appoint such other officers and
assistant officers and agents as may be deemed necessary or desirable and such
persons shall perform such duties in the management of the Partnership as may be
provided in this Agreement or as may be determined by Partnership Governance
Committee Action.
(b) The executive officers of the Partnership shall consist of a Chief
Executive Officer ("CEO"), and others as determined from time to time by
Partnership Governance Committee Action (collectively, the "Executive
Officers").
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(c) The Partnership Governance Committee may leave unfilled any offices
except those of CEO and Secretary. Two or more offices may be held by the same
person, except that the same person may not hold the offices of CEO and
Secretary.
7.2 SELECTION AND TERM OF EXECUTIVE OFFICERS.
(a) The initial Executive Officers are listed on Appendix C.
(b) The CEO shall hold office for a three-year term, subject to the
CEO's earlier death, resignation or removal. Upon the expiration of such term or
earlier death, resignation or removal, OCC GP shall designate the replacement
CEO. The CEO shall not be required to be an employee of the Partnership but
shall be required to devote substantially all of his or her efforts to the
Partnership's business.
(c) Each Executive Officer (other than the CEO) shall hold office until
his or her death, resignation or removal. Upon the death, resignation or removal
of an Executive Officer, or the creation of a new Executive Officer position,
the CEO may nominate a person to fill the vacancy, which shall be subject to
Partnership Governance Committee approval. Executive Officers shall not be
required to be employees of the Partnership. Any Executive Officer also may
serve as an officer or employee of any Partner or Affiliate of a Partner.
7.3 REMOVAL OF EXECUTIVE OFFICERS.
(a) The CEO may be removed (i) at any time, by Partnership Governance
Committee Action taken pursuant to Section 6.6, with or without cause, whenever
in the judgment of the Partnership Governance Committee the best interests of
the Partnership would be served thereby or (ii) by Geon LP, at any time after
twelve months have passed following the delivery of written notice from Geon LP
to the Partnership Governance Committee stating that the CEO should be removed
for cause and setting forth with reasonable specificity the factual bases for
such removal, if the bases for such removal for cause have not been rescinded,
removed or cured (to the reasonable satisfaction of Geon LP) within such twelve
month period.
(b) Any Executive Officer (other than the CEO), or any other officer or
agent may be removed, at any time, by Partnership Governance Committee Action
taken pursuant to Section 6.6, with or without cause, upon the recommendation of
the CEO, whenever in the judgment of the Partnership Governance Committee the
best interests of the Partnership would be served thereby.
(c) Notwithstanding anything to the contrary in Sections 7.3(a) and
7.3(b), either of the General Partner or Geon LP may, by action of two or more
of its Representatives, remove from office any Executive Officer who takes or
causes the Partnership to take any action described in Section 6.7 that has not
been approved by two or more Representatives of the General Partner and two or
more Representatives of Geon LP as contemplated by Section 6.7. Any such removal
shall be effected by delivery by such Representatives of written notice of such
removal (i) to such
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Executive Officer and (ii) to the Representatives of the other Partner; PROVIDED
THAT such removal shall not be effective if such action is rescinded or cured
(to the reasonable satisfaction of the Partner, whether the General Partner or
Geon LP, who has delivered such notice) promptly after such notice is delivered.
7.4 DUTIES.
(a) Each officer or employee of the Partnership shall owe to the
Partnership, but not to any Partner, all such duties (fiduciary or otherwise) as
are imposed upon such an officer or employee of a Delaware corporation. Without
limitation of the foregoing, each officer and employee in any dealings with a
Partner shall have a duty to act in good faith and to deal fairly; PROVIDED,
THAT, no officer shall be liable to the Partnership or to any Partner for his or
her good faith reliance on the provisions of this Agreement. Notwithstanding the
foregoing, it is understood that any officer or employee of the Partnership who
is also a Representative of either the General Partner or Geon LP shall, in his
capacity as a Representative, owe no duty (fiduciary or otherwise) to any Person
other than such Representative's appointing Partner.
(b) The policies and procedures of the Partnership adopted by the
Partnership Governance Committee may set forth the powers and duties of the
officers of the Partnership to the extent not set forth in or inconsistent with
this Agreement. The officers of the Partnership shall have such powers and
duties, except as modified by the Partnership Governance Committee, as generally
pertain to their respective offices in the case of a publicly held Delaware
corporation, as well as other such powers and duties as from time to time may be
conferred by the Partnership Governance Committee and by this Agreement. The CEO
and the other officers and employees of the Partnership shall develop and
implement management and other policies and procedures consistent with this
Agreement and the general policies and procedures established by the Partnership
Governance Committee.
(c) Notwithstanding any other provision of this Agreement, no Partner,
Representative, officer, employee or agent of the Partnership shall have the
power or authority, without specific authorization from the Partnership
Governance Committee, to undertake any of the following:
(i) to do any act which contravenes (or otherwise is inconsistent
with) this Agreement or which would make it impracticable or
impossible to carry on the Partnership's business;
(ii) to confess a judgment against the Partnership;
(iii) to possess Partnership property other than in the ordinary
conduct of the Partnership's business; or
(iv) to take, or cause to be taken, any of the actions described in
Section 6.7.
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7.5 CEO. Subject to the terms of this Agreement, the CEO shall have
general authority and discretion comparable to that of a chief executive officer
of a publicly held Delaware corporation of similar size to direct and control
the business and affairs of the Partnership, including its day-to-day operations
in a manner consistent with the Annual Budget and the most recently approved
Strategic Plan. The Partnership Governance Committee shall establish and
maintain a compensation plan for the CEO and the other key employees of the
Partnership. The level of compensation provided in such plan for the CEO and the
other key employees of the Partnership shall be consistent with levels obtaining
in the industry generally for comparably situated persons, and such plan shall
establish incentive compensation goals intended to reward the CEO and the other
key employees of the Partnership for achievement of the synergies and objectives
set forth in the Strategic Plan. The CEO shall take steps to implement all
orders and resolutions of the Partnership Governance Committee or, as
applicable, any Auxiliary Committee. The CEO shall be authorized to execute and
deliver, in the name and on behalf of the Partnership, (i) contracts or other
instruments authorized by Partnership Governance Committee Action and (ii)
contracts or instruments in the usual and regular course of business (not
otherwise requiring Partnership Governance Committee Action), except in cases
when the execution and delivery thereof shall be expressly delegated by the
Partnership Governance Committee to some other officer or agent of the
Partnership, and, in general, shall perform all duties incident to the office of
CEO as well as such other duties as from time to time may be assigned to him or
her by the Partnership Governance Committee or as are prescribed by this
Agreement.
7.6 OTHER OFFICERS. The President (if any) and the Vice Presidents (if
any) shall perform such duties as may, from time to time, be assigned to them by
the Partnership Governance Committee or by the CEO. In addition, at the request
of the CEO, or in the absence or disability of the CEO, the President (if any)
or any Vice President, in any order determined by the Partnership Governance
Committee, temporarily shall perform all (or if limited through the scope of the
delegation, some of) the duties of the CEO, and, when so acting, shall have all
the powers of, and be subject to all restrictions upon, the CEO.
7.7 SECRETARY. The Secretary shall keep the minutes of all meetings
(and copies of written records of action taken without a meeting) of the
Partnership Governance Committee in minute books provided for such purpose and
shall see that all notices are duly given in accordance with the provisions of
this Agreement. The Secretary shall be the custodian of the records and of the
seal, if any. The Secretary shall have general charge of books and papers of the
Partnership as the Partnership Governance Committee may direct and, in general,
shall perform all duties and exercise all powers incident to the office of
Secretary and such other duties and powers as the Partnership Governance
Committee or the CEO from time to time may assign to or confer upon the
Secretary.
7.8 SALARIES. Salaries or other compensation of the other Executive
Officers of the Partnership shall be established by the CEO consistent with
plans approved by the Partnership Governance Committee. Except as approved by
the Partnership Governance Committee, all fees and compensation of the officers
and employees of the Partnership other than the CEO with respect to their
services as such officers and employees shall be payable solely by the
Partnership and no
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Partner or its Affiliates shall pay (or offer to pay) any such fees or
compensation to any officer or employee, except to the extent that the
Partnership shall have agreed with a Partner or one of its Affiliates pursuant
to a separate agreement that a portion of the compensation of such officer or
employee shall be paid by such Partner or Affiliate.
7.9 DELEGATION. The Partnership Governance Committee may delegate
temporarily the powers and duties of any officer of the Partnership, in case of
absence or for any other reason, to any other officer of the Partnership, and
may authorize the delegation by any officer of the Partnership of any of such
officer's powers and duties to any other officer or employee of the Partnership,
subject to the general supervision of such officer.
7.10 GENERAL AUTHORITY. Persons dealing with the Partnership are
entitled to rely conclusively on the power and authority of each of the officers
as set forth in this Agreement. In no event shall any Person dealing with any
officer with respect to any business or property of the Partnership be obligated
to ascertain that the terms of this Agreement have been complied with, or be
obligated to inquire into the necessity or expedience of any act or action of
the officer; and every contract, agreement, deed, mortgage, security agreement,
promissory note or other instrument or document executed by the officer with
respect to any business or property of the Partnership shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and/or delivery thereof, this Agreement
was in full force and effect, (ii) the instrument or document was duly executed
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership, and (iii) the officer was duly authorized and empowered to
execute and deliver any and every such instrument or document for and on behalf
of the Partnership.
SECTION 8
STRATEGIC PLANS, ANNUAL BUDGETS AND LOANS
-----------------------------------------
8.1 STRATEGIC PLAN.
(a) The Partnership shall be managed in accordance with a five-year
strategic business plan (the "Strategic Plan") that shall be updated annually
under the direction of the CEO and presented for approval by the Partnership
Governance Committee pursuant to Section 6.7 no later than 45 days prior to the
start of the first fiscal year covered by the updated plan.
(b) The Strategic Plan shall establish the strategic direction of the
Partnership, including plans relating to capital maintenance and enhancement,
geographic expansion, acquisitions and dispositions, new product lines,
technology, long-term supply and customer arrangements, internal and external
financing, environmental and legal compliance, and plans, programs and policies
relating to compensation and industrial relations. Subject to Section 3.1, the
Strategic Plan also shall establish the Partnership's policies regarding the
timing and amount of any distributions to the Partners. The Strategic Plan shall
include projected income statements, balance sheets and cash flow statements,
including the expected timing and amounts of capital contributions and cash
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distributions. The format and level of detail of each Strategic Plan shall be
consistent with that of the initial Strategic Plan agreed to by the Partners on
or prior to the Closing Date or the Strategic Plan most recently approved
pursuant to Section 6.7. Except for entering into the Related Agreements, the
Partnership shall not, on other than an arm's length basis, enter into, or waive
any material rights under, any agreement between the Partnership and a Partner
or its Affiliates unless the taking of such action is specifically contemplated
by an approved Strategic Plan.
8.2 ANNUAL BUDGET.
(a) The Executive Officers of the Partnership shall prepare an Annual
Budget (each, an "Annual Budget") for each fiscal year, including an Operating
Budget and Capital Expenditure Budget; PROVIDED that each Annual Budget shall be
consistent with the information for such fiscal year included in the Strategic
Plan most recently approved pursuant to Section 6.7; and PROVIDED, FURTHER, that
unless provided otherwise in the most recently approved Strategic Plan, the
Annual Budget (including any Annual Budget prepared under Section 8.2(b)) shall
utilize a format and provide a level of detail consistent with the Partnership's
initial Annual Budget. The Annual Budget for each year shall be submitted to the
Partnership Governance Committee for approval at least 45 days prior to the
start of the fiscal year covered by such budget. Each Annual Budget shall
incorporate (i) a projected income statement, balance sheet and a cash flow
statement, (ii) the amount of any corresponding cash deficiency or surplus and
(iii) the estimated amount, if any, and expected timing for all required capital
contributions. Each proposed Annual Budget shall be prepared on a basis
consistent with the Partnership's financial statements.
(b) If for any fiscal year the Partnership Governance Committee has
failed to approve an updated Strategic Plan, then, subject to Section 8.5, for
such year and each subsequent year prior to approval of an updated Strategic
Plan, the Executive Officers of the Partnership shall prepare (and promptly
furnish to the Partnership Governance Committee) the Annual Budget consistent
with the projections and other information for that year included in the
Strategic Plan most recently approved pursuant to Section 6.7; PROVIDED,
HOWEVER, that the CEO, acting in good faith, shall be entitled to modify any
such Annual Budget in order to satisfy current contractual and compliance
obligations and to account for other changes in circumstances reflecting the
passage of time, such as general changes in general economic or industry
circumstances, or the occurrence of events beyond the control of the
Partnership, and notwithstanding any other provision of this Agreement, the CEO
shall be authorized to take or cause to be taken, on behalf of the Partnership,
all actions that the CEO determines in good faith are appropriate in order to
satisfy such obligations or respond to such changed circumstances. Except as may
be required above, the CEO shall not be authorized to cause the Partnership to
proceed with discretionary capital expenditures to accomplish capital
enhancement projects, except to the extent that such expenditures would enable
the Partnership to continue or complete any such capital project reflected in
the last Strategic Plan that was approved by the Partnership Governance
Committee pursuant to Section 6.7.
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(c) Each "Operating Budget" shall constitute an estimate for each
applicable period of all operating income, which shall include expenses required
to maintain, repair and restore to good and usable condition the Partnership's
assets.
(d) Each "Capital Expenditure Budget" shall constitute an estimate for
the applicable period of the capital expenditures required to (i) accomplish
capital enhancement projects included in the most recently approved Strategic
Plan, (ii) maintain and preserve the Partnership's assets in good operating
condition and repair and (iii) achieve or maintain compliance with any HSE Law.
8.3 FUNDING OF PARTNERSHIP EXPENSES. All Partnership expenses (both
operating and capital expenses), regardless of whether included in any Strategic
Plan or Annual Budget, shall be funded from operating cash flows or authorized
borrowings under available lines of credit, unless otherwise agreed bythe
Partnership Governance Committee. Subject to the limitations of Sections 2.3 and
6.7(v), if applicable, to the extent that the CEO determines at any time that
funds are needed to fund Partnership operations, the CEO may issue a Funding
Notice to the Limited Partners calling for an additional capital contribution.
8.4 IMPLEMENTATION OF BUDGETS AND DISCRETIONARY EXPENDITURES BY CEO.
(a) After a Strategic Plan and an Annual Budget have been approved by
the Partnership Governance Committee (or an Annual Budget has been developed in
accordance with Section 8.2(b)), the CEO will be authorized, without further
action by the Partnership Governance Committee, to cause the Partnership to make
expenditures consistent with such Strategic Plan and Annual Budget; PROVIDED,
HOWEVER, that all internal control policies and procedures, including those
regarding the required authority for certain expenditures, shall have been
followed.
(b) In any emergency, the CEO or the CEO's designee shall be authorized
to take such actions and to make such expenditures as may be reasonably
necessary to react to the emergency, regardless of whether such expenditures
have been included in an approved Strategic Plan or Annual Budget. Promptly
after learning of an emergency, the CEO or such designee shall notify the
Representatives of the nature of the emergency and the response that has been
made, or is committed or proposed to be made, with respect to the emergency.
8.5 STRATEGIC PLAN DEADLOCK. If, after the fifth anniversary of the
date of this Agreement, the Partnership Governance Committee has not agreed upon
and approved an updated Strategic Plan, as contemplated by Sections 6.7 and 8.1,
within 12 months after the beginning of the first fiscal year that would have
been covered by such plan, then the General Partner and Geon LP shall each
submit their disagreements to non-binding mediation by a Neutral. If the General
Partner and Geon LP are unable to agree upon a mutually acceptable Neutral
within 30 days after a nomination of a Neutral is made by the General Partner or
Geon LP to the other, then such Neutral shall upon the application of either the
General Partner or Geon LP be appointed within 70 days of such nomination by the
Center for Public Resources, or if such appointment is not so made promptly,
then promptly thereafter by the American Arbitration Association in Dallas,
Texas, or if such appointment is not
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so made promptly, then promptly thereafter by the senior United States District
Court judge sitting in Dallas, Texas. The fees of the Neutral shall be paid
equally by the General Partner and Geon LP. Within 20 days of selection of the
Neutral, two persons having decision-making authority on behalf of each the
General Partner and Geon LP shall meet with the Neutral and agree upon
procedures and a schedule for attempting to resolve the differences between the
General Partner and Geon LP. They shall continue to meet thereafter on a regular
basis until (i) agreement is reached by the General Partner and Geon LP (acting
through their Representatives) on an updated Strategic Plan or (ii) at least 24
months have elapsed since the beginning of the first fiscal year on or after the
fifth anniversary of the date of this Agreement that would have been covered by
the updated plan for which agreement was not reached, and the General Partner or
Geon LP shall determine and notify the other and the Neutral in writing (a
"Deadlock Notice") that no agreement resolving the dispute is likely to be
reached. Notwithstanding anything contained in this Agreement to the contrary,
in no event shall the General Partner or Geon LP have the right to commence the
procedures contained in this Section 8.5 until after the fifth anniversary of
the date of this Agreement.
8.6 LOANS.
(a) INITIAL FACILITIES. On the Closing Date, the Partnership shall
enter into the credit agreement provided for in Section 1.3(b)(x) of the Master
Transaction Agreement.
(b) OTHER LOANS. The Partnership Governance Committee may by
Partnership Governance Committee Action authorize the CEO to cause the
Partnership to borrow funds from third party lenders. No Partner shall be
required, and the Partnership Governance Committee shall not be authorized to
require any Partner, to guarantee or to provide other credit or financial
support for any loan. Any Partner may, at its sole discretion, guarantee or
provide other credit or financial support for all or any portion of any debt of
the Partnership, for such period of time and on such other terms as the Partner
shall determine.
SECTION 9
RIGHTS OF PARTNERS
------------------
9.1 DELEGATION AND CONTRACTS WITH RELATED PARTIES.
(a) The Partners acknowledge that the General Partner and Geon LP
(acting through the Partnership Governance Committee) are permitted to delegate
responsibility for day-to-day operations of the Partnership to officers and
employees of the Partnership.
(b) The Related Agreements, and upon receipt of any required approval
by the Partnership Governance Committee (including, as applicable, any approval
required by Section 6.7), all other contracts and transactions between the
Partnership and a Partner or its Affiliates, shall be deemed to be entered into
on an arm's-length basis and to be subject to ordinary contract and commercial
law, without any other duties or rights being implied by reason of the status of
being a Partner or by reason of any provision of this Agreement or the existence
of the Partnership. In the
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case of any contract (including applicable Related Agreements) between the
Partnership and OCC or any Affiliate thereof, Geon LP shall have the right under
all reasonable circumstances, after reasonable prior notice to the General
Partner, to cause the Partnership to exercise all of the Partnership's audit and
similar rights under any such contract, and shall have full access to any audit
or other reports resulting from the exercise of such rights.
9.2 GENERAL AUTHORITY. Persons dealing with the Partnership are
entitled to rely conclusively on the power and authority of each of the General
Partner and Geon LP as set forth in this Agreement. In no event shall any Person
dealing with either the General Partner or Geon LP or such Partners'
representatives with respect to any business or property of the Partnership be
obligated to ascertain that the terms of this Agreement have been complied with,
or be obligated to inquire into the necessity or expedience of any act or action
of the General Partner or Geon LP or such Partners' representatives; and every
contract, agreement, deed, mortgage, security agreement, promissory note or
other instrument or document executed by the General Partner or Geon LP or such
Partners' representatives with respect to any business or property of the
Partnership shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (i) at the time of the execution
and/or delivery thereof, this Agreement was in full force and effect, (ii) the
instrument or document was duly executed in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership, and (iii)
either the General Partner or Geon LP or such Partners' representative was duly
authorized and empowered to execute and deliver any and every such instrument or
document for and on behalf of the Partnership. Nothing in this Section 9.2 shall
be deemed to be a waiver or release of either the General Partner's or Geon LP's
obligations to the other Partners as set forth elsewhere in this Agreement.
9.3 LIMITATION ON FIDUCIARY DUTY; NON-COMPETITION; RIGHT OF FIRST
OPPORTUNITY.
(a) Each Partner (directly or through its Affiliates) is a
sophisticated party possessing extensive knowledge of and experience relating
to, and is actively engaged in, significant businesses in addition to its
Contributed Business, has been represented by legal counsel, is capable of
evaluating and has thoroughly considered the merits, risks and consequences of
the provisions of this Section 9.3 and is agreeing to such provision knowingly
and advisedly. The liability of the General Partner (including any liability of
its Affiliates or its and their respective officers, directors, agents and
employees) or of any Limited Partner (including any liability of its Affiliates
or its and their respective officers, agents, directors and employees), either
to the Partnership or to any other Partner, for any act or omission by such
Partner in its capacity as a partner of the Partnership that is imposed by such
Partner's status as a "general partner" or "limited partner" (as such terms are
used in the Act) of a limited partnership is hereby eliminated, waived and
limited to the fullest extent permitted by law; PROVIDED, HOWEVER, that the
General Partner and Geon LP shall at all times owe to the other a fiduciary duty
in observing the requirement described in Section 6.7 that (except as provided
in Section 6.7(iv)) two or more Representatives of the General Partner and two
or more Representatives of Geon LP shall be required to give their approval
before the Partnership may undertake any of the actions listed in Section 6.7.
Nothing in this Section 9.3(a) shall relieve any Partner from liability
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for any breach of this Agreement, and the General Partner and Geon LP shall at
all times owe to each other a duty to act in good faith with respect to all
matters involving the Partnership.
(b) Except as set forth in Section 9.3(c), each Partner's Affiliates
shall be free to engage in or possess an interest in any other business of any
type, including any business in direct competition with the Partnership, and to
avail itself of any business opportunity available to it without having to offer
the Partnership or any Partner the opportunity to participate in such business.
Except as set forth in Section 9.3(c), it is expressly agreed that the legal
doctrine of "corporate or business opportunities" sometimes applied to a Person
deemed to be subject to fiduciary or other similar duties so as to prevent such
Persons from engaging in or enjoying the benefits of certain additional business
opportunities shall not be applied in the case of any investment, acquisition,
business, activity or operation of any Partner's Affiliates.
(c) (i) If a Partner's Affiliate desires to initiate or pursue an
opportunity to undertake, engage in, acquire or invest in a Related Business by
investing in or acquiring a Person whose business is a Related Business,
acquiring assets of a Related Business, or otherwise engaging in or undertaking
a Related Business (a "Business Opportunity"), such Affiliate (such Affiliate,
together with its Affiliates, being called the "Proposing Person") shall offer
the Partnership the Business Opportunity on the terms set forth in Section
9.3(c)(ii).
(ii) When a Proposing Person offers a Business Opportunity to the
Partnership, the Partnership shall elect to do one of the following within a
reasonably prompt period:
(A) acquire or undertake the Business Opportunity for the benefit
of the Partnership as a whole, at the cost, expense and
benefit of the Partnership; provided, however, that, if the
Partnership ceases to actively pursue such opportunity for any
reason, then the Proposing Person will be entitled to proceed
under clause (B) below; or
(B) permit the Proposing Person to acquire or undertake the
Business Opportunity for its own benefit and account without
any duty to the Partnership or the other Partners with respect
thereto; PROVIDED, HOWEVER, that if the Business Opportunity
is in direct competition with the then existing business of
the Partnership (a "Competing Opportunity"), then the
Proposing Person and the Partnership shall, if either so
elects, promptly seek to negotiate and implement an
arrangement whereby the Partnership would either (i) acquire
or undertake the Competing Opportunity at the sole cost,
expense and benefit of the Proposing Person under a mutually
acceptable arrangement whereby the Competing Opportunity is
treated as a separate business within the Partnership with the
costs, expenses and benefits related thereto being borne and
enjoyed solely by the Proposing Person, or (ii) enter into a
management agreement with the Proposing Person to manage the
Competing Opportunity on behalf of the Proposing Person on
terms and conditions mutually acceptable to the Proposing
Person and the Partnership. If the Partnership and the
Proposing Person do not reach agreement as to such arrangement
within a reasonable period not to
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exceed 30 days, the Proposing Person may acquire or undertake
the Competing Opportunity for its own benefit and account
without any duty to the Partnership or the other Partners with
respect thereto.
(d) Notwithstanding the provisions of Section 9.3(c)(ii), if the
Business Opportunity constitutes less than 25% (based on annual revenues of the
business to be acquired or invested in for the most recently completed fiscal
year) of an acquisition of or investment in assets, activities, operations or
businesses that is not otherwise a Related Business, then a Proposing Person may
acquire or invest in such Business Opportunity without first offering it to the
Partnership; PROVIDED, that, after completion of the acquisition or investment
thereof, such Proposing Person must offer the Business Opportunity to the
Partnership pursuant to the terms of Section 9.3(c)(ii); and if the Partnership
elects option (A) of Section 9.3(c)(ii) with respect thereto, the Business
Opportunity shall be acquired by the Partnership at its fair market value as
mutually agreed or Finally Determined as of the date of such acquisition.
(e) If (i) the Partnership is presented with an opportunity to acquire
or undertake a Business Opportunity that it determines not to acquire or
undertake and (ii) the Representatives of the General Partner or Geon LP, but
not the other, desired that the Partnership acquire or undertake such Business
Opportunity, then the Partnership shall permit such first Partner's Affiliates
to acquire or undertake such Business Opportunity and Section 9.3(c)(ii)(B)
shall be deemed to be applicable thereto to the same extent as if such Partner's
Affiliates were a Proposing Person with respect to such Business Opportunity.
9.4 LIMITED PARTNERS.
(a) Except as expressly set forth in this Agreement, no Limited Partner
shall take part in the management or control of the Partnership's business,
transact any business in the Partnership's name or have the power to sign
documents for or otherwise to bind the Partnership.
(b) Each Limited Partner shall have the rights with respect to the
Partnership's books and records as set forth in Section 5.3.
9.5 PARTNER COVENANTS. Each Partner covenants and agrees with the
Partnership and with the other Partners as follows:
(i) It shall not exercise, or purport or attempt to exercise,
its authority to withdraw, retire, resign, or assert that it has been
expelled from the Partnership;
(ii) It shall not do any act that would make it impossible or
impracticable to carry on the Partnership's business; and
(iii) It shall not act or purport or attempt to act in a
manner inconsistent with any act of the General Partner or Geon LP
acting pursuant to the Partnership Governance
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Committee or in a manner contrary to the agreements of the Partners set
forth in this Agreement;
PROVIDED, THAT, nothing in this Section 9.5 shall be deemed to waive its rights
under Sections 10, 11 or 12.
9.6 SPECIAL PURPOSE ENTITIES. Each Partner covenants and agrees that
(i) its business shall be restricted solely to the holding of its Units and the
doing of things necessary or appropriate in connection therewith (including the
exercise of its rights and powers under this Agreement), and (ii) it shall not
own any assets, incur any liabilities or engage, participate or invest in any
business outside the scope of such business.
SECTION 10
TRANSFERS AND PLEDGES
---------------------
10.1 RESTRICTIONS ON TRANSFER AND PROHIBITION ON PLEDGE. Except
pursuant to Section 11 or the procedures described below in this Section, a
Partner shall not, in any transaction or series of transactions, directly or
indirectly Transfer all or any part of its Units without the consent of the
Other Partner, which consent may be granted or withheld in the Other Partner's
sole discretion. A Partner shall not, in any transaction or series of
transactions, directly or indirectly Pledge all or any part of its Units or its
interest in the Partnership without the consent of the Other Partner, which
consent may be granted or withheld in the Other Partner's sole discretion.
Neither the term "Transfer" nor the term "Pledge," however, shall include an
assignment by a Partner of such Partner's right to receive distributions from
the Partnership so long as such assignment does not purport to assign any right
of such Partner to participate in or manage the affairs of the Partnership, to
receive any information or accounting of the affairs of the Partnership, or to
inspect the books or records of the Partnership or any other right of a Partner
pursuant to this Agreement or the Act. Any attempt by a Partner to Transfer or
Pledge all or a portion of its Units in violation of this Agreement shall be
void AB INITIO and shall not be effective to Transfer or Pledge such Units or
any portion thereof. Subject to any applicable restrictions imposed by the
Parent Agreement, nothing in this Agreement shall prevent the Transfer or
Pledge by the owner thereof of any capital stock, equity ownership interests or
other securities of a Partner or any Affiliate of a Partner, whether such
Transfer or Pledge by such owner is in connection with the merger,
consolidation, conversion, share exchange or Change of Control of such owner or
otherwise.
10.2 RIGHT OF FIRST OPTION AND RIGHT OF FIRST REFUSAL.
(a) Except as provided in Section 10.6, without the consent of the
Partnership Governance Committee, no Partner may Transfer less than all of its
Units, and no Partner may Transfer its Units, directly or indirectly, for
consideration other than cash. Any Limited Partner and, in the case of OCC LP,
OCC GP (together, the "Selling Partners"), that receive a bona fide offer to
purchase all of their Units that the Selling Partners desire to accept (an
"Offer") or that otherwise
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desire to Transfer all of their Units to any Person shall give written notice
(the "Initial Notice") to the Partnership and the other Partners (the "Offeree
Partners") stating that the Selling Partners have received an Offer or otherwise
desire to Transfer their Units and shall set forth the cash purchase price and
all other terms of the Offer or the cash purchase price (established as provided
below) and all other terms on which they are willing to sell their Units (in
each case, the "Offer Terms"). In establishing the Offer Terms for a proposed
sale that does not involve an Offer, the Selling Partners shall obtain an
appraisal from an independent appraiser with a reasonable level of industry
experience of the cash price that a willing buyer under no compulsion to buy
would pay and a willing seller under no compulsion to sell would accept for the
Units of the Selling Partners (the "Appraised Value"). Delivery of an Initial
Notice shall constitute the irrevocable offer of the Selling Partners to sell
their Units to the Offeree Partners hereunder.
(b) The Offeree Partners shall have the option, exercisable by
delivering written notice (the "Acceptance Notice") of such exercise to the
Selling Partners within 60 days of the date of the Initial Notice, to elect to
purchase all, but not less than all, of the Units of the Selling Partners on the
Offer Terms described in the Initial Notice. The Acceptance Notice shall set a
date for closing the purchase, such date to be not less than 30 nor more than 90
days after delivery of the Acceptance Notice; PROVIDED, HOWEVER, that such time
period shall be subject to extension as reasonably necessary (up to a maximum of
an additional 120 days after such 90 day period) in order to comply with any
applicable filing and waiting period requirements under the Hart-Scott-Rodino
Antitrust Improvements Act (or any successor statute) or other Legal
Requirement. The closing shall be held at the Partnership's offices. The
purchase price for the Selling Partners' Units shall be paid in immediately
available funds delivered at the closing, and all actions at the closing shall
conform in all material respects to the Offer Terms.
(c) If the Offeree Partners do not elect to purchase all of the Selling
Partners' Units within 60 days after the receipt of the Initial Notice, the
Selling Partners shall have a further 180 days during which they may, subject to
Section 10.2(d), consummate the sale of their Units (i) substantially in
accordance with the terms of the Offer or (ii) if no Offer is involved, to a
third party purchaser on terms that are not substantially more favorable to such
purchaser than the Offer Terms and at a price equal to not less than 90% of the
Appraised Value of the Units. If the sale is not completed within such further
180-day period, the Initial Notice shall be deemed to have expired and a new
notice and offer shall be required before the Selling Partners may make any
Transfer of their Units. If the Selling Partners receive a written offer during
such further 180-day period from a third party purchaser that is for less than
90% of the Appraised Value, and the Selling Partners are willing to accept the
offer, then (1) the offer shall be treated as an Offer, and (2) the Selling
Partners must comply with the provisions of this Section 10.2 before the Selling
Partners may make any Transfer of their Units to the third party purchaser that
made the Offer.
(d) Notwithstanding the foregoing provisions of this Section 10.2, a
Partner may Transfer its Units only if all of the following occur:
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(i) The proposed transferor is not in default in the timely
performance of any of its material obligations to the Partnership.
(ii) The Transfer is accomplished in a non-public offering in
compliance with, and exempt from, the registration and qualification
requirements of all federal and state securities laws and regulations.
(iii) The Transfer does not cause a default under any material
contract (A) that has been approved unanimously by the Partnership
Governance Committee and (B) to which the Partnership is a party or by
which the Partnership or any of its properties is bound.
(iv) The transferee executes an appropriate agreement to be
bound by this Agreement.
(v) The transferor and transferee bear all reasonable costs
incurred by the Partnership in connection with the Transfer.
(vi) The business and activities of the transferee comply with
Section 9.6.
(vii) The provisions of Section 10.3 are satisfied.
(viii) The parent of the transferee satisfies the criteria set
forth in Section 1.2(d)(vii) of the Parent Agreement and delivers an
agreement to the Parent of the Offeree Partners and to the Partnership,
substantially in the form of the Parent Agreement.
10.3 INCLUSION OF GENERAL OR LIMITED PARTNER UNITS. OCC LP may not
Transfer its Units to any Person (other than in accordance with Section 10.6)
unless the Units of OCC GP are simultaneously transferred to such Person or a
Wholly-Owned Affiliate of such Person. OCC GP may not transfer its Units to any
Person (other than in accordance with Section 10.6) unless the Units of OCC LP
are simultaneously transferred to such Person or a Wholly-Owned Affiliate of
such Person.
10.4 RIGHTS OF TRANSFEREE. Upon consummation of a Transfer in
accordance with Section 10.2, the transferee or transferees shall immediately,
and without any further action of any Person, become (i) a Substitute Limited
Partner if and to the extent Limited Partner Units are transferred and (ii) a
Substitute General Partner, if and to the extent General Partner Units are
transferred.
10.5 EFFECTIVE DATE OF TRANSFER. Each Transfer shall become effective
as of the first day of the calendar month following the calendar month during
which the Partnership Governance Committee approves such Transfer and receives a
copy of the instrument of assignment and all such certificates and documents of
the character described in Section 10.2, which the Partnership Governance
Committee may reasonably request.
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10.6 TRANSFER TO 80%-OWNED AFFILIATE. Without the need for the consent
of any Person (subject to the provisions contained in Section 10.2(d) and this
Section 10.6):
(a) any Partner may Transfer its Units to any 80%-Owned Affiliate of
such Partner. Upon consummation of a Transfer in accordance with this Section
10.6(a), the transferee shall immediately, and without any further action of any
Person, become (i) a Substitute Limited Partner, if and to the extent Limited
Partner Units are transferred, and (ii) a Substitute General Partner, if and to
the extent General Partner Units are transferred; and
(b) OCC LP may, at its option and at any time, Transfer up to 99% of
its Limited Partner Units to OCC GP, whereupon such Limited Partner Units shall,
without any further action, become General Partner Units. Promptly following any
Transfer of Limited Partner Units in accordance with this Section 10.6(b), each
Partner shall take such actions and execute such instruments or documents
(including amendments to this Agreement or supplemental agreements hereto) as
may be reasonably necessary to ensure that OCC GP and OCC LP shall, taken as a
whole and following such Transfer, maintain all of its rights under this
Agreement as in effect immediately prior to such Transfer (including the portion
of any Partnership cash distributable to OCC GP and OCC LP).
10.7 INVALID TRANSFER. No Transfer of Units which is in violation of
this Section 10 shall be valid or effective, and the Partnership shall not
recognize the same for the purposes of making any allocation or distribution.
SECTION 11
DEFAULT
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11.1 DEFAULT.
(a) Each of the following events shall constitute a "Default" and
create the rights provided for in this Section 11 in favor of the Partnership
and the Non-Defaulting Partners against the Defaulting Partners:
(i) the failure by a Partner to make any contribution to the
Partnership as required pursuant to this Agreement (other than pursuant
to the Asset Contribution Agreement), which failure continues for at
least five Business Days from the date that the Partner is notified
such contribution is overdue; or
(ii) the withdrawal, retirement, resignation or dissolution of
a Partner (other than in connection with a Transfer of all of a
Partner's Units in accordance with this Agreement); or the Bankruptcy
of a Partner or its Parent.
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(b) The day upon which the Default commences or occurs (or if the
Default is subject to a cure period and is not timely cured, then the day
following the end of the applicable cure period) shall be the "Default Date."
Without prejudice to a Partner's (or any of its Affiliates') rights to seek
temporary or preliminary judicial relief, prior to any such Default Date all
rights and obligations of the Partners under this Agreement shall remain in full
force and effect.
11.2 REMEDIES FOR DEFAULT. Provided that there shall be no duplication
of remedies, without prejudice to any right to pursue independently and at any
time, including simultaneously, any other remedy it may have under law,
including the right to seek to recover Damages, or equity, the Non-Defaulting
Partners in their sole discretion may elect to pursue the following remedies:
(a) At any time prior to the expiration of 60 days from the Default
Date, each of the Non-Defaulting Partners may elect to purchase its pro rata
share (based on the ratio of the number of Units owned by such Partners to the
number of Units owned by each of the Non-Defaulting Partners electing to
purchase) of the Units of the Defaulting Partners as described in Section 11.3;
PROVIDED, HOWEVER, that within 10 days after the determination of the Fair
Market Value, the Non-Defaulting Partners may withdraw their election, in which
case the Non-Defaulting Partners shall have an additional 30 days from their
determination not to proceed to elect an alternative remedy under Section
11.2(b) below; and
(b) At any time prior to the expiration of 60 days from the Default
Date (or if the Non-Defaulting Partners initially elected to pursue their remedy
under Section 11.2(a) above, then at any time prior to the expiration of the
30-day extension period), the Non-Defaulting Partners may elect to effect a
liquidation of the Partnership under Section 11.4 and thereby cause the
Partnership to dissolve under Section 12.1(iv).
11.3 PURCHASE OF DEFAULTING PARTNERS' UNITS.
(a) Upon any election pursuant to Section 11.2(a), the purchase price
that the Non-Defaulting Partners shall pay, in the aggregate, to the Defaulting
Partners for their Units shall be an amount equal to (i) the amount that the
Defaulting Partners would receive in a liquidation (assuming that any sale under
Section 12.2 were for an amount equal to the Fair Market Value, without giving
effect to any Damages) reduced by (ii) the unrecovered Damages attributable to
the Default by the Defaulting Partners.
(b) If the Non-Defaulting Partners have a right to purchase the Units
of the Defaulting Partners, they may first seek a determination of Fair Market
Value at the sole cost and expense of the Defaulting Partners by delivering
notice in writing to the Defaulting Partners. The Non-Defaulting Partners shall
have 10 days from the final determination of Fair Market Value to elect to
purchase the Defaulting Partner Units by delivering notice of such election in
writing, and the purchase shall be consummated prior to the expiration of 60
days from the date such notice is delivered; PROVIDED that, such time period
shall be subject to extension as reasonably necessary (up to a maximum of an
additional 120 days after such 60 day period) in order to comply with any
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applicable filing and waiting period requirements under the Hart-Scott-Rodino
Antitrust Improvements Act or other Legal Requirement.
(c) The purchase price so determined shall be payable in cash at a
closing held at the Partnership's offices. The purchase shall be consummated by
appropriate and customary documentation (including the giving of representations
and warranties substantially similar to those set forth in Sections 2.1 and 2.2
of the Master Transaction Agreement) as soon as practicable and in any event
within the applicable time period specified in subsection (b).
(d) The Non-Defaulting Partners may assign, in whole or in part, their
right to purchase the Units of the Defaulting Partners to one or more third
parties without the consent of any Partner hereunder.
(e) If Units are transferred in accordance with this Section 11.3,
whether to the Non-Defaulting Partners or a third party, upon the consummation
of such Transfer, each such transferee shall immediately, and without any
further action on the part of any Person, become (i) a Substitute Limited
Partner of the Defaulting Partner if and to the extent that Limited Partner
Units were transferred to such Person and (ii) a Substitute General Partner of
the Defaulting Partner if and to the extent that General Partner Units were
transferred to such Person.
11.4 LIQUIDATION. Upon any election pursuant to Section 11.2(b), the
Non-Defaulting Partners shall have the right to elect to dissolve and liquidate
the Partnership pursuant to the procedures in Section 12.1(iv) (such procedures
constituting a "Liquidation"); PROVIDED, HOWEVER, that any amount payable to the
Defaulting Partners in such Liquidation pursuant to Section 12.2 shall be
reduced by, without duplication, any unrecovered Damages incurred by the
Non-Defaulting Partner and the Non-Defaulting Partners' Percentage Interest of
any unrecovered Damages incurred by the Partnership in connection with the
Default. The Non-Defaulting Partners shall deliver notice of such election to
dissolve and liquidate in writing to the Partnership and the Defaulting
Partners.
11.5 CERTAIN CONSEQUENCES OF DEFAULT. Notwithstanding any other
provision of this Agreement, commencing on the Default Date and (i) prior to the
Non-Defaulting Partners' collection of Damages through the exercise of its legal
remedies or otherwise, or (ii) while the Non-Defaulting Partners are pursuing
their remedies under Section 11.2(a) or (b), the Representatives of the
Defaulting General Partner shall not have any voting or decisional rights with
respect to matters requiring Partnership Governance Committee Action, and such
matters shall be determined solely by the Representatives of the Non-Defaulting
General Partner; PROVIDED, HOWEVER, that the foregoing loss of voting and
decisional rights shall not occur as a result of a Default caused solely by the
Bankruptcy of a Partner or a Parent described in Section 11.1(a)(ii); and
PROVIDED FURTHER, that in the case of a Default under Section 11.1(a)(i), the
foregoing loss of voting and decisional rights shall not apply to those voting
and decisional rights contained in Sections 6.7(i), (viii), (xi) or (xiii) of
this Agreement, which rights shall continue in full force and effect at all
times.
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SECTION 12
DISSOLUTION, LIQUIDATION AND TERMINATION
----------------------------------------
12.1 DISSOLUTION AND TERMINATION. As long as Geon LP is willing then to
convert its Units to General Partner Units and thereafter serve as the General
Partner (who is hereby authorized in such event to so convert its Units and to
conduct the business of the Partnership without dissolution), the withdrawal,
retirement, resignation, dissolution or Bankruptcy of the General Partner shall
not dissolve the Partnership, but rather shall be a Default covered by Section
11. The Partnership shall be dissolved upon the happening of any one of the
following events:
(i) the written determination of both the General Partner and
Geon LP to dissolve the Partnership;
(ii) the entry of a judicial decree of dissolution;
(iii) any other act or event that results in the dissolution
of a limited partnership under the Act (except as provided in the first
sentence of this Section 12.1);
(iv) the election of the Non-Defaulting Partners to effect a
dissolution of the Partnership under Section 11.4; or
(v) after the delivery of a Deadlock Notice by either the
General Partner or Geon LP pursuant to Section 8.5, the written
determination by either the General Partner or Geon LP to dissolve the
Partnership.
12.2 PROCEDURES UPON DISSOLUTION.
(a) GENERAL. If the Partnership dissolves, it shall commence winding-up
pursuant to the appropriate provisions of the Act and the procedures set forth
in this Section 12. Notwithstanding the dissolution of the Partnership, prior to
the termination of the Partnership, the business of the Partnership and the
affairs of the Partners, as such, shall continue to be governed by this
Agreement.
(b) CONTROL OF WINDING-UP. The winding up of the Partnership shall be
conducted under the direction of the Partnership Governance Committee; PROVIDED,
HOWEVER, that (i) if OCC GP and OCC LP are then Defaulting Partners and Geon LP
is a Non-Defaulting Partner, such winding-up shall be conducted under the
direction of Geon LP, and (ii) if the dissolution is caused by entry of a decree
of judicial dissolution, the winding-up shall be carried out in accordance with
such decree. The term "Liquidator" shall mean the Person or committee conducting
such winding-up of the Partnership.
(c) MANNER OF WINDING-UP. Unless the provisions of Section 12.2(e)
apply, the Liquidator shall cause the Partnership to attempt to sell all
Partnership properties and apply the
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proceeds therefrom in accordance with this Section 12.2(c) and Section 12.2(d).
Upon dissolution of the Partnership and subject to Section 12.2(f), the
Liquidator shall determine the time, manner and terms of any sale or sales of
Partnership property pursuant to such winding-up, consistent with its duties and
having due regard to the activity and condition of the relevant market and
general financial and economic conditions. Except as otherwise agreed by the
Partners, no distributions will be made in kind to any Partner without the
consent of each Partner.
(d) APPLICATION OF ASSETS. In the case of a dissolution and winding-up
of the Partnership, the Partnership's assets shall be applied as follows:
(i) First, to satisfaction of the liabilities of the
Partnership owing to creditors (including Partners and Affiliates of
the Partners who are creditors), whether by payment or reasonable
provision for payment. Any reserves created to make any such provision
for payment may be paid over by the Partnership to an independent
escrow holder or trustee, to be held in escrow or trust for the purpose
of paying any such contingent, conditional or unmatured liabilities or
obligations, and, at the expiration of such period as the Liquidator
may deem advisable, such reserves shall be distributed to the Partners
or their assigns in the manner set forth in Section 12.2(d)(ii) below.
(ii) Second, after all allocations of Profits or Losses and
other items pursuant to Section 4, to the Partners in accordance with
the balances in their Capital Accounts.
(iii) Notwithstanding the foregoing, if any Partner shall be
indebted to the Partnership, then until payment in full of the
principal of and accrued but unpaid interest on such indebtedness,
regardless of the stated maturity or maturities thereof, the
Partnership shall retain such Partner's distributive share of
Partnership property and apply such sums to the liquidation of such
indebtedness and the cost of operation of such Partnership property
during the period of such liquidation.
(e) DIVISION OF ASSETS UPON DEADLOCK. If dissolution occurs pursuant to
Section 12.1(v), then the provisions of this Section 12.2(e) shall, if elected
by any Partner, apply in lieu of the provisions of Section 12.2(c), but subject
to the provisions of Section 12.2(d)(ii). In such event, the Partnership
properties shall be divided and distributed in kind to the Partners in
accordance with the provisions of Appendix E.
(f) SUPPLY AGREEMENTS. In connection with a sale of Partnership
properties pursuant to Section 12.2(c), the Liquidator shall, at its option,
either (i) if a single purchaser acquires all or substantially all of such
properties, cause such purchaser to assume and agree to perform under all the
Supply Agreements, or if such properties are sold to more than one purchaser,
cause such purchasers (on a several basis) in the aggregate to assume and agree
to perform under all the Supply Agreements, with the benefits, duties and
obligations under the Supply Agreements being allocated among such purchasers as
deemed appropriate by the Liquidator, or (ii) cause the Supply Agreements to be
terminated prior to the sale of such properties with the purchaser or purchasers
of
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such properties not assuming the Supply Agreements, and prior to any
distribution of the Partnership's assets in connection with the dissolution and
winding-up of the Partnership, cause the Partnership to pay Geon LP in cash an
amount equal to the remaining value of the Supply Agreements (to the parties
thereto other than the Partnership) as of the date of the termination of the
Supply Agreements, assuming the extension of the Supply Agreements beyond their
respective initial terms pursuant to Geon's two five-year renewal options. The
Partners agree that any dispute regarding the value of the Supply Agreements
shall be resolved pursuant to the Dispute Procedures.
12.3 TERMINATION OF THE PARTNERSHIP. Upon the completion of the
liquidation of the Partnership and the distribution of all Partnership assets,
the Partnership's affairs shall terminate and the Partnership shall cause to be
executed and filed a Certificate of Cancellation of the Partnership's
Certificate of Limited Partnership pursuant to the Act, as well as any and all
other documents required to effectuate the termination of the Partnership.
12.4 ASSET AND LIABILITY STATEMENT. Within a reasonable time following
the completion of the winding-up and liquidation of the Partnership's business,
the Liquidator shall supply to each of the Partners a statement (which may be
unaudited) which shall set forth the assets and the liabilities of the
Partnership as of the date of complete liquidation, and each Partner's pro rata
portion of distributions pursuant to Section 12.2.
SECTION 13
MISCELLANEOUS
-------------
13.1 CONFIDENTIALITY AND USE OF INFORMATION.
(a) Except as provided in Section 13.1(c) or (d), each Partner shall,
and shall cause each of its Affiliates and its and their respective partners,
shareholders, directors, officers, employees and agents (collectively, "Related
Persons") to, keep secret, retain in strictest confidence, and not distribute,
disseminate or disclose any and all Confidential Information except to (i) the
Partnership and its officers and employees, (ii) any lender to the Partnership
or (iii) any Partner or any of their respective Affiliates or other Related
Persons on a "need to know" basis in connection with the transactions leading up
to and contemplated by this Agreement and the operation of the Partnership, and
such Partner disclosing Confidential Information pursuant to this Section
13.1(a) shall use, and shall cause its Affiliates and other Related Persons to
use, such Confidential Information only for the benefit of the Partnership in
conducting the Partnership's business or for any other specific purposes for
which it was disclosed to such Person; PROVIDED THAT the disclosure of financial
statements of, or other information relating to the Partnership shall not be
deemed to be the disclosure of Confidential Information (y) to the extent that
any Partner (or its ultimate parent entity) deems it necessary, appropriate or
customary pursuant to law, regulation or stock exchange rule (in the reasonable
good faith judgment of such parent entity) to disclose such information in or in
connection with filings with the SEC, press releases disseminated to the
financial community, presentations to lenders, presentations to ratings agencies
or information disclosed to similar
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audiences or (z) to the extent that in order to sustain a position taken for tax
purposes, any Partner deems it necessary and appropriate to disclose such
financial statements or other information. All Confidential Information
disclosed in connection with the Partnership or pursuant to this Agreement shall
remain the property of the Person whose property it was prior to such disclosure
unless such property has been transferred to the Partnership pursuant to an
Asset Contribution Agreement.
(b) No Confidential Information regarding the plans or operations of
any Partner or any Affiliate thereof received or acquired by or disclosed to any
unaffiliated Partner or Affiliate thereof in the course of the conduct of
Partnership business, or otherwise as a result of the existence of the
Partnership, may be used by such unaffiliated Partner or Affiliate thereof for
any purpose other than for the benefit of the Partnership in conducting the
Partnership Business. The Partnership and each Partner shall have the
affirmative obligation to take all necessary steps to prevent the disclosure to
any Partner or Affiliate thereof of information regarding the plans or
operations of such Partner and its Affiliates in markets and areas unrelated to
the business of the Partnership in which any other Partner or its respective
Affiliate competes.
(c) In the event that any Partner is legally required (by
interrogatories, discovery requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any Confidential
Information, it is agreed that such Partner prior to disclosure will provide the
Partnership Governance Committee with prompt notice of such request(s) so that
the Partnership Governance Committee may seek an appropriate protective order or
other appropriate remedy and/or waive the Partner's compliance with the
provisions of this Section. In the event that such protective order or other
remedy is not obtained, or that the Partnership Governance Committee grants a
waiver hereunder, such Partner may furnish that portion (and only that portion)
of the Confidential Information that, in the opinion of the Partner's counsel,
the Partner is legally compelled to disclose, and the Partner will exercise its
commercially reasonable best efforts to obtain reliable assurance that
confidential treatment will be accorded any Confidential Information so
furnished.
(d) Any Partner may disclose Confidential Information to a third party
who requires such Confidential Information for the purpose of evaluating a
possible purchase of such Partner's Units in accordance with Section 10;
PROVIDED, HOWEVER, that such third party shall be informed by such Partner of
the confidential nature of the information and the existence of this Section
13.1 and prior to any disclosure shall execute a written confidentiality
agreement with such Partner substantially identical in scope to this Section and
providing that such confidentiality agreement is also made for the benefit of
the Partnership and each of the other Partners.
(e) The Partners and their Affiliates shall consult with each other on
an ongoing basis with respect to disclosures regarding the Partnership and its
business and affairs permitted under Section 13.1(a)(y).
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13.2 INDEMNIFICATION.
(a) INDEMNIFICATION BY PARTNERSHIP. The Partnership agrees, to the
fullest extent permitted by applicable law, to indemnify, defend and hold
harmless each Partner, its Affiliates and their respective officers, directors
and employees from, against and in respect of any Liability which such
Indemnified Party may sustain, incur or assume as a result of, or relative to, a
Third Party Claim arising out of or in connection with the business, property or
affairs of the Partnership, except to the extent that it is Finally Determined
that such Third Party Claim arose out of or was related to actions or omissions
of the indemnified Partner, its Affiliates or any of their respective officers,
directors or employees (acting in their capacities as such) constituting a
breach of this Agreement or any Related Agreement. The Partnership shall
periodically reimburse or advance to any Person entitled to indemnity under this
Section 13.2(a) its legal and other expenses incurred in connection with
defending any claim with respect to such Liability if such Person shall agree to
reimburse promptly the Partnership for such amounts if it is finally determined
that such Person was not entitled to indemnity hereunder. Nothing in this
Section 13.2(a) is intended to, nor shall it, affect or take precedence over the
indemnity provisions contained in any Related Agreement.
(b) PARTNER'S RIGHT OF INDEMNIFICATION. Each Partner hereby agrees, to
the fullest extent permitted by law, to indemnify, defend and hold harmless the
other Partners, their Affiliates and their respective officers, directors and
employees from and against the indemnifying Partner's Percentage Interest
(calculated at the time any such Liability was incurred) of any Liability that
such Indemnified Party may sustain, incur or assume as a result of or relating
to any Third Party Claim arising out of or in connection with the business,
property or affairs of the Partnership; PROVIDED, HOWEVER, that such indemnified
Partner, its Affiliates and their respective officers, directors and employees
shall not be entitled to indemnity under this Section 13.2(b) to the extent that
it is Finally Determined that such Third Party Claim arose out of or was related
to actions or omissions of the indemnified Partner, its Affiliates or any of
their respective officers, directors or employees (acting in their capacities as
such) constituting a breach of this Agreement or any Related Agreement;
PROVIDED, FURTHER, that such indemnified Partner, its Affiliates and their
respective officers, directors and employees shall not be entitled to indemnity
under this Section 13.2(b) unless (i) the indemnified Partner shall first make a
written demand for indemnification from the Partnership in accordance with
Sections 13.2(a) and (c) and the Partnership shall fail to satisfy such demand
in a manner reasonably satisfactory to the indemnified Partner within 60 days of
such notice or (ii) the Partnership is insolvent or otherwise unable to satisfy
its obligations. The indemnifying Partner shall periodically reimburse any
Person entitled to indemnity under this Section 13.2(b) for its legal and other
expenses incurred in connection with defending any claim with respect to such
Liability if such Person shall agree to reimburse promptly the indemnifying
Partner for such amounts if it is Finally Determined that such Person was not
entitled to indemnity hereunder.
(c) PROCEDURES. Promptly after receipt by a Person entitled to
indemnification under subsection (a) or (b) (an "Indemnified Party") of notice
of any pending or threatened claim against it (a "Claim"), such Indemnified
Party shall give prompt written notice (including copies of all papers served
with respect to such claim) to the Person to whom the Indemnified Party is
entitled
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to look for indemnification (the "Indemnifying Party") of the commencement
thereof, which notice shall describe in reasonable detail the nature of the
Third Party Claim, an estimate of the amount of damages attributable to the
Third Party Claim to the extent feasible and the basis of the Indemnified
Party's request for indemnification under this Agreement; PROVIDED that the
failure to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of any liability that it may have to any Indemnified Party except to the
extent the Indemnifying Party demonstrates that it is prejudiced thereby. In
case any Claim that is subject to indemnification under Section 13.2(a) shall be
brought against an Indemnified Party and it shall give notice to the
Indemnifying Party of the commencement thereof, the Indemnifying Party may, and
at the request of the Indemnified Party shall, participate in and control the
defense of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Party unless (i) the employment thereof has been
specifically authorized in writing by the Indemnifying Party, (ii) the
Indemnifying Party failed to assume the defense and employ counsel or failed to
diligently prosecute or settle the Third Party Claim or (iii) there shall exist
or develop a conflict that would ethically prohibit counsel to the Indemnifying
Party from representing the Indemnified Party. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the Indemnifying Party and
its counsel in contesting any Third Party Claim that the Indemnifying Party
elects to contest, including by making any counterclaim against the Person
asserting the Third Party Claim or any cross-complaint against any Person, in
each case only if and to the extent that any such counterclaim or
cross-complaint arises from the same actions or facts giving rise to the Third
Party Claim. The Indemnifying Party shall be the sole judge of the acceptability
of any compromise or settlement of any claim, litigation or proceeding in
respect of which indemnity may be sought hereunder, PROVIDED that the
Indemnifying Party will give the Indemnified Party reasonable prior written
notice of any such proposed settlement or compromise and will not consent to the
entry of any judgment or enter into any settlement with respect to any Third
Party Claim without the prior written consent of the Indemnified Party, which
shall not be unreasonably withheld. The Indemnifying Party (if the Indemnified
Party is entitled to indemnification hereunder) shall reimburse the Indemnified
Party for its reasonable out of pocket costs incurred with respect to such
cooperation.
If the Indemnifying Party fails to assume the defense of a Third Party
Claim within a reasonable period after receipt of written notice pursuant to the
first sentence of this Section 13.2(c), or if the Indemnifying Party assumes the
defense of the Indemnified Party pursuant to this Section 13.2(c) but fails
diligently to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings; PROVIDED that the Indemnified Party shall not
settle such Third Party Claim without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. The Indemnifying Party
may participate in, but not control, any defense or
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settlement controlled by the Indemnified Party pursuant to this Section, and the
Indemnifying Party shall bear its own costs and expenses with respect to such
participation.
Notwithstanding the other provisions of this Section 13.2, if the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 13.2 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
13.2 or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of the litigation concerning such
dispute. If a dispute over potential liability is resolved in favor of the
Indemnified Party, the Indemnifying Party shall reimburse the Indemnified Party
in full for all costs of the litigation concerning such dispute.
After it has been mutually agreed or Finally Determined that an
Indemnifying Party is liable to the Indemnified Party under this Section
13.2(c), the Indemnifying Party shall pay or cause to be paid to the Indemnified
Party the amount of the Liability within ten Business Days of receipt by the
Indemnifying Party of a notice reasonably itemizing the amount of the Liability
but only to the extent actually paid or suffered by the Indemnified Party.
(d) SURVIVAL. The indemnities contained in this Section shall survive
the termination and liquidation of the Partnership.
(e) SUBROGATION. In the event of any payment by or on behalf of an
Indemnifying Party to an Indemnified Party in connection with any Liability, the
Indemnifying Party (or any guarantor who made such payment) shall be subrogated
to and shall stand in the place of the Indemnified Party as to any events or
circumstances in respect of which the Indemnified Party may have any right or
claim against any third party (not including the Partnership) relating to such
event or indemnification, but only to the extent of any such payments. The
Indemnified Party shall cooperate with the Indemnifying Party (or such
guarantor) in any reasonable manner in prosecuting any subrogated claim.
(f) NO LIMITATION. Nothing in this Agreement shall be deemed to (i)
limit the Partnership's power to indemnify its officers, employees, agents or
any other Person, to the fullest extent permitted by law, or (ii) limit the
Partnership's indemnity obligations to the Partners under the Act.
13.3 THIRD PARTY CLAIM REIMBURSEMENT.
(a) In the case of a Liability relating to a Third Party Claim and
caused by the Fault of either the General Partner or Geon LP, its Affiliates or
any of their respective officers, directors or employees (acting in their
capacities as such) against whom reimbursement is being sought, such Partner,
whether the General Partner or Geon LP, hereby agrees to reimburse the
Partnership for such Liability to the extent that:
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(i) the Liability relates to a Third Party Claim that has been
finally resolved and that the Partnership has actually paid (an
"Expense");
(ii) the Expense is not covered by insurance proceeds actually
received by the Partnership under policies of a nature such that future
premium rates thereunder will not be increased by claim experience
relating to such Liability; PROVIDED that, if the Partnership is
reimbursed by either the General Partner or Geon LP pursuant to this
Section 13.3(a) and subsequently receives insurance proceeds covering
such Expense under policies of a nature that future premium rates
thereunder will not be increased by claim experience relating to such
Liability, the Partnership shall promptly pay such insurance proceeds
to the reimbursing Partner up to the amount reimbursed by such Partner;
and
(iii) the Expense is not offset by third party indemnification
or otherwise;
PROVIDED, HOWEVER, that such reimbursing Partner shall reimburse the Partnership
for the Expense only to the extent and in proportion to its Fault.
(b) Any claim by the Partnership for reimbursement under this Section
may be initiated by either the General Partner or Geon LP upon written notice to
the other, and the General Partner and Geon LP shall have a period of 60 days
during which to reach unanimous agreement as to the terms on which any
reimbursement shall be made. If the General Partner and Geon LP are unable to
agree or there are any disputes over Fault and reimbursement under this Section,
such matters shall be resolved pursuant to the Dispute Procedures.
13.4 DISPUTE RESOLUTION. Except as otherwise provided for herein, all
controversies or disputes arising under this Agreement shall be resolved
pursuant to the provisions set forth on Appendix D (the "Dispute Procedures").
13.5 EXTENT OF LIMITATION OF LIABILITY, INDEMNIFICATION, ETC. TO THE
FULLEST EXTENT PERMITTED BY LAW AND WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE LIMITATION OF LIABILITY, INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS
SET FORTH HEREIN, A PARTY SHALL BE ENTITLED TO INDEMNIFICATION OR RELEASE
HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS
GIVING RISE TO ANY SUCH INDEMNIFICATION OR RELEASE IS THE RESULT OF THE SOLE,
GROSS, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY
OR OTHER FAULT OR VIOLATION OF ANY LAW OF OR BY ANY SUCH PARTY. THE PARTIES
AGREE THAT THIS STATEMENT CONSTITUTES A CONSPICUOUS LEGEND.
13.6 FURTHER ASSURANCES. From time to time, each Partner agrees to
execute and deliver such additional documents, and will provide such additional
information and assistance, as the Partnership may reasonably require to carry
out the terms of this Agreement and to accomplish the Partnership's business.
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51
13.7 SUCCESSORS AND ASSIGNS. Except as may be expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
successors of the Partners, but no Partner may assign or delegate any of its
rights or obligations under this Agreement. Except as expressly provided herein,
any purported assignment or delegation shall be void and ineffective.
13.8 BENEFITS OF AGREEMENT RESTRICTED TO THE PARTIES. This Agreement is
made solely for the benefit of the Partnership and the Partners, and no other
Person, including any officer or employee of the Partnership or any Partner,
shall have any right, claim or cause of action under or by virtue of this
Agreement.
13.9 NOTICES. All notices, requests and other communications that are
required or may be given under this Agreement shall, unless otherwise provided
for elsewhere in this Agreement, be in writing and shall be deemed to have been
duly given if and when (i) transmitted by telecopier facsimile during business
hours with proof of confirmation from the transmitting machine or (ii) delivered
by commercial courier or other hand delivery, as follows:
If to OCC GP or OCC LP: If to Geon LP:
c/o Occidental Chemical Corporation c/o The Geon Company
5005 LBJ Freeway One Geon Center
Dallas, Texas 75244 Avon Lake, Ohio 44012
Attention: President Attention: Chief Executive Officer
Telecopy Number: (972) 404-3906 Telecopy Number: (440) 930-1002
With a copy to: With a copy to:
Occidental Petroleum Corporation The Geon Company
10889 Wilshire Boulevard One Geon Center
Los Angeles, California 90024 Avon Lake, Ohio 44012
Attention: General Counsel Attention: General Counsel
Telecopy Number: (310) 443-6333 Telecopy Number: (440) 930-1002
And to:
Occidental Chemical Corporation
5005 LBJ Freeway
Dallas, Texas 75244
Attention: General Counsel
Telecopy Number: (972) 404-3957
13.10 SEVERABILITY. In the event that any provisions of this Agreement
shall be Finally Determined to be unenforceable, such provision shall, so long
as the economic and legal substance
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52
of the transactions contemplated hereby is not affected in any materially
adverse manner as to any Partner, be deemed severed from this Agreement and
every other provision of this Agreement shall remain in full force and effect.
13.11 CONSTRUCTION. In construing this Agreement, the following
principles shall be followed: (i) no consideration shall be given to the
captions of the articles, sections, subsections or clauses, which are inserted
for convenience in locating the provisions of this Agreement and not as an aid
in construction; (ii) no consideration shall be given to the fact or presumption
that any Partner had a greater or lesser hand in drafting this Agreement; (iii)
examples shall not be construed to limit, expressly or by implication, the
matter they illustrate; (iv) the word "includes" and its syntactic variants mean
"includes, but is not limited to" and corresponding syntactic variant
expressions; (v) the plural shall be deemed to include the singular, and vice
versa; (vi) each gender shall be deemed to include the other gender; and (vii)
each appendix, exhibit, attachment and schedule to this Agreement is a part of
this Agreement.
13.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, and all of which when
taken together shall constitute one and the same original document.
13.13 WAIVER OF RIGHT TO PARTITION. Except as provided in Section
12.2(e), each Person who now or hereafter is a party hereto or who has any right
herein or hereunder irrevocably waives during the term of the Partnership any
right to maintain any action for partition with respect to Partnership property.
13.14 GOVERNING LAW. The laws of the State of Delaware shall govern the
construction, interpretation and effect of this Agreement without giving effect
to any conflicts of law principles.
13.15 EXPENSES. Except as otherwise provided herein or in the Master
Transaction Agreement, each party hereto shall be responsible for its own
expenses incurred in connection with this Agreement.
13.16 PAYMENT TERMS AND INTEREST CALCULATIONS.
(a) If the payment due date for any payment hereunder (including
capital contributions and Damages) falls on a Saturday or a bank or federal
holiday, other than a Monday, the payment shall be due on the past preceding
Business Day. If the payment due date falls on a Sunday or Monday bank or
federal holiday, the payment shall be due on the following Business Day.
(b) Interest shall accrue on any unpaid and outstanding amount from the
time such amount is due and payable through the date upon which such amount,
together with accrued interest thereon, is paid in full. Interest shall, subject
to the provisions of Section 13.17, accrue at a per annum rate equal to the
lesser of (i) the Agreed Rate plus 2% per annum, compounded quarterly, to the
extent permitted by law or (ii) the Highest Lawful Rate.
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(c) A wire transfer or delivery of a check shall not operate to
discharge any payment under this Agreement and shall be accepted subject to
collection.
13.17 USURY SAVINGS CLAUSE. Notwithstanding any other provision of this
Agreement, it is the intention of the parties hereto to conform strictly to
Applicable Usury Laws, in each case to the extent they are applicable to this
Agreement. Accordingly, if any payment made pursuant to this Agreement results
in any Person having paid any interest in excess of the Maximum Amount, or if
any transaction contemplated hereby would otherwise be usurious under any
Applicable Usury Laws, then, in that event, it is agreed as follows: (i) the
provisions of this Section 13.17 shall govern and control; (ii) the aggregate of
all interest under Applicable Usury Laws that is contracted for, charged or
received under this Agreement shall under no circumstances exceed the Maximum
Amount, and any excess shall be promptly refunded to the payor by the recipient
hereof; (iii) no Person shall be obligated to pay the amount of such interest to
the extent that it is in excess of the Maximum Amount; and (iv) the effective
rate of any interest payable under this Agreement shall be IPSO FACTO reduced to
the Highest Lawful Rate, and the provisions of this Agreement immediately shall
be deemed reformed, without the necessity of the execution of any new document
or instrument, so as to comply with all Applicable Usury Laws. All sums paid, or
agreed to be paid, to any person pursuant to this Agreement for the use,
forbearance or detention of any indebtedness arising hereunder shall, to the
fullest extent permitted by the Applicable Usury Laws, be amortized, pro rated,
allocated and spread throughout the full term of any such indebtedness so that
the actual rate of interest does not exceed the Highest Lawful Rate in effect at
any particular time during the full term thereof.
13.18 AMENDMENT. All waivers, modifications, amendments or alterations
of this Agreement shall require the written approval of the General Partner and
each of the Limited Partners.
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IN WITNESS WHEREOF, this Agreement has been executed on behalf of each
of the parties hereto, by their respective officers thereunto duly authorized,
effective as of the date first written above.
GENERAL PARTNER
OCCIDENTAL PVC, LLC
By: /s/ John L. Hurst, III
-----------------------------------
John L. Hurst, III
President
LIMITED PARTNERS
OCCIDENTAL PVC LP, INC.
By: /s/ James R. Havert
-----------------------------------
James R. Havert
Vice President and Treasurer
1999 PVC PARTNER INC.
By: /s/ Woodrow W. Ban
-----------------------------------
Name: Woodrow W. Ban
--------------------------------
Title: Assistant Secretary
--------------------------------
55
APPENDIX A
TO LIMITED PARTNERSHIP AGREEMENT
DEFINITIONS
-----------
"AAA" has the meaning set forth in Appendix D.
"Acceptance Notice" has the meaning set forth in Section 10.2(b).
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
amended and in effect from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(i) Such Capital Account shall be deemed to be increased by
any amounts which such Partner is obligated to restore to the
Partnership (pursuant to this Agreement or otherwise) or is deemed to
be obligated to restore pursuant to the second to last sentence of
Regulation Section 1.704-2(g)(1) and Section 1.704-2(i)(5) (relating to
allocations attributable to nonrecourse debt).
(ii) Such Capital Account shall be deemed to be decreased by
the items described in Regulationss. 1.704-l(b)(2)(ii)(d)(4), (5) and
(6).
The foregoing definition of Adjusted Capital Deficit is intended to comply with
the provisions of Regulation Section 1.704-l(b)(2)(ii)(d) and shall be
interpreted and applied consistently therewith.
"Affiliate" means any other Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with the Person specified; PROVIDED, HOWEVER, that for purposes of this
Agreement neither the Partnership nor Compounding Partnership, nor any entity
controlled by either entity, shall be considered an Affiliate of any Partner.
For purposes of this definition, the term "control" (including the terms
"controlled by" and "under common control with") means the ownership of more
than 50% of the equity interests, Fully Diluted.
"Agreed Rate" means the base commercial lending rate announced by
Citibank, N.A. (or its successor) at its principal office, in effect from time
to time, such interest rate to change automatically, effective as of the date of
each change in such base rate.
"Agreement" means this First Amended and Restated Limited Partnership
Agreement of Oxy Vinyls, LP, as amended from time to time.
"Alternate" has the meaning set forth in Section 6.4(b).
Appendix A-1
56
"Annual Agreed Multiple" means five, unless and until otherwise
mutually agreed between the General Partner and Geon LP.
"Annual Budget" has the meaning set forth in Section 8.2.
"Applicable Usury Laws" means laws regarding the use, forbearance or
detention of any indebtedness arising under this Agreement whether such laws are
now or hereafter in effect, including the laws of the United States of America
or any other jurisdiction whose laws are applicable, and including any
subsequent revisions to or judicial interpretations of those laws.
"Appraised Value" has the meaning set forth in Section 10.2(a).
"Asset Contribution Agreement" means (i) in the case of OCC LP and OCC
GP, the Asset Contribution Agreement to be entered into between the Partnership,
OCC, OCC LP and OCC GP, and (ii) in the case of Geon LP, the Asset Contribution
Agreement to be entered into between the Partnership, Geon, and Geon LP.
"Asset Fair Market Value" means, with respect to any asset, as of the
date of determination, the cash price at which a willing seller would sell, and
a willing buyer would buy, each being apprised of all relevant facts and neither
acting under compulsion, such as in an arm's-length negotiated transaction with
an unaffiliated third party without time constraints.
"Assumed Liabilities" means (i) in the case of OCC LP and OCC GP,
"Assumed Liabilities," as defined in the Asset Contribution Agreement of OCC,
and (ii) in the case of Geon LP, "Assumed Liabilities," as defined in the Asset
Contribution Agreement of Geon.
"Auxiliary Committee" has the meaning set forth in Section 6.8.
"Bankruptcy" means the occurrence of any of the following: (i) a
Partner or its Parent shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer or
consent seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or
future applicable federal, state or other statute or law relating to bankruptcy,
insolvency, or other relief for debtors, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, conservator or liquidator
of such Partner or its Parent or of all or any substantial part of its
properties or its Units (the term "acquiesce," as used in this definition,
includes the failure to file a petition or motion to vacate or discharge any
order, judgment or decree within ten Business Days after entry of such order,
judgment or decree); (ii) a court of competent jurisdiction shall enter an
order, judgment or decree approving a petition filed against any Partner or its
Parent seeking a reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the present or any future
federal bankruptcy act, or any other present or future applicable federal, state
or other statute or law relating to bankruptcy, insolvency, or other relief for
debtors, and such Partner or its Parent shall acquiesce in the entry of such
order, judgment or decree or such other order, judgment or decree
Appendix A-2
57
shall remain unvacated and unstayed for an aggregate of 60 days (whether or not
consecutive) from the date of entry thereof, or any trustee, receiver,
conservator or liquidator of such Partner or its Parent or of all or any
substantial part of its property or its Units shall be appointed without the
consent or acquiescence of such Partner or its Parent and such appointment shall
remain unvacated and unstayed for an aggregate of 60 days (whether or not
consecutive); (iii) a Partner or its Parent shall admit in writing its inability
to pay its debts as they mature; (iv) a Partner or its Parent shall give notice
to any governmental body of insolvency or pending insolvency, or suspension or
pending suspension of operations; or (v) a Partner or its Parent shall make an
assignment for the benefit of creditors or take any other similar action for the
protection or benefit of creditors.
"Book Value" means, with respect to any asset of the Partnership, the
asset's adjusted basis for federal income tax purposes as of the relevant date,
except as follows:
(i) The initial aggregate Book Value of all of the assets of
the Partnership as of the Closing Date shall be equal to the sum of (A)
the beginning aggregate Capital Accounts of the Partners immediately
after the Closing Date, and (B) the aggregate amount of all liabilities
of the Partnership for federal income tax purposes immediately after
the Closing Date.
(ii) The initial Book Value of any asset contributed by a
Partner to the Partnership after the Closing Date shall be the gross
fair market value of such asset, which shall be equal to the amount
credited to such Partner's Capital Account for such contribution
(increased by the amount of any liabilities which the Partnership
assumes or takes subject to).
(iii) The Book Values of all Partnership assets (including
intangible assets such as goodwill) shall be adjusted (at the election
of the Partnership Governance Committee) to equal their respective
gross fair market values upon the occurrence of any of the events
described in Regulation Section 1.704-l(b)(2)(iv)(f)(5).
(iv) The Book Value of any asset distributed by the
Partnership to a Partner shall be equal to the gross fair market value
of such asset on the date of the distribution.
(v) The Book Value of any Partnership asset with respect to
which an adjustment to tax basis has occurred by reason of the
application of section 734(b) or 754(b) of the Code shall be adjusted
to the extent such adjustment to tax basis is taken into account
pursuant to Regulation Section 1.704-l(b)(2)(iv)(m).
(vi) If the Book Value of an asset is not equal to its
adjusted tax basis for federal income tax purposes, such Book Value
shall be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Profits and Losses and other
items allocated pursuant to Section 4.1.
Appendix A-3
58
The foregoing definition of Book Value is intended to comply with the provisions
of Regulation Section 1.704-l(b)(2)(iv) and shall be interpreted and applied
consistently therewith. Any determinations of "gross fair market value" in this
definition of Book Value shall be made by the Partnership Governance Committee.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks are closed in New York City, New York.
"Business Opportunity" has the meaning set forth in Section 9.3(c).
"Capital Account" means the separate capital account established and
maintained by the Partnership for each Partner, as contemplated by Section 2.
"Capital Expenditure Budget" has the meaning set forth in Section
8.2(d).
"CEO" has the meaning set forth in Section 7.1(b).
"Change of Control" means "Change of Control," as defined in Section
1.1(c) of the Parent Agreement.
"Claim" has the meaning set forth in Section 13.2(c).
"Closing Date" means "Closing Date," as defined in the Master
Transaction Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time and any successor thereto.
"Competing Opportunity" has the meaning set forth in Section 9.3(c).
"Compounding Partnership" means "Compounding Partnership," as defined
in the Master Transaction Agreement.
"Confidential Information" means all documents and information
(including commercial information and information with respect to customers,
trade secrets and proprietary technologies or processes (including with respect
to the Specialty Resin Business) and the design and development of new products
or services) concerning the Partnership, the Partners or their Affiliates,
furnished to a Partner in connection with the transactions leading up to and
contemplated by this Agreement and the operation of the Partnership, except to
the extent that such information (i) is or becomes generally available to and
known by the public or the chemical industry (other than as a result of an
unpermitted disclosure directly or indirectly by the Partnership or a Partner),
(ii) is or becomes available to a Partner on a nonconfidential basis from a
source other than the Partnership or a Partner; PROVIDED, HOWEVER, that such
source is not and was not bound by a confidentiality agreement with, or other
obligation of secrecy to, the Partnership or the other Partner, (iii) has
Appendix A-4
59
already been or is hereafter independently acquired or developed by a Partner
without violating any confidentiality agreement with or other obligation of
secrecy to the Partnership or another Partner or (iv) is otherwise generated by
the Partnership with the intention that it not be held as confidential.
"Contributed Business" means the "Contributed Business," as defined in
both of the Asset Contribution Agreements.
"Damages" means, with respect to a Person in connection with a Default,
any and all obligations (including all obligations to take an affirmative or
curative act), liabilities, damages (including damages arising out of any breach
of any representation or warranty, damages related to investigations,
proceedings, audits, the interruption of the Partnership's business,
restrictions upon the use of, or adverse impact on, the Assets or the
Partnership's business, or the interruption, breach or termination of any
Related Agreements or other agreements, including any lost profits attributable
thereto), fines, penalties, deficiencies, losses, judgments, settlements, costs
and expenses (including costs and expenses incurred in connection with
performing obligations, bonding and appellate costs and attorneys',
accountants', engineers', health, safety, environmental and other consultants'
and investigators' fees and disbursements, liquidating, selling or offering for
sale the Partnership's business and assets or winding-up the Partnership's
business, or other payments in respect of such payments) suffered or incurred by
such Person that arise out of or relate to such Default, regardless of whether
any of the foregoing are foreseeable, unforeseeable, matured or unmatured,
existing or contingent as of the date of such Default. "Damages" also shall
include, if and to the extent interest is not already included therein under
applicable law or other provisions hereof and subject to Section 13.17, interest
on amounts actually due until payment thereof is made at a rate per annum equal
to the rate set forth in Section 13.16(b). "Damages" shall not include any
consequential, incidental, indirect, punitive, exemplary, special or other
similar damages.
"Deadlock Notice" has the meaning set forth in Section 8.5.
"Default" has the meaning set forth in Section 11.1.
"Default Date" has the meaning set forth in Section 11.1.
"Defaulting Partners" means (i) OCC GP and OCC LP, in the case of a
Default by OCC GP, OCC LP or their Parent; and (ii) Geon LP, in the case of a
Default by Geon LP or its Parent.
"Depreciation" means, for each fiscal year or part thereof, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such year
or other period, except that if the Book Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year,
Depreciation shall be (i) an amount which bears the same ratio to such Book
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year bears to such adjusted tax basis, or, (ii) if
the federal income tax depreciation, amortization or other cost recovery
Appendix A-5
60
deduction for such year is equal to zero, an amount determined with reference to
such Book Value using a reasonable method selected by the Tax Matters Partner.
"Dispute Notice" has the meaning set forth in Appendix D.
"Dispute Procedures" has the meaning set forth in Section 13.4.
"Disputing Partner" has the meaning set forth in Appendix D.
"Distributable Cash" means as of the end of each month during the term
of this Agreement the cash plus short-term investments of the Partnership less
(i) the amount needed to meet the current operating expenses of the Partnership,
(ii) the amount needed for capital expenditures, (iii) the amount needed for
debt service, and (iv) the amount needed to fund reserves, in each case as
determined by the Partner Governance Committee pursuant to the authority granted
under Section 6 and as set forth in the Strategic Plan.
"EBITDA" means, for any period, the sum of the Partnership's net income
from operations before any extraordinary items, plus the following expenses or
charges to the extent deducted to arrive at net income in such period: interest
expense, income taxes, depreciation, and amortization, all determined in
accordance with GAAP.
"EBITDA Contribution" means, for any acquisition or expenditure, the
estimated average annual EBITDA attributable to such acquisition or expenditure,
calculated on an average annual basis with respect to a five year period
commencing at the end of a transition and integration period (the duration of
which shall be determined by the General Partner, acting reasonably) following
such acquisition or expenditure.
"80%-Owned Affiliate" means, as to any Person, an Affiliate of such
Person where the level of ownership of the equity interests involved, Fully
Diluted, is 80% or more.
"Enterprise Value Increase" has the meaning set forth in Section 6.9.
"Executive Officers" has the meaning set forth in Section 7.1(b).
"Expense" has the meaning set forth in Section 13.3(a).
"Fair Market Value" means (i) with respect to the Partnership, the
Asset Fair Market Value of all of the Partnership's assets decreased by the fair
value of all its liabilities, as of the most recently ended fiscal quarter; and
(ii) with respect to a Related Business, the Asset Fair Market Value of all the
assets of such Related Business decreased by the fair value of all its
liabilities, as of the most recently ended fiscal quarter. In either case, the
following shall apply to the determination of Fair Market Value:
Appendix A-6
61
(a) The General Partner and Geon LP shall first attempt to
agree on such value, which if agreed to shall be the Fair Market Value.
(b) If the General Partner and Geon LP are unable to agree
within 20 days of the first written notice from either the General
Partner or Geon LP to the other proposing an amount to be the Fair
Market Value (the "Notice"), then if requested by either the General
Partner or Geon LP, the General Partner and Geon LP shall each (at its
own cost) cause an independent, qualified appraiser to deliver a
written appraisal of its determination of the Fair Market Value within
50 days of the Notice. If the lower appraised value is greater than or
equal to 90% of the higher appraised value, then the average of the two
appraised values shall be the Fair Market Value.
(c) If the lower appraised value is less than 90% of the
higher appraised value, then the General Partner and Geon LP shall
jointly appoint a Neutral within 20 days of the delivery of both such
appraisals. If the General Partner and Geon LP have been unable to
agree upon such appointment within such 20 days, then such Neutral
shall upon the application of either the General Partner or Geon LP be
appointed within 10 days of the filing of such application by the
Center for Public Resources, or if such appointment is not so made
promptly then promptly thereafter by the American Arbitration
Association in Dallas, Texas or if such appointment is not so made
promptly then promptly thereafter by the senior United States District
Court judge sitting in Dallas, Texas. The fees and expenses of the
Neutral shall be paid equally by the General Partner and Geon LP.
(d) The Neutral shall, within 30 days of the appointment of
the Neutral, determine which of the two appraised values (without in
any way modifying or compromising between the two appraised values) is
closest to the fair market value of the enterprise's assets as
determined by the Neutral, and that appraised value shall be the Fair
Market Value.
"Fault" means any act or omission of a Partner, its Affiliates or any
of their respective officers, directors or employees (acting in their capacities
as such) that constitutes or results from intentional misconduct, criminal
intent or gross negligence.
"Finally Determined" means determined by any final, nonappealable
judicial order or pursuant to a binding alternative dispute resolution
procedure.
"Fully Diluted" means a computation of equity interests on a basis as
if all potentially dilutive securities, including warrants, stock options and
convertible bonds, have been exercised or converted.
"Funding Notice" has the meaning set forth in Section 2.3.
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
Appendix A-7
62
"General Partner" means each Person who executes this Agreement and who
is hereby admitted to the Partnership as a general partner of the Partnership,
unless such General Partner ceases to be a General Partner hereunder or sells,
transfers, forfeits or otherwise disposes of its Units and is replaced by a
Substitute General Partner in accordance with this Agreement and the Act, and
each Person that becomes a Substitute General Partner, if any, of the
Partnership as provided herein, in such Person's capacity as a general partner
of the Partnership.
"Geon" has the meaning set forth in the second recital.
"Geon LP" has the meaning set forth in the first paragraph.
"Highest Lawful Rate" means the maximum rate of interest, if any, that
may be charged to any person under all Applicable Usury Laws on any principal
balance from time to time outstanding pursuant to this Agreement.
"HSE Law" means "HSE Law," as defined in both of the Asset Contribution
Agreements.
"Indemnified Party" has the meaning set forth in Section 13.2(c).
"Indemnifying Party" has the meaning set forth in Section 13.2(c).
"Initial Agreement" has the meaning set forth in the fourth recital.
"Initial Assets" means "Assets," as defined in Section 1 of both of the
Asset Contribution Agreements.
"Initial Notice" has the meaning set forth in Section 10.2(a).
"IRS" means Internal Revenue Service.
"Legal Requirement" means any law, statute, rule, ordinance, decree,
regulation, requirement, order (including any executive order) or judgment of
any court or government or regulatory body or political subdivision thereof.
"Leverage Ceiling" has the meaning set forth in Section 6.7(vi).
"Liability" means any loss, claim, damages, fine, penalty, assessment
by public agencies, settlement, cost or expense (including costs of
investigation, defense and reasonable attorneys' fees) or other liability.
"Limited Partner" means each Person who executes this Agreement and who
is hereby admitted to the Partnership as a limited partner of the Partnership,
unless such Limited Partner ceases to be a Limited Partner hereunder or sells,
transfers, forfeits or otherwise disposes of its Units and
Appendix A-8
63
is replaced by a Substitute Limited Partner in accordance with this Agreement
and the Act, and each Person that becomes a Substitute Limited Partner, if any,
of the Partnership as provided herein, in such Person's capacity as a limited
partner of the Partnership.
"Limited Partners Pro Rata" means from or to the Limited Partners in
the ratio of the Units owned by each.
"Liquidation" has the meaning set forth in Section 11.4.
"Losses" has the meaning set forth in definition of "Profits and
Losses."
"Master Transaction Agreement" means that certain agreement between OCC
and Geon dated December 22, 1998, providing for the execution of various
agreements concerning the Partnership and the Initial Assets.
"Maximum Amount" means the maximum nonusurious amount of interest that
may be lawfully contracted for, charged or received by the applicable Person in
connection with any indebtedness arising under this Agreement under all
Applicable Usury Laws.
"Neutral" means a neutral Person acceptable to all of the appointing
Partners and not affiliated with any of the Partners, except where otherwise
specifically provided; PROVIDED that, if the appointing Partners are not able to
agree upon a neutral Person to act as the Neutral, the AAA shall select the
Neutral.
"Non-Defaulting Partners" means the Partners other than the Defaulting
Partners.
"OCC" has the meaning set forth in the second recital.
"OCC GP" has the meaning set forth in the first paragraph.
"OCC LP" has the meaning set forth in the first paragraph.
"Offer" has the meaning set forth in Section 10.2(a).
"Offeree Partners" has the meaning set forth in Section 10.2(a).
"Operating Budget" has the meaning set forth in Section 8.2(c).
"Other Partner" means, in the case of Geon LP, OCC GP, and in the case
of OCC GP or OCC LP, Geon LP.
"Parent" means "Parent," as defined in the Parent Agreement.
Appendix A-9
64
"Parent Agreement" means the Parent Agreement (Oxy Vinyls, LP) to be
entered into among Occidental Petroleum Corporation, OCC, Geon and the
Partnership in connection with this Agreement, as amended from time to time, the
form of which is referenced in the Master Transaction Agreement.
"Partners" means the General Partner and the Limited Partners on the
date of this Agreement until such Person ceases to be a partner of the
Partnership.
"Partnership" means Oxy Vinyls, LP, a Delaware limited partnership, the
limited partnership formed and continued under the Act and this Agreement.
"Partnership Annual Agreed Value" has the meaning set forth in Section
6.9.
"Partnership Governance Committee" has the meaning set forth in Section
6.1.
"Partnership Governance Committee Action" has the meaning set forth in
Section 6.1.
"Percentage Interest" means the percentage determined by dividing the
number of Units owned by a Partner by the total number of outstanding Units.
"Person" means any natural person or any corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization, business, government (or any agency or subdivision thereof) or
other entity.
"Pledge" means to mortgage, pledge, encumber or create or suffer to
exist any lien or encumbrance upon or security interest in. Such defined term is
used in this Agreement as both a noun and a verb.
"Profits and Losses" means, for each applicable period, the
Partnership's taxable income or loss for such period determined in accordance
with section 703(a) of the Code (for this purpose, all items of income, gain,
loss, deduction or credit required to be stated separately pursuant to section
703(a)(1) of the Code shall be included in taxable income or loss) with the
following adjustments:
(i) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken in account in computing Profits or
Losses pursuant to this definition shall be added to such taxable
income or loss.
(ii) Any expenditures of the Partnership described in section
705(a)(2)(B) of the Code or treated as such pursuant to Regulation
Section 1.704-1(b)(2)(iv)(i) and not otherwise taken in account in
computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss.
Appendix A-10
65
(iii) Depreciation for such period shall be taken into account
in lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss.
(iv) Gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized
for federal income tax purposes shall be computed with reference to the
Book Value of the property disposed of, rather than the adjusted tax
basis of such property.
(v) If any property is distributed in kind to any Partner, the
difference between its fair market value and its Book Value at the time
of distribution shall be treated as Profit or Loss, as the case may be,
recognized by the Partnership.
(vi) The amount of any adjustment to the Book Value of any
Partnership asset pursuant to clause (iii) of the definition of Book
Value herein shall be taken into account as Profit or Loss from the
disposition of such asset.
"Pro Rata" means in the ratio of the Units owned by a Partner to the
total number of applicable Units.
"Proposing Person" has the meaning set forth in Section 9.3(c).
"PVC" means polyvinyl chloride.
"Reconstituted Basis" means, as to each Partnership property, the
Partnership's basis in such property immediately after it is contributed to the
Partnership reduced by any depreciation and other deductions allocated to a
Partner pursuant to Section 4.5(c)(i)(a).
"Regulations" means the final or temporary income tax regulations
promulgated by Department of the Treasury and in effect from time to time.
"Related Agreements" means the agreements (other than this Agreement)
defined as "Related Agreements" in the Master Transaction Agreement, as such
agreements may be amended from time to time after the Closing Date.
"Related Business" means any Specified Business, except for any
business of producing, purchasing or otherwise acquiring, using, distributing,
marketing or exchanging caustic soda, chlorine, ethylene dichloride, ethylene,
sodium methylate or chlorinated paraffins.
"Related Persons" has the meaning set forth in Section 13.1.
"Representative" has the meaning set forth in Section 6.4(a).
Appendix A-11
66
"Retained Business" means, in the case of OCC, the Specialty Resin
Business conducted primarily at its manufacturing plant located in Pottstown,
Pennsylvania and all related assets, and in the case of Geon, the Specialty
Resin Business conducted primarily at its retained portion of the Pedricktown,
New Jersey manufacturing plant and all related assets and its manufacturing
plant located in Henry, Illinois and all related assets.
"SEC" means the Securities and Exchange Commission.
"Selling Partners" has the meaning set forth in Section 10.2(a).
"Specialty Resin Business" means the business of producing, purchasing
or otherwise acquiring, using, distributing, marketing and exchanging (i)
dispersion, blending and copolymer resins and (ii) Specialty Suspension PVC
Resin (as that term is defined in the Related Agreements that are attached as
Exhibits T and V to the Master Transaction Agreement), including those produced
by any Retained Business.
"Specified Business" means the business of doing the following: (i) to
produce, purchase or otherwise acquire, use, distribute, market and exchange
suspension/mass PVC resin products, chlorinated PVC, VCM (to the extent
permitted under applicable agreements concerning VCM produced by OxyMar),
caustic soda, chlorine, ethylene dichloride, sodium methylate and chlorinated
paraffins (the "Primary Business"); (ii) to maintain, conduct and expand the
Primary Business, including the development of new technologies and products
for, the licensing of intellectual property related to, and the transportation,
storage and exchange of any products produced, purchased, acquired, used,
distributed, marketed or exchanged by, the Primary Business; PROVIDED, HOWEVER,
that the production of caustic soda, chlorine and ethylene dichloride may be
expanded by the Partnership only to meet the internal consumption demand of the
other parts of the Primary Business for such products; (iii) to produce,
purchase or otherwise acquire electricity and to purchase or otherwise acquire
ethylene, in each case as required to conduct the Primary Business; (iv) to
distribute and market, but only through OCC in accordance with agreements
between the Partnership and OCC, any excess caustic soda, chlorine, ethylene
dichloride, sodium methylate and chlorinated paraffins that the Partnership
produces, purchases or otherwise acquires for, and does not consume in, the
Primary Business; (v) to distribute and market any ethylene, electricity and
other products and by-products (except for caustic soda, chlorine, ethylene
dichloride, sodium methylate and chlorinated paraffins, the distribution and
marketing of which are covered in clause (iv) above) that the Partnership
produces, purchases or otherwise acquires for, but does not consume in, the
Primary Business; PROVIDED, HOWEVER, that the distribution and marketing of any
such ethylene shall only be through Equistar Chemicals, LP in accordance with
agreements between the Partnership and Equistar Chemicals, LP; (vi) to engage in
the incidental purchase, acquisition, use or sale of PVC dry blend powder
compounds to support customers of the pipe segment of the Primary Business and
to support other customers of the Primary Business as approved by all Partners
(such approval not to be unreasonably withheld); and (vii) to produce, purchase
or otherwise acquire, use, distribute, market and exchange PVC pipe and pipe
fittings; PROVIDED, HOWEVER, that the "Specified Business" shall not include the
Specialty Resin Business.
Appendix A-12
67
"Strategic Plan" has the meaning set forth in Section 8.1.
"Substitute General Partner" means a Person who is admitted as a
General Partner to the Partnership in place of and with all the rights of a
General Partner.
"Substitute Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership in place of and with all the rights of a
Limited Partner.
"Supply Agreements" means the Related Agreements that are attached as
Exhibits L and O to the Master Transaction Agreement.
"Taxes" means all taxes, charges, fees, levies or other assessments
imposed by any taxing authority, including income, gross receipts, excise,
property, sales, use, transfer, payroll, license, ad valorem, value added,
withholding, social security, national insurance (or other similar contributions
or payments), franchise, severance and stamp taxes (including any interest,
fines, penalties or additions attributable to, or imposed on or with respect to,
any such taxes, charges, fees, levies or other assessments) and "Tax Return"
means any return, report, information return or other document (including any
related or supporting information) with respect to Taxes.
"Tax Matters Partner" means OCC LP in its capacity as the sole owner of
OCC GP or any substitute Partner designated by OCC LP.
"Third Party Claim" means any allegation, claim, demand, civil or
criminal action, proceeding, charge or prosecution brought by a Person other
than the Partnership, any Partner or any Affiliate of a Partner; PROVIDED,
HOWEVER, that if such allegation, claim, demand, civil or criminal action,
proceeding, charge or prosecution is brought by any Partner or any Affiliate of
a Partner, in each case in its capacity as the owner or operator of property not
transferred pursuant to the OCC or Geon Asset Contribution Agreement, such
allegation, claim, demand, civil or criminal action, proceeding, charge or
prosecution shall be a Third Party Claim.
"Transfer" means to sell, assign or otherwise dispose of, whether by
act, deed, merger or otherwise. Such defined term is used in this Agreement as
both a noun and a verb.
"Unit" means a unit representing a partnership interest in the
Partnership.
"VCM" means vinyl chloride monomer.
"Wholly-Owned Affiliate" means, as to any Person, an Affiliate of such
Person all of the equity interests of which are owned, directly or indirectly,
by a Partner, by another Wholly-Owned Affiliate of such Person or by the Parent
thereof
"Wholly-Owned Subsidiary" means, as to any Person, a subsidiary of such
Person all of the equity interests of which are owned, directly or indirectly,
by such Person.
Appendix A-13
68
APPENDIX B
TO LIMITED PARTNERSHIP AGREEMENT
--------------------------------
PARTNERSHIP FINANCIAL STATEMENTS AND REPORTS
--------------------------------------------
Item & Frequency Due Dates
- ---------------- ---------
Monthly:
Income Statement - current period and year-to-date 8th Business Day following month-end
Balance Sheet - current period 9th Business Day following month-end
Cash Flow Statement - current period and year-to-date 9th Business Day following month-end
Schedule of Income Allocation - preliminary 6th Business Day following month-end
Schedule of Income Allocation - final 10th Business Day following month-end
Calculation of Distribution of Available Net Operating
Cash - final 15th Business Day following month-end
Results of Operations Analysis 10th Business Day following month-end
Quarterly:
Analysis for Investor Relations and Form 10-Q
disclosures:
- Results of Operations 15th Business Day following quarter-end
- Cash Flow 15th Business Day following quarter-end
- Sales Variances 15th Business Day following quarter-end
- Capital Expenditures 15th Business Day following quarter-end
- Intercompany Transactions 15th Business Day following quarter-end
- Volumes 15th Business Day following quarter-end
- Prices 15th Business Day following quarter-end
- Unusual Items 15th Business Day following quarter-end
Income Statement - current quarter and year-to-date 10th Business Day following quarter-end
Balance Sheet - current period 11th Business Day following quarter-end
Cash Flow Statement - current quarter and year-to-date 11th Business Day following quarter-end
Appendix B-1
69
Annual:
Analysis for Investor Relations and Form 10-K
disclosures
- Same as quarterly requirements
- Plant Capacities 15th Business Day following year-end
Audited Financial Statements 90days following year-end
Appendix B-2
70
APPENDIX C
INITIAL EXECUTIVE OFFICERS
--------------------------
John L. Hurst, III, Chief Executive Officer
Appendix C-1
71
APPENDIX D
----------
DISPUTE RESOLUTION PROCEDURES
-----------------------------
(1) BINDING AND EXCLUSIVE MEANS. Except as otherwise provided in the
Partnership Agreement, the dispute resolution provisions set forth in this
Appendix shall be the binding and exclusive means to resolve all disputes
arising under the Agreement (each a "Dispute").
(2) STANDARDS AND CRITERIA. In resolving any Dispute, the standards and
criteria for resolving such Dispute shall, unless the Partners involved in the
Dispute in their discretion jointly stipulate otherwise, be as set forth in
Appendix 1 to this Appendix.
(3) ADR AND BINDING ARBITRATION PROCEDURES. If a Dispute arises, the
following procedures shall be implemented (with references to "Partners" meaning
the Partners involved in the Dispute):
(a) Any Partner may at any time invoke the dispute resolution
procedures set forth in this Appendix as to any Dispute by providing written
notice of such action to the Secretary of the Partnership, who within five
Business Days after such notice shall schedule a meeting to be held in Dallas,
Texas between the Partners. The Partners' meeting shall occur within 10 Business
Days after notice of the meeting is delivered to the Partners. The meeting shall
be attended by representatives of each Partner having decision-making authority
regarding the Dispute as well as the dispute resolution process and who shall
attempt in a commercially reasonable manner to negotiate a resolution of the
Dispute.
(b) The representatives of the Partners shall cooperate in a
commercially reasonable manner and shall explore whether techniques such as
mediation, minitrials, mock trials or other techniques of alternative dispute
resolution might be useful. In the event that a technique of alternative dispute
resolution is so agreed upon, a specific timetable and completion date for its
implementation shall also be agreed upon. The representatives will continue to
meet and discuss settlement until the date (the "Interim Decision Date") that is
the earliest to occur of the following events: (i) an agreement shall be reached
by the Partners resolving the Dispute; (ii) one of the Partners shall determine
and notify the other Partners in writing that no agreement resolving the Dispute
is likely to be reached; (iii) if a technique of alternative dispute resolution
is agreed upon, the completion date therefor shall occur without the Partners
having resolved the Dispute; or (iv) if another technique of alternative dispute
resolution is not agreed upon, two full Business Days (or such other time period
as may be agreed upon) shall expire without the Partners having resolved the
Dispute.
(c) If, as of the Interim Decision Date, the Partners have not
succeeded in negotiating a resolution of the Dispute pursuant to subsection (b),
the Partners shall proceed under subsections (d), (e) and (f).
Appendix D-1
72
(d) After satisfying the requirements above, such Dispute shall be
submitted to mandatory and binding arbitration at the election of any Partner
involved in the Dispute (the "Disputing Partner"). The arbitration shall be
subject to the Federal Arbitration Act as supplemented by the conditions set
forth in this Appendix. The arbitration shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date the notice of arbitration is served, other than as
specifically modified herein. In the absence of an agreement to the contrary,
the arbitration shall be held in Dallas, Texas. The Arbitrator (as defined
below) will allow reasonable discovery in the forms permitted by the Federal
Rules of Civil Procedure, to the extent consistent with the purpose of the
arbitration. During the pendency of the Dispute, each Partner shall make
available to the Arbitrator and the other Partners all books, records and other
information within its control requested by the other Partners or the Arbitrator
subject to the confidentiality provisions contained herein, and PROVIDED that no
such access shall waive or preclude any objection to such production based on
any privilege recognized by law. Recognizing the express desire of the Partners
for an expeditious means of dispute resolution, the Arbitrator may limit the
scope of discovery between the Partners as may be reasonable under the
circumstances. In deciding the substance of the Partners' claims, the laws of
the State of Delaware shall govern the construction, interpretation and effect
of this Agreement (including this Appendix) without giving effect to any
conflicts of law principles. The arbitration hearing shall be commenced promptly
and conducted expeditiously, with each Partner involved in the Dispute being
allocated an equal amount of time for the presentation of its case. Unless
otherwise agreed to by the Partners, the arbitration hearing shall be conducted
on consecutive days. Time is of the essence in the arbitration proceeding, and
the Arbitrator shall have the right and authority to issue monetary sanctions
against any of the Partners if, upon a showing of good cause, that Partner is
unreasonably delaying the proceeding. To the fullest extent permitted by law,
the arbitration proceedings and award shall be maintained in confidence by the
Arbitrator and the Partners.
(e) The Disputing Partner shall notify the American Arbitration
Association ("AAA") and the other Partners in writing describing in reasonable
detail the nature of the Dispute (the "Dispute Notice"). The arbitrator (the
"Arbitrator") shall be selected within 15 days of the date of the receipt of the
Dispute Notice by all of the Partners from the members of a panel of arbitrators
of the AAA or, if the AAA fails or refuses to provide a list of potential
arbitrators, of the Center for Public Resources, and shall be experienced in
commercial arbitration. In the event that the Partners are unable to agree on
the selection of the Arbitrator, the AAA shall select the Arbitrator, using the
criteria set forth in this Appendix, within 30 days of the date of the Dispute
Notice. In the event that the Arbitrator is unable to serve, his or her
replacement will be selected in the same manner as the Arbitrator to be
replaced. The Arbitrator shall be neutral. The Arbitrator shall have the
authority to assess the costs and expenses of the arbitration proceeding
(including the arbitrators' costs and attorneys' fees and expenses) against any
or all Partners.
(f) The Arbitrator shall decide all Disputes and all substantive and
procedural issues related thereto, and shall enforce this Agreement in
accordance with its terms. Without limiting the generality of the previous
sentence, the Arbitrator shall have the authority to issue injunctive relief;
however, the Arbitrator shall not have any power or authority to (i) award
consequential, incidental,
Appendix D-2
73
indirect, punitive, exemplary, special or other similar damages or (ii) amend
this Agreement. The Arbitrator shall render the arbitration award, in writing,
within 20 days following the completion of the arbitration hearing, and shall
set forth the reasons for the award. In the event that the Arbitrator awards
monetary damages in favor of either party, the Arbitrator must certify in the
award that no indirect, consequential, incidental, punitive, exemplary, special
or other similar damages are included in such award. If the Arbitrator's
decision results in a monetary award, the interest to be granted on such award,
if any, and the rate of such interest shall be determined by the Arbitrator in
his or her discretion. The arbitration award shall be final and binding on the
Partners, and judgment thereon may be entered in any court of competent
jurisdiction, and may not be appealed except to the extent permitted by the
Federal Arbitration Act.
(4) CONTINUATION OF BUSINESS. Notwithstanding the existence of any
Dispute or the pendency of any procedures pursuant to this Appendix, the
Partners agree and undertake that all payments not in dispute shall continue to
be made and all obligations not in dispute shall continue to be performed.
Appendix D-3
74
APPENDIX 1 TO APPENDIX D
------------------------
(a) First priority shall be given to maximizing the consistency of the
resolution of the Dispute with the satisfaction of all express obligations of
the Partners and their Affiliates as set forth in the Partnership Agreement.
(b) Second priority shall be given to resolution of the Dispute in a
manner which best achieves the objectives of the business activities and
arrangements under the Partnership Agreement and the Related Agreements and
permits the Partners to realize the benefits intended to be afforded thereby.
(c) Third priority shall be given to such other matters, if any, as the
Partners or the Arbitrator shall determine to be appropriate under the
circumstances.
Appendix D-4
75
APPENDIX E
DIVISION OF PARTNERSHIP BUSINESS
--------------------------------
If the Partnership is dissolved and Section 12.2(e) applies to the
winding-up of the affairs of the Partnership, the Partnership properties shall,
to the extent legally and contractually feasible and, after satisfaction of the
liabilities of the Partnership (whether by payment or reasonable provision for
payment), be distributed in kind to the Partners in accordance with a division
(the "Division") of the properties. The Division shall be implemented by
dividing the properties, to the extent feasible, in accordance with the
following priorities and principles:
A. First priority shall be given to maximizing the consistency of the
Division with a division of the Partnership properties that allocates
to each Partner (subject to such Partner's Percentage Interest of the
Partnership's liabilities) Partnership properties in proportion to the
value of such Partner's Percentage Interest in the Partnership's
business taking into account the aggregate Asset Fair Market Value of
the Partnership's properties and the value and benefits afforded to
such Partner under the Partnership Agreement and the other Related
Agreements.
B. Second priority shall be given to the allocation of the Partnership's
various assets and business units between the Partners so as to
maximize the aggregate going concern value of the respective assets and
business units allocated to each Partner, taking into account, without
limitation, the potential synergies and efficiencies that are
reasonably achievable in connection with the operation of such
allocated assets and business units as an independent business entity.
C. Third priority shall be given to maximizing the consistency of the
Division with the nature and quality of the Assets and Contributed
Business originally transferred to the Partnership by the respective
Partners or their Affiliates.
Absent an agreement by the Partners or direction by the Neutral as to
both (i) how the Partners should allocate Partnership debt and (ii) the process
for relieving each Partner of liability for that portion of Partnership debt
allocated to the other Partner, the Partners (A) shall be jointly and severally
liable to the holders of all Partnership debt and (B) as between the Partners,
each Partner shall be obligated to pay to holders of the debt its Percentage
Interest of all payments of principal and interest on Partnership debt.
Notwithstanding the foregoing, the Neutral shall be entitled to direct, and any
Partner may propose, an alternative allocation of Partnership debt in any
circumstance where such alternative allocation is reasonably likely to result in
a Division that is more consistent with the priorities outlined above.
For purposes of this Appendix E, OCC GP and OCC LP shall be treated as
if they were a single Partner.
Appendix E-1
76
The Partners shall attempt to agree on a plan for a mutually acceptable
Division. If they are unable to so agree after 60 days following the occurrence
of the dissolution, a Neutral shall be appointed in accordance with Appendix D
and each Partner shall submit to the Neutral a written proposal for a Division.
The Neutral shall decide which of the two proposals (without in any way
modifying or compromising between the two proposals) more closely follows the
priorities and principles set forth above, and the proposal so chosen shall
thereupon be binding upon all Partners and shall be promptly implemented under
the direction of the Neutral. The Neutral shall be entitled to employ (at the
expense of the Partnership) such financial and accounting advisors and legal
counsel as he or she shall select, provided that no such advisor or counsel
shall have any affiliation with any Partner.
Appendix E-2