EXHIBIT 3.22
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
NALCO/EXXON ENERGY CHEMICALS, L.P.
A DELAWARE LIMITED PARTNERSHIP
DATED AS OF SEPTEMBER 1, 1994
TABLE OF CONTENTS
PAGE
ARTICLE I ORGANIZATION OF LIMITED PARTNERSHIP...................................................................1
Section 1.1 Formation and Name.......................................................................1
Section 1.2 Term ....................................................................................2
Section 1.3 Principal Office; Tax Matters Partner; Agent.............................................2
Section 1.4 Administrative Arrangements by General Partner...........................................2
Section 1.5 Statement of Purpose.....................................................................2
ARTICLE II CAPITALIZATION; COMMITMENTS OF PARTNERS..............................................................2
Section 2.1 Initial Capital Contributions............................................................2
Section 2.2 Subsequent Capital Contributions.........................................................3
Section 2.3 Net Worth of the General Partner.........................................................4
Section 2.4 Additional Funding; Future Adjustments of Partnership Interests..........................5
Section 2.5 Future Funding...........................................................................6
Section 2.6 Capital Accounts.........................................................................7
Section 2.7 Interest................................................................................10
Section 2.8 GAAP Balance Sheet......................................................................10
ARTICLE III ALLOCATIONS AND DISTRIBUTIONS......................................................................10
Section 3.1 Allocations.............................................................................10
Section 3.2 Allocations for Tax Purposes............................................................15
Section 3.3 Distributions and Loans.................................................................16
ARTICLE IV RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER....................................................18
Section 4.1 Management and Control of Partnership...................................................18
Section 4.2 Action by General Partner...............................................................19
Section 4.3 Segregation of Funds....................................................................19
Section 4.4 Devotion of Time; Compensation..........................................................19
Section 4.5 Limited Partner Consents................................................................19
Section 4.6 Removal of General Partner..............................................................20
Section 4.7 Enforcement of Obligations/Non-Interference by Partners-in-Interest.....................20
Section 4.8 Legal and Regulatory Compliance.........................................................20
ARTICLE V TRANSFER RESTRICTIONS; TERMINATION...................................................................21
Section 5.1 General Restriction.....................................................................21
Section 5.2 Equitable Relief........................................................................21
Section 5.3 No Voluntary Termination................................................................21
Section 5.4 Withdrawal..............................................................................21
Section 5.5 Sales to Third Parties..................................................................22
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PAGE
Section 5.6 Additional Funding; Deadlock; Withdrawal of a Limited Partner...........................24
Section 5.7 Dissolution.............................................................................25
Section 5.8 Bankruptcy of a Limited Partner.........................................................26
Section 5.9 Remedies Upon Insolvency Event..........................................................26
Section 5.10 Remedies Upon Insolvency, Withdrawal or Removal of General Partner......................26
Section 5.11 Requirements for Substitution of Limited Partner........................................27
Section 5.12 Winding Up of Partnership...............................................................27
ARTICLE VI OTHER PROVISIONS....................................................................................28
Section 6.1 Nature of Relationship..................................................................28
Section 6.2 [Intentionally Omitted].................................................................28
Section 6.3 Insurance and Indemnification...........................................................28
Section 6.4 Limited Partner Approval of Allocations, Distributions and Loans........................31
Section 6.5 Internal Audit and Inspection...........................................................31
Section 6.6 Partnership Dealings with Partners......................................................32
Section 6.7 Books and Records.......................................................................35
Section 6.8 Tax Matters.............................................................................36
Section 6.9 Notices.................................................................................38
Section 6.10 Benefits and Obligations................................................................39
Section 6.11 Governing Law...........................................................................39
Section 6.12 Counterparts............................................................................39
Section 6.13 Liability of Partners...................................................................39
Section 6.14 Currency................................................................................40
Section 6.15 Amendments..............................................................................40
Section 6.16 Arbitration.............................................................................40
Section 6.17 Cooperation.............................................................................40
Section 6.18 Brokers.................................................................................41
Section 6.19 Captions................................................................................41
Section 6.20 No Waiver...............................................................................41
Section 6.21 Title to Partnership Property...........................................................41
Section 6.22 Publicity...............................................................................41
Section 6.23 Severability............................................................................42
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LIST OF EXHIBITS
----------------
A Definitions
B-1 Partnership Expenses
B-2 Unmutualized Expenses
C-1 Agreed Values, Net Agreed Values and tax basis of Nalco assets
transferred
C-2 Agreed Values, Net Agreed Values and tax basis of Exxon assets
transferred
C-3 Agreed Values and Net Agreed Values of Additional Transferred
Nalco Assets
C-4 Agreed Values and Net Agreed Values of Additional Transferred
Exxon Assets
D Accounting/Tax Policies
E Senior Staff
F Alternative Dispute Resolution Procedures
G Field of Operations
H Calculation of Redemption Price for Exercise of Equalization Option
I Description of Binding Appraisal
J Description of Loan Terms
K Qualified Compensation Events Example
L Form of Tax Indemnity
M-1 Additional Assumed Exxon Liabilities
M-2 Additional Assumed Nalco Liabilities
N GAAP Balance Sheet
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AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
-----------------------------
This Amended and Restated Limited Partnership Agreement dated and
effective as of September 1, 1994, by and among Nalco/Exxon Energy Chemicals,
Inc. a Delaware corporation (the "General Partner"), as General Partner, Exxon
Corporation, a New Jersey corporation ("Exxon"), acting by and through its
division, Exxon Chemical Company, as a Limited Partner, and Nalco Chemical
Company, a Delaware corporation ("Nalco"), as a Limited Partner. Capitalized
terms used herein shall have the definitions provided in Exhibit A, attached
hereto and made a part hereof.
WHEREAS, the General Partner, as general partner, and Nalco and Exxon,
as limited partners, formed the Partnership, on August 9, 1994, pursuant to the
laws of the State of Delaware by entering into a Limited Partnership Agreement
and filing a Certificate of Limited Partnership with the Secretary of State of
the State of Delaware; and
WHEREAS, the General Partner, and Nalco and Exxon as Limited Partners,
wish to reorganize the Partnership under the Act in order to (i) amend and
restate their limited partnership agreement in its entirety by entering into
this Agreement, and (ii) provide for the Partnership's acquisition of certain
assets relating to, and thereafter the Partnership's engaging in, the business
of developing, manufacturing and selling certain energy chemicals, and providing
related services, as those terms are set forth and defined in the Field of
Operations, which Field of Operations is attached to and made a part hereof as
Exhibit G, all subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and upon the terms and conditions hereinafter set forth, the General
Partner, Exxon and Nalco, intending to be legally bound, agree as follows:
ARTICLE I ORGANIZATION OF LIMITED PARTNERSHIP
SECTION 1.1 FORMATION AND NAME.
(a) The General Partner, Nalco and Exxon have formed and established a
limited partnership under the provisions of the Act, except as modified herein,
to be conducted under the name of Nalco/Exxon Energy Chemicals, L.P. (the
"Partnership") under the terms and provisions set forth in this Agreement.
Nalco/Exxon Energy Chemicals, Inc., a Delaware corporation, shall be the sole
General Partner. Nalco and Exxon shall each be Limited Partners.
(b) Prior to the Commencement Date, the Partnership shall conduct no
business activities, provided that this provision shall not limit the taking of
any actions, subject to the other provisions of this Agreement, as the General
Partner shall deem necessary or advisable to
prepare for the conduct of the Business (as defined below) by the Partnership
and its Affiliates after the Commencement Date, including, without limitation,
qualification of the Partnership and its Affiliates to conduct the Business and
formation of subsidiary corporations of the Partnership.
SECTION 1.2 TERM. The Partnership commenced on the date of the filing of the
Certificate and, unless earlier terminated in accordance with the terms of this
Agreement, shall have a period of existence equal to ninety-nine (99) years from
the Commencement Date.
SECTION 1.3 PRINCIPAL OFFICE; TAX MATTERS PARTNER; AGENT.
(a) The principal office of the Partnership and the principal place of
business of the Partnership shall be ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇-▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
(b) The General Partner is hereby designated as the Tax Matters
Partner.
(c) The name and address of the registered agent in the State of
Delaware for service of process are The Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(d) The General Partner may change the principal office, the principal
place of business, the registered office and the registered agent of the
Partnership, with prior written notice to the Limited Partners.
SECTION 1.4 ADMINISTRATIVE ARRANGEMENTS BY GENERAL PARTNER. The General Partner
and the Partnership shall qualify and remain qualified to do business under the
laws of such states and jurisdictions as are necessary to permit the Partnership
legally to conduct the Business.
SECTION 1.5 STATEMENT OF PURPOSE. The Partnership shall engage in the business
of developing, manufacturing and selling certain energy chemicals, and providing
related services, as described in the Field of Operations, which Field of
Operations is attached to and made a part hereof as Exhibit G (the "Business"),
anywhere in the world. It is anticipated that the Business will be conducted
outside the United States of America by subsidiaries of the Partnership.
ARTICLE II CAPITALIZATION; COMMITMENTS OF PARTNERS
SECTION 2.1 INITIAL CAPITAL CONTRIBUTIONS. On the date of formation of the
Partnership, the General Partner contributed $240 to the Partnership; Nalco, as
a Limited Partner, contributed $5,880 to the Partnership, and Exxon, as a
Limited Partner, contributed $3,880 to the Partnership; and each of the General
Partner, Nalco and Exxon received the following Capital Account credits and
Partnership Interests:
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PARTNER CAPITAL ACCOUNT CREDIT PARTNERSHIP INTEREST
------------------ ----------------------- --------------------
General Partner $ 240 2.4%
Nalco 5,880 58.8%
Exxon 3,880 38.8%
SECTION 2.2 SUBSEQUENT CAPITAL CONTRIBUTIONS.
(a) On the Commencement Date, in accordance with the Transfer
Agreements:
(i) The General Partner shall transfer or cause to be transferred
to the Partnership cash in the amount of $4,085,040.
(ii) Nalco shall transfer or cause to be transferred to the
Partnership the assets described in Exhibit C-1 hereto which, for the
purposes of this Agreement, have an aggregate tax basis of $62,834,000,
an aggregate Agreed Value of $110,940,000 and aggregate Net Agreed
Value of $99,740,000.
(iii) Exxon shall transfer or cause to be transferred to the
Partnership the assets described in Exhibit C-2 hereto which, for the
purposes of this Agreement, have an aggregate tax basis of $33,165,000,
an aggregate Agreed Value of $69,358,000 and aggregate Net Agreed Value
of $58,258,000.
(iv) The Partnership shall assume the Assumed Nalco Liabilities and
the Assumed Exxon Liabilities, as set forth in Exhibit C-1 and Exhibit
C-2, respectively, and indemnify and hold harmless the Partners from
and against such Assumed Liabilities.
(v) Upon such contributions, the Partners shall receive the
following initial Capital Account credits:
PARTNER CAPITAL ACCOUNT CREDIT
-------------------------- ----------------------------
General Partner $ 4,085,280
Nalco $99,745,880
Exxon $58,261,880
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(vi) Upon such contributions, the Partners shall have the following
Partnership Interests:
PARTNER PARTNERSHIP INTEREST
-------------------------- ----------------------------
General Partner 2%
Nalco 59%
Exxon 39%
(b) Subsequent to the Commencement Date, in accordance with the
Transfer Agreements:
(i) Nalco shall transfer or cause to be transferred to the
Partnership Additional Transferred Nalco Assets which, for the purpose
of this Agreement have an aggregate Agreed Value of 20,768,000 and an
aggregate Net Agreed Value of $20,768,000 as described in Exhibit C-3
hereto.
(ii) Exxon shall transfer or cause to be transferred to the
Partnership the Additional Transferred Exxon Assets which, for the
purposes of this Agreement, have an aggregate Agreed Value of
$21,400,000 and an aggregate Net Agreed Value of $21,400,000 as
described in Exhibit C-4 hereto.
(iii) The Partnership shall assume the Additional Assumed Nalco
Liabilities and the Additional Assumed Exxon Liabilities and indemnify
and hold harmless the Partners from and against such Assumed
Liabilities.
(iv) Upon such contributions, the Limited Partners shall receive
the following additional Capital Account credits:
PARTNER CAPITAL ACCOUNT CREDIT
-------------------------- ----------------------------
Nalco $20,768,000
Exxon $21,400,000
(v) Upon such contributions, the Partnership Interests of the
Limited Partners shall not be modified.
SECTION 2.3 NET WORTH OF THE GENERAL PARTNER. The General Partner covenants and
agrees that so long as it is the General Partner of the Partnership it will
maintain net assets (exclusive of its interest in, and notes and receivables
from, the Partnership or any other partnership in which it is a general
partner), on a net fair market value basis, equal to at least $10 million. Such
net assets shall be in the form of (a) cash, (b) cash equivalents, (c)
obligations issued or guaranteed by the United States Government or any agency
thereof, or issued by any state of the United States or any political
subdivision thereof, (d) commercial paper, (e) certificates of deposit, (f)
bankers acceptances, (g) securities traded on an established market, or (h)
Demand Notes. As of
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the date hereof, the General Partner represents and warrants that the value of
its net assets as so computed is not less than $10 million.
SECTION 2.4 ADDITIONAL FUNDING; FUTURE ADJUSTMENTS OF PARTNERSHIP INTERESTS.
(a) Beginning on January 1, 1998, and subject to Exxon providing to
Nalco, at such time, a tax indemnification substantially similar to the form of
Exhibit L hereto, Exxon shall have an option (the "Equalization Option"),
exercisable at any time on or before December 31, 1999, to cause the Partnership
to redeem part of Nalco's interest in the Partnership in a manner and for an
amount described in Exhibit H hereto, such that subsequent to such redemption
Exxon and Nalco shall have equal Partnership Interests. Exxon shall exercise the
Equalization Option by giving written notice to the other Partners. Closing of
such redemption shall occur on a date selected by the General Partner within
ninety (90) days after the redemption price shall have been determined. Provided
that there has been no adjustment in the Partnership Interests of the Partners
prior to the exercise of such option, the Partnership Interests of the Partners
after the exercise of the Equalization Option shall be:
General Partner 2%
Nalco 49%
Exxon 49%
(b) From time to time, if the General Partner deems it to be advisable
that funding or any other type of external financial support be made available
to the Partnership by the Partners and the Partners unanimously agree to such
increased funding or external financial support, such funding shall be made, or
such external financial support shall be made available, by each Partner in the
ratio which its Partnership Interest at the time of such funding or such support
bears to the aggregate Partnership Interest of all Partners, or disproportionate
funding shall be permitted with an adjustment of Partnership Interests for
succeeding periods, as determined by the Partners. If, after such external
financial support by the Partners is made available by the Partners, the
Partnership Interests of the Partners shall change, the external financial
support provided by each Partner shall be increased or reduced, as appropriate,
as of the time of such change in Partnership Interests, so that each Partner is
providing a percentage of the total such external financial support equal to its
revised Partnership Interest. The General Partner shall contribute such funds in
an amount necessary to maintain a Partnership Interest of at least 1%.
(c) If pursuant to Section 5.6 hereof a Funding Limited Partner
contributes Additional Funding under circumstances that are determined to have
been a Survival Matter and the Funding Limited Partner determines that such
Additional Funding shall be a Capital Contribution, then such Funding Limited
Partner's Partnership Interest shall be increased, effective as of the date such
Additional Funding is made, to a percentage determined by adding to the Funding
Limited Partner's Partnership Interest immediately preceding such increase a
percentage, the numerator of which is the amount of such Additional Funding and
the denominator is the sum of (A) the aggregate of the Partners' Capital
Accounts immediately
5
preceding such Additional Funding, as adjusted as provided in paragraph 2.6(d)
and (B) the Additional Funding. The other Partners' Partnership Interests shall
then be simultaneously adjusted downward accordingly. The General Partner shall
contribute such funds in an amount necessary to maintain a Partnership Interest
of at least 1%.
(d) Any indemnity payment made to the Partnership by Exxon pursuant to
the Exxon Transfer Agreement and any indemnity payment made to the Partnership
by Nalco pursuant to the Nalco Transfer Agreement shall be treated as a
contribution of capital to the Partnership by Exxon or Nalco, respectively;
provided, however, that Exxon's Partnership Interest and Nalco's Partnership
Interest shall not be adjusted by reason of contributions pursuant to this
paragraph 2.4(d).
(e) Exxon shall contribute to the Partnership an amount equal to forty
percent (40%) of Partnership Expenses and one hundred percent (100%) of
Unmutualized Expenses attributable to Exxon, and Nalco shall contribute to the
Partnership an amount equal to sixty percent (60%) of Partnership Expenses and
one hundred percent (100%) of Unmutualized Expenses attributable to Nalco,
within seven (7) days after submission of an invoice by either Limited Partner
to the Partnership with respect to any such Partnership Expense or Unmutualized
Expense incurred on or before December 31, 1994; provided, however, that Nalco's
Partnership Interest and Exxon's Partnership Interest shall not be adjusted in
respect of contributions pursuant to this paragraph 2.4(e).
(f) Within thirty days following the close of each calendar quarter,
each Transaction Partner shall contribute to the capital of the Partnership the
Agreed Cash Value of the Qualified Compensation Events which inured to the
benefit of each respective Transaction Partner; provided, however, that Nalco's
Partnership Interest and Exxon's Partnership Interest shall not be adjusted in
respect of contributions pursuant to this paragraph 2.4(f).
(g) Any adjustment in Partnership Interests shall be effective as of
the day of the applicable Capital Contribution. To the extent practicable, any
Capital Contribution shall be made on the first day of a month.
(h) Nothing in this Agreement shall require any Partner to make any
contribution to, or incur any obligation on behalf of, the Partnership, or
entitle the Partnership to require any such contribution or incurrence, other
than the contributions required pursuant to Section 2.1, Section 2.2, paragraph
2.4(b), paragraphs 2.4(c) through paragraph 2.4(f) and paragraph 5.12(c) hereof;
provided that, in the case of paragraph 2.4(b) hereof, such contribution shall
be required only after all of the Partners have first agreed in writing to such
contributions.
SECTION 2.5 FUTURE FUNDING. The Partnership shall, to the extent not elsewhere
provided in this Agreement, endeavor to generate the funds required for the
working capital, capital expenditures and other needs of the Partnership through
its own cash flow and borrowing capacity.
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SECTION 2.6 CAPITAL ACCOUNTS.
(a) The Partnership shall establish a separate Capital Account for each
Partner upon formation of the Partnership as set forth in Section 2.1 hereof and
shall maintain such Capital Accounts in accordance with the rules of Treasury
Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be (i)
increased by (1) the cash amount or Net Agreed Value of all Capital
Contributions made by such Partner to the Partnership pursuant to this Agreement
and (2) all items of Partnership income and gain (including income and gain
exempt from tax) computed in accordance with paragraph 2.6(b) hereof and
allocated to such Partner pursuant to Section 3.1 hereof, and (ii) decreased by
(1) the cash amount or Net Agreed Value of all actual and deemed distributions
of cash or property made to such Partner pursuant to this Agreement and (2) all
items of Partnership deduction and loss computed in accordance with paragraph
2.6(b) hereof and allocated to such Partner pursuant to Section 3.1 hereof.
(b) For purposes of computing the amount of any item of income, gain,
deduction or lass to be reflected in the Partners' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes (including any method of depreciation, cost recovery or amortization
used for this purpose); provided that:
(i) (1) In accordance with the requirements of Section 704(b) of
the Code, any deductions for depreciation, cost recovery or
amortization attributable to a Contributed Property shall be determined
as if the adjusted basis of such property on the date it was acquired
by the Partnership were equal to the Agreed Value of such property.
Upon an adjustment pursuant to paragraph 2.6(d) hereof to the Carrying
Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property shall be
determined as if the adjusted basis of such property were equal to the
Carrying Value of such property immediately following such adjustment.
(1) For any period, depreciation, cost recovery or amortization
attributable to the Freeport Facility shall be computed in accordance
with Treasury Regulation Section 1.704-3T(d)(2), and shall be the sum
of two separate computations. First, an amount of Agreed Value or
Carrying Value (immediately following any adjustment referred to in the
last sentence of clause 2.6(b)(i)(1)) up to that property's tax basis
will be depreciated or subject to cost recovery in the same manner and
over the same remaining useful life as that property's remaining tax
basis. Second, the remaining amount, if any, of Agreed Value or
Carrying Value, as the case may be, will be depreciated or subject to
cost recovery in the same manner and over the same period applicable if
the Partnership were to have (x) purchased a like asset for an amount
equal to the Book-Tax Disparity attributable to the Freeport Facility
on the Commencement Date and (y) placed such asset in service on the
Commencement Date or the date on
7
which the Carrying Value is redetermined, as the case may be.
(2) For any period, depreciation, cost recovery or amortization
attributable to any Contributed Property other than the Freeport
Facility shall be an amount that bears the same relationship to the
Agreed Value (in the case of Contributed Property) or Carrying Value
(immediately following any adjustment referred to in the last sentence
of clause 2.6(b)(i)(1), as the case may be, of such property at the
beginning of the period as the federal income tax depreciation, cost
recovery or amortization deduction with respect to such property for
the period bears to the adjusted basis of such property at the
beginning of the period; provided that if such property has a zero
adjusted basis, such depreciation, cost recovery or amortization may be
determined under any reasonable method selected by the General Partner,
subject to the approval of all the Limited Partners.
(ii) Any income, gain or loss attributable to the taxable
disposition of any property shall be determined by the Partnership as
if the adjusted basis of such property as of such date of disposition
were equal in amount to the Partnership's Carrying Value with respect
to such property as of such date.
(iii) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant
to Section 48(q)(1) or 48(q)(3) of the Code, the amount of such
reduction shall, solely for the purposes hereof, be deemed to be an
additional depreciation or cost recovery deduction in the year such
property is placed in service and shall be allocated among the Partners
pursuant to Section 3.1 hereof. Any restoration of such basis pursuant
to Section 48(q)(2) of the Code shall be allocated in the same manner
to the Partners to whom such deemed deduction was allocated.
(iv) Subject to Treasury Regulation Section 1.704-1(b)(2)(iv)(m),
the computation of all items of income, gain, deduction and loss shall
be made without regard to any election under Section 754 of the Code
which may be made by the Partnership and, as to those items described
in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to
the fact that such items are not includable in gross income or are
neither currently deductible nor capitalizable for federal income tax
purposes.
(c) A transferee of a Partnership Interest will succeed to the Capital
Account relating to the Partnership Interest transferred. If the transfer causes
a termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership properties shall be deemed to have been distributed in liquidation
of the Partnership to the Partners (including the transferee of a Partnership
Interest) and deemed recontributed by such Partners and transferees in
reconstitution of the Partnership. In such event, the Carrying Values of the
Partnership properties shall be adjusted immediately prior to such deemed
distribution pursuant to subparagraph 2.6(d)(ii)
8
hereof (and such adjusted Carrying Values shall constitute the Agreed Values of
such properties upon such deemed contribution to the reconstituted Partnership).
The Capital Accounts of such reconstituted Partnership shall be maintained in
accordance with the principles of this Section 2.6.
(d) (i) Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), upon the contribution of cash or property in
exchange for an increased Partnership Interest, as provided in Section
2.4 hereof or otherwise, the Capital Accounts of all Partners and the
Carrying Values of all Partnership properties shall, immediately prior
to such issuance, be adjusted (consistent with the provisions hereof)
upwards or downwards to reflect any Unrealized Gain or Unrealized Loss
attributable to such properties (as if such Unrealized Gain or
Unrealized Loss had been recognized upon an actual sale of each
property, immediately prior to such issuance, and had been allocated to
the Partners at such time pursuant to Section 3.1 hereof). In
determining such Unrealized Gain or Unrealized Loss, the aggregate fair
market value of Partnership properties as of any date of determination
shall be determined by agreement of all of the Limited Partners, or, if
the Limited Partners are unable to agree, by an independent appraiser
selected by agreement of the Limited Partners.
(i) In addition, in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to the actual or deemed
distribution of any Partnership cash or property in exchange for an
interest in the Partnership, the Capital Accounts of all Partners and
the Carrying Values of all Partnership properties shall be adjusted
(consistent with the provisions hereof) upward or downward to reflect
any Unrealized Gain or Unrealized Loss attributable to each Partnership
property, as if such Unrealized Gain or Unrealized Loss had been
recognized upon an actual sale of each property, immediately prior to
such distribution, and had been allocated to the Partners at such time
pursuant to Section 3.1 hereof. Immediately prior to a distribution
described herein, the Carrying Values of Partnership properties shall
be adjusted to reflect their fair market values, as determined
hereunder by the General Partner, subject to the approval of all the
Limited Partners, and if the Limited Partners are unable to agree, by
an independent appraiser, selected by agreement of the Limited
Partners.
(ii) Notwithstanding anything to the contrary in this paragraph
2.6(d), all adjustments pursuant to subparagraphs 2.6(d)(i) or (ii)
hereof shall be made unless the General Partner reasonably determines
that such adjustment is de minimis and therefore is not necessary or
appropriate to reflect the relative economic interests of the Partners
in the Partnership.
(e) The determination of the amount of any liability for purpose of
this Section 2.6 (including without limitation, in connection with the
computation of Net Agreed Value, Unrealized Gain and Unrealized Loss) shall be
made in accordance with Section 752(c) of the Code and any other applicable
provisions of the Code and regulations thereunder.
9
(f) It is the intention of the Partners that Capital Accounts shall be
determined in a manner so that allocations in this Agreement will have, or be
deemed to have, substantial economic effect under Section 704(b) of the Code and
Regulations thereunder.
SECTION 2.7 INTEREST. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
SECTION 2.8 GAAP BALANCE SHEET. After the contributions described in Section 2.2
have been made, the consolidated balance sheet of the Partnership for purposes
of GAAP shall be substantially as set forth in Exhibit N.
ARTICLE III ALLOCATIONS AND DISTRIBUTIONS
SECTION 3.1 ALLOCATIONS.
(a) The parties have agreed that, for purposes of maintaining the
Capital Accounts and in determining the rights of the Partners among themselves,
each item of income, gain, deduction and loss (computed in accordance with
paragraph 2.6(b) hereof) shall be allocated to the Partners according to the
following table ("PI" refers to such Partner's Partnership Interest at that
time):
NALCO EXXON GP
-------- ---------- -----
Prior to 1/1/95 PI + 10% PI-10% PI
1/1/95 through 12/31/95 PI + 8% PI-8% PI
1/1/96 through 12/31/96 PI + 6% PI-6% PI
1/1/97 through 12/31/97 PI + 4% PI-4% PI
1/1/98 through 12/31/98 PI + 2% PI-2% PI
After 12/31/98 PI PI PI
For purposes of determining the items of income, gain, deduction and loss to be
allocated under this paragraph 3.1(a), such items of income, gain, deduction or
loss shall be determined (i) by excluding the items to be specially allocated
pursuant to the provisions of paragraphs 3.1(c), 3.1(d), 3.1(e), 3.1(f), 3.1(g),
3.1(h), 3.1(j), 3.1(k), 3.1(1), 3.1(m), 3.1(o), and 3.1(p) and (ii) before
making any reallocations of net income pursuant to paragraph 3.1(i).
(b) After allocating items of income, gain, deduction and loss pursuant
to paragraph 3.1(a), for purposes of maintaining the Capital Accounts and in
determining the rights of the Partners among themselves, the special allocations
set forth in paragraph 3.1(c) through and including paragraph 3.1(m), as well as
paragraphs 3.1(o) and 3.1(p), shall be given effect.
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(c) (i) Each item of deduction, loss or (to the extent permitted) basis
attributable to Partnership Expenses paid by the Partnership pursuant
to paragraph 6.6(f) hereof shall be specially allocated among the
Partners in the ratio in which the funds with respect to such expense
were contributed pursuant to paragraph 2.4(e) hereof.
(i) Each item of deduction, loss or (to the extent permitted) basis
attributable to an Unmutualized Expense paid by the Partnership
pursuant to paragraph 6.6(f) hereof shall be specially allocated to the
Partner which contributed the funds with respect to such expense
pursuant to paragraph 2.4(e) hereof.
(ii) Each item of deduction, loss or (to the extent permitted)
basis attributable to expenditures which were actually paid by a
contribution pursuant to paragraph 2.4(d) hereof shall be specially
allocated to the Partner which contributed such funds; provided,
however, that with respect to environmental expenditures for which a
Limited Partner is required to make only a partial indemnity payment to
the Partnership pursuant to Section 9.3.3 of the Exxon Transfer
Agreement or the Nalco Transfer Agreement, each item of deduction or
loss, or (to the extent permitted) basis relating to that part of those
expenditures not so reimbursed by a Limited Partner shall be specially
allocated to the New Substituted Partner, and the Surplus Cash
otherwise distributable to such New Substituted Partner shall be
reduced by an equal amount.
(d) In the event that any adjustment (including any correlative
adjustments) of income, gain, loss, deduction or credit under Section 482 of the
Code (or other analogous Code provision) is required in respect of any actual or
deemed transaction between a Partner and the Partnership, or if any transaction
is recharacterized as a partnership item, such adjustment (including all related
adjustments and deemed contributions and distributions) shall be specially
allocated to the Partner which entered into the transaction to which such
adjustment relates.
(e) If any Limited Partner unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) for
any Fiscal Year or other taxable period, items of Partnership income and gain
shall be specially allocated to such Limited Partner in an amount and manner
sufficient to eliminate, to the extent required by such regulations, any
Adjusted Capital Account Deficit created for such Fiscal Year or other taxable
period by such adjustments, allocations or distributions as quickly as possible;
provided that an allocation pursuant to this paragraph 3.1(e) shall be made only
if and to the extent that such Limited Partners would have an Adjusted Capital
Account Deficit for such Fiscal Year or other taxable period after all other
allocations provided for in this Section 3.1 have been tentatively made for such
Fiscal Year or other taxable period and as if this paragraph 3.1(e) were not in
this Agreement. This paragraph 3.1(e) is intended to constitute a "qualified
income offset" within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(d).
11
(f) (i) Notwithstanding anything to the contrary in this Agreement, and
except as provided in Treasury Regulation Section 1.704-2(f)(2) through
(5), if there is a net decrease in Partnership minimum gain during a
Fiscal Year or other taxable period, each Partner shall be specially
allocated items of Partnership income and gain for such Fiscal Year or
other taxable period (and, if necessary, for each subsequent Fiscal
Year or other taxable period) in proportion to, and to the extent of,
an amount equal to such Partner's share of the net decrease in
Partnership minimum gain during such Fiscal Year or other taxable
period, such share being determined in accordance with Treasury
Regulation Section 1.704-2(g)(2). The items to be so allocated shall be
determined in accordance with Regulation Sections 1.704-2(f)(6) and
1.704-2(j)(2)(i). For purposes of this paragraph 3.1(f), "minimum gain"
shall be determined in accordance with the principles of Treasury
Regulation Section 1.704-2(d). Further, allocation of income or gain
required hereunder shall be effected prior to the application of any
other allocation pursuant to this Section 3.1 with respect to such
Fiscal Year or other taxable period other than an allocation pursuant
to paragraphs 3.1(h) and 3.1(m). This paragraph 3.1(f) is intended to
constitute a "minimum gain chargeback" within the meaning of Treasury
Regulation Section 1.704-2(f).
(i) Notwithstanding the other provisions of this Section 3.1 (other
than subparagraph 3.1(f)(i)), and, except as provided in Treasury
Regulation Section 1.704-2(i)(4), if there is a net decrease in Minimum
Gain Attributable to Partner Nonrecourse Debt during any Partnership
taxable period, any Partner with a share of Minimum Gain Attributable
to such Partner Nonrecourse Debt at the beginning of such Fiscal Year
or other taxable period shall be allocated items of Partnership income
and gain for such period (and, if necessary, subsequent periods) in
proportion to, and to the extent of, an amount equal to such Partner's
share of the net decrease in the Minimum Gain Attributable to such
Partner Nonrecourse Debt, such share being determined in accordance
with Treasury Regulation Section 1.704-2(i)(4). The items to be so
allocated shall be determined in a manner consistent with the
principles of Treasury Regulation Section 1.704-2(j)(2)(ii). Further
for purposes of this subparagraph 3.1(f)(ii), the allocation of income
or gain required hereunder shall be effected, prior to the application
of any other allocations pursuant to this subparagraph 3.1(f)(ii),
other than subparagraph 3.1(f)(i), with respect to such taxable period.
This subparagraph 3.1(f)(ii) is intended to comply with the chargeback
of items of income and gain requirement in Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(g) No allocation of loss or items thereof shall be made to any Limited
Partner to the extent such allocation would create or increase an Adjusted
Capital Account Deficit of such Limited Partner. Any losses or items thereof
that cannot be allocated to any Limited Partner by reason of the prior sentence
(the "Excess Loss") shall, subject to the prior sentence, be allocated to the
other Partners in proportion to such other Partners' remaining Partnership
Interests. Any Excess Loss which cannot be allocated pursuant to the preceding
provisions of this paragraph 3.1(g) shall be allocated to the General Partner.
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(h) Nonrecourse Deductions, for any taxable period, shall be allocated
to the Partners in accordance with their respective Partnership Interests. If
the Partners mutually agree and determine in their good faith discretion that
the Partnership's Nonrecourse Deductions must be allocated in a different ratio
to satisfy the safe harbor requirements of the Treasury Regulations promulgated
under Section 704(b) of the Code, the Partners shall revise the prescribed
ratios to the numerically closest ratios that do satisfy such requirements.
(i) Each Partner shall be specially allocated an amount of income
(positive or negative, as the case may be) equal to its Net Preferred Allocation
Amount. The negative Net Preferred Allocation Amount to be allocated to any
Partner in any Fiscal Year of the Partnership cannot exceed the net income
allocated to such Partner before the allocation of such negative Net Preferred
Allocation Amount. To the extent that the negative Net Preferred Allocation
Amount exceeds such net income, such excess negative Net Preferred Allocation
Amount and the corresponding positive Net Preferred Allocation Amount shall
carry over with an escalation factor to the next succeeding Fiscal Year or other
taxable period and shall be taken into account in calculating the Net Preferred
Allocation Amount under Exhibit K for such succeeding Fiscal Year or other
taxable period. For purposes of this paragraph 3.1(i), the escalation factor
referred to in the preceding sentence shall be determined for each Fiscal Year
or other taxable period by mutual agreement of the Partners.
(j) All gains and losses resulting from all extraordinary transactions
or events during the Pre-Withdrawal Period shall be specially allocated to the
Limited Partner not being redeemed, and to the extent that the losses so
allocated would exceed such Limited Partner's Capital Account, such excess shall
be specially allocated to the General Partner.
(k) All Partnership losses attributable to Partnership contracts or
transactions with one or more Partners and resulting from such Partners not
meeting their financial or other obligations to the Partnership shall be
specially allocated to the Partners which defaulted on their obligations to the
Partnership. Any income or gain relating to a recovery from such defaulting
Partner shall be specially allocated to such defaulting Partner.
(l) All income from any Transferred Entity which is classified as a
dividend for federal income tax purposes and which relates to the earnings and
profits accrued by such Transferred Entity prior to its Contribution Date, as
well as all related foreign tax credits, shall be specially allocated to the
Limited Partner which contributed or otherwise transferred such Transferred
Entity to the Partnership. Upon a sale of substantially all of the assets of the
Partnership, or upon an event which causes a redetermination of Carrying Value
pursuant to paragraph 2.6(d) hereof, gain shall be first allocated to the
noncontributing Limited Partner in an amount equal to the amount previously
allocated to the contributing Limited Partner pursuant to this paragraph 3.(l).
(m) Partner Nonrecourse Deductions for any Fiscal Year or other taxable
period shall be allocated 100% to the Partner that bears the Economic Risk of
Loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable to the extent
13
required by Treasury Regulation Section 1.704-2(i). If more than one Partner
bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated between
or among such Partners in accordance with the ratios in which they share such
Economic Risk of Loss.
(n) For purposes of Treasury Regulation Section 1.752-3(a)(3), the
Partners agree that Nonrecourse Liabilities of the Partnership in excess of the
sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of
Nonrecourse Built-in Gain shall be allocated to the Partners in accordance with
their respective Partnership Interests.
(o) All items of income, gain, deduction, loss, credit and basis
allocation recognized by the Partnership for federal income tax purposes and
allocated to the Partners in accordance with the provisions hereof shall be
determined without regard to any election under Section 754 of the Code which
may be made by the Partnership. To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution to a Partner in
complete liquidation of his interest in the Partnership, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Partners in accordance with their respective Percentage Interests in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partner to whom
such distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(p) In the case of the redemption of the Partnership Interest of a
Partner pursuant to Paragraph 5.4(a) hereof, the gain or loss with respect to
the assets and liabilities of the Partnership, as valued pursuant to Paragraph
5.4(a) and Exhibit I, shall be allocated (including for purpose of Paragraph
2.6(d) to create a positive balance in the Capital Account of the Partner being
redeemed equal to the amount to be received by such Partner in redemption of its
Partnership Interest.
(q) Each item of Partnership income, gain, deduction, loss and credit
attributable to a transferred Partnership Interest shall, for federal income tax
purposes, be determined on an annual basis and prorated on a monthly basis (or
other basis, as required or permitted by Section 706 of the Code) and shall be
allocated to the Partners as of the opening of business on the first day of the
month in which the transfer is recognized by the Partnership; provided, however,
that gain or loss on a sale or other disposition of all or a substantial portion
of the assets of the Partnership shall be allocated to the Partners as of the
opening of business on the day of the month in which the substantial disposition
of assets occurs.
14
SECTION 3.2 ALLOCATIONS FOR TAX PURPOSES.
(a) For federal income tax purposes, and except as otherwise provided
in this Section 3.2, the allocations provided in Section 3.1 shall be
applicable.
(b) Pursuant to Section 704(c) of the Code and in an attempt to
eliminate Book-Tax Disparities attributable to a Contributed Property or
Adjusted Property, items of income, gain, loss, depreciation and cost recovery
and amortization deductions shall be allocated solely for federal income tax
purposes among the Partners as follows:
(i) (1) In the case of a Contributed Property, other than the
Freeport Facility, items of income, gain, loss or deduction
attributable thereto shall be allocated under Treasury Regulations
Section 1.704-3(b)(1), using the traditional method without curative
allocations, and any items of Residual Gain or Residual Loss
attributable to any Contributed Property shall be allocated among the
Partners in accordance with Section 3.1(a).
(ii) In the case of the Freeport Facility, items of income, gain,
loss or deduction attributable thereto shall first be allocated under
Treasury Regulation Section 1.704-3(b)(1). To the extent that the
ceiling rule (as defined in Treasury Regulation Section 1.704-3(b)(1))
results in an allocation to a Noncontributing Partner for Capital
Account purposes different from the corresponding tax allocation, and
consistent with Treasury Regulation Section 1.704-3T(d)(1) and (3), a
remedial allocation of income, gain, loss or deduction shall be made to
such Noncontributing Partner equal to the full amount of said
difference, and a simultaneous offsetting remedial allocation of
deduction, loss, gain or income shall be made to the Contributing
Partner.
(iii) In the case of an Adjusted Property, such items attributable
thereto shall be allocated among the Partners generally consistent with
the principles of subparagraph 3.2(b)(i) hereof in the case of all
property other than the Freeport Facility, and subparagraph 3.2
(b)(ii), in the case of the Freeport Facility. In the event such
Adjusted Property was originally a Contributed Property, allocations
under this paragraph 3.2(b) shall be made sequentially to eliminate (1)
the Book-Tax Disparity relating to the change in Carrying Values
following the events described in subparagraphs 2.6(d)(i) and (ii)
hereof and (2) the remaining Book-Tax Disparity (if any) created at the
time such property was contributed to the Partnership.
(c) It is intended that the allocations prescribed in this Section 3.2
constitute allocations for federal income tax purposes that are consistent with
Section 704 of the Code and comply with any limitations or restrictions therein.
The General Partner, acting upon the advice of counsel, shall have sole and
complete discretion to adopt such conventions as it deems necessary or
appropriate in determining the amount of depreciation, cost recovery and
amortization deductions.
15
SECTION 3.3 DISTRIBUTIONS AND LOANS.
(a) General. Periodically, the General Partner shall determine the
amount of Surplus Cash, and, subject to (x) the maximum amount of cash to which
any Partner is entitled for any Fiscal Year or other taxable period pursuant to
subparagraph 3.3(a)(i) and 3.3(a)(ii) and (y) the provisions of paragraph
3.3(b), the General Partner shall use reasonable methods to cause the
Partnership to distribute cash sufficient to enable the Partners to pay income
tax liabilities attributable to their allocable shares of the Partnership's
taxable income. All Surplus Cash of the Partnership, to the extent distributed
among or loaned to the Partners, shall be distributed or loaned in the following
order:
(i) First, Surplus Cash shall be distributed or loaned in an amount
equal to the total GAAP Earnings of the Partnership. The GAAP Earnings
of each Earnings Year shall be distributed among or loaned to the
Partners under this subparagraph 3.3(a)(i) sequentially, on a FIFO
basis, and using the Applicable Distribution Split for each such
Earnings Year, until the aggregate amount distributed or loaned under
this subparagraph 3.3(a)(i) in the current Distribution Year and all
prior Distribution Years equals the aggregate GAAP Earnings of the
Partnership for all Earnings Years including the current Fiscal Year or
other taxable period; provided that if a Partner is allocated a GAAP
Loss for any Earnings Year, such GAAP Loss shall (x) first, be carried
back and set off, on a LIFO basis, against such Partner's allocated
GAAP Earnings from prior Earnings Years, not yet distributed or loaned
on the date of such carryback, and (y) second, to the extent such
allocated GAAP Loss were to exceed a Partner's not distributed or
loaned prior GAAP Earnings, the remaining net GAAP Loss will be carried
forward and shall reduce such Partner's allocable share of the GAAP
Earnings of the next succeeding Earnings Year(s), determined by using
the Applicable Distribution Split for such succeeding Earnings Year(s),
until such loss carryforward shall have been fully offset.
(ii) Then, Surplus Cash arising in any Distribution Year which is
in excess of all distributions or loans required to be made under the
preceding subparagraph 3.3(a)(i) for the current Earnings Year and all
preceding Earnings Years shall be distributed among or loaned to the
Partners, as the case may be, in the ratio of their respective
Partnership Interests for the Distribution Year in which such excess
Surplus Cash arose.
(b) Loans.
(i) Notwithstanding anything to the contrary in this Section 3.3,
the Partnership shall loan all Surplus Cash to the Partners until the
earlier of (x) June 30, 2001 (which date may be extended by the Board
of Directors of the General Partner (the "Board")) or (y) the date on
which the aggregate balance of all loans made by the Partnership to all
Partners shall have reached two hundred million dollars ($200,000,000)
(the "Loan Cessation Date"). A Partner entitled to borrow from the
Partnership under this paragraph 3.3(b) may assign its right to borrow
to any Affiliate (the borrowing
16
Partner or Affiliate hereinafter collectively referred to as the
"Borrower") all of whose common stock is owned, directly or indirectly,
by such Partner, provided such Borrower is approved by the Board.
(ii) Such loans will be evidenced by interest-bearing promissory
notes, with grids attached showing the principal amount outstanding at
any particular time (the "Notes").
(iii) Any Borrower shall have the right not to accept its pro rata
loan amount; in such case, such Surplus Cash which otherwise would have
been loaned to such Borrower will be invested by the Partnership in a
diversified, high-grade commercial paper portfolio. For purposes of
subparagraph 3.3(a)(i) all Surplus Cash retained by the Partnership
pursuant to this subparagraph 3.3(b)(iii) shall be treated as loaned to
such Borrower.
(iv) Each Partner will pledge its interest in the Partnership and
the General Partner, as security for the satisfaction of its
obligations under its Note. to the extent that such Note is an
obligation of an Affiliate of the Partner, such Partner will provide
its interest in the Partnership and the General Partner as collateral
for the Note given by such Affiliate.
(v) In the event such loans mature or are otherwise called by the
Partnership, each Partner shall have an automatic right to a cash
distribution in an amount equal to the loan principal repaid by such
Partner, in addition to any other distribution rights under this
Section 3.3, unless such repaid principal (u) is utilized to finance an
extraordinary Partnership transaction or event, or (v) is necessary to
fund a Partnership loss; provided, however, that such distribution to
each Partner shall not exceed the Capital Account balance of each
respective Partner on the date of such distribution. To the extent that
clause (u) or (v) of the preceding sentence applies, any remaining
amounts to be distributed among the Partners pursuant to this
subparagraph 3.3(b)(v) will be distributed among the Partners in the
ratio that the amount of the Loans repaid by each Partner bears to the
total amount of Loans repaid by all Partners, and notwithstanding any
other provision of this section 3.3, the Partners then shall be
entitled to distributions of first available Surplus Cash in the amount
equal to the amount by which distributions were previously reduced by
operation of such clauses (u) and (v) and in the same ratio.
(vi) In the event that (x) Loans of a Limited Partner are repaid
and are followed by a distribution to such Partner pursuant to
subparagraph 3.3(b)(v), and (y) the other Limited Partner had not
borrowed all or part of its share of Surplus Cash pursuant to
subparagraph 3.3(b)(iii) then such other Limited Partner shall receive
a cash distribution from the Partnership in an amount equal to a
percentage of its total entitlement of Surplus Cash invested by the
Partnership in securities pursuant to either subparagraph 3.3(b)(iii)
equal to the percentage of the amount of the Loans of the first
17
Limited Partner the proceeds of which were distributed to the latter
pursuant to subparagraph 3.3(b)(v).
(vii) The Loans shall mature on June 30, 2001, provided, that all
Loans to a Partner shall be called and repaid in full no later than the
date on which such Partner ceases to be a Partner.
(viii) Further details regarding the terms of such loans are set
forth in Exhibit J hereto.
(c) Notwithstanding the foregoing, in the case of a sale or other
disposition of all or substantially all of the assets of the Partnership, the
net proceeds therefrom and any other assets (including cash) of the Partnership
shall be applied and distributed as provided in Section 5.12 hereof.
(d) Any payments described in Sections 707(a) and (c) of the Code shall
not be deemed distributions for purposes of this Agreement.
(e) Notwithstanding any of the foregoing, the Surplus Cash otherwise
distributable to a Partner shall be reduced to the extent provided in
subparagraph 3.1(c)(iii).
ARTICLE IV RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER
SECTION 4.1 MANAGEMENT AND CONTROL OF PARTNERSHIP.
(a) The General Partner shall have the exclusive right, subject to the
provisions of this Agreement, to manage and control the business and affairs of
the Partnership. Except as otherwise specifically provided herein, the General
Partner shall have the right to perform all actions necessary, convenient or
incidental to the accomplishment of the purposes and authorized acts of the
Partnership, and shall possess and may enjoy and exercise all of the rights and
powers of a general partner as provided in and under the Act.
(b) Without limitation of the generality of the provisions of paragraph
4.1(a) hereof, the General Partner shall have the authority, for and on behalf
of the Partnership, to execute and deliver the Transfer Agreements and any other
agreements and instruments to be executed by the Partnership on or after the
Commencement Date, to form and capitalize subsidiaries, and to take any and all
actions necessary or advisable relating thereto, and thereby in all respects to
bind the Partnership.
(c) No Limited Partner shall participate in the control or management
of the business or affairs of the Partnership, except as permitted by law. The
Limited Partners hereby consent to the exercise by the General Partner of the
powers conferred on the General Partner by this
18
Agreement. The Limited Partners shall not have any authority or right to act for
or bind the Partnership.
(d) The General Partner shall be entitled to cause its officers and any
employees of the General Partner or the Partnership to perform services for the
Partnership. The persons set forth in Exhibit E attached hereto and made a part
hereof shall initially serve as Senior Staff in the offices of the General
Partner and the Partnership set forth opposite their name.
SECTION 4.2 ACTION BY GENERAL PARTNER. Except as may be expressly limited by the
provisions of this Agreement, the General Partner is specifically authorized, as
appropriate, to execute, sign, seal and deliver in the name and on behalf of the
Partnership any and all agreements, certificates, instruments or other documents
requisite to carrying out the intentions and purposes of this Agreement and of
the Partnership.
SECTION 4.3 SEGREGATION OF FUNDS. Partnership funds shall be kept exclusively in
one or more bank accounts in the Partnership's name, which accounts shall
designate the Partnership as the sole beneficiary thereof. No funds of the
General Partner or any of its Affiliates shall be kept in such accounts. Funds
shall be withdrawn from the Partnership's accounts exclusively for Partnership
purposes.
SECTION 4.4 DEVOTION OF TIME; COMPENSATION. The General Partner shall devote to
the affairs of the Partnership such time as shall be required for the proper
performance of the General Partner's duties. The General Partner shall not
engage in any other activities or assume any involvement or acquire any interest
in any entity other than the Partnership, except as may be approved by the
Board. The General Partner shall be entitled to receive reasonable compensation
from the Partnership for services provided thereto and reimbursement for
reasonable third party and its own expenses.
SECTION 4.5 LIMITED PARTNER CONSENTS. Notwithstanding anything herein contained
to the contrary, the General Partner shall not take, or suffer or permit to be
taken, on behalf of the Partnership any of the actions that are specifically
enumerated below without the prior approval of all of the Limited Partners in
writing:
(a) The amendment of this Agreement or the approval or disapproval of
any amendments hereto;
(b) The approval of an auditor;
(c) The termination or extension of the term of the Partnership;
(d) The admission of new Limited Partners to the Partnership, except
the admission of substitute Limited Partners;
(e) The admission of additional General Partners to the Partnership;
19
(f) The issuance of any Partnership Interests except as specifically
provided in this Agreement;
(g) The investment of Partnership assets in or entry into a commercial
venture with any entity in which the General Partner or any Limited Partner or
any of their respective Affiliates is an equity investor or a creditor, except
as permitted by the By-laws of the General Partner;
(h) The incurrence of any indebtedness for borrowed money by the
Partnership which by the terms of any note, agreement or other instrument
evidencing such indebtedness does not expressly state that it is non-recourse to
any Partner;
(i) The merger or consolidation of the Partnership;
(j) The sale, lease or exchange by the Partnership of, or the
mortgaging or pledging by the Partnership of, assets constituting more than
twenty percent (20%) of the Partnership's then gross assets, in each case in any
single transaction or in a series of related transactions and other than in the
ordinary course of business;
(k) The imposition of any personal liability on any Limited Partner
with respect to the business and affairs of the Partnership or any obligations
of the Partnership; or
(l) Any other action which pursuant to this Agreement requires the
approval of all of the Partners therefor.
SECTION 4.6 REMOVAL OF GENERAL PARTNER. The General Partner may be removed only
upon the unanimous vote of the Limited Partners.
SECTION 4.7 ENFORCEMENT OF OBLIGATIONS/NON-INTERFERENCE BY PARTNERS-IN-INTEREST.
Unless the Limited Partners unanimously and specifically direct to the contrary,
the General Partner shall have the power and shall be required to enforce all
obligations of the Partners to the Partnership and shall seek appropriate
redress for the Partnership with respect to the breach of any representation,
warranty or covenant of any Partner to the Partnership.
SECTION 4.8 LEGAL AND REGULATORY COMPLIANCE. It shall be the policy of the
Partnership, and the Partnership shall cause its U.S. and non-U.S. subsidiaries,
to establish and comply with high ethical standards and social responsibility
policies and practices, including those in the areas of conflicts of interest,
equal opportunity, environmental protection, health and safety, product quality,
business ethics, political contributions, adherence to proper accounting
practices, and other business policies and practices.
20
ARTICLE V TRANSFER RESTRICTIONS; TERMINATION
SECTION 5.1 GENERAL RESTRICTION.
(a) Except as otherwise provided in this Article V, no Partner shall,
without the prior written consent of the General Partner, Transfer all or any
part of its interest in the Partnership or this Agreement, including, without
limitation, any assignment which entitles the assignee to share in profits and
losses, to receive distributions or to receive allocations of income, gain,
deduction, loss or credits to which a Partner is entitled.
(b) It is the general intention of the Partners in this Article V to
restrict substantially the ability of any Partner to Transfer its Partnership
Interest.
(c) Except with the prior written approval of both Limited Partners,
the General Partner may not voluntarily withdraw as the General Partner or
Transfer all or any part of its Partnership Interest.
SECTION 5.2 EQUITABLE RELIEF. Each of the Partners agrees that its respective
Partnership Interest is unique, that a failure by any Partner to perform its
obligations under this Article V will result in irreparable harm for which
neither damages nor any other remedy at law will be adequate, and that specific
performance of such obligations may be obtained by a suit in equity.
SECTION 5.3 NO VOLUNTARY TERMINATION. Except as provided herein, no Partner
shall have the right voluntarily to dissolve or terminate the Partnership at any
time. Each Partner hereby waives any right under the laws of the State of
Delaware to apply for judicial dissolution. The only right of a Partner
unilaterally to withdraw from the Partnership shall be in accordance with this
Article V.
SECTION 5.4 WITHDRAWAL.
(a) Timing; Mechanism. At any time after December 31, 1999, either
Limited Partner by written notice to the other Partners may require that its
Limited Partnership Interest be redeemed by the Partnership, with the redemption
price to be an amount which will be determined either (i) by agreement of the
Partners, or (ii) an amount equal to the value to be determined by Binding
Appraisal (as defined below). Any such notice shall be irrevocable. Closing of
the redemption shall occur on a date selected by the remaining Limited Partner
falling (x) within ninety (90) days following the date the redemption price is
determined, if the remaining Limited Partner does not wish to avoid having the
Partnership's financial results consolidated with such remaining Limited
Partners' financial results for financial reporting purposes; or (y) otherwise,
within eighteen (18) months of the date the Limited Partner wishing to have its
interest redeemed gave written notice of such intention to the other Partners.
Any Loans to the withdrawing Partner shall be called and repaid in full no later
than the date on which the closing of the redemption shall occur. "Binding
Appraisal" shall mean the process
21
whereby a price is determined for application in the Withdrawal Procedure, as
set forth in Exhibit I hereto.
(b) Operating Risk/Benefit. During the Pre-Withdrawal Period the
Partner to be redeemed shall continue to have the right to receive distributions
under Section 3.3 hereof, which will continue to be made on the same bases as
previously used, and the other rights, and continue to be subject to the
obligations, of a Limited Partner hereunder, provided that the Partner to be
redeemed shall (i) have no obligation to make further Capital Contributions to
the Partnership and (ii) not be entitled to any distributions arising from
extraordinary transactions by the Partnership.
(c) Simultaneous Election by Both Limited Partners. If, within 30 days
after the Partnership receives written notice from one Limited Partner of its
intention to withdraw, the other Limited Partner also gives written notice to
the Partnership of its intention to withdraw, then, the Withdrawal Procedure
shall not apply, and the Partners shall cooperate with one another in the sale
of the Partnership or its assets.
SECTION 5.5 SALES TO THIRD PARTIES. At any time on or after January 1, 2000, if
a third party, with sufficient financial resources (an "Acquiror") and which is
not a Partner and in which the Offeror (as hereinafter defined) did not and does
not have any direct or indirect beneficial ownership interest and does not
control, has offered to purchase from a Limited Partner all of such Limited
Partner's Limited Partnership Interest and, as hereinafter provided, all of the
Limited Partnership Interest of the Offeree (as hereinafter defined), in a bona
fide, arm's-length transaction, not subject to material contingencies and if
such Limited Partner desires to accept such offer, such Limited Partner (the
"Offeror") shall give written notice to the other Limited Partner (the
"Offeree") and to the General Partner of a desire to so dispose of its Limited
Partnership Interest, which proposed disposition is subject to the following
provisions:
(a) The Offeror shall first offer to the Offeree the following options:
(A) to buy the Offeror's Limited Partnership Interest from the Offeror at the
same price and upon the same terms and conditions as (or, if any such terms and
conditions cannot be duplicated, on terms and conditions financially equivalent
to) those the Offeror has been offered by, and is willing to accept from, the
Acquiror, and (B) to sell all, but not less than all, of the Offeree's Limited
Partnership Interest to the Acquiror at an Equivalent Price and on the same
terms and conditions as the offer which the Offeror has received from the
Acquiror.
(b) The offer by the Offeror to the Offeree shall (A) disclose all the
details pertaining to any such proposed transaction with the Acquiror, including
the price, terms and conditions and the name and address of the Acquiror to whom
the Offeror is prepared to sell the Offeror's Limited Partnership Interest and
(B) state that the Acquiror has agreed, for the benefit of the Offeree, to
purchase all of the Offeree's Limited Partnership Interest at an Equivalent
Price (the amount of which shall be stated) and on the same terms and conditions
as are to be received by the Offeror. If the Offeree elects to exercise its
right to purchase the Offeror's Limited Partnership Interest, it shall give
written notice thereof to the Offeror and the General Partner
22
within sixty (60) days after receipt of such offer from the Offeror (with all
required information) and the purchase of such Limited Partnership Interest
shall be closed at the general offices of the Partnership (or at any other
mutually agreeable place) within ninety (90) days after the Offeree's notice of
such election to the Offeror and any necessary governmental reviews, consents or
approvals have occurred (or at any other mutually agreeable time).
(c) If the Offeree elects to participate in such sale by selling all
its Limited Partnership Interest to the Acquiror, it shall give written notice
thereof to the Offeror, the General Partner and the Acquiror within sixty (60)
days after receipt of such offer from the Offeror (with all required
information), in which case the Offeror shall not sell its Limited Partnership
Interest to the Acquiror unless the Acquiror shall purchase all of the Offeree's
Limited Partnership Interest at the same time and at the Equivalent Price and on
the same terms and conditions as the Offeror's Limited Partnership Interest is
purchased. Even if the Offeree does not elect to participate in such sale, it
shall give written notice of the receipt of such offer to the Offeror and the
Partnership within sixty (60) days after receipt of the offer.
(d) If, within sixty (60) days after giving the notice to the General
Partner required in the first paragraph of Section 5.5, the General Partner
shall not have granted its approval of the sale to the Acquiror of the Limited
Partnership Interest of the Offeror and, if applicable, the Offeree, then the
sale shall not occur, and within thirty days thereafter, the Offeror may invoke
the Withdrawal Procedure, at the price offered by the Acquiror; provided, that
the Offeror may not invoke the Withdrawal Procedure if the failure of the
General Partner to grant such approval was due to the failure of the Offeror's
nominees on the Board to consent to such sale.
(e) Any Transfer of a Limited Partnership Interest to an Acquiror,
another Limited Partner or any other Person (except a Transfer pursuant to the
Withdrawal Procedure) shall be subject to the approval of the General Partner,
which the General Partner may grant or withhold in its sole and absolute
discretion.
(f) If the General Partner shall approve the sale to the Acquiror, then
the sale of the Limited Partnership Interest of the Offeror, or the Offeror and
the Offeree, as the case may be, may be consummated; provided, however, that
such sale or sales are closed within ninety (90) days after the expiration of
the sixty (60) day period referred to in paragraph 5.5(c) hereof, at a price and
upon terms and conditions not more favorable, in any material respect, to the
Acquiror or to the Offeror than those which were first disclosed to the Offeree;
and provided further that the Acquiror agrees to be bound by the terms of this
Agreement and represents that its acquisition of the Limited Partnership
Interest is for its own account and for investment and not for purposes of
distribution.
(g) At or prior to the consummation of any such sale to the Acquiror,
the Offeror shall furnish to the Offeree and to the Partnership (A) if the
Offeree shall not have participated in such sale, an agreement of the Acquiror
agreeing to be bound by the terms of this Agreement and acknowledging that the
Acquiror shall be bound by, and entitled to the benefits of, this Agreement, and
(B) whether or not the Offeree shall have participated in such sale, an
affidavit
23
of the Offeror setting forth: the name and address of the Acquiror to whom any
Limited Partnership Interest was sold; the price and terms and conditions upon
which such Limited Partnership Interest was sold; and a statement that the
Offeror did not and does not have a direct or indirect beneficial ownership
interest in, and does not control, the Acquiror. The Acquiror shall not become a
Partner until the Acquiror shall have complied with all of the provisions of
this Section 5.5.
(h) Notwithstanding anything in this Article V to the contrary, if any
Limited Partner is permitted to sell its Partnership Interest to an Acquiror,
and the Acquiror, either directly or through an Affiliate, distributes, designs,
manufactures, markets, sells or otherwise deals in products or provides services
within the Field of Operations, the Acquiror shall be denied access to the
operations of the Partnership and information related thereto until it shall
have entered into an agreement with the Partnership pursuant to which the
Acquiror becomes bound to the same extent as the Limited Partner selling its
Limited Partnership Interest is bound by the terms and conditions of the
applicable Closing Documents regarding confidentiality; provided, however, that
in no event shall the Acquiror have any right of access to the books, records or
assets of the Partnership relating to the Proprietary Information or the
Transferee/Nalco Proprietary Information, as such terms are defined in the Nalco
Transfer Agreement, without first obtaining Nalco's written consent to such
access, or to the Proprietary Information or the Transferee/Exxon Proprietary
Information, as such terms are defined in the Exxon Transfer Agreement, without
first obtaining Exxon's written consent to such access. If the Acquiror and the
Partnership are unable to reach agreement on the terms of such agreement, the
matter will be resolved in accordance with the provisions of Section 6.16
hereof.
(i) Notwithstanding any other term of this Agreement to the contrary,
no Limited Partner may transfer an interest in the Partnership without the
written consent of all other Partners if such transfer would result in the
Partnership being treated as having been terminated within the meaning of
Section 708(b)(1)(B) of the Code, provided that the foregoing restriction shall
not apply to the simultaneous sale or exchange of all the Partnership Interests
owned by each of Nalco and Exxon. In the event the Offeror desires to sell its
Partnership Interest to an Acquiror as contemplated in this Section 5.5, and
such sale would result in the Partnership being treated as terminated as
described in the preceding sentence, then the Offeror, the Acquiror and the
Offeree shall enter into a reasonable arrangement whereby the Offeror sells its
Partnership Interest to the Acquiror (on terms otherwise consistent with those
provided in this Section 5.5) in two installments over a period in excess of 12
months such that no such termination will arise.
SECTION 5.6 ADDITIONAL FUNDING; DEADLOCK; WITHDRAWAL OF A LIMITED PARTNER.
(a) If (i) a Limited Partner comes to the good faith conclusion that a
Survival Matter exists and that additional funding ("Additional Funding") is
required to insure the survival of the Partnership, and such Limited Partner so
notifies the General Partner and the other Limited Partner, and (ii) within 10
days after the date of such notice, the General Partner does not consent to a
call for capital contributions which are necessary to address such Survival
Matter (provided such consent by the General Partner is not withheld due to the
failure of such Limited Partner's
24
nominees on the Board to consent to such call), or the other Limited Partner
fails to contribute its pro rata portion of capital contributions called for by
the General Partner within 30 days after such call, then such Limited ▇▇▇▇▇▇
(the "Funding Limited Partner") that has come to such conclusion may
unilaterally provide such funding and invoke the provisions of Section 6.16
hereof to determine whether the matter is a Survival Matter.
(b) For purposes of this Section 5.6, there shall be a "Survival
Matter" only if the Partnership has insufficient funds (i) to meet its
obligations as and when they become due, (ii) to maintain its existing
properties in working order, (iii) to meet the costs of its annual operating
budget (excluding capital expenditures) as approved by the General Partner, or
(iv) to meet the costs of its annual capital expenditures budget approved by the
General Partner and, in each case, if such funds are not available on reasonable
terms and conditions from third parties.
(c) If pursuant to the provisions of Section 6.16 hereof, it is
determined that the Additional Funding was made in response to a Survival
Matter, then the Partnership shall, at the direction of the Funding Limited
Partner, cause the Additional Funding to be reflected, as of the date on which
such Additional Funding was made, as (A) a Capital Contribution for which the
adjustment provided in paragraph 2.4(c) shall be made, or (B) a loan on terms
and conditions which are equivalent to the terms and conditions that otherwise
would be required by a third party institutional lender, taking into account the
circumstances of the Partnership at such time. Additionally, after electing (A)
or (B), above, the Funding Limited Partner may, at its sole discretion, continue
as a Limited Partner in the Partnership pursuant to the terms of this Agreement,
initiate a Withdrawal Procedure or cause the Partnership to be dissolved and
wound-up pursuant to Sections 5.7 and 5.12 hereof.
(d) If pursuant to the provisions of Section 6.16 hereof, it is
determined that a Survival Matter was not involved, then the Partnership and the
Funding Partner shall treat the Additional Funding as a term loan, on terms and
conditions which would otherwise be available to a credit-worthy party from a
third party institutional lender.
SECTION 5.7 DISSOLUTION. The Partnership shall be dissolved upon (i) the
expiration of the term set forth in Section 1.2 hereof; (ii) the unanimous
decision of the Partners to dissolve (including the decision to sell the assets
of the Partnership if both Limited Partners elect to withdraw pursuant to
paragraph 5.4(c); (iii) the removal or withdrawal of the General Partner, except
as specified in Section 5.10 hereof; (iv) the occurrence, at any time after
December 31, 1999, of a Substantial Event; (v) at the option of the Offeror, the
failure of the General Partner to consent to a proposed bona fide transfer of a
Limited Partnership Interest and such Offeror's shares in the General Partner,
on or after January 1, 2000; (vi) upon the action of a Limited Partner to
dissolve pursuant to paragraph 5.6(c) hereof; (vii) the issuance of a
Governmental Action; or (viii) the occurrence of any other event causing
dissolution of the Partnership under the laws of the State of Delaware.
25
SECTION 5.8 BANKRUPTCY OF A LIMITED PARTNER. The occurrence of an Insolvency
Event with respect to a Limited Partner shall not cause a dissolution of the
Partnership if the other Partners elect to continue the Partnership as provided
in Section 5.9 hereof.
SECTION 5.9 REMEDIES UPON INSOLVENCY EVENT. If any Insolvency Event involving a
Limited Partner shall have occurred, the other Partners may (but are not
required to) operate the Business and properties of the Partnership for their
own account and risk for a reasonable period of time until such time as the
other Partners determine to (a) liquidate the Business and properties of the
Partnership; (b) cause the Partnership to redeem the Partnership Interest and
Capital Account of the insolvent Partner at a price equal to the fair market
value thereof; (c) purchase the Partnership Interest and Capital Account of the
insolvent Partner at a price equal to the fair market value thereof as of the
date of such determination; or (d) locate a third party to acquire the
Partnership Interest and Capital Account of the insolvent Partner at a price
equal to the fair market value thereof.
SECTION 5.10 REMEDIES UPON INSOLVENCY, WITHDRAWAL OR REMOVAL OF GENERAL PARTNER.
(a) Upon the withdrawal or removal of the General Partner or the
occurrence of an Insolvency Event involving the General Partner, the Partnership
shall not be dissolved and the Business of the Partnership shall be continued
if, at any time before the end of the ninetieth (90th) day following the
effective date of such withdrawal or removal or insolvency, the remaining
Partners unanimously appoint in writing a successor General Partner. Any such
Person so appointed shall be admitted to the Partnership as the successor
General Partner, and the relationship between the Partners shall be governed by
the terms of this Agreement, upon the filing within such ninety (90) day period
of any amendment to the Certificate necessary to reflect such Person's admission
as the successor General Partner in accordance with the Act. Any such
appointment shall be deemed to be effective as of the effective date of the
withdrawal or removal or insolvency of the former General Partner.
(b) The General Partner, upon the voluntary or involuntary withdrawal
of the General Partner, shall notify each Limited Partner of its withdrawal,
and, upon any such withdrawal or its removal as the General Partner hereunder,
it shall execute and file such amendment to the Certificate as may be required
by the Act to effect such withdrawal or removal as of the date of filing.
(c) In the event of a continuation of the Partnership hereunder upon
the withdrawal or removal or insolvency of the General Partner, there shall
automatically be assigned and transferred to the successor General Partner such
portion or portions of the withdrawn or removed or insolvent General Partner's
Partnership Interest for such consideration, in each case, as shall be
reasonably determined by the Limited Partners and the successor General Partner.
26
SECTION 5.11 REQUIREMENTS FOR SUBSTITUTION OF LIMITED PARTNER. No assignee of a
Partnership Interest of a Limited Partner shall be admitted as a substitute
Limited Partner unless (i) the General Partner, in its sole and absolute
discretion, agrees to such substitution and (ii) the assignee agrees in writing
to be bound by all of the provisions of this Agreement. Unless admitted as a
substitute Limited Partner, the assignee of a Partnership Interest of a Limited
Partner shall not have any rights as a Limited Partner under this Agreement or
under the Act including, without limitation, any access to the technology,
business or assets of the Partnership or the right to receive the share of
profits, losses and distributions attributable to the Partnership Interest of a
Limited Partner; provided, however, that the foregoing shall not prohibit a
Limited Partner from assigning cash distributions so long as the assignee
thereof has no rights as a Partner or otherwise to compel distributions under
this Agreement.
SECTION 5.12 WINDING UP OF PARTNERSHIP.
(a) Upon dissolution of the Partnership, an appraisal of the net
realizable value (the "Appraised Value") of the remaining Partnership assets
shall be made by independent appraisers. Copies of such statements respecting
appraisal shall be furnished to each Partner. During the period ending on the
one hundred twentieth (120th) day after the aforesaid statements are furnished
to all Partners, either Limited Partner shall have the right, by written notice
to the other Partners, to elect to cause the Partnership to redeem the entire
interest of the other Limited Partner for the amount such other Limited Partner
would receive if (w) all of the assets of the Partnership were sold for their
Appraised Value, (x) all liabilities were paid, (y) the Capital Accounts of the
Partners were adjusted to reflect their allocable shares of the net gain or loss
on such sale pursuant to Section 2.6 hereof, and (z) the net proceeds from such
sale and the other liquid assets of the Partnership were distributed to the
Partners in proportion to their respective Capital Accounts as so adjusted. The
redemption of the Partnership Interest to be redeemed shall occur within sixty
(60) days following the determination of the identity of the Limited Partner
whose interest is to be redeemed and the amount of the redemption price to be
paid therefor. At such time, the redemption price shall be paid in cash and the
redeemed Partnership Interest shall be conveyed to the Partnership by instrument
or instruments satisfactory in form and substance to the Partnership.
Notwithstanding the foregoing, if, within 30 days after the Partners receive
written notice from one Limited Partner of its intention to cause the redemption
of the other Limited Partner as provided above, the other Limited Partner also
gives written notice to the other Partners of its intention to cause the
redemption of the first Limited Partner as provided above, then, the terms of
paragraph 5.12(a) shall not apply, and the following provisions of this Section
5.12 shall apply, unless the parties agree otherwise at such time.
(b) If no Limited Partner elects to cause the Partnership to redeem the
interest of the other Limited Partner as provided in paragraph 5.12(a) hereof,
the General Partner shall proceed to sell or otherwise liquidate the assets of
the Partnership, shall pay or provide for the payment of the liabilities of the
Partnership and, after adjusting the Capital Accounts of the Partners to reflect
their allocable shares of the net gain or loss arising from the sale or other
disposition of the Partnership assets pursuant to Section 2.6 hereof, shall
distribute the net proceeds of such
27
sales and other dispositions and the other liquid assets of the Partnership to
the Partners to the extent of and in proportion to the Partners' positive
balances of their Capital Accounts as so adjusted; provided, however, that the
General Partner shall be authorized to establish reserves for the payment or
satisfaction of any contingent liabilities or obligations of the Partnership in
such amounts and for such periods of time as it deems prudent under the
circumstances. Such reserves, to the extent not expended, shall be distributed
to the Partners in proportion to the remaining balances in their respective
Capital Accounts at such time or times as the General Partner deems they are no
longer required.
(c) If the General Partner shall have a deficit balance in its Capital
Account after the Capital Accounts are adjusted as provided in paragraph 5.12(b)
hereof, the General Partner shall be obligated to restore such deficit by
contributing the amount thereof to the Partnership within ninety (90) days after
the date on which such liquidation is completed. The amount so contributed shall
be applied first to the payment of recourse obligations of the Partnership and
the balance shall be distributed to the Partners who have positive balances in
their Capital Accounts, in proportion to their respective positive balances. No
Limited Partner shall have any obligation to restore any deficit balance in its
Capital Account.
(d) The Partnership shall terminate when all property owned by the
Partnership shall have been disposed of and the net proceeds, after payment or
satisfaction of liabilities to Partnership creditors, shall have been
distributed to the Partners.
ARTICLE VI OTHER PROVISIONS
SECTION 6.1 NATURE OF RELATIONSHIP. Nothing herein shall be construed to
constitute any Partner the agent or partner of the other, except as specifically
provided herein.
SECTION 6.2 [INTENTIONALLY OMITTED].
SECTION 6.3 INSURANCE AND INDEMNIFICATION.
(a) The Partnership shall procure and maintain, at Partnership expense,
programs of insurance coverage, including but not limited to comprehensive
general liability, property damage, product liability, directors' and officers',
fiduciary, fidelity, theft, burglary, worker's compensation, and business
interruption insurance, as the General Partner from time to time shall
determine, and with such companies and with such terms, limits and deductibles
as the General Partner from time to time shall determine. The Partnership, the
Partners, the stockholders of the General Partner and any other entity which has
an equity interest in the General Partner shall be named additional insureds
thereunder, to the extent practicable.
(b) (i) The Partnership shall, to the fullest extent permitted by
applicable law, indemnify any Person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
28
administrative or investigative and whether formal or informal
("Proceeding"), by reason of the fact that the Person (y) is or was an
officer of the Partnership, or (z) is or was serving at the request of
the Partnership as a stockholder, director, officer, partner or trustee
of another corporation, partnership, joint venture, trust, nonprofit
entity, or other enterprise, including any employee benefit plan. Such
indemnity shall include indemnification against any and all expenses,
liability and loss (including, without implied limitation, attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such Person in
connection with such Proceeding. Such indemnity shall also include the
right to have funds advanced by the Partnership for expenses, including
attorneys' fees, as incurred in defending any Proceeding in advance of
its final disposition. Notwithstanding the foregoing, however, the
Partnership shall not be liable, responsible or accountable for damages
or otherwise liable hereunder to such Person for the gross negligence,
dishonesty, fraud, bad faith, breach of fiduciary duty or willful
misconduct of such Person and any funds shall be advanced to a Person
hereunder only upon such Person's written undertaking to restore such
funds to the Partnership should it be determined that the Partnership
is not liable to such Person as herein provided.
(ii) In addition to the foregoing, the Partnership shall
unconditionally and absolutely hold each of the Partners harmless from,
and indemnify each of such Persons for, any and all damages, losses,
obligations, penalties, liabilities, claims, encumbrances,
deficiencies, costs, charges and expenses of any nature whatsoever
(including, but not limited to, reasonable attorneys' fees and other
costs and expenses) incident to any suit, action, investigation, claim
or proceeding suffered, sustained, incurred or required to be paid by
any such Person relating to the assets, property, business or
obligations or liabilities of the Partnership or the Partnership's
management, control, ownership and operation of the business of the
Partnership and its assets; provided, however, that the foregoing shall
not apply to any contractual obligation of any Partner undertaken
pursuant to any of the Closing Documents.
(iii) For purposes of this Section 6.3, an "Indemnified Party"
shall be any Person who is in the class of Persons entitled to
indemnification from the Partnership pursuant to this paragraph 6.3(b).
(c) The following indemnification procedures shall apply:
If any claim is asserted against any Indemnified Party to which the
indemnifications contained in paragraph 6.3(b) hereof shall apply or to which
any Indemnified Party proposes to assert that such indemnifications apply, then
such Indemnified Party shall give prompt notice of the claim to the Partnership.
The omission so to notify the Partnership shall not relieve the Partnership from
any duty to indemnify which otherwise might exist with regard to such claim
except to the extent the omission to notify materially prejudices the ability of
the Partnership to assume the defense of such claim.
29
After the Partnership has received notice from an Indemnified Party
that a claim has been asserted against such Indemnified Party, the Partnership
shall have the right, upon giving written notice to the Indemnified Party, to
participate in the defense of such claim or to elect to assume the defense
against the claim, at its own expense, through the Indemnified Party's attorney
or an attorney selected by the Partnership satisfactory to the Indemnified
Party, which approval shall not be unreasonably withheld. If the Partnership
fails to give prompt notice of such election, the Partnership shall be deemed
not to have elected to assume the defense of such claim and the Indemnified
Party may defend against such claim with its own attorney. If the Partnership
elects to participate in but not to assume the defense, the Indemnified Party
shall have the right to make the final decision, in a reasonable manner, in all
matters relating to such defense.
The Indemnified Parry and the Partnership will cooperate and make
available to each other (and their representatives) all employees, information,
books and records reasonably necessary or useful in connection with such
defense. In the event the Partnership shall have elected to assume the defense
of a claim the Partnership shall have the sole right to compromise and settle in
good faith any such claim.
If the Partnership shall elect to defend or agree in writing to
compromise or settle any such claim, it shall be bound by any ultimate judgment
or settlement as to the existence and amount of the claim, and the amount of
said judgment or settlement shall be conclusively deemed for all purposes of
this Agreement to be a liability on account of which the Indemnified Party is
entitled to be indemnified.
If the Partnership does not elect or is deemed not to have elected
to assume the defense of a claim:
(i) The Indemnified Parry alone shall have the right to conduct
such defense;
(ii) The Indemnified Party shall have the right to compromise and
settle the claim in good faith without the prior consent of the
Partnership; and
(iii) If it is ultimately determined that the claim of loss which
shall form the basis of such judgment or settlement is one that is
validly an obligation of the Partnership, the Partnership shall be
bound by any ultimate judgment or settlement as to the existence and
amount of the claim, and the amount of said judgment or settlement
shall be conclusively deemed for all purposes of this Agreement to be a
liability on account of which the Indemnified Party is entitled to be
indemnified.
(d) The rights of indemnification provided for in this Section 6.3
shall continue as to any Person who is no longer within the class of Persons
entitled to indemnification pursuant to paragraph 6.3(b) hereof with respect to
events occurring while such Person was part of such class
30
and shall inure to the benefit of the heirs, executors, administrators,
successors, legal representatives and permitted assigns, as the case may be, of
any such Person.
(e) The rights of indemnification provided for in this Section 6.3
shall continue to exist after rescission or modification of this Agreement with
respect to events occurring prior to such rescission or modification.
(f) The rights of indemnification provided for in this Section 6.3
shall be cumulative with any other right an Indemnified Party may have or may
hereafter acquire under any law, any provision of this Agreement or otherwise,
and any rights any such Person shall have may be asserted against the
Partnership, without regard to the rights such Person may have against another
Person.
SECTION 6.4 LIMITED PARTNER APPROVAL OF ALLOCATIONS, DISTRIBUTIONS AND LOANS.
Notwithstanding any other provision of this Agreement to the contrary, each
allocation under Sections 3.1 or 3.2, and each distribution or loan under
Section 3.3, shall he subject to the approval of both Limited Partners, which
approval may not be unreasonably withheld. At least 30 days prior to posting any
allocation or making any distribution or loan, the General Partner shall give
notice to both Limited Partners of such intent, and give both Limited Partners
30 days in which to approve or disapprove such allocation, distribution or loan.
If no Limited Partner objects to such allocations, distributions or loans within
such 30-day period, the General Partner may post such allocations, distributions
or loans; if a Limited Partner does object to an allocation, or make such
distribution or loan within such 30-day period, then no allocation, distribution
or loan may be made until such disagreement is resolved.
SECTION 6.5 INTERNAL AUDIT AND INSPECTION.
(a) Each Partner, through its authorized representatives, upon notice
in writing to the Partnership and the other Partners, shall have the right to
conduct an internal audit of accounts and records relating to the financial and
operating activities (including contractors and vendors supplying materials
and/or services to the Partnership) hereunder for any calendar year within
thirty-six (36) months following the end of such calendar year. Each Partner
shall make every reasonable effort to conduct joint or simultaneous audits in a
manner which will result in a minimum of inconvenience. The complete audit
report from such audits shall be made available to the Partnership and the other
Partners. The Partnership shall bear no portion of the audit cost incurred under
this paragraph unless agreed to by the Partners.
(b) Each Partner, through its authorized representatives, shall have
free access to and may inspect any of the operations of the Partnership and its
subsidiaries for any purpose not inconsistent with the best interests of the
Partnership. Such inspections shall occur during normal business hours upon
forty-eight (48) hours advance written notice.
31
SECTION 6.6 PARTNERSHIP DEALINGS WITH PARTNERS.
(a) Except for the transactions described in this Agreement and related
agreements entered into on or before the Commencement Date, arrangements and
agreements calling for transactions and dealings between the Partnership and
individual Partners, their Affiliates (including, without limitation, any loans
to be made by a Partner to the Partnership or by the Partnership to a Partner,
whether recourse or nonrecourse) must be consented to, ratified and approved by
each other Partner. Without limiting the generality of the foregoing, the terms
of any loans between the Partnership and a Partner must reflect market terms,
taking into account the credit standing of the borrower, unless otherwise agreed
by all Partners; provided that the interest rate payable under the Notes shall
be the same for all Partners who pledge their ownership interest in the
Partnership as collateral security for the payment obligations under the Notes,
provided, however, that in no event shall Nalco pay a higher rate of interest
than Exxon if Nalco has pledged its Limited Partnership Interest.
(b) No Partner shall do anything whereby the capital or the property of
the Partnership may be attached, taken in execution or otherwise impaired, and
each Partner punctually shall pay its separate debts and indemnify each other
Partner against any losses or damages incurred as a result of separate debts of
such Partner. Nothing herein shall be deemed to alter the obligations of a
Partner to the Partnership or the Partnership to a Partner under the terms of
any Closing Document. Except as otherwise provided in any written agreement by
the Partnership or in this Agreement, any expenses incurred by the Partnership
in defending or meeting obligations of an individual Partner shall be chargeable
solely to that individual Partner.
(c) Exxon and Nalco have agreed that their respective activities and
the activities of their respective Affiliates within the Field of Operations,
and the activities of the Partnership and its Affiliates outside the Field of
Operations, will be governed by the following terms:
(i) Except as otherwise provided in subparagraph 6.6(c)(x) below,
Exxon and Nalco and their Affiliates will conduct all their commercial
activities within the Field of Operations through the Partnership, for
the maximum period permitted by law, or for a period of 15 years,
whichever is less. Nothing contained herein shall prevent Exxon or
Nalco from entering into any joint research and development project
with a non-affiliated third party under which such third party obtains
the right to commercialize any products resulting from the Later
Developed Technology of the respective party (as defined in the Patent
and Know-How Assignment and License effected as of September 1, 1994
between Nalco, Exxon and the Partnership), including those within the
Field of Operations, resulting from such project, provided, however,
that the respective party shall use reasonable efforts to offer the
Partnership the right to obtain a license under such rights. Nothing
contained herein shall be deemed to prevent Nalco, Exxon or any of
their respective Affiliates from entering into any Qualified
Compensation Event or other transaction approved by the Board.
32
(ii) The Partnership will not operate outside of the Field of
Operations for the maximum period permitted by law, or for a period of
15 years, whichever is less.
(iii) If, after the date hereof, Exxon develops any Technical
Assets with application within the Field of Operations, and if Exxon
desires, at its sole discretion, to make such Technical Assets
available for use within the Field of Operations, Exxon, to the extent
it can do so without the consent of non-affiliated third parties and
subject to conditions under which Exxon acquired such Technical Assets,
will give the Partnership first negotiating rights to acquire a
non-exclusive right to use those Technical Assets within the Field of
Operations, on an arm's length basis. If the Partnership declines such
non-exclusive license, then Exxon shall have the right to grant an
exclusive license to any non-affiliated third party to use those
Technical Assets, without accounting to the Partnership therefor.
(iv) If, after the date hereof, Nalco patents any technology with
applications within the Field of Operations, and if Nalco desires, at
its sole discretion, to make such Patent available for use within the
Field of Operations by non-affiliated third parties, Nalco shall
license such patented technology to the Partnership for 5% of net sales
revenues of all products which are covered by a valid claim of the
Nalco patent. Patented inventions invented jointly by Nalco and
Partnership employees shall be owned jointly by Nalco and the
Partnership. The Partnership shall not license any non-affiliated third
party under those jointly owned patents outside the Field of Operations
without the permission of Nalco, and Nalco shall not license any
non-affiliated third party under those jointly owned patents within the
Field of Operations without the permission of both Exxon and the
Partnership.
(v) If the Partnership develops any Technical Assets with
application outside the Field of Operations, and such Technical Assets
are derivative to Technical Assets originally contributed or licensed
to the Partnership by Exxon or Nalco, the Partnership will make such
Technical Assets available free of charge exclusively for use by such
Partner outside the Field of Operations, where the Partnership may do
so without the consent of non-affiliated third parties.
(vi) If the Partnership develops any Technical Assets with
application outside the Field of Operations, and such Technical Assets
are not derivative to Technical Assets originally contributed or
licensed to the Partnership by Exxon or Nalco, the Partnership will
provide Exxon and Nalco the opportunity to negotiate for licenses to
use such Technical Assets outside of the Field of Operations, subject
to the following terms: (i) the economic terms will be on an arm's
length basis; (ii) both Exxon and Nalco may receive such a license;
(iii) if either Exxon or Nalco receives such a license, the Partnership
will not be entitled to license the use of such Technical Assets to any
other party, other than the other Limited Partner; (iv) any such
license shall be non-transferrable and may not be sub-licensed except
to the respective Limited Partner's Affiliates, joint ventures, joint
interests, or existing licensees; (v) if neither Exxon nor Nalco
negotiates such a license,
33
both Exxon and Nalco shall have a right of first refusal over the first
third party license for such Technical Assets, which, once exercised,
will require that no further licenses for such Technical Assets be
issued.
(vii) If the Partnership develops any Technical Assets with
application outside the Field of Operations, and such Technical Assets
are derivative to Technical Assets originally contributed or licensed
to the Partnership by both Exxon and Nalco and subsequently commingled
within the Partnership, the Partnership will not make such Technical
Assets available for use by any other party, including either Exxon or
Nalco, without the specific written agreement of both Exxon and Nalco.
(viii) Neither Exxon nor Nalco shall be prohibited from investing
in a competitive enterprise so long as either (x) within one year after
the date of such investment, such competitive enterprise has divested
itself of such business and assets or (y) the segment of the sales
revenues of such competitive enterprise relating to the Field of
Operations are not and do not become "significant" in amount. For the
purposes of this clause, the segment of the sales revenues of a
competitive enterprise are "significant" in amount if such sales
revenues, multiplied by Exxon's or Nalco's, as the case may be,
percentage ownership interest in such enterprise, constituted more than
ten percent (10%) of the total annual sales revenues of the Partnership
as of the last day of such enterprise's fiscal year most recently
completed prior to the date of acquisition, or in any of such
enterprise's complete fiscal years following such acquisition.
(ix) If any entity in which Exxon or Nalco or any Affiliate of
Exxon or Nalco owns an equity interest, the business of which is not
controlled by the parent or such Affiliate, distributes, designs,
manufactures, markets, sells or otherwise deals in products and/or
services for which the Partnership is intended to have and has
exclusive rights pursuant to the Field of Operations (a "Product
Overlap") and the volume of sales (in U.S. Dollars) of such product(s)
during any calendar year in any country or in the aggregate is equal to
at least ten percent (10%) of the volume of sales (in U.S. Dollars) by
the Partnership and its Affiliates in such country or in the aggregate,
then such Partner or such Affiliate, as the case may be, will use its
reasonable best efforts to cause that Affiliate to withdraw promptly
from the distribution, design, manufacturing, marketing and sale of or
otherwise dealing in such products) or, failing that, will compensate
the Partnership at least annually for the economic benefits realized by
such parent, directly or indirectly, as a result of such Product
Overlap.
(x) Notwithstanding the above, Exxon and its Affiliates expressly
reserve the right to transact business in the Field of Operations with
the limited exception of selling those specialty chemicals listed in
Exhibit G, Attachment I and Attachment II to non-affiliated third
parties. Exxon and its Affiliates may extend the foregoing right, but
not the right to sublicense, (1) to any of their respective joint
venture or joint interests, but only for use in joint operations,
and/or (2) to any of their respective licensees for
34
operations in the oil and gas industry and hydrocarbon processing
industry, but only for use in licensed operations.
(d) Each Partner hereby agrees that the obligations of such Partner set
forth in paragraph 6.6(c) hereof shall survive and continue to be in full force
and effect notwithstanding the fact that such Person is no longer a Partner of
the Partnership.
(e) To the extent the provisions of this Agreement are inconsistent
with the Act or with the law of any state or jurisdiction in which a Partnership
operation is established, the provisions of this Agreement shall apply to the
maximum extent lawfully permissible.
(f) The Partnership shall pay to each of the Limited Partners (i)
amounts equal to the amounts of Partnership Expenses incurred by such Limited
Partner, as shown on Exhibit B-1 and invoiced to the Partnership, and (ii)
amounts equal to the amounts of Unmutualized Expenses incurred by such Limited
Partner, as shown on Exhibit B-2 and invoiced to the Partnership; provided that
any such Partnership Expense or Unmutualized Expenses are invoiced to the
Partnership no later than December 31, 1994. Payments by the Partnership under
this paragraph 6.6(f) shall be made by the Partnership within seven (7) days
after receipt of such invoice. Such payments shall be characterized by the
Partnership as payments under Section 707(a) of the Code.
SECTION 6.7 BOOKS AND RECORDS.
(a) The general ledger and other books and records of the Partnership
and its subsidiaries shall be maintained in such manner as may be required to
compute the Partners' Capital Accounts as provided in Article II hereof, to
allow Partnership tax returns to be prepared and to allow the financial
statements of the Partnership and the Partners to be prepared in accordance with
United States generally accepted accounting principles and practices, and taking
into account the principles of Exhibit D hereto. These books and records shall
be separate from the Partners' financial records and shall fairly represent all
financial transactions related to the Partnership and its Affiliates.
(b) Except as may otherwise be agreed by all of the Partners, within
ten (10) business days after the close of each month, the General Partner shall
provide to the Partners a statement of income, and within eleven (11) business
days after the close of each quarter, the General Partner shall also provide to
the Partners a balance sheet, a statement of changes in the Partners' Capital
Accounts, a statement of cash flow, a reconciliation between book basis Capital
Account balances and tax basis Capital Account balances and a statement of
taxable income for each Partner for such quarter, which statements may be
unaudited. Each such quarterly statement shall be certified by the General
Partner as fairly presenting the financial position of the Partnership as of the
date thereof and its results of operations for the period then ended, subject to
changes resulting from audit and year-end adjustments (all of which such
statements shall be reviewed by the Partnership's auditors on a quarterly
basis).
35
(c) The Partnership and its subsidiaries shall have an examination of
its financial statements in accordance with United States generally accepted
auditing standards made by Price Waterhouse as of December 31, 1994 and for the
period then ending and by a mutually acceptable firm of independent public
accountants as the Partners may from time to time appoint for succeeding
periods. Each Partner shall be furnished with a copy of such financial
statements, including but not limited to a balance sheet, a statement of changes
in the Partners' Capital Accounts, a statement of income and a statement of cash
flow, together with the report of said accountants covering the results of such
examination, as soon as reasonably practicable after the close of the
Partnership's Fiscal Year; provided that in no event shall such financial
statements be furnished later than sixty (60) days after the close of each such
year. The Partnership shall cause its independent public accountants to
cooperate with the accountants of the Partners and Affiliates of the Partners.
(d) Within five (5) months after the end of each Fiscal Year of the
Partnership, the General Partner shall cause to be prepared and delivered as
provided in Section 6.9 hereof to each Partner a report setting forth in
sufficient detail all such information and data with respect to the Partnership
during such Fiscal Year as shall enable such Partner to prepare its income tax
returns in accordance with the laws, rules and regulations then prevailing in
the appropriate jurisdiction.
(e) Within five (5) months after the end of each Fiscal Year of the
Partnership, the General Partner shall cause to be prepared and delivered as
provided in Section 6.9 hereof to each Partner such annual information returns
and statements as may be required of partnerships generally under United States
tax laws and regulations. All such returns and statements shall reflect the
agreed allocations of tax depreciation, tax gains and tax losses set forth in
Section 3.2, hereof. Each of the Partners shall file its U.S. federal, state and
local income and other tax returns consistently with the tax consequences
contemplated in this Agreement.
(f) The Partners hereby adopt the accounting and tax policies set forth
in Exhibit D hereto as the accounting and tax policies of the Partnership.
SECTION 6.8 TAX MATTERS.
(a) Preparation of Tax Returns. The General Partner shall be
responsible for the preparation and timely filing of all returns of Partnership
income, gain, deduction, loss and other items necessary for federal and state
income tax purposes and shall use all reasonable efforts to furnish to the
Partners within five (5) months of the close of the taxable year the tax
information reasonably required for federal and state income tax reporting
purposes. The classification, realization and recognition of income, gain,
deduction and loss and other items shall be on the accrual method of accounting
for federal income tax purposes. The taxable year of the Partnership shall be
the Fiscal Year. Notwithstanding any other provision of this Agreement to the
contrary, all Partnership income tax returns shall be subject to the approval of
both Limited Partners, which approval may not be unreasonably withheld. At least
30 days prior to filing any income tax return, the General Partner shall give
written notice to both Limited Partners, and
36
give both Limited Partners 30 days in which to approve or disapprove such tax
return. If no Limited Partner objects to such tax return within such 30-day
period, the General Partner may file such tax return; if a Limited Partner does
object to a tax return, then the General Partner and both Limited Partners will
negotiate in good faith to resolve all outstanding issues.
(b) Tax Elections. Except as otherwise provided herein, the General
Partner shall, in its sole and complete discretion, determine whether to make
any available election pursuant to the Code. Notwithstanding the foregoing, the
General Partner shall make the election under Section 754 of the Code in
accordance with applicable regulations thereunder for the first Fiscal Year in
which there is a transfer or Partnership distribution to which such election
would apply, unless the Partners at the time of such transfer or distribution
agree at the time for filing the Partnership tax information return not to make
such election. In addition, the General Partner shall elect the
Last-In-First-Out method of accounting and shall elect under Section 195 of the
Code to amortize start-up costs ratably over a sixty (60) month period.
(c) Tax Controversies. Subject to the provisions hereof, the General
Partner is designated the Tax Matters Partner, and is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with all
examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
(d) Organizational Expenses. The Partnership shall elect to deduct
expenses incurred in organizing the Partnership ratably over a sixty (60) month
period as provided in Section 709 of the Code.
(e) Taxation as a Partnership. No election shall be made by the
Partnership or any Partner for the Partnership to be excluded from the
application of any of the provisions of Subchapter K, Chapter 1 of Subtitle A of
the Code or from any similar provisions of any state tax laws.
(f) Withholding. Notwithstanding any other provision of this Agreement,
the General Partner is authorized to take any action that it determines to be
necessary or appropriate to cause the Partnership to comply with any federal,
state and local withholding requirement with respect to any payment or
distribution by the Partnership to any Partner or other Person. All amounts so
withheld, and, in the manner determined by the General Partner, amounts withheld
with respect to any payment or distribution by any Person to the Partnership,
shall be treated as distributions to the Partners under Section 3.3 or Article V
hereof, or if any such withholding requirement was not satisfied with respect to
any amount previously distributed to such Partner under Section 3.3 or Article V
hereof, such Partner and any successor or assignee with respect to such
Partner's Partnership Interest will indemnify and hold harmless the General
Partner and the Partnership for such withholding requirement.
37
SECTION 6.9 NOTICES.
(a) Unless otherwise specified in this Agreement, all notices, demands,
elections, requests or other communications which the Partnership or any Partner
to this Agreement may desire or be required to give hereunder shall be in
writing and shall be given by delivering the same by a reputable courier service
which requires a signature upon delivery or by mailing the same by registered or
certified mail, postage prepaid, return receipt requested, or by sending by
telefax with receipt confirmation; addressed
(i) if to Nalco, to:
Nalco Chemical Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
or (ii) if to Exxon, to:
Exxon Chemical Company
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Attorney - Special Projects
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
or (iii) if to the Partnership or the General Partner, to:
Nalco/Exxon Energy Chemicals, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇-▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
with a copy to the other Partners.
(iv) if to any other Person who becomes a Partner, at the address
for notices furnished by such Person to each other Partner by notice pursuant to
this subsection, or (v) at any other address designated by any party in a notice
given to the other parties pursuant to the provisions of this subsection. All
notices given as in this Section 6.9 provided shall be deemed to have been given
or served on the date delivered by courier or sent by telefax or three business
days after the date so mailed.
38
(b) Promptly following receipt by the Partnership of any notice,
demand, election or request from Nalco, Exxon or any Affiliate thereof pursuant
to an agreement between the Partnership and Nalco or any Affiliate thereof, or
Exxon or any Affiliate thereof, the Partnership shall deliver to Exxon or Nalco,
as the case may be, a copy of such notice, demand, election or request pursuant
to the provisions of paragraph 6.9(a).
SECTION 6.10 BENEFITS AND OBLIGATIONS. The covenants and agreements herein
contained shall inure to the benefit of, and be binding upon, the Partners and
their respective successors. Any Person succeeding to the interest of a Partner
as provided herein shall succeed to all of such Partner's rights, interests,
obligations and liabilities hereunder, subject to and with the benefit of all
terms and conditions of this Agreement.
SECTION 6.11 GOVERNING LAW.
(a) All questions with respect to the construction of this Agreement
and the rights and liabilities of the parties hereto shall be determined in
accordance with the laws of the State of Delaware applicable to business
arrangements entered into and performed entirely within the State of Delaware.
(b) Each of the parties hereto (i) hereby irrevocably submits itself to
the non-exclusive jurisdiction of (a) the Court of Chancery of the State of
Delaware, County of New Castle, and (b) the United States District Court for the
District of Delaware, for the purposes of any suit, action or other proceeding
brought by any other party, or its respective successors or assigns, with
respect to this Agreement or the Act, including a suit, action or proceeding to
compel compliance with Section 6.16 hereof, or to enforce a resolution,
settlement, order or award made pursuant thereto, or to enforce any obligation
for the payment of money contained herein, and (ii) to the extent permitted by
applicable law, hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of the above-named courts, that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that the agreement to
compel compliance with Section 6.16 hereof, or a resolution, settlement, order
or award made pursuant thereto, or such an obligation for the payment of money,
may not be enforced in or by such courts.
SECTION 6.12 COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
SECTION 6.13 LIABILITY OF PARTNERS. Except as expressly provided herein or in
the Closing Documents, the liability of each Limited Partner shall be limited to
the maximum extent permitted by the Act. The General Partner shall not be
liable, responsible or accountable in damages or otherwise to the Partnership or
to any Partner for (i) any act performed within the scope of the authority
conferred on it by this Agreement, except for the gross negligence, dishonesty,
fraud, bad faith, breach of fiduciary duty or willful misconduct of the General
39
Partner in carrying out the obligations of the General Partner hereunder, (ii)
the General Partner's failure or refusal to perform any act, except those
required by the terms of this Agreement, (iii) the General Partner's performance
of, or failure to perform, any act, so long as such act or omission is made in
good faith in reliance on advice of legal counsel, accountants, consultants or
brokers to the Partnership or (iv) the negligence, fraud, dishonesty or bad
faith of any employee, agent, consultant or broker of the Partnership selected,
engaged or retained in good faith.
SECTION 6.14 CURRENCY. Except as specifically provided, all amounts referred to
in this Agreement are stated in United States dollars.
SECTION 6.15 AMENDMENTS. This Agreement and any term or provision hereof may at
any time or from time to time be modified, amended or waived, or additional or
substituted terms or provisions incorporated herein, upon the unanimous written
consent of the Partners, the giving or withholding of which shall be in the sole
discretion of each such Partner.
SECTION 6.16 ARBITRATION.
(a) Any claim, dispute, difference or controversy (a "Dispute") between
the Limited Partners as to whether a matter is a Survival Matter, which cannot
be settled by mutual understanding between the parties shall be submitted to the
chief executive officers of Nalco Chemical Company and Exxon Chemical Company
for resolution.
(b) Should said Dispute not be resolved, as above provided, within
thirty (30) days of submission to the appointed representatives, at the written
request of either Limited Partner, said Dispute shall be submitted to and
resolved by binding arbitration in accordance with the procedures set forth in
Exhibit F.
(c) Notwithstanding the foregoing, it is hereby agreed that the
arbitrators shall not have any power to terminate or dissolve the Partnership.
(d) Pending resolution of any Dispute, each Partner shall make every
reasonable effort to minimize adverse economic consequences to the Partnership
which would result from non-operation, sub-capacity operation or failure to meet
payment terms under loan agreements. Such reasonable effort may include, inter
alia, continued performance of obligations under a reservation of rights in lieu
of termination and non-performance.
(e) The Limited Partner which does not prevail in the arbitration
proceeding shall bear all the out of pocket costs and expenses of both Limited
Partners in the arbitration proceeding.
SECTION 6.17 COOPERATION. The Partners agree to cooperate with the Partnership
and with each other in connection with any tax dispute relating to the
Partnership (including its formation and operations) and any transaction entered
into between the Partnership and any Partner (or any of
40
their respective Affiliates). The Partners agree to provide reasonable requested
assistance to each other, at the reasonable cost of the Partner requesting such
assistance, in connection with any such tax dispute. In addition, each Partner
shall cooperate with the other Partners in the event of any inquiry, proceeding
or investigation relating to the subject matter of this Agreement instituted by
any agency of any federal, state, local or foreign jurisdiction against a
Partner or any Affiliate of a Partner.
SECTION 6.18 BROKERS. Each of the Limited Partners will indemnify and hold
harmless the Partnership and the other Partners against any and all liability or
obligations to any broker or finder retained by such Limited Partner resulting
from the involvement of such broker or finder in the transactions contemplated
by this Agreement.
SECTION 6.19 CAPTIONS. The captions and index of this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
SECTION 6.20 NO WAIVER. Any failure or delay on the part of any party in
exercising any power or right hereunder shall not operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
other or further exercise thereof or the exercise of any other right or power
hereunder or otherwise available in law or in equity.
SECTION 6.21 TITLE TO PARTNERSHIP PROPERTY. Legal title to Partnership property
shall at all times be held by and in the name of the Partnership, provided,
however, that if applicable law specifically requires or permits, legal title
may be held in the name of the General Partner or a legal nominee if the General
Partner or legal nominee acknowledges in writing that it is holding such legal
title only as nominee for the Partnership and that it has no beneficial
ownership in such Partnership property except as a Partner hereof.
SECTION 6.22 PUBLICITY. Except as required to comply with law or regulation or
the rules of any stock exchange in the opinion of counsel, no Limited Partner
shall issue any press release or advertisement concerning the Partnership or its
operations or this Agreement without first providing the other Partners with a
copy of any proposed press release or advertisement and obtaining such Partners'
approval thereof, which approval shall not be unreasonably withheld.
41
SECTION 6.23 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall in no way be affected,
impaired or invalidated, and to the extent permitted by applicable law any such
term, provision, covenant or restriction shall be restricted in applicability or
reformed to the minimum extent required for such to be enforceable.
IN WITNESS WHEREOF, the Partners have caused their duly authorized
representatives to execute this Agreement as of the day and year first above
written.
NALCO/EXXON ENERGY CHEMICALS, INC.
as General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Its President
NALCO CHEMICAL COMPANY,
as Limited Partner
By: /s/
-------------------------------
Title: Chairman & CEO
EXXON CHEMICAL COMPANY,
a division of Exxon Corporation,
as Limited Partner
By: /s/
-------------------------------
Title: President
42
Exhibit A
DEFINITION
The following terms shall have the meanings set forth in the Limited
Partnership Agreement and in this Exhibit A:
"Act" shall mean the Delaware Revised Uniform Limited Partnership Act Del. Code
▇▇▇. tit. 6, (▇▇.▇▇.)17-101 - 17 - 1109 as it may be amended from time to time.
"Acquiror" shall have the meaning set forth in Section 5.5 of this Agreement.
"Additional Assumed Exxon Liabilities" shall mean the assumed Exxon liabilities,
if any, to be assumed by the Partnership from Exxon after the Commencement Date,
in conjunction with the transfer of the Additional Transferred Exxon Assets. Any
Additional Assumed Exxon Liabilities will be listed, at the time assumed, and
such list or lists will be attached, at such time, to this Agreement as Exhibit
M-1.
"Additional Assumed Nalco Liabilities" shall mean the assumed Nalco liabilities,
if any, to be assumed by the Partnership from Nalco after the Commencement Date,
in conjunction with the transfer of the Additional Transferred Nalco Assets. Any
Additional Assumed Nalco Liabilities will be listed, at the time assumed, and
such list or lists will be attached, at such time, to this Agreement as Exhibit
M-2.
"Additional Funding" shall have the meaning set forth in paragraph 5.6(a) of
this Agreement.
"Additional Transferred Exxon Assets" shall mean the assets described in Exhibit
C-4 hereto.
"Additional Transferred Nalco Assets" shall mean the assets described in Exhibit
C-3 hereto.
"Adjusted Capital Account" shall mean the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g)(i) and 1.704-2(i)(5)), and
(b) decreased by (i) the amount of all losses and deductions that, as of the end
of such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to subparagraph
3.1(f)(i) or 3.1(f)(ii). The foregoing definition of Adjusted Capital Account is
intended to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
A-1
"Adjusted Capital Account Deficit" shall mean as to any Partner, the deficit
balance, if any, in such Partner's Adjusted Capital Account as of the end of the
relevant Fiscal Year or other taxable period.
"Adjusted Property" shall mean any property the Carrying Value of which has been
adjusted pursuant to subparagraph 2.6(d)(i) or subparagraph 2.6(d)(ii) of this
Agreement.
"Affiliate" of a Person shall mean an entity in which such Person owns an
interest, directly or indirectly, of twenty percent (20%) or more, provided,
that in no event shall either the Partnership or the General Partner be deemed
to be an Affiliate of any Limited Partner.
"Agreed Cash Value" shall mean for each calendar quarter the entire estimated
cash flow benefit (calculated on a 100% basis and not on an allocated Partner
basis), after payment of any foreign taxes (including withholding taxes), but
before U.S. taxes, which is derived by a Transaction Partner from a Qualified
Compensation Event during that calendar quarter; provided, however, that the
Agreed Cash Value for the last calendar quarter of the Fiscal Year, or other
taxable period, shall be adjusted, as appropriate to reflect any changes in the
Agreed Cash Value numbers for the preceding quarters of such Fiscal Year or
other taxable period.
"Agreed Value" of the properties transferred to the Partnership pursuant to
Section 2.2 of this Agreement shall mean such properties' Agreed Value as set
forth in Exhibits C-1 and C-3 (with respect to Nalco) and Exhibits C-2 and C-4
(with respect to Exxon) attached hereto and made a part hereof. Agreed Value of
any other Contributed Property transferred to the Partnership means the fair
market value of such property or other consideration as determined by the
General Partner using such reasonable method of valuation as may be adopted by
the Partners.
This "Agreement" shall mean this Amended and Restated Limited Partnership
Agreement, dated as of September 1, 1994, between the General Partner, Nalco and
Exxon, including any amendments thereto to which such parties may consent from
time to time.
"Applicable Distribution Split" shall mean the manner whereby GAAP Income and
Losses are allocated among the Partners for any given Earnings Year under the
provisions of paragraphs 3.1(a) and 3.1(b), without taking into account, for
purposes of applying paragraph 3.1(b), the items referred to in paragraph 3.1(c)
which are funded by capital contributions under paragraphs 2.4(d) and 2.4(e).
"Appraised Value" shall have the meaning set forth in paragraph 5.12(a) of this
Agreement.
"Assumed Exxon Liabilities" shall mean the U.S. Assumed liabilities, as defined
in the Exxon Transfer Agreement.
"Assumed Liabilities" shall mean all the Assumed Exxon Liabilities, the Assumed
Nalco Liabilities, the Additional Assumed Exxon Liabilities and the Additional
Assumed Nalco Liabilities.
"Assumed Nalco Liabilities" shall mean the U.S. Assumed Liabilities, as defined
in the Nalco Transfer Agreement.
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"Binding Appraisal" shall have the meaning set forth in paragraph 5.4(a) of this
Agreement.
"Board" shall mean the board of directors of the General Partner.
"Book-Tax Disparity" shall mean with respect to a Contributed Property or
Adjusted Property, as of any date of determination, the difference between the
Carrying Value of such Contributed Property or Adjusted Property, as of such
date, and the adjusted basis thereof for federal income tax purposes, as of such
date. A Partner's share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance, as maintained pursuant to
Section 2.6 of this Agreement, and such balance had the Capital Account been
maintained strictly in accordance with tax accounting principles.
"Borrower" shall have the meaning set forth in paragraph 3.3(b) of this
Agreement.
"Business" shall have the meaning set forth in Section 1.5 of this Agreement.
"Capital Account" shall mean the capital account maintained for the Partner
pursuant to Section 2.6 of this Agreement.
"Capital Contribution" shall mean any cash and cash equivalents or Contributed
Property which a Partner contributes or has contributed to the Partnership as
set forth in Article II hereof. A Capital Contribution shall not include a
contribution to the Partnership of a promissory note that is not readily traded
on an established securities market, where the note is contributed to the
Partnership by the maker (or the Partner contributing such note to the
Partnership is related to the maker within the meaning of Treasury Regulation
Section 1.752-1(a)(3)), until the Partnership makes a taxable disposition of
such note or until (and to the extent) principal payments are made on such note.
"Carrying Value" shall mean (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
cost recovery and amortization deductions charged to the Partners' Capital
Accounts pursuant to Section 2.6(a) of this Agreement with respect to such
property, and (b) with respect to any other property, the adjusted basis of such
property for federal income tax purposes, as of the time of determination. The
Carrying Value of any property shall be adjusted from time to time in accordance
with paragraphs 2.6(c) and 2.6(d) of this Agreement, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions,
acquisitions or improvements of Partnership properties.
"Certificate" shall mean the Certificate of Limited Partnership of the
Partnership.
"Closing Documents" shall mean the documents to be executed and delivered at any
closing in which assets are contributed to, or otherwise acquired by, the
Partnership or any of its Affiliates from Nalco or any of its Affiliates or from
Exxon or any of its Affiliates.
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"Code" shall mean the Internal Revenue Code of 1986, as may be amended from time
to time, and any successor thereto. Any reference herein to a specific section
or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Commencement Date" shall mean 12:01 A.M. local time on September 1, 1994.
"Contributing Partner" shall mean each Partner directly or indirectly
contributing (or deemed to have contributed upon termination of the Partnership
pursuant to Section 708 of the Code) a Contributed Property to the Partnership
in exchange for a Partnership Interest.
"Contributed Property" shall mean each Contributing Partner's interest in each
property (or interest therein), or other consideration, in such form as may be
permitted by the Act, but excluding cash and cash equivalents, directly or
indirectly contributed to the Partnership by such Contributing Partner (or
deemed contributed to the Partnership upon termination thereof pursuant to
Section 708 of the Code). Once the Carrying Value of a Contributed Property is
adjusted pursuant to paragraph 2.6(d) of this Agreement, such property shall no
longer constitute a Contributed Property for purposes of paragraph 3.2(b) of
this Agreement but shall thereafter constitute an Adjusted Property for such
purposes.
"Contribution Date" shall mean the date on which legal title to the shares of a
Transferred Entity passes to the Partnership.
"Demand Notes" shall mean negotiable promissory demand notes issued by a
stockholder of the General Partner or a wholly-owned subsidiary of such
stockholder ("Stockholder Notes") payable to the order of the General Partner in
substance similar to those delivered to the General Partner by the stockholders
thereof on the Commencement Date or such other Stockholder Notes as may be
acceptable to the General Partner.
"Dispute" shall have the meaning set forth in paragraph 6.16(a) of this
Agreement.
"Distribution Year" shall mean any Fiscal Year or other taxable period in which
Surplus Cash is distributed among or loaned to the Partners.
"Earnings Year" shall mean the Fiscal Year or other taxable period, the GAAP
Earnings of which are allocated among the Partners for cash distribution
entitlement purposes or otherwise distributed among or loaned to the Partners
pursuant to subparagraph 3.3(a)(i) of this Agreement.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation Section
1.752-2(a).
"Equalization Option" shall have the meaning set forth in paragraph 2.4(a) of
this Agreement.
"Equivalent Price" shall mean an amount equal to the purchase price to be paid
for the Partnership Interest of one Limited Partner divided by the percentage of
such Partnership Interest and multiplied by the percentage of the Partnership
Interest of the other Limited Partner.
"Excess Loss" shall have the meaning set forth in paragraph 3.1(g) of this
Agreement.
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"Exxon" shall mean Exxon Corporation, a New Jersey corporation.
"Exxon's Partnership Interest" shall mean, as of the Commencement Date,
thirty-nine percent (39%), and thereafter may be adjusted as provided herein or
as otherwise may be agreed by the Partners.
"Exam Transfer Agreement" shall mean that certain Asset Transfer Agreement, of
even date, between Exxon and the Partnership.
"Field of Operations" shall means or refer to and be interchangeable with
Exhibit G, attached hereto and made a part hereof.
"Fiscal Year" shall mean and include each twelve (12) month period ending on
December 31 and any shorter period for which the Partnership is required to file
a U.S. income tax return.
"Freeport Facility" shall mean the manufacturing facility, heretofore operated
by NCC and being contributed to the Partnership, located in Freeport, Texas.
"Funding Limited Partner" shall have the meaning set forth in Section 5.6 of
this Agreement.
"GAAP" shall mean United States generally accepted accounting principles.
"GAAP Earnings" shall mean the total consolidated net earnings of the
Partnership computed on a GAAP basis after foreign income taxes but before U.S.
federal, state or local income taxes.
"GAAP Loss" shall mean a loss computed on a net Partnership consolidated GAAP
basis with respect to an Earnings Year which is allocated to a Partner under the
Applicable Distribution Split.
"General Partner" shall mean Nalco/Exxon Energy Chemicals, Inc., a Delaware
corporation, as general partner of the Partnership, or any successor general
partner of the Partnership appointed pursuant to the terms of this Agreement.
"General Partner's Partnership Interest" shall mean, as of the Commencement
Date, two percent (2%), and thereafter may be adjusted as provided herein or as
otherwise may be agreed by the Partners.
"Governmental Action" shall mean the issuance of a final order or decree by a
governmental body requiring the dissolution of the Partnership, or the changing,
modification or alteration of the business or assets of the Partnership in a
manner which substantially impairs the ability of the Partnership to conduct the
Business.
"Indemnified Party" shall have the meaning set forth in subparagraph 6.3(b)(iii)
of this Agreement.
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"Insolvency Event" shall be deemed to have occurred with respect to any Partner
(a) if such Partner shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (ii) be generally unable or
admit in writing its inability to pay its debts as such debts become due, (iii)
make a general assignment for the benefit of its creditors, (iv) commence a
voluntary case under the federal Bankruptcy Code (as now or hereafter in
effect), (v) file a petition seeking to take advantage of any bankruptcy,
insolvency, moratorium, reorganization or other similar law affecting the
enforcement of creditors' rights generally, (vi) acquiesce in writing to, or
fail to controvert in a timely or appropriate manner, any petition filed against
it in an involuntary case under such Bankruptcy Code, or (vii) take any action
under the laws of any jurisdiction analogous to any of the foregoing; or (b) if
a proceeding or case shall be commenced under such Bankruptcy Code or a State
bankruptcy or insolvency statute, without the application or consent of such
Partner, in any court of competent jurisdiction, seeking (i) the liquidation,
reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of its
assets, or (iii) similar relief in respect of it, under any law providing for
the relief of debtors, and such proceeding or case shall continue undismissed
and unstayed and in effect, for a period of sixty (60) days.
"Joint Venture" shall mean the Partnership and its Affiliates.
"Limited Partner" shall mean either of Exxon or Nalco, as a limited partner of
the Partnership and any successor of either thereof as such limited partner in
accordance with the terms of this Agreement.
"Limited Partnership Interest" shall mean the ownership interest of any Limited
Partner in the Partnership.
"Loan" shall mean a loan extended by the Partnership to a Partner pursuant to
paragraph 3.3(b) and Exhibit J of this Agreement.
"Loan Cessation Date" shall have the meaning set forth in subparagraph 3.3(b)(i)
of this Agreement.
"Minimum Gain Attributable to Partner Nonrecourse Debt" shall mean that amount
determined in accordance with the principles of Treasury Regulation Section
1.704-2(i)(3).
"Nalco" shall mean Nalco Chemical Company, a Delaware corporation.
"Nalco's Partnership Interest" shall mean, as of the Commencement Date,
fifty-nine percent (59%), and thereafter may be adjusted as provided herein or
as otherwise may be agreed by the Partners.
"Nalco Priority Allocation" shall mean the amounts allocated to Nalco under
paragraph 3.1(a) in excess of what Nalco otherwise would have allocated to it
under paragraph 3.1(a) if its allocable share were equal to its Partnership
Interest.
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"Nalco Transfer Agreement" shall mean that certain Asset Transfer Agreement, of
even date, between Nalco and the Partnership.
"Net Agreed Value" shall mean (a) in the case of any Contributed Property, the
Agreed Value of such property or other consideration, reduced by any
indebtedness or liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (b) in
the case of any property currently distributed to a Partner pursuant to Section
3.3 of this Agreement or distributed in liquidation of the Partnership pursuant
to Section 5.12 of this Agreement, the Partnership's Carrying Value of such
property at the time such property is distributed (as adjusted pursuant to
Section 2.6(d) of this Agreement), reduced by any indebtedness either assumed by
such Partner upon such distribution or to which such property is subject at the
time of distribution.
"Net Preferred Allocation Amount", shall mean the amount calculated for each
Fiscal Year or other taxable period in accordance with Exhibit K of this
Agreement.
"New Substituted Partner" shall mean a Partner which is not an Affiliate of
either of Exxon or Nalco and which has acquired its Partnership Interest from
either of Nalco or Exxon with the consent of the General Partner.
"Noncontributing Partner" shall mean with respect to each Contributed Property
any Partner other than the Contributing Partner.
"Nonrecourse Built-in Gain" shall mean with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to paragraph 3.2(b) if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" shall mean any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b)(1), are
attributable to a Nonrecourse Liability.
"Nonrecourse Liability" shall have the meaning set forth in Treasury Regulation
Section 1.704-2(b)(3).
"Notes" shall have the meaning set forth in paragraph 3.3(b) of this Agreement.
"Offeree" shall have the meaning set forth in Section 5.5 of this Agreement.
"Offeror" shall have the meaning set forth in Section 5.5 of this Agreement.
"Partner" shall mean a General Partner or a Limited Partner.
"Partner Nonrecourse Debt" shall have the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
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"Partner Nonrecourse Deductions" shall mean any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(i)(2), are attributable to a Partner
Nonrecourse Debt.
"Partnership" shall mean Nalco Exxon Energy Chemicals, L.P., a Delaware limited
partnership.
"Partnership Expenses" shall mean those itemized expenses set forth in Exhibit
B-1 of this Agreement.
"Partnership Interest" shall mean, as of the Commencement Date, (a) as to the
General Partner, two percent (2%), (b) as to Nalco, fifty-nine percent (59%) and
(c) as to Exxon, thirty-nine percent (39%); provided, however, that proper
adjustment shall be made to the Partnership Interest to reflect any changes
effected pursuant to the provisions of this Agreement, or as otherwise may be
agreed by the Partners.
"Partnership Minimum Grain" shall mean that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Person" shall mean any natural person, firm, corporation, association,
partnership, limited liability company, government, governmental agency or other
entity, whether acting in an individual, fiduciary or other capacity.
"Pre-Withdrawal Period" shall mean the period between the date on which the
redemption price is determined and the date on which redemption actually takes
place pursuant to the terms of paragraph 5.4(a).
"Proceeding" shall have the meaning set forth in Section 6.3(b)(i) of this
Agreement.
"Product Overlap" shall have the meaning set forth in subparagraph 6.6(c)(ix) of
this Agreement.
"Qualified Compensation Event" shall mean those isolated transactions or long
term contractual arrangements whereby earnings and cashflow, originally intended
by the Partners to be realized by the Joint Venture, will in fact be derived
directly by a Limited Partner or its Affiliates outside of the Joint Venture in
order to meet certain legal or regulatory requirements or for other mutually
agreed valid business reasons. Whether and to which extent a transaction or
arrangement shall be treated as a Qualified Compensation Event shall be
determined by the Board.
"Residual Gain" or "Residual Loss" shall mean any net gain or net loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such net gain or net loss is not allocated
pursuant to paragraphs 3.1(e) and 3.1(f) or clause 3.2(b)(ii)(1) of this
Agreement to eliminate Book Tax Disparities.
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"Senior Staff" shall mean the President and such other officers and employees of
the General Partner or the Partnership as may be appointed from time to time by
the General Partner to manage the day to day affairs of the Partnership. The
initial composition of the Senior Staff is provided on Exhibit E of this
Agreement.
"Stockholder Agreement" shall mean that certain Stockholders Agreement, of even
date, among Nalco, Exxon and the General Partner.
"Substantial Event" shall mean any Deadlock, as defined in the Stockholders
Agreement which is not resolved following application of the procedures in
Section 3.2 of the Stockholders Agreement.
"Surplus Cash" shall mean Partnership cash which the General Partner has
determined to be in excess of the Partnership's immediate needs and which the
General Partner has determined to be available for distributions or loans to the
Partners; provided, however, that Surplus Cash shall not include the securities
held by the Partnership pursuant to subparagraph 3.3(b)(iii).
"Survival Matter" shall have the meaning set forth in Section 5.6 of this
Agreement.
"Tax Matters Partner" shall mean the Partner of the Partnership designated as
the tax matters partner in accordance with Section 6231(a)(7) of the Code, which
initially shall be the General Partner.
"Technical Assets" shall mean valid issued patents, patent applications and
patent applications in process, trademarks, trademark applications, copyrights,
copyright applications, licensed technical information of others, research and
development data and notebooks, operating guidelines and conditions, know how
and any other proprietary information or intangible assets of a technical
nature.
"Transaction Partner" shall mean the Limited Partner which either directly, or
indirectly through its Affiliates, obtained an economic advantage outside of the
Joint Venture from a Qualified Compensation Event.
"Transfer" shall mean to sell, assign or transfer, directly or indirectly, a
Partnership Interest (except for an adjustment of Partnership Interests among
Partners pursuant to the terms of this Agreement) (including by a pledge,
assignment, encumbrance or security interest that gives the pledgee, assignee or
secured party, upon the occurrence or non-occurrence of an event, the right to
acquire the Partnership Interest or to require that the Partnership Interest be
sold; but not, in any event, any "negative pledge" or similar type covenant).
"Transferred Assets" shall mean the assets to be contributed to the Partnership
pursuant to Section 2.2.
"Transfer Agreements" shall mean, collectively, the Nalco Transfer Agreement and
the Exxon Transfer Agreement.
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"Transferred Entity" shall mean any corporate entity some or all of the equity
interest of which is contributed or otherwise transferred to the Partnership by
a Limited Partner and which was already in existence prior to such contribution
or transfer.
"Treasury Regulations" shall mean the United States Treasury Regulations
(whether proposed, temporary or final) promulgated under the Code.
"Unmutualized Expenses" shall mean those itemized expenses set forth in Exhibit
B-2 of this Agreement.
"Unrealized Gain" attributable to a Partnership property shall mean as of any
date of determination, the excess, if any, of the fair market value of such
property (as determined under paragraph 2.6(d) of this Agreement) as of such
date of determination over the Carrying Value of such property as of such date
of determination (prior to any adjustment to be made pursuant to paragraph
2.6(d) of this Agreement as of such date).
"Unrealized Loss" attributable to a Partnership property shall mean as of any
date of determination, the excess, if any, of the Carrying Value of such
property as of such date of determination (prior to any adjustment to be made
pursuant to paragraph 2.6(d) of this Agreement as of such date) over the fair
market value of such property (as determined under paragraph 2.6(d) of this
Agreement) as of such date of determination.
"Withdrawal Procedure" shall mean the procedure described in Section 5.4 of this
Agreement.
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