Agreement And Plan Of Merger & Asset Contribution

CONFORMED COPY


AGREEMENT AND PLAN OF MERGER


AND


ASSET CONTRIBUTION


AMONG


OCCIDENTAL PETROCHEM PARTNER 1, INC.,


OCCIDENTAL PETROCHEM PARTNER 2, INC.,


OXY PETROCHEMICALS INC.,


PDG CHEMICAL INC.


AND


EQUISTAR CHEMICALS, LP


DATED: MAY 15, 1998


TABLE OF CONTENTS
-----------------


PAGE
---- SECTION 1 THE MERGER............................................................................................ 2
1.1 The Merger............................................................................................ 2
1.2 Effects of the Merger................................................................................. 2
1.3 Closing; Effective Time............................................................................... 2
1.4 Certificate of Limited Partnership; Partnership Agreement; Partnership Governance Committee.......... 3
1.5 Conversion of Certificates............................................................................ 3
1.6 Exchange of Certificates.............................................................................. 3
1.7 Transfer of Excluded Assets........................................................................... 4
1.8 Assumption of Excluded Liabilities.................................................................... 4
1.9 Transfer of Oxy Petrochemicals Assets................................................................. 4


SECTION 2 CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES............................................. 5
2.1 Transfer of Assets.................................................................................... 5
2.2 Excluded Assets....................................................................................... 6
2.3 Instruments of Conveyance and Assignment.............................................................. 7
2.4 Further Assurances.................................................................................... 8
2.5 Assumption of Liabilities............................................................................. 9
2.6 Excluded Liabilities.................................................................................. 10
2.7 Master Intellectual Property Agreement................................................................ 11
2.8 Employee Matters...................................................................................... 11
2.9 Joint Contracts....................................................................................... 17


SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS.................................................... 18
3.1 Due Organization; Good Standing and Power............................................................. 18
3.2 Authorization and Validity of Agreements.............................................................. 18
3.3 No Consents Required; No Conflict with Instruments to which a Contributor is a Party.................. 18
3.4 Employee Benefits..................................................................................... 19
3.5 Title to Assets; Absence of Liens and Encumbrances; Leases............................................ 20
3.6 Title Matters; Defects in Improvements................................................................ 21
3.7 Working Capital....................................................................................... 21
3.8 Technology and Similar Rights......................................................................... 21
3.9 Government Licenses, Permits and Related Approvals.................................................... 22
3.10 All Necessary Assets.................................................................................. 22
3.11 Conduct of Business in Compliance with Regulatory and Contractual Requirements........................ 22
3.12 Legal Proceedings..................................................................................... 22
3.13 [Reserved]............................................................................................ 22


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3.14 Tax Matters.............................................................................. 22
3.15 [Reserved]............................................................................... 22
3.16 HSE Matters.............................................................................. 22
3.17 Investigation to Acquire Knowledge....................................................... 23


SECTION 3A ADDITIONAL REPRESENTATIONS AND WARRANTIES OF OXY CH SUB.................................. 24
3A.1 Capitalization........................................................................... 24
3A.2 Ownership of Common Stock................................................................ 24
3A.3 No Undisclosed Liabilities............................................................... 24


SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP........................................ 24
4.1 Due Organization; Good Standing and Power................................................ 24
4.2 Authorization and Validity of Agreement.................................................. 25
4.3 No Consents Required; No Conflict with Instruments to which the Partnership is a Party... 25


SECTION 5 COVENANTS SUBSEQUENT TO CLOSING DATE..................................................... 25
5.1 Access to Information.................................................................... 25
5.2 Mail or Other Communications............................................................. 26
5.3 Use of Trade Name........................................................................ 26
5.4 Closing Date Balance Sheet............................................................... 26
5.5 [Reserved]............................................................................... 26
5.6 Collection of Accounts Receivable........................................................ 26
5.7 Reimbursement for Prepaid Expenses....................................................... 27


SECTION 6 SURVIVAL AND INDEMNIFICATION............................................................. 27
6.1 Survival Limitations..................................................................... 27
6.2 Indemnification.......................................................................... 27
6.3 Procedures............................................................................... 30
6.4 Subrogation.............................................................................. 32
6.5 Claims for HSE Work...................................................................... 32
6.6 EXTENT OF INDEMNIFICATION................................................................ 33


SECTION 7 MISCELLANEOUS............................................................................ 33
7.1 Construction............................................................................. 33
7.2 Payment of Certain Expenses and Taxes.................................................... 33
7.3 Notices.................................................................................. 34
7.4 [Reserved]............................................................................... 35
7.5 Binding Effect; Benefit.................................................................. 35
7.6 Occasional and Bulk Sales................................................................ 35
7.7 Assignability............................................................................ 35
7.8 Amendment; Waiver........................................................................ 36
7.9 Dispute Resolution....................................................................... 36


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7.10 Severability...................................................... 36
7.11 Counterparts...................................................... 36
7.12 APPLICABLE LAW.................................................... 36
7.13 JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER............... 36
7.14 WAIVER OF JURY TRIAL.............................................. 37


SECTION 8 DEFINITIONS....................................................... 37


LIST OF SCHEDULES AND EXHIBITS TO AGREEMENT
-------------------------------------------


Schedules
---------


Schedule A - Contributed Business Schedule 2.1(a) - Fee Interests Schedule 2.1(b) - Leases Schedule 2.1(d) - Equipment Schedule 2.1(k) - Contributed Subsidiaries Schedule 2.2(c) - Excluded Tradenames and Logos Schedule 2.2(h) - Certain Excluded Assets Schedule 2.5(a)(vii) - Assumed Indebtedness Schedule 2.5(a)(x) - Assumed Long-Term Liabilities Schedule 2.8(b) - Basic Severance Schedule 3 - Disclosure Schedule


Appendices
----------


Appendix A - Dispute Resolution Procedures


Exhibits
--------


Exhibit A - Form of Assignment of Lease and Act of Exchange Exhibit B - Form of Assignment of Leases Exhibit C - Form of Bill of Sale and Assignment Exhibit D - Form of Trademark License Exhibit E - Form of Patent Assignment Exhibit F - Form of Partnership Assumption Agreement Exhibit G - Form of Master Intellectual Property Agreement Exhibit H - Form of Assignment of Partnership Interests Exhibit I - Form of Assignment of Excluded Assets of Oxy
Petrochemicals Exhibit J - Form of Oxy CH Sub Assumption Agreement Exhibit K - Form of $419,700,000 Promissory Note


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AGREEMENT AND PLAN OF MERGER
----------------------------
AND
---
ASSET CONTRIBUTION
------------------


This AGREEMENT AND PLAN OF MERGER AND ASSET CONTRIBUTION (this "Agreement"), dated as of May 15, 1998, is entered into among Occidental Petrochem Partner 1, Inc., a Delaware corporation ("Occidental Chemical Sub"), Occidental Petrochem Partner 2, Inc., a Delaware corporation ("Oxy CH Sub"), Oxy Petrochemicals Inc., a Delaware corporation ("Oxy Petrochemicals"), PDG Chemical Inc., a Delaware corporation ("PDG Chemical"), and Equistar Chemicals, LP, a Delaware limited partnership (the "Partnership").


The definitions of capitalized terms used in this Agreement, including the appendices hereto, are set forth in Section 8 hereof.
---------


WHEREAS, Oxy Petrochemicals is a direct wholly owned subsidiary of Oxy CH Sub, Oxy CH Sub is a direct wholly owned subsidiary of Oxy CH Corporation, a California corporation ("Oxy CH") and Oxy CH is a wholly owned indirect subsidiary of Occidental Petroleum Corporation, a Delaware corporation ("Occidental").


WHEREAS, the Partnership, Occidental, Lyondell Petrochemical Company and Millennium Chemicals, Inc. are parties to that certain Master Transaction Agreement of even date (the "Master Transaction Agreement").


WHEREAS, Occidental Chemical Sub, PDG Chemical and Oxy CH Sub will be admitted as partners in the Partnership upon the Closing pursuant to an Amended and Restated Agreement of Limited Partnership of the Partnership.


WHEREAS, Occidental Chemical Sub wishes to contribute certain assets and a lease of certain other assets, in each case subject to certain liabilities associated with the olefins, polyolefins and related petrochemicals businesses to the Partnership, and the Partnership wishes to accept such assets and lease and assume such liabilities, all upon the terms and conditions hereinafter set forth.


WHEREAS, PDG Chemical wishes to contribute all of its right, title and interest in and to PD Glycol, a Texas limited partnership ("PD Gylcol"), and the Partnership wishes to accept such right, title and interest, all upon the terms and conditions hereinafter set forth. Occidental Chemical Sub and PDG Chemical, collectively or individually as the context may require, are referred to herein as the "Asset Contributors."


WHEREAS, the respective Boards of Directors of Oxy Petrochemicals and Oxy CH Sub and the Partnership Governance Committee of the Partnership deem it advisable and in the best interest of their respective entities that Oxy Petrochemicals merge with and into the Partnership (the "Merger"), upon the terms and conditions of this Agreement, and the applicable provisions of the


laws of the State of Delaware. The Asset Contributors and Oxy Petrochemicals, collectively or individually as the context may require, are referred to herein as the "Contributors."


WHEREAS, upon the Closing, the Partnership will consummate certain transactions and enter into certain agreements as provided for in the Master Transaction Agreement.


NOW THEREFORE, in consideration of the premises and of the mutual covenants of the parties hereto, it is hereby agreed as follows:


SECTION 1
THE MERGER
----------


1.1 The Merger. Upon the terms and subject to the conditions of this
---------- Agreement and in accordance with the provisions of the DGCL, at the Effective Time, Oxy Petrochemicals shall be merged with and into the Partnership, and the separate corporate existence of Oxy Petrochemicals shall cease and the Partnership shall continue as the surviving entity (hereinafter sometimes referred to as the "Surviving Partnership") under the laws of the State of Delaware under the name of "Equistar Chemicals, LP".


1.2 Effects of the Merger. The Merger shall have the effects provided
--------------------- therefor by the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time:


(a) All of the assets, properties, rights, privileges, powers and franchises of a public as well as a private nature of Oxy Petrochemicals of every kind, nature, character and description, tangible and intangible, real, personal or mixed, wherever located shall be taken and deemed to be transferred to, and vested in, the Surviving Partnership without further act or deed; and all such assets, properties, rights, privileges, powers and franchises and all and every other interest shall be thereafter the property of the Surviving Partnership, as such interests were the property of Oxy Petrochemicals.


(b) The Surviving Partnership shall be subject to all of the restrictions, disabilities and duties of Oxy Petrochemicals and the debts, liabilities and duties of Oxy Petrochemicals shall attach to the Surviving Partnership and the Surviving Partnership agrees to pay, perform and discharge all such debts, liabilities and duties when due.


1.3 Closing; Effective Time.
-----------------------


(a) The consummation of the transactions contemplated by Sections 1 and 2 hereof is referred to as the "Closing." Subject to the terms and conditions hereof, the Closing shall take place at the office of Baker & Botts, L.L.P., One Shell Plaza, 910 Louisiana, Houston Texas 77002-4995, at 10:00 a.m. local time on the date hereof (the "Closing Date"), or (ii) such other place or date as may be agreed to by the Partnership and Oxy CH Sub.


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(b) Subject to the terms and provisions of this Agreement, there shall be filed with the Secretary of State of the State of Delaware (the "Secretary of State"), on the Closing Date, a certificate of merger with respect to the Merger in such form as required by, and executed in accordance with, the applicable provisions of the DGCL. Such certificate of merger shall designate that the Merger shall become effective as of the time (the "Effective Time") that such certificate of merger is so filed with the Secretary of State.


1.4 Certificate of Limited Partnership; Partnership Agreement;
----------------------------------------------------------- Partnership Governance Committee. The certificate of limited partnership of the - -------------------------------- Surviving Partnership from and after the Effective Time shall be the Amended Certificate of Limited Partnership filed contemporaneously with the filing of the certificate of merger referenced herein, continuing until thereafter amended in accordance with the provisions provided by the DRULPA. The partnership agreement of the Surviving Partnership from and after the Effective Time shall be the Amended and Restated Agreement of Limited Partnership executed and delivered on the Closing Date, continuing until thereafter amended in accordance with the terms therein and as provided by the DRULPA. The Partnership Governance Committee of the Partnership as of the Closing Date shall be designated in accordance with such Amended and Restated Agreement of Limited Partnership.


1.5 Conversion of Certificates. As of the Effective Time, by virtue of
-------------------------- the Merger and without any action on the part of any Party or the holder of any of the following securities, the following shall occur:


(a) Oxy Petrochemicals Common Stock. The aggregate of all of the
------------------------------- common stock, par value $300.00, of Oxy Petrochemicals (the "Oxy Petrochemicals Common Stock") shall be converted into the right to receive (i) Oxy CH Sub's limited partnership interest in the Partnership as set forth in the Amended and Restated Agreement of Limited Partnership of the Partnership and (ii) a promissory note of the Partnership in the form of Exhibit K. All such shares of Oxy Petrochemicals Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the limited partnership interest and note to be issued pursuant to this Section 1.5(a) with respect thereto upon the surrender of such certificate in accordance with Section 1.6, without interest.


(b) Cancellation of Other Capital Stock of Oxy Petrochemicals. All
--------------------------------------------------------- shares of capital stock of Oxy Petrochemicals that are owned directly or indirectly by Oxy Petrochemicals shall be canceled and no stock or other consideration shall be delivered in exchange therefor.


1.6 Exchange of Certificates.
------------------------


(a) Oxy Petrochemicals Common Stock. At the Closing, Oxy CH Sub shall
------------------------------- deliver to the Partnership, subject to the terms of this Agreement, all certificates representing each share of Oxy Petrochemicals Common Stock together with duly executed stock powers endorsed to the Partnership or other assignments or instruments of conveyance and transfer, in form and substance satisfactory to the Partnership and its counsel, as shall be effective to vest in the Partnership at the


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Effective Time, all of Oxy CH Sub's right, title and interest in and to such shares of Oxy Petrochemicals Common Stock. Until surrendered to the Partnership pursuant to this Section 1.6, each such certificate shall, at and after the Effective Time, represent for all purposes only the right to receive the consideration provided for in Section 1.5(a). The certificates representing shares of Oxy Petrochemicals Common Stock so surrendered shall be canceled as of the Effective Time.


(b) No Further Ownership Rights in Capital Stock of Oxy Petrochemicals.
------------------------------------------------------------------ The limited partnership interest in the Partnership and the note delivered upon the surrender for exchange of shares of Oxy Petrochemicals in accordance with the terms hereof shall be deemed to have been delivered in full satisfaction of all rights pertaining to such securities, and following the Effective Time, no Person shall have any further rights to, or ownership in, shares of capital stock of Oxy Petrochemicals. There shall be no further registration of transfers on the stock transfer books of Oxy Petrochemicals of the shares of capital stock of Oxy Petrochemicals which were outstanding immediately prior to the Effective Time. If, after the Effective Time, any certificates for shares of the capital stock of Oxy Petrochemicals are presented to the Surviving Partnership for any reason, such certificates shall be canceled.


(c) No Liability. Notwithstanding anything to the contrary in this Section
------------ 1, neither the Surviving Partnership nor any other party shall be liable to a holder of shares of any of the capital stock of Oxy Petrochemicals for any amount paid to a public official pursuant to and in compliance with any applicable abandoned property, escheat or similar law.


1.7 Transfer of Excluded Assets. It is expressly understood that,
--------------------------- immediately prior to the Effective Time, any and all assets of Oxy Petrochemicals included in the Excluded Assets pursuant to Section 2.2 shall have been contributed, conveyed, assigned or transferred by Oxy Petrochemicals to Oxy CH Sub pursuant to an assignment in the form attached as Exhibit I (the "Excluded Asset Assignment") and shall not be part of the assets deemed transferred to the Partnership pursuant to the Merger.


1.8 Assumption of Excluded Liabilities. It is expressly understood that,
---------------------------------- immediately prior to the Effective Time, any and all obligations and liabilities of Oxy Petrochemicals included in the Excluded Liabilities pursuant to Section 2.6 shall be assumed by Oxy CH Sub pursuant to an assumption agreement in the form attached as Exhibit J ("Oxy CH Sub Assumption Agreement").


1.9 Transfer of Oxy Petrochemicals Assets. Notwithstanding that pursuant
------------------------------------- to Section 1.2, title to the Assets of Oxy Petrochemicals shall be deemed transferred from Oxy Petrochemicals to the Partnership as of the Effective Time, as between the parties hereto, the benefits and burdens associated with ownership of such Assets shall be deemed to have been transferred effective as of the Asset Transfer Effective Time.


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SECTION 2
CONTRIBUTION OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES
---------------------------------------------------------


2.1 Transfer of Assets. On the terms and subject to the conditions set
------------------ forth in this Agreement, on the date hereof and effective as of the Asset Transfer Effective Time, each Asset Contributor is contributing, conveying, assigning, transferring and delivering to the Partnership, or shall cause to be contributed, conveyed, assigned, transferred and delivered to the Partnership, and the Partnership shall accept, acquire and assume all of the assets, rights, and properties used or held for use in the contemplated operation and conduct of the Contributed Business of every kind, nature, character and description, tangible and intangible, real, personal or mixed, whether held by such Asset Contributor or an Affiliate thereof, wherever located other than the Excluded Assets (provided that the assets of Oxy Petrochemicals are being transferred to the Partnership pursuant to the Merger); and which conveyance, subject to Section 2.2, shall include, without limitation, the following:


(a) All right, title and interest of such Asset Contributor and any Affiliate thereof in the Fee Interests;


(b) All right, title and interest of such Asset Contributor and any Affiliate thereof under the Leaseholds;


(c) All right, title and interest of such Asset Contributor and any Affiliate thereof, if any, in the Associated Rights, including, without limitation, all contracts, easements, rights-of-way, permits, licenses and leases and other similar rights for related equipment, power and communications cables, and other related property and equipment used principally in the normal operation and conduct of the Contributed Business;


(d) All of the right, title and interest of such Asset Contributor and any Affiliate thereof in the Equipment and all warranties and guarantees, if any, express or implied, existing for the benefit of such Asset Contributor or any Affiliate thereof in connection with the Equipment to the extent assignable;


(e) Subject, to the extent applicable, to Section 5.3, all of the right, title and interest of such Asset Contributor and any Affiliate thereof in the Unrecorded Assets;


(f) All of the right, title and interest of such Asset Contributor and any Affiliate thereof in any Contributed Contracts;


(g) Any right, title and interest of such Asset Contributor in any Trademarks to the extent used or contemplated to be used principally in the normal operation and conduct of the Contributed Business;


(h) All Government Licenses that are transferable and as to which Consents to transfer are obtained where required;


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