george a. davis, esq. andrew m. troop, esq. christopher r...
TRANSCRIPT
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George A. Davis, Esq.Andrew M. Troop, Esq.Christopher R. Mirick, Esq.CADWALADER, WICKERSHAM & TAFT LLPOne World Financial CenterNew York, New York 10281
-and-Mark C. Ellenberg, Esq. Peter Friedman, Esq.CADWALADER, WICKERSHAM & TAFT LLP700 Sixth Street, N.W.Washington, DC 20001
Attorneys for Lyondell Chemical Company, et al.
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK ----------------------------------------------------------------x
In re:::: Chapter 11:
LYONDELL CHEMICAL COMPANY, et al., : Case No. 09-10023 (REG):
Debtors.:::
Jointly Administered
----------------------------------------------------------------x
DECLARATION OF GERALD A. O’BRIEN IN SUPPORT OF CONFIRMATION OF DEBTORS’ THIRD AMENDED JOINT PLAN OF REORGANIZATION FOR THE LYONDELLBASELL DEBTORS
Pursuant to 28 U.S.C. § 1746, Gerald A. O’Brien, declares:
1. I am the Vice President Deputy General Counsel of Lyondell Chemical
Company (“Lyondell Chemical), a debtor and debtor in possession in the above-captioned
chapter 11 case (together with its affiliated debtors and debtors in possession, the “Debtors”). I
have been employed by Lyondell Chemical since 1989, and have served as Vice President
Deputy General Counsel since 2000. I am familiar with the day-to-day operations, businesses
and financial affairs of the Debtors and their Non-Debtor Affiliates.
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2. I submit this declaration in support of confirmation of the Debtors’ Third
Amended Joint Plan of Reorganization for the LyondellBasell Debtors, dated March 12, 2010
and amended contemporaneously with the filing of this declaration (as so amended, and as it may
be amended further in accordance with the terms therein, the “Plan”).1 I have reviewed and am
familiar with the terms and provisions of the Plan and accompanying disclosure statement (the
“Disclosure Statement”). I am familiar with the documents comprising the Plan Supplement.
Together with the Debtors’ legal advisors, I have reviewed the requirements for confirmation of
the Plan under section 1129 of chapter 11 of title 11 of the United States Code, 11 U.S.C. §§
101-1532 (as amended, the “Bankruptcy Code”). If called upon, I would testify competently to
the facts set forth in this declaration. Unless otherwise stated, I have personal knowledge of the
facts stated in this declaration.
3. Based on my personal involvement in the plan process in these cases and
discussions with the Debtors’ advisors, I believe that the Plan complies with the applicable
provisions of the Bankruptcy Code, that the Plan was proposed in good faith, and that the
Debtors, acting through their officers, directors, and professionals, have conducted themselves in
a manner that complies with applicable law in relation to the formulation and negotiation of, and
the solicitation of votes with respect to, the Plan.
The Plan Satisfies Bankruptcy Code Section 1129
4. On the basis of my understanding of the Plan, the events that have
occurred throughout the Debtors’ Chapter 11 Cases and discussions that I have had with the
Debtors’ legal advisors regarding various orders entered during the Chapter 11 Cases and the
1 Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Plan.
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requirements of the Bankruptcy Code, as set forth below, the Plan fully complies with section
1129 of the Bankruptcy Code.
5. Plan Compliance with Bankruptcy Code (11 U.S.C. § 1129(a)(l)). On the
basis of my understanding and discussions with the Debtors’ legal advisors, the Plan satisfies
section 1129(a)(1) because it complies with the mandatory provisions of sections 1122 and 1123
of the Bankruptcy Code as follows:
Sections 1122 and 1123(a)(1) of the Bankruptcy Code: Article III of the Plan provides for the separate classification of Claims against, and Equity Interests in, the Debtors, as required by section 1123(a)(1) of the Bankruptcy Code and is a separate plan for each of the 94 Debtors. The Plan designates fourteen (14) Classes, comprised of ten (10) classes of Claims and four (4) classes of Equity Interests. Such classification complies with section 1122(a) of the Bankruptcy Code because each Class (or subclass) contains only Claims or Equity Interests that are substantially similar to each other. In addition, Claims of the type described in section 507(a)(1) of the Bankruptcy Code (Administrative Claims and Fee Claims) and section 507(a)(8) of the Bankruptcy Code (Priority Tax Claims) are not classified in Article III of the Plan. Rather, the treatment of such claims is addressed in Article II of the Plan.
Section 1123(a)(2) of the Bankruptcy Code: Article III of the Plan specifies whether each Class of Claims and Equity Interests is impaired, as required by section 1123(a)(2) of the Bankruptcy Code.
Section 1123(a)(3) of the Bankruptcy Code: Article IV of the Plan sets forth the treatment of each Class of Claims and Equity Interests as required by section 1123(a)(3) of the Bankruptcy Code.
Section 1123(a)(4) of the Bankruptcy Code: The Plan provides that the treatment of each Claim or Equity Interest in each particular Class (or subclass) is the same as the treatment of each other Claim or Equity Interest in such Class, unless the holder of the Claim or Equity Interest agrees to less favorable treatment, as required by section 1123(a)(4) of the Bankruptcy Code.
Section 1123(a)(5) of the Bankruptcy Code: Article V and various other provisions of the Plan, together with the Plan Supplement, provide the means for the implementation of the Plan as required by section 1123(a)(5) of the Bankruptcy Code.
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Section 1123(a)(6) of the Bankruptcy Code: Section 6.4 of the Plan provides that the New Topco Articles of Association shall prohibit the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code.
Section 1123(a)(7) of the Bankruptcy Code: The Plan provides for the appointment of certain individuals specified in the Plan Supplement and herein as officers and directors of New Topco, in all respects consistent with the interests of creditors and public policy, as required by section 1123(a)(7) of the Bankruptcy Code.
Section 1123(a)(8) of the Bankruptcy Code: This section applies to individual debtors and is not applicable to the Debtors.
On the basis of my understanding and discussions that I have had with the
Debtors’ legal advisors, Section 1123(b) of the Bankruptcy Code sets forth permissive provisions
that may be incorporated into a chapter 11 plan. The Plan contains the following permissive
provisions allowed by section 1123(b):
Section 1123(b)(1) of the Bankruptcy Code: The Plan impairs or leaves unimpaired Classes of Claims and Equity Interests, as permitted by section 1123(b)(1) of the Bankruptcy Code. Article III of the Plan provides for the following five (5) unimpaired Classes: Class 1 (Priority Non-Tax Claims); Class 2 (Secured Tax Claims); Class 6 (Other Secured Claims); certain sub-classes in Class 7-B (General Unsecured Claims against Non-Obligor Debtors); and Class 14 (Equity Interests in the Debtors (other than LBFC, LBIAF and Schedule III Debtors)). Article III of the Plan provides for the following nine (9) impaired Classes: Class 3 (DIP Roll-Up Claims); Class 4 (Senior Secured Claims); Class 5 (Bridge Loan Claims); Class 7-A (General Unsecured Claims against Non-Schedule III Obligor Debtors); Class 7-B (General Unsecured Claims against Non-Obligor Debtors); Class 7-C (General Unsecured Claims and Senior/Bridge Guarantee Claims against MPI, MSC, MPCO); Class 7-D (General Unsecured Claims and Senior/Bridge Deficiency Claims against Schedule III Obligor Debtors); Class 8 (2015 Notes Claims); Class 9 (Securities Claims); Class 10 (Subordinated Claims); Class 11 (Equity Interests in LBFC); Class 12 (Equity Interests in LBIAF); and Class 13 (Equity Interests in MCI and the Schedule III Debtors).
Section 1123(b)(2) of the Bankruptcy Code. Article IX of the Plan and the Plan Supplement provide for the assumption or rejection of the Debtors’ executory contracts and unexpired leases not previously
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assumed or rejected under section 365 of the Bankruptcy Code, as contemplated by section 1123(b)(2) of the Bankruptcy Code.
Section 1123(b)(3)(A) of the Bankruptcy Code. Consistent with section 1123(b)(3)(A) of the Bankruptcy Code, the Plan incorporates the terms of the Lender Litigation Settlement and the ARCO/Equistar Settlement. The Bankruptcy Court already has approved these settlements.
Section 1123(b)(3)(B) of the Bankruptcy Code. As permitted by Section 1123(b)(3)(B) of the Bankruptcy Code, Sections 11.1 and 11.9 of the Plan provide that the Reorganized Debtors, except as expressly provided in the Plan or the Lender Litigation Settlement, and explicitly subject to the treatment of the Assigned Preference Claims, the Abandoned Claims and the Non-Settling Defendant Claims as set forth in the Plan, will retain (i) any and all Claims against any Person, to the extent such Person asserts a cross-claim, counterclaim, and/or Claim for setoff which seeks affirmative relief against the Debtors, their officers, directors, or representatives, (ii) any and all claims under chapter 5 of the Bankruptcy Code except to the extent waived or settled pursuant to the DIP Financing Order or the Lender Litigation Settlement, (iii) any and all claims for the turnover of any property of the Debtors’ estates, (iv) all such claims, causes of action, rights of setoff, and other legal or equitable defenses which they had immediately prior to the Commencement Date fully as if the Chapter 11 Cases had not been commenced, except for those claims, causes of action, rights of setoff or other legal or equitable defense, if any, that the Debtors have effectively waived after the Commencement Date, and all of the Debtors’ and Reorganized Debtors’ legal and equitable rights respecting any Claim left unimpaired by the Plan may be asserted after the Confirmation Date to the same extent as if the Chapter 11 Cases had not been commenced, and (v) the rights to bring any causes of action that could have been brought by the respective Debtor at any time.
Section 1123(b)(4) of the Bankruptcy Code. Consistent with section 1123(b)(4) of the Bankruptcy Code, the Plan contemplates the sale and transfer of assets related to the Schedule III Debtors. Specifically, the Plan provides that the F&F Business of Schedule III Debtor MSC (which includes, inter alia, the equity interests in Smith Corona Marchant Finance A.G. held by Schedule III Debtor MHC) will be transferred to New F&F for its reorganization enterprise value, payable in Class A Shares. Further, the Acetyls Business of Schedule III Debtor MPI will be transferred to New Acetyls for its reorganization enterprise value, payable in Class A Shares. As the F&F Business and Acetyls Business are already part of the Debtors’ business enterprise, the Debtors could not have received a higher and better price for these assets. As further discussed in the Celentano Declaration, the sale of these businesses is for fair value. See Celentano Declaration at 9. The Class A Shares received
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from these sales will be distributed to holders of Claims against MPI and MSC.
Further, the Plan provides that certain Debtors will contribute the Transferred Real Properties to the Environmental Custodial Trust. Subsequently, the Environmental Custodial Trust will sell, transfer or otherwise dispose of the Transferred Real Properties and will make any distributions in accordance with the terms of the Environmental Custodial Trust Agreement. Additionally, the Plan contemplates that Equistar will transfer all of its Equity Interests in the Former Equistar Subsidiaries to MCI, and Lyondell Chemical will then transfer all of its Equity Interests in MCI to the Millennium Custodial Trust. Consequently, the Millennium Custodial Trust will directly or indirectly administer the assets and resolve the liabilities of the Schedule III Debtors (other than MPI, MSC and MPCO), and the Millennium Trust Trustee will distribute the net proceeds to the Schedule III Debtors’ respective creditors in the order of the priority of their Claims as set forth in the Bankruptcy Code.
Section 1123(b)(5) of the Bankruptcy Code. As authorized by section 1123(b)(5) of the Bankruptcy Code, and as discussed above, the Plan sets forth, among other things, the Debtors’ proposed treatment of unsecured and secured Claims against the Debtors’ estates. In certain instances (as discussed in more detail above), the Debtors propose to modify the rights of certain claimants, while in others the Debtors propose to leave particular Classes of Claims unimpaired, all in a manner permissible under the Bankruptcy Code.
Section 1123(b)(6) of the Bankruptcy Code. In accordance with this permissive section of the Bankruptcy Code, the Plan provides for, among other things, (i) the implementation of the global restructuring transactions and North American restructuring transactions and (ii) the establishment of the Millennium Custodial Trust, the Environmental Custodial Trust, the Litigation Trust and the Creditor Trust.
Section 5.4(b) of the Plan (subject to certain technical amendments intended to be included in the Confirmation Order filed substantially contemporaneously herewith) sets forth the basic steps for the global restructuring of LyondellBasell and for an Enforcement Sale that eliminates the guarantees provided and the liens granted by the Non-Debtor Obligors and Basell Germany to the Senior Secured Lenders, the Bridge Loan Lenders and the 2015 Noteholders. As further explained in the Confirmation Brief, it is my understanding that the Enforcement Sale is consistent with the provisions of the Bankruptcy Code.
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6. Debtors’ Compliance with the Bankruptcy Code (11 U.S.C. § 1129(a)(2)).
On the basis of my understanding and discussions with the Debtors’ legal advisors, the Debtors
have satisfied the requirements of section 1129(a)(2) by complying with sections 1125 and 1126
of the Bankruptcy Code regarding disclosure and plan solicitation (as discussed in more detail
below).
7. On March 11, 2010, after notice and a hearing, the Bankruptcy Court
entered an order approving the Disclosure Statement and approving the form and manner of
soliciting votes on the Plan (the “Disclosure Statement Order”).
8. On March 17, 2010, the Debtors commenced solicitation of votes to
accept or reject the Plan. The details regarding the manner in which votes were solicited is set
forth in the Affidavit of Service of Solicitation Materials by Jane Sullivan of Financial Balloting
Group LLC (“FBG”), sworn to on April 16, 2010 and filed on April 17, 2010 [Docket No. 4308]
(the “Solicitation Affidavit”).
9. The voting deadline for the Plan was April 15, 2010. Before the
Confirmation Hearing, FBG will file its sworn declaration describing the methodology it used in
tabulating votes for and against the Plan (the “Voting Declaration”).
10. To the best of my knowledge and belief, as described in the Solicitation
Affidavit and as I understand will be described the Voting Declaration, the Debtors have used the
forms and followed the procedures set forth and approved in the Disclosure Statement Order in
transmitting the Disclosure Statement, the Plan and related documents and notices to known
holders of Claims and Equity Interests and in soliciting and tabulating votes on the Plan.
Additionally, the Debtors did not solicit acceptances of the Plan from any creditor or equity
interest holder prior to the transmission of the Disclosure Statement.
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11. To the best of my knowledge and belief, good, sufficient and timely notice
of the hearing on the confirmation of the Plan has been provided to all known record holders of
Claims and Equity Interests and all other parties in interest to whom notice was required to have
been provided in the Disclosure Statement Order. The Debtors also caused the publication of the
Notice of Confirmation Hearing and Objection Deadline with Respect to the Debtors’ Plan of
Reorganization in the following newspapers on the following dates: (i) THE NEW YORK TIMES on
March 29, 2010, (ii) THE WALL STREET JOURNAL on March 30, 2010, and (iii) USA TODAY on
March 31, 2010. See Affidavit of Publication of Notice of Confirmation Hearing and Objection
Deadline with Respect to the Debtors’ Plan Reorganization by Erin Ostenson on Behalf of the
Wall Street Journal [Docket No. 4270]; Affidavit of Publication of Notice of Confirmation
Hearing and Objection Deadline with Respect to the Debtors’ Plan of Reorganization by Alice
Weber on Behalf of the New York Times [Docket No. 4272]; Affidavit of Publication of Notice
of Confirmation Hearing and Objection Deadline with Respect to the Debtors’ Plan of
Reorganization by Antoinette Chase on Behalf of USA Today [Docket No. 4273].
12. To the best of my knowledge and belief, the Debtors have used the forms
and followed the procedures set forth and approved in the Disclosure Statement Order in
transmitting the Subscription Rights Forms and related documents with respect to the Rights
Offering.
13. Additionally, it is my further understanding that, based on the Solicitation
Affidavit and anticipated Voting Declaration, the Debtors have properly solicited and tabulated
votes from all holders of Allowed Claims entitled to distributions under the Plan whose claims or
interests are impaired by the Plan (i.e., Classes 3, 4, 5, 7-A, certain subclasses of Class 7-B, 7-C,
7-D and 8).
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14. Plan Proposed in Good Faith (11 U.S.C. § 1129(a)(3)). On the basis of my
understanding and discussions with the Debtors’ legal advisors, the Debtors have met their good
faith obligations under section 1129(a)(3) of the Bankruptcy Code. The Plan is based upon
extensive arm’s-length negotiations among the Debtors, the Creditors’ Committee and all other
major creditor constituencies and is designed with the honest purpose of reorganizing and
expeditiously distributing value to creditors. The Plan enables the Debtors to emerge from
chapter 11 as a financially rehabilitated and viable entity, while at the same time distributing net
available value to creditors on account of their claims. The fundamental fairness of the Plan and
the appropriate, honest and well intended way it balances competing interests in these cases is
demonstrated by the support it has received from the Creditors’ Committee, the Senior Secured
Creditors, the Bridge Lenders, the 2015 Noteholders, the Millennium Bondholders and the other
parties in interest who have reached agreement with the Debtors over the treatment of their
claims, and the overwhelming aggregate votes cast in favor of the Plan.
15. Payments for Services or Costs and Expenses (11 U.S.C.
§ 1129(a)(4)). On the basis of my understanding and discussions with the Debtors’ legal
advisors, pursuant to the Order Granting Motion Establishing Procedures for Interim
Compensation and Reimbursement of Expenses for Professionals and Committee Members,
dated January 23, 2009 [Docket No. 363], as later amended on September 24, 2009 [Docket
No. 2838], the Bankruptcy Court has authorized and approved the payment of certain fees and
expenses of professionals retained in these Chapter 11 Cases. These fees and expenses, as well
as all other accrued fees and expenses of non-ordinary course professionals retained by the
Debtors and the Committee, and any ordinary course professional that exceeded the applicable
fee caps, and any success fees required to be paid by the Debtors to financial advisors retained by
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the major creditor constituencies through the Effective Date, remain subject to final review by
the Bankruptcy Court for reasonableness under sections 327, 328, 330 and 331 of the Bankruptcy
Code, and the Plan requires the filing of a final fee application by those professionals.
16. Pursuant to the DIP Financing Order, the DIP Term Loan Agreement and
the DIP ABL Agreement, the Debtors are required to pay the reasonable fees and expenses of
certain professionals retained by the DIP Agents and the Specified NM Lenders, without
application by or on behalf of any such parties to the Bankruptcy Court and without notice and a
hearing. Also pursuant to the DIP Financing Order, the Debtors are required to pay the
reasonable fees and expenses of certain professionals retained by the ARCO and Equistar Notes
Trustee, the Ad Hoc Group and certain agents to the prepetition credit facilities without
application by or on behalf of any such parties to the Bankruptcy Court and without notice and a
hearing unless, following the receipt of reasonably detailed invoices, the Debtors, the Creditors’
Committee or the U.S. Trustee object to those fees and expenses as provided in Section 17(c) of
the DIP Financing Order.
17. Pursuant to the ARCO/Equistar Settlement and Lender Litigation
Settlement, LyondellBasell is obligated to pay the reasonable fees and expenses of certain
advisors to other creditors or creditor groups involved in those settlements or otherwise as more
fully described in Section 13.1 of the Plan. All such entities paid pursuant to the various
settlement agreements must submit reasonably detailed invoices to the Debtors or the
Reorganized Debtors, as the case may be, prior to any request for such payment.
18. As described in the Plan Supplement, the Remuneration Committee of the
Supervisory Board of LyondellBasell recommended that Steve Cooper, Vice-Chairman of the
Supervisory Board and Chairman of the Restructuring Committee, receive a bonus in the amount
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of $9,750,000 for his extraordinary efforts and contributions to these Chapter 11 Cases. The
Supervisory Board subsequently approved this bonus on April 5, 2010 (Mr. Cooper was recused
from the Supervisory Board’s vote on the approval of his bonus). Mr. Cooper was instrumental
in, among other things, facilitating the resolution of myriad intercreditor disputes presented in
these cases and, as a result, facilitating the Debtors’ prompt emergence from chapter 11, and
eliminating substantial professional costs to these estates by renegotiating the terms of certain
professionals’ fees, resulting in savings to the estates many multiples in excess of Mr. Cooper’s
awarded bonus.
19. The aforementioned fees and fee review procedures are reasonable and,
therefore, the Debtors have complied with the requirements of section 1129(a)(4) of the
Bankruptcy Code.
20. Directors, Officers and Executive Compensation (11 U.S.C. § 1129(a)(5)).
The Debtors disclosed in the Plan Supplement information concerning the identity and
affiliations of the persons then known and expected to serve as the initial directors and executive
officers of New Topco upon emergence from these Chapter 11 Cases. In addition to the four
expected initial members of the Supervisory Board identified in the Plan Supplement, it is
expected that Marvin O. Schlanger will also serve as an initial director of New Topco and four
independent members of the initial Supervisory Board will be selected and appointed as soon as
reasonably practicable after the Effective Date in accordance with the Plan Supplement
documents. Mr. Schlanger is Chairman of the Board of CEVA Group, plc, and Vice Chairman
of Hexion Specialty Chemicals, Inc., a global specialty chemical company. He is also a principal
in the firm of Cherry Hill Chemical Investments, LLC, which provides management services and
capital to the chemical and allied industries. Mr. Schlanger was formerly President, Chief
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Executive Officer and Chairman of Resolution Performance Products, LLC; Chairman of
Covalence Specialty Materials Corp., and Chairman of Resolution Specialty Materials, LLC.
From 2000 to 2005, in conjunction with Apollo Management, Mr. Schlanger led the component
acquisitions and management of the Resolution companies. These companies were merged with
Borden Chemical and Bakelite AG to form Hexion in May, 2005.
21. James L. Gallogly, current Chief Executive Officer of LyondellBasell, will
serve as both Chief Executive Officer and sole member of the Management Board of New
Topco upon emergence from these Chapter 11 Cases. Based on the information provided to me
with respect to the individuals contemplated to serve as directors and officers of New Topco, and
together with the four additional supervisory board members that will be appointed after the
Effective Date, I believe the appointment to, or continuation in, such positions by these
individuals is consistent with the interests of creditors, equity interests and public policy.
22. On June 29, 2009, the Debtors filed a Motion to Approve their
Employment Agreement with James L. Gallogly as Chief Executive Officer [Docket No. 2108],
and on August 18, 2009, the Debtors filed a Motion to Approve their employment terms for
C. Kent Potter as Chief Financial Officer [Docket No. 2498] (collectively, the “Retention
Motions”). The Retention Motions explain why the appointment of these individuals to the
offices each will hold is in the best interest of the estates and also disclose the compensation they
will be paid, which descriptions are incorporated herein by reference. On July 21, 2009 and
September 8, 2009, respectively, the Bankruptcy Court entered orders approving the employment
agreement with Mr. Gallogly [Docket No. 2305] and the employment terms for Mr. Potter
[Docket No. 2709].
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23. The compensation expected to be paid to each of the top five executive
officers of New Topco following emergence from chapter 11 is as follows:
NameBase Salary ($)
2010 Target Bonus Percentage(2) Other Compensation(3) Employment Agreement (4)
Jim Gallogly 1,500,000 100% of base salary
(i) Medium Term Incentive Plan; (ii) Long-Term Incentive Plan
Yes
C. Kent Potter 700,000 170% of base salary
N/A No
Craig Glidden 524,550 80% of base salary
(i) Medium Term Incentive Plan; (ii) Long-Term Incentive Plan
Yes
Kevin Brown 400,000 75% of base salary
(i) Medium Term Incentive Plan; (ii) Long-Term Incentive Plan
Yes
Anton de Vries(1)
534,953 75% of base salary
(i) Management Incentive Plan; (ii) Medium Term Incentive Plan; (iii) Long-Term Incentive Plan
Yes
(1) For purposes of the executive compensation disclosure herein, the base salary for Mr. de Vries has been converted to U.S. dollars at a rate of 1.4737 U.S. dollars to one euro.
(2) Pursuant to their employment agreements (and the compensation terms approved by the Bankruptcy Court for Mr. Potter), the target bonus percentages for Messrs. Glidden and Brown cannot be respectively less than 80% and 75% of their base salary for the year, and Mr. Potter’s target bonus percentage cannot be less than 170% of his base salary for the year. While the target bonus percentage for Mr. Potter is outside the range of typical target bonus percentages, pursuant to his negotiated and Bankruptcy Court approved compensation terms, Mr. Potter will not participate in the company’s management incentive plan or long or medium-term incentive plans. The compensation committee alone establishes the target bonus percentage for the Chief Executive Officer after its annual evaluation of his performance. Pursuant to his employment agreement, the bonus award payout for Mr. Gallogly can range between 0% and 200% of his base salary for the year.
(3) The terms of the Medium Term Incentive Plan and the Long Term Incentive Plan are more fully described in the Plan Supplement. The terms of the Management Incentive Plan are more fully described in the Debtors’ Motion for an Order Authorizing the Implementation of (I) Management Incentive Plan; (II) Non-Insider Employee Retention Plan; (III) Discretionary Bonus Plan; and (IV) Hardship Plan, filed on July 1, 2009 [Docket No. 2149].
(4) Pursuant to his employment agreement, Mr. Gallogly is entitled to an initial equity award under the Long-Term Incentive Plan comprising restricted shares of common stock valued at $25 million and stock options to purchase an additional number of shares equal to 1.0% of the shares of common stock to be outstanding pursuant to the plan of reorganization at the time of emergence. The employment agreements for Messrs. Glidden and Brown each provide of an initial equity award under the Long-Term Incentive Plan to be not less than 220% and 200%, respectively, of base salary earned in 2009.
24. Based on the foregoing, I believe that the Debtors have satisfied the
requirements of section 1129(a)(5) of the Bankruptcy Code.
25. No Rate Changes (11 U.S.C. § 1129(a)(6)). Section 1129(a)(6) of the
Bankruptcy Code is inapplicable to these Chapter 11 Cases because the Debtors are not changing
any rates that require approval by any governmental agency.
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26. Best Interests of Creditors (11 U.S.C. § 1129(a)(7)). On the basis of my
understanding and discussions with the Debtors’ legal advisors, I have been informed that
section 1129(a)(7) of the Bankruptcy Code – the “best interests test” – requires that, with respect
to each impaired Class of Claims and Equity Interests, each such holder must either (a) accept
the Plan or (b) receive or retain under the Plan property of a value, as of the Effective Date, that
is not less than the value such holder would receive or retain if the Debtors were to be liquidated
under chapter 7 of the Bankruptcy Code.
27. Based on the Monger Declaration, I believe the Plan satisfies the “best
interests” test. I refer interested parties to that declaration for the details, but all creditors and
equity interest holders can anticipate receiving under the Plan property of a value not less than
the amount such holders would receive or retain if the Debtors were to be liquidated under
chapter 7 of the Bankruptcy Code.
28. Acceptance by All Classes (11 U.S.C. § 1129(a)(8)). Exhibit A hereto
includes a chart that depicts the preliminary voting results for each Debtor, and the Voting
Declaration will verify these results and reflect for each Debtor the number and amount of the
votes cast to accept or reject the Plan by creditors in impaired Classes entitled to vote. Holders
of Claims in Class 1 (Priority Non-Tax Claims), Class 2 (Secured Tax Claims), Class 6 (Other
Secured Claim), subclasses of Class 7-B (General Unsecured Claims against Non-Obligor
Debtors) and Class 14 (Equity Interests in the Debtors (other than LBFC, LBIAF and Schedule
III Debtors) are unimpaired and not entitled to vote. Based on the preliminary voting results
which are expected to be confirmed by the Voting Declaration, with one exception, all Impaired
Classes of Claims entitled to vote on the Plan, Classes 3, 4, 5, 7-A, 7-C, 7-D and 8, resoundingly
voted to accept the Plan. Only impaired Claims in one sub-class of Class 7-B (Millennium
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Holdings LLC) voted to reject the Plan. The remaining impaired Classes (certain subclasses in
Class 7-B and Classes 9 through 13) are deemed to reject the Plan (collectively, the “Rejecting
Classes”). Although section 1129(a)(8) is not satisfied with respect to certain of the Debtors, it is
my understanding that the Plan is confirmable because the Plan satisfies section 1129(b)(2) of
the Bankruptcy Code with respect to each of the dissenting Classes (as discussed more fully
below).
29. Treatment of Administrative, Priority Tax and Priority Non-Tax Claims
(11 U.S.C. § 1129(a)(9)). On the basis of my understanding and discussions with the Debtors’
legal advisors, the Debtors have complied with section 1129(a)(9) of the Bankruptcy Code. In
accordance with section 1129(a)(9)(A) of the Bankruptcy Code, Section 2.1 of the Plan provides
that all Allowed Administrative Expenses, including those arising under section 503(b) of the
Bankruptcy Code, will be paid in full on the later of (i) the Effective Date, (ii) the date such
Administrative Expense Claim otherwise would become due in the ordinary course of business
and (iii) the last Business Day of the month in which such Administrative Expense becomes
Allowed, provided such Administrative Expense becomes Allowed at least ten (10) days prior to
the last Business Day of the month, otherwise the last Business Day of the following month,
except to the extent that a holder of an Allowed Administrative Expense Claim agrees to less
favorable treatment.
30. In accordance with section 1129(a)(9)(B) of the Bankruptcy Code, Section
4.1 of the Plan provides that, except to the extent that such holder of an Allowed Priority
Non-Tax Claim has been paid prior to the Effective Date or agrees to less favorable treatment, all
Allowed Other Priority Claims will be paid Cash equal to the Allowed amount of such Priority
Non-Tax Claim on the later of (i) the Effective Date, (ii) the last Business Day of the month in
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which such Claim becomes Allowed, provided such Priority Non-Tax Claim becomes Allowed
at least ten (10) days prior to the last Business Day of the month, otherwise the last Business Day
of the following month.
31. The Plan also satisfies the requirements of sections 1129(a)(9)(C)-(D) of
the Bankruptcy Code in respect of the treatment of Priority Tax Claims under section 507(a)(8)
of the Bankruptcy Code. Pursuant to Sections 2.2 and 4.2 of the Plan, the Debtors will pay the
holders of Allowed Priority Tax Claims and Allowed Secured Tax Claims that are due on or
before the Effective Date, either (i) on the Effective Date, an amount in Cash equal to the
Allowed amount of such Claim, or (ii) on the Effective Date and each year on the Effective Date
Anniversary, or on any earlier date at the sole option of the applicable Debtor, equal annual Cash
payments, in an aggregate amount equal to such Allowed Priority Tax Claim or Allowed Secured
Tax Claim, together with a rate of interest determined under applicable nonbankruptcy law
pursuant to section 511 of the Bankruptcy Code, over a period not exceeding five (5) years after
the Commencement Date. Holders of an Allowed Secured Tax Claim will retain their lien
pending payment of such Claim. All Allowed Priority Tax Claims not due and payable on or
before the Effective Date shall be paid in the ordinary course of business as such obligations
become due.
32. Therefore, it is my understanding that, based upon the foregoing, the Plan
satisfies the requirements of section 1129(a)(9) of the Bankruptcy Code.
33. Acceptance by Impaired Classes (11 U.S.C. § 1129(a)(10)). As reflected
in the chart annexed as Exhibit A depicting the preliminary voting results and as is expected to
be confirmed by the Voting Declaration, at least one impaired Class of Claims for each of the
Debtors has voted to accept the Plan, without including votes cast by insiders.
USActive 19110764.9 17
34. On the basis of my understanding and discussions with the Debtors’ legal
advisors, the Plan satisfies section 1129(a)(10) of the Bankruptcy Code with respect to all
Debtors.
35. Feasibility (11 U.S.C. § 1129(a)(11)). For the reasons and based upon the
conclusions reached in the Celentano Declaration and Monger Declaration, except as otherwise
provided for in the Plan, confirmation of the Plan is not likely to be followed by liquidation or
the need for further reorganization of the Debtors. The Plan thus satisfies the requirements of
section 1129(a)(11) of the Bankruptcy Code.
36. Payment of Fees (11 U.S.C. § 1129(a)(12)). The Debtors will pay on the
Effective Date all fees, if any, then payable under section 1930 of chapter 123 of title 28 of the
United States Code, and the Reorganized Debtor will pay any such fees due after the Effective
Date, thus satisfying the requirements of section 1129(a)(12) of the Bankruptcy Code.
37. Continuation of Retiree Benefits (11 U.S.C. § 1129(a)(13)). Section 9.7 of
the Plan provides that, unless otherwise terminated or rejected prior to the Effective Date, the
Reorganized Debtors will continue to pay all retiree benefits of the Debtors, if any, at the level
established in accordance with section 1114 of the Bankruptcy Code at any time prior to the
Confirmation Date, for the duration of the period for which the Debtors are obligated to provide
such benefits. Based upon the foregoing, the Plan satisfies the requirements of section
1129(a)(13) of the Bankruptcy Code.
38. Principal Purpose of the Plan (11 U.S.C. § 1129(d)). The Plan has not
been filed for the purpose of the avoidance of taxes or the application of Section 5 of the
Securities Act of 1933, as amended.
USActive 19110764.9 18
39. Confirmation of the Plan Using Cram Down Provisions (11 U.S.C. §
1129(b). It is my understanding, based on discussions with the Debtors’ legal advisors, that a
plan may be confirmed notwithstanding the rejection or deemed rejection by a class of claims or
equity interests so long as the plan does not “discriminate unfairly” and is “fair and equitable”
with respect to each such dissenting class. It is my further understanding, based on such
discussions, that (i) a plan does not discriminate unfairly if the legal rights of a rejecting class are
treated in a manner that is consistent with the treatment of other classes whose legal rights are
substantially similar to those of the rejecting class and (ii) the fair and equitable requirement is
satisfied if the holders of claims and equity interests in junior classes are not receiving or
retaining any property under the plan.
40. Based on my understanding and discussions with the Debtors’ legal
advisors, the Plan does not discriminate unfairly and is fair and equitable with respect to each
Rejecting Class for all Debtors for the following reasons:
Class The Plan does not Unfairly Discriminate The Plan is Fair and Equitable
Class 7-B Class 7-B consists of General Unsecured Claims against Non-Obligor Debtors, and differs in legal nature and priority from all other Classes of General Unsecured Claims. Holders of Claims in this Class would not have benefited if the Committee Litigation was successful, so they do not participate in the Lender Litigation Settlement. All holders of Claims in this Class receive the same treatment – they receive the unencumbered value, if any, from the Non-Obligor Debtor against which they hold a Claim after payment in full of administrative and priority claims asserted against or allocated to such Debtor. In some instances, the Non-Obligor Debtor has no such value available for distribution, so those impaired 7-B subclasses will receive no distribution under the Plan.
There are no Classes junior to Class 7-B that will receive or retain any value on account of their Claims or Equity Interest under the Plan. Neither holders of disputed subordinated Claims in Classes 9 and 10, nor holders of Equity Interests in Classes 11 through 14, are receiving or retaining any value under the Plan. Because the Plan provides that LBIAF’s interests in its direct and indirect subsidiaries will be terminated as of the Effective Date and LBIAF, LBAFGP and BF S.à.r.l. will be dissolved post-emergence in accordance with applicable law, holders of Equity Interests in Class 12 will not receive or retain any property under the Plan. Prepetition intercompany equity holders in Classes 13 and 14 are similarly not receiving or retaining any value under the Plan, rather those intercompany equity interests are being maintained out of administrative convenience merely to preserve the corporate structure of
USActive 19110764.9 19
LyondellBasell for the benefit of the Reorganized Debtors and the Millennium Custodial Trust and the beneficiaries thereof.
Classes 9 - 10 Class 9 and 10 consist of Securities Claims and Subordinated Claims that are legally subordinated in right of payment to all other Classes of unsecured claims and differ in legal nature and priority from all other Claims. Holders of Claims in these Classes do not participate in the Lender Litigation Settlement because they would not have benefited if the Committee Litigation was successful. Because of the subordinated nature of Claims in these Classes, there is no value available for distribution and holders of Claims in these Classes receive no distribution under the Plan.
For the reasons described above, there are no Classes junior to Classes 9 and 10 that will receive or retain any value on account of their Claims or Equity Interest under the Plan.
Classes 11 – 13 Classes 11-13 are comprised of the Equity Interests in each of the Debtors. Each Debtor has one Class of Equity Interests under the Plan and, as described above, no holder of Equity Interests is receiving or retaining any value under the Plan.
Equity Interests are afforded the lowest priority in the distribution of a debtor’s estate, and because each Debtor has only one Class of Equity Interests, there are no Classes of Equity Interests junior to the Equity Interests in Classes 11-13 that will receive or retain any value under the Plan.
41. Shortening Stay of Confirmation Order. It is my understanding, based on
discussions with the Debtors’ legal advisors, that Bankruptcy Rule 3020(e) provides for a
fourteen day stay of a confirmation order, unless the court orders otherwise. See Fed. R. Bankr.
P. 3020(e); see also Fed. R. Bankr. P. 7062. Accordingly, the Debtors are requesting that the
Bankruptcy Court shorten the fourteen day stay so that the Plan may become effective as soon as
practicable following entry of the Confirmation Order.
42. The shortening of the stay is imperative so that LyondellBasell can
complete a month-end closing rather than a mid-month closing. A mid-month closing would
require an expenditure of approximately $5 million to $8 million to reconcile the company’s
books and records and effectively would require that the company close its books twice in a
single month. Not only would a mid-month closing add these significant costs to the estate, but
it also brings significant risk of further delays in consummating the Plan.
USActive 19110764.9 20
43. Further, shortening the stay period would save these estates considerable
professional expenses and financing costs. In addition to the monthly fees, interest and adequate
protection the Debtors are paying pursuant to the DIP Financing documents, they are now paying
interest on the exit financing that already closed into escrow. These double interest and adequate
protection payments aggregate approximately $2 million per day. Additionally, under the
existing DIP financing documents, the Debtors incur expenses of $40 million to $60 million per
month for staying in chapter 11. Additionally, shortening of the stay would benefit the
participants in the rights offering by limiting additional costs and risks. These parties have
already committed substantial funds in anticipation of an end-of-April exit from bankruptcy and
purchase of reorganized equity. Delaying this closing would impose additional risks and
opportunity costs on these parties as well.
44. The Debtors have made an appropriate showing that the Bankruptcy Court
should shorten the fourteen day stay pursuant to Bankruptcy Rules 3020(e) and, to the extent
applicable, Bankruptcy Rule 7062, and any order confirming the Plan should be effective and
enforceable immediately following entry.
45. In light of the forgoing, the Plan satisfies all of the requirements of section
1129 of the Bankruptcy Code and should be confirmed.
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I declare under penalty of perjury that the foregoing is true and correct.
Executed on this 19th day of April, 2010
/s/ Gerald A. O’BrienGerald A. O’BrienVice President Deputy General CounselLyondell Chemical CompanyOne Houston Center, Suite 7001221 McKinney StreetHouston, TX 77011
EXHIBIT A
Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 Class 7-A Class 7-B Class 7-C Class 7-D Class 8 Class 9 Class 10 Class 11 Class 12 Class 13 Class 14
LID EntityName PriorNonTax SecTax DipRoll SrSec BrdgL SecOther
GUC against Obligor Debtors
GUC Against Non-Obligor
Debtors
GUC and Sr/Br Guar.
Claims against MPI, MSC, MPCO
GUC and Sr/Br Def. Claims
against Sch III Obg Debtors 2015 Securities Subord LBFC Equity LBIAF Equity
Sch III Equity Other Debtor Equity
1 Lyondell Chemical Company X 2 Basell Germany Holdings GmbH 3 Basell North America Inc. 4 Basell USA Inc. 5 Circle Steel Corporation X6 Duke City Lumber Company, Inc. X X7 Equistar Chemicals, LP 8 Equistar Transportation Company, LLC X9 Glidco Leasing, Inc. X X
10 Glidden Latin America Holdings, Inc. X11 HOISU Ltd. X X12 Houston Refining LP 13 HPT 28 Inc. X14 HPT 29 Inc. X15 H.W. Loud Co. X X16 IMWA Equities II, Co., L.P. X17 ISB Liquidating Company X18 LBI Acquisition LLC 19 LBIH LLC 20 LeMean Property Holdings Corporation X21 Lyondell Asia Pacific, Ltd. X 22 Basell Finance USA Inc. 23 Lyondell Chemical Delaware Company 24 Lyondell Chemical Espana Co. 25 Lyondell Chemical Europe, Inc. 26 Lyondell Chemical International Co. 27 Lyondell Chemical Nederland, Ltd. 28 Lyondell Chemical Products Europe, LLC 29 Lyondell Chemical Properties, L.P. 30 Lyondell Chemical Technology Management, Inc. 31 Lyondell Chemical Technology 1 Inc. 32 Lyondell Chemical Technology, L.P. 33 Lyondell Chimie France LLC 34 Lyondell-Equistar Holdings Partners 35 Lyondell Europe Holdings Inc. 36 Lyondell Greater China, Ltd. 37 Lyondell Houston Refinery Inc. 38 Lyondell LP3 GP, LLC 39 Lyondell LP3 Partners, LP 40 Lyondell LP4 Inc. 41 Lyondell (Pelican) Petrochemical L.P. 1, Inc. 42 Lyondell Petrochemical L.P. Inc. 43 Lyondell Refining Company LLC 44 Lyondell Refining I LLC 45 LyondellBasell Advanced Polyolefins USA Inc. 46 LyondellBasell Finance Company X47 MHC Inc. X48 Millennium America Holdings Inc. X49 Millennium America Inc. X50 Millennium Chemicals Inc. X X51 Millennium Holdings, LLC X X52 Millennium Petrochemicals GP LLC X53 Millennium Petrochemicals Inc. X
Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 Class 7-A Class 7-B Class 7-C Class 7-D Class 8 Class 9 Class 10 Class 11 Class 12 Class 13 Class 14
LID EntityName PriorNonTax SecTax DipRoll SrSec BrdgL SecOther
GUC against Obligor Debtors
GUC Against Non-Obligor
Debtors
GUC and Sr/Br Guar.
Claims against MPI, MSC, MPCO
GUC and Sr/Br Def. Claims
against Sch III Obg Debtors 2015 Securities Subord LBFC Equity LBIAF Equity
Sch III Equity Other Debtor Equity
54 Millennium Petrochemicals LP LLC X55 Millennium Petrochemicals Partners, LP X56 Millennium Realty Inc. X X57 Millennium Specialty Chemicals Inc. X58 Millennium US Op Co LLC X59 Millennium Worldwide Holdings I Inc. X60 MWH South America LLC X61 National Distillers & Chemical Corporation X X X62 NDCC International II Inc. X63 Nell Acquisition (US) LLC 64 Penn Export Company, Inc. X65 Penn Navigation Company X66 Penn Shipping Company, Inc. X X67 Penntrans Company X68 PH Burbank Holdings, Inc. X X69 Power Liquidating Company, Inc. X70 Quantum Acceptance Corporation X X71 SCM Plants, Inc. X X72 Suburban Propane GP, Inc. X X73 Tiona, Ltd. X X74 UAR Liquidating Inc. X X75 USI Chemicals International, Inc. X76 USI Credit Corp. X77 USI Puerto Rico Properties, Inc. X78 Walter Kidde & Company, Inc. X X79 Wyatt Industries, Inc. X X96 Basell Capital Corporation
110 Basell Impact Holding Company 156 Equistar Bayport, LLC (Delaware) X 158 Equistar Funding Corporation (Delaware) X163 Equistar Polypropylene, LLC (Delaware) X189 Lyondell Bayport, LLC (Delaware) 192 Lyondell Chemical Holding Company 196 Lyondell Chemical Wilmington, Inc (Delaware) 208 Lyondell General Methanol Company (Delaware) 211 Lyondell Intermediate Holding Company (Delaware) 223 LyondellBasell AFGP S.à r.l. X 227 LyondellBasell Industries AF S.C.A. X X252 Quantum Pipeline Company (Illinois) X277 LPC Partners Inc. X278 SCM Chemicals Inc. X
KEYNo claims/non-voting class
X Deemed to rejectX Voted to reject Deemed to accept Voted to accept