Common use of Phase Down Clause in Contracts

Phase Down. Both parties have the right to elect to reduce the parties' Ethylene quantity obligations so long as any such reduction is accomplished in accordance with and subject to the following ("Phase Down"): i. Either party may exercise its right of Phase Down by providing at least 3 full calendar years irrevocable written notice (the "Phase Down Notice") to the other party for each calendar year affected by such Phase Down Notice, but in no event will Phase Down affect any calendar year prior to the calendar year beginning January 1, 2009. The party providing a Phase Down Notice shall state therein the Phase Down quantity such party elects for any Phase Down year specified in such Phase Down Notice. The timely delivery of the Phase Down Notice specifying the Phase Down quantity is an essential term of this Agreement. ii. In order to effect the parties' intention that Phase Down of the entire quantity hereunder could be completed in no less than 5 years and that the Phase Down quantity in any year may never exceed the quantity reduction that would occur in a 5 year uniform quantity Phase Down, the parties agree that a Phase Down Basis Quantity will be the basis for calculating the maximum Phase Down quantity in any year, as set forth in Subparagraphs iii. and iv., below. iii. As used herein, the "Phase Down Basis Quantity" will be the annual average of the purchased Ethylene quantity hereunder (plus any quantity Buyer may have been obligated to purchase but did not) for the 3 calendar years immediately preceding the first Phase Down year. iv. As used herein, the "Phase Down Annual Minimum" will equal Buyer's purchase obligation in the Phase Down period. In the first Phase Down year the Phase Down Annual Minimum shall not be less than 83.33% of the Phase Down Basis Quantity, and in any subsequent year, the reduction of the Phase Down Annual Minimum for that year as compared to the previous year may not exceed 16.67% of the Phase Down Basis Quantity. Subject to Subparagraph 2(f) vii, the party exercising its right to reduce the Ethylene quantity obligations under Paragraph 2(f) of this Agreement may elect to reduce the Phase Down Annual Minimum by said 16.67% or any lesser quantity. If a Reduction Event occurs during the Phase Down, the Phase Down Annual Minimum for the year in which the Reduction Event occurs and is continuing will be reduced by an amount equal to the product of (A) the reduction in ethylene use attributable to the reduction in practical production capacity resulting from such Reduction Event multiplied by (B) a fraction, the numerator of which is the Phase Down Annual Minimum for such year without giving effect to reduction for any Reduction Event and the denominator of which is the Phase Down Basis Quantity. If all or any portion of the practical production capacity is placed back in service, then, subject to Paragraph 2(c), the Phase Down Annual Minimum will be increased by the same amount as it previously had been reduced as a result of the reduction of such practical production capacity. Any such changes will be prorated for the remainder of any year in which such Reduction Event occurs. v. As used herein, the "Phase Down Annual Maximum" will be, in each year, 115% of the Phase Down Annual Minimum for that year. vi. Beginning with the first Phase Down year, the quantity obligations of the parties will cease to be on a requirements basis for Buyer and on a 2,550 MM lbs. Annual Maximum basis (as may be reduced by a Reduction Event) for Seller. Beginning with the first Phase Down year the quantity obligations will apply in accordance with this Paragraph 2(f) in that the Annual Minimum for any year will be the applicable Phase Down Annual Minimum and the Annual Maximum for such year will be the applicable Phase Down Annual Maximum. vii. If one party has furnished the Phase Down Notice to the other, the other party may elect to reduce the quantity in the affected year by a greater amount, but not exceeding, in total reduction quantity, the upper limit specified in Subparagraph 2(f) iv., provided that the election is made by written notice at least 3 full calendar years prior to the affected Phase Down year, or within 10 days after receipt of the Phase Down Notice, whichever is later. viii. There will be no automatic reduction of quantity unless the Phase Down Notice for a given Phase Down year is provided at least 3 full calendar years prior to such Phase Down year. Phase Down may be effected over any number of years and this Agreement shall not be terminated in accordance with Section 3 until the quantity is reduced to zero under the provisions of this Paragraph 2(f). An example of a Phase Down of the entire quantity in 5 consecutive years would occur as follows: Assuming a Phase Down Basis Quantity of 2,200 MM lbs., Phase Down Year Annual Minimum Annual Maximum --------------- -------------- -------------- (MM lbs.) (MM lbs.) 1 1 833 2,108 2 1,467 1,687 3 1,100 1,265 4 733 844 5 367 422 6 0 0

Phase Down. Both parties have the right to elect to reduce the parties' ’ Ethylene quantity obligations so long as any such reduction is accomplished in accordance with and subject to the following ("“Phase Down"”): i. Either party may exercise its right of Phase Down by providing at least 3 full calendar years irrevocable written notice (the "“Phase Down Notice"”) to the other party for each calendar year affected by such Phase Down Notice, but in no event will Phase Down affect any calendar year prior to the calendar year beginning January 1, 20092014. The party providing a Phase Down Notice shall state therein the Phase Down quantity such party elects for any Phase Down year specified in such Phase Down Notice. The timely delivery of the Phase Down Notice specifying the Phase Down quantity is an essential term of this Agreement. ii. In order to effect the parties' ’ intention that Phase Down of the entire quantity hereunder could be completed in no less than 5 years and that the Phase Down quantity in any year may never exceed the quantity reduction that would occur in a 5 year uniform quantity Phase Down, the parties agree that a Phase Down Basis Quantity will be the basis for calculating the maximum Phase Down quantity in any year, as set forth in Subparagraphs iii. and iv., below. iii. As used herein, the "“Phase Down Basis Quantity" ” will be the annual average of the purchased Ethylene quantity hereunder (plus any quantity Buyer may have been obligated to purchase but did not) for the 3 calendar years immediately preceding the first Phase Down year. iv. As used herein, the "“Phase Down Annual Minimum" ” will equal Buyer's ’s purchase obligation in the Phase Down period. In the first Phase Down year the Phase Down Annual Minimum shall not be less than 83.33% of the Phase Down Basis Quantity, and in any subsequent year, the reduction of the Phase Down Annual Minimum for that year as compared to the previous year may not exceed 16.67% of the Phase Down Basis Quantity. Subject to Subparagraph 2(f2(d) vii, the party exercising its right to reduce the Ethylene quantity obligations under Paragraph 2(f2(d) of this Agreement may elect to reduce the Phase Down Annual Minimum by said 16.67% or any lesser quantity. If a Reduction Event occurs during the Phase Down, the Phase Down Annual Minimum for the year in which the Reduction Event occurs and is continuing will be reduced by an amount equal to the product of (A) the reduction in ethylene use attributable to the reduction in practical production capacity resulting from such Reduction Event multiplied by (B) a fraction, the numerator of which is the Phase Down Annual Minimum for such year without giving effect to reduction for any Reduction Event Event, and the denominator of which is the Phase Down Basis Quantity. If all or any portion of the practical production capacity is placed back in service, then, subject to Paragraph 2(c), then the Phase Down Annual Minimum will be increased by the same amount as it previously had been reduced as a result of the reduction of such practical production capacity. Any such changes will be prorated for the remainder of any year in which such Reduction Event occurs. v. As used herein, the "“Phase Down Annual Maximum" ” will be, in each year, 115% of the Phase Down Annual Minimum for that year. vi. Beginning with the first Phase Down year, the quantity obligations of the parties will cease to be on a requirements basis for Buyer and on a 2,550 MM lbs. the then applicable Annual Maximum basis (as may for Seller shall be reduced by a Reduction Event) for Sellerphased down. Beginning with the first Phase Down year the quantity obligations will apply in accordance with this Paragraph 2(f2(d) in that the Annual Minimum for any year will be the applicable Phase Down Annual Minimum and the Annual Maximum for such year will be the applicable Phase Down Annual Maximum. vii. If one party has furnished the Phase Down Notice to the other, the other party may elect to reduce the quantity in the affected year by a greater amount, but not exceeding, in total reduction quantity, the upper limit specified in Subparagraph 2(f2 (d) iv., provided that the election is made by written notice at least 3 full calendar years prior to the affected Phase Down year, or within 10 days after receipt of the Phase Down Notice, whichever is later. viii. There will be no automatic reduction of quantity unless the Phase Down Notice for a given Phase Down year is provided at least 3 full calendar years prior to such Phase Down year. Phase Down may be effected over any number of years and this Agreement shall not be terminated in accordance with Section 3 until the quantity is reduced to zero under the provisions of this Paragraph 2(f2(d). An example of a Phase Down of the entire quantity (assuming a Phase Down Basis Quantity of 2,200 MM lbs), in 5 consecutive years would occur as follows: Assuming a Phase Down Basis Quantity of 2,200 MM lbs., Phase Down Year Annual Minimum Annual Maximum --------------- -------------- -------------- (MM lbs.) (MM lbs.) 1 1 833 1,833 2,108 2 1,467 1,687 3 1,100 1,265 4 733 844 5 367 422 6 0 0422