EXHIBIT 10.34
DATED 18 DECEMBER 2000
____________________________________________________________________
GENERAL PARTNERSHIP AGREEMENT
____________________________________________________________________
BETWEEN
BAYER POLYURETHANES B.V.
AND
LYONDELL PO-11 C.V.
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS................................................... 1
ARTICLE 2 FORMATION OF PARTNERSHIP...................................... 2
2.1 Formation of the Partnership.................................. 2
2.2 Partnership Percentages....................................... 2
ARTICLE 3 NAME, SEAT, TRADE REGISTER, MANAGING PARTNER.................. 2
3.1 Name of the Partnership....................................... 2
3.2 Seat of the Partnership....................................... 2
3.3 Registration.................................................. 2
3.4 Managing Partner.............................................. 2
3.5 Solely a Manufacturing Joint Venture.......................... 2
ARTICLE 4 PURPOSE AND BUSINESS OF THE PARTNERSHIP....................... 2
4.1 Business of the Partnership................................... 2
4.2 Activities.................................................... 3
ARTICLE 5 TERM.......................................................... 3
5.1 Initial Contract Term......................................... 3
5.2 Extension of the Term......................................... 3
ARTICLE 6 CAPITAL CONTRIBUTIONS......................................... 3
6.1 General....................................................... 3
6.2 Working Capital............................................... 6
ARTICLE 7 ACCOUNTS IN THE NAME OF THE PARTNERS.......................... 7
7.1 Capital Accounts.............................................. 7
7.2 Current Accounts.............................................. 8
ARTICLE 8 MANAGEMENT.................................................... 8
8.1 General....................................................... 8
8.2 Operating Agreement........................................... 12
ARTICLE 9 OFFTAKE RIGHTS, MONTHLY PRODUCTION AND LIFTING PLANNING,
SPARE CAPACITY, DELIVERY OF PRODUCT, SHARED STORAGE
FACILITIES.................................................... 13
9.1 Offtake Rights of the Partners................................ 13
9.2 Monthly Production and Lifting Nominations.................... 13
9.3 Cost Allocations.............................................. 14
9.4 Bayer Spare Capacity.......................................... 15
9.5 Production Loss............................................... 17
9.6 Product Specifications........................................ 17
9.7 Delivery and Testing of Products.............................. 17
9.8 Risk of loss of Raw Materials................................. 17
9.9 Shared Storage Facilities..................................... 18
ARTICLE 10 PAYMENT OF OPERATING COSTS.................................... 19
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10.1 Invoicing for Operating Costs................................. 19
10.2 Fixed Costs................................................... 19
10.3 Variable Costs................................................ 19
10.4 Depreciation.................................................. 19
10.5 Special Adjustments........................................... 19
10.6 Payment of Operating Costs.................................... 20
10.7 Disputes Regarding Operating Costs Statements................. 20
10.8 Billing Addresses............................................. 20
ARTICLE 11 RECORD KEEPING, REPORTING..................................... 21
11.1 Books and Records of the Partnership.......................... 21
11.2 Partner Access to Books and Records........................... 21
11.3 Notice of Material Events..................................... 22
11.4 Administration of the Partnership Accounts.................... 22
ARTICLE 12 FINANCIAL YEAR, ANNUAL ACCOUNTS, OTHER AUDIT RIGHTS........... 22
12.1 Financial Years............................................... 22
12.2 Preparation and Certification of Annual Financial Statements.. 22
12.3 Annual Accounts Approval and Disputes......................... 23
12.4 Disputes as to Significant Monetary Amounts................... 23
ARTICLE 13 ANNUAL PLAN, FIVE YEAR DEMAND FORECAST; PARTNER SELF
PROCUREMENT RIGHTS; DISPUTES REGARDING EHS AND PERSONNEL
COMPENSATION EXPENDITURES..................................... 24
13.1 Annual Plan................................................... 24
13.2 Five Year Demand Forecast..................................... 24
13.3 Partner Rights to Self-Procurement of Strategic Raw Materials. 25
13.4 Disputes Regarding EHS and Personnel Compensation
Expenditures................................................ 28
ARTICLE 14 DISCRETIONARY CAPITAL PROJECTS PROPOSED BY THE PARTNERS,
UNILATERAL CAPITAL PROJECTS................................... 29
14.1 Discretionary Capital Projects Proposed by a Partner.......... 29
14.2 Detailed Study................................................ 29
14.3 If Both Partners Desire to Proceed with a Discretionary
Capital Project............................................. 30
14.4 Right to Qualified Independent Engineer Confirmation.......... 30
14.5 Unilateral Capital Projects; Unilateral Capital Project
Threshold................................................... 30
14.6 Risks and Benefits Borne by Proceeding Partner................ 30
14.7 Disputes Regarding any Unilateral Capital Project
Implementation Plan......................................... 31
14.8 Management Committee Disapproval Does Not Prohibit Proceeding
with a Project as a Unilateral Capital Project.............. 31
14.9 Adjustment to Unilateral Capital Project...................... 31
14.10 No Rights to Technology....................................... 31
ARTICLE 15 ADJUSTMENTS OF INTERESTS FOR UNILATERAL CAPITAL PROJECTS THAT
AFFECT CAPACITY............................................... 31
15.1 Unilateral Capital Projects that Increase Production
Capacity.................................................... 31
15.2 Change to Offtake Percentages................................. 31
15.3 Allocation of Capital Costs................................... 32
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ARTICLE 16 ALLOCATION OF PROFITS AND LOSSES.............................. 32
ARTICLE 17 DISTRIBUTIONS................................................. 32
17.1 Distributions of Cash......................................... 32
17.2 Classification of Proceeds.................................... 32
ARTICLE 18 RATIFICATION OF PRIOR BUSINESS................................ 32
ARTICLE 19 INDEMNIFICATION, WAIVERS...................................... 33
19.1 Indemnification of the Operator............................... 33
19.2 Indemnification for Product Liability and Related Claims...... 33
19.3 Indemnification for Failure to Timely Make Payment............ 33
19.4 Indemnification Procedures.................................... 33
19.5 Waiver of Claims.............................................. 34
19.6 No Warranties or Indemnities.................................. 34
19.7 Liability of Partners......................................... 35
ARTICLE 20 USE OF TECHNOLOGY............................................. 35
20.1 Use by Bayer Partner of Lyondell License...................... 35
20.2 Accommodation Fee............................................. 35
20.3 No Application to Bayer Spare Capacity Sold to Lyondell....... 35
20.4 Certification................................................. 35
20.5 No Technology Transfer or Grant of License under this
Agreement................................................... 36
20.6 Lyondell Group Technology..................................... 36
ARTICLE 21 COMPETITION................................................... 36
ARTICLE 22 RESTORATION FOLLOWING CASUALTY LOSS........................... 36
22.1 Restoration Absent Mutual Agreement for First Twenty Years.... 36
22.2 No Restoration Following Major Casualty Occurring After First
Twenty Years................................................ 36
22.3 Restoration................................................... 36
22.4 Where Facilities Are Not Being Restored....................... 37
22.5 Decisions..................................................... 37
22.6 Definition of Major Casualty.................................. 37
ARTICLE 23 RESTRICTION OF TRANSFERS AND PLEDGES.......................... 37
23.1 Prohibition on Transfer Unless Exception Applies.............. 37
23.2 Permitted Transfers to an Affiliate........................... 37
23.3 Certain Transfers in Connection with Successor Parent Transfer
or Permitted Successor...................................... 37
23.4 Assumption of Obligations by Assignee......................... 38
23.5 Admission of a New Partner.................................... 39
23.6 Continuation of the Partnership............................... 39
23.7 New Partners Bound by Terms and Conditions of this Agreement.. 39
23.8 No Application to Transfers or Pledges of Ownership Interests
within Partners............................................. 39
ARTICLE 24 TERMINATION, DISSOLUTION OF THE PARTNERSHIP................... 39
24.1 Events of Dissolution and Liquidation......................... 39
24.2 No Dissolution of the Partnership Upon Bankruptcy............. 39
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ARTICLE 25 CONTINUATION OR LIQUIDATION................................... 39
25.1 Winding Up or Continuation of the Partnership................. 39
25.2 Winding Up and Liquidation.................................... 40
25.3 Offering of Partnership Assets................................ 40
25.4 Payment of Debts; Liquidating Distributions................... 40
25.5 Liquidation Report............................................ 40
ARTICLE 26 CLAIMS AFTER THE DISSOLUTION OF THE PARTNERSHIP............... 41
ARTICLE 27 CONFIDENTIALITY............................................... 41
27.1 Obligation Not to Disclose or Misuse Confidential Information. 41
27.2 Disclosures Required by Law................................... 41
27.3 Confidential Information Remains Property of Disclosing Party. 42
27.4 Survival...................................................... 42
27.5 Relationship With License Agreements.......................... 42
ARTICLE 28 MISCELLANEOUS................................................. 42
28.1 Notices....................................................... 42
28.2 Construction.................................................. 44
28.3 Severability.................................................. 44
28.4 Tax Matters................................................... 44
28.5 Governing Law................................................. 45
28.6 Amendment and Waiver.......................................... 45
28.7 Performance Extended to Next Business Day..................... 45
28.8 Benefits of Agreement Restricted to the Parties............... 45
28.9 Dispute Resolution............................................ 45
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GENERAL PARTNERSHIP AGREEMENT
THIS GENERAL PARTNERSHIP AGREEMENT (this "AGREEMENT") is dated 18 December
2000 and is made between BAYER POLYURETHANES B.V. (the "BAYER PARTNER"), a
company incorporated under the laws of The Netherlands, having its registered
office at ▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and
LYONDELL PO-11 C.V. (the "LYONDELL PARTNER"), a limited partnership formed under
the laws of The Netherlands, having its registered office at ▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇.
The Bayer Partner and the Lyondell Partner are hereinafter individually
referred to as a "PARTNER" and collectively they are referred to as the
"PARTNERS".
WHEREAS:
(A) On 31 March 2000, Lyondell entered into certain arrangements with Bayer
and Bayer Corporation pursuant to which, inter alia, the Bayer Group purchased
the Lyondell Group's world-wide polyether polyols business. At the same time
Lyondell created a Delaware limited partnership to which certain of Lyondell's
PO and associated co-product plants were contributed by Lyondell and in which
Affiliates of Bayer Corporation purchased limited partnership interests.
(B) As part of these arrangements, Lyondell, Bayer and Bayer Corporation
entered into the Master Transaction Agreement. The Master Transaction Agreement
contemplates Bayer's and Lyondell's joint participation in, among other things,
a manufacturing joint venture for a grassroots "PO-11" PO/SM plant employing
technology owned by an Affiliate of Lyondell.
(C) The Partners have agreed to form a general partnership for the
development, construction, ownership, maintenance and operation of the PO-11
Plant Facilities and the production therein of PO and SM for the Partners, have
entered into agreements to license to each Partner certain technology from an
Affiliate of Lyondell and have agreed that the Operator will be the development
manager and the operator of the PO-11 Plant Facilities in accordance with the
terms and conditions of the Operating Agreement.
(D) In accordance with the terms and conditions of this Agreement, the
Partners wish to enter into a general partnership agreement under the laws of
The Netherlands to form a general partnership ("vennootschap onder firma").
NOW THEREFORE, the Parties hereto agree as follows:
ARTICLE 1 DEFINITIONS
Capitalised terms that are used and not otherwise defined in this Agreement
have the meanings given to them in Exhibit A.
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ARTICLE 2 FORMATION OF PARTNERSHIP
2.1 Formation of the Partnership. The Partners hereby form a general
partnership ("vennootschap onder firma"), hereinafter referred to as the
"PARTNERSHIP", pursuant to the laws of The Netherlands. The rights and duties of
the Partners shall be as provided in those laws and under the terms and
conditions of this Agreement.
2.2 Partnership Percentages. The "PARTNERSHIP PERCENTAGE" means the
percentage share of each Partner in profits and losses, assets (subject to
Article 14) and voting rights in the Partnership in accordance with the terms of
this Agreement. The Partnership Percentage of the Bayer Partner and the Lyondell
Partner is 50% (fifty percent) for each Partner.
ARTICLE 3 NAME, SEAT, TRADE REGISTER, MANAGING PARTNER
3.1 Name of the Partnership. The name of the Partnership shall be "Lyondell
Bayer Manufacturing Maasvlakte VOF".
3.2 Seat of the Partnership. The Partnership shall have its seat at
Rotterdam, The Netherlands.
3.3 Registration. The Partnership shall be registered with the Trade
Register of the Chamber of Commerce at Rotterdam, The Netherlands.
3.4 Managing Partner. The Lyondell Partner shall be the "MANAGING PARTNER",
provided, however, that upon fulfilment of any of the Lyondell Suspending
Conditions, the Bayer Partner will become the Managing Partner. Upon such event,
the references to the Lyondell Partner in its capacity as Managing Partner,
including under Article 6, Article 8, Article 10, Article 11, Article 12,
Article 13, Article 14, Article 25 and Article 26, shall be deemed changed to
refer to the Bayer Partner. Upon fulfilment of any of the Lyondell Dissolving
Conditions, the Lyondell Partner shall again become the Managing Partner.
Additionally, if a competent court grants a request for suspension of payments
pursuant to a Suspension of Payments Proceeding filed by the Lyondell Partner,
then effective upon the grant of the request, the Bayer Partner and the Lyondell
Partner acting jointly shall be the Managing Partner. Upon such event, the
references to the Lyondell Partner in its capacity as Managing Partner,
including Article 6, Article 8, Article 10, Article 11, Article 12, Article 13,
Article 14, Article 25 and Article 26, shall be deemed changed to refer to both
Partners acting jointly. If and when the suspension of payments ends without
resulting in a Lyondell Suspending Condition, then the Bayer Partner shall cease
to be a Managing Partner, effective upon the effective date of termination of
the Suspension of Payments Proceeding.
3.5 Solely a Manufacturing Joint Venture. Neither Partner shall create the
impression through its marketing, sales or other activities that the Partnership
is more than a manufacturing joint venture.
ARTICLE 4 PURPOSE AND BUSINESS OF THE PARTNERSHIP
4.1 Business of the Partnership. The business of the Partnership shall
consist of the development, construction, ownership, maintenance and operation
of the PO-11 Plant Facilities and of the production therein of PO and SM for the
sole account of the Partners.
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4.2 Activities. In conducting such activities, the Partnership may lease,
purchase or sell personal and real estate property, purchase, sell or use any
kind of raw materials, energy or other supplies, enter into contracts of any
nature, employ and discharge agents or employees, make financial arrangements,
borrow or lend funds and mortgage the assets of the Partnership, participate in
and co-operate with legal entities and other functions as may be necessary or
desirable in connection with the business described in Section 4.1 of this
Agreement.
ARTICLE 5 TERM
5.1 Initial Contract Term. This Agreement shall enter into force as of the
date on which it has been signed by all of the Partners and shall end on the
50th (fiftieth) anniversary of Commercial Start-up (hereinafter the "INITIAL
CONTRACT TERM"), unless previously terminated in accordance with Article 24.
5.2 Extension of the Term. After the expiration of the Initial Contract
Term or the most recent extension period, as applicable, the Partnership shall
be extended each time under the same conditions for a period of two years,
unless one of the Partners elects to terminate the Partnership by registered
letter no later than 24 (twenty-four) months prior to the original or extended
date of expiry.
ARTICLE 6 CAPITAL CONTRIBUTIONS
6.1 General.
6.1.1 The Partners shall contribute capital to fund the PO-11 Project
Costs in the ratio of the Partnership Percentages. The Partners
acknowledge that as of the Signing Date, LCNL has incurred
PO-11 Project Costs in an agreed value amount of NLG
248,000,000 (two hundred and forty-eight million Dutch
Guilders), including NLG 83,000,000 (eighty-three million Dutch
Guilders) of PO-11 Project Costs incurred and to be incurred
during calendar year 2000. The Partners further acknowledge
that on, or within 24 (twenty-four) hours after, the Signing
Date, (a) the Bayer Partner shall purchase a 50% (fifty
percent) undivided joint ownership interest in the PO-11
Project Assets pursuant to the Sale and Transfer Agreement for
NLG 124,000,000 (one hundred twenty-four million Dutch
Guilders), on which applicable VAT (if any) at the standard
rate will be charged; (b) the Lyondell Partner shall contribute
to the Partnership a 50% (fifty percent) undivided joint
ownership interest in the PO-11 Project Assets in exchange for
the Lyondell Partner's Partnership Interest in the Partnership;
and (c) the Bayer Partner shall contribute to the Partnership
its 50% (fifty percent) undivided joint ownership interest in
the PO-11 Project Assets in exchange for the Bayer Partner's
Partnership Interest in the Partnership. In furtherance of the
Sale and Transfer Agreement, and the contributions by the
Partners described in clauses (b) and (c) of the prior
sentence, (v) the Bayer Partner, the Lyondell Partner and the
Partnership shall enter into the Partners Transfer Agreement as
of the Signing Date; (w) LCNL and the Partnership shall enter
into the
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Assignment and Assumption Agreement as of the Signing Date; (x)
LCNL and the Bayer Partner shall enter into the Notarial Deed
as of the Signing Date; (y) the Lyondell Partner, its general
partner and the Partnership shall enter into the Lyondell
Notarial Deed as of the Signing Date; and (z) the Bayer Partner
and the Partnership shall enter into the Bayer Notarial Deed as
of the Signing Date. Payments by the Rotterdam Port Authority
in respect of certain costs of infrastructure constructed by
the Partnership are currently expected to be made on various
dates during the Development Phase Recovery Period as agreed
between the Partnership and the Rotterdam Port Authority for
costs incurred by the Partnership to that date. Such payments
shall be applied against then current and future PO-11 Project
Costs or, following the end of the Development Phase Recovery
Period, shall be distributed to the Partners in accordance with
their Partnership Percentages.
6.1.2 During the Development Phase Recovery Period, the Bayer Partner
and the Lyondell Partner will make capital contributions to the
Partnership pursuant to cash calls administered by the Lyondell
Partner to fund PO-11 Project Costs and other obligations of
the Partnership during the Development Phase. Cash calls shall
be denominated in Euros and shall include applicable VAT and
similar charges on the underlying invoices. Each cash call
shall be accompanied by a "DEVELOPMENT PHASE CASH CALL
STATEMENT", which shall show for any expenditure in excess of
EUR 100,000 (one hundred thousand Euros) each party to whom
payment is due, a brief explanation of the purpose of the
payment and the calculation of the amount payable by each
Partner in accordance with the format included in Schedule
6.1.2A. Each cash call shall be accompanied, if applicable, by
(a) a copy of the request for payment from the EPC Contractor,
(b) a copy of the Operator's invoice for Service Charges and
(c) a copy of the invoice in respect of any amount in excess of
EUR 250,000 (two hundred fifty thousand Euros) payable to any
Person other than the EPC Contractor or the Operator. In order
to best match funding of the Partnership Accounts with the
spending for each month, the Lyondell Partner shall determine
the date(s) on which the Partners shall fund the Partnership
Accounts. The information to the two Partners shall be provided
at least 10 (ten) calendar days prior to the date on which the
Partnership Accounts must be funded. The Lyondell Partner may
issue two or more cash calls during a month if it determines
such action is advisable. The Lyondell Partner shall attempt to
minimise overdrafts and funding balances in the Partnership
Accounts in determining the amount and due dates for payments.
The Partners shall pay the cash calls in accordance with their
Partnership Percentages.
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For information purposes only, a schedule of anticipated
spending for PO-11 Project Costs is attached hereto as Schedule
6.1.2B. Actual spending may differ from that shown on Schedule
6.1.2B.
6.1.3 During the Production Term, the Bayer Partner and the Lyondell
Partner will make such capital contributions to the Partnership
as are necessary to fund Capital Projects undertaken in
accordance with Article VII of the Operating Agreement. The
Lyondell Partner shall administer cash calls for each such
capital contribution. In order to best match funding of the
Partnership Accounts with the spending for each Capital
Project, the Lyondell Partner shall determine the date on which
the Partners shall fund the Partnership Accounts. The
information to the two Partners shall be provided at least 10
(ten) calendar days prior to the date on which the Partnership
Accounts must be funded. The Lyondell Partner shall prepare the
"CAPITAL COSTS STATEMENTS" which are to accompany each cash
call. The Capital Costs Statements shall include separate
breakdowns by category for EHS Capital Projects, Maintenance
Capital Projects, Enterprise Consistency Capital Projects and
Discretionary Capital Projects as to which Capital Costs are
included in the cash call. A pro forma Capital Costs Statement
is attached hereto as Schedule 6.1.3.
6.1.4 Each Partner shall timely pay its share of any cash call in
connection with the Development Phase Cash Call Statement or
the Capital Costs Statement, as the case may be, on the date
specified in the cash call. Payments shall be timely made in
immediately available funds, such that funds are credited to
the Partnership Accounts on the due date, without withholding,
deduction, offset or counterclaim. Any Partner failing to
timely pay the amount due shall pay interest on such unpaid
amount from the date due until paid at the Default Rate. If
there is a manifest error in calculation in the Development
Phase Cash Call Statement or Capital Costs Statement, as the
case may be, the Lyondell Partner, upon learning of such error,
will correct the calculation and show such recalculation.
6.1.5 If the Bayer Partner disputes any amount payable pursuant to
any Capital Costs Statement submitted to it by the Lyondell
Partner, then the Bayer Partner shall have the right to raise
such objection with the Lyondell Partner. Any such dispute may
be raised at any time, provided that any dispute that is not
resolved between the Partners may only be resolved through a
binding advisor procedure in accordance with Article 12. The
Bayer Partner shall timely pay the amount in question pending
the resolution of any dispute. Payment shall not constitute
acceptance of the amount charged. If it is determined that the
Bayer Partner has overpaid any amount pursuant to a Capital
Costs Statement, then the Partnership shall pay interest on
such overpaid amount from the date of payment until the date
refunded at the Default Rate.
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6.2 Working Capital.
6.2.1 The Lyondell Partner shall prepare and administer on behalf of
the Partnership the requests for Partnership Working Capital
and the Working Capital Statements, which shall be denominated
in Euros. In advance of the scheduled date of Commercial Start-
up, the Partners shall make such Partnership Working Capital
contributions in order to (a) provide the Partnership with
sufficient funds to purchase required Raw Materials; (b) fund
the Initial Services Charge Advance; and (c) otherwise meet all
obligations of the Partnership with respect to the initial
period of operations, taking into account the payment due date
of the initial Operating Costs Statements pursuant to Section
10.1 and the projected timing of VAT payments by and refunds to
the Partnership. The total amount of such cash calls made to
the Partners by the Lyondell Partner on behalf of the
Partnership that is not used to fund PO-11 Project Costs is
referred to herein as "PARTNERSHIP WORKING CAPITAL". The
Lyondell Partner shall provide the "WORKING CAPITAL STATEMENTS"
which are to accompany each cash call and the supporting
documentation and projected uses for each cash call. A pro
forma Working Capital Statements is attached hereto as Schedule
6.2.1. The Lyondell Partner shall provide for cash flow
management for the Partnership that (i) is working capital
neutral to the Partnership; (ii) timely meets all obligations
of the Partnership; (iii) prevents excessive accumulation of
funds in the Partnership Accounts; (iv) does not create
excessive administrative burdens on the Partners; and (v)
provides transparency to the Partners as to Operating Costs and
Capital Costs. The Partners shall review the provisions of this
Section 6.2 periodically and shall change such provisions by
mutual agreement if these objectives are not being met. On a
quarterly basis, the Lyondell Partner will provide the Bayer
Partner with cash flow forecasts for the Partnership for the
upcoming 12 (twelve) month period. The Bayer Partner and the
Lyondell Partner shall make capital contributions to the
Partnership to fund Partnership Working Capital in accordance
with the foregoing provisions of this Section 6.2.1.
6.2.2 The Partnership Working Capital is intended to remain in place
throughout the Term of this Agreement, subject to adjustment as
provided herein. On a quarterly basis, or more frequently if so
requested by one or both Partners, the Lyondell Partner shall
review with the Bayer Partner the account balances in the
Partnership Accounts in relationship to the due dates of
Operating Costs. When appropriate to achieve the goals stated
in Section 6.2.1, the Lyondell Partner shall provide for a
Partnership Working Capital adjustment in accordance with
Section 6.2.1.
6.2.3 The Lyondell Partner will send requests for capital
contributions to the Partnership in accordance with Section
6.1.2, Section 6.1.3 and Section 6.2.1 to the Partners at the
following addresses unless and until otherwise instructed by
the Partners.
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To the Bayer Partner:
Bayer Polyurethanes B.V.
▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: Managing Director
Copy to:
▇▇▇▇▇ ▇▇
KB-KF Finanzen
GEB. W1
D-51368
Leverkusen
Germany
Attention: Leitung
To the Lyondell Partner:
Lyondell PO-11 C.V.
Lyondell Service Center
Weenapoint D
Weena 762
3014 DA
Rotterdam
The Netherlands
Attention: Director Financial Controls
Copy to:
Lyondell ▇▇-▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇ Rotterdam-1 Botlek
The Netherlands
Attention: Director, European Manufacturing
ARTICLE 7 ACCOUNTS IN THE NAME OF THE PARTNERS
7.1 Capital Accounts. In the books of the Partnership a separate capital
account (the "CAPITAL ACCOUNT") shall be established and maintained in respect
of each Partner. The Capital Account shall be credited with the value of any
capital contributions made by such Partner to the Partnership and be debited
with the value of any capital repayment (including the deemed repayment in
connection with depreciation) made to such Partner. The Capital Accounts of the
Partners will not bear interest. No Partner shall be entitled to withdraw or
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encumber any part of its Capital Account except in the case of capital
repayments pursuant to Article 6 or Article 17 or with the other Partner's prior
written approval.
7.2 Current Accounts. Besides the Capital Account, each Partner will have a
current account in which any profits distributable to such Partner pursuant to
Article 17 will be credited.
ARTICLE 8 MANAGEMENT
8.1 General.
8.1.1 Except as provided in Section 8.1.2, any decision that
specifically requires the approval of both Partners shall be
taken by the Partnership Representatives jointly. The Lyondell
Partner shall appoint one Partnership Representative and the
Bayer Partner shall appoint one Partnership Representative.
Each Partnership Representative shall have the authority to
represent the Partner by whom it is appointed in all matters
and decisions under this Agreement, except as provided in
Section 8.1.2 and except as provided in the Operating
Agreement. Each Partner may change its designated Partnership
Representative from time to time by written notice to the other
Partner and the Operator.
8.1.2 For the purpose of reviewing for approval (a) the Annual Plan
in accordance with Section 13.1; (b) the Annual Accounts in
accordance with Section 12.3; and (c) any other Major Decisions
(as listed in Section 8.1.7), the Partners shall meet and act
through a management committee (the "MANAGEMENT COMMITTEE").
The Management Committee meeting to approve the Annual Accounts
shall take place within 30 (thirty) days after the Lyondell
Partner provides the Annual Accounts to the Bayer Partner. The
notice in respect of the calling of any Management Committee
meeting shall in all cases indicate any Major Decision
scheduled for consideration. Each Partner may convene
Management Committee meetings for the above and/or other
subjects upon 10 (ten) Business Days prior written notice to
the other Partner.
8.1.3 The Management Committee shall consist of six members (the
"MEMBERS") to be appointed by the Partners by nomination. Three
Members shall be appointed by nomination of the Bayer Partner
(the "BAYER MEMBERS") and three Members shall be appointed by
nomination of the Lyondell Partner (the "LYONDELL MEMBERS").
Members may at any time be replaced by the Partner who
appointed the respective Member by notice to the other Partner
and the Operator. Members may at any time give another Member a
written power of attorney to act on that Member's behalf at a
Management Committee meeting. When a Member holding a written
power of attorney attends any Management Committee meeting, it
shall provide the other
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Members in attendance with copies of any such written power of
attorney.
8.1.4 Management Committee meetings shall be held in person at the
PO-11 Plant Facilities unless an alternative location or a
meeting by telephone is agreed in advance by a decision of the
Management Committee in accordance with Section 8.1.5.
8.1.5 At least two Bayer Members and at least two Lyondell Members,
in either case including Members attending through a power of
attorney, shall constitute a quorum. The decisions of the
Management Committee can only be taken by a majority vote
consisting of at least two Bayer Members and at least two
Lyondell Members voting in favour (any such decision as
evidenced in writing shall be a "MANAGEMENT COMMITTEE
RESOLUTION"). The vote of at least two of the Members appointed
by a Partner to approve or disapprove a decision shall
constitute the approval or disapproval of the Partner in
question. No Member will have a deadlock determining casting
vote. Except with respect to approval of the Annual Plan and
Annual Accounts (unless otherwise agreed by the Members by a
Management Committee Resolution), decisions can be taken in
writing by resolution without convening a meeting. All
decisions of the Management Committee shall be evidenced by a
written resolution signed by at least two Bayer Members and at
least two Lyondell Members. If at any Management Committee
meeting convened to address any Major Decision there is an
insufficient quorum to take a valid decision, then a second
Management Committee meeting shall be convened on at least 10
(ten) Business Days prior written notice. At such second
Management Committee meeting a valid decision can be taken on
any Major Decision noticed for the above initial Management
Committee meeting without any quorum.
8.1.6 The Lyondell Partner will be responsible for the management of
the Partnership and will as such manage the business of the
Partnership in the best interests of the Partnership. Except as
expressly provided otherwise in this Agreement, the Lyondell
Partner shall have full decision making authority with regard
to the management of the Partnership's business. The Lyondell
Partner has delegated certain of its rights and duties to the
Operator in accordance with, and subject to, the express limits
of the Operating Agreement and this Agreement.
8.1.7 The following decisions of the Lyondell Partner (the "MAJOR
DECISIONS") shall be subject to the prior approval of the
Partners at a Management Committee meeting:
(a) The adoption of the Annual Accounts;
(b) The adoption of an Annual Plan (including each of the
Annual Production Plan, the Operating Budget and the
Capital Budget);
9
(c) The adoption of a Strategic Raw Materials Purchasing Plan
and an Other Raw Materials Purchasing Plan;
(d) Initiating, compromising or settling Material Litigation
on behalf of the Partnership subject to Section 19.4.5;
(e) Entering into, amending, extending or terminating any
agreement between the Partnership and any Partner or any
Affiliate of any Partner except as otherwise permitted
under Article V of the Operating Agreement;
(f) Adopting or amending a hedging or derivative strategy
policy;
(g) To the extent not authorised under a hedging or derivative
policy adopted pursuant to the prior paragraph, entering
into, amending, extending or terminating any derivative,
hedging or similar contract;
(h) Entering into any initial utility contract after the
Signing Date or making any Material Utility Contract
Amendment;
(i) Incurring debt (other than trade debt in the ordinary
course of business) or the entering into, amending,
extending or terminating of any loan agreement on behalf
of the Partnership;
(j) Acquiring, selling or pledging of fixed assets, except
worn-out or obsolete inventory, and except for equipment
and other components of the PO-11 Plant Facilities that
are sold or disposed of pursuant to an Annual Plan, in
conjunction with routine maintenance or in connection with
a Capital Project permitted pursuant to Article VII of the
Operating Agreement;
(k) The matters requiring approval under Section 4.7 of the
Operating Agreement and under Paragraph 1.4 of Appendix 1
to the Operating Agreement;
(l) The adoption or modification of profit or cash
distribution policies;
(m) The appointment of the auditor of the Partnership;
(n) Consent to assignment by the Operator of its rights and
obligations under the Operating Agreement, except where
approval to assignment is expressly not required under
such Agreement;
(o) Entering into a new operating agreement for the PO-11
Plant Facilities if there is a termination of the
Operating Agreement in accordance with its terms;
10
(p) Amending or terminating the Ground Lease;
(q) Acquiring, founding or selling Affiliates of the
Partnership;
(r) Decisions in respect of a Casualty requiring the approval
of both Partners pursuant to Article 22;
(s) Entering into bankruptcy proceedings or filing for a
suspension of payments ("surseance van betaling") on
behalf of the Partnership;
(t) Dissolution or winding up of the Partnership; and
(u) Any changes of or amendments to the Partnership Agreement.
The exceptions contained in 8.1.7(e) and (j) shall apply only
for so long as the Operator and the Lyondell Partner shall both
be Lyondell Affiliates.
8.1.8 Subject to Section 8.1.9(a), only the Lyondell Partner shall
have the authority to represent and bind the Partnership.
Provided that the Management Committee has approved a Major
Decision, the Bayer Partner shall provide the Lyondell Partner
promptly upon its request with a written confirmation of its
consent and/or a written power of attorney authorising the
Lyondell Partner to represent and bind the Partnership in
respect of such Major Decision. Additionally, the Bayer Partner
shall provide the Lyondell Partner promptly upon its request
with a written power of attorney authorising the Lyondell
Partner to represent and bind the Partnership in respect of any
decision other than a Major Decision, notwithstanding the
limitations of authority submitted for registration pursuant to
Section 8.1.10.
8.1.9 (a) If for any reason the Bayer Partner alleges in good faith
that the Lyondell Partner fails or refuses to enforce
either (i) the obligations of the Operator under the
Operating Agreement or (ii) the obligations of any other
Lyondell Affiliate that is a contracting party with the
Partnership to the detriment of the Partnership or (iii)
the rights of the Partnership against any Affiliate of the
Lyondell Partner (if any) then, upon and following written
notice to the Lyondell Partner, the Bayer Partner shall
have the right to enforce such obligations on behalf of
the Partnership.
(b) For the avoidance of doubt, the Lyondell Partner shall
have the right to enforce the rights of the Partnership
against any Affiliate of the Bayer Partner that is a
contracting party with the Partnership.
8.1.10 (a) The limitations of the authority of the Lyondell Partner
described in Schedule 8.1.10 will be submitted for
registration
11
with the Trade Register of the Chamber of Commerce at
Rotterdam, The Netherlands.
(b) The amount specified in Section 1(a) of Schedule 8.1.10
shall be adjusted every five years from the Signing Date
by multiplying the amount by a propylene market price
ratio as determined by reference to the average quarterly
propylene contract price for Northwest Europe, published
in ICIS during the relevant year divided by a base value
of EUR 535/MT as of the Signing Date. If ICIS is not
available a mutually agreed market publication will be
used in substitution.
(c) For avoidance of doubt, the limitations set forth in
Schedule 8.1.10 are for external effect only and do not
limit or expand the limitations of authority of the
Lyondell Partner under Section 8.1.7.
8.2 Operating Agreement.
8.2.1 The Partnership shall enter into the Operating Agreement with
the Operator. The Operating Agreement will provide for a power
of attorney authorising the Operator to represent and bind the
Partnership under the terms and conditions set forth in the
Operating Agreement. Notwithstanding the limitations submitted
for registration pursuant to Section 8.1.10, upon request of
the Lyondell Partner, the Bayer Partner shall promptly provide
the Operator with a written confirmation of the above power of
attorney, provided that the Operator is acting within the scope
of its authority under the Operating Agreement.
8.2.2 The Partnership Representatives, provided they are acting
jointly, are hereby granted the powers necessary to bind the
Partnership in accordance with the terms of the Operating
Agreement.
8.2.3 Each Partner shall have the right to request that the Operator
performs Additional Services in accordance with the terms of
the Operating Agreement. The requesting Partner shall pay the
Operator directly for the Operator's charges in providing the
Additional Services which the Operator has agreed to provide to
the requesting Partner. The other Partner shall have no
responsibility for such charges.
8.2.4 The Lyondell Partner shall provide the Bayer Partner with all
reports delivered by the Operator to the Partnership.
8.2.5 At the request of one or both Partners, the Lyondell Partner
shall request the Operator to use reasonable endeavours,
subject to Section 4.2.16 of the Operating Agreement, to obtain
a quality certification for the PO-11 Plant Facilities in
excess of that maintained by the Operator at the time of such
request with respect to other facilities of the Lyondell Group
in The Netherlands operated by the
12
Operator. The requesting Partner or Partners shall pay all
incremental costs incurred by the Operator in obtaining and
maintaining such quality certification.
8.2.6 Each Partner shall properly instruct and use reasonable
endeavours to cause its respective officers, employees, agents,
representatives, contractors, vendors, customers or other
business invitees entering the PO-11 Plant Facilities to comply
with the EHS Policies.
ARTICLE 9 OFFTAKE RIGHTS, MONTHLY PRODUCTION AND LIFTING PLANNING, SPARE
CAPACITY, DELIVERY OF PRODUCT, SHARED STORAGE
FACILITIES
9.1 Offtake Rights of the Partners. Subject to the provisions of this
Agreement, the Partnership shall make available to each Partner and each Partner
will accept from the Partnership its share, determined in accordance with the
Partners' respective Offtake Percentages, of PO and co-produced SM that are
produced from the PO-11 Plant Facilities as and when produced in accordance with
Section 9.2.2, and each Partner will pay to the Partnership the costs incurred
therewith.
9.2 Monthly Production and Lifting Nominations.
9.2.1 Prior to the 25th (twenty-fifth) day of each month, each
Partner will provide the Partnership with (a) a binding two
month production nomination for each of the following two
months and (b) a binding one month lifting nomination for the
following month. Each Partner's lifting nomination for both PO
and SM shall be broken down on a daily basis for the upcoming
month.
9.2.2 The Partners shall cause their Partnership Representatives to
meet with the Operator prior to establishing the Partner's
binding nominations to (a) co-ordinate and optimise lifting
nominations for each month, taking into account each Partner's
lifting preferences and any production constraints based on the
latest information available to the Partners and the Operator
and (b) address the Partners' binding production nomination for
the second following month (e.g., the Partners will address
their production nomination for September at the end of July).
As the base case for production is 100% (one hundred percent)
operating rates, absent Turnarounds or other scheduled or
unscheduled production disruptions, these meetings will focus
mainly on intra-month optimisations of lifting nominations. In
agreeing upon production and lifting nominations, the Partners
may consider and agree in writing to changes to the risk of
loss provisions of Section 9.8. The Partners shall be allocated
and shall accept for delivery PO and co-produced SM as actually
produced during each month in accordance with the ratio
established by their product nominations, regardless of whether
actual production is more or less than that forecasted for that
month.
13
9.2.3 Each Partner has the right to reduce its share of PO and co-
produced SM from maximum operating rates in its firm production
nominations pursuant to Section 9.2.1. However, no Partner may
reduce production such that the PO-11 Plant Facilities would
run below the Minimum Turndown Operating Rate. If both
Partners' combined nominations would result in the PO-11 Plant
Facilities running below the Minimum Turndown Operating Rate,
then the following shall apply:
(a) Partner's respective annual output in the Proposed Annual
Production Plan shall be adjusted such that each Partner's
nominations from full operating rates is reduced in
proportion to their respective Offtake Percentages until
either (i) the Minimum Turndown Operating Rate is reached
or (ii) the output to either Partner is reduced to such
Partner's desired nominations, whichever occurs first.
(b) If a Partner's desired nominations are reached under
Section 9.2.3(a), then the other Partner's output may be
further reduced until either (i) the Minimum Turndown
Operating Rate is reached or (ii) such Partner's desired
nominations are achieved, whichever occurs first.
9.2.4 The Bayer Partner is not entitled to reduce production without
first offering Bayer Spare Capacity to the Lyondell Partner
pursuant to Section 9.4.
9.2.5 Any Partner choosing to reduce its share of production in
accordance with Section 9.2.3 shall remain liable for its share
of Fixed Costs, as determined in accordance with Section 9.3,
and will be responsible for all incremental Variable Costs
(such as increased costs of Raw Materials and utilities)
resulting from any production turndown below full operating
rates such that the other Partner is held neutral. In addition,
if a Partner proposes to change its binding production and
lifting nominations, and the Operator, acting in good faith,
accommodates such requested change, then the Partner changing
its nominations shall be responsible for all incremental costs
resulting from such change that the Operator is unable to
mitigate, such as Raw Material contract cancellation charges
and/or utility take-or-pay or capacity reservation charges.
Such adjustments will be included in the Operating Costs
Statements to the relevant Partner for the month in question.
9.2.6 The Partners shall inform each other in a timely manner as to
Turnarounds, shutdowns and other major events impacting each
Partner's use and offtake of PO and SM from the PO-11 Plant
Facilities.
9.3 Cost Allocations. Regardless of actual production levels resulting
from the Partners' nominations or production disruptions, each Partner shall pay
its Partnership
14
Percentage share of all Fixed Costs for each month, subject to potential
modification in accordance with a Unilateral Capital Implementation Plan, as
provided in the last sentence in this Section 9.3. Subject to the adjustments
provided for in Section 9.2.5, Variable Costs shall be payable by the Partners
in the ratio of their total production nominations for the month. For avoidance
of doubt, for Unilateral Capital Projects, Fixed Costs and Variable Costs for
Unilateral Capital Projects shall be allocated in accordance with the applicable
Unilateral Capital Implementation Plan.
9.4 Bayer Spare Capacity.
9.4.1 As part of the meeting at the end of the month described in
Section 9.2.2, the Bayer Partner shall offer to the Lyondell
Partner in writing:
(a) the PO from the Bayer Partner's share of production from
the PO-11 Plant Facilities that the Bayer Group does not
intend to use captively for its Identified Polyols
business together with co-produced SM; or
(b) the SM from the Bayer Partner's share of production from
the PO-11 Plant Facilities that the Bayer Group does not
intend to use captively, directly or indirectly pursuant
to product "swap" arrangements or to sell pursuant to
trading arrangements (whether existing or anticipated)
together with co-produced PO.
If the Bayer Partner has both PO and SM spare capacity pursuant
to clauses (a) and (b) above, then the Bayer Partner may select
between clauses (a) and (b) but, for the avoidance of doubt, in
all cases the PO and SM offered must be in proportion based on
the actual production ratio. The metric tonnes of PO and SM
that are required to be offered by the Bayer Partner to the
Lyondell Partner pursuant to this Section 9.4.1 are called
herein the "BAYER SPARE CAPACITY".
9.4.2 The Lyondell Partner shall use reasonable endeavours to either
use the Bayer Spare Capacity captively within the Lyondell
Group or to market and sell the Bayer Spare Capacity to third
parties for the account of Bayer as provided herein.
Notwithstanding the foregoing, the Lyondell Partner will not be
required to attempt to use or sell the Bayer Spare Capacity if:
(a) as to PO, the Lyondell Partner anticipates that the
Lyondell Group will not be using for the month in question
100% (one hundred percent) of its own PO production
capacity within Western Europe (in its own derivative
business and/or pursuant to third party sales); or
(b) such captive use or third party sale of the Bayer Spare
Capacity will, in the Lyondell Partner's opinion, be
detrimental to the business of the Lyondell Group.
15
9.4.3 The Lyondell Partner shall notify the Bayer Partner in writing
within 15 (fifteen) days following the Bayer Partner's written
request pursuant to Section 9.4.1 whether the Lyondell Partner
will take part or all of the Bayer Spare Capacity, and if only
part thereof, which portion of the co-produced PO and SM. In
such notice, the Lyondell Partner will identify how it
anticipates the Bayer Spare Capacity for PO will be sold or
used derivatively by the Lyondell Group, the corresponding
period over which the Bayer Spare Capacity for PO is
anticipated to be sold or used derivatively by the Lyondell
Group, the corresponding price and volumes for each month of
the designated period and corresponding payment terms. With
respect to SM, such notice shall include the period within
which the Lyondell Partner anticipates that the Lyondell Group
will sell the Bayer Spare Capacity as to SM and the
corresponding volumes for each month within the designated
period. The foregoing information is to be used solely for
assisting the Partners in negotiating a price and establishing
payment terms to the Bayer Partner and is in no way binding on
the Lyondell Partner. The Lyondell Group's actual use or sales
may differ substantially from such forecast and the Lyondell
Partner shall have no obligation to attempt to track sales or
derivative use of either PO or SM or report such results to the
Bayer Partner .
9.4.4 The PO price will be based in each case on a 2% (two percent)
net profit to the Lyondell Group on the Lyondell Group's net
sales of the PO or PO derivative product(s) in which the PO is
consumed, as anticipated by the Lyondell Partner, taking into
account all costs anticipated to be incurred by the Lyondell
Group .
9.4.5 The Bayer Spare Capacity (or portion thereof elected to be
purchased by the Lyondell Partner) as to SM will be priced to
the Lyondell Partner as if purchased and resold by Lyondell to
third parties. The Lyondell Partner will pay the Bayer Partner
an amount equal to 50% (fifty percent) of the positive net
margin of (a) the arithmetic mean of the "spot" "low" ▇▇ ▇▇▇▇▇
for each of the weekly reports published by ICIS during each
month of the designated period times the corresponding
anticipated sales volume for the month in excess of (b) the SM
Manufacturing Costs for the month in question. If such net
margin is negative, the Bayer Partner shall bear 100% (one
hundred percent) of such difference.
9.4.6 The Bayer Partner shall have 15 (fifteen) days to accept or
reject the Lyondell Partner's offer. The Bayer Partner must
accept or reject the Lyondell Partner's offer in its entirety
as to both PO and SM.
9.4.7 If and to the extent that the Lyondell Partner declines to
purchase the Bayer Spare Capacity in accordance with Section
9.4.3 or if the Bayer Partner rejects the Lyondell Partner's
offer pursuant to Section 9.4.6, then the Bayer Partner may (a)
(i) market and sell the PO component of the Bayer Spare
Capacity to third parties subject to payment to the
16
Lyondell Partner of the Accommodation Fee and (ii) freely sell
the associated SM of the Bayer Spare Capacity as it may
determine or (b) decide not to use the Bayer Spare Capacity, in
which case the production of the PO-11 Plant Facilities shall
be reduced accordingly subject to and in accordance with
Section 9.2.3 and Section 9.2.5.
9.4.8 Where the Lyondell Partner has agreed to purchase Bayer Spare
Capacity from the Bayer Partner in accordance with this Section
9.4, then subject to Section 9.9.4, PO and SM Shared Storage
Facilities capacities shall be automatically adjusted to
reflect such agreement, based on the volumes affected by such
agreement .
9.4.9 In addition to the foregoing provisions of this Section 9.4, it
is understood that the Bayer Partner may, from time to time,
offer to the Lyondell Partner Bayer Spare Capacity of SM or PO
only, and the Lyondell Partner may accept or reject any such
offer in its sole discretion.
9.5 Production Loss. The Partners shall share in proportion to their
respective Offtake Percentages all PO and SM production loss and corresponding
increased costs of production, storage and logistics costs resulting from both
scheduled and unscheduled shutdowns and turndowns, regardless of cause.
9.6 Product Specifications. The Lyondell Partner shall use reasonable
endeavours to cause the Operator to produce and deliver to the Delivery Point PO
and SM that meets the specifications set forth in Schedule 9.6. Off-spec PO and
SM that is accepted by a Partner (or its nominee) at the Delivery Point shall be
such Partner's responsibility to the same extent as if the product met
specifications. As used herein, "off-spec" means PO or SM that does not comply
with the specifications set forth in Schedule 9.6.
9.7 Delivery and Testing of Products. Unless the PO or SM fails to meet
the specifications set forth in Section 9.6, each Partner shall accept at the
Delivery Point all PO and SM that is produced in accordance with the production
schedule that is established in accordance with Section 9.2.2. The Lyondell
Partner shall cause the Operator to sample and test PO and SM in accordance with
the procedures set forth in Schedule 9.7 or such other testing procedures for PO
and SM used, from time to time, by the Lyondell Group in accordance with the
Policies and the Lyondell Operating Practices. A Partner may, at its sole
discretion, choose to accept or refuse off-spec PO and SM. Risk of loss for PO
and SM shall pass from the Partnership to a Partner at the Delivery Point,
except as otherwise agreed between the Partners in connection with the agreed
production and lifting schedules pursuant to Section 9.2.2.
9.8 Risk of loss of Raw Materials. Risk of loss to the Partnership's share
of Raw Materials shall be shared by the Partners in accordance with their
Offtake Percentages. The Partnership's share of Commingled Raw Materials shall
be determined in accordance with Section 4.4 of the Operating Agreement.
17
9.9 Shared Storage Facilities.
9.9.1 The Partnership shall hold title to PO and SM in Shared Storage
Facilities.
9.9.2 As a general rule, capacity in PO and SM Shared Storage
Facilities shall be shared by the Partners in accordance with
their respective Offtake Percentages, and the Partners shall
share risk of loss to the PO or SM contained in the Shared
Storage Facilities in accordance with their respective Offtake
Percentages. The Partners shall make regular liftings of PO and
SM from the Shared Storage Facilities in accordance with
Section 9.2. By written agreement between the Partners as to
volume, term and compensation to the granting Partner, the
Partners may agree to a different allocation of Shared Storage
Facilities capacity and risk of loss for SM and/or PO for a
designated period.
9.9.3 Where the Partners have agreed in writing pursuant to Section
9.2 to temporarily share production or liftings of either PO or
SM for a given period of time on a basis other than in
accordance with their respective Offtake Percentages, then such
agreement shall automatically apply to their capacity rights
with respect to the PO and/or SM Shared Storage Facilities,
whichever shall be the subject of such agreement. Furthermore,
the Partners may also agree in writing to share risk of loss in
a manner different than as provided in Section 9.9.5.
9.9.4 There will be no adjustment to the provisions regarding
transfer of title or risk of loss with respect to PO and SM
which constitutes Bayer Spare Capacity that Lyondell has agreed
to purchase.
9.9.5 Subject to Section 9.9.6, if a loss to PO or SM in Shared
Storage Facilities occurs such that one of the Partners does
not receive a proportionate amount of production of that
product at the time of loss because the other Partner has made
a lifting prior to the loss, then the Partner that did not
receive its proportionate share of production at the time of
loss shall be entitled upon restoration of normal production to
the first production of such product as may be necessary so
that such production loss and corresponding production costs
are shared by the Partners in accordance with their respective
Offtake Percentages, subject, without duplication, to any
written agreement made pursuant to Section 9.9.2 or Section
9.9.3.
9.9.6 If any Partner fails to timely lift PO or SM from the Shared
Storage Facilities in accordance with Section 9.2, such Partner
shall bear all risk of loss with respect to the product that is
not timely lifted in accordance with Section 9.2, and shall
bear all incremental costs incurred by the Partnership and the
other Partner as a consequence of such failure, including
taking corrective action pursuant to Section 9.9.7.
18
9.9.7 Following prior written notice to the defaulting Partner and
after such prior consultation with the defaulting Partner as is
reasonably feasible under the circumstances, the non-defaulting
Partner shall instruct, on behalf of the Partnership, the
Operator to take such steps as are appropriate to prevent the
non-defaulting Partner from incurring Damages as a result of
such failure, while mitigating the Damages to the defaulting
Partner. Such steps may include selling, utilising or placing
in off-site storage for the account of the defaulting Partner
the product which the defaulting Partner has failed to lift
and/or curtailing production, in which case all incremental
costs of such curtailment and all resulting production loss
shall be for the account of the defaulting Partner.
ARTICLE 10 PAYMENT OF OPERATING COSTS
10.1 Invoicing for Operating Costs. On or about the 7th (seventh) Business
Day of each month, commencing in the month following that containing the date of
Commercial Start-up, the Lyondell Partner, on behalf of the Partnership, will
separately provide each Partner with an invoice (the "OPERATING COSTS
STATEMENT") in Euros for each Partner's share of Operating Costs incurred. Each
Operating Costs Statement will detail each Partner's share of PO and SM liftings
during the prior month and be increased with VAT, if applicable. Each Operating
Costs Statement shall show the total Operating Costs incurred and each Partner's
share of such Operating Costs and shall further contain a breakdown of Fixed
Costs, Variable Costs and depreciation into the constituent key cost components
in accordance with the pro forma Operating Costs Statement attached hereto as
Schedule 10.1. Adjustments to Operating Costs for any month due to rebates,
discounts, surcharges, billing errors or other reasons shall be made in the
month in which payment in respect of such adjustment is made, received or
discovered, as the case may be. The per unit Raw Material costs for each Partner
will be the same, subject to Section 9.2.5. The Operating Costs Statement shall
contain copies of invoices of the supplier to the Operator for Commingled Raw
Materials.
10.2 Fixed Costs. Fixed Costs for the invoiced month shall be invoiced to
the Partners in accordance with Section 9.3.
10.3 Variable Costs. Variable Costs for the invoiced month shall be
invoiced to the Partners based on their respective production nominations for
the invoiced month in accordance with Section 9.2, subject to any changes
required by a Unilateral Capital Implementation Plan.
10.4 Depreciation. Depreciation for the invoiced month shall be charged to
the Partners in accordance with their Partnership Percentages on a 10 (ten) year
straight-line basis for all assets of the Partnership. Depreciation will be
settled by a deemed payment from the Partners followed by a deemed repayment of
capital from the Partnership, resulting in a corresponding decrease of each
Partner's Capital Account.
10.5 Special Adjustments. Special adjustments to the Operating Costs
payable by a Partner in accordance with this Agreement (e.g., incremental costs
billed to a Partner who changes its firm production or lifting nominations as
provided in Section 9.2.5) shall be separately listed and detailed.
19
10.6 Payment of Operating Costs. Each Partner shall pay its respective
share of Operating Costs based on the Operating Costs Statement on or before the
20th (twentieth) calendar day of each month, or if such day is not a Business
Day, on the preceding Business Day. Payments will be made when due in
immediately available funds, such that funds are credited to the Partnership
Accounts without withholding, deduction, offset or counterclaim. Interest on
late payments will accrue and be payable at the Default Rate. If there is a
manifest error in calculation in the Operating Costs Statement, the Lyondell
Partner, upon learning of such error, will correct the calculation and show such
recalculation.
10.7 Disputes Regarding Operating Costs Statements. If the Bayer Partner
disputes any amount payable pursuant to any Operating Costs Statement submitted
to it by the Lyondell Partner, then the Bayer Partner shall have the right to
raise such objection with the Lyondell Partner and to instruct the Lyondell
Partner to raise such objection on behalf of the Partnership with the Operator
or any other third party supplier. Any such dispute may be raised and any such
instruction may be given at any time, provided that any dispute that is not
resolved between the Partners may only be resolved through a binding advisor
procedure in accordance with Article 12. The Bayer Partner shall timely pay the
amount in question pending the resolution of any dispute. Payment shall not
constitute acceptance of the amount charged. If it is determined that the Bayer
Partner has overpaid any amount pursuant to an Operating Cost Statement the
Partnership shall pay interest on such overpaid amount from the date of payment
until the date refunded at the Default Rate.
10.8 Billing Addresses. The Partnership will send Operating Costs
Statements to the Partners at the following addresses unless and until otherwise
instructed by the Partners.
To the Bayer Partner:
Bayer Polyurethanes B.V.
▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: Managing Director
Copy to:
Bayer
KB-KF Finanzen
GEB.W1
▇-▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
Germany
Attention: Leitung
20
To the Lyondell Partner:
Lyondell Service Center
▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇
The Netherlands
Attention: Director Financial Controls
Copy to:
Lyondell ▇▇-▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇ Rotterdam-1 Botlek
The Netherlands
Attention: Director, European Manufacturing
ARTICLE 11 RECORD KEEPING, REPORTING
11.1 Books and Records of the Partnership.
11.1.1 The Lyondell Partner shall open and maintain on behalf of the
Partnership books, records and accounts in Euros, which, in
reasonable detail, accurately and fairly reflect the business
activities as they have been carried out by the Partnership.
11.1.2 The Lyondell Partner will devise and maintain an adequate
system of internal accounting controls which shall, amongst
others, be sufficient to provide reasonable assurance that
transactions are recorded as necessary (a) to permit
preparation of financial statements in conformity with
generally accepted accounting principles as applied, from
time to time, in Western Europe by the Lyondell Group and (b)
to maintain accountability for assets and liabilities.
11.2 Partner Access to Books and Records. Each Partner or its
representative shall have access, upon reasonable notice during normal business
hours, to all financial records and other books and records of the Partnership
and shall be entitled to make copies of such books and records as often as such
Partner may request, excluding any books and records containing information with
respect to PO-11 Technology. All expenses associated with such inspections and
copying will be at the requesting Partner's expense. The Lyondell Partner will
use reasonable endeavours to redact sensitive information and take other steps
so that books and records containing information regarding PO-11 Technology
shall not contain any other material information relevant to the business of the
Partnership that is not available to the Partners from another source.
21
11.3 Notice of Material Events. Each Partner shall notify the other
Partner in writing promptly after obtaining knowledge of any incident or event
materially adversely affecting the Partnership or the Partnership's business or
assets.
11.4 Administration of the Partnership Accounts. The Lyondell Partner
shall administer the Partnership Accounts on behalf of the Partnership. The
Partnership Accounts will be maintained in the name of the Partnership. The
Lyondell Partner may maintain Partnership Accounts in Dutch guilders, Euros and
US dollars. All contributions and payments by the Partners will be deposited in
the Partnership Accounts and the Lyondell Partner shall make payments from the
Partnership Accounts to third parties and to the Operator for Service Charges in
respect of Operating Services and the management, operation, maintenance and
ownership of the PO-11 Plant Facilities. The Lyondell Partner shall be the sole
signatory to withdraw funds from the Partnership Accounts. The Bayer Partner
shall have direct, constant and real-time on-line access to the balances of the
Partnership Accounts. The Lyondell Partner has submitted to the Bayer Partner
for review a description of the internal authorisation and control system that
has been put in place by the Lyondell Partner to protect the interests of the
Partnership and the names of the persons currently authorised to withdraw funds
from the Partnership Accounts on behalf of the Lyondell Partner. Such internal
authorisation and control system will require, inter alia, that withdrawals
require the authorisation of at least two persons. Any modification to the
authorisation and controls system intended to be implemented by the Lyondell
Partner shall be subject to the prior review (but not approval) of the Bayer
Partner. In addition, the Bayer Partner may request that such authorisation and
control system as used for the Partnership be modified to add the requirement of
a Bayer Partner representative approval, in addition to the Lyondell Partner
representatives approval, for withdrawals of more than EUR 1,000,000 (one
million Euros) (Inflation Adjusted), provided that any such modification to the
authorisation and controls system proposed by the Bayer Partner preserves the
control integrity of the existing system.
ARTICLE 12 FINANCIAL YEAR, ANNUAL ACCOUNTS, OTHER AUDIT RIGHTS
12.1 Financial Years. The first financial year of the Partnership shall
run from the date of the formation of the Partnership up to and including 31
December 2000. In subsequent years, the financial year of the Partnership shall
be concurrent with the calendar year.
12.2 Preparation and Certification of Annual Financial Statements. Within
one month after the end of each financial year, the Lyondell Partner shall
prepare (or have prepared) a balance sheet, profit and loss statement, cash flow
statement, depreciation schedule, explanatory notes and similar items thereto
for the Partnership for the prior year in accordance with the accounting
practices maintained from time to time by the Lyondell Group in Western Europe.
Within such period, the Lyondell Partner shall cause such accounts to be
certified by the external auditors of the Partnership to the extent necessary
for Bayer and Lyondell to prepare their respective consolidated financial
statements and shall deliver a copy thereof to the Bayer Partner. Within four
months after the end of each financial year, the Lyondell Partner shall cause to
be finalised, and audited and certified by the external auditors of the
Partnership, the annual accounts ("ANNUAL ACCOUNTS") of the Partnership for the
prior year and provide a copy thereof to the Bayer Partner. The Bayer Partner
shall be provided with a copy of any reports (including management reports)
prepared
22
by the Partnership's external auditors and shall be notified of and afforded the
opportunity to participate in any meetings with such external auditors relating
to the Partnership.
12.3 Annual Accounts Approval and Disputes.
12.3.1 The Annual Accounts shall be considered as final and binding
upon each of the Partners when they have been approved by the
Partners at a Management Committee meeting.
12.3.2 If a Partner affirmatively objects to the approval of the
Annual Accounts at any Management Committee meeting as set
forth in Section 8.1.5, then the disputing Partner has the
right, within two weeks after the date of such meeting, to
have the Annual Accounts finally determined by way of a
binding advice ("bindend advies") procedure in accordance
with Article D of Exhibit B. If the disputing Partner does
not timely initiate such procedure, then the Annual Accounts
shall be deemed to be approved.
12.3.3 If there is no quorum at the second Management Committee
meeting as set forth in Section 8.1.5, then the attending
Members may approve the Annual Accounts, and such approvals
will make the Annual Accounts final and binding. For the
avoidance of doubt, in such case, no Partner shall have the
right to initiate the above binding advice procedure.
12.3.4 Each Partner has the right to invoke an audit of the
Operating Costs or the Capital Costs assessed to them in
accordance with this Agreement in accordance with this
Section 12.3 and Section 12.4. Any such audit under this
Section 12.3 shall be subject to Section 12.3.3 and must be
brought within the time periods and in accordance with the
procedures set forth in Section 12.3.2. In connection with
any audit under this Section 12.3 or Section 12.4, the
disputing Partner shall notify the Operator that an audit is
being brought under Section 9.4.1 of the Operating Agreement.
12.3.5 The final determination of the Annual Accounts and the
resolution of any audit under Section 12.3.4 and Section 12.4
shall constitute a discharge of the Lyondell Partner from the
liability, if any, it may have incurred with respect to the
charging of Operating Costs and Capital Costs for the year in
question.
12.4 Disputes as to Significant Monetary Amounts. In addition to the
procedure set forth in Section 12.3, either Partner may raise disputes with
regard to, and audit any individual item of, any Development Phase Cash Call
Statement, Capital Costs Statement and Operating Cost Statement if such item
exceeds (a) EUR 5,000,000 (five million Euros) (Inflation Adjusted) for
Development Phase Cash Call Statements and Capital Costs Statements and
(b) EUR 1,000,000 (one million Euros) (Inflation Adjusted) for Operating Costs
Statements if in any such case those disputes are not resolved between the
Partners, without waiting until the Annual Accounts are reviewed by the Partners
under Section 12.3.
23
The disputing Partner shall submit such dispute to resolution in accordance with
the binding advice procedure described in Article D of Exhibit B.
ARTICLE 13 ANNUAL PLAN, FIVE YEAR DEMAND FORECAST; PARTNER
SELF PROCUREMENT RIGHTS; DISPUTES REGARDING EHS AND
PERSONNEL COMPENSATION EXPENDITURES
13.1 Annual Plan.
13.1.1 The Lyondell Partner shall cause the Operator to prepare and
deliver to the Partnership on or before 1 October of each
year, commencing in 2002, the Annual Plan and the Four Year
Forward Forecast.
13.1.2 If the Management Committee approves the Annual Plan by 1
November, the Lyondell Partner shall provide to the Operator
a copy of the Management Committee Resolution approving the
Annual Plan. If the Management Committee is deadlocked on any
element of the Annual Plan and such deadlock continues beyond
1 November, then the Management Committee shall adopt a
Management Committee Resolution approving the elements that
are not in dispute and the issues in dispute shall be
submitted to the Global Steering Committee for further review
and attempted resolution by 1 December. The Lyondell Partner
shall provide the Operator with a copy of the Management
Resolution approving the elements that are not in dispute.
13.1.3 If the Global Steering Committee approves the entire Annual
Plan by 1 December, then the Lyondell Partner shall provide
the Operator with a written authorisation to implement the
Annual Plan. Where any portion of the Annual Plan is not
approved, and the Partnership is deadlocked as to whether the
Operator's proposed course of action is consistent with the
Policies and the Lyondell Operating Practices, then the Bayer
Partner as the disputing Partner, may at its election invoke
the binding advice procedure on behalf of the Partnership to
resolve the dispute in accordance with the provisions of
Section 7.3.4 of the Operating Agreement.
13.2 Five Year Demand Forecast.
13.2.1 Both Partners shall furnish to the Partnership and the
Operator on or before 1 August of each year commencing in
2002 their "Five Year Demand Forecast", being the Partner's
good faith estimate of the total volume requirements of PO
and SM for the Partner for the next succeeding five years,
broken down by month for the first year and by quarter for
the following four years. No Partner may include in its
demand forecast for any month a production level that would
cause the PO-11 Facilities to operate at less than the
Minimum Turndown Operating Rate, assuming the other Partner
is utilising all of its production capacity.
24
13.2.2 The base case for the Partners' demand forecasts will be
proportionate offtakes of PO and SM and 100% (one hundred
percent) continuous operating rates, after taking into
account Turnarounds and reliability indices.
13.2.3 As part of its Five Year Demand Forecast, the Bayer Partner
will indicate any Bayer Spare Capacity for co-produced PO
and SM that it expects to offer to the Lyondell Partner in
accordance with Section 9.4.
13.2.4 In addition to the Five Year Demand Forecast, both Partners
shall furnish the Partnership and the Operator such other
information as the Operator may reasonably request to
enable the Operator to prepare the Proposed Annual Plan.
13.3 Partner Rights to Self-Procurement of Strategic Raw Materials.
13.3.1 Subject to the terms and conditions of this Section 13.3
that follow, and solely in connection with arrangements
involving SM supply to, offtake by and/or equity
arrangements with a Third Party, each Partner shall have
the right to procure for its own account from the Third
Party or its Affiliates ethylene and/or benzene up to the
amount required to produce its entire production capacity
of SM for the upcoming Plan Year, based on such Partner's
production nominations in the Annual Plan, but not more
than the ethylene and/or benzene, as applicable, required
to produce the SM to which the Third Party or its
Affiliates is or are entitled under the relevant
arrangements.
13.3.2 Subject to the terms and conditions of this Section 13.3
that follow, and solely in connection with market-based
arrangements involving PO supply to and/or offtake by a
Third Party, each Partner shall also have the right to
procure for its own account from the Third Party or its
Affiliates propylene up to the amount required to produce
30% (thirty percent) of such Partner's Offtake Percentage
of "nameplate" capacity for PO, but not more than the
propylene required to produce the PO to which the Third
Party or its Affiliates is or are entitled under the
relevant arrangements.
13.3.3 Nothing contained in this Section 13.3 affects or limits
Bayer's obligations under Section 9.4 or the provisions of
Section 20.1 or Section 20.2.
13.3.4 The procurement limits for each Partner under Section
13.3.1 and Section 13.3.2 will be based on and consistent
with the PO/SM production ratio contained in the Annual
Plan.
13.3.5 In connection with each separate arrangement with a Third
Party, a Partner desiring to procure Strategic Raw
Materials (a "SRM PROCURING PARTNER") shall indicate such
intent to the other Partner (for this purpose, the "NON-
PROCURING PARTNER") and the Operator at least
25
(a) 12 (twelve) months prior to 1 January of the first year
in which the SRM Procuring Partner desires to procure
ethylene and/or benzene for its own account and (b) 24
(twenty-four) months prior to 1 January of the first year
in which the SRM Procuring Partner desires to procure
propylene for its own account. The SRM Procuring Partner
may make its election for a single year (or portion
thereof) or for a designated period of years, subject to
the limitations of this Section 13.3.
13.3.6 The SRM Procuring Partner's rights to procure Strategic Raw
Materials are subject to the terms of any then existing
Strategic Raw Materials supply contracts. If both Partners
desire to be SRM Procuring Partners for the same period,
then any quantities available for Partner procurement shall
be equitably allocated between them in the ratio of their
intended self-procurement quantities, until the
availability limit is reached or until a Partner's self-
procurement quantity is fully satisfied, in which latter
case any remaining availability shall be allocated to the
other Partner.
13.3.7 The SRM Procuring Partner shall be responsible for keeping
the Non-Procuring Partner economically neutral
notwithstanding the SRM Procuring Partner's procurement for
its own account, including as to Strategic Raw Material
structural discounts and rebates that will be available to
the Partnership for the desired period of procurement by
the SRM Procuring Partner under then existing supply
contracts and as provided in the Strategic Raw Materials
Purchasing Plan.
13.3.8 The SRM Procuring Partner shall be responsible for meeting
specifications established by the Operator for the
Strategic Raw Materials so procured. The SRM Procuring
Partner shall be responsible for compliance with the
Operator's requirements as to delivery terms for the
Strategic Raw Materials so procured. The SRM Procuring
Partner shall co-ordinate delivery schedules with the
Operator to provide for integration with overall Strategic
Raw Material procurement for the PO-11 Plant Facilities.
The SRM Procuring Partner shall bear all production loss
attributable to its failure to timely arrange delivery of
Strategic Raw Materials meeting specifications to the
appropriate delivery point(s) for the Strategic Raw
Materials that the SRM Procuring Partner has elected to
procure for its own account, notwithstanding the provisions
of Section 9.5.
13.3.9 Title and risk of loss of the Strategic Raw Materials
procured by the SRM Procuring Partner shall pass to the
Partnership upon receipt by the Partnership of the
Strategic Raw Materials at the delivery point, subject to
the Strategic Raw Materials meeting specification testing
in accordance with the Operator's customary practices. The
delivery point for propylene delivered by the SRM Procuring
Partner to the Europoort Terminal shall be the intake
flange at a common storage tank for propylene at Europoort.
The delivery point for ethylene and benzene, and propylene
delivered to the PO-11 Plant Facilities, shall be
26
the intake flange at a common storage tank for such
Strategic Raw Material located at the Leased Premises.
13.3.10 The SRM Procuring Partner shall bear the total acquisition
costs (including costs to deliver the Strategic Raw
Materials to the delivery point, as provided in Section
13.3.9) of the Strategic Raw Materials that it has elected
to procure for its own account. The SRM Procuring Partner
is not required to disclose the price terms for such
Strategic Raw Materials procured for its own account to the
other Partner or to the Operator. The Non-Procuring Partner
shall bear a correspondingly higher share of the
corresponding Strategic Raw Material purchased for the
account of the Partnership so that its PO or SM (as
relevant for the Strategic Raw Material in question)
capacity needs are met solely from the Strategic Raw
Materials purchased for the account of the Partnership.
Notwithstanding the foregoing, such share could be subject
to possible adjustment if and to the extent necessary so
that the Non-Procuring Partner is kept economically neutral
by reason of the SRM Procuring Partner's procurement.
13.3.11 As an example of how these provisions are intended to
apply, assume both Partners' Offtake Percentage is 50%
(fifty percent) and that the PO-11 Plant Facilities are
scheduled in the Annual Plan to operate at nameplate
capacity for the upcoming Plan Year. Assume a SRM Procuring
Partner intends to supply for the upcoming year 30% (thirty
percent) of the propylene required to supply its Offtake
Percentage of nameplate PO capacity. This would mean that,
under the foregoing assumptions, the SRM Procuring Partner
elects to supply 15% (fifteen percent) of the total
propylene needs of the PO-11 Plant Facilities for the
upcoming Plan Year. Assume the acquisition and delivery
costs of the propylene purchased by or on behalf of the
Partnership on a unit (metric tonne) basis is unaffected by
the SRM Procuring Partner's decision. Assume propylene
deliveries by the SRM Procuring Partner are made rateably
each month. Each month, the SRM Procuring Partner would pay
for (a) 100% (one hundred percent) of the acquisition and
delivery costs of the propylene it is supplying and (b) 41%
(forty-one percent) of the acquisition and delivery costs
of the propylene purchased by or on behalf of the
Partnership. The Non-Procuring Partner would pay 59%
(fifty-nine percent) of the acquisition and delivery costs
of the propylene purchased by or on behalf of the
Partnership. The Non-Procuring Partner will be in the same
economic position that it would have been in if it were
paying 50% (fifty percent) of the costs of the total
propylene supplied to the PO-11 Plant Facilities, since the
unit cost of propylene is unchanged.
13.3.12 Not more than once per year, each Partner shall have the
right to have an independent external auditor conduct the
other Partner's compliance with this Section 13.3 for the
then current and/or prior calendar year if the other
Partner has procured Strategic Raw Materials for its own
account during such period.
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13.4 Disputes Regarding EHS and Personnel Compensation Expenditures.
13.4.1 The following provisions of this Section 13.4 apply to the
rights of the Bayer Partner to dispute expenditures or
proposed expenditures by the Operator for EHS activities or
that are the result of personnel compensation increases
that are not in accordance with the Annual Budget and that
are undertaken or are proposed to be undertaken by the
Operator based on its spending authority under Section
7.4.2(b) or Section 7.4.2(f) or Section 7.5.2(a) or Section
7.5.2(g) (and not another basis under Section 7.4.2 or
Section 7.5.2).
13.4.2 If the Bayer Partner believes that any such unbudgeted
expenditure for EHS activities or that results from
personnel compensation increases is not consistent with the
EHS Policies or the Personnel Policies, as applicable, then
the Bayer Partner, with concurrent notice to the Lyondell
Partner and to the Operator, shall bring such dispute to
the Management Committee for attempted resolution within 10
(ten) days after the Bayer Partner becomes aware of the
disputed expenditure pursuant to written information
provided to the Bayer Partner by the Operator or the
Lyondell Partner.
13.4.3 If the Bayer Partner timely brings the dispute to the
Management Committee and if the Management Committee does
not resolve such dispute within 10 (ten) days after the
dispute is first submitted to the Management Committee for
attempted resolution, then the Bayer Partner may submit the
dispute to the Global Steering Committee for attempted
resolution within 5 (five) Business Days after the
expiration of the 10 (ten) day period within which the
Management Committee is given to resolve such dispute.
13.4.4 If the Bayer Partner timely brings the dispute to the
Global Steering Committee and if the Global Steering
Committee does not resolve such dispute within 10 (ten)
days after the dispute is first submitted to the Global
Steering Committee for attempted resolution, then the Bayer
Partner, by notice to the Lyondell Partner and to the
Operator within 10 (ten) days after the expiration of the
10 (ten) day period within which the Global Steering
Committee is given to resolve such dispute, may submit the
issue as to whether the Operator's positions in dispute are
in fact consistent with the EHS Policies or the Personnel
Policies, as applicable, to resolution by a three-member
panel of binding advisors in accordance with Article C of
Exhibit B. As a precondition to submitting the dispute to
resolution by a panel of binding advisors, the Bayer
Partner shall submit with its notice to the Lyondell
Partner and to the Operator a written reasoned explanation
of the basis for the Bayer Partner's objections.
13.4.5 The Bayer Partner shall elect in writing by notice to the
Lyondell Partner prior to or at the time the Bayer Partner
submits such dispute to resolution by a binding advisor
procedure pursuant to Section 13.4.4.
28
whether (a) to release the Lyondell Partner from
responsibility pursuant to Section C.7(d) of Exhibit B for
potentially paying more than the Lyondell Partner's
Partnership Percentage share of the costs associated with
such expenditures by the Operator which the Partnership may
incur during the pendency of the dispute resolution process
if the Operator proceeds with the EHS or personnel
compensation increase expenditure or (b) to accept
responsibility for Damages that the Operator and the
Lyondell Partner may incur if the Operator defers such
activities and expenditures until the dispute is resolved.
13.4.6 If the Bayer Partner elects not to so release the Lyondell
Partner, then the Lyondell Partner shall instruct the
Operator to continue with the Operator's proposed
expenditures or to defer such expenditures.
13.4.7 If the Bayer Partner elects not to so release the Lyondell
Partner, and the binding advisors determine that the EHS or
personnel expenditures are inconsistent with the EHS
Polices or the Personnel Policies, as applicable, then the
Partners' respective share of the costs incurred by the
Partnership as a result the Operator's proceeding with its
proposed expenditures during the resolution of the dispute
shall be determined under Section C.7 of Exhibit B.
13.4.8 If the Lyondell Partner instructs the Operator to defer
such expenditures during the resolution of the dispute, and
the binding advisors do not determine that the EHS or
personnel expenditures are inconsistent with the EHS
Polices or the Personnel Policies, as applicable, then the
Bayer Partner shall be solely responsible for Damages
incurred by the Operator and the Partnership as a
consequence of the deferral in accordance with Section C.8
of Exhibit B.
ARTICLE 14 DISCRETIONARY CAPITAL PROJECTS PROPOSED BY THE
PARTNERS, UNILATERAL CAPITAL PROJECTS
14.1 Discretionary Capital Projects Proposed by a Partner. Each Partner
shall have the right on or before 1 September of each year to submit to the
Partnership for the following year proposals for Discretionary Capital Projects
which, in the opinion of such Partner, are beneficial to both Partners or that
Partner alone. Given that the Bayer Partner does not have access to the
Proprietary PO/SM Technology, the Bayer Partner may present its proposals on the
basis of certain desired results.
14.2 Detailed Study. Where the Operator proceeds with a feasibility and
cost study in accordance with Section 7.6.1 of the Operating Agreement, and if
either or both of the Partners desire to further proceed with the proposal, then
the Lyondell Partner shall cause the Operator to prepare a detailed study
including a schedule for implementation, project scope, plans, a preliminary
estimate of costs and all other information relevant or necessary to allow the
Partners to evaluate the proposal and determine whether to participate in the
Capital Costs, risks and resulting benefits in accordance with their Partnership
Percentages.
29
14.3 If Both Partners Desire to Proceed with a Discretionary Capital
Project. If both Partners desire to proceed with the Discretionary Capital
Project proposed by a Partner, then such Discretionary Capital Project shall be
included in the Annual Plan and Capital Budget and the Partners shall
participate in such Capital Project in accordance with their Partnership
Percentages. Without limitation, the costs incurred by the Operator under
Section 7.6.1 and Section 7.6.2 of the Operating Agreement shall be shared by
the Partners in accordance with their Partnership Percentages. If only one
Partner desired the Operator to proceed with the feasibility and cost study or
detailed study, then the costs incurred by the Operator under Section 7.6.1 and
Section 7.6.2 of the Operating Agreement shall be borne by the requesting
Partner.
14.4 Right to Qualified Independent Engineer Confirmation. If a Partner is
not satisfied with the Operator's justification for not proceeding with a
feasibility and cost study, is not satisfied with the results of a feasibility
and cost study, or is not satisfied with the detailed study under Section 14.2,
then such Partner, at its expense, may require the Operator to have a qualified
independent engineer selected by the Operator and confirmed by the Partner
Representative of such Partner validate the Operator's conclusions, subject to
the independent engineer entering into an appropriate confidentiality agreement
with the Operator.
14.5 Unilateral Capital Projects; Unilateral Capital Project Threshold.
14.5.1 If a Discretionary Capital Project is proposed by a Partner
or the Operator as part of the Annual Plan process but is
rejected by the other Partner, then the Partner desiring to
proceed may proceed with such project as a Unilateral Capital
Project if (a) such Discretionary Capital Project exceeds the
then applicable Unilateral Capital Project Threshold and (b)
at least four years have lapsed from Commercial Start Up
before such Unilateral Capital Project is commenced. If the
Partner proceeds with such project as a Unilateral Capital
Project, then the following provisions of this Article 14
will apply.
14.5.2 "UNILATERAL CAPITAL PROJECT THRESHOLD" means a threshold
applicable to the estimated costs of a proposed Discretionary
Capital Project equal to EUR 50,000,000 (fifty million Euros)
(Inflation Adjusted) if the proposed Discretionary Capital
Project has not been proposed as part of the Annual Plan
process in any prior year and has not been included in a Four
Year Forward Forecast in any prior year, or in all other
cases, EUR 20,000,000 (twenty million Euros) (Inflation
Adjusted), subject in each case to adjustment in accordance
with Section 14.9.
14.6 Risks and Benefits Borne by Proceeding Partner. Regardless of which
Partner desires to proceed with a Unilateral Capital Project, the Lyondell
Partner shall instruct the Operator to proceed with a Unilateral Capital
Implementation Plan with the objective that the economic ownership, including
all cost saving, capacity increase, reliability improvement and other
performance benefits and all costs and risks of the Unilateral Capital Project
shall be for the sole account of the Partner proceeding with such Capital
Project, and that the other Partner is to be held entirely economically neutral,
as if such Unilateral Capital Project had not been undertaken.
30
14.7 Disputes Regarding any Unilateral Capital Project Implementation
Plan. Either Partner, acting reasonably and in good faith, may object to any
Unilateral Capital Implementation Plan proposed by the Operator in accordance
with Section 7.6 of the Operating Agreement. If any dispute concerning the
Unilateral Capital Implementation Plan remains unresolved among the Partners 30
(thirty) days following the Operator's initial submission of the Unilateral
Capital Implementation Plan to the Partners, the Partner who is dissatisfied
with the Unilateral Capital Implementation Plan may initiate the Dispute
Resolution Procedures of Exhibit B. If the dispute is not resolved within 6
(six) months after the Unilateral Implementation Plan of the Operator is first
submitted to the Partners, then the Partner desiring to proceed with the
Unilateral Capital Project may, at its sole election, instruct the Operator on
behalf of the Partnership to proceed with such Capital Project, subject to the
subsequent determination of the Unilateral Implementation Plan through the
Dispute Resolution Procedures of Exhibit B.
14.8 Management Committee Disapproval Does Not Prohibit Proceeding with a
Project as a Unilateral Capital Project. For the avoidance of doubt, no
disapproval of a Discretionary Capital Project by the Management Committee shall
prevent a Partner desiring to proceed with such Capital Project from doing so as
a Unilateral Capital Project, subject to the provisions of this Article 14.
14.9 Adjustment to Unilateral Capital Project. If in the then current Plan
Year a Partner has rejected 75% (seventy five percent) or more of the aggregate
costs of the Discretionary Capital Projects for the consecutive period of five
years consisting of the then current Plan Year and the four preceding years,
based on the initial estimated capital cost for each such project, proposed as
part of the Annual Plan process either by the other Partner or the Operator,
then the Unilateral Capital Project Threshold, as applied to the other Partner,
shall be reduced to EUR 3,000,000 (three million Euros) (Inflation Adjusted) for
the remainder of the current Plan Year and for the next Plan Year. The adjusted
Unilateral Capital Project Threshold shall apply regardless of whether a
Discretionary Capital Project has been proposed in a Four Year Forward Forecast
in any prior year.
14.10 No Rights to Technology. Nothing in this Article 14 entitles or
shall be deemed to entitle the Bayer Partner to any rights or access to, or
disclosure concerning, the Proprietary PO/SM Technology.
ARTICLE 15 ADJUSTMENTS OF INTERESTS FOR UNILATERAL CAPITAL
PROJECTS THAT AFFECT CAPACITY
15.1 Unilateral Capital Projects that Increase Production Capacity. With
respect to a Unilateral Capital Project that increases the overall production
capacity of the PO-11 Plant Facilities for PO and co-produced SM, the Offtake
Percentage for each Partner shall be changed in accordance with Section 15.2.
15.2 Change to Offtake Percentages. The Offtake Percentage shall, for the
Partner proceeding with such Unilateral Capital Project, be adjusted by (a)
multiplying that Partner's then-existing Offtake Percentage prior to such
Unilateral Capital Project by the sum of the total rated PO capacity of the
PO-11 Plant Facilities prior to such Unilateral Capital Project being
undertaken; (b) adding to such amount the incremental demonstrated rated PO
capacity increase attributable to such Unilateral Capital Project; and (c)
dividing such sum by the total
31
demonstrated rated PO capacity of the PO-11 Plant Facilities after such
Unilateral Capital Project has been undertaken. All calculations shall be made
based on the same PO/SM production ratio. The methodology for determining the
incremental demonstrated PO capacity shall be determined in the Unilateral
Capital Implementation Plan. The other Partner's Offtake Percentage shall be
100% (one hundred percent) minus the new Offtake Percentage of the Partner
proceeding with the Unilateral Capital Project.
15.3 Allocation of Capital Costs. Subject to any contrary provision of the
Unilateral Capital Implementation Plan, for purposes of allocating Capital Costs
for the period from the first invoicing of a Unilateral Capital Project, the
Partners' shares of such Capital Costs shall be determined by allocating all
Capital Costs attributable to the Unilateral Capital Project to the Partner
undertaking such project, including as to future Maintenance Capital Projects,
EHS Capital Projects and Discretionary Capital Projects attributable to the
Unilateral Capital Project subsequent to completion of such Unilateral Capital
Project, and by allocating all other Capital Costs of the Partnership to the
Partners in accordance with their Partnership Percentages.
ARTICLE 16 ALLOCATION OF PROFITS AND LOSSES
The profits and losses, if any, of the Partnership shall be allocated to
the Partners in accordance with their respective Partnership Percentages.
ARTICLE 17 DISTRIBUTIONS
17.1 Distributions of Cash. All cash not required for Partnership Working
Capital purposes under Section 6.2.1 of this Agreement shall be distributed to
the Partners quarterly. If cash in excess of that required for Partnership
Working Capital purposes under Section 6.2.1 exceeds (a) first, the profits, if
any, allocated to the Partners for that year and (b) second, the amount of all
profits for prior years in excess of previous cumulative cash distributions,
such excess cash shall be used for the repayment of the capital of the Partners.
17.2 Classification of Proceeds. The Lyondell Partner shall classify all
proceeds received by the Partnership from the sale, exchange, involuntary
conversion or other disposition of Partnership assets as "PARTNERSHIP ASSET
PROCEEDS" or "UNILATERAL CAPITAL PROJECT ASSET PROCEEDS". The characterisation
of proceeds shall be made in accordance with the characterisation of the assets
to which such proceeds relate. Except as otherwise provided, the Partnership
Asset Proceeds will be distributed in accordance with their Partnership
Percentages to the Partners and the Unilateral Capital Project Asset Proceeds
will be distributed to the Partner who funded the Unilateral Capital Project
Asset.
ARTICLE 18 RATIFICATION OF PRIOR BUSINESS
The Partners hereby ratify and adopt the contracts, commitments, letters of
intent, liabilities, obligations and rights pertaining to the Partnership's
business arising from the acts, agreements and commitments undertaken prior to
the Signing Date set forth in Schedule 18. The agreements listed on Schedule 18
shall be assigned to and assumed by the Partnership, subject to obtaining the
consent of the counterparty to each such agreement.
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ARTICLE 19 INDEMNIFICATION, WAIVERS
19.1 Indemnification of the Operator. The Partners shall severally in
accordance with their Partnership Percentages indemnify and hold harmless the
Operator and the Operator's Eligible Indemnitees against any Third Party Claim
and resulting Damages arising out of or in connection with the ownership or
operation of the PO-11 Plant Facilities, except to the extent that such Third
Party Claim is covered by the indemnification of the Operator under Section
10.3.1 of the Operating Agreement or the indemnification of the other Partner
under Section 19.2 or Section 19.3.
19.2 Indemnification for Product Liability and Related Claims. In addition
to the indemnification under Section 19.1, each Partner shall be responsible
for, and shall indemnify and hold harmless the Operator and the Operator's
Eligible Indemnitees and the other Partner and the other Partner's Eligible
Indemnitees against, any Third Party Claim and resulting Damages arising out of
PO, SM or other products or services sold, made available or distributed by the
indemnifying Partner and/or its Affiliates and/or the storage, transportation,
processing or sale of PO or SM after receipt of such product by such Partner at
the Delivery Point.
19.3 Indemnification for Failure to Timely Make Payment. In addition to
the indemnification provided in Section 19.1 and Section 19.2, each Partner
shall be solely responsible for all resulting Damages incurred by the Operator
and the other Partner for their own account (excluding lost profits, and
consequential, incidental and punitive damages and net of and after taking into
account available recoveries through insurance and against Third Parties) as a
result of a Partner's failure or refusal to timely make any payment in
accordance with this Agreement.
19.4 Indemnification Procedures.
19.4.1 Any Party seeking indemnification from another Party must
promptly notify in writing the Party from which it seeks
indemnification of the Claim. In such notice, the Party
seeking indemnification for a Third Party Claim shall include
copies of all papers served or delivered with respect to such
Claim. Such notice shall state the basis for the request for
indemnification.
19.4.2 The Partnership hereby authorises the Operator, as an expense
of the Partnership (but without altering the Operator's
potential responsibility for reimbursement under Section 10.3
of the Operating Agreement where applicable), to instruct
legal counsel and otherwise take all actions to avoid,
defend, appeal, settle and/or otherwise manage every Third
Party Claim on behalf of all Parties, including in the name
of the Partnership or any Partner that is a named defendant
in such Third Party Claim. The Partners shall confirm such
authorisation in writing promptly following written request
of the Operator.
19.4.3 The Partners shall fully co-operate with the Operator in
respect of the Claim, including promptly providing copies of
all court or arbitration papers and other notices and
documents. The Partners shall sign as
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requested all court or arbitration filings and make their
respective employees available on a mutually convenient basis
to provide information and to serve as witnesses.
19.4.4 The Parties will not assert any Claim against one another in
connection with any Third Party Claim until (a) the Third
Party Claim and resulting Damages are resolved by final
judgement or settlement and (b) all claims against insurers
and Third Parties for indemnification or contribution related
to the Third Party Claim are resolved by final judgement or
settlement.
19.4.5 Pursuant to the terms of Section 4.7 of the Operating
Agreement, the Operator may not, without the approval of the
Partnership, such approval not to be unreasonably withheld,
initiate or settle any Material Litigation. The Partners
agree that where only one Partner would be adversely affected
by the initiation or settlement of such Material Litigation,
the adversely affected Partner shall have the sole right to
exercise such approval on behalf of the Partnership.
19.5 Waiver of Claims.
19.5.1 To the maximum extent permitted by Applicable Law, each
Partner releases and waives all Claims against the Operator
and its officers, employees and agents, for personal injury
to or death of employees or agents or damage to or
destruction or loss of tangible property that is located
within the PO-11 Plant Facilities and is owned or leased, as
applicable, by the Partnership or the waiving Partner or its
Affiliates, regardless of the acts, omissions, negligence
(whether active, passive, concurrent or sole) or Fault of any
Person.
19.5.2 To the maximum extent permitted by Applicable Law, each
Partner releases and waives on behalf of itself and its
Affiliates, all Claims against the Operator and its officers,
employees and agents, for any Damages incurred by the
Partnership, or the waiving Partner or its Affiliates for
their own account, including actual damages, lost profits and
consequential, incidental or punitive damages, arising out of
the ownership or operation of the PO-11 Plant Facilities or
any activities or obligations under or related to this
Agreement, regardless of the acts, omissions, negligence
(whether active, passive, concurrent or sole) or Fault of the
Operator, except as expressly otherwise provided in Section
10.3.2 of the Operating Agreement.
19.6 No Warranties or Indemnities. Neither Partner makes any warranties or
guarantees to any other Party, either express or implied, with respect to the
subject matter of this Agreement, and all Parties disclaim and waive any implied
warranties or warranties imposed by law (recognising that there are no implied
warranties under the laws of The Netherlands as of the Signing Date).
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19.7 Liability of Partners. Neither Partner shall be liable, responsible
or accountable in damages or otherwise to the Partnership or the other Partner
for any act or omission, except for its Fault, in carrying out its obligations
hereunder.
ARTICLE 20 USE OF TECHNOLOGY
20.1 Use by Bayer Partner of Lyondell License. If the Bayer Partner
receives PO produced by the Partnership that it desires to use or uses outside
of the field of use specified in the Bayer License Agreement, then the Bayer
Partner shall have the right to require that the Lyondell Partner accommodate
the Bayer Partner such that the Bayer Partner obtains the use of the Lyondell
Partner's unrestricted license solely for such use, only if and provided that
the Bayer Partner pays to the Lyondell Partner on or before the 15th (fifteenth)
day of the month in which the Bayer Partner uses the PO outside the field of use
specified in the Bayer License Agreement the Accommodation Fee, accompanied by a
report showing the total metric tonnes of PO to be used outside of the field of
use in the Bayer License Agreement.
20.2 Accommodation Fee.
20.2.1 The "ACCOMMODATION FEE" is an amount for each metric tonne of
PO or portion thereof used outside of the field of use
specified in the Bayer License Agreement equal to the
positive difference between (a) the average PO sales price of
the Lyondell Group to Third Parties for use in Western Europe
for the month and (b) the PO Manufacturing Costs for the
month.
20.2.2 The "PO MANUFACTURING COSTS" equals [Total Costs Plus New
Capital Depreciation minus (the SM Manufacturing Costs for
the month, based on budgeted costs, times the total metric
tonnes of SM nominated by the Partners for the month)]
divided by the total metric tonnes of PO nominated by the
Partners for the month.
20.2.3 "TOTAL COSTS PLUS NEW CAPITAL DEPRECIATION" equals the sum of
actual Operating Costs for the PO-11 Plant Facilities for the
month in question plus 1/12th (one twelfth) of the annual
depreciation charge in respect of Capital Projects that are
not part of the initial construction of the PO-11 Plant
Facilities (i.e. the costs for which are not part of PO-11
Project Costs). Unilateral Capital Projects and Capital Costs
associated with Unilateral Capital Projects, as described in
Section 15.3, shall not be included in such calculation,
regardless of whether the Lyondell Partner or the Bayer
Partner is the Partner proceeding with such Unilateral
Capital Project.
20.3 No Application to Bayer Spare Capacity Sold to Lyondell. The
Accommodation Fee shall not apply to any PO sold to Lyondell pursuant to
Section 9.4.
20.4 Certification. On or before 1 April of each year, an executive
officer of Bayer will certify on behalf of the Bayer Partner to the Lyondell
Partner as to the implementation of Section 20.2 and the determination of the
Accommodation Fee, if any, payable as provided in the foregoing provisions of
this Article 20, in accordance with Schedule 20.4.
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20.5 No Technology Transfer or Grant of License under this Agreement.
Neither this Agreement, nor the performance by a Partner of its duties
hereunder, shall operate to convey, license or otherwise transfer from one
Partner to another (or from the Operator to the Partners, or from the Partners
to the Operator) any patent, patent application, invention, know-how, trade
secret or other intellectual property rights.
20.6 Lyondell Group Technology. The Proprietary PO/SM Technology is
proprietary technology of an Affiliate of Lyondell. Subject only to the express
written rights of the Lyondell Partner and the Bayer Partner under each
Partner's respective License Agreement, all rights of ownership, use, practice
and exploitation of the Proprietary PO/SM Technology are, and are intended to
remain, the exclusive property rights of the Affiliate of Lyondell. All
inventions, developments and improvements to the Proprietary PO/SM Technology
resulting from the development and operation of and improvements to the PO-11
Plant Facilities are the sole property of the Lyondell Affiliate to the
exclusion of the Partnership and the Partners, subject only to the express
written rights of the Partners under their respective License Agreement.
ARTICLE 21 COMPETITION
Except as may be set forth in the Master Transaction Agreement, each
Partner and each Partner's Affiliates shall be free to engage in or possess an
interest in any other business of any type, including any business in direct
competition with the Partnership and to avail itself of any business opportunity
available to it without having to offer to the Partnership or any Partner the
opportunity to participate in such business. Such activities shall not
constitute or be construed as a breach of any duty, including without limitation
any duty arising from the principles of reasonableness and fairness and shall
not constitute any improper or unlawful use of a corporate or business
opportunity.
ARTICLE 22 RESTORATION FOLLOWING CASUALTY LOSS
22.1 Restoration Absent Mutual Agreement for First Twenty Years. Where any
Casualty occurs in relation to the PO-11 Plant Facilities within the first 20
(twenty) years of the Production Term, unless both Partners agree otherwise, the
PO-11 Plant Facilities shall be restored in accordance with Section 22.3. Where
the Partners agree otherwise, the provisions of Section 22.4 shall apply.
22.2 No Restoration Following Major Casualty Occurring After First Twenty
Years. Where any Casualty occurs in relation to the PO-11 Plant Facilities
after the first 20 (twenty) years of the Production Term, except where such
Casualty is a Major Casualty or except where the Parties agree otherwise, the
PO-11 Plant Facilities shall be restored in accordance with Section 22.3. In the
case where such Casualty is a Major Casualty, unless the Parties agree
otherwise, the PO-11 Plant Facilities shall not be restored and the provisions
of Section 22.4 shall apply.
22.3 Restoration. Where restoration of the PO-11 Plant Facilities is to
take place either by agreement between the Partners or otherwise in accordance
with the terms of this Article 22, such restoration shall be to the condition
existing prior to the Casualty with such changes as agreed by the Partners and
shall be treated as a Maintenance Capital Project. The Lyondell Partner shall
instruct the Operator to diligently prosecute the restoration to
36
completion, provided that the Partners timely fund their share of Casualty
Restoration Costs. The Partners shall mutually agree on required changes to any
amounts payable under this Agreement or the Operating Agreement or other changes
required to reflect changes made to the PO-11 Plant Facilities, including as to
technology.
22.4 Where Facilities Are Not Being Restored. Where it is agreed between
the Partners or deemed otherwise in accordance with the terms of this Article 22
that the PO-11 Plant Facilities shall not be restored, then the available
insurance proceeds attributable to the PO-11 Plant Facilities shall be
distributed to the Partners in accordance with Article 17. The Partnership shall
then be wound up and liquidated in accordance with Article 24.
22.5 Decisions. Any agreement of the Partners required under this Article
22 shall be reflected in a written Management Committee Resolution.
22.6 Definition of Major Casualty. For the purposes of this Article 22,
"MAJOR CASUALTY" shall mean a Casualty to the PO-11 Plant Facilities as to which
the restoration will take more than one and a half years.
ARTICLE 23 RESTRICTION OF TRANSFERS AND PLEDGES
23.1 Prohibition on Transfer Unless Exception Applies. Except as otherwise
permitted under this Article 23, neither Partner shall Transfer or Pledge its
respective Partnership Interest or any part thereof.
23.2 Permitted Transfers to an Affiliate.
23.2.1 Either Partner may, without the need for the consent of the
other Partner or any of its Affiliates, Transfer all (but not
part only) of its Partnership Interest to an Affiliate, a
Successor Parent or an Affiliate of a Successor Parent,
provided that the conditions of Section 4.3 and Section 4.4
of the Parent Agreement remain satisfied following the
Transfer and the conditions of Section 23.4 are satisfied.
23.2.2 The Partners hereby consent in advance to the Transfer of a
Partnership Interest to (a) the Bayer Conditional Transferee
in accordance with Section 2 of the Conditional Transfer
Agreement, (b) the Lyondell Conditional Transferee in
accordance with Section 3 of the Conditional Transfer
Agreement and (c) a permitted assignee of the Bayer
Conditional Transferee or the Lyondell Conditional Transferee
following assignment by the Bayer Conditional Transferee or
the Lyondell Conditional Transferee, as the case may be, of
its rights and obligations under the Conditional Transfer
Agreement in accordance with Section 4.2 of the Conditional
Transfer Agreement.
23.3 Certain Transfers in Connection with Successor Parent Transfer or
Permitted Successor. Either Partner may Transfer all (but not part only) of its
Partnership Interest if such Transfer is in connection with any of the
following:
23.3.1 With respect to either the Bayer Partner or the Lyondell
Partner, as applicable, a merger, consolidation, conversion
or share exchange of
37
Lyondell (or the Lyondell Successor Parent) or Bayer (or the
Bayer Successor Parent).
23.3.2 In the case of the Lyondell Partner:
(a) a sale or other disposition of the Partnership Interest
of the Lyondell Partner, together with assets
representing at least 50% (fifty percent) of the book
value of the total assets of Lyondell (or the Lyondell
Successor Parent), excluding the Lyondell Partnership
Interest, as reflected in the most recent audited
consolidated (or combined) financial statements of
Lyondell (or the Lyondell Successor Parent) to a single
entity or to entities which are all Affiliates of one
another; or
(b) a sale or other disposition of the Partnership Interest
of the Lyondell Partner, together with (i) the PO-11
Technology and (ii) other assets equal to at least 90%
(ninety percent) of the book value of all of the PO
production assets of the Lyondell Group world-wide, to
a single entity or to entities which are all Affiliates
of one another.
23.3.3 In the case of the Bayer Partner:
(a) a sale or other disposition of the Partnership Interest
of the Bayer Partner, together with assets representing
at least 50% (fifty percent) of the book value of the
total assets of Bayer (or the Bayer Successor Parent),
excluding the Bayer Partnership Interest, as reflected
in the most recent audited consolidated (or combined)
financial statements of Bayer (or the Bayer Successor
Parent) to a single entity or to entities which are all
Affiliates of one another; or
(b) a sale or other disposition of the Partnership Interest
of the Bayer Partner, together with other assets equal
to at least 90% (ninety percent) of the book value of
all of the Identified Polyols production assets of the
Bayer Group world-wide, to a single entity or to
entities which are all Affiliates of one another.
23.4 Assumption of Obligations by Assignee. Either Partner assigning its
rights and obligations hereunder in connection with an assignment permitted
under this Article 23, or as approved in writing by the other Partner, shall
procure, as a condition precedent to the assignment, (a) a written assumption
agreement from the assignee thereof to the effect that the assignee accepts and
assumes all obligations of the assignor under this Agreement and agrees to be
fully and unconditionally bound by the terms and provisions of this Agreement
and (b) a new Conditional Transfer Agreement executed by the assignee on the
same terms and conditions as the Conditional Transfer Agreement of the assignor
(the Conditional Transfer Agreement of the assignor shall be contemporaneously
cancelled). Upon the delivery of such assumption agreement by the assignee, the
assigning Partner, except in
38
connection with an assignment to an Affiliate, shall be released from
obligations and liabilities with respect to events occurring subsequent to the
assignment.
23.5 Admission of a New Partner. The admission of any new Partner (except
in accordance with the foregoing provisions of this Article) shall require the
unanimous consent of all Partners.
23.6 Continuation of the Partnership. Upon the admission of any new
Partner, the Partnership shall continue to exist between the new Partner and the
existing Partner. Upon the replacement of a Partner and the transfer of a
Partnership Interest to a permitted assignee, the Partnership shall terminate
with respect to the transferring Partner and continue to exist between the new
Partner and the non transferring Partner.
23.7 New Partners Bound by Terms and Conditions of this Agreement. Any new
Partner shall be subject to and bound by all of the terms and conditions of this
Agreement.
23.8 No Application to Transfers or Pledges of Ownership Interests within
Partners. Nothing in this Article 23 applies to or restricts the Transfer or
Pledge of Ownership Interests within the Lyondell Partner or the Bayer Partner.
Transfers and Pledges of Ownership Interests within the Lyondell Partner and the
Bayer Partner are exclusively governed by the Parent Agreement.
ARTICLE 24 TERMINATION, DISSOLUTION OF THE PARTNERSHIP
24.1 Events of Dissolution and Liquidation. The Partnership shall be
dissolved and liquidated, in accordance with Article 25 and Article 26 hereof,
upon the happening of any of the following events:
(a) the written decision of all Partners to dissolve the
Partnership, or
(b) the expiration of the Initial Contract Term, or the extended
Term if the Term has been extended in accordance with Section
5.2.
24.2 No Dissolution of the Partnership Upon Bankruptcy. The Partnership
shall not be dissolved in the event of the bankruptcy of either Partner pursuant
to a Bankruptcy Proceeding. The Partners hereby agree to enter into the
Conditional Transfer Agreement pursuant to which (a) the Lyondell Partner will
sell and transfer its Partnership Interest to an Affiliate of the Bayer Partner
under certain suspending ("opschortende") and dissolving ("ontbindende")
conditions and (b) the Bayer Partner will sell and transfer its Partnership
Interest to an Affiliate of the Lyondell Partner under certain suspending
("opschortende") and dissolving ("ontbindende") conditions.
ARTICLE 25 CONTINUATION OR LIQUIDATION
25.1 Winding Up or Continuation of the Partnership. If Section 24.1
applies or the Partnership is dissolved for any other reason than the bankruptcy
of a Partner pursuant to a Bankruptcy Proceeding, neither Partner shall have the
unilateral right to continue the Partnership's business. In the event of the
bankruptcy of a Partner pursuant to a Bankruptcy
39
Proceeding, the non-bankrupt Partner shall have the right to continue the
Partnership's business pursuant to the provisions of the Conditional Transfer
Agreement.
25.2 Winding Up and Liquidation. If at any time the Partnership is
dissolved, no further business and/or operations shall be conducted except for
such business and/or operations as shall be necessary for the winding up and
liquidation of the Partnership's assets. The liquidation of the Partnership
shall be conducted by the Lyondell Partner.
25.3 Offering of Partnership Assets. Upon liquidation of the Partnership
in accordance with the following provisions of this Article 25, the Lyondell
Partner shall offer the assets of the Partnership for sale and shall consider
all appropriate bids, including bids from the Partners, with the objective to
obtain the best price for such assets.
25.4 Payment of Debts; Liquidating Distributions
The Lyondell Partner shall cause the Partnership to pay all debts,
obligations and liabilities of the Partnership and all costs of the liquidation.
Additionally, the Lyondell Partner shall set aside sufficient funds (in the
Lyondell Partner's opinion) for contingent liabilities and claims. Any
remaining proceeds shall be distributed to the Partners in the following order:
(a) the profits allocated to the Partners pursuant to Article 16 of
this Agreement which have not yet been distributed to the
Partners up to that date; and
(b) the remainder to the Partners in accordance with their
Partnership Percentages, except that in the event that a Partner
has undertaken a Unilateral Capital Project, any Unilateral
Capital Project Asset Proceeds shall first be distributed to the
Partner who undertook such Unilateral Capital Project.
Furthermore, except as otherwise agreed in writing by the
Partners, if the Partners' contributions have been made in
proportions other than in accordance with their Partnership
Percentages, the capital contributions shall first be equalised
before distributions in accordance with Partnership Percentages
are made.
In the event that the proceeds of the liquidation and the other funds of the
Partnership are not sufficient to pay all debts, obligations and liabilities of
the Partnership and the costs of the liquidation, the loss shall be borne by the
Partners in accordance with their Partnership Percentages.
25.5 Liquidation Report. Within a reasonable time following the completion
of the liquidation of the Partnership, the Lyondell Partner shall supply to both
Partners a report on the way the liquidation has been conducted as well as a
statement that shall set forth the assets and liabilities of the Partnership as
of the date of completion of the liquidation and the distribution to each
Partner in accordance with Section 25.4.
40
ARTICLE 26 CLAIMS AFTER THE DISSOLUTION OF THE PARTNERSHIP
In case any third party should file or commence a Claim against the
Partnership or one of the former Partners in connection with an alleged
liability of the Partnership, resulting from events which have occurred prior to
the liquidation of the Partnership, then the Partner who has received such Claim
shall immediately inform the other Partner. Except in the case of Material
Litigation (in which case both Partners shall decide), the Lyondell Partner
shall decide whether to negotiate with the third party or to commence any legal
proceedings, including the conduct of arbitration proceedings, and/or enter into
settlement agreements with respect to such Claim. The costs of such actions
shall be borne by both Partners in accordance with their Partnership
Percentages.
ARTICLE 27 CONFIDENTIALITY
27.1 Obligation Not to Disclose or Misuse Confidential Information.
27.1.1 Subject only to the express provisions of this Agreement,
each Party shall, and shall cause each of its Affiliates and
its and their respective Related Persons to, keep secret,
retain in strictest confidence and not distribute,
disseminate or disclose any and all Confidential Information
of another Party, except to the Related Persons and
contractors of such Party and its respective Affiliates on a
"need to know" basis in connection with this Partnership
Agreement and the performance thereof, provided that such
Person receiving such Confidential Information of another
Party executes a written confidentiality agreement of
comparable scope to this Section 27.1 or is bound by
professional obligations of confidentiality.
27.1.2 A Party to whom the Confidential Information of another Party
is disseminated pursuant to this Section 27.1 shall use, and
shall cause its Affiliates and other Related Persons to use,
such Confidential Information only for the specific purposes
for which it was disclosed to such Person.
27.1.3 Disclosure of Confidential Information by a Party or its
Affiliates shall not violate this Section 27.1 to the extent
that any Party (or its ultimate parent company) (a) deems it
necessary, pursuant to law, regulation or stock exchange rule
(in the reasonable good-faith judgement of such parent
company) to disclose such information in or in connection
with filings with any Governmental Entity, presentations to
lenders or presentations to ratings agencies or (b) to the
extent that disclosure is necessary in order to sustain a
position taken for tax purposes. The Parties and their
Affiliates shall consult with each other in advance to the
extent feasible and on an on-going basis with respect to
disclosures made by reason of this Section 27.1.3.
27.2 Disclosures Required by Law. If a Party is legally required to
disclose any Confidential Information, it is agreed that such Party prior to
disclosure will provide the other Party with prompt notice of such request(s) so
that the other Party may seek an appropriate
41
protective order or other appropriate remedy and/or waive the Party's compliance
with the provisions of this Article 27. If such protective order or other
remedy is not obtained, or the other Party grants a waiver hereunder, the Party
required to furnish Confidential Information may furnish that portion (and only
that portion) of the Confidential Information which, in the opinion of such
Party's legal counsel, such Party is legally compelled to disclose, and such
Party will use reasonable endeavours to obtain reliable assurance that
confidential treatment will be given to Confidential Information so furnished.
27.3 Confidential Information Remains Property of Disclosing Party. All
Confidential Information and any intellectual property rights to which the
Confidential Information relates, that is disclosed in connection with or
pursuant to this Agreement shall remain the property of the Person whose
property it was prior to such disclosure.
27.4 Survival. The provisions of this Article 27 shall survive the
termination of this Agreement indefinitely.
27.5 Relationship With License Agreements. The provisions of this Article
27 are subject to the confidentiality provisions of the License Agreements,
which shall control in the event of a conflict with this Article 27.
ARTICLE 28 MISCELLANEOUS
28.1 Notices. All notices, requests, demands and other communications that
are required or may be given to any Party under this Agreement, unless otherwise
provided herein, shall be in writing (facsimile and electronic communications
shall be treated as being "in writing") and shall be given to a Party thereto at
the address and/or facsimile number or electronic mail address specified below
or as such Party shall at any time otherwise specify by like notice to the other
Party. Each such notice, request, demand or other communication shall be
effective (a) if given by facsimile, at the time such facsimile is transmitted
and the appropriate confirmation is received (or, if such time is not during
regular business hours of a Business Day, at the beginning of the next such
Business Day); (b) if given by electronic mail, when receipt is confirmed by the
sender, provided notice is also delivered by another means permitted under this
Section 28.1; or (c) if given by mail or by any other means, upon receipt or
refusal of service at the address specified below.
To the Lyondell Partner:
Lyondell PO-11 C.V.
▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇
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Attention: Director, European Manufacturing
Facsimile: ▇▇(▇) ▇▇▇▇ ▇▇▇▇▇
42
Copy to:
Lyondell Chemical Europe, Inc.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ U.K.
Attention: Global Vice President, Oxygenated Chemicals
Facsimile: ▇▇(▇) ▇▇▇▇ ▇▇▇▇▇▇
Copy to:
Lyondell Chemical Europe, Inc.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ U.K.
Attention: European Counsel
Facsimile: ▇▇(▇) ▇▇▇▇ ▇▇▇▇▇▇
Copy to:
Lyondell Chemical Company
One Houston Center
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
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Attention: General Counsel
Facsimile: 1 713 309 2143
To the Bayer Partner:
Bayer Polyurethanes B.V.
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Attention: Managing Director
Facsimile: ▇▇(▇) ▇▇▇ ▇▇▇▇▇▇
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Copy to:
▇▇▇▇▇ ▇▇
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Germany
Attention: Senior Counsel
Facsimile: ▇▇(▇) ▇▇▇ ▇▇ ▇▇▇▇▇
28.2 Construction. In construing this Agreement: (a) no consideration
shall be given to the captions of the Articles, Sections, subsections or
clauses, which are inserted for convenience only, (b) no consideration shall be
given to the fact or presumption that any Party had a greater or lesser hand in
drafting this Agreement, (c) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate, (d) the word "includes" and its
syntactic variants means "includes, but is not limited to" and corresponding
syntactic variant expressions, words such as "herein," "hereafter," "hereof,"
"hereto" and "hereunder" refer to this Agreement as a whole and the word "and"
shall be deemed to mean "and/or" where the context so requires, (e) the plural
shall be deemed to include the singular, and vice versa, (f) each gender shall
be deemed to include the other gender, (g) each Exhibit, Appendix and Schedule
to this Agreement is part of this Agreement, (h) references to a Person are also
to its permitted successors and permitted assigns, (i) unless otherwise
expressly provided herein, any agreement, instrument or statute defined or
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes, and (j) the use of the word "reasonable" or the
failure to use the word "reasonable" does not expand or limit the application of
Article 6:248 of the Netherlands Civil Code.
28.3 Severability. In the event that any provision of this Agreement shall
be finally determined to be unenforceable, such provision shall, so long as the
economic and legal substance of the transactions contemplated hereby are not
affected in any materially adverse manner as to any Party, be deemed severed
from this Agreement and every other provision of this Agreement shall remain in
full force and effect.
28.4 Tax Matters.
28.4.1 The Parties agree to provide to one another necessary
documentation to support any position relating to the
ownership or operation of the PO-11 Plant Facilities that is
being taken by such Party in the preparation of its tax
return or in connection with any tax audit by any
Governmental Entity.
28.4.2 The Partners acknowledge and agree that the tax attributes of
Partnership operations (including items of income, expense,
depreciation, gain, loss, etc.) shall be allocated to and
accounted for by the Partners in the same manner as the
corresponding economic item is shared pursuant to this
Agreement.
44
28.5 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of The Netherlands.
28.6 Amendment and Waiver. This Agreement may not be amended, modified or
altered except by an instrument in writing signed on behalf of each Party. By an
instrument in writing any Party may waive compliance by any other Party with any
term or provision of this Agreement. The failure of a Party at any time to
strictly enforce any provision of this Agreement shall in no way affect its
right thereafter to require performance thereof, nor shall the waiver of any
breach of any provision of this Agreement be taken or held to be a waiver of any
succeeding breach of any such provision or as a waiver of the provision itself.
28.7 Performance Extended to Next Business Day. Notwithstanding any
deadline for payment, performance, notice or election under this Agreement, if
such deadline falls on a date that is not a Business Day, then the deadline for
such payment, performance, notice or election will be extended to the next
succeeding Business Day provided that this Section 29.7 shall not apply to the
provisions of Section 10.6.
28.8 Benefits of Agreement Restricted to the Parties. This Agreement is
made solely for the benefit of the Partnership and the Partners, and no other
person, including any employee of the Partnership or any Partner shall have any
right, claim or cause of action under and by virtue of this Agreement, except
for Article 19, with respect to the Operator and the Operator's Eligible
Indemnitees, which are intended beneficiaries thereof.
28.9 Dispute Resolution. All controversies or disputes arising under this
Agreement shall be resolved pursuant to the provisions applicable to the dispute
in question set forth in Exhibit B.
45
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and effective as of the date first above written.
Signed in fourfold copies at Rotterdam, The Netherlands.
BAYER PARTNER
BAYER POLYURETHANES B.V.
By: /s/ ▇▇▇▇-▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇-▇. ▇▇▇▇▇▇
--------------------------
Title: Head of BG PU
-------------------------
LYONDELL PARTNER
LYONDELL PO-11 C.V.
By: Lyondell Chemie (POSM) B.V.,
its sole general partner
By: /s/ ▇.▇. ▇▇▇▇▇▇
----------------------------
Name: ▇.▇. ▇▇▇▇▇▇
--------------------------
Title: Global V.P., Oxygenated Chemicals
-----------------------------------
[signature page to PO-11 General Partnership Agreement]
EXHIBIT A
LIST OF DEFINED TERMS
FOR PO-11 DOCUMENTS
The following defined terms are used in the Partnership Agreement,
Operating Agreement, Parent Agreement and Conditional Transfer Agreement.
"Above Threshold" is in reference to a Capital Project and is defined
in Section 7.2 of the Operating Agreement.
"Accommodation Fee" is defined in Section 20.2 of the Partnership
Agreement.
"ACTLP" means Arco Chemical Technology L.P., and its permitted
successors and assigns under the Bayer License Agreement.
"Additional Services" is defined in Section 4.8 of the Operating
Agreement.
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries or otherwise,
controls, is controlled by or is under common control with, the specified
Person. As used in this definition, "control" means the power to direct or
cause the direction of the management or policies of a Person, directly or
indirectly, whether through ownership of voting securities by contract or
otherwise); the terms "controlling" and "controlled" have meanings correlative
to the foregoing. For purposes of Article 3 of the Parent Agreement, in addition
to the foregoing requirements, "control" shall require (i) with respect to a
corporation (or similar entity), the ownership, whether directly or indirectly,
of at least 51% of the voting securities of such Person, (ii) with respect to a
partnership, that such Person is the sole general partner or managing general
partner of such partnership and (iii) with respect to a limited liability
company, as applicable, either (x) the ownership, whether directly or
indirectly, of at least 51% of the voting interests of such limited liability
company or (y) that such Person is the sole manager or the managing member of
such limited liability company. Notwithstanding the foregoing, the Operator and
the Partnership shall not be deemed to be Affiliates of one another. For
purposes of the PO-11 Transaction Documents (but without limiting any accounting
treatment), the Partnership shall not be deemed to be an Affiliate of either
Lyondell or Bayer.
"Annual Accounts" is defined in Section 12.2 of the Partnership
Agreement.
"Annual Plan" is defined in Section 7.3 of the Operating Agreement.
"Annual Production Plan" is defined in Section 7.3 of the Operating
Agreement.
"Applicable Law" means any judgement or any applicable statute, law,
ordinance, rule or regulation of a Governmental Entity that is applicable to the
PO-11 Plant Facilities or the ownership or operation thereof, the Partners or
the Partnership, as the context may require.
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"Arbitration Notice" is defined in Section B.2 of the Dispute
Resolution Procedures.
"Assignment and Assumption Agreement" is defined in Section 1.1 of the
Sale and Transfer Agreement.
"AVR Agreement" means the agreement dated 11 May 1998 and made between
Arco Chemie Nederland, Ltd (now LCNL) and RAV Water Treatment, CV.
"Bankruptcy Proceeding" is defined in Section 2.1 of the Conditional
Transfer Agreement.
"Bayer" means ▇▇▇▇▇ ▇▇, a German Corporation.
"Bayer 300 Million Pound PO Option Agreement" has the meaning
specified in the definitions to the MTA.
"Bayer Beneficiaries" is defined in Section 2.2 of the Parent
Agreement.
"Bayer Conditional Transferee" means Bayer B.V. and its permitted
successors and assigns under the Conditional Transfer Agreement.
"Bayer Conditional Transferor" means Bayer Polyurethanes B.V. and its
permitted successors and assigns under the Conditional Transfer Agreement.
"Bayer Conditions" is defined in Section 3.1 of the Conditional
Transfer Agreement.
"Bayer Dissolving Conditions" is defined in Section 3.1 of the
Conditional Transfer Agreement.
"Bayer Group" means Bayer, Bayer Corporation and their respective
Affiliates.
"Bayer License Agreement" means the license, dated as of the Signing
Date, by ACTLP to the Bayer Partner in respect of the PO-11 Technology, as the
same may be amended from time to time.
"Bayer Members" is defined in Section 8.1 of the Partnership Agreement
(in reference to the Management Committee).
"Bayer Notarial Deed" is defined in Section 1.1 of the Sale and
Transfer Agreement.
"Bayer Partner" means Bayer Polyurethanes B.V., and its permitted
successors and assigns under the Partnership Agreement.
"Bayer PO-11 Affiliates" is defined in the Recitals of the Parent
Agreement.
"Bayer PO Annual Offtake Amount" has the meaning specified in the
definitions to the MTA.
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"Bayer Spare Capacity" is defined in Section 9.4 of the Partnership
Agreement.
"Bayer Successor Parent" is defined in Section 3.2 of the Parent
Agreement.
"Bayer Suspending Conditions" is defined in Section 3.1 of the
Conditional Transfer Agreement.
"Below Threshold" is in reference to a Capital Project and is defined
in Section 7.2 of the Operating Agreement.
"Botlek Complex" means the Botlek Plant and other chemical
manufacturing and related facilities operated by the Lyondell Group located at
Botlek, The Netherlands.
"Botlek Plant" means the PO/TBA plant and related facilities currently
owned and operated by LCNL as of the Signing Date located at Botlek, The
Netherlands.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks are closed in Rotterdam, The Netherlands; provided, however,
that for purposes of the definition of "EURIBOR", "Business Day" shall mean a
day on which the Trans-European Automated Real-Time Gross-Settlement Express
Transfer system (TARGET) is open.
"Capital Account" means the separate capital account established and
maintained by the Partnership for each Partner, as contemplated by Section 7.1
of the Partnership Agreement.
"Capital Budget" is defined in Section 7.3 of the Operating Agreement.
"Capital Costs" means all costs in connection with Capital Projects
that may be capitalised by the Partnership in accordance with US GAAP and that
the Lyondell Group capitalises in accordance with Lyondell's accounting
capitalisation procedures, as the same may be modified from time to time.
"Capital Costs Statement" is defined in Section 6.1.3 of the
Partnership Agreement.
"Capital Project" means any project with respect to the PO-11 Plant
Facilities that is permitted to be treated as a capital project under US GAAP
and that is the type of project which the Lyondell Group treats as a capital
project in accordance with Lyondell's accounting capitalisation procedures, as
the same may be modified from time to time.
"Casualty" means any damage or destruction to the PO-11 Plant
Facilities by explosion, fire or other cause.
"Casualty Restoration Costs" means in the event of a Casualty to the
PO-11 Plant Facilities, the sum of (i) the portion of the cost of restoration of
such PO-11 Plant Facilities that is not paid under any property and/or boiler
and machinery insurance policies maintained by the Operator, plus (ii) any
surcharge that is payable under such policies thereafter in respect of the
insured claim.
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"Chemical Substance" means any (i) petroleum or any fraction thereof,
(ii) chemical substance, pollutant, contaminant, constituent, chemical, mixture,
raw material, intermediate, product or by-product that is regulated (including
any requirement for the reporting of any Release thereof) under any EHS Law, as
now or hereafter in effect, or defined or listed as an industrial, toxic,
deleterious, harmful, radioactive, infectious, disease-causing or hazardous
substance, material or waste under any EHS Law, as now or hereafter in effect.
"Claim" means (i) for all purposes other than in respect of the
Conditional Transfer Agreement, any claim, demand or litigation made or pending
for Damages and (ii) in respect of the Conditional Transfer Agreement, the
definition given to such term in Section 2.2.3 of the Conditional Transfer
Agreement.
"Commercial Start-up" means the first date on which the PO-11 Plant
Facilities after "air in" has run at stable conditions for 72 consecutive hours
at not less than 70% of design operating rates, with all products meeting
specification.
"Commingled Raw Materials" is defined in Section 4.4 of the Operating
Agreement.
"Conditional Transfer Agreement" means the Conditional Transfer
Agreement dated as of the Signing Date entered into among the Lyondell Partner,
the Bayer Partner, the Bayer Conditional Transferee and the Lyondell Conditional
Transferee.
"Confidential Information" means with respect to any Person, all non-
public or proprietary information of any nature (including trade secrets,
technological know-how, research and development data, product formulations,
processes and application technology and all other non public or proprietary
concepts, methods of doing business, ideas, materials or information of or
prepared or performed for, by or on behalf of that Person), and all information
derived from any non-public or proprietary information of that Person.
"Consistency Claim" is defined in Section C.1 of the Dispute
Resolution Procedures.
"Control Estimate" means the official estimate of the required PO-11
Project Costs, as of the Signing Date (being NLG 1,476,000,000), exclusive of
working capital and indirect capital, which are estimated separately. A
breakdown of the Control Estimate is attached as Appendix 1B to the Operating
Agreement.
"Damages" means, with respect to any Person, any cost, damage or
expense (including attorneys' fees and disbursements), any fine of or penalty on
or any liability of any nature of that Person. With respect to a Party,
"Damages" excludes lost profits and consequential damages, incidental damages
and punitive damages incurred by or awarded to the Party for its own account.
"Default Rate" means EURIBOR plus 2.5%, compounded monthly.
"Delivery Point" means, with respect to PO and SM produced from the
PO-11 Plant Facilities, the outlet flange of the loading facility fixed loading
arm or hose leading to any transport vessel.
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"Development Phase" means the period from and including 1 January 2000
to and including Commercial Start-up.
"Development Phase Cash Call Statement" is defined in Section 6.1 of
the Partnership Agreement.
"Development Phase Recovery Period" is defined in Appendix 1A to the
Operating Agreement.
"Development Services" means the services, utilities, materials,
facilities and access easements required to be supplied by the Operator for the
construction, development and commissioning of the PO-11 Plant Facilities during
the Development Phase. The Development Services are described in more detail in
Appendix 1 to the Operating Agreement.
"Development Works" means all design, engineering, procurement,
construction and other work required to be performed by the EPC Contractor under
the EPC Contract.
"Discretionary Capital Project" means a Capital Project that is not an
EHS Capital Project, a Maintenance Capital Project or an Enterprise Consistency
Capital Project.
"Dispute Resolution Procedures" means Exhibit B to the Operating
Agreement, the Partnership Agreement and the Parent Agreement.
"Disruption Event" means any event resulting in a disruption or
impairment of PO and/or SM production below planned operating levels from any
cause whatsoever, including (i) any event of Force Majeure; (ii) any shortage in
supplies, impairment in facilities of production, manufacture, or
transportation; (iii) any event that is attributable to mechanical or other
breakdown or failure or preventative maintenance that is performed to avoid such
breakdown or failure, (iv) any unscheduled Turnaround or continuation of a
scheduled turndown or other planned outage beyond its anticipated duration; or
(v) the inability to obtain any feedstock, catalyst or other raw material
(including energy) on reasonable terms.
"Dissolving Conditions" means the Bayer Dissolving Conditions and/or
the Lyondell Dissolving Conditions, as context requires.
"EB" means ethylbenzene.
"EHS" means the environment, health and safety or environmental,
health and safety, as the context requires.
"EHS Capital Project" means a Capital Project that in the Operator's
good faith judgement is necessary to achieve or maintain compliance with any EHS
Law or the EHS Policies.
"EHS Law" means any Applicable Law relating to (i) protection of the
environment, including pertaining to or regulating pollution, contamination,
cleanup, preservation, protection and reclamation of the environment, (ii)
health or safety of
A-5
employees and other individuals, including the exposure of employees and other
individuals to any Chemical Substance, (iii) a Release or threatened Release,
including investigation, study, assessment, testing, monitoring, containment,
removal, remediation, response, cleanup and abatement of such Release or
threatened Release and (iv) the management of any Chemical Substance, including
the manufacture, generation, formulation, processing, labelling, use, treatment,
handling, storage, disposal, transportation, distribution, re-use, recycling or
reclamation of any Chemical Substance.
"EHS Policies" is defined in Section 4.6 of the Operating Agreement.
"EID" means the Energy Investment Deduction ("Energie Investerings
Aftrek"), a tax incentive for certain energy efficient investments in The
Netherlands.
"Eligible Indemnitees" means, with respect to any Person, its
Affiliates and their respective employees, officers and directors (or the
equivalent thereof).
"Enterprise Consistency Capital Project" means an Enterprise
Consistency Initiative that is permitted to be treated as a capital project
under US GAAP and that is the type of project which the Lyondell Group treats as
a capital project in accordance with Lyondell's accounting capitalisation
procedures, as the same may be modified from time to time.
"Enterprise Consistency Initiative" means a new programme or a
modified programme (i) that relates in whole or in part to the Operating
Services and (ii) is undertaken on an enterprise-wide basis within the Lyondell
Group for plants operations that are similar to the PO-11 Plant Facilities in
respect of the systems or equipment to be replaced or modified by the Enterprise
Consistency Initiative. Examples of Enterprise Consistency Initiatives include
certain information systems and manufacturing controls systems.
"Enterprise Consistency Operating Cost" means an Operating Cost
incurred in connection with an Enterprise Consistency Initiative.
"EPC Contract" means the Lump Sum Engineering, Procurement,
Construction Management and Construction Agreement between LCNL and the EPC
Contractor dated as of 19 June, 2000, as the same may be amended from time to
time.
"EPC Contractor" means ABB ▇▇▇▇▇▇ Global B.V.
"EPC Lump Sum Price" means the lump sum, turnkey price under the EPC
Contract, subject to adjustment for incentive bonus payments and as otherwise
provided in the EPC Contract.
"Equistar" means Equistar Chemicals, LP, a Delaware limited
partnership, and any successor to all or substantially all of the business
conducted as of the Signing Date by Equistar Chemicals, LP.
"Estimated Final Cost" means at any time, the then-current forecast
(updated regularly) of the total PO-11 Project Costs expected to be incurred
through the Development Phase Recovery Period, including an allowance for
contingencies. The Estimated Final Cost includes the EPC Lump Sum Price,
projected incentive bonus payments to the EPC
A-6
Contractor, overheads and other reimbursements due the Operator, the costs of
pre-operations and start-up (including the estimated net cost due to the
anticipated loss of Raw Materials and utilities that are estimated to be
consumed in the Development Phase) and other costs under purchase orders and
contracts related to the development of the PO-11 Plant Facilities, but
excluding the Partnership Working Capital and indirect capital.
"EURIBOR" means, for the day, the one-month EURIBOR as published on
that day on page 248 of the BRIDGE telerate screen (or any subsequent official
or industry-recognised source for EURIBOR rates) provided that if that day is
not a Business Day, the one-month EURIBOR as so published on the immediately
preceding Business Day.
"Europoort Terminal" means the terminal so designated which, among
other things, provides logistics facilities and propylene storage for the PO-11
Plant Facilities and the Botlek Plant.
"Fault" is defined as any act or omission by Managerial Personnel of a
Person that viewed objectively from the standpoint of the Person at the time the
events occurred (and without viewing the matter in hindsight) (i) involved an
extreme degree of risk, considering the probability and magnitude of the
potential harm to others and (ii) Managerial Personnel of the Person must have
actual, subjective awareness of the risk involved, but nevertheless proceed in
conscious indifference to the rights, safety or welfare of others. The Parties
agree that with respect to the Operator, the material disregard by a member of
the Senior Plant Management Team at the PO-11 Plant Facilities of the policies
and procedures manuals applicable to the PO-11 Plant Facilities proximately
causing a Third Party Claim shall be deemed to be Fault.
"Financial Institution" is defined in Section 3.7 of the Parent
Agreement.
"Five Year Demand Forecast" is defined in Section 13.2 of the
Partnership Agreement.
"Fixed Costs" means costs associated with the production of PO and SM,
as the case may be, that do not vary directly to a significant extent with
changes in production levels.
"Force Majeure" has the meaning as set forth in Article 6:75 of The
Netherlands Civil Code, but expressly includes acts of God, floods, storms or
unusually bad weather; war or other military action, national emergency,
governmental rationing, prioritisation, taking or requisition, civil commotion
or riot; any strike or other difference with workers or unions, without regard
to the reasonableness of acceding to the demands of such workers or unions;
explosions, fires, mechanical breakdown, electrical shortage or blackouts or
other production shutdown; inability to obtain sufficient feedstocks, catalysts
or other raw materials or supplies; or other event beyond the reasonable control
of Managerial Personnel of a Party.
"Four Year Forward Forecast" is defined in Section 7.2 of the
Operating Agreement.
"FTEs" means (in relation to personnel providing shared services and
those personnel supporting personnel providing shared services) full time
equivalents.
A-7
"General and Administrative Shared Support and Overheads Staff" is
defined in Appendix 6.2 to the Operating Agreement.
"Global Steering Committee" means the steering committee established
by Bayer and Lyondell to review the overall relationship of the Lyondell Group
and Bayer Group with respect to PO and SM, as the same may be constituted from
time to time.
"Global Steering Committee Resolution" means a written resolution
signed by a majority of both (i) the Lyondell Group representatives and (ii) the
Bayer Group representatives of the Global Steering Committee, in accordance with
the Global Steering Committee Charter.
"Good Industry Practice" means standards, practices and methods of
prudent operators of major chemical plants in Western Europe, taking into
account and adjusting for Applicable Law, the EHS Policies, the process design
and location of the PO-11 Plant Facilities and the products it produces and the
feedstocks, raw materials and catalysts used in production at the PO-11 Plant
Facilities.
"Governmental Entity" means any European Union, national, regional or
local governmental body or authority exercising executive, legislative,
judicial, regulatory, administrative or other governmental authority with
jurisdiction over a Party or such Party's Parent Company (including the United
States Securities Exchange Commission as to Lyondell) or the PO-11 Plant
Facilities or their ownership or operation.
"Ground Lease" means the ground lease to be created between the
Rotterdam Port Authority and the Partnership whereby the Partnership leases the
approximately 52 hectares of land covered thereby and certain related
infrastructure that constitutes part of the PO-11 Plant Facilities, as such
ground lease is amended from time to time.
"Guarantor" is defined in Section 2.3 of the Parent Agreement.
"Higher Tier Entity" is defined in Section 3.2 of the Parent
Agreement.
"ICIS" means the Independent Commodity Information Services - London
Oil Reports.
"Identified Polyols" means: (i) materials containing one hydroxyl
group, one or more propylene oxide units, and having a number average molecular
weight of more than 500, (ii) materials having an average hydroxyl functionality
of greater than one, containing one or more propylene oxide units and having a
number average molecular weight of more than 250, or (iii) materials that are
exceptions to (i) and (ii) because they fall below the minimum average molecular
weight recited, are prepared by reacting PO with a starter compound which is not
a glycol, and are used in polyurethane applications
"Inflation Adjusted" is defined in Section 7.7 of the Operating
Agreement.
"Inflation Index" means "Producentenprijsindex cijfers naar
activiteiten (SBI) totale verbruik 241 basischemie" (1995 = 100) as published by
the Centraal Bureau voor de Statistiek ("CBS"), Princes ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇.
A-8
"Initial Contract Term" is defined in Section 5.1 of the Partnership
Agreement.
"Initial Service Charge Advance" is defined in Section 6.4 of the
Operating Agreement.
"Key Performance Indicators" is defined in Section 7.2 of the
Operating Agreement and listed on Schedule 7.2.4 to the Operating Agreement.
"KT" means 1,000 metric tonnes.
"LCNL" means Lyondell Chemical Nederland, Ltd., a Delaware
corporation, and its successors and assigns by operation of law or any successor
to substantially all of the business conducted by LCNL as of the Signing Date.
"LCT License Agreement" is defined in the Recitals to the Parent
Agreement.
"LCTN" means Lyondell Chemie Technologie Nederland B.V., and its
permitted successors and assigns as the licensor under the Lyondell License
Agreement.
"Leased Premises" means the land and certain related infrastructure
that is leased by the Partnership under the Ground Lease. The Leased Premises
are depicted on the Plot Plan.
"License Agreements" means the Lyondell License Agreement and the
Bayer License Agreement.
"Local Project Team" is defined in Appendix 1A to the Operating
Agreement.
"Lyondell" means Lyondell Chemical Company.
"Lyondell Beneficiaries" is defined in Section 2.2 of the Parent
Agreement.
"Lyondell Conditional Transferee" means Lyondell Chemie (PO-11) B.V.
and its permitted successors and assigns under the Conditional Transfer
Agreement.
"Lyondell Conditions" is defined in Section 2.1 of the Conditional
Transfer Agreement.
"Lyondell Conditional Transferor" means Lyondell PO-11 C.V. and its
permitted successors and assigns under the Conditional Transfer Agreement.
"Lyondell Dissolving Conditions" is defined in Section 2.1 of the
Conditional Transfer Agreement.
"Lyondell Group" means Lyondell and its Affiliates.
"Lyondell License Agreement" means the license, dated as of the
Signing Date, by LCT Nederland to the Lyondell Partner in respect of the PO-11
Technology, as the same may be amended from time to time.
A-9
"Lyondell Members" is defined in Section 8.1 of the Partnership
Agreement (in reference to the Management Committee).
"Lyondell Notarial Deed" is defined in Section 1.1 of the Sale and
Transfer Agreement.
"Lyondell Operator Representative" is defined in Section 2.6 of the
Operating Agreement.
"Lyondell Operating Practices" means both (i) the operating practices
employed by the Operator with respect to the Botlek manufacturing complex,
except as to operational matters that relate to the PO/SM production process and
related Raw Materials procurement, and (ii) the operating practices employed by
the Lyondell Group with respect to the other PO/SM manufacturing plants operated
by the Lyondell Group.
"Lyondell Partner" means Lyondell PO-11 C.V., and its permitted
successors and assigns under the Partnership Agreement.
"Lyondell PO-11 Affiliates" is defined in the Recitals of the Parent
Agreement.
"Lyondell Suspending Conditions" is defined in Section 2.1 of the
Conditional Transfer Agreement.
"Lyondell Successor Parent" is defined in Section 3.2 of the Parent
Agreement.
"Maintenance Capital Project" means a Capital Project as to which the
primary purpose is, in the Operator's reasonable judgement, to either (a)
maintain the PO-11 Plant Facilities in their condition in accordance with the
initial operating design specifications and parameters for the PO-11 Plant
Facilities or (b) maintain or achieve the Key Performance Indicators. The
restoration of the PO-11 Plant Facilities following a Casualty shall be
considered a Maintenance Capital Project. The Parties acknowledge that
Maintenance Capital Projects may also result in enhanced efficiency or other
performance characteristics.
"Maintenance Policies" is defined in Section 4.2 of the Operating
Agreement.
"Major Casualty" is defined in Section 22.6 of the Partnership
Agreement.
"Major Decisions" is defined in Section 8.1 of the Partnership
Agreement.
"Management Committee" means the management committee of the
Partnership, established in accordance with Section 8.1 of the Partnership
Agreement.
"Management Committee Resolution" is defined in Section 8.1 of the
Partnership Agreement.
"Managerial Personnel" means (i) with respect to a Partner, any
employee of that Partner or its Affiliate who holds a senior managerial or
higher position with such Partner and who has direct responsibility for the
administration and oversight of the Partner's
A-10
investment in the Partnership and (ii) with respect to the Operator, any
employee who holds a position as "Plant Manager" of the PO-11 Plant Facilities
or higher and who, in each case, has direct responsibility for the operation of
the PO-11 Plant Facilities.
"Managing Partner" is defined in Section 3.4 of the Partnership
Agreement.
"Master Transaction Agreement" means the Master Transaction Agreement
between Lyondell, Bayer and Bayer Corporation dated as of 31 March 2000, as
amended from time to time.
"Material Litigation" means any litigation or other proceedings to
which the Partnership and/or the Operator in connection with its capacity as
such under the Operating Agreement is a claimant or defendant and (i) where the
total claim or counterclaim against the Partnership and/or the Operator is more
than 5,000,000 Euros above applicable insurance coverage limits; (ii) where the
total claim or counterclaim of the Partnership against third parties is more
than five million Euros; or (iii) where the claim against the Partnership and/or
the Operator (x) involves credible allegations of criminal wrongdoing with the
potential for material criminal penalties against the Partnership and/or its
Partners; (y) imposes a material risk of shut down or other disruption of
production on the PO-11 Plant Facilities; and/or (z) imposes material
restrictions on the Partners' use or sale of PO or SM produced from the PO-11
Plant Facilities.
"Material Raw Materials Contract" means (i) any ethylene, propylene
and benzene contracts (other than "spot" contracts), or (ii) any Other Raw
Materials contract which has a total expenditure by the purchaser of more than
1,000,000 Euros per contract year.
"Material Utility Contract Amendment" means any amendment, renewal,
extension, or replacement of any contract for the provision of utilities to the
PO-11 Plant Facilities which relates to the costs or duration of supply or which
may result in the termination of a utility contract.
"Members" is defined in Section 8.1 of the Partnership Agreement (in
reference to the Management Committee).
"MERIT" is defined in Appendix 1A to the Operating Agreement.
"Minimum Turndown Operating Rate" is defined in Section 7.2 of the
Operating Agreement.
"month" means a calendar month.
"Monthly Production Report" is defined in Section 4.2 of the Operating
Agreement.
"Movable Assets" is defined in Section 2.2 of the Conditional Transfer
Agreement.
"NAI" means The Netherlands Arbitration Institute ("Nederlands
Arbitrage Instituut").
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"NAI Rules" means the Arbitration Rules of the NAI.
"Non-Procuring Partner" is defined in Section 13.3 of the Partnership
Agreement.
"Notarial Deed" is defined in Section 1.1 of the Sale and Transfer
Agreement.
"Offtake Percentage" means the percentage interest of each Partner in
PO and co-produced SM capacity rights for PO-11. The Offtake Percentage of each
of the Bayer Partner and Lyondell Partner is 50% as of the Signing Date and is
subject to adjustment in accordance with Section 15.1 of the Partnership
Agreement.
"Operating Agreement" means the PO-11 Operating Agreement between the
Partnership and the Operator dated as of the Signing Date, as amended from time
to time.
"Operating Budget" is defined in Section 7.3 of the Operating
Agreement.
"Operating Costs" means all costs, including all third party charges
and Service Charges incurred in connection with the management, operation,
maintenance and ownership of the PO-11 Plant Facilities, which are not
capitalised by the Partnership in accordance with US GAAP or Lyondell's
accounting capitalisation procedures for the Lyondell Group, as the same may be
modified from time to time.
"Operating Costs Statement" is defined in Section 10.1 of the
Partnership Agreement.
"Operating Services" means all services, utilities, materials,
facilities and access easements required to be supplied or procured by the
Operator for the operation of the PO-11 Plant Facilities and production of PO
and SM at the PO-11 Plant Facilities during the Production Term. The Operating
Services are described in more detail in Article IV of the Operating Agreement.
"Operator" means LCNL and its permitted successors and assigns as the
Operator under the Operating Agreement.
"Other Assets" is defined in Section 2.2 of the Conditional Transfer
Agreement.
"Other Project Implementation Staff" is defined in Appendix 1A to the
Operating Agreement.
"Other Raw Materials" means any feedstock (other than ethylene,
propylene or benzene), catalyst, additive or process chemical used in the
production of PO and SM.
"Other Raw Materials Purchasing Plan" is defined in Section 5.2 of the
Operating Agreement.
"Ownership Interest" is defined in Section 3.2 of the Parent
Agreement.
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"Parent Agreement" means the Agreement dated as of the Signing Date
between Lyondell and Bayer pursuant to which, among other things, Lyondell and
Bayer guarantee the performance of their respective Affiliates that are the
Partners in the Partnership and enter into certain agreements as to indirect
transfers of the interests in the Partnership owned by their respective
Affiliates as of the Signing Date.
"Parent Company" means, as to the Lyondell Partner and the Operator,
Lyondell or its permitted successor under the Parent Agreement and means as to
the Bayer Partner, Bayer or its permitted successor under the Parent Agreement.
"Parent Company Guarantee Beneficiary" is defined in Section 2.2 of
the Parent Agreement.
"Partner" means a partner of the Partnership.
"Partners Transfer Agreement" is defined in Section 1.1 of the Sale
and Transfer Agreement.
"Partnership" means Lyondell Bayer Manufacturing Maasvlakte VOF, a
general partnership organised under the laws of The Netherlands ("vennootschap
onder firma"), together with the Partnership's permitted successors and assigns
under the Operating Agreement.
"Partnership Accounts" means, whether one or more, the bank account or
accounts of the Partnership, to be held with Bank of America or another
creditworthy bank.
"Partnership Agreement" means the Partnership Agreement of the
Partnership dated as of the Signing Date between the Lyondell Partner and the
Bayer Partner, as amended from time to time.
"Partnership Asset Proceeds" is defined in Section 17.3 of the
Partnership Agreement.
"Partnership Interest" means all of a Partner's rights and obligations
under the Partnership Agreement.
"Partnership Percentage" has the meaning specified in Section 2.2 of
the Partnership Agreement.
"Partnership Representatives" is defined in Section 2.6 of the
Operating Agreement.
"Partnership Working Capital" is defined in Section 6.2 of the
Partnership Agreement.
"Party" or "Parties" means (i) as used in the Partnership Agreement,
the Lyondell Partner and the Bayer Partner, (ii) as used in the Operating
Agreement, the Operator and the Partnership and (iii) as used in the Parent
Agreement, Lyondell and Bayer. For purposes of Section 10.4 of the Operating
Agreement and Section 19.4 of the Partnership
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Agreement, "Party" shall mean and include, as applicable to the Claim in
question, the Operator, the Partnership, the Lyondell Partner and/or the Bayer
Partner.
"Party Obligor" is defined in the Recitals of the Parent Agreement.
"Party Representative" is defined in Section 2.6 of the Operating
Agreement.
"Permitted PO Successor" means the successor (acknowledging that the
"successor" may be an Affiliated group of companies acting collectively) or an
Affiliate of a successor to (a) the Partnership Interest of the Lyondell
Partner; (b) the PO-11 Technology; and (c) other assets equal to at least 90% of
the book value of all of the PO production assets of the Lyondell Group world-
wide.
"Permitted Polyols Successor" means the successor (acknowledging that
the "successor" may be an Affiliated group of companies acting collectively) to
(a) the Partnership Interest of the Bayer Partner; and (b) other assets equal to
at least 90% of the book value of all of the Identified Polyols production
assets of the Bayer Group world-wide.
"Person" means any individual, corporation, limited liability company,
limited partnership, general partnership, trust, joint, venture, governmental
authority, association or other entity or organisation, wherever residing or
organised.
"Personnel Policies" is defined in Section 2.5 of the Operating
Agreement
"Plan Year" is defined in Section 7.2 of the Operating Agreement.
"Pledge" means to mortgage, pledge, hypothecate charge, encumber or
create or suffer to exist any pledge, lien or encumbrance upon or security
interest in any asset. Such defined term is used as both a noun and a verb.
"Plot Plan" means the site plan drawing depicting, among other things,
the PO-11 Plant Facilities, which is attached to the Operating Agreement as
Exhibit C thereto.
"PO" means propylene oxide.
"PO-11 Agreements" means, collectively, the Partnership Agreement, the
Operating Agreement, the Parent Agreement, the Bayer License Agreement, the
Lyondell License Agreement and the Conditional Transfer Agreement.
"PO-11 Business" is defined in Section 4.3 of the Parent Agreement.
"PO-11 Design Volumes" means 285 KT of PO per year and 640 KT of SM
per year.
"PO-11 Plant Facilities" means, collectively, the Leased Premises, the
EB production plant, PO/SM production plant and related piping (other than
piping owned by third parties), logistics, storage and other fixtures, equipment
and property located within the Leased Premises.
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"PO-11 Project Costs" means all amounts due under the EPC Contract,
amounts owed to the Operator with respect to the Development Phase in accordance
with Appendix 1 of the Operating Agreement and all other amounts required to
develop, design, procure, construct, equip, pre-commission, commission and
start-up the PO-11 Plant Facilities and related infrastructure, including Sunk
Costs.
"PO-11 Project Assets" means all assets, rights and obligations,
including the Ground Lease, claims and contracts (including the contracts,
letters of intent and negotiations listed on Schedule 18 to the Partnership
Agreement), relating to the development, design, procurement and construction of
the PO-11 Plant Facilities, excluding the PO-11 Technology.
"PO-11 Project Development" is defined in Appendix 1A to the Operating
Agreement.
"PO-11 Technology" means all technical information patented in The
Netherlands or unpatented relating to the POSM Process (as defined in the
License Agreements) practised at the PO-11 Plant Facilities, including, process
descriptions, production and production results, tests and test results, data,
plans, designs, specifications, reports, know-how, inventions, software
operating experience and other information (including PO-11 Plant Facilities
plant operating manuals) in the possession or control of Lyondell and/or any of
its Affiliates, or acquired or developed by Lyondell and/or any of its
Affiliates.
"PO-11 Transaction Agreements" is defined in the Recitals of the
Parent Agreement.
"Policies" means the EHS Policies, the Maintenance Policies and the
Personnel Policies.
"PO Logistics Agreement" means the Propylene Oxide Exchange and
Logistics Agreement dated as of 31 March 2000 between Lyondell and LCNL and
Bayer, BAYPO Limited Partnership, Bayer Antwerpen N.V. and Bayer Polyols SNC, as
the same may be amended or replaced from time to time.
"PO Manufacturing Costs" is defined in Section 20.2 of the Partnership
Agreement.
"Production Term" means the period commencing on Commercial Start-up
and ending on the 50th anniversary of Commercial Start-up, subject to automatic
extension for any extension of the term of the Partnership Agreement pursuant to
Section 5.2 of the Partnership Agreement.
"Proposed Annual Plan" is defined in Section 7.2 of the Operating
Agreement.
"Proposed Annual Production Plan" is defined in Section 7.2 of the
Operating Agreement.
"Proposed Capital Budget" is defined in Section 7.2 of the Operating
Agreement.
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"Proposed Operating Budget" is defined in Section 7.2 of the Operating
Agreement.
"Proprietary PO/SM Technology" means all technical information
patented or unpatented relating to the POSM Process (as defined in the License
Agreements) practised by the Lyondell Group in any location (including the PO-11
Technology), including, process descriptions, production and production results,
tests and test results, data, plans, designs, specifications, reports, know-how,
inventions, software operating experience and other information (including PO-11
Plant Facilities plant operating manuals) in the possession or control of
Lyondell and/or any of its Affiliates, or acquired or developed by Lyondell
and/or any of its Affiliates.
"Purchase Price" is defined in Section 2.1 of the Conditional Transfer
Agreement.
"Raw Materials" means ethylene, propylene, benzene and/or Other Raw
Materials.
"Registered Goods" is defined in Section 2.2 of the Conditional
Transfer Agreement.
"Related Persons" is defined in Section 13.1 of the Operating
Agreement.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, dumping, discharge, dispersal, leaching, escaping,
emanation or migration of any Chemical Substance in, into or onto the
environment of any kind whatsoever, including the movement of any Chemical
Substance through or in the environment, exposure of any type in any workplace,
any release as defined in any EHS Law.
"Sale and Transfer Agreement" means the Sale and Transfer Agreement
entered into as of the Signing Date between LCNL as Transferor and the Bayer
Partner as Transferee.
"Senior Plant Management Team" means the Director of European
Manufacturing, PO-11 Plant Manager, Process Engineering Manager, Project
Engineering Manager and EHS/Q Manager (or equivalent positions of responsibility
if titles change) with responsibility for the PO-11 Plant Facilities and whether
or not such Persons have responsibility for other facilities operated by the
Lyondell Group.
"Service Center Europe" or "SCE" means Lyondell's Service Center
Europe located on the Signing Date at ▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, or any successor service function.
"Service Charges" means all direct personnel and other costs, indirect
costs, taxes and permitted off-site or corporate indirect costs and overheads
(subject to Section 6.2 of the Operating Agreement), including third party
Operating Costs and Capital Costs that are billed by a third party to the
Operator, incurred by or on behalf of the Operator in connection with the
provision of Development Services and/or Operating Services pursuant to the
Operating Agreement.
A-16
"Service Provider" is defined in Schedule 4.2.5 to the Operating
Agreement.
"Shared European/Regional Manufacturing Staff" is defined in Appendix
1A to the Operating Agreement (for purposes of Appendix 1A only) and in Appendix
6.2 to the Operating Agreement (for all purposes other than Appendix 1A).
"Shared Storage Facilities" means storage facilities for PO or SM that
are located within the Leased Premises and are shared between the Partners
(i.e., are not dedicated 100% to the use of any one Partner as a result of a
Unilateral Capital Project).
"Signing Date" means the signing date for the PO-11 Transaction
Agreements, being 18 December 2000.
"SM" means styrene monomer.
"SM Manufacturing Costs" means the total Variable and Fixed Costs
excluding depreciation per metric tonne of styrene for SM from PO-11, as
determined by the Lyondell accounting system and used in Lyondell's business
management processes. The monthly SM Manufacturing Costs shall be auditable for
the Bayer Partner in accordance with Section 9.4.2 of the Operating Agreement.
"Small Projects Budget" is defined in Section 7.2 of the Operating
Agreement.
"SRM Procuring Partner" is defined in Section 13.3 of the Partnership
Agreement.
"Strategic Raw Materials" means propylene, ethylene and/or benzene, as
context requires.
"Strategic Raw Materials Purchasing Plan" is defined in Section 5.1 of
the Operating Agreement.
"Successor Parent" is defined in Section 3.2 of the Parent Agreement.
"Sunk Costs" means all costs incurred by the Lyondell Group prior to
2001 in connection with the development and design, procurement and construction
of the PO-11 Plant Facilities, as agreed by the Partners and reflected in their
initial capital contributions funded in accordance with Section 6.1 of the
Partnership Agreement.
"Suspending Conditions" means the Bayer Suspending Conditions and/or
the Lyondell Suspending Conditions, as context requires.
"Suspension of Payments Proceeding" is defined in Section 2.1 of the
Conditional Transfer Agreement.
"Taxes" means all taxes, charges, fees, levies or other assessments
imposed by any taxing authority, including, but not limited to, income, gross
receipts, excise, property, sales, use, transfer, payroll, license, ad valorem,
value added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, severance and
A-17
stamp taxes (including any interest, fines, penalties or additions attributable
to, or imposed on or with respect to, any such taxes, charges, fees, levies or
other assessments).
"TBA" means tertiary butyl alcohol.
"Technical Support Staff" is defined in Appendix 1A to the Operating
Agreement (for purposes of Appendix 1A only) and in Appendix 6.2 to the
Operating Agreement (for all purposes other than Appendix 1A).
"Technology Licensor" means Lyondell Chemie Technologie Nederland B.V.
and its permitted successors and assigns under the Parent Agreement.
"Term" means the Development Phase and the Production Term.
"Third Party" means any Person other than the Partnership, a Partner,
the Operator, and their respective Affiliates.
"Third Party Claim" means any Claim by a Third Party. For avoidance
of doubt, any obligation to remediate under EHS Law or Applicable Law and
regardless of whether the remediation or environmental condition has become the
subject of an enforcement proceeding, shall be considered a Third Party Claim.
"Total Costs Plus New Capital Depreciation" is defined in Section 20.2
of the Partnership Agreement.
"Transfer" means to sell, assign or otherwise in any manner other than
a Pledge dispose of, whether by act, deed, merger, consolidation, conversion or
otherwise. Such defined term is used as both a noun and a verb.
"Turnaround" means a major periodic maintenance programme for the
PO-11 Plant Facilities or a portion thereof, involving disruption of production.
A Turnaround may be scheduled or unscheduled.
"Umbrella Agreement" means the Umbrella Agreement to be entered into
between the Municipality of Rotterdam (represented by the Chairman of the
Rotterdam Municipal Port Management) and the Partnership.
"Unilateral Capital Project" is defined in Section 7.6 of the
Operating Agreement.
"Unilateral Capital Project Asset" means an asset of the Partnership
used exclusively in connection with a Unilateral Capital Project, and the
allocable share attributable to a Unilateral Capital Project of an asset of the
Partnership used in both a Unilateral Capital Project and other aspects of
Partnership operations.
"Unilateral Capital Project Asset Proceeds" is defined in Section 17.3
of the Partnership Agreement.
"Unilateral Capital Implementation Plan" is defined in Section 7.6 of
the Operating Agreement.
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"Unilateral Capital Project Threshold" is defined in Section 14.5 of
the Partnership Agreement.
"Uninsured Third Party Claim" means a Third Party Claim with respect
to the operations of the PO-11 Plant Facilities that is not covered by the
insurance program maintained by or on behalf of the Operator. A Third Party
Claim that would be insured but for deductibles and/or self-insurance retention
limits under the insurance program maintained by or on behalf of the Operator
shall not be considered an Uninsured Third Party Claim. The portion of a Third
Party Claim that exceeds coverage limits or that would have been covered but for
a lapse in coverage due to non-payment of premium or otherwise shall be treated
as an Uninsured Third Party Claim.
"VAMIL" means "Free Depreciation of Ecologically Sound Investments"
("Willekeurige afschrijving milieu-investeringen"), a tax incentive for certain
environmentally beneficial investments in The Netherlands.
"Variable Costs" means the portion of cash costs associated with the
production of PO or SM, as the case may be, that vary directly with changes in
production levels.
"VAT" means value added tax ("BTW" in The Netherlands).
"Working Capital Statements" is defined in Section 6.2 of the
Partnership Agreement.
"year" means a calendar year.
A-19
EXHIBIT B
DISPUTE RESOLUTION PROCEDURES
FOR OPERATING AGREEMENT AND PARTNERSHIP AGREEMENT
A. GENERAL PROVISIONS.
1. Binding and Exclusive Means.
The applicable dispute resolution provisions set forth in this Exhibit B
shall be the binding and exclusive means to resolve all disputes arising
under the Operating Agreement, the Partnership Agreement, the Parent
Agreement, the Conditional Transfer Agreement and any other instrument
entered into between members of the Lyondell Group and members of the Bayer
Group that expressly provides for disputes to be exclusively resolved in
accordance with these Dispute Resolution Procedures.
2. Single Proceeding for Disputes.
For disputes involving more than one of the instruments which provide for
disputes to be resolved in accordance with these Dispute Resolution
Procedures, and all disputes arising under the same facts or circumstances
relating to more than one of such instruments, such disputes, if submitted
to the same dispute resolution body, shall be combined in a single
proceeding involving all relevant Parties.
3. Continuation of Business.
Notwithstanding the existence of any dispute or the pendency of any
procedures pursuant to this Exhibit B, the Parties agree and undertake that
all payments shall continue to be made and that all obligations not in
dispute shall continue to be performed.
4. Initiation of Dispute Resolution Procedures.
Any Party may at any time invoke these Dispute Resolution Procedures by
providing written notice of such action to the other Parties. The following
provisions of this Article A do not apply to any dispute that is governed by
the provisions of Article C to Article E below.
5. Submission of Dispute to the Management Committee.
Unless the dispute has arisen at the Management Committee, the Parties
within five Business Days after such notice shall schedule a meeting of the
Management Committee to be held at the Operator's offices in Rotterdam, The
Netherlands. The meeting shall occur within 20 Business Days after notice of
the meeting is delivered to the Parties. The Management Committee shall
attempt, in a commercially reasonable manner, to negotiate a resolution of
the dispute.
1
6. Submission of Dispute to the Global Steering Committee.
If the Management Committee has not negotiated a resolution to the dispute
within 45 days of the initial notice of such dispute, or if the dispute
arose at the Management Committee, then a meeting of the Global Steering
Committee shall be called and shall be held. The meeting shall be held in
Rotterdam, The Netherlands or at another location selected by the Global
Steering Committee members. The Global Steering Committee shall attempt, in
a commercially reasonable manner, to negotiate a resolution of the dispute.
7. Mediation or Other Alternative Dispute Resolution.
Either the Management Committee or the Global Steering Committee may, by a
majority vote of each of the Lyondell representatives and the Bayer
representatives, order mediation or other form of alternative dispute
resolution if they believe such technique is useful in resolving the
dispute. If a method of alternative dispute resolution is agreed upon, a
specific timetable and completion date for its implementation shall also be
agreed upon.
8. Implementing the Resolution.
If the Management Committee or the Global Steering Committee succeed in
resolving the dispute, then one or more of the Parties shall be directed (in
as comprehensive detail as reasonably practicable) to take the actions
necessary to carry out such resolution and each Party agrees that it will do
all things reasonably necessary to give full effect to such resolution. Each
Party shall have a commercially reasonable time in which to take such
actions.
B. ARBITRATION.
1. Binding Arbitration under NAI Rules.
Any dispute, other than disputes that are governed by Article C to Article E
below, that is not resolved within 45 days after the first meeting of the
Global Steering Committee, under Article A above, shall be finally settled
by arbitration by a three-member arbitration panel in accordance with the
rules of The Netherlands Arbitration Institute (the "NAI RULES"). The
arbitration proceedings and all documents delivered to or by the arbitrators
shall be in English and the arbitrators shall make their award in accordance
with the rules of law. The extended periods of time applicable to
international arbitration proceedings pursuant to Article 5(2) of the NAI
Rules shall not be applicable. The venue for the proceedings shall be
Rotterdam, The Netherlands. To the fullest extent permitted by law, the
arbitration proceedings and award shall be maintained in confidence by the
arbitrators and the Parties. The NAI will not be authorised to publish the
award in accordance with Article 55 of the NAI Rules.
2. Appointment of Arbitrators.
The Party initiating arbitration shall notify the NAI in accordance with the
NAI Rules (the "ARBITRATION NOTICE") and shall deliver a copy thereof to the
other Parties. The
2
Parties, having regard to the nature of the dispute and the expertise
required of the arbitrators (e.g., technical, financial or judicial), shall
attempt to agree on the qualification requirements of the arbitrators to
present to the NAI within 15 days following the Arbitration Notice to be
used by the NAI in its "List Procedure" under Article 14 of the NAI Rules.
If the Parties cannot agree on such qualification requirements within such
15 day period, then the normal procedures of Article 14 of the NAI Rules
shall apply. If any arbitrator is unable to serve, his or her replacement
will be selected in the same manner as the arbitrator to be replaced.
3. Arbitration Decision.
The arbitrators shall have the authority to issue injunctive relief. The
arbitrators shall render the final arbitration award, in writing, within 20
days following the completion of the final arbitration hearing. If the
arbitrators' decision results in a monetary award, the interest to be
granted on such award, if any, and the rate of such interest shall be
determined by the arbitrators in their discretion. The arbitrators shall
allocate the costs of the arbitrators and the costs of the proceeding in
their discretion. The arbitration award shall be final and binding on the
Parties and, to the extent permitted by Applicable Law, the Parties waive
any rights to appeal against such award.
4. Special Burden of Proof for Certain Disputes.
For any dispute to be resolved by arbitration in relation to the Operating
Agreement in which it is alleged that the Operator is not complying with
Applicable Law, the Policies or Good Industry Practice or is acting in a
manner that is not consistent with the Lyondell Operating Practices, the
arbitrators must find such non-compliance or inconsistency in a significant
respect, after giving reasonable latitude to the Operator's judgement in
applying Applicable Law, the Policies, the Lyondell Operating Practices and
Good Industry Practice.
5. Curative Period.
If the issue of whether a breach of the Operating Agreement and/or the
Partnership Agreement occurred or whether one of the Parties was entitled to
exercise remedial rights is in dispute, then the non-prevailing Party shall
have a commercially reasonable period of time to cure the default or
circumstance before the prevailing Party shall be entitled to exercise such
remedial rights. The Arbitrators shall include in their award the time in
which the non-prevailing Party must complete such cure.
C. DETERMINATION OF CERTAIN CONSISTENCY CLAIM DISPUTES BY PANEL OF BINDING
ADVISORS.
1. Submission of Consistency Claim Disputes to Panel of Binding Advisors.
Any dispute as to whether the Operator's proposed actions and/or
expenditures are consistent with the Policies and Lyondell Operating
Practices (a "CONSISTENCY CLAIM") in connection with a dispute under Section
7.3.4 of the Operating Agreement among the Parties regarding the Annual Plan
or in connection with an expenditure or proposed expenditure by the Operator
in respect of EHS activities or resulting from
3
personnel compensation increases in which such expenditure is disputed by
the Bayer Partner pursuant to and in accordance with Section 13.4 of the
Partnership Agreement, may be submitted by the Bayer Partner within the time
period provided in Section 7.3.4 of the Operating Agreement or Section 13.4
of the Partnership Agreement, as applicable, to binding resolution by a
three-member panel of binding advisors ("bindend adviseurs") pursuant to
this Article C. Both Partners and the Operator shall be Parties to any
Consistency Claim procedure under this Article C. The fact that the
Partnership is deadlocked on the issue shall be disclosed to the binding
advisors and neither Party shall have the authority to represent the
Partnership in such proceeding.
2. Appointment of Binding Advisor Panel.
Within 15 days following the notice by the Bayer Partner to the Operator
that the Consistency Claim is to be submitted to resolution by a three-
member binding advisor panel, the Parties shall attempt to agree on the
qualification requirements of the binding advisors to present to the NAI to
be used by the NAI in its "List Procedure" under Article 14 of the NAI
Rules, which shall be used to appoint the binding advisor panel members. If
the Parties cannot agree on such qualification requirements within such 15
day period, then the qualification requirements are that each binding
advisor must be a chemical engineer with experience in the management and
operation of a major chemical plant in Western Europe or North America.
3. Conduct of the Proceedings.
The binding advisor proceeding and all documents delivered to or by the
binding advisors shall be in English. In the absence of an agreement to the
contrary, the place of the proceeding shall be Rotterdam, The Netherlands.
The proceeding shall be conducted in accordance with the NAI Rules. The
extended periods of time applicable to international arbitration proceedings
pursuant to Article 5(2) of the NAI Rules shall not be applicable. To the
fullest extent permitted by law, the binding advisor proceedings and
decision shall be maintained in confidence by the binding advisors and the
Parties. The NAI will not be authorised to publish the award in accordance
with Article 55 of the NAI Rules.
4. Standard of Proof.
To reach a decision in favour of the Bayer Partner, the binding advisors
must find, after giving reasonable latitude to the Operator's judgement in
applying the Policies and the Lyondell Operating Practices, that the
Operator's proposed course of action and/or expenditure, as applicable, is
inconsistent with the Policies and the Lyondell Operating Practices in a
significant respect. The binding advisors are not authorised to make any
other decision or award except as provided in Section C.7 and Section C.8
below.
5. If Decision is in Favour of the Operator and the Lyondell Partner or there
is No Decision within Six Months.
4
If the binding advisors decide for the Operator and the Lyondell Partner, or
do not reach a decision for any reason within six months following the
expiration of the period within which the Global Steering Committee is to
attempt to resolve the dispute pursuant to Section 7.3.4(b) of the Operating
Agreement or Section 13.4 of the Partnership Agreement, as applicable, then
the proposed course of action or expenditure of the Operator shall be deemed
consistent with the Policies and the Lyondell Operating Practices for all
purposes and shall be treated as part of the Annual Plan for all purposes,
including as to spending authority of the Operator. In addition, if a
decision is made regarding proposed spending under Section 13.4 of the
Partnership Agreement and the Lyondell Partner has instructed the Operator
to defer proceeding with the disputed expenditures pending resolution of the
dispute because the Bayer Partner would not release the Lyondell Partner
from responsibility for a disproportionate share of costs pursuant to
Section C.7 below, then the binding advisors shall have the authority to
award Damages in favour of the Operator and/or the Lyondell Partner in the
appropriate case under Section C.8 below.
6. If Decision is Against the Lyondell Partner and the Operator.
If the binding advisors decide in favour of the Bayer Partner, the Operator
shall prospectively modify its conduct accordingly. The Operator shall not
be responsible in Damages for the past failure of the Operator to have
operated consistently with the Policies and the Lyondell Operating
Practices. Allocation of cost responsibility between the Partners shall be
in accordance with Section C.7 below.
7. If there is a Dispute under Section 13.4 of the Partnership Agreement
Decided Against the Lyondell Partner and the Operator.
For Consistency Claim disputes regarding expenditures or proposed
expenditures for EHS activities, or that result from personnel compensation
increases, the Bayer Partner is required by Section 13.4 of the Partnership
Agreement to elect whether it will release the Lyondell Partner from
responsibility pursuant to this Section C.7 for potentially paying more than
its Partnership Percentage share of the costs associated with such
expenditures by the Operator which the Partnership may incur during the
pendency of the relevant dispute resolution process. If the Bayer Partner
elects not to release the Lyondell Partner from responsibility for
additional costs pursuant to Section 13.4 of the Partnership Agreement, and
the Operator makes expenditures in connection with the disputed EHS activity
or personnel compensation increase and the binding advisors determine that
the Operator's expenditures were not consistent with the EHS Policies or the
Personnel Policies, as applicable, then the following shall apply:
(a) The binding advisors shall determine a realistic alternative to the
Operator's proposed course of action that is also consistent with the
Policies and the Lyondell Operating Practices.
(b) The binding advisors shall make a cost/benefit analysis, comparing the
relative benefits and costs of the course of action undertaken by the
Operator to the alternative course of action determined by the binding
advisors pursuant to Section C.7(a) above.
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(c) Subject to Section C.7(d) below, the Lyondell Partner will be allocated
100% of the capital or other costs incurred that are associated with
the course of action of the Operator that is determined to be not
consistent with the EHS Policies or the Personnel Policies, as
applicable.
(d) If and to the extent that the course of action undertaken by the
Operator creates an economic benefit to the Partnership, then the
portion of the economic costs allocated 100% to the Lyondell Partner
shall be reduced by a ratio (expressed as a percentage) equal to the
economic benefit resulting to the Partnership over the total costs
associated with the course of action undertaken by the Operator. This
reduction shall be applied to each item of the applicable costs for the
course of action undertaken by the Operator. The costs for the course
of conduct undertaken by the Operator that are not charged 100% to the
Lyondell Partner shall be shared by the Partners in the ratio of their
Partnership Percentages.
(e) By way of example only, if an EHS course of action implemented by the
Operator is subsequently determined by the binding advisors to be
completely unnecessary for regulatory purposes and is otherwise
inconsistent with the EHS Policies and the Lyondell Operating
Practices, then the applicable costs will have no economic benefit to
the Partnership and all of those costs will be allocated 100% to the
Lyondell Partner. On the other hand, if the EHS course of action
implemented by the Operator is subsequently determined by the binding
advisors to address an applicable regulatory requirement but otherwise
is determined to be inconsistent with the EHS Policies and the Lyondell
Operating Practices, and the alternative determined by the binding
advisors that is consistent with the Policies and the Lyondell
Operating Practices is less costly, then the costs associated with the
action implemented by the Operator will have an economic benefit equal
to the costs that would have been incurred by the Partnership to
implement the alternative course of action determined by the binding
advisors that is consistent with the EHS Policies and the Lyondell
Operating Practices.
8. If there is a Dispute under Section 13.4 of the Partnership Agreement that
is Not Decided against the Lyondell Partner and the Operator and Damages
Result From Deferral.
If the Bayer Partner elects under Section 13.4 of the Partnership Agreement
not to release the Lyondell Partner from responsibility pursuant to Section
C.7 above for potentially paying more than the Lyondell Partner's
Partnership Percentage share of the costs associated with such expenditures
by the Operator which the Partnership may incur during the resolution of the
dispute if the Operator proceeds with the proposed EHS or personnel
compensation increase expenditures, then the Lyondell Partner may elect
under Section 13.4 of the Partnership Agreement to instruct the Operator to
defer proceeding with such disputed expenditures during the resolution of
the dispute. If the binding advisors do not find that the proposed
expenditures were inconsistent with the EHS Policies and/or the Personnel
Polices, as applicable, then the following shall apply:
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(a) If the Lyondell Partner and/or the Operator allege that the Partnership
or the Operator have incurred Damages as a result of the deferral of
such expenditures during the resolution of the dispute, then the
binding advisors shall determine the Damages actually incurred by the
Partnership and/or the Operator as a result of such deferral. For the
avoidance of doubt, "Damages" excludes any lost profits or
consequential, incidental or punitive damages incurred by the Operator
or the Partnership for its own account.
(b) The Bayer Partner shall be responsible for 100% of the Damages awarded
by the binding advisors that are incurred by the Partnership or the
Operator as a result of the Operator's deferral in proceeding with its
proposed course of action and corresponding expenditures.
9. Costs.
Costs of the binding advisor procedure shall be borne by the non-prevailing
Partner.
D. DETERMINATION OF DISPUTES CONCERNING THE ANNUAL ACCOUNTS THROUGH BINDING
ADVISORS.
1. Application; Binding Advisor Panel.
The provisions of this Article D shall only be applicable to disputes
concerning the Annual Accounts that are timely submitted by the disputing
Partner to resolution hereunder pursuant to Section 12.3 of the Partnership
Agreement. Such disputes are to be resolved by a three-member binding
advisor panel in accordance with the following provisions of this Article D.
2. Appointment of Binding Advisor Panel.
The binding advisor panel shall be comprised of three public accountants
with substantial experience in auditing chemical businesses in Western
Europe. If no agreement is reached on the appointment of the binding
advisors by the Partners within 15 days from the submission of the dispute
to binding advisor determination pursuant to Section 12.3 of the Partnership
Agreement, then such qualification requirements shall be used by the NAI in
its "List Procedure" under Article 14 of the NAI Rules, which shall be used
to appoint the binding advisor panel members.
3. Conduct of the Proceedings.
The binding advisor proceedings shall be in English. In the absence of an
agreement to the contrary, the place of the proceeding shall be Rotterdam,
The Netherlands. The proceeding shall be conducted in accordance with the
NAI Rules. The binding advisors shall have access to the books and records
of the Partnership as well as to all relevant working papers and other
information available to the external auditors which audited the Annual
Accounts. The extended periods of time applicable to international
arbitration proceedings pursuant to Article 5(2) of the NAI Rules shall not
be applicable. To the fullest extent permitted by law, the binding advisor
proceedings and decision shall be maintained in confidence by the binding
advisors
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and the Parties. The NAI will not be authorised to publish the award in
accordance with Article 55 of the NAI Rules.
4. Decision of the Binding Advisors; Costs.
The binding advisors shall reach their decision within 30 days of
appointment. The costs of the binding advisors proceeding shall be for the
account of the Partnership if the Annual Accounts, as revised by the binding
advisors, deviate materially from the Annual Accounts as audited by the
Partnership's external auditors. Otherwise, the costs of the binding
advisors proceeding shall be for the sole account of the disputing Partner.
E. DETERMINATION OF FAIR MARKET VALUE THROUGH BINDING ADVISORS UPON FULFILMENT
OF SUSPENDING CONDITIONS.
1. Application.
The provisions of this Article E shall only be applicable following
fulfilment of the Lyondell Suspending Conditions or the Bayer Suspending
Conditions pursuant to the Conditional Transfer Agreement.
2. Fair Market Value by Binding Advisors.
The fair market value of the Partnership Interest of the Lyondell Partner or
the Bayer Partner as of the date of the fulfilment of a Lyondell Suspending
Condition or a Bayer Suspending Condition whichever is applicable, shall be
determined by the decision of a three-member binding advisor panel in
accordance with the following procedures. The determination of fair market
value shall include a separate allocation of value to the Ground Lease.
3. Appointment of Binding Advisor Panel.
The binding advisor panel shall be comprised of three investment bankers or
business consultants with substantial experience in valuing chemical plants
and chemical businesses in Western Europe. Such qualification requirements
shall be used by the NAI in its "List Procedure" under Article 14 of the NAI
Rules, which shall be used to appoint the binding advisor panel members.
4. Conduct of the Proceedings.
The binding advisors shall conduct the proceeding in accordance with the NAI
Rules, except as hereinafter provided. In the absence of an agreement to the
contrary, the place of the proceeding shall be Rotterdam, The Netherlands.
The proceedings and all documents delivered to and by the binding advisors
shall be in English. The extended periods of time applicable to
international arbitration proceedings pursuant to Article 5(2) of the NAI
Rules shall not be applicable. The binding advisors shall consider all
relevant valuation methodologies and all relevant facts and circumstances in
determining the fair market value of the Partnership Interest of the
Lyondell Partner or the Bayer Partner, as applicable, including the
availability or non-availability of licenses and permits to operate the
PO-11 Plant Facilities.
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5. Decision of the Binding Advisors; Costs.
The binding advisors shall reach their decision within 30 days of
appointment. The costs of the binding advisor procedure shall be for the
account of the transferee of the Partnership Interest of the Lyondell
Partner or the Bayer Partner, as applicable.
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