* THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT, WHICH HAVE BEEN REMOVED AND
REPLACED WITH ONE OR MORE ASTERISKS, HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
Acrylonitrile Expanded Relationship
and
Master Modification Agreement
This Acrylonitrile Expanded Relationship and Master Modification Agreement (this
"ER Agreement") is entered into by and between BP Chemicals Inc. ("BP"), an Ohio
corporation, and Sterling Chemicals, Inc. ("Sterling"), a Delaware corporation,
effective as of June 19, 2003 (the "Effective Date"), with reference to the
following facts:
A. Sterling owns a plant in Texas City, Texas (the "AN Plant") for the
production of acrylonitrile ("AN") that has not been in operation since February
2001. Sterling filed voluntary petitions for relief under Chapter 11 of Title 11
of the United States Code in the United States Bankruptcy Court for the Southern
District of Texas, Houston Division (the "Bankruptcy Court") on July 16, 2001.
▇. ▇▇▇▇▇▇▇▇ and BP are parties to the following agreements which
together with this ER Agreement are referred to collectively as the "AN
Agreements:" (i) an Amended and Restated Production Agreement dated effective as
of March 31, 1998 (as amended, the "Production Agreement"); (ii) a Joint Venture
Agreement dated effective as of March 31, 1998 (as amended, the "ANEXCO JV
Agreement"); (iii) a Limited Liability Company Agreement of ANEXCO, LLC dated
effective as of March 31, 1998 (the "ANEXCO LLC Agreement"); (iv) a Catalyst
Sales Contract dated effective as of March 31, 1998 (as amended, the "Catalyst
Agreement"); and (v) a Letter Agreement dated April 23, 1998 (the "Letter
Agreement").
C. It is the intent of the parties that the AN Agreements, as amended
or otherwise affected hereby, will collectively constitute one integrated
agreement governing their relationship outside the European Union with respect
to AN-related matters.
▇. ▇▇▇▇▇▇▇▇ and BP are parties to * * * * and a License Agreement dated
effective as of April 15, 1988 (the "License Agreement").
E. Consistent with its Joint Plan of Reorganization (the
"Reorganization Plan") confirmed by order of the Bankruptcy Court entered on
November 21, 2002 and the business plan and financial projections attached
thereto, and to facilitate the subsequent restart of the AN Plant, the parties
have
entered into this ER Agreement to amend and integrate the AN Agreements as
set forth herein which will result in an expanded AN relationship between the
parties everywhere but the European Union.
NOW THEREFORE, the parties hereto, intending to be bound, agree as follows:
1. INTEGRATION
1.1 The AN Agreements, as amended and otherwise affected by this ER
Agreement, will be co-terminous, and, notwithstanding anything to the
contrary contained herein or in any of the AN Agreements, if any AN
Agreement is terminated, rescinded, rejected, or otherwise ceases to be
in effect for any reason, then all of the other AN Agreements will
immediately and automatically terminate without the need for any other
action or notice. This ER Agreement is entered into in reliance on the
fact that the AN Agreements will collectively constitute one and the
same agreement.
1.2 For the avoidance of doubt, the parties acknowledge and agree that * *
* and the License Agreement are not AN Agreements and are not subject
to Section 1.1 above. The termination or expiration, for any reason, of
the AN Agreements will not cause the termination or expiration of * * *
the License Agreement. The termination or expiration of either * * * or
the License Agreement will not cause the termination or expiration of
any of the AN Agreements. * * * and the License Agreement will
terminate only in accordance with their respective terms.
2. TERM
Each of the AN Agreements will be for an initial term ending on
December 31, 2009, but continuing thereafter unless either party gives
the other party twenty four (24) months prior written notice of
termination, such termination to be effective only on December 31, 2009
or any anniversary thereof. Notwithstanding the foregoing, however, (i)
if any of the AN Agreements is earlier terminated, for any reason, all
the AN Agreements will terminate on the same date, (ii) if ANEXCO, LLC,
a Delaware limited liability company in which Sterling and BP are
members ("ANEXCO"), is dissolved and liquidated for any reason, the AN
Agreements will terminate as of the date such dissolution and
liquidation is completed, and (iii) if the term of any of the AN
Agreements is extended in writing by the mutual written agreement of
the parties, this ER Agreement and all of the other AN Agreements will
likewise be extended.
3. TERMINATION
3.1 Effect on Termination Clauses in AN Agreements. It is the intent of the
parties that none of the AN Agreements may be terminated in any manner
2
or for any reason except as set forth in Section 2 above or in this
Section 3. Without limiting the foregoing, the parties agree that the
term and termination clauses in the AN Agreements will be amended as
set forth in Section 4 below.
3.2 Termination if AN Plant does not Start Up. The "AN Plant Start Up" will
be defined to occur when Sterling restarts the AN Plant and begins
producing and delivering AN to BP and to ANEXCO in accordance with the
terms and conditions of the AN Agreements and * * * . In the event that
the AN Plant Start Up has not occurred by August 31, 2003, the AN
Agreements will terminate as of September 1, 2003. If the AN Agreements
are terminated pursuant to this Section 3.2, the provisions of Section
3.7.2 of this ER Agreement will apply.
3.3 Termination by Sterling upon AN Plant Shut Down. If (i) after the
Effective Date hereof, the AN Plant Start Up has occurred, and (ii)
thereafter Sterling has elected, in its sole discretion, to permanently
shut down the AN Plant and to cease manufacturing AN at the AN Plant,
Sterling may, at any time and in its sole discretion, elect to
terminate all the AN Agreements by giving BP at least twelve (12)
months prior written notice of such termination, such notice (the "Shut
Down Notice") to include the date on which the AN Plant is to shut down
(the "Proposed Shut Down Date"); provided, however, if Sterling
delivers a Shut Down Notice to BP:
3.3.1 BP has the right to require Sterling to continue to produce AN
for a period not to exceed twelve (12) months after the
Proposed Shut Down Date (the "Extension Right"). If BP
exercises the Extension Right, the AN Agreements will
terminate on the Proposed Shut Down Date but Sterling will not
shut down the AN Plant and will instead produce and sell AN
solely to BP or its designee, pursuant to BP's instructions,
during the period that begins on the Proposed Shut Down Date
and ends on such date that BP determines, at its sole option
(the "Extension Period"), provided that such ending date
cannot extend beyond the date that is twelve (12) months after
the Proposed Shut Down Date. During the Extension Period, BP
will reimburse Sterling for * * of Sterling's Fixed Costs and
Variable Costs (as such terms are defined in the Production
Agreement) and * * of such other costs that Sterling currently
can charge to BP under the Production Agreement; provided,
however, that in the event that Sterling becomes aware that,
to continue to operate the AN Plant, it will be required to
incur any unusual or unexpected item of cost or expense that
is directly related to the production of AN, the reimbursement
for which is not specifically addressed by the Production
Agreement, Sterling will, as soon as is reasonably possible
after it becomes aware of such requirement but, in any event,
prior to incurring such cost or expense, notify BP, in
writing,
3
of the specifics of such cost or expense (the "Expense
Notice") including the reason for the cost or expense, an
estimate of the amount, and the anticipated date on which
Sterling will need to start incurring such cost or expense.
Promptly after BP's receipt of any Expense Notice, Sterling
and BP will discuss such cost or expense and the parties will
work together, in good faith, to explore any potential actions
that might be taken to avoid or mitigate such cost or expense.
In addition, Sterling will provide BP with reasonable
documentation that supports the information that Sterling
included in the Expense Notice. Promptly after the conclusion
of these discussions, BP may elect whether it will reimburse
Sterling for such cost or expense. In the event that BP elects
to not reimburse Sterling for such cost or expense, or if BP
fails to make an election prior to the anticipated date for
incurring such cost or expense referenced in the Expense
Notice, Sterling will have the right to shut down the AN Plant
and discontinue production of AN immediately prior to the time
that such cost or expense would have been required to have
been incurred and, in such event, the Extension Period shall
be deemed to have ended on the date of such shut down of the
AN Plant.
3.3.2 Except as otherwise provided in Section 3.3.1 above, Sterling
will permanently shut down the AN Plant on the Proposed Shut
Down Date or, if applicable, at the expiration of the
Extension Period, whichever is later, and, thereafter, neither
Sterling nor any of its affiliated, subsidiary, or parent
companies will use the AN Plant to manufacture AN, and
Sterling will not market, distribute, or sell AN manufactured
at the AN Plant anywhere in the world (other than any
inventory on hand at the AN Plant as of the Proposed Shut Down
Date). Neither Sterling nor any of its affiliates, subsidiary,
or parent companies will, at any time after the Proposed Shut
Down Date or the expiration of the Extension Period (if
applicable), whichever is later, start up the AN Plant without
BP's express, prior written consent.
3.3.3 (i) Sterling will not sell, transfer, lease, convey, or
dispose of (each, a "Transfer") the AN Plant, or any equipment
or fixtures that are a part of the AN Plant, unless such
Transfer is in compliance with this Section 3.3.3; provided,
however that this Section 3.3.3 does not apply to any
transaction involving the Transfer of all or substantially all
of (a) the capital stock, or (b) the business, operations, or
assets of Sterling (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) if, in the case of (a),
the entity whose capital stock is being Transferred owns
assets with a significant monetary value in addition to the AN
Plant or, in the case of (b), such Transfer includes assets
with a significant
4
monetary value other than the AN Plant. In no event is this
Section 3.3.3(i) to be used to circumvent the intent of the
provisions set forth below in this Section 3.3.3. In the event
of any such Transfer permitted by this Section 3.3.3(i),
Sterling will require the transferee in such Transfer to agree
in writing to comply with the restrictions and obligations set
forth in this Section 3.3.3.
(ii) During the period commencing with BP's receipt
of a Shut Down Notice and continuing thereafter until the
Proposed Shut Down Date or the expiration of the Extension
Period, whichever is later, and during any Response Period (as
defined below), (a) Sterling will cooperate with BP in its
performance of a due diligence investigation and will provide
BP access to all information, including, but not limited to,
all records, documents, personnel interviews, site visits, and
equipment inspections, as may be reasonably necessary for BP
to evaluate whether it desires to make an offer for the
Transfer of the AN Plant or any part thereof or to make a
Proposal (as defined below), and (b) Sterling will cooperate
with BP and will work with BP, in good faith, as BP may
request to prepare the terms, conditions, structure, and
similar matters related to any offer that BP may be
considering making for the Transfer of the AN Plant or any
part thereof.
(iii) On or before the Proposed Shut Down Date or the
expiration of the Extension Period, whichever is later, BP
will have the right to make an offer to Sterling for the
Transfer of the AN Plant or any part thereof. Any offer from
BP pursuant to this clause (iii) must be in writing and
contain all relevant terms and conditions of the proposed
Transfer. The failure of BP to make an offer pursuant to this
clause (iii) on or before the Proposed Shut Down Date or the
expiration of the Extension Period, whichever is later, will
be deemed to be an election by BP to decline to make any offer
pursuant to this clause (iii).
(iv) In the event that BP makes an offer for the
Transfer of the entire AN Plant or any portion thereof
pursuant to clause (iii) above, Sterling must notify BP in
writing whether Sterling accepts or declines such offer within
ninety (90) days after Sterling receives such offer from BP,
and Sterling's failure to make an election within such ninety
(90) day period will be deemed to be an election by Sterling
to decline such offer. If Sterling declines or is deemed to
have declined any such offer from BP, Sterling may then
Transfer all of the assets that were the subject of the offer
in a single transaction or a series of related transactions to
a third party, without BP's consent, if, and only if, (a) the
consideration being provided by the third party to Sterling
for the Transfer of such
5
assets is greater than the consideration set forth in the
offer from BP, (b) the terms of the third party Transfer,
taken as a whole, are no more favorable to the third party
than those set forth in the offer from BP were to BP, and (c)
the Transfer is concluded no later than twelve (12) months
after Sterling declined or is deemed to have declined such
offer from BP. If Sterling does not Transfer all of the assets
that were the subject of the offer from BP in a single
transaction or a series of related transactions within such
twelve (12) month period, Sterling may not thereafter Transfer
such assets, in any form or in any combination, to a third
party unless Sterling first extends BP another opportunity to
make an offer for the Transfer of such assets pursuant to
clause (vi) below and BP's right contained in this Section
3.3.3 will continue to apply to such assets.
(v) If any offer from BP pursuant to clause (iii) above
does not contemplate a Transfer of the entire AN Plant,
or if BP declines, or is deemed to have declined, to make an
offer for the Transfer of the entire AN Plant pursuant to
clause (iii) above, Sterling may thereafter Transfer the AN
Plant in its entirety (but not a portion thereof) to any
person or entity on such terms as ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ acceptable,
in its sole discretion.
(vi) If Sterling desires to Transfer the AN Plant in
its entirety or any portion thereof, and such Transfer is not
otherwise permitted under clause (iv) or (v) above, Sterling
will not Transfer such assets to a third party without first
offering to Transfer such assets to BP. Such offer to BP will
be in writing and must contain a detailed description of the
assets Sterling desires to Transfer (the "Offer"). After it
receives any such Offer, BP will have sixty (60) days in the
case of an Offer for the AN Plant in its entirety or any
substantial portion thereof, or thirty (30) days in the case
of any other Offer, within which to conduct a due diligence
review of the Offer (the "Response Period"). No later than the
end of the Response Period, BP will have the right to make a
proposal for the Transfer of any of the assets described in
the Offer (a "Proposal"). Any Proposal from BP must be in
writing and contain all relevant terms and conditions of the
proposed Transfer. The failure of BP to make a Proposal prior
to the expiration of the Response Period will be deemed to be
an election by BP to decline to make a Proposal. In the event
that BP declines, or is deemed to have declined, to make a
Proposal, Sterling may then Transfer any of the assets that
were described in the Offer to a third party, without BP's
consent, for such consideration as is acceptable to Sterling,
in its sole discretion, provided that the Transfer must be
concluded no later than twelve (12) months after the end of
the Response Period. If Sterling does
6
not Transfer all of such assets within this twelve (12) month
period, Sterling may not thereafter Transfer such assets, in
any form or in any combination, to a third party unless
Sterling again extends an Offer to BP pursuant to this clause
(vi), and BP's right contained in this Section 3.3.3 will
continue to apply to such assets. In the event that BP makes a
Proposal for the Transfer of any of the assets described in
the Offer, Sterling must notify BP, in writing, whether
Sterling accepts or declines the Proposal no later than thirty
(30) days after Sterling received the Proposal. The failure of
Sterling to make an election within such thirty (30) day
period will be deemed to be an election by Sterling to decline
the Proposal. If Sterling declines or is deemed to have
declined the Proposal, Sterling may then Transfer any of the
assets described in the Offer to a third party, without BP's
consent, if, and only if, (a) the consideration being provided
by the third party to Sterling for the Transfer of such assets
is greater than the consideration set forth in the Proposal,
(b) the terms of the third party Transfer are no more
favorable to the third party, taken as a whole, than those set
forth in the Proposal were to BP, and (c) the Transfer is
concluded no later than twelve (12) months after Sterling
declined or is deemed to have declined the Proposal. If
Sterling has the right to Transfer all of the assets that were
described in the Offer to a third party pursuant to the terms
of this clause (vi), and Sterling fails to complete the
Transfer of such assets within such twelve (12) month period,
Sterling may not thereafter Transfer such assets, in any form
or in any combination, to a third party unless Sterling again
extends an Offer to BP pursuant to this clause (vi), and BP's
right contained in this Section 3.3.3 will continue to apply
to such assets.
3.3.4 If Sterling is Transferring any assets to a third party
pursuant to Section 3.3.3 above (other than a Transfer
pursuant to clause (v) above or a Transfer pursuant to clause
(vi) above for which BP declined, or is deemed to have
declined, to make a Proposal), Sterling will provide BP with
(i) in the case of a proposed Transfer of a portion of the AN
Plant, at least ten (10) calendar days prior written notice
before the expected Transfer is to take place, or (ii) in the
case of a proposed Transfer of the entire AN Plant, at least
thirty (30) calendar days prior written notice before the
expected Transfer is to take place. Subject to the receipt by
Sterling of appropriate confidentiality agreements, BP has the
right to have an independent third party auditor selected by
BP (the "Auditor) audit the books and records of Sterling, at
reasonable times during normal business hours, to determine
whether Sterling has complied with, and any Transfer is in
accordance with, the terms of Section 3.3.3 hereof, except as
such access may be prohibited by law or third party
confidentiality agreements existing as of the date this ER
Agreement is executed. The Auditor will thereupon have the
right
7
to make copies of and abstracts from such books, records, and
accounts, at BP's expense, which copies may be removed from
the premises of Sterling and retained by the Auditor, subject
to the terms of any confidentiality agreement between Sterling
and BP regarding the use of such information. It is agreed
that the Auditor may report to BP only its conclusions
resulting from such Auditor's review of Sterling data, and
nothing else. In the event that the auditor determines that
any proposed Transfer would not be in compliance with the
terms of Section 3.3.3 hereof, Sterling will not Transfer such
assets without first complying with the terms and conditions
of Section 3.3.3 hereof.
3.3.5 If the AN Agreements are terminated pursuant to this
Section 3.3, the provisions of Section 3.7.3 will apply.
3.4 Termination for Material Breach. In the event that a party has
committed a material breach of an AN Agreement and has not cured the
material breach within ninety (90) days after the non-breaching party
provided the breaching party with written notice of such material
breach, the non-breaching party may provide written notice to the
breaching party that it is terminating the AN Agreements, such
termination to be effective twelve (12) months after the date the
breaching party received the notice of termination. For purposes of
this ER Agreement, a "material breach" means (i) the failure of either
party or ANEXCO to supply or accept a material quantity of raw
materials, finished products, or services as and when required under
the terms and conditions of any of the AN Agreements (except to the
extent such nonperformance is excused due to force majeure or the
express terms of this ER Agreement or the relevant AN Agreement), (ii)
the failure of a party to obey any order of the arbitrators when such
order was made as a part of the Dispute Resolution Process set forth in
Section 11 of this ER Agreement; provided, however, that if the matter
in dispute involves less than two million dollars ($2,000,000) during
any twelve (12) month period, the failure by either party to comply
with such arbitrator's order will not be considered a material breach
hereunder so long as the party that did not comply with such
arbitrator's order pays the other party any damages associated with the
non-complying party's failure to comply with the arbitrator's order if,
as, and when such damages are incurred by the other party, (iii) the
failure to pay within thirty (30) days of the date when due any amount
in excess of $250,000 that is not disputed in good faith by such party
or (iv) any breach of any of the AN Agreements that is likely to have
an adverse effect, in an amount that will exceed two million dollars
($2,000,000) during any twelve (12) consecutive month period, on the
business, financial position, results of operations, or cash flows of
Sterling, if BP is the breaching party, or of BP's Nitriles Business
Unit, if Sterling is the breaching party. If the AN
8
Agreements are terminated pursuant to this Section 3.4, the provisions
of Section 3.7.4 of this ER Agreement will apply.
3.5 Termination due to Court Order. All the AN Agreements will terminate if
any of the AN Agreements is terminated due to a final order of a court
or governmental agency of competent jurisdiction that is not the
subject of an existing appeal and, for any reason whatsoever, can no
longer be appealed. If the AN Agreements are terminated pursuant to
this Section 3.5, the provisions of Section 3.7.5 of this ER Agreement
will apply.
3.6 Termination for Force Majeure. In the event that either party declares
force majeure under any AN Agreement, and the force majeure event
remains in effect for a period of six (6) months or more, the
non-declaring party may give the declaring party written notice that
the non-declaring party is terminating the AN Agreements. Such notice
will include the date upon which the AN Agreements will terminate,
provided that, such termination may be effective no earlier than three
(3) months, nor later than twelve (12) months, after the date the
non-terminating party received the termination notice. If the
non-declaring party fails to specify a date in its notice, the AN
Agreements will terminate on the date that is three (3) months after
the date the non-terminating party receives the notice. If the AN
Agreements are terminated pursuant to this Section 3.6, the provisions
of Section 3.7.6 of this ER Agreement will apply.
3.7 Effect of Termination.
3.7.1 Optional Termination. If the AN Agreements are terminated
pursuant to the first sentence of Section 2 hereof, the
provisions of Section 5 of this ER Agreement will apply and BP
will continue to offer AN Catalyst for sale to Sterling and
Sterling will continue to buy AN catalyst from BP in the
manner set forth in Section 3.7.9 below.
3.7.2 AN Plant does not Start Up. If the AN Agreements are
terminated pursuant to Section 3.2 hereof, Sterling will
promptly refund, no later than September 30, 2003, to BP: (i)
any and all payments, for both expense and capital items, made
by BP in connection with the restart of the AN Plant and BP
will have no liability to Sterling for any restart costs
thereafter, including any such costs invoiced but not yet due;
(ii) * * of the Fixed Costs that BP paid Sterling each month
since April 1, 2003 in accordance with Section 6.2.2 of this
ER Agreement; and (iii) the refund of cure costs payment of
seven hundred seventy thousand dollars ($770,000) BP made to
Sterling as required by the Order Authorizing Assumption of
Acrylonitrile Agreements on Negotiated Terms and Approving
Compromise of Controversies Presented by Negotiated Terms that
the Bankruptcy
9
Court entered on November 20, 2002 (the "Assumption Order").
In addition, if the AN Agreements are terminated pursuant to
Section 3.2 hereof, (a) BP has the right to elect to purchase
from Sterling at a cost of * * all of Sterling's interest in
ANEXCO (including all contract rights) and, if BP elects to
purchase such interest in ANEXCO, Sterling will sell its
interest in ANEXCO to BP, on the date the AN Agreements
terminate, free and clear of all liens, claims, encumbrances,
pledges, hypothecations, security interests, options, charges
and any other adverse claims of any third party of any sort
whatsoever, whether voluntarily incurred or arising by
operation of law (each, a "Lien"), (b) BP will continue to
offer AN Catalyst for sale to Sterling and Sterling will
continue to buy AN catalyst from BP in the manner set forth in
Section 3.7.9 below, and (c) if Sterling Permanently Shuts
Down the AN Plant, BP has the right to elect to purchase from
Sterling at a cost of * * all AN catalyst supplier by BP that
is located at the AN Plant by providing Sterling with written
notice of such election within thirty (30) days after the date
on which Sterling Permanently Shuts Down the AN Plant, the
failure of BP to provide Sterling with written notice of such
election by such time being deemed an election by BP to
purchase such AN catalyst. In the event that BP elects or is
deemed to have elected to purchase such AN catalyst, the sale
of such AN catalyst will occur promptly after BP elects to
purchase such AN catalyst or Sterling shuts down the AN Plant,
whichever is later, free and clear of all Liens. "Permanently
Shuts Down the AN Plant" is defined to occur on the earliest
of (A) the date BP receives written notice from Sterling that
it is permanently shutting down the AN Plant, (B) the date
Sterling publicly announces that it is permanently shutting
down the AN Plant, or (C) the date on which both of the
following have occurred (x) the AN Plant is not operating and
(y) Sterling has laid off, fired, or otherwise terminated, a
majority of its employees assigned to work at the AN Plant or
has reassigned a majority of such employees for a period of
more than twenty four (24) months; provided, however, that in
the case of each of (A), (B), or (C) above, such event occurs
within five (5) years after the date the AN Agreements
terminate. In the event BP elects not to buy Sterling's
interest in ANEXCO, or fails to make an election on or before
the date on which the AN Agreements terminate, the parties
will * * * (as defined in Section 3.7.8.1 below) in the manner
set forth in Section 3.7.8 below.
3.7.3 AN Plant Shut Down. If the AN Agreements are terminated
pursuant to Section 3.3 hereof: (i) BP has the right to elect
to purchase from Sterling at a cost of * * all of Sterling's
interest in ANEXCO (including all contract rights) and, if BP
elects to purchase such interest in ANEXCO, Sterling will sell
its interest in ANEXCO
10
to BP, on the date the AN Agreements terminate, free and clear
of all Liens; (ii) BP has the right to elect to purchase from
Sterling at a cost of * * all AN catalyst supplied by BP that
is located at the AN Plant by providing Sterling with written
notice of such election within thirty (30) days prior to the
date on which the AN Agreements terminate or the expiration of
the Extension Period (if applicable), whichever is later, the
failure of BP to provide Sterling with written notice of such
election by such time being deemed an election by BP to
purchase such AN catalyst, and in the event that BP elects, or
is deemed to have elected, to purchase such AN catalyst, such
sale will occur on the date the AN Agreements terminate, free
and clear of all Liens; (iii) Sterling will pay BP, within
sixty (60) days after the date the AN Agreements terminate,
the BP Net Unrecouped Investment Amount (as such term is
defined in the Production Agreement), as of the date the AN
Plant shuts down; and (iv) BP will pay Sterling either * * of
Sterling's actual costs and expenses of shutting down the AN
Plant or * * , whichever amount is less, as BP's sole and
exclusive obligation to pay Sterling for any and all costs and
expenses of shutting down the AN Plant. In the event BP elects
not to buy Sterling's interest in ANEXCO, or fails to make an
election on or before the date on which the AN Agreements
terminate, the applicable provisions of Section 3.7.8 below
will apply.
3.7.4 Material Breach. If the AN Agreements are terminated pursuant
to Section 3.4 hereof: (i) BP will act as Sterling's agent in
the Joint Venture Territory (as such term is defined in the
ANEXCO JV Agreement) in the manner set forth in Section 3.7.7
hereof; (ii) the parties will * * in the manner set forth in
Section 3.7.8 below; and (iii) BP will continue to offer AN
Catalyst for sale to Sterling and Sterling will continue to
buy AN catalyst from BP in the manner set forth in Section
3.7.9 below. In addition, if Sterling terminates the AN
Agreements pursuant to Section 3.4 hereof, BP will pay to
Sterling, on the date the AN Agreements terminate, as
liquidated damages and not as a penalty, the applicable amount
set forth in Exhibit A attached hereto, and if BP terminates
the AN Agreements pursuant to Section 3.4 hereof, Sterling
will pay to BP, on the date the AN Agreements terminate, as
liquidated damages and not as a penalty, the applicable amount
set forth in Exhibit A attached hereto.
3.7.5 Court Order. If the AN Agreements are terminated pursuant to
Section 3.5 hereof: (i) BP will act as Sterling's agent in the
Joint Venture Territory in the manner set forth in Section
3.7.7 hereof unless and except to the extent such arrangement
is barred by the court or agency order; (ii) the parties will
* * in the manner set forth
11
in Section 3.7.8 below; and (iii) BP will continue to offer AN
Catalyst for sale to Sterling and Sterling will continue to
buy AN catalyst from BP in the manner set forth in Section
3.7.9 below. In addition, if this Agreement is terminated
pursuant to Section 3.5 hereof, Sterling will pay to BP,
quarterly, an amount equal to the Net Margin (if any) on
Product (as such terms are defined in the Production
Agreement) produced from the AN Plant during each calendar
quarter after the date of termination in excess of * * of the
Rated Capacity (as such term is defined in the Production
Agreement) then in effect which is sold or otherwise provided
to a third party during such calendar quarter. Such payments
will be made for each calendar quarter during the period from
the date of termination until the earlier to occur of: (a) the
date on which the aggregate amount of such payments equals the
BP Net Unrecouped Investment Amount as of the date the AN
Agreements terminate, or (b) the earliest possible date the AN
Agreements could have been terminated pursuant to the first
sentence of Section 2 of this ER Agreement. Nothing herein
requires Sterling to pay to BP, in the aggregate, a sum
greater than the BP Net Unrecouped Investment Amount as of the
date the AN Agreements terminate or requires Sterling to
produce any amount of Product.
3.7.6 Force Majeure. If Sterling terminates the AN Agreements
pursuant to Section 3.6 hereof: (i) BP will act as Sterling's
agent in the Joint Venture Territory in the manner set forth
in Section 3.7.7 hereof; (ii) upon termination of the AN
Agreements, the parties will * * in the manner set forth in
Section 3.7.8 below; and (iii) BP will continue to offer AN
Catalyst for sale to Sterling and Sterling will continue to
buy AN catalyst from BP in the manner set forth in Section
3.7.9 below. If BP terminates the AN Agreements pursuant to
Section 3.6 hereof: (a) BP has the right to elect to purchase
from Sterling at a cost of * * all of Sterling's interest in
ANEXCO (including all contract rights) and, if BP elects to
purchase such interest in ANEXCO, Sterling will sell its
interest in ANEXCO to BP, on the date the AN Agreements
terminate, free and clear of all Liens, (b) Sterling will pay
BP, within sixty (60) days after the date the AN Agreements
terminate, the BP Net Unrecouped Investment Amount, as of the
date the AN Agreements terminate, (c) unless Sterling
Permanently Shuts Down
12
the AN Plant, BP will continue to offer AN Catalyst for sale
to Sterling and Sterling will continue to buy AN catalyst from
BP in the manner set forth in Section 3.7.9 below, and (d) if
Sterling Permanently Shuts Down the AN Plant, BP has the right
to elect to purchase from Sterling at a cost of * * all AN
catalyst supplier by BP that is located at the AN Plant by
providing Sterling with written notice of such election within
thirty (30) days after the date on which Sterling Permanently
Shuts Down the AN Plant, the failure of BP to provide Sterling
with written notice of such election by such time being deemed
an election by BP to purchase such AN catalyst. In the event
that BP elects or is deemed to have elected to purchase such
AN catalyst, the sale of such AN catalyst will occur promptly
after BP elects or is deemed to have elected to purchase such
AN catalyst, or Sterling has laid off, fired, or otherwise
terminated, a majority of its employees assigned to work at
the AN Plant or has reassigned a majority of such employees
for a period of more than twenty four (24) months, whichever
is later, free and clear of all Liens. In the event BP elects
not to buy Sterling's interest in ANEXCO, or fails to make an
election on or before the date on which the AN Agreements
terminate, the parties will * * in the manner set forth in
Section 3.7.8 below.
3.7.7 Agency. If the AN Agreements are terminated pursuant to
Section 3.4, Section 3.5, or Section 3.6 hereof, for twelve
(12) months after the date the AN Agreements terminate, BP
will act as Sterling's agent for the sale of AN in the Joint
Venture Territory, with the intent but not the obligation, to
sell volumes of AN no less than the Sterling Maximum AN Volume
(as defined in Section 9.2.3.3 hereof). The parties
acknowledge and agree that (i) BP's sole obligation under this
Section 3.7.7 is to use commercially reasonable efforts to
sell Sterling's AN at such volumes, (ii) BP is not required to
preferentially sell Sterling AN in lieu of selling BP AN, and
(iii) BP will have no liability to Sterling whatsoever if BP
is unable to sell Sterling's AN at such volumes, whether such
liability is based on contract, tort, negligence, strict
liability, indemnity, or otherwise. If the AN Agreements are
terminated pursuant to Section 3.4, Section 3.5, or Section
3.6 hereof, Sterling will have the right to elect to have the
agency relationship with BP be on an exclusive or a
non-exclusive basis by providing BP with written notice of
such election (i) within ninety (90) days after the date on
which the applicable notice of termination is received by the
non-terminating party or (ii) in the case of a termination
pursuant to Section 3.5, within ninety (90) days after the
date on which Sterling becomes aware that the AN Agreements
will be terminating pursuant to that Section, or, if the AN
Agreements will be terminating prior to such time, within ten
(10) calendar days after the AN Agreements terminate or by the
ninetieth (90th) day after the date on which Sterling becomes
aware that the AN Agreements will be terminating, whichever
occurs first, and the failure of Sterling to provide BP with
written notice of such election by the applicable time being
deemed an election by Sterling to have such agency
relationship be on a non-exclusive basis. If Sterling elects
to have such agency relationship be on an exclusive basis,
Sterling will not
13
directly or indirectly sell AN into the Joint Venture
Territory nor will Sterling knowingly sell AN to third parties
who intend to sell or resell the AN into the Joint Venture
Territory, and for all Sterling AN sold into the Joint Venture
Territory during such period, Sterling will pay BP a
commission equal to * * of the net invoice price, or * * per
metric ton, whichever amount is greater, on all sales BP makes
on behalf of Sterling to customers that are * * * or * * of
the net invoice price, or * * per metric ton, whichever amount
is greater, on all other sales BP makes on behalf of Sterling,
in either case, with such price adjusted to be on a FOB Texas
City, Texas, basis for purposes of calculating the commission
and, in addition, Sterling will reimburse BP for all relevant
costs to service such sales, including, but not limited to,
all fixed and variable logistics costs and all customer
fulfillment costs, with the precise calculation of the exact
amount of such costs to be mutually agreed upon. If Sterling
elects to have such agency relationship be on a non-exclusive
basis, (a) for all Sterling AN sold into the Joint Venture
Territory during such period in transactions arranged by BP,
Sterling will pay BP a commission equal to * * of the net
invoice price of such sales, or * * per metric ton, whichever
amount is greater, with such price adjusted to be on a FOB
Texas City, Texas, basis for purposes of calculating the
commission, and (b) if Sterling elects to have BP service any
such sales of Sterling AN, BP will service such sales and
Sterling will reimburse BP for all relevant costs to service
such sales, including, but not limited to, all fixed and
variable logistics costs and all customer fulfillment costs,
with the precise calculation of the exact amount of such costs
to be mutually agreed upon.
3.7.8 * * * * * * * * * * * * * * * * (Approximately three
and one-half pages have been omitted pursuant to the
request for confidential treatment.)
3.7.8.2 From and after the completion of * * pursuant to this
Section 3.7.8 until the termination of the AN
Agreements, the parties will cause and direct ANEXCO
to no longer enter into any new or additional AN
Sales Contract.
3.7.8.3 Notwithstanding anything to the contrary
contained herein or in any of the AN Agreements, from
and after the time that this Section 3.7.8 applies
until the termination of the AN Agreements, ANEXCO
will no longer have the sole and exclusive
responsibility for the marketing, sale or
distribution of AN in the Joint Venture Territory on
behalf of BP and Sterling, and both Sterling and BP
may market, sell and distribute AN in the Joint
Venture Territory
14
but only with respect to (i) any volume a party might
make to a customer pursuant to * * * , (ii) any
volume to a customer that replaces volume that such
customer previously purchased under an AN Sales
Contract that terminated in accordance with its
terms after this Section 3.7.8 became applicable or
that was terminated, canceled or lapsed after this
Section 3.7.8 became applicable, (iii) any additional
AN volumes that a customer under any AN Sales
Contract * * * may wish to purchase in excess
of the maximum volume specified in its AN Sales
Contract, (iv) any volumes that any customer in the
Joint Venture Territory may wish to buy, without a
written, countersigned agreement, or (v) any volume
to any customer that is not then a party to an AN
Sales Contract. In addition, notwithstanding anything
to the contrary contained herein or in any of the
other AN Agreements, both parties will be entitled,
during such period, to solicit orders from customers
in the Joint Venture Territory (including ANEXCO
customers) for delivery of AN after the termination
of the AN Agreements. Either party may request that
ANEXCO continue to service, under the terms of the AN
Agreements to the extent applicable, * * * any other
sales of AN that such party makes in the Joint
Venture Territory, in either case, until such time
that the requesting party determines ANEXCO's
services are no longer required or until the
termination of the AN Agreements, whichever comes
first. If a party elects to use ANEXCO to service * *
any other sales of AN in the Joint Venture Territory,
ANEXCO will service such AN sales and the requesting
party will pay ANEXCO a commission equal to * * * ,
whichever amount is greater, on all such sales ANEXCO
services on behalf of that party to customers who are
buying AN from the requesting party pursuant to a
written, countersigned contract, or * * * , whichever
amount is greater, on all other sales ANEXCO services
on behalf of the requesting party, in either case,
with such price adjusted to be on a FOB Texas City,
Texas, basis for purposes of calculating the
commission and, in addition, that party will
reimburse ANEXCO for all relevant costs to service
such sales, including, but not limited to, all fixed
and variable logistics costs and all customer
fulfillment costs, with the precise calculation of
the exact amount of such costs to be mutually agreed
upon.
3.7.8.4 * * * * * * * * * * * * * * *
15
3.7.9 Catalyst Supply. If the AN Agreements are terminated pursuant
to the first sentence of Section 2 hereof or pursuant to
Section 3.2, Section 3.4, Section 3.5, or Section 3.6 hereof,
for a * * * period after termination of the AN Agreements, BP
will continue to offer AN Catalyst for sale to Sterling and
Sterling will continue to buy AN catalyst from BP pursuant to
the terms and conditions set forth in the Catalyst Agreement
as that agreement existed just prior to its termination
hereunder (hereinafter the "Reinstated Catalyst Agreement"),
except that Paragraph (i) of Part Two of the Reinstated
Catalyst Agreement will be amended, with such amendment
effective as of the termination of the AN Agreements, to read
in its entirety as follows:
(i) Term: The term of the Contract will continue for
* * and then from year to year thereafter unless
either party gives the other party twenty four (24)
months prior written notice of its election to
terminate this Contract, such termination to be
effective only on the * * anniversary of the
Effective Date or any anniversary thereafter;
provided, however, no such termination of this
Contract will relieve Buyer of its obligation to pay
for any Product delivered by Seller to Buyer prior to
such termination.
In addition, the "Effective Date" as set forth in Paragraph
(j) of Part Two of the Reinstated Catalyst Agreement will at
the same time be amended to be, in its entirety, the date of
termination of the AN Agreements.
3.7.10 Wind Up and Dissolution. If the AN Agreements are terminated
for any reason, the provisions of Article XI of the ANEXCO LLC
Agreement will apply unless BP has exercised its right to
purchase Sterling's interest in ANEXCO for * * pursuant to
Section 3.7.2, Section 3.7.3, or Section 3.7.6 hereof.
3.7.11 Survival; Effect on Other Rights. All provisions of this ER
Agreement that may reasonably be interpreted as surviving the
termination of this ER Agreement will survive such
termination. Notwithstanding anything to the contrary
contained herein or in any of the AN Agreements, the
termination of the AN Agreements for any reason will not
affect any rights or remedies of either party arising out of
any breach of any of the AN Agreements prior to such
termination or the right of either of the parties to receive
any amount earned or accrued thereunder prior to such
termination or otherwise payable with respect to any period
prior to such termination. Except as otherwise provided in
this Section 3, neither party will be obligated to make any
payment to the other party
16
solely in connection with or as a result of the termination of
the AN Agreements.
4. AMENDMENTS TO AN AGREEMENTS AS A RESULT OF SECTIONS 1, 2, AND 3 ABOVE
4.1 Amendments to Production Agreement. Effective as of the Effective Date
of this ER Agreement, the Production Agreement is modified as set forth
in this Section 4.1.
4.1.1 Section 2.1 of the Production Agreement is hereby amended to
read in its entirety as follows:
2.1 The term of this Agreement, the rights of
the parties to terminate this Agreement and
the effects of the expiration or termination
of this Agreement will be as set forth in
that certain Acrylonitrile Expanded
Relationship and Master Modification
Agreement dated as of June 19, 2003 between
BP and Sterling (the "ER Agreement").
4.1.2 Section 2.2 and Section 2.3 of the Production Agreement are
hereby amended to respectively read in their entirety as
follows:
2.2 [Intentionally Omitted].
2.3 [Intentionally Omitted].
4.1.3 Section 13.5 and Section 13.6 of the Production Agreement are
hereby amended to respectively read in their entirety as
follows:
13.5 Solely for the valuation purposes under this
Agreement, any Capital Project for which BP
has reimbursed Sterling for a portion of the
Capital Expenditures in accordance with the
terms of this Agreement shall, unless
otherwise agreed by the parties, be deemed
to have a useful life of ten years and the
Capital Expenditures associated therewith
shall be amortized on a straight-line basis.
13.6 Prior to the expiration or termination of
this Agreement, BP shall be entitled to the
benefit of any and all depreciation and
amortization or expense deductions with
respect to the portion of any Capital
Expenditures for which BP has reimbursed
Sterling, and Sterling shall be entitled to
the benefit of any and
17
all depreciation and amortization or expense
deductions with respect to the portion of
any Capital Expenditures which has not been
reimbursed by BP. Following the expiration
or termination of this Agreement, (a) BP
shall be entitled to the benefit of any and
all depreciation and amortization or expense
deductions with respect to the portion of
any Capital Expenditures for which BP has
reimbursed Sterling minus the amount that
Sterling has paid to BP if Sterling is
required to pay the BP Net Unrecouped
Investment Amount and (b) Sterling shall be
entitled to the benefit of any and all other
depreciation and amortization or expense
deductions with respect to the AN Plant,
including, if Sterling is required to and
has paid the BP Net Unrecouped Investment
Amount, any future depreciation and
amortization or expense deduction with
respect to any portion of any Capital
Expenditures for which Sterling has paid the
BP Net Unrecouped Investment Amount.
4.1.4 Section 19.2 of the Production Agreement is hereby amended by
replacing the phrase "during the Initial Term or any
Additional Term" appearing therein with the phrase "during the
term of this Agreement."
4.1.5 Section 22.1 and Section 22.2 of the Production Agreement are
hereby amended by replacing the phrase "At the termination of
the Initial Term or any Additional Term" appearing therein
with the phrase "At the termination of this Agreement."
4.1.6 Exhibit A to the Production Agreement is hereby amended by
deleting the definitions of "Additional Term," Cross
Termination Right," "Initial Term," and "Termination Notice"
therefrom.
4.1.7 The definition of "BP Net Unrecouped Investment Amount"
appearing in Exhibit A to the Production Agreement is hereby
amended to read in its entirety as follows:
BP Net Unrecouped Investment Amount means
the actual Project Cost plus the sum of the Capital
Expenditures funded by BP prior to termination of
this Agreement under Section 2.3, less depreciation
thereon, based on amortization over ten years. As of
March 31, 2003, the BP Net Unrecouped Investment
Amount is * * * .
18
4.1.8 In Exhibit A to the Production Agreement, the definition of
"Catalyst Sales Contract" is hereby amended to read in its
entirety as follows:
Catalyst Sales Contract means that certain
Catalyst Sales Contract dated as of March 31, 1998
between BP and Sterling.
4.1.9 In Exhibit A to the Production Agreement, the definition of
"Contract Year" is hereby amended to read in its entirety as
follows:
Contract Year means a period of 12
consecutive Months beginning on the first Day of
January next following the Effective Date, and
beginning on the first Day of January of each
subsequent year during the term of this Agreement.
The period of time from the Effective Date until the
first day of the January next following the Effective
Date, and the period of time from the first day of
January last occurring during the term of this
Agreement until the termination of this Agreement
shall each be considered to be a Contract Year,
provided that in each such period the Minimum Annual
Contract Quantity and the Maximum Annual Contract
Quantity shall be prorated.
4.2 Amendments to ANEXCO JV Agreement. Effective as of the Effective Date
of this ER Agreement, the ANEXCO JV Agreement is modified as set forth
in this Section 4.2.
4.2.1 Section 6.1 of the ANEXCO JV Agreement is hereby amended to
read in its entirety as follows:
6.1 Term, Termination and Effect of
Termination. The term of this Agreement, the rights
of the parties to terminate this Agreement and the
effects of the expiration or termination of this
Agreement will be only as set forth in the ER
Agreement.
4.2.2 Section 6.2, Section 6.3, Section 6.4, and Section 6.5 of the
ANEXCO JV Agreement are hereby amended to respectively read in
their entirety as follows:
6.2 [Intentionally Omitted].
6.3 [Intentionally Omitted].
6.4 [Intentionally Omitted].
19
6.5 [Intentionally Omitted].
4.2.3 Section 10.2 of the ANEXCO JV Agreement is hereby amended to
read in its entirety as follows:
10.2 Rights and Obligations upon Default.
Upon the occurrence of any Default, the
non-defaulting Party may, at its option, make a claim
for damages pursuant to Section 10.3 hereof and, to
the extent such Default triggers any rights or
remedies under the ER Agreement, exercise any of its
rights available under the ER Agreement.
4.3 Amendments to ANEXCO LLC Agreement. Effective as of the Effective Date
of this ER Agreement, the ANEXCO LLC Agreement is modified as set forth
in this Section 4.3.
4.3.1 Section 2.05(c) of the ANEXCO LLC Agreement is hereby amended
to read in its entirety as follows:
(c) the occurrence of any event that, under
the terms of that certain Acrylonitrile Expanded
Relationship and Master Modification Agreement dated
as of June 19, 2003 between BP and Sterling (the "ER
Agreement"), results in a termination of the AN
Agreements (as defined in the ER Agreement);
4.3.2 Section 2.05(d) and Section 2.05(e) of the ANEXCO LLC
Agreement are hereby amended to respectively read in their
entirety as follows:
(d) [Intentionally Omitted];
(e) [Intentionally Omitted];
4.4 Amendments to Catalyst Agreement. Effective as of the Effective Date of
this ER Agreement, Paragraph (i) of Part Two of the Catalyst Agreement
is hereby amended to read in its entirety as follows:
(i) The term of this Contract, the rights of the
parties to terminate this Contract and the effects of the
expiration or termination of this Contract will be as set
forth in that certain Acrylonitrile Expanded Relationship and
Master Modification Agreement dated as of June 19, 2003
between BP and Sterling (the "ER Agreement"). Termination of
this Contract will be without prejudice to outstanding orders.
20
5. WINDING UP OF ANEXCO
5.1 This Section 5 will apply only if the AN Agreements are terminated
pursuant to the first sentence of Section 2 of this ER Agreement. For
purposes of this ER Agreement, the "Wind up Period" means the period
commencing on the date that is twenty four (24) months prior to the
intended termination date of the AN Agreements and continuing
thereafter until the termination of the AN Agreements.
5.2 From and after * * * 5 until the termination of the AN Agreements, the
parties will cause and direct ANEXCO to no longer enter into any new or
additional AN Sales Contracts.
5.3 Notwithstanding anything to the contrary contained herein or in any of
the AN Agreements, during the Wind up Period, ANEXCO will no longer
have the sole and exclusive responsibility for the marketing, sale, or
distribution of AN in the Joint Venture Territory on behalf of BP and
Sterling, and both Sterling and BP may market, sell, and distribute AN
in the Joint Venture Territory but only with respect to (i) any volume
a party might make to a customer pursuant to * * * , (ii) any volume to
a customer that replaces volume that such customer previously purchased
under an AN Sales Contract that terminated in accordance with its terms
during the Wind up Period or that was terminated, canceled, or lapsed
during the Wind up Period, (iii) any additional AN volumes that a
customer under any AN Sales Contract * * * may wish to purchase in
excess of the maximum volume specified in its AN Sales Contract, (iv)
any volumes that any customer in the Joint Venture Territory may wish
to buy, without a written, countersigned agreement in place, during the
last twelve (12) months of the Wind up Period, or (v) any volume to any
customer that is not then a party to an AN Sales Contract. In addition,
notwithstanding anything to the contrary contained herein or in any of
the other AN Agreements, both parties will be entitled, during the Wind
up Period, to solicit orders from customers in the Joint Venture
Territory (including ANEXCO customers) for delivery of AN after the
termination of the AN Agreements. Either party may request that ANEXCO
* * * service any other sales of AN that such party makes in the Joint
Venture Territory, in either case, until such time that the requesting
party determines ANEXCO's services are no longer required or until the
termination of the AN Agreements, whichever comes first. If a party
elects to use ANEXCO to service * * any other sales of AN in the Joint
Venture Territory, ANEXCO will service such AN sales and the requesting
party will pay ANEXCO a commission equal to * * * , whichever amount is
greater, on all such sales ANEXCO services on behalf of that party to
customers who are buying AN from the requesting party pursuant to a
written, countersigned contract, or * * * , whichever amount is
greater, on all other sales ANEXCO services on behalf of the requesting
party, in either case, with such price adjusted to be on a FOB Texas
City, Texas,
21
basis for purposes of calculating the commission, and, in addition,
that party will reimburse ANEXCO for all relevant costs to service such
sales, including, but not limited to, all fixed and variable logistics
costs and all customer fulfillment costs, with the precise calculation
of the exact amount of such costs to be mutually agreed upon.
5.4 * * * * * * * * * * * * *
5.5 * * * * * * * * * * * * *
5.6 * * * * * * * * * * * * *
5.7 * * * * * * * * * * * * *
5.8 * * * * * * * * * * * * *
5.9 * * * * * * * * * * * * *
5.10 * * * * * * * * * * * * * (An aggregate of approximately two pages have
been omitted from Sections 5.4 through 5.10 pursuant to the request for
confidential treatment.)
6. AMENDMENTS TO THE PRODUCTION AGREEMENT RELATED TO INCREASE IN CAPACITY
RIGHTS, START-UP COSTS, AND ANNUAL AND QUARTERLY MEETINGS
6.1 BP and Sterling agree to increase BP's Right (as defined in the
Production Agreement), and corresponding reimbursement obligations,
from * * to * * . Accordingly, effective as of April 1, 2003, the
Production Agreement is modified as set forth in this Section 6.1:
6.1.1 Section 13.1 of the Production Agreement is hereby amended by
replacing the word " * * " appearing therein with the word " *
* ."
6.1.2 Exhibit A of the Production Agreement is hereby amended by (i)
replacing the word * * with the word * * and (ii) replacing
the figure * * with the figure * * in each instance such word
and figure appear in the definitions of "Fixed Cost
Component," "Maximum Annual Contract Quantity," and "Right"
contained therein.
6.1.3 Exhibit A of the Production Agreement is hereby further
amended by replacing the figure * * appearing in the
definition of "Minimum Annual Contract Quantity" contained
therein with the figure * *
6.1.4 Exhibit A of the Production Agreement is hereby further
amended by replacing the figure * * appearing in the
definition of "Minimum Quarterly Contract Quantity" contained
therein with the figure * *
22
6.2 BP and Sterling agree that provisions in the Production Agreement
governing the division of costs and expenses do not reflect the
parties' intent as to how they should share the costs and expenses
solely related to the restart of the AN Plant that might occur prior to
August 31, 2003. Consequently, notwithstanding anything to the contrary
contained in this ER Agreement or the Production Agreement, the
responsibility of BP to reimburse Sterling for such costs and expenses
will be determined solely by reference to the following provisions:
6.2.1 During the period from November 20, 2002 (the date of
the Assumption Order) until April 1, 2003 (the "Start
Up Period"), BP will pay Sterling * * of the
aggregate Fixed Costs for each month up to a maximum
payment of * * per month, with such amount prorated
for any partial month.
6.2.2 After April 1, 2003, BP will pay Sterling * * of the
aggregate Fixed Costs for each month in accordance
with the terms of the Production Agreement.
6.2.3 BP will pay Sterling * * of Sterling's actual Capital
Expenditures (as such term is defined in the
Production Agreement) (i) associated with compliance
of the AN Plant with the "Chronic Excessive Emissions
Event" rules of the Texas Commission on Environmental
Quality, (ii) associated with its recent installation
of the T-11 tank at the AN Plant, and (iii) to
complete the installation of chillers at the AN
Plant.
6.2.4 BP will pay * * of Sterling's costs for make-up
catalyst and, if necessary, * * of Sterling's
replacement costs for catalyst.
6.2.5 BP will pay * * of Sterling's costs that it incurs
during the Start Up Period that are associated with
the replacement of equipment, motors, valves,
instrumentation, or similar items for the AN Plant,
up to a maximum amount of * * .
6.3 Effective as of April 1, 2003, the title to Article 3 of the Production
Agreement is hereby amended to read in its entirety "Article 3 -
Technology and Annual Meetings."
6.4 Effective as of the April 1, 2003, Article 3 of the Production
Agreement is hereby amended by adding a new Section 3.6 thereto to read
in its entirety as follows:
23
3.6 As soon as reasonably possible after the Effective Date (as
defined in the ER Agreement), and on or before each September
1st of each Contract Year thereafter, BP and Sterling will
hold a meeting (each such meeting, an "Annual Meeting") and
engage, in good faith, in a comprehensive annual budgetary
review and discuss the organizational, operating, Capital
Expenditure and health, safety, and environmental parameters
for the operation of the AN Plant for the next calendar year.
Such review will include discussions regarding (i) cost
budgets for direct fixed, direct variable, and indirect costs
for the ensuing year, (ii) sustaining and growth capital
budgets for maintenance, health safety, environment, and
Capital Expenditures and (iii) co-products revenue streams
budget for the ensuing year. The parties will mutually agree
upon the specific types of information that will be included
in each of the above categories. The objective of this overall
process will be to align, to the extent possible, the mutual
interests of the parties with respect to manufacturing
operations and to create shared value. This process also will
serve to try to identify possible process improvements and
other beneficial opportunities that the parties could, if
mutually agreed upon, try to execute for the benefit of both
parties. On or before March 1st, June 1st, September 1st, and
December 1st of each Contract Year, commencing with September
1, 2003, BP and Sterling will engage in a business review that
will include a review of the above information and the actual
performance compared to all agreed upon parameters, as well as
such other matters as BP and Sterling believe are pertinent to
the optimization of the parties' relationship under the AN
Agreements.
6.5 Effective as of April 1, 2003, Section 13.2 of the Production Agreement
is hereby amended by replacing the phrase "On or before October 1 of
each Contract Year" with the phrase "At each Annual Meeting".
6.6 Effective as of April 1, 2003, Section 15.2 of the Production Agreement
is hereby amended to read in its entirety as follows:
15.2 During the term of this Agreement, insurance on the Facility
and those parts of the Plant which serve the Facility shall be
maintained by Sterling in types and amounts and against such
risks as are typically insured against in the same general
area, by persons of comparable size engaged in the same or
similar business as Sterling but BP and Sterling may each
carry additional insurance, at its sole discretion and cost.
Sterling shall make BP an additional insured under the
policies evidencing such insurance coverages for liability
purposes only. In the event of a fire, explosion, flood,
hurricane or windstorm or other casualty resulting in the loss
of the Facility or a substantial part thereof, and Sterling
and BP cannot
24
agree whether or not the Facility should be repaired, Sterling
shall have the right to require that the Facility be repaired
and that the insurance proceeds first be applied to the
payment of all repair costs. In such event, the parties'
obligations under this Agreement shall continue, but Sterling
shall bear all costs of such repair in excess of the proceeds
of insurance and shall have the right to fully depreciate such
repair costs.
6.7 Effective as of April 1, 2003, the Production Agreement is hereby
amended by deleting Schedule 15.2 thereto in its entirety.
7. AMENDMENTS TO THE ANEXCO LLC AGREEMENT RELATED TO DISTRIBUTIONS AND
GOVERNANCE
7.1 The last sentence only of Section 6.05 of the ANEXCO LLC Agreement is
hereby amended to read in its entirety as follows:
All distributions of Assets of the Company in kind (other than
in connection with the winding up and liquidation of the
Company) shall be made in proportion to the respective
Percentage Interests of the Members on the date of any such
distribution and may be (as the Members specifically provide)
subject to existing Liabilities, except that * * * * * * .
7.2 The first sentence only of Section 7.02 of the ANEXCO LLC Agreement is
hereby amended to read in its entirety as follows:
The Company may not take any of the following actions unless
such action is required by this Agreement or has been approved
by the affirmative vote of at least * * Managers on the Board:
7.3 Section 7.02 (d) of the ANEXCO LLC Agreement is hereby amended to read
in its entirety as follows:
(d) approval of each Annual Business Plan, or any
material revision to any Annual Business Plan, if such Annual
Business Plan or revised Annual Business Plan does not
contemplate the Company selling the entire Sterling ANEXCO
Volume (as defined in the ER Agreement); provided, however,
that if such Annual Business Plan or revised Annual Business
Plan does contemplate the Company's sale of the entire
Sterling ANEXCO Volume, the approval of such Annual Business
Plan or revision will only require the affirmative vote of a
simple majority of the Whole Board;
25
7.4 Section 7.02 (g) of the ANEXCO LLC Agreement is hereby amended to read
in its entirety as follows:
(g) the sale, transfer, lease or other disposition of
any Asset of the Company if the aggregate fair market value of
the Assets disposed of in a single transaction, or a series of
related transactions, exceeds * * , except that if such sale,
transfer, lease, or other disposition of Assets (i) is
pursuant to a Contract entered into pursuant to an Annual
Business Plan, (ii) relates to a Member or the Company
entering into a third party contract under which such Member
or the Company is obligated to purchase Acrylonitrile that is
intended to be resold within the Joint Venture Territory, in
accordance with Section 5.2 of the Joint Venture Agreement, or
(iii) is for the purchase of Additional Volume (as that term
is defined in Section 9.4 of the ER Agreement), which in the
case of (i), (ii), or (iii), the approval of such will only
require the affirmative vote of a simple majority of the Whole
Board.
7.5 Section 7.02 (l) of the ANEXCO LLC Agreement is hereby amended by
replacing the figure * * appearing therein with the figure * *
7.6 Section 7.02 (m) of the ANEXCO LLC Agreement is hereby amended to read
in its entirety as follows:
(m) any matter that could reasonably be expected to
result in a Member being required to spend any amount in
excess of * * in order to comply with such matter (e.g., any
change in the specifications for acrylonitrile sold by the
Company that would require a Member to make over * * in
capital expenditures at its production facilities in order to
comply with such revised specifications) or any matter not in
the ordinary course of business that could reasonably be
expected to have an adverse effect, in an amount that will
exceed * * during any 12 consecutive month period, on the
business financial position, results of operations, or cash
flows of Sterling or BP's Nitriles Business Unit, provided
that, if a Member believes, in good faith, that any matter
that is proposed to be approved, or is apparently approved, by
less than * * Managers on the Board is subject to the
provisions of this clause (m), such Member must notify the
other Members of such belief by the earliest of the following
to occur: (i) as soon as is reasonably possible after such
Member forms such belief; (ii) if any Manager appointed by
that Member was at such Board meeting, within seven (7)
calendar days after the Board Meeting; or (iii) if no Manager
appointed by such Member were at such Board meeting, within
seven (7) calendar days after any Manager that attended the
Board Meeting provides written notice to the Member whose
26
Managers failed to attend the Board Meeting of the actions
taken by the Board at such Board Meeting; and provided
further, that if a Member does not so notify the other Members
as provided above with respect to a matter, that matter will
be deemed not to fall within the provisions of this paragraph
(m); and
7.7 The last sentence of Section 7.02 of the ANEXCO LLC Agreement is hereby
amended by replacing the phrase "a majority of the Board fails"
appearing therein with the phrase "at least * * Managers on the Board
fail."
7.8 The first sentence only of Section 7.03(a) of the ANEXCO LLC Agreement
is hereby amended to read in its entirety as follows:
(a) The number of Managers constituting the whole Board (the
"Whole Board") will be * * , * * of whom will be appointed by
BP (the "BP Representatives"), and * * of whom will be
appointed by Sterling (the "Sterling Representatives" and,
together with the BP Representatives, the "Representatives").
One of the BP Representatives will be the President.
7.9 The last sentence of Section 7.07 of the ANEXCO LLC Agreement is hereby
amended by replacing the phrase "a majority of the Managers" appearing
therein with the phrase "the consent of * * or more Managers."
7.10 The first sentence of Section 7.11 of the ANEXCO LLC Agreement is
hereby amended by replacing the phrase "a majority of the Whole Board"
appearing therein with the phrase "a majority of the Whole Board, at
least one of whom must be a Sterling Representative."
7.11 Section 7.15 of the ANEXCO LLC Agreement is hereby amended by replacing
the phrase "a majority of the Whole Board" appearing therein with the
phrase " * * or more Managers on the Board."
7.12 The first sentence of Section 7.16(c) of the ANEXCO LLC Agreement is
hereby amended by replacing the phrase "a majority of the Whole Board"
appearing therein with the phrase " * * or more Managers on the Board."
7.13 Section 8.01(a) of the ANEXCO LLC Agreement is hereby amended to read
in its entirety as follows:
(a) The officers of the Company shall be a Chairman of the
Board, a President, one or more Vice Presidents, a Secretary,
a Treasurer and such other officers as may be determined by
the Board from time to time. At each annual meeting of the
Board at which a quorum shall be present, at least * *
Managers on the Board shall
27
elect officers of the Company to succeed any officers whose
terms of office are scheduled to expire; provided however,
that BP has the sole right to appoint, remove, and replace the
Chairman of the Board and the President. Any two or more
offices may be held by the same person, except that the
offices of President and Secretary may not be held by the same
person. No officer (other than the Chairman of the Board and
the President) needs to be a Manager. No officer needs to be a
Member or a resident of the State of Delaware.
7.14 Section 8.01 of the ANEXCO LLC Agreement is hereby amended by adding a
new paragraph (c) thereto to read in its entirety as follows:
(c) BP has the sole right to designate the Chairman
of the Board and the President of the Company, and BP may
exercise such right at any time and from time to time. Upon
the death, resignation, or removal of the Chairman of the
Board or the President, BP has the sole right to designate a
new individual as Chairman of the Board or President, as the
case may be. Neither the Board nor any Member other than BP
will have any authority to appoint the Chairman of the Board
or the President.
7.15 The first three sentences of Section 8.03 of the ANEXCO LLC Agreement
are hereby amended to read in their entirety:
BP may, in its sole discretion, by written notice to the
Company, remove the Chairman of the Board or the President, or
both, at any time, with or without cause. Neither the Board
nor any Member other than BP will have any authority to remove
the Chairman of the Board or the President. Each of the other
officers of the Company may be removed at any time by the
affirmative vote of at least * * Managers on the Board, with
or without cause.
7.16 The second sentence only of Section 8.04 of the ANEXCO LLC Agreement is
hereby amended to read in its entirety as follows:
Whenever a vacancy shall occur (a) in the office of President,
such vacancy may only be filled by BP, and (b) in any office
of the Company (other than Chairman of the Board or
President), such vacancy may only be filled by the affirmative
vote of at least * * Managers on the Board.
7.17 Section 8.07 of the ANEXCO LLC Agreement is hereby amended by replacing
the phrase "the Chief Executive Officer" appearing therein with the
phrase "a Manager on the Board with full voting rights and the Chief
Executive Officer."
28
7.18 The third sentence only of Section 11.01 of the ANEXCO LLC Agreement is
hereby amended by replacing the phrase "majority of the Whole Board"
appearing therein with the phrase "at least * * Managers on the Board."
7.19 The fourth sentence of Section 11.01 of the ANEXCO LLC Agreement is
hereby amended by relettering clauses (c) and (d) thereto as clauses
(d) and (e) and adding a new clause (c) thereto to read in its entirety
as follows:
(c) * * * * * * ;
8. AMENDMENTS TO THE ANEXCO JV AGREEMENT RELATED TO CHANGES IN SALES
VOLUMES
8.1 Effective as of the Effective Date of this ER Agreement, Sections 1.3,
1.4, 1.5, 1.12, 1.23 and 1.33 of the ANEXCO JV Agreement are hereby
amended to respectively read in their entirety as follows:
1.3 [Intentionally Omitted].
1.4 [Intentionally Omitted].
1.5 [Intentionally Omitted].
1.12 [Intentionally Omitted].
1.23 [Intentionally Omitted].
1.33 [Intentionally Omitted].
8.2 Effective as of the Effective Date of this ER Agreement, Subpart (ii)
(a) only of the first sentence of Section 3.2 of the ANEXCO JV
Agreement is hereby amended to read in its entirety as follows:
* * * * * * * * *
8.3 The second sentence of Section 3.4 of the ANEXCO JV Agreement is hereby
amended by replacing the phrase "used in determining each Party's BRV"
appearing therein with the phrase "treated in the same manner as such
Party's own production of Acrylonitrile."
8.4 Effective as of the Effective Date of this ER Agreement, the fourth
sentence only of Article 4 of the ANEXCO JV Agreement is hereby amended
to read in its entirety as follows:
29
At the beginning of each year, the President of the Company
will, in good faith, and consistent with Section 9 of the ER
Agreement, estimate the actual volume of Acrylonitrile that
each Party will sell to the Company during that year, and the
President's estimated volume for a Party, divided by the
President's good faith estimation of the actual volume of
Acrylonitrile that both Parties will sell to the Company
during that same year, will be that Party's "Sales Ratio." If,
at any time during the year, the actual volumes sold to the
Company appear to be materially different from the estimates
the President used to calculate the Sales Ratios, the
President may, in good faith, and consistent with Section 9 of
the ER Agreement, modify the Sales Ratios to reflect his then
current best estimate of the volumes to be sold. * * * * *
8.5 Effective as of the Effective Date of this ER Agreement, Article 5 of
the ANEXCO JV Agreement is hereby amended to read in its entirety as
follows:
Article 5 - Volumes
5.1 Volumes. Each calendar year, (a) Sterling will
sell, and the Company will purchase, the Sterling ANEXCO
Volume (as defined in, and determined in accordance with,
Section 9.3 of the ER Agreement) for such year and (b) BP will
sell, and the Company will purchase, the BP ANEXCO Volume (as
defined in, and determined in accordance with, Section 9.3 of
the ER Agreement) for such year.
5.2 New Purchase Contracts. After the Effective Date
(as defined in the ER Agreement) except as may be otherwise
provided in Section 3.7.8 or Section 5 of the ER Agreement,
neither ANEXCO nor a Party will enter into any new third party
contracts under which the Company or either Party is obligated
to purchase Acrylonitrile for resale within the Joint Venture
Territory without the consent of a simple majority of the
Whole Board (as defined in the LLC Agreement); provided,
however, that in the event that the Company or BP enter into
any such contracts, the volume to be resold in the Joint
Venture Territory will be considered a part of the BP ANEXCO
Volume (as that term is defined in Section 9.3 of the ER
Agreement) and subject to any and all provisions of the ER
Agreement applicable to the BP ANEXCO Volume.
8.6 Section 7.2 of the ANEXCO JV Agreement is hereby amended by deleting
the last three sentences thereof.
30
8.7 Effective as of the Effective Date of this ER Agreement, the last
sentence only of Section 11.1 of the ANEXCO JV Agreement is hereby
amended to read in its entirety as follows:
The total quantity hereunder so omitted will be deducted from
such Party's obligation to sell, and ANEXCO's obligation to
purchase, such quantity pursuant to this Agreement, without
liability.
8.8 Effective as of the Effective Date of this ER Agreement, Exhibit A to
the ANEXCO JV Agreement is hereby amended to include the country of * *
8.9 Effective as of the Effective Date of this ER Agreement, Exhibit D to
the ANEXCO JV Agreement is hereby amended to read in its entirety as
set forth in Exhibit D (2003) attached hereto and incorporated herein
for all purposes.
9. AN PLANT PRODUCTION MARKETING
9.1 The parties acknowledge that (i) Sterling is currently in the process
of restarting the AN Plant, (ii) the inability of Sterling to market
all of its AN production contributed to the prolonged shutdown of the
AN Plant, (iii) the viability of the AN Plant is an important factor in
the business plan and financial projections included in the
Reorganization Plan, (iv) the AN Plant does not operate as efficiently
at a rate below * * * , and (v) a secure outlet for the sale of the * *
output quantity of the AN Plant is crucial for the long term viability
of the AN Plant. The parties have accordingly entered into this ER
Agreement to provide such a secure outlet, among other reasons.
9.2 During each calendar year the AN Agreements are in effect, Sterling
will produce and sell to BP and ANEXCO, and BP and ANEXCO will purchase
from Sterling, a volume of AN determined in accordance with this
Section 9. During each calendar year during the period commencing on
the day of the AN Plant Start Up and ending on the date the AN
Agreements terminate (with such obligations pro rated for any partial
year):
9.2.1 BP has the right but not the obligation under the Production
Agreement to purchase up to * * of the Rated Capacity (as such
term is defined in the Production Agreement) of the AN Plant.
The volume BP elects to purchase under the Production
Agreement during any given year is referred to herein as the
"Production Agreement Volume" for such year.
9.2.2 Sterling is obligated to sell, and BP is obligated to
purchase, * * * of AN under * * * , unless the parties
mutually agree on a different volume. * * * * *
31
9.2.3
9.2.3.1 Except as set forth in Section 9.3 below and
excluding the Wind up Period and further excluding
any period during which Section 3.7.8 hereof applies,
Sterling has the right to require ANEXCO to purchase
up to an aggregate volume of * * * of AN that is
produced at the AN Plant each year, minus the
Production Agreement Volume for such year, and minus
* * * for such year.
9.2.3.2 This Section 9.2.3.2 will apply during any period
during which Section 3.7.8 hereof applies and during
the Wind up Period. For purposes of this Section
9.2.3.2, the "Applicable Period" is defined to be,
for any calendar year, the number of days in such
calendar year during which Section 3.7.8 hereof
applies or the number of days in such calendar year
comprising the Wind up Period, as the case may be,
and the "Period Ratio" is defined to be, for any
calendar year, a fraction, the numerator of which is
the number of days in the Applicable Period during
such calendar year and the denominator of which is
the number of days in such calendar year. Except as
set forth in Section 9.3 below, during any Applicable
Period, Sterling has the right to require ANEXCO to
purchase up to an aggregate volume equal to (i) the
Period Ratio for such calendar year multiplied by * *
* of AN that is produced at the AN Plant, minus (ii)
the portion of the Production Agreement Volume for
such year nominated by BP for delivery during such
Applicable Period, minus (iii) the Period Ratio
multiplied by the * * * for such year, minus (iv) the
aggregate volume of AN that Sterling sells in the
Joint Venture Territory during such Applicable
Period, including * * * plus the aggregate volume of
AN that Sterling sells in the Joint Venture Territory
to all other former ANEXCO customers, or to any other
customer in the Joint Venture Territory, during such
Applicable Period. Promptly after the beginning of
each Applicable Period, Sterling will notify ANEXCO,
in writing, of Sterling's good faith estimate of the
volume of AN that is described in clause (iv) above
for such Applicable Period. Promptly after the end of
each calendar quarter ending during any Applicable
Period , Sterling will notify ANEXCO, in
32
writing, as to the actual volume of AN that Sterling
sold into the Joint Venture Territory under clause
(iv) above during the portion of that calendar
quarter falling within such Applicable Period.
Sterling also will notify ANEXCO, in writing, if
Sterling becomes aware that the actual volume
described in clause (iv) above may be significantly
different than the estimate Sterling provided to BP
at the beginning of the relevant Applicable Period.
9.2.3.3 The amount Sterling has the right to require ANEXCO
to purchase in any given year pursuant to this
Section 9.2.3 is referred to herein as the "Sterling
Maximum AN Volume" for such year.
9.2.3.4 Notwithstanding anything to the contrary contained
herein, Sterling acknowledges and agrees that, unless
BP or ANEXCO, as the case may be, consents otherwise
in writing, which consent may be withheld by BP or
ANEXCO, as the case may be, in its sole discretion,
Sterling will not supply or deliver, and neither BP
nor ANEXCO will be obligated to purchase or receive,
any AN other than AN that Sterling produces at the AN
Plant
9.3 Unless Sterling nominates, in writing, a lesser volume at least six (6)
months prior to the start of a calendar year, Sterling will be deemed
to have nominated to sell to ANEXCO during such upcoming calendar year
an aggregate volume of AN equal to the applicable Sterling Maximum AN
Volume for such upcoming calendar year (in either case, the "Sterling
ANEXCO Volume"). The Sterling ANEXCO Volume will not exceed the
Sterling Maximum AN Volume for such year. During each year, ANEXCO will
purchase, and Sterling will sell, under the ANEXCO JV Agreement, a
volume equal to the Sterling ANEXCO Volume for such year. In any given
year, BP may sell to ANEXCO such volumes of AN as BP may from time to
time elect (the "BP ANEXCO Volume") * * * . * * * * * * * * * * * * *
If ANEXCO fails to purchase at least * * of the Sterling ANEXCO Volume
for three consecutive months, Sterling may shut down the AN Plant and
be relieved of its obligation to sell AN to BP and ANEXCO, and ANEXCO
and BP will be relieved of their obligation to purchase AN from
Sterling, under the AN Agreements, during the period the AN Plant is
shut down, provided that, if Sterling elects to shut down the AN Plant,
it must (x) provide ANEXCO notice of such shut down as soon as
reasonably possible after Sterling makes the decision to shut down the
AN Plant, and (y) give ANEXCO a minimum of two (2) months prior written
notice of the date Sterling intends to restart the AN Plant and resume
production (the "Anticipated Restart Date"). In the event Sterling
restarts the AN Plant and resumes production no later than ten (10)
days after the Anticipated Restart Date, Sterling will again be
obligated to supply AN to BP and ANEXCO, and ANEXCO and BP will again
be obligated to purchase AN from Sterling, under the AN Agreements, on
the Anticipated Restart Date
33
or on the date the AN Plant resumed production, whichever occurred
last. In the event the AN Plant resumed production more than ten (10)
days after the Anticipated Restart Date, Sterling will again be
obligated to supply AN to BP and ANEXCO, and ANEXCO and BP will again
be obligated to purchase AN from Sterling, under the AN Agreements, on
the tenth (10th) day after the Anticipated Restart Date. The volume of
AN that BP and ANEXCO are obligated to buy from Sterling, and that
Sterling is obligated to sell to BP and ANEXCO, pursuant to the AN
Agreements, will be reduced by the amount of AN Sterling would have
otherwise been entitled to supply to BP and ANEXCO during the period
the AN Plant was shut down. To the extent that ANEXCO has any liability
to Sterling pursuant to this Section 9.3, such liability will be paid
by ANEXCO and BP and the amount paid will either be adjusted or
otherwise paid in a manner that will result in Sterling being
compensated for one hundred percent (100%) of such liability without
direct or indirect reduction resulting from Sterling's ownership
interest in ANEXCO. To the extent that ANEXCO has any liability to BP
pursuant to this Section 9.3, and such liability results from the
actions or inactions of Sterling, such liability will be paid by ANEXCO
and Sterling and the amount paid will either be adjusted or otherwise
paid in a manner that will result in BP being compensated for one
hundred percent (100%) of such liability without direct or indirect
reduction resulting from BP's ownership interest in ANEXCO.
9.4 If Sterling wishes to sell an amount of AN greater than the Sterling
ANEXCO Volume to ANEXCO ("Additional Volume"), it will so advise ANEXCO
and BP, and if ANEXCO or BP is interested in purchasing such volume,
the parties will, in good faith, negotiate the terms and conditions
associated with the sale and purchase of such Additional Volumes of AN.
Nothing in this Section 9.4 obligates Sterling to sell, or obligates
either ANEXCO or BP to buy, any Additional Volume.
9.5 Unless ANEXCO is excused from its obligation to purchase such volume
under the terms of this ER Agreement or any of the AN Agreements,
during any given calendar quarter, BP and Sterling must sell, and
ANEXCO must purchase, one fourth (1/4) of the volume of AN that BP or
Sterling, as applicable, is obligated to sell under this Section 9 (the
BP ANEXCO Volume and the Sterling ANEXCO Volume, respectively) during
that calendar year, plus or minus ten percent (10%) of the BP ANEXCO
Volume or the Sterling ANEXCO Volume, as the case may be (with such
amount minus ten percent (10%) being the "BP Minimum Ratable Volume"
and the "Sterling Minimum Ratable Volume" respectively); provided
however, that, at the option of the relevant party (with such option
being exercised in writing and made as soon as is reasonably possible
after the occurrence of the event giving rise to the proration), the
foregoing quarterly sales requirements will be prorated for any quarter
during which such party experiences a force majeure event or has shut
down an AN
34
production facility for forty five (45) days or less for scheduled
maintenance (a "Temporary Shutdown") provided that, in the case of a
Temporary Shutdown, such party, no later than September 30th of the
preceding year, gave ANEXCO written notice of the expected dates and
durations of its anticipated Temporary Shutdowns for the year in
question and thereafter provided ANEXCO with prompt written notice of
any change in the anticipated dates or expected duration of any such
Temporary Shutdown at least ninety (90) days prior to the new proposed
date of commencement of such Temporary Shutdown. At the option of
Sterling (with such option being exercised in writing and made as soon
as is reasonably possible after the occurrence of the event giving rise
to the proration), the quantities of AN that Sterling is required to
sell to BP pursuant to the Production Agreement will be prorated for
any calendar year during which Sterling experiences a force majeure
event or has a Temporary Shutdown provided that, in the case of a
Temporary Shutdown, Sterling, no later than September 30th of the
preceding year, gave BP written notice of the expected dates and
durations of its anticipated Temporary Shutdowns for the year in
question and thereafter provided BP with prompt written notice of any
change in the anticipated dates or expected duration of any such
Temporary Shutdown at least ninety (90) days prior to the new proposed
date of commencement of such Temporary Shutdown. If any quantities are
to be prorated pursuant to this Section 9.5, the proration will occur
based on the number of days in the relevant period during which the
relevant force majeure event or Temporary Shutdown continues. Unless
ANEXCO or BP is excused from its obligation to purchase such volume
under the terms of any of the AN Agreements, (i) if BP fails to deliver
the BP Minimum Ratable Volume, for any particular calendar quarter, the
difference between the BP Minimum Ratable Volume and the amount of AN
that BP actually delivered during that calendar quarter will be
deducted from the BP ANEXCO Volume for the calendar year in question,
and (ii) if Sterling fails to deliver the Sterling Minimum Ratable
Volume, for any particular calendar quarter, the difference between the
Sterling Minimum Ratable Volume and the amount of AN that Sterling
actually delivered during that calendar quarter will be deducted from
the Sterling ANEXCO Volume for the calendar year in question. The
preceding sentence does not affect any rights or remedies of either
party hereto.
9.6 Upon the mutual agreement of the parties, such agreement not to be
unreasonably withheld, delayed, or conditioned, the parties will cause
ANEXCO to ask the issuers of any letters of credit associated with
ANEXCO's accounts receivables to discount such letters of credit, and
the proceeds from such discounted letters of credit will be disbursed
to Sterling as an advance payment of amounts otherwise due or to become
due to Sterling for AN sales made by Sterling to or through ANEXCO. If
such occurs, the amount ANEXCO is obligated to pay to Sterling for
35
ANEXCO's purchases of AN from Sterling will be reduced by the amount of
the discounting and any bank fees or charges or other costs ANEXCO
incurs as a result of the discounting of such letters of credit.
10. REFUND OF CURE COSTS
Within thirty (30) days after the Effective Date of this ER Agreement,
BP will pay Sterling seven hundred seventy thousand dollars ($770,000)
as required by the Assumption Order.
11. DISPUTE RESOLUTION
11.1 The procedures for resolving disputes set forth in this Section 11.1
(the "Dispute Resolution Process") will apply to any dispute or
controversy arising out of or related to any of the AN Agreements,
including this ER Agreement.
11.2 If, at any time, a dispute or controversy exists arising out of or
related to this ER Agreement or any other AN Agreement, a party may
send the other party written notice ("Dispute Notice") that it is
exercising its rights to begin this Dispute Resolution Process. The
Dispute Notice also will contain a description of the dispute or
controversy. Within ten (10) days of the date of the Dispute Notice,
the parties will submit the dispute or controversy to their respective
Chief Executive Officers ("CEOs") or Business Unit Leaders ("▇▇▇▇") for
resolution. In the event the CEOs or ▇▇▇▇ fail to amicably resolve the
dispute within thirty (30) days of such referral, the dispute will be
settled by binding arbitration pursuant to Section 11.3 below.
11.3 Resolution of any dispute or controversy arising out of or related to
this ER Agreement or any other AN Agreement that cannot be resolved by
the CEOS and ▇▇▇▇ within thirty (30) days after such matter is referred
to them pursuant to Section 11.2 above will be determined by
arbitration by three (3) arbitrators, one (1) of whom will be appointed
by BP, one (1) of whom will be appointed by Sterling, and one (1) of
whom will be appointed by the other two (2) arbitrators. If the first
two (2) arbitrators cannot agree on the appointment of a third
arbitrator, then such third arbitrator will be appointed by the
Regional Director of the American Arbitration Association whose
jurisdiction includes New York, New York. The arbitration will be
conducted in New York, New York pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The parties hereto agree
that the determination of the arbitrators will be final and binding.
Judgment upon the arbitrators' award may be entered in any court having
jurisdiction thereof. BP and Sterling will each bear the costs of their
respective arbitrators and their related expenses, and the costs of the
third arbitrator and his or her related expenses, as well as all other
costs of the
arbitration, will be paid equally by BP and Sterling or as otherwise
determined by such arbitrators. During arbitration, the parties will
continue to perform their obligations under this ER Agreement and the
other AN Agreements with the exception of those under arbitration.
11.4 Article 21 of the Production Agreement is hereby amended to read in its
entirety as follows:
Article 21 - Dispute Resolution and Arbitration
All disputes and controversies arising out of or relating to
this Agreement or the License Agreement will be determined in
accordance with Section 11 of the ER Agreement.
11.5 Exhibit A of the Production Agreement is hereby amended by deleting the
definitions of "Arbitration Notice," "CEOs" and "Dispute Resolution
Committee" therefrom.
11.6 Section 13.10 of the ANEXCO JV Agreement is hereby amended to read in
its entirety as follows:
13.10 Disputes. All disputes and controversies
arising out of or relating to this Agreement will be
determined in accordance with Section 11 of the ER Agreement.
11.7 Section 12.11 of the ANEXCO LLC Agreement is hereby amended to read in
its entirety as follows:
Section 12.11 Dispute Resolution. All disputes and
controversies arising out of or relating to this Agreement
will be determined in accordance with Section 11 of the ER
Agreement.
11.8 Paragraph (f) of Part Three of the Catalyst Agreement is hereby amended
to read in its entirety as follows:
(f) Disputes. All disputes and controversies arising out of or
relating to this Contract will be determined in accordance
with Section 11 of the ER Agreement.
12. GENERAL
12.1 Each of Sterling and BP is and will be an independent contractor with
respect to its rights and obligations under this ER Agreement, the
Production Agreement, the Catalyst Agreement and the Letter Agreement,
and this ER Agreement, the Production Agreement, the Catalyst Agreement
and the Letter Agreement will not be construed to create a
37
partnership, joint venture, association or other entity or business
organization between Sterling and BP.
12.2 This ER Agreement will inure to the benefit of, and will be binding
upon, BP and Sterling and their respective successors and permitted
assigns.
12.3 This ER Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which taken together will
constitute one and the same agreement.
12.4 Should any clause, sentence, paragraph, subsection or Section of this
ER Agreement be judicially declared to be invalid, unenforceable, or
void, such decision will not have the effect of invalidating or voiding
the remainder of this ER Agreement, and the parties hereto agree that
the part or parts of this ER Agreement so held to be invalid,
unenforceable, or void will be deemed to have been stricken herefrom as
if such stricken part or parts had never been included herein.
12.5 This ER Agreement together with the other AN Agreements, as amended
herein, and * * * and the License Agreement, set forth all of the
promises, agreements, conditions, understandings, warranties, and
representations between the parties with respect to the matters covered
hereby and thereby, and supersede all prior agreements, arrangements,
and understandings between the parties, whether written, oral or
otherwise, with respect to the subject matter hereof and thereof. There
are no promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied, between the
parties concerning the subject matter hereof or thereof except as set
forth herein or therein. In the event of any conflict, the provisions
of this ER Agreement will govern over the terms of any other AN
Agreement. Except as expressly amended herein, the terms of the other
AN Agreements will continue in full force and effect. No modification
of or amendment to this ER Agreement will be valid for any purpose
unless made in a written document that specifically states that it is a
modification of or an amendment to this ER Agreement, and the document
is signed by both parties. No waiver of any provision of this ER
Agreement will be valid unless made in a written document that
specifically states it is a waiver under this ER Agreement and is
signed by the party against whom that waiver is sought to be enforced.
No failure or delay on the part of either party in exercising any
right, power, or privilege under this ER Agreement, and no course of
dealing between the parties, will operate as a waiver of any right,
power, or privilege hereunder. No single or partial exercise of any
right, power, or privilege under this ER Agreement will preclude any
other or further exercise thereof or the exercise of any other right,
power, or privilege hereunder. No notice to or demand on either party
under this ER Agreement will entitle such party to any other or further
notice or
38
demand in similar or other circumstances or constitute a waiver of the
rights of either party to any other or further action in any
circumstances without notice or demand.
12.6 Notwithstanding anything to the contrary contained in this ER Agreement
or any other AN Agreement, the parties' respective obligations to sell
and purchase AN pursuant to this ER Agreement and the other AN
Agreements, and ANEXCO's obligations to purchase AN pursuant to the
ANEXCO JV Agreement and the ANEXCO LLC Agreement, will not commence
until the date of the AN Plant Start Up.
12.7 Notwithstanding anything to the contrary, the parties to this ER
Agreement (and each employee, representative, or other agent of such
party for so long as they remain an employee, representative, or agent)
may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transaction contemplated by
this Agreement (the "Transaction") and all materials of any kind
(including opinions or other analyses) that are provided to such party
relating to such tax treatment or tax structure. Nothing in this
Agreement, or any other agreement between the parties hereto express or
implied, will be construed as limiting in any way the ability of either
party to consult with any tax adviser (including a tax adviser
independent from all other entities involved in the Transaction)
regarding the tax treatment or tax structure of the Transaction,
provided, however, that any such disclosure may not be made (a) until
the earlier of (i) the date of the public announcement of discussions
relating to the Transaction, (ii) the date of the public announcement
of the Transaction, or (iii) the date of the execution of the agreement
to enter into the Transaction (with or without conditions) and (b) to
the extent required to be kept confidential to comply with any
applicable securities laws.
12.8 Each of BP and Sterling, by its execution of this ER Agreement,
acknowledges and agrees that ANEXCO will be bound by and perform all
covenants and actions contemplated to be performed by ANEXCO under this
ER Agreement.
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12.9 This ER Agreement will be governed by and interpreted in accordance
with the laws of the State of Texas, without regard to its principles
on choice of law, except to the extent that the laws of the State of
Delaware mandatorily govern any amendments to the ANEXCO LLC Agreement
made herein.
INTENDING TO BE LEGALLY BOUND, the parties have executed this ER Agreement
through their duly authorized officers.
BP CHEMICALS INC. STERLING CHEMICALS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------- ------------------------------
Title: Business Unit Leader Nitriles Title: President & CEO
------------------------------- -----------------------------
Date: June 20, 2003 Date: 6/19/03
-------------------------------- -----------------------------
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EXHIBIT A
LIQUIDATED DAMAGES
* * * * * * * * * * * * * * * * * * * * * * * *
41
Exhibit D: * * * *
* * * * * * * * * * * * * * * * * * * *