JOINT VENTURE AGREEMENT
BETWEEN
SOLUTIA INC.
AND
FMC CORPORATION
TABLE OF CONTENTS
1. Definitions 1
2. Creation of the Joint Venture and its Structure 5
3. PCL3 and POCL3 6
4. Termination of Joint Venture after the Effective Date 8
5. Parties' Interests in the Joint Venture 8
6. Parties' Contributions to the Joint Venture and Financing 9
7. Net Asset Value Adjustments 11
8. Parties' Withdrawal from the Field of Agreement; Rights of First Refusal 12
9. Future Products and Developments 15
10. Supervision of the Joint Venture 16
11. Management of the Joint Venture 17
12. Post-Effective Date Agreements 17
13. The Joint Venture's Personnel 18
14. Liabilities 20
15. Environmental Provisions 22
15.1. Exclusive Remedy 22
15.2. FMC Group's and Solutia Group's Responsibilities 23
15.3. Joint Venture's Responsibilities 27
15.4. Indemnity for compliance with Environmental Law 27
15.5. Access 28
15.6. Confidentiality 28
15.7. Participation Permitted 28
15.8. Application and Conditions 29
15.9. Permit Transfers 29
15.10. Cooperation 30
15.11. Cessation of Manufacture 31
15.12. Special Provision Regarding Definitions 31
16. Warranties by the Parties; Guaranties of Parents 31
17. Conditions Precedent; Termination of Agreement 32
18. Operations until Transfer 33
19. Assignment; Pledge of Joint Venture Interest 33
20. Costs, Fees and Taxes 33
21. Notices 34
22. Law 35
23. Miscellaneous provisions 35
23.1. Third Parties 35
23.2. Brokers 35
23.3. Press Releases 35
23.4. Entire Agreement Confidentiality 35
23.5. Counterparts 36
23.6. Amendment; Waiver; Headings 36
23.7. Due Diligence 36
23.8. Auditors 36
23.9. Supremacy 36
23.10. Settlements 37
24. Special Provisions Regarding Xxxxxxxxx 00
00. Dispute Resolution Procedures 37
26. Joint Venture to be Bound 38
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (this "Agreement") is made April 29,
1999, and is by and between Solutia Inc., a Delaware Corporation
("Solutia") and FMC Corporation, a Delaware corporation ("FMC").
RECITALS
A. Currently, the FMC Group and the Solutia Group are participants in
the global Phosphorus Chemicals market. Their product ranges are
diverse, serve many customers with global positions, and are
essentially complementary.
B. The demand side of the worldwide Phosphorus Chemicals market has
undergone significant change in the past few years. The parties
believe that, to continue to provide customers with the best range
and quality of products at competitive prices, to make the
investment required to keep up with increasingly sophisticated
customer demands, and to encourage efficient innovations, it is
appropriate now to bring their respective Phosphorus Chemicals
businesses (except as provided in Article 3) together in a
worldwide Joint Venture.
C. Such Joint Venture shall be an autonomous entity with sufficient
management, personnel, financial, mechanical, technological, land
or leases of land, and other resources and assets, to allow it to
be managed independently of its owners.
D. Without derogating from the principles of Recital C, it is also
anticipated and recognized by the parties that a period of
transition will be required in order to allow the Joint Venture to
establish itself as an independent entity and, as a result of the
location of the parties' respective production facilities, certain
longer-term relationships will have to continue between the
parties and the Joint Venture.
E. The parties envision the Joint Venture continuing in effect for an
indefinite period.
AGREEMENT
Now therefore, the parties agree:
1. DEFINITIONS. In this Agreement, the following words shall have
the meanings set forth below:
1.1. "BOARD" is defined in Article 10.1 hereof.
1.2. "BRAZILIAN CONSENTS" shall mean those consents of any
governmental authority, or any third party who is an owner of Fosbrasil,
in each case, from whom the consent to transfer the Transferred Assets
located in Brazil or Solutia's interest in Fosbrasil to the Joint
Venture is required.
1.3. "CEO" is defined in Article 10.5 hereof.
1.4. "CERCLA" means the statutes contained in 42 U.S.C.
Sections 9601-9675, and all rules and regulations promulgated
thereunder, as amended or replaced from time to time.
1.5. "CLAIMANT" is defined in Article 14.1 hereof.
1.6. "DESIGN PARAMETERS" shall mean the design and performance
criteria for the projects necessary to be in compliance with Pocatello
Consent Decree as developed in accordance with Article 15.2(c)(i).
1.7. "DISCLOSING PARTY" is defined in Article 23.4 hereof
1.8. "DISPUTING PARTY" is defined in Article 7.1.
1.9. "DOJ" is defined in Article 2.4 hereof
1.10. "EFFECTIVE DATE" means 12:01 a.m. (1ocal time where each
of the Transferred Assets are located) on a date that the parties may
mutually agree in writing. The parties intend that the Effective Date
will be on the first day of a calendar month.
1.11. "ENVIRONMENTAL COSTS" shall mean any and all verifiable
costs and expenses, paid to third parties or otherwise incurred, as
evidenced by itemized invoices, for a Remedial Action, arising out of
the presence of Facilities Substances and/or Non-Facilities Substances
in, on, or under the Facilities or which have been released or migrated
from the Facilities or to the extent caused in whole or in part, by any
event, condition or circumstance occurring or existing at the Facilities
at any time before, on or after the Effective Date.
1.12. "EXCLUDED ASSETS" means operating assets that are used in,
but not exclusively dedicated to, a party's Phosphorus Chemicals
business which will be provided to the Joint Venture under lease,
operating or transition services agreements, or such other assets
mutually agreed to by the parties.
1.13. "FACILITIES" means, collectively, the FMC Facilities and
the Solutia Facilities.
1.14. "FACILITIES SUBSTANCES" are, with respect to the FMC
Facilities and the Solutia Facilities, respectively, those chemical
substances associated with the production of products from and after
January 1, 1998 at the facilities listed on Appendices 1.48A and 1.48B
hereto, respectively, including, without limitation, those products
produced at such locations after the Effective Date.
1.15. "FIELD OF AGREEMENT" is defined in Appendix 1.15 attached
hereto.
1.16. "FMC FACILITIES" means, collectively, (i) the locations
listed on Appendix 1.48A and its environs, (ii) any site providing raw
materials (excluding soda ash) to any of the locations listed on
Appendix 1.48A, such as any mine, or (iii) any other site, whether owned
or leased, related in any way, including but not limited to waste
disposal, to any of the locations listed on Appendix 1.48A.
1.17. "FMC GROUP" shall mean FMC and each and every entity in
which FMC holds, directly or indirectly, more than 50 percent (50%)
ownership or voting rights, but excluding, hereunder, unless otherwise
specifically stated otherwise, the Foret Phosphorus Chemicals Business
and the Venezuelan Interest; provided, however, that for purposes of
this Agreement, on and from the Effective Date, entities that become
part of the Joint Venture shall no longer be considered a part of the
FMC Group.
1.18. "FORET" means FMC Xxxxx, X.X., which is 100% owned by the
FMC Group.
1.19. "FORET PHOSPHORUS CHEMICALS BUSINESS" means the business,
listed by product, conducted by Foret which is within the Field of
Agreement as described on Appendix 1.19.
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1.20. "FOSBRASIL" shall mean that certain Brazilian corporation,
named Fosbrasil S.A. (formerly known as Fosbrasil Industria Brasileira
De Acido Fosforico Ltda), which is owned by, or held for the benefit of,
Solutia Participacoes, Ltda., Societe Chimique Prayon-Xxxxx X.X., Prayon
Development S.A., and Quimbrasil-Quimica Industrial Brasileira S.A.
1.21. "FTC" is defined in Article 2.4.
1.22. "GROUP" shall mean the FMC Group or the Solutia Group,
including the relevant entities of the Solutia Group or the FMC Group,
as the case may be.
1.23. "GROUP HEAD" is defined in Article 25 hereof.
1.24. "HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
1.25. "JOINT VENTURE" means the joint venture to be formed
between the FMC Group and the Solutia Group in accordance with the
principles set out in this Agreement. References to the Joint Venture
shall include reference to the relevant constituent entities of the
Joint Venture as the context requires.
1.26. "INDEMNIFYING GROUP" is defined in Article 14.1 hereof.
1.27. "INFORMATION" is defined in Article 23.4 hereof
1.28. "LOSSES" shall mean any and all actual losses,
liabilities, damages, penalties (including, without limitation,
governmental penalties), obligations, awards, fines, deficiencies,
interest, claims (including third party claims), costs and expenses
whatsoever (including reasonable attorneys', consultants' and other
professional fees and disbursements of every kind, nature and
description), and all actual payments to third parties, but excluding
punitive, special, incidental, unforeseen or other consequential damages
incurred by a party resulting from, arising out of or incident to (y)
any matter for which indemnification is provided under this Agreement,
or (z) the enforcement by a Claimant of its rights to indemnification
under this Agreement.
1.29. "MANAGEMENT" is defined in Article 11.1 hereof.
1.30. "MAT SEVERANCE COSTS" is defined in Article 13.4 hereof.
1.31. "MASTER OPERATING AGREEMENT" is defined in Article 12.2
hereof.
1.32. "NON-FACILITIES SUBSTANCES" are any chemical substances
that are not Facilities Substances.
1.33. "NORTH AMERICA" is defined in Article 8.4.6 hereof.
1.34. "PARTIES" shall mean Solutia and FMC.
1.35. "PHOSPHORUS CHEMICALS" is defined in Appendix 1.15
attached hereto.
1.36. "POCATELLO CONSENT DECREE" means that certain consent
decree (together with all attachments and appendices thereto) between
FMC and the United States lodged in the United States
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Xxxxxxxx Xxxxx for the District of Idaho on October 16, 1998, together
with the federal implementation plan (as proposed, and ultimately
finalized, together with all attachments and appendices thereto), and
all related agreements, orders and decrees, including all amendments,
supplements, or modifications to each of the foregoing or any
replacements thereof.
1.37. "PPA TECHNOLOGY" shall mean the technology, trademarks,
and patents described (including the ownership thereof) on Appendix 1.37
attached hereto together with all related know-how and all related
rights, whether owned by, or licensed to, the FMC Group or to which the
FMC Group has rights which is used to make technical and/or food grade
wet processed purified phosphoric acid. "PPA Technology" expressly
includes all future improvements and upgrades thereto.
1.38. "RCRA" means the statutes contained in 42 U.S.C.
Sections 6901-6992, and all rules and regulations promulgated
thereunder, as amended or replaced from time to time.
1.39. "RECIPIENT PARTY" is defined in Article 23.4 hereof.
1.40. "REMEDIAL ACTION" shall mean environmental remediation
(including, without limitation, site investigation, testing, any related
removal, sampling, clean-up, disposal, encapsulation, air, soil and
groundwater clean-up, and monitoring and advocacy of or defense of any
such activity), as imposed by any Requirements of Environmental Law
applicable to the Facilities resulting in Environmental Costs. Such
environmental remediation shall mean remediation pursuant to consent
decree, administrative order, judicial decree or order, permits,
licenses or registrations.
1.41. "REQUIREMENTS OF ENVIRONMENTAL LAW" shall mean the legal
requirements of environmental laws, rules and regulations in effect at
and/or after the Effective Date and applicable to the Facilities.
1.42. "REVIEWED PARTY" is defined in Article 6.6 hereof.
1.43. "REVIEWING PARTY" is defined in Article 6.6 hereof.
1.44. "SELLING PARTY" is defined in Article 4 hereof.
1.45. "SOLUTIA FACILITIES" means, collectively, excluding, in
all cases, the Soda Springs, Idaho facility, the Rock Springs, Wyoming
facility, and any mines related to the foregoing two sites, (i) the
locations listed on Appendix 1.48B and its environs, (ii) any site
providing raw materials to any of the locations listed on Appendix
1.48B, such as any mine, or (iii) any other site, whether owned or
leased, related in any way, including but not limited to waste disposal,
to any of the locations listed on Appendix 1.48B.
1.46. "SOLUTIA GROUP" shall mean Solutia and each and every
entity in which Solutia holds, directly or indirectly, more than 50
percent (50%) ownership or voting rights; provided, however, that for
purposes of this Agreement, on and from the Effective Date, entities
that become part of the Joint Venture shall no longer be considered a
part of the Solutia Group.
1.47. "THIRD PARTY COSTS" shall mean any and all verifiable
costs and expenses including but not limited to legal fees and expenses,
investigatory expenses and court costs, paid to third parties (except
for claims of employees of either party hereto arising out of their
employment within the Facilities), for third party claims, demands,
suits, damages, liabilities or loss (including but not limited to
property damage, illness, bodily injury, death or governmental fines or
penalties) arising out of the presence of Facilities Substances and/or
Non-Facilities Substances in, on, or under the Facilities or which have
been released or
4
migrated from the Facilities (including but not limited to slag used as
aggregate and/or concrete offsite) or to the extent caused in whole or
in part by any event, condition or circumstance occurring or existing at
the Facilities at any time before, on or after the Effective Date.
1.48. "TRANSFERRED ASSETS" means the assets of the respective
members of the FMC Group and the Solutia Group that are to be
transferred or irrevocably licensed to the Joint Venture. The assets to
be transferred or irrevocably licensed by the FMC Group are more
particularly described in Appendix 1.48A, and the assets to be
transferred or irrevocably licensed by the Solutia Group are more
particularly described in Appendix 1.48B. The Transferred Assets shall
include, without limitation, transfers or irrevocable licenses of the
following types of assets: contracts, leases, patents, know-how,
trademarks, fixtures, equipment, land, and inventory, in each case
existing on the Effective Date.
1.49. "TRANSITION PERIOD" means a period (not to exceed two (2)
years) after the Effective Date during which the parties will be working
with a view to putting the Joint Venture into full force and effect on a
stand-alone basis.
1.50. "VENEZUELAN ENTITY" shall mean Tripoliven, C.A.
1.51. "VENEZUELAN INTEREST" shall mean the 33% equity interest
in the Venezuelan Entity held by Foret.
2. CREATION OF THE JOINT VENTURE AND ITS STRUCTURE.
2.1. Subject to the terms and conditions stated in this
Agreement, and with respect to the FMC Group, excluding the Foret
Phosphorus Chemicals Business and the Venezuelan Interest, the parties
shall take all such steps and do all such things as are reasonably
necessary to create between the FMC Group and the Solutia Group a
worldwide joint venture capable of operating as an autonomous commercial
entity within the Field of Agreement. In conjunction with the
foregoing, from the date hereof until the date this Agreement is
terminated, Solutia and FMC will negotiate exclusively in good faith
with each other for the formation of a joint venture of their Phosphorus
Chemicals businesses (and the transfer of each of its respective
Phosphorus Chemicals business), and will not discuss with any third
parties any other joint venture, sale, disposition or combination of its
respective Phosphorus Chemicals business that is subject to terms of
this Agreement and will not encourage or solicit any inquiries or
proposals by, or engage in any discussions or negotiations with, or
except as required by any governmental authority or applicable law, rule
or regulation, furnish any non-public information to, any person,
concerning a joint venture, sale, combination or other disposition of
its Phosphorus Chemicals business.
2.2. The legal structure of the Joint Venture in the United
States shall be a Delaware limited liability company, taxed as a
partnership, with any foreign entities being in the form as finally
agreed between the parties before the Effective Date based on the advice
of tax counsel, applicable law, the requirements of the parties and the
needs of Management.
2.3. The parties intend that the transfer of the Transferred
Assets to the Joint Venture and the other various transactions,
transfers, contributions and agreements to be made or entered by and
between the Solutia Group or the FMC Group and the Joint Venture in
connection with the formation of the Joint Venture, shall be effective
on the Effective Date. In the event that the Transferred Assets are not
transferred to the Joint Venture on the Effective Date, the entity who
is to make such transfer(s) shall ensure that the Joint Venture shall
have all of the benefits and bear all of the burdens of such assets on
and from the Effective Date.
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2.4. A. Upon the terms and subject to the conditions of this
Agreement, each of the parties hereby agrees to use reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary or proper under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, obtaining
consent under the HSR Act, the Brazilian Consents, and any other
relevant governmental consents.
B. Each of FMC and Solutia will as promptly as practicable,
but in no event later than 10 business days following the execution of
this Agreement, file with the United States Federal Trade Commission
(the "FTC") and the United States Department of Justice (the "DOJ") the
notification and report form required by the HSR Act for the
transactions contemplated hereby, and will file any supplemental
information if requested in connection therewith. Any such notification
and report form and supplemental information will be in substantial
compliance with the requirements of the HSR Act. Each party shall
furnish to the other party such necessary information and assistance as
the other party may reasonably request in connection with its
preparation of any filing or submission which is necessary under the HSR
Act. Each party shall also keep the other party promptly apprised of
the status of any communications with, and inquiries or requests for
additional information from, the FTC and/or the DOJ and shall promptly
comply with any such inquiry or request.
C. Notwithstanding clause (b) above, nothing contained in
this Agreement will require or obligate either party to initiate any
litigation to which any governmental authority is a party, including the
DOJ or the FTC, although the parties agree to use commercially
reasonable good faith efforts to negotiate with the FTC or DOJ, as the
case may be, in order to avoid any such litigation.
D. Notwithstanding clause (b) above, nothing contained in
this Agreement will require or obligate either party to agree or
otherwise become subject to any limitations on the right of the Joint
Venture to acquire, own, control or operate the Transferred Assets
(including either party or the Joint Venture being required to sell or
otherwise dispose of, or hold separate, the Transferred Assets), if such
party reasonably believes in its good faith judgment as a result of any
such limitation that it cannot substantially realize the material
benefits that such party reasonably expects to derive from the Joint
Venture. The parties agree to use commercially reasonable good faith
efforts to negotiate with the FTC or DOJ, as the case may be, in order
to avoid any such limitations.
3. PCL3 AND POCL3. The terms of this Article 3 shall govern with
respect to PCL3 and POCL3:
3.1. Notwithstanding anything contained herein to the contrary,
(i) so long as the Solutia Group is a member of the Joint Venture, the
Solutia Group shall not sell PCL3 and POCL3 to the merchant market,
provided, however, if the Solutia Group is not a member of the Joint
Venture, subject to the existing license agreement between Solutia and
Monsanto Company, to the extent that the Solutia Group has rights to
sell to the merchant market PCL3 produced at Monsanto Company's Luling,
Louisiana location, such rights shall be retained by the Joint Venture
for ten (10) years after the Effective Date or such lesser time period
that the Solutia Group has the right (and only to the extent of such
right) to purchase PCL3 from Monsanto Company's Luling, Louisiana
location and the Solutia Group shall not sell PCL3 or POCL3 to the
merchant market during such period, and (ii) subject to the existing
license agreement between Solutia and Monsanto Company, the Transferred
Assets transferred to the Joint Venture by the Solutia Group shall
include a nonexclusive, worldwide, non-transferable, non-assignable,
royalty-free license (for the full time period that the Solutia Group
has the rights, but only to the extent of such rights) to make, have
made, use, or sell under, all technology, owned by, or licensed to, the
Solutia Group which is exclusively dedicated to the manufacture of PCL3
or POCL3; provided, however, notwithstanding the foregoing two clauses,
(A) excluded from the Transferred Assets transferred by the Solutia
Group to the Joint Venture, shall be the Solutia Group's existing
swap/sale arrangement regarding PCL3 with one customer (and all
modifications, renewals, extensions or new arrangements with such
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(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
customer or such customer's successors and assigns), and (B) any person
or entity who buys or is a transferee of any Solutia Group PCL3 or POCL3
dependent business shall be permitted to sell, swap or transfer PCL3 or
POCL3 to the merchant market without restriction and shall be permitted
to obtain a license, without restriction, from the Solutia Group to all
technology that is owned by it, or licensed to it, which is exclusively
dedicated to the manufacture of PCL3 and POCL3 technology. The Joint
Venture shall at no time (i) use any PCL3 from Monsanto's Luling,
Louisiana location in the production or manufacture of, glyphosate
and/or its salts or any glyphosate intermediate or compound competitive
with glyphosate and/or its salts or products for other agricultural or
life science uses or applications, (ii) sell any PCL3 from Monsanto's
Luling, Louisiana location to any person for use in the production or
manufacture of, glyphosate and/or its salts or any glyphosate
intermediate or compound competitive with glyphosate and/or its salts or
products for other agricultural or life science uses or applications, or
(iii) use any technology owned by, or licensed to, the Solutia Group
which is exclusively dedicated to the manufacture of PCL3 or POCL3 in
connection with the sale or manufacture, of any PCL3 or POCL3 for use in
the production or manufacture of glyphosate and/or its salts or any
glyphosate intermediate or compound competitive with glyphosate and/or
its salts or products for other agricultural or life science uses or
applications.
3.2. Notwithstanding anything contained herein to the contrary,
(i) so long as the FMC Group is a member of the Joint Venture, the FMC
Group shall not sell PCL3 and POCL3 to the merchant market, provided,
however, if the FMC Group is not a member of the Joint Venture, the
exclusive right to sell to the merchant market PCL3 or POCL3 produced at
FMC Group's (or any subsequent owner or operator's) Nitro, West Virginia
location, shall be retained by the Joint Venture for fifteen (15) years
after the Effective Date and the FMC Group shall not sell PCL3 or POCL3
to the merchant market during such period, and (ii) the transferred
Assets transferred to the Joint Venture by the FMC Group shall include a
perpetual, nonexclusive, worldwide, non-transferable, non-assignable,
royalty-free license to make, have made, use, or sell under, all
technology, owned by, or licensed to, the FMC Group which is exclusively
dedicated to the manufacture of PCL3 or POCL3; provided, however, except
for any person or entity who may purchase, operate or lease the FMC
Group's Nitro, West Virginia facility, any person or entity who buys or
is a transferee of any FMC Group PCL3 or POCL3 dependent business to
shall be permitted to sell, swap or transfer PCL3 or POCL3 to the
merchant market without restriction and to obtain a license, without
restriction, from the FMC Group to use all technology owned by, or
licensed to, the FMC Group which is exclusively dedicated to the
manufacture of PCL3 or POCL3.
3.3. The parties intend that the Joint Venture will sell PCL3
and POCL3 to the merchant market at such price as the Joint Venture
determines. The Joint Venture will provide phosphorus (P4) at the Joint
Venture's cost to the FMC Group at its Nitro, West Virginia facility,
and the FMC Group shall toll convert at its Nitro, West Virginia
facility such phosphorus (P4) into PCL3 and/or POCL3 at the FMC Group's
actual cost (consistent with 1998 cost allocation structure) plus a
[**********] toll conversion fee per year (payable in equal quarterly
installments of [********]) in order for the Joint Venture to sell PCL3
and POCL3 to the merchant market. The Joint Venture will offer to sell
annually to the Solutia Group all of its excess available capacity
(which is estimated to be, on an annual basis, between [***************]
pounds in the aggregate of PCL3 and POCL3, but in no event more than [****]
to [*************] pounds of POCL3), from the FMC Group's Nitro, West
Virginia site, in each case at the Joint Venture's actual cost and on such
other terms and conditions to be mutually agreed. Each of the arrangements
described in this Article 3.3 shall be for a period of fifteen (15) years
from the Effective Date, or if the sale of the Nitro, West Virginia facility
occurs prior to the Effective Date, fifteen (15) years from such date (the
"Nitro Sale Date") and shall require the Joint Venture to purchase a minimum
of [**********] pounds of PCL3 per calendar year from the Nitro, West
Virginia facility (subject to reduction, in the event the owner or
operator of the Nitro, West Virginia facility purchases a customer of
the Joint Venture, equal to the amount of such customer's purchases of
PCL3), and shall permit the Joint Venture to purchase up to [**************]
of PCL3 per calendar year. If the Nitro, West Virginia facility is
7
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
expanded, and if the Joint Venture participates in such expansion, the
Joint Venture shall be permitted to purchase (on the same basis as set
forth above) a pro-rata amount of such expanded capacity, and if the
Joint Venture choses not to participate in such expansion, the Joint
Venture shall bear no cost or expense (including, without limitation,
increases in product costs) in connection with such expansion. FMC
agrees, in the event that the Joint Venture does not have sufficient
customers to purchase [*****************] of PCL3 from it, then the FMC
Group shall purchase all of the FMC Group's requirements for PCL3 (at a
price equal to [*************************] price for the preceding
calendar year) until such time that the Joint Venture has sufficient
customers to purchase at least [**********] pounds of PCL3 from the
Joint Venture. In the event that the FMC Group is no longer the owner
or operator of the Nitro, West Virginia facility, FMC shall cause each
subsequent owner or operator thereof to be bound by the terms of
Articles 3.2 and this Article 3.3 and any such subsequent owner or
operator shall not sell PCL3 or POCL3 manufactured at the Nitro, West
Virginia location to the merchant market for fifteen (15) years
following the Effective Date or from the Nitro Sale Date, whichever is
earlier. In addition, for a fifteen (15) year period beginning on the
Effective Date or from the Nitro Sale Date, whichever is earlier, the
cost of PCL3 and POCL3, whether paid by the Joint Venture to FMC (or any
subsequent owner or operator of the Nitro, West Virginia facility) or
paid by the Solutia Group to the Joint Venture, shall not [***********
[*********************************************************************
**********************************************************************
**************************] Any such costs or expenditures which are
passed through to the Joint Venture and/or the Solutia Group, as the
case may be, as a part of the purchase price of such PCL3 or POCL3,
shall be borne solely by the FMC Group. The FMC Group shall reimburse
the Joint Venture or the Solutia Group, as the case may be monthly,
within 30 days following the end of each calendar month, for all such
costs that are passed through to the Joint Venture or the Solutia Group,
as the case may be. No more than once in any calendar year, the Joint
Venture shall have the right to audit the books and records of the
person or entity toll converting the PCL3 to the Joint Venture in order
to confirm that pricing is consistent with the agreement set forth above
(any such audit shall be performed within twenty-four months following
the end of a calendar year, or the results of such calendar year shall
be deemed final).
4. TERMINATION OF JOINT VENTURE AFTER THE EFFECTIVE DATE.
After the Effective Date, either party may request the other party to
discuss a reasonable procedure for such party to exit the Joint Venture.
In addition, if a party (the "Selling Party") desires to sell all or any
part of its interest in the Joint Venture, including without limitation,
by means of an initial public offering, such Selling Party shall, prior
to engaging in discussions with third parties regarding any such sale,
offer (such offer to contain price and other material terms) to sell to
the other party its entire remaining interest in the Joint Venture. If
the other party has not accepted such offer within sixty (60) days from
its receipt of such offer, then the Selling Party may sell its interest
in the Joint Venture to a third party, but only on material terms and
conditions (including price) that are no more favorable than those
offered to the other party taken as a whole. In addition, in the event
of an exit by either party from the Joint Venture in any manner, all
supply, transition and operating agreements then in effect between the
Joint Venture such party's Group shall remain in effect in accordance
with their terms. The foregoing shall not prohibit a party from seeking
advice from financial or other advisors in connection with the
foregoing.
5. PARTIES' INTERESTS IN THE JOINT VENTURE.
5.1. The parties shall each have a direct or indirect fifty
percent (50%) interest in the Joint Venture, and control of the Joint
Venture shall be shared equally between the parties. Subject to Article
6.6, the parties agree that their respective Phosphorus Chemicals
businesses have equal value, and that no payment shall be made from one
party to the other party in the event appraisals performed for tax
accounting reasons of the Transferred Assets give rise or would give
rise to different valuations.
8
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
5.2. The parties shall share all profits and losses earned or
incurred by the Joint Venture in equal shares. The parties recognize
that the FMC Group and the Solutia Group each has certain tax attributes
(e.g., percentage depletion, remaining tax depreciation on Transferred
Assets, and LIFO reserves) that are not being considered in the
valuation of each party's contribution to the Joint Venture; the parties
agree that the existing economic benefit or detriment of such tax
attributes will be attributed to the transferring party in the manner
required by Section 704(c) of the Internal Revenue Code. The parties
agree that all depletion tax deductions shall be for the account of the
Joint Venture, except for the depletion tax deductions attributed to
either a four furnace operation at the Pocatello, Idaho facility, or
when and if two furnaces are shut down at the Pocatello, Idaho facility,
a two furnace operation at the Pocatello, Idaho facility and one new
facility using the PPA Technology capable of producing 80,000 metric
tons of phosphoric acid. In the formation documents relating to the
Joint Venture (e.g. the limited liability company agreement), the
parties will agree on a mechanism to handle these attributes between the
Groups.
6. PARTIES' CONTRIBUTIONS TO THE JOINT VENTURE AND FINANCING.
6.1. Subject to the terms and conditions of this Agreement, FMC
shall contribute, or cause to be contributed, to the Joint Venture the
Transferred Assets described in Appendix 1.48A.
6.2. Subject to the terms and conditions of this Agreement,
Solutia shall contribute, or cause to be contributed, to the Joint
Venture the Transferred Assets described in Appendix 1.48B. In
addition, the Solutia Group shall, at its own cost and expense, cause a
contract for the supply of phosphorus to be entered into between the
Joint Venture and P4 Production LLC, which shall provide for a minimum
of [***** ******* ******] of phosphorus to be sold to the Joint Venture
each year, and shall be (subject to the next sentence) for a period of
either one or ten years following the date of the Solutia Group's sale
of its interest in P4 Production LLC to Monsanto Company. The parties
agree to use their commercially reasonable good faith efforts (and shall
cause the Joint Venture to use its commercially reasonable good faith
efforts) to work with P4 Production LLC to reduce the term of such
agreement to a shorter term which takes into consideration the interests
of the Joint Venture as well as the Solutia Group with the target of the
time period of such shorter term being approximately four (4) to five
(5) years from the Effective Date, with any such new agreement
containing such other terms and provisions which are reasonably
acceptable to each party and the Joint Venture.
6.3. The parties anticipate that all assets exclusively dedicated
or exclusively used in their respective Phosphorus Chemicals businesses
shall be contributed to the Joint Venture. Notwithstanding the
foregoing, the Excluded Assets shall not be contributed by any party to
the Joint Venture. Rights to use assets that are not exclusively
dedicated to a Group's Phosphorus Chemicals business, but necessary to
such business, will be provided to the Joint Venture pursuant to the
Transition Services Agreement, the Master Operating Agreement and/or
other applicable agreements. By way of clarification, (i) Fosbrasil is
not a part of the Solutia Group, (ii) only Solutia's equity interest in
Fosbrasil is being transferred to the Joint Venture, and (iii) none of
the restrictions contained herein applicable to the Solutia Group apply
to Fosbrasil or Fosbrasil's operations.
6.4. On the Effective Date, the FMC Group shall deliver to the
Joint Venture, at the FMC Group's sole cost and expense, undivided,
joint ownership of the PPA Technology (all as more specifically
described in by Article 8.4 hereof) as well as all necessary technology,
know-how, intellectual property, and engineering drawings so that the
Joint Venture can fund and construct at Agrium Corporation's or its
subsidiary's (collectively, "Agrium") Conda, Idaho facility a new plant
using the PPA Technology that is capable of producing up to 80,000
metric tons of food grade wet processed purified phosphoric acid (the
"New PPA Facility") and any subsequent facilities utilizing PPA
9
Technology. The Joint Venture will reimburse Foret, and Foret will
reimburse the Joint Venture, for the other's actual costs (including
allocated costs) and expenses (consistent with past practices between
Foret and other members of the FMC Group) in providing assistance to the
other after the Effective Date in connection with the PPA Technology.
The FMC Group has executed a letter of intent with Agrium regarding the
foregoing (a complete copy of which has been delivered to Solutia). In
addition, based upon such letter of intent, the FMC Group is negotiating
with Agrium definitive documents regarding the New PPA Facility. The
FMC Group shall negotiate such definitive documents with Agrium for the
benefit of the Joint Venture, and shall not execute any such documents
which contain terms materially less favorable taken as a whole than
those terms disclosed to Solutia prior to the Effective Date. Any such
definitive documents shall provide that the FMC Group is permitted to
assign such documents to the Joint Venture on the Effective Date without
further action or consent by Agrium and such assignment shall be without
cost or expense to the Joint Venture or the Solutia Group and the FMC
Group shall pay all costs and expenses associated with such assignment.
The FMC Group shall use its reasonable efforts to finalize such
definitive documents prior to the Effective Date. On the Effective
Date, the Joint Venture shall assume the FMC Group's rights and
obligations under such definitive documents and provide customary
indemnification to FMC Group for the post-Effective Date period. To the
extent that the FMC Group shall have discussions with parties other than
Agrium regarding a new plant using the PPA Technology, the provisions of
this Article 6.4 shall apply.
6.5. Title to the Transferred Assets shall be passed to the Joint
Venture in accordance with Asset Transfer Agreements to be entered into
by the Joint Venture and the relevant members of the FMC Group and the
Solutia Group, as the case may be. Such Asset Transfer Agreements shall
be in accordance with the principles set forth in Appendix 6.5.
6.6. Without prejudice to the provisions of Article 5.1, for the
purposes of the various asset transfers contemplated by this Agreement,
the value of the contributions by the parties to the Joint Venture has
been determined by mutual agreement of the parties. If, as a result of
the due diligence by a party (the "Reviewing Party") of the other
party's (the "Reviewed Party") records of its Phosphorus Chemicals
business, the Reviewing Party reasonably believes inaccuracies and
errors have occurred in the 1998 actual financial results of the
Reviewed Party which have a net negative affect on the valuation of the
Reviewed Party's Phosphorus Chemicals business by more than Fifteen
Million Dollars in the aggregate on a net present value basis (excluding
adjustments related to Article 7.1 hereof), then the Reviewing Party
shall promptly notify the Reviewed Party's team responsible for
negotiating this Agreement, which such notification shall be no later
than thirty (30) days after the date of this Agreement. If the parties'
respective negotiating teams cannot resolve such valuation issue within
30 days, then the provisions of Article 25 of this Agreement shall
become applicable.
6.7. Unless the parties specifically agree otherwise on a case-
by-case basis, the debt of the Joint Venture shall be non-recourse
against each Group. Each of the parties agrees to use its reasonable
best efforts to cause the Joint Venture to incur the maximum amount of
long-term indebtedness that is consistent with the business and cash
desires of the parties and the cash needs of the Joint Venture.
6.8. The Joint Venture shall periodically declare (but, in any
event, at least once a calendar year or quarterly in the case of
quarterly tax payments) on a consolidated basis, the maximum possible
distribution consistent with the parties' obligation to make quarterly
tax payments on Joint Venture income passed through to the parties
(which shall include a preferential payment in respect of the tax
attributes provided in Article 5.2), any discretionary distributions,
and the forecasted cash requirements of the Joint Venture, including
cash requirements for long term investment in accordance with the
investment plan of the Joint Venture, and the annual budget.
10
6.9. On the Effective Date, the Joint Venture shall reimburse the
Solutia Group for its share of the working funds held by P4 Production,
LLC and/or Monsanto Company (or its subsidiaries) relating to the
existing (and all future contracts) with P4 Production, LLC or relating
to Solutia Group's Transferred Assets located at Sao Xxxx, Brazil. The
working funds shall not appear on any of Solutia Group's balance sheets
described in Article 7.
7. NET ASSET VALUE ADJUSTMENTS.
7.1. Solutia and FMC mutually agree that the balance sheet of
each of its Phosphorous Chemicals business as of December 31, 1998, is
attached in Appendix 7.1 (each being a "December 31, 1998 Balance
Sheet"). The parties shall retain for their own account trade
receivables and trade payables outstanding as of the Effective Date.
Each party shall have thirty (30) days from the date hereof to audit the
December 31, 1998 Balance Sheet of the other party, and during which
period the other party (the "Disputing Party") shall have access to and
the right to copy the work papers and such other documents and
information relating to the preparation of the December 31, 1998 Balance
Sheet as it shall reasonably request. Within such thirty (30) day
period, the Disputing Party shall notify the other party in writing of
any dispute with respect to the December 31, 1998 Balance Sheet.
7.2. Within thirty (30) business days following the Effective
Date, each Group shall deliver to the other Group a closing balance
sheet (each being a "Closing Balance Sheet"), and such Closing Balance
Sheet shall be prepared in a manner consistent with such Group's
December 31, 1998 Balance Sheet; provided however, for the period
January 1, 1999 through the Effective Date, the Closing Balance Sheets
will reflect depreciation and amortization that is calculated on the
same methodology for both parties. The assets and liabilities contained
in the Closing Balance Sheet shall be contributed to the Joint Venture.
Each Group's Closing Balance Sheet shall be subject to verification by
the Disputing Party within thirty (30) days of the date of delivery of
such Closing Balance Sheet, during which period the Disputing Party
shall have access to and the right to copy the work papers and such
other documents and information relating to the preparation of the
Closing Balance Sheet as it shall reasonably request. Within such
thirty (30) day period, the Disputing Party shall notify the other party
in writing of any dispute with respect to the Closing Balance Sheet.
7.3. Any dispute(s) which cannot be resolved after good faith
negotiations within thirty (30) days from the date the Disputing Party
notifies the other party of such dispute shall be referred to
PriceWaterhouseCoopers, LLP, or another nationally-recognized firm of
certified public accountants chosen by the parties, whose determination
on such matters shall be final and binding on the parties and whose fees
and expenses shall be shared equally by the parties. For purposes of
this Agreement, each Group's December 31, 1998 Balance Sheet and Closing
Balance Sheet shall be either as modified by resolution of the parties
or by the aforesaid independent accounting firm, or if the Disputing
Party fails to provide notice in writing of any disputed items within
the prescribed thirty (30) day period, the December 31, 1998 Balance
Sheet and/or Closing Balance Sheet, as the case may be, previously
delivered to Disputing Party.
7.4. The parties will equally fund an imprest account to handle
the Joint Venture's initial cash needs. The Joint Venture will repay
the outstanding balance of the imprest account at the later to occur of
sixty (60) days from the Effective Date, or ten (10) days after the
Joint Venture has received sufficient cash from its permanent financing
to repay such amount.
7.5. Within ten (10) business days after the determination of the
Closing Balance Sheet of a party: (i) if the net amount shown on the
Closing Balance Sheet of a Group is determined to be less than the net
amount on such party's December 31, 1998 Balance Sheet, such party shall
pay in cash the shortfall to the Joint Venture, or (ii) if the net
amount shown on the Closing Balance Sheet of a party is
11
determined to be greater than the net amount on such party's December
31, 1998 Balance Sheet, the Joint Venture shall record such amount as an
account payable on the Joint Venture's books. If payments from the
Joint Venture are due to both parties, the amounts will be netted
against each other, and the remainder shall be recorded on the books of
the Joint Venture as a payable to the party due the remainder. The
Joint Venture shall pay in cash any such account payable within ten (10)
days after the Joint Venture has received sufficient cash from its
permanent financing to make such payment. All settlement calculations
shall be done on a FIFO inventory basis. All settlement payments shall
be without interest.
7.6. The parties agree that the liabilities described in Article
13.6 of this Agreement shall be contributed to the Joint Venture as set
forth such Article.
7.7. Each party represents and warrants to the other party that
none of the assets reflected on such party's Closing Balance Sheet
includes any assets purchased or leased since December 31, 1998 which
were purchased or leased to bring any of such party's operations into
compliance with any environmental laws, rules or regulations and, with
respect to the FMC Group, any assets necessary to be in compliance with
the Pocatello Consent Decree.
7.8. With respect to the Transferred Assets of a party, for all
periods, such party shall retain the tax depreciation relating to such
assets as such existed on December 31, 1998. In addition, for all
assets purchased by the Joint Venture or reimbursed to the parties as
provided for in this Article 7, tax and book depreciation shall be
shared equally between the parties. Notwithstanding the foregoing, with
respect to tax and book depreciation arising from capital expenditures
paid for by FMC in accordance with Article 15 in order for the
Pocatello, Idaho facility and other assets and locations subject to the
Pocatello Consent Decree to be in compliance with the Pocatello Consent
Decree, such depreciation shall be for the sole account of FMC, although
such assets shall be owned by the Joint Venture and shall be on the
Joint Venture's books and records.
8. PARTIES' WITHDRAWAL FROM THE FIELD OF AGREEMENT; RIGHTS OF FIRST
REFUSAL.
8.1. The parties agree that the operations of Fosbrasil, the
operations of the Venezuelan Entity and the Foret Phosphorus Chemicals
Business are not subject to the terms of Articles 8.2 and 8.3.
8.2. Each party shall ensure that each member of its Group shall
do all such things and shall take all such steps as are reasonably
necessary to effect its total withdrawal from the Field of Agreement.
Such withdrawal shall be effective from the Effective Date.
8.3. After the Effective Date and as long as the Solutia Group
and the FMC Group are parties in the Joint Venture, neither Group shall,
directly or indirectly, as stockholders, consultants, members, partners
or in any other capacity, engage in any enterprise or business anywhere
in the world, which develops, manufactures, markets, or sells products
falling within the Field of Agreement; provided, however, that neither
Group is hereby prevented from investing or acquiring in any enterprise
which, directly or indirectly, is within the Field of Agreement if:
A. with respect to an investment, the investment in such
enterprise is for passive investment purposes only (e.g. pension
fund investment) without any participation in the management of
such enterprise and the ownership by such Group does not comprise
more than ten percent (10%) of the capital stock of such
enterprise;
or, if the condition in the above clause is not fulfilled,
B. such competitive enterprise or the Group making such
investment or acquisition
12
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
completely divests itself of the assets and business which are
within the Field of Agreement within the two (2) years following
the completion of such investment or acquisition; provided,
however, with respect to an acquisition, any such acquisition will
not be permitted if the business subject to such acquisition which
engages in commerce within the Field of Agreement has more than
Twenty Five Million Dollars ($25,000,000) of sales within the
Field of Agreement for the past twenty-four (24) months.
The Group divesting itself of such assets and business shall offer (such
offer to contain price and all other material conditions) to the Board
to sell such assets and business to the Joint Venture. If the Board
shall not have accepted such offer within sixty (60) days from its
receipt of such offer, then the Group may sell such assets and business
to third parties, but only on terms that are no more favorable than
those offered to the Board.
8.4. In light of the FMC Group's contributions to the Joint
Venture and recognizing that Foret excluded from the Joint Venture,
after the Effective Date and as long as there are at least two members
of the Joint Venture, the parties hereby make the following covenants
and agreements with respect to Foret and the Joint Venture and FMC shall
cause Foret to comply with the following covenants and agreements:
8.4.1. Foret shall not own, license, lease or otherwise
have rights in or to any assets or business within the Field of
Agreement the Joint Venture except for the Foret Phosphorus
Chemicals Business and except as otherwise permitted under this
Article 8.4.
8.4.2. Effective on the Effective Date, Foret and any
other member of the FMC Group that owns, licenses or otherwise has
rights to any of the PPA Technology shall transfer to the Joint
Venture undivided joint ownership of the PPA Technology. So long
as Foret is 80% or more owned by the FMC Group, Foret and the
Joint Venture shall promptly provide (at no cost) to the other,
all improvements and upgrades to the PPA Technology developed,
practiced or discovered by it from time to time, and each party
shall jointly own all such improvements and upgrades (and take all
reasonably necessary action to reflect such joint ownership).
8.4.3. Neither the FMC Group nor Foret shall sell,
transfer, license or convey, its ownership interest in the PPA
Technology to any person or entity other than the Joint Venture.
The foregoing shall not prevent Foret from using the PPA
Technology as permitted elsewhere in this Article 8.4. In
addition, Foret shall not license, sell or transfer any other
technology owned or controlled by Foret which is within the Field
of Agreement.
8.4.4. [***********************************************
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8.4.5. Foret shall not make any acquisition, lease or
other arrangement with respect to the Foret Phosphorus Chemicals
Business, except that Foret shall be permitted to acquire
facilities or entities dedicated to STPP production for cleaning
compound applications. In addition, Foret shall not make any
investments in, or enter into any joint venture with, any entities
with respect to the Foret Phosphorus Chemicals Business, except
that Foret shall be permitted to make investments in, or enter
into joint ventures with, other entities whose businesses are
dedicated to STPP production for cleaning compound applications.
13
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
8.4.6. Foret shall not, directly or indirectly, (i)
market, distribute, produce, mine, manufacture, or sell any
products or materials, or engage in any other commercial activity
in, the United States, Canada or Mexico (collectively, "North
America") within the Field of Agreement, (ii) market, distribute,
manufacture, produce, mine, or sell anywhere in the world P4,
PCL3, POCL3 or P2S5, (iii) market, distribute, manufacture,
produce, or sell Phosphorus Chemicals for human consumption
anywhere in the world, or (iv) market, distribute, produce,
manufacture or sell anywhere in the world products competitive
with Phos-Chek(R) or the Solutia Group's wildfire business being
transferred to the Joint Venture, provided, however, subject to
clause (i), the foregoing shall not restrict Foret from engaging
in any of the foregoing activities with respect to technical
grade DAP or MAP; provided, however, with respect to countries in
the European Union, the foregoing restrictions shall be applicable
for a period ending five (5) years after the Effective Date.
8.4.7. With respect to the Foret Phosphorus Chemicals
Business, unless otherwise restricted herein, Foret shall be
permitted to conduct such businesses as it deems fit.
8.4.8. [***********************************************
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*******************************]
8.4.9. If the FMC Group should at any time sell, transfer,
assign or convey all or any portion of its equity interests in
Foret, or sell, transfer, assign or convey all or substantially
all or any material portion of the assets comprising the Foret
Phosphorus Chemicals Business, the FMC Group shall cause each
purchaser, assignee or transferee thereof (and each subsequent
purchaser, assignee or transferee thereof) to agree to be bound in
writing (in a form reasonably satisfactory to the Board) by the
terms of this Article 8.4 as a condition precedent to any such
sale, transfer, assignment or conveyance.
8.4.10. Except with respect to any of the PPA Technology,
FMC Group represents that it has not, and covenants that it will
not, license or transfer to Foret any patents, know-how,
trademarks or technology owned by, or licensed to, the FMC Group
within the Field of Agreement.
8.5. In the event that the FMC Group should decide to sell,
transfer, or otherwise convey the Foret Phosphorus Chemicals Business
(whether by asset or equity transfer or sale), it shall offer (such
offer to contain price and other material conditions) to the Board to
sell such equity interests or assets, as the case may be, to the Joint
Venture. If the Board shall not have accepted such offer within sixty
(60) days from its receipt of such offer, then the FMC Group may sell
such equity interests or assets, as the case may be, to third parties,
but only on terms that are no more favorable than those offered to the
Board; provided, however, if the FMC members of the Board vote against
acquiring Foret, but the Solutia members of the Board vote in favor of
such acquisition, Solutia shall be offered the option to purchase
14
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
Foret on the same terms as the Joint Venture and if Solutia purchases
Foret, it shall be bound by Article 8.4 to the extent the FMC Group and
Foret are so bound. In the event that the FMC Group should decide to
sell, transfer, or otherwise convey the Venezuelan Interest and subject
to arrangements existing on the date hereof with respect to Foret's
ownership of the Venezuelan Interest, it shall offer (such offer to
contain price and other material conditions) to the Board to sell the
Venezuelan Interest to the Joint Venture. If the Board shall not have
accepted on behalf of the Joint Venture such offer within sixty (60)
days from its receipt of such offer, then the FMC Group may sell such
Venezuelan Interest to third parties, but only on terms that are no more
favorable than those offered to the Board.
8.6. Except as set forth in Article 8.3 and Article 8.4, it is
explicitly agreed that nothing contained in this Agreement shall prevent
any member of the Solutia Group or the FMC Group from engaging, directly
or indirectly, in any enterprise, which develops, manufactures, markets,
or sells products that are not within the Field of Agreement, and except
as set forth in Article 8.3 and Article 8.4, either Group shall be free
to engage in any business, enterprise, or undertaking, or to make any
investment it chooses.
8.7. The parties agree that the Joint Venture shall not, directly
or indirectly, (i) market, distribute, produce, manufacture, or sell
STPP for cleaning compound applications in or into [**************
********************] (ii) except for existing sales volume levels
(consistent with 1998 actual levels and budgeted 1999 levels) of the
Solutia Group, market, distribute, produce, manufacture, or sell STPP
for cleaning compound applications in or into the [****************
***************] or (iii) market, distribute, produce, manufacture, or
sell PPA in or into [**************************]
9. FUTURE PRODUCTS AND DEVELOPMENTS.
9.1. Subject to Article 8.3b, if, after the date of this
Agreement and continuing as long as either Group is a partner, member,
or shareholder of the Joint Venture, such Group develops or completes
the development of, or discovers, or acquires proprietary rights over, a
product or process falling within the Field of Agreement, the Joint
Venture then shall, on reasonable commercial terms taking into account
the time and money spent by such Group and taking into account other
relevant commercial factors (including, without limitation, the possible
payment of royalties at market rates), have exclusive rights to exploit
such product or process, but only within the Field of Agreement. The
Group that has developed, discovered or acquired such product or process
will, however, be entitled to exploit such product or process for
application outside the Field of Agreement. For purposes of this
Article 9.1, Foret shall be a part of the FMC Group, but this Article
9.1 shall not apply to products within the Foret Phosphorus Chemicals
business listed on Appendix 1.19 or products Foret is permitted to
manufacture or sell under Article 8.4.
9.2. If, after the date of this Agreement and continuing as long
as a Group is a partner, member, or shareholder of the Joint Venture,
the Joint Venture develops or completes the development of, or
discovers, or acquires proprietary rights over, a process or product
which at, or after, the time of its development, discovery or
acquisition has, or might have, some application outside of the Field of
Agreement, then the Joint Venture shall offer to license the use of the
process or product (or the production thereof) for such application to
each of the parties on reasonable commercial terms (including, without
limitation, the possible payment of royalties at market rates) taking
into account the time and money spent by the Joint Venture and taking
into account other relevant commercial factors. The grant of licenses
to any third parties shall be the prerogative of the Board provided that
no such license shall be granted at terms more favorable to the third
party than were offered to the member(s) of such Group.
15
10. SUPERVISION OF THE JOINT VENTURE.
10.1. The Joint Venture will be supervised by a board of six (6)
members (the "Board"). Each party shall appoint three (3) of such
members and each of such members shall be an employee or serving officer
of the party making the appointment. Such party will cause its
representatives on the governing boards of the various Joint Venture
entities to act in accordance with decisions of the Board.
10.2. The decisions of the Board shall be by majority vote of
the members present, provided that such majority vote includes the
affirmative vote of at least two members appointed by each party.
10.3. A Chairman of the Board shall be appointed from among the
members of the Board. Each Chairman shall hold office for two (2) years.
If the CEO comes from one party, the first Chairman shall come from the
other party.
10.4. The Chairman, being one of the six (6) members of the
Board, shall not have a tie-breaking vote.
10.5. The Board shall establish various authorizations and
delegations for Management to conduct the business of the Joint Venture
as contemplated by Article 11 hereof. In addition, the Board shall:
A. select the officers or directors (depending on the
structure of the entity) who will manage the Joint Venture
including, but not limited to, a Chief Executive officer
("CEO") as well as all persons reporting directly to the
CEO (after the Effective Date, such persons shall be
nominated by the CEO to the Board);
B. approve all annual budgets for the Joint Venture;
C. approve any and all capital investments to be made by the
Joint Venture or, at its discretion, delegate such
approval to the governing bodies of the separate entities
of the Joint Venture with respect to capital investments
that do not exceed amounts to be determined by the Board
in each such delegation;
D. subject to Article 6.8, approve any dividend or profit
distribution to be made to the shareholders, members or
partners, as the case may be;
E. approve any merger of the Joint Venture, acquisition of
another entity or another entity's business by the Joint
Venture;
F. approve the closing of any plant or facility of the Joint
Venture;
G. generally set performance standards and targets for the
Joint Venture;
H. approve any incurrence of indebtedness for borrowed money;
and
I. approve the licensing of the PPA Technology by the Joint
Venture to any other person, firm or entity; provided,
however, no such consent is necessary to license the PPA
Technology to the entities comprising the Joint Venture
and/or any other entity controlled by the Joint Venture.
16
If the Board should be deadlocked on any matter and such deadlock shall
continue for sixty (60) days, then in such event, the dispute resolution
procedures set forth in Article 25 shall apply, except either party may
immediately cause the dispute to be directed to the Group Heads.
Furthermore, if any such deadlock is in regards to the budget for the
Joint Venture, then until such dispute is resolved, the budget for the
preceding calendar year or fiscal period, as the case may be, shall
continue to govern plus any adjustments for inflation as well
adjustments for customary increases in compensation to the Joint
Venture's employees.
10.6. The Joint Venture shall be jointly controlled by the
parties who, as shareholders, members, or partners, shall have the
exclusive power, by instructing the Board, to: (i) dissolve the Joint
Venture, (ii) sell, or dispose of all or substantially all assets of the
Joint Venture or permit the Joint Venture to place or grant any
consensual lien or security interest on its assets (except liens for
taxes and materialsmen's liens being contested in good faith which are
not material in amount), or (iii) permit the Joint Venture to engage in
material commerce outside the Field of Agreement or change the scope of
the Field of Agreement. On receipt of such instructions, the Board
shall act in accordance with this Article 10.
11. MANAGEMENT OF THE JOINT VENTURE.
11.1. The business of the Joint Venture shall be conducted by a
CEO, together with other officers or directors (depending on the
structure of the entity), from time to time appointed by the CEO or, as
provided in Article 10.5 the Board (collectively the "Management"). The
parties shall ensure that the Management shall be entitled to control
and manage the business conducted by the entities and partnerships
comprising the Joint Venture.
11.2. Subject to Article 10.5, in general, and at a minimum, the
Management shall conduct the business of the Joint Venture in the
following areas:
A. creation, development, and implementation of commercial
policies;
B. creation, development, and implementation of sales and
marketing strategies;
C. financial management;
D. creation, development, and implementation of human
resources policies;
E. creation, development, and implementation of research and
development policies, objectives and programs;
F. manufacturing and other operations; and
G. legal services.
12. POST-EFFECTIVE DATE AGREEMENTS.
12.1. During the Transition Period, each party shall, and shall
cause each member of its Group, to use all commercially reasonable
efforts to provide to the Management and to the Joint Venture such
support and services as the Management and the Joint Venture shall
reasonably require in order to allow the Joint Venture to become an
independent, free-standing entity. Such services shall be provided in
accordance with the principles of the Transition Services Agreement set
forth in Appendix 12.1.
17
12.2. In addition to the Transition Services Agreement (the
terms of which shall be mutually agreed to by the parties), the parties
and the Joint Venture shall enter into a master operating agreement
under which the "Operator" (which can be either Group, depending on the
location) shall operate the production facilities for and on behalf of
the "Guest" (which will be the Joint Venture), and provide incidental
utilities and services in support of such operations as agreed to by
Operator and Guest (the "Master Operating Agreement"). The Master
Operating Agreement (the terms of which shall be mutually agreed to by
the parties) shall relate on substantially identical terms at each
location to Solutia's Sauget, Illinois location, Solutia's Trenton,
Michigan location and FMC's Green River, Wyoming location. Also, the
Joint Venture shall enter into a lease and operating agreement with
Monsanto Company with respect to Solutia Group's Transferred Assets
located at Monsanto Company's Sao Xxxx, Brazil location, which such
lease and operating agreement shall either be a partial assignment of
the existing agreement with the Solutia Group or shall be a new
agreement, but in any event, it shall be in the same form as that which
currently exists between the Solutia Group and Monsanto Company.
12.3. Subject to the next sentence, in order to support the
activities of the Joint Venture, the parties shall supply to the Joint
Venture, at the option of the Joint Venture, certain raw materials, at
competitive market prices and, where such market prices are
impracticable to determine, at a formula price to be agreed between the
relevant Group and the Joint Venture. For a period of ten years
following the Effective Date, the Solutia Group shall supply to the
Joint Venture and the Joint Venture shall purchase food grade adipic
acid consistent with the pricing mechanisms used in 1998. For a period
of fifteen (15) years following the Effective Date, to the extent that
the FMC Group can meet the Joint Venture's quality requirements for soda
ash at the locations listed on Appendix 1.48A (only for so long as the
Joint Venture operates the facilities at such locations), the FMC Group
shall supply to the Joint Venture (and the Joint Venture shall purchase)
soda ash consistent with the pricing mechanism used in 1998 (e.g.
weighted average bulk price for all grades consistent with the formula
agreed to between the parties). For a period of fifteen years, in
addition, to the extent that the FMC Group can meet the Joint Venture's
quality requirements for soda ash at the locations listed on Appendix
1.48B (only for so long as the Joint Venture operates the facilities at
such locations), and, subject to any existing soda ash supply
arrangements of the Solutia Group that will be assumed by the Joint
Venture, and further subject to any customer qualifications of soda ash
containing products, the FMC Group shall supply to the Joint Venture
(and the Joint Venture shall purchase) soda ash consistent with the
pricing mechanism used in 1998, subject to any increase in price (to
reflect the FMC Group's increase in actual costs) reflecting increases
in soda ash purity levels, if any are required. At the request of the
Joint Venture, FMC agrees to use commercially reasonable efforts to work
with the Joint Venture to put in place arrangements for the swap of soda
ash if any such swap arrangements will be economically beneficial to FMC
and the Joint Venture. No more than once in any calendar year, the
Joint Venture shall have the right to audit (through internal or
external audits) the books and records of the Group providing the
foregoing raw materials in order to confirm that pricing is consistent
with the agreement set froth above (any such audit shall be performed
within twenty-four months following the end of a calendar year, or the
results of such calendar year shall be deemed final).
13. THE JOINT VENTURE'S PERSONNEL.
13.1. The parties agree that neither Group shall hire or solicit
for hire, directly or indirectly, the employees of the Joint Venture, it
being the intention of the parties that the Joint Venture will develop
and train its own employees. Notwithstanding the foregoing (but subject
to the proviso to this sentence), three calendar years after an employee
of the Joint Venture has held the same functional position with the
Joint Venture, (i) with the prior approval of the Board, FMC or Solutia
may for good reason solicit and hire the individuals reporting directly
to the Chief Executive Officer (but excluding the Chief Executive
Officer), and (ii) with the prior approval of the Chief Executive
Officer, FMC or Solutia may for good reason solicit any other employees
of the Joint Venture; provided, however, without Solutia's prior
18
written consent, at no time may any employee of the Joint Venture be
hired by, or transferred to, Foret. Further, notwithstanding anything
to the contrary, the foregoing restrictions on solicitation and hire
shall not apply to any employee of the Joint Venture who for any reason
ceases to be employed by the Joint Venture for a period of at least 365
consecutive days.
13.2. All worldwide direct personnel of each parties' respective
Phosphorus Chemicals business (excluding employees of Foret), to the
extent that they are marketing, administrative or technical personnel,
will be specifically identified by the parties prior to the Effective
Date. The parties shall ensure that the Joint Venture is staffed by
people in sufficient numbers and with appropriate skills and
qualifications so as to allow the Joint Venture to operate safely and in
accordance with legal requirements as an independent commercial entity.
13.3. In countries outside of the United States, certain
employees shall have their contracts of employment transferred (novated)
to the Joint Venture by operation of 1aw. In the United States and
possibly elsewhere, offers of employment by the Joint Venture shall be
made on an individual basis.
13.4. In the United States, costs of redundancies of marketing,
administrative, and technical personnel resulting from the formation of
the Joint Venture shall be for the account of FMC or Solutia, as the
case may be. FMC and Solutia agree that if the cash severance liability
and enhanced pension benefit costs for such redundancy costs (excluding,
however, any claims (e.g. discrimination) arising from any such
severance or redundancy, such cash severance liability and such enhanced
pension benefit costs being, the "MAT Severance Costs") is not equal
between the parties, then the parties shall, promptly after each party
shall have delivered to the other party an itemized statement of such
party's MAT Severance Costs, cause a payment to be made from one party
to the other in order to ensure that each party pays the same amount in
MAT Severance Costs. Each party shall indemnify the Joint Venture and
each other against any such MAT Severance Costs. In all other
countries, costs of redundancies shall be for the account of the Joint
Venture to the extent the redundant personnel were substantially
dedicated to the Phosphorus Chemicals operations of a party. The Joint
Venture shall indemnify the parties against any such costs.
13.5. Costs of redundancies arising from employees of the Joint
Venture arising after the Effective Date shall be for the account of the
Joint Venture; provided, however, with respect to the Pocatello, Idaho
facility, the parties shall use their commercially reasonable efforts
(and shall cause the Joint Venture to use its commercially reasonable
efforts) to keep such costs as low as is reasonably possible.
13.6. Within six (6) months following the Effective Date, using
equivalent assumptions and discount rates, each Group shall contribute
to the Joint Venture, and the Joint Venture shall assume, an equal
amount of liabilities for those current actives and retirees of each
Group's Phosphorus Chemicals business (and, if necessary to equalize
such amounts, from other businesses of a party that such party no longer
owns) for: retiree medical insurance; retiree life insurance; total and
permanent term disability; incurred but not reported employee medical
and dental expenses (which amount shall be equal); and dental expenses.
On the Effective Date, using equivalent assumptions and discount rates,
the parties will place an estimated amount of such liabilities on the
books of the Joint Venture. The parties shall work together to
calculate the foregoing amounts, which shall be calculated as of the
Effective Date, unless both parties agree to use December 31, 1999 as a
calculation date.
13.7. With respect to all personnel in the United States who are
offered employment with the Joint Venture, all pension obligations
arising from service prior to the date the employee transfers to the
Joint Venture shall be for the account of FMC or Solutia, as the case
may be (and such party shall indemnify the Joint Venture against any
such obligations), except to the extent the Joint Venture in its
19
discretion determines to adopt a plan which credits such service. All
pension assets of Solutia or FMC, as the case may be, shall remain with
the Solutia Group or FMC Group, respectively. With respect to all
personnel outside the United States who are offered employment with the
Joint Venture, all pension obligations arising from service prior to the
date the employee transfers to the Joint Venture shall be for the
account of the Joint Venture.
13.8. In countries where transfers do not occur by operation of
law, the Joint Venture will offer prospective employees benefit plans,
terms of employment and working conditions in accordance with the
business objectives of the Joint Venture. In countries where transfers
occur by operation of law, the Joint Venture will provide benefit plans,
terms of employment and working conditions which, taken as a whole,
provide total compensation packages substantially equivalent to those
enjoyed by the employees when they were employed by the FMC Group or the
Solutia Group, as the case may be. The parties recognize that
particular components of the compensation package provided by the Joint
Venture may not be equivalent to those provided by the Solutia Group or
the FMC Group, as the case may be.
13.9. In all countries, the Joint Venture shall pay the costs of
relocating employees of either the FMC Group or the Solutia Group who
join the Joint Venture in accordance with a relocation policy developed
for the Joint Venture. The Joint Venture shall indemnify the parties
against any such costs.
14. LIABILITIES.
14.1. Neither Group (collectively, an "Indemnifying Group")
shall be obligated to pay any Losses incurred or suffered by the other
Group (collectively, a "Claimant") in connection, directly or
indirectly, with any breach of a representation or warranty in this
Agreement, in any document relating to the formation of the Joint
Venture, or in any Asset Transfer Agreement connected with this
Agreement, unless and until:
A. the value of such Loss, or a series of Losses arising from
one event, exceeds (the equivalent of) Twenty Five
Thousand Dollars ($25,000); and
B. the aggregate value of all of Claimant's Losses previously
accepted by, or successfully asserted against, the
Defendant, excluding in all cases claims for any amounts
below Twenty Five Thousand Dollars ($25,000), exceeds (the
equiva1ent of) Five Million Dollars ($5,000,000), which
such Five Million Dollar ($5,000,000) represents a
deductible amount not to be paid by a Defendant, up to an
aggregate of Thirty Million Dollars ($30,000,000) for each
Defendant.
The limits set out in this Article 14.1 shall apply to any claims made
by the Joint Venture against either Group.
14.2. Subject to and except as provided in Article 15 (which
sets forth the exclusive remedy and indemnification for matters
contained in such Article), each Indemnifying Group shall be responsible
for and shall indemnify the other Group and the Joint Venture against,
any and all Losses arising in connection, directly or indirectly, with:
A. any material breach of any material representation or
warranty made by an Indemnifying Group in this Agreement
or in any document contemplated by this Agreement;
B. any material breach of any material covenant made by an
Indemnifying Group in this Agreement or in any document
contemplated by this Agreement;
20
C. Phosphorus Chemicals made and sold by or on behalf of such
Indemnifying Group or its predecessors prior to the
Effective Date;
D. breaches of contract, negligent acts or omissions, or
breaches of law, perpetrated or caused by such
Indemnifying Group or its predecessors prior to the
Effective Date;
E. other than with respect to cash severance as set forth in
Article 13.4, employee claims (including, without
limitation, due to dismissal by reason of redundancy,
conduct or otherwise) made by employees of such
Indemnifying Group or its predecessors prior to the
Effective Date; and
F. any acts or omissions occurring prior to the Effective
Date arising out of or relating to (i) such Group's
Transferred Assets, (ii) such Group's businesses which
are the subject of this Agreement, or (iii) in the case of
Solutia, its interest in Fosbrasil that is transferred to
the Joint Venture.
14.3. Subject to and except as provided in Article 15 (which
sets forth the exclusive remedy and indemnification for matters
contained in such Article), the Joint Venture shall be responsible for
and shall indemnify each Group against, any and all claims arising in
connection, directly or indirectly, with:
A. Phosphorus Chemicals made or sold by, or on behalf of, the
Joint Venture on or after the Effective Date;
B. breaches of contract, negligent acts or omissions, or
breaches of law, perpetrated or caused by the Joint
Venture on or after the Effective Date;
C. employee claims (including, without limitation, due to
dismissal by reason of redundancy, conduct or otherwise)
made by employees of the Joint Venture (including any
transferred employees) on or after the Effective Date.
14.4. The amount of any Loss for which indemnification is
provided under this Article 14 shall (i) be net of (x) any amounts
recovered by the Claimant pursuant to any indemnification by or
indemnification agreement with any third party and (y) any insurance
proceeds (net of associated incremental premiums) available as an offset
against such Loss (each such source named in clauses (x) or(y), a
"Collateral Source") and (ii) shall be increased to take account of any
net tax cost incurred by the Claimant arising from the receipt or
accrual of indemnity payments hereunder and reduced to take account of
any net tax benefit realized by the Claimant from the incurrence or
payment of any such Loss. If the amount to be netted hereunder from any
payment required in Articles 14.2 and 14.3 is determined after payment
by the Indemnifying Group of any amount otherwise required to be paid to
a Claimant pursuant to this Article 14, the Claimant shall repay to the
Indemnifying Group, promptly after such determination, any amount that
the Indemnifying Group would not have had to pay pursuant to this
Article 14 had such determination been made at the time of such payment.
Indemnification under this Article 14 shall not be available to any
Claimant unless such Claimant first takes reasonable steps to seek
recovery from a Collateral source for such Claim before being paid
indemnification by the Indemnifying Group; provided, however, that in no
event will any Claimant be required to initiate litigation or any other
dispute resolution proceedings before being paid indemnification. Any
Indemnifying Group may, in its sole discretion, require any Claimant to
grant an assignment of the right of such Claimant to assert a claim for
Losses against any Collateral Source or otherwise use all commercially
reasonable efforts to cause the Indemnifying Group to stand in the stead
of the Claimant. In the event of such assignment or arrangement, the
Indemnifying Group shall pursue such claim for Losses at its own
expense. The same procedure shall apply with respect to claims between
the Joint Venture and a Group.
21
14.5. In the event that, from and after the Effective Date, a
claim is asserted by a third party against any Claimant, with respect to
any matter to which the indemnities contained in this Article relate,
the Claimant shall give prompt written notice to the Indemnifying Group,
and the Indemnifying Group shall have the right, at its election, to
take over the defense or settlement (such settlement to be made only
with the prior written consent of the Claimant which shall not be
unreasonably withheld) of such claim at its own expense by giving prompt
notice to the Claimant; provided, however, that (a) the Claimant shall
at all times have the right, at its option and expense, to participate
fully therein, and (b) if the Indemnifying Group does not give such
notice and does not proceed diligently to defend the claim within thirty
(30) days after receipt of such notice of the claim, the Claimant shall
have the right, but not the obligation, to undertake the defense of such
claim for the account of and at the risk of the Indemnifying Group, and
the Indemnifying Group shall be bound by any defense or settlement that
the Claimant may make as to such claim. The parties shall cooperate
(and shall cause the Joint Venture to cooperate) in defending any such
third party's claim, and the Indemnifying Group shall have reasonable
access to the books and records, and personnel in the possession or
control of the Indemnified Party which are pertinent to the defense.
The parties agree that any Claimant may join an Indemnifying Group in
any action, claim or proceeding brought by a third party, as to which
any right of indemnity created by this Agreement (or any agreement
contemplated hereby) would or might apply, for the purpose of enforcing
any right of indemnity granted to such Claimant pursuant to this
Agreement. Any failure by an Indemnified Party to provide the notice
required by the first sentence of this Article 14.5 shall relieve the
Indemnifying Group to whom such notice was not provided of liabilities
and indemnification under this Article 14.5 with respect to such matter
to the extent, but only to the extent, that such non-notified
Indemnifying Group is prejudiced by the lack of such timely and adequate
notice. Subject to the other provisions of this Article, the costs and
expenses, including reasonable fees and disbursements of counsel,
incurred by any Claimant in connection with any claim shall be
reimbursed on a quarterly basis by the Indemnifying Group, without
prejudice to the Indemnifying Group's right to contest the Claimant's
right to indemnification and subject to refund in the event the
Indemnifying Group is ultimately held not to be obligated to indemnify
the Claimant. The same procedure shall apply with respect to claims
between the Joint Venture and a Group.
14.6. Subject to and except as provided in Article 15 (which
sets forth the exclusive remedy and indemnification for matters
contained in such Article), the parties acknowledge and agree that their
sole and exclusive remedy shall be for Losses, and any and all claims
relating to the subject matter of this Agreement shall be pursuant to
the indemnification provisions set forth in this Article 14; provided,
however, that the parties hereby reserve their respective rights to
commence judicial proceedings to seek injunction, declaratory or other
non-monetary relief or to enforce its rights under this Article 14.
15. ENVIRONMENTAL PROVISIONS.
15.1. EXCLUSIVE REMEDY.
Except as provided for in the Master Operating Agreement or except as
otherwise specifically set forth in any other agreement executed in
connection herewith, the indemnification and remedies provisions
provided for in this Article 15 shall be the exclusive remedy for the
matters contained in this Article 15, including but not limited to any
private right of action that either party or the Joint Venture might
have otherwise had under CERCLA, RCRA or any other law, rule or
regulation that relates to the environmental condition of the
Facilities. The provisions of Article 14.4 and Article 14.5 shall be
applicable to claims made under this Article 15.
22
15.2. FMC GROUP'S AND SOLUTIA GROUP'S RESPONSIBILITIES.
(a) The FMC Group agrees to, shall, and hereby does, indemnify
and hold harmless the Joint Venture and the Solutia Group: (i) for
Environmental Costs and Third Party Costs incurred as the result of the
presence of Non-Facilities Substances which were released or originated
from the FMC Facilities, including, without limitation, all sewers,
piping and other improvements located below grade, prior to the
Effective Date or which have been released or deposited above, in, on,
or under the FMC Facilities or which have migrated therefrom, to the
extent resulting in each case from events prior to the Effective Date;
(ii) for Environmental Costs incurred for soil, air and groundwater
remediation as a result of the presence of Facilities Substances which
were released or originated from the FMC Facilities, including, without
limitation, all sewers, piping and other improvements located below
grade, prior to the Effective Date or which have been deposited above,
in, on, or under, or which have migrated therefrom, or any land related
thereto leased by the FMC Group, including, without limitation, all
sewers, piping and other improvements located below grade thereon, or
which have migrated therefrom, to the extent resulting in each case from
events prior to the Effective Date; (iii) for Third Party Costs incurred
as a result of the presence in the soil, air or groundwater of
Facilities Substances which were released or originated from the FMC
Facilities, including, without limitation, all sewers, piping and other
improvements located below grade, prior to the Effective Date or which
have been deposited above, in, on, under, or which have migrated
therefrom, the FMC Facilities or any land related thereto leased by the
FMC Group or which have migrated therefrom to the extent resulting in
each case from events prior to the Effective Date; (iv) for all damages,
liabilities, costs and expenses (including, without limitation, Third
Party Costs and Environmental Costs) relating to damages or injury to
Natural Resources (as such term is defined in CERCLA) and any person or
entity claiming such damages to itself, or on behalf of a third party,
as a result of any such damage or injury to Natural Resources from
events occurring prior to the Effective Date at the Pocatello, Idaho
facility and all lands relating thereto; and (v) only to the extent not
included in subclauses (i), (ii), (iii) and (iv) of this Article, for
any other Environmental Costs and Third Party Costs incurred as a result
of the presence of Facilities Substances which originated or were
released from the FMC Facilities, including, without limitation, all
sewers, piping and other improvements located below grade, or which have
migrated therefrom to the extent resulting from events occurring prior
to the Effective Date; provided, however, if the FMC Group can
demonstrate by clear and convincing evidence that the Joint Venture
operations or the "management practices" of the Joint Venture post-
Effective Date have created a new liability or exacerbated an existing
liability from prior practices, then the Joint Venture will share in the
cure of such liability to the extent demonstrated by the evidence in
accordance with the evidentiary standard set forth above, and unless the
FMC Group shall show by clear and convincing evidence otherwise, the
Environmental Costs for any Remedial Action shall be apportioned between
the FMC Group and the Joint Venture pro-rata based upon the amount of
Facilities Substances contributed by each company during that company's
respective period of operation.
(b) (i) The FMC Group agrees to, shall, and does hereby,
indemnify and hold harmless the Joint Venture and the Solutia Group for
Environmental Costs and Third Party Costs which arise from the presence
of Non-Facilities Substances at any on-site waste disposal facility
(e.g. ponds, slag piles or landfills, etc.) or at any off-site waste
disposal facility which have been released, deposited or disposed of at
any time above, in, on or under or have come to reside or form part
thereof, or have migrated therefrom. and (ii) the FMC Group agrees to,
shall, and does hereby, indemnify and hold harmless the Joint Venture
for Environmental Costs and Third Party Costs which arise from the
presence of Facilities Substances at any on-site waste disposal facility
(e.g. ponds, slag piles or landfills) or at any off-site location waste
disposal facility which have been released, deposited or disposed of at
any time prior to the Effective Date above, in, on or under or have come
to reside or form part thereof, or have migrated therefrom unless the
FMC Group can provide clear and convincing evidence that the Joint
Venture operations or the "management practices" of the Joint Venture
post-Effective Date have created a new liability or exacerbated an
existing liability from prior practices,
23
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
then the Joint Venture will share in the cure of such liability in
accordance with the evidentiary standard and apportionment requirements
set forth above in Article 15.2(a).
(c) Notwithstanding anything contained herein to the contrary,
the following provisions shall govern with respect to the Pocatello,
Idaho facility and any other assets or locations subject to the
Pocatello Consent Decree:
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24
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
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(d) The Solutia Group agrees to, shall, and hereby does,
indemnify and hold harmless the Joint Venture and the FMC Group: (i)
for Environmental Costs and Third Party Costs incurred as the result of
the presence of Non-Facilities Substances which were released or
originated from the Solutia Facilities, including, without limitation,
all sewers, piping and other improvements located below grade, prior to
the Effective Date or which have been released or deposited above, in,
on or under the Solutia Facilities or which have migrated therefrom, to
the extent resulting in each case from events prior to the Effective
Date; (ii) for Environmental Costs incurred for soil, air and
groundwater remediation as a result of the presence of Facilities
Substances which were released or originated from the Solutia
Facilities, including, without limitation, all sewers, piping and other
improvements located below grade, prior to the Effective Date or which
have been deposited above, in, on, or under, or which have migrated
therefrom, or any land related
25
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
thereto leased by the Solutia Group, including, without limitation, all
sewers, piping and other improvements located below grade thereon, or
which have migrated therefrom, to the extent resulting in each case from
events prior to the Effective Date; (iii) for Third Party Costs incurred
as a result of the presence in the soil, air or groundwater of
Facilities Substances which were released or originated from the Solutia
Facilities, including, without limitation, all sewers, piping and other
improvements located below grade, prior to the Effective Date or which
have been deposited above, in, on, under, or which have migrated
therefrom, the Solutia Facilities or any land related thereto leased by
the Solutia Group or which have migrated therefrom to the extent
resulting in each case from events prior to the Effective Date; and (iv)
only to the extent not included in subclauses (i), (ii), and (iii) of
this Article, for any other Environmental Costs and Third Party Costs
incurred as a result of the presence of Facilities Substances which
originated or were released from the Solutia Facilities, including,
without limitation, all sewers, piping and other improvements located
below grade, or which have migrated therefrom to the extent resulting
from events occurring prior to the Effective Date; provided, however, if
the Solutia Group can demonstrate by clear and convincing evidence that
the Joint Venture operations or the "management practices" of the Joint
Venture post-Effective Date have created a new liability or exacerbated
an existing liability from prior practices, then the Joint Venture will
share in the cure of such liability to the extent demonstrated by the
evidence in accordance with the evidentiary standard set forth above,
and unless the Solutia Group shall show by clear and convincing evidence
otherwise, the Environmental Costs for any Remedial Action shall be
apportioned between the Solutia Group and the Joint Venture pro-rata
based upon the amount of Facilities Substances contributed by each
company during that company's respective period of operation.
(e) (i) The Solutia Group agrees to, shall, and does hereby,
indemnify and hold harmless the Joint Venture and the FMC Group for
Environmental Costs and Third Party Costs which arise from the presence
of Non-Facilities Substances at any on-site waste disposal facility
(e.g. ponds, slag piles or landfills, etc.) or at any off-site waste
disposal facility which have been released, deposited or disposed of at
any time above, in, on or under or have come to reside or form part
thereof, or have migrated therefrom. and (ii) the Solutia Group agrees
to, shall, and does hereby, indemnify and hold harmless the Joint
Venture for Environmental Costs and Third Party Costs which arise from
the presence of Facilities Substances at any on-site waste disposal
facility (e.g. ponds, slag piles or landfills) or at any off-site
location waste disposal facility which have been released, deposited or
disposed of at any time prior to the Effective Date above, in, on or
under or have come to reside or form part thereof, or have migrated
therefrom unless the Solutia Group can provide clear and convincing
evidence that the Joint Venture operations or the "management practices"
of the Joint Venture post-Effective Date have created a new liability or
exacerbated an existing liability from prior practices, then the Joint
Venture will share in the cure of such liability in accordance with the
evidentiary standard and apportionment requirements set forth above in
Article 15.2(d).
(f) [******************************************************
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26
(g) For purposes of this Article 15, records of the Joint
Venture regarding amounts of Facilities Substances and Non-Facilities
Substances handled, present, generated, or disposed of shall be deemed
clear and convincing evidence.
15.3. JOINT VENTURE'S RESPONSIBILITIES.
(a) The Joint Venture agrees to, shall and does hereby
indemnify and hold harmless the FMC Group and the Solutia Group for:
(i) Environmental Costs incurred, other than in relation to soil, air or
groundwater remediation, as a result of the presence of Facilities
Substances, which the FMC Group or the Solutia Group can demonstrate
through clear and convincing evidence were released or originated from
the Facilities or migrated therefrom to the extent resulting in each
case from events occurring on or after the Effective Date; (ii) Third
Party Costs incurred, other than in relation to soil, air or groundwater
remediation, as the result of the presence of Facilities Substances,
which the FMC Group or the Solutia Group can demonstrate through clear
and convincing evidence originated or were released, from the Facilities
or migrated therefrom to the extent resulting in each case from events
occurring on or after the Effective Date; and (iii) Environmental Costs
incurred for surface soil clean up and soil remediation due solely to
the presence of Facilities Substances which the FMC Group or the Solutia
Group can demonstrate through clear and convincing evidence are due to a
discharge, release or spill of Facilities Substances at the Facilities
due to the actions of the Joint Venture which occurred on or after the
Effective Date.
(b) The Joint Venture agrees to, shall, and does hereby,
indemnify and hold harmless the FMC Group and the Solutia Group for
Environmental Costs and Third Party Costs which the FMC Group or the
Solutia Group can demonstrate through clear and convincing evidence
arise from the presence of Facilities Substances at any on-site waste
disposal facility (e.g. ponds, slag piles or landfills) or at any off-
site waste disposal facility which have been deposited or disposed of at
any time on or after the Effective Date in, on or under or have come to
reside or form part thereof, or have migrated therefrom.
(c) Subject to Article 15.2(c) with respect to the Pocatello,
Idaho facility and any assets or locations that are subject to the
Pocatello Consent Decree, if the Facilities are transferred to the Joint
Venture in compliance with the Requirements of Environmental Laws, then
the Joint Venture shall be solely responsible at its sole cost and
expense for maintaining such Facilities in compliance with the
Requirements of Environmental Laws.
(d) From and after the Effective Date, the Joint Venture shall
be responsible for reporting all wastes generated by either the
Transferred Assets or the operations of the Joint Venture.
15.4. INDEMNITY FOR COMPLIANCE WITH ENVIRONMENTAL LAW.
(a) Subject to, and without limiting the obligations of, the
FMC Group under this Article 15 and without imposing any time
limitations on any other obligations of the FMC Group under this Article
15, for a period of four (4) years after the Effective Date, the FMC
Group agrees to, shall and hereby does indemnify and hold harmless the
Joint Venture and the Solutia Group from and against any Losses
(including any fines, penalties or assessments) as well as all capital
expenditures, costs and expenses, arising from or relating to the
failure of any of the FMC Facilities from being in compliance with the
Requirements of Environmental Laws prior to the Effective Date,
including, without limitation any claims made by the Joint Venture
during such four-year period; provided, however, the foregoing shall
exclude any projects or series of related projects that are in each case
less than $25,000 in the aggregate.
27
(b) Subject to, and without limiting the obligations of, the
Solutia Group under this Article 15 and without imposing any time
limitations on any other obligations of the Solutia Group under this
Article 15, for a period of four (4) years after the Effective Date, the
Solutia Group agrees to, shall and hereby does indemnify and hold
harmless the Joint Venture and the FMC Group from and against any Losses
(including any fines, penalties or assessments) as well as all capital
expenditures, costs and expenses, arising from or relating to the
failure of any of the Solutia Facilities from being in compliance with
the Requirements of Environmental Laws prior to the Effective Date,
including, without limitation any claims made by the Joint Venture
during such four-year period; provided, however, the foregoing shall
exclude any projects or series of related projects that are in each case
less than $25,000 in the aggregate.
(c) The Joint Venture shall indemnify and hold harmless the
FMC Group and the Solutia Group from and against any Losses (including
any fines, penalties or assessments) arising from or relating a breach
of the Joint Venture's obligations set forth in Article 15.3(c).
15.5. ACCESS.
(a) FMC reserves the right of reasonable access to and the
right to be upon the Facilities and any part thereof as reasonably
necessary, but only in such manner and at such times as will not
interfere with the Joint Venture's normal operations, for purposes of
evaluation, testing, remedial work and any other appropriate activities
in connection with the matters contemplated by this Article 15 or
undertaken by the FMC Group to mitigate the potential cost of any
Remedial Action which could thereafter be imposed. In the event that
such access would interfere with the Joint Venture's normal operations,
the Joint Venture and the FMC Group agree to discuss in good faith a
mutually satisfactory solution for access. The parties agree that data
generated as a result of such evaluation and testing shall be made
available to the Joint Venture and the Solutia Group.
(b) Solutia reserves the right of reasonable access to and the
right to be upon the Facilities and any part thereof as reasonably
necessary, but only in such manner and at such times as will not
interfere with the Joint Venture's normal operations, for purposes of
evaluation, testing, remedial work and any other appropriate activities
in connection with the matters contemplated by this Article 15 or
undertaken by the Solutia Group to mitigate the potential cost of any
Remedial Action which could thereafter be imposed. In the event that
such access would interfere with the Joint Venture's normal operations,
the Joint Venture and the Solutia Group agree to discuss in good faith a
mutually satisfactory solution for access. The parties agree that data
generated as a result of such evaluation and testing shall be made
available to the Joint Venture and the FMC Group.
15.6. CONFIDENTIALITY.
Each party shall hold, and shall cause its officers, directors,
employees, agents and representatives (and shall cause the Joint Venture
and shall cause its officers, directors, employees, agents and
representatives) to hold, in strict confidence information provided to a
party or received by a party under this Article 15 in accordance with
Article 23.4 hereof.
15.7. PARTICIPATION PERMITTED.
Any party which could incur liability pursuant to this Article 15 shall
have the full right, at its own expense, to participate, through counsel
or otherwise, in all meetings and proceedings with adverse parties or
governmental authorities pertaining to the matter involved. This right
of participation shall not apply to confidential meetings in cases where
the parties are litigating claims against each other in a judicial or
administrative proceeding.
28
15.8. APPLICATION AND CONDITIONS.
The following provisions shall apply to the Joint Venture only.
(a) With respect separately to each circumstance where the FMC
Group's obligations under Article 15 could arise, such obligations are
conditioned upon (but only to the extent that the FMC Group is
prejudiced by the failure to occur of):
(i) the exercise of reasonable efforts and employment
of design, engineering and construction techniques
by the Joint Venture to reasonably minimize any
environmental, remediation or similar costs,
although the FMC Group shall pay excess costs of
design or construction incurred by the Joint
Venture in such exercise;
(ii) the Joint Venture providing FMC with reasonable
prior notice except in the event of emergencies,
and in such emergencies the Joint Venture shall
inform FMC as soon as practical before incurring
any Environmental Costs or other clean-up costs;
(iii) the Joint Venture giving full and fair consideration
to comments and suggestions by FMC with respect to the
avoidance of Environmental Costs or other clean-up costs
(unless such comments or suggestions are deemed
unreasonable); and
(iv) the Joint Venture keeping designated FMC management
personnel informed of the progress of any work or
other actions which may result in Environmental
Costs or other clean-up costs.
(b) With respect separately to each circumstance where the
Solutia Group's obligations under Article 15 could arise, such
obligations are conditioned upon (but only to the extent that the
Solutia Group is prejudiced by the failure to occur of):
(i) the exercise of reasonable efforts and employment
of design, engineering and construction techniques
by the Joint Venture to reasonably minimize any
environmental, remediation or similar costs,
although the Solutia Group shall pay excess costs
of design or construction incurred by the Joint
Venture in such exercise;
(ii) the Joint Venture providing Solutia with reasonable
prior notice except in the event of emergencies,
and in such emergencies the Joint Venture shall
inform Solutia as soon as practical before
incurring any Environmental Costs or other clean-up
costs;
(iii) the Joint Venture giving full and fair consideration
to comments and suggestions by Solutia with respect
to the avoidance of Environmental Costs or other
clean-up costs (unless such comments or suggestions
are deemed unreasonable); and
(iv) the Joint Venture keeping designated Solutia
management personnel informed of the progress of
any work or other actions which may result in
Environmental Costs or other clean-up costs.
15.9. PERMIT TRANSFERS.
(a) In the event any registrations, licenses, permits or other
rights granted by governmental agencies to the FMC Group must be
transferred, amended or issued in order that the Joint Venture may
29
lawfully conduct its business and sell Phosphorus Chemicals on or after the
Effective Date, and such transfer, amendment or issuance has not been
accomplished as of the date hereof, the FMC Group shall permit the Joint
Venture to use the FMC Group's registration, license or permit solely to
conduct its business and sell Phosphorus Chemicals, at the Joint Venture's
expense, if, to do so, such would be permitted by and not violate the terms
of the registration, license or permit and any law, regulation, ordinance
or rule, until such permit, registration or license is transferred or
issued to the Joint Venture or until 3 years (or such longer period of time
as the parties may mutually agree in writing) on or after the Effective
Date, whichever is earlier, provided the Joint Venture diligently pursues
transfer, amendment or issuance thereof. The FMC Group shall not be liable
to the Joint Venture and the Joint Venture releases and discharges the FMC
Group and the Solutia Group from, any and all Losses which any of them may
suffer or incur on account of the Joint Venture's use of the FMC Group's
registration, license or permit or other rights granted by governmental
agencies, or the FMC Group's permitting such use. Subject to the
procedures set forth in Article 14.5 hereof, the Joint Venture shall
indemnify and hold harmless the FMC Group and the Solutia Group from and
against any and all third party claims arising from or related to the Joint
Venture's use of the FMC Group's registration, license or permit or other
rights granted by governmental agencies, or the FMC Group's permitting such
use.
(b) In the event any registrations, licenses, permits or other
rights granted by governmental agencies to the Solutia Group must be
transferred, amended or issued in order that the Joint Venture may lawfully
conduct its business and sell Phosphorus Chemicals on or after the
Effective Date, and such transfer, amendment or issuance has not been
accomplished as of the date hereof, the Solutia Group shall permit the
Joint Venture to use the Solutia Group's registration, license or permit
solely to conduct its business and sell Phosphorus Chemicals, at the Joint
Venture's expense, if, to do so, such would be permitted by and not violate
the terms of the registration, license or permit and any law, regulation,
ordinance or rule, until such permit, registration or license is
transferred or issued to the Joint Venture or until 3 years (or such longer
period of time as the parties may mutually agree in writing) on or after
the Effective Date, whichever is earlier, provided the Joint Venture
diligently pursues transfer, amendment or issuance thereof. The Solutia
Group shall not be liable to the Joint Venture and the Joint Venture
releases and discharges the Solutia Group and the FMC Group from, any and
all Losses which any of them may suffer or incur on account of the Joint
Venture's use of the Solutia Group's registration, license or permit or
other rights granted by governmental agencies, or the Solutia Group's
permitting such use. Subject to the procedures set forth in Article 14.5
hereof, the Joint Venture shall indemnify and hold harmless the Solutia
Group and the FMC Group from and against any and all third party claims
arising from or related to the Joint Venture's use of the Solutia Group's
registration, license or permit or other rights granted by governmental
agencies, or the Solutia Group's permitting such use.
15.10. COOPERATION.
(a) The Joint Venture and the FMC Group agree to consult with each
other and to cooperate in pursuing methods of Remedial Action which
reasonably comply with the Requirements of Environmental Law in a practical
and economic fashion and also agree to consult with each other and to
cooperate in order that any and all transferable permits, registrations,
licenses or other rights referred to in Article 15.9 are transferred to the
Joint Venture as required for the conduct of its business.
(b) The Joint Venture and the Solutia Group agree to consult with
each other and to cooperate in pursuing methods of Remedial Action which
reasonably comply with the Requirements of Environmental Law in a practical
and economic fashion and also agree to consult with each other and to
cooperate in order that any and all transferable permits, registrations,
licenses or other rights referred to in Article 15.9 are transferred to the
Joint Venture as required for the conduct of its business.
30
(The information below marked by * and [] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.)
15.11. CESSATION OF MANUFACTURE.
(a) Subject to 15.2(c)(i), after the Effective Date, all costs
and expenses incurred in connection with the costs of closure, dismantling,
removal and demolition of machinery, equipment and structures transferred
to the Joint Venture by the FMC Group as a part of the Transferred Assets
(the "FMC Equipment") down to foundation level shall be solely to the Joint
Venture's account. Environmental Costs arising from the presence of
Facilities Substances on or in such FMC Equipment shall be to the Joint
Venture's account. Environmental Costs arising from the presence of non-
Facilities Substances on or in such FMC Equipment shall be to the FMC
Group's account. Environmental Costs arising from the presence of
Facilities Substances and/or Non-Facilities Substances on the land under
such FMC Equipment or in the subsurface, soil or groundwater under such FMC
Equipment or removal of FMC Equipment below grade shall be apportioned in
accordance with Article 15.2(a) above. Notwithstanding the foregoing
provisions of this Article 15.11(a), all costs and expenses incurred in
connection with [******************************************************
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***************************] shall be solely to FMC's account and FMC shall
pay all such amounts and reimburse the Joint Venture for such amounts.
(b) After the Effective Date, all costs and expenses incurred in
connection with the costs of closure, dismantling, removal and demolition
of machinery, equipment and structures transferred to the Joint Venture by
the Solutia Group as a part of the Transferred Assets (the "Solutia
Equipment") down to foundation level shall be solely to the Joint Venture's
account. Environmental Costs arising from the presence of Facilities
Substances on or in such Solutia Equipment shall be to the Joint Venture's
account. Environmental Costs arising from the presence of non-Facilities
Substances on or in such Solutia Equipment shall be to the Solutia Group's
account. Environmental Costs arising from the presence of Facilities
Substances and/or Non-Facilities Substances on the land under such Solutia
Equipment or in the subsurface, soil or groundwater under such Solutia
Equipment or removal of Solutia Equipment below grade shall be apportioned
in accordance with Article 15.2(d) above. Notwithstanding the foregoing
provisions of this Article 15.11(b), all costs and expenses incurred in
connection with [********************************************************
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****************************************************************] shall be
solely to Solutia's account and Solutia shall pay all such amounts and
reimburse the Joint Venture for such amounts.
15.12. SPECIAL PROVISION REGARDING DEFINITIONS.
For purposes of the indemnities in this Article 15, each reference to a
Group or the Joint Venture shall also include each director, officer,
employee and agent of the relevant entity.
16. WARRANTIES BY THE PARTIES; GUARANTIES OF PARENTS.
16.1. Each party represents and warrants to the other party that
(i) it is duly formed and validly existing, and it is in good standing in
the state of its incorporation and in each other state except where the
failure to be in good standing would not have a material adverse effect on
such party's Phosphorus Chemicals business, (ii) it is duly authorized and
has the requisite power to execute this Agreement and to from the Joint
Venture and to do all other things necessary to implement the various
agreements contemplated in and by this Agreement, (iii) this Agreement has
been duly executed, and constitutes the legal, valid and binding obligation
of such party, enforceable against such party in accordance with its terms,
except to the extent that the enforceability thereof against such party may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by equitable principles of
general application, (iv) none of such party's Transferred Assets
31
are subject to any consensual liens or security interests (except liens for
taxes and materialsmen's liens being contested in good faith which are not
material in amount), and (v) it has disclosed to the other party all
material facts and circumstances existing on the date hereof which could
reasonably be likely to, in such party's commercially reasonable judgment,
have a material adverse effect on the Joint Venture.
16.2. The performance of the obligations and liabilities of, as
well as the representations and warranties provided by, each member of each
Group contained in this Agreement and the Asset Transfer Agreements are
hereby guaranteed by the relevant ultimate parent of each such entity (i.e.
Solutia or FMC, as the case may be).
16.3. As of the date of this Agreement, each party represents and
warrants to the other party that the methodology for cost allocations for
its Group's Phosphorus Chemicals business has not changed or been altered
since January 1, 1998 where such change or alteration would have a material
adverse effect on its Phosphorus Chemicals business.
17. CONDITIONS PRECEDENT; TERMINATION OF AGREEMENT.
17.1. The obligation of each party to consummate the Joint Venture
is subject to the satisfaction (or waiver) on the Effective Date of the
following conditions:
A. Subject to Article 2.4, approval shall have been received
under the HSR Act, or the waiting period thereunder shall
have expired;
B. Any other necessary governmental approvals of the Joint
Venture shall have been given (either expressly or by
operation of law), with exception of the Brazilian Consents,
including without limitation, XXXX in Brazil which the
parties recognize and agree may not be obtained until after
the Effective Date, in which case the Group owning any
affected Brazilian assets or equity interests shall hold
them in trust for the Joint Venture, with all benefits and
burdens from such assets and equity interests being for the
sole account of the Joint Venture; and
C. Approval of the Board of Directors of each of Solutia and
FMC shall have been given.
17.2. Without prejudice to the foregoing, either party shall be
entitled to terminate this Agreement at any time, without liability to the
other party, from the date hereof up to the Effective Date, if:
A. Subject to Article 2.4, no order of any court, arbitrator,
or governmental, regulatory or administrative body, shall be
in effect which restrains or prohibits the transactions
contemplated hereby;
B. There has arisen, after the date of this Agreement, any bona
fide claim or litigation involving, directly or indirectly,
one or both of the parties, of any member of either Group,
which may reasonably be expected to materially and adversely
affect the Transferred Assets and/or the business falling
with the Field of the Agreement; and
C. There has been a material adverse change reasonably outside
of the control of the party seeking to terminate (i) if the
party seeking to terminate is Solutia, with respect to the
Transferred Assets, taken as a whole, relating to the FMC
Group, or (ii) if the party seeking to terminate is FMC,
with respect to the Transferred Assets, taken as a whole,
relating to the Solutia Group.
32
17.3. Subject to Article 14, if, on or before December 31, 1999,
the conditions set out in Article 17.1 shall not all have been met,
satisfied or waived or if an event set forth in Article 17.2 shall occur,
then either party may terminate this Agreement by written notice to the
other party. Further subject to Article 14 hereof, any such termination
shall be without liability to any party, any member of its Group, or to any
shareholder, director, officer, employee, agent, consultant or
representative of any party.
18. OPERATIONS UNTIL TRANSFER.
From and after the date hereof, each party will use its reasonable
best efforts to ensure that (i) no consensual secured liens or security
interest shall be created or levied on the Transferred Assets (except liens
for taxes and materialsmen's liens being contested in good faith which are
not material in amount), and (ii) the assets to be transferred to the Joint
Venture, shall be operated in the ordinary course of business consistent
with past business practices, and no portion thereof (except inventory sold
in the ordinary course of business) shall be sold, conveyed, or otherwise
transferred, unless replacement assets are acquired or, due to the nature
of the Transferred Assets and the business relating thereto, replacement
assets are not required to continue the operation of the business
consistent with past business practices. Each party represents and
warrants to the other party that, since December 31, 1998, the assets of
such party's Group being transferred to the Joint Venture and such Group's
Phosphorus Chemicals business have been operated in the ordinary course of
business consistent with past practices, and each party covenants that from
the date hereof through the Effective Date it shall and shall cause its
Group to operate it assets and its Phosphorus Chemicals business in the
ordinary course of business, consistent with past practices.
19. ASSIGNMENT; PLEDGE OF JOINT VENTURE INTEREST.
Neither party shall assign this entire Agreement, or all related rights and
obligations in the Joint Venture or all rights and all obligations in any
related agreements, without the prior written consent of the other party
which consent may not be unreasonably withheld or delayed; provided,
however, if a party desires to assign a portion of this Agreement, or a
portion of the related rights and related obligations in the Joint Venture
or a portion of the rights and obligations in any the related agreements,
then the party desiring to make such assignment shall obtain the consent of
the other party, which such consent of the other party may be withheld
without cause being shown; provided, further, however, except such member
of a Group may assign such interest to a wholly-owned subsidiary (which
shall at all times remain a wholly-owned subsidiary, and such subsidiary
may be a partnership, limited liability company, or corporation) of Solutia
or FMC, as the case may be, provided that the ultimate parent company (e.g.
Solutia or FMC, as the case may be) shall guarantee such subsidiary's
performance hereunder. Without the prior written consent of the other
party, no member of the Solutia Group or the FMC Group, as the case may be,
shall pledge, encumber, or grant a security interest in, any interest
(stock, membership or partnership) in any entity comprising the Joint
Venture. Any permitted assignee shall, prior to the effectiveness of any
assignment to such assignee, agree in writing to be bound by, and assume
each obligation of the assigning party under, this Agreement, and each
other document and agreement relating to the Joint Venture to which the
assignor (or its Group) is a party, which such written agreement shall be
in a form satisfactory to the party not assigning its interest hereunder.
20. COSTS, FEES AND TAXES.
20.1. Unless the parties agree otherwise in writing, each party
shall bear and pay its own costs, expenses and fees incurred in connection
with the making of this Agreement.
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20.2. Any and all stamp duties, transfer taxes, recording and
filing fees, and other similar statutory costs, incurred or payable in
connection, directly or indirectly, with the transfer to the Joint Venture
of any of the Transferred Assets, or the implementation of this Agreement
and the formation of the Joint Venture, shall be borne and paid by the
Joint Venture. Notwithstanding the previous sentence, any and all taxes
relating to income, capital gains, or other similar taxes or charges shall
be borne by the Group transferring the Transferred Assets to the Joint
Venture.
21. NOTICES.
21.1. Any notice to be served by one party on the other in
connection with this Agreement shall be validly served if delivered by
overnight delivery service (costs pre-paid), confirmed fax, or delivered in
person, to the following addresses (or such other address as a party may
specify from time to time in accordance with this Article):
A. FMC Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn.: Vice-President of Chemical Products Group
FAX: (000) 000-0000
TEL: (000) 000-0000
with a copy to:
FMC Corporation
000 Xxxx Xxxxxxxx Xx.
Xxxxxxx, Xxxxxxxx 00000
Attn.: General Counsel
FAX: (000) 000-0000
TEL: (000) 000-0000
B. Solutia Inc.
00000 Xxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000-0000
Attention: President
FAX: (000) 000-0000
TEL: (000) 000-0000
with a copy to:
Solutia Inc.
00000 Xxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000-0000
Attention: General Counsel
FAX: (000) 000-0000
TEL: (000) 000-0000
After the Effective Date, the Joint Venture shall give each of the parties
appropriate addresses for notices.
34
21.2. Any notice validly served on a business day of the recipient
and in accordance with Article 21.1 shall be deemed served on the day of
receipt in the case of faxed, hand-delivered, and overnight delivery
service notices.
22. LAW.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York, without reference to the conflicts of laws
principles thereunder.
23. MISCELLANEOUS PROVISIONS.
23.1. THIRD PARTIES. Except as expressly stated herein with
respect to members of each Group, no person or entity not a party to this
Agreement (including, without limitation, any employee of either Group or
the Joint Venture) shall be a third-party beneficiary of any provision of
this Agreement, and nothing contained herein shall be construed or deemed
to confer any benefit or right upon any third party.
23.2. BROKERS. Each party agrees to indemnify and hold the other
harmless against any and all liability to any broker retained by its Group
in connection with this Agreement and the transactions contemplated by this
Agreement.
23.3. PRESS RELEASES. Except as required by law or securities
exchange rules, public announcements and press releases concerning this
Agreement and the transactions contemplated hereby shall be made only as
mutually agreed by the parties.
23.4. ENTIRE AGREEMENT CONFIDENTIALITY.
A. This Agreement, including the Appendices attached to this
Agreement and the Recitals set forth herein, constitutes the
entire agreement between the parties pertaining to the
subject matter hereof, and all prior representations,
discussions and negotiations between the parties and/or
members of their Groups pertaining to the subject matter of
this Agreement are superseded. Notwithstanding the
preceding sentence, the terms and provisions of the certain
letter agreement dated as of November 18, 1998 between the
parties shall remain of full force and effect.
B. Each Group (the "Recipient Party") agrees to hold in
confidence and not to disclose either directly or indirectly
to any third party any technical, financial, commercial or
other information (the "Information") as may be revealed or
disclosed orally, in writing or otherwise to it by the other
Group or by the Joint Venture (the "Disclosing Party") and
shall refrain from using any such Information for any
purpose whatsoever other than for the purpose(s) for which
the Information was disclosed or unless previously approved
in writing by the Disclosing Party; provided, however, that
these obligations shall not apply to Information:
(i) which at the time of disclosure to the Recipient
Party was in the public domain,
(ii) which after disclosure to the Recipient Party becomes
part of the public domain through no fault of said
party,
(iii) which at the time of disclosure to the Recipient
Party was in its possession or was independently
developed by the Recipient Party (and the Recipient
Party can demonstrate such by written documents dated
before the time of disclosure),
35
(iv) which disclosure is obtained by the Recipient Party
from a third party which has not, either directly or
indirectly, received the Information from the
Disclosing Party; or
(v) which disclosure is required otherwise by law, unless
compelled to disclose such documents or information
by judicial or administrative process,.
Specific Information shall not be deemed to be within the
foregoing exceptions merely because such specific
Information may be construed as being within broader, non-
confidential information which is either in the public
domain or in the possession of the Receiving Party at the
time of the disclosure of such Information, nor shall a
combination of features which form Information be deemed to
be non-confidential merely because the individual features,
without being combined, are non-confidential. In any such
instance where disclosure appears to be compelled by law,
the first party will notify the other party so that such
party may avail itself of such measures as may be available
for protecting the confidentiality of such information;
provided, however, that neither party will be prohibited
-----------------
from using such documents and information in litigation
against the other party.
C. The parties shall cause the Joint Venture to adhere to
similar obligations of confidentiality as set forth above
with respect to Information received by it from either
Group.
D. Unless otherwise agreed between the parties, the provisions
of this clause shall survive the termination of this
Agreement and continue to be in force thereafter for a
period of five (5) years.
23.5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument. Signatures to
this Agreement may be given by facsimile or other electronic transmission,
and such signatures shall be fully binding on the party sending the same.
23.6 AMENDMENT; WAIVER; HEADINGS. No waiver, modification or
amendment of any provision, term, or condition of this Agreement shall be
of any force or effect unless in writing and executed by each of the
parties. No usage of trade, course of dealing or performance shall modify
the terms or conditions of this Agreement. The headings in this Agreement
are for convenience only and shall not be deemed a part of this Agreement.
23.7. DUE DILIGENCE. Until the Effective Date, each party shall
continue to use its reasonable efforts to allow the other party to continue
due diligence of such party's Phosphorus Chemicals business.
23.8. AUDITORS. The parties will agree on the independent
auditors of the Joint Venture. From time to time, each party shall have
the right to have its own internal or external auditors review the books
and records of the Joint Venture.
23.9. SUPREMACY. In the event of any conflict or inconsistency
between the provisions of this Agreement and any other document related to
the subject matter of this Agreement, which may be entered into by the
parties or between a member of any Group and the Joint Venture, from time
to time, the provisions of this Agreement shall prevail in each case,
unless the parties otherwise expressly agree in writing.
36
23.10. SETTLEMENTS. Except as expressly provided otherwise herein,
all settlements calculations under this Agreement shall be in United States
Dollars, with the exchange rate for any other currencies into United States
Dollars being as set forth in the last U.S. edition of The Wall Street
---------------
Journal published on the business day immediately preceding the Effective
-------
Date.
24. SPECIAL PROVISIONS REGARDING FOSBRASIL.
Solutia has informed FMC that currently, (i) the interest in
Fosbrasil is owned by a subsidiary of Monsanto Company, which holds such
interest for the benefit of Solutia, and (ii) all of the benefits and
burdens of such Fosbrasil interest currently pass through to Solutia.
The Brazilian Consents may not be obtained prior to the Effective
Date. From and after the date hereof, the parties agree to use their
respective commercially reasonable good faith efforts to procure the
Brazilian Consents in a prompt manner, and to timely comply in all material
respects with all reasonable requests of any authorized governmental
authority or third party who is also an owner of Fosbrasil in connection
with obtaining the Brazilian Consents (including, consent of the other
partners of Fosbrasil to obtain their consent and waiver of any right of
first refusal, first, with respect to the transfer of the interest in
Fosbrasil from Monsanto to Solutia, and second, to the transfer of the
interest in Fosbrasil from Solutia to the Joint Venture). In connection
with obtaining such consents, the parties will use their commercially
reasonable good faith efforts to coordinate their respective efforts and
work together in obtaining such consents. In the event a payment must be
made to another owner of Fosbrasil to obtain such consent, such payment
shall be for the sole account of Solutia.
In the event that some or all of the Brazilian Consents are not
obtained on or before the Effective Date, then with respect to those
Transferred Assets for which the relevant Brazilian Consents are not
obtained (e.g. the Fosbrasil interest owned by Monsanto Company for the
benefit of Solutia and/or Solutia Group's other assets located in Brazil as
identified on Appendix 1.48B), Solutia shall cause, at its sole cost and
expense, all of the benefits and burdens (including, without limitation,
associated profits, losses and liabilities) of such affected Transferred
Assets shall inure to the Joint Venture from and after the Effective Date.
25. DISPUTE RESOLUTION PROCEDURES.
25.1 At any time after the date of this Agreement for so long as
both the FMC Group and the Solutia Group own an interest in the Joint
Venture, at the request of either party in a written notice to the other
party's appointees to the Board, the parties agree to negotiate in good
faith to resolve expeditiously any controversies, claims or disputes
between the parties that may arise from time to time under this Agreement
or otherwise relating to the Joint Venture. If, after a period of sixty
(60) days from the date of any such notice, the parties' respective
appointees to the Board cannot resolve the matter under consideration, then
any such matter not so resolved shall be referred (by written notice by
either party to the other party's general counsel and the other party's
appointees to the Board) to the chief executive officers of Solutia and FMC
(the "Group Heads"), who shall have an initial meeting with respect to such
matters within thirty (30) days of the date of such referral notice, and
who shall thereafter negotiate in good faith with each other for an
additional thirty (30) day period following the date of such initial
meeting in an attempt to resolve any open issues. If the Group Heads are
also unable to resolve such issues within such thirty (30) day period, the
parties agree that thereafter either party shall be free to exercise
whatever rights or remedies it may then have at law or equity, but in
connection with any judicial proceedings, if any, with respect to such
matter, both parties agree to waive their rights, if any, to a jury trial,
and further agree that they will not assert in any such legal proceedings
as a defense any statute of limitations or a claim of laches (unless the
period of time between the occurrence of the event giving rise
37
to the controversies, claims or disputes between the parties and the
initiation of any such legal proceedings, less the time period consumed in
the parties' compliance with the foregoing provisions of this Article,
exceeds by ninety (90) days or more the time period of the relevant statute
of limitations or would fulfill the time period required to assert a claim
of laches).
25.2. At any time the parties may, by mutual consent, retain a
mediator to aid the parties in their discussions and negotiations by
informally providing advice to the parties. Any opinion expressed by the
mediator shall be strictly advisory and shall not be binding on the
parties, nor shall any opinion expressed by the mediator be admissible in
any proceeding or be made know to any third parties without the express
prior written consent of both parties. Costs of mediation shall be borne
equally by the parties, except each party shall be responsible for its own
expenses.
26. JOINT VENTURE TO BE BOUND.
On the Effective Date, each of the parties shall cause the Joint Venture
(and each of its constituent entities) to agree to and be irrevocably bound
by the terms and provisions of this Agreement, including, without
limitation, Articles 14 and 15.
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38
IN WITNESS of the foregoing, the parties have signed this Agreement
as to the date first written above.
FMC CORPORATION SOLUTIA INC.
By /s/ Wm. X. Xxxxxxxx By /s/ M. E. Xxxxxx
--------------------------- ---------------------------
Title Vice President Title Vice President
------------------------ ------------------------
APPENDICES ATTACHED [Omitted]
-------------------
Appendix No. Description
------------ -----------
1.15 Field of Agreement and Phosphorus Chemicals
1.19 Foret Phosphorus Chemicals Business
1.37 PPA Technology
1.48A FMC Group Transferred Assets
1.48B Solutia Group Transferred Assets
6.5 Asset Transfer Agreements Principles
7.1 December 31, 1998 Balance Sheet of each party
12.1 Transition Services Agreement Principles
39
OMITTED ATTACHMENTS
A list briefly identifying the contents of all omitted attachments to this
Joint Venture Agreement between Solutia Inc. and FMC Corporation appears
on page 39 of the agreement. Solutia will furnish supplementally to the
Securities and Exchange Commission upon request a copy of any omitted
attachment.
