Parties

Construtora Norberto Odebrecht S.A. (CNO) and Braskem S.A. (Braskem)

Relationship with the issuer

Braskem and CNO are both subsidiaries of Odebrecht S.A.

Subject

The parties entered into an Alliance Agreement on May 26, 2014, which establishes the general conditions for contracting engineering, construction and project design services and other activities (ACTIVITIES) to be executed by CNO during conservation and maintenance shutdowns, as well as expansion or modification works at the industrial units.

The services are contracted through Specific Activity Agreements (TAE), which are signed for each specific demand.

The TAEs are drafted by an Integrated Project Team formed by representatives from both Parties, which defines the conditions for the execution of each ACTIVITY, stipulating: (i) the financial schedule of the activities; (ii) the composition of costs, contingency amounts and price breakdown of the activities; (iii) the matrix of responsibilities of the activities; (iv) the work instructions related to the activities; (v) the assumptions used to determine the costs, prices and dates of conclusion of the activities; (vi) the guaranties and responsibilities related to the activities, as well as any other specifications and details related to the execution of the ACTIVITIES.

The amount of each TAE includes all the costs to be incurred with the services to be rendered by CNO, including any costs with third parties that may be contracted to provide materials and services, as well as CNO’s remuneration, which must be reported at the end of each agreement. CNO’s remuneration for the execution of the TAEs under the Alliance Agreement is limited to R$121 million. This remuneration will be calculated as a percentage of the value of the TAE, according to the type of service to be rendered and the payment of a bonus or discount for penalties, which are calculated as the difference between the Final Price and the Target Price.

Based on this system, the total contracted value based on the Alliance Agreement, resulting from the sum of the set of TAEs, will be determined only at the end of the term of the Alliance Agreement. If the ceiling of CNO’s remuneration mentioned above is reached before the end of the Alliance Agreement, a new contract must be negotiated between the parties. 

The scope of the First Amendment to TAE no 081 entered into on July 10, 2018 is detailed in the following item (Main terms and conditions).

Main terms and conditions

TAE 081:

Scope: Management, Supervision and Execution Services for Construction, Assembly and Commissioning Services, in accordance with items “a” and “d” of Clause 2.1 of the Alliance Agreement executed by and between Braskem and Odebrecht, to be performed for the Maintenance Intervention Services, including Pre-Assembly and Assembly of tubing, assembly, disassembly and support of scaffoldings, intervention in industrial equipment during Pre-Shutdown, Shutdown and Post-Shutdown of the Chemicals 2 Plant, including supply of the equipment, by CNO, in the municipality of Triunfo, Rio Grande do Sul.

Duration: from Jan. 29, 2018 to Jul. 30, 2018.

Total price for TAE 081: ten million, two hundred ninety-seven thousand, eight hundred sixty-five reais and sixty-seven centavos (R$10,297,865.67).

 (Amendment to TAE 081 changed the total price of activity).

The main terms and conditions of said Alliance Agreement were approved in PD.CA/BAK-03/2014, at a meeting of the Board of Directors of Braskem held on May 7, 2014.

Date of signing of TAE

Execution of the Amendment to TAE 081: July 10, 2018 (TAE 081 was signed on January 29, 2018)

Any participation by the counterparty, its partners or managers in the issuer’s decision-making process or in the negotiation of the transaction as representatives of the issuer

The Alliance Agreement, which provides for the execution of TAEs, was deliberated at a meeting of the Board of Directors of Braskem S.A., whose members include one director and one alternate director on the board of the direct parent company of Construtora Norberto Odebrecht/the counterparty.

However, no manager of CNO or its parent company participated in negotiations of the transaction as a representative of the issuer.

Detailed justification of the reasons why the management of the issuer believes the transaction was carried out on an arm’s length basis or involves adequate compensatory payment

The commercial conditions established in said TAE were based on industry standards, considering the volumes contracted and technical conditions. Braskem conducted a comparative analysis of its routine agreements, maintenance shutdown agreements and market proposals, in particular, an analysis of labor costs, charges, contractual management fees and profit, and the CNO proposal was found technically and commercially competitive. Furthermore, the execution of the Services requires compliance with rigorous cost and deadline targets, as well as high quality and productivity technical standards, with strict compliance with environmental, health and safety standards, and CNO fulfilled all these requirements. CNO holds vast experience in executing the Services under other previous alliance agreements and its performance reviews have always been positive.

The decision-making process involved an analysis and negotiation of the proposal prepared by CNO by the respective Executive Officers of Braskem.