EXHIBIT 10.12
AMENDMENT TO PROPYLENE FACILITY AND
PIPELINE AGREEMENT AND PROPYLENE SALES AGREEMENT
This Amendment, effective on January 1, 1993, is between HIMONT U.S.A, Inc.
("HIMONT") and Enterprise Products Company ("Enterprise"). HIMONT, successor to
Hercules Incorporated, and Enterprise, successor to Enterprise Petrochemical
Company, hereby agree to amend that certain Propylene Facility and Pipeline
Agreement effective December 13, 1978, as amended (the "PFP Agreement") and the
Propylene Sales Agreement attached as Exhibit A to the PFP Agreement, as amended
(the "Propylene Sales Agreement") as set forth below.
PART 1 - PROPYLENE SALES AGREEMENT
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A. The text of Article IV of the Propylene Sales Agreement shall be
replaced with the following:
"ARTICLE IV
QUANTITY AND SCHEDULING
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SECTION 4.1 - QUANTITY
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4.1 Beginning on January 1, 1993, and continuing throughout the term of
this Agreement, including any extensions or renewals hereof,
Enterprise shall sell and deliver to HIMONT, and HIMONT shall purchase
and receive from
Enterprise, the full output capacity of Polymer Grade Propylene from the
Plant as expanded in 1990, estimated to be one billion eighty million
(1,080,000,000) pounds per year, less the agreed upon tolling volumes, of
three hundred and eighty four million (384,000,000) pounds per year. During
any month that the total plant production is less than ninety-two million
(92,000,000) pounds of Polymer Grade Propylene, Enterprise shall have the
right, but not the obligation, to supplement such short fall in production
from Enterprise's inventory of Polymer Grade Propylene, which was
previously produced by the Plant. The estimated volume of Polymer Grade
Propylene which shall be sold by Enterprise and purchased by HIMONT, is
seven hundred million (700,000,000) pounds per year. The actual monthly
volume sold to HIMONT during any month shall not be more than sixty million
(60,000,000) pounds, unless mutually agreed to by both parties, or less
than fifty million (50,000,000) pounds except for "force majeure"
conditions.
Notwithstanding anything herein to the contrary, in the event Enterprise
invokes force majeure, the volume delivered to HIMONT shall not be less
than 64.58 percent of the total plant production during the force majeure
period.
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SECTION 4.2 - SCHEDULING
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4.2 A. Enterprise shall provide HIMONT, at least fifteen (15) days prior
to the first (1st) day of each calendar quarter, with an estimate
of the production of Polymer Grade Propylene at the Plant, by
quarter, for the next succeeding twelve (12) month period. It is
understood that such estimate is for the purpose of facilitating
scheduling only and is not binding on either party.
B. Enterprise shall further provide HIMONT in writing, at least five
(5) days prior to the first (1st) day of each calendar month, a
schedule indicating the estimated quantity of Polymer Grade
Propylene produced at the Plant that will be delivered by
Enterprise to HIMONT during such month."
B. Article V of the Propylene Sales Agreement shall be replaced with the
following:
"ARTICLE V
QUALITY
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5.1 Enterprise represents, warrants and covenants that Polymer Grade
Propylene sold and purchased hereunder
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shall meet the specifications set forth in Schedule A attached hereto.
Enterprise is dedicated to continuous quality improvement and shall
endeavor, through training and use of statistical methods, to seek
improvements in its methods of production, delivery and quality
measurement for the purpose of minimizing variation in the quality
parameters of Polymer Grade Propylene delivered under this Agreement
as defined in Schedule A and Schedule B attached hereto. Enterprise
shall endeavor to reduce the maximum allowable levels of impurities in
Polymer Grade Propylene from that listed in Schedule A to that listed
in Schedule B. Schedule A shall be amended from time to time by
written agreement of the parties to reflect Enterprise's improved
ability to continuously supply Polymer Grade Propylene with maximum
allowable levels of impurities below those defined in Schedule A.
Enterprise shall endeavor to satisfy HIMONT's quality requirements, as
they may evolve, and as they may be defined by joint technical effort,
subject to mutual agreement on the allocation of costs incurred by
Enterprise in satisfying HIMONT's evolving requirements."
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C. The text of Article VI of the Propylene Sales Agreement, shall be
replaced with the following:
"ARTICLE VI
PRICE
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SECTION 6.1 - PARTIES INTENT
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6.1 It is the intent of HIMONT and Enterprise that this Agreement
constitute a long-term relationship for the sale and purchase of
Polymer Grade Propylene at a freely negotiated price representative of
Large Volume\Long-Term contract transactions for pipeline deliveries
of Polymer Grade Propylene on the Texas Gulf Coast. For purposes of
this Agreement Large Volume\Long-Term contracts are defined as freely
negotiated contracts covering the sale of a minimum volume of one
hundred million (100,000,000) pounds of Polymer Grade Propylene per
year on the Texas Gulf Coast, with all terms, including pricing
provision, and contract extensions, in effect for a minimum of two
years.
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The parties acknowledge that the marketplace for Large Volume\Long-
Term contract sales of Polymer Grade Propylene by pipeline deliveries
on the Texas Gulf Coast is determined by the application of a
contractually agreed-to discount from a base contract price or range
of base contract prices established monthly between suppliers and
purchasers of propylene, and that such base contract prices are
published monthly by CMAI in their Monomers Market Report. It is the
desire of both parties that the sale and purchase of Polymer Grade
Propylene hereunder be at a price representative of the freely
negotiated Large Volume\Long-Term contract market as defined above.
SECTION 6.2 - PRICE
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6.2 For Polymer Grade Propylene having a composition conforming with
specification set forth in Schedule A, HIMONT shall pay Enterprise
each month the following:
a. For the "Base Volume:"
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Ninety three and one-half percent (93.5%) of the final month-end
Average Contract Price for Polymer Grade Propylene in the United
States as published by CMAI in their Monomers Market Report or
otherwise reported to Enterprise and HIMONT by CMAI.
The Average Contract Price shall be defined as the average of the
three closest posted monthly prices among five polymer grade propylene
sellers which shall be mutually agreed to by HIMONT and Enterprise.
Base Volume is defined as the daily rateable monthly equivalent of the
first five hundred million (500,000,000) pounds per year of Polymer
Grade Propylene produced and sold by Enterprise to HIMONT, except
that:
i. During any month that Enterprise is unable to produce the daily
rateable volume of Polymer Grade Propylene, equivalent to one
billion and eighty million (1,080,000,000) pounds per year, due to
plant operating problems, or
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"force majeure" conditions and, as a result, Enterprise reduces
the volume of Polymer Grade Propylene available for sale to HIMONT
below the daily rateable equivalent of seven hundred million
(700,000,000) pounds per year, then during such months, the Base
Volume shall be reduced by seventy one percent (71%) of the
difference between the daily rateable equivalent of seven hundred
million (700,000,000) pounds per year and the actual volume sold
to HIMONT during such month.
b. For the "Incremental Volume:"
Ninety three and one-half percent (93.5%) of the final month-end
Average Contract Price for Polymer Grade Propylene in the Gulf Coast
United States as published by CMAI in their Monomers Market Report or
otherwise reported to Enterprise and HIMONT by CMAI, less an
additional discount of one-half cent (.50c) per pound.
Incremental Volume is defined as all Polymer
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Grade Propylene in excess of the Base Volume which is sold by
Enterprise to HIMONT each month.
Enterprise and HIMONT mutually agree that effective January 1,
1995, and each twenty four (24) months thereafter, either party
can request a Contract Price reopener, on ninety (90) days written
notice, if either party can reasonably demonstrate that the Price
herein set forth is not representative of the Large Volume\Long-
Term contract market.
SECTION 6.3 - ALTERNATE PRICING MEDIUM
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6.3 In the event CMAI discontinues, suspends or fails to report a final
month-end average Contract Price for Polymer Grade Propylene in the
Gulf Coast United States, Enterprise and HIMONT agree they will
promptly and in good faith adopt a price basis on an alternate pricing
medium."
D. The last sentence of Article VIII of the Propylene Sales Agreement
shall be rewritten in its entirety as follows:
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"Nothing contained herein shall affect HIMONT's right to terminate this
Agreement because of the inability or refusal of Enterprise, after
notification as provided for in Section 14.1 hereof, to correct any
existing failure to deliver polymer grade propylene meeting the
specifications set forth in Schedule A attached hereto; HOWEVER
ENTERPRISE'S ONLY LIABILITY UNDER THIS AGREEMENT WITH REGARD TO NON-
CONFORMING PRODUCT SHALL BE LIMITED TO REPLACEMENT FOR ANY NON-CONFORMING
POLYMER GRADE PROPYLENE DELIVERED BY ENTERPRISE HEREUNDER AND FOR ANY
PRODUCT IN HIMONT'S ABOVE GROUND STORAGE AND PIPELINES THAT IS CONTAMINATED
DUE TO COMINGLING WITH SUCH NON-CONFORMING PRODUCT. ENTERPRISE SHALL NOT BE
LIABLE TO HIMONT FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY
DAMAGES WITH RESPECT THERETO, NOR SHALL ENTERPRISE BE LIABLE TO ANY THIRD
PARTIES WITH WHICH HIMONT MAY ENTER INTO AGREEMENTS CONCERNING THE POLYMER
GRADE PROPYLENE OR THE PRODUCTS MADE THEREFROM."
E. The text of Article X of the Propylene Sales Agreement shall be
replaced with the following:
"ARTICLE X
BILLING AND PAYMENT
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Section 10.1 - BILLING AND PAYMENT
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10.1 Enterprise shall forward to HIMONT, no more often that once during
each calendar month, an invoice for Polymer Grade Propylene sold and
delivered hereunder (determined by passage of title) during the
preceding calendar month. Such invoices, with supporting
documentation, shall be dispatched promptly by Enterprise and in such
manner so as to be received by HIMONT, within five (5) days of the
date of invoice, at the following address:
HIMONT U.S.A., Inc.
0000 Xxxxxxxxxxx Xxxx
X.X. Xxx 00000
Xxxxxxxxxx, XX 00000-0000
Attention: Vice President
Strategic Raw Materials
or to such other address as HIMONT may hereinafter designate in
writing to Enterprise. Payment by HIMONT shall be made to Enterprise
net thirty (30) days from date of invoice, via wire transfer to:
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Xxxxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx
ABA 000000000
Account of: Enterprise Products Company
Account #000-0-00000
or to such other address or bank as Enterprise may hereinafter
designate in writing to HIMONT.
If the payment date for an invoice falls on a Saturday, then the
invoice shall be due and payable on the immediately preceding Friday.
If the payment date for an invoice falls on a Sunday, then the invoice
shall be due and payable on the next following Monday. If the payment
date for an invoice falls on a Statutory Holiday, then the invoice
shall be due and payable on the nearest preceding business day."
PART 2 - PFP AGREEMENT
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A. The text of Section 2.5 B of the PFP Agreement shall be replaced with
the following:
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"SECTION 2.5 - TERM OF LEASE AND RENTAL PAYMENT
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B. Enterprise shall pay Himont, without previous demand therefor and
without deduction or setoff (including deductions or setoffs due or
alleged to be due by reason of any past, present or future claims of
Enterprise against Himont under this Agreement or under the Propylene
Sales Agreement, or otherwise), as rent for use of the leasehold
estate created in Section 2.4, a sum which equals 3.5cents per gallon
for 50% of all Polymer Grade Propylene produced at the Plant;
provided, however, that
(a) During the period commencing January 1, 1981, and ending November
30, 1990, the sum payable as rent during each month of this period
shall equal 4cents per gallon for 50% of all Polymer Grade
Propylene produced at the Plant.
(b) During the period commencing December 1, 1990, and ending December
31, 1992, the sum payable as rent during each month of this period
shall equal 4cents per gallon on 50% of the rateable monthly
production of a fixed annual production volume of nine hundred and
eighty million (980,000,000) pounds per year of Polymer Grade
Propylene (hereinafter the "Fixed Volume").
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(c) Commencing on January 1, 1993, the sum payable as rent during each
month thereafter shall equal the lesser of: (i) 3.50c per gallon
on fifty percent (50%) of the current month's Fixed Volume, or
(ii) 3.50c per gallon on fifty percent (50%) of the current
month's Fixed Volume multiplied by the actual volume in pounds of
Polymer Grade Propylene purchased by HIMONT hereunder during the
current month divided by the current month's daily rateable
equivalent of seven hundred million (700,000,000) pounds per year
providing, however, that during any month that force majeure
conditions are not invoked by Enterprise and Enterprise, at its
sole discretion, elects to reduce the volume of Polymer Grade
Propylene sold to HIMONT to less than the current month's daily
rateable equivalent of seven hundred million (700,000,000) pounds
per year, then the provisions of this Section 2.5 B (c) (ii) shall
not apply.
Within 15 days after the end of each month during the Lease Term,
Enterprise shall furnish to HIMONT a statement, certified as true and
correct by Enterprise, setting forth the number of gallons of Polymer Grade
Propylene produced at the Plant during the preceding month."
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B. Effective on January 1, 1993, Section 2.5 D of the PFP Agreement shall
be deleted in its entirety.
C. Insert the following sentence before the last sentence in Section 2.8
A.(1) of the PFP Agreement:
"Beginning on January 1, 1993, and continuing throughout the term of
this Agreement, including any extensions or renewals hereof,
Enterprise shall sell and deliver to HIMONT, and HIMONT shall purchase
and receive from Enterprise, the full output capacity of Polymer Grade
Propylene from the Plant, estimated to be one billion eighty million
(1,080,000,000) pounds per year, less the agreed upon tolling volumes
of three hundred and eighty four million (384,000,000) pounds per
year. The net volume of Polymer Grade Propylene which HIMONT shall
purchase each month shall be determined as provided for under Section
4.1 of the Propylene Sales Agreement."
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PART 3 - EXTENSION OF TERM
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This Amendment shall extend the term of the PFP Agreement and the Propylene
Sales Agreement for the first option of twelve (12) years, as provided for
in Section 11.1 of the PFP Agreement, and shall remain in full force and
effect as amended until December 31, 2004. All other terms and conditions
of Article XI of the PFP Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, HIMONT and Enterprise, by their duly authorized
representatives, have executed this Amendment effective as of January 1, 1993.
HIMONT U.S.A., INC. ENTERPRISE PRODUCTS COMPANY
By: /s/ X.X. Xxxxxx By: /s/ X. X. Xxxx
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Title: Sr. Vice President Title: Sr. Vice President
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Date: May 14, 1993 Date: 4-27-93
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