EXHIBIT 10.9
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PROPYLENE FACILITY AND PIPELINE AGREEMENT
BETWEEN
ENTERPRISE PETROCHEMICAL COMPANY
AND
HERCULES INCORPORATED
EFFECTIVE: DECEMBER 13, 1978
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PROPYLENE FACILITY AND PIPELINE AGREEMENT
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THIS AGREEMENT, effective this day of , 1978,
is made and entered into by and between
ENTERPRISE PETROCHEMICAL COMPANY, a Texas corporation, having an
office and place of business at 0000 Xxxxx Xxxxxxxx, Xxxxxxx, Xxxxx 00000
("Enterprise"),
and
HERCULES INCORPORATED, a Delaware corporation, having an office and
place of business at 000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000
("Hercules").
RECITALS
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Enterprise is constructing at its site near Mt. Belvieu, Texas a
facility to separate polymer grade propylene from a mixed propane-propylene
stream. Hercules desires to purchase the polymer grade propylene output of such
facility for requirements at its Lake Charles, Louisiana and Bayport, Texas
plants, and to participate in the ownership of the facility and certain
pipelines connecting it with the mentioned Hercules plants.
Enterprise and Hercules are entering this Agreement for the purpose
of confirming their respective rights and obligations in connection with the
construction, ownership and operation of the propylene facility and certain
related pipelines and the purchase by Hercules of the facility's output of
polymer grade propylene.
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W I T N E S S E T H
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In consideration of the representations and warranties herein made and the
agreements hereinafter contained to be kept and performed, Enterprise and
Hercules agree as follows:
ARTICLE I
DEFINITIONS
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In addition to the terms elsewhere defined in this Agreement, the following
terms as used in this Agreement shall have the meanings indicated below:
(1) "Bayport Distribution System" means all or any part of any and all real
or personal property, of whatever kind or nature and location, which is required
to be constructed or acquired (by lease or otherwise) pursuant to the provisions
of this Agreement for receiving, storing, pumping, measuring and transporting
Polymer Grade Propylene from the Plant to the point designated in the manner
herein set forth at the Bayport, Texas plant of Hercules. Such property includes
any and all structures, improvements, facilities, machinery, equipment,
furniture and fixtures, leasehold interests, sites, easements, rights-of-way and
other interests in land, together with any and all improvements, alterations
and additions to such property as may be hereafter made pursuant to the
provisions of this Agreement. Said Pipeline System is more particularly
described in Exhibit B attached hereto.
(2) "Construction Loan" means that certain agreement, dated October 13,
1977, between First City National Bank of Houston and Enterprise, covering a
loan to aid Enterprise in the construction of the Plant.
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(3) "Feedstock" means a liquid stream mix of Procane, Propylene and
incidential heavier and lighter hydrocarbon fractions and associated impurities,
in any proportion.
(4) "Lake Xxxxxxx Distribution System" means all or any part of any and all
real or personal property, of whatever kind or nature and location, which is
reauired to be constructed or acquired (by lease or otherwise) pursuant to the
provisions of this Agreement for receiving, storing, pumping, measuring and
transporting Polymer Grade Propylene from the Plant to the point designate~ in
the manner herein set forth at the Lake Charles, Louisiana plant of Hercules.
Such property includes any and all structures, improvements, faciiities,
machinery, equipment, furniture and fixtures, leasehold interests, sites,
easements, rights-of-way and other interests in land, together with any and all
improvements, alterations and additions to such property as may be hereafter
made pursuant to the provisions of this Agreement. Said Pipeline System is more
particulariy described in Exhibit B attached hereto.
(5) "Permitted Encumbrances" means, as of any particular time:
(a) Liens for ad valorem taxes not then delinquent;
(b) This Agreement;
(c) Utility, access and other servi tudes (herein sometimes called
"easements") and rights-of-way, restrictions, reservations and EXCEPTIONS THAT
Enterprise certifies will not interfere with or impair the operations being
conducted on the Plant; and
(d) Such minor defects, irregularities, encumbrances, easements,
rights-of-way and clouds on title as normally exist with respect to properties
similar in character to the Plant and/or Pipeline System, as the case may be,
and as do not, in the opinion of counsel acceptable to Enterprise and Hercules,
materially impair the property affected thereby for the purpose for which it was
acquired or is held by Enterprise.
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(6) "Pipeline Systems" means, individually and collectively, the Bayport
Distribution System and the Lake Xxxxxxx Distribution System, as they may at any
time exist.
(7) "Plant" means all or any part of (i) the propane-propylene splitter and
appurtenant facilities and fixtures for the production of Polymer Grade
Propylene which are required by paragraph 2.1A to be constructed, together with
any and all improvements, alterations and additions to such property as may be
hereafter made pursuant to the provisions of this Agreement; (ii) those items of
machinery, equipment and related Property to be acquired and installed in or on
the Plant pursuant to paragraph 0.xX and any item of machinery, equipment and
related property acquired and installed in or on the Plant in substitution
therefor and renewals and replacements thereof pursuant to the provisions of
this Agreement; and (iii) the real estate described in Exhibit C attached
hereto, together with all additions thereto and substitutions therefor.
(8) "Polymer Grade Propylene" means product meeting the specifications set
forth in Schedule A attached to the Propylene Sales Agreement.
(9) "Propane" means light liquid hydrocarbons, predominantly C/3/H/8/ and
conforming to the most current Natural Gas Producers Association specifications
for Propane.
(10) "Propylene" means light liquid double bonded hydrocarbons,
predominantly C/3/H/6/.
(11) "Propylene Sales Agreement" means that certain agreement, executed
concurrently herewith, between Enterprise, as seller, and Hercules, as buyer,
providing for the sale and purchase of Polymer Grade Propylene produced at the
Plant. Said Propylene Sales Agreement is attached hereto as Exhibit A.
As used in this Agreement:
(a) All references in this instrument to "Articles", "Sections",
"paragraphs" and other subdivisions are to corresponding Articles, Sections,
paragraphs and other subdivisions of this instrument.
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The words "herein", "hereof", "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular
Article, Section, paragraph or other subdivision.
(b) Words of the singular number shall be construed to include
correlative words of the plural number and vice versa.
(c) The word "includes" means including but not limited to.
ARTICLE II
THE PLANT
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SECTION 2.1 COMPLETION OF THE PLANT
A. Enterprise shall, at its own risk, cost and expense, cause the
construction of the Plant to be continued and completed, wholly within the
boundaries of the parcel of land described in Exhibit C attached hereto. Said
Plant shall consist of a splitter and appurtenant facilities and fixtures for
the separation of Polymer Grade Propylene from mixed propane-propylene streams,
and shall include all facilities and fixtures necessary for the production,
storage, distribution and sale of Polymer Grade Propylene and allied products
and for the operation, maintenance and repair of the Plant as a complete and
modern manufacturing facility dedicated to and suitable for the purpose
hereinafter stated. The Plant shall have a minimum annual capacity of 315
million pounds of Polymer Grade Propylene at 99.5% purity or 380 million pounds
at 98% purity, subject to being supplied with the requisite quantities of
Feedstocks meeting the specifications set forth in Exhibit E attached hereto.
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B. Enterprise shall, at its own risk, cost and expense, continue to
procure and install, or cause to be procured and installed, in or on the Plant,
the items of machinery, equipment and related property which are more
particularly, but not exclusively, described in the general list thereof in
Exhibit D attached hereto, together with such other items of machinery,
equipment and related property which may be necessary for operation, maintenance
and repair of the Plant.
C. Enterprise shall have full responsibility for the supervision,
direction and coordination of all phases of procurement, construction and
installation with respect to the Plant.
D. Enterprise shall, as such payments become due, pay all costs and
expenses incurred in connection with the construction of the Plant and the
acquisition and installation of the items of machinery, equipment and related
property referred to in paragraph 2.1B, including all costs and expenses
incurred or accrued in connection with the acquisition of (i) all labor,
materials, equipment and tools, (ii) all necessary permits, consents, approvals,
licenses, certificates and other authorizations, and (iii) all necessary
easements, rights-of-way and other interests in land.
E. Enterprise shall cause the construction of the Plant and the
procurement and installation of the items of machinery, equipment and related
property referred to in paragraph 2.1B to be performed with all reasonable
dispatch, in workmanlike manner and consistent with good engineering and
construction practices and in accordance with all applicable laws. Enterprise
shall use its best efforts to cause such construction, procurement and
installation to be completed by December 31, 1978, or as soon
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thereafter as may be practicable, delays incident to strikes, acts of God or
other causes beyond the reasonable control of Enterprise only excepted.
F. Enterprise shall have the right to subcontract such portions of the
engineering and construction work as it shall deem advisable, and to procure
materials and equipment from such vendors as it shall deem advisable.
SECTION 2.2 ACQUISITION AND SALE OF 50% INTEREST 1N THE PLANT
A. Contemporaneously with the execution of this Agreement, Hercules
shall purchase from Enterprise, and Enterprise shall sell, assign and convey to
Hercules, a 50% undivided interest in and to the Plant, all for the purchase
price and subject to and upon the other terms and conditions set forth below in
this Section 2.2.
B. The price to be paid by Hercules to Enterprise for the 50% undivided
interest in and to the real property upon which the Plant is to be constructed,
as described in Exhibit C attached hereto, shall be 50% of the actual cost, not
to exceed $95,000.00, and shall be paid in cash simultaneously with the
conveyance thereof, as provided in Article VII.
C. The price to be paid by Hercules to Enterprise for the 50% undivided
interest in and to the Plant (exclusive of real property referred to in
paragraph 2.2B) shall be: (i) an amount equal to 50% of the final book
investment of Enterprise for the Plant (exclusive of real property referred to
in paragraph 2.2B) as of the date of completion of construction, plus 50% of
construction loan interest accrued prior to Hercules' acquisition
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of said interest in and to the Plant, said amount (including book investment and
interest) not to exceed $6.325 million; plus (ii) 50% of Plant Start-Up Costs
(as defined below in this Article), not to exceed $200,000.00. Payment shall be
made as follows:
(1) 50% of all Plant Start-Up Costs (as defined below in this Article)
incurred or accrued prior to actual delivery of the 50% undivided interest in
and to the Plant shall be paid in cash simultaneously with the conveyance
thereof, as provided in Article VII, and 50% of all Plant Start-Up Costs (as
defined below in this Article) thereafter incurred shall be paid in cash
within 20 days of payment thereof by Enterprise;
(2) 50% of the interest incurred or accrued prior to Closing (as
hereinafter defined) under the Construction Loan Agreement is to be paid in
cash at the time of Closing (as hereinafter defined); and
(3) 50% of the book value of the Plant (exclusive of real property referred
to in paragraph 2.2B) is to be paid (i) by an initial installment equal to 50%
of all costs and expenses incurred prior to the Closing (as hereinafter
defined) in connection with the construction of the Plant and the acquisition
of the items of machinery, equipment and related property referred to in
paragraph 2.1B; and (ii) by monthly installments in amounts sufficient to
reimburse Enterprise for all costs and expenses (other than permanent
financing interest accruing after the Closing, as hereinafter defined) paid
after the Closing (as hereinafter defined) in connection with the construction
of the Plant and the acquisition of the items of machinery, equipment and
related property referred to in paragraph 2.1B. Each such monthly installment
shall cover payments made by Enterprise in the month preceding reimbursement
by Hercules, and shall be paid by Hercules within 20 days after receipt of
properly certified invoices, approved by Hercules. All invoices shall be
accompanied by such relevant vouchers, invoices and other documents as
Hercules may require.
Such terms of payment are subject to revision in the event Hercules and
Enterprise are able to obtain more favorable permanent financial terms than
those contained in the Construction Loan Agreement.
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D. There shall be no apportionment of such items as taxes, water charges
and the like, since all normally adjustable items shall be paid by Enterprise
either as vendor or as tenant under this Article.
E. As used in this Section, "Plant Start-Up Costs" means all reasonable
direct costs and expenses incurred by Enterprise for the introduction of process
materials into the operating unit of the new facility and not capitalized. Such
costs and expenses shall include those specified in Exhibit F attached hereto,
and shall be determined in accordance with the provisions of said Exhibit F.
SECTION 2.3 GUARANTEES
A. Enterprise guarantees to Hercules that the completed Plant, when
supplied with the requisite quantities of Feedstocks meeting the specifications
set forth in Exhibit E attached hereto, will produce Polymer Grade Propylene at
a production rate of 315 million pounds per year at 99.5% purity and 380 million
pounds per year at 98% purity.
B. Enterprise, for itself and its subcontractors, guarantees to
Hercules that:
(1) all design, engineering, construction, procurement and
installation services performed in connection with the construction of
the Plant will comply with all laws, ordinances, orders, rules and
regulations of all Federal, State and local authorities of competent
jurisdiction and will be in conformity with sound and currently
acceptable engineering and construction practices and experience; and
(2) all work performed in connection with the construction of the
Plant will be free from defects in
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workmanship and materials for a period of 18 months after successful
performance of the performance guarantees set forth in paragraph 2.3A.
Enterprise shall, as soon as practicable, correct, repair or replace any
defective material or workmanship within said 18 month period and shall make
such alterations and assume such costs as may be necessary to cause the Plant to
be free from defects.
C. Enterprise shall obtain from vendors, manufacturers and other
contractors, for the benefit of Enterprise and Hercules, such guarantees and/or
warranties as are reasonably obtainable.
SECTION 2.4 DEMISING CLAUSE
Hercules leases to Enterprise, and Enterprise leases from Hercules,
the 50% undivided interest to be acquired by Hercules from Enterprise, as
provided in Section 2.2, in and to the Plant, to have and to hold the Plant
during the period, at the rental and upon the terms and conditions hereinafter
provided.
SECTION 2.5 TERM OF LEASE AND RENTAL PROVISIONS
A. The Plant shall be leased for a period commencing on the date upon
which Hercules acquires a 50% undivided interest therein and ending 11:59 p.m.
on the date of expiration of this Agreement, including any extensions thereof,
(as such term is provided for in Section 11.1), both dates inclusive; provided,
that such lease term may be terminated by cancellation or other termination of
this Agreement as is provided for in Section 11.2.
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As to the interest in the Plant leased hereunder, the initial lease term and any
extension thereof hereunder are collectively referred to hereinafter as the
"Lease Term".
B. Enterprise shall pav Hercules, 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
Hercules 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 3.5 cents per gallon for 50% of all Polymer Grade Propylene
produced at the Plant; provided, however, that commencing January 1, 1981, the
sum payable as rent during that year and each year thereafter shall equal 4
cents per gallon for 50% of all Polymer Grade Propylene produced at the Plant.
Within 15 days after the end of each month during the Lease Term, Enterprise
shall furnish to Hercules 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.
C. The rents specified in paragraph 2.5B are predicated upon production
levels at the Plant of 180 million pounds of Polymer Grade Propylene in 1979,
200 million pounds in 1980, 315 million pounds in 1981 and 380 million pounds in
1982 and subsequent years. Enterprise agrees that if actual production of
Polymer Grade Propylene does not at least equal these levels, the difference
between the amount of rent paid based on actual production and the amount of
rent that would have been payable at the applicable level mentioned above shall
be paid as additional rent to Hercules; but only to the extent that requisite
quantities of Feedstocks meeting the specifications set forth in Exhibit E
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attached hereto are obtainable, either by Enterprise or Hercules. If Enterprise
fails to give Hercules at least 180 days prior written notice of a potential
shortfall in supply of specification Feedstocks, Enterprise shall pay to
Hercules, as additional rent, the full difference between the amount of rent
paid based on actual production and the amount of rent that would have been
payable at the applicable level mentioned above; but only if Hercules can
demonstrate by reasonable evidence that such Feedstocks were obtainable.
D. In the event Hercules should fail in any year to take delivery of
the applicable quantities specified in paragraph 2.8A, Enterprise shall be
relieved of its obligation under paragraph 2.5B to pay rent.
E. In the event Enterprise should fail to make any of the payments
required under this Section 2.5 when due and payable, the leasehold estate
created in Section 2.4 shall be in default. Hercules shall have the right (but
not the obligation) to waive any such default as to the termination of this
Agreement or to extend the payment date; however, any such waiver or extension
shall not absolve Enterprise from its obligation to pay all unpaid rents. All
unpaid rents shall continue as an obligation of Enterprise until such amount
shall have been fully paid, with interest thereon at a rate, per annum, on the
overdue payments for the period of time during which they are overdue, equal
to 1.5% over the prime commercial lending rate, then in effect, of Citibank, New
York, New York, or if said rate is legally unenforceable, then such lesser
amount as may be legally enforceable.
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F. Enterprise shall make all rental payments to Hercules in immediately
available funds, at a bank in Wilmington, Delaware designated by Hercules, or
to such other person and/or at such other place as Hercules or Hercules'
assignee may designate in writing. All such payments shall be made concurrently
with the furnishing of the statement provided for in paragraph 2.5B.
G. Enterprise shall keep and retain at its principal offices complete
and accurate books, records and accounts to record and reflect the amount of
Polymer Grade Propylene produced at the Plant and all other business transacted
at the Plant. Hercules and its representatives shall have the unrestricted
right at all reasonable times during regular business hours, at such offices,
to audit, examine and make copies of and extracts from any and all of such
books, records and accounts (and supporting materials). Enterprise shall
preserve and make available the above books, records and accounts for a period
of 5 years following the end of the calendar year to which they pertain.
H. Hercules may require that the records and accounts of Enterprise
referred to in paragraph 2.5G be audited at the conclusion of each business year
of Enterprise, or more often if Hercules questions the certified statements
furnished by Enterprise. The cost of these audits shall be paid by Hercules
unless the certified statement is found inaccurate by an independent certified
public accountant, in which case Enterprise shall bear all costs and expenses of
the audit and immediately pay any rental due.
I. All taxes, charges, costs and expenses which Enterprise assumes or
agrees to pay hereunder, together with (i) all interest and penalties that may
accrue thereon in the event
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of Enterprise's failure to pay the same as herein provided, (ii) all other
damages, costs and expenses which Hercules mav suffer or Incur, and (iii) any
and all other sums which may become due by reason of any default of Enterprise
or failure on Enterprise's part to comply with the agreements, terms, covenants
and conditions of this Agreement on Enterprise's part to be performed, and each
or any of them, shall be deemed to be additional rent. In the event of
nonpayment of any of them, Hercules shall have all the rights and remedies
herein provided in the case of nonpayment of rent.
SECTION 2.6 USE CLAUSE
Enterprise shall only use the demised premises for separation of Polymer
Grade Propylene and propane from a mixed propane-propylene stream. Such premises
shall not be used for any other purpose without Hercules' prior written consent.
SECTION 2.7 OPERATION OF THE PLANT
A. Enterprise shall assume full and sole responsibility for the
operation and management of the Plant. Enterprise shall conduct all operations,
maintenance and repairs of the Plant at its own risk, cost and expense,
supplying all and every item or items of expense it deems necessary or desirable
for such operations, maintenance and repairs. It is specifically understood and
agreed that in no event shall Hercules be liable for any cost or expense
incurred by Enterprise in conducting operations, maintenance and/or repairs at
the Plant.
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B. Enterprise shall operate, maintain and repair the Plant in
accordance with accepted good practices, and shall use all due diligence to
continuously Produce for Hercules such quantities of Polymer Grade Propylene as
are at least sufficient to cover the requirements of Hercules for such product
under the Propylene Sales Agreement; subject, however, at all times to the
capacity limitations of the Plant and to interruption for scheduled maintenance
shutdowns or turnarounds of approximately 15 days during any year.
C. Enterprise shall be entitled to all revenues and profits arising out
of the operations at the Plant; all expenses, losses and liabilities incurred,
accruing or resulting from such operations shall be borne solely by Enterprise.
SECTION 2.8 DISPOSITION AND STORAGE OF PRODUCT
A. All propylene, propane, light ends, heavy fractions and waste
produced at the Plant shall be disposed of as follows:
(1) Hercules shall take Polymer Grade Propylene produced at the
Plant as follows:
During 1979 and 1980, Enterprise shall sell and deliver to
Hercules, and Hercules shall purchase from Enterprise, a total of 50
and 150 million pounds, respectively each year, of Polymer Grade
Propylene. Beginning in 1981, and throughout the continuation of
this Agreement, including any renewal thereof, Enterprise shall sell
and deliver to Hercules, and Hercules will purchase from Enterprise,
the full output of the Plant of Polymer Grade Propylene, which is
estimated to be 315 million pounds at 99.5% purity in 1981 and 380
million pounds at 98% purity in 1982 and thereafter. All such
Polymer Grade Propylene shall be sold by
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Enterprise to Hercules under the terms set forth in the Propylene
Sales Agreement, which Enterprise and Hercules shall enter into
concurrently herewith.
(2) Prior to January 1, 1981, Enterprise may sell to any firm or firms
such quantities of propylene as may be in excess of that required for
supply to Hercules under the Propylene Sales Agreement.
(3) Propane produced at the Plant (other than the propane sold to
Hercules as part of propylene on a contained basis) shall be taken by
Enterprise. All other by-products (including light ends and heavy
fractions) and waste resulting from operation of the Plant shall
likewise be taken by Enterprise. Enterprise shall take all such by-
products and waste in kind for further processing, sale, storage or
disposal, or shall otherwise dispose thereof, all without cost or
compensation to Hercules.
B. Enterprise has leased until April 1, 1983 certain salt dome caverns
and related storage facilities at Mt. Belvieu, Texas for the storage underground
and handling of 1 million barrels of Feedstocks and 500,000 barrels of Polymer
Grade Propylene. In connection with the use thereof, Enterprise shall provide,
or cause to be provided, all attendant connecting pipelines pumps, meters
and other appurtenant equipment and facilities necessary for the storage and
handling of Feedstocks required for the Plant and Polymer Grade Propylene
produced at the Plant. Beginning on January 1, 1979, Hercules shall reimburse
Enterprise for the actual lease costs for Polymer Grade Propylene storage, not
to exceed $315 thousand per year. Beginning on January 1, 1980, Hercules shall
reimburse Enterprise for 50% of the actual lease costs for Feedstocks storage,
not to exceed $313 thousand per year.
C. After April 1, 1983, Enterprise shall provide, or cause to be
provided, storage capacity at Mt. Belvieu, Texas sufficient to meet the then
requirements for Feedstocks and Polymer Grade Propylene at the Plant. Such
capacity shall be made available by Enterprise at the rental and upon such other
terms
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and conditions as may be mutually agreed upon by Enterprise and Hercules. Said
mutually agreed upon rent shall not exceed actual lease costs or, in the case of
facilities owned by Enterprise and/or any of its affiliates, the prevailing rent
then payable by major oil or chemical companies for comparable storage
facilities in the Gulf Coast area.
D. Storage of Polymer Grade Propylene shall be in accordance with a
storage agreement to be entered into between Enterprise and Hercules as soon as
practicable after the execution of this Agreement, said storage agreement to
contain provisions consistent with this Agreement and mutually satisfactory to
both Enterprise and Hercules.
SECTION 2.9 MAINTENANCE AND MODIFICATIONS
A. Enterprise shall, at all times during the Lease Term, and at its own
cost and expense, maintain and keep the Plant in good repair and operating
condition, making from time to time any and all repairs thereto and renewals and
replacements thereof sufficient for the operation of the Plant for the uses
herein specified. Enterprise shall use all reasonable precautions to prevent
waste, damage or injury to the Plant. This obligation of Enterprise with respect
to repairs and maintenance is intended and understood to cover and include the
entire Plant and each part and portion thereof (including all structures,
fixtures, machinery, equipment and related property which at any time during the
Lease Term shall be erected or installed thereon or therein), both inside and
outside, structural or non-structural, extraordinary or ordinary, and whether
the same be determined to be in the nature of real property, personal property
or mixed. It is further intended and understood that said obligation covers and
includes
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repairs, renewals and replacements howsoever the necessity or desirability
therefor may occur, and whether or not necessitated by wear and tear.
B. The necessity for and adequacy of repairs to the Plant and each part
and portion thereof (including all structures, fixtures, machinery, equipment
and related property which at any time during the Lease Term shall be erected or
installed thereon or therein) pursuant to this Agreement shall be measured by
the standard which is appropriate for facilities of similar construction and
class; provided that Enterprise shall in any event make all repairs necessary to
avoid any structural damage or injury to the Plant.
C. Notwithstanding the provisions of paragraph 2.9A, in any instance
where Enterprise in, its sound discretion determines that any items of
machinery, equipment and related property installed in or brought by Enterprise
on the Plant at any time during the Lease Term pursuant to this Agreement (such
machinery, equipment and related property (i) consisting of each item more
particularly, but not exclusively, described in the general list attached to
this Agreement as Exhibit F and each item of machinery, equipment and related
property installed in or brought by Enterprise on the Plant pursuant to this
Agreement in substitution therefor and/or renewals or replacements thereof, and
(ii) collectively and individually hereinafter called "Plant Equipment") have
become inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary,
the following provisions shall apply:
(1) Enterprise may remove such items of Plant Equipment from the Plant
and sell, trade in, exchange or otherwise dispose of them (as a whole or
in part) without compensation to Hercules therefor, but only where such
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Plant Equipment is replaced, or substitution therefor is installed anywhere
on the Plant, by other machinery, equipment or related property having
equal or greater value and utility (but not necessarily having the same
function) in the operation of the Plant as a modern industrial plant; and
provided such removal and substitution shall not impair operating utility.
All such substituted machinery, equipment or related property shall be free
of all liens and encumbrances (other than Permitted Encumbrances) and shall
become a part of the Plant.
(2) In the event such removal causes damage to existing buildings,
structures or Plant Equipment not being removed, the restoration and repair
of such damage shall be made at the cost and expense of Enterprise.
(3) The removal from the Plant of any portion of the Plant Equipment
pursuant to the provisions of this Section shall not entitle Enterprise to
any abatement or diminution of the rents payable under paragraph 2.5B.
(4) Enterprise will promptly report to Hercules each removal,
substitution, sale and other disposition under this Section; provided, that
unless otherwise requested by Hercules, no such report need be made until
the amount of all such sales, trade-ins or other dispositions not
previously reported aggregates at least $100,000. Enterprise shall not
remove, or permit the removal of, any of the Plant Equipment from the Plant
except in accordance with the provisions of this paragraph 2.9C.
D. In the event that Enterprise shall at any time during the Lease Term
fail, neglect or refuse to make or do any and all repairs or maintenance
required to be made or done by it under the terms and provisions hereof, then
Hercules, upon 10 days' prior written notice and the failure of Enterprise to
make or do, or undertake and diligently pursue to make or do, the required
repairs or maintenance within such time, may make or do such repairs or
maintenance for the account of Enterprise (but shall be under no obligation to
do so), and any costs and expenses incurred or paid by Hercules therefor,
together with interest
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thereon at the rate, per annum, specified in paragraph 2.5E hereof, shall be
charged against Enterprise and shall be deemed a part of and paid with the next
installment of rent payable by Enterprise to Hercules hereunder. Enterprise
hereby waives the provisions of all statutes or laws, whether now in force or
hereafter adopted, permitting Enterprise to make repairs at the expense of or
for the account of Hercules, or to terminate a lease by reason of the condition
of the premises leased by Enterprise.
E. All work done pursuant to paragraphs 2.9A, B, C and D shall be done
in a good and workmanlike manner and in accordance with all applicable laws.
Title to any and all repairs, renewals and replacements to the Plant or any
part thereof shall upon their completion vest in Enterprise and Hercules in
proportion to their respective interests in the Plant and shall be subject to
this Agreement.
F. Hercules shall not be liable for or be called upon at any time
during the Lease Term to make any repairs or replacements of any part of the
Plant, or any improvements, additions or alterations, under any conditions
whatsoever. The intention of this Agreement is that the rent received by
Hercules shall be free and clear from any expenses in connection with the
maintenance or repair to the Plant or any improvements on equipment at any time
thereon.
SECTION 2.10 SERVICES
Hercules shall not be under any obligation to furnish any service to the
Piant, including gas, heat and electric
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current, and shall not be liable for any failure of water supply or electric
current or of any service by any utility. Enterprise shall pay to the persons
furnishing the same, when and as the same become due and payable, and shall hold
Hercules and its successors harmless from and against, all charges for water,
heat, gas, electricity, power, refuse disposal and other utilities furnished to
and used at or in connection with the construction, operation, maintenance, use,
occupancy and upkeep of the Plant.
SECTION 2.11 CASUALTY AND CONDEMNATION
A. Except as hereinafter provided, the loss, irreparable damage or
destruction of all or a part of the Plant by reason of any cause whatsoever, or
the taking or requisition thereof for any public or quasi-public purpose by
any lawful power or authority, by the exercise of the right of condemnation or
eminent domain or by agreement between Enterprise, Hercules and those authorized
to exercise such right (hereinafter collectively called "Casualty Occurrences"),
shall not terminate this Agreement or diminish the obligations of Enterprise
hereunder, any law, rule or regulation to the contrary notwithstanding.
Enterprise shall as soon as practicable notify Hercules in writing of any
material loss or destruction by Casualty Occurrence affecting the Plant.
B. Unless otherwise agreed upon by Enterprise and Hercules, in the
event that any Casualty occurrence results in damage to or impairment of the
value or the use of the Plant, and such damage or impairment does not constitute
a total or substantial loss as provided in paragraph 2.11C, Enterprise shall (i)
promptly commence and thereafter proceed with all reasonable diligence to
repair, restore or reconstruct the Plant to the
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extent necessary to re-establish the value and use thereof, with such changes,
alterations and modifications (including the substitution and addition of other
property) as may be desired by Enterprise and approved by Hercules and as will
not impair operating unity or productive value of the Plant; and (ii) apply for
such purpose so much as may be necessary of any net proceeds of any condemnation
award and/or insurance required to be carried in Section 8.4 resulting from
claims for losses. In the event such net proceeds are not sufficient to pay in
full the costs of such repair, restoration or reconstruction, Enterprise shall
nonetheless complete such work and Enterprise and Hercules shall each pay one-
half of that portion of the costs thereof in excess of the amount of said net
proceeds.
C. Unless otherwise agreed upon by Enterprise and Hercules, in the
event any Casualty Occurrence shall result in a total or substantial loss of the
Plant, that is, any loss, damage or destruction for which the cost of repair or
restoration exceeds 50% of the replacement cost of the Plant or $6 million,
whichever is the greater, Enterprise and Hercules shall each have the right (but
shall be under no obligation) to repair, restore or reconstruct the Plant to the
extent necessary to re-establish the value and use thereof, applying for such
purpose so much as may be necessary of any net proceeds of any condemnation
award and/or insurance required to be carried in Section 8.4 resulting from
claims for losses. In the event such net proceeds are not sufficient to pay in
full the costs of such repair, restoration or reconstruction, the party(s)
electing to complete such work shall pay for that portion of the costs thereof
in excess of the amount of said proceeds. Neither Enterprise nor Hercules shall,
by reason of the payment of such excess costs, be entitled to any reimbursement
from the other party hereto, and all assets acquired
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as a part of such repair, restoration or reconstruction, by construction or
otherwise, shall be the exclusive property of the party(s) paying for such
acquisition. In the event of payment of such excess cost by Hercules or
Enterprise, the rentals payable under this Agreement shall be adjusted to
reflect the change in percentage of ownership of the Plant.
D. In any case where the use of the Plant is adversely affected by any
Casualty Occurrence, there shall be either an abatement or an equitable
reduction in compensation payable under paragraph 2.5B. The amount of such
abatement or reduction shall depend on the period for which and the extent to
which the Plant is not reasonably usable for the purpose for which an interest
therein is leased hereunder.
ARTICLE III
FEEDSTOCKS
SECTION 3.1 SUPPLY OF FEEDSTOCKS
A. Enterprise shall provide for the period commencing with the
effective date hereof and ending December 31, 1992, Feedstocks in sufficient
quantities to enable it to produce at the Plant such quantities of Polymer Grade
Propylene as are necessary to meet Enterprise's obligations to supply such
propylene under the Propylene Sales Agreement; subject, however, at all times to
the capacity limitations of the Plant. Such supply shall be without cost or
expense to Hercules.
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B. At the expiration of the aforesaid period (ending December 31,
1992), Enterprise shall, if requested to do so by Hercules, use its best
efforts to supply, for the continuation of this Agreement and any extended
term(s) thereof, Feedstocks for production at the Plant of such quantities of
Polymer Grade Propylene as are necessary to meet Enterprise's obligations to
supply such propylene under the Propylene Sales Agreement; subject, however, at
all times to the capacity limitations of the Plant. Said Feedstocks, if
obtained, shall be without cost or expense to Hercules and shall be dedicated to
production that shall be sold by Enterprise pursuant to the Propylene Sales
Agreement.
C. Enterprise shall, at its own risk, cost and expense, construct,
install, own, operate and maintain on its site near Mt. Belvieu, Texas, all
equipment and related facilities, including pipelines, pumps, meters and other
appurtenances, necessary for the supply of Feedstocks and for the return to
Enterprise of by-products produced in the propane-propylene separation process
at the Plant, as such return is provided for under paragraph 2.8A(3).
D. Title to Feedstocks provided by Enterprise hereunder shall at all
times remain in Enterprise.
SECTION 3.2 RIGHT TO SUPPLY FEEDSTOCKS
A. Hercules may from time to time provide (but shall be under no
obligation to do so) such additional quantities of Feedstocks as may be required
for maximum production at the
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Plant, but only those quantities which are in excess of that available under
contracts between Enterprise and third parties. In such event, title to all such
Feedstocks shall from and after delivery to the Plant be in Hercules, and title
to all products and by-products produced therefrom shall until delivery to
Hercules be in Hercules, save and except that all propane and other light ends
and heavy fractions resulting as by-products of the separation process shall be
retained by Enterprise for its own account, subject to payment of reasonable
compensation therefor to Hercules. Enterprise and Hercules shall from time to
time mutually agree upon a tolling fee for the Polymer Grade Propylene, which
shall be equal to reasonable direct operating costs plus 2 cents per gallon of
Polymer Grade Propylene.
B. Enterprise shall guarantee that the losses of Feedstocks supplied by
Hercules, if any, will not exceed 2%. Enterprise shall reimburse for excess loss
at the value of such Feedstocks plus all transportation, warehousing and
handling charges which Hercules has already paid or becomes obligated to pay for
the Feedstocks.
ARTICLE IV
TECHNOLOGY
For and in consideration of the agreements herein contained to be kept
and performed by Hercules, Enterprise hereby grants to Hercules a non-exclusive
right and license to use the technical and operational information and data
outlined in Exhibit G attached hereto. Said information and data relate to
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processes, apparatus and compositions used for separation of polymer grade
propylene from mixed propane-propylene streams. The terms and conditions under
which the patents, information and data are to be disclosed and made available
are contained in said Exhibit G.
ARTICLE V
PIPELINE SYSTEMS
SECTION 5.1 CONSTRUCTION OF PIPELINES
A. Subject to the provisions of Section 5.4, Enterprise shall continue,
with diligence and continuity, and at its own risk, cost and expense, to design,
engineer, construct and equip the following pipelines:
(1) a pipeline commencing at a location which shall be selected by
mutual agreement between Hercules and Enterprise on the property line of
the Plant and extending to a point which shall be selected by mutual
agreement between Hercules and Enterprise on the property line of the
property on which the Goodyear Beaumont Chemical Plant, southwest of
Beaumont, Texas, is situated;
(2) a pipeline commencing at the terminus east of the Sabine River
of the pipeline leased from Mobil Oil Company pursuant to Section 5.2
and extending to a point which shall be selected by mutual agreement of
Hercules and Enterprise on the property line of the property on which
Hercules' plant near Lake Charles, Louisiana is situated; and
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(3) a pipeline commencing at the terminus near La Porte, Texas of
the pipeline leased from Mobil oil Company pursuant to Section 5.2 and
extending to a point which shall be selected by mutual agreement of
Hercules and Enterprise on the property line of the property on which
Hercules' plant near Bayport, Texas is situated.
Such pipelines shall include all pumps, meters and related equipment and
facilities which may be necessary for the distribution and storage of Polymer
Grade Propylene and allied products and for the operation and maintenance of
each pipeline as part of a complete and modern closed petrochemical pipeline
system dedicated to and adequate for the purposes hereinafter stated. Said
pipelines shall have a nominal throughput capacity of 380 million pounds per
year from Mt. Belvieu, Texas to Bayport, Texas; 380 million pounds per year
from Mt. Belvieu, Texas to Beaumont, Texas; and 510 million pounds per year from
Beaumont, Texas to Lake Charles, Louisiana.
B. Enterprise shall have full responsibility for the supervision,
direction and coordination of all phases of procurement, construction and
installation with respect to the pipelines, pumps, meters and related equipment
and facilities referred to in paragraph 5.1A and for the acceptance or rejection
thereof.
C. Enterprise shall, as such payments become due, pay all costs and
expenses incurred in connection with the design, engineering, construction and
equipping called for by paragraph 5.1A, including all cost and expenses incurred
or accrued in connection with the acquisition of (i) all labor, materials,
equipment and tools, (ii) all permits, consents, approvals, licenses,
certificates and other authorizations, and (iii) all easements, rights-of-way
and other interests in land.
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D. Enterprise shall cause the design, engineering, construction and
equipping called for by paragraph 5-1A to be performed with all reasonable
dispatch, in workmanlike manner and consistent with good engineering and
construction practices and in accordance with all applicable laws.
E. During the construction period, Enterprise shall:
(1) prepare monthly engineering and construction progress reports and
progress cost statements, showing cumulative commitments, expenditures
and construction progress to date, in relation to the cost estimate; and
(2) in general, keep Hercules advised of developments in all phases
of the construction work, particularly those which may affect the cost
of construction or completion date.
F. upon completion of each of the Pipeline Systems, Enterprise shall
deliver to Hercules "as-built" drawings.
G. Enterprise shall have the right to subcontract such portions of the
design, engineering, construction and equipment work as it shall deem advisable
and to procure materials and equipment from such vendors as it shall deem
advisable.
SECTION 5.2 LEASE OF MOBIL PIPELINES
Enterprise shall exercise its best efforts to negotiate and enter into:
(1) a lease, in assignable form and satisfactory in scope,
substance and form to Hercules, from Mobil Oil Company or its affiliate,
as lessor, to Enterprise, as
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lessee, covering the petroleum products pipeline commencing at a point
near Mt. Belvieu, Texas and extending under the Houston, Texas ship
channel to a point near La Porte, Texas (such pipeline, if acquired by
lease, shall constitute part of the Pipeline Systems); and
(2) a lease, in assignable form and satisfactory in scope,
substance and form to Hercules, from Mobil Oil Company or its affiliate,
as lessor, to Enterprise, as lessee, covering the petroleum products
pipeline commencing at the Goodyear Beaumont Chemical Plant, southwest
of Beaumont, Texas, and extending under the Sabine River to its terminus
at a point east of such river (such pipeline, if acquired by lease,
shall constitute part of the Pipeline Systems).
SECTION 5.3 COMPLETION DATE
Enterprise shall use its best efforts to cause the segment of the Lake
Xxxxxxx Distribution System beginning at Mt. Belvieu, Texas and terminating at
Beaumont, Texas to be completed April 1, 1979, and the remaining portions of the
Lake Xxxxxxx Distribution System and the Bayport Distribution System to be
completed by July 1, 1979, or as soon thereafter as may be practicable, delays
incident to strikes, acts of God or other causes beyond the reasonable control
of Enterprise excepted.
SECTION 5.4 ACQUISITION AND SALE OF INTERESTS
IN THE PIPELINE SYSTEMS
A. Contemporaneously with the execution of this Agreement, Hercules
shall purchase from Enterprise, and Enterprise shall sell, assign and convey to
Hercules, a 50% undivided interest in and to each Pipeline System, all for the
purchase price and on the other terms and conditions hereinafter set forth.
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B. The purchase price to be paid by Hercules to Enterprise for each of
the 50% undivided interests referred to in paragraph 5.4A shall be an amount
equal to 50% of the final book investment (excluding any interest charges) of
Enterprise for said Pipeline System, not to exceed $4.66 million, in the
aggregate, for both the Lake Xxxxxxx and Bayport Distribution Systems. Such
ceiling does not include actual lease costs for pipelines referred to in Section
5.2; it pertains only to capital costs. Payment shall be made by monthly
installments in amounts sufficient to reimburse Enterprise for all costs and
expenses referred to in paragraph 5.1C that are paid in the preceding month.
Each such installment is to be paid by Hercules within 20 days after receipt of
properly certified invoices, approved by Hercules. All invoices shall be
accompanied by such relevant vouchers, invoices and other documents as Hercules
may require.
SECTION 5.5 GUARANTEES
A. Enterprise, for itself and its subcontractors, guarantees to Hercules
that:
(1) all design, engineering, construction and equipping services
performed in connection with the construction of the Pipeline Systems
and/or the construction and installation of all equipment and
facilities appurtenant thereto, including pipelines, pumps, meters and
other equipment and facilities associated with the Pipeline Systems,
will comply with all laws, ordinances, orders, rules and regulations of
all Federal, State and local authorities of competent jurisdiction and
will be in conformity with sound and currently acceptable engineering
and construction practices and experience; and
(2) all work performed in connection with the design, engineering,
construction and equipping of the Pipeline Systems, including the
construction and
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installation of all pipelines, pumps, meters and appurtenant equipment
and facilities, will be free from defects in workmanship and materials
for a period of 18 months after installation.
Enterprise shall, as soon as practicable, correct, repair or replace any
structures, facilities or equipment found to be defective in material or
workmanship within said 18 month period and shall make such alterations and
assume such costs and expenses as may be necessary to cause the Pipeline Systems
to be free from defects.
B . Enterprise shall obtain from vendors and manufacturers, for the
benefit of Enterprise and Hercules, such guarantees and/or warranties as are
reasonably obtainable.
SECTION 5.6 OPERATION OF PIPELINE SYSTEMS
A. Enterprise shall undertake to operate and maintain the Pipeline
Systems in accordance with the terms and provisions of this Agreement, when and
if the following conditions have been fully met:
(1) all applicable approvals, permits, licenses, certificates and
other authorizations required for the safe construction and operation of
the Pipeline Systems shall have issued;
(2) all consents, licenses, easements, rights-of-way and other
interests in land necessary or desirable for construction and operation
of the Pipeline Systems shall have been obtained; and
(3) all insurance coverage described in Section 8.4 shall have
issued.
B. Hercules hereby engages Enterprise, and,Enterprise hereby
undertakes, as an independent contractor and not as an
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agent of Hercules, to operate and maintain the Pipeline Systems solely (except
as hereinafter provided in Section 5.11) to transport for Hercules Polymer Grade
Propylene between the Plant and the Lake Charles, Louisiana and Bayport, Texas
plants of Hercules, and between such other places on the Pipeline Systems as
Hercules may from time to time direct; subject, however, at all times to, the
capacity limitations of the Pipeline Systems and to the extent all or any part
of said Pipeline Systems are deemed to be a common carrier under Federal or
state law. Enterprise shall assume and have full direction, management and
control of the Pipeline Systems and, subject to the terms and provisions hereof,
shall conduct and manage the operations of the Pipeline Systems for the safe and
careful transportation of Polymer Grade Propylene and other products between
the places referred to in the preceding sentence.
C. Enterprise shall perform such duties and functions as are customarily
performed in the usual course of handling, storing, transporting and delivering
light hydrocarbon liquids, using all reasonable diligence and cause to provide
continuously for the safe, efficient, expeditious and economic distribution of
product. Without limiting the generality of the foregoing, Enterprise may
curtail or interrupt the operations of the Pipeline Systems when essential for
maintenance, repair, replacement, relocation or alteration of the Pipeline
Systems, or any portion thereof, but such curtailment or interruption shall be
kept to a minimum, and such activities shall be scheduled so as to avoid,
whenever possible, interference with normal operations at the Bayport, Texas and
Lake Charles, Louisiana plants of Hercules.
D. Prior to the commencement of operations of the Pipeline Systems,
Enterprise, in cooperation with Hercules, shall
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prepare an operating manual ("Operating Manual") and an accounting procedures
manual ("Accounting Procedures Manual") setting forth procedures for the
operation and maintenance of, and accounting for, the Pipeline Systems. The
Accounting Procedures Manual shall be subject to the approval of Hercules. Both
manuals shall, when completed, be incorporated by reference to this Agreement.
It is understood and agreed that notwithstanding any approval by Hercules of the
Accounting Procedures Manual, or any participation by Hercules in the
preparation of the Operating Manual, Hercules shall have no responsibility
therefor.
E. In carrying out its duties and functions with respect to the
operations and maintenance of the Pipeline Systems, Enterprise shall inter alia:
(1) operate and maintain the Pipeline Systems in a safe, efficient,
economic and workmanlike manner, and in accordance with the Operating
Manual and good and modern petrochemical industry practice, for the
handling, storage, transportation and delivery of product in accordance
with schedules developed with complete cooperation with Hercules so as
to meet Hercules' requirements;
(2) except as otherwise provided herein, advance all necessary
operating funds required to conduct all operations and maintenance
hereunder;
(3) employ, supervise, discharge and pay employees, contractors and
other personnel required for the efficient and safe operation and
maintenance of the Pipeline Systems and for the safe and careful
transportation and storage of Polymer Grade Propylene and allied
products;
(4) except as otherwise provided herein, supply or purchase all
materials, supplies, equipment, tools and other physical elements
necessary or desirable for the efficient and safe operation and
maintenance of the Pipeline Systems and for the safe and careful
transportation and storage of Polymer Grade Propylene and allied
products;
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(5) supply or purchase all water, electricity and other utilities
necessary for the operation and maintenance of the Pipeline Systems and
for the safe and careful transportation and storage of Polymer Grade
Propylene and allied products;
(6) perform all financial, accounting, purchasing, labor relations,
traffic and other similar management and administrative services or
functions required by the operations of the Pipeline Systems;
(7) cause to be made under its supervision such routine repairs,
replacements, relocations and alterations as Enterprise reasonably shall
consider necessary or advisable, all in accordance with the Operating
Manual and good industry practice;
(8) take all steps and action necessary to comply strictly in every
respect with, and to cause the Pipeline Systems to be in compliance
with, (i) all existing and future applicable laws, ordinances, rules,
orders and regulations of any competent authority having jurisdiction,
as provided in Section 8.1; (ii) all applicable provisions contained in
documents executed in connection with the obtaining of financing,
whether interim or permanent, of the Pipeline Systems; (iii) all
applicable provisions contained in insurance policies issued to
Enterprise in connection with the Pipeline Systems; and (iv) all terms
and conditions of all leases forming a part of the Pipeline Systems, so
that such leases shall be kept in full force and effect;
(9) promptly, carefully, safely and properly handle, store,
transport and deliver for Hercules all Polymer Grade Propylene and
allied products to be transported between the places referred to in
paragraph 5.6B;
(10) make and keep a daily and monthly account of all Polymer Grade
Propylene and other products received and delivered;
(11) account and be responsible for all property of Hercules
received by or delivered to Enterprise for transmission;
(12) perform all duties and responsibilities described in the
Operating Manual, including:
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(a) telemeter monitorina of all portions of all pumping
stations, including pumps, meter runs, pressure control equipment,
block valves and automation and telemetering equipment;
(b) preparation of weekly operation records that indicate
discharge pressure of pumps and any other unusual operations of the
Pipeline Systems;
(c) approximate monthly aerial or physical patrol of the
pipelines;
(d) semi-annual inspection of all block valves on the pump
station and pipelines;
(e) semi-annual examination of test coupons to determine the
extent of any internal corrosion;
(f) semi-annual inspections and test of relief valves and other
pressure control equipment;
(g) regular calibration and inspection of meters;
(h) emergency and routine investigations of the pipelines if
leakage is indicated, either by a comparison of the flow rate of
check meters or reported by third party or any other reason;
(i) emergency repair of damaged pipelines facilities from any
cause, and warning the public, landowners and others with respect
thereto;
(j) investigation of landowner, state, regulatory or general
public complaints and inquiries and advising Hercules;
(k) preparation and filing of required reports to Federal,
state and local agencies;
(l) preparation of records to substantiate the inspection tests
and repairs required above;
(13) promptly pay and discharge all operating and maintenance costs and
expenses actually incurred by or allocable to the Pipeline Systems, including
taxes, assessments, premiums on insurance and interest and
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amortization on interim and permanent financing of construction loans;
(14) keep the Pipeline Systems in continuous operation, except during
periods of shutdown occasioned by unusual catastrophes and accidents beyond the
reasonable control of Enterprise;
(15) notify Hercules promptly of any labor disputes, operating difficulties
or other problems which are considered to be of a major importance with respect
to the Pipeline Systems and keep Hercules informed as to action taken in
connection therewith;
(16) furnish monthly and annual reports to Hercules of the following
particulars with regard to Pipeline Systems operation:
(a) total quantities (by product) of all products transported through
the Pipeline Systems during the preceding month or year, as the case may
be;
(b) statement of loss of product with such explanations as are
applicable;
(c) inventory of total products (by product) stored for the account of
Hercules;
(d) expenditures and accounting statements as are required to
substantiate the Pipeline Systems' operating and maintenance costs;
(e) an operating report prepared by technical and management personnel
summarizing operations for the month or year, as the case may be; and
(f) projection of unusual costs and capital expenditures.
The monthly reports called for in clause (16) shall be mailed to Hercules on or
before the 15th working day following the end of the monthly period reported.
The annual reports called for in (a), (b), (c), (d) and (e) of clause (16) shall
be submitted to Hercules on or before the 31st day of January for operations of
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the previous year, and the annual report called for in (f) shall be submitted to
Hercules on or before the 1st day of September of the year preceding the year
for which such projections are made.
F. The foregoing specific duties and functions are not in limitation of
any other duties or functions to be performed by Enterprise as provided
elsewhere in this Agreement.
G. It is understood and agreed that: (i) except as expressly provided
otherwise elsewhere in this Agreement, Enterprise shall conduct all operations
and routine maintenance of the Pipeline Systems, supplying all and every item or
items of expense; and (ii) in no event shall Hercules be liable for any cost or
expense incurred by Enterprise in the operation or maintenance of the Pipeline
Systems, except as expressly provided in Section 5.7.
H. Notwithstanding any provision of this Section to the contrary,
unless an expenditure is made or an obligation incurred in direct pursuance to
a budget approved as hereinafter provided, no single expenditure or series of
related expenditures shall be made, and no single obligation or series of
related obligations shall be incurred, by Enterprise in connection with the
operation or maintenance of the Pipeline Systems (except emergency measures as
hereinafter provided) which is reasonably estimated to cost in excess of $5,000
unless a detailed, written plan of the proposed undertaking, including an
estimate of the costs to be incurred and the reason or reasons such expenditure
is deemed necessary or advisable, has been submitted to and approved by
Hercules. Total expenditures and/or obligations made or incurred in any fiscal
year may not exceed $50,000 unless made or incurred in direct pursuance to an
approved budget (as provided in Section 5.9) and/or other approval, in writing,
by Enterprise and Hercules.
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I. In the event of any emergency affecting the Pipeline Systems,
Enterprise shall take appropriate action, to the best of its ability, to protect
life, in the first instance, and property, in the second instance, using
whatever human resources and equipment Enterprise deems advisable under the
circumstances. Enterprise shall notify Hercules as soon as reasonabiy
practicable by telephone, confirming by telegraph or telex, of the nature and
scope of such emergency, the action taken and the cost or approximate cost
thereof, if known.
SECTION.5.7. COMPENSATION
A. For performance by Enterprise of all its duties and services under
this Article, Hercules shall pay Enterprise the following:
(1) Reimbursement for 50% of all 14 reasonable direct costs and
expenses incurred in the operation and maintenance of the Pipeline
Systems, which costs and expenses shall be determined in accordance with
the Accounting Procedures Manual. It is understood and agreed that
operating and maintenance expenses reimbursable hereunder will consist
of the entire actual cost to Enterprise of accomplishing the work,
including, in particular, actual wages and salaries of all personnel
while directly engaged in performing Enterprise's duties and functions
hereunder, together with the actual cost of fringe benefits relating to
such personnel, but not any costs or expenses for overhead or similar,
general indirect expenses in connection with such labor; rental costs
for properties leased pursuant to Section 5.2; purchase and carrying
costs of stores, materials and supplies; accounting, auditing and legal
costs; power and other utility costs; insurance costs; and 50% of all
taxes paid by Enterprise pursuant to clause (13) of paragraph 5.6E, to
the extent the same are imposed as an incident of ownership of real
property included in the Pipeline System. All items purchased or
provided for operation and maintenance of the Pipeline Systems
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and for repairs or emergency services carried out by Enterprise shall be
charged to Hercules at Enterprise's actual cost therefor paid to the
supplier or contractor. Discounts shall be taken when available and
credited against the costs reimbursed by Hercules.
(2) A fee of 1 cent per gallon for all Polymer Grade Propylene
meeting specifications as provided in the Propylene Sales Agreement,
which is shipped from the Plant and destined either to Bayport, Texas or
Lake Charles, Louisiana, plus 1/2 cent per gallon for product
originating in Beaumont, Texas. Fees with respect to products
transported for Hercules from or to other sources shall be as mutually
determined from time to time by Enterprise and Hercules.
B. The total amount payable under clause (2) next above shall be no
less than $0.870 million per year and no more than $1.0 million per year for
quantities up to 530 million pounds per year. For deliveries in excess of 530
million pounds per year, enterprise shall receive pursuant to said clause (2)
1/2 cent per gallon. The minimum amount payable under this paragraph 5.7B shall
be reduced proportionately for partial years, as well as in the event Enterprise
is unable to produce at the Plant 180 million pounds of Polymer Grade Propylene
meeting specifications as aforesaid in 1979, 200 million pounds in 1980, 315
million pounds in 1981 and 380 million pounds in 1982, and subsequent years.
C. Payments under clause (1) of paragraph 5.7A shall be made by Hercules
within 30 days after receipt of Enterprise's invoice therefor covering the
immediately preceding calendar month, accompanied by such data as may be
reasonably requested by Hercules.
D. Payments provided for in paragraph 5.7A(2) are predicated upon final
book investment ceilings specified in paragraph 5.4B. If actual book investment
exceeds the aforesaid book investment, then such $1.0 million ceiling shall be
suspended
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until such time as Enterprise shall have recovered the excess investment. Upon
the recovery by Enterprise of such excess investment, the $1.0 million per year
ceiling shall be reinstated.
E. In any case where the use of the Pipeline Systems is affected by any
Casualty Occurrence (as that term is defined in paragraph 2.11A), there shall be
either an abatement or an equitable reduction in the fee payable under
paragraph 5.7A(2). The amount of such abatement or reduction shall depend on the
period for which and the extent to which the Pipeline Systems are not
reasonably usable for the purpose contemplated herein.
F. In the event Enterprise should fail to make any of the payments
required under Section 2.5 when due and payable, Hercules may, in its sole
discretion, offset the amounts of such unpaid rents against any amounts payable
under this Section 5.7.
G. In the event Enterprise is required, pursuant to agreement or
otherwise, to defend, protect, indemnify and hold Mobil Chemical Company
harmless from and against claims, demands and causes of action on the account of
personal injuries or death or damage to property directly or indirectly caused
by the negligence of Enterprise (whether such negligence is active, passive,
joint, concurring or otherwise) in the operation, maintenance or construction of
pipelines leased from Mobil Chemical Company and comprising a part of the
Pipeline Systems, any payments made and/or costs or expenses incurred shall be
borne solely by Enterprise and shall not be reimbursable costs under this
Section.
SECTION 5.8 BOOKS AND RECORDS
Enterprise shall keep complete and accurate books, records and accounts
to record and reflect all the expenses and
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transactions pertaining to the Pipeline Systems and the operations and
maintenance thereof. The manner in which the books and accounts are to be
maintained by Enterprise and the kind of other records which are to be
maintained by Enterprise shall be in accordance with the Accounting Procedures
manual and generally accepted accounting principles consistently applied. All
such books, records and accounts shall be kept at the principal office of
Enterprise, and Hercules and its duly authorized representatives shall have the
unrestricted right at all reasonable times during regular business hours, at
such office, to audit, examine and make copies of or extracts from any or all of
such books, records and accounts. Enterprise shall preserve and make available
the above books, records and accounts for a period of 5 years following the end
of the calendar year to which they pertain.
SECTION 5.9 BUDGETS
Enterprise shall prepare and submit to Hercules for its consideration on
or before the first day of October of the year preceding the year covered
thereby, forecasts and budgets setting forth the estimated receipts and
expenditures (capital, operating and other) for the Pipeline Systems for the
period covered by the forecasts and budgets. When approved by Hercules,
Enterprise shall implement the forecasts and budgets and shall be authorized,
without need for further approvals by Hercules, to make the expenditures and
incur the obligations provided for in the forecasts and budgets. If necessary,
these forecasts and budgets shall be revised during the year to correctly
reflect anticipated costs and cash outlays, and if approved by Hercules in
writing, such revision shall be effective upon such approval. Such forecasts and
budgets shall include a statement as to the purpose of the expenditures and
sufficient details regarding each expenditure to
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enable Hercules to have a clear understanding of the nature of said Proposed ex-
penditures and the reasons therefor.
SECTION 5.10 EMPLOYEES AND PIPELINE SYSTEMS MANAGER
A. Enterprise shall assign, as agreed from time to time by Enterprise
and Hercules, such number of employees, supervisors, engineers, accountants and
other persons as may be necessary or appropriate to carry out the safe and
efficient management and operation of the Pipeline Systems. All such persons
shall be qualified, regular employees of Enterprise, and shall be subject to the
exclusive control, direction and supervision of Enterprise. They shall not be
deemed or treated for any purpose to be an employee, agent or servant of
Hercules. The numbers of personnel assigned, their compensation and the hours of
work shall conform to established practices in the petrochemical pipeline
industry, having due regard to all relevant circumstances. It is understood and
agreed that in performing duties and functions hereunder, except in the case of
an emergency, Enterprise will endeavor to minimize personnel utilization at
premium wage rates.
B. Enterprise shall provide, on a part time basis, a competent Pipeline
Systems Manager, acceptable to Hercules, for the supervision of the management,
administrative and operating functions of the Pipeline Systems. Except as may
be otherwise agreed upon by Enterprise and Hercules, it is understood and
agreed that said Pipeline Systems Manager shall devote such portion of his time
as is required to supervise the manacement, administrative and operating
functions of the Pipeline Systems. The Pipeline Systems Manager shall be
available to Hercules for consultation at all reasonable times. Hercules shall
have the right to require removal of such Pipeline Systems Manager if at
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any time he is deemed unsatisfactory by Hercules, and Enterprise shall promptly
appoint another Pipeline Systems Manager who shall be acceptable to Hercules.
SECTION 5.11 RIGHT TO UNUSED CAPACITY
In the event Hercules shall determine at any time that some of the
Pipeline Systems capacity is not needed by Hercules, it shall notify Enterprise
that such capacity will be available and Enterprise shall have a right to use
such capacity for transportation of Polymer Grade Propylene, at its own cost
and expense; provided, such use does not interfere with, or impede, the delivery
of product for the Lake Charles, Louisiana and Bayport, Texas plants of
Hercules. For such use, Enterprise shall reimburse Hercules a proportionate
share of all reasonable direct costs and expenses incurred in the operation of
the Pipeline Systems and shall, in addition, pay Hercules 1 cent per gallon for
all material originating at the Plant regardless of destination. During 1979 and
1980, Enterprise shall be required to pay 1/2 cent per gallon, rather than the
aforesaid 1 cent per gallon, for all material originating at Mt. Belvieu, Texas
and transported to the Beaumont, Texas facilities of Mobil Chemical Company.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF ENTERPRISE
A. Enterprise represents and warrants to Hercules that:
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(1) Enterprise is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. Enterprise has all requisite
power and authority, corporate and otherwise, and legal right, to (i) carry on
the business as contemplated by this Agreement, (ii) own or hold under lease the
properties and assets included in the Plant and Pipeline Systems which it now
owns or holds under lease, and (iii) execute, deliver and perform this Agreement
and the Propylene Sales Agreement and the transactions contem plated by each,
including the sale, assignment, conveyance, transfer and delivery of the 50%
undivided interests in and to the Plant and the Pipeline Systems, as provided
herein. Enterprise is duly licensed and qualified to do business in the State of
Louisiana. True and complete copies of the charter of Enterprise, as amended to
date, and of the By-Laws of Enterprise, as amended to date, both certified by
the Secretary Enterprise, have heretofore been furnished to Hercules.
(2) Enterprise has delivered, or caused to be delivered, to Hercules copies
of the following financial statements:
(a) Consolidated balance sheets of Enterprise Products Company as at
December 31, 1975, 1976 and 1977 and related consolidated statements of
income and retained earnings for the years ending on those dates, certified
by X. X. Xxxxxx & Co., certified public accountants, whose opinions with
respect to such financial statements are attached thereto, together with
the unaudited consolidated balance sheet of Enterprise Products Company as
at September 30, 1978 and the related consolidated statements of income and
retained earnings for the nine months ended that date, certified by the
Treasurer of Enterprise Products Company.
(b) Unaudited balance sheet of Enterprise as at December 31, 1977 and
related statements of income and retained earnings for the years ending on
said date, together with the unaudited balance sheet of Enterprise as at
September 30, 1978 and the related consolidated statements of income and
retained earnings for the nine months ended that date, certified by the
Treasurer of Enterprise.
Each of the foregoing financial statements is true and complete in all respects;
is in accordance with the
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books and records of Enterprise or Enterprise Products Company, as the
case may be; has been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of prior
periods; and fully and accurately presents the financial condition and
the results of operations of the subjects thereof as of the dates
thereof.
For purposes of this Agreement, the "Balance Sheet" of Enterprise or
Enterprise Products Company shall mean the individual balance sheet of
such corporation as at December 31, 1977, together with the notes
thereto, and the "Balance Sheet Date" shall mean the date of the Balance
Sheet of such corporation.
(3) As at its Balance Sheet Date, neither Enterprise nor
Enterprise Products Company had any outstanding liability, indebtedness
or obligation, or any understanding or commitment or lease, of a
material nature and commonly required by generally accepted accounting
principles to be disclosed or reflected in a balance sheet (whether
absolute, accrued, contingent or otherwise and whether due or to become
due), which is not adequately reflected in or shown on its Balance
Sheet, or reflected in the notes thereto. Since its Balance Sheet Date,
neither Enterprise nor Enterprise Products Company has incurred any
liability, indebtedness or obligation, or any understanding or
commitment or lease other than it be ordinary course of business and
consistent with past practice. Neither Enterprise nor Enterprise
Products Company is in default with respect to any term or condition of
any indebtedness, and there exists no event or condition which with
notice or lapse of time, or both, would constitute an event of default
thereunder in respect of which either Enterprise or Enterprise Products
Company, as the case may be, has not taken or caused to be taken
adequate steps to prevent an event of default from happening. Neither
Enterprise nor Enterprise Products Company is, directly or indirectly,
liable upon or with respect to, or obligated in any way to provide funds
in respect of or to guarantee or assume, any debt, obligation or
dividend of any corporation, partnership or other entity, except
endorsements made int he ordinary course of business in connection with
the deposit of items for collection and except as otherwise reflected in
its Balance Sheet or on the notes thereto.
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(4) Since its Balance Sheet Date, there has not been any material change in
the financial condition or in the business, prospects, properties, liabilities
or assets of Enterprise or Enterprise Products Company; and since that date
there have not been any changes except those occurring in the ordinary course of
business and not materially adversely affecting the business, prospects,
properties, liabilities, assets or financial condition of Enterprise and/or
Enterprise Products Company, as the case may be.
(5) Enterprise and Enterprise Products Company each has filed all tax
returns (Federal, state, county, municipal and foreign) required to be filed by
it and such returns are true and complete. Enterprise and Enterprise Products
Company, respectively, has each paid all taxes shown thereon to be due,
including interest and penalties, or provided adequate reserves for the payment
thereof, as reflected in its financial statements referred to in paragraph
6.1A(2). The Federal income tax returns of Enterprise Products Company have been
examined by the Internal Revenue Service for the years and pertinent periods
through December 31, 1973, and all deficiencies as a result of such examinations
have been paid or settled.
(6) Enterprise has good and marketable title in fee simple absolute to all
property, real, personal or mixed, included in the Plant and/or Pipeline Systems
which it purports to own (including the real property referred to in paragraph
2.2B and the machinery, equipment and related property referred to in paragraph
2.1B), in each case free and clear of all liabilities, mortgages, pledges,
liens, charges, easements, restrictions and burdens or encumbrances of any
nature whatsoever, except for Permitted Encumbrances and those set forth in
Exhibit H attached hereto.
(7) Enterprise has delivered to Hercules a true and complete schedule
(certified by the President of Enterprise), attached hereto as Exhibit I,
setting forth a description of all contracts, agreements, deeds, leases,
licenses, arrangements or commitments to which Enterprise is a party, relating
to or affecting (i) the business and/or operations conducted by Enterprise at
the Plant and/or Pipeline Systems, and/or (ii) the property, real, personal or
mixed, or any interest therein, which is included in the Plant and/or Pipeline
Systems. Each of said contracts, agreements, deeds, leases, licenses,
arrangements and commitments is in full force
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and effect and, except as indicated on Exhibit 1, is assignable to Hercules
without the consent of any third party; and there exists no default thereunder
or any event or condition which with notice or lapse of time, or both, would
constitute an event of default thereunder in respect of which Enterprise has not
taken or caused to be taken adequate steps to prevent an event of default from
happening. Copies of all documents described in the foregoing schedule have been
delivered by Enterprise to Hercules and are true and complete and include all
amendments, supplements or modifications thereto.
(8) Except for the Construction Loan, or a substitute permanent loan
agreement, Enterprise has not made any agreement, arrangement or other
commitment of any kind whatsoever relating to the borrowing of money, the
performance of which by any other party thereto would give rise to the creation
or imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any kind or description whatsoever upon or with
respect to the Plant and/or Pipeline Systems. Enterprise has not made any other
agreement of any kind or description whatsoever, the performance of which by any
other party thereto would give rise to the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any kind or description whatsoever upon or with respect to the
Plant and/or Pipeline Systems, except for construction contracts and other
contracts made in the ordinary course of business.
(9) No violation of any law, ordinance, order, rule or regulation of any
governmental authority (Federal, state, county or municipal) exists with respect
to the Plant and/or Pipeline Systems, and the anticipated uses of each
complies with applicable building, zoning or other ordinances, codes or
regulations and restrictive covenants affecting the Plant and/or Pipeline
Systems.
(10) The operation of the Plant and the Pipeline Systems as contemplated by
this Agreement, the practice of any process therein (including separation of
propane and polymer grade propylene from a mixed stream of propane and
propylene) and/or the use of any equipment, machinery or other facilities
necessary for operation of the Plant and Pipeline Systems as contemplated by
this Agreement, shall not be subject to royalties or obligations other than
those which Enterprise is subject to;
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and if an infringement or claimed infringement of a United States patent is
lodged against Hercules, the terms and conditions set forth in paragraph 7 of
Exhibit G attached hereto, said paragraph being entitled "Patent Indemnities"
shall be applied. Upon best information and belief at the present time,
Enterprise validly owns or is validly licensed (under 1icenses assignable to
Hercules without, except as heretofore disclosed to Hercules in writing, the
consent of any third party) in respect of all inventions, processes, knowhow,
trade secrets, designs, formula and/or technical information directed to the
separation of propane and polymer grade propylene from mixed streams of propane
and propylene, and all such rights are valid and in good standing, are free and
clear of all liens and encumbrances of any nature whatsoever and have not been
challenged in any way or involved in any interference proceeding.
(11) Enterprise has or will hereafter obtain (evidence of which shall be
delivered promptly to Hercules) all permits, consents, approvals, licenses,
certificates and other authorizations (Federal, state, county and municipal)
necessary to, and of material importance to, the construction of the Plant
and/or Pipeline Systems and the use and operation of the Plant and/or Pipeline
Systems for the purposes contemplated by this Agreement (including, in
particular, all permits relating to the protection of the environment). Copies
of all such permits, consents, approvals, licenses, certificates and other
authorizations which have been obtained have been delivered to Hercules and are
true and complete and include all amendments, supplements and modifications
thereto.
(12) All utility services necessary for the construction of the Plant and
the operation thereof for its intended purpose are available at the boundaries
of the Plant site, including water supply, storm and sanitary sewer facilities
and gas, electric and telephone utilities.
(13) The execution, delivery and performance by Enterprise of this
Agreement and the Propylene Sales Agreement, and the consummation of the
transactions contemplated by each such agreement, have been duly authorized by
all necessary corporate action, and do not and will not (i) require any consent
or approval of the stockholders of Enterprise, (ii) result in a breach of or
constitute a default under any mortgage, deed of trust, indenture, loan or
credit agreement, lease or
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other obligation or instrument to which Enterprise is a Party or by which it or
any of its properties may be bound or affected, (iii) violate any provision of
the charter or By-Laws of Enterprise, or (iv) to the best of Enterprise's
knowledge and belief, violate any provision of any law, order, rule, regulation,
writ, judgment, injunction or decree of any government, governmental
instrumentality or court having Jurisdiction over Enterprise or any of its
property; and Enterprise is not in default under any such indenture, agreement,
lease or instrument (and there exists no event or condition which with notice or
lapse of time, or both, would constitute an event of default thereunder in
respect of which Enterprise has not taken or caused to be taken adequate steps
to prevent an event of default from happening) or, to the best of Enterprise's
knowledge and belief, any such law, order, rule, regulation, writ, judgment,
injunction or decree.
(14) This Agreement and the Propylene Sales Agreement each constitutes the
legal, valid and binding obligation of Enterprise enforceable against Enterprise
in accordance with their terms, except as enforcement thereof may be limited by
laws of general application affecting the rights and remedies of creditors.
(15) There are no actions, suits or proceedings pending or, to the
knowledge of Enterprise, threatened against or affecting Enterprise or the Plant
or Pipeline Systems, or involving the validity or enforceability of this
Agreement and/or the Propylene Sales Agreement, at law or in equity, before any
court or governmental department, commission, board, bureau, agency or
instrumentality, of the United States or otherwise, which, if adversely
determined, would materially impair the ability of Enterprise to complete
construction of the Plant and Pipeline Systems by the date scheduled for
completion, or impair the ability of Enterprise to perform its obligations under
this Agreement and/or the Propylene Sales Agreement, or would materially and
adversely affect the business, prospects, properties, assets or financial
condition of Enterprise, the Plant, the Pipeline Systems or the operations
relating to the Plant and/or Pipeline Systems.
(16) No representation or warranty by Enterprise in this Agreement contains
any untrue statement of a material fact, or omits to state a material fact
necessary to make the statements contained therein not misleading.
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B. The representations and warranties of Enterprise contained herein
shall survive and continue in existence after the passage of any titles and
delivery of any instrument of conveyance and shall remain effective regardless
of any investigation at any time made by or on behalf of Hercules or of any
information Hercules may have or acquire in respect thereof.
C. In the event that any representation herein set forth which is
qualified by a reference to the knowledge of Enterprise shall prove inaccurate
in any material respect, Enterprise shall promptly remedy or cure such condition
to the extent necessary to restore the accuracy of such representation, and
shall indemnify and hold harmless Hercules from all liabilities, damages, costs
or expenses arising out of such inaccuracy.
SECTION 6.2 REPRESENTATIONS AND WARRANTIES OF HERCULES
Hercules represents and warrants to Enterprise that:
(1) Hercules is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Hercules has the corporate
power and authority to execute, deliver and perform this agreement and the
Propylene Sales Agreement and the transactions contemplated by each, including
the purchase from and thereafter lease to Enterprise, as herein provided, of the
50% undivided interests in and to the Plant and Pipeline Systems. Hercules is
duly licensed and qualified to do business in the States of Texas and Louisiana.
True and complete copies of the Restated Certificate of incorporation of
Hercules, as amended to date, and of the By-Laws of Hercules, as amended to
date, both certified by the Secretary of Hercules, have been furnished to
Enterprise.
(2) Hercules has delivered to Enterprise copies of the consolidated balance
sheets of Hercules as at December 31, 1975, 1976 and 1977 and related
consolidate statements of income and retained earnings for the years
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ending on those dates, certified by Coopers & Xxxxxxx, certified public
accountants, whose opinions with respect to such financial statements are
attached thereto, together with the unaudited consolidated balance sheet of
Hercules as at September 30, 1978 and the related consolidated statements of
income and retained earnings for the nine months ended that date, certified by
the Treasurer of Hercules. Each of the foregoing financial statements is true
and complete in all respects; is in accordance with the books and records of
Hercules; has been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that of prior periods; and fully
and accurately presents the financial condition and the results of operations
of the subjects thereof as of the dates thereof. For purposes of this Agreement,
the "Balance Sheet" of Hercules shall mean the individual balance sheet of such
corporation as at December 31, 1977, together with the notes thereto, and the
"Balance Sheet Date" shall mean the date of the Balance Sheet of such
corporation.
(3) As at its Balance Sheet Date, Hercules did not any outstanding
liability, indebtedness or obligation, or any understanding or commitment or
lease, material nature and commonly required by generally accepted accounting
principles to be disclosed or reflected in a balance sheet (whether absolute,
accrued contingent or otherwise and whether due or to become due), which is not
adequately reflected in or shown on its Balance Sheet, or reflected in the notes
thereto. Since its Balance Sheet Date, Hercules has not incurred any liability,
indebtedness or obligation, or any understanding or commitment or lease other
than in the ordinary course of business and consistent with past practice.
Hercules is not in default with respect to any term or condition of any
indebtedness, and there exists no event or condition which with notice or lapse
of time, or both, would constitute an event of default thereunder in respect of
which Hercules has not taken or caused to be taken adequate steps to prevent an
event of default from happening. Hercules is not, directly or indirectly, liable
upon or with respect to, or obligated in any way to provide funds in respect of
or to guarantee or assume, any debt, obligation or dividend of any corporation,
partnership or other entity, except endorsements made in the ordinary course of
business in connection with the deposit of items for collection and except as
otherwise reflected in its Balance Sheet or on the notes thereto.
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(4) Since its Balance Sheet Date, there has not been any material change
in the financial condition or in the business, prospects, properties,
liabilities or assets of Hercules; and since that date there have not been any
changes except those occurring in the ordinary course of business and not
materially adversely affecting the business, prospects, properties, liabilities,
assets or financial condition of Hercules.
(5) Hercules has filed all tax returns (Federal, state, county, municipal
and foreign) required to be filed by it and such returns are true and complete,
and has paid all taxes shown thereon to be due, including interest and
penalties, or provided adequate reserves for the payment thereof, as reflected
in its financial statements referred to in paragraph 6.2(2). The Federal income
tax returns of Hercules have been examined by the Internal Revenue Service for
the years and pertinent periods through December 31, 1964, and all deficiencies
as a result of such examinations have been paid or settled.
(6) The execution, delivery and performance by Hercules of this Agreement
and the Propylene Sales Agreement, and the consummation of the transactions
contemplated by each such agreement, have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
the stockholders of Hercules, (ii) result in a breach of or constitute a default
under any mortgage, deed of trust, indenture, loan or credit agreement, lease or
other agreement or instrument to which Hercules is a party or by which it or any
of its properties may be bound or affected, (iii) violate any provision of the
Restated Certificate of Incorporation or By-Laws of Hercules, or (iv) to the
best of Hercules' knowledge and belief, violate any provision of any law, order,
rule, regulation, writ, judgment, injunction or decree of any government,
governmental instrumentality or court having jurisdiction over Hercules or any
of its property; and Hercules is not in default under such indenture, agreement,
lease or instrument or, to the best of Hercules' knowledge and belief, any such
law, order, rule, regulation, writ, judgment or decree.
(7) This Agreement and the Propylene Sales Agreement each constitutes the
legal, valid and binding obligation of Hercules enforceable against Hercules in
accordance with their terms, except as enforcement
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thereof may be limited by laws of general application affecting the rights and
remedies of creditors.
(8) There are no actions, suits or proceedings pending or, to the knowledge
of Hercules, threatened against or affecting Hercules, or involving the validity
or enforceability of this Agreement and/or the Propylene Sales Agreement, at law
or in equity, before any court or governmental department, commission, board,
bureau, agency or instrumentality, of the United States or otherwise, which if
adversely determined, would materially impair the ability of Hercules to perform
its obligations under this Agreement and/or the Propylene Sales Agreement, or
would materially and adversely affect the business, prospects, properties,
assets or financial condition of Hercules.
(9) No representation or warranty by Hercules in this Agreement contains
any untrue statement of a material fact, or omits to state a material fact
necessary to make the statements contained therein not misleading.
ARTICLE VII
THE CLOSING
SECTION 7.1 TIME AND PLACE
The transfer of the undivided interests in the Plant and Pipeline
Systems to Hercules, as provided for herein (the "Closing"), shall take place
contemporaneously with the execution of this Agreement, and shall be at the
office of Hercules at 000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx.
SECTION 7.2 ENTERPRISE'S OBLIGATIONS AT THE CLOSING
A. At the Closing, Enterprise shall deliver, or cause to be delivered,
to Hercules, against delivery of the items specified in Section 7.3:
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(1) All documents listed in Exhibit J attached hereto which are specified
therein to be delivered by Enterprise.
(2) A title guaranty policy (or commitment) in the amount of the fair
market value of the real property more particularly described in Exhibit C
attached hereto. Such policy shall be in standard form issued by an insurance
company satisfactory to Hercules and qualified to do business in the State of
Texas, and shall insure title in Enterprise to the real property in conformity
with the warranties set forth herein as of the date hereof.
(3) A survey of the real property more particularly described in Exhibit C
attached hereto I certified by a licensed surveyor, which survey shall show all
improvements, elevations and depressions and shall show title to be marketable
in all respects as to which the information shown on the survey is pertinent.
(4) Such,warranty deeds, bills of sale with full covenants of warranty,
endorsements, assignments and other good and sufficient instruments of
conveyance, sale, transfer and assignment, with all required Federal and state
documentary and revenue stamps affixed, as shall be required or as may be
desirable in order effectively to vest in Hercules good, indefeasible and
marketable title to a 50% undivided interest in and to the Plant and the
Pipeline Systems, free and clear of all liabilities, mortgages, pledges, liens,
charges, easements, restrictions or burdens or encumbrances of any nature
whatsoever, except for Permitted Encumbrances and those set forth in Exhibit H
attached hereto. Such instruments will include:
(a) A general warranty deed, properly attested, executed and acknowledged
before notary and sealed, containing survey description transferring to Hercules
title, in fee simple absolute, to a 50% undivided interest in and to the real
property more particularly described in Exhibit E attached hereto, free and
clear of all liens, encumbrances and restrictions other than Permitted
Encumbrances and those set forth in Exhibit G attached hereto.
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(b) A warranty bulk xxxx(s) of sale, properly attested, executed and
acknowledged before notary and sealed, vesting full title in Hercules to a
50% undivided interest in and to the personal and other property
constituting a part of the Plant which Enterprise purports to own, free and
clear of all liens, encumbrances and restrictions other than Permitted
Encumbrances and those set forth in Exhibit G attached hereto.
(c) A warranty bulk xxxx(s) of sale, properly attested, executed and
acknowledged before notary and sealed, vesting full title in Hercules to a
50% undivided interest in and to the personal and other property
constituting a part of the Pipeline Systems which Enterprise purports to
own, free and clear of all liens, encumbrances and restrictions other than
Permitted Encumbrances and those set forth in Exhibit G attached hereto.
(5) A copy of the final plans and specifications for all of the
improvements to be constructed on the site described in Exhibit C attached
hereto as submitted by Delta Engineering Company from time to time to
Enterprise, and a copy of any contracts between Enterprise and Delta Engineering
Company relating to rendering of services or furnishing of material in
connection with construction of the aforesaid improvements.
(6) A certified copy(s) of the contract(s) with the supplier(s) wherein
such supplier(s) agrees to supply, until December 31, 1981, approximately 85%
of the Plant's requirements for Feedstocks meeting the specifications set forth
in Exhibit E attached hereto, all duly executed and in full force and effect.
(7) A favorable opinion of Xxxx X. XxXxxxx, counsel for Enterprise, dated
the date of such acquisition, in form and substance satisfactory to Hercules, as
to matters referred to in paragraphs 0.xX(l), (6), (7), (8), (9), (10), (11),
(13) and (14). In addition, the opinion of counsel for Enterprise shall
favorably opine that:
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(a) The instruments executed by Enterprise and delivered to Hercules
hereunder are valid and effective to transfer the 50% undivided interests
being acquired by Hercules in accordance with the terms of this Agreement,
free and clear of all liabilities, obligations, liens and encumbrances,
except Permitted Encumbrances and those set forth in Exhibit H attached
hereto.
(b) Such counsel does not know or have any reason to believe that
Enterprise is a party to or affected by any litigation or other proceedings
before any court or administrative agency pending or threatened against or
relating to Enterprise, or the 50% undivided interests being acquired by
Hercules, which, if adversely determined, would materially and adversely
affect the business related to the 50% undivided interests being acquired
by Hercules, the Plant, the Pipeline Systems or the operations relating to
the Plant and/or Pipeline Systems.
(c) Such counsel does not know or have any reason to believe that any
representation or warranty set forth or contained in this Agreement or in
any statement, deed, certificate, schedules or other documents delivered
pursuant to this Agreement or in connection with the transactions
contemplated hereby is false or inaccurate in any respect, or that any
statement of fact made by Enterprise herein or therein contains any untrue
statement of fact or omits to state any fact necessary in order to make the
statements contained herein or therein not misleading.
(d) Such opinion shall also favorably opine on such other matters
incident to the transactions contemplated hereby as Hercules may reasonably
require.
(8) Copies of all permits, approvals, consents, licenses, certificates and
other authorizations from third parties and governmental authorities necessary
for the lawful transfer of the 50% undivided interests being acquired by
Hercules from Enterprise, and, to the extent obtained prior to the Closing, for
the construction, use and occupancy of the Plant and/or Pipeline Systems in the
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manner herein contemplated (including, in particular, all permits
relating to the protection of the environment). Each such permit,
approval, consent, license, certificate and other authorization shall be
accompanied by a certificate by the Secretary of Enterprise to the
effect that such permit, approval, consent, license, certificate or
other authorization is in full force and effect on the date of Closing,
and has not been rescinded or modified.
B. All documents delivered, or caused to be delivered, by Enterprise
under this Section 7.2 shall be in form, scope and substance acceptable to
Hercules.
SECTION 7.3 HERCULES' OBLIGATIONS AT THE CLOSING
A. At the Closing, Hercules shall by wire transfer to 0xx Xxxx Xxxxxxxx
Xxxx, Xxxxxxx, Xxxxx, for the account, and to reduce the outstanding balance of
Enterprise Petrochemical Company Loan, 1st City Commercial Loan Account No.
0000000, pay Enterprise an amount equal to the aggregate of the payments to be
made by Hercules at the time of the Closing pursuant to Sections 2.2 and 5.4,
and shall deliver, or cause to be delivered, to Enterprise against delivery of
the items specified in Section 7.2:
(1) All documents listed in Exhibit J attached hereto which are
specified therein to be delivered by Hercules.
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(2) A favorable opinion of Xxxxxxx X. X. Xxxxxx, counsel for Hercules,
dated the date of such sale, in form and substance satisfactory to Enterprise,
as to matters referred to in paragraphs (1), (6) and (7) of Section 6.2. In
addition, the opinion of counsel for Hercules shall favorably opine that:
(a) This Agreement is valid and effective to lease back to Enterprise
the 50% undivided interests being sold by Enterprise to Hercules in
accordance with the terms of this Agreement.
(b) Such counsel does not know or have any reason to believe that
Hercules is a party to or affected by any litigation or other proceedings
before any court or administrative agency pending or threatened against or
relating to Hercules, or the 50% undivided interests being acquired by
Hercules, which, if adversely determined, would materially and adversely
affect the business related to the 50% undivided interests being acquired
by Hercules, the Plant, the Pipeline Systems or the operations relating to
such assets.
(c) Such counsel does not know or have any reason to believe that any
representation or warranty set forth or contained in this Agreement or in
any statement, certificate, schedule or other document delivered pursuant
to this Agreement or in connection with the transactions contemplated
hereby is false or inaccurate in any respect, or that any statement of fact
made by Hercules herein or therein contains any untrue statement of fact or
omits to state any fact necessary in order to make the statements contained
herein or therein not misleading.
(d) Such opinion shall also favorably opine on such other matters
incident to the transactions contemplated hereby as Enterprise may
reasonably require.
B. All documents delivered, or caused to be delivered by Hercules under
this Section 7.3 shall be in form, scope and substance acceptable to Enterprise.
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ARTICLE VIII
SPECIAL COVENANTS
SECTION 8.1 COMPLIANCE WITH LAWS
A. During the continuation of this Agreement, Enterprise shall, at its
own cost and expense, promptly (i) observe and comply strictly with all present
and future applicable laws, statutes, ordinances, regulations, orders and
requirements of all Federal, state, county or municipal authorities of competent
jurisdiction in its construction, occupation, use and maintenance of the Plant
and/or Pipeline Systems; (ii) pay all costs, expenses, claims, fines, penalties
and damages that may in any manner arise out of or be imposed because of the
failure of Enterprise to observe or comply with this Section; and (iii) give
notice to Hercules, confirmed in writing, of any notice of violation received by
Enterprise.
B. Without limiting the generality of paragraph 0.xX, Enterprise
shall:
(1) in connection with its operation, maintenance and repair of the
Plant and Pipeline Systems, acquire and keep in effect all necessary
consents, permits, licenses, certificates and any other authorizations
and rights for the construction, occupation, use, maintenance and repair
of the Plant and/or Pipeline Systems, including, in particular, all
permits relating to the protection of the environment; and
(2) in connection with its operation, maintenance and repair of the
Pipeline Systems, (i) assume complete responsibility for compliance with
the provisions of all applicable local, state or Federal workmen's
compensation acts and other employee benefits laws for protection of
workers as may be now or hereafter applicable to work performed in
connection with the construction of the
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Pipeline Systems and/or the installation of equipment, facilities and
related property; (ii) have exclusive liability for the payment of any
and all contributions or taxes for unemployment insurance or old age
benefits, pensions or annuities now or hereafter imposed by any
government having jurisdiction which are measured by the wages, salaries
or other remunerations paid to persons employed by Enterprise or its
subcontractors, and for the preparation and filing of required reports;
and (iii) hold harmless and unconditionally indemnify Hercules against
any penalties or fines imposed as a result of failure of Enterprise
and/or its subcontractors to comply with such laws.
C. Hercules shall reimburse Enterprise 50% of all capital costs incurred
under this Section 8.1 as a result of compliance with laws hereafter enacted.
SECTION 8.2 TAXES
A. Enterprise shall pay and discharge at least 15 days before the last
day on which they may be paid without penalty or interest, and agrees to
indemnify and hold Hercules and its successors harmless from and against, all
taxes, assessments, fees and charges or levies of any kind and nature
whatsoever, ordinary or extraordinary, foreseen or unforeseen, general or
special, together with any penalties, fines, additions of tax or interest
thereon, which, pursuant to present or future law or otherwise, during the
continuation of this Agreement, or any extensions or renewals thereof, shall
have been or shall be imposed, assessed, charged or levied (collectively,
"imposed") upon Enterprise, Hercules or otherwise by any Federal, state, county
or municipal government or governmental body, upon, against or with respect to
(i) the Plant and/or Pipeline Systems, or any part of either of them, (ii) the
ownership, possession, occupation, alteration, maintenance, repair and use of
the Plant and/or Pipeline Systems,
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or any part of either of them (including any machinery, equipment or other
property installed or brought by Enterprise and/or Hercules therein or thereon),
or (iii) this Agreement or any payment made pursuant to this Agreement (all such
taxes, assessments, fees, charges, penalties, fines, additions to tax and
interest imposed as aforesaid being hereinafter called "Taxes"). Notwithstanding
the foregoing, with respect to special assessments or other governmental charges
that may lawfully be paid in installments over a period of years, Enterprise
shall be obligated to pay only such installments as are required to be paid
during this Agreement.
B. Enterprise shall deliver to Hercules, at least 15 days before the
last day on which any of the foregoing Taxes may be paid without penalty or
interest, receipts or other evidence satisfactory to Hercules showing the full
payment thereof.
C. If Enterprise shall first notify Hercules of its intention to do so,
Enterprise may, at its own cost and expense and in its own name, contest the
validity, applicability or amount of any Taxes by appropriate proceedings
diligently conducted in good faith and, in the event of any such contest, may
permit the Taxes so contested to remain unpaid during the period of such contest
and any appeal therefrom, provided during such period enforcement of such
contested item is effectively stayed. Hercules shall cooperate fully with
Enterprise in any such contest.
D. In the event that Enterprise shall fail to pay any of the foregoing
items required by paragraph 8.2A to be paid by Enterprise, Hercules may (but
shall be under no obligation to), pay the same, and any amounts so advanced
therefor by Hercules shall become an additional obligation of Enterprise to
Hercules, which amounts, together with interest thereon from the date
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thereof, at the rate, per annum, specified in paragraph 2.5E, Enterprise agrees
to pay upon demand.
E. All obligations of Enterprise under this Section 8.2 shall survive
and continue, but only with respect to periods included in this Agreement,
notwithstanding the expiration or other termination of this Agreement.
F. Hercules shall reimburse Enterprise for all payments made by
Enterprise under this Section in respect of taxes imposed upon the Polymer
Grade Propylene stored by Enterprise for Hercules under the storage agreement
contemplated by paragraph 2.8C. In addition, Hercules shall reimburse Enterprise
(under Section 5.7 in the case of the Pipeline Systems) one-half of all payments
made by Enterprise under this Section in respect of taxes imposed as an incident
of ownership of real property included in the Plant and/or the Pipeline Systems.
All other payments made by Enterprise under this Section shall be reimbursable
(under Section 5.7) if and to the extent made in respect of taxes imposed upon
the Pipeline Systems, or any part of them, or the ownership, possession,
occupation, alteration, maintenance, repair or use of the Pipeline Systems, or
any part of them, (including any machinery, equipment or other property
installed or brought by Enterprise and/or Hercules therein or thereon).
SECTION 8.3 LOSS OR DAMAGE TO PRODUCTS
A. Except as Hercules may be compensated by insurance to be maintained
as provided in Section 8.4, Enterprise shall account and be responsible for all
Polymer Grade Propylene and allied products of Hercules received by or delivered
to Enterprise for storage and/or for transportation through the
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Pipeline Systems, except for 1oss or damage resulting from any cause beyond the
reasonable control of Enterprise. To the extent that loss of or damage to
product does not exceed 0.5% of the amount so received by or delivered to
Enterprise, such loss or damage is not covered by this paragraph unless and to
the extent the loss or damage results from known events or causes. The burden of
proof with respect to any and all exceptions under this paragraph shall be on
Enterprise; this includes proof that a cause was beyond the reasonable control
of Enterprise, as well as proof that particular loss or damage results from
unknown events or causes.
B. To insure that the specifications of all Polymer Grade Propylene and
allied products delivered to Hercules from the Pipeline Systems shall meet the
specifications at time of receipt into the Pipeline Systems, Enterprise shall
maintain adequate control and exercise adequate supervision over the receipt,
handling, storage, transporting and delivery of all products.
SECTION 8.4 INSURANCE
A. During the construction period of the Plant and Pipeline Systems,
and at all times throughout this Agreements, Enterprise shall carry and
maintain insurance in full force, all at its own cost and expense (except as
provided in paragraph 8.4B below) and on behalf of and to the extent set forth
in Exhibit K attached hereto; and,
(1) All insurance required in this Section shall be effected under
valid and enforceable policies issued by insurers of recognized
responsibility which have been
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approved in writing by Hercules as to the qualifications of insurers and the
amounts of insurance to be carried by each.
(2) All insurance policies maintained pursuant to this Agreement shall: (i)
name Hercules as a Named Insured with respect to all operations including the
Plant, Pipeline Systems and storage facilities and thus insure Hercules'
interests; (ii) provide that all insurance proceeds with respect to the Plant
and/or Pipeline Systems shall be adjusted by Enterprise so long as no Event of
Default (as defined below in Section 10.1) shall have occurred and be
continuing; and (iii) provide that no cancellation thereof shall be effective
until at least 30 days after the giving of notice by the insurer thereunder to
Hercules and Enterprise.
(3) Upon the execution of this Agreement, and thereafter not less than 15
days prior to the expiration dates of the policies theretofore delivered
pursuant to this Section, Enterprise shall deliver to Hercules duplicate
originals of all policies (or in the case of Blanket policies, certificates
thereof issued by the issuers thereunder) for the insurance maintained pursuant
to this Section; provided, however, that if the delivery of a formal policy or
certificate, as the case may be, is delayed, Enterprise shall deliver an
executed binder with respect thereto and shall deliver the formal policy or
certificate, as the case may be, upon receipt thereof.
(4) In the event Enterprise shall fail to maintain the insurance coverage
required by this Section, Hercules may (but shall be under no obligation to)
provide such insurance, unless Enterprise gives immediate assurances that such
failure will be cured and such assurances as are satisfactory to Hercules in the
exercise of its reasonable discretion. In the event Hercules provides insurance
pursuant to this paragraph, Enterprise shall, upon demand from time to time,
reimburse Hercules for the cost thereof together with interest, on the amount of
the cost to Hercules of such insurance which Enterprise shall have failed to
maintain, at the rate per annum specified in paragraph 2.5E.
B. All payments made by Enterprise for insurance coverage required by
this Section with respect to the Pipeline Systems or any part thereof, shall be
reimbursable under Section 5.7.
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C . At all times during the lease or sublease of the storage facilities
of XRAL Storage and Terminaling Company, a Texas company, at Mt. Belvieu, Texas,
Hercules shall reimburse Enterprise for the cost of the storage facilities
insurance coverage as set forth in Exhibit K attached hereto.
SECTION 8.5 INDEMNIFICATION
A. Except as may be compensated by insurance to be maintained as
provided in Section 8.4, Enterprise and Hercules (individually, "Indemnitor"),
to the extent only of its undivided interest in the Plant, each shall indemnify,
protect and save harmless the other and its successors, assigns, officers,
directors, employees and agents (collectively "Indemnified Persons") from and
against any and all causes of action, suits, penalties, claims, demands or
judgments, of any and every kind and nature whatsoever (collectively, "Claims")
which may be imposed on, incurred by or asserted against any Indemnified Person,
including any or all liabilities, obligations, damages, costs, disbursements and
expenses (including attorney's fees and other expenses) of any Indemnified
Person relating thereto, arising or growing out of or in any way connected with:
(1) the Plant and/or the use, condition or operation; and/or
(2) any damage to or loss of property (including loss of use thereof) or
any injury to (including death at any time resulting therefrom) or death of any
and all persons sustained on or near the Plant;
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whether such Claims are based on negligence (whether of Indemnitor or another),
breach of contract, breach of warranty, absolute liability or otherwise;
provided, however, that said Indemnitor shall not be required to indemnify,
protect and save harmless an Indemnified Person from any Claim (a) resulting
from the negligence of any Indemnified Person or (b) arising out of claims
against such Indemnified Person as a result of any Indemnified Person failing to
perform its obligations hereunder or under the Propylene Sales Agreement.
B. Subject to the provisions of Section 8.3, and except as may be
compensated by insurance as provided in Section 8.4, Enterprise and Hercules
(individually, "Indemnitor"), to the extent only of its undivided interest in
the Pipeline Systems, each shall indemnify, protect and save harmless the other
and its successors, assigns, officers, directors, employees and agents
(collectively "Indemnified Persons") from and against any and all claims
causes of action, suits, judgments, liabilities, damages and losses, of any and
every kind and nature whatsoever (collectively, "Claims"), which may be imposed
upon, incurred by or asserted against any Indemnified Person, including any and
all liabilities, obligations, damages, costs, disbursements and expenses
(including attorney's fees and other expenses) of any Indemnified Persons
relating thereto, arising or growing out of or in any way connected with:
(1) the Pipeline Systems and/or the construction, use, condition or
operation thereof, and/or the receipt, handling, transportation and delivery of
Polymer Grade Propylene and allied products; and/or
(2) any damage to or loss of property (including loss or use thereof) or
any injury to (including death at any time resulting therefrom) or death of any
and all persons sustained on or near the Pipeline Systems;
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whether such Claims are based on negligence (whether or Indemnitor or another),
breach of contract, breach of warranty, absolute liability or otherwise;
provided, however, that said Indemnitor shall not be required to indemnify,
protect and save harmless any Indemnified Person from any Claims, (a) resulting
from the gross negligence or willful misconduct of any Indemnified Person or
(b) arising out of claims against such Indemnified Person as a result of any
Indemnified Person failing to perform its obligations hereunder or under the
Propylene Sales Agreement. Any Claims in any way arising out of or relating to
the receipt, storage and/or handling of Polymer Grade Propylene and allied
products at the storage facilities owned by XRAL Storage and Terminaling
Company, a Texas corporation, shall not be covered by this paragraph so long as
such facilities are so leased.
C. In case any action, suit or proceeding is brought against any
Indemnified Person in connection with any Claim indemnified against hereunder,
Indemnitor may and, upon such Indemnified Person's request, shall, at
Indemnitor's own cost and expense, defend such action, suit and proceeding and,
in the event of any failure of Indemnitor to do so, Indemnitor shall pay all
costs and expenses (including attorney's fees and expenses) incurred by such
Indemnified Person in connection with such action, suit or proceeding.
D. In the event the Indemnitor is required to make any payment under
this Section, such Indemnitor shall pay such Indemnified Person an amount which,
after deduction of all taxes required to be paid by such Indemnified Person in
respect of the receipt thereof under the laws of any and all Federal, state,
county or municipal government or governmental body, shall be equal to the
amount of such payment.
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E. In the event Enterprise is required to make any payment under this
Section 8.5, such payment, cost or expense is not reimbursable under Section
5.7.
F. The indemnities contained in this Section shall survive the
expiration or termination of this Agreement with respect to all events, facts,
conditions or other circumstances occurring or existing prior to such expiration
or termination and are expressly made for the benefit of, and shall be
enforceable by any Indemnified Person.
SECTION 8.6 LIENS
Enterprise shall not create, incur, assume or suffer to exist, and shall
forthwith discharge any and all mechanics' or other liens, security interests or
other encumbrances or charges (except Permitted Encumbrances and those
enumerated in Exhibit H) upon or against the Plant and/or Pipeline Systems, or
any part of either, now existing or hereafter leased or acquired, including
liens, security interests, encumbrances or charges placed by Enterprise or
arising by reason of the occupation, erection or use of the Plant and/or
Pipeline Systems by Enterprise; provided, however, that if Enterprise shall have
first notified Hercules, so long as such lien, security interest, encumbrance or
charge is contested in good faith by Enterprise, with due diligence and
dispatch and without cost or expense to Hercules, it shall not be in default
under this Agreement.
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SECTION 8.7 ACCESS
Hercules shall have the following specific rights and privileges, which
shall not be in limitation of any other rights or privileges provided by this
Agreement:
(1) the unrestricted right to enter into and upon the Plant and/or Pipeline
Systems, and/or any part thereof, at all reasonable times, to observe and
inspect any operations of, or any part of, the Plant and/or Pipeline Systems;
and
(2) the unrestricted right to inspect any document, agreement or instrument
directly pertaining to or affecting the Plant and/or Pipeline Systems or the
operations and/or maintenance thereof which is in the custody or control of
Enterprise; and Enterprise shall furnish Hercules, at Hercules' expense, with
copies of any such document, agreement or instrument.
ARTICLE IX
ADDITIONAL FACILITIES AND EXPANSION
SECTION 9.1 NEW PRODUCTION CAPACITY
If either Enterprise or Hercules should desire to expand the Polymer
Grade Propylene production capacity of the Plant, it shall discuss such proposed
expansion with the other. If Enterprise and Hercules are unable to reach an
agreement relating to the expansion of the Plant, the party desiring to expand
the Plant may, at its own cost and expense, unless the other party has agreed to
share in the expense thereof, initiate engineering studies required to prepare a
detailed cost estimate of the proposed expansion and all other details necessary
for the evaluation by both Enterprise and Hercules of said proposed expansion.
If,
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within 60 days following receipt of said studies, the party not proposing said
engineering studies shall notify the proposing party of its election to join in
such expansion, which shall include a commitment to share in one-half the cost
of studies for such expansion, or if the parties can reach agreement within
such period on an alternative plan of joint expansion, the same shall be
undertaken. If the party not proposing said engineering studies does not elect
to join in such expansion and the parties cannot reach agreement as to an
alternate plan of expansion or on an agreement which would permit expansion in
accordance with the studies prepared at the request of the party proposing such
expansion, the Plant will not be expanded. To minimize the possibility of
such an impasse occurring, it is understood that both Enterprise and Hercules
shall negotiate in good faith in an effort to reach a solution regarding such
proposed expansion which is equitable under the circumstances.
SECTION 9.2 DEBOTTLENECKING PROJECTS
It is contemplated that from time to time during the term of this
Agreement either Enterprise or Hercules will propose improvements, additions or
acquisitions ("New Projects") directed to reduction of operating costs or
improvements of yields at the Plant. If the other party, Enterprise or Hercules,
as the case may be, does not approve the proposed New Project, the proposing
party may nonetheless proceed with the New Project upon contribution of the
total cost thereof; but the ownership interests of Enterprise and Hercules in
the Plant shall not be adjusted. If Hercules is the party proceeding with the
New Project, Hercules shall be entitled to receive an amount equal to the annual
savings attributable to the New Project, before Federal and state income
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tax. Except as specifically provided in this paragraph, expenditures for New
Projects shall not otherwise affect the rights and obligations of either
Enterprise or Hercules under this Agreement and/or the Propylene Sales
Agreement.
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1 EVENTS OF DEFAULT DEFINED
A. Any material violation or breach by Enterprise or Hercules in the
due performance of, or compliance with, any of its obligations under this
Agreement and/or the Propylene Sales Agreement shall constitute an "Event of
Default" or "Default" under this Agreement if, after the other party hereto
shall have given the defaulting party written notice thereof, specifying with
particularity the condition, act, omission or course of conduct asserted to
constitute such material violation or breach, the defaulting party, within 60
days of such notice, has not cured, corrected or eliminated the asserted
violation or breach or, if the asserted violation or breach cannot be corrected
within such 60 day period, the defaulting party has not instituted corrective
action within the applicable period and/or thereafter diligently pursued such
action until the default is cured, corrected or eliminated, in all events not
more than 120 days from the date of the violation or breach.
B. For purposes of the provisions of paragraph A, next above, without
limiting the generality of the same, a material violation or breach shall,
except as specifically provided in
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this Agreement or agreed to by Enterprise and Hercules, be deemed to include any
of the following transactions by or caused by either party hereto:
(1) except as may otherwise be permitted under this Agreement, the sale of
any property constituting a part of the Plant and/or Pipeline Systems or the
sale of any undivided interest of Enterprise or Hercules in the Plant and/or
Pipeline Systems;
(2) failure of Enterprise to produce and deliver Polymer Grade Propylene,
because of disability under Section 12.3, in quantities sufficient to meet at
least 80% of Hercules' then current requirements under the Propylene Sales
Agreement (which shall be deemed not to exceed, on a monthly basis, the
average of Hercules' actual receipts from Enterprise over the 6-month period
preceding the disability under Section 12.3) and Enterprise's failure to deliver
at such level continues for a period which constitutes an Event of Default or
which would constitute an Event of Default but for the requirement that notice
be given;
(3) failure of Hercules to take delivery of at least 80% of the Polymer
Grade Propylene tendered under the Proloylene Sales Agreement (which shall be
deemed not to exceed, on a monthly basis, the average of Hercules' actual
receipts from Enterprise over the 6-month period preceding the disability under
Section 12.3), because of a disability under Section 12.3, and such failure
continues for a period which constitutes an Event of Default but for the
requirement that notice be given; and/or
(4) failure of Enterprise to pay the rents and/or additional rents
required to be paid under this Agreement at the times specified herein and
continuing, (i) in the case of rent, for a period of 20 days after notice given
to Enterprise by Hercules that the payment referred to in such notice has not
been received, and (ii) in the case of additional rents, for the applicable
period specified in paragraph 10.1A.
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C. Except for inserts (2) and (3) of paragraph B, next above, the
foregoing provisions of this Section are expressly subject to the provisions and
limitations of Section 12.3.
SECTION 10.2 OPTIONAL TERMINATION
Whenever any Event of Default specified in Section 10.1 shall have
occurred and be continuing, then at the option of the party hereto not in
default, this Agreement may be terminated and the party intending to terminate
shall give the defaulting party written notice of such termination. Such notice
shall be given within 30 days of the Default. If notice is not given within such
30 day period, the non-defaulting party shall be required to renotify the
defaulting party as provided in paragraph 10.1A before terminating. If this
Agreement is terminated as a result of a Default, such termination shall be
subject to the specific rights hereinafter granted Enterprise and Hercules under
Article XI.
ARTICLE XI
TERM, TERMINATION AND CERTAIN RIGHTS UPON TERMINATION
SECTION 11.1 TERM OF AGREEMENT
A. This Agreement is effective as of the date first above written and
shall remain in full force and effect for an initial period ending December 31,
1992, unless sooner cancelled or terminated as hereinafter provided. Provided
this Agreement has not been earlier terminated and Hercules is not in default
hereunder, Hercules shall have three successive options to extend
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the term of this Agreement for terms of 12 years each (making three extended
terms totaling 36 years). Each option shall be exercised by Hercules' giving to
Enterprise written notice of intention to extend at least 12 months prior to
the expiration of any then current term. Each extended term shall be upon the
same agreements, terms, covenants and conditions as provided for herein for the
original term, unless either Enterprise or Hercules gives written notice to the
other not less than 18 months prior to termination of the initial or extended
term of this Agreement that Enterprise or Hercules, as the case may be, desires
adjustment of
(1) the compensation payable to Enterprise for operation and maintenance of
the Pipeline Systems;
(2) the purchase price paid by Hercules for Polymer Grade Propylene
produced at the Plant;
(3) the rental payable to Enterprise for storage of Feedstocks and/or
Polymer Grade Propylene; and/or
(4) the rental payable to Hercules by Enterprise for lease of Hercules'
interest in the Plant.
Within 15 days after said notice, Enterprise and Hercules shall undertake to
negotiate in good faith a mutually acceptable modification to this Agreement
and, where appropriate, to the Related Agreements. If, after 6 months after the
giving of notice as provided above, Enterprise and Hercules are unable to agree
upon an acceptable modification, such modification, if any, shall be determined
by the procedure set forth in the next succeeding paragraph.
B. Within 25 business days after the expiration of the 6 months referred
to in the paragraph next above, Enterprise and Hercules shall each appoint a
person of recognized competence in
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the petrochemical industry to serve as arbitrator. The two arbitrators so
appointed shall appoint a third disinterested person of recognized competence in
the petrochemical industry, and such three arbitrators shall as promptly as
possible determine what modifications, if any, shall be made to this Agreement;
provided, however, that
(1) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall proceed to, on 10 days notice to
Enterprise and Hercules, determine such matter; and
(2) if the two arbitrators appointed by Enterprise and Hercules,
respectively, shall be unable to agree (within 15 days after the
appointment of the second arbitrator), upon the appointment of a third
arbitrator, they shall given written notice of such failure to agree to the
parties; and, if the parties fail to agree upon the selection of such third
arbitrator within 15 days after the arbitrators appointed by Enterprise and
Hercules give notice as aforesaid, then within 12 days thereafter either
Enterprise or Hercules upon written notice to the other may request such
appointment by the then President of the Natural Gas Producers Association
(or any organized successor thereto), or in his absence, refusal, failure
or inability to act, apply for such appointment to the President of the
American Arbitration Association or its successors.
C. A determination shall be made by the majority of the arbitrators,
and shall be made in accordance with the rules then obtaining of the American
Arbitration Association or its successors. The decision of the arbitrators shall
be conclusive upon Enterprise and Hercules and such decision may be entered in
any court having jurisdiction thereof. The expenses of arbitration shall be
borne equally by Enterprise and Hercules.
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SECTION 11.2 TERMINATION
A. This Agreement may be cancelled and terminated at any time upon
mutual written agreement by Enterprise and Hercules, or upon 30 days' written
notice, by election of termination (i) by either Enterprise or Hercules pursuant
to Section 10.2; (ii) by either Enterprise or Hercules, as the case may be, if
the other, its successors and assigns, has assigned this Agreement, and/or any
interest therein, without compliance with the requirements of, Section 12.11; or
(iii) by Enterprise upon the failure of Hercules to exercise its option under
Section 11.1.
B. This Agreement shall terminate ipso facto upon the happening of
either of the following circumstances:
(1) The entry of a decree or order by a court having jurisdiction in
the premises adjudging either Enterprise or Hercules a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of either of said
companies under the Federal Bankruptcy Act or any other applicable
Federal or state law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator or other similar official of either of said
companies or of any substantial part of their property, or ordering the
winding up or liquidation of their affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days; or
(2) The institution by either Enterprise or Hercules of proceedings
to be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under the Federal Bankruptcy Act or any other applicable
Federal or state law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator or other similar official of said company or of
any substantial part of its property, or
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the making by it of an assignment for the benefit of creditors, or the
admission by in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by said company in
furtherance of any such action;
provided, however, that if upon application for an arrangement under Chapter XI
of the Federal Bankruptcy Act (or any other similar, applicable Federal or state
law) either Enterprise or Hercules, as the case may be, continues pursuant to a
lawful court order to operate its business as a debtor is in possession, this
Agreement shall not terminate for such period as said debtor-in-possession
and control of its assets and properties and is discharging all of its
obligations under this Agreement with respect to the sale, purchase and
delivery of Polymer Grade Propylene.
SECTION 11.3 CERTAIN RIGHTS OF HERCULES UPON TERMINATION
A. Upon cancellation or termination of this Agreement under the
following circumstances:
(1) Election of termination by Hercules pursuant to Section 10.2 or
paragraph 11-2A; or
(2) Certain events of bankruptcy, insolvency or
reorganization involving Enterprise, as provided in paragraph 11.2B;
then and in every such case Hercules shall have again, repossess and enjoy
its former estates and may enter on the premises and take immediate possession
of the Plant and/or the Pipeline Systems to the exclusion of Enterprise,
anything at law or in equity and/or herein contained to the contrary
notwithstanding. In such event Hercules shall be entitled to receive, and
Enterprise shall forthwith:
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(1) lease to Hercules all of Enterprise's interests in and to all of the
real property, together with all buildings and other improvements thereon, owned
or leased by Enterprise and used in connection with the Plant;
(2) lease or, at Hercules' option, sell to Hercules all of Enterprise's
interests in and to all machinery, equipment, furniture, fixtures and similar
personal property owned or leased by Enterprise and used in connection with the
Plant;
(3) convey, transfer, assign and deliver to Hercules, without further
consideration of any kind or amount, all assets, properties and description,
real, personal and mixed, and wherever located, tangible and intangible, owned
or leased by Enterprise and used in connection with the Plant other than the
types covered by clauses (1) and (2) next above, including all of Enterprise's
rights, title, interest, privileges and benefits of Enterprise in and under all
permits, consents, approvals, licenses, certificates and other authorizations
covering the production, sale and transportation of Polymer Grade Propylene and
allied products, and all contracts (including, without limitation, contracts for
the purchase of materials, supplies, services or equipment), leases, licenses
and other agreements directed to the conduct of operations at the Plant and/or
the Pipeline Systems, but expressly excepting cash and accounts receivables,
inventories of raw materials, work in progress, finished product and goodwill;
(4) lease to Hercules all of Enterprise's interests in and to all of the
real property, together with all buildings and improvements thereon, owned or
leased by Enterprise and used in connection with the Pipeline Systems;
(5) lease, or at Hercules' option, sell to Hercules all assets, properties
and rights of every type and description, real, personal and mixed, and wherever
located, tangible and intangible, owned or leased by Enterprise and used in
connection with the Pipeline Systems, including all of Enterprise's right,
title and interest in and to all leasehold estates, easements, rights-of-way and
contracts, licenses and other agreements, but expressly excepting cash and
accounts
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receivables, inventories of raw materials, work in progress, finished product
and goodwill.
B. The foregoing leases and/or sales, and all instruments of
conveyance, transfer and/or assignments necessary to effect and evidence the
lease and sales shall be in such form as will permit Hercules thereunder to
operate, maintain and repair the Plant and/or Pipeline Systems in a usual and
customary manner. The term of all leases shall be for periods of not less than
the unexpired term (including renewals) of this Agreement, and the annual rental
under each shall not exceed, in the case of a lease of the Plant, 4 cents per
gallon for 50% of all Polymer Grade Propylene produced at the Plant; and, in the
case of a lease of the Pipeline Systems, the actual lease cost plus 1 cent per
gallon for all Polymer Grade Propylene transported through the Pipeline Systems.
C. The purchase price for assets, properties and rights purchased under
this Section shall be the fair market value thereof.
D. Contemporaneously with and upon its execution of the lease pursuant
to clause (1) of paragraph 11.3A, Enterprise without further consideration
and at its own cost and expense shall:
(1) grant to Hercules all requisite rights in land, easements and
rights-of-way in, on, under, over, along, across and through such
portions of properties owned or otherwise possessed and/or occupied by
Enterprise (collectively, "Enterprise's Remaining Lands"), with full
right of ingress and egress, for the purpose of operating, maintaining
and repairing the Plant and/or Pipeline Systems (including rights in
land, easements and rights-of-way (i) for pedestrian and vehicular
traffic to use all present and future walks, railroads, roads and
driveways upon Enterprise's
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Remaining Lands in order to provide Hercules with all necessary or convenient
ingress and egress between the Plant and railroads, public roads and highways;
(ii) for the passage of pedestrians, vehicles and pipelines through any part of
Enterprise's Remaining Lands necessary or convenient for Hercules, its
successors and assigns, in order to assure the passage of finished goods, raw
materials and items in the process of manufacture from one portion of the Plant
and/or Pipeline Systems to another, it being intended that Hercules, its
successors and assigns, shall have such rights and easements as are necessary
for the movement of goods, personnel and vehicles through the various parcels of
land comprising Enterprise's Remaining Lands in order to permit and facilitate
the operation, maintenance and repair of the Plant and/or Pipeline Systems; and
(iii) for the construction, maintenance, renewal, replacement and use on, over
and under any part of Enterprise's Remaining Lands, such pipes, conduits and
wires as are necessary or convenient to ensure access to and an adequate system
for or supply of sewage and waste disposal, steam, compressed air, inert gas,
process and space heat, communications, instrumentation and control systems,
water, gas, electricity and other similar facilities to the Plant and/or
Pipeline Systems (including the right to make connections with pipes, conduits
and wires on Enterprise's Remaining Lands), all on a permanent, non-exclusive
and non-transferable basis and in form and substance reasonably acceptable to
Hercules;
(2) enter into an agreement with Hercules whereby Enterprise agrees for the
duration of the aforesaid leases (including any extensions, renewals or
successors uses thereto) to operate all necessary common facilities in a manner
to provide Hercules with the utilities and services required for the operation,
maintenance and repair of the Plant and/or Pipeline Systems, all at a cost to
Hercules which is reasonable and consistent with the cost thereof from other
available sources; and
(3) if requested to do so by Hercules, use its best efforts to assist
Hercules in procuring from the appropriate state, municipal and other
authorities and corporations, connection arrangements for an adequate supply of
water, gas, electricity, telephone and other utilities and for adequate
highways, railroads, effluent disposal and sewage disposal for the operation of
the Plant and/or Pipeline Systems.
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X. Xxxx time to time, at Hercules' request (whether at or after the
consummation of the leases, conveyances and easements and licenses provided for
in this Section), Enterprise, without further consideration and at its own cost
and expense, shall execute and deliver to Hercules such instruments and take
such other action as Hercules may reasonably request to perfect any lease,
conveyance, easement or license provided for under this Section.
F. If this Agreement is terminated upon the occurrence of any of the
events of bankruptcy, insolvency or reorganization involving Enterprise
specified in paragraph 11.1B, Enterprise's trustee in bankruptcy or other legal
representative shall execute such documents, in form satisfactory to Hercules,
as may be necessary to effect and evidence the leases, conveyances, easements
and licenses provided for in this Section 11.3. If such trustee or legal
representative fails or refuses to execute such documents, Hercules is hereby
irrevocably authorized to execute them in the name of, and on behalf of
Enterprise, as the attorney-in-fact for Enterprise.
SECTION 11.4 CERTAIN RIGHTS OF ENTERPRISE UPON TERMINATION
A. Upon cancellation or termination of this Agreement under the
following circumstances:
(1) Election of termination by Enterprise pursuant to Section 10.2
or paragraph 11.2A; or
(2) Certain events of bankruptcy, insolvency or reorganization
involving Hercules, as provided in paragraph 11.2B;
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then and in every such case Enterprise shall have a right to purchase from
Hercules, the ownership interests of Hercules in the Plant and/or Pipeline
Systems.
B. The purchase price for assets, properties, rights and business
purchased under this Section shall be the fair market value thereof.
SECTION 11.5 DETERMINATION OF FAIR MARKET VALUE
If Enterprise and Hercules cannot agree on the price and terms of sale
for any interest, or part thereof, to be sold and purchased under Sections 11.3
and 11.4, then Enterprise and Hercules shall promptly appoint one experienced
and qualified appraiser to determine such "fair market value" and they shall
simultaneously report to each Enterprise and Hercules within 30 days of their
appointment of their appraisal as to the "fair market value" of the interest or
part thereof. Such "fair market value" shall be as of the date of the offer to
buy said interest or part thereof. In case the two appraisers cannot agree as to
the "fair market value" then the two appraisers shall within 15 days thereafter
appoint a third appraiser and the third appraiser shall within 30 days after his
appointment report to each Hercules and Enterprise his determination of "fair
market value". The "fair market value" as determined by the appraisers or
appraiser, as the case may be, shall in no event be less than twice the book
value of the assets, properties and/or rights to be conveyed as reflected on the
books of the selling party. In the case of the Plant and the Pipeline Systems,
the book value of each shall be computed by depreciating the properties on
straight line depreciation over a period of 11 years. The "fair market value"
determined by the two appraisers, or if they cannot agree on the "fair
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market value", then the "fair market value" determined by the single appraiser
appointed by them, as the case may be, shall be a final and binding "fair market
value" upon Hercules and Enterprise and judgment upon the "fair market value"
determined by the appraisers or appraiser may be entered in any court having
jurisdiction thereof.
SECTION 11.6 FURTHER ASSISTANCE
From time to time, at the other party's request (whether at or after the
consummation of the sale), the selling party, without further consideration and
at its own cost and expense, shall execute and deliver to the purchasing party
such instruments and take such other actions as such other party may reasonably
request to perfect the sale of any interests sold and purchased under Sections
11.3 and 11.4, subject to and upon payment by the purchasing party of the
consideration provided for in its offer.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 PATENT INDEMNIFICATION
It is expressly understood and agreed that the indemnities contained in
Section 8.5 include the obligation of Enterprise to indemnify, protect and save
harmless Hercules and its successors, assigns, officers, directors, employees
and agents from and against all claims, liabilities and losses arising from
infringement or alleged infringement of any right of a third party by the
practice of any process and/or the use of any equipment, machinery or other
facilities in the Plant and/or Pipeline
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Systems or by the sale of any product produced at the Plant.
SECTION 12.2 WAIVER OF STATUTORY RIGHTS
Enterprise hereby waives any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender the lease of any interests leased
hereunder, except in accordance with the express terms hereof.
SECTION 12.3 FORCE MAJEURE
In the event either Hercules or Enterprise is rendered unable, wholly or
in part, by force majeure to perform or observe the terms, provisions and
conditions of this Agreement, other than to make payment of monies due
hereunder, then, upon such party giving notice and full particulars of such
force majeure in writing or by telegraph to the other party, the obligations of
the party giving such notice to perform or observe the terms, provisions and
conditions, as far as they are affected by such force majeure, shall be
suspended during the continuance of an inability so caused, but no longer
period, and such cause shall, as far as reasonably possible, be remedied with
all reasonable dispatch. Neither party shall be liable to the other for loss or
damages by reason of any act, omission or circumstance occasioned by or in
consequence of force majeure, as defined herein; and such act, omission or
circumstance shall not constitute or be deemed to be a breach of or default
under this Agreement.
The term "force majeure" as used herein means: fires, floods,
earthquakes and other acts of God; strikes, lockouts or other labor
disturbances; explosions, accidents or destruction or damage to facilities used
to perform under this Agreement; breakage of machinery or equipment or
pipelines; civil commotions, riots, sabotage, wars, blockades or acts of public
enemy; acts, restraints, requisitions, regulations or directions of any
governmental authorities; shortages of labor, fuel, power or raw materials;
inability to obtain
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supplies from normal sources of supplies; inability to obtain or delays of
transportation facilities; and other causes, whether similar or dissimilar to
the kind enumerated, not within the reasonable control of the party claiming
force majeure and which by the exercise of reasonable diligence such party is
unable to prevent or overcome.
It is understood and agreed that the term "force majeure" also includes
the voluntary or mandatory compliance with any request of the United States
Government, or any office, department, agency or commission thereof for purposes
of national defense as well as the voluntary or mandatory compliance with any
request for materials represented to be for purposes of producing articles for
national defense or completing national defense facilities.
It is further understood and agreed that the settlement of any and all
labor disputes shall be entirely within the discretion of the party having the
difffculty, and that the requirement that any force majeure, shall be remedied
with all reasonable dispatch shall not require the settlement of strikes or
lockouts by acceding to the demands of the opposing party when such course is
inadvisable in the discretion of the party having the difficulty.
SECTION 12.4 DENIAL OF PARTNERSHIP
This Agreement does not and shall not be construed to create or
constitute a partnership, association or joint venture of any kind. The
obligations of the parties hereto shall be several, and not joint or collective,
each party to be responsible only for the obligations assumed herein by it.
Nothing contained herein shall be deemed to impose upon any other party any
responsibility for the obligations assumed by any other party.
SECTION 12.5 INDEPENDENT CONTRACTOR
Enterprise shall construct, operate and maintain the Plant and Pipeline
Systems at its sole risk
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and account and shall assume full responsibilitv therefor. Nothing in this
Agreement shall be deemed to constitute Enterprise, its affiliates or
contractors, or the agents or employees of any of them, as the agent,
representative or employee of Hercules. Neither Enterprise, its affiliates or
contractors, nor its agents or employees or any of them, shall have or exercise
the right to bind Hercules to any contractual obligation or undertaking.
Enterprise shall be an independent contractor and shall use its own discretion
and shall have complete control over the construction, operation and maintenance
of the Plant and Pipeline Systems and as to the details of performing such work.
SECTION 12.6 ECONOMIC HARDSHIP
In the event that governmental or other conditions change the economic
relationship of the parties to the gross disadvantage of one of the parties in a
manner for which no adequate relief is provided in this Agreement, the party
believing it is so disadvantaged may, upon 90 days' notice to the other, convene
a meeting to discuss an equitable resolution of the alleged hardship. If such
meeting does not lead to a resolution, the existing commitment shall remain in
effect without legal recourse under this Section on the part of either party.
SECTION 12.7 NO REMEDY EXCLUSIVE
No remedy herein conferred upon or reserved to Hercules or Enterprise
under this Agreement is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle Hercules or Enterprise to exercise any remedy reserved to it in this
Agreement, it shall
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not be necessary to give any notice, other than such notice as may be herein
expressly required.
SECTION 12.8 GRANTING OF EASEMENTS
If no Event of Default shall have happened and be continuing, Enterprise
may at any time or times grant easements, licenses, rights-of-way (including the
dedication of public highways) and other rights or privileges in the nature of
easements with respect to any property included in the Plant and/or Pipeline
Systems, or Enterprise may release existing easements, licenses, rights-of-way
and other rights or privileges. If said grant or release is approved by
Hercules, it may be extended without consideration. Hercules shall execute and
deliver any instrument necessary or appropriate to confirm and grant or release
any such easement, license, right-of-way or other right or privilege upon
receipt of:
(1) A copy of the instrument of grant or release;
(2) A written application signed by Enterprise requesting such
instrument; and
(3) A certificate executed by Enterprise stating:
(a) That such grant or release is not detrimental to the proper
conduct of the business of Enterprise; and
(b) That such grant or release will not impair the effective use
or interfere with the operation of the Plant and/or Pipeline Systems.
Any and all consideration received in respect of such easements, licenses,
rights-of-way and other rights or privileges shall be shared equally by
Enterprise and Hercules.
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SECTION 12.9 HERCULES' RIGHT TO PERFORM FOR ENTERPRISE
If Enterprise shall at any time fail to make a payment or perform any
other act on its part to be made or performed under this Agreement, Hercules
may, but shall not be obligated to, and without notice or demand and without
waiving or releasing Enterprise from any obligation of Enterprise under this
Agreement, make such payment or perform such other act to the extent Hercules
may deem desirable. All sums so paid by Hercules and all expenses in connection
therewith, together with interest on such amount at the rate, per annum,
specified in paragraph 2.5E, shall be payable to Hercules on demand.
SECTION 12.10 NOTICES
All notices, demands, requests, consents or other communications
provided for or permitted to be given pursuant to this Agreement shall be in
writing and shall be deemed to have been given or made if signed by a proper
officer designated for such purposes and delivered personally to the party to be
notified, or if mailed to such party at the address set forth below, postage
prepaid, and registered or certified with return receipt requested:
If to Enterprise:
Enterprise Petrochemical Company
0000 Xxxxx Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention:
If to Hercules:
Hercules Incorporated
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Director, Plastic Resins
Business Center
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or, in each case, at such other address as shall have been designated most
recently in writing by such party to the party so delivering or mailing. Notices
given or served pursuant to this Section shall be effective upon receipt by the
party to be notified. Each party may from time to time change its address by
written notice to the other party.
SECTION 12.11 ASSIGNMENT OR TRANSFER OF INTEREST IN THE
PLANT AND PIPELINE SYSTEMS
Neither Enterprise nor Hercules may sell, assign, transfer, encumber,
pledge, hypothecate, lease or otherwise dispose of any interest in and to the
Plant and/or Pipeline Systems without the consent of the other, except as
provided below.
The total interest of either party hereto in and to the Plant and/or
Pipeline Systems may be sold, assigned and transferred to a third party
purchaser after the selling party has notified the other party hereto in writing
of the identity of the proposed purchaser and the price and other terms and
conditions of the sale and given said other party the first preferential right
to buy such interest in and to the Plant and/or Pipeline Systems, as the case
may be, at the same price, terms and conditions the offeror is willing to
accept from such third party purchaser. Said other party shall have 30 days in
which to elect to purchase such interest upon the same terms and conditions and
90 days thereafter in which to consummate such purchase. If the offeree party
does not elect to purchase, or fails to consummate the purchase if it does elect
to so purchase, then the offeror party may then sell such interest to the third
party purchaser on the basis offered. The failure of the offeree party to accept
or reject such offer within the 30 day period shall be considered a rejection of
such offer. If the offeror party does not consummate the sale of such interest
to such purchaser upon the terms set forth within 90 days after the offeree
party either rejected the offer or accepted and failed to consummate such
purchase within 90 days thereafter, such interest in and to the Plant and/or
Pipeline Systems, as the case may
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be, will thereafter continue to be subject to all the restrictions contained in
this Section.
Notwithstanding the provisions of the preceding paragraph, no sale,
assignment or transfer of interest pursuant thereto shall be effective unless
the purchaser, transferee or assignee in writing irrevocably and unconditionally
assumes the due and punctual performance of the obligations of the transferor
and shall agree in writing to be bound by and perform this Agreement and all
other agreements made pursuant hereto and the undertaking provided in this
paragraph shall be accepted by each successive purchaser, transferee or
assignee.
Enterprise and Hercules each agrees that it will at all times maintain
its corporate existence; provided, however, that it may consolidate with or
merge into another corporation or sell or otherwise transfer to another
corporation all or substantially all of its assets (or, in the case of
Hercules,all or substantially all of the assets of Hercules dedicated to
the manufacture and sale of polypropylene resins) as an entirety and may
transfer at any time its total ownership interest in the Plant and Pipeline
Systems to any corporation shall succeed to the business of such party
by merger, consolidation, reorganization or transfer of all or substantially
all of its assets as an entirety if the resulting, surviving or transferee
corporation, as the case may be, irrevocably and unconditionally assumes the due
and punctual performance of the obligations of the transferor corporation under
this Agreement, and all other agreements made pursuant hereto.
The above restrictions on assignment and transfer of interest in the
Plant and Pipeline Systems shall not apply in a case in which all of the issued
and outstanding capital stock of Enterprise is sold, or substantially all of the
assets of Enterprise as an entirety are transferred to any corporation, as part
of the sale or transfer of all the issued and outstanding capital stock of
Enterprise Products Company, or the sale of all or substantially all of the
assets of Enterprise Products Company; provided, however, no sale, assignment or
transfer of interest pursuant
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thereto shall be effective unless the purchaser, transferee or assignee in
writing irrevocably and unconditionally assumes the due and punctual performance
of the obligations of Enterprise hereunder and shall agree in writing to be
bound by and perform this Agreement and all other agreements made pursuant
hereto and the undertaking provided in this paragraph shall be accepted by each
successive purchaser, transferee or assignee.
SECTION 12.12 BINDING EFFECT; ASSIGNMENT
Subject to the restrictions on transfers and encumbrances as provided
herein, this Agreement shall be binding upon and inure to the benefit of the
undersigned parties and their respective successors and assigns.
Neither Enterprise nor Hercules, without the prior written consent of
the other, may assign its rights hereunder or any interest herein, or delegate
its duties or obligations hereunder, except as provided herein. Any attempt to
so transfer or assign shall be void.
Whenever in this Agreement a reference to Hercules or Enterprise is
made, such reference shall be deemed to include a reference to the successors
and assigns of such entity.
SECTION 12.13 SEVERABILITY
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction, shall be, as to such jurisdiction, ineffective to the extent
of such prohibition or unenforceability without affecting, impairing or
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not affect, impair or invalidate or
render unenforceable such provision in any other jurisdiction.
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SECTION 12.14 WAIVER
No consent or waiver, express or implied, by any party to or of any
breach or default by the other party in the performance of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any
other breach or default in the performance by such other party of the same or
any other obligation of such party hereunder. Failure on the part of any party
to complain of any act or failure to act of the other party or to declare the
other party in default irrespective of how long such failure continues, shall
not constitute a waiver by such party of its right hereunder.
SECTION 12.15 ASSISTANCE
At the Closing and at any time or from time to time thereafter, the
parties each agree at the request of the other to execute, acknowledge and
deliver, or cause to be executed, acknowledged or delivered, such further
instruments of conveyance, sale transfer and assignment, and take such other
action as the other may request to effectuate the purposes of this Agreement
and/or the conveyances and transfers provided herein.
SECTION 12.16 EXPENSES
Each party shall pay all expenses incurred by it in connection with the
authorization, preparation, execution and performance of this Agreement
including, but not limited to, all fees and expenses of agents, representatives,
counsel, engineers and accountants employed by it.
SECTION 12.17 AMENDMENTS, CHANGES AND MODIFICATIONS
The provisions of this Agreement, or of the Exhibits attached hereto,
may not be effectively amended, changed, modified or altered except by
instrument signed by duly authorized signatories for Enterprise and Hercules.
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SECTION 12.18 CAPTIONS
The captions or headings in this Agreement are inserted for convenience
only and in no way define, limit or describe the scope or intent of any
provision of this Agreement.
SECTION 12.19 INCORPORATION OF EXHIBITS
Exhibits X, X, X, X, X, X, X, X, X, X, and K referred to herein, as the
same may be amended from time to time to incorporate such changes and
modifications therein as Enterprise and Hercules mutually determine and agree to
in writing, are by this reference incorporated herein for all purposes.
SECTION 12.20 GOVERNING LAW
The terms of this Agreement and all rights and obligations hereunder
shall be governed by, construed and enforced in accordance with the laws of the
State of Texas.
IN WITNESS WHEREOF, the parties have caused the due execution of this
Agreement in duplicate on the day and year first above written.
ENTERPRISE PETROCHEMICAL COMPANY
By: /s/ XXXX X. XXXXXXX
---------------------------------------
Title: Senior Vice President
HERCULES INCORPORATED
By: /s/ X.X. XXXXXX
---------------------------------------
Title: Director, Plastic Resins
Worldwide Business Center
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In consideration of, and in order to induce, Hercules Incorporated to
execute the foregoing agreement and the Propylene Sales Agreement entered into
concurrently with the said foregoing agreement (collectively, the "Agreements"),
the undersigned, Enterprise Products Company, a Texas corporation ("Enterprise
Products"), hereby joins in the foregoing agreement and by its joinder does
hereby:
(1) confirm the representations and warranties contained in
Section 6.1(3), (4), and (5) of the Propylene Facility and Pipeline
Agreement; and
(2) guarantee to Hercules Incorporated the due and punctual
observation and performance by its subsidiary, Enterprise Petrochemical
Company ("Enterprise Petrochemical"), of duties and obligations of
Enterprise Petrochemical arising under the Agreements and the due and
punctual compliance by Enterprise Petrochemical with the terms, conditions
and provisions of said Agreements in all respects.
This is a primary liability and Hercules Incorporated shall not be
obligated to take any step or action against Enterprise Petrochemical as a
condition precedent to the operation or enforcement of Enterprise Products'
obligations under this guarantee.
This guarantee shall remain in force only so long as the Agreements
remain in full force and effect; provided, however,
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that in any event this guarantee shall cover all claims arising from valid acts
taken during the term of the Agreements and in this respect, the guarantee shall
survive the termination of the Agreements.
IN WITNESS WHEREOF, Enterprise Products Company has caused the due
execution of this guarantee in duplicate on the day and year first above
written.
ENTERPRISE PRODUCTS COMPANY
By /s/ XXX X. XXXXXX
----------------------------------
Title: President
THE STATE OF DELAWARE )
)
COUNTY OF NEW CASTLE )
BEFORE ME, the undersigned authority, on this day personally appeared
Xxxx X. Xxxxxxx, Senior Vice President of ENTERPRISE PETROCHEMICAL
COMPANY, a Texas corporation, known to me to be the person
whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes
therein expressed, as the act and deed of said corporation,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 13th day of
December, 1978.
[Signature appears here]
----------------------------------------
Notary Public in and for New
Castle County, Delaware
THE STATE OF DELAWARE )
)
COUNTY OF NEW CASTLE )
BEFORE ME, the undersigned authority, on this day personally appeared
X. X. Xxxxxx, Director, Plastic Resins Business Center of HERCULES INCORPORATED,
a Delaware corporation, known to me to be the person whose name is subscribed to
the foregoing instrument, and acknowledged to me that he executed the same for
the purposes therein expressed, as the act and deed of said corporation, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 13th day of
December, 1978.
[Signature appears here]
--------------------------------------
Notary Public in and for New
Castle County, Delaware
THE STATE OF DELAWARE )
)
COUNTY OF NEW CASTLE )
BEFORE ME, the undersigned authority, on this day personally appeared
Xxx X. Xxxxxx, President of ENTERPRISE PRODUCTS COMPANY, a Texas corporation,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
therein expressed, as the act and deed of said corporation, and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 13th day of
December, 1978.
[Signature appears here]
--------------------------------------
Notary Public in and for New
Castle County, Delaware
