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EXHIBIT 10.25
[KUB LOGO]
July 26, 1996
Mr. Xxxxxxx Xxxxxxx
Virginia Gas Storage Company
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxxxx:
Please find enclosed one fully executed original of the Firm Gas Storage
Agreement between Knoxville Utilities Board and Virginia Gas Pipeline Company
dated July 10, 1996.
Sincerely,
/s/ XXXXX XXXXX
Xxxxx Xxxxx
Energy Supply Analyst
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FIRM GAS STORAGE AGREEMENT
BY AND BETWEEN
KNOXVILLE UTILITIES BOARD
AND
VIRGINIA GAS PIPELINE COMPANY
Dated: July 10, 1996
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TABLE OF CONTENTS
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ARTICLE HEADING PAGE
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I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II Precedent Events and Regulatory Approvals . . . . . . . . . . . . . . . . . . 3
III Quantity of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
IV Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
V Delivery Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
VI Conditions of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
VII Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
VIII Billing and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
IX Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
X Title, Indemnity, and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 12
XI Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
XII Operational Flow Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
XIII Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
XIV Regulatory Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
XV Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
XVI Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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GAS STORAGE AGREEMENT
THIS GAS STORAGE AGREEMENT, made and entered into as of this 10 day of
July, 1996, by and between VIRGINIA GAS PIPELINE COMPANY, a Virginia
Corporation, hereinafter referred to as "VGPC," and KNOXVILLE UTILITIES BOARD,
an agency of the City of Knoxville, Tennessee, hereinafter referred to as
"KUB."
WITNESSETH THAT:
WHEREAS, VGPC has undertaken to provide a firm storage service from its
Saltville, Virginia property and desires to provide that service to KUB;
WHEREAS, KUB has requested storage service from said property on a FIRM
basis, in order to facilitate its service to its customers, who are primarily
residential and small commercial gas consumers for whom security of supply is
of the highest priority; and
WHEREAS, VGPC and KUB desire to enter into an agreement providing for
such gas storage service on a firm basis, upon the terms and conditions set
forth herein;
NOW, THEREFORE, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless expressly stated otherwise, the following terms as used in this
Agreement shall mean:
1.1 The term "Btu" shall mean British Thermal Unit(s) which shall
mean that amount of heat energy required to raise the temperature of one
avoirdupois pound of water from fifty-nine degrees Fahrenheit (59 degree F) to
sixty-degrees Fahrenheit (60 degree F) at standard atmospheric pressure, as
determined on a dry basis. All prices and charges paid hereunder shall be
computed on a "dry" Btu basis.
1.2 The term "calendar year" shall mean a twelve month period from
January 1 through December 31.
1.3 The term "Contract Year" shall mean the period from November 1 of
a calendar year through October 31 of the following calendar year.
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1.4 The term "day" shall mean the period of time beginning at 8:00
a.m., Central Time Zone, on a calendar day and ending at 8:00 a.m., Central
Time Zone, on the following calendar day, or such other definition of "day", as
may change from time to time, set forth in the tariff of East Tennessee Natural
Gas Company ("East Tennessee") on file with the Federal Energy Regulatory
Commission ("FERC") or any successor agency ("East Tennessee Tariff").
1.5 The term "gas" shall include casinghead gas, natural gas from gas
xxxxx, coal bed methane gas, and residue gas resulting from processing
casinghead gas and gas well gas.
1.6 The term "MMBtu" shall mean one million (1,000,000) Btus, and may
be used interchangeably with the terms "Dekatherm" or "Dth".
1.7 The term "month" shall mean the period of time beginning at 8:00
a.m., Central Time Zone, on the first calendar day of each calendar month and
ending at 8:00 a.m., Central Time Zone, on the first day of the following
calendar month, or such other definition of "month", as may change from time to
time, set forth in the East Tennessee Tariff.
1.8 The term "Partial Contract Year" shall mean the period of less
than one year from the Effective Date, if it does not fall on November 1 of a
calendar year, through October 31 of the same or the following calendar year,
as applicable.
1.9 Unless otherwise specified in this Agreement, the term "Party"
shall refer only to KUB or VGPC, and the term "Parties" shall refer to KUB and
VGPC.
1.10 The terms "Storage Inventory" and "KUB's Storage Inventory" shall
mean the volumes of gas being stored by VGPC for the account of KUB at any
particular time pursuant to the provisions of this Agreement, and shall equal
the cumulative volumes of gas that KUB has caused to be delivered to VGPC for
injection into storage, less the cumulative volumes of gas withdrawn from
storage and redelivered by VGPC for ultimate redelivery to KUB (or deemed to be
withdrawn pursuant to Section 6.2.2 hereof), as adjusted upward or downward for
any net volumes VGPC may from time to time allow KUB to exchange with other
customers of VGPC storing gas at Saltville.
1.11 The term "year" shall mean a period of twelve (12) consecutive
months.
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ARTICLE II
PRECEDENT EVENTS AND REGULATORY APPROVALS
2.1 Precedent Events - The commencement of the firm storage service
described herein, and all related payments therefor, are predicated upon VGPC
obtaining any necessary Federal Energy Regulatory Commission ("FERC")
authorizations to provide such storage service. VGPC covenants and agrees that
it will promptly take, at its sole expense, such actions as are reasonably
necessary to obtain such authorizations, including making any filings necessary
with the State Corporation Commission of Virginia and FERC, and promptly notify
KUB as of the date all such authorizations are in place. KUB covenants and
agrees that it will not oppose any such filing made by VGPC, provided, however,
that KUB retains all its rights to take any position it deems appropriate on
any VGPC filing subsequent to the initial authorizations hereunder. If (a)
VGPC cannot obtain all necessary authorizations by October 31, 1997, or (b) any
necessary authorization is issued in a manner that is materially adverse to
either Party (including, but not limited to, in a manner that would require a
material change in the rates or terms and conditions of this Agreement), then
either Party may, within sixty (60) days of October 31, 1997 or such issuance,
whichever is applicable, provide the other with thirty (30) days prior written
notice of its intent to terminate this Agreement, and, following such notice,
this Agreement will be of no further force and effect, unless all necessary
authorizations are issued in a form satisfactory to both Parties during said
thirty-day notice period. Upon termination pursuant to this section, should KUB
have any gas already in or remaining in storage, VGPC agrees to purchase KUB's
Storage Inventory for an amount calculated pursuant to Section 2.3 below. VGPC
will make such payment(s) to KUB within ten (10) days of receipt by VGPC of
KUB's invoice detailing the amounts due KUB.
2.2 Effective Date - The "Effective Date" of this Agreement shall be
the first day of the first month following receipt by KUB of notification from
VGPC pursuant to Section 2.1 above that VGPC has received all necessary
authorizations to provide the firm storage service contemplated hereunder.
2.3 Valuation of KUB's Storage Inventory - Upon the termination of
this Agreement pursuant to Section 2.1 above or another provision of this
Agreement, if KUB has any gas remaining in storage pursuant to this Agreement,
KUB's Storage Inventory shall be valued at an amount equal to the volume of
KUB's Storage Inventory, as adjusted upwards for transportation fuel on
Tennessee Gas Pipeline Company ("Tennessee") and East Tennessee, times the sum
of the then current month's Inside FERC Gas Market Report-Tennessee Zone 1
index price per MMBtu plus applicable interruptible transportation charges on
Tennessee and East Tennessee.
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2.4 Effect of Virginia Gas Tariff
(a) If, at any time subsequent to the execution of this Agreement,
tariff sheets filed by VGPC are approved by the Virginia State Corporation
Commission and/or FERC and become effective ("VGPC's Gas Tariff"), this
Agreement shall be deemed to be a Firm Storage Service Agreement executed under
VGPC's Rate Schedule FSS or other applicable rate schedule, to the extent
necessary to effectuate the terms and provisions of this Agreement; provided,
however, that it is understood and agreed that, to the extent any provision of
this Agreement conflicts with such Tariff, this Agreement shall be controlling
and shall take precedence over such Tariff. By executing this Agreement, the
Parties further agree that KUB shall be deemed to have satisfied any applicable
requirement(s) in VGPC's Gas Tariff for making a request for service and/or for
demonstrating its creditworthiness.
(b) If, notwithstanding Section 2.4(a) above, any court or regulatory
authority shall hold that VGPC's Gas Tariff takes precedence over this
Agreement or has the effect of altering the rights and obligations of the
Parties as set forth in this Agreement, and KUB believes in good faith that
such alteration or compliance with such Tariff would have a material adverse
effect on KUB, then KUB may in its sole discretion terminate this Agreement
upon ten (10) days prior written notice to VGPC, and, following such notice,
this Agreement will be of no further force and effect, provided, however, that
VGPC may, during such notice period, attempt to revise its Tariff to remove
KUB's objection, and KUB may, in its sole discretion, opt to proceed with the
termination, to delay it, or to rescind it. Upon termination pursuant to this
section, VGPC agrees to purchase KUB's Storage Inventory for an amount
calculated pursuant to Section 2.3 above. VGPC will make such payment to KUB
within ten (10) days of receipt by VGPC of KUB's invoice detailing the amounts
due KUB.
ARTICLE III
QUANTITY OF SERVICE
3.1 Elements of Service
3.1.1 VGPC's Obligations - Subject to the terms and conditions
of this Agreement, and following commencement of service hereunder, VGPC shall
receive for injection on a firm basis into VGPC's Saltville storage facility
("Saltville") for KUB's account a quantity of gas up to KUB's Maximum Daily
Injection Quantity ("MDIQ"), on any day; receive and hold in storage a total
quantity of gas up to KUB's Maximum Storage Quantity ("MSQ"); and on demand
withdraw from KUB's Storage Inventory on a firm basis and deliver to KUB on a
firm basis a quantity of gas up to KUB's Maximum Daily Withdrawal Quantity
("MDWQ"), on any day until KUB's Storage Inventory is depleted and reduced to
zero MMBtu.
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3.1.2 KUB's Reservations - KUB shall not at any time be under
any obligation to make any level of injections or withdrawals or to maintain
any level of Storage Inventory, and KUB shall have the sole discretion as to
what levels, if any, of injections, withdrawals, or Storage Inventory to make
or maintain, within the limits of its MDIQ, MDWQ, and MSQ, respectively.
3.2 Injections - KUB's MDIQ for each day shall be 2000 MMBtu per day
in the Contract Year or Partial Contract Year ending October 31, 1997, and 4500
MMBtu per day in each Contract Year thereafter. VGPC, at its sole discretion,
may allow KUB to make injections in excess of the MDIQ on a best efforts,
interruptible basis if such injections can be made without adverse effect upon
injections of other customers or to VGPC's operations.
3.3 Withdrawals - KUB's MDWQ for each day shall be 4000 MMBtu per day
in the Contract Year or Partial Contract Year ending October 31, 1997, and 9000
MMBtu per day in each Contract Year thereafter. VGPC, at its sole discretion,
may allow KUB to make withdrawals in excess of the MDWQ on a best efforts,
interruptible basis if such withdrawals can be made without adverse effect upon
withdrawals of other customers or to VGPC's operations and the amount of such
wit withdrawals will not exceed KUB's Storage Inventory.
3.4 Storage Capacity - KUB's MSQ shall be 40,000 MMBtu during the
Contract Year or Partial Contract Year ending October 31, 1997, and 90,000
MMBtu in each Contract Year thereafter.
ARTICLE IV
NOMINATIONS
4.1 Monthly Nomination - On or before two business days prior to East
Tennessee's nomination deadline for the next month, KUB will provide VGPC with
a nomination specifying the quantities of gas to be injected and/or withdrawn
under this Agreement for each day during the next month ("Daily Nominated
Quantity"). Such nomination may be in an amount from zero to the MDIQ and/or
MDWQ, as applicable. If KUB makes no nomination, its nomination will be deemed
to be zero.
4.2 Daily and Intraday Adjustments - Upon at least two (2) hours
advance notice to VGPC prior to East Tennessee's nomination deadline for the
next day, or, in the case of intraday adjustments, prior to the effective time
of the adjustment, KUB may adjust its Daily Nominated Quantity upward or
downward to any amount from zero to the MDIQ and/or MDWQ, as applicable.
4.3 Manner of Submitting Nominations - KUB may provide the
nominations or adjustments thereto set forth above in this section either
orally (including by
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telephone) or in writing (including by facsimile), but an oral nomination must
be followed by written confirmation within twenty-four (24) hours.
4.4 Appointment of Agent - At any time during the Term of this
Agreement, KUB may appoint an agent to exercise its rights under this
Agreement, including but not limited to making nominations pursuant to this
Article IV, and/or assign its rights under this Agreement to such agent so that
such agent may manage KUB's storage.
ARTICLE V
DELIVERY POINTS
5.1 Delivery Points - The Primary Delivery Point for all gas injected
and withdrawn hereunder shall be the interconnect between the Saltville storage
field and the East Tennessee system located in Xxxxx County, Virginia. VGPC
will take whatever steps may be necessary, at its own expense, to assure that
this point is a qualified receipt point on East Tennessee for purposes of
making intraday nominations. Upon reasonable notice to KUB and with its
consent, and subject to the availability of transportation to KUB, as
determined by KUB, and provided that VGPC shall bear any incremental expense,
VGPC may deliver gas under this Agreement at any other qualified receipt point
on the East Tennessee system ("Secondary Delivery Points"), provided that such
deliveries shall have the same firm priority status as deliveries to the
Primary Delivery Point. The Primary and Secondary Delivery Points shall be
referred to collectively herein as the Delivery Points.
ARTICLE VI
CONDITIONS OF SERVICE
6.1 Storage Charges - KUB will pay VGPC $0.05 per each MMBtu injected
to and $0.05 per each MMBtu withdrawn from Saltville by or for KUB. KUB will
also pay VGPC an annual storage charge ("Annual Storage Charge") which shall be
the product of the lesser of $5.64 and the maximum applicable rate under VGPC's
Gas Tariff, multiplied by the MSQ applicable to the Contract Year, which fee
shall be payable in twelve (12) equal monthly installments beginning in
November, 1996, or, if the Effective Date is later than November 1, 1996, on a
pro-rated basis beginning on the Effective Date such that the total Annual
Storage Charge for such Partial Contract Year shall be the product of the
lesser of $5.64 and the maximum applicable rate under VGPC's Gas Tariff,
multiplied by the MSQ applicable to such Contract Year times a ratio the
numerator of which shall be the number of months in such Partial Contract Year
and the denominator of which shall be 12. KUB may also begin to make injections
into Saltville prior to the Effective Date and at any time from and after
November 1, 1996, up to its MDIQ. KUB will pay VGPC $0.05 per each MMBtu thus
injected, and VGSC will store such gas volumes in full compliance
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with all applicable provisions of this Agreement. KUB will not be liable to
VGPC for any annual storage charge for any such period prior to the Effective
Date.
6.2 Failure to Perform
6.2.1 Injection - If VGPC fails to accept for injection on a
firm basis XXX's adjusted nominations up to the MDIQ on any day, for reasons
other than an event of Force Majeure, then VGPC shall reimburse or credit to
KUB the product of the volumes VGPC failed to inject times the then-effective
rate being charged by Tennessee for interruptible storage, including but not
limited to any charges for injections, withdrawals, and fuel and losses. In
addition, if VGPC has not cured the failure(s) to inject such that KUB does not
have an opportunity to inject on a timely basis its desired volumes, and, as a
result of the failure to inject, KUB's Storage Inventory is subsequently
depleted, then VGPC shall also reimburse or credit to KUB for the volumes VGPC
failed to inject the sum of (i) any reasonable incremental expenses incurred by
KUB in transporting substitute supplies to the interconnect between KUB's
facilities and the pipeline facilities of East Tennessee, (ii) the
differential, if positive, between the cost of the substitute supplies KUB
purchases as a result of the depletion and the value of the gas VGPC failed to
inject (as calculated pursuant to Section 2.3 of this Agreement), (iii) any
reasonable incidental expenses incurred in purchasing substitute supplies, (iv)
any penalties, including but not limited to those imposed by pipelines,
incurred by KUB as a result of VGPC's failure, and (v) a pro rata credit of the
Annual Storage Charge equal to $5.64 times the volumes VGPC failed to inject
divided by 365.
6.2.2 Withdrawal - If VGPC fails to withdraw and deliver to KUB
on a firm basis its adjusted nominations up to the MDWQ on any day, for reasons
other than an event of Force Majeure, then VGPC shall reimburse or credit to
KUB the sum of (i) the value of the gas VGPC failed to withdraw, as calculated
pursuant to Section 2.3 of this Agreement (and KUB's Storage Inventory shall be
reduced by such volumes as if they had been withdrawn), (ii) any reasonable
incremental expenses incurred by KUB in transporting substitute supplies to the
interconnect between KUB's facilities and the pipeline facilities of East
Tennessee, (iii) the differential, if positive, between the cost of the
substitute supplies KUB purchases as a result of the failure and the value of
the gas VGPC failed to withdraw (as calculated pursuant to Section 2.3 of this
Agreement), (iv) any reasonable incidental expenses incurred by KUB in
purchasing substitute supplies, (v) any penalties, including but not limited to
those imposed by pipelines, incurred by KUB as a result of VGPC's failure to
withdraw, and (vi) a pro rate credit of the Annual Storage Charge equal to
$5.64 times the volumes VGPC failed to withdraw divided by 365.
6.2.3 Termination - If VGPC's failure to perform under Sections
6.2.1 or 6.2.2 above on any day exceeds 25 percent of its obligation under the
applicable section (such that its performance falls short of 75 percent of its
obligation), then, in
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addition to the remedies prescribed in those sections, such day shall be
counted as a "Failure to Perform Day." If the total number of Failure to
Perform Days exceeds three (3) days in any Contract Year, then KUB shall have
the right, upon 15 days prior written notice, to terminate this Agreement.
6.2.4 Curtailment - If for any reason, including a Force
Majeure event, VGPC is unable to satisfy all of its obligations under this
Agreement, then VGPC agrees to provide to KUB at least a pro rata share (a) of
the total amount VGPC is able to inject into Saltville, based on the ratio of
KUB's firm injection rights to the total firm injection rights into Saltville;
(b) of the total amount VGPC is able to withdraw from Saltville, based on
the ratio of KUB's firm withdrawal rights to the total firm withdrawal rights
out of Saltville; and (c) of the total firm storage capacity available, based
on the ratio of KUB's firm right to storage capacity in Saltville to the total
firm rights to storage capacity in Saltville. At KUB's request, VGPC shall
provide KUB with information necessary to verify that KUB's injections,
withdrawals, and capacity were curtailed in accordance with this Section.
Compliance with this subsection shall not excuse VGPC from any of its other
obligations under this Section 6.2.
6.3 Quality and Pressure
(a) KUB shall insure that gas delivered to VGPC meets the
minimum quality specifications of the East Tennessee Tariff, as they may be
changed from time to time, and such gas shall be deemed to satisfy any
applicable quality specifications in VGPC's Tariff.
(b) VGPC shall insure that gas delivered to KUB at the
Delivery Points meets the minimum quality specifications of the East Tennessee
Tariff, as they may be changed from time to time, and is at a pressure
sufficient to effect delivery into East Tennessee's facilities at such points
against the pressure prevailing therein from time to time.
(c) If (i) the gas delivered to KUB at the Delivery Points
fails to meet the standards concerning quality or pressure set forth in Section
6.3(b) above, and (ii) East Tennessee fails to receive and transport the gas,
then VGPC shall be deemed to have failed to deliver the quantities nominated by
KUB, and shall be subject to the remedies set forth in Section 6.2.2 above.
VGPC shall indemnify and hold KUB harmless for any and all suits, actions,
damages, losses and expenses reasonably incurred by KUB as a result of any
quality deficiency in gas delivered or attempted to be delivered hereunder.
6.4 Measurement - The measurement of quantities for billing purposes,
in MMBtu, delivered to or received from VGPC shall be performed by East
Tennessee.
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ARTICLE VII
NOTICES
7.1 Notices - Notices hereunder shall be directed in writing or, if
initially made by telephone, promptly confirmed in writing, to the respective
Party at the applicable address, telephone number, or facsimile machine number
stated below, or such other addresses, telephone numbers, or facsimile numbers
as the Parties shall respectively hereafter designate in writing from time to
time:
Virginia Gas Pipeline Company
P.O. Box 0000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone Number: (000) 000-0000
Facsimile Machine Number: (000) 000-0000
Knoxville Utilities Board
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-6206
Attention: Xxxxxxx X. Xxxxx
Telephone Number: (000) 000-0000
Facsimile Machine Number: (000) 000-0000
ARTICLE VIII
BILLING AND PAYMENT
8.1 Billing - On or before the fifteenth (15th) day of each calendar
month, VGPC shall submit to KUB an invoice for services performed during the
preceding month.
8.2 Payment - KUB shall pay the amounts invoiced within the later of
the twenty-fifth (25th) day of each month in which said invoice is received by
KUB or ten (10) days of KUB's receipt of VGPC's invoice, unless such date falls
on a Saturday, Sunday, or holiday, in which case KUB shall pay the amounts
invoiced on the next business day. All payments by VGPC to KUB shall be
payable within ten days of receipt by VGPC of KUB's invoice detailing the
method used for calculating the amounts due KUB.
8.3 Late Payment - Should either Party fail to pay all of the amount
of any invoice as herein provided when such amount is due, the non-paying Party
shall pay a charge for late payment which shall be included on the next regular
monthly invoice rendered hereunder. Such charge for late payment shall accrue
interest at an annual rate equivalent to the then current Chase Manhattan Bank,
N.A. prime
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interest rate plus two percent (2%), but not to exceed the maximum rate
permitted by law, from the date when such payment was due until it is paid,
together with any court costs, reasonable attorneys' fees, and all other
reasonable costs of collection which the Party due payment may incur in
enforcing the terms of this Agreement.
8.4 Remedies and Good Faith Disputes - If such failure to pay
continues for thirty (30) days after payment is due, VGPC, in addition to any
other remedy it may have, may suspend further injections and/or withdrawals of
gas for KUB's account until such amount is paid; provided, however, that if
KUB, in good faith, disputes the amount of any such invoice or part thereof and
pays to VGPC such amounts as KUB concedes to be correct, and, at any time
thereafter within thirty (30) days of a demand made by VGPC, pays the disputed
amount to an independent third party escrow agent with provision for release of
any amounts ultimately found due upon such invoices after a final
determination, which may be reached either by agreement or arbitration, as the
case may be, then VGPC shall not be entitled to suspend further injections
and/or withdrawals of gas unless and until default be made in the conditions on
such escrow account or there is a subsequent default under the terms of this
Agreement. If the Parties are unable to resolve the dispute within sixty (60)
days of the due date of the invoice, then the matter will be submitted to
arbitration in accordance with Article XV.
8.5 Discrepancies - In the event any overcharge or undercharge in any
form whatsoever shall be found within twenty four (24) months from the date a
billing discrepancy occurs, the appropriate Party shall refund the amount of
overcharge or pay the amount of undercharge within thirty (30) days after the
final determination of the amount overcharged or undercharged has been made.
Any overcharge or undercharge found after such twenty four (24) months shall be
deemed waived by both Parties.
8.6 Books and Records - Both Parties hereto shall have the right, at
any and all reasonable times, to examine the books and records of the other
Party, the confidentiality of which they agree to maintain, to the extent
necessary to verify the accuracy of any statement, charge, computation or
demand made under or pursuant to this Agreement or any curtailment under
Section 6.2.4 hereof.
8.7 Source of Payment of Obligations of KUB - Although the
performance of KUB under this Agreement is not excused by a lack of such
revenue, any and all obligations of KUB under this Agreement may be satisfied
solely from the revenues of KUB's Division of Gas.
8.8 Winding-Up Arrangements - Upon the expiration of this Agreement
at the expiration of its term or any extension thereof pursuant to Section 9.1
below, any monies due and owing shall be paid pursuant to the terms hereof, and
KUB shall have the right to withdraw its Storage Inventory within 30 days,
notwithstanding its
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MDWQ. Upon the termination of this Agreement pursuant to any other provision
hereof, any monies due and owing shall be paid pursuant to the terms hereof,
and VGPC shall purchase KUB's Storage Inventory for an amount calculated
pursuant to Section 2.3 above. VGPC will make such payment to KUB within ten
(10) days of receipt of KUB's invoice detailing the amounts due KUB. The
Parties' rights and obligations under this Agreement shall remain in effect
solely for the purpose of complying with this section until the obligations
under this section, including withdrawal by KUB, payment by VGPC, or any
combination thereof, have been fulfilled.
8.9 Credit Standards for KUB - Upon request, KUB will provide to VGPC
copies of KUB's annual financial reports. Pursuant to Section 2.4(a) of this
Agreement, KUB shall be deemed to have satisfied any applicable requirement(s)
in VGPC's Gas Tariff for demonstrating its creditworthiness for service
hereunder. In the event of a default by KUB which continues uncured for thirty
(30) days after written notice to KUB, VGPC shall have the right to make a
written request to KUB for demonstration of its continued creditworthiness and
for KUB to provide VGPC with such security for the performance of KUB's
obligations under this Agreement as is reasonably satisfactory to VGPC (such
security for an amount not to exceed two times the average amount of all
monthly invoices delivered to KUB under this Agreement prior to the date of
VGPC's written request for security).
ARTICLE IX
TERM
9.1 Term - Subject to the provisions hereof, including but not
limited to the satisfaction of the conditions precedent set forth in Article II
above, this Agreement shall be in full force and effect for a primary term from
the date first written above through April 30, 2000 (the "Termination Date"),
and shall continue and remain in full force and effect for successive terms of
one (1) year each thereafter unless and until cancelled by KUB upon one year's
written notice to the other Party prior to the end of the primary term or any
yearly extension thereof, provided that any such cancellation shall take effect
at the end of a Contract Year.
9.2 Right of First Refusal - KUB shall have a right of first refusal
on an amount of storage services up to the quantities set forth in Article III
hereof (including injections, withdrawals, and storage capacity) for a period
of five years after the expiration of the primary term (the "Option Period").
If at any time during the Option Period VGPC wishes to terminate this Agreement
because it has received a bona fide offer from a third party to use said amount
of capacity, VGPC shall give KUB written notice of such offer (an "Option
Notice") and shall make such storage capacity available to KUB on the same
terms and at the same price per MMBtu which is set forth in such bona fide
offer which VGPC is willing to accept. If KUB fails to accept such offer
within a thirty day period (the "Option Exercise Period")
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15
after receiving the Option Notice, VGPC shall be free to terminate this
Agreement and to make such storage capacity available to the third party.
ARTICLE X
TITLE, INDEMNITY, AND TAXES
10.1 Title - KUB shall at all times hold title to the gas stored
hereunder, and VGPC shall at no time acquire title or any claim to ownership of
such gas. VGPC hereby covenants and agrees that it will not assert any claim
of ownership or otherwise attempt to encumber KUB's gas held in storage. VGPC
hereby further covenants and agrees that it will execute, sign, and deliver at
KUB's request any receipts, instruments, documents, and certifications
confirming KUB's Storage Inventory and purporting to demonstrate that KUB holds
title to the gas in storage, under the Uniform Commercial Code, other state
law, or otherwise, that KUB may reasonably determine are necessary to give
notice to third parties of KUB's exclusive ownership rights to the gas which is
stored hereunder.
10.2 Control - As between the Parties hereto, KUB shall be deemed to
have the exclusive control and possession of the gas until delivered to VGPC at
the Primary Delivery Point and after the gas is redelivered to KUB at a
Delivery Point pursuant to Sections 3.2 and 3.3 hereof. VGPC shall be deemed
to have the exclusive control and possession of the gas after it has been
delivered to VGPC at the Primary Delivery Point, until such time as the gas is
redelivered to KUB at a Delivery Point pursuant to Sections 3.2 and 3.3 hereof.
VGPC shall bear all risk of loss of any volumes of KUB's gas, for any reason
whatsoever, while it is in VGPC's control and possession, including while it is
stored at Saltville.
10.3 Indemnity - The Party in control of the gas will defend,
indemnify and hold the other harmless from and against any and all damage,
injury, losses, claims, causes of action, or judgments (including reasonable
attorneys' fees and expenses), including but not limited to adverse claims to
title or ownership, in any way arising with respect to the gas while in that
Party's control, and the other shall not be liable for any part thereof.
10.4 Taxes - VGPC shall be responsible for all taxes, fees, or charges
which are levied by a governmental or regulatory body on the ownership or
operation of the Saltville storage facility. KUB shall be responsible for all
taxes, fees, or charges which are levied by a governmental or regulatory body
on the ownership of its gas stored hereunder.
10.5 Security - VGPC shall provide KUB with copies of its financial
statements on an annual basis. If at any time VGPC (a) admits that it is
unable to pay its debts as they become due, (b) applies for or agrees to the
appointment of a receiver or trustee in liquidation of it or its properties,
(c) makes a general
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16
assignment for the benefit of creditors, (d) files a voluntary petition in
bankruptcy or a petition seeking reorganization or an arrangement with
creditors under any bankruptcy law, (e) is a party against whom a petition
under any bankruptcy law is filed and such party admits the material
allegations in such petition filed against it, or (f) is adjudicated as
bankrupt under a bankruptcy law, then KUB shall have the right to make a
written request to VGPC to provide KUB with such security for the performance
of VGPC's obligations under this Agreement as is reasonably satisfactory to
KUB, and VGPC shall provide KUB with such security within thirty (30) days
after receipt of KUB's request. If VGPC fails to do so, then KUB may, at its
option, terminate this Agreement upon ten days' prior written notice to VGPC,
or pursue its other remedies at law and equity for VGPC's breach of this
provision, or both. If KUB reasonably believes that any of the events
enumerated in subsections (a)-(f) above is threatened or imminent, KUB shall
further have the right to request relevant financial information from VGPC in
order to evaluate its financial condition, and VGPC shall promptly supply such
information. Upon review of such information, if KUB continues to reasonably
believe that one or more of the events in subsections (a)-(f) is threatened or
imminent, then KUB shall have the rights to request security, terminate this
Agreement, and pursue other remedies specified above.
10.6 Books and Records - VGPC will at all times maintain its books and
records to accurately reflect the volumes of gas held in storage under this
Agreement for KUB, and KUB shall have the right, at any and all reasonable
times, to examine VGPC's books and records to the extent necessary to verify
the accuracy of VGPC's record of KUB's Storage Inventory.
ARTICLE XI
FORCE MAJEURE
11.1 Suspension of Obligations - Subject to the provisions of this
Article XI, no Party shall be liable to the other Party for the failure to
perform in conformity with this Agreement to the extent such failure results
from an event of Force Majeure which is beyond the reasonable control of the
Party affected thereby, which wholly or partially prevents the delivery,
injection, storage, withdrawal or redelivery of gas, except that it is
expressly understood by KUB and VGPC that the occurrence of an event of Force
Majeure will not excuse VGPC under any circumstances from its obligations under
Article X hereof, or under Section 3.3 hereof for a period in excess of one
month.
11.2 Definition of Force Majeure - Events of Force Majeure shall
include, by way of illustration, but not limitation: acts of God, strikes,
lockouts or other industrial disturbances, acts of public enemy, wars,
insurrections, floods, and the operation of Governmental Authority (other than
at the request of the Party claiming inability to perform), earthquakes and
fires, and breakage of VGPC's pipelines by third parties, it being understood
and agreed by the Parties hereto that the failure
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to hold the MSQ, the inability of VGPC to withdraw the MDWQ from or inject the
MDIQ into Saltville, and the failure or breakage of any of VGPC's equipment,
machinery, or pipelines other than by third parties shall not constitute Force
Majeure.
11.3 Notice - Immediately upon becoming aware of the occurrence of an
event of Force Majeure, the Party affected shall give notice thereof to the
other Party, describing such event and stating the specific obligations, the
performance of which are, or are expected to be, delayed or prevented, in whole
or in part, and (either in the original or in supplemental notices) stating the
estimated period during which performance may be suspended or reduced,
including, to the extent known or ascertainable, the estimated extent of such
reduction of performance. Such notice of an event of Force Majeure is to be
first given by telephone communication, and then shall be confirmed in writing
within five (5) days, giving particulars available to the reporting Party, and
being supplemented if necessary within twenty (20) days to give full
particulars.
11.4 Failure of Storage Facility - Notwithstanding any other provision
in this Agreement, the Parties mutually agree that should some cause or event,
beyond the control of VGPC, cause VGPC to reasonably conclude that the
Saltville storage facility is losing pressure and may no longer be viable for
storage, it may immediately notify KUB (by facsimile, telephone or other means)
and KUB shall immediately begin to accept redelivery of the stored gas, as soon
as practicable, and to the maximum extent practicable, in order to drain the
storage area and mitigate the potential loss to VGPC. VGPC may otherwise
dispose of any volumes not thus withdrawn. VGPC will pay KUB for each MMBtu of
its Storage Inventory not thus withdrawn, including any gas that is lost or
unaccounted for, at a price calculated pursuant to Section 2.3 of this
Agreement. VGPC will make such payment to KUB within ten (10) days of receipt
by VGPC of KUB's invoice detailing the amount due KUB. Thereafter this
Agreement shall be considered of no further force and effect unless VGPC can
reasonably revitalize and stabilize such storage area to hold gas pressure, in
which event VGPC shall give KUB thirty (30) days prior written notice, after
which the Agreement shall continue in full force and effect.
11.5 Cure - The Party relying upon an event of Force Majeure shall act
prudently and use all reasonable efforts to eliminate the effects of Force
Majeure as soon as reasonably practicable, provided that the settlement of
strikes and lockouts shall be entirely within the discretion of the Party
affected.
11.6 Termination - No suspension or reduction of performance by reason
of an event of Force Majeure shall invalidate this Agreement, and upon removal
of the Force Majeure, performance shall resume pursuant to this Agreement as
soon as practicable, provided that, if a Force Majeure event continues for a
period of thirty (30) consecutive days, then the Party which did not claim such
Force Majeure may
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at any time thereafter terminate this Agreement upon thirty (30) days prior
written notice, if the Force Majeure event has not been corrected prior to the
expiration of such notice period.
ARTICLE XII
OPERATIONAL FLOW ORDERS
12.1 Operational Flow Orders - It is understood by the Parties that,
to the extent it has the authority to do so under its applicable state and/or
federal authorizations, VGPC may from time to time implement operating
procedures, sometimes known as operational flow orders ("OFO's"), in order: (a)
to alleviate conditions that threaten the integrity of VGPC's system; (b) to
maintain pressures necessary for VGPC's operations; and (c) to prevent damage
to the Saltville storage field. Although such an OFO shall not relieve VGPC of
any of its obligations hereunder, KUB shall use reasonable efforts to cooperate
with any such OFOs, including adjusting its injections or withdrawals.
ARTICLE XIII
SUCCESSORS AND ASSIGNS
13.1 Assignment - All provisions of this Agreement shall extend to and
be binding on the successors and assigns of the Parties hereto insofar as
applicable to the rights and obligations succeeded to or assigned, but no
succession or assignment shall relieve the assigning or succeeded to Party of
its obligations without the written consent of the other Party, which consent
shall not be unreasonably withheld. Nothing in this section prevents either
Party from pledging or mortgaging all or any part of.such Party's property as
security, nor from participating in any program to release capacity or transfer
storage gas in place that may be permitted by VGPC.
ARTICLE XIV
REGULATORY BODIES
14.1 Laws and Regulations - Subject to Section 2.4 above, this
Agreement shall be subject to all valid applicable governmental laws and
orders, regulatory authorizations, directives, rules and regulations of any
governmental body or official having jurisdiction over the Parties, their
facilities, the gas or this Agreement or any provision thereof, but nothing
contained herein shall be construed as a waiver of any right to question or
contest any such law, order, rule or regulation in any forum having
jurisdiction.
14.2 Reliance on Law - The Parties are entitled to act in accordance
with a law until such law is amended, reversed or otherwise disposed in a final
nonappealable order.
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14.3 Cooperation - The Parties shall cooperate to ensure compliance
with all governmental regulation, including obtaining and maintaining all
necessary regulatory authorizations or any reasonable exchange or provision of
information needed for filing or reporting requirements.
14.4 Changes in Law or Regulation - Subject to Section 2.4 above, if
any federal or state statute or regulation or order by a court of law or
regulatory authority directly or indirectly (a) prohibits performance under
this Agreement or (b) makes such performance illegal or impossible, then the
Parties will use all reasonable efforts to revise the Agreement prospectively
in a manner mutually acceptable so that (a) performance under the Agreement is
no longer prohibited, illegal, or impossible, and (b) the Agreement is revised
in a manner that preserves, to the maximum extent possible, the respective
positions of the Parties. Each Party will provide reasonable and prompt notice
to the other Party as to any proposed law, regulations or any regulatory
proceedings or actions that could affect the rights and obligations of the
Parties. If the Parties are unable to revise the Agreement in accordance with
the above, then the Party whose performance has been affected shall have the
right, at its sole discretion, to terminate this Agreement upon 30 days prior
written notice to the other Party.
ARTICLE XV
ARBITRATION
15.1 Submission of Dispute for Arbitration - Any controversy
pertaining to matters expressly made subject to arbitration under this
Agreement shall be determined by a board of arbitration, consisting of three
members, upon notice of submission given by either Party, which notice shall
also name one (1) arbitrator. The Party receiving such notice, shall, by notice
to the other Party within ten (10) business days thereafter, name the second
arbitrator, or failing to do so, the Party giving notice of submission shall
name the second arbitrator. The two (2) arbitrators so appointed shall name a
third arbitrator.
15.2 Qualification of Arbitrators - The arbitrators shall not be
employed by or affiliated with either Party and shall be qualified by
education, experience and training in the natural gas industry to decide upon
the particular question in dispute.
15.3 Arbitration Proceedings - The arbitrators so appointed, after
giving the Parties due notice of the date of a hearing and reasonable
opportunity to be heard, shall promptly hear the controversy in a location
mutually agreeable to the Parties or selected by the arbitrators, and shall
thereafter render their decision determining said controversy no later than
ninety (90) days after such board has been appointed. Any decision requires
the support of a majority of the arbitrators. After the presentation of
evidence has been concluded, each Party shall submit to the
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arbitrators a final offer of its proposed resolution of the dispute. The
arbitrators shall approve the final offer of one Party, without modification,
and reject that of the other.
15.4 Arbitrator's Decision - The decision of the arbitrators shall be
rendered in writing and supported by written reasons. The decision of the
arbitrators shall be final and binding upon the Parties and will be complied
with by the Parties. It shall be made effective as of the date the dispute
arose, unless to do so is impracticable, in which case it shall be made
effective as of the date the dispute arose to the maximum extent practicable.
Each Party shall bear the expenses of its chosen arbitrator, and the expenses
of the third arbitrator shall be borne equally by the Parties. Each Party
shall bear the compensation and expenses of its legal counsel, witnesses and
employees.
ARTICLE XVI
MISCELLANEOUS
16.1 Choice of Law - The laws of the Commonwealth of Virginia shall
govern the validity, construction, interpretation, and effect of this
Agreement, without regard to choice of law doctrine that refers to the laws of
another jurisdiction.
16.2 No Incidental, Consequential or Punitive Damages - Except as
expressly provided in this Agreement, the Parties hereto waive any and all
rights, claims, or causes of action arising under this Agreement for
incidental, consequential or punitive damages. Subject to Sections 6.2 and 10.5
of this Agreement, any damages resulting from a breach of this Agreement by
either Party shall be limited to actual damages incurred by the Party claiming
damages.
16.3 Third Party Beneficiaries - Neither KUB nor VGPC intends for the
provisions of this Agreement to benefit any third party. Subject to the
Guaranty Agreement of even date herewith between KUB and Virginia Gas Company,
no third party shall have any right to enforce the terms of this Agreement
against KUB or VGPC.
16.4 Waiver of Default - No waiver by KUB or VGPC of any default of
the other under this Agreement shall operate as a waiver of any future default,
whether of a like or different character.
16.5 Interpretation - In interpretation and construction of this
Agreement, no presumption shall be made against any Party on grounds such Party
drafted the Agreement or any provision thereof.
16.6 Headings - The Table of Contents and the headings of any article,
section or subsection of this Agreement are for purposes of convenience only
and shall not be interpreted as having meaning or effect.
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16.7 Entire Agreement - The terms and conditions contained herein
constitute the full and complete agreement between the Parties and any change
to be made must be submitted in writing and agreed to by both Parties.
16.8 Attorneys' Fees - In the event any litigation is commenced by
either Party to enforce this Agreement, the prevailing Party shall be entitled
to collect from the losing Party the reasonable cost and expense of such
litigation, including reasonable attorneys' fees.
16.9 Severability - Except as otherwise stated herein, any article or
section declared or rendered unlawful by a court of law or regulatory authority
with jurisdiction over the Parties or deemed unlawful because of a statutory
change will not otherwise affect the lawful obligations that arise under this
Agreement.
16.10 Enforceability - Each Party represents that it has all necessary
power and authority to enter into and perform its obligations under this
Agreement and that this Agreement constitutes a legal, valid and binding
obligation of that Party enforceable against it in accordance with its terms,
except as such enforceability may be affected by any bankruptcy law or the
application of principles of equity.
IN WITNESS WHEREOF, this Agreement has been executed in duplicate as of
the date first written above by the Parties' duly authorized officers.
KNOXVILLE UTILITIES BOARD
Attest:
/S/ XXXX XXXXX By: /s/ XXXXX X. XXXXXX
------------------------- -------------------------------------------
Its: Senior Vice President Gas Operations
------------------------------------------
VIRGINIA GAS PIPELINE COMPANY
Attest:
/S/ XXXX X. XXXXX By: /s/ X.X. XXXXXXX
------------------------- -------------------------------------------
Its: President
-------------------------------------------
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GUARANTY AGREEMENT
This Guaranty Agreement made and entered into as of July 10, 1996 (the
"Guaranty"), by and between Virginia Gas Company, a Delaware corporation
("Guarantor"), and Knoxville Utilities Board, an agency of the City of
Knoxville, Tennessee ("Purchaser").
WITNESSETH:
WHEREAS, Virginia Gas Pipeline Company ("VGPC"), a Virginia corporation
and a subsidiary of the Guarantor, and the Purchaser desire to enter into a
Firm Gas Storage Agreement dated July 10, 1996 (the "Gas Storage Agreement")
pursuant to which VGPC has agreed to provide firm storage service to the
Purchaser in the quantities and subject to the terms and conditions set forth
therein; and
WHEREAS, the Guarantor has determined that VGPC's commitments pursuant
to the Gas Storage Agreement are beneficial to Guarantor and Guarantor desires
to guarantee such obligations;
NOW, THEREFORE; in consideration of the premises, the receipt and
sufficiency of which is hereby acknowledged, and in order to induce the
Purchaser to enter into the Gas Storage Agreement, Guarantor does hereby agree
as follows:
1. Guarantor hereby unconditionally guarantees to the Purchaser the
full and timely performance by VGPC of its financial obligations under the Gas
Storage Agreement. Performance by Guarantor of its obligations hereunder shall
be made in full irrespective of (but without prejudice to the rights otherwise
of Guarantor with respect to) any claim, set-off or other right that Guarantor
may have at any time against the Purchaser, VGPC, or any other person or
entity, whether in connection herewith or with any unrelated transaction.
2. This Guaranty is a primary obligation of Guarantor and shall be
construed as an unconditional, absolute and continuing guaranty, irrespective
of the validity or enforceability of the Gas Storage Agreement, the absence of
any action to enforce the same, the recovery of any judgment against VGPC or
any action to enforce the same or any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. This
Guaranty shall remain in full force and effect until all obligations of VGPC
under the Gas Storage Agreement have been performed. Guarantor represents that
it has all necessary power and authority
23
to enter into and perform its obligations under this Guaranty and that this
Guaranty constitutes a legal, valid and binding obligation of Guarantor.
3. The Purchaser shall have the full right, in its sole discretion
and without any notice to or consent from Guarantor, from time to time and at
any time, without affecting, impairing or discharging, in whole or in part, the
liability of Guarantor hereunder, to deal with VGPC in any manner whatsoever
with respect to the obligations guaranteed hereunder, including but not limited
to: (i) extending, in whole or in part, the time of performance or payment of
any obligation owing by VGPC under the Gas Storage Agreement or otherwise
guaranteed hereunder; (ii) agreeing with VGPC to make any change, amendment or
modification whatsoever of any term or condition of the Gas Storage Agreement,
including, but not limited to, the amounts payable thereunder; and (iii)
settling, compromising, releasing, surrendering, modifying, or impairing, and
enforcing, exercising or failing or refusing to enforce or exercise, any
claims, rights or remedies of any kind or nature against VGPC. Guarantor
hereby consents to, ratifies, and affirms any such extension, change,
amendment, renewal, release, surrender, exchange, modification, impairment,
settlement or compromise, and all such actions shall be binding upon Guarantor.
4. Guarantor hereby waives diligence, presentment, demand for
payment, protest or notice with respect to the Gas Storage Agreement and all
demands whatsoever, and notice of acceptance hereof, and covenants that this
Guaranty will not be discharged except by complete and final payment of all
financial obligations of VGPC contained in the Gas Storage Agreement and by
Guarantor contained in this Guaranty. Guarantor hereby waives any legal or
equitable defenses arising out of the insolvency, bankruptcy or similar legal
disability of VGPC.
5. This Guaranty constitutes the entire agreement, and supersedes
all prior written agreements and understandings, and all oral agreements,
between the parties with respect to the subject matter hereof and may be
executed simultaneously in several counterparts, each of which shall be deemed
an original, and all of which together shall constitute one and the same
instrument.
6. The invalidity or unenforceability of any one or more phrases,
sentences, clauses or Sections in this Guaranty shall not affect the validity
or enforceability of the remaining portions of this Guaranty or any part
thereof.
7. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS. The Guarantor, by its execution hereof, hereby submits to
the non-exclusive jurisdiction of the courts of the Commonwealth of Virginia
and of the United States of America sitting in Virginia in connection with any
action or proceeding relating to this Guaranty and hereby consents to service
of process or other summons in any such action or
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proceeding brought by the Purchaser against it in any such court by means of
registered mail to the last known address of the Guarantor. Nothing herein,
however, shall prevent service of process by any other means permitted by law
or the bringing of any such action or proceeding in any other jurisdiction.
8. This Guaranty shall remain in full force and effect or shall be
reinstated (as the case may be) if at any time any payment by VGPC, in whole or
in part, is rescinded or must otherwise be returned by the Purchaser upon the
insolvency, bankruptcy or reorganization of VGPC or otherwise, all as though
that payment had not been made.
9. So long as any amount payable by VGPC under the Gas Storage
Agreement is overdue and unpaid, the Guarantor shall not (i) exercise any right
of subrogation or indemnity, or similar right or remedy, against VGPC or any of
its assets or property in respect of any amount paid by the Guarantor under
this Guaranty or (ii) file a proof of claim in competition with the Purchaser
for any amount owing to the Guarantor by VGPC on any account whatsoever in the
event of the bankruptcy, insolvency or liquidation of VGPC.
10. The rights and remedies set forth in the Gas Storage Agreement
and this Guaranty are in addition to and not exclusive of any rights and
remedies available to the Purchaser by law in respect of this Guaranty. If any
amount payable by the Guarantor under this Guaranty is not paid when due, the
Purchaser may, without notice or demand of any kind, set off and apply such
amount against any indebtedness of the Purchaser to the Guarantor then due and
payable (including without limitation principal, interest, indemnity or
reimbursement for losses) whether under any loan or credit agreement, note,
interest rate or currency exchange agreement, or otherwise, and such set off
and application shall satisfy the obligations hereunder of the Guarantor to the
Purchaser to the extent such amount is so set off and applied. The Purchaser
shall be entitled to apply any amount received by it from any source, including
the Guarantor, in respect of VGPC's obligations under the Gas Storage Agreement
to the discharge of those obligations in such order as the Purchaser may from
time to time elect in its sole discretion.
11. The Guarantor shall pay or reimburse the Purchaser on demand for
all reasonable costs and expenses (including fees and expenses of counsel)
incurred in connection with the enforcement of the Purchaser's rights under
this Guaranty.
12. All amendments, waivers and modifications of or to any provision
of this Guaranty and any consent to departure by the Guarantor from the terms
hereof shall be in writing and signed and delivered by the Purchaser and, in
the case of any such amendment or modification, by the Guarantor, and shall not
otherwise be effective. Any such waiver or consent shall be effective only in
the specific instance and for the purpose for which it is given.
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25
13. This Guaranty shall be binding on the Guarantor and its
successors and assigns. However, the Guarantor shall not transfer any of its
obligations hereunder without the prior written consent of the Purchaser, and
any purported transfer without that consent shall be void. This Guaranty shall
inure to the benefit of the Purchaser and its successors and assigns.
IN WITNESS WHEREOF, Xxxxxxxxx has caused this Guaranty to be executed
in its name and behalf.
VIRGINIA GAS COMPANY
By: /s/ X.X. XXXXXXX
----------------------------------
Name:
Title:
Accepted as of July 10, 1996 by
KNOXVILLE UTILITIES BOARD
By: /s/ XXXXX X. XXXXXX
---------------------------------------------
Name:
Title: Senior Vice President Gas Operations
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