Exhibit 10.27
PRODUCT SUPPLY AGREEMENT
by and between
AIR PRODUCTS AND CHEMICALS, INC.
AND
XXXXX REFINING & MARKETING, INC.
1 AUGUST 1999
TABLE OF CONTENTS
1. FACILITY AND UTILITY ASSETS......................................1
2. TERM.............................................................3
3. DELIVERY AND PRODUCT AND UTILITY SPECIFICATIONS..................5
4. MEASUREMENT......................................................9
5. QUANTITIES......................................................18
6. FEED AND FUEL SUPPLY TO THE FACILITY............................22
7. PRICE...........................................................23
8. PRICE ADJUSTMENT................................................29
9. TERMS OF PAYMENT................................................34
10. GOVERNMENT REQUIREMENTS.........................................35
11. TAXES...........................................................39
12. FORCE MAJEURE...................................................41
13. WARRANTY........................................................43
14. LIMITATION OF LIABILITY.........................................43
15. BUYER'S OBLIGATIONS.............................................45
16. TERMINATION.....................................................47
17. ASSIGNMENT......................................................49
18. NOTICE..........................................................50
(i)
19. INDEMNIFICATION.................................................48
20. CONFIDENTIALITY.................................................51
21. DISPUTE RESOLUTION..............................................52
22. GENERAL PROVISIONS..............................................52
23. REPRESENTATIONS.................................................56
24. DEFINITIONS.....................................................58
EXHIBITS
EXHIBIT A TECHNICAL DESCRIPTION
EXHIBIT B LEASE AGREEMENT
EXHIBIT C PIPELINE EASEMENT
EXHIBIT C UTILITIES AND SERVICES TO BE SUPPLIED BY BUYER
EXHIBIT D UTILITIES AND SERVICES TO BE SUPPLIED BY BUYER
EXHIBIT E DELIVERY POINTS
EXHIBIT F FACILITY PERFORMANCE CAPABILITIES
EXHIBIT G GAS TURBINE PLANNED MAINTENANCE SCHEDULE
EXHIBIT H [INTENTIONALLY BLANK]
EXHIBIT I REFINERY FUEL GAS VOLUME ADJUSTMENT
EXHIBIT J BASE FACILITY CHARGE PREPAYMENT SCHEDULE
EXHIBIT K SITE HYDROGEN BALANCE
(ii)
PRODUCT SUPPLY AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of August
1999 (the "Effective Date") by and between AIR PRODUCTS AND CHEMICALS, INC., a
corporation organized and existing under the laws of the State of Delaware
(hereinafter called "Seller"), and XXXXX REFINING & MARKETING, INC., a
corporation organized and existing under the laws of the State of Delaware
(hereinafter called "Buyer").
WITNESSETH THAT:
WHEREAS, Buyer has requirements for hydrogen, steam and power
(hereinafter called "Products") at its Port Xxxxxx, Texas plant (together with
all additions and modifications to such plant, the "Buyer's Plant") and
desires to purchase such requirements of Products from Seller; and
WHEREAS, in order for Seller to furnish such Products to Buyer, it
will be necessary for Seller to design, fabricate and install a facility for
the manufacture of Products at Buyer's Plant (the "Facility");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, Seller agrees to sell to Buyer and Buyer agrees to purchase
from Seller such requirements of Products, upon the following terms and
conditions:
1. FACILITY AND UTILITY ASSETS
1.1 Construction of the Facility. Seller shall design and construct
the Facility, which shall be generally as described in Exhibit A.
Seller's obligation to design and construct the
Facility shall be relieved on a Day for Day (including the obligation to
meet the Start-up Date) basis in the event Buyer fails to meet the
obligations and milestones set forth in Exhibit D and such failure is the
proximate cause of Seller failing to meet its obligations to design and
construct the Facility. Upon completion, the Facility shall be capable of
producing Products meeting the specifications set forth in Sections 3.2
through 3.4 in the quantities of Products set forth in Article 5, in each
case, when supplied with Utilities in accordance with this Agreement.
Seller shall construct such Facility on a site (the "Facility Site") to
be furnished by Buyer in accordance with the requirements of this
Agreement and a lease agreement substantially in the form attached hereto
as Exhibit B. The prices set forth herein are predicated on the scope of
supply set forth in Exhibit A.
1.2 Construction of the Utility Assets. Buyer shall design and
construct the facilities (the "Utility Assets") required to provide to
Seller the utilities described in Exhibit D (the "Utilities"). Upon
completion, the Utility Assets shall be capable of producing Utilities
meeting the specifications set forth in Exhibit D in producing the
quantities of Utilities set forth in Exhibit D.
1.3 Right to Inspect.Buyer shall have the right upon reasonable
written notice to Seller to inspect the on-going construction of the
Facility. For these purposes, Buyer shall have reasonable access during
normal business hours to the Facility, storage and deposit areas, sources
of materials, equipment being assembled, already assembled or in
operation, equipment being tested and to any other places or areas
occupied by Seller or its subcontractors in connection with the design
and construction of the Facility. Such right of access shall be subject
to the reasonable
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confidentiality, safety and security requirements of Seller and the
obligations of Buyer to not interfere with Seller's on-going construction
of the Facilty.
1.4 Spare Parts.Seller shall provide and maintain an adequate
inventory of spare parts consistent with Prudent Industries Standards.
Seller shall ensure that all such spare parts are delivered prior to the
Commencement Date. Any spare parts withdrawn from the Facility for
start-up shall be replaced by Seller at its own cost.
2. TERM
2.1 Supply Period.This Agreement shall be effective as of the
Effective Date. The initial supply term of this Agreement shall commence
on the date the Facility is installed and "ready for commercial
operation" (the "Commencement Date"), and shall continue for 246
consecutive calendar months (the "Initial Term"); provided, that if Buyer
begins taking Products after 6 October 2000 but before 6 December 2000,
the Initial Term shall be reduced by six (6) Days for each Day after 6
October but before 6 December 2000 that Buyer has begun taking Products.
Thereafter, this Agreement shall remain in force from year to year unless
terminated in accordance with Article 17. The Initial Term, together with
any extensions, shall be referred to as the "Supply Period". Written
notice of the Commencement Date shall be furnished to Buyer by Seller.
For purposes of this Agreement, "ready for commercial operation" shall
mean that Products are available for supply to Buyer from the Facility at
substantially the quantities and specifications set forth herein.
Notwithstanding anything to the contrary in this Agreement or the Letter
Agreement described below, any activities or obligations related to the
Facility will be conducted under and in accordance with the Letter
Agreement dated 7 July 1998 (as amended) between Seller and Buyer
(including the obligation to pay termination payments and cancellation
charges) and the Interim Lease until such time as Port Xxxxxx completes
financial closing under the Financing Documents, which will occur on or
before 15 August 1999. In the event financial
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closing does not occur as described, the provisions of the Letter
Agreement shall continue to apply notwithstanding anything in the Letter
Agreement to the contrary. Buyer shall provide written notice of
financial closing to Seller. Upon such notice to Seller, the terms and
conditions in this Agreement shall take effect (other than the last four
sentences in this Section 2.1 which take effect now).
2.2 Start-up Date.
2.2.1 Seller shall cause the Commencement Date to occur on or
before the Start-up Date. If Seller fails to achieve the
Commencement Date on or before the Start-up Date, then for each Day
of delay due to Seller's acts or omissions, Seller shall pay to
Buyer, subject to the Start-up Damages Cap, liquidated damages of
Nineteen Thousand Two Hundred Fifty Dollars ($19,250) per Day for
each Day of delay.
2.2.2 Buyer shall be ready and able to take the Products on the
Start-up Date and shall not cause a delay in Seller's ability to
cause the Commencement Date to occur. If Buyer is unable to take the
Products on the Start-up Date due to Buyer's acts or omissions or if
Seller fails to achieve the Commencement Date on or before the
Start-up Date due to Buyer's or Port Xxxxxx Xxxxx Company's acts or
omissions, then for each Day of delay, Buyer shall pay to Seller,
subject to the Start-up Damages Cap, a liquidated damage payment of
Thirty-eight Thousand Five Hundred Dollars ($38,500) per Day for
each Day of delay; provided, however, that in no event shall the
aggregate amount of Buyer's payment under this Section 2.2.2 and
Port Xxxxxx Xxxxx Company's payment under Section 2.2.2 of the
Hydrogen Supply Agreement exceed a liquidated damage payment of (i)
Thirty-eight Thousand Five Hundred Dollars ($38,500) per Day for
each Day of delay or (ii) One Million One Hundred Fifty-five
Thousand Dollars ($1,155,000).
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2.2.3 Each party shall provide prompt written notice to the
other party in the event it determines that it shall not meet its
obligations set forth in this Section 2.2. In no event shall a party
owe any liquidated damages payments to the other party during the
period of time that the other party is also liable for liquidated
damage payments under this Section. In the event Buyer has not met
its obligations set forth in Section 2.2.2, the Supply Period shall
be automatically extended for three (3) Days for each Day of delay
by Buyer hereunder. In no event shall the Start-up Damage Cap apply
in situations in which either party is not meeting its obligations
hereunder due to a discretionary election by such party to not meet
such obligations.
3. DELIVERY AND PRODUCT AND UTILITY SPECIFICATIONS
3.1 Delivery.Products shall be delivered by Seller to Buyer at the
respective Product Delivery Points, as set forth in Exhibit E. Title and
risk of loss with respect to Products shall pass from Seller to Buyer at
the respective Product Delivery Points.
3.2 Hydrogen Specification.Hydrogen delivered to Buyer shall conform
to the following specifications, provided that the Utilities meet the
specifications contained in Exhibit D.
Volume Basis
------------
H2 99.9% (vol) minimum
CO + CO2 1 ppm (vol) maximum
N2 + Ar 509 ppmv (maximum)
CH4 0.1 mol% (max)
O2 10 ppmv (max)
NH3 10 ppmv (max)
S compounds 0.3 ppmv (max)
HCN 0.3 ppmv (max)
HCL 0.3 ppmv (max)
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Volume Basis
------------
Hg 0.1 ppmv (max)
MEA 0.1 ppmv (max)
Oil 10 ppmv (max)
Dew Point -40(degree)F (max) (@ 1 atm.)
CO and N2 will be continuously monitored. Analysis of Ar, CH4, O2, NH3 and Oil
will be performed on batch samples once each quarter, unless additional
samples are reasonably requested by Buyer and then as reasonably requested.
Delivery pressure:
Minimum Normal Maximum
------- ------ -------
850 psig 865 psig 910 psig
Delivery temperature:
Minimum Normal Maximum
------- ------ -------
56(degree)F 100(degree)F 120(degree)F
3.3 Power Specification.Power produced and delivered to Buyer by
Seller shall conform to the following nominal specifications, provided
that the Utilities meet the specifications contained in Exhibit D.
Voltage 13.8 kV
Frequency 60 Hz
Phase 3
Power Factor 0.90 Lagging to Unity
3.4 Export Steam Specification.Steam delivered to Buyer shall
conform to the following specifications, provided that the Utilities meet
the specifications contained in Exhibit D:
Delivery pressure Delivery Temperature
----------------- --------------------
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Minimum: 640 psig Minimum: 640 (degree) F
Normal: 665 psig Normal: 650 (degree) F
Maximum: 680 psig Maximum: 750 (degree) F
Other
-----
Ammonia <0.5 ppm
Methanol <10 ppm
3.5 Waiver of Products Specification.If any of the Products do not
conform to the specifications set forth in this Article 3 for any reason,
Seller shall promptly inform Buyer of the details of such nonconformance
and the expected duration thereof. Buyer shall either reject the Products
as nonconforming or waive the nonconformance, in which case Seller shall
continue to produce and deliver Products and such Products shall be
deemed to be within specification for all purposes of this Agreement.
Buyer's failure to reject Products not meeting specifications will not
constitute a waiver of Buyer's right in the future to reject subsequent
deliveries of Products not meeting specifications. Should any of the
Products be rejected by Buyer, Seller shall promptly effect modifications
to bring the Products within specification, including curtailing Products
or shutting down the Facility, if necessary; provided that such work
shall be conducted in a manner that minimizes outages at the Facility.
3.6 Delivery of Utilities.Utilities shall be delivered by Buyer to
Seller at the respective Utility Delivery Points, as set forth in Exhibit
E. Title and risk of loss with respect to Utilities shall pass from Buyer
to Seller at the respective Utility Delivery Points.
3.7 Utility Specifications.Utilities delivered to Seller shall
conform to the specifications set forth in Exhibit D.
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3.8 Waiver of Utility Specification.If any of the Utilities do not
conform to the specifications set forth in this Article 3 for any reason,
Buyer shall promptly inform Seller of the details of such nonconformance
and the expected duration thereof. Seller shall either reject the
Utilities as nonconforming or waive the nonconformance, in which case
Buyer shall continue to produce and deliver Utilities and such Utilities
shall be deemed to be within specification for all purposes of this
Agreement. Seller's failure to reject Utilities not meeting
specifications will not constitute a waiver of Seller's right in the
future to reject subsequent deliveries of Utilities not meeting
specifications. Should any of the Utilities be rejected by Seller, Buyer
shall promptly effect modifications to bring the Utilities within
specification; provided that such work shall be conducted in a manner
that minimized outages at the Utility Assets.
4. MEASUREMENT
4.1 Fluid Measurement
4.1.1 Products to be Measured. For purposes of this Agreement,
the products to be measured on a custody transfer basis are
hydrogen, steam and refinery fuel gas.
4.1.2 Measurement Period. Volumes and mass flow will be
calculated and reported on a calendar month basis. The billing Day
shall be calculated on a 2400-hour basis beginning at 00:00 each
calendar Day.
4.1.3 Unit of Measurement. The unit of volume of hydrogen for
all purposes hereunder shall be a standard cubic foot ("SCF"),
measured as one (1) cubic foot of gas at a temperature of
60(degree)F and at a pressure of 14.73 psia. Steam shall be measured
in thousands of pounds ("Mlbs"). Water shall be measured in
thousands of gallons ("Mgal"). Gallon shall mean
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a unit of volume equivalent to 231 cubic inches measured at
60(degree)F. Feed and refinery fuel gas shall be measured in
millions of British Thermal Units ("MMBTU"), higher heating value
("HHV").
4.1.4 Measurement System. Seller shall design, install, own,
operate and maintain at Seller's expense, metering systems that are
capable of measuring the quantity of hydrogen, steam and refinery
fuel gas to be delivered hereunder and determining compliance with
the specifications set forth herein, in accordance with the
applicable industry standards referenced in this section. Such
meters shall be connected to an electronic gas measurement ("EGM")
system ("EGM System") as defined in the American Petroleum
Institute's MPMS, Chapter 21, Section 1 - "Electronic Gas
Measurement."
4.1.5 System Design. The measurement systems for the
measurement of hydrogen, steam and refinery fuel gas shall be
designed in accordance with the current standards prescribed in the
most recent version of the American Petroleum Institute's Manual of
Petroleum Measurement Standards (MPMS) Chapter 14, Section 3,
"Concentric, Square-Edged Orifice Meters" (AGA Report No. 3).
4.1.6 Types of Meters.
Metering system components shall be as follows:
(a) Steam meter (Tag No. FE-50) - Orifice measurement,
Daniel's or equivalent meter tube, flow conditioning,
digital temperature and pressure transmitters, RTD for
temperature sensing.
9
(b) Refinery fuel gas meter (Tag No. FE-1407) - Orifice
measurement, Daniel's or equivalent meter tube, digital
temperature and pressure transmitters, RTD for temperature
sensing, online gas chromatograph and densitometer.
(c) The above-mentioned meters shall have a commercial EGM
flow computer such as Bristol Babbcock, Daniel's, or
equivalent. The refinery fuel gas meter run shall include
a dual chambered orifice fitting (commonly referred to as
a "Senior Fitting") that will allow the retraction of the
orifice plate while the line is in service.
All meters shall operate within a .3 to .7 Beta Ratio range in
conjunction with an EGM device. These devices shall utilize
transmitters installed in conjunction with an orifice meter run
whose taps are in the vertical plan. The distance between the
orifice tap and the transmitter shall be minimized.
4.1.7 Temperature Determination. The temperature of the fluid
flowing through each of the meters shall be measured with a
temperature device so installed as to provide an accurate
measurement of the flowing temperature at the primary device. These
temperature devices shall be "Smart" RTD type temperature
transmitters, utilizing a 100-ohm platinum sensor. The temperature
device shall be capable of determining the temperature to the
nearest 0.1(degree)F.
4.1.8 Pressure Determination. The static and differential
pressures generated by the fluid flowing through each of the meters
shall be measured with a pressure device so installed as to provide
an accurate measurement of the flowing pressure at the primary
device. These
10
pressure devices shall be "Smart" type pressure transmitters. The
differential pressure measuring device's range shall not exceed 200
inches of water. Dual range differential transmitters may be
considered if operating conditions demonstrate a need. The pressure
device shall be capable of determining the pressure to the nearest
1-lb/1 square inch.
4.1.9 Density Determination. The flowing density of the
refinery fuel gas stream shall be determined utilizing an on line
Gas Densitometer. The flowing density for hydrogen shall be
calculated using a modified Xxxxxxxx-Xxxx-Xxxxx (MBWR) equation of
state in accordance with National Institute of Standards &
Technology (NIST) standards. (Journal of Physical & Chemical
Reference Date, Volume 11 supplement No. 1, Titled: "Thermophysical
Properties Of Fluids, Argon, Ethylene, Parahydrogen, Nitrogen,
Nitrogentrifluoride, & Oxygen").
The flowing density of steam shall be calculated in accordance with
appendix B of the N.B.S. (NIST)/NRC Steam Tables.
4.1.10 Sampling Systems. The gross heating value and
composition of the refinery fuel gas will be determined by an
on-line gas chromatograph. All samples shall be analyzed using
current Gas Processors Association (GPA 2261) standard, "Analysis
for Natural Gas and Similar Gaseous Mixtures by Gas Chromatography"
or Gas Processors Association (GPA 2286) standard, "Tentative Method
of Extended Analysis for Natural Gas and Similar Gaseous Mixtures by
Temperature Programmed Gas Chromatography". American Petroleum
Institute (API MPMS Ch 14.5) or Gas Processors Association (GPA
2172) standards, "Calculation of Gross Heating Value, Relative
Density and Compressibility Factor for Natural Gas Mixtures
11
from Compositional Analysis" shall be used to calculate the gross
heating value of the samples. These analytical results shall be
applied to the volumes measured during the collection period.
4.1.11 Meter Bypasses. Meter bypasses shall not be
allowed.
4.1.12 Calculation/Volume Determination. The quantity
of hydrogen, steam and refinery fuel gas delivered shall be deemed
conclusively to be the quantity indicated by the meters and the EGM
System; except when the EGM or meters have ceased to function or are
determined to be commercially inaccurate pursuant to Section 4.1.21.
4.1.13 EGM System. The EGM System shall be capable of
calculating all volumes in accordance with the current standards
prescribed in the API MPMS Chapter 14, Section 3; and American Gas
Association Report No. 3, "Orifice Metering of Natural Gas and Other
Hydrocarbon Fluids". The EGM system shall also be capable of
calculating the steam based on the NIST steam tables and, in addition,
must also be able to calculate the refinery fuel gas on a mass basis
with direct input from a densitometer and chromatograph.
The EGM system shall be capable of establishing an audit trail
by compiling and retaining sufficient electronic data and
information for the purpose of verifying daily and hourly
quantities, and shall comply with the American Petroleum Institute
MPMS, Chapter 21. Section 1-Electronic Gas Measurement. Audit trail
information shall be preserved for a minimum of three (3) years.
The measurement data described in the above paragraph and
calculated by the EGM device (flow computer) shall be preserved and
provided for auditing purposes in a mutually agreeable standard
format. Unless mutually agreed otherwise by the parties, standard
format shall
12
mean the API Chapter 21, Section 1 compliant electronic format
provided by the manufacturer of the device. In addition, the final
custody transfer volumes, and a log of the changes made between the
amounts calculated by the EGM device and the settlement amounts,
shall be available if requested by either party. Unless a currently
unresolved exception exists, all volumes shall be considered final
after two years.
4.1.14 Calibrations General. Seller shall calibrate analyzers
and flow meter instrumentation monthly, or on a mutually agreeable
schedule. Seller shall give Buyer at least two (2) Days prior notice
of the dates of the calibrations, or calibrations should occur per a
mutually agreeable schedule. Buyer shall be permitted to witness
such calibrations. Buyer shall have the right to have a
representative present at the time of any installing, cleaning,
changing, repairing, inspecting, testing, calibrating or adjusting
done in connection with the equipment used in measuring deliveries.
4.1.15 Calibration of Gas Densitometer. Seller shall calibrate
the refinery fuel gas density-measuring device in accordance with
the manufacturer's recommendations.
4.1.16 Calibration of Chromatograph. Chromatograph calibration
shall be in accordance with the GPA Standard 2261 "Analysis for
Natural Gas and Similar Gaseous Mixtures by Gas Chromatography".
4.1.17 Calibration of EGM Devices. Seller shall calibrate EGM
devices used for custody transfer in accordance with API MPMS
Chapter 21, Section 1, and part 8.
4.1.18 Inspection of Orifice Meter Run. During Facility
shutdown periods for maintenance and repair, the steam orifice plate
shall be removed and inspected to ensure
13
compliance with the current API MPMS Chapter 14, Section 3, Part 2,
Specification and Installation Requirements. The refinery fuel gas
orifice shall be removed and inspected on a quarterly basis at
minimum.
4.1.19 Adjustments. An adjustment shall be in order if, upon
any test, the metering equipment in aggregate is found to be
recording inaccurately by plus or minus two percent (2.0%) or more
of the reading at normal flowing conditions. Registration thereof
and payment based upon such registration shall be corrected at the
rate of such inaccuracy for any period of inaccuracy that is
definitely known and/or agreed upon. In the event such period of
inaccuracy is not definitely known and/or agreed upon, the
adjustment will be made halfway back to the preceding calibration.
Adjustments shall not extend prior to one hundred eighty (180) Days
from the time the error is determined, unless such error is a result
of improper design or installation of the measuring equipment. Under
no circumstance shall an adjustment extend beyond two years prior to
the date that the error was discovered. Following any test, any
metering equipment found to be inaccurate to any degree shall be
adjusted immediately to record accurately. The maximum zero-cutoff
value, which may be programmed for the differential transmitter
reading, is .25 inches.
If for any reason the meter is out of service or repair so that
the quantity of Product deliveries through such meter cannot be
ascertained or computed from the readings thereof, the quantity of
Product so delivered during the period when the meter is out of
service or repair shall be determined on the basis of the first of
the following methods which is feasible, as agreed between the
parties hereto.
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(a) By using the cumulative volumes from any field "check"
measurement source adjusting for historical differences
between the field meters and custody meters. The Seller
agrees to allow the same provisions for Buyer to witness
and audit such measurement that the Seller allows on the
custody transfer measurement equipment;
(b) By correcting the error mathematically if the amount of
such error is ascertainable by calibration, test, or
calculation;
(c) By estimating the quantity from the amount of deliveries
during, preceding, and/or following periods where the
delivery conditions were similar and the meters were
recording accurately; or
(d) By any other method which is mutually agreeable.
Any volume or energy revision made by the measurement party
following initial closeout shall not be made without a detailed
written explanation of the revision and such changes must be
mutually agreed upon between the parties. Also, the measurement
party shall respond in writing within thirty (30) Days following
receipt of any adjustment request, either by making the requested
volume adjustment or by stating its reasons for not doing so.
4.1.20 Inspection of Records. In accordance with
Seller's obligation under Section 10.3, Seller shall preserve all
its original test data, and other records related to the
measurements described in this Article 4, for a period of at least
three (3) years. Seller shall make such records available, together
with calculations therefrom, for inspection, copying or verification
by Buyer. All such records shall be the property of Seller.
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4.1.21 Metering Accuracy Statement. Metering accuracy is
considered to be plus or minus 2% of reading at normal flowing
conditions.
To the extent that the requirements of this Section 4.1 result
in additional costs and expenses beyond that already provided by
Seller, Buyer shall compensate Seller for Seller's reasonable
additional costs and expenses.
4.2 Power Measurement.
4.2.1 Unit of Measurement. The unit of quantity of power for
all purposes hereunder shall be a kilowatt hour ("KWH").
4.2.2 Metering Equipment. Seller shall install, own, operate
and maintain at its expense meters which are capable, in accordance
with Prudent Industry Standards, of measuring the quantity of power
to be delivered hereunder and determining compliance with the
specifications set forth herein. Such meters shall be connected to a
billing computer, which shall be located within the Facility
("Billing Computer"). The quantity of power delivered shall be
deemed conclusively to be the quantity indicated by the meters and
the Billing Computer, except when the Billing Computer or meters
have ceased to function or are determined to be commercially
inaccurate pursuant to Section 4.3, or in the reasonable judgment of
Seller, in which case the parties shall negotiate a mutually
agreeable means of determining flow and production. For purposes of
this Agreement electric power produced and delivered to Buyer will
be metered in Seller's high voltage switchgear at 13.8 kV and 4.16 kV
as shown in Exhibit E. A single pulse-generated signal from each of
the electric power meters will be integrated by the Billing
Computer. The meters and Billing Computer shall be available for
inspection by Buyer
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at all reasonable times, but readings, calibrations, and adjustments
thereof and changing of charts shall be performed by employees or
agents of Seller. Seller shall calibrate power meters annually.
Seller shall give Buyer at least five (5) Days prior notice of the
dates of the calibrations and shall be permitted to witness such
calibrations. The electric power meters and their calibration shall
be in accordance with ANSI C12.1-1995.
4.3 Tests. Buyer shall have the right to challenge the accuracy of
any of the meters or the Billing Computer by requesting that any or all
the meters and/or the Billing Computer be tested for sufficiency and
commercial accuracy. Such tests shall be conducted by a mutually
acceptable third party or, if Buyer and Seller cannot agree, by an
authorized representative of the manufacturer(s) of the meter(s) or
Billing Computer, as the case may be, in the presence of Seller's and
Buyer's representatives. Costs of all such tests shall be borne by Buyer,
provided, however, that should any test indicate that a meter or the
Billing Computer is inaccurate in excess of two percent (2%) of the power
delivery rate, then the costs of such test shall be borne by Seller. If
any meter or the Billing Computer is found on any test to be inaccurate
by more than two percent (2%) of the delivery rate for the period in
question, Seller shall (a) at its own cost, promptly correct for such
inaccuracy and (b) adjust charges to Buyer in order to correct for such
inaccuracy. Charges to Buyer shall be adjusted for the period extending
back to the date, if known or agreed upon, that such inaccuracy occurred;
provided, however, that if such date is not definitely known or agreed
upon, then charges shall be adjusted for a period extending back for a
period not exceeding one hundred and eighty (180) Days.
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5. QUANTITIES
5.1 Hydrogen. During the Supply Period, Seller shall supply and
Buyer shall take the quantities of hydrogen set forth in Exhibits A and D
related to the Spill Stream Hydrogen.
5.2 Power. During the Supply Period, Seller shall produce and Buyer
shall take and pay for, or pay for if not taken, all power produced by
the Facility up to a maximum power delivery rate of 43,600 KW (the
"Maximum Quantity of Power") for use in Buyer's Plant. Buyer shall pay
for all such power at the price set forth in Section 7.2. For avoidance
of doubt, Buyer shall be obligated to take and pay for all power produced
by the Facility net of power consumed at the Facility. The parties
acknowledge that the power production rate of the Facility will vary
depending on current ambient conditions, the condition of the gas turbine
generator relative to its major maintenance cycle and the rate of
hydrogen production from the Facility. Based on ambient conditions of
65(Degree)F, 72% relative humidity, 14.68 psia, the gas turbine generator
shall have an annual levelized gross power output of 37,200 (+/-2%) KW
measured at the generator terminals.
5.3 Steam. During the Supply Period, Seller shall produce and Buyer
shall take and pay for, or pay for if tendered, all quantities of steam
produced by the Facility up to a maximum rate of 470,000 pounds per hour
of steam (the "Maximum Quantity of Steam") for use at Buyer's Plant. In
addition, during the Supply Period, if requested by Buyer, and to the
extent available, Seller shall produce and Buyer shall take and pay for,
or pay for if tendered, all quantities of steam in excess of the Maximum
Quantity of Steam but not exceeding five hundred eighteen thousand
(518,000) pounds per hour of steam for use at Buyer's Plant. Buyer shall
pay for all such steam at the price set forth in Section 7.3. For
avoidance of doubt, Buyer shall be obligated
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to take and pay for all quantities of steam produced by the Facility up
to the Maximum Quantity of Steam. Buyer will utilize at least 100
MMBTU/hr of steam provided by Seller in Buyer's Plant in an industrial
process. The parties acknowledge that the steam production rate of the
Facility will vary depending on current ambient conditions, the condition
of the gas turbine generator relative to its maintenance cycle and the
rate of hydrogen production from the Facility. Exhibit F sets forth the
production levels of steam based on the operating level of the Facility.
The parties further acknowledge that steam can only be produced at rates
above 320,000 pounds per hour if the gas turbine generator is running,
the power produced by the gas turbine generator is equal to or greater
than 37,200 KW and hydrogen production from the Facility is equal to 100
MMSCFD. In no event shall Seller operate the Facility for the purpose of
producing steam in excess of the quantity that can be produced as a
by-product of the production of hydrogen and power, unless requested by
Buyer.
5.4 Hydrogen Requirements. In the event Buyer has requirements for
hydrogen in excess of the Internal Hydrogen Production (the "Hydrogen
Requirements"), Buyer shall purchase such Hydrogen Requirements from
Seller at the prices set forth in Section 7.4; provided hydrogen is
available for delivery to Buyer from the Facility (as reasonably
determined by Seller). For purposes of this Agreement, "Internal Hydrogen
Production" shall mean (i) the 84.8 MMSCFD of hydrogen which may be
produced by Buyer or Port Xxxxxx Xxxxx Company from their internal
sources at Buyer's Plant or Port Xxxxxx Xxxxx Company's Plant as set
forth in Cases 1 through 6 in Exhibit K and (ii) 6 MMSCFD (typical) of
hydrogen produced by the pressure swing adsorption unit and compressor
owned and operated by Seller within the battery limits of the Facility to
recover such 6 MMSCFD of hydrogen from Buyer's hydrotreater spill streams
(the "Spill Stream Hydrogen").
19
5.5 Power Production Rate. Seller shall operate the Facility to
produce and deliver power at reasonably uniform rates consistent with
Exhibit A. In the event it becomes necessary for Seller to reduce the
Facility power output, Seller will provide reasonable notice to Buyer's
authorized representative of such change, except in the event of an
emergency. Seller may interrupt deliveries of power hereunder if Seller
reasonably believes such delivery will cause an imminent physical threat
of danger to life, health or property of any party and if it needs to
perform maintenance or construction on its power generating facilities.
5.6 Steam Production Rate. Seller shall operate the Facility to
produce and deliver steam at a continuous rate up to the Maximum Quantity
of Steam. In the event it becomes necessary for Seller to reduce the
Facility's steam output, to the extent practical, Seller will provide
reasonable notice to Buyer's authorized representative of a steam rate
change if the change is greater than fifty thousand (50,000) pounds per
hour. Buyer shall utilize at Buyer's Plant the steam produced by Seller
from the Facility before Buyer utilizes any steam produced by Buyer from
its own facilities, excluding waste heat generated steam. Buyer will be
required to balance operations within Buyer's Plant in order to utilize
the steam produced by the Facility. Any quantities of steam (i) up to but
not exceeding the Maximum Quantity of Steam produced for Buyer hereunder
but not taken by Buyer for any reason, or (ii) which could have been
tendered by Seller but were not tendered due to Port Xxxxxx Xxxxx Company
failing to take the Minimum Quantity of Hydrogen shall be deemed to be
tendered by Seller to Buyer for purposes of this Agreement.
5.7 Scheduled Maintenance. The parties shall give each other as much
notice as is reasonably possible of scheduled maintenance periods at
their respective facilities that will affect
20
the ability of the parties to deliver or use Products, but in no event
shall such notice be less than sixty (60) Days. The parties shall use
commercially reasonable efforts to coordinate (i) maintenance shutdowns
at their respective facilities and (ii) any other maintenance activities
at such facilities that will affect the ability of either party to
operate its facilities. The parties acknowledge that the Facility will
require a scheduled maintenance period (i) no later than twelve (12)
months after the Commencement Date, lasting approximately ten (10) Days
in aggregate, and (ii) at approximately twenty-four (24) month intervals
thereafter lasting approximately ten (10) Days in aggregate for each
outage. In addition, the parties acknowledge that the gas turbine
generator will undergo maintenance in accordance with the schedule
attached hereto as Exhibit G. Seller shall make all reasonable efforts to
coordinate scheduled downtime of the gas turbine generator with scheduled
downtime of the steam methane reformer.
5.8 Operations Interface Meetings. The parties shall conduct, on at
least a quarterly basis, operations interface meetings to review (i)
upcoming events which may impact the parties, (ii) significant safety,
operational and quality changes, (iii) expected rate and feedstock
changes and (iv) any other parties related to this Agreement.
6. FEED AND FUEL SUPPLY TO THE FACILITY
6.1 Refinery Fuel Supply to the Facility. In each month during the
Supply Period, Buyer will provide refinery fuel gas to Seller for use at
the Facility for the production of hydrogen for Port Xxxxxx Xxxxx
Company. Buyer and for Seller's requirements for hydrogen for delivery
into the Pipeline Network, in accordance with Section 10.2 of Exhibit D.
21
6.1.1 In determining the value of refinery fuel provided to the
Facility by Buyer, the actual stream composition and heating value
shall be used.
6.1.2 Refinery fuel provided to the Facility by Buyer shall be
valued per MMBTU, HHV where each MMBTU of refinery fuel gas is
multiplied by an efficiency factor which shall be calculated in
accordance with Exhibit 1, the monthly sum of which hereinafter is
referred to as "Rfa". Rfa shall be valued on a monthly basis at the
unit price for natural gas for month n.
6.2 Natural Gas Supply to the Facility. Seller will supply or
arrange for the supply of natural gas to satisfy the requirements of the
Facility. The price for natural gas, "NG", shall be equal to the weighted
average actual unit cost of natural gas in dollars per MMBTU, higher
heating value (HHV), delivered to the Facility's inlet flange, including
all taxes, rounded off to three decimal places. Upon request, Seller
shall provide Buyer with access to any and all information forming the
basis for the calculation of Seller's price for natural gas, NG, for the
Facility.
7. PRICE
7.1 Base Facility Charge. During the Supply Period, Buyer shall pay
Seller monthly the following Base Facility Charge ("BFC") regardless of
the quantity of hydrogen taken by Buyer hereunder:
Spill Stream Hydrogen System $ 68.348/mo.
22
7.2 Power Charges. Buyer shall pay Seller each billing month a
capacity charge ("Capacity Charge"), an operations and maintenance charge
("O&M Charge"), a fuel charge ("Fuel Charge"), together known as the
"Power Charge" for the supply of power as follows:
PCn = (CCc + OMn) x ACFn - FCn x (GKWHn - FALKWHn)
------------------
0.95
Where:
PCn = The Power Charge for billing month n.
CCc = The monthly Capacity Charge of $321,333.
OMn = The monthly O&M Charge as calculated pursuant to Section
8.2.1 for billing month n.
ACFn = The Average Capacity Factor calculated on a rolling
average basis for the most recent 36 month period,
including the current billing month n, or for the actual
number of billing months since the Commencement Date if
less than 36 billing months have elapsed since the
Commencement Date, in accordance with Section 7.2.1.
FCn = The monthly Fuel Charge as calculated pursuant to
Section 8.2.2 for billing month n.
GKWHn = The gross KWH delivered by the Seller at the Generator
Terminal during billing month n.
FALKWHn = The total KWH consumed by Seller's Facility Auxiliary
Load as determined in accordance with Section 7.2.2 during
billing month n.
7.2.1 Average Capacity Factor. The Average Capacity Factor
shall be calculated at the end of each billing month as follows:
ACFn = ?GKWHn - ?FALKWHn
-------------------------------------------------------
(Committed Capacity - Facility Auxiliary Load) x ?BMH
Where:
?GKWHn = The cumulative sum of GKWHn, delivered by Seller to
Buyer for the most recent 36 billing month period,
including the current billing month n, or for the actual
number of billing months since the Commencement Date if
less than 36 billing months have elapsed since the
Commencement Date.
23
?FALKWHn= The cumulative sum of FALKWHn consumed by Seller for the
most recent 36 billing month period, including the current
billing month n, or for the actual number of billing
months since the Commencement Date if less than 36 billing
months have elapsed since the Commencement Date.
?BMH = The sum of (l) the total number of hourly periods in the
most recent 36 billing months, including the current
billing month n or for the actual number of billing
months since the Commencement Date if less than 36 billing
months have elapsed since the Commencement Date less (2)
the number of hourly periods in the above billing months
when the Seller was excused from delivering power due to
events of Force Majeure or Buyer being unable to receive
power from the Seller at the Delivery Point due to
maintenance, testing, or forced outages.
For avoidance of doubt, any partial hourly period is counted as one full
hourly period for purposes of this calculation. Notwithstanding the
foregoing, the Average Capacity Factor for the first twelve billing months
following the Commencement Date shall be deemed to be 95 percent.
Beginning with the thirteenth billing month following the Commencement
Date and for each billing month thereafter, the actual Average Capacity
Factor will be calculated. In the event that the actual Average Capacity
Factor calculated for the first twelve (12) billing months is greater or
less than ninety-five percent (95%), Seller shall retroactively adjust
the Power Charge payments Seller received for the first twelve (12)
billing months.
7.2.2 Monthly Facility Auxiliary Load. The Facility Auxiliary
Load shall include all load connected to the Seller's 4.16 KV
electrical distribution system except for the electric load associated
with (i) the Seller's two hydrogen compressors (CM-250A and CM-250B),
(ii) the Seller's spill gas compressor (CM-255), and (iii) a fixed
allowance of 32 KW per hour for all auxiliary loads required to
operate Seller's two hydrogen compressors and spill gas compressor.
The electric power metering arrangement to determine the Facility
Auxiliary Load KWH is
24
shown in Exhibit E.1. The KWH consumed by the Facility Auxiliary Load
each billing month is calculated as follows:
FALKWHn = TKWHn, (CAKWHn - CBKWHn - SGKWHn, + (32 KW x ABMHn))
Where:
FALKWHn = The total KWH consumed by the Facility Auxiliary Load for
billing month n.
TKWHn = The total KWH consumed by the Seller's 4.16 KV loads as measured
at the Seller's 4.16 KV switchgear as shown in Exhibit E.1 for
all hourly periods in billing month n excluding those hourly
periods when generator CG-500 is not operating.
CAKWHn = The total KWH consumed by Seller's product hydrogen compressor,
plant load CM-250A, as shown in Exhibit E.1 for all hourly
periods in billing month n excluding those hourly periods when
generator CG-500 is not operating.
CBKWHn = The total KWH consumed by Seller's product hydrogen compressor,
plant load CM-250B, as shown in Exhibit E.l for all hourly
periods in billing month n excluding those hourly periods when
generator CG-500 is not operating.
SGKWHn = The total KWH consumed by Seller's spill gas compressor, plant
load CM-255, as shown in Exhibit E.1 for all hourly periods in
billing month n excluding those hourly periods when generator
CG-500 is not operating.
ABMHn = The adjusted number of hourly periods in billing month n
excluding those hourly periods when generator CG-500 is not
operating.
Initially, the Facility Auxiliary Load is deemed to be 950 KW.
7.3 Steam Charge. During the Supply Period, Buyer shall pay Seller
monthly a charge of $3.50 for each 1,000 pounds per hour of steam (the
"Steam Charge") tendered by Seller to Buyer. At the end of each Contract
Year, to the extent that Buyer has paid for steam in excess of a rate of
436,000 pounds per hour averaged over the Contract Year, Seller shall
provide to Buyer a credit based on the average natural gas price for the
Contract Year. Such credit shall be calculated as follows:
25
Credit = [A - (436,000 x 8,760 x B)] x C
Where:
A = Quantity of steam actually invoiced in the Contract Year
B = The On-Stream Factor for the Contract Year as calculated
pursuant to Section 9.1 of the Hydrogen Supply Agreement
C = $3.50/1,000 pounds, adjusted for the average natural gas price
for the Contract Year
Notwithstanding the foregoing, in calculating "A," "A" shall not include
any quantities of steam specifically requested by Buyer to be produced by
the Facility in excess of those quantities which the Facility would
otherwise produce as a by-product of the production of hydrogen and
power. Prior to the Supply Period, during Facility commissioning and
start-up, Buyer shall purchase steam produced and delivered by Seller,
such steam to be at a charge of $2.50/l,000 pounds. This charge shall be
adjusted to reflect the cost of natural gas for the Facility in
accordance with the formula in Section 8.3.
7.4 Credit for Hydrogen Compression. To the extent Seller consumes
electric power for compression of hydrogen supplied into the Pipeline
Network, Seller shall credit Buyer for such power, whether such power was
produced by Seller or, during periods of gas turbine generator shutdown,
provided by Buyer to Seller. The credit shall be calculated monthly on
the basis of a specific power in KWH/MSCF, for hydrogen compression, in
accordance with the following:
Pipeline hydrogen compression credit = 1.184 KWH/MSCF x MSCFn x CPCn
26
Where:
MSCFn = Quantity of hydrogen in MSCF compressed and supplied into the
Pipeline Network for billing month n.
CPCn = Cost of power in $/KWH for billing month n; if supplied by
Seller, to be based on PCn divided by the sum of GKWHn minus
FALKWHn, or if supplied by Buyer, Buyer's incremental cost for
power for each billing Day.
7.5 Hydrogen Charge. During the Supply Period, Buyer shall pay Seller
monthly a charge of $1.585/MSCF for all Hydrogen delivered by Seller to Buyer
(the "Hydrogen Charge").
8. PRICE ADJUSTMENT
8.1 Base Facility Charge ("BFC"). The Base Facility Charge set forth in
Section 7.1 shall be adjusted each month after the Commencement Date as
follows:
BFCn = BFCo x [0.75 + 0.25 x (0.25 x PPIn/PPIc + 0.75 x Ln/Lc)]
Where:
BFCo = $68,348/month
BFCn = Base Facility Charge for billing month n
Ln = Employment Cost Index for billing month n
Lc = Employment Cost Index at the Commencement Date
PPIn = PPI for billing month n
PPIc = PPI at the Commencement Date
8.2 Power Charges. The Power Charge set forth in Section 7.1 shall be
adjusted as follows.
8.2.1 The O&M Charge shall be adjusted each month after the
Commencement Date and for the duration of the Supply Period in accordance
with the following formula:
27
OMn = OMo x [0.16 x LIn/LIc + .16 x Pn/Pc + .34 x Ln/Lc + 34 x PPIn/PPIc]]
Where:
OMn = O&M Charge for billing month n
OMc = $207.333/mo.
LIn = Labor Index for billing month n
LIc = Labor Index at the Commencement Date
Pn = Parts Index for billing month n
Pc = Parts Index for August 1998
PPIn = PPI for billing month n.
PPlc = PPI at the Commencement Date
Ln = Employment Cost Index for billing month n.
Lc = Employment Cost Index at the Commencement Date.
8.2.2 The Fuel Charge shall be adjusted at the Commencement Date and
monthly thereafter based on the average cost of natural gas consumed by
the Facility in accordance with the following formula:
FCn = FCo x (NGn/NGo)
Where:
FCn = Fuel Charge for billing month n
FCo = 50.0074/KWH
NGn = Average cost of natural gas for the Facility in billing month n
NGo = $2.25/MMBTU
8.3 Steam Charge. The Steam Charge ("SC") set forth in Section 7.3 shall
be adjusted monthly as follows:
SCn = SCo x (NGn/NGo)
Where:
SCn = Steam Charge for billing month n
SCo = $3.50 per one thousand pounds
NGn = Average cost of natural gas for the Facility in billing month n
NGo = $2.25/MMBTU
28
8.4 Hydrogen Charge ("HC"). The Hydrogen Charge set forth in Section 7.4
shall be adjusted monthly as follows:
HCn = HCo x [0.2 + .71 NGn/NGo - 0.09 x (0.8 x Ln/Lc + 0.2 x PPIn/PPIc)]
Where:
HCo = $l,585/MSCF
HCn = Hydrogen Charge for billing month n
NGn = Average cost of natural gas for the Facility in billing month n
NGo = $2.25/MMBTU
Ln = Employment Cost Index for billing month n
Lc = Employment Cost Index at the Commencement Date
PPIn = PPI for billing month n
PPIc = PPI at the Commencement Date
8.5 Indices. For purposes of Sections 8.1 through 8.4, the following
indices shall be used:
L = Employment Cost Index, Total Compensation, Private Industry
Workers, Professional Specialty and Technical, not seasonally
adjusted.
PPI = Producer Price Index, Chemical and Manufacturing Industries,
Machinery Equipment and Parts, Code 35591.
P = Producer Price Index, Steel Mill Products, 10-17.
LI = Average Weekly Earnings Index, SIC Code 3511 (Turbine).
8.6 Change of Indices. In the event any of the indices referred to in
Sections 8.1 through 8.5 cease to be published as constituted as of the
Effective Date hereof, the parties shall mutually agree upon a suitable
substitute index as required for purposes of this Article 8. In the event
either party believes an index no longer accurately reflects the intent of the
parties in choosing such index, such party may notify the other party of such
belief and the parties shall negotiate in good faith a substitute index. In no
event shall either party have the right to exercise such right more than one
(1) time every five (5) Contract Years. Seller shall use the most
29
recently available value (whether preliminary, estimated or final) for each
index at the xxxx Xxxxxx prepares each invoice.
8.7 Estimated Natural Gas Costs. In the event that the average actual
cost of natural gas for billing month n is not available at the time of
billing, then an estimated cost of natural gas may be used, such estimate to be
based upon the best natural gas volume and price information available at the
time; provided, however, if estimated costs are used, then an adjustment for
actual costs will be made no later than the next billing cycle following the
reasonable availability of such actual cost information.
9. PERFORMANCE GUARANTEE
9.1 Compression Performance. Seller guarantees that the two (2) product
hydrogen compressors (CM-250 A.B) which are part of the Facility will not
consume power in excess of 4,900 (+/- 3%) KW (measured at motor terminals) to
compress 100 MMSCFD of hydrogen (the "Base Power Allowance"). Buyer may
request that Seller conduct a performance test every two (2) Contract Years to
ensure that the compressors are not utilizing power in excess of the Base
Power Allowance. Such performance test shall be conducted by Seller based on
the performance test criteria mutually developed and agreed upon by the
parties. In the event such performance test proves that the compressors are
consuming power in excess of the Base Power Allowance, Seller will make the
repairs or corrections to the compressors necessary to cause the compressors
to perform in conformance with the Base Power Allowance. The Base Power
Allowance is based on a natural gas supply pressure of 525 psig at the
Facility's battery limit and in the event such pressure is less than 525 psig,
the guarantee set forth above shall be equitably adjusted.
30
10. TERMS OF PAYMENT
10.1 Invoicing. During the Supply Period, Seller shall deliver an invoice
to Buyer on or before the tenth (10th) Day of each calendar month (i) for
Quantities of Products delivered or deemed to be delivered in the preceding
calendar month in accordance with Article 5, and (ii) for other sums due
hereunder and related to the preceding calendar month (or calendar quarter, if
appropriate). Seller may deliver such invoice by mail, facsimile, electronic
data interchange or other mutually acceptable means. All payments due Seller
hereunder shall be made to Seller by electronic transfer at the location
indicated on the invoice, payable within thirty (30) Days from date of
invoice. It is agreed that the timely payment by Buyer of all undisputed
amounts due and owing to Seller hereunder is an express condition to the
continued performance by Seller of its obligations hereunder.
10.2 Interest Rate for Late Payments. All amounts payable hereunder if
not paid when due will accrue interest daily at the annual rate of interest
announced from time to time by The Chase Manhattan Bank, N.A. at its offices
located in New York, New York as its prime commercial interest rate for U.S.
Dollar-denominated loans originated in the United States plus two percent (2%)
calculated from the due date of such payment until the date of payment. In the
event an amount is subject to a valid dispute, interest will not accrue on
such amount if the dispute is resolved in favor of Buyer.
10.3 Recordkeeping; Access to Books and Records. Seller shall, in
accordance with good business practices, keep and maintain such books,
records, accounts and other documents which are sufficient to reflect
accurately and completely all amounts which form the basis for any invoice
submitted hereunder, including, without limitation, records maintained
pursuant to
31
Section 4.1.20 hereof. Buyer shall have the right to inspect and examine,
during regular business hours and on not less than ten (10) calendar Days
notice to Seller, all records maintained pursuant to this Section.
11. GOVERNMENT REQUIREMENTS
11.1 Government Requirements. If the facilities producing the Products
for delivery to Buyer hereunder must be modified, additional equipment must be
installed, or tests, studies or any other action must be undertaken with
respect to such facilities or their operations to comply with any anticipated,
proposed or final regulation, order, law, decree or other requirement of any
governmental authority ("Regulation") which in Seller's reasonable judgment
may require such modifications, tests or other action, Seller (or the facility
owner) will effectuate such modifications, tests or other action following (i)
in the case of a final Regulation, consultation with Buyer concerning the
anticipated costs and expenses thereof to confirm that there is not a more
cost effective manner to comply with such final Regulation or (ii) in the case
of an anticipated or proposed regulation, the consent of Buyer (which consent
shall not be unreasonably withheld); provided, however, that Seller shall have
given Buyer prompt notice of its knowledge of any proposed Regulation.
Notwithstanding the foregoing, in the event Buyer is responsible for any
obligation hereunder, Seller agrees (i) to refrain from objecting or in any
way opposing an application by Buyer to intervene before any regulatory body
or judicial forum in which the approval of such Regulation is at issue, or
otherwise fully participate before such body or forum, (ii) that if Buyer is
unable to intervene or participate on its own behalf before any regulatory
body or judicial forum in which the approval of such Regulation is at issue,
upon Buyer's request Seller shall intervene on Buyer's behalf at Buyer's
expense, (iii) that Buyer shall
32
have the right to pursue, or participate in, an appeal of any final Regulation
before the relevant legislative, judicial or government authority of competent
jurisdiction, and (iv) that if Buyer is unable to pursue an appeal of any
final Regulation on its own behalf, upon Buyer's request Seller shall pursue
an appeal on Buyer's behalf at Buyer's expense, except in each case (i)
through (iv), any action which Seller reasonably believes would have a
material adverse impact on Seller or its business. The parties agree to
cooperate with one another in order to minimize any costs and expenses
incurred pursuant to this Section. Buyer's Pro Rata Share of the total costs
and expenses of such modifications, tests or other action, including both
fixed and variable costs, additional operating costs, applicable overheads,
general and administrative expenses, financing charges and a reasonable fee,
all in accordance with Seller's normal accounting practices, shall be promptly
reimbursed to Seller by Buyer as such costs and expenses are incurred;
provided, however, that should the aggregate amount of Buyer's Pro Rata Share
of such costs and expenses related to any single Regulation exceeds $250,000,
Buyer shall promptly reimburse Seller an amount equal to $250,000 and
thereafter Seller and Buyer shall establish a mechanism for reimbursement of
the balance of such costs and expenses by Buyer through periodic payments over
the remainder of the Supply Period. Buyer shall have the right to audit at its
cost and at reasonable business hours all available supporting documentation
associated with such modifications prior to payment. Seller shall be
responsible for its share of any costs and expenses incurred pursuant to this
Section.
11.2 Contaminants. It is understood and contemplated by the parties that
the Facility is designed to use Utilities and air containing only normal
contaminants, as more fully described in Exhibit D, and therefore if
contaminants in the Utilities or air, or changes in the construction or
33
operation of facilities in or about Buyer's Plant, justify the relocation,
repair, modification or removal of any equipment comprising the Facility or
the installation of additional equipment, Seller shall notify Buyer, and at
Buyer's election, Seller shall either (i) make such relocation, repair,
modification, or removal or (ii) install such additional equipment. Buyer
shall reimburse Seller for any extra costs incurred and a reasonable fee all
in accordance with Seller's normal accounting practices as such costs are
incurred; provided, however, that should the aggregate amount of such extra
costs exceed $250,000, Buyer shall promptly reimburse Seller an amount equal
to $250,000 and thereafter Seller and Buyer shall establish a mechanism for
reimbursement of the balance of such costs by Buyer through periodic payments
over the remainder of the Supply Period. Buyer shall have the right to audit
at its cost and at reasonable business hours all available supporting
documentation associated with such reimbursement obligations prior to payment.
Seller shall be responsible for its share of any costs and expenses incurred
pursuant to this Section.
11.3 Licensing, Permits and Approvals. Each party shall obtain, in a
timely fashion, and maintain in effect, including all renewals and updates
thereof, any and all professional licenses, Permits or other government
approvals necessary for the performance of its obligations hereunder and any
activities related hereto, including, without limitation, air emissions
permits from the Texas Natural Resource Conservation Commission and, prior to
the date electric energy is first produced and delivered by the Facility
hereunder, an order from FERC certifying the Facility as a Qualifying
Facility, which order shall have become final and unappealable prior to such
date; provided, however, that Seller may self-certify the Facility in
accordance with Applicable Law in lieu of obtaining an order from FERC, unless
prohibited by FERC.
34
11.4 Compliance with Law and Prudent Industry Standards. Each party shall
perform its obligations hereunder and any activities related hereto in
compliance with all Applicable Laws and Permits and in accordance with
Prudent Industry Standards and shall not undertake any act or omission which
will cause the other party to fail to comply with Applicable Laws and Permits
and in accordance with Prudent Industry Standards. Without limiting the
generality of the foregoing, neither party shall undertake any act or omission
which would cause or be likely to cause it or the other party to be subject to
regulation as an "electric utility", "electric corporation", "electrical
company", "public utility", "retail electric utility", "retail electric
provider", "power generation company" or a "public utility holding company"
(as such terms may be revised from time to time) under any Applicable Laws (an
"Electric Utility").
12. TAXES
12.1 Seller shall bear and pay all federal, state, and local taxes based
upon or measured by its net income, and all franchise taxes based upon its
existence or its general right to transact business. The prices as stated
herein do not include any taxes, charges, or fees other than as stated in the
prior sentence. If any other taxes, charges or fees, now or hereafter imposed
by or under the authority of any federal, state or local law, rule or
regulation howsoever denominated and howsoever measured (including, but not
limited to, energy taxes, value added taxes, pollution or environmental taxes,
taxes on services, real estate taxes, sales and use taxes and ad valorem
taxes), are imposed on the Facility, the Facility Site, the inventory, or upon
the operation or maintenance of the Facility, or upon or measured by the
production, manufacture, storage, sale, transportation, delivery, use or
consumption of Products, Buyer's Pro Rata Share of such taxes, charges, or
fees shall be paid directly by Buyer, or if paid by Seller shall be invoiced
to
35
Buyer as a separate item and paid by Buyer to Seller. Seller shall be
responsible for its share of any taxes, charges or fees pursuant to this
Section.
12.2 Property Taxes and Payment in-lieu-of Tax Agreements. The parties
understand and agree that Seller has not independently negotiated or obtained,
and does not intend to independently negotiate or obtain, directly with any
taxing authority having jurisdiction or potential jurisdiction over the
Facility or Facility Site, any property tax relief, property tax abatements or
incentives, or agreements-in-lieu-of taxes, that would apply to the Facility,
the Facility Site or any of Seller's property to be located at the Facility
Site, it being understood by the parties hereto that Buyer has initiated such
matters directly and desires to continue such efforts. Buyer represents to
Seller that it has secured or is in the process of negotiating and obtaining
agreements (by assignment or otherwise) for payments-in-lieu-of taxes or
abatement of property taxes ("Property Tax Agreements") with the City of Port
Arthur, Jefferson County, the Port Xxxxxx Navigation Agency, Drainage District
Number 7, and perhaps other governmental authorities, which allow or will
allow Seller (and any assignee of Seller), Seller's Facility, the Facility
Site and Seller's (or an assignee's) property at the Facility Site, to be
included (by assignment, amendment or otherwise) under the terms of such
Property Tax Agreements. Based upon the foregoing, Buyer agrees that with
respect to property taxes, ad valorem taxes and any payments due under any
Property Tax Agreements that are imposed upon or arise in connection with the
construction, ownership, possession, operation or control of the Facility, the
Facility Site or Seller's (or an assignee's) property at the Facility Site,
Buyer hereby agrees that it shall be responsible for, as between Seller and
Buyer, Buyer's Pro Rata Share of property, ad valorem taxes and payments under
the Property Tax Agreements, and Buyer agrees
36
to reimburse Seller therefore and indemnify, defend and hold harmless Seller
therefrom. Seller agrees to reasonably cooperate with Buyer and Buyer agrees
to reasonably cooperate with Seller in obtaining Property Tax Agreements that
will include or cover Seller (and any assignee of Seller), the Facility,
Facility Site and Seller's (or an assignee's) property at the Facility Site
provided that (i) such cooperation shall be at Buyer's expense with respect to
third party costs, if any, and (ii) such cooperation shall not have an adverse
impact upon Seller (taking into account Buyer's obligations set forth in the
preceding sentence). Seller shall cooperate with Buyer to the extent
commercially reasonable to hire local contractors who are deemed by Seller to
be qualified to provide the services required.
13. FORCE MAJEURE
13.1 Definition. Neither party hereto shall be considered in default in
the performance of its obligations hereunder or be liable in damages for
failure or delay in performance which is due to Force Majeure, provided that
the excuse of performance shall be of no greater scope and no longer duration
than is reasonably required because of the Force Majeure. For purposes of this
Agreement, "Force Majeure" shall include any act or event that prevents or
delays the performance by either party of its obligations hereunder if and to
the extent (i) such act or event is beyond such party's reasonable control and
not the result of such party's fault or negligence, (ii) such party has been
unable to overcome the consequences of such act or event by the exercise of
reasonable commercial efforts, which may include the reasonable expenditure of
funds, and (iii) such party has given the other party notice within ten (10)
Days of such party's knowledge of the act or event giving rise to such Force
Majeure. Subject to the satisfaction of the foregoing conditions, Force
Majeure shall include, but not be limited to, the following acts or events, or
37
any similar and equally serious acts or events which prevent or delay the
performance by a party of its obligations hereunder: acts of God; acts of the
public enemy; acts by Seller, in the case of Buyer, or acts by Buyer or Xxxxx,
in the case of Seller; wars; sabotage; insurrections; riots; strikes; boycotts
or lockouts (except any such strike, boycott or lockout that involves Seller's
or Buyer's employees (as the case may be) and is not national or industry-wide
or is not caused by the other party's employees); a determination that such
party is subject to regulation as an Electric Utility under Applicable Law
(regardless of whether delivery of power is prevented); vandalism; blockages;
labor disputes; boycotts; fires; explosions; vapor releases; natural
disasters; floods; perils of the sea; lightning; wind; ability to obtain or
maintain any easement, rights-of-way, permit or license; actions of a court or
public authority (including the denial, revocation or nonrenewal of a permit,
certificate or license); accidents or failure of equipment or machinery; or
allocation or failure of normal sources of supply of materials,
transportation, energy or utilities or other causes of a similar or dissimilar
nature. Under no circumstances will inability to pay monies or other economic
difficulty on behalf of Buyer or Seller be construed to constitute Force
Majeure, frustration or impossibility of performance.
13.2 Efforts to Remedy. The affected party shall use all reasonable
efforts to remedy its inability to perform, except that neither party hereto
shall be required to bring to an end any strike or other concerted act of
workers.
13.3 Notice. The party affected by an event described in Section 13.1
shall, promptly upon learning of such event and ascertaining that it has
affected or will affect such party's performance hereunder, give notice to the
other party, stating the nature of the event, its anticipated duration and any
action being taken to avoid or minimize its effect.
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13.4 Payment. Nothing contained in Section 13.1 above shall relieve Buyer
of its obligation to pay any charges due hereunder.
14. WARRANTY
14.1 Conformance to Specification. Seller warrants that Products
delivered to Buyer shall conform to the specifications set forth in Sections
3.2 through 3.4, respectively and that at the time of delivery Seller shall
have good title and right to transfer the same and that the same shall be
delivered free and clear of any lien or other encumbrances.
14.2 Limitations. THE WARRANTIES SET FORTH IN SECTION 14.1 ARE IN LIEU OF
ALL OTHER WARRANTIES BY SELLER, EXPRESS OR IMPLIED, IN FACT OR BY LAW,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
15. LIMITATION OF LIABILITY
15.1 Determination of the suitability of the Products furnished
hereunder for the use contemplated by Buyer is the sole responsibility of
Buyer, and Seller shall have no responsibility in connection therewith.
15.2 Buyer acknowledges that there are hazards associated with the use of
the Products, that it understands such hazards, and that it is the
responsibility of Buyer to warn and protect its employees and others exposed
to such hazards through Buyer's use of the Products. Seller will provide Buyer
with copies of Material Safety Data Sheets relating to the Products for Buyer
to
39
make such warnings, and Buyer shall hold harmless, indemnify and defend Seller
from and against any liability incurred by Seller because such warnings were
not made. Buyer assumes all risk and liability for loss, damages or injury to
persons or to property of Buyer or others arising out of the presence or use
of the Products or from the failure to make such warnings. Seller acknowledges
that there are hazards associated with the use of the Utilities, that it
understands such hazards, and that it is the responsibility of Seller to warn
and protect its employees and others exposed to such hazards through Seller's
use of the Utilities. Buyer will provide Seller with copies of Material Safety
Data Sheets relating to the Utilities for Seller to make such warnings, and
Seller shall hold harmless, indemnify and defend Buyer from and against any
liability incurred by Buyer because such warnings were not made. Seller
assumes all risk and liability for loss, damages or injury to persons or to
property of Seller or others arising out of the presence or use of the
Utilities or from the failure to make such warnings.
15.3 Buyer acknowledges that it can obtain and install devices to sample
the Products delivered to determine its compliance with specifications prior
to use.
15.4 SELLER'S SOLE LIABILITY AND BUYER'S SOLE AND EXCLUSIVE REMEDY FOR
THE NON-DELIVERY OF PRODUCTS OR FOR THE DELIVERY OF PRODUCTS NOT CONFORMING TO
SPECIFICATIONS SHALL BE LIMITED TO THE DIRECT DAMAGES TO THE EQUIPMENT, PLANT
AND FACILITIES OWNED BY BUYER; PROVIDED, HOWEVER, THAT SUCH LIABILITY SHALL
ONLY BE APPLICABLE TO SUCH DAMAGES THAT ARE INCURRED BY BUYER AND ONLY TO THE
EXTENT SUCH DAMAGES ARE PROVEN BY BUYER TO BE CAUSED BY SELLER'S FAILURE TO
DELIVER PRODUCTS OR FOR THE DELIVERY OF PRODUCTS
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NOT CONFORMING TO SPECIFICATIONS SET FORTH HEREIN AND SUCH OBLIGATION SHALL
NOT EXCEED THE PURCHASE PRICE OF THE PRODUCT TO WHICH SUCH CLAIM RELATES.
BUYER SHALL USE ALL REASONABLE EFFORTS TO MITIGATE ANY DAMAGES WHICH MAY BE
THE RESPONSIBILITY OF SELLER HEREUNDER.
15.5 EXCEPT AS EXPRESSLY PROVIDED IN SECTION 15.4, SELLER SHALL NOT BE
LIABLE IN CONTRACT OR TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE OR STRICT
LIABILITY) FOR ANY OTHER DIRECT DAMAGES. NOTWITHSTANDING ANYTHING HEREIN TO
THE CONTRARY, BUT EXCEPT IN THE CASE OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SELLER, SELLER SHALL NOT BE LIABLE IN CONTRACT OR TORT
(INCLUDING WITHOUT LIMITATION NEGLIGENCE OR STRICT LIABILITY) FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING BY WAY OF
ILLUSTRATION AND NOT OF LIMITATION, LOSS OF USE, LOSS OF WORK IN PROCESS, DOWN
TIME OR LOSS OF PROFITS, AND SUCH LIMITATION ON DAMAGES SHALL SURVIVE FAILURE
OF AN EXCLUSIVE REMEDY.
15.6 Claims for non-delivery of Product or delivery of non-specification
Product shall be void unless notification is given to Seller's operating
personnel promptly upon discovery and confirmed in writing by Buyer within
five (5) working Days thereafter.
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16. BUYER'S OBLIGATIONS
16.1 Facility Site. In consideration of the mutual obligations of this
Agreement, Buyer shall lease to Seller, pursuant to the Lease Agreement, a
suitable site at Buyer's Plant meeting Applicable Laws for the location of the
Facility, along with the right of ingress and egress thereto for the
installation, operation, maintenance, repair, replacement and removal of such
Facility.
16.2 Site Preparation. Buyer shall provide Product and Utility
distribution lines and other services in accordance with Exhibit D. Buyer
shall also provide at no cost a suitable lay down area for use by Seller
during construction of the Facility.
16.3 Hydrogen Pipeline Easement and Right of Way. In consideration of the
mutual obligations of this Agreement, Buyer shall grant to Seller, for the
duration of the Lease Agreement, without cost to Seller, a pipeline
right-of-way, in or along Buyer's Plant along a reasonable and mutually
agreeable routing to allow Seller to install a hydrogen pipeline to connect
the Facility to the Pipeline Network along with the right to ingress and
egress to and from the pipeline and easement for the installation, operation,
maintenance, repair, replacement and removal. Buyer agrees to execute any
documents that may be required under the laws of the State of Texas to
effectuate the recordation of these rights-of-way and easements which shall be
outlined in Exhibit Contractor.
16.4 Permits. Buyer agrees to assist Seller as reasonably requested in
any activity related to Seller's obligations under Section 11.3.
16.5 Utilities and Services. Buyer shall provide to Seller the Utilities
set forth in Exhibit D. The parties explicitly agree that the obligation to
supply the Utilities shall survive and continue after the termination or
expiration of this Agreement prior to its stated term for a
42
period equal to two hundred forty-six (246) months from the Commencement Date
in the event such termination or expiration is not due to Seller's acts or
omissions and for so long as Seller has continuing obligations to supply
hydrogen under the Hydrogen Supply Agreement.
17. TERMINATION
17.1 Termination for Default. This Agreement may be terminated by either
party on account of any material default of the other in carrying out the
terms hereof; provided, however, that if the party so in default shall, within
sixty (60) Days after written notice thereof from the other party, cure such
default or prepare a program to effect such cure and thereafter diligently
pursue such program to completion within a reasonable period of time, then in
either case the right of termination shall be nullified and shall be of no
effect; provided further, however, that the curing of any such default shall
not affect the right to terminate this Agreement as aforesaid in the event of
subsequent material defaults. In addition to the cure rights granted to Buyer
in this Section 17.1, Port Xxxxxx Xxxxx Company shall have the right, but not
the obligation, to cure any material default by Buyer hereunder within the
cure period described in this Section 17.1.
17.2 Termination Following Initial Term. Either party may terminate this
Agreement as of the expiration of the Initial Term or the expiration of any
anniversary date thereafter by giving not less than thirty-six (36) months'
prior written notice to the other party.
17.3 Termination for Lack of Requirements. Buyer may terminate this
Agreement for lack of requirements for Products following Contract Year 10 if
Buyer's management reasonably determines that Buyer's use of Products at
Buyer's Plant will permanently cease following such determination and Port
Xxxxxx Xxxxx Company concurrently terminates the Hydrogen Supply
43
Agreement in accordance with Section 17.3 thereof. Such right of termination
shall be exercisable at any time following Contract Year 10 by Buyer giving
Seller twelve (12) months' prior written notice thereof and paying to Seller
on the date such termination becomes effective the applicable Termination
Payment set forth in Section 17.3.1. The Termination Payment shall be made by
Buyer on the effective date of termination. If the effective date of
termination does not occur at the start of a Contract Year, the Termination
Payment will be determined by a straight-line interpolation between the
Termination Payments for the applicable two (2) Contract Years. In no event
shall termination of this Agreement under this Section limit or affect Buyer's
obligations under Section 18.1.
17.3.1 Schedule of Termination Payments.
Years Remaining in Supply Period Termination Payment ($)
10 54,394,500
9 50,579,500
8 46,412,500
7 41,862,000
6 36,892,500
5 31,549,500
4 25,864,000
3 19,759,000
2 13.094,000
1 7,750,000
17.4 Certain Events Related to Termination.
17.4.1 In the event the Hydrogen Supply Agreement between Seller and
Port Xxxxxx Xxxxx Company is terminated or expires prior to its stated
term, Buyer shall have the right to assume each and every obligation of
Port Xxxxxx Xxxxx Company under the Hydrogen Supply Agreement upon twenty
(20) Days prior written notice to Seller. In the event Buyer does not
44
exercise its rights in this Section 17.4.1, Seller shall have the right
to (i) terminate this Agreement if it is not reasonably practical for
Seller to continue to operate the Facility or if such continued
operations would cause Seller to violate any Applicable Laws or Permits
or (ii) increase the price of Products to be paid by Buyer hereunder to
fully compensate Seller for any costs or expenses incurred by Seller to
continue to operate the Facility to supply Products under this Agreement.
18. ASSIGNMENT
18.1 Upon notice to Buyer, any or all of the Seller's rights, title and
interest under this Agreement (including without limitation any payments by
Buyer hereunder) may be assigned by Seller to an affiliate, a joint venture
company in which Seller or its affiliate is general partner or in which Seller
owns at least fifty percent (50%) of any equity, or to any bank, trust
company, insurance company, financial institution or other entity or groups
thereof under the terms of financing arrangements. In the event of an
assignment in the prior sentence, the assignor shall execute for the benefit
of the other party hereunder a guarantee or similar agreement guaranteeing the
performance of the obligations hereunder by the assignee. This Agreement shall
not otherwise be assignable or transferable by either Buyer or Seller without
the prior written consent of the other, which consent will not be unreasonably
withheld, and any attempted assignment or transfer without such consent shall
be void. All covenants and provisions of this Agreement shall bind and/or
inure to the benefit of the respective successors and permitted assigns of the
parties. In the event of the sale, lease or transfer of all or any portion of
Buyer's Plant which utilizes Products, Buyer will assign its interest in this
Agreement to such other entity
45
who will assume all of Buyer's obligations hereunder, subject to the rights
contained in this Section 18.1.
19. NOTICE
19.1 Manner of Giving Notice. Unless herein provided to the contrary, any
notice called for in this Agreement shall be in writing and shall be
considered as having been given when delivered to the U.S. Postal Service,
properly addressed and with all postage charges prepaid by registered or
certified mail, when delivered to an overnight courier with proof of delivery
or when faxed with proof of transmission, with all charges prepaid, to either
party at the address designated, or by actual delivery to either party. Unless
changed in writing, the addresses of the parties are as follows:
Air Products and Chemicals, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Corporate Secretary
FAX No. (000) 000-0000
Xxxxx Refining & Marketing, Inc.
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Legal Department
FAX No. (000) 000-0000
19.2 Other Communications. All communications given under this Agreement
other than those notices and other writings specifically governed by Section
19.1, shall be given in a manner such that the communication is likely to be
received in a timely manner by a responsible representative of the receiving
party.
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19.3 Change in Addressee. Either party shall have the right at any time
to notify the other in writing of a different addressee to whom a particular
type of notice or other writing is to be sent under this Article.
20. INDEMNIFICATION
20.1 BUYER AND ITS AGENTS, EMPLOYEES, AND AFFILIATES SHALL RELEASE
SELLER AND ITS AGENTS, EMPLOYEES, AND AFFILIATES FROM AND SHALL INDEMNIFY,
DEFEND AND HOLD SELLER AND ITS AGENTS, EMPLOYEES, AND AFFILIATES HARMLESS
AGAINST ANY COSTS, LOSSES, LIABILITIES, CLAIMS, EXPENSES, DEMANDS, ACTS, SUITS
AND CAUSES OF ACTION OF EVERY KIND AND NATURE (WHETHER IN CONTRACT, TORT OR
OTHERWISE), INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEY'S FEES, ARISING
FROM OR RELATED TO PERSONAL INJURY OR PROPERTY DAMAGE INCURRED BY BUYER, ITS
AGENTS, EMPLOYEES, AND AFFILIATES IN CONNECTION WITH ACTIVITIES ARISING FROM
OR RELATED TO THIS AGREEMENT, THE HYDROGEN SUPPLY AGREEMENT OR THE LEASE
AGREEMENT, REGARDLESS OF WHETHER SUCH INJURY OR DAMAGE IS CAUSED IN WHOLE OR
IN PART BY THE NEGLIGENCE OF SELLER, ITS AGENTS, EMPLOYEES, AND AFFILIATES BUT
EXCLUDING, HOWEVER, PERSONAL INJURY OR PROPERTY DAMAGE CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER, ITS AGENTS, EMPLOYEES, AND
AFFILIATES OR ARISING OUT OF OR RELATED TO ANY ENVIRONMENTAL MATTER FOR WHICH
SELLER IS OBLIGATED TO INDEMNIFY BUYER PURSUANT TO THE LEASE AGREEMENT. THIS
INDEMNIFICATION SHALL APPLY
47
NOTWITHSTANDING ANY LIMITATIONS ARISING OUT OF WORKERS' COMPENSATION OR OTHER
LIKE STATUTES AND SHALL SURVIVE TERMINATION OF THIS AGREEMENT.
20.2 SELLER AND ITS AGENTS, EMPLOYEES, AND AFFILIATES SHALL RELEASE BUYER
AND ITS AGENTS, EMPLOYEES, AND AFFILIATES FROM AND SHALL INDEMNIFY, DEFEND AND
HOLD BUYER AND ITS AGENTS, EMPLOYEES, AND AFFILIATES HARMLESS AGAINST ANY
COSTS, LOSSES, CLAIMS, EXPENSES, DEMANDS, ACTS, SUITS AND CAUSES OF ACTION OF
EVERY KIND AND NATURE (WHETHER IN CONTRACT, TORT OR OTHERWISE), INCLUDING,
WITHOUT LIMITATION, REASONABLE ATTORNEY'S FEES, ARISING FROM OR RELATED TO
PERSONAL INJURY OR PROPERTY DAMAGE INCURRED BY SELLER, ITS AGENTS, EMPLOYEES,
AND AFFILIATES IN CONNECTION WITH ACTIVITIES ARISING FROM OR RELATED TO THIS
AGREEMENT, THE HYDROGEN SUPPLY AGREEMENT OR THE LEASE AGREEMENT, REGARDLESS OF
WHETHER SUCH INJURY OR DAMAGE IS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE
OF BUYER, ITS AGENTS, EMPLOYEES, AND AFFILIATES BUT EXCLUDING, HOWEVER,
PERSONAL INJURY OR PROPERTY DAMAGE CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF BUYER, ITS AGENTS, EMPLOYEES, AND AFFILIATES OR ARISING OUT OF
OR RELATED TO ANY ENVIRONMENTAL MATTER FOR WHICH BUYER IS OBLIGATED TO
INDEMNIFY SELLER PURSUANT TO THE LEASE AGREEMENT. THIS INDEMNIFICATION SHALL
APPLY NOTWITHSTANDING ANY LIMITATIONS
48
ARISING OUT OF WORKERS' COMPENSATION OR OTHER LIKE STATUTES AND SHALL SURVIVE
TERMINATION OF THIS AGREEMENT.
20.3 At all times during the terms of this Agreement, each party shall
obtain, at its own individual expense and with deductibles, casualty, public
liability, environmental liability, property damage and other types of
insurance which are normal and customary in such party's industry protecting
such party from liability arising out of operations in relation to this
Agreement. Each party shall cause such insurance policies to be endorsed to
waive all express or implied rights of subrogation against the other party and
its agents, employees and affiliates to effectuate the intent of this Article.
Each party shall have the right to self-insure, on a funded or unfunded
basis, for all or any part of the coverages required under this Section as it
may solely determine, provided (i) such levels of self-insurance are
consistent with good industry practice and (ii) it maintains a net worth of at
least $50 million ($50,000,000) as demonstrated by independently audited
financial statements or other reasonably verifiable means. For purposes of the
foregoing net worth calculation, the net worth of Air Products and Chemicals,
Inc. shall be used in such calculation as to Seller.
21. CONFIDENTIALITY
Each party (the "receiving party") shall hold in confidence and not
disclose to any third party all technical and business information (the
"Confidential Information") disclosed to the receiving party from the other
party (the "delivering party") or developed by the delivering party for
delivery to the receiving party, except (a) Confidential Information which is
in or becomes, without fault of receiving party, part of the public domain;
(b) Confidential Information which
49
the receiving party can show was received by it from an independent third
party that is under no obligation to the delivering party regarding the
Confidential Information; (c) Confidential Information which the receiving
party can show was already in its possession at the time the Confidential
Information was made available to it, directly or indirectly, from the
delivering party; (d) Confidential Information required to be disclosed by law
or valid legal or regulatory process, following notice by the receiving party
to the delivering party of the requirement to disclose and reasonable
cooperation with any attempt by the delivering party to maintain the
confidentiality of such Confidential Information; or (e) Confidential
Information the disclosure of which is consented to by the other party. The
foregoing provisions shall continue in force and effect during the term of
this Agreement and for a period of five (5) years following any termination or
expiration of this Agreement. The parties agree that the terms and conditions
set forth in this Agreement shall be considered Confidential Information for
purposes of this Section. In the event any Confidential Information is
disclosed to a third party (including shareholders, direct and indirect
providers of equity capital, representatives, legal counsel, accountants,
investment bankers, commercial bankers or other professional consultants), in
accordance with the provisions hereof, such third party shall agree in writing
to be bound by the provisions hereof and the receiving party and delivering
party shall agree to such other terms and conditions, including
indemnification protection of the delivering party, as reasonably requested by
the delivering party.
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22. DISPUTE RESOLUTION
22.1 Arbitration. The parties shall endeavor to resolve any dispute
arising out of or relating to this Agreement by mediation under the rules and
guidelines of the American Arbitration Association. Any controversy or claim
arising out of or relating to this Agreement or the breach, termination or
validity thereof, which remains unresolved forty-five (45) Days after the
appointment of a mediator, shall be settled by arbitration by three
arbitrators in accordance with the rules and guidelines of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.
22.2 Submission to Jurisdiction. Each of the parties hereto submits to
the jurisdiction of the courts of the State of New York and the courts of the
United States of America located in the State of New York over any suit,
action or proceeding with respect to this Agreement or the transactions
contemplated hereby or the enforcement of any arbitral award in connection
therewith.
22.3 Forum Selection. Except for an arbitration proceeding under Section
22.1, any suit, action or proceeding with respect to this Agreement or the
transactions contemplated hereby, or the enforcement of any arbitral award in
connection therewith, may be brought only in the courts of the State of New
York or the courts of the United States of America located in the State of New
York, in each case located in the Borough of Manhattan, City of New York,
State of New York. Each of the parties hereto waives any objection that it may
have to the venue of such suit, action or proceeding in any such court or that
such suit, action or proceeding in such court was brought in an inconvenient
court and agrees not to plead or claim the same.
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22.4 Appointment of Agent for Service of Process. Each party shall take
any and all action as may be necessary to appoint and maintain an agent in the
State of New York for service of process so long as this Agreement is in
effect. In the event a party does not already maintain such an agent, such
party hereto irrevocably appoints CT Corporation, at 0000 Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, as its authorized agent in the State of New York upon which
process may be served in any suit, action or proceeding with respect to this
Agreement or the transactions contemplated hereby, and agrees that service of
process upon such agent, and written notice of said service to such party by
the person serving the same to the address provided in Article 19, shall be
deemed in every respect effective service of process upon such party in any
such suit or proceeding.
23. GENERAL PROVISIONS
23.1 Entire Agreement; etc. This Agreement, including all exhibits
incorporated herein by reference, constitutes the entire agreement between the
parties hereto, supersedes all previous agreements and understandings, whether
oral or written, relating to the subject matter hereof, and may not be changed
or modified orally.
23.2 Headings. The headings used in this Agreement are for reference
purposes only and do not constitute substantive matter to be considered in
construing the terms of this Agreement.
23.3 Governing Law. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of New York.
52
23.4 Modification. This Agreement, including the Exhibits hereto, may be
amended or modified from time to time only by an instrument in writing signed
by both parties, and shall not be modified by any course of performance,
course of conduct or usage of trade.
23.5 Severability. In the event that any provision of this Agreement
shall be held invalid or unenforceable under the laws of the State of New
York, or any municipality or governmental entity whose substantive laws may
apply to this Agreement, or under any rules or regulations promulgated by any
governmental authority thereof, the remainder of this Agreement or the
application of the provisions hereof to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby. The remedies set forth herein are exclusive of any remedy available
by operation of law or equity.
23.6 Conflicts. In the event of any conflict between this Agreement and
any Exhibit or attachment hereto that is not reconcilable, the provisions of
this Agreement shall apply.
23.7 Waiver. No waiver by Buyer or Seller of any default of the other
party under this Agreement will operate as a waiver of any subsequent default,
whether of a like or different character.
23.8 Equitable Adjustment. If and to the extent that any court or
governmental authority of competent jurisdiction holds any part of provisions
of this Agreement to be invalid or unenforceable, the parties will equitably
adjust the provisions of this Agreement with a view toward effecting its
purposes; such holding will not affect the validity or effectiveness of the
other provisions of this Agreement, which will remain in full force and
effect.
53
23.9 Exhibits. Each Exhibit referred to in this Agreement is incorporated
into this Agreement and made a part hereof by such reference. All obligations
of any party under any such Exhibit will be considered as obligations under
this Agreement.
23.10 Preparation. Drafting and negotiations of this Agreement have been
participated in by each party hereto, and not by either party to the exclusion
of the other and for all purposes this Agreement shall be deemed to have been
drafted jointly by the parties.
23.11 Execution. This instrument may be executed in separate original
counterparts but which will constitute one and the same Agreement.
23.12 Liquidated Damages not a Penalty. The parties acknowledge and agree
that in each instance where liquidated damages are provided for as the remedy
of the non-defaulting party in this Agreement, such party's actual damages are
difficult to measure, such liquidated damages are reasonable compensation to
the non-defaulting party for its damages and such liquidated damages are not a
penalty. Nothing set forth in this Agreement shall limit or affect either
party's right to assert an action for price or payment for Utilities or
Products described hereunder.
23.13 Cooperation for Financing. Each party agrees to cooperate with the
other party in its efforts to obtain financing by executing any consents or
similar agreements or providing information reasonably necessary by such party
to obtaining financings, subject to compliance with Article 21 hereof. Such
cooperation would include, to the extent necessary, a party's assignment to
such lenders of this Agreement and accommodation of lender's reasonable
requests regarding performance of any obligations hereunder.
54
23.14 Relationship of the Parties. Nothing in this Agreement shall be
deemed to constitute either party hereto a partner, joint venturer, agent or
legal representative of the other party or to create any fiduciary
relationship between or among the parties. This Agreement is intended solely
for the benefit of Seller and Buyer and their respective affiliates and is not
intended to confer any benefits upon, or create any rights in favor of, any
other entity or person, except that any assignee of either party shall have
the rights and obligations and be bound by the terms and conditions set forth
herein upon assignment in accordance with Article 18 hereof.
23.15 Interpretation of Certain Terms. In this Agreement, the singular
shall include the plural and the masculine shall include the feminine and
neuter, as the context requires, and "include," "includes" and "including"
shall mean include [includes] [including], without limitation.
24. REPRESENTATIONS
24.1 Representations by Buyer. Buyer represents and warrants to Seller as
of the Effective Date that:
24.1.1 Buyer is a corporation duly formed and validly existing under
the laws of the State of Delaware; Buyer has the power and authority to
own its assets and to transact the business in which it is now engaged or
proposed to be engaged in; and Buyer is duly qualified to do business in
each jurisdiction in which the character of the properties owned by it
therein or in which the transaction of its business makes such
qualification necessary.
24.1.2 The execution, delivery and performance by Buyer of this
Agreement has been duly authorized by all necessary corporate action and
does not and will not: (i) require any further consent or approval of the
management or Board of Directors of Buyer; (ii) contravene Buyer's
55
certificate of incorporation, by-laws or other organizational or
governing documents of Buyer; (iii) violate any provision of any
Applicable Law presently in effect having applicability to Buyer; (iv)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any indenture or loan or credit agreement
or any other agreement, lease or instrument to which Buyer is a party or
by which it or its properties may be bound or affected; or (v) result in,
or require, the creation or imposition of any lien, upon or with respect
to any of the properties now owned by Buyer, except, in each case, for
such matters for which non-compliance with the foregoing would not have a
material adverse effect on Buyer.
24.1.3 This Agreement is the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
moratorium, insolvency or other similar laws affecting creditors' rights
generally and by general equitable principles (whether enforcement is
sought by proceedings in equity or at law).
24.2 Representation by Seller. Seller represents and warrants to Buyer as
of the Effective Date that:
24.2.1 Seller is a corporation duly formed and validly existing
under the laws of the State of Delaware; Seller has the power and
authority to own its assets and to transact the business in which it is
now engaged or proposed to be engaged in; and Seller is duly qualified to
do business in each jurisdiction in which the character of the properties
owned by it therein or in which the transaction of its business makes
such qualification necessary.
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24.2.2 The execution, delivery and performance by Seller of the
Agreement has been duly authorized by all necessary corporate action and
does not and will not: (i) require any further consent or approval of the
management or the Board or Directors of Seller; (ii) contravene Seller's
certificate of incorporation, by-laws or other organizational or
governing documents of Seller; (iii) violate any provision of any
Applicable Law presently in effect having applicability to Seller; (iv)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any indenture or loan or credit agreement
or any other agreement, lease or instrument to which the Seller is a
party or by which it or its properties may be bound or affected; or (v)
result in, or require, the creation or imposition of any lien, upon or
with respect to any of the properties now owned by Seller, except, in
each case, for such matters for which non-compliance with the foregoing
would not have a material adverse effect on Seller.
24.2.3 This Agreement is the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except
to the extent that such enforcement may be limited by applicable
bankruptcy, moratorium, insolvency, or other similar laws affecting
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
25. DEFINiTIONS
Except as otherwise herein provided, the following words and/or terms as
used hereunder shall have the following meaning:
25.1 "Agreement" means this agreement dated the first date set forth
herein between Seller and Buyer, as may be amended from time to time.
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25.2 "Applicable Law" means all laws, treaties, ordinances, judgments,
decrees, injunctions, writs, orders and stipulations of any court, arbitrator
or governmental agency or authority and statutes, rules, regulations, orders
and interpretations thereof of any federal, state, county, municipal,
regional, environmental or other governmental body, instrumentality, agency,
authority, court or other body applicable from time to time to either parties'
facilities, or the operation or maintenance, or the performance of any
obligations by either party under this Agreement or any other agreement
entered into in connection herewith.
25.3 "Average Capacity Factor" shall have the meaning given such term in
Section 7.2.1.
25.4 "Base Power Allowance" shall have the meaning given such term in
Section 9.1.
25.5 "Billing Computer" shall have the meaning given such term in Section
4.2.2.
25.6 "Buyer" shall have the meaning given such term in the introductory
paragraph of this Agreement.
25.7 "Buyer's Plant" shall have the meaning given such term in the first
WHEREAS clause.
25.8 "Buyer's Pro Rata Share" shall mean one hundred percent (100%) of
any charge, expense, cost, fee or tax that is calculable or measurable,
directly or indirectly, by the Products sold to Buyer, and in any other case,
8l.13% of such charge, expense, cost, fee or tax in the event Port Xxxxxx
Xxxxx Company does not pay such charge, expense, cost, fee or tax.
25.9 "Capacity Charge" shall have the meaning given such term in Section
7.1.
25.10 "Commencement Date" shall have the meaning given such term in
Section 2.1.
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25.11 "Committed Capacity" shall mean the annual levelized KW capacity of
37,200 KW made available at the Generator Terminal from the Commencement Date
through the remaining Supply Period of this Agreement which the Seller has
agreed to make available to Buyer at the Generator Terminal at the Average
Capacity Factor.
25.12 "Confidential Information" shall have the meaning given such term
in Article 21.
25.13 "Contract Year" means the period commencing on the Commencement
Date and ending twelve (12) months thereafter and each twelve (12) month
period thereafter.
25.14 "Day" means a twenty-four (24) hour period commencing at midnight
(12:00 am) local time on one day and ending at the same time on the following
day and such day shall bear the date of the day on which it commences.
25.15 "Delivery Point" shall have the meaning given to such term in
Section 3.1.
25.16 "Delivering party" shall have the meaning given such term in
Article 21.
25.17 "Effective Date" is defined as set forth in the introductory
paragraph of this Agreement.
25.18 "Facility" shall have the meaning given in the second WHEREAS
clause.
25.19 "Facility Auxiliary Load" shall have the meaning given such term in
Section 7.2.2.
25.20 "Facility Site" shall have the meaning given such term in Section
1.1.
25.21 "Financing Documents" means all documents entered into by Port
Xxxxxx evidencing or securing the financing of Port Arthur's Plant dated on or
about 15 August 1999.
25.22 "Force Majeure" shall have the meaning given such term in Section
13.1.
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25.23 "Fuel Charge" shall have the meaning given such term in Section 7.1.
25.24 "Generator Terminal" shall mean the Seller's KW and KWH metering
point located in Seller's 13.8 kV switchgear for Seller's gas turbine generator
where the gross output of the gas turbine generator unit is measured.
25.25 "HHV" shall have the meaning given such term in Section 4.2.1.
25.26 "Hydrogen Charge" shall have the meaning given such term in Section
7.4.
25.27 "Hydrogen Requirements" shall have the meaning given such term in
Section 5.4.
25.28 "Hydrogen Supply Agreement" shall mean that certain Hydrogen Supply
Agreement between Seller and Port Xxxxxx Xxxxx Company dated the date hereof,
as it may be amended from time to time.
25.29 "Initial Term" shall have the meaning given such term in Section
2.1.
25.30 "Internal Hydrogen Production" shall have the meaning given such
term in Section 5.4.
25.31 "KW" means one (1) kilowatt of electric capacity.
25.32 "KWH" shall have the meaning given such term in Section 4.2.1.
25.33 "Lease Agreement" shall have the meaning given such term in Section
1.1.
25.34 "Mgal" shall have the meaning given such term in Section 4.2.1.
25.35 "Mlbs" shall have the meaning given such term in Section 4.2.1.
25.36 "MMBTU" shall have the meaning given such term in Section 4.2.1.
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25.37 "Maintenance Hours" shall mean those hours each Contract Year
designated by the Seller when the Facility is closed for inspection, testing,
repair and/or maintenance; provided, however, that the Seller can declare no
more than 438 Maintenance Hours in a normal Contract Year and no more than 600
Maintenance Hours in a Contract Year when the Seller has scheduled a 48,000
Hour Inspection in accordance with Exhibit G.
25.38 "Maximum Quantity of Power" shall have the meaning given such term
in Section 5.1.
25.39 "Maximum Quantity of Steam" shall have the meaning given such term
in Section 5.3.
25.40 "MSCF" means one thousand SCF.
25.41 "MMSCFD" means one million SCF per Day.
25.42 "NG" shall have the meaning given such term in Section 6.2.
25.43 "O&M Charge" shall have the meaning given such term in Section 7.1.
25.44 "Permits" means any waiver, exemption, variance, franchise, permit,
authorization, license or similar order of or from any federal, state, county,
municipal, regional, environmental or other governmental body,
instrumentality, agency, authority, court or other body having jurisdiction
over either party's facility, or the performance of either party of any
obligation under this Agreement or any other agreement in connection herewith.
25.45 "Pipeline Network" means the pipeline system connected to the
Facility and constructed, owned or operated by Seller or its affiliates, which
is used to transport hydrogen in Texas.
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25.46 "Port Xxxxxx Xxxxx Company" shall mean the Port Xxxxxx Xxxxx
Company, L.P., a Delaware limited partnership.
25.47 "Port Xxxxxx Xxxxx Company Plant" shall mean the facilities and
equipment owned and operated by Port Xxxxxx Xxxxx Company in Port Xxxxxx,
Texas.
25.48 "Power Charge" shall have the meaning given such term in Section
7.1.
25.49 "Product Delivery Points" shall mean those points where Products are
delivered from Seller to Buyer hereunder, as shown on Exhibit D.
25.50 "Products" shall have the meaning given in the first WHEREAS
clause.
25.51 "Property Tax Agreements" shall have the meaning given such term in
Section 12.2.
25.52 "Prudent Industry Standards" means those practices, methods,
equipment specifications and standards of safety and performance, as the same
may change from time to time, as are commonly used in facilities in the United
States of a type and size similar to the facility in question.
25.53 "Psig" means pounds per square inch gauge.
25.54 "Qualifying Facility" means a cogeneration facility meeting the
operational, efficiency, ownership and other requirements to be a "qualifying
cogeneration facility" as defined in the Public Utility Regulatory Policies
Act of 1978, as amended ("PURPA") and in Part 292 of the rules and regulations
of the Federal Energy Regulatory Commission ("FERC") under PURPA.
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25.55 "receiving party" shall have the meaning given such term in Article
21.
25.56 "Regulation" shall have the meaning given such term in Section
11.1.
25.57 "Rfa" shall have the meaning given such term in Exhibit I.
25.58 "SCF" shall have the meaning given such term in Section 4.2.1.
25.59 "SCFD" means an instantaneous rate of flow of a gas which would be
equivalent to one SCF of that gas if continued for twenty-four (24) hour
period.
25.60 "Seller" shall have the meaning given such term in the introductory
paragraph of this Agreement.
25.61 "Spill Stream Hydrogen" shall have the meaning given such term in
Section 5.4.
25.62 "Start-up Damages Cap" shall mean an aggregate amount equal to One
Million One Hundred Fifty-five Thousand Dollars ($1,l55,000).
25.63 "Start-up Date" shall mean 6 December 2000.
25.64 "Steam Charge" shall have the meaning given such term in Section 7.
25.65 "Supply Period" shall have the meaning given such term in Section
2.1.
25.66 "Utilities" shall have the meaning given such term in Section 1.2.
25.67 "Utility Assets" shall have the meaning given such term in Section
1.2.
25.68 "Utility Delivery Points" shall mean those points where Utilities
are delivered from Seller to Buyer hereunder, as shown on Exhibit D.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the Effective Date.
XXXXX REFINING & MARKETING, INC. AIR PRODUCTS AND CHEMICALS, INC.
By: /s/ Xxxxx Xxxxx By: /s/ Xxxx X. XxXxxxx
--------------------------------- ------------------------------
Title: EVP and CFO Title: Vice President
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