HECO Exhibit 10.9(a)
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AGREEMENT RELATING TO
INTER-ISLAND INDUSTRIAL FUEL OIL
AND DIESEL FUEL SUPPLY CONTRACT
THIS AGREEMENT (hereinafter "Agreement") is made as of the 29th day of
October, 1999, by and between HAWAIIAN ELECTRIC COMPANY, INC. ("HECO"), a Hawaii
corporation whose principal place of business and address is 000 Xxxxxxxx
Xxxxxx, Xxxxxxxx, Xxxxxx 00000, MAUI ELECTRIC COMPANY, LIMITED ("MECO"), a
Hawaii corporation whose principal place of business and address is 000
Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxx, Xxxxxx 00000, HAWAII ELECTRIC LIGHT COMPANY,
INC. ("HELCO"), a Hawaii corporation whose principal place of business and
address is 0000 Xxxxxxx Xxxxxx, Xxxx, Xxxxxx 00000, HAWAIIAN TUG & BARGE CORP.
("HTB"), a Hawaii corporation whose principal place of business and address is
Xxxx 00, Xxx 0000, Xxxxxxxx, Xxxxxx 00000, YOUNG BROTHERS, LIMITED ("YB"), a
Hawaii corporation whose principal place of business and address is Xxxx 00, Xxx
0000, Xxxxxxxx, Xxxxxx 00000, SALTCHUK RESOURCES, INC. ("Saltchuk"), a
Washington corporation whose principal place of business and address is 0000
Xxxxxxxx Xxx. Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000 and MOANA PA'A KAI, INC., a
Hawaii corporation formed or being formed by Saltchuk (referred to herein as
"Moana").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, HECO, MECO, HELCO (collectively, the "Utilities"), HTB and YB
are parties to that certain Inter-Island Industrial Fuel Oil and Diesel Fuel
Supply Contract with Chevron U.S.A. Inc. ("Chevron"), dated as of November 14,
1997 (hereinafter the "Fuel Contract"); and
WHEREAS, HTB, YB, and Hawaiian Electric Industries, Inc. ("HEI"), have
entered into a stock purchase agreement with Saltchuk dated August 4, 1999
whereby HTB will sell to Saltchuk all of the issued and outstanding capital
stock of YB (the "Stock Purchase Agreement") and HEI and HTB have entered into
an asset purchase agreement with Saltchuk also dated August 4, 1999, whereby HTB
will sell certain of the other assets of HTB to Saltchuk (the "Asset Purchase
Agreement"); and
WHEREAS, under the Asset Purchase Agreement HTB will assign to Moana
the interests of HTB under the Fuel Contract (hereinafter the "Assignment"); and
WHEREAS, it is contemplated by the Stock Purchase Agreement and the
Asset Purchase Agreement (the "Purchase Agreements") that this Agreement will be
entered into by the parties hereto, with the provisions hereof to become
effective on the closing date of the transactions contemplated by the Purchase
Agreements (the "Closing Date");
NOW, THEREFORE, in consideration of these premises and of the mutual
promises herein contained, the parties hereto hereby agree as follows:
I. ASSIGNMENT; FURTHER ASSIGNMENT.
Subject to obtaining such consents or approvals as shall be required from
Chevron, and subject to the terms and conditions of this Agreement, HECO, MECO
and HELCO hereby consent to the assignment of HTB's interests under the Fuel
Contract to Moana. After such assignment, neither the Fuel Contract nor the
interests of YB and Moana thereunder shall be further assigned by YB or Moana
without the consent of the Utilities and Chevron.
II. QUANTITIES; AMENDMENTS.
By letter of even date herewith, (the "Notification/Consent Letter") HTB
and YB shall notify Chevron (in accordance with section 3.1 of the Fuel
Contract) that the annual physical quantities of Diesel to be purchased by YB
and Moana in the aggregate under the Fuel Contract shall be a minimum of 0
barrels and a maximum of 78,000 barrels. Such notification shall be effective
on the Closing Date. Thereafter, neither YB nor Moana shall (a) make any change
to the individual minimum or maximum annual physical quantities of Diesel
specified in such letter to be purchased by YB and/or Moana, nor (b) make any
other change under the Fuel Contract that is not contemplated by this Agreement,
nor (c) commence any negotiations with Chevron with respect to amendment or
other modification of the Fuel Contract, without the express prior written
consent of the Utilities, which consent may be granted or denied in the
Utilities' sole discretion. The Utilities may amend or otherwise modify the
Fuel Contract with the consent of Chevron and without the consent of YB or
Moana, provided they do not thereby breach any provision of this Agreement and
provided further that the consent of YB and Moana shall be required for any
amendment which materially and adversely affects their rights or obligations
under the Fuel Contract (which consent shall not be unreasonably withheld). YB
and Moana may also negotiate a new, separate contract with Chevron, without the
consent of the Utilities, provided that such new contract shall become effective
only upon termination of YB's and Moana's interests under the Fuel Contract.
III. FORECAST.
Prior to the 15th day of each calendar month, YB and Moana, individually
and collectively, shall provide to HECO a forecast of monthly liftings of Diesel
(as that term is defined in the Fuel Contract) for the coming three calendar
months, in order that HECO can meet its obligations under section 3.2 of the
Fuel Contract. YB and Moana agree to update HECO of any change in their lifting
forecast as soon as it shall become known. Within fifteen (15) business days
after the end of each calendar month, YB and Moana shall furnish HECO a schedule
of the volume of Diesel purchased on behalf of their vessels and others for the
referenced period.
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IV. RATABILITY.
Assignees' liftings of Diesel will occur in a reasonably ratable fashion
throughout the calendar year. The maximum volume of Diesel purchased by YB and
Moana in any calendar quarter shall in no case exceed an amount equivalent to
35% of their total actual purchases for the calendar year in question.
V. TERM, TERMINATION AND DEFAULT.
Section 5.1. Term.
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The term of this Agreement shall commence on the Closing Date and shall be
void and of no force or effect in the event the transactions contemplated by the
Purchase Agreements are not closed. If this Agreement becomes effective, it
shall continue in full force and effect until the earlier to occur of (a)
December 31, 2001 or such later date as the Utilities in their sole discretion
shall agree in writing, if Chevron consents to the termination of the interest
of YB and Moana on such date as requested in the Notification/Consent Letter or
(b) termination of the interests of YB and Moana in accordance with the
provisions of Article II hereof or the provisions of the Fuel Contract;
provided, however, that any such termination shall not relieve any party of any
obligations under the Fuel Contract or this Agreement arising or accruing prior
to the date of such termination.
Section 5.2. Optional Termination of YB's and Moana's Interests by HECO.
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Notwithstanding any other provision to the contrary, each of YB and Moana
acknowledge and agree that HECO may terminate YB's and Moana's respective
interest in the Fuel Contract if YB and Moana is in default of any obligation
under the Fuel Contract or this Agreement.
Section 5.3. Mandatory Reduction of Purchases by YB and Moana.
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YB and Moana each agrees to that if for any reason their interests under
the Fuel Contract have not been terminated on or before December 31, 2001, the
aggregate maximum annual physical quantities of Diesel to be purchased by them
during the remaining term of the Fuel Contract shall be 0 barrels unless the
Utilities shall before such date agree in writing, in their sole discretion,
that such maximum shall be a greater number of barrels.
VI. INDEMNITY.
Section 6.1. No Joint and Several Liability.
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Each of the parties hereto acknowledges and agrees that any liability of
the parties to the Fuel Contract shall be individual and not joint and several.
Each party to the Fuel Contract shall be responsible for its own actions,
including without limitation any
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negligence or breach of contract, and all direct, indirect, consequential,
special and incidental damages, losses, penalties and claims arising therefrom.
Section 6.2. Indemnity.
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(a) YB and Moana, jointly and severally, shall indemnify, defend and hold
harmless HECO, MECO, HELCO and each of their respective directors, officers,
employees and agents (including but not limited to affiliates and contractors
and their employees) from and against all liabilities, damages, losses,
penalties, claims, demands, suits, costs, expenses (including reasonable
attorneys' fees and costs), and proceedings of any nature whatsoever for
personal injury (including death), or property damage, including but not limited
to HECO's, MECO's or HELCO's facilities (collectively, "Injury or Damage"), that
results from non-specification or contaminated Diesel in the custody or control
of YB or Moana or that arises out of or is in any manner connected with the
delivery or receipt of Diesel when in the custody or control of YB or Moana, any
carrier for YB or Moana or subsequent buyer from YB or Moana of Diesel related
to the Fuel Contract, except to the extent that such Injury or Damage may be
attributable to the negligence or willful action of the party seeking indemnity.
(b) Without limiting the generality of Section 6.2.(a), YB and Moana,
jointly and severally, shall indemnify, defend and hold harmless HECO, MECO,
HELCO and each of their respective directors, officers, employees and agents
(including but not limited to affiliates and contractors and their employees)
from and against all liabilities, damages, losses, penalties, claims, demands,
suits, costs, expenses and proceedings of any nature whatsoever directly or
indirectly arising out of or attributable to the release, threatened release,
discharge, disposal or presence of Diesel or hazardous material related to the
Fuel Contract when in the custody of YB or Moana, any carrier for or subsequent
buyer from YB or Moana of Diesel related to the Fuel Contract, except to the
extent that such release, threatened release, discharge, disposal or presence of
Diesel or hazardous material may be attributable to the negligence or willful
action of the party seeking indemnity, including without limitation: (1) all
foreseeable and unforeseeable consequential damages; (2) the reasonable costs of
any required or necessary repair, cleanup or detoxification of any area of
Diesel or hazardous material and the preparation and implementation of any
closure, remedial or other required plans; (3) the reasonable costs of
investigation of any environmental claims by the party seeking indemnity; (4)
the reasonable costs of HECO's enforcement of the Fuel Contract and this
Agreement by the party seeking indemnity; and (5) all reasonable costs and
expenses incurred by the party seeking indemnity in connection with clauses (1),
(2), (3) and (4), including without limitation reasonable attorneys' fees and
court costs.
(c) HECO, MECO, HELCO, jointly and severally, shall indemnify, defend and
hold harmless YB and Moana and each of their respective directors, officers,
employees and agents (including but not limited to affiliates and contractors
and their employees) from and against all liabilities, damages, losses,
penalties, claims, demands, suits, costs,
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expenses (including reasonable attorneys' fees and costs), and proceedings of
any nature whatsoever for personal injury (including death), or property damage,
including but not limited to YB's or Moana's facilities (collectively, "Injury
or Damage"), that results from non-specification or contaminated Diesel in the
custody or control of HECO, MECO or HELCO or that arises out of or is in any
manner connected with the delivery or receipt of Diesel when in the custody or
control of HECO, MECO or HELCO, any carrier for HECO, MECO or HELCO or
subsequent buyer from HECO, MECO or HELCO of Diesel related to the Fuel
Contract, except to the extent that such Injury or Damage may be attributable to
the negligence or willful action of the party seeking indemnity.
(d) Without limiting the generality of Section 6.2.(c), HECO, MECO or
HELCO, jointly and severally, shall indemnify, defend and hold harmless YB,
Moana and each of their respective directors, officers, employees and agents
(including but not limited to affiliates and contractors and their employees)
from and against all liabilities, damages, losses, penalties, claims, demands,
suits, costs, expenses and proceedings of any nature whatsoever directly or
indirectly arising out of or attributable to the release, threatened release,
discharge, disposal or presence of Diesel or hazardous material related to the
Fuel Contract when in the custody of HECO, MECO or HELCO, any carrier for or
subsequent buyer from HECO, MECO or HELCO of Diesel related to the Fuel
Contract, except to the extent that such release, threatened release, discharge,
disposal or presence of Diesel or hazardous material may be attributable to the
negligence or willful action of the party seeking indemnity, including without
limitation: (1) all foreseeable and unforeseeable consequential damages; (2)
the reasonable costs of any required or necessary repair, cleanup or
detoxification of any area of Diesel or hazardous material and the preparation
and implementation of any closure, remedial or other required plans; (3) the
reasonable costs of investigation of any environmental claims by the party
seeking indemnity; (4) the reasonable costs of YB's or Moana's enforcement of
the Fuel Contract and this Agreement by the party seeking indemnity; and (5) all
reasonable costs and expenses incurred by the party seeking indemnity in
connection with clauses (1), (2), (3) and (4), including without limitation
reasonable attorneys' fees and court costs.
(e) Nothing in this Section 6.2 is intended to diminish in any respect the
indemnity obligations of Chevron under the Fuel Contract.
VII. CONFIDENTIALITY.
YB and Moana shall keep the terms of this Agreement and the Fuel Contract
in strictest confidence and shall not disclose them to any other party without
the prior written consent of the Utilities, which consent may be withheld in the
Utilities' sole discretion.
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VIII. INSURANCE.
YB and Moana shall each maintain all of the insurance specified in Article
XX of the Fuel Contract. The insurance specified in Sections 20.1(ii),
20.1(iii) and 20.1(v) Option One shall name the Utilities as additional
insureds. On or prior to the Closing Date, YB and Moana shall provide HECO with
certificates of insurance or other documentary evidence satisfactory to HECO of
the insurance coverages and endorsements required by Article XX of the Fuel
Contract and by this Article VIII.
IX. MISCELLANEOUS PROVISIONS.
Section 9.1. Headings of Articles and Sections.
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Headings of Articles and sections are for convenient reference only and are
not considered part of this Agreement.
Section 9.2. Entire Agreement.
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This Agreement contains the entire agreement between the parties covering
the subject matter and cancels all prior agreements of any kind covering such
subject matter and any amendments thereto.
Section 9.3. Notice.
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Except as otherwise expressly provided herein, all notices shall be given
in writing, by letter, facsimile, or electronic mail to the following addresses,
or such other address as the parties may designate by notice, and shall be
deemed given upon receipt.
HECO, MECO, HELCO: Manager, Power Supply Services Department
Hawaiian Electric Company, Inc.
X.X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000-0000
Fax: (000) 000-0000
HTB: Financial Vice President
Hawaiian Electric Industries, Inc.
X.X. Xxx 000
Xxxxxxxx, Xxxxxx 00000
YB: President
Young Brothers, Limited
Xxxx 00, Xxx 0000
Xxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
Saltchuk: President
Saltchuk Resources, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
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Moana: President
Saltchuk Resources, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Section 9.4. Court Rulings.
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If any term or provision, or any part of any term or provision, of this
Agreement is held by any court or other competent authority to be illegal or
unenforceable, the remaining terms, provisions, rights and obligations shall not
be affected.
Section 9.5. Binding Effect.
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This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors and permitted assigns.
Section 9.6. Governing Law.
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This Agreement shall be governed by and construed in accordance with the
laws of the State of Hawaii.
Section 9.7. Contract Administration
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HECO shall act as an agent of YB and Moana with respect to the compilation
of market price data, computation of the monthly price of Diesel, obtaining the
agreement of Chevron to the price of the Diesel, and other operational and
contract administration issues. HECO shall issue a monthly notice showing the
Diesel price calculation, substantially in the same format as the current "HTB
Diesel Prices" notice. It is expressly agreed and understood that YB and Moana
shall reimburse HECO for one-quarter of the cost of an annual subscription to
"Xxxxx'x Oilgram Price Report" or its successor publication used in the
determination of the Diesel price, and shall reimburse HECO for labor and other
non-labor costs reasonably incurred by HECO in the performance of the monthly
Diesel price determination and other administrative activities with respect to
the Fuel Contract. YB and Moana shall promptly notify HECO of any and all
disputes with Chevron that arise relating to the Fuel Contract, including
without limitation disputes regarding delivery operations, safety issues,
pollution mitigation, Diesel quality, Diesel quantity, invoicing, payment and
the like.
Section 9.8. Affiliated Entity Filing.
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Although this Agreement shall become effective only upon the closing or the
Closing Date, after which neither YB nor Moana will be an affiliate of HECO,
MECO or HELCO, the parties hereto nevertheless agree that the Agreement shall be
submitted promptly after the date hereof to the Public Utilities Commission
under Hawaii Revised Statutes (S) 269-19.5.
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Section 9.9. No Resale or Unauthorized Use.
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It is expressly understood and agreed that the Diesel is provided for the
exclusive use of YB and Moana and that its intended use is as a fuel for marine
vessels in a non-vehicular application.
IN WITNESS WHEREOF, the parties have caused these presents to become
effective as of the day and year first written above.
HAWAIIAN ELECTRIC COMPANY, INC. ("HECO") HAWAIIAN TUG & BARGE CORP. ("HTB")
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxx K. Y. Hong
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Its Vice President Its President
MAUI ELECTRIC COMPANY, LIMITED ("MECO") YOUNG BROTHERS, LIMITED ("YB")
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxx K. Y. Hong
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Its Vice President Its President
HAWAII ELECTRIC LIGHT COMPANY, SALTCHUK RESOURCES, INC.
INC. ("HELCO") ("Saltchuk")
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
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Its Vice President Its Vice President
MOANA PA'A KAI, INC. ("Moana")
By: /s/ Xxxxx K. Y. Hong
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Its President
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