EXHIBIT 10.2
LETTER AGREEMENT FOR GAS MANAGEMENT SERVICES
This letter agreement sets forth the agreement and understanding between
Indigenous Global Development Corporation (IGDC), and DMJ Gas Marketing
Consultants, LLC (DMJ), collectively "the parties", for the purpose of
supporting IGDC's natural gas operations pursuant to the following terms and
conditions:
OBJECTIVES OF SERVICES:
The primary objective of services provided in this Letter Agreement is to
enhance the profitability of IGDC's natural gas production through efficient
operations and enhanced gas sales opportunities. The secondary objective is to
reduce counterparty credit risk by diversifying from one to several (two to
four) potential buyers for IGDC's gas each month.
DMJ is neither a gas broker nor gas marketer. DMJ is acting exclusively as an
authorized limited agent for IGDC, providing scheduling services, imbalance
services, marketing intelligence, and marketing assistance.
SCOPE OF SERVICES:
A. Contract Administration
(Items 1 and 2 are in the event IGDC has California produced natural gas
for sale.)
1. PG&E California Production Balancing Agreement (CPBA). DMJ shall
facilitate implementation of a CPBA between PG&E and IGDC. DMJ shall
further administer the terms and conditions of the CPBA on behalf of
IGDC during the term hereof.
2. PG&E Gas Transmission Service Agreement (GTSA). DMJ shall facilitate
implementation of GTSA between PG&E and IGDC. DMJ shall further
administer the terms and conditions of the GTSA during the term
hereof. IGDC shall either place a deposit with PG&E or demonstrate
adequate creditworthiness with PG&E to allow use of the GTSA to
transport IGDC's gas from the CPBA to the PG&E Citygate (Silverado
transportation). IGDC shall authorize DMJ to nominate gas under the
terms of the GTSA.
(Items 3 and 4 pertain to all gas available for sale by IGDC)
3. Gas Sales Agreements. DMJ shall facilitate implementation of gas sales
agreements with at least four buyers, creditworthy to IGDC, to provide
IGDC multiple opportunities for gas sales. Said agreements shall be by
and between IGDC and the buyer. DMJ shall in no way take title to or
independent control of any gas associated with its services to IGDC.
DMJ shall arrange that all daily, monthly, and longer-term transaction
agreements are properly in place subject to IGDC granting DMJ limited
authority to act on IGDC's behalf and that all applicable transaction
information is available to DMJ.
4. Natural Gas Financial-Only Transactions. Upon request, DMJ shall
assist IGDC to obtain agreements to purchase financial-only,
fixed-for-index price swaps or other financial gas derivative
products.
B. Marketing Assistance
1. Beyond facilitating implementation of gas sales agreements stated
above, upon IGDC's request, DMJ shall actively promote gas sales to
IGDC approved buyers under stated IGDC sales criteria. Said sales
criteria may be modified by IGDC at any time for future transactions.
Such criteria may specify various prices and terms such as daily,
monthly, multi-month, fixed, indexed, and others desirable to IGDC.
2. The parties shall use their best efforts to support oral
communications between each other with written confirmations, either
by fax or email.
3. Upon request by IGDC, DMJ shall provide IGDC with relevant market
intelligence held by DMJ such as NYMEX data, basis data, gas industry
publication pricing data, and other information pertaining to
prospective transaction for IGDC.
4. DMJ accepts no liability for the financial outcome of sales
transactions entered into by IGDC, whether IGDC acted under DMJ's
guidance or not.
- 1 -
C. Management of Production Imbalances
1. DMJ shall monitor and record IGDC's natural gas production rates. IGDC
shall make production data accessible to DMJ at least twice per week.
2. DMJ shall monitor and record the ongoing balance between IGDC's actual
gas production and gas scheduled. DMJ shall notify IGDC at times when
IGDC's monthly production- to-scheduled imbalance becomes greater than
ten percent (10%).
3. DMJ shall be available to assist IGDC with monthly management of
month-end imbalances between actual production and gas scheduled into
the pipeline or otherwise sold at the wellhead master meter. DMJ
assistance may include, but not be limited to, soliciting trading
counterparties, administering trades, and preparing necessary
paperwork for IGDC's approval and execution. Following IGDC's
guidelines, DMJ shall seek counterparties each month to trade
imbalances and negotiate prices for the imbalances and conduct the
trades on IGDC's behalf. Prior to trading each month, DMJ shall inform
IGDC of current market conditions, expected value for imbalance gas,
and expected value of carrying imbalances forward versus selling or
buying. DMJ shall then proceed based on the outcome of the discussions
with IGDC. All imbalance payments shall be made to and from IGDC.
Every effort will be made to keep IGDC within the 10% tolerance, but
in the event IGDC needs to buy imbalance gas, IGDC is aware that
prepayment may be required from the counterparty.
4. DMJ accepts no liability for the financial outcome of imbalance trades
which it makes on behalf of IGDC. Furthermore, DMJ assumes no
responsibility for representing the creditworthiness of IGDC or other
parties, or for lack of payment from purchases of IGDC's imbalances.
D. Gas Scheduling Services
1. DMJ shall initiate and maintain nominations on IGDC's transportation
contracts. DMJ shall perform gas nomination services in compliance
with all applicable pipeline standards, which includes DMJ being
available seven days per week to schedule gas.
2. DMJ shall schedule gas in accordance with IGDC's sales agreements, and
shall maintain accounting of daily deliveries to IGDC's customers.
3. DMJ shall coordinate nominations with IGDC counterparties in a timely
manner.
E. Customer Invoices
1. At IGDC's request, DMJ shall prepare and deliver gas supply invoices
to IGDC's customers as specified by the terms of the IGDC sales
agreements with its customers. DMJ is prepared to meet the following
requirements:
a. Create invoices on IGDC letterhead.
b. Issue invoices by the 10th of each month.
c. Fax or email, then send original by first class U.S. Mail
d. Invoices contain customer name, month of deliveries, quantity
delivered, billing rates, billing amount, payment instructions,
and contact name and number at DMJ and/or IGDC to call for
invoice questions.
2. As stated above, DMJ shall respond to invoice inquiries from IGDC
customers.
Fees:
1. IGDC shall pay DMJ two and a half cents ($.025) per MMBtu for all gas sold
and scheduled each month. It is expected that a portion of this volume will
be baseloaded to a market at first of month prices, either indexed or
fixed. In addition, this $.025 fee will apply to any volumes of gas sold at
a fixed price for a period of longer than 30 days.
2. For additional volumes above the baseloaded amount per day, IGDC will pay
DMJ two and a half cents ($.025) per MMBtu scheduled, and IGDC and DMJ
shall share in any trading profits per the attached tiered fee schedule
(attachment A). Trading profits are defined as profits resulting in a trade
on the daily gas market that receives IGDC a higher value than the first of
the month baseloaded price. This includes the value of any gas traded in
the imbalance market.
IGDC and DMJ will engage in frequent, often daily, communication to determine
IGDC's best interests as to optimizing the value of the gas production.
- 2 -
Payment:
1. DMJ shall xxxx IGDC on a monthly basis. Payment is due 10 days after
receipt of the invoice.
2. Payment shall be made via check to :
DMJ Gas Marketing Consultants
0000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxx, XX 00000
TERM:
1. This Letter Agreement shall commence Apr 1, 2005, or upon signing, and
shall continue for an initial term of six (6) months, ending Sep 30, 2005.
2. Following the initial 6 month term, if no written termination notice is
received, this Letter Agreement shall continue month to month thereafter.
TERMINATION:
1. Either party may terminate this Letter Agreement at the end of the initial
term by providing at least 30 days prior written notice to the other party.
2. If IGDC fails to pay invoices timely, DMJ shall be entitled to terminate
this Letter Agreement with ten days notice. Such termination shall not
limit any other remedy available to DMJ.
3. If DMJ fails to perform the services outline herein, IGDC shall be entitled
to terminate this Letter Agreement subject to providing written notice of
DMJ deficiency. DMJ will have 10 days to cure deficiency. If deficiency is
not cured, then IGDC may terminate this Letter Agreement.
CONFIDENTIALITY:
DMJ and IGDC recognize and agree that during the term, both will gain access to
certain information critical to the ongoing business operations of each entity.
This may include, but not be limited to, customers, clients, and supplier
identities, transportation arrangements and terms, and conditions of certain
contractual arrangements relative to the above. Both parties to this Letter
Agreement specifically agree to keep any and all suck information strictly
confidential throughout the term defined hereunder and subsequent to the
termination of this Letter Agreement.
WARRANTY:
DMJ shall perform all services with due diligence in a good workmanlike manner
under generally accepted industry professional standards and, where applicable,
standards imposed by law for comparable or similar services. All materials
incorporated into services shall be of good quality.
INDEMNIFICATION:
IGDC agrees to indemnify DMJ and hold it harmless from all losses, liabilities,
or claims including attorney's fees and costs of court ("Claims"), from any and
all persons, arising from or out of claims associated with agreements between
IGDC and its customers and/or supplies. DMJ agrees to indemnify and save it
harmless from all Claims, from any and all persons, arising from or out of
claims directly between DMJ, its customers, suppliers, and employees.
FORCE MAJEURE:
During declared force majeure events associated with IGDC gas supply or by IGDC
customers, DMJ shall act in a manner consistent with IGDC supply and delivery
agreement and pipeline delivery standards. The clear objective will be to
minimize operational impacts on IGDC and its customers. DMJ will prepare for
IGDC and immediate assessment of any force majeure impact including volumes of
gas affected, projected duration of the force majeure event to the extent
information is available to DMJ, and operational alternatives.
- 3 -
INDEPENDENT CONTRACTOR:
In performing under this Letter Agreement, DMJ shall act at all times as an
independent contractor. DMJ shall not make any commitment or incur any charge or
expense that is not explicitly authorized by IGDC.
DMJ expressly agrees, acknowledges, and stipulates that neither this Letter
Agreement nor the performance of it obligations or duties hereunder shall ever
result in DMJ, or anyone employed by DMJ, being:
A. An employee of IGDC or agent for IGDC (unless otherwise agreed to by
both parties); or
B. Entitled to any benefits from IGDC, including, without limitation,
pension, profit sharing, accident insurance, or health, medical, life,
or disability insurance benefits or coverage, to which employees of
IGDC are entitled.
The sole and only compensation and/or benefit of any nature to which DMJ shall
be entitled are the payments provided for herein. IGDC shall have no direction
or control of DMJ or its employees and agents; however, IGDC may from time to
time inspect work performed by DMJ on IGDC's behalf. The actual performance and
supervision of all services shall be by DMJ, but the services shall meet the
approval of IGDC.
CHOICE OF LAW:
This Letter Agreement and all matters associated with it shall be interpreted
under the laws of the State of California.
NOTICES:
Any formal notice, request or demand that either party gives to the other
respecting this Letter Agreement shall be in writing and shall be mailed by
registered or certified mail or delivered in hand to the following address of
the other party:
Indigenous Global Devl. Corp. IGDC
000 Xxxx Xx., Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxx
DMJ Gas Marketing Consultants DMJ Gas Marketing Consultants, LLC
0000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxx Xxxxx
SIGNATURES:
The parties accept the terms and conditions herein, and are duly authorized to
execute this Letter Agreement for Gas Management Services.
Indigenous Global Development Corporation
By: /s/ Xxxx Xxxxxxx
---------------------------------
Name: Xxxx Xxxxxxx
Title: Chairman/CEO
Date: 09/28/04
DMJ Gas Marketing Consultants, LLC
/s/ Xxxx Xxxxx
---------------------------------
President
- 4 -
