1
EXHIBIT 10.11
GAS SALE AND PURCHASE AGREEMENT
between
EASTERN AMERICAN ENERGY CORPORATION
"SELLER"
and
SENECA POWER PARTNERS, L.P.
"BUYER"
DATE: March 27, 1991
2
TABLE OF CONTENTS
PAGE NO.
--------
Article I Definitions . . . . . . . . . . . . . . . . . . . 2
Article II Volumes . . . . . . . . . . . . . . . . . . . . . 3
Article III Price . . . . . . . . . . . . . . . . . . . . . . 4
Article IV Billing and Payment . . . . . . . . . . . . . . . 5
Article V Point of Delivery . . . . . . . . . . . . . . . . 7
Article VI Term . . . . . . . . . . . . . . . . . . . . . . . 7
Article VII Taxes . . . . . . . . . . . . . . . . . . . . . . 8
Article VIII Measurement . . . . . . . . . . . . . . . . . . . 8
Article IX Quality . . . . . . . . . . . . . . . . . . . . . 9
Article X Possession of Gas and Warranty of Title . . . . . 10
Article XI Remedies . . . . . . . . . . . . . . . . . . . . . 11
Article XII Force Majeure . . . . . . . . . . . . . . . . . . 11
Article XIII Arbitration . . . . . . . . . . . . . . . . . . . 13
Article XIV Successors and Assigns . . . . . . . . . . . . . . 13
Article XV Waiver of Default . . . . . . . . . . . . . . . . 14
Article XVI Rules and Regulations . . . . . . . . . . . . . . 14
Article XVII Governing Laws . . . . . . . . . . . . . . . . . . 14
Article XVIII Complete Agreement . . . . . . . . . . . . . . . 15
Article XIX Headings . . . . . . . . . . . . . . . . . . . . . 15
Article XX Notices . . . . . . . . . . . . . . . . . . . . . 15
3
GAS SALE AND PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into this 27th day of March, 1991, by
and between EASTERN AMERICAN ENERGY CORPORATION, a West Virginia corporation,
with its principal office located in Charleston, West Virginia, (hereinafter
referred to as "Seller"), and SENECA POWER PARTNERS, L.P., a Delaware Limited
Partnership, of which Seneca Power Corporation, a Delaware corporation, is the
General Partner, with its principal office located in New York, New York,
(hereinafter referred to as "Buyer").
WHEREAS, Seller is a marketer of natural gas in the States of West
Virginia and Pennsylvania and has available to it through contracts with
producers and other marketers natural gas in volumes adequate to meet the
contract demands of Buyer, hereinafter specified, for Buyer's daily and annual
requirements; and
WHEREAS, Buyer operates certain facilities in the county of Genese,
State of New York, ( "Batavia Project") which facilities use natural gas as a
basic energy source; and
WHEREAS, Seller is willing to sell and Buyer desires to purchase natural
gas to meet the daily and annual requirements specified in this agreement
("Agreement").
NOW, THEREFORE, in consideration of the covenants and agreements herein
set forth, Seller and Buyer agree as follows, to-wit:
ARTICLE I. DEFINITIONS
1.1 The term "day" shall mean a period of twenty-four (24)
consecutive hours, ending at 8:00 a.m., Batavia, New York Time.
1.2 The term "Mcf" shall mean one-thousand (1,000) cubic feet of gas.
4
1.3 The term "Btu" shall mean one (1) British thermal unit.
1.4 The term "MBtu" shall mean one (1) thousand Btu.
1.5 The term "MMBtu"" shall mean one (1) million Btu.
1.6 The term "PSIG" shall mean per square inch gauge.
1.7 The term "Contract Annual Volume" shall mean 4,380,000 MMBtu.
1.8 The term "Contract Year" shall mean a period of one (1) year
commencing on the effective date, as specified herein, and each succeeding one
(1) year period thereafter.
1.9 The term "Maximum Daily Volumes" shall mean 12,900 MMBtu per day,
which shall be the greatest volume of gas which Seller shall, during the term
of this Agreement, be obligated to deliver to Buyer and which Buyer shall at
the time be entitled to receive from Seller during any one day.
1.10 The term "Minimum Daily Volume" shall mean a volume of gas equal
to 10,300 MMBtu which Seller shall be obligated to deliver to Buyer during any
one day during the term of this Agreement.
1.11 The term "Maximum Annual Volume" shall mean 4,750,000 MMBtu.
1.12 The term "Minimum Annual Volume" shall mean 3,850,000 MMBtu.
1.13 The term "Point(s) of Delivery" shall have the meaning as defined
in Article V hereof.
ARTICLE II. VOLUMES
Subject to the Maximum Daily Volume and the Minimum Daily Volume, the
Seller agrees to deliver to the Buyer and the Buyer agrees to purchase at the
Point(s) of Delivery specified in
-2-
5
Article V herein such quantities of gas as Buyer shall nominate in writing to
the Seller each month for use at the Batavia Project. Such nomination shall be
made on or before the fifteenth (15th) day of the month preceding the month in
which deliveries of the nominated quantities are to be made; provided, however,
that in no event shall such nomination be greater than the Maximum Daily Volume
multiplied by the number of calendar days in such calendar month or less than
the Minimum Daily Volume multiplied by the number of days in such calendar
month. In addition, the Buyer agrees that the aggregate total of such
nominations shall not be greater than the Contract Annual Volume during any
Contract Year, but in no event shall the aggregate total of volumes actually
delivered be greater than the Maximum Annual volume or less than the Minimum
Annual Volume.
ARTICLE III. PRICE
3.1 Commencing with the initial date of deliveries hereunder, Buyer
shall pay to Seller a price of $2.38 per MMBtu. Except as modified below, the
price for the gas delivered hereunder shall increase on an annual basis by five
percent (5%) on the anniversary date of the initial deliveries hereunder.
3.2 Notwithstanding the forgoing provisions of Paragraph 3.1 above,
if Buyer does not commence the acceptance of the Minimum Daily Volumes by
August 1, 1992, the initial price to be paid by Buyer to Seller shall be
adjusted by a five percent (5%) annual computation prorated on a monthly basis.
3.3 On the seventh (7th) anniversary of the first date of deliveries
hereunder, Seller may, at its sole option, request of Buyer a renegotiation of
the price to be paid by the Buyer hereunder. In renegotiating the price, the
parties shall take into consideration the market value of the gas to
-3-
6
Buyer at the Batavia Project. Provided, however, that the renegotiated price
shall not exceed a price level which would:
(a) Cause the Loan Coverage Ratio to be less than 1.25 for the
Batavia Project, as established on a Pro Forma basis as calculated by
Buyer and reasonably accepted by Seller; or
(b) Exceed the product of the initial Contract price of $2.38
per MMBtu multiplied by a fraction, the numerator being the average of
the fifty-two (52) week spot market price in the Appalachian Basin
immediately preceding the renegotiation request and the denominator
being the average of the fifty-two (52) week spot market price in the
Appalachian Basin immediately preceding July 1, 1989. For purposes of
this Paragraph, the spot market price shall be determined by reference
to the table, "Gas Price Report" ($/MMBTU) - "Delivered to Pipeline"
under "Appalachia - Spot" as published each week in Natural Gas Week.
If such publication ceases, or the publication ceases to report a price
under the above described table and heading, then Buyer and Seller shall
agree upon an alternate and comparable publication and index.
If the price is renegotiated in accordance with this Paragraph, the
renegotiated price shall escalate at a rate of five percent (5%) per year
during the remainder of the Contract term on the anniversary of the
renegotiation request.
-4-
7
ARTICLE IV. BILLING AND PAYMENT
4.1 Seller shall render bills, on or about the fifth (5th) day of
each month, for all gas delivered hereunder during the preceding month. Buyer
shall pay Seller at its payment address or at any other address designated by
Seller, within twenty (20) days of the receipt of the bills for the gas
delivered hereunder during the preceding month.
4.2 Should Buyer f ail to pay all of the amount of a xxxx as provided
herein when due, interest on the unpaid portion shall accrue at a rate equal to
the lesser of the then current prime interest rate plus 2% as charged by The
Chase Manhattan Bank, N.A. to its most favored customers or the maximum legal
rate, from the date when payment is due until the same is paid. If Buyer f
ails to pay any portion of a xxxx when the same is due, Seller, in addition to
any other remedy it may have, may suspend further delivery of gas until the
amount is paid provided, however, that if Buyer in good faith shall dispute the
amount of any xxxx or part thereof and shall pay to Seller all undisputed
amounts and, at any time thereafter upon thirty (30) days demand therefor by
Seller, shall furnish Seller a good and satisfactory surety bond in an amount
and with a surety satisfactory to Seller, guaranteeing payment to Seller of the
disputed amount remaining due (after a final determination is reached by
agreement, or through arbitration), then Seller shall not be entitled to
suspend further delivery of gas on the disputes because of which deliveries
were suspended unless default shall be made by Buyer or the surety on the bond.
4.3 If it shall be found that at any time or times Buyer has been
overcharged or undercharged in any manner whatsoever and Buyer shall have
actually paid the bills containing the overcharge or undercharge, then within
thirty (30) days after the final determination thereof, Seller shall re fund
the amount of any overcharge without interest and Buyer shall pay the amount of
any
-5-
8
undercharge without interest. In the event an error is discovered in the
amount billed in any invoice or statement rendered by Seller, the error shall
be adjusted within thirty (30) days of the determination thereof, provided that
claim therefor shall have been made within thirty (30) days from the date of
discovery of the error, and in any event within twelve (12) months from the
date of the invoice or statement. If the parties are unable to agree on the
adjustment of any claimed error, any resort by either of the parties to legal
or equitable remedies must be commenced within fifteen (15) months after the
accrual of any claimed cause of action or shall thereafter be forever barred.
ARTICLE V. POINT OF DELIVERY
The Point(s) of Delivery shall be the various points (as acceptable to
CNG Transmission Corporation), as may be changed from time to time, at which
Seller's gathering facilities are connected to the pipeline facilities of CNG
Transmission Corporation for ultimate delivery to Buyer. Title to and
ownership of the gas delivery hereunder will pass to and vest in Buyer at the
inlet side of the various meters at the Point(s) of Delivery.
ARTICLE VI. TERM
This Agreement shall be effective from the date of this Agreement and
deliveries of natural gas shall commence with the chart change made on the date
of first deliveries to the Batavia Project, and shall terminate with the chart
change made the date which is fifteen (15) Contract Years after the date of the
first deliveries, unless modified or extended as hereinafter provided.
Notwithstanding, anything to the contrary herein, this Agreement shall be null
and void at the option of Seller if (i) the financing for the Batavia Project
is not obtained by Buyer on or before June 30,
-6-
9
1991 or (ii) natural gas deliveries of the minimum Daily Volumes do not
commence by March 1, 1993.
ARTICLE VII. TAXES
Seller agrees to pay, or cause to be paid, all State severance or
production taxes and other federal, state or local government assessments
lawfully levied and imposed upon Seller with respect to the gas delivered
hereunder prior to its delivery to Buyer. Any taxes imposed by any federal,
state, or local government in respect to the gas delivered to the Buyer on
account of the receipt or usage thereof or otherwise, after the Point(s) of
Delivery shall be paid by Buyer.
ARTICLE VIII. MEASUREMENT
The gas to be sold hereunder shall be delivered through the facilities
of CNG Transmission Corporation ("CNG") to the Point(s) of Delivery and Buyer
shall cause CNG or its duly appointed agents, to read the meter, furnish, place
and remove any and all recording gauge charts, calculate the deliveries and
perform any other service pertaining to the routine operation of the meter.
Either party shall be entitled to request that CNG, or its duly appointed
agents, furnish a competent inspector to make an inspection of the measuring
device or devices. The cost of making any special tests on any devices shall
be borne by the requesting party. A representative of each party may be
present at any such inspection. For any tests or inspection, any resultant
aggregate error exceeding two percent (2%) of computed delivery shall be
adjusted, insofar as exact knowledge of such errors or contributing causes is
obtainable. Such adjustments shall be made for a period not to exceed thirty
(30) days previous to the date of the challenge by the requesting party. Upon
written request
-7-
10
from Seller, copies of available meter charts shall be forwarded to it for
inspection, copying and reproduction, subject to their return within ten (10)
days after receipt. Buyer shall keep and shall cause CNG to keep any such
copies on file for one (1) year after date of the deliveries charged thereon,
during which time they will be open for inspection by authorized parties at any
and all reasonable times.
ARTICLE IX. QUALITY
The quality and heating value of the gas to be delivered hereunder will
conform to the quality specifications set forth in the General Terms and
Conditions of CNG's FERC Gas Tariff, effective as of the date hereof as such
specifications may be changed from time to time. Any quality and heating value
standards of CNG's contracts are hereby expressly incorporated herein by
reference as if completely set out, and shall be applicable to and binding upon
Seller and upon all natural gas sold by Seller to Buyer. Notwithstanding the
above, heating value in BTUs for all gas delivered hereunder shall not be less
than one thousand (1,000) BTUs per standard cubic foot.
ARTICLE X. POSSESSION OF-GAS AND WARRANTY OF TITLE
10.1 Seller shall be deemed to be in control and possession of the gas
hereunder until it shall have been physically delivered to Buyer at the
Point(s) of Delivery, after which Buyer shall be deemed to be the owner and in
control and possession thereof.
10.2 Buyer shall have no responsibility with respect to any gas
hereunder until it is physically delivered to Buyer, or on account of anything
which may be done, happen or arise with respect to said gas before such
delivery; and Seller shall have no responsibility with respect to said
-8-
11
gas after such delivery to Buyer, or on account of anything which may be done,
happen, or arise with respect to said gas after such delivery.
10.3 Seller agrees that it will, and it hereby does, warrant that it
will, at the time of physical delivery, have good right and title to sell said
gas as aforesaid, free and clear of all liens and encumbrances; and, that it
will indemnify Buyer and save it harmless from all suits, actions, debts,
accounts, damages, Costs, losses and expenses arising from or out of adverse
claims of any or all persons to said gas.
ARTICLE XI. REMEDIES
In the event that Seller fails to deliver any quantity of gas that it is
required to deliver under this Agreement, Buyer will use commercially
reasonable efforts to purchase for delivery a quantity of gas equal to the
quantity of gas which Seller failed to deliver at fair market prices on a spot
basis. Seller shall pay Buyer on a monthly basis an amount equal to the
excess, if any, of the cost of such replacement gas plus all incremental
transportation costs incurred by Buyer in connection with purchasing such
replacement gas over the amount which Buyer would have been obligated to pay
Seller in accordance with this Agreement if Seller had performed its
obligations hereunder. Upon payment of the aforesaid amount, said sums will
constitute liquidated damages for Seller's failure to perform its obligations
hereunder and shall be Buyer's sole remedy for Seller's failure to so perform.
-9-
12
ARTICLE XII. FORCE MAJEURE
Neither Seller nor Buyer shall be liable in damages to the other for any
act, omission or circumstance occasioned by or in consequence of any acts of
God, strikes, lockouts, acts of the public enemy, war, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
storms, floods, washouts, [deletion] arrests and restraints of rulers and
peoples, civil disturbances, explosions, breakage or accident to machinery or
lines of pipe, lack of pipeline capacity (specifically excluding therefrom
Seller's own gathering and/or transmission facilities), the binding order of
any court or governmental authority which has been resisted in good faith by
all reasonable legal means, and any other cause, whether of the kind herein
enumerated or otherwise, not reasonably within the control of the party
claiming suspension and which by the exercise of due diligence such party is
unable to prevent or overcome. Notwithstanding the above, economic duress or
hardship shall not constitute an event of Force Majeure. Failure to prevent or
settle any strike or strikes shall not be considered to be a matter within the
control of the party claiming suspension.
Such causes or contingencies affecting the performance hereunder by
either Seller or Buyer, however, shall not relieve it of liability in the event
of its concurring negligence or in the event of the failure to use due
diligence to remedy the situation and to remove the cause in the adequate
manner and with all reasonable dispatch, nor shall such causes or contingencies
affecting such performance relieve either party from its other obligations
under this Agreement, even should it cause this Agreement to be extended beyond
the termination date.
-10-
13
ARTICLE XIII. ARBITRATION
13.1 Any dispute or controversy arising out of or relating to this
Agreement shall be determined and settled by arbitration in the City of
Pittsburgh, Pennsylvania, in accordance with the then Prevailing Commercial
Arbitration Rules of the American Arbitration Association. The award rendered
by the arbitrators shall be final and binding in respect of both matters of law
and fact. The expenses of the arbitration shall be borne by the parties to the
arbitration, provided that each party shall pay for and bear the cost of its
own expert witnesses and legal counsel.
ARTICLE XIV. SUCCESSORS AND ASSIGNS
Any company which shall succeed by purchase, merger or consolidation of
the properties substantially as an entirety, of Seller or of Buyer, as the case
may be, shall be entitled to the rights and shall be required by the
transferring party to assume the obligations of its predecessors in title under
this Agreement; and upon such succession, the transferring party shall be free
and discharged of all obligations under this Agreement and the successor
substituted as the sole and primary obligor. Otherwise, then as set out
herein, neither party shall assign this Agreement or any of its rights
thereunder unless it first shall have obtained the consent thereto in writing
of the other party. Such consent shall not be unreasonably withheld.
ARTICLE XV. WAIVER OF DEFAULT
No waiver by either party of any one or more defaults by the other in
the performance of any provision of this Agreement shall operate or be
construed as a waiver of any future default or defaults, whether of a like or
of a different character.
-11-
14
ARTICLE XVI. RULES AND REGULATIONS
This Agreement is subject to valid laws, orders and regulations of duly
constituted authorities having jurisdiction. If any valid future laws, orders,
rules or regulations of duly constituted authorities having jurisdiction have
the effect of altering or amending the provisions of this Agreement, the
parties shall continue the performance of this Agreement as so altered or
amended; provided, however, that such alterations or amendments shall not alter
or change the consideration paid by Buyer to Seller, the term of this
Agreement, or the volumes of gas to be delivered hereunder.
ARTICLE XVII. GOVERNING LAW
All questions concerning the validity or the meaning of this Agreement
or relating to the rights and obligations of the parties with respect to
performance under this Agreement shall be construed and resolved under the laws
of the State of Delaware, except to the extent specifically required by federal
laws.
ARTICLE XVIII. COMPLETE AGREEMENT
This document contains the entire agreement between the parties and
supersedes all prior or contradictory discussions or negotiations,
representations or agreements relating to the subject matter of this Agreement.
No changes to this Agreement shall be made or be binding on either party unless
made in writing and signed by each party to this Agreement.
-12-
15
ARTICLE XIX. HEADINGS
The captions or headings preceding the various parts Of this Agreement
are inserted solely for the convenience of the parties hereto and shall not be
considered or given effect in construing this Agreement, or in connection with
the intent, rights, duties or liabilities of the parties.
ARTICLE XX. NOTICES
Any notice, either contemplated or required by this Agreement, may be
given either by registered letter addressed to the following:
SELLER: Eastern American Energy Corporation
000 00xx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
BUYER: Seneca Power Partners, L.P.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Batavia Project Manager
by depositing such registered letter, postage paid, in the United States Post
Office or by telegram, telex or TWX directed to such party at such address -
Any notice sent to Buyer will also be sent to Lender at the address set forth
above. The foregoing addresses may be changed by written notice.
-13-
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SELLER:
EASTERN AMERICAN ENERGY CORPORATION
Attest:
By:
------------------------------- ---------------------------------
Secretary
Its:
--------------------------------
BUYER:
SENECA POWER PARTNERS, L.P.
Attest:
Attest:
By:
------------------------------- ---------------------------------
Secretary Seneca Power Corporation
Its: General Partner
--------------------------------
Signature page to that Gas Sale and Purchase Agreement by and between EASTERN
AMERICAN ENERGY CORPORATION, "SELLER", and SENECA POWER PARTNERS, L.P.,
"BUYER", dated this 2nd day of April, 1991.
-14-
