EXHIBIT 10.6
GAS SERVICE AGREEMENT
THIS GAS SERVICE AGREEMENT (the "Agreement") is made and entered into this
31st day of December, 1998 by and between AMERICAN CITIGAS COMPANY, a Nevada
corporation (hereinafter referred to as "Company"), and ATP ENERGY, INC., a
Texas corporation (hereinafter referred to as "Customer").
WITNESSETH:
That in consideration of the mutual benefits accruing and to accrue by
virtue of this Agreement, the parties do hereby agree and covenant as follows:
1. This Agreement shall be for an original term of ten (10) years from the
first day of the month next succeeding that month in which gas commences to flow
to Customer and thereafter shall renew from year to year. This Agreement may be
terminated effective at the expiration of the original term or any yearly
renewal thereof, by either party giving the other party not less than six (6)
months written notice.
2. The Gas to be furnished hereunder shall be delivered at the following
described Point(s) of Delivery:
a) inlet side of pipeline meter of Sabine Pipeline's meter at tailgate of
Texaco's plant at Xxxxx Hub, Louisiana or
b) any mutually agreeable delivery point.
3. Customer agrees to purchase, take and pay for one hundred percent (100%)
of the Daily Contract Quantities ("DCQ") subject to the terms herein. Company
agrees to sell and tender delivery of the Daily Contract Quantities subject to
the terms herein. The Daily Contract Quantity shall be nine thousand (9,000)
mmBtu of Gas per day during the first year of the term of this Agreement and
five thousand (5,000) mmBtu of Gas per day during the balance of the term.
Customer may take in excess of the Daily Contract Quantities if advance approval
by Company is obtained.
4. The Gas furnished herein is in accordance with Appendix A attached
hereto and made a part hereof and in accordance with the additional terms and
conditions set forth in Appendix B attached hereto and made a part hereof.
IN WITNESS WHEREOF; the parties hereto have subscribed their names on the
day and year first above written.
"Customer"
WITNESS: ATP ENERGY, INC.
a Texas corporation
/s/ Xxxxxx Xxxxx Xx. /s/ T. Xxxx Xxxxxxx
------------------------- ----------------------------
T. Xxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxx President
-------------------------
"Company"
WITNESS: AMERICAN CITIGAS COMPANY,
a Nevada corporation
------------------------- By: -------------------------
Xxxxxx X. Xxxxxxxxxxx
------------------------- President
IN WITNESS WHEREOF; the parties hereto have subscribed their names on the
day and year first above written.
"Customer"
WITNESS: ATP ENERGY, INC.
a Texas corporation
/s/ Xxxxxx Xxxxx, Xx. By: /s/ T. Xxxx Xxxxxxx
---------------------------- -----------------------------
T. Xxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxx President
----------------------------
"Company"
WITNESS: AMERICAN CITIGAS COMPANY,
a Nevada corporation
/s/ [signature] By: /s/ Xxxxxx X. Xxxxxxxxxxx
---------------------------- -----------------------------
Xxxxxx X. Xxxxxxxxxxx
/s/ [signature] President
----------------------------
STATE OF NEVADA )
SS:
COUNTY OF XXXXX )
On this 31st day of December, 1998, personally appeared Xxxxxx X. Xxxxxxxxxxx
before me a Notary Public, who acknowledged that he executed the within
instrument freely and voluntarily.
/s/ XXXXX XXXXX Notary Public-State of Nevada
--------------------------- County of Xxxxx
OFFICIAL HAND AND SEAL: XXXXX XXXXX
My Appointment Expires
October 3, 2001
2
APPENDIX A
Attached to and made a part of Gas Service Agreement (the "Agreement")
dated 31st day of December, 1998 between AMERICAN CITIGAS COMPANY ("Company")
and ATP ENERGY, INC. ("Customer").
Section 1. AVAILABILITY AND RATE
1.1 AVAILABILITY
The sale and delivery of Gas by Company under the Agreement is subject to
economic availability of supply and transportation. Customer acknowledges that
supply and transportation may be procured from others and will be subject to
curtailment or interruption. Notwithstanding provisions of the Agreement or its
appendices to the contrary, Company may interrupt its performance at any time
for any reason whether or not caused by Force Majeure, with no liability except
it shall be responsible for any Imbalance Charges as set forth in Section 4.1,
Appendix B related to its interruption after a nomination is made to the
Transporter and until the change in deliveries and/or receipts is confirmed by
the Transporter.
1.2 RATE
The base charge for recorded consumption of Gas at the point of delivery
in any month is as follows:
Four hundred fifty cents (450 cents) per mmBtu.
Section 2. ADJUSTMENT FOR COST OF GAS
2.1 (a) The base charge in Section 1.2 hereof shall be adjusted automatically on
a monthly basis (the "Adjusted Base Charge") cent for cent (unrounded)
to the extent the average daily midpoint price of gas for the month of
delivery at Xxxxx Hub, Louisiana as published in the Regional Price
Sampler of Gas Daily is greater than or less than the average daily
midpoint price of gas for September, 1998 at Xxxxx Hub, Louisiana as
published in the October, 1998 Regional Price Sampler of Gas Daily. For
example, the base charge for gas deliveries in January, 1999 shall be
adjusted to the extent (a) the average daily midpoint price of gas for
January, 1999 at Xxxxx Hub, Louisiana as published in the Regional Price
Sampler in February, 1999 is (b) greater than or less than the average
daily midpoint price of gas for September, 1998 at Xxxxx Hub, Louisiana.
In the event the average daily midpoint price of gas is no longer
published by Gas Daily then the parties shall negotiate in good faith to
identify and use a similar price index.
Appendix A
Page A-1
(b) To the price determined for each month under Section 1.2 herein shall
be added any new or increased taxes, fees or charges, except income
taxes, whether measured by or imposed upon the production, severance,
gathering, transportation, metering, delivery, purchase or sale of gas
that may be levied or charged after the date first above written
against the Company either directly or indirectly by duly constituted
governmental authorities having jurisdiction therof; and (2) any new or
increased costs due to transportation tariff rates, charges or
provisions imposed after the date first above written which have been
approved by duly constituted governmental authorities having
jurisdiction thereof that may be allocated to the gas sold and
delivered hereunder; such costs to be allocated on the basis of the
weighted average cost of gas.
Section 3. PREMIUM PAYMENT TRANSACTION
3.1 Simultaneously with the execution hereof, the Company shall deliver the
following to Customer (collectively, the "Premium Payment"):
(i) $6,000,000.00 (the "Initial Payment") in immediately available funds to
be paid by wire transfer; and
(ii) $33,600,000.00 payable in 120 monthly installments bearing interest at
6.0% per annum to be evidenced by a Non-Negotiable Promissory Note to
be in form and content mutually agreeable to the parties hereto (the
"Promissory Note") which is incorporated by reference herein.
3.2 $2,000,000.00 of the Premium Payment shall be deemed earned by Customer upon
the execution of this Agreement.
3.3 Customer herby represents and warrants that Customer is a wholly owned
subsidiary of ATP Oil & Gas Corporation, a Texas corporation ("ATP Oil").
Simultaneous with the execution hereof, ATP Oil shall execute and deliver to
Company an irrevocable Guaranty Agreement guaranteeing Customer's obligations
under this Agreement and any security agreements all to be in form and content
acceptable to Company.
Section 4. CURTAILMENT
4.1 Whenever, in Company's opinion, it is necessary to curtail deliveries on all
or part of Company's system, service to customers on this rate schedule in the
areas affected shall be immediately reduced or totally discontinued to all
customers on a prorated basis. To the extent Company fails to tender delivery of
the DCQ on any day for any reason, Customer shall remain obligated to pay an
amount equal to the difference between the then Adjusted Base Charge and the
then Fair Market Price (defined in Appendix B) for such undelivered quantity
which shall be payable when it would have been due if such gas had been
delivered. Company shall have the right to subsequently overdeliver to make up
for such under delivery(ies). Such make up over deliveries may extend up to
twelve (12) calendar months beyond the termination of the Agreement. Customer
will
Appendix A
Page A-2
receive a credit against payment for such overdeliveries to the extent of
payments made by Customer pursuant to the previous provisions of this Section
4.1.
Section 5. MISCELLANEOUS TERMS AND CONDITIONS
5.1 MEASUREMENT
The parties agree that the measurement of Gas purchased hereunder shall be
performed in accordance with the established procedures by the Transporter. BTU
and volume measurements shall be made in accordance with the provisions of such
pipeline's then effective F.E.R.C. Gas Tariff, or in the event such pipeline is
not subject to F.E.R.C. regulation, the applicable gas transportation
regulations or contract provisions of such pipeline.
End of Appendix A
Appendix A
Page A-3
APPENDIX B
ADDITIONAL TERMS AND CONDITIONS
Attached hereto and made a party of Gas Service Agreement dated the 31st
day of December, 1998, between AMERICAN CITIGAS COMPANY ("Company") and ATP
ENERGY, INC. ("Customer").
1. PURPOSES AND PROCEDURES
1.1 The parties desire to set forth certain terms and conditions applicable to
the Transaction(s) contemplated by the Agreement.
2. DEFINITIONS
2.1 "EFP" shall mean the purchase, sale or exchange of Gas as the "physical"
side of an exchange for physical Transaction involving gas Futures Contracts.
2.2 "Business Day" shall mean any day except Saturday, Sunday, or Federal
Reserve Bank holidays.
2.3 "Day" shall mean the period of time defined as "day" or "daily" in the
effective tariff or other operating rules, policies or procedures of the
Transporter applicable to transportation service.
2.4 "Delivery Point(s)" shall mean the point(s) at which title to the Gas,
possession and risk of loss transfers from Company to Customer.
2.5 "Eligible Collateral" shall mean (i) cash, or (ii) a Letter of Credit from a
financial institution acceptable by the Beneficiary Party (defined below), or
(iii) acceptable cash equivalents subject to a security interest.
2.6 "Fair Market Price" shall mean the midpoint price of gas for the day at
Xxxxx Hub, Louisiana as published in Gas Daily. In the event the midpoint price
of gas is no longer published by Gas Daily then the parties shall negotiate in
good faith to identify and use a similar price index.
2.7 "Force Majeure" shall mean any event beyond the reasonable control of the
party in question which prevents, in whole or in part, that party's performance
of obligations.
2.8 "Futures Contract" shall mean the standardized contract for the purchase or
sale of Gas that is traded for future delivery under the applicable trading
board's regulations.
2.9 "Gas" shall mean and include all vapor phase hydrocarbons and gaseous
substances consisting primarily of methane.
Appendix B
Page B-1
2.10 "Imbalance Charges" shall mean any fees, penalties, costs or charges (in
cash or in kind) assessed by a Transporter for failure to satisfy the
Transporter's balance and/or nomination requirements.
2.11 "Material Adverse Change" shall mean that Customer and its consolidated
subsidiaries and parent shall have Total Assets below $50,000,000.00 or a
consolidated Net Worth below $20,000,000.00.
2.12 "Minimum Delivery Amount" shall mean as (i) with respect to Company
$100,000.00 and (ii) with respect to Customer $100,000.00.
2.13 "Month" shall mean the period of time defined as "month" in the effective
tariff or other operating rules, policies or procedures of the Transporter
applicable to transportation service.
2.14 "mmBtu" shall mean the unit of measurement for payment purposes expressed
as one million (1,000,000) BTU, measured on a dry basis.
2.15 "Net Worth" shall mean Total Assets (exclusive of intangible assets,
deferred tax benefits, and intercompany notes receivable), minus total
liabilities, each as would be reflected on a balance sheet of the subject party
prepared in accordance with Generally Accepted Accounting Principles ("GAAP").
2.16 "NYMEX" shall mean the New York Mercantile Exchange.
2.17 "Pledgor" shall mean Customer, if it (i) receives a demand for or is
required to provide Eligible Collateral or (ii) has provided Eligible
Collateral.
2.18 "Point of Delivery" shall have the same meaning as Delivery Point(s);
however, specified as in the Agreement.
2.19 "Primary in-path" shall mean firm transportation service obtained directly
from the respective Transporter. This term specifically excludes "secondary"
and/or "released" firm transportation, as those terms are commonly used in the
natural gas industry.
2.20 "Tax" shall mean any tax levied, assessed or claimed to be due by any
Federal, State, County, Tribal, or Municipal Government or any other
governmental agency having jurisdiction to do so.
2.21 "Termination Payment Threshold" shall mean (i) with respect to the Company
$250,000.00 and (ii) with respect to Customer $250,000.00.
2.22 "Total Assets" means total assets (exclusive of intangible assets, deferred
tax benefits, and intercompany notes receivables), including deferred income
based on income tax return.
2.23 "Transaction" shall mean a particular, specifically agreed-to purchase or
sale of Gas for delivery or receipt to be performed under the Agreement and all
obligations related thereto including, without limitation, the transaction
contemplated in Appendix A and the Promissory Note.
2.24 "Transporter" shall mean the pipeline(s) or gathering line(s) designated by
the Company to deliver Gas to the Delivery Point(s).
Appendix B
Page B-2
3. QUANTITY AND DELIVERY
3.1 Company shall notify Customer of its nomination(s), from time to time, with
prior notice of at least twenty-four (24) hours and/or within the Transporter's
pipeline's deadline date for making changes in nominations to be effective the
next Day at 7:00 a.m. Customer shall be responsible for compliance with the
effective nominations given within the Transporter's pipeline's deadline date
for changes.
4. TRANSPORTATION AND IMBALANCE
4.1 Company shall be responsible for all arrangements necessary to deliver Gas
sold hereunder to the Delivery Point(s) and Customer shall be responsible for
all arrangements necessary to receive Gas at the Delivery Point(s). In the event
Company delivers more or less than the DCQ, and as a result thereof, Customer is
assessed imbalance penalties, fees, or charges, Company shall reimburse Customer
for same within ten (10) days of Company's receipt of Customer's invoice
therefor. In the event Customer takes delivery of more or less than the DCQ, and
as a result thereof, Company is assessed imbalance penalties, fees, or charges,
Customer shall reimburse Company for same within ten (10) days of Customer's
receipt of Company's invoice therefor.
5. DELIVERY POINT
5.1 The Delivery Point(s) for all Gas delivered hereunder shall be set out in
the Agreement. All rights, title, interest and risk of loss to all Gas purchased
hereunder shall pass to Customer upon the receipt of such Gas by Customer or
Customer's designee at the Delivery Point(s). Company shall have possession of
the Gas and shall arrange for all necessary transportation of the Gas from
Company's source(s) of such Gas to the Delivery Point(s).
6. PRICE
6.1 Customer shall pay Company, for all quantities of Gas delivered for
Customer's account hereunder, the price per mmBtu set forth in Appendix A of the
Agreement. Such price will be inclusive of all royalties, taxes, transportation
charges, expenses and costs applicable to the Gas prior to receipt by Customer
at the Delivery Point(s). In the event Customer should be required, by the laws
of any governmental body having jurisdiction hereunder, to pay any such costs or
charges for which Company is liable, then Customer shall have the right to
reduce the amount payable hereunder by an amount equal to such costs or charges.
In the event Company should be required, by the laws of any governmental body
having jurisdiction hereunder, to pay any such costs or charges for which
Customer is liable, then Customer shall reimburse Company for same within ten
(10) days of Customer's receipt of Company's invoice therefor.
6.2 Company may offer a temporary user allowance ("TUA") as a discount on the
price of gas provided for in the Agreement.
Appendix B
Page B-3
7. FAILURE TO PERFORM
7.1 If on any Day, Customer fails to accept tender of delivery of the DCQ,
Company shall have the right to sell to a third party purchaser during the then
current Month the difference between the quantity actually accepted by Customer
on such Day and such DCQ. Company shall be entitled to reimbursement from
Customer for an amount calculated by multiplying the quantity of Gas not
purchased times the difference between:
(i) The then Adjusted Base Charge provided in Section 2.1(a), Appendix A,
less
(ii) The then Fair Market Price adjusted for commercially reasonable
differences in transportation costs to or from the Delivery Point(s).
Any payments due Company by Customer under this paragraph shall be made
in the Month following the Month Company sells such Gas to a third
party purchaser; provided, however, Company first provides Customer
with information and documentation supporting Company's claim for
reimbursement.
7.2 If on any Day, Company fails to tender delivery of the DCQ, Customer shall
have the right to purchase from a third party supplier during the then current
Month the difference between the amount actually delivered by Company on such
Day and such DCQ. Customer shall be entitled to recover from Company an amount
calculated by multiplying the quantity of Gas not delivered times the difference
between:
(i) The then Adjusted Base Charge; and
(ii) The then Fair Market Price adjusted for commercially reasonable
differences in transportation costs to or from the Delivery Point(s).
Any reduction in the payment due to Company shall be made in the Month
following the Month in which the failure to deliver Customer's
nominated quantity occurred; provided, however, Customer shall first
provide Company with information and documentation supporting the
reduction.
8. DEFAULT, REMEDIES, AND TERMINATION
8.1 If a Triggering Event, as defined in Section 8.2 below, occurs with respect
to either party at any time during the term of the Agreement, the other party
(the "Notifying Party") may (i) upon two (2) Business Days written notice to the
first party (the "Affected Party"), which notice shall be given no later than
sixty (60) days after the discovery of the occurrence of the Triggering Event,
establish a date on which any or all Transactions pursuant to the Agreement will
terminate ("Early Termination Date"), and (ii) withhold any payments due in
respect of such Transactions; provided, upon the occurrence of any Triggering
Event listed in item (iv) of Section 8.2 as it may apply to any party, the
Agreement shall automatically terminate, without notice, as if an Early
Termination Date had been immediately declared. If an Early Termination Date
occurs, the Notifying Party shall in good faith calculate its damages, including
its associated costs and attorneys' fees, resulting from the termination of the
terminated Transactions (the "Termination Payment").
The Termination Payment will be determined by: (i) comparing the value of (a)
the remaining term, quantities and prices and any loan payments under each such
Transaction had it not been terminated to (b) the equivalent quantities and
relevant market prices for the remaining term either quoted by a bona fide third
party offer, or which are reasonably expected to be available in the market
under a replacement contract for each such Transaction; and (ii) ascertaining
the associated costs and attorney's fees. To
Appendix B
Page B-4
ascertain the market prices of a replacement contract the Notifying Party may
consider, among other valuations, including but not limited to, any or all of
the settlement prices of NYMEX (or applicable futures trading board) gas Futures
Contracts, quotations from leading dealers in Gas swap contracts and other bona
fide third party offers, all adjusted for the length of the remaining term and
the basis differential.
All terminated Transactions under any provision herein shall be netted against
each other and upon the netting of all terminated Transactions, if the
calculation of the Termination Payment does not result in damages to the
Notifying Party, the Termination Payment shall be zero. The Notifying Party
shall give the Affected Party written notice of the amount of the Termination
Payment, inclusive of a statement showing its determination. The Affected Party
shall pay the Termination Payment within ten (10) days of receipt of such
notice. At the time for payment of any amount due under this provision, each
party shall pay to the other party all additional amounts payable by it pursuant
to this Agreement, but all such amounts shall be netted and aggregated with any
Termination Payment payable hereunder. If the Affected Party disagrees with the
calculation of the Termination Payment, the issue shall be submitted to
arbitration pursuant to this Agreement and the resulting Termination Payment
shall be due and payable within three (3) Business Days after the award.
8.2 "Triggering Event" shall mean, with respect to a party (the "Affected
Party"): (i) the failure by the Affected Party to make, when due, any payment
required under the Agreement if such failure is not remedied within five (5)
Business Days after written notice of such failure is given to the Affected
Party; or (ii) any representation or warranty made by the Affected Party in this
Agreement shall prove to have been false or misleading in any material respect
when made or deemed effective; or (iii) the failure by the Affected Party to
perform any covenant set forth in the Agreement and such failure is not excused
by Force Majeure or cured within five (5) Business Days after written notice
thereof to the Affected Party; or (iv) the Affected Party shall (a) make an
assignment or any general arrangement for the benefit of creditors, (b) file a
petition or otherwise commence, authorize or acquiesce in the commencement of a
proceeding or cause under any bankruptcy or similar law for the protection of
creditors, or have such petition filed against it, (c) otherwise become bankrupt
or insolvent (however evidenced) or (d) be unable to pay its debts as they fall
due; or (v) the occurrence of a Material Adverse Change of the Affected Party;
provided, such Material Adverse Change shall not be considered if the Affected
Party establishes, and maintains throughout the term hereof, Eligible Collateral
in amount equal to the sum of (a) the Notifying Party's Termination Payment plus
(b) if the Notifying Party is Company, the aggregate of the amounts Company is
entitled to receive under each Transaction; (vi) the Affected Party fails to
establish, maintain, extend or increase Eligible Collateral when required
pursuant to the Agreement, or (vii) the Affected Party shall have defaulted on
any indebtedness to a third party resulting in an acceleration of obligations in
excess of the greater of $250,000.00 or three percent (3%) of the Affected
Party's Net Worth.
8.3 If at any time and from time to time during the term of this Agreement
(and notwithstanding whether a Triggering Event has occurred) the Termination
Payment that would be owed to a party in respect of all Transactions then
outstanding should exceed the Pledgor's Termination Payment Threshold, such
party as the "Beneficiary Party" may request the Pledgor to deliver Eligible
Collateral in an amount at least equal to the Termination Payment minus the
Pledgor's Termination Payment Threshold in increments equal to the Minimum
Delivery Amount. Eligible Collateral must be delivered within two (2) Business
Days of the date of such notice provided that notice be given before 9:00 a.m.
Central Time. On any subsequent Business Day, the Pledgor may be requested to
deliver additional Eligible Collateral
Appendix B
Page B-5
to the Beneficiary Party in excess of any additional uncollateralized
Termination Payment in increments equal to the Minimum Delivery Amount.
8.4 Notwithstanding any provision in the Agreement to the contrary, each
party reserves to itself all rights, setoffs, counterclaims and other remedies
and defenses consistent with Article 16 which such party has or may be entitled
to arising from or out of this Agreement. All outstanding Transactions and the
obligations to make payment in connection therewith or under this Agreement may
be offset against each other, setoff, or recouped therefrom.
9. QUALITY AND PRESSURE
9.1 Gas tendered for sale hereunder shall meet the quality and pressures
specifications of the pipeline system and/or facilities which shall receive the
Gas at the Delivery Point(s) set forth in the Agreement.
10. BILLING AND PAYMENT
10.1 Company shall invoice Customer by the tenth (10th) day of the calendar
month for Gas delivered to Customer during the preceding Month. Company shall
render to Customer a statement showing the quantity of Gas delivered at the
Delivery Point(s) and the amount due therefor. Customer shall make payment to
Company, by wire transfer, as provided for in Company's invoice, on or before
the twenty-fifth (25th) day of the Month following the delivery Month. In the
event Customer has obtained a statement of actual volumes received for
Customer's account from the party responsible for measurement at the Delivery
Point(s), then Customer shall adjust the amounts due on Company's next invoice
and shall make payment to Company of the adjusted amount. In such event,
Customer shall promptly provide Company with a third party measurement statement
sufficiently supporting Customer's adjustment.
10.2 If there is a bona fide dispute with regard to any amount billed,
Customer shall nevertheless pay the total amount when due and if such dispute is
settled in Customer's favor, the refund to Customer from Company shall include
interest as hereinafter defined. If any amount billed hereunder is not paid by
Customer when due, interest shall accrue on the unpaid amount from the due date
until paid at the prime commercial rate charged by CitiBank N.A. New York, New
York, plus two (2) percent or the maximum legal rate, whichever is less.
10.3 Either party may withhold payment of amounts due hereunder to offset an
equivalent amount due such party under this or any other agreement between the
parties so long as the payment withheld is due to a netting of payments which
are due on the same calendar day, in which case the party owing the greater
aggregate amount shall pay to the other party the difference in the amounts
owed.
10.4 If any overcharges or undercharges in any form whatsoever shall be found
within one (1) year of occurrence and the xxxx therefore has been paid, Company
shall refund the amount of overcharges received by Company and Customer shall
pay the amount of undercharges within thirty (30) days after final determination
thereof.
Appendix B
Page B-6
11. TAXES
11.1 As between the parties, Company will pay, or cause to be paid, all Taxes
or other sums due on production, gathering, processing or severance of the Gas
prior to delivery to Customer at the Delivery Point(s). All such Taxes shall be
paid by Company directly to the taxing authority unless Customer is required by
law to collect and remit such Taxes, in which event Customer shall withhold from
payments to Company an amount required to be collected and remitted by Customer.
If any such Tax is claimed, assessed or levied on Customer, then Company shall
reimburse Customer for the amount of such Tax. Customer will pay or cause to be
paid, all Taxes upon and after delivery to Customer (including, without
limitation, sales, use or gross receipts Taxes) unless Customer furnishes
Company with applicable exemption certificates. In the event a national energy,
BTU, consumption, or use tax shall be imposed, both Customer and Company shall
work to reasonably apportion said Tax, taking into account the ability of either
party to pass through all or a part of such tax; provided, however, that not
Tax, whether existing or future, shall render either party economically
incapable of continuing its performance hereunder.
12. TITLE, WARRANTY AND INDEMNITY
12.1 Unless otherwise specifically agreed, title to the Gas shall pass from
Company to Customer at the Delivery Point(s). Company shall have responsibility
for and assume any liability with respect to the Gas prior to its delivery to
Customer at the specified Delivery Point(s). Customer shall have responsibility
for and assume any liability with respect to said Gas after its delivery to
Customer at the Delivery Point(s).
12.2 Company warrants that it will have good and merchantable title to or
will have the right to deliver all Gas sold hereunder and delivered by it to
Customer, free and clear of all liens, encumbrances, and claims.
12.3 Company agrees to indemnify Customer and save it harmless from all
losses, liabilities or claims, including attorneys' fees and costs of court
("Claims"), arising from or out of claims of title, personal injury or property
damage from any or all persons to said Gas or other charges thereon which attach
before title passes to Customer. Customer agrees to indemnify Company and save
it harmless from all Claims arising from or out of claims regarding payment,
personal injury or property damage from said Gas or other charges thereon which
attach after title passes to Customer.
12.4 Notwithstanding the other provisions of this Section 12 as between
Company and Customer, Company will be liable for all Claims to the extent that
such Claims arise from the failure of Gas delivered by Company to meet the
quality requirements of Section 9.1.
12.5 In the event of any claim or litigation, at any time, concerning
Company's title to the Gas sold hereunder or the proceeds from the sale thereof,
Customer shall be entitled to suspend payments to Company until such claims or
litigation of title is resolved to Customer's reasonable satisfaction.
13. FORCE MAJEURE
13.1 Nonperformance of any obligation hereunder, other than the obligation to
make payment for Gas previously delivered under this Agreement, or Imbalance
Charges under Section 4.1, shall be excused
Appendix B
Page B-7
if rendered commercially impractical by an occurrence of Force Majeure, but only
for so long as performance is prevented by such Force Majeure. The party
claiming excuse shall promptly advise the other party of such Force Majeure
event and shall, as soon as commercially reasonable, seek to remedy the
occurrence. The party claiming Force Majeure shall not be excused from its
responsibility for Imbalance Charges. Additionally, in the event Customer is the
party claiming Force Majeure, Customer shall remain obligated, notwithstanding
anything contained in the Agreement to the contrary, to pay an amount equal to
the difference between the Adjusted Base Charge and the Fair Market Price for
the amount of gas not accepted during the duration of Force Majeure.
13.2 The party whose performance is rendered commercially impracticable by
Force Majeure must provide notice as soon as reasonably practical to the other
party. Initial notice may be given orally; however, written notification with
reasonably full particulars of the event or occurrence is required as soon as
reasonably possible. Upon providing written notification of Force Majeure to the
other party, the Affected Party will be relieved of its obligation to make or
accept delivery of Gas as applicable to the extent and for the duration of Force
Majeure, and neither party shall be deemed to have failed in such obligations to
the other during such occurrence or event. In the event of a Force Majeure, the
non-claiming party may declare an extension to each contract year of the
Agreement to the extent that the Force Majeure condition exists.
13.3 Force Majeure shall include, but not be limited to, the following: (i)
physical events such as acts of God, landslides, lightning, earthquakes, fires
hurricanes, tornadoes, storms or storm warnings which result in evacuation of
the affected area, floods, washouts, explosions, breakage or accident or
necessity of repairs to machinery or equipment or lines of pipe; (ii) weather
related events affecting an entire geographic region, such as hurricanes, or
freezing or failure of xxxxx or lines of pipe; (iii) acts of others such as
strikes, riots, sabotage, insurrections or wars; (iv) governmental actions such
as necessity for compliance with any court order, law, statute, ordinance, or
regulation promulgated by a governmental authority having jurisdiction; and (v)
any other causes, whether of the kind herein enumerated or otherwise, not
reasonably within the control of the affected party. Company and Customer shall
make reasonable efforts to avoid the adverse impacts of a Force Majeure and to
resolve the event or occurrence once it has occurred in order to resume
performance. Notwithstanding anything to the contrary herein, the parties agree
that the settlement of strikes, lockouts or other industrial disturbances shall
be entirely within the sole discretion of the party experiencing such
disturbance.
13.4 Force Majeure shall also include the inability to transact futures
trading for any reason beyond the reasonable control of Customer, including,
without limitation, closing of the NYMEX or applicable futures trading board,
any refusal by the NYMEX or applicable futures trading board to allow trading
during normal trading hours; failure of telecommunications lines or of computer
or other equipment utilized in trading; and other such causes.
13.5 The term Force Majeure as used herein specifically EXCLUDES the
following occurrences or events: (i) the loss, interruption, or curtailment of
interruptible transportation on any Transporter necessary to make or accept
delivery of Gas hereunder, unless and to the extent the same event also curtails
Primary in-path, firm transportation at the same point; and (ii) loss of markets
or either party's inability to economically use or resell Gas purchased under
this Agreement.
Appendix B
Page B-8
14. NOTICE
14.1 Any notice, demand, or statement or payment, other than nominations
provided for herein, shall be in writing and shall be deemed delivered three (3)
Business Days after posting when mailed, postage prepaid, return receipt
requested, by United States mail to the address of the party to receive same as
set forth below; but actual notice or demand, however given or received, shall
always be effective.
ATP ENERGY, INC. AMERICAN CITIGAS COMPANY
NOTICE/BILLING NOTICE/BILLING
ADDRESS 0000 Xxxx Xxx Xxxxx, Xxxxx 000 ADDRESS 0000 Xxxxx Xxxxxxx Xx.
Xxxxxxx, Xxxxx 00000 Suite 204 P.O. Box 70540
ATTN President Xxx Xxxxx, XX 00000-0000
ATTN Gas Administration
TELEPHONE (000)000-0000
FACSIMILE (000)000-0000 PAYMENT ADDRESS:
For Wire Transfer: US Bank
For the account of
AMERICAN CITIGAS COMPANY
ABA# 1212-01694
ACCT# 15370034 6213
TELEPHONE: (000)000-0000
FACSIMILE: (000)000-0000
or to such other address as either party may from time to time designate by
certified or registered mail addressed to the other party at the then effective
address of that party.
15. ARBITRATION CLAUSE
15.1 Any controversy or claim arising out of or relating to the Agreement or
the breach thereof shall be settled by binding arbitration by one (1) arbitrator
in Houston, Texas, in accordance with the American Arbitration Association
Commercial Arbitration rules. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The
prevailing party shall be entitled to its reasonable attorneys' fees. Any
monetary award shall accrue interest from the date of the breach to the date of
any judgment entered on the award at the prime commercial rate charged on the
date of the breach by CitiBank, N.A. New York, New York plus two (2) percent or
at the maximum legal rate, whichever is less. If a party files a complaint in
any court with respect to any matter subject to arbitration hereunder, the
defendant in such court action shall be entitled to recover its reasonable
attorneys' fees in connection with the court action. This arbitration provision
shall survive termination of the Agreement.
16. LIMITATION ON LIABILITY
16.1 NOTWITHSTANDING ANY OTHER PROVISIONS HEREIN, THE PARTIES HERETO WAIVE
ANY AND ALL RIGHTS, CLAIMS OR CAUSES OR ACTION ARISING UNDER THIS
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Page B-9
AGREEMENT FOR INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES. THIS PROVISION
SHALL SURVIVE ANY TERMINATION OF THE AGREEMENT.
17. DECEPTIVE TRADE PRACTICES
17.1 COMPANY AND CUSTOMER CERTIFY THAT THEY ARE NOT "CONSUMERS" WITHIN THE
MEANING OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SUBCHAPTER E OF CHAPTER 17, SECTIONS 17.41 ET SEQ., AMENDED (THE "DTPA"). THE
PARTIES COVENANT, FOR THEMSELVES THAT IF DTPA IS APPLICABLE, (A) THE PARTIES ARE
"BUSINESS CONSUMERS" THEREUNDER, (B) EACH PARTY HEREBY WAIVES AND RELEASES ALL
OF ITS RIGHTS AND REMEDIES THEREUNDER (OTHER THAN SECTION 17.5555, TEXAS
BUSINESS AND COMMERCE CODE) AS APPLICABLE TO THE OTHER PARTY AND ITS SUCCESSORS
AND ASSIGNS, AND (C) EACH PARTY SHALL DEFEND AND INDEMNIFY THE OTHER FROM AND
AGAINST ANY AND ALL OF THEIR AFFILIATES BASED IN WHOLE OR IN PART ON THE DTPA,
ARISING OUT OF OR IN CONNECTION WITH THE TRANSACTIONS FORTH IN THIS AGREEMENT.
18. FINANCIAL RESPONSIBILITY
18.1 When reasonable grounds for insecurity of payment or title to the Gas
arise, either party may demand adequate assurance of performance. Adequate
assurance shall mean sufficient security in the form and for the term reasonably
specified by the party demanding assurance, including, but not limited to, a
standby irrevocable letter of credit, a prepayment, a security interest in an
asset acceptable to the demanding party or a performance bond or guarantee by a
creditworthy entity. In the event either party shall: (i) make an assignment or
any general arrangement for the benefit or creditors; or (ii) default in the
payment obligation to the other party; or (iii) file a petition or otherwise
commence, authorize, or acquiesce in the commencement of a proceeding or cause
under any bankruptcy or similar law for the protection of creditors or have such
petition filed or proceeding commenced against it; or (iv) otherwise become
bankrupt or insolvent (however evidenced); or (v) be unable to pay its debts as
they fall due; or (vi) fail to give adequate assurance of its ability to perform
its obligations under the Agreement within two (2) Business Days of a reasonable
request by the other party, then the other party shall have the right to either
withhold and/or suspend deliveries or payment, or terminate the Agreement
without prior notice, in addition to any and all other remedies available
hereunder. Company may immediately suspend deliveries to Customer hereunder in
the event Customer has not paid any amount due Company hereunder on or before
the fifth (5th) Business Day following the date such payment is due.
19. MISCELLANEOUS
19.1 Audit. Each party shall have the right, at its own expense, at
reasonable hours and reasonable notice to examine the records of the other party
to the extent necessary to verify the accuracy of any statement or other data
that may reasonably have a bearing on or pertain to any business conducted
hereunder between the parties; provided, however, that the auditing party does
not have the right to examine any record relating to Transactions that occurred
more than two (2) years before the date of the
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Page B-10
audit. In the event of any inaccuracy, any necessary adjustments in the billing
shall be made within thirty (30) days after the determination thereof. This
provision shall survive any termination of this Agreement.
19.2 DISCLAIMER OF WARRANTIES. THERE ARE NO WARRANTIES WHICH EXTEND BEYOND
EXPRESS WARRANTY OF TITLE SET FORTH HEREIN. IN PARTICULAR, THERE ARE NO OTHER
EXPRESS WARRANTIES AND NO IMPLIED WARRANTIES, INCLUDING ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
19.3 Assignments. The Agreement may not be assigned by either party without
the prior written consent of the other party. Additionally, neither party may
pledge, mortgage or assign its rights hereunder as security for any
indebtedness. The Agreement extends to and will be binding upon the respective
successors and permitted assigns of Customer and Company.
19.4 APPLICABLE LAW. THE AGREEMENT AND ALL DOCUMENTS EXECUTED SIMULTANEOUSLY
HEREWITH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS, WITHOUT RECOURSE
TO THE RULES OF CONFLICT OF LAWS. THIS PROVISION SHALL SURVIVE ANY TERMINATION
OF THE AGREEMENT.
19.5 Entire Agreement. This document, including the Agreement and Appendix A
thereof, and all documents executed simultaneously herewith including, without
limitation, the Promissory Note, constitute the entire agreement between the
parties with respect to the subject matter hereof. No promises, agreements or
warranties additional to this Agreement will be deemed to be a part hereof, nor
will any alteration, amendment or modification hereof, be effective unless
mutually agreed in writing by the parties hereto.
19.6 Confidentiality. The terms of the Agreement and any transaction thereof
shall not be disclosed to any person or party except when the disclosure is (i)
required by law; (ii) requested by Customer's or Company's independent public
accountants; (iii) required pursuant to a loan agreement; (iv) required to be
disclosed in connection with the prosecution or defense of any litigation; or
(v) is otherwise agreed in writing to be disclosed.
19.7 Severability. If any provision in this Agreement is determined to be
invalid, void or unenforceable by any court having jurisdiction, such
determination shall not invalidate, void, or make unenforceable any other
provision, agreement or covenant of this Agreement.
19.8 Waiver. A waiver by either party of any provision hereof shall not be
construed to constitute a continuing waiver hereunder by such party, and
furthermore, a waiver by either party of any one or more defaults by the other
party in performance of any provisions of this Agreement shall not operate or be
construed as a waiver of any future default or defaults, whether of a like or
different character.
19.9 Captions. Captions used herein are for convenience only and shall not be
used to construe this Agreement.
End of Appendix B
Appendix B
Page B-11
