EXHIBIT 10.9
Pages where confidential treatment has been requested are stamped "Confidential
Treatment Requested. The redacted material has been separately filed with the
Commission", the appropriate section has been marked at the appropriate place
and in the margin with a (*).
GAS SUPPLY AND SERVICE AGREEMENT
BETWEEN
CHEVRON PRODUCTS COMPANY
(PERTH AMBOY ASPHALT PLANT)
AS "BUYER"
AND
NATURAL GAS CLEARINGHOUSE
AS "SELLER"
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS................................................... 1
ARTICLE 2. QUANTITY; NOMINATIONS......................................... 2
ARTICLE 3. FAILURE TO PERFORM............................................ 3
ARTICLE 4. TRANSPORTATION................................................ 4
ARTICLE 5. QUALITY....................................................... 6
ARTICLE 6. DELIVERY AND PRESSURE; TITLE AND CONTROL; LIABILITY........... 6
ARTICLE 7. MEASUREMENT................................................... 7
ARTICLE 8. COMMODITY CHARGE.............................................. 7
ARTICLE 9. BILLING AND PAYMENT........................................... 10
ARTICLE 10. TAXES......................................................... 12
ARTICLE 11. LAWS AND REGULATION........................................... 12
ARTICLE 12. FORCE MAJEURE................................................. 12
ARTICLE 13. WARRANTY OF TITLE AND ROYALTIES............................... 13
ARTICLE 14. TERM.......................................................... 13
ARTICLE 15. CONFIDENTIALITY............................................... 13
ARTICLE 16. ARBITRATION................................................... 14
ARTICLE 17. MISCELLANEOUS................................................. 15
GAS SUPPLY AND SERVICE AGREEMENT
THIS AGREEMENT is made and entered into as of September 1, 1996 (the
"Effective Date"), by and between CHEVRON PRODUCTS COMPANY, a division of
Chevron U.S.A. Inc., a Pennsylvania corporation, herein referred to as "Buyer",
and NATURAL GAS CLEARINGHOUSE, a Colorado general partnership, herein referred
to as "Seller".
WITNESSETH
WHEREAS, Buyer requires a firm but flexible supply of natural gas for use
in Buyer's Perth Amboy Asphalt Plant in Middlesex County, New Jersey, and Seller
desires to sell such gas to Buyer on a firm basis as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the Parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
For the purpose of this Agreement, the following definitions are
applicable:
1.1. The term "Agreement" means this agreement, including all exhibits
attached hereto and all amendments hereof that may be made from time to time.
1.2. The term "Btu" means British thermal unit, and is the quantity of
heat required to raise the temperature of 1 pound of water from 58.5 to 59.5
Fahrenheit.
1.3. The term "Business Day" means any day on which commercial banks in
Houston, Texas, are open for general business.
1.4. The term "Contract Year" means the 12-month period from September 1
of each year through August 31 of the succeeding year during the term hereof.
1.5. The term "day" means a period of 24 consecutive hours, coinciding
with the gas day of Tetco.
1.6. The term "Facility" means Buyer's Perth Amboy Asphalt Plant in
Middlesex County, New Jersey.
1.7. The term "FERC" means the Federal Energy Regulatory Commission or
successor agency.
1.8. The term "gas" means natural gas to be made available by Seller and
taken by Buyer under the terms of this Agreement.
1.9. The term "Locked Price" means the price per MMBtu to be paid by
Buyer, in lieu of the otherwise applicable Commodity Charge, for Locked
Quantities of gas purchased hereunder. A Locked Price shall be determined in
accordance with Section 8.5. hereof.
1.10. The term "Locked Quantities" means quantities of gas to be sold by
Seller and purchased by Buyer during any month during the term hereof, as to
which a Locked Price has been established.
1.11. The term "MMBtu" means 1,000,000 British thermal units.
1.12. The term "month" means the period beginning on the first day of a
calendar month and ending on the first day of the next succeeding month.
1.13. The term "Party" or "Parties" means Seller and/or Buyer under this
Agreement.
1.14. The term "Delivery Point" means either (a) the interconnect between
Tetco and the Facility.
1.15. The terms "Transporter" and "Tetco" mean Texas Eastern Transmission
Company.
1.16. The term "Unlocked Quantities" means quantities of gas as to which no
Locked Price has been established.
1.17. The term "Maximum Contract Quantity" or "MCQ" means 10,000 MMBtu per
day of gas.
1.18. The term "Daily Baseload Quantity" or "DBQ" means the quantity of gas
(in MMBtu per day) nominated as such by Buyer at least 48 hours prior to the
first of the month nomination deadline for transportation on Texas Eastern
Transmission Company. In the absence of written agreement to the contrary, the
DBQ shall never exceed the MCQ.
ARTICLE 2.
QUANTITY; NOMINATIONS
2.1. SELLER'S OBLIGATION. On each day during the term hereof, Seller will
make available at the Delivery Point, if nominated by Buyer as provided herein,
the full natural gas requirements of the Facility (including any requirements
for gas supplies which Buyer will provide to other facilities located on or near
the Facility property and which are related to or in support of the operation of
the Facility, whether owned by an affiliate of Buyer or a third party), up to
but not to exceed the Maximum Contract Quantity.
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2.2. BUYER'S OBLIGATION. On each day during the term hereof, Buyer shall
take from Seller, if made available at the Delivery Point, the full natural gas
requirements of the Facility. This provision shall not, however, prevent Buyer
from acquiring gas or alternate fuels from third parties when necessary to
mitigate its damages from Seller's non-delivery as described in Section 3.1.
2.3. PURCHASE NOMINATIONS. By the 20th day of each month or five Business
Days prior to Texas Eastern's first of the month nomination deadline, whichever
is earlier, Buyer shall provide Seller a non-binding, good-faith estimate of the
quantities of gas which the Facility expects to require on each day of the
subsequent month. At least 48 hours before Texas Eastern's first of the month
nomination deadline, Buyer shall advise Seller of the Daily Baseload Quantity
which Buyer elects for the upcoming month, using a form similar to that attached
hereto as Exhibit "A". Thereafter, any daily nomination changes which Buyer
desires to make after its first of the month nomination shall be transmitted to
Seller at least two hours prior to Texas Eastern's nomination deadline for the
day on which the change is to be effective. Seller agrees to use its best
efforts to accept and implement nominations after the deadlines stated above,
subject to the requirements and willingness of the applicable Transporter.
Buyer's and Seller's representatives shall exchange information as necessary to
ensure that Seller is aware, to the maximum extent practicable, of the actual
gas requirements of the Facility for each day.
ARTICLE 3.
FAILURE TO PERFORM
3.1. SELLER'S FAILURE TO MAKE GAS AVAILABLE. If Seller fails, in whole or
in part, to make available to Buyer's Facility the full quantity of gas
nominated by Buyer on any day, and if such failure is not excused by an event of
force majeure, Buyer shall be entitled to recover liquidated damages for such
failure in an amount equal to the shortfall in delivery, multiplied by Buyer's
cost per MMBtu of cover supplies, including natural gas, vaporized propane, or
other alternate fuels, less the Commodity Charge which would have been payable
but for the failure to deliver. Seller agrees to pay Buyer any liquidated
damages to which Buyer is entitled under this Section 3.1. on or before the
10th day after Seller receives a written calculation of the amount of such
liquidated damages from Buyer. Buyer shall use reasonable efforts to notify
Seller prior to obtaining replacement supplies and to obtain any replacement
supplies at the lowest reasonable price, but it is understood that Buyer's
Facility does not employ full time gas supply management personnel and the only
practical source of cover may be vaporization of propane, other alternative
fuels, or unauthorized overrun gas from the Transporter's system.
3.2. BUYER'S FAILURE TO PURCHASE GAS. If Buyer fails on any day, to
purchase the full quantity of gas nominated by Buyer on any day, as set forth in
Section 2.3., and if such failure is not excused by an event of force majeure
or Seller's failure to make gas available, Seller shall be entitled to recover
liquidated damages for such failure in
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an amount equal to the purchase deficiency multiplied by the amount, if any, by
which the Commodity Charge which would have been payable hereunder exceeds the
price per MMBtu received by Seller in an alternate sale of the deficient
quantity. Buyer agrees to pay Seller any liquidated damages to which Seller is
entitled under this Section 3.2. on or before the 10th day after Buyer receives
a written calculation of the amount of such liquidated damages from Buyer.
Seller shall use reasonable efforts to obtain the highest price reasonably
available in any such alternate sale.
3.3. TERMINATION RIGHTS UPON MATERIAL DEFAULT. If Seller fails to make
available to Buyer's Facility at least 95% of the full quantity of gas nominated
by Buyer on any three consecutive days after notice to Seller that a default has
occurred, or on five or more days (following notice in each case), which need
not be consecutive, in any calendar year, and if such failure is not excused by
an event of force majeure, Buyer shall have the right to terminate this
Agreement by giving Seller at least thirty days prior written notice of
termination. Any notice of termination under this Section must be given within
thirty days after occurrence of the event(s) on which the termination is based.
Neither Party shall have any liability to the other under this Agreement
following any termination of this Agreement pursuant to this Section, except for
payment of amounts accruing prior to such termination.
3.4. NO SPECIAL DAMAGES. THE REMEDIES SPECIFIED IN SECTIONS 3.1., 3.2.,
and 3.3. ABOVE, AND SECTION 8.5.5. BELOW, SHALL BE THE SOLE AND EXCLUSIVE
REMEDIES FOR SELLER'S FAILURE TO DELIVER GAS ACCORDING TO THIS AGREEMENT. THE
PRICING AND BALANCING PROVISIONS OF THIS AGREEMENT ARE INTENDED AS SELLER'S
EXCLUSIVE REMEDIES FOR ANY FAILURE BY BUYER TO PURCHASE NOMINATED QUANTITIES OF
GAS UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY BREACH OR ALLEGED
BREACH OF THIS AGREEMENT.
3.5. NO THIRD PARTY BENEFICIARIES. It is specifically agreed that there
are no third party beneficiaries to this Agreement, and that this Agreement
shall not impart any rights enforceable by any person, firm, organization, or
corporation not a Party hereto.
ARTICLE 4.
TRANSPORTATION
4.1. TRANSPORTATION GUIDELINES. The rules, guidelines, operational
procedures and policies of the Transporter(s), as they may be changed from time
to time, shall define and control the manner in which gas delivered and sold
under this Agreement is transported. Seller and Buyer each agree to provide to
the other, in as prompt a manner as reasonable, all information necessary to
permit scheduling pursuant to such requirements.
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4.2. TRANSPORTATION IMBALANCES.
4.2.1. General. If Seller delivers to the Transporter or Buyer takes
at the Delivery Point(s) a quantity of gas not equal to the quantity nominated
and confirmed for transportation, a "Transportation Imbalance" may occur. Upon
notification by the other Party or Transporter that a Transportation Imbalance
exists, each Party will exercise due diligence to correct the Transportation
Imbalance, subject to any restrictions imposed by Transporter(s). Buyer and
Seller agree to use due diligence to prevent or diminish any occurrences of
Transportation Imbalances, and to minimize any resulting imbalance penalties
through the use of imbalance trading or netting procedures, or other methods
offered by the Transporter. Adjustments to transportation nominations made
pursuant to this paragraph shall not modify or impair the Parties' obligations
or remedies as set forth in Article 3.
4.2.2. Imbalance Cashouts. The Transporter's tariff or applicable
contracts may contain provisions under which, in the event of Transportation
Imbalances related to the gas sold and purchased hereunder, a Party to this
Agreement may be required to purchase net imbalance quantities from the
Transporter, or to sell net imbalance quantities to the Transporter, at prices
determined pursuant to the Transporter's tariff or the applicable contract (such
purchases and/or sales being referred to herein as "cash-outs"). If one Party
hereto is required by the Transporter to cash out an imbalance caused by the
other Party's failure to deliver or receive the quantity of gas nominated and
confirmed for transportation, the Party whose act or omission caused the
Transportation Imbalance shall reimburse the other Party for the penalty
component of the cash-out price. For purposes of this Agreement, the penalty
component of a cash-out price shall be the amount by which the price at which a
Party is required to buy the cashed-out quantity exceeds the Commodity Charge
effective when the imbalance accrued, or the amount by which the Commodity
Charge in effect when the imbalance accrued exceeds the price at which a Party
is required to sell the cashed-out quantity. Due to the possibility of graduated
penalties in the Transporter's tariff, several different penalty components may
apply to portions of a Transportation Imbalance. Once determined, any penalty
components of cash-out prices shall be multiplied by the quantities cashed out
to which such penalties are applicable.
4.2.3. Other Transportation Penalties. Seller shall hold Buyer
harmless from all costs and penalties in addition to those described in Section
4.2.2. which may be assessed by Transporter(s) as a result of over-delivery or
under-delivery of gas caused by Seller. Buyer shall hold Seller harmless from
all costs and penalties in addition to those described in Section 4.2.2. which
may be assessed by Transporter(s) as a result of over-takes or under-takes of
gas caused by Buyer.
4.2.4. Minimization of Penalties. If any costs or penalties
associated with the transportation of gas are anticipated, the Party becoming
aware that such costs or penalties may be assessed or incurred shall inform the
other Party promptly after the Party becomes aware, followed by notice in
writing. Each Party shall then promptly cooperate in good faith with the other
Party to minimize or eliminate, if possible, such
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costs or penalties. The Parties shall cooperate with each other and with the
Transporter to verify delivery and receipt of the Nominated Purchase Quantity on
a timely basis.
4.3. UPSTREAM TRANSPORTATION. Seller shall be responsible for
transportation to the Delivery Point(s) and payment of all transportation
charges relating thereto. Buyer shall be responsible for any transportation from
the Delivery Point(s) and payment of all transportation charges relating
thereto.
ARTICLE 5.
QUALITY
5.1. SPECIFICATIONS OF TRANSPORTER. All gas delivered hereunder shall
conform to the quality specifications set forth in the transportation agreement
and/or FERC-approved tariff of the Transporter delivering the gas at the
Delivery Point. Seller's tender of gas which does not meet such quality
specifications shall be deemed a failure to deliver gas for purposes of Article
3. hereof unless the tender of off-spec gas is caused by an event of force
majeure.
5.2. TESTING. Buyer shall have the right to be represented and to
participate in all tests of gas delivered hereunder. Upon request by Buyer, not
more often than once a month, Seller shall cause the Transporter delivering gas
at the Facility to provide Buyer's representative at the Facility a Certificate
of Analysis showing the composition and content of the gas at the Delivery
Point.
ARTICLE 6.
DELIVERY AND PRESSURE; TITLE AND CONTROL; LIABILITY
6.1. DELIVERY AND PRESSURE. All gas to be sold and purchased hereunder
shall be delivered to Buyer at the Delivery Point at the pressure maintained in
the facilities of the Transporter from time to time.
6.2. TITLE AND CONTROL. Title to the gas delivered hereunder shall pass to
and vest in Buyer at the Delivery Point. Seller shall be deemed to be in
exclusive control and possession of said gas prior to the time of delivery to
Buyer, and Buyer shall be deemed to be in exclusive control and possession of
said gas thereafter.
6.3. LIABILITY. The Party deemed to be in control and possession of the
gas sold hereunder shall be responsible for and shall indemnify, defend and hold
the other Party harmless with respect to any losses, claims, liabilities or
damages arising therefrom when such gas is deemed to be in that Party's control
and possession.
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
ARTICLE 7.
MEASUREMENT
The unit of volume for measurement of gas delivered hereunder shall be 1
cubic foot of gas. The sales unit of the gas shall be one MMBtu, determined on
a dry basis. All measurements of gas delivered and sold hereunder shall be in
accordance with the provisions of the tariff of the Transporter, insofar as such
tariff applies at the Delivery Point.
ARTICLE 8.
COMMODITY CHARGE
8.1. CALCULATION OF COMMODITY CHARGE. For each MMBtu of gas delivered to
Buyer by Seller at the Delivery Point, Buyer shall pay Seller a "Commodity
Charge" calculated as follows:
8.1.1. For all gas nominated and delivered hereunder on any day up to
the Daily Baseload Quantity, the Commodity Charge shall be Seller's actual
* and reasonable cost of acquiring the gas, plus REDACTED per MMBtu. (The
Parties intend that the portion of the Commodity Charge determined in this
Section by reference to Seller's acquisition cost be replaced by a
published index price at such time as the Parties agree that a suitable
published index price exists. In that event, this Section shall be amended
accordingly.)
8.1.2. For the quantity of gas, if any, delivered on any day pursuant
to Buyer's nomination which is in excess of the Daily Baseload Quantity,
the Commodity Charge shall be the midpoint of the range of prices quoted
for gas flowing on that day in the publication "Gas Daily" under "Daily
* Price Survey" for Tetco's M-3 Zone, plus REDACTED per MMBtu.
8.2. SWING DOWN ADJUSTMENTS. On any day when Buyer nominates less than the
Daily Baseload Quantity, a swing-down adjustment shall apply. The swing-down
adjustment shall be calculated as follows. If Buyer nominates less than the
Daily Baseload Quantity on any day, the midpoint of the range of prices quoted
for gas flowing on that day in the publication "Gas Daily" under "Daily Price
Survey" for Tetco's M-3 Zone shall be subtracted from the Commodity Charge
provided for in Section 8.1.1., and the result shall be multiplied by the
difference between the Daily Baseload Quantity and the quantity nominated for
that day. If the resulting amount is a negative number, that amount shall be
credited to Buyer on the monthly invoice for that month's deliveries. If the
resulting amount is a positive number, that amount shall be charged to Buyer on
the monthly invoice for that month's deliveries.
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8.3. NON-PUBLICATION OF INDEX. If any index required for establishing the
Commodity Charge is not published in the applicable publication, or if
significant changes in the marketplace render the current index unsatisfactory
for determining the Commodity Charge, then, in the absence of mutual agreement
to the contrary, a replacement index shall be determined by binding arbitration
in accordance with Article 16. hereof. In any such arbitration, each Party
shall submit its proposal for the replacement index and the arbitrators will be
charged to select from the two proposals the one which best reflects the market
price of gas delivered to the Facility under all of the terms and conditions of
this Agreement. Pending determination of a new index, whether by agreement or
arbitration, the last available index shall be used, subject to retroactive
adjustment after the new index is determined.
8.4. PRICE RENEGOTIATION. Beginning two years after the Effective Date,
either Party may request renegotiation of the Commodity Charge payable under
this Agreement if such Party believes in good faith that the current methodology
does not reflect the fair market value of gas delivered to the Delivery Points
under similar contractual terms. If either Party requests renegotiation pursuant
to this Section 8.4., the Parties shall meet and attempt in good faith to reach
agreement on a different formula for calculation of the Commodity Charge. In any
such price renegotiation, and in any arbitration resulting from a price
renegotiation, the following principles will be applied. The Parties agree, for
purposes of any arbitration which may be requested, that the Commodity Charge is
intended to fairly compensate Seller for the gas supplied under this Agreement
and the related services being provided by Seller, to allow Seller a reasonable
opportunity to fully recover its costs of providing such gas and services, and
to provide Seller a reasonable profit for the efforts expended by it, taking
into consideration the assets placed by Buyer at Seller's disposal and the
opportunities those assets offer. In addition, the Parties acknowledge that (a)
the Commodity Charge is designed primarily to allocate to Buyer the risk of
daily and monthly changes in the commodity price of natural gas, and to
compensate Seller for its services in obtaining, delivering and otherwise
managing the gas supply for the Facility, and (b) Seller's liability for non-
performance under this Agreement is limited to Buyer's cost of cover. Therefore,
evidence of Seller's costs of providing the services called for under this
Agreement will be given greater weight than evidence of charges or fees under
other agreements in which the seller bears a greater portion of the risk of
commodity price fluctuations or a greater potential liability for non-
performance. If the Parties are unable to reach agreement within 60 days after
delivery of the request for renegotiation, then upon 30 days prior written
notice, either Party may require that the issue(s) be submitted to binding
arbitration in accordance with Article 16. In any such arbitration, each Party
shall submit a detailed proposal for calculation of the Commodity Charge and the
arbitrators will be charged to select from the two proposals the one which best
reflects the fair market value of gas delivered to the Facility under all of the
terms and conditions of this Agreement, including the principles stated in this
Section 8.4. If the Commodity Charge is redetermined by arbitration as
provided above, then neither Party shall have the right to again have such
issue(s) submitted to arbitration for at least twelve months following the
decision of the arbitrators.
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8.5. LOCKED PRICE. Subject to the terms set forth herein, in lieu of
paying the applicable Commodity Charge hereunder, Buyer may lock the price of
all or a portion of the gas to be purchased during any of the 12 months
immediately following the date of Buyer's request to lock price (insofar as such
months are during the term hereof), by notifying one of Seller's authorized
representatives by telephone of Buyer's desire to lock price on such gas. If
Buyer opts for such a Locked Price and the Commodity Charge otherwise payable is
based in part upon a published index, or other base amount, plus a monetary
adjustment, the Locked Price so established shall replace the index or base
amount as to Locked Quantities affected by such Locked Price, but the monetary
adjustment shall still be applied to such Locked Quantities.
8.5.1. Timing for Requesting Locked Price; Recording of
Conversations. Buyer may request quote of a Locked Price for gas to be delivered
hereunder by telephone on any Business Day, between the hours of 8:30 a.m. and
2:00 p.m., local Houston, Texas time, up to and including the 7th Business Day
prior to the beginning of the month to which the Locked Price shall apply. The
Parties acknowledge and agree that all telephone conversations between them
relating to a Locked Price may by recorded by either Party, or both, for
purposes of establishing the terms and conditions associated with the Locked
Price. The Parties also agree that the taped conversation may be used to prove
the terms and conditions associated with a Locked Price if the Parties
subsequently disagree on such terms and conditions.
8.5.2. Procedures. As soon as possible after Buyer's telephonic
request, but in any event within 24 hours (excluding weekends and holidays),
Seller shall determine the price per MMBtu at which it is willing and able to
lock price and shall notify Buyer's authorized representative of such price. The
Locked Price will be based on the NYMEX (or other exchange selected by Seller)
posting for the natural gas futures contract applicable to the month(s)
requested by Buyer and prevailing at the time of Buyer's request for a Locked
Price, plus a basis differential adjustment to equate the posted price with an
imputed price at the applicable Delivery Point. If Buyer accepts such Locked
Price, then Seller shall forward to Buyer a "Price Lock Confirmation", similar
to the form attached hereto as Exhibit "B", which specifies the terms to which
the Parties have agreed. Said Price Lock Confirmation shall be forwarded to
Buyer prior to the end of the month in which deliveries are to be made. The
terms set forth in the Price Lock Confirmation shall be binding upon the Parties
unless Buyer notifies Seller in writing that Buyer disputes one or more of the
terms set forth in said Price Lock Confirmation within 48 hours, exclusive of
weekends and Chevron holidays, after Buyer receives the same. Any terms which
remain undisputed after expiration of said period shall be binding on the
Parties, and the Parties shall work together in good faith to resolve any
disputes as expeditiously as possible.
8.5.3. Multiple Price Locks. Buyer may request and establish a
Locked Price on gas quantities for a particular month more than once, so long as
Buyer meets the requirements of this Section 8.5. with regard to timing. Seller
at its option may include all Locked Prices and Locked Quantities in one Price
Lock Confirmation for any applicable month.
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8.5.4. Irrevocability; Nominations; Allocation. Once a Locked Price
has been established for a delivery month hereunder, the Locked Price shall be
irrevocable as to the affected Locked Quantities, and shall not thereafter be
subject to change. Additionally, for any month as to which a Locked Price has
been established, Buyer shall be obligated to nominate and take a quantity of
gas not less than the Locked Quantities then in effect. If Buyer elects to
establish a Locked Price for less than all of the gas to be delivered in any
applicable month, and/or if Buyer and Seller have established more than one
Locked Price for different Locked Quantities, the first gas delivered during
said month shall be the first Locked Quantities established, followed by any
additional Locked Quantities in the order they were established, followed by any
Unlocked Quantities of gas.
8.5.5. Failure to Purchase Locked Quantities. If Buyer fails to
purchase the full quantity of gas subject to a Locked Price in any month, then,
to the extent such failure is not the result of force majeure or Seller's
failure to make the gas available, Buyer shall pay Seller liquidated damages
calculated as follows. The unexcused deficient purchase quantity of gas subject
to a Locked Price shall be multiplied by the difference between the Locked Price
and the settlement price of the natural gas futures contract on NYMEX (or other
applicable exchange) for the Month in which the deficiency occurred, plus or
minus the basis differential set forth in the Price Lock Confirmation. In
addition, if Seller has entered into a financial instrument, including, without
limitation, an over-the-counter basis swap, for purposes of hedging the risk
associated with the basis differential component of the Locked Price, Buyer
shall reimburse Seller one hundred percent (100%) of the actual losses incurred
by Seller under such financial instrument to the extent such losses result from
Buyer's unexcused failure to purchase gas subject to a Locked Price. Seller
shall exercise its best efforts to minimize such losses (including for example
the early termination of financial instruments if Seller reasonably believes at
the time of termination that early termination may minimize such losses).
Buyer's obligation to purchase gas subject to a Locked Price is a monthly
obligation and not a daily obligation and therefore for purposes of this Section
Buyer shall have compiled with its obligation to purchase quantities of gas
subject to a Locked Price if it purchases such quantities during the course of
the Month.
8.5.6. Cessation of Futures Trading. If natural gas futures
contracts cease to be traded on the New York Mercantile Exchange or on any other
mercantile exchange acceptable to Seller in its sole discretion, then after such
cessation Seller shall be relieved of any and all obligation to establish Locked
Prices hereunder.
ARTICLE 9.
BILLING AND PAYMENT
9.1. BILLING AND PAYMENT. Not later than the 15th day of each month,
Seller shall provide Buyer an invoice (which may be transmitted by electronic
facsimile) setting forth the quantities of gas delivered at the Delivery Point
during the preceding month, the amount due therefor and any other charges,
credits or adjustments due
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under the terms hereof. If actual quantities are not available by the xxxx
Xxxxxx prepares its invoice, Seller may invoice based on the quantities
nominated and confirmed for transportation, subject to appropriate adjustments
to actual quantities when available. Buyer shall make payment by wire transfer
by the 25th day of the month following the delivery month, or within 10 Days
after receipt of Seller's invoice, whichever is later; provided, however, that
payments which would be due on a Saturday or bank holiday shall be due on the
last preceding Business Day, unless the bank holiday falls on a Monday. Payments
otherwise due on Sunday or on a Monday bank holiday shall be due on the first
succeeding Business Day.
9.2. BILLING DISPUTES. If a dispute arises as to the amount payable in any
invoice rendered hereunder, Buyer shall nevertheless pay when due the amount not
in dispute under such invoice. Such payment shall not be deemed to be a waiver
of the right by Buyer to recoup any overpayment, nor shall acceptance of any
payment be deemed to be a waiver by Seller of any underpayment. If Buyer fails
to forward the entire undisputed amount due to Seller when same is due, interest
on the unpaid portion shall accrue at a rate equal to 2% above the prime rate
charged by Xxxxx Fargo Bank, San Francisco, from time to time, or the maximum
legal rate, whichever is the lesser, compounded daily from the date such payment
is due until the same is paid. If Buyer's failure to pay the undisputed portion
of any invoice rendered hereunder continues beyond five days after the due date
of such invoice, then Seller, in addition to all other legal remedies available
to it, shall have the right and option upon written notice to Buyer to (a)
suspend further deliveries of gas until such default shall have been cured, and
(b) terminate this Agreement if the payment default is not cured within five
days after such written notice is given.
9.3. NOTICE OF DISPUTE. If Buyer withholds payment of any disputed amount
as authorized herein, Buyer shall within 15 days after the due date of the
disputed invoice submit to Seller a written explanation of the dispute and any
available supporting documentation. The Parties shall then cooperate in good
faith to resolve such dispute as expeditiously as possible, and the portion, if
any, of such disputed amount eventually determined to be due shall bear interest
at the rate stated in Section 9.2. from the original due date until the date
actually paid.
9.4. AUDIT. Each Party shall have the right at its own expense to examine
and audit at any reasonable time the books, records and charts of the other to
the extent necessary to verify the accuracy of any statements or charges made
under or pursuant to any of the provisions of this Agreement. Upon request,
Buyer shall also make available to Seller for audit purposes any relevant
records of the Transporter to which Buyer has access. A formal audit of accounts
shall not be made more often than once each Contract Year. Any inaccuracy will
be promptly corrected when discovered; provided, however, that neither Party
shall be required to maintain books, records or charts for a period of more than
2 Contract Years following the end of the Contract Year to which they are
applicable. Neither Party shall have any right to question or contest any charge
or credit if the matter is not called to the attention of the other Party in
writing within 2 years of the end of the Contract Year in question.
11
ARTICLE 10.
TAXES
The price for gas delivered hereunder is inclusive of all production,
severance, ad valorem, or similar taxes levied on the production or
transportation of the gas prior to its delivery to or for the account of Buyer
at the Delivery Point, and all such taxes shall be borne and paid exclusively by
Seller. The price does not include any Federal, Indian, State or local sale,
use, consumption, or similar taxes of whatever designation which may now or
hereafter be imposed on the transfer of title or possession of the gas to or for
the account of Buyer, or on Buyer's subsequent use or disposition thereof. Any
such taxes shall be paid by Buyer directly to the taxing authority unless Seller
is required by law to collect and remit such taxes, in which case Buyer shall
reimburse Seller for all amounts so paid. If Buyer claims exemption from any
such taxes, Buyer shall provide Seller a tax exemption certificate or other
appropriate documentation thereof.
ARTICLE 11.
LAWS AND REGULATION
This Agreement is subject to all valid laws, orders, rules and/or
regulations of any and all duly constituted governmental authorities, Federal,
State or local, to the extent such laws, regulations, and orders are applicable
and effective from time to time.
ARTICLE 12.
FORCE MAJEURE
12.1. SUSPENSION OF OBLIGATIONS. If either Party hereto is rendered unable,
wholly or in part, by force majeure to carry out its obligations under this
Agreement, other than to make payment for gas delivered hereunder, then upon
such Party's giving notice and full particulars of such force majeure in writing
to the other Party as soon as practicable after the occurrence of the cause
relied on, the obligations of the Party giving such notice, so far as they are
affected by such force majeure, shall be suspended during the continuance of any
inability so caused but for no longer period, and such cause shall as far as
possible be remedied with all reasonable dispatch.
12.2. DEFINITION OF FORCE MAJEURE. The term "force majeure" as employed
herein means acts of God, strikes, lockouts, or other industrial disturbances,
acts of the public enemy, wars, blockades, insurrections, riots, epidemics,
landslides, lightning, hurricanes or storms, hurricane or storm warnings which
result in the precautionary shut-down or evacuation of production facilities,
earthquakes, fires, floods, washouts, arrest and restraints of governments and
people, civil disturbances, explosions, breakage or accidents to machinery,
equipment, or lines of pipe, freezing of xxxxx or lines of pipe, interruption or
curtailment of transportation by the Transporter (but only interruption or
curtailment of firm transportation if the gas is subject to a Locked Price under
Section 8.5.), partial or entire failure of xxxxx, and any other cause beyond
the
12
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
reasonable control of the Party affected which renders that Party unable to
carry out its obligations under this Agreement. The settlement of strikes or
lockouts shall be entirely within the discretion of the Party having the
difficulty, and the above requirement that any force majeure shall be remedied
with all reasonable dispatch shall not require the settlement of strikes or
lockouts by acceding to the demands of opposing Party when such course is
inadvisable in the discretion of the Party having the difficulty. A failure to
perform by a supplier of gas to Seller shall constitute force majeure under this
Agreement only to the extent that such failure was caused by force majeure as
defined herein.
ARTICLE 13.
WARRANTY OF TITLE AND ROYALTIES
13.1. TITLE. Seller hereby warrants title to the gas sold by it hereunder
and its right to sell the same and warrants that all such gas shall be delivered
by Seller free from all liens, encumbrances and adverse claims, including, but
not limited to liens to secure payment of production taxes, severance taxes and
other taxes.
13.2. ROYALTIES AND OTHER CHARGES. Seller shall pay or cause to be paid all
royalties and other sums due on the gathering and handling of the gas prior to
its delivery to Buyer. Seller shall indemnify and save Buyer harmless from and
against all suits, actions, damages, costs and expenses arising from or out of
any breach of this provision.
ARTICLE 14.
TERM
This Agreement shall commence on the Effective Date and shall continue in
force and effect, unless terminated earlier under the provisions hereof, for
* a primary term of REDACTED, and year to year thereafter until and unless
terminated by either Party upon prior written notice delivered not less than
ninety days prior to the end of the primary term or any annual renewal term
thereafter.
ARTICLE 15.
CONFIDENTIALITY
15.1. CONFIDENTIALITY. Each Party agrees that it will maintain the
commercial terms of this Agreement in strictest confidence and that it will not
cause or permit disclosure of those terms to any third party without the express
written consent of the other Party hereto; provided, however, that such third
party restriction does not apply to
13
affiliated companies. Disclosures otherwise prohibited by this Article 15. may
be made by either Party (1) to the extent necessary for such Party to enforce
its rights hereunder against the other Party, (2) to the extent a Party is
contractually or legally bound to disclose financial information to a third
party such as a royalty owner or partner, or (3) only to the extent to which a
Party hereto is required to disclose all or part of this Agreement by a statute
or by a court, agency, or other governmental body exercising jurisdiction over
the subject matter hereof, by order, by regulation or by other compulsory
process (including, but not limited to, deposition, subpoena, interrogatory, or
request for production of documents).
15.2. NOTIFICATION OF DISCLOSURE. If either Party is or becomes aware of a
fact, obligation or circumstance that has resulted or may result in a disclosure
authorized in Section 15.1., it shall so notify the other Party promptly and
shall provide documentation or an explanation of the disclosure as soon as it is
available. Each Party further agrees to cooperate to the fullest extent in
seeking confidential status to protect any material so disclosed.
15.3. DISCLOSURE TO CONSULTANTS OR COUNSEL. The Parties hereto acknowledge
that consultants or legal counsel may, from time to time, be provided with a
copy of this Agreement and agree that such disclosure does not require consent
by the other Party, provided that such consultants or counsel are obligated to
abide by the terms and conditions of this Article 15.
ARTICLE 16.
ARBITRATION
16.1. ALL DISPUTES ARBITRATION. All disputes between the Parties arising
under this Agreement shall be submitted to arbitration in accordance with this
Article 16., and the Parties hereby expressly waive all rights to have any such
disputes heard before a court of law, except the right to enforce an arbitration
award as described in Section 16.5. Arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. (S) 1, et seq., and not by the arbitration
acts, statutes or rules of any other jurisdiction.
16.2. PROCEDURE. In the event the Parties are unable to resolve a dispute
arising under this Agreement after exercising good faith efforts to do so,
either Party may require that the matter be resolved through binding arbitration
by submitting a written notice to the other. The notice shall name the noticing
Party's arbitrator and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen days after receipt of a notice of arbitration, the
other Party shall name its arbitrator by written notice and may designate any
additional issue(s) for arbitration. The two named arbitrators shall select the
third arbitrator within fifteen days after the date on which the second
arbitrator was named. Should the two arbitrators fail to agree on the selection
of the third arbitrator, either Party shall be entitled to request the Senior
Judge of the United States District Court of the Southern District of Texas to
select the third arbitrator. All arbitrators shall be qualified by education or
experience within the energy industry to decide the issues presented for
arbitration. No arbitrator shall be a
14
current or former director, officer or employee of either Party, or its
affiliates; an attorney (or member of a law firm) who has rendered legal
services to either Party, or its affiliates, within the preceding three years;
or an owner of any of the common stock of either Party or its affiliates.
16.3. ARBITRATION HEARINGS. The three arbitrators shall commence the
arbitration hearing within twenty-five days following the appointment of the
third arbitrator. The proceeding shall be held at a mutually acceptable site in
Houston, Texas. If the Parties are unable to agree on a site, the arbitrators
shall select a site. The arbitrators shall have the authority to establish
rules and procedures governing the arbitration hearing. Each Party shall have
the opportunity to present its evidence at the hearing. The arbitrators may
call for the submission of pre-hearing statements of position and legal
authority, but no post-hearing briefs shall be submitted. After the
presentation of the evidence has concluded, each Party shall submit to the
arbitration panel a final offer of its proposed resolution of the dispute. The
arbitration panel shall not have the authority to award incidental (except as
specifically provided herein), consequential, special, punitive or exemplary
damages. In addition, if the issue under consideration is limited to a
determination of an amount of money owed by one Party to the other, the
arbitration panel shall be charged to select from the two proposals the one
which the panel finds to be the most reasonable and consistent with the terms
and conditions of this Agreement, and the arbitration panel shall not average
the Parties' proposals or otherwise craft its own remedy. The arbitrators'
decision must be rendered within thirty days following the conclusion of the
hearing or submission of evidence, but no later than 90 days after appointment
of the third arbitrator. All evidence submitted in an arbitration proceeding,
transcripts of such proceedings, and all documents submitted by the Parties in
an arbitration proceeding shall be deemed confidential information subject to
Article 15., above.
16.4. ARBITRATION DECISION. The decision of the arbitrators or a majority
of them, shall be in writing and shall be final and binding upon the Parties as
to the issue submitted. Each Party shall bear the expense and cost of own
attorneys and witnesses, its own arbitrator and one-half of the expense and cost
of the third arbitrator.
16.5. ENFORCEMENT OF AWARD. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. The prevailing
Party shall be entitled to reasonable attorneys' fees in any court proceeding
brought to enforce or collect any award or judgment rendered by the arbitrators.
ARTICLE 17.
MISCELLANEOUS
17.1. WAIVERS. No waiver by either Seller or Buyer of any default of the
other under this Agreement shall operate as a waiver of future default, whether
of like or different character nature.
15
17.2. BINDING NATURE; ASSIGNMENT AS SECURITY. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns, or the
heirs, administrators, or executors of the Parties hereto. Either Party hereto
may assign its right, title and interest in, to and under this Agreement,
including without limitation, any and all renewals, extensions, amendments,
and/or supplements herein to any individual, bank, trustee, company or
corporation as security for any notices, bonds or other obligations or
securities of such assignor; provided, however, that no such assignment shall in
any way operate to enlarge, alter or change any obligation of the other Party
hereto.
17.3. ASSIGNMENT. Seller and Buyer reserve the right to assign this
Agreement in its entirety to any of their affiliates; however, ultimate
responsibility for performance hereunder shall remain with the respective Party
hereto. Except provided in the foregoing sentence, this Agreement may not be
assigned by either Party without the prior written consent of the other Party,
which shall not unreasonably be withheld. Notwithstanding the foregoing, either
Party shall have the right to condition such Party's consent to an assignment of
this Agreement to an unaffiliated third party on the agreement of the assignee
to a renegotiation of the terms of this Agreement within one year after the
effective date of the assignment.
17.4. FACILITY SHUTDOWN OR DOWNSIZING. If Buyer, during the term of this
Agreement, shuts down the Facility entirely, Buyer may terminate this Agreement
without liability upon not less than ninety days' prior written notice to
Seller. If Buyer reduces operation of the Facility so as to significantly reduce
the Facility's gas requirements, Buyer shall have the right, upon similar notice
to Seller, to reduce any applicable minimum daily quantity to correspond to such
reduced requirements. Nothing in this Section shall relieve Buyer from its
obligations with respect to quantities of gas for which a Locked Price has been
established in accordance with Section 8.5.
17.5. NOTICES. Any notice, request, demand, or statement, provided for in
this Agreement, except as otherwise herein provided, may be given in writing,
delivered in person or by United States Mail, to the Parties hereto at the
addresses shown below or at such other addresses as may hereafter be furnished
to the other Party in writing:
BUYER: Notices, and Correspondence:
Chevron Products Company
0000 Xxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
16
with a copy to:
Chevron Products Company
X.X. Xxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
Telecopy: (000) 000000-0000
Invoices and Statements:
Chevron Products Company
0000 Xxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SELLER: Correspondence and Notices:
Natural Gas Clearinghouse
00000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Contract Administration, Xxxxx Xxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
Payments Shall Be Made By Wire Transfer To:
Natural Gas Clearinghouse
Account No. 55-53911
First National Bank of Chicago--Chicago, IL
ABA Ref. No. 000000000
Any notice initially delivered by telecopy shall be confirmed by
regular mail within 1 week after transmission of the telecopy, but an
inadvertent failure to confirm by regular mail shall not impact the
effectiveness of the telecopied notice.
17.6. CHOICE OF LAW. Except as provided in Article 16., all disputes
directly or indirectly arising from or connected with this Agreement shall be
resolved in accordance with the laws of the State of Texas; however, conflict-
of-laws provisions that would require application of the law of some other state
shall be disregarded in their entirety.
17.7. MODIFICATIONS. No modification of the terms and provisions of this
Agreement shall be or become effective except pursuant to and upon the due and
mutual execution of an appropriate supplemental written contract by the Parties
hereto.
17
17.8. CONFLICTS OF INTEREST. No director, employee, or agent of either
Party shall give or receive any commission, fee, rebate, gift, or entertainment
of significant cost or value in connection with this Agreement. Any mutually
agreeable representative(s) authorized by either Party may audit the applicable
records of the other Party solely for the purpose of determining whether there
has been compliance with this paragraph.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals, each of which shall constitute and be an original contract.
SELLER:
NATURAL GAS CLEARINGHOUSE
By
---------------------------------------
Title
------------------------------------
BUYER:
CHEVRON PRODUCTS COMPANY
a division of Chevron U.S.A. Inc.
By
---------------------------------------
Title
------------------------------------
Signature Page To Gas Supply and Service Agreement effective as of September 1,
1996, between Natural Gas Clearinghouse as Seller, and Chevron Products Company,
as Buyer.
18
EXHIBIT "A"
To Gas Supply and Service Agreement effective as of September 1, 1996,
between Natural Gas Clearinghouse as Seller, and Chevron Products Company,
as Buyer.
FORM FOR PURCHASE NOMINATIONS
[Date]
Nomination of Gas
[Month, Year]
Contract No._____________________________
Natural Gas Clearinghouse
Attention Gas Control
Gentlemen:
Chevron Products Company hereby nominates the following quantities of gas for
purchase during the month indicated above, in accordance with the terms of the
captioned contract, at the following receipt points:
---------------------------------------------------------------------
Effective Date Quantity
of Nomination: (MMbtus/day) Delivery Point
--------------------------
Current New
Nomination Nomination
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Very truly yours,
CHEVRON PRODUCTS COMPANY
By
---------------------------------------
Title
------------------------------------
EXHIBIT "B"
[Date]
Price Lock Confirmation
Gas Purchase Agreement
Our Contract No.__________________
Chevron Products Company
[Address]
Gentlemen:
In accordance with that certain Gas Purchase Agreement effective as of September
1, 1996, by and between Chevron Products Company, a division of Chevron U.S.A.
Inc., as Buyer, and Natural Gas Clearinghouse, as Seller, which agreement is
incorporated herein and made a part hereof, Seller hereby confirms establishment
of the following "Locked Price" and "Locked Quantities" as previously discussed
and agreed orally:
Date of Parties' Oral Agreement:________________________________________________
Month of Delivery Affected:_____________________________________________________
Locked Quantities (MMBtus/day):_________________________________________________
Locked Price ($/MMBtu):_________________________________________________________
Basis Differential Adjustment ($/MMBtu):________________________________________
Remaining Unlocked Quantities (MMBtus/day):_____________________________________
This Sales Confirmation is binding upon the Parties unless Buyer notifies Seller
of a dispute with all or a portion hereof 48 hours (exclusive of weekends and
Chevron holidays) after Buyer's receipt hereof.
Very truly yours,
Natural Gas Clearinghouse
By
---------------------------------------
Trading Representative
Date
-------------------------------------
Approval & Execution:
Review: CA T/M/TR
------------- ---------
The following agreements, in accordance with Instruction 2 of Item 601, are
substantially identical in all material respects to the agreement filed as
Exhibit 10.9 to the Registration Statement:
1. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Oak Point).
2. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Orange Plant).
3. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Cedar Bayou
Plant).
4. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Pascagoula
Refinery).
5. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Salt Lake City
Refinery).
6. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (El Segundo
Refinery).
7. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Richmond
Refinery).
8. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Richmond
Refinery).
The following is a list of material details in which such agreements differ from
Exhibit 10.9:
1. The calculation of the commodity charge differs slightly depending on the
delivery method.
2. The location of each of the refineries is different.
