EXHIBIT 10.2
GATHERING SYSTEM OPERATING SERVICES AGREEMENT
This Gathering System Operating Services Agreement ("Agreement") is made
and entered into this 23rd day of November, 1999, by and between KN Gas
Gathering, Inc., a Colorado corporation ("KNGG"), and HS Gathering, L.L.C., a
Colorado limited liability company ("Contractor").
RECITALS
WHEREAS, KNGG is the owner of the Gathering System (as hereinafter
defined);
WHEREAS, KNGG desires to engage Contractor to provide certain operating
services with regard to the Gathering System as provided herein;
NOW, THEREFORE, for and in consideration of the premises, the terms,
covenants and conditions hereinafter set forth and the sums hereinafter
specified, the Parties hereby agree as follows:
ARTICLE I DEFINITIONS
Terms defined in this Article I shall, for purposes of this Agreement, have
the respective meanings set forth below. Terms defined elsewhere in this
Agreement shall have the meanings so specified when used in this Agreement.
1.1 "AFFILIATE" shall mean with respect to an entity, any other entity
controlling, controlled by or under common control with such entity. As used in
this definition, the term "control," including the correlative terms
"controlling," "controlled by" and "under common control with" shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management or policies of an entity, whether through ownership of voting
securities, by contract or otherwise.
1.2 "AGGREGATE INTERIM GROSS MARGIN" with respect to any Contract Month
shall mean the sum of the Gathering Interim Gross Margin and the Transmission
Interim Gross Margin for such Contract Month.
1.3 "BASE FEE" is defined in Section 3.2.
1.4 "BOOKS AND RECORDS" shall mean all existing financial, engineering,
operating, accounting, tax, business, environmental, legal, marketing, and other
data, files, documents, instruments, notes, papers, books and records (other
than those protected by legal privilege or that pertain to obligations retained
by Owner hereunder) of Owner and its Affiliates that relate materially to the
Gathering System, including without limitation, financial statements, budgets,
ledgers, journals, deeds, property records, title policies, drawings, records,
maps, charts, surveys, prints, franchises, customer lists, supplier lists, sales
and sales promotional data, advertising materials, cost and pricing information,
corporate records, permits, certificates, and reports.
1.5 "CALENDAR YEAR" shall mean a period of 365 consecutive days, 366
consecutive days when such period includes a February 29, beginning at 8:00 a.m.
Mountain Time on January 1 and ending at 8:00 a.m. Mountain Time on the
following January 1.
1.6 "CONTRACT" shall mean any agreement, contract, commitment, license,
option, lease, or instrument, including all amendments, modifications and
supplements thereto.
1.7 "CONTRACTS-GATHERING" shall mean all Contracts set forth in Schedule
1.1(a).
1.8 "CONTRACT MONTH" shall mean each calendar month during the period
commencing with the calendar month of October 1999 and ending with the calendar
month in which termination of this Agreement occurs.
1.9 "DEFAULT RATE" shall mean the lesser of (i) the Prime Rate plus 2% or
(ii) the maximum rate permitted by applicable law.
1.10 "DIRECT COSTS" shall mean all direct costs of services, materials and
equipment, including transportation thereof, paid to non-Affiliated third
parties or any Affiliated parties to the extent such costs paid to any
Affiliated party do not exceed the costs that would be charged by a
non-Affiliated third party for comparable services, materials and equipment, but
excluding (i) the costs of Contractor's and its Affiliates' personnel and (ii)
the costs of any material that would otherwise be provided as routine Operating
Services.
1.11 "ENVIRONMENTAL LAWS" shall mean any and all federal, state and local
laws, statutes, regulations, rules, orders, ordinances, licenses or permits of
any Governmental Authority pertaining to health, safety, the environment,
wildlife or natural resources in effect in any and all jurisdictions in which
the Transmission Assets are located, including, without limitation, the Clean
Air Act, the Federal Water Pollution Control Act, the Rivers and Harbors Act of
1899, the Safe Drinking Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act; the Superfund Amendments and Reauthorization Act
of 1986, the Solid Waste Disposal Act, the Resource Conservation and Recovery
Act, the Hazardous and Solid Waste Amendments of 1984, the Toxic Substances
Control Act, the Emergency Planning and Community Right-to-Know Act, the
National Environmental Policy Act, the Occupational Safety and Health Act, the
Oil Pollution Act, the Pipeline Safety Act, the Natural Gas Pipeline Safety Act,
and the Hazardous Materials Transportation Uniform Safety Act, any state laws
implementing the foregoing federal laws, any state laws pertaining to waste
management, including, without limitation, the handling of oil and gas
exploration and production or processing wastes or the use, maintenance and
closure of pits and impoundments, all other federal, state or local
environmental conservation or protection laws, and any common law creating
liability for environmental conditions, all as amended as of the date of this
Agreement. Environmental Laws shall include, without limitation, all
restrictions, conditions, standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in Environmental Laws in effect
on the date of this Agreement or contained in any order, decree, judgment, or
injunction which is issued, entered, promulgated or approved (x) prior to the
date of this Agreement and in effect on the date of this Agreement under any of
the foregoing Environmental Laws, or (y) after the date of this Agreement under
any of the foregoing Environmental Laws in effect as of the date of this
Agreement.
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1.12 "EXCLUDED ASSETS" shall mean any properties, privileges, rights and
interests (i) described in Schedule 1.1.(c) and (ii) the "Optional Excluded
Assets" described in Schedule 5.3.19 provided that Sellers (as such term is
defined in the Purchase and Sale Agreement) notify Buyer (as such term is
defined in the Purchase and Sale Agreement) prior to Closing (as such term is
defined in the Purchase and Sale Agreement) that Sellers elect to retain such
"Optional Excluded Assets."
1.13 "FERC" shall mean the Federal Energy Regulatory Commission.
1.14 "GOVERNMENTAL AUTHORITY" shall mean any court, governmental
department, commission, council, board, agency or other instrumentality of the
United States of America or any state, county, municipality or local government.
1.15 "GATHERING ASSETS" shall mean the Real Property-Gathering, Personal
Property-Gathering, Line Pack-Gathering, Contracts-Gathering, Permits-Gathering
and Other Assets-Gathering, except for the Excluded Assets.
1.16 "GATHERING INTERIM GROSS MARGIN" shall mean with respect to any
Contract Month the following: (i) all amounts payable, including fees and
penalties, to Owner for services provided through the Gathering System during
such Contract Month; plus (ii) all proceeds from the sale of liquid hydrocarbon
products recovered during such Contract Month; plus (iii) the net plant revenue
from the Plant Interest attributable to operations during such Contract Month;
less (iv) all costs incurred for fuel, shrinkage, and lost and unaccounted for
gas in connection with the operation of the Gathering System during such
Contract Month. Gathering Interim Gross Margin does not include insurance
proceeds or other proceeds for damage to and/or condemnation of the Gathering
System or the Facilities Fees.
1.17 "GATHERING SYSTEM" all of the facilities owned or leased by Owner and
used in the gathering of natural gas from individual xxxxx located in Weld,
Adams, Arapahoe, Denver, and Boulder Counties, Colorado to the transmission
system owned by XX Xxxxxxxxxx Transmission Limited Liability Company comprising
approximately 1000 miles of pipeline and 3000 horsepower of site rated
compression, located in Weld, Adams, Arapahoe, Denver, and Boulder Counties,
Colorado, as more fully depicted on the map attached hereto as Exhibit A, as
operated by or on behalf of Owner on the date hereof.
1.18 "INCENTIVE AMOUNT" is defined in Section 3.2.
1.19 "INTERIM SERVICES" shall mean the services described in Section
2.3(b), (c) and (f).
1.20 "INTERIM SERVICES TRANSFER DATE" shall mean January 1, 2000, unless
otherwise agreed in writing.
1.21 "KMI GUARANTEE" shall mean the Guaranty Agreement of even date
herewith from Xxxxxx Xxxxxx, Inc. in favor of Contractor.
1.22 "LINE PACK GATHERING" shall mean the natural gas utilized as line pack
in the Gathering System.
1.23 "MODIFICATION" shall mean any expansion, enhancement, modification,
abandonment, improvement or replacement to the Gathering System, other than
those in the ordinary course of business such as routine repairs and
maintenance.
1.24 "MASTER EQUIPMENT LEASE" shall mean the Master Equipment Lease
Agreement dated March 31, 1993 between NationsBanc Leasing and KN Front Range
Gathering Company, predecessor to KNGG, as amended by the First Amendment to
Master Equipment Lease Agreement between the same Persons, dated as of August
19, 1993, and the Second Amendment to Master Equipment Lease Agreement between
the same Persons, dated as of June 22, 1995, and the Third Amendment to Master
Equipment Lease Agreement, dated as of November 23, 1999, together with all
conveyances, supplemental deeds, security agreements, mortgages and other
instruments executed by such Persons in connection therewith.
1.25 "OPERATING SERVICES" is defined in Section 2.2.
1.26 "OPERATING SERVICES FEES" is defined in Section 3.2
1.27 "OPERATIONS TRANSFER DATE" shall mean December 1, 1999.
1.28 "OTHER ASSETS-GATHERING" shall mean all of the following: (i) all
Books and Records that relate materially to the Gathering System; and (ii) all
computer software (to the extent transferable) and computer files used solely in
connection with the Gathering System.
1.29 "OWNER" shall mean KNGG and its successors and permitted assigns.
1.30 "PARTY" shall mean Owner or Contractor, and "Parties" shall mean Owner
and Contractor.
1.31 "PERMITS" all permits, certificates, registrations, licenses,
franchises, authorities, consents, and approvals of a Governmental Authority.
1.32 "PERMITS-GATHERING" shall mean all Permits relating to or used in
connection with the Gathering System, the same being more particularly described
in Schedule 1.1(d).
1.33 "PERSON" shall mean an individual, partnership, corporation (including
a business trust), joint venture, limited liability company or other entity, or
a federal, state or local governmental entity.
1.34 "PERSONAL PROPERTY-GATHERING" shall mean all machinery, equipment,
compressors, tanks, pumps, pipe, engines, heaters, pipelines, meters, liquid
handling facilities, tools, fire equipment, parts, supplies, rolling stock,
vehicles, trailers, communications equipment, phones, radios, licenses, testing
equipment, and other equipment and tangible personal property owned or leased
by, or held for the benefit of, Owner relating to or used in connection with the
Gathering System, as listed in Schedule 1.1(f).
1.35 "PLANT" shall mean all real and personal property which comprise the
BP Amoco Wattenberg Gas Processing Plant located near Watkins, Colorado, being
the plant owned
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and operated pursuant to the Agreement for the Operation of the Wattenberg Gas
Processing Plant, Xxxxx County, Colorado dated January 1, 1977 between Amoco
Production Company and Xxxxxxxx Petroleum Company, as amended.
1.36 "PLANT INTEREST" shall mean the 6.8728% undivided ownership interest
in the Plant owned by Owner and all rights interests associated therewith.
1.37 "PRIME RATE" shall mean a rate per annum equal to the lesser of (a) a
varying rate per annum that is equal to the interest rate publicly quoted by The
Chase Manhattan Bank, New York, New York from time to time as its prime
commercial or similar reference interest rate, with adjustments in that varying
rate to be made on the same date as any change in that rate or (b) the maximum
rate permitted by applicable law.
1.38 "PURCHASE AND SALE AGREEMENT" shall mean that certain Purchase and
Sale Agreement dated November 23, 1999, among Xxxxxx Xxxxxx, Inc., KN Gas
Gathering, Inc., HS Resources, Inc., and HS Gathering, L.L.C., as may be amended
or supplemented from time to time.
1.39 "REAL PROPERTY-GATHERING" shall mean all land, buildings, structures,
fixtures, stations, facilities, improvements, surface and building leases,
surface use agreements, easements, Rights-of-Way, and other rights and interests
in and to real property and appurtenances thereto owned or leased by, or held
for the benefit of, Owner and relating to or used in connection with the
Gathering System, all as more particularly described in Schedule 1.1(h).
1.40 "RIGHTS-OF-WAY" shall mean any right-of-way, easement or prescriptive
right that is used in connection with the Gathering System.
1.41 "SERVICE AGREEMENTS" shall mean all gathering and other agreements to
which Owner is now or hereafter a party or to which its interest in the
Gathering System is subject pursuant to which Owner provides gathering and/or
other services with respect to the Gathering System, including, without in any
way limiting the foregoing, those contracts described in Schedule 1.1(a).
1.42 "STATEMENT OF OPERATING SERVICES FEES, GATHERING INTERIM GROSS MARGIN
AND AGGREGATE INTERIM GROSS MARGIN" shall mean with respect to any Contract
Month a monthly statement submitted by Contractor to Owner setting forth (i) the
applicable Base Fee and Incentive Amount, if any, for such Contract Month, (ii)
the amount of Gathering Interim Gross Margin payable with respect to such
Contract Month and (iii) the Aggregate Interim Gross Margin for such Contract
Month.
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1.43 "TARGET AMOUNT" with respect to any Contract Month shall mean the
following:
Contract Month Target Amount
-------------- -------------
Each of October, November and
December 1999 $2,082,300
Each month in 2000 $2,278,800
Each month in 2001 $2,382,000
1.44 "TRANSMISSION INTERIM GROSS MARGIN" is defined in the Transmission
System Operating Services Agreement of even date herewith between XX Xxxxxxxxxx
Transmission Limited Liability Company and Contractor.
ARTICLE II GENERAL RESPONSIBILITIES OF CONTRACTOR
2.1 PERFORMANCE OF OPERATING SERVICES. Subject to the terms and conditions
of this Agreement, the Contractor shall perform all Operating Services in
accordance with the terms and conditions contained herein, in accordance with
the terms and conditions of the Service Agreements and other
Contracts-Gathering, and in accordance with the requirements of all applicable
laws, rules, orders, permits and regulations of governmental authorities having
jurisdiction, including without limitation, 18 Code of Federal Regulations Parts
154 (Rate Schedules and Tariffs) and 157 (Applications for Certificates of
Public Convenience and Necessity and for Orders Permitting and Approving
Abandonment under Section 7 of the Natural Gas Act), 49 Code of Federal
Regulations Parts 192 (Transportation of Natural and Other Gas by Pipeline:
Minimum Federal Safety Standards) and 199 (Drug and Alcohol Testing), all
Environmental Laws, and any successor laws, rules, orders and regulations, and
in accordance with sound, efficient, workmanlike and economically prudent
natural gas pipeline industry practices and Owner's standard engineering,
construction, environmental, health and safety practices and policies as
provided to Contractor prior to the execution of this Agreement, but such
policies, provided by or on behalf of Owner in the form of written manuals, are
subject to the provisions of Section 2.11(d) of the Purchase and Sale Agreement.
2.2 DESCRIPTION OF OPERATING SERVICES. From and after the Operations
Transfer Date, with respect to all Operating Services except the Interim
Services, and from and after the Interim Services Date with respect to the
Interim Services, Contractor shall perform, furnish and pay for all costs,
expenses, services, supplies, equipment, resources, material, labor and other
personnel, contractors and subcontractors, as may be required to manage, operate
and maintain the Gathering System and Gathering Assets (the "Operating
Services") in accordance with the terms of this Agreement, except only for those
services to be performed by Owner pursuant to Section 2.3. The Operating
Services shall include and Contractor hereby is granted the exclusive right,
power and authority to perform and furnish, without limitation, the following
services, supplies, equipment, materials, labor and personnel, except to the
extent any such services are described in Section 2.3 or restricted pursuant to
Section 2.4 or any other provision of this Agreement, and subject to the
Recoveries as provided in the Purchase and Sale Agreement:
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(a) Manage, operate, maintain and repair the Gathering System and
Gathering Assets and procure and furnish all materials (e.g. consumables,
including bolts, gaskets and fluids), equipment, tools, services, supplies,
supervision and labor, liquids and chemicals, and mechanical parts
necessary to carry out Contractor's responsibilities under this Agreement;
(b) Perform, on behalf of Owner, all of the obligations of Owner
continuing or arising after the Operations Transfer Date under or with
respect to the Gathering System and Gathering Assets, including, but not
limited to, the performance of all obligations of Owner under the Service
Agreements and Contracts-Gathering, all obligations of Owner under the
Master Equipment Lease (other than the payment of basic payments, as
defined therein, the payment of ad valorem and property taxes and any
amounts payable as a result of failure to pay such basic rent and taxes),
all obligations of Owner (including the payment of rent and other monetary
obligations) under all other leases pursuant to which any of the Gathering
Assets are leased by Owner and all obligations (including the payment of
fees, rentals and other payments) arising under all Real
Property-Gathering;
(c) Perform, on behalf of Owner, such Modifications to the Gathering
System as Contractor deems appropriate, necessary or desirable and which
satisfy the requirements of Section 2.5, and provide all supplies,
equipment and material required in connection therewith, and acquire in the
name of Owner, all Rights-of-Way or other rights as may be required in
connection therewith;
(d) Perform, on behalf of Owner, the administrative functions of Owner
relating to the maintenance of the Gathering System, including all
engineering, planning, budgeting, reporting and other technical and
administrative functions relating to maintenance;
(e) Keep an accurate account of all transactions in respect of the
Gathering System consistent with the provisions of Section 3.1 and maintain
the Books and Records;
(f) Prepare preliminary engineering plans and outlines of proposed
construction for any Modification of the Gathering System;
(g) Maintain in force and effect, and require all contractors (and
their subcontractors) of Contractor performing services for the benefit of
Owner to the extent applicable and appropriate to a particular contractor
or subcontractor to maintain in force and effect, the insurance coverage as
described in Exhibit B;
(h) Prepare, make and be solely responsible for, all filings,
notifications and reports, required to be made or filed by Owner in support
of non-FERC related routine Operating Services with any Governmental
Authority under applicable laws, orders, rules and regulations, including
Environmental Laws;
(i) Manage and pay all sales, use and production taxes and interest
and penalties associated therewith applicable to the Gathering System and
Gathering Assets
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(other than any taxes payable upon transfer thereof as provided in the
Purchase and Sale Agreement), and attributable to periods during the term
of this Agreement including the maintenance of all associated books and
records and the preparation and filing of all sales, use and production tax
returns with the requisite governmental authorities and the handling of all
audits and disputes arising therefrom;
(j) Provide and pay for any and all employees, labor, personnel,
vendors, suppliers, outside services, and independent and sub-contractors
(including overtime payments, payroll, taxes, benefits, employee expenses,
employee training and safety training) necessary for the successful
performance of Contractor's obligations hereunder;
(k) Manage, operate, maintain and abandon the Gathering System and
Gathering Assets in accordance with the Master Equipment Lease and with all
applicable laws, orders, rules and regulations, including but not limited
to Environmental Laws, safety regulations and cathodic protection
regulations and comply with all permits, plans and regulatory programs
existing or required in the future in connection therewith;
(l) Manage and maintain all records consistent with and as required by
Environmental Laws;
(m) Provide for proper communications, inspections, surveillance, flow
control, electronic flow measurement, corrosion control, cathodic
protection, and monitoring of the Gathering System;
(n) Market the Gathering System gathering services to shippers and
other potential customers, and maintain customer relationships;
(o) Collect and market condensate, drip liquids, and NGL's collected
and transported through the Gathering System;
(p) Accept nominations from shippers and provide all scheduling and
dispatching required in connection with the operation of the Gathering
System;
(q) Provide written notification (which may be in the form of a
service request) to Owner of each request for service on the Gathering
System within five (5) business days after receipt of such request;
(r) Provide all metering activities, chart integration services,
measurement auditing, compression operations, maintenance and repairs, gas
analysis and measurement services, gas control and scheduling, billing and
accounting services with respect to the Gathering System;
(s) Maintain proper account payable records with respect to amounts
incurred related to the Gathering System, including all books and records
for sales and use taxes and the accrual and remittances thereof, and
promptly pay and discharge when due all costs and expenses incurred in
connection with the operation and maintenance of the
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Gathering System and the Gathering Assets and the performance of
Operating Services hereunder;
(t) Maintain proper account receivable records for Owner and xxxx and
collect all revenues due to Owner in connection with the operation of the
Gathering System, with all such xxxxxxxx for gathering services to be
separately itemized on each xxxx consistent with the form currently used by
Owner, and pay the Gathering Interim Gross Margin to Owner as provided in
Section 3.2;
(u) Maintain proper accounts and records, and pay and be responsible
for, all fuel, shrinkage, line loss, and other lost and unaccounted for gas
relating to the Gathering System for periods after the Operations Transfer
Date and perform all obligations under all gas purchase contracts pursuant
to which gas is purchased in connection with the operation of the Gathering
System;
(v) Recommend to Owner such new or amended contracts or agreements or
arrangements as Contractor deems necessary, desirable or appropriate for
furnishing gathering and other services in respect to the Gathering System;
(w) Provide all emergency response services, including receiving,
handling and responding to all calls from the emergency answering line
phone service, and provide all line locating services; and
(x) Do such other acts and things as are necessary, required,
desirable or appropriate for the operation and maintenance of the Gathering
System and which are consistent with applicable legal requirements and the
status of the Gathering System as a nonregulated facility under the Natural
Gas Act.
2.3 CERTAIN RIGHTS AND OBLIGATIONS OF OWNER. Notwithstanding anything to
the contrary herein, Owner shall have the right and the obligation during the
term of this Agreement, to provide the following services with respect to the
Gathering System:
(a) Cooperate with Contractor in obtaining any regulatory
authorization that may be necessary for Contractor to perform its
obligations or exercise its rights hereunder, as more fully provided for in
Section 2.12 of this Agreement;
(b) Maintain and manage consistent with prior practices of Owner an
electronic bulletin board system for the Gathering System until such time
as Contractor and Owner can orderly transfer such duties to Contractor
(which shall occur no later than March 31, 2000).
(c) Perform all nomination and scheduling with regard to the Gathering
System, provide accounting and billing information to Contractor not later
than 15 days after the end of each Contract Month so that Contractor may
send bills to the shippers using the Gathering System, and provide accounts
payable services with respect to gas purchases relating to the Gathering
System, until such time as Contractor and Owner can
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orderly transfer such duties to Contractor (which shall occur no later
than January 1, 2000, unless otherwise agreed in writing);
(d) Pay all expenses of operating and maintaining, the Gathering
System attributable to each Contract Month ending prior to the Operations
Transfer Date;
(e) Pay all ad valorem, property, or similar taxes, and interest and
penalties associated therewith, applicable to the Gathering System and
attributable to the period from and after the date of this Agreement until
termination of this Agreement, including the preparation and filing of all
required tax returns with the requisite governmental authorities and the
handling of all audits and disputes arising therefrom;
(f) Until January 1, 2000, unless otherwise agreed in writing, xxxx
and collect all revenues for services, and perform the following services:
chart integration services, measurement auditing, gas analysis and
measurement services and gas control;
(g) Prepare and file all compliance reports for reporting periods
ending before the Operations Transfer Date, including but not limited to
the semi-annual compliance monitoring reports that must be prepared
pursuant to the air permits associated with the compressor stations and
provide Contractor with a copy of any such reports; and
(h) Until May 1, 2000, utilize the Brighton office facilities in
connection with other operations of Owner and its Affiliates in a manner
consistent with past practices, including third parties providing services
in connection therewith.
2.4 RESTRICTED ACTIVITIES. Without first procuring the prior written
approval of Owner which shall not be unreasonably withheld, conditioned or
delayed, Contractor shall not enter into any new or amend any existing Service
Agreement (however, this restriction does not preclude Contractor from entering
into well connect agreements pursuant to the terms of existing Service
Agreements). Contractor shall not create any lien, security interest or other
encumbrance against the Gathering Assets and shall keep the Gathering Assets
free and clear of any lien, security interest or other encumbrance arising out
of the operations of Contractor, except (i) liens and security interests granted
in favor of the lessor under the Master Equipment Lease pursuant to the
instruments executed in connection with the Purchase and Sale Agreement and (ii)
liens, security interests and encumbrances securing payments not more than 60
days past due or being contested by Contractor in good faith. In addition,
Contractor shall not take any action that may subject Owner, the Gathering
System, or any portion thereof to regulation under the Natural Gas Act.
2.5 MODIFICATION OF GATHERING SYSTEM. Contractor shall consult with Owner
not less than 20 days prior to commencing construction of any Modification
except for any well connection under an existing Service Agreement, relocation
of gathering facilities, replacement of meters or repair and maintenance of
gathering facilities. Within 10 days of the initial consultation, Owner shall
reasonably determine what, if any, authorization of the FERC is required for
such proposed Modification, and if FERC authorization is determined to be
required, Contractor shall provide to Owner engineering plans, capital expense
estimates, and other economic projections regarding the proposed Modification.
Contractor shall consult with Owner on any aspect of such
planned Modification and shall fairly consider Owner's recommendations in
connection therewith and Contractor shall not commence construction activities
on such Modifications until completion of Owner's review, which review shall be
completed expeditiously so as to not unduly delay Contractors construction
schedule. All Modifications shall be engineered and constructed in accordance
with prudent industry standards and practices and, if Owner's standards and
practices are higher, then in accordance with the standards and practices
previously employed by Owner. Except for any authorization or approval from
FERC, Contractor shall prepare, file and prosecute any regulatory action
necessary to authorize any Modification, and Owner shall cooperate with and
assist Contractor, at Contractor's expense, in obtaining such regulatory
authorizations, as reasonably requested by Contractor. If Owner reasonably
determines that authorization or approval from FERC is required in connection
with any proposed Modification, Contractor shall not commence construction of
such Modification until such authorization or approval is obtained. Obtaining
any such authorization or approval from FERC shall be done in accordance with
Section 2.12. Contractor is obligated to act consistent with and in a timely
fashion observe all potentially relevant requirements pursuant to Environmental
Law, including air permit requirements that might apply to the Modification.
2.6 EMERGENCY OPERATIONS. Notwithstanding any other provision of this
Agreement, in case of explosion, fire, extreme cold, freezing or other sudden
emergency, or any major interruption of the operation of the Gathering System,
or any part thereof, the prior notice to Owner shall not be a prerequisite to
Contractor's taking such steps and incurring such costs as are required to deal
with such emergency or interruption or to safeguard life and/or property in such
event if, in Contractor's good faith opinion, any potential delay incurred by
giving such notice would possibly jeopardize the interests of Owner or the
health and safety of the public or employees; provided, however, that Contractor
shall, as promptly as may be reasonably practicable, report such emergency or
interruption to Owner. Contractor shall also, as promptly as may be reasonably
practicable, make on behalf of Owner any required reports of such emergency or
interruption to federal, state or local regulatory authorities having
jurisdiction.
2.7 REPORTS. Contractor shall report on a monthly basis in reasonable
detail to Owner on the operation of the Gathering System and, in so doing but
without in any way limiting the foregoing, shall timely prepare and deliver to
Owner not later than 30 days after the end of each Contract Month a report in
the form set forth on Exhibit D hereto. Contractor shall also furnish to Owner
annual budgets and such additional information, reports, copies of all sales and
use tax returns, and records as may be reasonably requested by Owner.
Additionally, Contractor shall meet with Owner on a quarterly basis, at
Contractor's offices in the Denver metropolitan area to report on all
operational, maintenance and other aspects of its operatorship. Contractor shall
provide Owner such additional information concerning the operation of the
Gathering System as Owner may reasonably request.
2.8 REPRESENTATION BEFORE AGENCIES. In connection with the operation of the
Gathering System, after the Operations Transfer Date, Contractor shall and is
hereby granted the authority to make applications, filings and notifications
with, appear before and make presentations to, governmental agencies having
jurisdiction over operations conducted with respect to the Gathering System
except for any such applications, filings, notifications,
appearances or presentations with, before, or to, FERC. Contractor shall provide
seven (7) days advance notice to Owner of any meetings with or appearances
before Governmental Authorities.
2.9 ACCESS. Owner and its representatives, contractors, agents and
employees shall have access to the Gathering Assets at its sole risk and expense
for the purpose of inspecting the same and for conducting any environmental
remediation activities retained by Owner under the Purchase and Sale Agreement.
In addition, Panhandle Eastern Pipe Line Company, any successor to its
obligations under the Consent Order dated December 17, 1992 issued by the
Colorado Oil & Gas Conservation Commission IN THE MATTER OF PANHANDLE EASTERN
PIPE LINE COMPANY, and their respective representatives, contractors, agents,
and employees shall have access to the Gathering Assets in accordance with the
Temporary License Agreement Permitting Entry to Property dated March 3, 1993
between Owner, XX Xxxxxxxxxx Transmission Limited Liability Company and
Panhandle Eastern Pipe line Company. Owner and its representatives, contractors,
agents and employees shall have access to the books and records of Contractor
applicable to operations hereunder at all reasonable times and upon reasonable
advance notice to Contractor.
2.10 PERMITS. After the Operations Transfer Date , Contractor shall obtain
(other than permits and certificates from FERC), maintain in effect and comply
with all permits that are required in order to operate the Gathering System and
shall conduct any operations with respect thereto. Contractor shall obtain all
such permits in its own name, or, if required by any governmental agency having
jurisdiction, in the name of Owner and where necessary make notification of its
designation as operator. Owner shall cooperate and assist Contractor in
obtaining such permits. Any Person is entitled to rely on this Agreement as
granting to Contractor the power and authority to operate and manage the
Gathering System and to perform the Operating Services on behalf of Owner. In
order to evidence the rights, powers and duties of Contractor hereunder, Owner
has executed a Designation of Operator and Power of Attorney (the "Power of
Attorney") in the form set forth in Exhibit C. Owner shall execute such
additional counterparts of the Power of Attorney as are reasonably requested by
Contractor from time to time.
2.11 INFORMATION. Contractor agrees to apprise Owner from time to time as
reasonably requested by Owner regarding the conduct of operations hereunder,
except that such requests that require extensive investigation, preparation or
accounting research shall be done at Owner's expense.
2.12 CERTAIN REGULATORY MATTERS. Under Section 2.3(a) above, Owner has
retained its obligations to perform those regulatory functions related to the
Gathering System that Contractor is not permitted to perform in its own name as
Contractor and has agreed to perform such regulatory functions, as may be
reasonably requested by Contractor from time to time. As to such matters and to
the extent practical, Contractor at its expense shall conduct the necessary
research and preparation of the required paperwork for Owner. All such
regulatory filings and other documentation, reports, and other paperwork shall
be prepared in proper form and in accordance with all rules and regulations of
the appropriate governmental agency. Owner shall reasonably and promptly
cooperate and assist Contractor in completing such documentation and filing such
documentation with the appropriate regulatory agency, provided that such filings
and paperwork are prepared in accordance with the standards and requirements of
this Agreement. Any third
12
party expenses incurred by Owner in cooperating with Contractor with respect to
regulatory matters shall be reimbursed by Contractor within 15 days of receipt
of invoice from Owner.
2.13 TITLE TO MODIFICATIONS. Subject to the terms of the Master Equipment
Lease, Owner shall own and have title to all Modifications made by Contractor to
the Gathering System during the term of this Agreement, and Contractor shall
execute such documents as may be appropriate to cause title to any such
Modification to be so vested. The costs of all Modifications made during the
term of this Agreement shall be funded as provided in Section 3.3.
ARTICLE III ACCOUNTING AND COMPENSATION
3.1 ACCOUNTING RECORDS. Contractor shall, and shall cause its contractors,
subcontractors, agents, vendors and other representatives to keep complete and
accurate books and records concerning the operation of the Gathering System in
accordance with generally accepted accounting principles (and the FERC's Uniform
System of Accounts for Class A and B natural gas companies, if applicable.)
3.2 OPERATING SERVICES FEE.
(a) With respect to each Contract Month commencing with the Contract
Month of December 1999, the Owner shall pay the Contractor the applicable
Operating Services Fees in the amounts set forth below. The "Operating
Services Fees" for each Contract Month shall be the Base Fee for such
Contract Month increased or decreased, as applicable, by the Incentive
Amount as provided in Section 3.2(b). The "Base Fee" for each Contract
Month is the following amount:
(i) The Base Fee for the Contract Month of December shall be
$233,240 per month.
(ii) The Base Fee for each Contract Month in Calendar Year 2000
shall be $248,241 per month.
(iii) The Base Fee for each Contract Month in Calendar Year 2001
shall be $248,241 per month escalated in accordance with the annual
GNP Implicit Price Deflator most recently published at that time by
the U.S. Department of Commerce, Bureau of Economic Analysis.
(b) With respect to any Contract Month commencing with the Contract
Month of December 1999 in which the Aggregate Interim Gross Margin is less
than 95% of the Target Amount, for any reason, including without
limitation, an event of force majeure, the Base Fee for such Contract Month
shall be decreased (and such decrease can be below zero) by the amount by
which such Aggregate Interim Gross Margin is less than 95% of the Target
Amount for that Contract Month. (Any negative amount shall constitute an
amount payable by Contractor to Owner.) With respect to any Contract Month
in which the Aggregate Interim Gross Margin is more than 105% of the Target
Amount for such
14
Contract Month, the Base Fee for such Contract Month shall be increased by
the amount by which such Aggregate Interim Gross Margin is greater than
105% of the Target Amount for that Contract Month. The amount by which the
Base Fee for any Contract Month is increased or decreased pursuant to the
immediately preceding two sentences is the "Incentive Amount" for such
Contract Month. The Incentive Amount is zero for any Contract Month for
which the Aggregate Interim Gross Margin payable with respect to such
Contract Month is between 95% and 105%, inclusive, of the applicable Target
Amount.
(c) On or before the last day of the month after each Contract Month
commencing with the Contract Month of December 1999 Contractor shall (i)
deliver to Owner a combined Statement of Operating Services Fees, Gathering
Interim Gross Margin and Aggregate Interim Gross Margin with respect to the
Contract Month and (ii) pay to Owner the amount of the Gathering Interim
Gross Margin for such Contract Month less (or plus if negative) the
Operating Services Fees for such Contract Month as set forth on such
Statement. Except as provided in 3.2(e) below, such net amount shall be
paid without the right of set-off with respect to any other amount payable
by a Party to another Party.
(d) Except as otherwise stated in this Agreement, the Operating
Services Fees are intended as turnkey payments for the Operating Services
to be performed and provided by Contractor under this Agreement and are
intended to constitute full and complete reimbursement and compensation for
all of the Operating Services and all costs and expenses of every nature,
whether such costs are characterized as operating, capital, direct,
indirect or otherwise, that Contractor incurs in performing or providing
the Operating Services. Except for the Recoveries provided in the Purchase
and Sale Agreement or as otherwise set forth in this Agreement, Owner shall
have no obligation to reimburse Contractor for any costs, expenses or
liabilities paid or incurred by Contractor hereunder, all of such costs,
expenses and liabilities to be borne and paid by Contractor. If Owner pay
any costs, expenses or liabilities that are properly borne by Contractor
pursuant to this Section, Contractor shall promptly reimburse Owner for
such payment.
(e) If during any Contract Month Contractor makes a payment of basic
rent, as defined in the Master Equipment Lease, or of any ad valorem and
property taxes for which KNGG is responsible for payment thereunder or of
any amounts payable as a result of failure to pay such basic rent or taxes
because of a failure of Owner to pay such amount in a timely manner,
Contractor shall reimburse itself for such payment out of amounts that
would have otherwise been payable by Contractor to Owner under Section
3.2(c) for that Contract Month. If Contractor is unable to fully reimburse
itself for such payment out of amounts due under Section 3.2(c) for the
Contract Month, the unreimbursed portion of the rental or other payment
shall be carried over to succeeding Contract Months and may be applied
against amounts thereafter coming due under Section 3.2(c) until such time
as Contractor is fully reimbursed. If Closing occurs under the Purchase and
Sale Agreement and at that time Contractor is not fully reimbursed, the
consideration due at Closing from Contractor under the Purchase and Sale
Agreement shall be reduced by the amount of any unreimbursed payment made
by Contractor under the Master Equipment Lease.
14
Notwithstanding anything herein to the contrary, Contractor shall not make
any such payment under the Master Equipment Lease unless Contractor has
notified Owner in writing that (i) Owner is in default in the payment of
any such amount under the Master Equipment Lease, Contractor intends to
make such payment and exercise its set-off rights under this Section 3.2(e)
in connection therewith, and (iii) Owner fails to pay the amount due within
5 Business Days after the date of such notice.
3.3 CERTAIN CAPITAL COSTS. All costs and expenses incurred by Contractor in
making any Modification to the Gathering System shall be paid directly by
Contractor. The Direct Costs of any such Modification made in accordance with
the terms of this Agreement and that is prudently done and reasonably determined
to be economic to the Gathering System at the time of the termination shall
constitute a loan from Contractor to Owner pursuant to Section 5.3.20 of the
Purchase and Sale Agreement. Subject to the terms of the Purchase and Sale
Agreement, such loans shall be payable in full on the earlier of termination of
the Purchase and Sale Agreement or the date that the closing occurs under the
Purchase and Sale Agreement. Except for repayment of such loans as above, Owner
shall have no obligation to reimburse Contractor for any costs or expenses
incurred by Contractor in making any Modification.
3.4 AUDIT. Owner, after 15 days notice in writing to Contractor, shall have
the right during normal business hours to audit, at Owner's own expense, all
books and records of Contractor relating to the operation of the Gathering
System. Such audits shall not be made more often than twice each Calendar Year.
Owner shall have two years after the close of a Calendar Year in which to make
an audit of Contractor's records for such Calendar Year. Contractor shall
neither be required nor permitted to adjust any item unless a claim therefore is
presented or adjustment is initiated within two years after the close of the
Calendar Year in which the statement therefore is rendered, and in the absence
of such timely claims or adjustments, the bills and statements rendered shall be
conclusively established as correct.
3.5 ADJUSTMENT TO BASE FEE FOR INTERIM SERVICES. If Owner continues to
provide any one or more of the Interim Services after January 1, 2000, the Base
Fee for any Contract Month after that date for which one or more of such Interim
Services are provided by Owner shall be adjusted in the amount set forth in
Exhibit E attached to this Agreement for each Interim Service so provided.
3.6 ACCOUNTING FOR OCTOBER AND NOVEMBER 1999. On or before the last day of
December 1999 Owner shall (i) deliver to Contractor a statement of the Gathering
Interim Gross Margin, Transmission Interim Gross Margin and Aggregate Interim
Gross Margin with respect to each of the Contract Months of October and November
1999. If the Aggregate Interim Gross Margin for any such Contract Month is less
than 95% of the Target Amount for such Contract Month, Contractor shall pay
Owner the amount by which the Aggregate Interim Gross Margin for such Contract
Month is less than 95% of such Target Amount. If the Aggregate Interim Gross
Margin for any such Contract Month is more than 105% of the Target Amount for
such Contract Month, Owner shall pay Contractor the amount by which the
Aggregate Interim Gross Margin for such Contract Month is more than 105% of such
Target Amount. The net amount payable pursuant to this Section 3.6 shall be paid
by the owing Party to the other Party within 2 Business
15
Days after receipt to such statement. Except as provided in 3.2(e), such net
amount shall be paid without the right of set-off with respect to any other
amount payable by a Party to another Party.
ARTICLE IV PERFORMANCE OF CONTRACTOR'S OBLIGATIONS
4.1 PERFORMANCE. In the performance of Contractor's obligations under this
Agreement, Contractor shall be an independent contractor and not an employee or
agent of Owner and shall comply with all of the applicable laws, rules, orders
and regulations of governmental authorities having jurisdiction. Owner shall
have no supervision rights over the manner or method used by Contractor in
performance of the Operating Services. Owner's sole and exclusive interest shall
be in the results obtained by Contractor.
ARTICLE V INDEMNITY AND RISK OF LOSS
5.1 INDEMNITY. Article VII of the Purchase and Sale Agreement sets forth
the indemnity obligations and indemnification procedures of the Parties.
5.2 LIMITATION ON LIABILITIES. OWNER AND CONTRACTOR (I) AGREE THAT ONLY
ACTUAL DAMAGES SHALL BE RECOVERABLE UNDER THIS AGREEMENT AND (II) HEREBY WAIVE
ANY RIGHT TO RECOVER, AND AGREE THAT THE TERM LOSSES SHALL NOT COVER, SPECIAL,
PUNITIVE, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES (WHETHER BASED ON
STATUTE, CONTRACT, TORT OR OTHERWISE, AND WHETHER OR NOT ARISING FROM THE
INDEMNIFYING PARTY'S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT) EXCEPT TO THE EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO AN
UNAFFILIATED THIRD-PARTY IN CONNECTION WITH A THIRD-PARTY CLAIM, IN WHICH EVENT
SUCH DAMAGES SHALL BE RECOVERABLE.
5.3 RISK OF LOSS. Risk of loss of, or damage to, the Gathering System for
any reason after the Operations Transfer Date, shall be borne as set forth in
Section 5.3.8 of the Purchase and Sale Agreement.
5.4 EXCLUSIVE REMEDIES. Except to the extent either Party has the right to
terminate this Agreement pursuant to the Purchase and Sale Agreement, the
Parties' sole and exclusive remedy for any dispute or claim arising under or
related to this Agreement or the operations conducted pursuant hereto shall be
the rights provided under Section 2.10 and Article VII of the Purchase and Sale
Agreement and under Article V and Section 10.7 hereof. The Parties hereby waive
any other remedies, whether based in contract, tort, statute or otherwise.
ARTICLE VI ASSIGNMENT
6.1 All of the terms, covenants and conditions of this Agreement shall be
binding upon, and inure to the benefit of, and be enforceable by, the Parties
and their respective successors by merger, and permitted assigns (and in the
case of indemnities to the benefit of all persons indemnified). This Agreement
and the rights and obligations hereunder shall not be assigned or delegated by
either Party without the consent of the other Party, which consent will not be
unreasonably withheld, conditioned or delayed except that (i) Owner may assign
and
16
delegate its rights and obligations hereunder in whole or in part to one or
more Affiliates of Xxxxxx Xxxxxx, Inc. to which all or any portion of Gathering
Assets are assigned or transferred, provided that each such Affiliate assumes
and agrees to perform the obligations of Owner under this Agreement applicable
to the assigned or transferred Gathering Assets and Xxxxxx Xxxxxx, Inc.
guarantees the performance of such obligations pursuant to a form of guaranty
substantially in the same form as the KMI Guarantee, and (ii) Contractor may
assign and delegate its rights hereunder to any Affiliate of Contractor,
provided that such Affiliate assumes and agrees to perform the obligations of
Contractor under this Agreement and Contractor guarantees the performance of
such obligations pursuant to a form of guaranty substantially in the same form
as the KMI Guarantee.
ARTICLE VII FORCE MAJEURE
7.1 FORCE MAJEURE. If by reason of force majeure either Party hereto is
rendered unable, wholly or in part, to carry out its obligations under this
Agreement (except as to an obligation to pay money), and if such Party gives
notice and reasonably full particulars of such force majeure in writing or by
facsimile to the other within a reasonable time after the occurrence of the
cause relied on, the Party giving such notice, so far as and to the extent that
it is affected by such force majeure, shall not be liable in damages during the
continuance of any inability so caused; provided, such cause shall be remedied
with all reasonable dispatch.
7.2 FORCE MAJEURE DEFINED. As used herein, force majeure shall mean any
event, circumstance or condition which is not reasonably in the control of the
Party claiming suspension, including, without limitation, acts of God, strikes,
lockouts, or other industrial disturbances; acts of a public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms (including but not limited to hurricanes or hurricane warnings),
arrests and restraints of the government, either federal or state, civil or
military, civil disturbances; shutdowns for purposes of necessary repairs,
relocation, or construction of facilities; breakage or accident to machinery or
lines of pipe; the necessity for testing (as required by governmental
authority), the necessity of making repairs or alterations to machinery or lines
of pipe; failure of surface equipment or pipelines; accidents, breakdowns,
inability to obtain necessary material, supplies, or permits, or labor to
perform or comply with any obligation or condition of this Agreement. It is
understood and agreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty and that 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 an opposing party when such course is inadvisable in the
discretion of the Party having the difficulty.
7.3 LIMITATIONS. Such force majeure affecting the performance hereunder by
either Party, however, shall not relieve such Party of liability in the event of
concurring negligence or in the event of failure to use due diligence to remedy
the situation and to remove the cause in an adequate manner and with all
reasonable dispatch, nor shall such causes or contingencies affecting such
performance relieve either Party from its obligations to make payments as
determined hereunder.
17
ARTICLE VIII TERM AND TERMINATION
8.1 TERM. This Agreement shall become effective on the date of execution
hereof and shall continue in force and effect until the earlier of (i)
termination of the Purchase and Sale Agreement (in which event, this Agreement
shall terminate 90 days after the termination of the Purchase and Sale
Agreement), or (ii) closing of the sale of the Gathering System to Contractor
pursuant to the terms of the Purchase and Sale Agreement.
8.2 EFFECT. Termination of this Agreement shall not relieve either Party
from any obligation accruing or accrued to the date of such termination or
deprive the Party not in default of any remedy otherwise available to it.
8.3 TRANSFER OF CONTRACTORSHIP. In the event of termination of this
Agreement in whole or in part, Contractor will submit to Owner a final
accounting of its operations hereunder (or the portion thereof with respect to
which this Agreement has terminated) and deliver, except as a result of the
closing of the sale of the Gathering System to Contractor, to Owner all records,
reports, and data that relate to Operating Services hereunder and that are in
its possession as Contractor hereunder as promptly as possible. Contractor may
retain copies of all of said records, reports and data, which copies will be
prepared at the expense of Contractor. Contractor will cooperate with Owner to
cause an orderly transition of operations to a successor operator, including the
execution by Contractor of all documents, instruments and regulatory filings
reasonably requested by Owner in connection with such transition.
ARTICLE IX NOTICES
9.1 NOTICES. All notices, requests, demands and other communications
(collectively, "NOTICES") required or permitted to be given hereunder shall be
in writing and delivered personally, or by facsimile transmission or mailed
first class, postage prepaid, registered or certified mail, as follows:
If to Contractor, to:
HS Gathering, L.L.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile Number: 303/296-9709
If to the Owner, to:
KN Gas Gathering, Inc.
000 Xxx Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx
Attention: Xx. Xxxxxx Xxxxxxx
Facsimile Number: 303/914-7447
18
All Notices shall be effective upon receipt. Any Party may change its
Notice address by giving written Notice to the other Parties in the manner
specified above.
ARTICLE X MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado, without regard to any
conflicts of laws principles which, if applied, might permit or require the
application of the laws of another jurisdiction.
10.2 LAWS AND REGULATORY BODIES. This Agreement, the operation of the
Gathering System and the rights and obligations of Owner and Contractor
hereunder shall be subject to all valid and applicable laws, orders, directives,
rules and regulations of any duly constituted governmental body or official
having jurisdiction.
10.3. WAIVER. No waiver by either Party of any default by the other Party
in the performance of any provision, condition or requirement herein shall be
deemed to be a waiver of, or in any manner release the other Party from,
performance of any other provision, condition or requirement herein, nor deemed
to be a waiver of, or in any manner release the other Party from, future
performance of the same provision, condition or requirement; nor shall any delay
or omission of either Party to exercise any right hereunder in any manner impair
the exercise of any such right or any like right accruing to it thereafter.
10.4. MODIFICATION. This Agreement may not be modified, varied or amended
except by an instrument in writing signed by the Parties.
10.5. CAPTIONS. The titles to each of the various Articles and Sections in
this Agreement are included for convenience or reference only and shall have no
effect on, or be deemed as part of the text of, this Agreement.
10.6 MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.
10.7 ARBITRATION. All disputes hereunder shall be resolved pursuant to the
arbitration provisions of Article IX of the Purchase and Sale Agreement.
10.8 CONFLICT. In the event of any conflict between the terms of this
Agreement and the terms of the Purchase and Sale Agreement the terms of the
Purchase and Sale Agreement shall prevail.
10.9 FURTHER ASSURANCES. Subject to the terms and conditions set forth in
this Agreement, each of the Parties agrees to use all reasonable efforts to
take, or to cause to be taken, all actions, and to do, or to cause to be done,
all things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the execution
of this Agreement, any further action is necessary or desirable to carry out its
19
purposes, the proper officers, directors, managers or other representatives of
the Parties shall take or cause to be taken all such necessary action.
10.10 SURVIVAL. The indemnification obligations set forth in this Agreement
and all obligations of one Party to make payments to another Party shall survive
termination of this Agreement.
[the remainder of this page intentionally left blank]
20
IN WITNESS WHEREOF, the Parties have executed this Agreement in multiple
counterparts as of the date first above written.
OWNER:
KN GAS GATHERING, INC.
By: /S/XXXX X. XXXXXXX
---------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President and Treasurer
CONTRACTOR:
HS GATHERING, L.L.C.
By its sole Member, HS Resources, Inc.
By: /S/XXXXXXXX XXXXXXX
---------------------------------------
Name: Xxxxxxxx Xxxxxxx
Title: Vice President
21
EXHIBIT A
MAP OF GATHERING SYSTEM
EXHIBIT B
INSURANCE REQUIREMENTS
EXHIBIT C
DESIGNATION OF OPERATOR AND POWER OF ATTORNEY
EXHIBIT D
FORM OF REPORT
EXHIBIT E
INTERIM SERVICES FEES
ARTICLE I - DEFINITIONS................................................1
ARTICLE II GENERAL RESPONSIBILITIES OF CONTRACTOR.....................6
2.1 Performance of Operating Services.............................6
2.2 Description of Operating Services............................6
2.3 Certain Rights and Obligations of Owners.....................9
2.4 Restricted Activities.......................................10
2.5 Modification of Gathering System............................10
2.6 Emergency Operations........................................11
2.7 Reports.....................................................11
2.8 Representation Before Agencies..............................11
2.9 Access......................................................12
2.10 Permits.....................................................12
2.11 Information.................................................12
2.12 Certain Regulatory Matters..................................12
2.13 Title to Modifications......................................13
ARTICLE III ACCOUNTING AND COMPENSATION..............................13
3.1 Accounting Records..........................................13
3.2 Compensation................................................13
3.3 Certain Capital Costs.......................................15
3.4 Audit.......................................................15
3.5 Adjustment to Base Fee for Interim Services.................15
3.6 Accounting for October and November 1999....................15
ARTICLE IV PERFORMANCE OF CONTRACTOR'S OBLIGATIONS...................16
4.1 Performance.................................................16
ARTICLE V INDEMNITY AND RISK OF LOSS.................................16
5.1 Indemnity...................................................16
5.2 Limitation On Liabilities...................................16
5.3 Risk of Loss................................................16
5.4 Exclusive Remedies..........................................16
ARTICLE VI ASSIGNMENT................................................16
ARTICLE VII FORCE MAJEURE............................................17
7.1 Force Majeure...............................................17
7.2 Force Majeure Defined.......................................17
7.3 Limitations.................................................17
ARTICLE VIII TERM AND TERMINATION...................................18
8.1 Term........................................................18
8.2 Effect......................................................18
8.3 Transfer of Contractorship..................................18
ARTICLE IX NOTICES...................................................18
9.1 Notices.....................................................18
ARTICLE X MISCELLANEOUS..............................................19
10.1 Applicable Law..............................................19
10.2 Laws and Regulatory Bodies..................................19
10.3. Waiver......................................................19
10.4. Modification................................................19
10.5. Captions....................................................19
10.6 Multiple Counterparts.......................................19
10.7 Arbitration.................................................19
10.8 Conflict....................................................19
10.9 Further Assurances..........................................19
10.10 Survival...................................................20
