THROUGHPUT PAYMENT AGREEMENT
EXHIBIT
10.2
This
Throughput Payment Agreement ("Throughput Agreement') dated March 25, 2008 is
entered into effective as of April 1, 2008 (the “Effective Date”), between West
Texas Gas, Inc., a Texas corporation (“WTG”), and Impact International, L.L.C.,
an Oklahoma limited liability company (“Impact”).
RECITALS
A. Under
a Purchase and Sale Agreement (“PSA”) dated March 25, 2008, between WTG, as
Purchaser, and Reef Ventures, L.P. (“Reef Ventures”), as Seller, WTG has
acquired all of the membership interests in Reef International, LLC, a Texas
limited liability company, and in Reef Marketing, LLC, a Texas limited liability
company.
B. As
a portion of the consideration for the PSA, and in exchange for WTG’s payment to
Impact (at the direction of Reef Ventures, on behalf of Tidelands Oil & Gas
Corporation (“Tidelands”) of $2,436,825 of the Purchase Price under the PSA, and
WTG’s execution and delivery of this Throughput Agreement, Impact has agreed to:
(i) cancel the promissory note from Tidelands to Impact dated May 25, 2004 (the
“Indebtedness”); (ii) cancel the guaranty of the Indebtedness and related
matters by Reef Ventures dated May 25, 2004; (iii) cancel the pledge agreement
from Reef Ventures to Impact dated May 25, 2004; and (iv) release the Deed of
Trust dated May 25, 2004, from Reef Ventures to Impact recorded in Book 809,
Page 195 of the Official Public Records of Maverick County,
Texas.
AGREEMENT
For and in consideration of the
foregoing WTG and Impact agree as follows:
1. Definitions.
(a) “Delivered Volume” -
the quantity of natural gas delivered by WTG at the respective crossing to the
receiving party including WTG (or its designee) at the crossing. The unit of
quantity measurement will be one MMBTU dry. Measurement of quantities hereunder
shall be based upon and in accordance with the established procedures of the
receiving purchaser at the respective crossing.
(b) “MMBTU” - one million
British thermal units.
(c) “Reef Crossing” – the
pipeline delivering natural gas into Mexico at the custody transfer meter
station(s) under the Presidential Permit granted to Reef International, L.L.C
under F.E.R.C. Docket No. CP02-74-000 dated May 30, 2002.
(d) “Throughput Volume” -
the monthly volume of natural gas subject to the payment herein, which will be
the sum of the Delivered Volumes at the Reef Crossing and the WTG
Crossing.
(e) “WTG Crossing” – the
pipeline delivering natural gas into Mexico at the custody transfer meter
station(s) under the Presidential Permit granted to Valero Transmission Company
and West Texas Gas, Inc. under F.E.R.C. Docket No. CP96-497-000 dated September
13, 1996.
2. Term. This
Throughput Agreement is effective as of the Effective Date and will continue in
effect for 15 years from the Effective Date hereof, unless sooner terminated by
an attempted assignment by either party hereunder in violation of the provisions
hereof.
3. Throughput
Payment.
(a) Effective Date through March
31, 2012. The Throughput Payment will be the sum of $0.05 per
MMBTU times the Throughput Volume for the respective month.
(b) April 1, 2012 through March
31, 2022. The Throughput Payment will be the sum of $0.025 per MMBTU
times the Throughput Volume for the respective month.
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(c) Payment Date and
Place. Payment shall be made by WTG to Impact on or before the
tenth day following the end of the month immediately following the month of
delivery of the Throughput Volume, if any, at the respective crossing. By way of
example only, payment for volumes delivered at the Reef Crossing during the
month of November, 2007 would be due and payable on or before January 10, 2008.
At Impact’s express direction, all payments hereunder are to be made as
follows:
Impact
International, L.L.C.
0000
Xxxxxxxxx Xxxx.
Xxxxx
000
Xxxxxxxx
Xxxx, XX. 00000
(d) Meter Data.
Contemporaneous with payment hereunder, WTG shall deliver to Impact
documentation of the Throughput Volume as metered by the receiving purchaser at
the respective crossing.
4. Cancellation of Indebtedness
and Release of Liens. Impact hereby cancels and releases, and
shall return to Reef Ventures and Tidelands, the guaranty, pledge agreement, and
promissory note referenced above marked “Paid.” In addition, contemporaneous
herewith, Impact shall deliver to WTG a release of the deed of trust in form and
substance satisfactory to WTG.
5. Audits and
Adjustments. Impact has the right during reasonable business
hours to examine the books, records and charts of WTG to the extent necessary to
verify performance of this Throughput Agreement and the accuracy of
payments. However, (i) the right is conditioned on the execution of a
reasonable confidentiality agreement and (ii) the right may not be exercised
more than once in any period of 12 consecutive months. No adjustments
for any payment will be made after the lapse of two years from the date paid,
except as to matters Impact has noted in a specific written objection to WTG
during the two-year period.
6. Disputes –
Litigation. All disputes in any way relating to, arising under, connected
with, or incident to, this Throughput Agreement, and over which the federal
courts have subject matter jurisdiction, must be litigated, if at all,
exclusively in the United States District Court for the Western District of
Texas, Midland-Odessa Division, and, if necessary, the corresponding appellate
courts. All disputes in any way relating to, arising under, connected
with, or incident to this Throughput Agreement, and over which federal courts do
not have subject matter jurisdiction, must be litigated, if at all, exclusively
in the courts of the State of Texas, in Midland County, and, if necessary, the
corresponding appellate courts.
7. Miscellaneous.
(a) No
Liens. Nothing contained in this Throughput Agreement will be
construed as, or be deemed to grant to Impact, a security interest in or lien
upon: (i) the partnership or membership interests acquired by WTG under the PSA;
or (ii) any other assets of WTG or any of its subsidiaries or
affiliates.
(b) Assignment. The
Throughput Agreement may not be assigned by either party without the prior
written consent of the other party, which consent will not be unreasonably
withheld.
(c) Entire
Agreement. This Throughput Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof and
they supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto. No party hereto
has relied on any verbal statement of any other party or their agents,
employees, or representatives, and each covenants and agrees that this
Throughput Agreement and any other written agreements or statements form the
sole and exclusive basis for the agreements and transactions contained herein
and contemplated hereby.
(d) Texas Law to
Apply. This Throughput Agreement will be construed under and
in accordance with the laws of the State of Texas excluding any choice of law
rules which may direct the application of the laws of another
jurisdiction.
(e) No Delay, Waiver,
Etc. No delay on the part of the parties hereto in exercising
any power or right hereunder will operate as a waiver thereof; nor will any
single or partial exercise of any power or right hereunder preclude other or
further exercise thereof or the exercise of any other power or
right.
(f) Modification. No
amendment hereof will be effective unless contained in a written instrument
signed by the parties hereto.
(g) Parties
Bound. This Throughput Agreement is binding upon and inures to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns, except as otherwise expressly provided
herein.
(h) Notices. Unless
otherwise provided herein, all payments, notices, requests, instructions and
other communications required or permitted to be given under this Throughput
Agreement by a party to the other party may be delivered personally or by
nationally recognized overnight courier service or sent by mail, at the
respective addresses set forth below and will be effective: (i) in the case of
personal delivery, when received; (ii) in the case of mail, upon the earlier of
actual receipt or five business days after deposit in the United States Postal
Service, first class certified mail, postage prepaid, return receipt requested;
and (iii) in the case of a nationally-recognized overnight courier service, one
business day after delivery to such courier service together with all
appropriate fees or charges and instructions for overnight
delivery. The parties may change their respective addresses by
written notice to all other parties, sent as provided in this section. All
communications must be in writing and addressed as
follows:
| If to Impact: | Impact International, L.L.C. |
| 0000 Xxxxxxxxx Xxxx. | |
| Xxxxx 000 | |
| Xxxxxxxx Xxxx, XX. 00000 | |
| Attention: Xxx Xxxxxx | |
| Facsimile: (000) 000-0000 | |
| If to WTG: | West Texas Gas, Inc. |
| 000 Xxxxx Xxxxxxxx | |
| Xxxxxxx, XX 00000 | |
| Attention: X. X. Xxxxx | |
| Facsimile: (000) 000-0000 |
(i) Counterparts. This
Throughput Agreement may be executed in any number of counterparts, each of
which will be an original, but all of which together will constitute one
instrument. This Throughput Agreement may be executed by facsimile or other
electronic signatures, which signatures will constitute valid, legally binding,
signatures hereto.
Executed
on March 25, 2008, and effective as of the Effective Date.
WEST
TEXAS GAS,
INC.
IMPACT INTERNATIONAL, L.L.C.
By:
/s/ X.X.
Xxxxx
By: /s/ Xxxxx X.
Xxxxxx III
Name:
X.X.
Xxxxx Name:
Xxxxx X. Xxxxxx
III
Title: President Title:
Manager
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