EXHIBIT 10.71
GAS SALES AGREEMENT
This Agreement is made and entered into as of the first day of
November, 1992 by and between YANKEE GAS SERVICES COMPANY, a
Connecticut corporation ("Buyer"), and CHEVRON U.S.A. PRODUCTION
COMPANY, a division of CHEVRON U.S.A. INC., a Pennsylvania
corporation ("Seller"), both Buyer and Seller sometimes referred to
collectively as "Parties" or singularly as "Party".
I.Definitions
1.1 "Agreement" means the provisions of this document and
those contained in Exhibits A, B, C, and D, attached hereto, as
such may be amended from time to time.
1.2 "Alternate Delivery Point(s)" shall have the meaning set
forth in Paragraph 4.1 hereof.
1.3 "Btu" (British Thermal Unit) means the amount of heat
energy required to raise the temperature of one avoirdupois pound
of water from fifty-nine-degrees Fahrenheit (59 F) to sixty degrees
Fahrenheit (60 F).
1.4 "Ceiling Price" shall mean the maximum price per MMBtu to
be paid by Buyer for Protected Volumes of gas purchased hereunder.
A Ceiling Price may be established by agreement of the parties in
accordance with Paragraph 5.3 hereof.
1.5 "Contract Year" shall mean a period of twelve (12)
consecutive months from the date first written above, and annually
thereafter.
1.6 "Delivery Point(s)" shall be the point or points
identified in Exhibits A and B hereto, and shall include Primary
Delivery Point(s), Secondary Delivery Point(s), and Alternate
Delivery Point(s).
1.7 "Demand Charge" shall have the meaning as set forth in
Article V hereof.
1.8 "FERC" means the Federal Energy Regulatory Commission or
any successor governmental authority.
1.9 "Gas" or "Natural Gas" means any mixture of hydrocarbons
or of hydrocarbons and noncombustible gases, in a gaseous state,
consisting essentially of methane.
1.10 "Index Price" shall have the meaning as set forth in
Article V hereof.
1.11(a) "Liquefiable Hydrocarbons" means any hydrocarbons
contained in the vapor phase of the Gas stream which can be
liquefied and extracted from the Gas, plus such methane as is used
or consumed in the extraction process.
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1.11(b) "Liquid Hydrocarbons" means any hydrocarbons which,
in their natural state, are liquids and shall include any
Liquefiable Hydrocarbons that condense out of the Gas stream during
production or transportation.
1.12 "Locked Price," as used in Article V, shall mean the
price per MMBtu to be paid by Buyer for a Locked Quantity purchased
hereunder.
1.13 "Locked Quantity," as used in Article V, shall mean a
quantity of Gas to be delivered during any calendar month during
the term hereof which is equal to the MDQ multiplied by the number
of days in that month.
1.14 "Maximum Daily Quantity" or "MDQ" means ******** MMBtu of
Gas per day, plus fuel requirements to deliver Gas from the
Delivery Point(s) to Buyer s city-gate stations as imposed by
Tennessee under its FERC-approved tariff, as such may be revised
from time to time.
1.15 "MMBtu" means one million (1,000,000) Btu.
1.16 "Monthly Nominated Quantity" shall have the meaning set
forth in Paragraph 2.2(a) herein.
1.17 "Nomination Day," when used in the context of nominations
given to Tennessee, means (i) in the case of Gas to flow on Tuesday
through Saturday of any week, the Monday of that week through the
following Friday and (ii) in the case of Gas to flow on Sunday or
Monday, the preceding Saturday. The end of a Nomination Day for
each different type of nomination shall coincide with the deadline
for each such nomination as set forth in Transporter s or
Tennessee s tariff, as applicable, as such may be revised from time
to time.
1.18 "Price Protection Fee," as used in Article V, shall mean
the cost or credit per MMBtu at which Seller is able to establish
the Protected Price (including Ceiling Price, Floor Price, or both)
as requested by Buyer.
1.19 "Primary Delivery Point(s)" shall have the meaning set
forth in Paragraph 4.1 herein.
1.20 "Protected Price," as used in Article V, shall mean the
actual price per MMBtu to be paid by Buyer for a Protected Quantity
of Gas purchased hereunder. If between the Ceiling Price and the
Floor Price, the Protected Price shall equal the Index Price
established pursuant to Paragraphs 5.1(b), (c), or (d) hereof; but
in no event shall the Protected Price be less than the Floor Price,
if established as to an affected Protected Quantity, nor greater
than the Ceiling Price, if established as to an affected Protected
Quantity.
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1.21 "Protected Quantity," as used in Article V, shall mean a
quantity of Gas to be delivered during any calendar month during
the term hereof which is equal to the MDQ multiplied by the number
of days in that month.
1.22 "Secondary Delivery Point(s)" shall have the meaning set
forth in Paragraph 4.1 herein.
1.23 "Transporter" means the pipeline(s) transporting the Gas
delivered under this Agreement from the source of supply to the
Delivery Point(s).
1.24 "Tennessee" means Tennessee Gas Pipeline Company.
II. Quantity
2.1 Subject to the other provisions of this Agreement, Seller
shall sell and deliver and Buyer shall purchase and receive, on a
firm basis, at the Delivery Point(s) listed in Exhibits A and/or B,
the MDQ which, as defined, includes such additional quantities of
Gas as may be necessary to account for fuel requirements to deliver
Gas from the Delivery Point(s) to Buyer s city-gate stations as
imposed by Tennessee under its FERC-approved tariff, as such may be
revised from time to time.
2.2(a) On or before ******** Nomination Days prior to the
first-of-month nomination deadline for Tennessee, Buyer shall
notify Seller in writing of the quantity of Gas, not to exceed the
MDQ, that Buyer desires to purchase from Seller on each day of the
coming month ( Monthly Nominated Quantity ). To the extent
practicable, deliveries and receipts of Gas shall be at uniform
daily and hourly rates of flow.
2.2(b) Following Buyer s nomination of the Monthly
Nominated Quantity or any subsequent increase pursuant to Paragraph
2.2(c), Buyer may decrease its purchases from Seller by notifying
Seller in writing of Buyer s intention to decrease purchases at
least ******** Nomination Days prior to the nomination deadline. If
Buyer decreases its purchases as provided herein, such a decrease
shall be deemed to be a failure to purchase and receive the Monthly
Nominated Quantity as provided in Paragraph 2.9.
2.2(c) (i) At any time during a month, Buyer may increase
the Monthly Nominated Quantity, up to but not to exceed the MDQ, by
providing Seller with reasonable written notice of the additional
quantities over the previously applicable Monthly Nominated
Quantity that Buyer desires to purchase ( increased quantities );
provided however that Buyer may not so increase the Monthly
Nominated Quantity more than ******** times in any given month.
The increased quantities so nominated shall constitute part of the
Monthly Nominated Quantity as of the first day that Seller is
required to sell and deliver them. The demand charge applicable to
such increased quantities shall be as set forth in Paragraph
5.1(a)(ii) hereof. The Index Price for the increased quantities
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actually purchased shall be as set forth in Paragraph 5.1(c)
hereof.
(ii) If Buyer requests increased quantities pursuant
to the previous subparagraph; if Seller s proposed Index Price
pursuant to Paragraph 5.1(c) is not acceptable to Buyer in its sole
discretion; if a delegation or assignment is in effect pursuant to
Paragraph 3.1 hereof; and if Buyer is able to purchase from a third
party a gas supply that is within the area subject to delegation or
assignment, then Buyer shall have the right to require Seller to
nominate such third-party supply for transportation and delivery
pursuant to Seller s authority under the delegation or assignment.
In such event, Buyer s request for increased quantities of Gas
shall be deemed to have been null and void.
2.2(d) Upon mutual agreement as to both the Index Price and
Alternate Delivery Point(s) to be used (to be confirmed in writing,
within one business day after agreement has been reached, utilizing
the form appearing as Exhibit B hereto) Buyer may request Seller
to, and Seller shall, deliver any quantity of Gas to be sold and
delivered hereunder, up to the MDQ, to Alternate Delivery Point(s).
Seller's failure to deliver any quantity of Gas as agreed pursuant
to this Paragraph 2.2(d) shall be deemed to be a failure to sell
and deliver under Paragraph 2.8 hereof, and the remedy set forth
therein shall be available to Buyer.
2.3 Buyer and Seller shall cooperate to ensure that
nominations are timely made to Transporter and/or Tennessee and
that such nominations reflect the actual expected deliveries and
receipts. Seller shall be responsible for nominations upstream
from the Delivery Point(s); and Buyer shall be responsible for
nominations downstream from the Delivery Points(s) unless Seller is
delegated or assigned pursuant to Article III hereof any of
Buyer's rights under Buyer's firm transportation agreement with
Tennessee, in which case Seller shall be responsible for
nominations pursuant to such delegation or assignment.
2.4 If either Party becomes aware of any reason why the
quantities established or nominated in accordance with this Article
II may not be delivered or taken, then that Party shall notify the
other Party as soon as possible. The Parties will cooperate to
ensure that corrected nominations are provided to Transporter
and/or Tennessee as soon as possible. Nothing in this Section 2.4
shall affect the time limitations and notice requirements set forth
elsewhere in this Article II.
2.5 Should Buyer fail to nominate or take a quantity of Gas
in accordance with this Article II and should such failure result
in the imposition of a penalty, charge, or expense, then, as
between the Parties, Buyer shall be liable for and hold Seller
harmless for such amount. Should Seller fail to nominate or
deliver a quantity of Gas in accordance with this Article II and
should such failure result in the imposition of a penalty, charge,
or expense, then, as between the Parties, Seller shall be liable
for, and hold Buyer harmless for such amount.
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2.6(a) Seller will have and, subject to Article XI hereof,
will maintain throughout the term of this Agreement such Gas supply
and/or valid contracts to purchase gas for resale to Buyer, capable
of being delivered to the Delivery Point(s) for the account of
Buyer, as will enable Seller to sell and deliver one hundred
percent (100%) of the MDQ, as nominated by Buyer from time to time
under the terms of this Agreement. Seller will not release any Gas
supply, or sell or commit to sell such supply to any other party,
if such release, sale, or commitment to sell would render seller
unable to satisfy its obligations to Buyer as set out herein.
Seller shall use its best efforts, to the extent operationally
feasible, to preserve its ability to supply Buyer from different
supply sources in order to minimize the potential for a production-
related force majeure occurrence.
2.6(b) Buyer may request from Seller no more than ********
every Contract Year a summary of Seller s deliverability and firm
sales obligations, by field and/or receipt point on Tennessee, for
the remaining term of this Agreement. Seller shall comply with
such request within ******** days.
2.7 Buyer and Seller acknowledge that their obligations
hereunder to deliver and receive nominated volumes of Gas up to the
MDQ are firm. If for any reason, including force majeure, Seller
is unable to meet all of its sales obligations under this and other
contracts then being supplied from the same supply area, Seller
agrees that it will deliver its obligatory volumes under this
Agreement and other firm contracts prior to supplying any
interruptible customers ********. Notwithstanding the foregoing,
Seller shall be obligated to curtail deliveries to interruptible
customers only in the event, and only to the extent, that such
curtailment increases the supply of Gas available for delivery to
Buyer under this Agreement.
2.8(a) If Seller fails to sell and deliver the firm
quantity of Gas nominated by Buyer pursuant to this Agreement, and
if such failure is not otherwise excused under this Agreement,
then, subject to Paragraph 2.8(c), Buyer s sole remedy shall be to
obtain alternate supplies ******** to cover the quantity not
delivered by Seller (such alternate supplies obtained by Buyer are
referred to as Deficiency Gas ) and collect from Seller an amount
equal to the difference, if any, between the higher price paid for
the Deficiency Gas ******** less the price provided in this
Agreement ********. This difference shall then be multiplied by
the Deficiency Gas quantity. Provided, however, that Buyer shall
make reasonable efforts (with due consideration given to all
relevant circumstances) to obtain Deficiency Gas at the lowest cost
available.
2.8(b) Buyer s obtaining of Deficiency Gas and recovery of
Buyer s costs from Seller as specified in Paragraph 2.8(a), shall
be limited to those firm quantities underdelivered. Buyer s
recovery from Seller may be taken, at Buyer s choice, as a credit
against future purchases, a physical delivery of gas according to
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a mutually agreeable delivery schedule, and/or a cash payment in
accordance with Article XIV.
2.8(c) In order to recover the remedy provided in this
Paragraph 2.8, Buyer shall notify Seller, when it is planning to
obtain Deficiency Gas from a third party, except in cases where
such replacement is related to after-the-fact corrections. Within
no more than one (1) business day following receipt of such
notification, Seller shall have the right to replace the Gas;
provided, however, that in order to allow Buyer to make adequate
arrangements for replacement Gas, Seller must exercise the right to
replace the Gas and give notice of such exercise to Buyer prior to
Buyer s deadline to arrange for the transportation and delivery of
its replacement Gas. Seller s failure to replace the Gas within
such time shall constitute a waiver of Seller s right to replace
the Gas and shall then subject Seller to the credit or payment
requirements of this Paragraph 2.8. The remedy stated in this
Paragraph 2.8 shall be Buyer s exclusive remedy for Seller s
failure to deliver the nominated quantity, and all other remedies
are hereby waived.
2.8(d) The parties shall at all times use reasonable
efforts to arrange for the resumption of normal deliveries by
Seller.
2.9(a) If on any day during a month, Buyer fails to
purchase and receive the Monthly Nominated Quantity in effect
pursuant to Paragraph(s) 2.2(a), 2.2(c), and/or 2.2(d) hereof, then
Seller s remedy shall be to collect from Buyer an amount equal to
the price provided in this Agreement for the period of the failure
to purchase, less the lower price at which Seller in good faith and
in the exercise of reasonable judgment is able to sell some or all
of such supplies to an alternate market; provided, however, that
for purposes of determining the difference between the price
provided hereunder and the price to alternate markets, Seller s
price to such alternate markets shall be deemed to be either: (a)
as mutually agreed upon in writing by the Parties; or (b) if the
Parties are unable to agree, ******** most proximate in time to the
effective date of the decrease in purchases, for production from
the same region as the Delivery Point(s) during the term of
Buyer s failure to purchase. Such difference(s) shall then be
multiplied by the quantities not taken by Buyer.
2.9(b) Seller shall recover from Buyer the amount set forth
in this Paragraph 2.9 by invoicing Buyer in accordance with Article
XIV of this Agreement, and Buyer shall pay Seller in accordance
with Article XIV. The remedy stated in this Paragraph 2.9 shall be
Seller s exclusive remedy for Buyer s failure to purchase and
receive the nominated quantity, and all other remedies are hereby
waived.
2.10 In the event of interruption, proration, or curtailment
of quantities delivered to Buyer or for Buyer s account (including
deliveries to storage) due to force majeure, the following measures
shall apply:
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(a) If a force majeure event occurs upstream of
Tennessee s Station 219, the following shall apply:
(i) If a delegation or assignment is in effect
pursuant to Paragraph 3.1 hereof, Seller shall deliver
Gas to Buyer at Primary and/or Secondary Delivery
Point(s) located within the area subject to the
delegation or assignment; provided, however, that Seller
has or can obtain both Gas supply and transportation to
supply Buyer. Buyer shall use its best efforts to assist
Seller in making arrangements to deliver Gas in
accordance with this paragraph. The Index Price for Gas
sold and delivered to Buyer at Primary Delivery Point(s)
under this Paragraph 2.10(a)(i) shall be as set forth in
Paragraph 5.1(b)(i) hereof. The Index Price for Gas sold
and delivered to Buyer at Secondary Delivery Point(s)
under this Paragraph 2.10(a)(i) shall be as set forth in
Paragraph 5.1(c) hereof; and/or
(ii) If a delegation or assignment is in effect
pursuant to Paragraph 3.1 hereof but Seller is unable to
secure alternate supplies within the area subject to
delegation or assignment after first using its best
efforts to do so (with due consideration given to all
relevant circumstances), then Seller shall deliver Gas to
Buyer at Secondary Delivery Point(s) outside the
delegation or assignment area and/or under reasonably
priced alternate arrangements satisfactory to Seller and
Buyer; provided, however, that Seller has or can obtain
both Gas supply and transportation to supply Buyer.
Buyer shall use its best efforts to assist Seller in
making arrangements to deliver Gas in accordance with
this paragraph. The Index Price for Gas sold and
delivered to Buyer under this Paragraph 2.10(a)(ii) shall
be as set forth in Paragraph 5.1(c) hereof.
(iii) If no delegation or assignment is in
effect pursuant to Paragraph 3.1 hereof, Seller shall
deliver Gas to Buyer at Secondary Delivery Point(s)
and/or under reasonably priced alternate arrangements
satisfactory to Seller and Buyer; provided, however, that
Seller has or can obtain both Gas supply and
transportation to supply Buyer. Buyer shall use its best
efforts to assist Seller in making arrangements to
deliver Gas in accordance with this paragraph. The Index
Price for Gas sold and delivered to Buyer under this
Paragraph 2.10(a)(iii) shall be as set forth in Paragraph
5.1(c) hereof.
(b) If a force majeure event occurs at or downstream of
********, Seller shall use its best efforts to provide a reasonably
priced supply of Gas accessible to Buyer s facilities, including,
but not limited to ********, and/or other delivery points or
arrangements satisfactory to Seller and Buyer; provided, however,
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that Seller has or can obtain both Gas supply and transportation to
supply Buyer. The Index Price for gas sold and delivered to Buyer
under this Paragraph 2.10(b) shall be as set forth in Paragraph
5.1(c) hereof. Buyer shall use its best efforts to assist Seller
in making arrangements to deliver Gas in accordance with this
paragraph.
(c) Subject to Paragraph 2.10(d), in supplying Gas to
Buyer under the measures set forth in Paragraphs 2.10(a) and
2.10(b), Seller must (i) first provide Buyer notice of its proposed
supply arrangements (including price); (ii) provide Buyer a
reasonable opportunity (commensurate with the circumstances in
obtaining such supply) to decline to purchase such Gas; and (iii)
make all necessary arrangements to deliver such Gas if Buyer does
not decline to purchase such Gas within a reasonable time
(commensurate with the circumstances in obtaining such supply)
after receiving Seller s notice of proposed arrangements. Buyer s
declining to purchase any Gas supply offered by Seller under this
Paragraph 2.10 will relieve Seller of its obligation to deliver Gas
under this Paragraph 2.10 for the duration of, and to the extent
of, such force majeure event. Buyer s declining to purchase shall
not constitute a failure to take under Paragraph 2.9 hereof, and
Seller shall not be considered to have failed to deliver under
Paragraph 2.8 hereof. In the event Buyer declines to purchase Gas
pursuant to this Paragraph 2.10(c), purchases and deliveries of Gas
shall resume immediately upon termination of the force majeure
event.
(d) If a delegation or assignment is in effect pursuant
to Paragraph 3.1 hereof and Buyer is able to purchase a gas supply
that is within the area subject to the delegation or assignment,
then Buyer shall have the right to require Seller to nominate such
supply ( Buyer-requested supply ) for transportation and delivery
pursuant to Seller s authority under the delegation or assignment.
Seller s failure to nominate a Buyer-requested supply shall be
deemed a failure by Seller to sell and deliver under Paragraph 2.8
hereof, and the remedy there provided shall be applicable;
provided, however, that Seller shall not be subject to such remedy
if it properly nominates such supply for transportation and
delivery and Buyer s failure to receive such supply is the fault of
either Buyer or some third party; and provided, further, that
Buyer s failure to receive such supply for any reason whatsoever
shall never be deemed a failure to take under Paragraph 2.9 hereof.
(e) When implementing the provisions of this Paragraph
2.10, if Seller has been supplying any portion of the Gas sold and
delivered hereunder from Secondary Delivery point(s) or under other
arrangements, Seller shall resume deliveries from the Primary
Delivery Point(s) set forth in Exhibit A to the extent that such
action will increase the total quantity of Gas delivered to Buyer
hereunder.
(f) The actions described in this Paragraph 2.10 are in
addition to any other actions which the Parties may undertake
toremedy or mitigate a force majeure condition. Buyer s exclusive
remedy for Seller s failure to deliver Gas which Seller has
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available in accordance with this Paragraph 2.10 shall be the
remedy described in Paragraph 2.8 hereof; provided, however, that
to the extent payments are made under Paragraph 2.8 hereof, Demand
Charges shall continue to be paid under Paragraph 5.1(a) hereof.
III. Transportation
3.1 During the term of this Agreement, Buyer and Seller may
agree that certain of Buyer's transportation rights and
responsibilities may be delegated or assigned to Seller. In such
event, the Parties shall deliver and execute mutually agreeable
documents fully setting forth the terms of such delegation or
assignment and the rights and responsibilities associated
therewith. Subject to Tennessee s offering an Operational
Balancing Agreement ( OBA ) or similar agreement on terms and
conditions agreeable to Seller, Seller agrees that it will, at all
times during the delivery and receipt of Gas, have an OBA or
similar agreement in effect with Tennessee for the purpose of
reducing the potential for imbalances under this Agreement. Seller
shall not be in breach of this provision, however, if Seller is not
able to obtain or maintain an OBA or similar agreement due to no
fault of Seller.
IV. Delivery Point(s)
4.1 The Primary Delivery Point(s) and Secondary Delivery
Point(s) shall be as set forth in Exhibit A hereto, as such may be
amended from time to time. The Alternate Delivery Point(s) shall
be as set forth in Exhibit B hereto, as such may be amended from
time to time. The Delivery Point(s) as set forth in Exhibits A and
B, may be changed by means of revised Exhibits A and/or B, and such
revised Exhibits may be executed on behalf of Seller and Buyer by
such authorized representative as each respective Party may
designate in writing. Except as provided in any delegation or
assignment under Article III hereof, such Delivery Point(s) shall
be the point(s) at which title to the Gas passes to Buyer and the
point(s) at which Gas is delivered for the account of the Buyer.
4.2 Seller shall be allowed to deliver Gas to Secondary
Delivery Point(s) in accordance with Buyer s transportation
agreement with Tennessee. Buyer agrees to use its best efforts to
add or delete Primary Delivery Point(s) upon the reasonable request
of Seller and to affirmatively seek such changes in its
transportation agreement with Tennessee. The Parties agree to
prepare, execute, and deliver an appropriate revised Exhibit A to
reflect such changes in Delivery Point(s).
V. Price
5.1 The price to be paid for Gas sold in accordance with this
Agreement shall be as set forth below:
5.1(a) Demand Charge
(i) Except as provided in Paragraphs 5.1(a)(ii), 5.2(g), and
5.3(g) hereof, the Demand Charge shall be calculated by multiplying
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******** times the MDQ, times the number of days in a month. The
Demand Charge, as calculated herein, shall be paid monthly by
Buyer, regardless of the quantity of Gas actually purchased and
received by Buyer during each month.
(ii) In addition to the Demand Charge under Paragraph
5.1(a)(i), Buyer shall also pay Seller an Incremental Demand Charge
of ******** for each MMBtu of the increased quantities nominated
pursuant to Paragraph 2.2(c) hereof. Such Incremental Demand
Charge shall be applicable as of the first day of any month in
which Seller is required to sell and deliver such increased
quantities, shall continue in effect through the end of such month,
and shall be paid by Buyer regardless of the increased quantities
actually purchased and received by Buyer during such month and
regardless of any subsequent decrease of Buyer's nomination
pursuant to Paragraph 2.2(b).
5.1(b) Index Price
Except as provided in Paragraphs 5.1(c) and (d), 5.2, and 5.3,
Buyer shall also pay Seller the Index Price for all quantities of
Gas purchased and received each month by Buyer under this
Agreement, as follows:
(i) Except as provided in Paragraph 5.1(b)(ii), the Index
Price under this Paragraph 5.1(b) shall be the ******** per MMBtu.
The IFGMR Index shall be determined using the first issue published
during the delivery month of Inside FERC s Gas Market Report
( IFGMR ), and the particular IFGMR price quote to be used shall be
the Index price quoted in the table entitled Prices of Spot Gas
Delivered to Pipelines (Per MMBtu dry) for deliveries during that
month to Tennessee in Louisiana (zone 1).
(ii) In the event the IFGMR Index is no longer published or is
no longer representative of prices for Gas delivered in the
vicinity of the Primary Delivery Point(s), then the Party which
becomes aware of such event shall notify the other Party, and the
Parties shall attempt in good faith to select an alternate
published index to serve as the basis of the new Index Price. If,
within sixty (60) days of receipt of such notice, the Parties have
not reached agreement on an alternate published index, then the new
Index Price shall be based on the Revised Price, determined by
using the following formula:
Revised Price = SP(avg) + D(avg)
Where
SP(avg) = The average of the closing Settlement Prices for
natural gas futures on the New York Mercantile Exchange
( NYMEX ) for the last three (3) days of trading prior to the
month in which the gas is delivered; and
D(avg) = the average of the differences, over the period
beginning with the date first written above and ending with
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the last month for which the IFGMR Index was utilized in
determining the Index Price, between (i) the applicable IFGMR
Index for each month of such period and (ii) the NYMEX gas
futures closing Settled Price for the Henry Hub for each month
of such period.
The preceding formula shall be used to calculate the basis of the
New Index Price for each month thereafter, with SP(avg) being
redetermined each month and D(avg) being held constant. The new
Index Price as determined under this Paragraph 5.1(b)(ii) shall be
effective as of the first day of the first month after notice is
given as specified herein and shall be ******** per MMBtu less than
the price determined from the alternate published index agreed on
by the parties or the Revised Price, as applicable.
5.1(c) Alternate Index Price
An Alternate Index Price shall apply to: (i) all increased
quantities of Gas sold and delivered to Buyer under Paragraph
2.2(c); (ii) all quantities of Gas sold and delivered to Buyer at
Secondary Delivery Point(s) pursuant to Paragraph 2.10(a); and
(iii) all quantities of Gas sold and delivered to Buyer under
mutually satisfactory arrangements pursuant to Paragraphs 2.10(a)
and (b). The Alternate Index Price shall be a mutually agreeable
price. If the Parties are unable to agree on a price in time to
permit all necessary delivery arrangements to be made, then the
Index Price for such Gas shall be one that reimburses Seller for
all reasonable costs (including, without limitation, the commodity
cost of the gas, and any transportation, storage, and other costs,
as applicable) that were communicated at least generically to Buyer
before the arrangements were concluded and were actually incurred
by Seller in making such deliveries, less ******** per MMBtu. In
determining reasonable costs for purposes of this Paragraph 5.1(c),
due consideration shall be given to all relevant circumstances.
5.1(d) Mutually Agreeable Index Price
The Index Price for quantities of Gas sold and purchased under
Paragraph 2.2(d) shall be the price agreed to by the Parties and
confirmed in writing as provided in Paragraph 2.2(d).
5.2 Locked Prices
In addition to the Demand Charge under Paragraph 5.1(a) and in
lieu of paying the Index Prices set forth in Paragraphs 5.1(b),
(c), and/or (d) or a Protected Price pursuant to Paragraph 5.3,
Buyer may elect to lock in and pay a Locked Price for a Locked
Quantity, as follows:
5.2(a) The Parties may lock the price for a Locked Quantity
to be purchased during any of the twelve (12) calendar months
immediately following Buyer s obtaining of a Locked Price that are
within the term of this Agreement. Locked Prices may be set by the
authorized representative(s) designated in writing by each Party,
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using the procedures set forth in Paragraphs 5.2(b) or (c) or both.
5.2(b) Buyer may request a specific Locked Price or Prices
for Gas to be delivered hereunder by telephone on any regular
Chevron business day, between the hours of 8:30 a.m. and 2:00 p.m.,
local Houston, Texas time, up to ******** hours (excluding weekends
and Chevron holidays) before the close of trading in natural gas
futures on the New York Mercantile Exchange ( NYMEX ) for the month
to which the Locked Price applies ( Trading Period ). As soon as
possible after Buyer s telephone request, but in any event within
twenty-four (24) hours thereafter (excluding weekends and Chevron
holidays), Seller shall confirm the Locked Price requested by Buyer
if there are, within such time period, any NYMEX natural gas
futures transactions reported at a price that is ******** or more
below the Locked Price requested by Buyer.
5.2(c) During the Trading Period, Buyer may request Seller
to propose a Locked Price for Gas to be sold and purchased
hereunder during one or more months, and Seller shall propose a
Locked Price as soon as practical. During the Trading Period,
Seller may also, on its own, propose to Buyer by telephone a
Locked Price for Gas to be sold and purchased hereunder during one
or more months. Buyer shall immediately accept or reject any such
proposals, and if accepted by Buyer the Locked Price proposed by
Seller shall be deemed confirmed. If Buyer does not accept
Seller s proposal, Seller s proposal shall be null and void.
5.2(d) If a Locked Price is confirmed pursuant to either
Paragraphs 5.2(b) or (c), then Seller shall forward to Buyer a
"Price Lock Confirmation similar to the form attached hereto as
Exhibit C, which specifies the terms to which the Parties have
agreed. Such Price Lock Confirmation shall be forwarded to Buyer
as soon as practical, but in any event prior to the beginning of
the calendar 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 forty-eight (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.
5.2(e) Buyer may request Locked Prices only on quantities
for the applicable months that are equal to the applicable Locked
Quantities.
5.2(f) Once a Locked Price has been established for a
delivery month hereunder, it shall be irrevocable as to the
affected Locked Quantity, and shall not thereafter be subject to
change.
5.2(g) If natural gas futures contracts cease to be traded
on the NYMEX or on any other mercantile exchange acceptable to
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Seller in its sole discretion, then after such cessation Seller
shall be relieved of any and all obligations to establish Locked
Prices hereunder, and the Demand Charge set forth in Paragraph
5.1(a)(i) hereof shall be reduced by ******** per MMBtu; provided,
however, that if a Demand Charge reduction has already been made
pursuant to Paragraph 5.3(g), no further reduction shall be made
pursuant to this Paragraph 5.2(g).
5.3 Protected Prices
In addition to the Demand Charge under Paragraph 5.1(a) and in
lieu of paying Index Prices pursuant to Paragraphs 5.1(b), (c),
and/or (d) or Locked Prices pursuant to Paragraph 5.2 hereof, Buyer
may request the establishment of a Ceiling Price, a Floor Price, or
both (a Protected Price ) for a Protected Quantity, as follows:
5.3(a) Through the authorized representative(s) designated
in writing by each Party, the Parties may establish a Protected
Price for a Protected Quantity to be purchased during any of the
twelve (12) calendar months immediately following the establishment
of such Protected Price(s) that are within the term of this
Agreement.
5.3(b) During the Trading Period defined in Paragraph
5.2(b), Buyer may request by telephone a Protected Price for Gas to
be delivered during the month to which the Protected Price applies.
5.3(c) As soon as possible after Buyer's telephone request,
but in any event within 24 hours (excluding weekends and Chevron
holidays), Seller shall determine the Price Protection Fee(s) which
Seller must charge Buyer in order to establish the Protected
Price(s) as requested, and shall notify Buyer's authorized
representative of such Price Protection Fee(s). If Buyer's
authorized representative accepts such Price Protection Fee(s),
then Seller shall forward to Buyer a Protected Price
Confirmation , similar to the form attached hereto as Exhibit D,
which specifies the terms to which the parties have agreed. Said
Protected Price Confirmation shall be forwarded to Buyer as soon as
practical, but in any event prior to the beginning of the calendar
month in which deliveries are to be made. The terms set forth in
the Protected Price 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 Protected Price Confirmation
within forty-eight (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.
5.3(d) Buyer may request Protected Prices only on
quantities for the applicable months that are equal to the
applicable Protected Quantities.
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5.3(e) Once a Protected Price (whether involving a Floor
Price, a Ceiling Price, or both) has been established for a
delivery month hereunder, it shall be irrevocable as to the
affected Protected Quantity, and shall not thereafter be subject to
change.
5.3(f) The Price Protection Fees for Protected Quantities
shall be discrete charges or credits to Buyer, and shall be
included in the next monthly invoice sent to Buyer following such
request for a Protected Price. Said Price Protection Fees shall be
charged or credited, as applicable, for all Protected Quantities,
whether all such quantities are taken and/or paid for by Buyer or
not.
5.3(g) If natural gas futures contracts cease to be traded
on the NYMEX 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 obligations to establish Protected
Prices hereunder, and the Demand Charge set forth in Paragraph
5.1(a)(i) hereof shall be reduced by ******** per MMBtu; provided,
however, that if a Demand Charge reduction has already been made
pursuant to Paragraph 5.2(g), no further reduction shall be made
pursuant to this Paragraph 5.3(g).
5.4 The price as specified herein is a price per MMBtu (dry),
measured in accordance with this Agreement.
5.5 Seller and Buyer hereby agree that all Gas purchased and
sold under this Agreement is decontrolled and not subject to any
maximum lawful price.
VI. Responsibility
6.1 Except as provided in any delegation or assignment of any
of Buyer s transportation rights, all charges, expenses, fees,
taxes, damages, injuries, cash-outs, payments and/or imbalance
charges, and other costs incurred in or attributable to the
handling or transportation of the Gas delivered in accordance with
this Agreement (or otherwise caused by or attributable to the Gas)
prior to delivery to Buyer at the Delivery Point(s) shall be the
responsibility of Seller, as between the Parties hereto, and Seller
shall indemnify, defend, and hold Buyer harmless from all such
costs; provided, however, that if Buyer is required by law to remit
such taxes to the collecting authority, Buyer shall do so and
deduct the taxes so paid on Seller s behalf from payments otherwise
due to Seller hereunder.
6.2 Seller shall be responsible for the maintenance and
operation of any of its facilities (including those it owns an
interest in) and shall indemnify, defend, and hold Buyer harmless
from any and all costs arising from any act or accident in
connection with the installation, presence, maintenance, and
operation of Seller's facilities.
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6.3 All charges, expenses, fees, taxes (including sales or
transfer taxes and other taxes levied on or in connection with the
transactions under this Agreement by the State in which the Gas is
consumed or otherwise used), damages, injuries, cash-outs, payments
and/or imbalance charges, and other costs incurred in or
attributable to the purchase and transfer, transportation, and
handling of the Gas (or otherwise caused by or attributable to the
Gas) from and after delivery shall be the responsibility of Buyer,
as between the Parties hereto, and Buyer shall indemnify, defend,
and hold Seller harmless from all such costs; provided, however,
that if Seller is required by law to remit such taxes so paid on
Buyer s behalf to the collecting authority, Seller shall do so, and
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.
6.4 Except as provided in Article XII herein, Buyer warrants
that it has all necessary regulatory approvals and authorizations
for the purchase of Gas by Buyer hereunder.
6.5 Buyer shall be responsible for the maintenance and
operation of any of its facilities (including those it owns an
interest in) and shall indemnify, defend, and hold Seller harmless
from any and all costs arising from any act or accident in
connection with the installation, presence, maintenance, and
operation of Buyer's facilities.
6.6 As used in this Agreement, indemnify, defend, and hold
harmless , means that the indemnifying Party shall pay any and all
costs incurred by the indemnified Party (including, but not limited
to, attorneys fees and court costs) associated with or relating to
any breach of warranty or any responsibility or risk assigned to
the indemnifying Party under this Agreement.
VII. Term
7.1 The term of this Agreement shall commence as of the date
first written above, and shall continue for a term of ********
Contract Years thereafter.
7.2 If the Parties desire to extend the effectiveness of this
Agreement beyond the term provided in Paragraph 7.1, they shall
commence negotiations no later than the last day of the ********
Contract Year. The failure of one Party to request negotiations by
such deadline shall be adequate grounds for the other Party to
assume that the first Party has no interest in any such extension.
VIII.Measurement
8.1 The quantity of Gas delivered at the Delivery Point(s)
shall be calculated from the measurements taken by Tennessee at the
Delivery Point(s) and from the heating value determined by the
instruments operated by Tennessee at the Delivery Point(s). The
unit of measurement shall be one MMBtu, calculated on a dry basis.
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IX. Quality and Pressure
9.1 The Gas delivered to Buyer at the Delivery Point(s) shall
be of merchantable quality and shall meet the quality and pressure
specifications (including the specifications regarding heating
content) of Tennessee s currently effective FERC Gas Tariff. If
any of the Gas delivered hereunder fails to meet the quality and
pressure specifications described in this paragraph, then Buyer
will have the right to refuse to accept deliveries of such
nonconforming Gas, and, should Seller fail to replace the
nonconforming Gas as soon as possible (but in no event later than
the first day for which Tennessee will accept Gas from Seller to
replace the nonconforming Gas), such failure shall be deemed to be
a failure by Seller to sell and deliver a quantity of Gas under
Paragraph 2.8 hereof, and Buyer may purchase Deficiency Gas and be
reimbursed for the cost of such purchases provided therein.
9.2 To the extent Buyer accepts Gas delivered by Seller at
the Delivery Point(s), Seller shall be deemed to have complied with
the quality and pressure specifications contained herein.
X. Processing Rights and Injection of Liquids
10.1 Seller hereby reserves the right to process all or any
portion of the gas deliverable to Buyer hereunder for the removal
of all or any constituents thereof other than methane, and to
remove such methane as is necessary in the operation of the
processing facilities; provided, however, that Seller s exercise of
such rights shall not have the effect of reducing the quantities of
Gas (determined on a thermal basis) sold and delivered hereunder
below the quantities nominated by Buyer pursuant to Article II
hereof; and provided further that any such reduction below the
quantities nominated by Buyer shall be deemed to be a failure to
sell and deliver under Paragraph 2.8 hereof, and the remedy there
provided shall be applicable. Such processing rights may be
exercised either upstream of or, if Tennessee allows, downstream of
the Delivery Point(s) and may be accomplished by Seller or by any
assignee or designee of Seller; provided, however, that if Seller
elects to process Gas downstream of the Delivery Point(s), Seller
shall deliver to Tennessee for Buyer s account any additional
quantities of Gas necessary to account for any reduction in
quantity and/or heating value that may result from such processing.
When Seller is exercising its right to process the Gas (and such
right may be exercised at any time and from time to time during the
term of this Agreement), title to the liquid and liquifiable
hydrocarbons and other constituents removed or consumed during
processing shall not pass to Buyer, but shall remain at all times
in Seller. Buyer and Seller agree that they will cooperate in good
faith to facilitate the exercise of Seller s processing rights,
including, without limitation, taking the actions described in the
remainder of this Article 10.
10.2 Regardless of whether or not Seller initially elects to
process the Gas, Buyer shall make reasonable efforts to ensure that
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DELETED INFORMATION
all transportation agreements entered into by Buyer for
transportation of the Gas downstream of the Delivery Point(s)
contain a provision acknowledging and providing for the exercise of
Seller s processing rights upon reasonable terms and conditions at
a mutually agreeable point on the system of Tennessee.
10.3 When and if Seller elects to exercise its processing
rights, Buyer and Seller will establish reasonable accounting and
billing procedures so that (a) Buyer will pay only for the
quantities of residue Gas remaining after processing, and (b) all
charges of the Transporter will be equitably allocated between
Buyer and Seller, with Seller paying all costs attributable to the
exercise of its processing rights (including any cash-outs imposed
by Tennessee) and Buyer paying all costs attributable to the Gas
purchased by it hereunder.
10.4 It is understood that Seller s Gas wells may produce
liquid hydrocarbons (condensate) along with the gas-well Gas to be
delivered hereunder. To the extent that any Delivery Point
provided for in this Agreement is located on an offshore platform,
Buyer agrees that Seller may inject condensate into the Gas stream
delivered hereunder for transportation and redelivery to Seller at
a separation facility to be located onshore. Buyer shall make
reasonable efforts to ensure that all transportation agreements
entered into by Buyer for transportation of the Gas downstream of
any offshore Delivery Point(s) contain a reservation in favor of
Seller of the right to inject and have such condensate transported
in Tennessee s pipeline for redelivery to Seller at the onshore
separation facility. Seller agrees to bear, or reimburse Buyer
for, all charges of the Tennessee attributable to the injection,
transportation, and redelivery of Seller s condensate.
10.5 Buyer shall furnish Seller with documentation
establishing the actual charges incurred by Buyer and borne by
Seller under Paragraphs 10.3 and 10.4. Such documentation shall
reflect the method of allocation of such charges between Buyer and
Seller.
10.6 Seller shall indemnify and save Buyer harmless from all
losses, damages, expenses, and liabilities (including reasonable
attorneys fees) that may occur or be asserted by reason of
accidents or occurrences resulting from Seller s or any third
party s operations as authorized by this Article X.
XI. Force Majeure
11.1 In the event that either Seller or Buyer is rendered
unable, by reason of an event of force majeure, to perform wholly
or in part any obligation or commitment set forth herein, then,
provided that such Party gives notice and reasonably full
particulars of such event as soon as practicable after the
occurrence thereof, the obligations of both parties, except for
unpaid financial obligations arising prior to such event of force
majeure, and except for the alternative delivery options arising
under Paragraph 2.10 hereof, shall be suspended to the extent of,
and insofar as they are affected by such force majeure event and
for the duration of the force majeure event.
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11.2 The term force majeure as employed herein shall mean
acts of God, strikes, lockouts, or industrial disputes or
disturbances, civil disturbances, arrests and restraints of rulers
and peoples, interruptions by government or court orders, necessity
for compliance with any court order, law, statute, ordinance, or
regulation promulgated by a governmental authority having
jurisdiction, acts of the public enemy, war, riots, blockades,
insurrections, inability to secure labor or materials, including
inability to secure materials by reason of allocations promulgated
by authorized governmental agencies, inability to obtain Gas
supplies at any price, epidemics, landslides, lightning,
earthquakes, fire, storms, floods, washouts, inclement weather that
would necessitate extraordinary measures and expense to construct
facilities and/or maintain operations, explosions, breakage or
accident to machinery or wells or lines of pipe, freezing of wells
or pipelines, inability to obtain or delays in obtaining easements
or rights of way, shutting-in of facilities for the making of
repairs, alterations, or maintenance to wells, pipelines, or
plants, or any other cause not reasonably within the control of the
Party claiming force majeure; provided, however, that neither the
loss of markets by Buyer nor the inability of Seller to acquire
supplies at prices satisfactory to Seller shall be considered force
majeure events.
11.3 To the extent such force majeure situation can be
mitigated or eliminated by the exercise of due diligence by the
Party claiming force majeure, such Party shall act to remedy the
situation with all reasonable dispatch; provided, however, that
settlement of strikes and lockouts will be entirely within the
discretion of the Party affected, and the requirement that any
event of force majeure be remedied with all reasonable dispatch
will not require the settlement of strikes and lockouts by acceding
to the demands of the parties directly or indirectly involved in
such strikes or lockouts when such course is inadvisable in the
discretion of the Party having the difficulty.
XII. Government Regulation
12.1 This Agreement shall be subject to all valid, applicable
state, federal, and local laws, rules, orders, and regulations; and
either Party hereto shall be entitled to regard all such laws,
rules, and regulations as valid and may act in accordance therewith
until such time as the same may be held invalid by final judgment
in a court of competent jurisdiction. Nothing herein shall be
taken to preclude Buyer or Seller or both from contesting the
validity of any such laws, rules, or regulations.
12.2 Notwithstanding Paragraph 12.1, if at any time during the
term of this Agreement any governmental authority shall take any
action whereby the purchase, sale, delivery, transportation,
redelivery, or resale of Gas as contemplated hereunder is
proscribed or made subject to terms, conditions, regulation,
restraints, or rate or price controls that (i) would render the
performance of this Agreement impossible or commercially
impracticable or (ii) would cause the performance of this Agreement
to be substantially more burdensome or substantially less
18
profitable for either Party, or (iii) would cause the Buyer to be
unable to recover from its resale customers the cost of Gas
purchased hereunder ( adverse governmental action ), then the Party
so affected may elect, in writing, to renegotiate the terms of this
Agreement as reasonably necessary to eliminate the effect of such
adverse governmental action. If the Parties are unable, after
sixty (60) days following the date on which a Party's written
election to renegotiate is delivered to the other Party, to reach
mutual agreement on such renegotiated terms, either Party shall
have the right to cancel this Agreement by giving written notice to
the other Party at least one hundred twenty (120) days in advance;
provided, however, that such notice must be given within thirty
(30) days after completion of the sixty-day renegotiation period.
Unless otherwise agreed, the provisions of this Agreement shall
remain in effect until the termination of this Agreement pursuant
to this Paragraph 12.2.
12.3 Notwithstanding Paragraphs 12.1 and 12.2, Seller shall
have the right, in the event of a Major Governmental Action (as
hereinafter defined) to terminate this Agreement effective on the
last day before the effective date of the Major Governmental
Action. For purposes of this Paragraph, the term Major
Governmental Action shall mean either the passage by any
governmental authority having jurisdiction over this Agreement of
a rule, regulation, or order that would require, or the passage by
either house of a two-house legislative body of a bill that would
require, if it should subsequently become law, that Seller seek and
obtain approval or abandonment authority from a governmental
authority before discontinuing sales to Buyer after the term of
this Agreement has expired or this Agreement has otherwise
terminated according to its terms. If operation of this Paragraph
results in retroactive termination of this Agreement, then
settlement between the Parties related to transactions occurring
between the retroactive termination date and the triggering of this
Paragraph 12.3 (the Interim Period ) shall be handled according to
the winding-up principles set forth in Paragraph 12.4.
12.4 Unless otherwise agreed by the Parties, if it should be
necessary for the Parties to reach settlement with respect to
transactions that occurred during the Interim Period, the following
winding-up principles shall apply:
(a) No refunds of amounts already paid (and not in dispute
between the Parties) shall be required;
(b) For any transaction as to which settlement has not
occurred, the amount due shall be at the same price level as was
last paid for a similar transaction, whether under Paragraph
12.4(a) hereof or under the other provisions of this Agreement when
they were effective; and
(c) Any disputes as to the amounts due shall be settled by
arbitration, pursuant to Article XIII hereof, so as to promote
overall fairness between the Parties, giving due consideration to
all relevant circumstances.
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XIII. Arbitration
13.1 Any dispute or controversy between the Parties arising
out of this Agreement may be settled by arbitration; provided,
however, that arbitration shall not be available with respect to:
(i) applicability and level of the Demand Charge under Paragraph
5.1(a); (ii) the Revised Prices, if any, under Paragraph
5.1(b)(ii); and (iii) any action taken by either Party or both
Parties pursuant to Paragraph(s) 12.2, 12.3, and 12.4, except as
provided under Paragraph 12.4(d). The arbitration shall be
conducted in Houston, Texas, unless otherwise mutually agreed.
Arbitration of any such dispute or controversy, as well as all
recourse to the courts from any decision of the arbitrator(s),
shall be subject to the United States Arbitration Act, as codified
at 9 U.S.C. Sec. 1-16 (1991) and the Commercial Arbitration Rules of
the American Arbitration Association except to the extent either
the United States Arbitration Act or the Commercial Arbitration
Rules conflicts with the provisions herein. In the event of
conflict between the United States Arbitration Act and the
Commercial Arbitration Rules, the United States Arbitration Act
shall govern.
13.2 Either Party may request arbitration pursuant to this
Article XIII by providing written notice to the other Party. The
Parties shall attempt to agree upon a single arbitrator within
fifteen (15) days following receipt of such notice. In this event,
the dispute shall be arbitrated by this single arbitrator. If the
Parties are unable to agree upon a single arbitrator within such
fifteen (15) day period, then each Party shall select an arbitrator
within fifteen (15) days of the failure to agree upon a single
arbitrator. The two arbitrators shall select a third arbitrator
within fifteen (15) days after selection of such arbitrators.
Should the two arbitrators fail to agree on a third arbitrator
within the fifteen (15) day period, either party may apply to the
Senior Judge of the United States District Court for the Southern
District of Texas for appointment of the third arbitrator. The
dispute shall then be arbitrated by the three arbitrators chosen as
set forth above.
13.3 All arbitrators shall be qualified to decide the matter
in dispute, by education and experience within the natural gas
industry, and shall be licensed attorneys. No arbitrator shall be
a current or former employee, agent, or the beneficial owner of any
interest or common stock of either Party, any affiliate of either
Party, or any direct competitor of either Party, or a partner or
employee of a law firm that has represented either Party within the
five years preceding the invocation of arbitration.
13.4 The arbitrator(s) shall schedule the time and place for
hearings or the submission of written statements, at which time
each Party shall submit evidence. Pre-trial discovery shall be
available to both Parties. The decision of the arbitrator(s) shall
be made within thirty (30) days after the conclusion of any
hearings or the submission of written statements of the Parties.
The decision of the arbitrator(s) shall be in writing, shall state
with particularity the decision, shall be signed by the
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arbitrator(s) or a majority of them, and shall be subject to court
review in accordance with the United States Arbitration Act. A
judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
13.5 Both Parties shall submit evidence in their separate
proposals to the arbitrator(s) setting forth clearly their relative
positions with respect to the dispute. Following the presentation
of the evidence, each Party shall submit its final proposal for
resolution of the matter in dispute. The arbitrator(s) shall be
limited to selecting either Buyer s or Seller s final proposal.
13.6 Each Party shall pay the expenses of the arbitrator
selected by it, and of its counsel, witnesses, and employees, and
all other costs of arbitration shall be equally divided between the
Parties.
XIV. Billing and Payment
14.1(a) On or before the fifteenth (15th) day of each
calendar month, Seller shall submit to Buyer (by telecopy, mail, or
other means, at Seller s option) a statement showing the amount of
Gas purchased during the preceding month and the amount due Seller
for such purchases, calculated in accordance with the terms of this
Agreement. If actual amounts are unavailable, billing and payment
shall be made on estimates, subject to adjustment in succeeding
months. Buyer shall make payment of the amount due hereunder on or
before the twenty-fifth (25th) day of the calendar month by wire
transfer as follows:
********
14.1(b) On or before the twentieth (20th) day of each
calendar month, Buyer shall submit to Seller (by telecopy, mail, or
other means, at Buyer s option) a statement showing the amount(s)
due Buyer hereunder, if any, related to transactions occurring in
the preceding month. If actual amounts are unavailable, billing,
and payment shall be made on estimates subject to adjustment in
succeeding months. Statements shall be sent to the following
address:
Chevron U.S.A. Production Co.
P.O. Box J - Section 980
Concord, California 94524
Attn: Gas Accounting - Section 980
Seller shall make payment of the amount due hereunder on or before
the tenth (10th) day after submission of such bill by Buyer by wire
transfer as follows:
********
14.2 Should either Party fail to pay part or all of the other
Party s statement as provided in Paragraph 14.1, then interest on
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the unpaid portion shall accrue at the prime interest rate
established by Chase Manhattan Bank, N.A. plus two percent (2%) (or
the maximum lawful rate, whichever is less) from the due date until
the date of payment.
14.3(a) Should Buyer fail to pay all or part of any
statement on or before the due date, Seller, subject to Paragraph
14.4, but in addition to any other remedy it may have (and without
affecting those remedies), may suspend delivery of Gas to Buyer
upon written notice. Buyer shall have the right to have deliveries
reinstated by paying the full amount due, including interest within
ten (10) days of the date when deliveries were suspended.
14.3(b) Should Seller fail to pay all or part of any
statement on or before the due date, Buyer, subject to Paragraph
14.4, but in addition to any other remedy it may have (and without
affecting those remedies), may suspend receipts of Gas and payment
of demand charges to Seller upon written notice. Seller shall have
the right to have receipts of Gas and payment of demand charges
resumed by paying the full amount due, including interest, within
ten (10) days of the date when receipts were suspended.
14.4 If either party in good faith shall dispute the amount of
any invoice or part thereof rendered under any provision of this
Agreement, and shall pay to the other Party such amounts as it
concedes to be correct and, at any time within thirty (30) days
after a demand made by the Party to be paid, shall furnish a good
and sufficient surety bond guaranteeing payment to the Party to be
paid of the amount ultimately found due after a final
determination, which may be reached either by agreement of the
Parties, arbitration pursuant to Article XIII, or final judgment of
the courts, the Party to be paid shall not be entitled to suspend
deliveries or receipts of Gas and payment of demand charges until
default be made in the conditions of such bond. The amount related
to any dispute which is ultimately determined to be owed to either
party shall be paid in full, with interest which shall accrue at
the rate provided for in Paragraph 14.2 from the date payment of
such amount was originally due, until the date of payment.
14.5 During the term of this Agreement and for six (6) years
thereafter, the Parties shall have reasonable access to each
other s books and records to determine accurate measurement,
billing, and payment under this Agreement. Each Party also agrees
to make available to the other Party any relevant records of
Tennessee or Transporter to which the first Party has access. All
books and records of either Party pertaining to deliveries and
billings under this Agreement shall be retained for at least six
years after the end of the month to which such books or records
pertain.
14.6 If Seller owes funds to Buyer hereunder, Seller may
offset any amounts owed Buyer with amounts Buyer owes Seller
hereunder. If Seller makes such offset, it shall be noted on
Seller s statement.
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14.7 Either Party may change the addresses and account
information set forth in this Article XIV by giving written notice
to the other Party.
XV. Succession and Assignment
15.1 Either Party may, without relieving itself of any
obligations hereunder, assign, either on a permanent or temporary
basis, all or any part of its rights hereunder to any corporation,
partnership, joint venture, or other entity with which it is
affiliated. No other assignment of this Agreement or any of the
rights or obligations hereunder may be made unless and until the
Party seeking the assignment obtains the written consent thereto of
the non-assigning Party, which consent shall not be unreasonably
withheld; provided, however, that nothing in this Agreement in any
way prevents either Party from pledging or mortgaging all or any
part of such Party s property or rights hereunder as security for
mortgage, debt, or other similar obligations; and provided,
further, that nothing in this Agreement prevents any company or
other entity that purchases, merges, consolidates with, or
otherwise succeeds to the interests of either Party hereto,
substantially as an entirety, from assuming the rights or
obligations of its predecessor in interest under this Agreement.
No transfer of or succession to the interest of either Party
hereunder, wholly or partially, will affect or bind the non-
assigning Party until it has been furnished with written notice and
a true copy of such assignment or with other proper proof that the
claimant is legally entitled to such interest.
XVI.Financial Responsibility
16.1 Prior to the commencement of deliveries and sales of gas
hereunder, and at any time and from time to time thereafter upon
request from Seller, Buyer shall provide Seller credit information
as may reasonably be required by Seller to determine Buyer's
creditworthiness. If Seller determines in its reasonable judgment
that Buyer s credit is not sufficient, Buyer shall promptly provide
Seller a letter of credit, guaranty, or other good and sufficient
security of a continuing nature, satisfactory in form and amount to
Seller, as determined by Seller in its reasonable discretion.
Seller, in its reasonable discretion, may delay commencement of
deliveries, or suspend deliveries after they are commenced, pending
Buyer s full compliance with this Paragraph.
XVII. Notices
17.1 Any notice, demand, request, statement, or correspondence
provided for in this Agreement, or any notice which a Party may
desire to give to the other, shall be in writing (unless otherwise
provided) and shall be considered duly delivered when received by
mail, telecopy, or overnight courier, at the addresses below:
(i) To Seller:
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Correspondence and Operational Notices:
Chevron U.S.A. Production Co.
1301 McKinney
Houston, Texas 77010
Attention: Natural Gas Business Unit
Telecopy No.: (713) 754-5838
OR
Chevron U.S.A. Production Co.
P.O. Box 2100
Houston, Texas 77252
Attention: Natural Gas Business Unit
Telecopy No.: (713) 754-5838
Dispatching
Chevron U.S.A. Production Co.
P.O. Box 2100
Houston, Texas 77252
Attention: Natural Gas Business Unit
Telecopy No.: (713) 754-3840
Emergency Telephone No. (713) 754-7373
(ii) To Buyer:
Yankee Gas Services
P.O. Box 1030
599 Research Parkway
Meriden, Connecticut 06450-1030
Attention: Mr. Dave Egelson
Telecopy No.: (203) 639-4050
17.2 Either Party may change the information shown in
Paragraph 17.1 by giving written notice to the other Party.
XVIII. Confidentiality
18.1 Each Party agrees that it will maintain this Agreement
and all terms and conditions of this Agreement in strictest
confidence and that it will not cause or permit disclosure of this
Agreement or of the contents thereof 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
affiliated companies. Disclosures otherwise prohibited by this
Article 18 may be made by either Party only (a) to the extent
necessary for either Party to enforce this Agreement against the
other Party, or (b) to the extent to which a Party hereto is
required to disclose all or part of this specific 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).
18.2 If either Party is or becomes aware of a statute,
regulation, order, other compulsory process, or a judicial or
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governmental proceeding that has resulted or may result in such
compulsory disclosure, it shall so notify the other Party
immediately and shall provide a copy of the order, regulation or
compulsory process 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.
18.3 The Parties hereto acknowledge that independent legal
counsel and outside consultants 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.
XIX. Conflict of Interest
19.1 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.
XX.Miscellaneous
20.1 This Agreement shall be governed in accordance with the
laws of the State of Connecticut (including the Uniform Commercial
Code as adopted in Connecticut) except for such laws concerning the
application of the laws of another jurisdiction. Except as
otherwise set forth herein, the Parties hereto waive any and all
rights, claims, or other cause of action arising under this
Agreement for incidental, consequential, or punitive damages.
20.2 THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT OF THE
PARTIES AND CANNOT BE ALTERED, MODIFIED, OR AMENDED EXCEPT IN A
WRITING SIGNED BY THE PARTY AGAINST WHOM IT IS TO BE ENFORCED.
THERE ARE NO WARRANTIES EXPRESS OR IMPLIED EXCEPT AS STATED IN THIS
AGREEMENT.
20.3 Any waiver of any default under this Agreement shall not
be construed as a waiver of any future defaults, whether of like or
different character.
20.4 This Agreement shall not be construed to create any third
party beneficiary relationship in favor of anyone not a Party to
this Agreement. In addition, the Parties waive and disclaim any
third party beneficiary status as to any of the contracts of the
other Party.
20.5 This Agreement may be executed in counterparts.
20.6 The covenant contained in Paragraph 18.1 survives the
term of this Agreement.
20.7 Buyer shall have the unilateral right to cancel this
Agreement at any time, effective at the end of any Contract Year,
upon giving 60 days prior written notice.
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NOW THEREFORE, the Parties evidence their consent and
agreement to the foregoing by executing below:
BUYER: SELLER:
YANKEE GAS SERVICES CHEVRON U.S.A. PRODUCTION COMPANY, a
COMPANY division of CHEVRON U.S.A. INC.
By: /s Thomas J. Houde By: /s D. H. MacLean
Title: Vice President - Title: Assistant Secretary
Rates & Resource Planning
Attest: /s Charles E. Gooley
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