EXHIBIT 10(t)
MASTER GAS PURCHASE AGREEMENT
THIS MASTER GAS PURCHASE AGREEMENT (this "Agreement"), dated this
14th day of December, 1993, is by and among SANTA FE ENERGY RESOURCES,
INC., a Delaware corporation, and SANTA FE ENERGY OPERATING PARTNERS,
L.P., a Delaware limited partnership (hereinafter jointly referred to
as "Seller"), and ADOBE GAS PIPELINE COMPANY, a Delaware corporation
(hereinafter referred to as "Buyer"). Seller and Buyer may
hereinafter be referred to collectively as "Parties" or singularly as
a "Party."
W I T N E S S E T H:
WHEREAS, Seller has available for sale certain quantities of gas
not committed to any other purchaser; and
WHEREAS, Buyer desires to purchase and receive, and Seller
desires to sell and deliver, such gas upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, Seller and Buyer agree as follows:
ARTICLE 1
DEFINITIONS
The following definitions when used in this Agreement shall have
the following meanings (other terms are defined elsewhere in this
Agreement):
1.1 "Btu" shall mean British Thermal Unit.
1.2 "Buyer's Transporter" means, for each Delivery Point, the
pipeline company or companies with whom Buyer contracts to transport
Seller's Gas from each such Delivery Point to the corresponding
Pricing Point for such Delivery Point.
1.3 "Cashout Costs" means, for Seller's Gas delivered to each
Delivery Point, (i) the difference between the Index Price for such
Delivery Point and the price paid to
or received from a transporter to purchase or sell gas to eliminate any
imbalance on such transporter's pipeline attributable to Seller's Gas from
such Delivery Point, in accordance with such transporter's Tariff, and
(ii) all costs assumed or incurred by Seller or its operator to buy gas
under any operational balancing agreement with a transporter to eliminate
any imbalance on such transporter's pipeline.
1.4 "Contract Year" shall mean a period of twelve (12) consecutive
Months beginning on April 1 and ending on March 31 of the following
calender year, except the first Contract Year which shall begin on the
Effective Date and end on March 31, 1994.
1.5 "Day" or "day" shall mean a period of twenty-four (24)
consecutive hours concurrent with the respective operating day of
Buyer's Transporter as set forth in Buyer's Transporter's Tariff.
1.6 "Delivery Points" means, for each Seller's Well, the
measuring station or other measurement facilities at the point of
interconnection between Seller's delivery facilities for each such
Seller's Well and the facilities of Buyer's Transporter accepting and
transporting Seller's Gas from each such Seller's Well, which as of
the Effective Date are the points of interconnection described in
Exhibit A.
1.7 "Development Lands" means the lands covered by the oil, gas,
and mineral leases described in Exhibit B and any lands pooled or
unitized therewith, limited, in each case, as to depth, from the
surface of the earth to one hundred feet (100') below the depth of the
deepest interval first completed and producing gas in the first well
drilled on such lands.
1.8 "Development Well" means the wellbore of any well drilled
and completed after the Effective Date (i) on the Development Lands or
(ii) from an existing production platform in the Gulf of Mexico from
which one or more Existing Wells are producing as of the Effective
Date, limited, as to depth, from the surface of the earth
-2-
to one hundred feet (100') below the depth of the deepest interval
completed and producing gas in commercial quantities in such Existing
Wells.
1.9 "Effective Date" shall mean the date first written above.
1.10 "Existing Wells" means the wellbores of the wells described
in Exhibit A, limited, in each case, as to depth, from the surface of
the earth to one hundred feet (100') below the depth of the bottom of
the deepest interval producing or completed to produce gas on the
Effective Date.
1.11 "Exploration Lands" means all lands in the continental
United States or the Gulf of Mexico in which Seller owns or hereafter
acquires a working interest or other rights to produce and sell gas,
other than (i) Development Lands and (ii) lands covered by oil, gas
and/or mineral leases or similar rights and interests acquired by
Seller after the Effective Date in connection with or as part of the
acquisition or purchase of producing oil and gas properties.
1.12 "Exploration Well" means the wellbore of any well drilled
and completed after the Effective Date on the Exploration Lands and
for which Seller has elected to accept Buyer's Gathering Proposal
under Section 5.1 which requires Seller to sell and deliver gas
produced from such well to Buyer under this Agreement.
1.13 "FERC" means the Federal Energy Regulatory Commission or any
successor thereto having jurisdiction.
1.14 "Gas" or "gas" shall mean natural gas produced from gas
wells, casinghead gas produced from oil wells, and residue gas
resulting from the processing of such gas well gas or casinghead gas.
1.15 "Imbalance Penalties" means, for Seller's Gas delivered to
each Delivery Point, any imbalance penalty charges and Cashout Costs
assessed by a transporter pursuant to such transporter's Tariff for
Buyer's failure to take or Seller's failure to deliver Seller's
Estimate for such Delivery Point or Buyer's failure to submit a timely
and accurate nomination based on any timely given Seller's Estimate to
such
-3-
transporter, including, without limitation, penalty charges and
Cashout Costs incurred by Seller or its operator under operational
balancing agreements with a transporter.
1.16 "Index Price" means, for Seller's Gas delivered to each
Delivery Point, the price that best represents the fair market price
for similar quantities and quality of gas delivered at or near the
Pricing Point for each such Delivery Point, which as of the Effective
Date the Parties have agreed is the price reported in the table "Price
of Spot Gas Delivered to Pipeline," for the Pricing Point for such
Delivery Point, under the heading "Index," in the first issue of
INSIDE FERC published in each Month in which Seller's Gas is delivered
to each such Delivery Point.
1.17 "INSIDE FERC" means the publication INSIDE F.E.R.C.'S GAS
MARKET REPORT, as published by McGraw Hill, Inc.
1.18 "MMBtu" shall mean one million (1,000,000) British Thermal
Units.
1.19 "Month" shall mean the period beginning on the first Day of
each calendar month and ending at the beginning of the first Day of
the next succeeding calendar month.
1.20 "Llano System" means the Llano gas pipeline system located
in Eddy and Lea Counties, New Mexico.
1.21 "Preexisting Contracts" means the gas sales and purchase
contracts, processing agreements, and other contracts described in
Exhibit C.
1.22 "Pricing Point" means, for Seller's Gas delivered to each
Delivery Point, the point downstream of each such Delivery Point at
which the Index Price for each such Delivery Point is determined by
Buyer each Month, consistent with Section 8.2.
1.23 "Seller's Estimate" means, with respect to each Delivery
Point, Seller's estimate under Section 4.1 of the quantity of
Seller's Gas that Seller expects to deliver in each Month to each such
Delivery Point.
-4-
1.24 "Seller's Gas" means, for each Seller's Well, (i) Seller's
net revenue interest share of gas produced and delivered from each
such Seller's Well and (ii) any Third Party Gas produced and delivered
by Seller hereunder from each such Seller's Well.
1.25 "Seller's Wells" means the Existing Wells, the Development
Wells, and the Exploration Wells.
1.26 "Tariff" means the currently effective tariff of a
transporter filed with FERC, or if a transporter does not have a
tariff on file with FERC, such transporter's current operating
policies and procedures.
1.27 "Third Party Gas" means all gas produced and delivered from
each Seller's Well (i) that is attributable to the interests of
parties other than Seller (including royalty owners and overriding
royalty owners) in such Seller's Well and (ii) that Seller has the
right and authority to deliver and sell to Buyer under this Agreement.
1.28 "Transportation Expenses" means, for Seller's Gas delivered
to each Delivery Point, the actual and reasonable transportation rates
paid by Buyer to gather and transport Seller's Gas from each such
Delivery Point to the corresponding Pricing Point for each such
Delivery Point.
1.29 "Working Day" means a calendar day Monday through Friday and
excludes Saturday, Sunday, and nationally recognized holidays.
ARTICLE 2
DEDICATION OF GAS
2.1 SELLER'S COMMITMENT. Except as otherwise provided in this
Agreement, Seller commits and dedicates all of Seller's Gas to the
performance of this Agreement that is not dedicated or committed to a
Preexisting Contract.
2.2 ADDITIONAL GAS FROM NONOPERATED WELLS. Buyer may, by giving
Seller sixty (60) days' prior written notice, elect to purchase under
this Agreement any gas
-5-
that is produced from the nonoperated wells described in Exhibit D if
(i) in Seller's reasonable business judgment the sale of such gas to
Buyer under this Agreement would not result in a lower gas price or
higher transportation or other costs and expenses than Seller would
receive or pay if such gas is sold through the operator of such wells
and (ii) Seller has the right to sell such gas to Buyer under this
Agreement. Exhibit A shall be amended from time to time to incorporate
any such wells which become subject to this Agreement pursuant to the
foregoing sentence. Buyer shall be fully responsible for all
Imbalance Penalties paid by or assessed against Buyer or Seller for
wells added to Exhibit A under this Section 2.2.
2.3 RELEASE OF THIRD PARTY GAS. Upon written request by Seller,
Buyer shall release from this Agreement any Third Party Gas that
Seller reasonably believes should be released from this Agreement and
sold to third parties under other agreements to avoid incurring
penalties or other costs and expenses if Seller continues to deliver
and sell such Third Party Gas to Buyer under this Agreement.
2.4 RIGHT TO CONTROL AND CURTAIL PRODUCTION. Seller reserves
the right, in its sole discretion, to limit, curtail, or shut-in any
or all of the production of Seller's Gas from any Seller's Well or
Wells for any reason, including, without limitation, inadequate price,
unacceptable market conditions, or any mechanical, engineering, legal,
title, or other field or well condition. Seller shall use all
reasonable efforts to give notice to Buyer at least thirty (30) Days'
prior to the first Day of any Month in which Seller intends to curtail
or shut-in any quantities of Seller's Gas solely as a result of
Seller's belief that the price received hereunder for such Seller's
Gas is inadequate. For any other curtailment or shut-in of any
quantities of Seller's Gas, Seller shall give Buyer notice as soon as
reasonably practicable under the circumstances. Each curtailment
notice shall be in writing and shall identify the quantities of
Seller's Gas that Seller intends to curtail or shut-in and the
expected duration of such curtailment or shut-in period. Seller shall
not, however, shut in or
-6-
curtail any quantities of Seller's Gas solely for inadequate price
during any Month in which such quantities of Seller's Gas have been
represented as being available for sale to Buyer in Seller's Estimate
given three (3) Days prior to Buyer's Transporter's nomination
deadline for such Month. If Seller returns to production during the
middle of any Month any quantities of Seller's Gas shut-in or
curtailed due to inadequate price, Seller shall give prior written
notice to Buyer and Buyer shall have the right, but not the
obligation, to purchase such Seller's Gas for the balance of such
Month at the gas price determined under Section 8.4. If Buyer elects
to not purchase such Seller's Gas for the balance of such Month,
Seller may sell such Seller's Gas not purchased by Buyer to any third
party. At the end of such Month, Buyer shall resume purchasing under
the terms of this Agreement all such Seller's Gas nominated under
Section 4.1.
2.5 PROCESSING OF GAS. Seller reserves the right to process
Seller's Gas either prior to the Delivery Points or after delivery to
Buyer at the Delivery Points. Seller's Gas may be processed to
extract liquid and liquefiable hydrocarbons, together with any methane
unavoidably contained in the ethane or heavier hydrocarbons. Such
processing will not render the total heating value to be less than the
requirements of the transporter or otherwise cause Seller's Gas to not
meet the quality specifications of the transporter. All liquid and
liquefiable hydrocarbons so recovered shall belong to Seller. If
Seller's Gas is processed by Seller after delivery to the Delivery
Points, Seller shall be paid by Buyer for the volumes of residue gas
remaining after processing and Seller shall be responsible for charges
of Buyer's Transporter for the transportation to the processing plant
of fuel and plant volume reduction resulting from such processing. If
Seller's Gas is processed under percentage of proceeds-type contracts
or other agreements that do not provide for the residue gas
attributable to Seller's Gas to be returned in kind at the tailgate of
the processing plant, Buyer shall
-7-
release such Seller's Gas from this Agreement in writing upon written
request by Seller.
2.6 RELEASE OF CERTAIN PROPERTIES. Buyer shall, if requested by
Seller, promptly release from commitment and dedication hereunder all
Seller's Gas produced from any Seller's Wells if (i) Seller commits to
sell or exchange such Seller's Wells under a written agreement with a
third party which is not an affiliate of Seller and (ii) under such
agreement the average amount of the consideration to be received by
Seller for the gas reserves attributable to Seller's interests in each
such Seller's Well is less than $250,000 per Seller's Well. If Seller
desires to sell to a third party and have released from this Agreement
any Seller's Wells that do not meet the requirements of the preceding
sentence, Seller may substitute for such Seller's Wells like
quantities of gas delivered to delivery points reasonably acceptable
to Buyer and with daily deliverabilities during the term of this
Agreement similar to the Seller's Wells which Seller proposes to sell.
Buyer shall release from commitment under this Agreement such Seller's
Wells effective as of the date such substitute wells become subject to
this Agreement.
2.7 RELEASE OF CERTAIN NONOPERATED WELLS. If the Imbalance
Penalties paid or incurred by Seller under this Agreement for any
Seller's Gas produced from any nonoperated Seller's Well become
excessive in Seller's reasonable opinion, Buyer shall, upon written
request by Seller, release such Seller's Gas from commitment under
this Agreement unless Buyer agrees to be responsible for and bear such
Imbalance Penalties for such Seller's Well.
2.8 OPERATIONAL RESERVATIONS. Seller hereby reserves and
excepts the following rights and quantities of Seller's Gas from the
provisions of this Agreement:
(i) The right to use Seller's Gas produced from any lease or
field for Seller's requirements in the development and operation
of such leases and fields including, but not limited to, use of
Seller's Gas for drilling, enhanced recovery
-8-
operations, workover operations, treating, gas lifting oil wells
for repressuring, recycling, or pressure maintenance purposes,
and compressor fuel, and to otherwise operate such leases and
fields free from any control by Buyer. Subject to Section 2.9,
Seller will not, however, use any Seller's Gas for enhanced oil
recovery operations in California other than Seller's Gas that is
produced in California.
(ii) Seller's Gas which is delivered to others under Seller's
leases, Seller's agreements for easements, unit agreements, unit
operating agreements, operating agreements, or other similar
agreements affecting Seller's Wells.
(iii) All liquids, liquid hydrocarbons, oil, and condensate
removed from Seller's Gas prior to the Delivery Points.
(iv) The right to pool or unitize Seller's leases with other
leases of Seller or others located in the field in which Seller's
Wells are located.
(v) The right to operate Seller's leases and Seller's Wells in
such manner as Seller, in Seller's discretion, deems advisable,
including the right to drill new wells, to rework Seller's Wells,
to renew in whole or in part any leases, and to abandon any
Seller's Well or surrender, release, or terminate any lease, in
Seller's discretion.
(vi) Seller's Gas delivered to others under gas balancing
agreements or similar arrangements affecting any of Seller's
Wells.
2.9 EOR OPERATIONS. At any time after twenty-four (24) Months
after the Effective Date and upon forty-five (45) Days' prior written
notice from Seller, Buyer shall release from commitment under this
Agreement up to 30,000 MMBtu's per Day of Seller's Gas for use by
Seller in Seller's enhanced oil recovery operations in California or
in exchange for other gas to be used in such operations ("EOR Gas").
Buyer shall, at the request of Seller, arrange for the transportation
of EOR Gas from the Delivery Points to Seller's enhanced oil recovery
operations in California using
-9-
either Seller's transportation rights or Buyer's transportation
rights, as directed by Seller. Seller shall be responsible for
transportation charges to transport EOR Gas to its enhanced oil
recovery operations in California. In consideration of Buyer
releasing and arranging such transportation for EOR Gas, Seller shall
pay Buyer each Month a handling fee of five cents (5 cents) for each MMBtu
released under this Section 2.9. EOR Gas shall become recommitted to
this Agreement on the first day of the Month following the date Seller
permanently ceases to use EOR Gas in its California enhanced oil
recovery operations. Seller shall give Buyer at least fifteen (15)
Days' notice prior to the first day of the Month in which EOR Gas will
become recommitted to this Agreement.
2.10 ACQUISITION PROPERTIES. Buyer recognizes that all gas
produced from wells or properties acquired by Seller after the
Effective Date in connection with or as part of the acquisition or
purchase of producing oil and gas properties shall not be subject to
or committed to this Agreement.
2.11 PREEXISTING CONTRACTS. Upon the expiration of or
termination of any Preexisting Contract, any Seller's Gas subject to
or covered by such Preexisting Contract shall become committed to this
Agreement without further action of the Parties. Buyer shall notify
Seller in writing no less than thirty (30) Days before the date each
Preexisting Contract expires or terminates based on the information in
Exhibit C. If Buyer timely gives Seller such notice, Seller will
exercise its rights to terminate each Preexisting Contract at the end
of its primary term unless the failure to extend the term of any such
Preexisting Contract would cause Seller to pay penalties or to
otherwise incur any costs or expenses for failing to extend the term
of such Preexisting Contract. Seller shall not, however, have any
obligation to Buyer, and this provision does not create any obligation
upon Seller, to cause the early termination or expiration of any
Preexisting Contract.
-10-
2.12 POWER TEX CONTRACT. Buyer shall, for a period ending not
later than twenty-four (24) Months after the Effective Date and upon
not less than ten (10) days' prior written notice by Seller, release
from commitment under this Agreement up to 4,500 MMBtu's per Day of
Seller's Gas to allow Seller to supply gas under that certain Gas
Sales Agreement between Adobe Gas Marketing Co. and the City of
Lubbock, dated May 9, 1991 (the "Power Tex Contract"). Any such
released Seller's Gas shall become recommitted to this Agreement at
the beginning of the first Month following the end such twenty-four
(24) Month period.
ARTICLE 3
QUANTITY
3.1 PURCHASE AND SALE OBLIGATION. Commencing on the Effective
Date and continuing through the term hereof, Seller agrees, subject to
the other provisions hereof, to sell and deliver, or cause to be
delivered and sold, to Buyer at the Delivery Points the quantity of
Seller's Gas nominated each Month by Seller under Article 4. Seller
shall use its reasonable efforts to deliver the gas at uniform hourly
and daily rates of flow. Buyer agrees to take and purchase all of
Seller's Gas delivered each Month at the Delivery Points.
3.2 FAILURE TO DELIVER OR TAKE. If for any reason other than
Force Majeure either Party fails in any Month to perform its
obligation to deliver or take Seller's Gas under this Agreement, the
other Party shall use its reasonable efforts to mitigate the effect of
such failure to perform, which includes attempting to secure an
alternate interruptible supply or interruptible market, as the case
may be, at reasonable prices.
3.3 PARTIAL MONTHLY PRODUCTION. If Seller delivers to any
Delivery Point after the first day of any Month any quantity of
Seller's Gas that was not previously delivered at any time in such
Month due to Force Majeure affecting Seller or that is
-11-
attributable to the recompletion of an Existing Well or the completion
or recompletion of any Development Well or Exploration Well, Buyer
shall have the obligation to take and purchase such Seller's Gas
during such Month, but only to the extent Buyer is able to arrange
transportation for such Seller's Gas in such Month. If Buyer is
unable to arrange transportation for such Seller's Gas in such Month,
Seller may sell such Seller's Gas to any third parties during such
Month.
ARTICLE 4
SCHEDULING AND TRANSPORTATION OF DAILY VOLUMES
4.1 GAS SCHEDULING. At least three (3) Days prior to Buyer's
Transporter's nomination deadline for the first Day of the following
Month, Seller shall provide Buyer a written report by telecopy showing
Seller's Estimate for each Delivery Point for the following Month.
Seller shall use its reasonable efforts to provide along with Seller's
Estimate for each Month a description of any planned or foreseeable
events which will materially affect deliveries during the following
Month, including workovers and new Seller's Wells beginning
production. If the quantity of Seller's Gas delivered to one or more
Delivery Points differs from Seller's Estimate by more than the
transporter's tolerance level for such Delivery Points for any Day or
Days, Seller shall so notify Buyer immediately after becoming aware of
such change by telephone, and shall provide Buyer with a revised
written Seller's Estimate for such Delivery Points for the remainder
of the Month by telecopy as soon as reasonably practicable. As of the
Effective Date, Buyer shall notify Seller in writing of the Daily and
Monthly tolerance levels for Imbalance Penalties for each transporter
for each Delivery Point. Such tolerance levels shall remain in effect
until Seller is otherwise notified by Buyer.
-12-
4.2 TRANSPORTATION CAPACITY. Buyer shall arrange for and
maintain all necessary transportation downstream of the Delivery
Points to ensure that Seller's Gas flows without interruption, except
in the case of Force Majeure.
4.3 TRANSPORTATION IMBALANCES.
(a) AVOIDANCE. Buyer and Seller shall use all reasonable
efforts to avoid the imposition of Daily or Monthly Imbalance
Penalties by any transporter and each Party agrees to cooperate
with the other Party to resolve and eliminate, to the extent
reasonably practicable, any Imbalance Penalties.
(b) RESPONSIBILITY. If any Imbalance Penalties are incurred
or payable to a transporter with respect to Seller's Gas
delivered to any Delivery Point as a result of Seller's actions,
including Seller's failure to give Buyer timely notice of any
increase or decrease in Daily quantities to be delivered at such
Delivery Point from Seller's Estimate for such Delivery Point,
Seller shall be responsible for such Imbalance Penalties. If any
Imbalance Penalties are incurred or payable to a transporter with
respect to Seller's Gas delivered to any Delivery Point as a
result of Buyer's actions, including Buyer's failure to give
timely notice to such transporter of any change in Seller's
Estimate for such Delivery Point after receiving timely notice
from Seller of such change, Buyer shall be responsible for such
Imbalance Penalties.
(c) TIMELY NOTICE. For the purpose of this Section 4.3,
Seller's notice will be deemed timely if, under the
circumstances, it gives Buyer reasonably sufficient time to
notify the transporter of such changes to Seller's Estimate by
the time required under the terms of such transporter's Tariff to
avoid the imposition of such Imbalance Penalties.
(d) SELLER'S CREDIT. In determining the amount of any
Imbalance Penalties due by Seller hereunder in any Month, Buyer
shall aggregate the Cashout Costs for which Seller is responsible
and which were incurred by Buyer
-13-
for all transporters for such Month. Buyer shall, for each such
Month, credit all such Cashout Costs that resulted in Buyer
selling gas at a price higher than the applicable Index Price or
that resulted in Buyer buying gas at a price lower than the
applicable Index Price ("Buyer's Monthly Gain") against all such
Cashout Costs that resulted in Buyer buying gas at a price higher
than the applicable Index Price or that resulted in Buyer selling
gas at a price lower than the applicable Index Price ("Buyer's
Monthly Loss") to arrive at an aggregate net Imbalance Penalty
for such Month. If, for any Month, Buyer's Monthly Gain for such
Month exceeds Buyer's Monthly Loss for such Month, Buyer shall
have no obligation to refund the difference to Seller.
(e) BUYER'S CREDIT. In determining the amount of any
Imbalance Penalties due by Buyer hereunder, Seller shall
aggregate all Cashout Costs for which Buyer is responsible and
which were incurred by Seller in any Month under operational
balancing agreements, operating agreements, or other agreements
covering any Seller's Well. Seller shall, for each such Month,
credit all such Cashout Costs that resulted in Seller selling gas
at a price higher than the applicable Index Price ("Seller's
Monthly Gain") against all such Cashout Costs that resulted in
Seller selling gas at a price lower than the applicable Index Price
or that resulted from Seller buying gas ("Seller's Monthly Loss")
to arrive at an aggregate net Imbalance Penalty for such Month.
If, for any Month, Seller's Monthly Gain exceeds Seller's Monthly
Loss, Seller shall have no obligation to refund the difference to
Buyer.
(f) LLANO SYSTEM. Seller shall not be responsible for any
Imbalance Penalties for Seller's Gas gathered on the Llano
System.
(g) NO LIMIT. The provisions of this Section 4.3 do not in
any way waive, limit, or alter either Party's obligation under
Section 3.1.
-14-
4.4 ASSIGNMENT OF GATHERING CONTRACTS. As of the Effective Date,
Seller shall assign to Buyer, to the extent Seller has the contractual
right to do so, any agreements entered into prior to the Effective
Date with third parties for the gathering of Seller's Gas. If Seller
is required to obtain the consent or approval of any third party to
assign any or all of such agreements to Buyer, Seller shall use its
reasonable efforts to obtain any and all third-party consents and
approvals as quickly as reasonably practicable. If Seller does not
have the legal right to assign any such agreement, then Seller shall
authorize Buyer to act as Seller's agent under such agreements. Buyer
shall administer all such agreements so that they remain valid and
enforceable in accordance with their terms. Buyer shall obtain the
consent of Seller prior to releasing, amending, or otherwise modifying
such agreements. Upon termination or expiration of this Agreement,
Buyer shall reassign to Seller or its designee all such agreements
that remain in effect.
4.5 DELIVERY POINTS. As of the Effective Date, Buyer and Seller
have agreed that Seller's Gas will be delivered and accepted at the
Delivery Points described in Exhibit A. The parties shall mutually
agree to the Delivery Point for each Development Well or Exploration
Well which subsequently produces Seller's Gas subject to this
Agreement and the Parties may at any time otherwise agree to change,
add to, or delete from the Delivery Points shown in Exhibit A. Any
supplement or amendment to Exhibit A shall be in writing and executed
by both Parties.
4.6 DELIVERY DIFFERENCES. If at the end of the first six (6)
Months of this Agreement, the aggregate quantity of Seller's Gas
delivered by Buyer for each Month to any interstate pipeline has been
materially different from Seller's Estimate for such Seller's Gas made
by Seller three (3) Days prior to the nomination deadline of the
applicable Buyer's Transporter for each such Month, except as allowed
under the provisions of this Agreement, Seller shall, upon Buyer's
written request, use all reasonable efforts to promptly correct such
differences in the following two (2)
-15-
Months. If Seller fails to correct such differences in the following
two (2) Months, Buyer may request the renegotiation of Buyer's payment
hereunder of the Index Price for such differences and allocation among
the Parties of any benefits or costs to Buyer arising out of such
differences for the remaining term of this Agreement. If Buyer and
Seller are unable to mutually agree on the price to be paid for such
differences and such allocation, such matter may be submitted by
either Party to Arbitration as a Dispute under Article 9.
ARTICLE 5
BUYER'S SERVICES
5.1 CONNECTION OF GATHERING SYSTEMS - EXPLORATION WELLS. Within
thirty (30) Days of the drilling and completion of any well producing
commercial quantities of gas on the Exploration Lands, Seller shall
notify Buyer of the completion of such well and provide Buyer with all
available well test data including, without limitation, all well logs,
drill stem tests, well potential tests, and Seller's estimate of well
deliverability and ultimate recoverable reserves. Within twenty (20)
Days after receipt of Seller's notice, Buyer shall submit to Seller,
in writing, for Seller's review, Buyer's recommendation of the most
economical and efficient method of gathering and transporting the gas
produced from such well, whether by Buyer, Seller, or third parties
("Buyer's Gathering Proposal"). Seller may, in its discretion, either
accept or reject Buyer's Gathering Proposal by giving written notice
to Buyer. If Seller accepts Buyer's Gathering Proposal, Buyer shall
promptly commence and diligently complete the work necessary to
implement Buyer's Gathering Proposal, and, upon completion of such
gathering system, Seller will sell the gas produced from such well to
either Buyer or a third party, as provided in Buyer's Gathering
Proposal. If the gas produced from such well is sold to Buyer under
this Agreement, such well shall become committed to this Agreement as
an Exploration Well. If Seller rejects
-16-
Buyer's Gathering Proposal, Seller may contract with any third parties
to gather and purchase the gas produced from such well without any
obligation to Buyer under this Agreement.
5.2 DEVELOPMENT WELLS. Upon completion of each Development Well,
Buyer shall, if requested by Seller, recommend the most economical
method of gathering the gas produced from such Development Well.
5.3 MARKETING UPDATES. Buyer shall, upon request, provide Seller
written updates and verbal briefings on gas market trends including,
but not limited to, the development of new natural gas markets or
expansion of existing markets, changes in the relative wellhead values
of gas in different regions of the country due to the construction of
new pipelines or other developments, and supply and demand forecasts.
In addition, Buyer shall periodically provide written updates on
regulatory trends and developments in both the domestic and
international gas market that could impact Seller.
5.4 SUPPLY OF GAS UNDER POWER TEX CONTRACT. Upon request by
Seller, during the first twenty-four (24) Months of this Agreement,
Buyer will, as agent for Seller, purchase and deliver the gas required
to be delivered under the Power Tex Contract upon terms mutually
acceptable to Buyer and Seller.
ARTICLE 6
QUALITY AND MEASUREMENT
6.1 BUYER'S TRANSPORTER. The rules, guidelines, and policies of
Buyer's Transporter, as may be changed from time to time, shall govern
the units of measurement, measurement specifications, quality, heating
value, and testing specifications of Seller's Gas delivered to each
Delivery Point.
6.2 QUALITY. Seller's Gas shall meet the quality specifications
of Buyer's Transporter at each Delivery Point. If all or any portion
of the Seller's Gas does not
-17-
meet the quality specifications of Buyer's Transporter, Buyer at its
option may at any time refuse to accept any or all such Seller's Gas
("Subquality Gas"). Acceptance of any or all Subquality Gas that
fails to conform to the quality specifications of this Agreement shall
not be deemed a waiver of Seller's obligations hereunder with respect
to such Subquality Gas or with respect to any future deliveries of
Subquality Gas. All Subquality Gas which Buyer fails to take under
this Section 6.2 may be sold to any third parties free from any
obligation under this Agreement during the period Buyer refuses to
accept such Subquality Gas. SELLER MAKES NO OTHER WARRANTIES,
EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ABOUT SELLER'S
GAS.
ARTICLE 7
OWNERSHIP AND CONTROL
7.1 DELIVERY. Gas sold and delivered hereunder shall be
delivered by Seller to Buyer at the Delivery Points. Title and risk
of loss to all Seller's Gas shall pass from Seller to Buyer at the
Delivery Points. If Seller elects under Section 2.5 to process any
quantities of Seller's Gas after the Delivery Points, the risk of loss
for such Seller's Gas shall pass from Buyer to Seller where such
Seller's Gas enters the facilities of the party processing such
Seller's Gas. The risk of loss to the residue gas resulting from
processing such Seller's Gas shall pass to Buyer where it enters the
facilities of Buyer's transporter at or near the tailgate of such
processing facilities.
7.2 CONTROL. As between the Parties hereto, Seller shall be
deemed to be in control and possession of Seller's Gas and shall be
fully responsible for and shall defend and indemnify Buyer, its
successors and assigns, against any damages or injury resulting from
the operation of facilities used to deliver gas at the Delivery
Points, or the possession and handling of such Seller's Gas, until
delivered to Buyer or
-18-
Buyer's Transporter at the Delivery Points and during the period such
Seller's Gas, if processed, is in the facilities of the processor.
Except as provided in the preceding sentence, Buyer shall be deemed to
be in control of Seller's Gas and shall be responsible for and shall
defend and indemnify Seller, its successors and assigns, against any
and all damages or injury resulting from the transportation, handling,
or use of Seller's Gas after it is delivered to Buyer, or Buyer's
Transporter, at the Delivery Points.
ARTICLE 8
PRICE
8.1 MONTHLY GAS PRICES. Except as otherwise provided in this
Article 8, for all Seller's Gas delivered to each Delivery Point each
Month, Buyer shall pay Seller a gas price per MMBtu equal to the Index
Price for each such Delivery Point for such Month less Transportation
Expenses, if any, for such Seller's Gas for such Month.
8.2 PRICING COMBINATION. Buyer shall, for each Month, use its
best efforts to obtain for Seller at each Delivery Point the Index
Price, Pricing Point, and Transportation Expenses for Seller's Gas
delivered to each such Delivery Point in such Month that result in the
highest net back price to Seller under Section 8.1 for such Delivery
Point, giving consideration to and consistent with Buyer's obligation
under Section 3.1 to purchase and take all of Seller's Gas delivered
to each such Delivery Point in such Month.
8.3 DELIVERY. Subject to the other provisions of this Agreement,
Seller shall be responsible for, and shall pay all costs and expenses
of, all arrangements necessary to deliver Seller's Gas to the Delivery
Points and Buyer shall be responsible for, and shall pay all costs and
expenses of, all arrangements necessary to receive Seller's Gas
delivered hereunder at the Delivery Points.
-19-
8.4 PARTIAL MONTHLY PRODUCTION. For all Seller's Gas taken by
Buyer at any Delivery Point under Section 3.3 and for all Seller's Gas
returned to production in the middle of a Month under Section 2.4
after being shut-in or curtailed due to inadequate price, the average
of the high and low prices per MMBtu published in the table "Daily
Price Survey" in GAS DAILY for the first Day of deliveries for the
region of production for such Delivery Point shall be substituted for
the Index Price in determining the price to be paid by Buyer to Seller
for such Seller's Gas under Section 8.1.
8.5 LLANO SYSTEM TRANSPORTATION RATE. The Transportation
Expenses for Seller's Gas gathered on the Llano System shall never
exceed in any Month the lowest transportation rate charged by Buyer to
other shippers on the Llano System in the prior six (6)-Month period,
except for any such rate which may be agreed to by Llano Inc., in its
discretion, as part of the settlement of any claim made against Llano
Inc. or its affiliates.
8.6 TRANSPORTATION EXPENSES. Buyer shall, for each Delivery
Point, use its best efforts each Month to obtain for Seller the lowest
reasonably available transportation rates on Buyer's Transporter for
Seller's Gas, consistent with reliability and giving consideration to
Buyer's obligation to purchase and take all of Seller's Gas at such
Delivery Point and to Seller's right to shut-in or curtail production
of Seller's Gas hereunder.
8.7 PUBLICATION OF INDEX PRICE. If INSIDE FERC or any
replacement publication or other information source then in effect to
determine the Index Price ceases to be available, substantially alters
the method by which the referenced prices are calculated, or otherwise
substantially alters the referenced prices, the Parties shall mutually
agree in writing on a replacement publication or information source.
If the Parties are unable to mutually agree on a replacement
publication or information source, the matter may be submitted by
either Party to Arbitration under Article 9.
-20-
ARTICLE 9
ARBITRATION
9.1 RESOLUTION OF DISPUTES. Except as provided in the following
sentence, any action, dispute, claim, or controversy arising between
the Parties under this Agreement (each a "Dispute") shall be resolved
by arbitration ("Arbitration") in accordance with the procedures set
forth below. Any dispute, claim, or controversy arising under Article
12 shall not be a subject to arbitration under this Article 9. If a
Dispute is not resolved by the Parties after negotiation among
themselves, either Party may invoke Arbitration by providing written
notice to the other Party of its intent to submit the Dispute to
Arbitration hereunder. Either Party may bring an action to compel the
Arbitration of any Dispute.
9.2 SELECTION OF THE ARBITRATOR. Not later than ten (10) Working
Days following the receipt of notice from either Party notifying the
other Party of its intent to submit a Dispute to Arbitration, Buyer
and Seller shall mutually select and appoint an arbitrator (the
"Arbitrator") to resolve the Dispute. If at the end of such ten (10)
Working-Day period the Arbitrator has not been selected and appointed,
then each Party shall, within five (5) Working Days, thereafter,
select an arbitrator. The two arbitrators shall then jointly select a
third arbitrator (each an "Arbitrator") within ten (10) Working Days
after the appointment of the second Arbitrator. Any Arbitrator acting
hereunder shall be a qualified neutral third party not having any
prior, current, or known or anticipated future affiliation or
association with Seller or Buyer. If the Dispute involves a pricing
matter hereunder, each Arbitrator shall have a minimum of ten (10)
years' (immediately prior to the appointment) general experience in
the purchase and sale of natural gas.
9.3 ARBITRATION. Upon selection and appointment of the
Arbitrators, each Party shall deliver to the other Party and to the
Arbitrators, within ten (10) Working
-21-
Days of the appointment of the Arbitrators, a written proposal stating
its proposed outcome together with supporting materials and
documentation. Each Party may submit its written counterproposal
together with supporting materials and documentation, within ten (10)
Working Days of receipt of the written proposal from the other Party,
to both that Party and the Arbitrators. The Arbitrators may request
additional information or documentation from either Party, which
information or documentation shall be timely provided. No later than
twenty (20) Working Days after the counterproposals are submitted, the
Arbitrators shall select and adopt either the outcome desired by
Seller or the outcome desired by Buyer, without modification or
compromise. All Arbitrations shall take place in Houston, Harris
County, Texas.
9.4 PRICING INSTRUCTIONS. If the Dispute involves the
determination of the Index Price, the Arbitrators shall be given the
following instructions, unless the Parties agree in writing upon other
instructions:
(i) In determining the Index Price, the Arbitrators will
recognize that the Parties selected INSIDE FERC as representative
of the fair market value of Seller's Gas at each Pricing Point on
the Effective Date;
(ii) The Index Price shall be reported on a Monthly basis
from a publication or other information source publicly
available; and
(iii) The Arbitrators shall determine the Index Price by
selecting either the Index Price proposed by Seller or the Index
Price proposed by Buyer, without modification or compromise.
9.5 PRICE PAYABLE DURING ARBITRATION. If the Dispute relates to
the publication or other information source then being used to
determine the Index Price, the price paid during the Arbitration shall
be determined from such publication or information source or, if such
publication or information source is no longer available, the price
shall be determined from the last such publication or information
source that was
-22-
available. Upon the conclusion of the Arbitration, the price paid by
Buyer to Seller for such Seller's Gas shall be adjusted retroactively
to the date the Arbitration was invoked. The Party owing the other
Party as a result of such retroactive adjustment shall pay to such
other Party the amounts due under the redetermined Index Price within
ten (10) Working Days following the Arbitrator's decision.
9.6 FINALITY OF AWARD AND COSTS OF ARBITRATION. The
determination of the Arbitrators shall be final and binding on the
Parties, except in the event of manifest material error or misconduct
by the Arbitrators. Each Party shall bear its own costs and expenses
and share equally the costs and expenses of the Arbitrators and the
arbitration.
9.7 SUPPLEMENTAL ARBITRATION RULES. Each Arbitration shall be
administered in accordance with the terms of this Article 9 and the
Commercial Arbitration Rules of the American Arbitration Association.
Judgment on any award rendered by the Arbitrators may be entered in
any court having jurisdiction.
ARTICLE 10
TAXES
The price to be paid by Buyer to Seller for Seller's Gas
purchased and sold hereunder is inclusive of all production,
severance, ad valorem, and/or similar taxes levied on the production
of Seller's Gas prior to the Delivery Points, and all such taxes shall
be borne and paid by Seller. If state law requires Buyer to remit
such taxes to the collecting authority, then Buyer shall do so and
deduct the taxes so paid on Seller's behalf from payments otherwise
due to Seller hereunder. Buyer shall pay and be responsible for all
federal, Indian, state or local sales, use, consumption, and/or
similar taxes which may now or hereafter be imposed on the transfer of
title or possession of Seller's Gas.
-23-
ARTICLE 11
PAYMENT
11.1 MONTHLY PAYMENT. Not later than the fifteenth (15th) day
of each Month, Seller shall provide Buyer with a statement setting
forth the volumes of gas delivered at the Delivery Points in the prior
Month along with an invoice for payment based thereon. If actual
volumes at the Delivery Points are not available by the fifteenth
(15th) day of the Month, Seller may furnish statements and invoices
based on Seller's Estimate. By no later than the last Working Day of
the Month following the production Month, Buyer shall make payment of
the amount set forth in Seller's statement by wire transfer into
Seller's account in accordance with Seller's instructions. Buyer
shall submit to Seller with each Monthly payment a schedule showing,
for each Delivery Point for such Month, the quantity of Seller's Gas
delivered to such Delivery Point, the Pricing Point, the Index Price,
and any Transportation Expenses and Imbalance Penalties attributable
to Seller's Gas from such Delivery Point. If requested by Seller,
payment to Seller hereunder shall be made through a bank or escrow
account established, funded, and maintained in a manner acceptable to
Seller in all respects.
11.2 PAYMENT DEFAULT. If Buyer fails to pay Seller for
Seller's Gas for any Month within three (3) Working Days of the date
required under Section 11.1, Seller may, at its option, either,
singularly or in combination, (i) immediately terminate this
Agreement, or (ii) suspend performance under this Agreement until all
indebtedness under this Agreement is paid in full.
11.3 ERRORS. If an error is discovered in any invoice
rendered hereunder (including reconciliations for actual deliveries of
any payments made by Buyer based on Seller's Estimate), such error
shall be adjusted within thirty (30) Days after notice of the
discovery of the error. If a dispute arises as to the amount payable
pursuant to any invoice rendered hereunder, Buyer shall nevertheless
pay when due the amount
-24-
not in dispute under such invoice. Such payment shall not be deemed
to be a waiver of the right by Buyer to recoup any overpayment, nor
shall acceptance of any payment be deemed to be a waiver by Seller of
any underpayment.
11.4 OVERDUE PAYMENTS. If Buyer fails to pay the entire
amount due to Seller when same is due, interest on any unpaid portion
shall accrue at a rate equal to the lesser of (i) three percent (3%)
above the rate of interest then most recently announced by Texas
Commerce Bank, National Association as its "prime rate" and (ii) the
maximum non-usurious rate of interest allowed by applicable law.
11.5 AUDITING. Each Party shall keep and maintain true and
correct books, records, files, and accounts of all information
reasonably related to the transactions contemplated by this Agreement
(the "Records"), including all measurement records, all information
used to determine prices and calculate invoices, and all invoices,
statements, and payment records. All such Records shall be maintained
for at least forty-eight (48) Months after the Month to which they
pertain. Either Party may, at its own expense, audit, and copy the
other Party's Records at any time during normal business hours upon at
least fifteen (15) Days' written notice. No adjustment to any payment
made by Buyer to Seller for Seller's Gas sold hereunder shall be made
after the lapse of eighteen (18) Months from the date of any such
payment, except for any adjustments to such payments due to volume
adjustments of Seller's Gas delivered at the Delivery Points.
ARTICLE 12
TERM
12.1 TERM. Unless sooner terminated as provided herein, this
Agreement shall be effective on the Effective Date and shall continue
in full force and effect thereafter until March 31, 2001.
-25-
12.2. EARLY TERMINATION. Seller may terminate this Agreement,
and immediately cease delivering and selling all Seller's Gas to Buyer
under this Agreement, upon the occurrence of any of the following
events:
(i) the occurrence of an event which allows Seller to
terminate this Agreement under Section 11.2;
(ii) the occurrence of an event of default under any debt
or credit agreement of Buyer for borrowed money (each a "Credit
Agreement") that results in an obligation in excess of
$10,000,000.00 becoming due before its stated maturity;
(iii) Buyer makes an assignment or any general arrangement
for the benefit of creditors, files a petition or otherwise
commences, authorizes, or acquiesces in the commencement of a
proceeding under any bankruptcy or similar law for the protection
of creditors, or otherwise becomes insolvent or bankrupt; or
(iv) Buyer fails to purchase at least (a) eighty percent
(80%) of Seller's Gas made available at all Delivery Points in
two (2) or more Months during any Contract Year or (b) ninety
percent (90%) of Seller's Gas made available at all Delivery
Points in any consecutive six (6)-Month period, other than as a
result of Force Majeure.
12.3 RIGHTS OF EITHER PARTY TO TERMINATE. Either Party may
terminate this Agreement by giving written notice (for the notice
period specified) to the other Party upon the occurrence of any of the
following events:
(i) the taking by any governmental authority of the
action described in Article 15, but only after giving the notice
required by Article 15; or
(ii) a material breach of this Agreement by the other
Party which such defaulting Party fails to cure within thirty
(30) days after receiving written notice of the breach from the
nondefaulting Party.
-26-
12.4 FINANCIAL REVIEW. Buyer shall provide to Seller (i) by
the thirtieth (30th) day of each Month, internally prepared monthly
unaudited financial statements of Buyer for the prior Month, (ii) by
the forty-fifth (45th) day following the end of each calendar quarter,
unaudited quarterly financial statements of Buyer, and (iii) by March
31 of each year, annually audited financial statements of Buyer
accompanied by an opinion of independent auditors for the prior year.
12.5 BUYER'S FINANCIAL ASSURANCES.
(a) REQUEST OF FINANCIAL ASSURANCES. Anything to the
contrary herein notwithstanding, if at any time the financial
condition of Buyer materially and adversely changes from its
financial condition on the Effective Date, Seller may request in
writing that Buyer deliver and maintain for Seller's benefit
financial assurances acceptable to Seller in amount, form,
issuer, term, and all other respects, in Seller's sole discretion
(the "Financial Assurances").
(b) TEMPORARY RELEASE. Buyer shall provide the Financial
Assurances to Seller within five (5) Working Days after the date
of Seller's notice. If Buyer fails to provide Financial
Assurances covering the value of all of Seller's Gas within such
five (5) Working-Day period, Seller shall not be obligated to
sell to Buyer under this Agreement any Seller's Gas that is not
covered by such Financial Assurances, as determined by Seller,
and Seller may sell such Seller's Gas to third parties.
(c) PERMANENT RELEASE. Buyer shall have thirty (30) Working
Days to obtain Financial Assurances covering the value of
Seller's Gas released under Section 12.5(b) above. To the extent
Buyer fails to provide Financial Assurances covering such
released Seller's Gas within thirty (30) Working Days after the
date of Seller's notice under Section 12.5(a), such Seller's Gas
shall be permanently released from this Agreement.
-27-
(d) SUBSEQUENT RELEASE. If any Seller's Gas for which Buyer
has provided Financial Assurances as set forth above is at any
time thereafter not covered by Financial Assurances, such
Seller's Gas shall be permanently released from this Agreement on
the date Buyer ceases to provide such Financial Assurances. If
all of Seller's Gas is permanently released from this Agreement,
this Agreement shall terminate.
(e) RELEASE OF FINANCIAL ASSURANCES. Buyer's obligation to
provide and maintain Financial Assurances covering Seller's Gas
under all provisions of this Section 12.5 shall cease at the time
when the financial condition of Buyer is no longer materially and
adversely different than its financial condition on the Effective
Date.
12.6 NOTICE. Buyer shall notify Seller immediately upon
receipt by Buyer of any notice of default under any Credit Agreement.
ARTICLE 13
SELLER'S WARRANTY
Seller warrants title to, or the right to sell, all Seller's
Gas delivered under this Agreement. Seller also warrants that all
Seller's Gas shall be free and clear from liens, encumbrances, and
adverse claims including, but not limited to, liens to secure payment
of production taxes, severance taxes, and ad valorem taxes. If
Seller's title is questioned or becomes the subject of litigation,
Seller shall indemnify and save Buyer harmless from and against all
suits, actions, damages, costs and expenses relating thereto.
-28-
ARTICLE 14
FORCE MAJEURE
14.1 NONPERFORMANCE. Except with regard to a Party's
obligation to make payments due under this Agreement, if either Party
fails to observe or perform any of the covenants or obligations herein
imposed upon it and such failure shall have been occasioned by, in
connection with, or in consequence of Force Majeure, as hereinafter
defined, such failure shall not be deemed to be a breach of such
covenants or obligations of such Party.
14.2 DEFINITION. The term "Force Majeure" shall mean acts of
God, strikes, lockouts, industrial disputes or disturbances, civil
disturbances, interruptions by government or court orders, present or
future orders of any regulatory body having jurisdiction, acts of the
public enemy, wars, riots, inability to secure materials or labor,
inability to secure rights-of-way, epidemics, landslides, lightning,
earthquakes, fires, hurricanes, tropical storms, storms, floods,
explosions, breakage or accident to machinery, pipelines or equipment,
freezing of Seller's Wells or pipelines, well blowouts, craterings,
partial or entire failure of gas wells, or any other situation,
occurrence, or condition not reasonably within the control of the
Party claiming suspension and which, by the exercise of due diligence,
such Party is unable to overcome.
14.3 EXCLUSIONS. The term "Force Majeure" does not include
(i) loss of Buyer's markets, or (ii) the loss, interruption, or
curtailment of gathering or transportation capacity on any gathering
or pipeline system for purposes of gathering or transporting all or
any part of Seller's Gas from and after the Delivery Points, unless
such loss, interruption, or curtailment is due to Force Majeure
invoked by the operator of such gathering or pipeline system.
14.4 STRIKES. The settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty and
the above requirement of the use of
-29-
diligence in restoring normal operating conditions shall not require
the settlement of strikes or lockouts by acceding to the terms of the
opposing party when such course is inadvisable in the discretion of
the Party having the difficulty.
14.5 FORCE MAJEURE NOTICE. The Party affected by Force
Majeure shall give written notice to the other Party of the Force
Majeure and the expected duration as soon as reasonably practicable
after the occurrence of the Force Majeure.
14.6 MARKETING OF FORCE MAJEURE GAS. If Buyer is unable to
take Seller's Gas from any Delivery Points due to the occurrence of
Force Majeure, Seller may market and sell such Seller's Gas from the
affected Delivery Point to any third parties free from this Agreement
and without any obligation to Buyer during the continuance of the
Force Majeure.
ARTICLE 15
CHOICE OF LAW AND GOVERNMENT REGULATIONS
15.1 CHOICE OF LAW. The transactions contemplated hereunder
bear a reasonable relationship to, and shall be governed by and
construed in accordance with, the laws of the State of Texas,
excluding any law thereof which would direct the application of the
law of any other jurisdiction.
15.2 REGULATIONS. This Agreement is subject to all present
and future valid orders, rules, and regulations of any regulatory body
or other authority of a state or the federal government having
jurisdiction. Either Party shall have the right to contest before
such regulatory body or authority, or in court, the validity of any
such law, order, rule, or regulation. If any governmental authority
reimposes price controls on Seller's Gas, or adopts any action, rule,
or order which materially and adversely affects the rights or ability
to perform of either Party, then the affected Party may terminate this
Agreement by giving sixty (60) Days' written notice to the other
Party.
-30-
ARTICLE 16
ASSIGNMENT
16.1 NO ASSIGNMENT. Except as permitted below, this Agreement
may not be assigned in whole or in part by either Party without the
prior written consent of the other Party.
16.2 MERGER. The Parties recognize that Adobe Gas Pipeline
Company will be merged into Hadson Corporation on the Effective Date,
and, upon consummation of such merger, Hadson Corporation will be the
"Buyer" under this Agreement.
16.3 SALE OF SELLER'S GAS. Except as provided in Section 2.6,
all of Seller's Gas shall remain dedicated to this Agreement
notwithstanding any assignment or sale of any Seller's Wells producing
Seller's Gas by Seller. Seller may, however, assign this Agreement to
the extent this Agreement covers such Seller's Wells to any party
purchasing such Seller's Wells without the consent of Buyer. Upon
such assignment by Seller, Seller shall be fully released from any
obligation to Buyer hereunder for the performance by Seller's assignee
of this Agreement for such Seller's Wells.
ARTICLE 17
MISCELLANEOUS
17.1 NOTICES. Any formal notice or other communication
required or permitted to be given pursuant to this Agreement shall be
in writing and shall be deemed properly given when hand delivered,
telegraphed by prepaid telegram, transmitted by telecopy or mailed
from within the United States by certified mail, return receipt
requested, postage pre-paid, to the following addresses or such other
address as a Party may designate in writing from time to time:
-31-
Buyer: Notices and Correspondence
Hadson Gas Systems, Inc.
600 East John W. Carpenter Freeway
Suite 201
Irving, Texas 75062-3977
Attention: Contract Administration
Telephone: (214) 717-1499
Telecopy: (214) 717-0171
Seller: Notices and Correspondence:
Santa Fe Energy Resources, Inc.
1616 South Voss Road, Suite 1000
Houston, Texas 77057-2696
Attention: Vice President, Marketing
Telephone: (713) 783-2401
Telecopy: (713) 268-5716
Payments shall be made to:
Santa Fe Energy Resources, Inc.
1616 South Voss Road, Suite 1000
Houston, Texas 77057-2696
Attention: Treasurer
17.2 INTEGRATED AGREEMENT. This Agreement, together with the
exhibits and other material incorporated herein by reference,
constitute the entire agreement of the Parties.
17.3 NO WAIVER. Waiver by either Party hereto of any one or
more defaults by the other in the performance of any provisions of
this Agreement shall not operate nor be construed as a waiver of any
other default or defaults, or the same default on a subsequent
occasion.
17.4 HEADINGS. The numbering and titling of particular
provisions of this Agreement are for the purpose of facilitating
administration and are not to be taken
-32-
into account or considered in construing the terms and provisions
hereof, or to be deemed to qualify, modify, explain, or have any
substantive effect on such provisions.
17.5 ACCESS. To the extent Seller has the legal right to do
so, Seller grants to Buyer the right of ingress and egress to
Development Wells and Exploration Wells to the extent Buyer needs such
rights to implement any Buyer's Gathering Proposal, and the right to
use all existing lease roads of Seller for such Development Wells and
Exploration Wells.
17.6 LIMIT OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL, PUNITIVE,
EXEMPLARY, OR SIMILAR DAMAGES ARISING OUT OF OR RELATED TO THE
PERFORMANCE OR NONPERFORMANCE OF THIS AGREEMENT.
17.7 AMENDMENT. This Agreement may not be amended, altered,
revised, renewed, extended, or otherwise changed, except by a writing
that refers to this Agreement and is executed by the Parties.
17.8 CONSTRUCTION OF AGREEMENT. In construing this Agreement,
the following principles shall be followed:
(i) no consideration shall be given to the captions of
the articles, sections, subsections, or clauses, which are
inserted for convenience in locating the provisions of this
Agreement and not as an aid in its construction;
(ii) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser hand in
drafting this Agreement;
(iii) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(iv) the word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding syntactical
variant expressions;
(v) a defined term has its defined meaning throughout this
Agreement, regardless of whether it appears before or after the
place in this Agreement where it is defined;
-33-
(vi) the plural shall be deemed to include the singular,
and vice versa; and
(vii) each exhibit, attachment, and schedule to this
Agreement is a part of this Agreement, but if there is any
conflict or inconsistency between the main body of this Agreement
and any exhibit, attachment, or schedule, the provisions of the
main body of this Agreement shall prevail.
17.9 RELATIONSHIP OF PARTIES. This Agreement does not create a
partnership, joint venture, or relationship of trust or agency between
the Parties.
-34-
IN WITNESS WHEREOF, the Parties have, by their duly
authorized officers or agents, executed this Agreement as of the
Effective Date.
"SELLER"
ATTEST: SANTA FE ENERGY RESOURCES, INC.
/s/ MARK A. OLDER By:/s/
Title: VICE PRESIDENT
"SELLER"
ATTEST: SANTA FE ENERGY OPERATING
PARTNERS, L.P.
/s/ MARK A. OLDER By:/s/
Title: VICE PRESIDENT
"BUYER"
ATTEST: ADOBE GAS PIPELINE COMPANY
/s/ MARK A. OLDER By:/s/
Title: SENIOR VICE PRESIDENT
-35-